cizn20231231d

cizn20231231d_10k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2023 or

☐	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: 001-15375

CITIZENS HOLDING COMPANY

(Exact Name of Registrant as Specified in Its Charter)

Mississippi

(State or Other Jurisdiction of

Incorporation or Organization)

(Address of Principal Executive Office)

521 Main Street, Philadelphia, MS

(Zip Code)

39350

Registrant’s Telephone Number, Including Area Code:

(601) 656-4692

64-0666512

(IRS Employer Identification Number)

Securities registered pursuant to Section 12(b) of the Act: None

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered

Securities registered pursuant to Section 12(g) of the Act:

None

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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definition of “accelerated filer,” “large accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☒

Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.... ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.... ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).... ☐

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

As of June 30, 2023, the aggregate market value of the registrant’s common stock, $.20 par value, held by non-affiliates of the registrant was $61,630,338 based on the closing sale price as reported on the NASDAQ Global Market for such date (the exchange on which the registrant’s common stock was listed on June 30, 2023).

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 29, 2024

Common stock, $.20 par value

5,624,052 Shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Citizens Holding Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2023 are incorporated by reference into Part II of this Annual Report on Form 10-K.

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CITIZENS HOLDING COMPANY

FORM 10-K

INDEX

PART I

		Page

ITEM 1.	BUSINESS	3
ITEM 1A.	RISK FACTORS	11
ITEM 1B.	UNRESOLVED STAFF COMMENTS	24
ITEM 1C.	CYBERSECURITY	24
ITEM 2.	PROPERTIES	29
ITEM 3.	LEGAL PROCEEDINGS	31
ITEM 4.	MINE SAFETY DISCLOSURES	31

PART II

ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	32
ITEM 6.	[RESERVED]	32
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	32
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	32
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	32
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	32
ITEM 9A.	CONTROLS AND PROCEDURES	33
ITEM 9B	OTHER INFORMATION	33
ITEM 9C	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	33


PART III

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	34
ITEM 11.	EXECUTIVE COMPENSATION	40
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	52
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	54
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	56

PART IV

ITEM 15.	EXHIBIT AND FINANCIAL STATEMENT SCHEDULES	57
ITEM 16.	FORM 10-K SUMMARY	59

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CITIZENS HOLDING COMPANY

FORM 10-K

PART I

Cautionary Note Regarding Forward Looking Statements

In addition to historical information, this report contains statements that constitute forward-looking statements 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, that 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.” Citizens Holding Company (the “Company”) notes that a variety of factors could cause its actual results or experience to differ materially from the anticipated results or other expectations described or implied by such forward-looking statements. The risks and uncertainties that may affect the operation, performance, development and results of the business of the Company and the Company’s wholly-owned subsidiary, The Citizens Bank of Philadelphia, Mississippi (the “Bank”), include, but are not limited to, the following:

●

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

●

risks associated with national and global events, such as the conflicts between Russia and Ukraine and between Israel and Hamas, as well as supply chain disruptions;

●

risks associated with the failure of Silicon Valley Bank, Signature Bank and First Republic Bank, which have resulted in significant market volatility and less confidence in depository institutions;

●

internal and external factors affecting net interest margin;

●

adverse changes in asset quality and loan demand, and the potential insufficiency of the allowance for credit losses and our ability to foreclose on delinquent mortgages;

●

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

●

natural disasters, civil unrest, epidemics (including any re-emergence of the COVID-19 pandemic) and other catastrophic events in the Company’s geographic area;

●

the impact of increasing inflation rates on the general economic, market or business conditions;

●

extensive regulation, changes in the legislative and regulatory environment that negatively impact the Company and the Bank through increased operating expenses and the potential for regulatory enforcement actions, claims, or litigation;

●

increased competition from other financial institutions, in particular with respect to deposits, and the risk of failure to achieve our business strategies;

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●

events affecting our business operations, including the effectiveness of our risk management framework, the accuracy of our estimates, our reliance on third party vendors, the risk of security breaches and potential fraud, and the impact of technological advances;

●

climate change and societal responses to climate change could adversely affect the Company’s business and results of operations, including indirectly through impact to its customers;

●

our ability to maintain sufficient capital and to raise additional capital when needed;

●

our ability to maintain adequate liquidity to conduct business and meet our obligations;

●

events affecting our ability to compete effectively and achieve our strategies, such as the risk of failure to achieve the revenue increases expected to result from our acquisitions, branch additions and in new product and service offerings, our ability to control expenses and our ability to attract and retain skilled people;

●

events that adversely affect our reputation, and the resulting potential adverse impact on our business operations;

●

increased cybersecurity risk, including network breaches, business disruptions or financial losses;

●

risks arising from owning our common stock, such as the volatility and trading volume, our ability to pay dividends, the regulatory limitations on stock ownership, and provisions in our governing documents that may make it more difficult for another party to obtain control of us; and

●

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

The Company undertakes no obligation to update or revise any forward-looking statements subsequent to the date on which they are made. Please also refer to Item 1A, “Risk Factors,” for a detailed discussion of the risks related to the Company, the Bank in particular, and the banking industry generally.

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ITEM 1.

BUSINESS.

BACKGROUND

The Company is a one-bank holding company incorporated under the laws of the State of Mississippi on February 16, 1982. The Company is the sole shareholder of the “Bank. The Company does not have any subsidiaries other than the Bank. The “Company,” “we,” or “our,” as used herein, includes the Bank, unless the context otherwise requires. All dollar amounts appearing in this report are in thousands unless otherwise noted or the context otherwise dictates.

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, 2023, the Bank was the largest bank headquartered in Neshoba County, Mississippi, with total assets of $1,405,202 and total deposits of $1,170,311. For more information regarding the assets, revenue and profits of the Company, refer to the Consolidated Financial Statements of the Company contained in Item 8, “Financial Statements and Supplementary Data.” The Company’s only reportable segment is the assets and cash flow of the Bank, resulting in revenues of $58,032, operating profit of $1,780 and total assets of $1,404,597 for the Company as of December 31, 2022.

The principal executive offices of both the Company and the Bank are located at 521 Main Street, Philadelphia, Mississippi 39350, and the main telephone number is (601) 656-4692. All references hereinafter to the activities or operations of the Company reflect the Company’s activities or operations through the Bank.

OPERATIONS

Through its ownership of the Bank, the Company engages in a wide range of commercial and personal banking activities, including accepting demand deposits, savings and time deposit accounts, making secured and unsecured loans, issuing letters of credit, originating mortgage loans, and providing personal and corporate trust services. The Company also provides certain services that are closely related to commercial banking such as credit life insurance and title insurance for its loan customers through third-party relationships.

Revenues from the Company’s lending activities constitute the largest component of the Company’s operating revenues. Revenue from loan interest and fees made up 56.5% of gross revenues in 2023, 53.8% in 2022 and 61.6% in 2021. Loan demand was stagnant and loan yields compressed due to the low-rate environment coupled with aggressive loan terms offered by other financial institutions. The Company’s primary lending area is the entire state of Mississippi and contiguous states. The Company continues to look for areas of growth within the state of Mississippi and surrounding states but, occasionally the Company extends out-of-area credit to borrowers who are considered to be low risk, as defined within the Bank’s lending policy. The Company is not dependent upon any single customer or small group of customers, and it has no foreign operations.

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The Company’s market area has historically been rural, however, since 2008, the Company has continued to expand into larger metropolitan areas and now serves a number of larger growth areas with Jackson, population 138,998, Gulfport, population 72,105, Hattiesburg, population 48,173, Biloxi, population 49,241, and Meridian, population 33,816, being the largest markets. The economy throughout Mississippi is becoming more diverse but agriculture and manufacturing continue to be the largest industries in Mississippi. For more information regarding revenue from external customers for the last three fiscal years, attributed by geographic region, please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is included in the Company’s Annual Report and attached as an exhibit hereto.

The Company has historically made, and intends to continue to make, most types of real estate loans, including, but not limited to, single and multi-family housing, farm, residential and commercial construction, and commercial real estate loans. At December 31, 2023, approximately 82.7% of the Company’s loan portfolio was attributed to real estate lending, 14.6% of the Company’s loan portfolio was comprised of commercial, industrial and agricultural production loans, and consumer loans made up the remaining 2.7% of the Company’s total loan portfolio.

The Company’s loan personnel have the authority to extend credit under guidelines established and approved by the Company’s Board of Directors. Any aggregate credit that exceeds the authority of the loan officer is forwarded to the Board’s loan committee for approval. The loan committee is composed of certain independent Company directors. All aggregate credits that exceed the loan committee’s lending authority are presented to the 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 policies, but also provides valuable insight through the communication and pooling of knowledge, judgment and experience of its members.

All loans in the Company’s portfolio are subject to risk based on the state of both the local and national economy. As our footprint expands, the Company’s portfolio risks are more closely aligned with the state economy. The state economy remains stable after having an increase in unemployment due to the pandemic with unemployment rates having improved to pre-pandemic levels. The state economy is expected to remain stable. The national economic outlook remains uncertain as it relates to inflation and rising interest rates and the ultimate impact of monetary policy. Therefore, it is still uncertain how the recovering economies on the local, state and national levels will affect the Company in the future.

The Company continues to invest in technology as we understand it is necessary to compete in today’s market. The Company has the technology for consumers to perform many of the routine, transaction-related items through its online and mobile platforms. Additionally, the Company continues to build out a robust treasury management suite of products for business banking such as remote deposit capture, ACH transactions and wire transfers. The Company is evolving with the market to ensure we continue to offer a great customer experience that they have come to expect from the Company.

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

Stacy M. Brantley, 50, was employed by the Bank in February of 2023. He was named President and Chief Executive Officer of the Bank. From 2009 to February 2023, he served as Executive Vice President and Chief Banking Officer of Morris Bank in Dublin, GA. Prior to that role, he served as Chief Financial Officer of Magnolia Bankshares, Inc. in Eastman, GA. Prior to that role, he served as a Senior Accountant at a regional CPA firm in Georgia.

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Phillip R. Branch, 40, has been employed by the Bank since 2018. He has served as Senior Vice-President and Chief Financial Officer of the Bank since October 2020. Prior to October 2020, Mr. Branch held the title of Vice-President and Comptroller of the Bank from 2018 until 2020. Prior to joining Citizens, Mr. Branch was a Senior Manager in the Financial Institutions practice of HORNE LLP, beginning in September 2006, serving banks throughout the southeastern United States. Mr. Branch has been a Certified Public Accountant since 2009.

EMPLOYEES

The Company has no employees other than three Bank officers who provide services to the Company. These officers receive no compensation from the Company for their services to it as their compensation is paid by the Bank. At December 31, 2023, the Bank employed 246 full-time equivalents. 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 Mississippi Department of Banking and Consumer Finance and the Federal Deposit Insurance Corporation (“FDIC”). The Company is a registered bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and is subject to the supervision of the Federal Reserve Board (“FRB”). Certain legislation and regulations affecting the businesses of the Company and the Bank are discussed below.

General

The current regulatory environment for financial institutions includes substantial enforcement activity by the federal and state banking agencies, and other state and federal law enforcement agencies, reflecting an increase in activity over prior years. This environment entails significant increases in compliance requirements and associated costs. The FRB requires the Company to maintain certain levels of capital and to file an annual report with the FRB. The FRB also has the authority to conduct examinations of the Company and the Bank and to take enforcement action against any bank holding company that engages in any unsafe or unsound practice or that violates certain laws, regulations, or conditions imposed in writing by the FRB.

Capital Standards

The FRB, FDIC and other federal banking agencies have established risk-based capital adequacy guidelines. These guidelines are intended to provide a measure of a bank’s capital adequacy that reflects the degree of risk associated with a bank’s operations.

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Under those guidelines, assets and off-balance sheet items are assigned to broad risk categories, each with appropriate weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items. Under the current risk-based capital adequacy guidelines, we are required to maintain (1) a ratio of common equity Tier 1 capital (“CET1”) to total risk-weighted assets of not less than 4.5%; (2) a minimum leverage capital ratio of 4%; (3) a minimum Tier 1 risk-based capital ratio of 6%; and (4) a minimum total risk-based capital ratio of 8%. CET1 generally consists of common stock, retained earnings, accumulated other comprehensive income and certain minority interests, less certain adjustments and deductions. In addition, we must maintain a “capital conservation buffer,” which is a specified amount of CET1 capital in addition to the amount necessary to meet minimum risk-based capital requirements. The capital conservation buffer is designed to absorb losses during periods of economic stress. If our ratio of CET1 to risk-weighted capital is below the capital conservation buffer, we will face restrictions on our ability to pay dividends, repurchase our outstanding stock and make certain discretionary bonus payments. The required capital conservation buffer is 2.5% of CET1 to risk-weighted assets in addition to the amount necessary to meet minimum risk-based capital requirements.

Management believes that, as of December 31, 2023, the Company and the Bank met all capital adequacy requirements under Basel III. Management will continue to monitor these and any future proposals submitted by the Company’s and Bank’s regulators.

Prompt Corrective Action and Other Enforcement Mechanisms

The Federal Deposit Insurance Corporation Improvement Act of 1991, as amended (“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 Company and the Bank are classified as well capitalized under the guidelines promulgated by the FRB and the FDIC.

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 and for deposits by certain employee benefits accounts.

Restrictions on Dividends and Other Distributions

The Company’s ability to pay dividends depends in large part on the ability of the Bank to pay dividends to the Company. 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 federal 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.

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The approval of the Mississippi Department of Banking and Consumer Finance is also required prior to the Bank paying dividends. The department’s regulations limit dividends to earned surplus in excess of three times the Bank’s capital stock. At December 31, 2023, the maximum amount available for transfer from the Bank to the Company in the form of a dividend was approximately $104,804, or 174.5% of the Bank’s consolidated net assets.

FRB regulations limit the amount the Bank may loan to the Company unless those loans are collateralized by specific obligations. At December 31, 2023, the maximum amount available for transfer from the Bank in the form of loans was $6,006, or 10% of the Bank’s consolidated net assets. The Bank does not have any outstanding loans with the Company.

FDIC Insurance Assessments

The FDIC insures the deposits of federally insured banks up to prescribed statutory limits for each depositor, through the Deposit Insurance Fund (“DIF”) and safeguards the safety and soundness of the banking and thrift industries. The amount of FDIC assessments paid by each insured depository institution is based on its relative risk of default as measured by regulatory capital ratios and other supervisory factors.

The FDIC’s deposit insurance premium assessment is based on an institution’s average consolidated total assets minus average tangible equity.

We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. At least semi-annually, the FDIC will update its loss and income projections for the DIF and, if needed, will increase or decrease assessment rates, following notice-and-comment rulemaking, if required. If there are additional bank or financial institution failures or if the FDIC otherwise determines to increase assessment rates, the Bank may be required to pay higher FDIC insurance premiums. Any future increases in FDIC insurance premiums may have a material and adverse effect on our earnings.

Other BHC Act Provisions

The BHC Act requires a bank holding company to obtain the prior approval of the FRB before acquiring direct or indirect ownership or control of more than 5% of the voting shares of any bank that is not already majority-owned by such bank holding company. The BHC Act provides that the FRB shall not approve any acquisition, merger or consolidation that would result in a monopoly or that would be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking. The FRB also will not approve any other transactions in which the effect might be to substantially lessen competition or in any manner be a restraint on trade, unless the anti-competitive effects of the proposed transaction are clearly outweighed by the public interest in the probable effect of the transaction in meeting the convenience and needs of the community to be served.

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The BHC Act also prohibits a bank holding company, with certain exceptions, from engaging in or from acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in non-banking activities. The principal exception to this rule is for engaging in or acquiring shares of a company whose activities are found by the FRB to be so closely related to banking or managing banks as to be a proper incident thereto. In making such determinations, the FRB is required to consider whether the performance of such activities by a bank holding company or its subsidiaries can reasonably be expected to produce benefits to the public such as greater convenience, increased competition or gains in efficiency of resources that outweigh the risks of possible adverse effects such as decreased or unfair competition, conflicts of interest or unsound banking practices.

The BHC Act prohibits the acquisition by a bank holding company of more than 5% of the outstanding voting shares of a bank located outside the state in which the operations of its banking subsidiaries are principally conducted, unless such an acquisition is specifically authorized by statute of the state in which the bank to be acquired is located.

The Company and the Bank are subject to certain restrictions imposed by the Federal Reserve Act and the Federal Deposit Insurance Act on any extensions of credit to the Company or the Bank, on investments in the stock or other securities of the Company or the Bank, and on taking such stock or other securities as collateral for loans of any borrower.

The BHC Act was amended in 2000 by the Gramm-Leach-Bliley Financial Services Modernization Act of 1999 to permit “financial holding companies” to engage in a broader range of nonbanking financial activities, such as underwriting and selling insurance, providing financial or investment advice, and dealing and making markets in securities and merchant banking. In order to qualify as a financial holding company, the Company must declare to the FRB its intention to become a financial holding company and certify that the Bank meets the capitalization management requirements and that it has at least a satisfactory rating under the Community Reinvestment Act of 1997, as amended (the “CRA”). To date, we have not elected to become a financial holding company.

Community Reinvestment Act

The CRA requires the assessment by the appropriate regulatory authority of a financial institution’s record in meeting the credit needs of the local community, including low and moderate-income neighborhoods. The regulations promulgated under CRA emphasize an assessment of actual performance in meeting local credit needs, rather than of the procedures followed by a bank to evaluate compliance with the CRA. CRA compliance is also a factor in evaluations of proposed mergers, acquisitions and applications to open new branches or facilities. Overall CRA compliance is rated across a four-point scale from “outstanding” to “substantial noncompliance.” Different evaluation methods are used depending on the asset size of the bank.

The FDIC examined the Bank on September 24, 2019 for its performance under the CRA.... The Bank was rated Satisfactory during this examination, and the FDIC found no discriminatory practices or illegal discouragement of applications.

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Consumer Protection

The Bank is subject to a number of federal and state consumer protection laws. These laws provide substantive consumer rights and subject the Bank to substantial regulatory oversight. Violations of applicable consumer protection laws can result in significant potential liability from litigation brought by customers, including actual damages, restitution and attorneys’ fees. Federal bank regulators, state attorneys general and state and local consumer protection agencies may also seek to enforce consumer protection requirements and obtain these and other remedies, including regulatory sanctions, customer rescission rights, action by the state and local attorneys general in each jurisdiction in which the Bank operates and civil money penalties. Failure to comply with consumer protection requirements may also result in the Bank’s failure to obtain any required bank regulatory approval for merger or acquisition transactions the Bank may wish to pursue or its prohibition from engaging in such transactions even if approval is not required.

Anti-Money Laundering Efforts

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”) requires financial institutions to establish anti-money laundering programs and due diligence policies, procedures and controls with respect to bank accounts involving foreign individuals and certain foreign banks, and to avoid establishing and maintaining accounts in the United States for, or on the behalf of, foreign banks that do not have a physical presence in any country. We believe that we are in compliance with the requirements of the USA PATRIOT Act.

Corporate Governance

The Sarbanes-Oxley Act of 2002 (“Sarbanes Act”) requires publicly traded companies, such as the Company, to adhere to several directives designed to prevent corporate misconduct. As a result, additional duties have been placed on officers, directors, auditors and attorneys of public companies. The Sarbanes Act requires certifications regarding financial statement accuracy and internal control adequacy by the chief executive officer and the chief financial officer to accompany periodic reports filed with the Securities and Exchange Commission (“SEC”). The Sarbanes Act also accelerates insider reporting obligations under Section 16 of the Securities Exchange Act of 1934, as amended, restricts certain executive officer and director transactions, imposes new obligations on corporate audit committees and provides for enhanced review by the SEC.

The Dodd-Frank Act mandated a number of new requirements with respect to corporate governance. The legislation requires publicly traded companies to give stockholders a non-binding vote on executive compensation at least every three years and on so-called “golden parachute” payments in connection with approvals of mergers and acquisitions. The Dodd-Frank Act also authorizes the SEC to promulgate rules that would allow stockholders to nominate their own candidates using a company’s proxy materials. Additionally, the Dodd-Frank Act directs the federal banking regulators to promulgate rules prohibiting excessive compensation paid to executives of depository institutions and their holding companies with assets in excess of $1.0 billion, regardless of whether the company is publicly traded. The Dodd-Frank Act gives the SEC authority to prohibit broker discretionary voting on elections of directors and executive compensation matters.

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Impact of Monetary Policies

Banking is a business that substantially 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 including the FRB. The nature and timing of any future changes in such policies and their impact on the Company cannot be predicted.

Future Legislation

Various legislation affecting financial institutions and the financial industry is from time to time introduced in Congress. Such legislation may change banking statutes and our operating environment in substantial and unpredictable ways and could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance depending upon whether any of this potential legislation will be enacted, and if enacted, the effect that it or any implementing regulations, would have on the financial condition or our results of operations. With the proposals to alter the Dodd-Frank Act and the evolution of the CFPB, the nature and extent of future legislative and regulatory changes affecting financial institutions continues to be very unpredictable.

COMPETITION

The banking business is highly competitive. The Company’s primary market area is the entire state of Mississippi and contiguous states. The Company continues to look for areas of growth in the state of Mississippi and surrounding states but, occasionally the Company extends out-of-area credit to borrowers who are considered to be low risk, as defined within the Bank’s lending policy. The Company competes with local, regional and national financial institutions throughout the state in obtaining deposits, lending activities and providing many types of financial services. The Company also competes with larger regional banks for the business of companies located in the Company’s market area.

All financial institutions, including the Company, compete for customers’ deposits. The Company also competes with savings and loan associations, credit unions, production credit associations, federal land banks, finance companies, personal loan companies, money market funds and other non-depository financial intermediaries. Many of these financial institutions have resources significantly greater than those of the Company. In addition, 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. The Company believes it benefits from a good reputation in the community and from the significant length of time it has provided needed banking services to its customers. Also, as a locally owned financial institution, the Company believes it is able to respond to the needs of the community with services tailored to the particular demands of its customers. Furthermore, as a local institution, the Company believes it can provide such services faster than a larger institution not based in the Company’s market area.

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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 Dodd-Frank Act and other banking laws and regulations are expected to continue to further stimulate competition in the markets in which the Company operates, although it is not possible to predict the extent or timing of such increased competition.

Currently, there are approximately fifty different financial institutions in the Company’s market competing for the same customer base. According to the FDIC’s Summary of Deposits that is collected as of June 30 each year, the Company’s market share in its market area was approximately 4.14% at June 30, 2023.The Company competes in its market for loan and deposit products, along with many of the other services required by today’s banking customer, on the basis of availability, quality and pricing. The Company believes it is able to compete favorably in its markets, in terms of both the rates the Company offers and the level of service that the Company provides to its customers.

AVAILABILITY OF INFORMATION

The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments thereto, along with other information about the Company, are available, free of charge, on our website https://www.thecitizensbankphila.com/investor-relations/sec-filings/. The information contained on our website is not incorporated into this report. Upon request, the Company will provide to any record holder or beneficial holder of its shares a copy of such reports without charge. Requests should be made to Phillip R. Branch, Treasurer and Chief Financial Officer, Citizens Holding Company, 521 Main Street, Philadelphia, Mississippi 39350.

On December 1, 2023, the Company notified the Nasdaq Stock Market, LLC (“Nasdaq”) of its intent to file a Form 25 with the SEC to effect the voluntary delisting of the Company’s common stock from Nasdaq. On December 11, 2023, the Company filed the Form 25 with the SEC, and the Company’s common stock began trading on the OTCQX Market on December 15, 2023. On December 29, 2023, the Company filed a Form 15 to deregister its common stock under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which will become effective on March 28, 2024. On January 3, 2024, the Company filed a Form 15 to report the automatic suspension of its duty to file reports with the SEC under Section 15(d) of the Exchange Act. The Company’s obligation to file periodic reports under the Exchange Act has been suspended, subject only to its obligation to file this Form 10-K for its 2023 fiscal year.

ITEM 1A.

RISK FACTORS.

In addition to the other information contained in or incorporated by reference into this report and the exhibits hereto, the following risk factors should be considered carefully in evaluating the Company’s business. The risks disclosed below, either alone or in combination, could materially adversely affect the business, prospects, financial condition or results of operations of the Company and/or the Bank. Additional risks not presently known to the Company, or that the Company currently deems immaterial, may also adversely affect the Company’s business, financial condition or results of operations.

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Risks Related to The Company’s Business and Industry

The Company is subject to interest rate risk.

One of the most important aspects of management’s efforts to sustain long-term profitability for the Company is the management of interest rate risk. Management’s goal is to maximize net interest income within acceptable levels of interest-rate risk and liquidity.

The Company’s assets and liabilities are principally financial in nature and the resulting earnings thereon are subject to significant variability due to the timing and extent to which the Company can reprice the yields on interest-earning assets and the costs of interest bearing liabilities as a result of changes in market interest rates. Interest rates in the financial markets affect the Company’s decisions on pricing its assets and liabilities, which impacts net interest income, an important cash flow stream for the Company. As a result, a substantial part of the Company’s risk-management activities is devoted to managing interest-rate risk. Currently, the Company does not have any significant risks related to foreign currency exchange, commodities or equity risk exposures.

The Company’s earnings and cash flows are largely dependent upon the net interest income of the Company. Net interest income is the difference between interest earned on assets, such as loans and securities, and the cost of interest-bearing liabilities, such as deposits and borrowed funds. Interest rates are highly sensitive to many factors that are beyond the Company’s control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the FRB. Changes in monetary policy, including changes in interest rates, could influence not only the interest the Company receives on loans and securities and the amount of interest the Company pays on deposits and borrowings, but such changes could also affect (i) the Company’s ability to originate loans and obtain deposits, which could reduce the amount of fee income generated; (ii) the fair value of the Company’s financial assets and liabilities; and (iii) the average duration of the Company’s mortgage-backed securities portfolio. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, the Company’s net interest income could be adversely affected, which in turn could negatively affect its earnings. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.

Interest rates increased significantly in 2022 and 2023, and these increases may continue in as the U.S. government attempts to slow economic growth to counteract rising inflation. Although management believes it has implemented effective asset and liability management strategies to reduce the potential effects of changes in interest rates on the results of operations of the Company, any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on the Company’s financial condition and results of operations. For the reasons set forth above, an increase in interest rates generally as a result of such a credit rating downgrade could adversely affect our net interest income levels, thereby resulting in reduced earnings, and reduce loan demand. Volatility in interest rates may also result in disintermediation, which is the flow of funds away from financial institutions into direct investments, such as United States Government and Agency securities and other investment vehicles, including mutual funds, which generally pay higher rates of return than financial institutions because of the absence of federal insurance premiums and reserve requirements. Disintermediation could also result in material adverse effects on the Company’s financial condition and results of operations.

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A discussion of the policies and procedures used to identify, assess and manage certain interest rate risk is set forth in Item 7A, “Quantitative and Qualitative Disclosures about Market Risk.”

The Company is subject to risks related to recent events impacting the financial services industry.

The high-profile bank failures of Silicon Valley Bank and Signature Bank in March 2023 and First Republic Bank in May 2023 have generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks. These market developments have negatively impacted customer confidence in the safety and soundness of regional banks. As a result, customers may choose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which could materially adversely impact our liquidity, cost of funding, loan funding capacity, net interest margin, capital and results of operations. These events are occurring during a period of continued interest rate increases by the Federal Reserve which, among other things, have resulted in unrealized losses in longer-duration securities held by banks, increased competition for bank deposits and the possibility of an increase in the risk of a potential recession. These recent events have, and could continue to, adversely impact the market price and volatility of the Company’s common stock.

These rapid bank failures have also highlighted risks associated with advances in technology that increase the speed at which information, concerns and rumors can spread through traditional and new media, and increase the speed at which deposits can be moved from bank to bank or outside the banking system, heightening liquidity concerns of traditional banks. While regulators and large banks have taken steps designed to increase liquidity at regional banks and strengthen depositor confidence in the broader banking industry, there can be no guarantee that these steps will stabilize the financial services industry and financial markets. In addition, regulators may adopt new regulations or increase FDIC insurance costs, which could increase our costs of doing business.

The Company is subject to lending risk.

There are inherent risks associated with the Company’s lending activities. These risks include, among other things, the impact of changes in interest rates and changes in the economic conditions in the markets where the Company operates as well as those across the United States. Increases in interest rates or weakening economic conditions could adversely impact the ability of borrowers to repay outstanding loans or the value of the collateral securing these loans.

As of December 31, 2023, approximately 80.7% of the Company’s loan portfolio consisted of commercial, construction and commercial real estate loans. These types of loans are generally viewed as having more risk of default than residential real estate loans or consumer loans due primarily to the large amounts loaned to individual borrowers. Because the loan portfolio contains a significant number of commercial, construction and commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in non-performing loans. An increase in non-performing loans could result in a net loss of earnings from these loans, an increase in the provision for possible loan losses and an increase in loan charge-offs, all of which could have a material adverse effect on the Company’s financial condition and results of operations.

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Delays in the Company’s ability to foreclose on delinquent mortgage loans may negatively impact our business.

As business necessitates, the Company forecloses on and takes title to real estate serving as collateral for loans. The amount of other real estate held by the Company may increase in the future as a result of, among other things, business combinations, increased uncertainties in the housing market or increased levels of credit stress in residential real estate loan portfolios. Increased other real estate balances could lead to greater expenses as the Company incurs costs to manage, maintain and dispose of real properties as well as to remediate any environmental cleanup costs incurred in connection with any contamination discovered on real property on which the Company has foreclosed and to which the Company has taken title. As a result, the Company’s earnings could be negatively affected by various expenses associated with other real estate owned, including personnel costs, insurance and taxes, completion and repair costs, valuation adjustments and other expenses associated with real property ownership, as well as by the funding costs associated with other real estate assets. The expenses associated with holding a significant amount of other real estate could have a material adverse effect on the Company’s financial condition or results of operations.

The allowance for possible loan losses may be insufficient.

Although the Company tries to maintain diversification within its loan portfolio in order to minimize the effect of economic conditions within a particular industry, management also maintains an allowance for loan losses, which is a reserve established through a provision for loan losses charged to expense, to absorb probable credit losses inherent in the entire loan portfolio. The appropriate level of the allowance is based on management’s quarterly analysis of the loan portfolio and represents an amount that management deems adequate to provide for inherent losses, including collective impairment. Among other considerations in establishing the allowance for loan losses, management considers economic conditions reflected within industry segments, the unemployment rate in the Company’s markets, loan segmentation and historical losses that are inherent in the loan portfolio. The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires management to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of the Company’s control, may require an increase in the allowance for loan losses.

In addition, bank regulatory agencies periodically review the allowance for loan losses and may require an increase in the provision for loan losses or the recognition of further loan charge-offs, based on judgments different than those of management. In addition, if charge-offs in future periods exceed the allowance for loan losses, the Company will need additional provisions to increase the allowance for loan losses. Any increases in the allowance for loan losses will result in a decrease in net income and, possibly, capital, and may have a material adverse effect on the Company’s financial condition and results of operations. A discussion of the policies and procedures related to management’s process for determining the appropriate level of the allowance for loan losses is set forth in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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The Company is subject to environmental liability risk associated with lending activities.

A significant portion of the loan portfolio is secured by real property. During the ordinary course of business, the Company may foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, the Company may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require the Company to incur substantial expenses and may materially reduce the affected property’s value or limit the ability of the Company to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase the Company’s exposure to environmental liability. Although management has policies and procedures to perform an environmental review during the loan application process and also before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on the Company’s financial condition and results of operations.

The profitability of the Company depends significantly on economic conditions in the State of Mississippi.

The Company’s success depends primarily on the general economic conditions of the State of Mississippi and the specific local markets in which it operates. Unlike larger national or other regional banks that are more geographically diversified, the Company provides banking and financial services to customers primarily in the state of Mississippi. The local economic conditions in this area have a significant impact on the demand for the Company’s products and services, as well as the ability of its customers to repay loans, the value of the collateral securing loans and the stability of its deposit funding sources.

The Company is subject to extensive government regulation and supervision.

The Company and the Bank are subject to extensive federal and state regulation and supervision. Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, not security holders. These regulations and supervisory guidance affect the Company’s lending practices, capital structure, investment practices, dividend policy and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations, and policies for possible changes. Changes to statutes, regulations or regulatory policies or supervisory guidance, including changes in interpretation or implementation or statutes, regulations, policies and supervisory guidance, could affect the Company in substantial and unpredictable ways. Such changes could subject the Company to additional costs, limit the types of financial services and products the Company may offer and/or increase the ability of nonbanks to offer competing financial services and products, among other things. Failure to comply with laws, regulations, policies or supervisory guidance could result in enforcement and other legal actions by Federal or state authorities, including criminal and civil penalties, the loss of FDIC insurance, the revocation of a banking charter, civil money penalties, other sanctions by regulatory agencies and/or reputational damage. In this regard, government authorities, including bank regulatory agencies, continue to pursue enforcement agendas with respect to compliance and other legal matters involving financial activities, which heightens the risks associated with actual and perceived compliance failures. Any of the foregoing could have a material adverse effect on the Company’s financial condition or results of operations.

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We are subject to claims and litigation.

From time to time, customers and others make claims and take legal action pertaining to our performance of our responsibilities. Whether customer claims and legal action related to our performance of our responsibilities are founded or unfounded, or if such claims and legal actions are not resolved in a manner favorable to us, they may result in significant financial liability and/or adversely affect the market perception of us and our products and services, as well as impact customer demand for those products and services. Any financial liability or reputation damage could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

The Company operates in a highly competitive financial services industry.

The Company faces substantial competition in all areas of its operations from a variety of different competitors, many of which are larger and may have greater financial resources. Such competitors primarily include banks, as well as community banks operating nationwide and regionally within the various markets in which the Company operates. The Company also faces competition from many other types of financial institutions, including savings and loans, credit unions, finance companies, brokerage firms, insurance companies, factoring companies and other financial intermediaries. Additionally, fintech developments, such as blockchain and other distributed ledger technologies, have the potential to disrupt the financial industry and change the way banks do business. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation.

Some of the Company’s competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many of the Company’s larger competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than the Company.

The Company’s ability to compete successfully depends on a number of factors, including: the ability to develop, maintain and build upon long-term customer relationships based on top quality service, high ethical standards and safe, sound assets; the ability to continue to expand the Company’s market position through organic growth and acquisitions; the scope, relevance and pricing of products and services offered to meet customer needs and demands; the rate at which the Company’s introduces new products and services relative to its competitors; and industry and general economic trends. Failure to perform in any of these areas could significantly weaken the Company’s competitive position, which could adversely affect the Company’s financial condition or results of operations.

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We are subject to a variety of operational risks, including the risk of fraud or theft by employees, which may adversely affect our business and results of operations.

We are exposed to many types of operational risks, including liquidity risk, credit risk, market risk, interest rate risk, legal and compliance risk, strategic risk, information security risk, and reputational risk. We are also reliant upon our employees, and our operations are subject to the risk of fraud, theft or malfeasance by our employees. We have established processes and procedures intended to identify, measure, monitor, report and analyze these risks, however, there are inherent limitations to our risk management strategies as there may exist, or develop in the future, risks that we have not appropriately anticipated, monitored or identified. If our risk management framework proves ineffective, we could suffer unexpected losses, we may have to expend resources detecting and correcting the failure in our systems and we may be subject to potential claims from third parties and government agencies. We may also suffer severe reputational damage. Any of these consequences could adversely affect our business, financial condition or results of operations. In particular, the unauthorized disclosure, misappropriation, mishandling or misuse of personal, non-public, confidential or proprietary information of customers could result in significant regulatory consequences, reputational damage and financial loss.

Our risk management policies and procedures may not be fully effective in identifying or mitigating risk exposure in all market environments or against all types of risk, including employee misconduct.

We have devoted significant resources to develop our risk management policies and procedures and will continue to do so. Nonetheless, our policies and procedures to identify, monitor and manage risks may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk. Many of our methods of managing risk and exposures are based upon our use of observed historical market behavior or statistics based on historical models. During periods of market volatility or due to unforeseen events, the historically derived correlations upon which these methods are based may not be valid. As a result, these methods may not predict future exposures accurately, which could be significantly greater than what our models indicate. This could cause us to incur investment losses or cause our hedging and other risk management strategies to be ineffective. Other risk management methods depend upon the evaluation of information regarding markets, clients, catastrophe occurrence or other matters that are publicly available or otherwise accessible to us, which may not always be accurate, complete, up-to-date or properly evaluated.

Moreover, we are subject to the risks of errors and misconduct by our employees and advisors, such as fraud, non-compliance with policies, recommending transactions that are not suitable, and improperly using or disclosing confidential information. These risks are difficult to detect in advance and deter, and could harm our business, results of operations or financial condition. Management of operational, legal and regulatory risks requires, among other things, policies and procedures to record properly and verify a large number of transactions and events, and these policies and procedures may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk. Insurance and other traditional risk-shifting tools may be held by or available to us in order to manage certain exposures, but they are subject to terms such as deductibles, coinsurance, limits and policy exclusions, as well as risk of counterparty denial of coverage, default or insolvency.

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The Company may be required to pay significantly higher FDIC premiums in the future.

The FDIC insures deposits at FDIC insured financial institutions, including the Bank. The FDIC charges the insured financial institutions premiums to maintain the Deposit Insurance Fund at an adequate level. The FDIC may increase these rates and impose additional special assessments in the future, which could have a material adverse effect on future earnings.

The Company’s controls and procedures may fail or be circumvented.

Management regularly reviews and updates the Company’s internal control over financial reporting, disclosure controls and procedures and corporate governance policies and procedures. Any system of controls, however well designed and operated, has inherent limitations, including the possibility that a control can be circumvented or overridden, and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to the Company’s adherence to financial reporting, disclosure and corporate governance policies and procedures.

The Company may be adversely affected by the soundness of other financial institutions.

Financial institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. The Company has exposure to many different industries and counterparties, and routinely executes transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients. Many of these transactions expose the Company to credit risk in the event of a default by a counterparty or client. In addition, the Company’s credit risk may be exacerbated when the collateral held by the Company cannot be realized or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to the Company. Any such losses could have a material adverse effect on the Company’s financial condition and results of operations.

The Company relies on third party vendors for a number of key components of its business.

The Company contracts with a number of third party vendors to support its infrastructure. Many of these vendors are large national companies who are dominant in their area of expertise and would be difficult to quickly replace. Failures of certain vendors to provide services could adversely affect the Company’s ability to deliver products and services to its customers, disrupting its business and causing it to incur significant expense. External vendors also present information security risks.

The Company is substantially dependent on dividends from the Bank for its revenues.

The Company is a separate and distinct legal entity from the Bank, and it receives substantially all of its revenue from dividends from the Bank. These dividends are the principal source of funds to pay dividends on its common stock and interest and principal on debt. Various federal and state laws and regulations limit the amount of dividends that the Bank may pay to the Company. In the event the Bank is unable to pay dividends to the Company, it may not be able to pay obligations or pay dividends on the Company’s common stock. The inability to receive dividends from the Bank could have a material adverse effect on the Company’s business, prospects, financial condition and results of operations. The information under the heading “Supervision and Regulation” in Item 1, “Business,” provides a discussion about the restrictions governing the Bank’s ability to transfer funds to the Company.

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Potential acquisitions may disrupt the Company’s business and dilute shareholder value.

From time-to-time, the Company evaluates merger and acquisition opportunities and conducts due diligence activities related to possible transactions with other financial institutions. As a result, merger or acquisition discussions and, in some cases, negotiations may take place, and future mergers or acquisitions involving cash, debt or equity securities may occur at any time. Acquiring other banks, businesses or branches involves various risks commonly associated with acquisitions, including, among other things:

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potential exposure to unknown or contingent liabilities of the target company;

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exposure to potential asset quality issues of the target company;

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difficulty and expense of integrating the operations and personnel of the target company;

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potential disruption to the Company’s business;

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potential diversion of management’s time and attention;

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the possible loss of key employees and customers of the target company;

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difficulty in estimating the value of the target company; and

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potential changes in banking or tax laws or regulations that may affect the target company.

In addition, acquisitions typically involve the payment of a premium over book and market values, and, therefore, some dilution of the Company’s tangible book value and net income per common share may occur in connection with any future transaction. Furthermore, failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, or other projected benefits from an acquisition could have a material adverse effect on the Company’s business, prospects, financial condition and results of operations.

The Company’s information systems may experience an interruption or breach in security. Evolving technologies and the need to protect against and react to cybersecurity risks and electronic fraud requires significant resources.

The Company relies heavily on communications and information systems to conduct its business. Furthermore, the Bank provides its customers the ability to bank online. The secure transmission of confidential information over the Internet is a critical element of online banking. The Company needs to invest in information technology to keep pace with technology changes, and while the Company invests amounts it believes will be adequate, it may fail to invest adequate amounts such that the efficiency of information technology systems fails to meet operational needs. Any failure, interruption or breach in security of these systems could result in failures or disruptions in its customer relationship management, general ledger, deposit, loan and other systems. While the Company has policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of the Company’s information systems, there can be no assurance that any such failures, interruptions or security breaches will be prevented, and if they occur, that they will be adequately addressed. Additionally, to the extent the Company relies on third party vendors to perform or assist operational functions, the challenge of managing the associated risks becomes more difficult. The occurrence of any failures, interruptions or security breaches of the Company’s information systems could damage its reputation, result in a loss of customer business, subject the Company to additional regulatory scrutiny, or expose it to civil litigation and possible financial liability, any of which could have a material adverse effect on the financial condition and results of operations of the Company.

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The operational functions of business counterparties may experience similar disruptions that could adversely impact us and over which the Company may have limited or no control.

Over the course of the past few years, companies such as major retailers have experienced data systems incursions reportedly resulting in the thefts of credit and debit card information, online account information, and other financial data of tens of millions of the retailers’ customers. Retailer incursions affect cards issued and deposit accounts maintained by many banks, including the Bank. Although the Bank systems are not breached in retailer incursions, these events can cause the Bank to reissue a significant number of cards and take other costly steps to avoid significant theft loss to the Bank and its customers. Other possible points of incursion or disruption not within the Bank’s control include internet service providers, electronic mail portal providers, social media portals, distant-server (“cloud”) service providers, electronic data security providers, telecommunications companies, and smart phone manufacturers.

The Company continually encounters technological change and we may not have the resources to implement new technology.

The Company’s industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and reduce costs. The Company’s future success depends, in part, upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Company’s operations. Many of the Company’s competitors have substantially greater resources to invest in technological improvements. The Company may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to its customers. Failure to successfully keep pace with technological change affecting the Company’s industry could have a material adverse impact on its business and, in turn, the Company’s financial condition and results of operations.

Consumers may decide not to use banks to complete their financial transactions.

While the Company continually attempts to use technology to offer new products and services, at the same time, technology and other changes are allowing parties to complete financial transactions that historically have involved banks through alternative methods. For example, consumers can now maintain funds in brokerage accounts, mutual funds or use electronic payment methods such as Apple Pay or PayPal, that would have historically been held as bank deposits. Consumers can also complete transactions such as paying bills or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as disintermediation, could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the lower cost deposits as a source of funds could have a material adverse effect on the Company’s financial condition and results of operations.

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The Company is subject to accounting estimate risks.

The preparation of the Company’s consolidated financial statements in conformity with generally accepted accounting principles requires management to make significant estimates that affect the financial statements. The Company’s most critical estimate is the level of the allowance for credit losses. However, other estimates occasionally become highly significant, especially in volatile situations such as litigation and other loss contingency matters. Estimates are made at specific points in time; as actual events unfold, estimates are adjusted accordingly. Due to the inherent nature of these estimates, it is possible that, at some time in the future, the Company may significantly increase the allowance for credit losses or sustain credit losses that are significantly higher than the provided allowance, or the Company may make some other adjustment that will differ materially from the estimates that the Company makes today.

Risks Associated With the Company’s Common Stock

The trading volume in the Company’s common stock is less than that of other larger bank holding companies.

The Company’s common stock is quoted on the OTCQX Market. The average daily trading volume in the Company’s common stock is low, generally less than that of many of its competitors and other larger bank holding companies. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of the Company’s common stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which the Company has no control. Given the lower trading volume of the Company’s common stock, significant sales of the Company’s common stock, or the expectation of these sales, could cause volatility in the price of the Company’s common stock.

Issuing additional shares of our common stock to acquire other banks, bank holding companies, financial holding companies and/or insurance agencies may result in dilution for existing shareholders and may adversely affect the market price of our stock.

We may issue, in the future, shares of our common stock to acquire additional banks, bank holding companies, and other businesses related to the financial services industry that may complement our organizational structure. Resales of substantial amounts of common stock in the public market and the potential of such sales could adversely affect the prevailing market price of our common stock and impair our ability to raise additional capital through the sale of equity securities. We may be required to pay an acquisition premium above the fair market value of acquired assets for acquisitions. Paying this acquisition premium, in addition to the dilutive effect of issuing additional shares, may also adversely affect the prevailing market price of our common stock.

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The Company’s Articles of Incorporation and Bylaws, as well as certain banking laws, may have an anti-takeover effect.

Provisions of the Company’s Articles of Incorporation and Bylaws, which are exhibits to this Annual Report on Form 10-K, and the federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire the Company, even if doing so would be perceived to be beneficial to the Company’s shareholders. The combination of these provisions impedes a non-negotiated merger or other business combination, which, in turn, could adversely affect the market price of the Company’s common stock.

General Risk Factors

The Company is subject to risk from adverse economic conditions.

Our operations and profitability are impacted by general business and economic conditions in the State of Mississippi, and the United States. These conditions include recession, short-term and long-term interest rates, inflation, money supply, political issues, international conflicts (including the conflict between Ukraine and Russia and between Israel and Hamas), legislative and regulatory changes, fluctuations in both debt and equity capital markets, broad trends in industry and finance, and the strength of the U.S. economy and the local economies in which we operate, all of which are beyond our control. A deterioration in economic conditions could result in an increase in loan delinquencies and nonperforming assets, decreases in loan collateral values and a decrease in demand for our products and services, among other things, any of which could have a material adverse impact on our financial condition and results of operations.

Negative perceptions or publicity could damage our reputation among existing and potential customers, investors, employees and advisors.

Our reputation is one of our most important assets. Our ability to attract and retain customers, investors, employees and advisors is highly dependent upon external perceptions of our company. Damage to our reputation could cause significant harm to our business and prospects and may arise from numerous sources, including litigation or regulatory actions, failing to deliver minimum standards of service and quality, compliance failures, any perceived or actual weakness in our financial strength or liquidity, technological, cybersecurity, or other security breaches resulting in improper disclosure of client or employee personal information, unethical behavior and the misconduct of our employees, advisors and counterparties. Negative perceptions or publicity regarding these matters could damage our reputation among existing and potential customers, investors, employees and advisors. Adverse developments with respect to our industry may also, by association, negatively impact our reputation or result in greater regulatory or legislative scrutiny or litigation against us. In addition, the SEC and other federal and state regulators have increased their scrutiny of potential conflicts of interest. It is possible that potential or perceived conflicts could give rise to litigation or enforcement actions. It is possible also that the regulatory scrutiny of, and litigation in connection with, conflicts of interest will make our clients less willing to enter into transactions in which such a conflict may occur and will adversely affect our businesses.

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The Company may not be able to attract and retain skilled people.

The Company’s success depends in part on its ability to retain key executives and to attract and retain additional qualified personnel who have experience both in sophisticated banking matters and in operating a bank of the Company’s size. Competition for such personnel is strong in the banking industry, and the Company may not be successful in attracting or retaining the personnel it requires. The unexpected loss of one or more of the Company’s key personnel could have a material adverse impact on its business because of their skills, knowledge of the Company’s markets, years of industry experience and the difficulty of promptly finding qualified replacements. The Company expects to effectively compete in this area by offering financial packages that are competitive within the industry.

Severe weather, natural disasters, acts of war or terrorism and other external events could significantly impact the Company’s business.

The Bank has branches along the coast of Mississippi that are subject to risks from hurricanes from time to time. Severe weather, natural disasters, acts of war or terrorism, and other adverse external events could have a significant impact on the ability of the Company to conduct business. Such events could affect the stability of the Company’s deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue or cause the Company to incur additional expenses. The occurrence of any such event could have a material adverse effect on the Company’s business, prospects, financial condition and results of operations.

The Company’s stock price can be volatile.

Stock price volatility may make it more difficult for you to sell your common stock when you want and at prices you find attractive. The Company’s stock price can fluctuate significantly in response to a variety of factors including, among other things:

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actual or anticipated variations in quarterly results of operations;

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recommendations by securities analysts;

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operating and stock performance of other companies that to be peers;

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perceptions in the marketplace regarding the Company or its competitors;

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new technology used, or services offered, by competitors;

●

significant acquisitions or business combinations involving the Company or its competitors;

●

failure to integrate acquisitions or realize anticipated benefits from acquisitions;

●

changes in government regulations; and

●

volatility affecting the financial markets in general.

General market fluctuations, the potential for breakdowns on electronic trading or other platforms for executing securities transactions, industry factors and general economic and political conditions could cause the Company’s stock price to decrease regardless of operating results.

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Climate change and societal responses to climate change could adversely affect the Company’s business and results of operations, including indirectly through impact to its customers.

The current and anticipated effects of climate change are creating an increasing level of concern for the state of the global environment. As a result, political and social attention to the issue of climate change has increased. In recent years, governments across the world have entered into international agreements to attempt to reduce global temperatures, in part by limiting greenhouse gas emissions. The United States Congress, state legislatures and federal and state regulatory agencies have continued to propose and advance numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change. These agreements and measures may result in the imposition of taxes and fees, the required purchase of emission credits and the implementation of significant operational changes, each of which may require businesses to expend significant capital and incur compliance, operating, maintenance and remediation costs. Consumers and businesses also may change their behavior on their own as a result of these concerns.

It is not possible to predict how climate change may impact the Company’s financial condition and operations; however, the Company’s operates in areas where its business and the activities of its customers could be impacted by the effects of climate change. The effects of climate change may include increased frequency or severity of weather-related events, such as severe storms, hurricanes, flooding and droughts and rising sea levels. These effects can disrupt business operations, damage property, devalue assets and change customer and business preferences, which may adversely affect borrowers, increase credit risk and reduce demand for the Company’s products and services. The Company and its customers will need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns. The Company and its customers may face cost increases, asset value reductions, operating process changes and the like. The impact to the Company’s customers will likely vary depending on their specific attributes, including reliance on or role in carbon intensive activities. In addition, the Company could face reductions in creditworthiness on the part of some customers or in the value of assets securing loans. The Company’s efforts to take these risks into account may not be effective in protecting it from the negative impact of new laws and regulations or changes in consumer or business behavior and could have a material adverse effect on the Company’s financial condition and results of operations.

ITEM 1B.

UNRESOLVED STAFF COMMENTS.

None.

ITEM 1C.

Cybersecurity

Risk Management and Strategy

General. The Company’s information security program, including its processes with respect to cybersecurity, is focused on protecting our systems, networks, and data from unauthorized access by a third party. Concerns about cybersecurity risks impact, at some level, every facet of the Company’s operations, from the way we structure the services we offer, to how we communicate with our customers, to our interactions with and training of employees, and to the expenditures we make when expanding and enhancing our technological infrastructure. We expect this continue to be the case as cybersecurity threats, and the means to respond to those threats, continue to evolve.

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The Company has adopted a defense-in-depth philosophy that relies on multiple systems and processes to reasonably provide for the confidentiality, integrity, and availability of our systems, networks, and data. Features of our information security include:

•Documentation: We have written policies and procedures that delineate the roles and responsibilities of the Company’s Board of Directors, executive management, and other employees, as well as outside parties, with respect to the various aspects of the information security program. This documentation helps to align the entire information security program with our efforts to maintain the integrity of the Company’s cybersecurity. These policies and procedures are reviewed and updated at least annually.

•Separation of duties: Separation of duties means that, where appropriate, a task is designed to ensure that more than one person or group is responsible for its completion. We believe that separation of duties helps to prevent fraud, misuse, or other security compromise, and we apply this concept when we delegate administrative and oversight responsibilities to multiple groups for certain aspects of the information security program, including identity and access management, network management, system administration, policy oversight, monitoring, and alerting.

•The principle of least privilege: Access approval for the Company’s employees is coordinated between an employee’s manager, the Company’s human resources department and the Information Technology Service Desk. The goal is to give an employee access rights to our data, applications, and other information resources only to the extent necessary for the employee to perform the functions of the particular job. Any change in employment responsibilities that requires access changes is implemented using the same access approval procedures. Finally, all remote access into the Company’s networks must include approval by the Information Security Officer (which we refer to as the “ISO”).

•Vulnerability and patch management: The Company’s vulnerability management program includes internal and external scanning using third-party tools and services. Software patches are deployed based on criticality of vulnerability. Further, we track our performance in implementing patches, and if implementation timing falls below performance expectations, management will take steps to identify and remediate the root causes of implementation delays.

•Risk assessments: At least annually, management conducts risk assessments to assess the existence, severity and trends of cybersecurity risks and other risks that the Company’s information security program faces. The scope of an individual risk assessment can be the whole organization, parts of the organization, an individual information system, specific system components, or services.

•Log management: System security logs are consolidated by the Company’s Security Incident and Event Management system and are reviewed by the Bank’s contracted Managed Service Security Provider via both automatic and manual processes for anomalous behavior.

•Incident response: The incident response process is designed to, among other things, promptly elevate a cybersecurity threat or incident to the parties responsible for leading our efforts to identify, contain and mitigate the threat or incident, notify impacted customers or other third parties and comply with applicable law, regulations, and regulatory expectations.

•Employee training: Information security is an integral component of our employee training program. Training includes efforts to maintain security awareness among employees at all times by means of company-wide communications of cybersecurity risks or incidents.

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The information security program applies to all the Company’s business lines and employees as well as to vendors and other third parties with access to the Company’s information systems or its confidential and proprietary information. Whenever we consider a new product or service to offer to its clients, or a new means of offering or providing an existing product or service, or a new back-office process or procedure, the implications to the Company’s information security are required to be considered.

Our ISO leads the Company’s information security team. The Board of Directors oversee our information security team, receiving regular updates related to the material features of the information security program, our success and failures in maintaining information security and emerging threats and management’s proposed response thereto.

Strategy and Testing. As mentioned above, the Company employs a layered, defense-in-depth approach that leverages people, processes, and technology to manage and maintain cybersecurity controls. We also employ a variety of preventative and detective tools to monitor, block and provide alerts regarding suspicious activity and to report on any suspected threats. These controls include appropriate access controls based on least privilege, multifactor authentication for remote and privilege access, and encryption to protect data. The information security program is designed to comply with applicable laws and regulations and is driven by industry standards for financial institutions, including the Federal Financial Institutions Examination Council (“FFIEC”) Cybersecurity Assessment Tool. We work closely with government and industry associations to stay abreast of developments and share best practices with respect to cybersecurity. The following paragraphs describe how we test, or otherwise obtain feedback about, the Company’s cybersecurity and other information security. The feedback we develop through testing and assessment, in addition to information about cybersecurity threats or incidents impacting other entities, is incorporated into the Company’s information security program to enhance our cybersecurity; in certain circumstances a new or emerging cybersecurity threat may require modifications to how we conduct business.

The Company’s information security team utilizes the Financial Services Sector Coordinating Council for Critical Infrastructure Protection and Homeland Security version of the FFIEC Cybersecurity Assessment Tool to perform an annual assessment of our information security program. The assessment provides a repeatable and measurable process for institutions to measure their cybersecurity preparedness over time. The assessment incorporates cybersecurity-related principles from the FFIEC Information Technology Examination Handbook and regulatory guidance, and concepts from other industry standards.

The assessment consists of two parts: Inherent Risk Profile and Cybersecurity Maturity. The Cybersecurity Maturity aspect of the assessment is designed to help management measure the institution’s level of risk and corresponding controls. The levels range from baseline to innovative. Cybersecurity Maturity includes tests to determine whether an institution’s behaviors, practices and processes can support cybersecurity preparedness within the following five domains:

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Cyber risk management and oversight

●

Threat intelligence and collaboration

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Cybersecurity controls

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External dependency management

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Cyber incident management and resilience

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We also retain third parties to test the effectiveness of our cybersecurity efforts. Annually, we obtain independent third-party audits of the information security program, including program maturity and overall control effectiveness. Each year we engage a third-party security firm to conduct both external and internal penetration tests. The goal of these assessments is to discover vulnerabilities in the Company’s in-scope corporate networks. When testing reveals potential vulnerabilities in the Company’s security, management works to develop appropriate mitigation plans to resolve any outstanding issues; we also consider other recommendations to enhance our cybersecurity that these security firms may offer, implementing those that management concludes are appropriate within the context of the Company’s information security program and processes.

In addition to audits and testing by third party security firms, our information security program and infrastructure is subject to supervision by the FDIC and the DBCF, including regular in-depth examinations by subject-matter experts from the FDIC and DBCF. The laws and regulations that these regulators administer impose very high expectations on the Company with respect to its information security policies, procedures, processes, and controls. In particular, the Interagency Guidelines

Establishing Information Security Standards (the “Guidelines”) require us to implement a comprehensive written information security program that includes administrative, technical and physical safeguards designed to (1) ensure the security and confidentiality of customer information; (2) protect against any anticipated threats or hazards to the security or integrity of such information; (3) protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer; and (4) ensure the proper disposal of customer information and consumer information. We also must comply with the information sharing requirements and restrictions enacted pursuant to the GLBA. The regulators’ supervision of the Company is designed to ensure, among other things, that our information security program meets all the standards set forth in the Guidelines and that we operate in compliance with the GLBA and all other applicable information security laws and regulations. Finally, in addition to external scrutiny, our internal audit department reviews our compliance with the Guidelines, the GLBA and other laws and regulations, including those related to information security. If any of these examinations identify deficiencies or areas for improvement, the Company’s information security team works with management to act as promptly as reasonably possible to address the action item resulting from any such examination or review.

Diligence of Vendors and Other Third Parties. As noted above, the Company’s information security program applies to our vendors and other third parties (referred to collectively as “vendors”) with access to our information systems and networks and/or confidential and proprietary information. Before we grant access to the Company’s systems, or a vendor otherwise obtains access to the Company’s confidential and proprietary information, our information security team assesses the vendor’s information security program. We review the vendor’s information security policy (to the extent the third party is willing to provide a copy of such policy), information security audits, service organization reports and similar information; the team will also investigate the background, reputation and history of prior cybersecurity incidents of such vendor or other third party. If the information security team is not satisfied that the vendor’s information security infrastructure is adequate to reasonably protect the Company’s systems and confidential and proprietary information from unauthorized access, and there is no suitable solution to address the information security team’s concerns, then we will not engage such vendor.

The vendors we retain are also categorized by the level of risk that the vendor presents to us, of which information security risk is a component. The information security team annually reviews those vendors in the “high risk” category and periodically reviews other vendors. This review includes obtaining updated information security audits and service organization reports, where available, and otherwise analyzing whether the vendor’s cybersecurity risk profile has materially changed.

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The information security team’s review process does not, and cannot, guarantee that a Company vendor will not suffer a cybersecurity incident that impacts us. Due to the possibility that a vendor’s information security may be breached, we also negotiate provisions in vendor contracts that address cybersecurity incidents. In addition to including provisions that address the parties’ relative responsibility for damages resulting from a cybersecurity incident at a vendor, these contracts also typically include provisions to ensure that the Company receives timely and complete notification of a cybersecurity incident and cooperation in responding thereto so that we can assess the extent of the incident’s impact on the Company’s systems or information, mitigate any adverse effects arising therefrom and comply with any customer or regulation notification requirements and other legal, regulator or contractual obligations.

Incident Response. For those situations where a cybersecurity threat or incident arises, whether internal to the Company or relating to one of its vendors, we have also organized an incident response team. The incident response team includes representatives from the information technology, operations, risk management, legal (including securities law counsel), privacy and finance departments, among others. In addition to meeting quarterly, the incident response team (or a subset of the team) gathers whenever there is a threatened or actual breach of the Company’s information security (whether involving an external actor or an internal party) to determine the nature and extent of the threatened or actual breach and, if appropriate, the steps to take in response thereto to protect the Company’s information security and mitigate any harm that has already occurred. The team is also responsible for ensuring the Company complies with legal and regulatory requirements (including notifying affected customers and regulators and making any filings required by the securities laws). The activities of our incident response team are reported to the Board’s Enterprise Risk Management Committee.

The Company also maintains a cyber insurance policy that provides cyber liability coverage.

Employee Training and Security Awareness. All employees are required to complete quarterly security awareness training programs. Courses within the training program include general cybersecurity best practices as well as a course specifically related to social engineering, email, and social media security. The Company also conducts routine internally focused exercises to help raise employee awareness of the risks associated with cybersecurity. For example, over the course of 2023, employees received at least one email per month designed to test employees’ ability to identify and avoid potential “phishing” emails, and those employees that fail this phishing test are assigned additional training. In addition, annually the Company’s incident response team engages in a cyber-attack tabletop exercise to train the incident response team in overcoming a simulated attack against The Citizens Bank’s payment systems and processes.

Governance and Oversight

Management Role. The Company takes a layered approach to the governance of its cybersecurity risk management. The first line of defense against cybersecurity risk is the company’s information security team, led by the ISO. This team is primarily responsible for promptly identifying cybersecurity risks associated with our existing and anticipated operations and once identified, assessing as to the level that each cybersecurity risk poses to us, and then controlling or mitigating to the extent reasonably possible (in the context the Company’s operations and resources, and competitive factors affecting how banks and other financial services companies conduct operations, among other things).

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The efforts of our information security team to address cybersecurity risk are reviewed by the Chief Risk Officer, which oversees our enterprise risk management program. The Chief Risk Officerfocuses on the quality of the Company’s risk management process in order to manage risks within acceptable tolerance levels. As it pertains to cybersecurity risk, the Chief Risk Officer challenges the processes that the information security team has implemented to identify, assess, control, and mitigate cybersecurity risk. The Chief Risk Officer collaborates with the ISO and other business unit owners impacted by our cybersecurity risk management practices to develop and monitor controls and other processes that mitigate identified risks.

As the third line of defense against cybersecurity risk, our Internal Audit Department, with the assistance of outside experts, annually reviews and tests the Company’s processes, including its policies, procedures, and controls, with respect to cybersecurity risk. The Internal Audit Department reports the results of its review, including the steps management intends to take to address any findings, to the Audit Committee of the Board of Directors.

Board Oversight. The Company’s Board of Directors oversees the risks related to our technological infrastructure, information security, cybersecurity, business continuity and disaster recovery programs.

ITEM 2.

PROPERTIES.

The Company, through the Bank, currently operates from its main office in downtown Philadelphia, Mississippi, and from 27 additional branches in Neshoba, Newton, Leake, Lamar, Forrest, Scott, Attala, Lauderdale, Lafayette, Oktibbeha, Rankin, Madison, Harrison, Jackson, Winston, and Kemper counties, Mississippi. Information about these branches, the Bank’s main office and its loan production office is set forth in the table below:

NAME OF OFFICE	LOCATION/TELEPHONE NUMBER	BANKING/FUNCTIONS OFFERED
Main Office	521 Main Street Philadelphia, Mississippi (601) 656-4692	Full Service; 24 Hour Teller
Eastside Branch	599 East Main Street Philadelphia, Mississippi 601) 656-4976	Full Service; 24 Hour Teller
Westside Branch	912 West Beacon Street Philadelphia, Mississippi (601) 656-4978	Full Service; 24 Hour Teller
Union Branch	502 Bank Street Union, Mississippi 656-4879	Full Service; 24 Hour Teller

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NAME OF OFFICE	LOCATION/TELEPHONE NUMBER	BANKING/FUNCTIONS OFFERED
Carthage Branch	301 West Main Street Carthage, Mississippi (601) 257-4525	Full Service; 24 Hour Teller
Ridgeland Branch	320 Highway 51 North Ridgeland, Mississippi (601) 519-4020	Deposits; Loans
Sebastopol Branch	24 Pine Street Sebastopol, Mississippi (601) 625-7447	Full Service; 24 Hour Teller
DeKalb Branch	176 Main Avenue Service DeKalb, Mississippi (601) 743-2115	Full Service
Kosciusko Branch	775 North Jackson Avenue Kosciusko, Mississippi (662) 289-4356	Full Service; 24 Hour Teller
Scooba Branch	27597 Highway 16 East Scooba, Mississippi (662) 476-8431	Full Service;
Meridian Eastgate Branch	1825 Highway 39 North Meridian, Mississippi (601) 693-8367	Full Service; 24 Hour Teller
Decatur Branch	15330 Highway 15 South Decatur, Mississippi (601) 635-2321	Full Service; 24 Hour Teller
Forest Branch	247 Woodland Drive North Forest, Mississippi (601) 469-3424	Full Service; 24 Hour Teller
Louisville Main Branch	906 S Columbus Avenue Louisville, MS (662) 773-6261	Full Service; 24 Hour Teller
Louisville Industrial Branch	1760 S Church Avenue Louisville, MS (662) 773-6261	Drive Up
Noxapater Branch	45 East Main Street Noxapater, MS (662) 724-4261	Deposits
Starkville Branch	201 Highway 12 West Starkville, MS 39759 (662) 323-1420	Full Service;
Collinsville Branch	9065 Collinsville Road Collinsville, MS 39325 (601) 626-7608	Full Service; 24 Hour Teller

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NAME OF OFFICE	LOCATION/TELEPHONE NUMBER	BANKING/FUNCTIONS OFFERED
Hattiesburg	6222 Highway 98 West Hattiesburg, MS 39402 (601) 264-4425	Full Service; 24 Hour Teller
Biloxi Lemoyne	15309 Lemoyne Boulevard Biloxi, MS 39532 (228) 207-2343	Full Service; 24 Hour Teller
Biloxi Cedar Lake	1830 Popps Ferry Road Biloxi, MS 39532 (228) 594-6913	Full Service; 24 Hour Teller
Oxford Branch	902 Sisk Avenue, Suite E Oxford, MS 38655	Full Service; 24 Hour Teller
Gulfport Branch	12008 Hwy 49 Gulfport, MS 39503 (228) 831-3535	Full Service; 24 Hour Teller
Ocean Springs Branch	2702 Bienville Blvd Ocean Springs, MS 39564 (228) 875-3933	Full Service; 24 Hour Teller
Pascagoula Branch	1519 Jackson Ave Pascagoula, MS 39567 (228) 762-3330	Full Service; 24 Hour Teller

The Bank owns its offices, except for the Gulfport Branch and the Oxford Branch, each of which is leased. The main office facility, originally occupied in 1966, is used solely by the Company and the Bank. This facility contains approximately 20,000 square feet and houses the executive offices and all operations-related departments of the Company. The other branches range in size from nearly 1,000 square feet to 12,000 square feet.

ITEM 3.

LEGAL PROCEEDINGS.

There are no material pending legal proceedings, other than routine litigation incidental to their business, to which either the Company or the Bank is a party or to which any of their property is subject.

ITEM 4.

MINE SAFETY DISCLOSURES.

Not applicable.

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PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Information required in partial response to this Item 5 can be found under the heading “Market Price and Dividend Information” in the 2023 Annual Report to Shareholders, a copy of which is filed as an Exhibit to this Annual Report on Form 10-K. Such information in incorporated herein by reference.

There were no unregistered sales of equity securities not covered by the filing of a Form 10-Q or Form 8-K during the period covered by this filing. There were no repurchases of equity securities not covered by the filing of a Form 10-Q or Form 8-K during the period covered by this filing.

ITEM 6.

[RESERVED]

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Information required in response to this Item 7 can be found under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations as of December 31, 2023, 2022 and 2021” in the 2023 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 required in response to this Item 7A can be found under the headings “Quantitative and Qualitative Disclosures about Market Risk” in the 2023 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 required in response to this Item 8 can be found under the heading “Consolidated Financial Statements” and “Quarterly Financial Trends” in the 2023 Annual Report to Shareholders, a copy of which is filed as an Exhibit to this Annual Report on Form 10-K. Such information is incorporated herein by reference.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

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ITEM 9A

CONTROLS AND PROCEDURES.

DISCLOSURE CONTROLS AND PROCEDURES

The management of this Company, with the participation of its principal executive and financial officers, has evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a – 15(e) and 15d – 15(e) of the Securities Exchange Act of 1934, as amended, in ensuring that the information required to be disclosed in our filings under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, the Company’s principal executive and financial officers have concluded that such disclosure controls and procedures were effective as of December 31, 2023 (the end of the period covered by this Annual Report on Form 10-K).

MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Information required in response to this item can be found under the headings “Management’s Assessment of Internal Control over Financial Reporting” and “Report of Independent Registered Public Accounting Firm” in the Company’s Consolidated Financial Statements contained in its 2023 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.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes to the internal control over financial reporting in the fourth quarter of 2023 that materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

ITEM 9B

OTHER INFORMATION.

INSIDER TRADING ARRANGEMENTS AND POLICIES

During the three months ended December 31, 2023, no “director” or “officer” (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

ITEM 9C

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

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PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

A total of twelve directors currently serve on our Board of Directors. There are three classes of directors. Currently, four directors are in Class I, four directors are in Class II, and four directors are in Class III. Class I directors, which are Messrs. G. Cronin, D. Kilgore, H. King and J. Voyles, have terms that expire at the 2024 Annual Meeting of shareholders (the “2024 Annual Meeting”).

Our Chief Executive Officer does not serve as the Chairperson of our Board of Directors. Our Board of Directors believes that having an outside director serve as the Chairperson helps to ensure that the non-employee directors take an active leadership role on our Board of Directors, and that this leadership structure is beneficial to the Company.

The term of office of each Class I director expires at the 2024 Annual Meeting, the term of office of each Class II director expires at the 2025 annual meeting of shareholders, and the term of office of each Class III director expires at the 2026 annual meeting of shareholders.

Gregory E. Cronin, 61, joined our Board of Directors in 2019. Mr. Cronin is the Gulf Coast Area president of the Bank. Prior to joining the bank in October 2019, Mr. Cronin served as President and CEO of Charter Bank since 2008. As a long-time bank executive, Mr. Cronin provides expertise into the day to day bank operations and the related loan functions.

Jason R. Voyles, 46, joined our Board of Directors in 2021. Mr. Voyles is a licensed real estate broker and has been serving as President of Spectrum Capital since 2006. Prior to that time, Mr. Voyles served as the Vice President of Corporate Development for W. G. Yates and Sons, Inc., a general contractor doing business worldwide, since 2009. As a real estate professional, Mr. Voyles provides a deep knowledge of commercial real estate transactions and as an executive of a real estate company provides a perspective into what our customers value.

David A. King, 69, joined our Board of Directors in 1997 and currently serves on the loan committee. Since 1977, Mr. King has been the proprietor of Philadelphia Motor Company, a company primarily engaged in wholesale and retail auto parts sales. As a small business owner, Mr. King provides a first-hand perspective regarding the needs of a typical small business owner, including loans, deposit operations and other services.

Greg L. McKee, 62, joined our Board of Directors in 2001. Mr. McKee served as the President and Chief Executive Officer of the Bank. Prior to becoming Chief Executive Officer, he was employed as President of the Bank since January 2002. He was previously employed by the Bank as an Executive Vice-President, Senior Vice-President and Vice-President prior to January 2002. As our former Chief Executive Officer, Mr. McKee is uniquely qualified to advise the Board of Directors on our operations, competition and industry.

Terrell E. Winstead, 63, joined our Board of Directors in 2007. Since 1987, Mr. Winstead has been employed by The Molpus Company, now doing business as Molpus Woodlands Group, which acquires, manages, and sells timberland as an investment vehicle for pension funds, college endowments, foundations, insurance and high-net-worth individual investors. During that time, he has served as Controller, Vice President of Finance, Chief Financial Officer, Executive Vice President, and is now President and Chief Executive Officer. As a Certified Public Accountant, Mr. Winstead offers accounting expertise and financial sophistication to the audit committee and to the Board of Directors.

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Stacy M. Brantley, 50, joined our Board of Directors in 2023. Mr. Brantley was named President and Chief Executive Officer of the Bank and President of the Company in February 2023. From 2009 to February 2023, he served as Executive Vice President and Chief Banking Officer of Morris Bank in Dublin, GA. Prior to that role, he served as Chief Financial Officer of Magnolia Bankshares, Inc. in Eastman, GA. Prior to that role, he served as a Senior Accountant at a regional CPA firm in Georgia.

Jane D. Crosswhite, 62, joined our Board of Directors in 2020. is the Executive Vice-President and Secretary/Treasurer of Williams Brothers Incorporated, a general merchandise store located in Philadelphia, Mississippi, that was started by her family in 1907. She began working there part-time in 1979 and transitioned to full-time in 1983. Ms. Crosswhite brings a wealth of experience in the retail business and tremendous knowledge of the general economy in our service area.

Craig Dungan, MD, 61, joined our Board of Directors in 2008. Dr. Dungan is a physician specializing in gastroenterology and has been associated with Meridian Gastroenterology PLLC since 2004. Prior to that time, he practiced as a member of the Rush Medical Group. As a physician, he brings a unique perspective to the Board of Directors regarding the needs of the medical community, especially as it relates to the Meridian, Mississippi geographic market.

Daniel Adam Mars, 44, joined our Board of Directors in 2007. Mr. Mars is currently serving in the capacity as the business manager for Mars, Mars and Mars, Attorneys-at-Law. Mr. Mars has been the owner of MMM Investments LLC since 2004. As a real estate professional, Mr. Mars’ insight into the local real estate market is invaluable to our Board of Directors when evaluating potential real estate loans.

David P. Webb, 64, joined our Board of Directors in 1998. Mr. Webb is a tax attorney and has been engaged in the practice of law since 1986. He is currently a shareholder of the law firm of Baker, Donelson, Bearman, Caldwell and Berkowitz, PC. As a practicing attorney and Certified Public Accountant, Mr. Webb provides both legal and accounting expertise.

Donald L. Kilgore, 74, joined our Board of Directors in 2001. Mr. Kilgore is a practicing attorney for Alford, Thomas & Kilgore after serving in Mississippi Attorney General’s Office as an Assistant Attorney General from 2015 until 2019. Prior to that, he served as the Attorney General for the Mississippi Band of Choctaw Indians beginning in March 2005. Prior to that time, he was engaged in the practice of law for 26 years as a partner of the law firm of Alford, Thomas and Kilgore. As a practicing attorney, Mr. Kilgore offers expertise regarding real estate and contract law issues.

Herbert A. King, 72, joined our Board of Directors in 1997 and currently serves as Chairman of our Board of Directors. Mr. King is a civil engineer and has been associated with King Engineering, Inc. since 1990. King Engineering is primarily engaged in general civil engineering and land surveying. As a civil engineer, Mr. King provides insight into the ramifications of certain engineering issues impacting our potential real estate loans.

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There are no family relationships between any director, executive officer or persons nominated or chosen to become a director or executive officer, except that David A. King is Caroline Forks uncle.

All of our continuing directors presently serve on the Board of Directors of the Bank.

COMMITTEES OF THE BOARD OF DIRECTORS

Audit Committee

Terrell E. Winstead (Chairman), Herbert A. King, Jason R. Voyles, Vincent C. Dungan and Jane D. Crosswhite are the members of the audit committee. Our Board of Directors has determined that each member of the audit committee is an “independent director” as defined in rule 2.5 of the OTCQX Rules for U.S. Companies and that each meets the criteria for independence set forth in Rule 10A-3 under the Exchange Act. Our Board of Directors has determined that Terrell Winstead qualifies as an “audit committee financial expert” as such term is defined under SEC regulations and satisfies the financial sophistication requirements of Rule 5605(c)(2)(A) of the Nasdaq Marketplace Rules. Our Board of Directors has adopted a written charter for the audit committee that details its authority, powers and responsibilities. The committee periodically reviews the charter and makes appropriate revisions. A copy of the audit committee charter can be found on our website, www.citizensholdingcompany.com, under the “Investor Relations—Corporate Governance” tab. The information on our website is not incorporated into this proxy statement.

The audit committee reviews our financial reporting process on behalf of our Board of Directors. The audit committee’s duties and responsibilities include the following:

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appointing (which includes the power to dismiss), compensating and overseeing our independent auditors;

●

monitoring the integrity of our financial reporting process and system of internal controls;

●

monitoring the independence and performance of our independent auditors and internal auditing department;

●

reviewing and establishing internal policies and procedures regarding audits, accounting and other financial controls;

●

reviewing the adequacy of our internal controls and determining whether new controls or procedures are necessary;

●

pre-approving all auditing and permitted non-audit services provided by our independent auditors;

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providing an avenue of communication among our independent auditors, management, the internal auditing department, and our Board of Directors; and

●

establishing procedures for (1) the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters, and (2) the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters.

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During 2023, the audit committee held seven meetings.

Nominating Committee

The members of the nominating committee are David P. Webb (Chairman), David A. King, Jason R. Voyles, and Stacy M. Brantley. Our Board of Directors has determined that each member of the nominating committee is an “independent director” as defined in rule 2.5 of the OTCQX Rules for U.S. Companies. The nominating committee has adopted a charter that details its authority, powers and responsibilities. The committee periodically reviews the charter and makes appropriate revisions. A copy of the nominating committee charter can be found on our website, www.thecitizensbankphila.com/investor-relations, under the “Corporate Governance” tab. The information on our website is not incorporated into this proxy statement.

The nominating committee is responsible for interviewing, evaluating, nominating and recommending individuals for membership on our Board of Directors and its committees. The nominating committee prepared the slate of candidates for election at the Annual Meeting and presented this list to our Board of Directors for their approval.

The nominating committee seeks recommendations from our existing directors to identify potential candidates to fill vacancies on our Board of Directors. The nominating committee will also consider nominees who are recommended by our shareholders. The nominating committee evaluates all nominees for election as a director, whether such individuals are recommended by our current directors, by shareholders or otherwise, using the following criteria:

●

the candidate’s independence for purposes of the OTCQX Market Rules and SEC rules;

●

the candidate’s financial sophistication for purposes of service as a member of the audit committee;

●

the candidate’s experience in banking, or in marketing, finance, legal, accounting or other professional disciplines;

●

the candidate’s capacity and desire to represent the best interests of the shareholders as a whole and not a special interest group or constituency;

●

the candidate’s familiarity with and participation in the local community and prominence and reputation in his or her profession; and

●

the candidate’s record of honest and ethical conduct, personal integrity and independent judgment.

Although the Company has no formal policy regarding diversity, the nominating committee also looks at the potential candidates with a purpose to include a diversity of job and life experiences drawn from shareholders throughout the geographic market served by us. The Company pays special attention to maintain a group of directors from diverse areas of expertise to add value to the Board of Directors and the decisions that they make. The Company believes that a board of directors that draws experience from a variety of professions will have the ability to consider all views prior to making decisions.

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The nominating committee held four meetings in 2023.

BOARD MEMBERSHIP, MEETINGS AND ATTENDANCE

Our Board of Directors meets monthly, generally in a joint session with the Board of Directors of the Bank. During 2023, our Board of Directors met 13 times. There were 12 regular monthly meetings and 1 special meeting. Each director attended at least 75% of all meetings held by our Board of Directors and the committees on which he served. The members of our Board of Directors who are “independent directors,” as defined in rule 2.5 of the OTCQX Rules for U.S. Companies, met in executive session one time in 2023.

Our Board of Directors does not have a policy regarding director attendance at the Annual Meeting. Last year, all of the directors attended the Annual Meeting, and we expect that all directors will attend this year’s Annual Meeting.

Our Board of Directors has established an audit committee, a compensation committee, and a nominating committee. The composition and responsibilities of the audit committee and the nominating committee are described below. The composition and responsibilities of the compensation committee are described in the “Compensation Discussion and Analysis” section below.

CORPORATE GOVERNANCE MATTERS; RISK OVERSIGHT AND MANAGEMENT

Both the Board of Directors as a whole and its respective committees serve an active role in overseeing management of our risks. Our Board of Directors regularly reviews, with members of our senior management and outside advisors, information regarding our strategy and key areas of the Company including operations, finance, legal and regulatory, as well as the risks associated with each. The compensation committee is responsible for overseeing the management of risks relating to our executive compensation plans and reviewing the risks associated with our overall compensation practices and policies for all of our employees. The audit committee oversees risks associated with financial matters such as accounting, internal controls over financial reporting, tax, fraud assessment and financial policies. The nominating committee manages risks associated with corporate governance policies, the independence of our Board of Directors and potential conflicts of interest.

EXECUTIVE OFFICERS

Stacy M. Brantley and Phillip R. Branch are our executive officers. Information about the age, position and experience of Mr. Branch is listed below. Information about Mr. Brantley appears previously under the heading “Board of Directors.” Both of our executive officers are appointed annually by our Board of Directors and serve at the discretion of our Board of Directors.

Name	Age	Position
Phillip R. Branch	40	Mr. Branch has been employed as our Treasurer and Chief Financial Officer since October 2020. He has been employed by the Bank as Vice President since March 2018. Prior to that, he served as a Senior Manager in a regional firm’s financial institutions practice serving financial institutions across the Southeast since 2006. He is a licensed Certified Public Accountant in the state of Mississippi.

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To the best of our knowledge, during the past ten years, none of the following occurred with respect to any director, director nominee or executive officer: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time, (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses), (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, or any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities, (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed suspended or vacated, (5) being the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: (i) any federal or state securities or commodities law or regulation; (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease–and–desist order, or removal or prohibition order, or (6) being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self–regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29)), or any equivalent, exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member (covering stock, commodities or derivatives exchanges, or other SROs).

CODE OF ETHICS

The Company has adopted a Code of Ethics and Code of Conduct in compliance with Item 406 of Regulation S-K for the Company’s principal executive officer, principal financial officer, principal accounting officer and controller. Copies of both the Code of Ethics and the Code of Conduct can be found on the Company’s website: https://www.thecitizensbankphila.com/investor-relations/corporate-governance/ The Company intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the Code of Ethics and the Code of Conduct by posting information on the Company’s website at the address specified above.

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ITEM 11.

EXECUTIVE COMPENSATION.

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (“CD&A”) describes the compensation program for our named executive officers (“NEOs”). Our NEOs are Mrs. Brantley and Mr. Branch. As more fully described below, our compensation committee is charged with establishing, reviewing and administering our executive officer compensation program, including making all decisions about the compensation of our NEOs.

The compensation committee is responsible for determining the compensation of our NEOs and our directors. The committee consists of David P. Webb, Herbert A. King, Terrell E. Winstead, Daniel A. Mars, Jane D. Crosswhite, and Donald L. Kilgore, who is the chairman. Each member of the compensation committee is an “independent director,” as defined under Rule 2.5 of the OTCQX Rules for U.S. Companies. Each member is also a “non-employee director,” as defined in Rule 16b-3 promulgated under the Exchange Act, and each qualifies as an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

The compensation committee has adopted a written committee charter that details its authority, powers and responsibilities. A copy of the charter can be found on our website at www.citizensholdingcompany.com under the “Investor Relations - Corporate Governance” tab. The information on our website is not incorporated into this proxy statement. The compensation committee periodically reviews its charter and makes revisions as it deems appropriate. The compensation committee meets with the frequency necessary to perform its duties and responsibilities. The compensation committee usually makes many of its performance-based decisions at a meeting held in January of each fiscal year, including evaluating the performance of our NEOs during the immediately preceding year, determining the amount of their annual cash bonuses for the preceding year, and determining base salaries for the upcoming fiscal year. Grants of equity compensation are generally made in the second quarter of each year; however, the compensation committee did not make any equity grants to NEOs during 2023 other than the restricted stock grant made to Mr. Brantley in his capacity as a director. The committee met five times during 2023.

Role of Our Executive Officers

Our executive officers compile and provide information and assist in the management and administration of our executive compensation and other benefit plans. Mr. Brantley will make recommendations to the compensation committee regarding the compensation of officers, other than himself.... Our executives’ responsibilities may include, but are not limited to, the following:

●

recommending pay levels and grants and awards for our officers, other than our President and Chief Executive Officer and the Treasurer and Chief Financial Officer;

●

recommending changes to ensure that our compensation programs remain competitive and align with our objectives; and

●

providing information to the compensation committee, including but not limited to (1) information concerning Company and individual performance, (2) information concerning the attainment of our strategic objectives, (3) the common stock ownership of each executive officer and his option holdings, (4) equity compensation plan dilution, and (5) compensation and performance data of other similar size banks.

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Our executive officers may attend the meetings of the compensation committee, at its request, except that Messrs. Branch and Brantley may not be present during the compensation committee’s deliberation of their individual compensation. A portion of each of the four compensation committee meetings held during 2023 was an executive session during which none of our executive officers were present.

Compensation Consultants

The compensation committee has the power and authority to hire outside advisors or consultants to assist the compensation committee in fulfilling its responsibilities to review our director and executive compensation programs. Prior to 2020, the compensation committee engaged Bruce Hlavacek, a registered representative of The Leaders Group, to review the Bank’s Supplemental Executive Retirement Program (the “SERP”), and the program was further reviewed by iZale Financial Group and our independent auditors. Based on those reviews, we modified the SERP to provide for lower forecasts in the rate of growth in executive pay. The SERP is described more fully in this CD&A.

In 2018, the compensation committee retained the services of ChaseCompGroup to provide an independent review of the directors’ and executive officers’ compensation programs and to make recommendations to the committee. The compensation committee has utilized some of the results of this study in formulating the current level of compensation for the executive officers and directors of the Company.

Compensation Program Objectives

The fundamental purpose of our executive officer compensation program is to assist us in achieving our financial and operating performance objectives. Specifically, our compensation program has three basic objectives:

●

to retain and motivate our executive officers, including the NEOs;

●

to reward executive officers upon the achievement of measurable corporate, business unit and individual performance goals; and

●

to align each executive officer’s interests with the interests of our shareholders.

Specifics of the Compensation Program

The elements of the executive compensation program have remained substantially the same for several years. We believe our programs are effectively designed and are working well to align our named executive officers’ interests with the interests of our shareholders and are instrumental to achieving our business strategy. In determining executive compensation for 2023, the compensation committee considered that a vast majority of shareholders (approximately 69.5%) voted to approve the “say-on-pay” proposal at our 2023 Annual Meeting. As a result, the compensation committee continued to utilize the same elements it has used in previous years and will continue to consider shareholder concerns and feedback in the future.

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Our compensation program includes four basic elements:

●

Base salary: This element is intended to reflect an executive officer’s job responsibilities and his value to us. It is also intended to retain our executive officers and to acknowledge each executive officer’s individual efforts in furthering our strategic goals.

●

Annual cash bonus: An annual cash bonus is one of the performance-based elements of our compensation program. It is intended to motivate our executive officers and to provide an immediate reward for short-term (annual) set performance.

●

Equity-based incentives: Grants of equity awards are the method we use to align the long-term interests of our NEOs with the interests of our shareholders, which is another element of performance-based compensation.

●

Welfare benefits and retirement plans: These benefits and plans are intended to retain qualified executive officers, by ensuring that our compensation program is competitive and provides an adequate opportunity for retirement savings.

Benchmarking

The compensation committee does not believe it is appropriate to determine total compensation, or any element of compensation, based primarily on benchmarking, which is the practice of setting compensation based upon the compensation practices of other companies similar in size, industry and other characteristics. However, the compensation committee does review the Mississippi Bankers Association Salary Survey as it determines the appropriate salary levels for all our officers and employees, including the NEOs.

Determination of Amounts Allocated to Each Compensation Program Element

The compensation committee does not use a specific formula to determine the amount allocated to each element of our compensation program. Instead, the compensation committee makes individual compensation decisions that provide for adequate exposure to equity, an appropriate mix of short-term and long-term rewards and an adequate performance based component.

Base Salary

Considerations. The compensation committee reviews and adjusts base salary annually. Adjustments are based upon a review of a variety of factors, including the following:

●

individual, Company and Bank performance, measured against quantitative and qualitative goals, such as asset and net income performance;

●

duties and responsibilities; and

●

compensation paid by similar size banks.

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Fiscal Year 2023 Decisions. The 2023 base salary of our NEOs is included in the Summary Compensation Table that follows this discussion. For 2023, base salaries increased 4.0% when compared to base salaries paid in 2022. The primary factors evaluated by the compensation committee in connection with the decision to raise base salaries in 2023 were (1) the earnings performance of the Company, and (2) individual performance.

Fiscal Year 2024 Decisions. The compensation committee has set the following base salaries for 2024, which was an increase over the base salary paid in 2023:

Executive Officer	2024 Base Salary	2023 Base Salary	Percentage Increase Over 2023 Base Salary
Stacy M. Brantley	$390,000	$375,000⁽¹⁾	4.0%
Phillip R. Branch	$192,629	$185,220	4.0%
Greg McKee	$ -	$354,333⁽²⁾	N/A

____________________

^{(1) Mr. Brantley started with the Bank effective February 13, 2023.}

^{(2) Mr. McKee retired in 2023.}

Annual Cash Bonus

Considerations. At its meeting in January each fiscal year, the compensation committee analyzes our performance, Bank performance and the individual performance of each NEO with the growth of our net income being the primary consideration. For the 2023 fiscal year, the compensation committee determined that Mr. Brantley would be paid a guaranteed cash bonus of 40% of Mr. Brantley’s 2023 base salary (“Brantley Base Bonus”). Mr. Branch would be paid a cash bonus of 10% of Mr. Branch’s 2023 base salary (“Branch Base Bonus”) if our net income attained the income level set by our Board of Directors (the “Net Income Target”). The Brantley Base Bonus was guaranteed and the Branch Base Bonus was subject to adjustment either up or down, based upon the difference between actual net income for 2023 and the Net Income Target. For each 1% increment actual net income varied above the Net Income Target, the Branch Base Bonus was increased by 2%. For each 1% increment actual net income varied below the Net Income Target, the Branch Base Bonus was decreased by 5%. The tables below demonstrate how the Branch Base Bonus would be determined under various scenarios.

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Fiscal Year 2023 Decisions. Cash bonuses paid to our NEOs are listed on the Summary Compensation Table, which follows this discussion. In 2023, our net income was not higher than the Net Income Target and accordingly, Mr. Branch received a base bonus of 4% Using the above formula, the compensation committee determined that Mr. Branch should receive a bonus of $7,409.

Fiscal Year 2024 Decisions. For the 2024 fiscal year, the compensation committee is analyzing the current incentive structure as it relates to cash bonuses for Mr. Brantley and Mr. Branch. Changes for fiscal year 2024 and moving forward are being considered, but no formal incentive structure has been approved as of the publication date of this annual report and proxy.

Equity Compensation

Considerations. Prior to 2009, equity compensation was granted under our LTIP, our 1999 Employees’ Long-Term Incentive Plan, in the form of stock options, which are used to incentivize long-term performance. In 2013, we adopted the 2013 Incentive Compensation Plan, which provides for various forms of equity awards, including stock options and restricted stock, to incentivize long-term performance. Stock options and restricted stock align management’s interests with those of our shareholders. The exercise price for stock options is always the fair market value of our common stock on the grant date, which is the closing market price of our common stock on the date of the grant as quoted on The OTCQX Market (or on the immediately preceding trading date if shares are not traded on the grant date). Unless the compensation committee otherwise provides, restricted stock vest in one year and options vest in six months and one day after grant, and stock options lapse ten years after the grant date. The vesting of restricted stock and options is accelerated and an executive officer’s options remain exercisable for not less than six months following a change in control of the Company.

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The compensation committee believes that the practice of making grants about the same date each year precludes any inference that we are attempting to manipulate the timing of our equity grants to take advantage of non-public information. We do not backdate options or grant options retroactively. Generally, in determining the amount of any grant, the compensation committee considers:

●

the position, responsibility and prior performance of each executive officer;

●

his ability to affect corporate performance;

●

the value of grants or awards in relation to other elements of total compensation; and

●

the number of shares of our common stock that he owns, whether directly or beneficially.

Fiscal Year 2023 Decisions. The Summary Compensation Table and the table entitled Grants of Plan Based Awards, which follow this discussion, each provide specific information about equity awards granted for the 2023 fiscal year. For 2023, the compensation committee granted an equity award to Mr. Brantley for 3,868 shares in relation to his employment agreement and another 750 shares of restricted stock to Mr. Brantley in his capacity as a director.

Welfare and Retirement Plans

Retirement Benefits. We offer our eligible employees, including our NEOs, participation in a tax-qualified defined contribution 401(k) plan, which allows savings for retirement on a tax deferred basis. In 2023, we provided 50% matching contributions, up to 6% of compensation deferred, as well as discretionary non-matching contributions. Both contributions are subject to the completion of a three-year incremental service vesting period. The plan provides for the distribution of account balances following termination of employment, generally in the form of a lump sum. The Summary Compensation Table includes information about our contributions for the 2023 fiscal year.

Supplemental Retirement Benefits. We also maintain a Supplemental Executive Retirement Plan, or SERP, for our NEOs. The SERP is a noncontributory, nonqualified retirement plan. It generally provides for the payment of benefits upon retirement, death or disability. If a participant retires on or after reaching the age 55, the participant is entitled to receive a benefit equal to 50% of the participant’s average base salary during the three years preceding retirement. This benefit is reduced by 5% for each year between the participant’s age at retirement and his 65th birthday. The benefit is paid in monthly installments over 15 years, commencing the month after the participant’s employment ends.

If a participant’s employment ends before age 55, he is entitled to receive the vested portion of his benefit in a lump sum the month following termination of employment. Each of our NEO’s benefit is fully vested. The Pension Benefits table that follows this discussion sets forth the amount of the benefit that each NEO has accrued under the SERP as of December 31, 2023.

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If a participant’s employment ends within two years of a change in control, our SERP provides a benefit equal to 50% of his average base salary over the three years preceding his/her termination. Payment is made in monthly installments over 15 years, commencing the month after the participant’s employment ends. The term “change in control” is defined to include the following events:

●

any person or group becomes the direct or indirect beneficial owner of at least 25% of our or the Bank’s outstanding voting stock;

●

the completion of a merger of us or the Bank in which we or the Bank, as applicable, are not the surviving entity;

●

sale of our or the Bank’s assets equal to 25% of the fair market value of all of our or the Bank’s gross assets prior to the sale;

●

the members of our or the Bank’s board of directors immediately prior to a tender offer, exchange offer or contested director election cease to constitute a majority after such transaction; or

●

a tender offer or exchange offer is made which, if completed, would result in the offeror owning at least 25% of our or the Bank’s outstanding voting stock.

Welfare Benefits. We maintain a number of broad-based benefit plans that are available to all of our employees, including group medical, dental and life insurance plans, some of which are contributory.

Agreements with our NEOs

We have entered into a change in control agreement with Mr. Brantley, and our NEOs are entitled to change in control benefits under the SERP. We believe that change in control payments ensure that personal concerns do not impede transactions that may be in the best interests of our shareholders, such as a sale of the Company to a third party. The agreement is described in the section below titled “Potential Payments upon Termination or Change in Control.”

Risks Associated with our Compensation Practices

We believe that any risks arising from our compensation policies and practices for our employees, including our NEOs, are not reasonably likely to have a material adverse effect on us. Our compensation program is relatively simple and has only three material elements: base salary; annual cash bonus; and equity-based incentive compensation. Base salary represents a fixed amount of payment and therefore does not encourage any excessive risk taking. The compensation committee has determined annual bonus amounts by objectively analyzing changes in our net income, which has a positive effect on shareholder value and mitigates any incentive for employees to take excessive risk. Finally, our equity-based incentive compensation program provides for various equity awards, including restricted stock and stock options. We believe that the equity component of our compensation program serves to align the long-term interest of management with the interests of shareholders and thus mitigates excessive risk taking.

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Tax Considerations

Section 162(m). Section 162(m) of the Code limits publicly held companies to an annual deduction for federal income tax purposes of $1.0 million for compensation paid to each of its chief executive officer, chief financial officer and the next three most highly compensated executive officers whose compensation is required to be disclosed in the company’s annual proxy statement (referred to as “Covered Employees”). Historically, there has been an exception to this $1.0 million limitation for performance-based compensation that meets certain requirements, and the chief financial officer has been excluded from the definition of a Covered Employee. Effective January 1, 2018, under the Tax Cuts and Jobs Act, the exception for performance-based compensation has been eliminated, and compensation paid to the chief financial officer is now subject to the $1.0 million deduction limitation. The amendments to Section 162(m) included a grandfather clause applicable to compensation paid pursuant to a written binding contract in effect on November 2, 2017 that is not materially modified after such date.

Although deductibility of compensation is preferred, tax deductibility is not a primary objective of the Company’s compensation programs. The compensation committee believes that achieving its objectives under the compensation philosophy set forth above is more important than the benefit of tax deductibility. The compensation committee reserves the right to maintain flexibility in how it compensates its executive officers that may result in limiting the deductibility of amounts of compensation from time to time. Given our current levels of compensation, the compensation committee does not anticipate that the compensation presently paid to any executive officer will be impacted by the limit or the recent changes to Section 162(m).

Other Statutes and Regulations. In January 2006, we adopted the provisions of FASB ASC Topic 718, Compensation-Stock Compensation, which replaced FASB 123R. ASC Topic 718 establishes accounting requirements for share-based compensation to employees and carries forward prior guidance on accounting for awards to non-employees. Under ASC Topic 718, we are required to recognize compensation expense for all share-based payments to our employees, including our NEOs.

Conclusions of the Compensation Committee

After considering all of the elements of compensation paid to our NEOs in 2023, the compensation committee has concluded that the compensation is reasonable and not excessive. This conclusion is based upon a number of factors, including the following:

●

our earnings over the previous three years;

●

our consistent dividends;

●

that meaningful portion of our NEOs’ total compensation is subject to the achievement of performance goals; and

●

that the total compensation levels for our NEOs are consistent with the compensation levels deemed appropriate by the committee, which are less than those of similar size banks.

Compensation Committee Report

We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on our review and discussion with management, we have recommended to our Board of Directors that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Compensation Committee:

Donald L. Kilgore, Chairman

David P. Webb

Herbert A. King

Terrell E. Winstead

Daniel A. Mars

Jane D. Crosswhite

Compensation Committee Interlocks and Insider Participation

David P. Webb, Donald L. Kilgore, Terrell E. Winstead, Daniel A. Mars, Jane D. Crosswhite and Herbert A. King are the members of the compensation committee, and they determined the compensation for our executive officers in 2023. None of the members of the compensation committee is or was an officer or employee of the Company or the Bank. Please refer back to the Board of Directors section regarding director independence and for Mr. Webb’s disclosure of a related party transaction. During 2023, none of our NEOs served as a director or member of the compensation committee of any other entity whose executive officers served on our Board of Directors or compensation committee.

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COMPENSATION TABLES

The following table provides information concerning the total compensation earned or paid to our NEOs for services rendered to us or the Bank during the 2023, 2022, and 2021 fiscal years.

Summary Compensation Table

(2023, 2022 and 2021 Fiscal Years)

Name and

Principal

Position

Year

Salary ($)

Bonus ($)

Stock Awards ($)⁽¹⁾

Change in

Pension Value

and Nonqualified

Deferred

Compensation

Earnings ($)⁽²⁾

All

Other

Compensation ($)

Total ($)

Stacy Brantley President and Chief Executive Officer

2023

2022

2021

375,000

131,250

69,360

283,764⁽³⁾

859,374

Phillip R. Branch Treasurer and Chief Financial Officer

2023

2022

2021

185,220

176,400

167,692

7,409

27,536

19,404

28,776⁽⁴⁾

26,631

25,274

221,405

230,567

212,370

Greg L. McKee Former President and Chief Executive Officer

2023

2022

2021

61,327

354,333

336,842

9,360

14,288

14,220

131,493

145,631

142,916

19,571⁽⁵⁾

53,266

53,468

221,751

705,796

644,888

⁽¹⁾

Neither Mr. Brantley, Mr. Branch, nor Mr. Mckee received any stock options in 2023, 2022, or 2021. These non-cash payments only represent the aggregate grant date fair value, as computed in accordance with FASB ASC Topic 718, of 750 shares of restricted stock granted in 2023 to Mr. Mckee and Mr. Brantley as well as 2022 and 2021 to Mr. McKee in his capacity as a director. The value of the awards shown in this column is based on the grant date closing price.

⁽²⁾

This amount represents an increase in accrued benefits under our SERP.

⁽³⁾

For 2023, includes director’s fees of $19,300, group life insurance premiums in the amount of $1,333, group health premiums in the amount of $5,409, a signing/moving bonus of $235,000, a car allowance of $10,615, and country club dues in the amount of $9,097

⁽⁴⁾

For 2023, includes our matching and profit-sharing contributions to the Bank’s 401(k) plan in the amount of $12,766, the value of group life insurance premiums in the amount of $1,318, group health premiums in the amount of $6,491 and country club dues in the amount of $6,300.

⁽⁵⁾

For 2023, includes our matching and profit-sharing contributions to the Bank’s 401(k) plan in the amount of $6,806, the value of group life insurance premiums in the amount of $128, and group health premiums in the amount of $11,515.

Grants of Plan –Based Awards in 2023

Name

Grant Date

All Other Stock

Awards: Number of

Shares of Stock or

Units (#)(1)

Grant Date Fair Value

Of Stock and Option

Awards ($)⁽¹⁾

Mr. Brantley

March 1, 2023

3,868

$60,000

Mr. Brantley

April 26, 2023

750

$9,360

⁽¹⁾	This column shows the full grant date fair value of the restricted stock granted in 2023 under ASC 718. Such shares were granted to Mr. Brantley in his capacity as a director.

Mr. Branch was not granted any plan-based awards of stock options or restricted stock in 2023.

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The following table includes information about the restricted stock award held by our NEOs at the end of our 2023 fiscal year, which were granted under our LTIP. The exercise price is fair market value on the date of grant, defined as the closing market price of a share of our common stock as quoted on The Nasdaq Global Market.

Outstanding Equity Awards at December 31, 2023

		Option Awards				Stock Awards
Name	Grant Date	Number of Securities Underlying Unexercised Options	Number of securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price ($)	Option Expiration Date	Number of Shares That Have Not Vested	Market Value of Shares That Have Not Vested($)
Mr. Brantley	3/1/2023	-	-	-	-	3,868	60,000
Mr. Brantley	4/26/2023	-	-	-	-	750	9,360

Option Exercises and Stock Vested in 2023

Name

Number of Securities

Underlying Exercised

Options (#)

Restricted

Stock Vested

(#)

Value Realized

on Exercise/

Vesting ($)

Option

Exercise/Vesting

Date

N/A

Neither the Company nor the Bank maintains a tax-qualified defined benefit or pension plan. The following table includes information about the benefits accrued under the Bank’s nonqualified Supplemental Executive Retirement Plan, or SERP.

Pension Benefits

Name

Number of Years

Of Credited Service

Present Value of

Accumulated Benefit⁽¹⁾

($)

Payments in Fiscal

2023 ($)

Phillip R. Branch

10,847

—

⁽¹⁾

This amount represents the present value as of December 31, 2023, of the accumulated benefit necessary to fund a retirement benefit under the SERP using a 5.12% interest rate and amortizing an appropriate service cost per year until retirement.

Potential Payments upon Termination or Change in Control

The Bank had entered into an agreement with Mr. Brantley, which provides for a payment upon the occurrence of a change in control, whether or not Mr. Brantley’s employment continues after the change in control. In the event of a change in control, the Bank will pay to Mr. Brantley an amount equal to his salary and target bonus of 40% for 24 months following separation. The payment will be made in 24 equal monthly installments commencing on the first business day of the month next following the date of the change in control.

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The term “change in control” is defined in Mr. Brantley’s agreement to include the following events:

●

any person or group becomes the direct or indirect beneficial owner of more than 50% of the Bank’s outstanding voting stock;

●

as a result of a merger or consolidation of the Bank, less than 50% of the surviving corporation’s outstanding voting securities owned by us;

●

a transfer of substantially all of the property of the Bank other than to an entity in which the Bank owns at least 50% of the voting stock; or

●

the majority of the Bank’s board of directors is replaced without recommendation or approval of a majority of the incumbent board.

As discussed in the CD&A section of this proxy statement, the Bank’s SERP also provides for payments in the event employment is terminated in connection with a change in control. Assuming the change in control occurred on the last business day of the 2022 fiscal year, the aggregate amounts payable under Mr. Brantley’s change in control agreement and each NEO’s benefit under the SERP are as follows:

Name	Change in Control Agreement		SERP		Total

Stacy M. Brantley	$	1,092,000	$	-	$	1,092,000
Phillip R. Branch		-		486,189		486,189

CEO Pay ratio

As required by Section 953(b) of the Dodd-Frank Act and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our median employee and the annual total compensation of Stacy M. Brantley, our CEO.

For 2023, our last completed fiscal year, the median of the annual total compensation of all employees of the Company (other than our CEO) was $46,702, and the annual total compensation of our CEO as detailed in the Summary Compensation Table in this proxy, was $774,464. Based on this information, for 2023 the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 16.6 to 1.

To determine the median of the annual total compensation of all employees of the Company (other than our CEO), we identified our total employee population as of December 31, 2023, which consisted of approximately 269 individuals. Of these employees, approximately 246 individuals are full-time equivalent employees, with the remainder employed on a part-time (less than 40 hours per week) basis.

To identify the “median employee” we conducted an analysis of this employee population, without the use of statistical sampling. We determined our median employee using “total compensation” for the full year 2023. “Total compensation” consisted of base pay, bonuses, commissions, fringe benefits, incentives, severance and vacation payout. Using this methodology, we determined that the “median employee” was a full-time branch teller responsible for establishing, retaining, and deepening customer relationships by performing efficient and accurate banking transactions; and opening and closing accounts in support of the Company’s goals and objectives within the branch. With respect to the annual total compensation of the “median employee,” we identified and calculated the elements of such employee’s compensation for 2023 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K.

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Pay Versus Performance Table

As required by Section 953(a) of the Dodd-Frank Act and Item 402(v) of Regulation S-K, the Pay Versus Performance (“PVP”) rules because effective for the Company as of December 31, 2023 and the Company must comply with the PVP rules in proxy and information statements that include compensation disclosures.

The following table provides information concerning the required PVP disclosures for the 2023, 2022, and 2021 fiscal years.

Year	Summary Compensation Table Total for PEO ($)⁽¹⁾	Compensation Actually Paid to PEO ($)⁽³⁾	Average Summary Compensation Table total for Non-PEO NEOs ($)⁽²⁾	Average Compensation Actually Paid to Non-PEO NEOs ($)	Value of Initial Fixed $100 Investment Based on Total Shareholder Return ($)	Net Income ($ - in *thousands*)
2023	859,374	743,861	221,405	221,405	44	1,854
2022	705,796	555,995	230,567	230,567	73	9,620
2021	644,888	502,160	212,370	212,370	94	7,494

⁽¹⁾

^{Greg McKee was considered the PEO through his retirement date, therefore his pay included in the Summary Compensation Table is not included here.}

⁽²⁾

^{Phillip Branch was considered the Non-PEO NEO for the fiscal years in the chart above.}

⁽³⁾

^{The following table sets forth the adjustments made during each year represented in the PVP Table to arrive at Compensation Actually Paid to PEO during 2023, 2022 and 2021 fiscal years.}

Year	Salary ($)	Bonus ($)	Increase/(Deduction) for Change in Fair Value of Stock Awards Issued in Prior Year Still Outstanding at Year End ($)	Increase/(Deduction) for Change in Fair Value of Stock Awards Issued in Prior Year that Vested During the Current Year ($)	All Other Compensation ($)	Total ($)
2023	375,000	131,250	(33,571)	-	283,764	756,443
2022	354,333	138,278	(4,013)	(158)	53,266	541,707
2021	336,842	97,442	(158)	345	53,468	487,940

DIRECTOR COMPENSATION

During 2023, each of our directors, including Mr. McKee, who was an employee of the Company and an employee of the Bank, received an annual retainer of $18,300 and a year-end payment of $1,525. Directors who serve on the Bank’s loan committee received an additional $100 per month. Mr. McKee’s director fees are included in the “All Other Compensation” column of the Summary Compensation Table in the “Executive Compensation” section below.

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We currently maintain two equity compensation plans for the benefit of our nonemployee directors, the 1999 Directors’ Stock Compensation Plan and the 2013 Incentive Compensation Plan. During 2023, 750 shares of restricted stock were granted to each of the directors under the 2013 Incentive Compensation Plan. We have no plans to grant future awards under the 1999 Directors’ Stock Compensation Plan.

Directors may elect to participate in the Directors’ Deferred Fee Plan maintained by the Bank. A participating director elects to defer all or part of his fees to a bookkeeping account maintained by the Bank for a period of ten years. Interest is credited to the account at 100% of Moody’s Average Corporate Bond Rate, subject to a contractual rate floor of 6.54%. Benefits are generally payable when a director attains age 70. The Bank has elected to purchase individual life insurance policies to fund its obligations under this plan.

The following table details the cash compensation, equity awards and change in the value of the deferred compensation arrangements for the year 2023.

Total 2023 Director Compensation

Name

Fees Earned

or Paid in

Cash⁽¹⁾

Stock

Awards⁽²⁾

Change in

Deferred

Compensation

Total

Gregory E. Cronin

19,825

9,360

29,185

Jane D. Crosswhite

19,825

9,360

29,185

Craig Dungan, MD

19,825

9,360

17,864

47,049

Donald L. Kilgore

19,825

9,360

29,185

David A. King

21,025

9,360

18,647

49,032

Herbert A. King

19,825

9,360

29,185

Daniel Adam Mars

19,825

9,360

8,750

37,935

David P. Webb

21,025

9,360

13,492

43,877

Jason R. Voyles

20,125

9,360

29,485

Terrell E. Winstead

21,025

9,360

30,385

Greg L. McKee

15,250

9,360

18,204

42,814

⁽¹⁾	Includes amounts voluntarily deferred to our deferred compensation plans.

⁽²⁾	Amounts represent the aggregate grant date fair value, as computed in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, of 750 shares of stock granted to each director on April 26, 2023.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth as of March 22, 2024, each person or group (as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”) known to us to be the beneficial owner of more than 5% of the outstanding shares of our common stock, excluding any director or officer whose ownership is reflected in the next table. Beneficial ownership has been determined under Rule 13d-3 under the Exchange Act and is based upon the number of shares of our common stock issued and outstanding as of March 22, 2024, which was 5,624,052.

Name and Address

of Beneficial Owner

Amount and Nature of

Beneficial Ownership

Percent of Class

The Molpus Company and

Richard H. Molpus, Jr.

502 Valley View Drive

Philadelphia, Mississippi 39350

401,511⁽¹⁾

7.149%

⁽¹⁾

Based upon a Schedule 13G/A filed jointly by the Molpus Company and Richard H. Molpus, Jr. on February 2, 2024 with the SEC. Of the shares of common stock, par value $0.20 per share, of Citizens Holding Company covered by that Schedule 13G/A, (i) 190,000 shares of our common stock are held by the Molpus Company; (ii) 99,233 shares of our common stock are owned by Mr. Molpus personally; and (iii) 112,278 shares of common stock that are owned by the Dick Molpus Foundation, a non-profit organization of which Richard H. Molpus, Jr., Terrell Winstead and Jimmy Jon Josey are directors and as to which Mr. Molpus has sole investment and voting power.

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The following table includes information about the common stock owned by our directors, nominees and named executive officers as of March 22, 2024, including their name and the number of shares beneficially owned. Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act and is based upon the number of shares of our common stock issued and outstanding as of March 22, 2024, which was 5,624,052 shares, and the number of options exercisable within sixty days of March 22, 2024. Unless otherwise noted, these persons have sole voting power and investment power with respect to the listed shares (subject to any applicable community property laws). The address of each director and executive officer is Citizens Holding Company, 521 Main Street, Philadelphia, Mississippi 39350.

	Amount and Nature of Beneficial Ownership
	Direct		Options Exercisable Within 60 Days		Other			Total		Percent of Class
Directors and Nominees:

Craig Dungan, MD		97,121		-		273	⁽¹⁾		97,394		1.7	%

Jason R. Voyles		2,250		-		435	⁽²⁾		2,685		*

Donald L. Kilgore		12,503		-		-			12,503		*

David A. King		143,591		-		2,650	⁽³⁾		146,241		2.6	%

Herbert A. King		127,594		-		11,396	⁽⁴⁾		138,990		2.5	%

Daniel Adam Mars		30,264		-		-			30,264		*

David P. Webb		21,979		-		-			21,979		*

Terrell E. Winstead		22,899		-		-			22,899		*

Gregory E. Cronin		11,087		-		-			11,087		*

Jane D. Crosswhite		5,591		-		-			5,591		*

Greg L. McKee⁽⁵⁾		62,803		-		1,494	⁽⁵⁾		64,297		1.1	%

Named Executive Officers:
Stacy M. Brantley		29,846		-		-			29,846		*

Phillip R. Branch		1,614		-		-			1,614		*

All directors, nominees and executive officers as a group (13 persons):		543,047		-		16,248			559,295		10.4	%

*	Less than 1% of the outstanding common stock.

⁽¹⁾	Indicates shares owned by Craig Dungan’s spouse in a retirement account as to which Dr. Dungan has no voting and investment control.

⁽²⁾	Indicates 435 shares owned by Jason R. Voyle’s spouse, who exercises sole voting and investment power with respect to the shares and as to which Mr. Voyles disclaims beneficial ownership.

⁽³⁾	Indicates 2,650 shares owned by David A. King’s spouse, who exercises sole voting and investment power with respect to the shares and as to which Mr. King disclaims beneficial ownership.

⁽⁴⁾	Includes 11,396 shares owned by K&D, L.P., a Mississippi limited partnership of which Mr. King is the controlling general partner and as to which shares Mr. King has sole voting and investment power.

⁽⁵⁾	Indicates shares owned by Greg L. McKee’s spouse in a retirement account of which Mr. McKee is the beneficiary.

The Company does not have any practices or policies regarding hedging or offsetting any decrease in market value of registrant equity securities.

Equity Compensation Plan Information

The following table provides information about the Company’s equity compensation plans as of December 31, 2023.

Equity Compensation Plan Information

Plan category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights		(b) Weighted-average exercise price of outstanding options, warrants and rights		(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities in column (a))
Equity compensation plans approved by security holders⁽¹⁾		-0-	$	0.00		270,000
Equity compensation plans not approved by security holders		-0-	$	0.00		-0-
Total		-0-	$	0.00		270,000

⁽¹⁾	Consists of the 1999 Directors’ Stock Compensation Plan and the 2013 Incentive Compensation Plan.

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ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Our directors and executive officers and their affiliates and associates have engaged in the following transactions with the Company.

In 2023 and 2022, the Company paid legal and other fees paid to the law firm of Baker, Donelson, Bearman, Caldwell and Berkowitz, PC of $62,000 and $49,000, respectively. As stated previously, Director David P. Webb is a partner of the law firm of Baker, Donelson, Bearman, Caldwell and Berkowitz, PC.

In addition, the Company also purchased insurance from Philadelphia Security Insurance in the amount of $265,000 for 2023 and $273,000 in 2022. Philadelphia Security Insurance is principally owned by director Jason R. Voyles’s father-in-law. The Company believes the premiums and terms of the insurance policies are no more favorable than could be obtained from a nonrelated party in an arm’s length transaction. Mr. Voyles does not benefit financially from this transaction as he has no ownership interest in Philadelphia Security Insurance.

Certain of our directors, nominees and officers, businesses with which they are associated and members of their immediate families are customers of the Bank and have had transactions with the Bank in the ordinary course of the Bank’s business. In the opinion of our Board of Directors, such transactions were made in the ordinary course of business, were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons not related to the Bank, and did not involve more than the normal risk of collectability or present other unfavorable features.

Policy Concerning Related Party Transactions

On December 19, 2006, our Board of Directors adopted a written related person transaction policy, entitled “Policy and Procedures With Respect To Related Person Transactions” (referred to as the “Related Person Policy”). The Related Person Policy is administered by our audit committee. It covers any transaction, relationship or arrangement (or series of transactions, relationships or arrangements) (1) in which we or any of our subsidiaries participate or will participate, (2) where the amount involved exceeds $50,000 and (3) in which any of the following persons or entities (referred to as “related persons”) has or will have a direct or indirect material interest: (x) any of our directors, executive officers, or any owner of 5% or more of our securities, (y) any immediate family member of any of the foregoing persons, or (z) any firm or other entity in which any of the foregoing persons is a partner, principal or holder of a 5% or greater beneficial ownership interest. Any covered transaction, relationship or arrangement is referred to as a “related person transaction.”

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Identification of Potential Related Party Transactions

Pursuant to the Related Person Policy, the audit committee requires our directors and executive officers to compile a list of all related persons of the director or executive officer. Such information is also requested from owners of greater than 5% of our common stock. Nominees for election as a director and persons appointed as directors or executive officers also must compile a list of related persons for the audit committee. The directors and executive officers must provide the audit committee with updates of their list of related persons when necessary. The audit committee, in its discretion, may also examine publicly-available information to ensure that each list of related persons is accurate and complete.

Review and Approval of Related Party Transactions

Once a master list of related persons is prepared, the audit committee distributes this list to the loan committee and to our Treasurer and Chief Financial Officer, who will distribute the list to such other individuals as he deems appropriate. The loan committee and other individuals then use this master list to determine if any existing or proposed transaction is a related person transaction. If a proposed related person transaction is identified, then the audit committee gathers information about the transaction, including, among other things, (1) the related person involved, (2) the material facts of the proposed transaction, including the amount involved, (3) the benefits of the transaction to us, (4) the availability of other sources of comparable products or services, and (5) an assessment of whether the terms of the proposed transaction are comparable to those available to unrelated third parties.

With this information, the audit committee determines whether the proposed related person transaction should be approved. If an audit committee member has an interest in the subject transaction, he or she is not permitted to participate in the review of the transaction. Under the Related Person Policy, the audit committee may only approve a related person transaction that is in, or at least not inconsistent with, the best interests of us and our shareholders.

If the loan committee or any other person becomes aware of an ongoing related party transaction that the audit committee has not approved, then information about the transaction similar to that described above will be compiled. The audit committee will then determine whether the transaction should be ratified or, if possible, amended or terminated. If the related person transaction is already complete, the committee must determine whether it is appropriate to attempt to rescind the transaction. Under the Related Person Policy, the audit committee must request our Treasurer and Chief Financial Officer to review our controls and procedures to ascertain why the related person transaction was not submitted to the audit committee for its prior approval. Finally, under the Related Person Policy, the audit committee is charged with reviewing annually any previously approved or ratified related party transaction that has a remaining term of more than six months or has remaining amounts payable greater than $25,000. Based on this review, the audit committee must determine whether it is in the best interests of us and our shareholders to continue, modify or terminate any ongoing related party transaction.

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DIRECTOR INDEPENDENCE

Our Board of Directors has determined that each of Craig Dungan, Jane D. Crosswhite, Donald L. Kilgore, Herbert A. King, David A. King, Daniel Adam Mars, David P. Webb, Terrell E. Winstead, and Jason R. Voyles is “independent” as defined in rule 2.5 of the OTCQX Rules for U.S. Companies.

Our Board of Directors considered certain relationships between our directors and nominees for director and us when determining each director’s or nominee’s status as an “independent director” under rule 2.5 of the OTCQX Rules for U.S. Companies. In particular, our Board of Directors noted that we engaged Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, a law firm of which David P. Webb was a shareholder in 2023, to provide advice in various legal areas, including tax audits, employee benefits, civil litigation defense and general corporate law. Our Board of Directors determined that this relationship did not affect the status of Mr. Webb as an “independent director.” Additionally, Jason R. Voyles’s father-in-law, William G. Yates, Jr. is the principal owner of Philadelphia Security Insurance in which the Company purchased insurance policies from in 2023. The Company determined that this relationship did not affect the status of Mr. Voyles as an “independent director” as the Company has been using Philadelphia Security Insurance as its insurance provider for several years before Mr. Voyles was elected as a director and, in the opinion of the Company’s board of directors, this relationship would not interfere with Mr. Voyles’s exercise of independent judgment in carrying out his responsibilities of a director.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

HORNE LLP, an independent registered public accounting firm, has served as our auditor since December 31, 1998. The audit committee has appointed HORNE LLP to serve as auditor for the fiscal year ending December 31, 2024.

Fees related to services performed for us by HORNE LLP in fiscal years 2023 and 2022 are as follows:

	2023		2022
Audit Fees ⁽¹⁾	$	347,254	$	354,717
Audit-Related Fees⁽²⁾		-		-
Tax Fees ⁽³⁾		37,500		36,300
All Other Fees		-		-
Total	$	384,754	$	374,759

⁽¹⁾	Audit fees include fees and expenses associated with the audit of our annual financial statements, the reviews of the financial statements in our quarterly reports on Form 10-Q, and regulatory and statutory filings.

⁽²⁾	Audit-related fees primarily include professional services rendered for the audit of our employee benefit plans and technical accounting, consulting and research.

⁽³⁾	Tax fees and expenses include tax compliance services, tax advice, and tax planning assistance, all of which were pre-approved by the audit committee. All tax fees were permissible tax fees under SEC rules.

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In accordance with the procedures set forth in its charter, the audit committee pre-approves all auditing services and permitted non-audit services (including the fees and terms of those services) to be performed for us by our independent auditor prior to engagement for the services, subject to the de minimis exceptions for non-audit services permitted by SEC rules and regulations. For fiscal years 2023 and 2022, none of the fees listed under Audit-Related Fees, Tax Fees or All Other Fees were covered by the de minimis exception. The chairman of the audit committee has been delegated the authority by the committee to pre-approve the engagement of the independent auditors when the entire committee is unable to do so. The chairman must report all such pre-approvals to the entire audit committee at the next committee meeting.

PART IV

ITEM 15.

EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.

(a)

Financial Statements

Consolidated Financial Statements and Supplementary Information for years ended December 31, 2021, 2022 and 2023, which include the following:

(i)

Report of Independent Registered Public Accounting Firm (Financial Statements and Internal Control)

(ii)

Management’s Assessment of Internal Control over Financial Reporting

(iii)

Consolidated Statements of Condition

(iv)

Consolidated Statements of Income

(v)

Consolidated Statements of Comprehensive Income

(vi)

Consolidated Statements of Changes in Stockholders’ Equity

(vii)

Consolidated Statements of Cash Flows

(viii)

Notes to Consolidated Financial Statements

Financial Statement Schedules

None.

Exhibits required by Item 601 of Regulation S-K

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		Incorporated by Reference
Exhibit Number	Description of Document	Form	Filing Date	Exhibit Number	SEC File No.
2.1	Agreement and Plan of Merger, dated as of May 21, 2019, by and among Citizens Holding Company, The Citizens Bank of Philadelphia and Charter Bank	8-K	May 21, 2019	2.1	000-25221
3(i)	Restated Articles of Incorporation of Citizens Holding Company	10-Q	May 10, 2017	3(A)	000-25221
3(ii)	Second Amended and Restated Bylaws of Citizens Holding Company, as amended	10-Q	May 10, 2017	3(B)	000-25221
4	Description of Common Stock				000-25221
10(1)	Citizens Holding Company Revolving Credit Loan Agreement	8-K	June 14, 2021	10(1)	000-25221
10(a)	Directors’ Deferred Compensation Plan - Form of Agreement †	10/A	June 21, 1999	10	000-25221
10(b)	Citizens Holding Company 1999 Directors’ Stock Compensation Plan †	10/A	June 21, 1999	10(A)	000-25221
10(c)	Citizens Holding Company 1999 Employees’ Long-Term Incentive Plan †	10/A	June 21, 1999	10(B)	000-25221
10(d)	Change in Control Agreement dated December 10, 2002 between Citizens Holding Company and Greg L. McKee †	10-K	March 31, 2003	10(D)	000-25221
10(e)	Supplemental Executive Retirement Plan †	10-K	March 16, 2005	10(F)	000-25221
10(f)	Citizens Holding Company 2013 Incentive Compensation Plan †	DEF-14A	March 21, 2013	A	000-25221
10(g)	Form of Incentive Stock Option Agreement under the Citizens Holding Company 2013 Incentive Compensation Plan †	8-K	April 25, 2013	10.1	000-25221
10(h)	Form of Non-Qualified Stock Option Agreement under the Citizens Holding Company 2013 Incentive Compensation Plan †	8-K	April 25, 2013	10.2	000-25221
10(i)	Form of Restricted Share Award Agreement under the Citizens Holding Company 2013 Incentive Compensation Plan †	8-K	April 25, 2013	10.3	000-25221
10(j)	Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under the Citizens Holding Company 2013 Incentive Compensation Plan †	8-K	April 25, 2013	10.4	000-25221
10(k)	Form of Voting Agreement, between Citizens Holding Company and certain shareholders of Charter Bank (included as an exhibit to the Agreement and Plan of Merger attached as Exhibit 2.1)	8-K	May 21, 2019	2.1	000-25221
10(l)	Citizens Holding Company Revolving Credit Loan Agreement	8-K	June 14, 2021	10(1)	000-25221
10(m)	First Amendment to Loan Agreement and Revolving Credit Note, as of June 26, 2023, between Citizens Holding Company and First Horizon Bank	10-Q	August 14, 2023	10(1)	000-25221
10(n)	Employment Agreement, dated January 11, 2023 by and between the Citizens Bank of Philadelphia and Stacy M. Brantley†	10-Q	May 15, 2023	10(1)	000-25221
13	2023 Annual Report to Shareholders +				000-25221
14	Code of Ethics ±	10-K	March 26, 2004		000-25221
21	Subsidiaries of Citizens Holding Company +				000-25221
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer +				000-25221
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer +				000-25221
32.1	Section 1350 Certification of Chief Executive Officer ++				000-25221

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		Incorporated by Reference
Exhibit Number	Description of Document	Form	Filing Date	Exhibit Number	SEC File No.
32.2	Section 1350 Certification of Chief Financial Officer ++				000-25221
101	Inline XBRL Exhibits +
104	Cover Page Interactive Data File (formatted as Inline EXBRL and contained in Exhibit 101)				000-25221


†	Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K pursuant to Item 15(b) of Form 10-K
+	Filed herewith
++	Furnished herewith
±	As updated on Citizens Holding Company’s
	website, https://www.thecitizensbankphila.com/investor-relations/

ITEM 16.

FORM 10-K SUMMARY.

The Company has elected not to include summary information.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CITIZENS HOLDING COMPANY

Date: March 29, 2024	By:	/s/ Stacy M. Brantley
	Stacy M. Brantley
	President and Chief Executive Officer

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 capacity and on the dates indicated:

SIGNATURES	CAPACITIES	DATE
/s/ Stacy M. Brantley Stacy M. Brantley	President and Chief Executive Officer and Director (Principal Executive Officer)	March 29, 2024
/s/ Phillip R. Branch Phillip R. Branch	Treasurer and Chief Financial Officer (Principal Financial & Accounting Officer)	March 29, 2024
/s/ Greg McKee Greg McKee	Director	March 29, 2024
/s/ Craig Dungan Craig Dungan, MD	Director	March 29, 2024
/s/ Jason R. Voyles Jason R. Voyles	Director	March 29, 2024
/s/ Donald L. Kilgore Donald L. Kilgore	Director	March 29, 2024
/s/ David A. King David A. King	Director	March 29, 2024
/s/ Herbert A. King Herbert A. King	Chairman of the Board	March 29, 2024
/s/ Adam Mars Adam Mars	Director	March 29, 2024
/s/ David P. Webb David P. Webb	Director	March 29, 2024
/s/ Jane D. Crosswhite Jane D. Crosswhite	Director	March 29, 2024
/s/ Terrell E. Winstead Terrell E. Winstead	Director	March 29, 2024
/s/ Gregory E. Cronin Gregory E. Cronin	Director	March 29, 2024

SEC Form 10-K filed by Citizens Holding Company