As of and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023

Citizens Holding Company (referred to herein as the “Company”) owns and operates The Citizens Bank of Philadelphia (the “Bank”). As a state bank, the Bank is subject to regulations of the Mississippi Department of Banking and Consumer Finance and the Federal Deposit Insurance Company. The Company is also subject to the regulations of the Federal Reserve. The area served by the Bank is east central Mississippi, along with southern and northern counties of Mississippi and their surrounding areas. Services are provided at multiple branch offices.

These interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). However, these interim consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. The interim consolidated financial statements are unaudited and reflect all adjustments and reclassifications, which, in the opinion of management, are necessary for a fair presentation of the results of operations and financial condition as of and for the interim periods presented. All adjustments and reclassifications are of a normal and recurring nature. Results for the period ended ~~September~~June 30, ~~2017~~ 2023 are not necessarily indicative of the results that may be expected for any other interim period or for the year as a whole.

The interim consolidated financial statements of ~~Citizens Holding~~the Company ~~(the “Company”)~~ include the accounts of its ~~wholly-owned~~wholly owned subsidiary, The Citizens Bank of ~~Philadelphia (the “Bank” and collectively with Citizens Holding Company, the “Corporation”).~~Philadelphia. All significant intercompany transactions have been eliminated in consolidation.

For further information and significant accounting policies of the ~~Corporation,~~Company, see the Notes to Consolidated Financial Statements of Citizens Holding Company included in the ~~Corporation’s~~Company’s Annual Report on Form~~10-K~~10-K for the year ended December 31, ~~2016,~~ 2022, filed with the Securities and Exchange Commission on March ~~15, 2017.~~16, 2023.

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

Estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses (“ACL”) and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, or other real estate owned (“OREO”). In connection with the determination of the ACL and valuation of foreclosed real estate, management obtains independent appraisals for significant properties.

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

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). This update to Accounting Standards Codification Topic (“ASC”) 326,Financial Instruments - Credit Losses (“ASC 326”), significantly changed the way entities recognize impairment on many financial assets by requiring immediate recognition of estimated credit losses expected to occur over the asset’s remaining life. FASB describes this impairment recognition model as the current expected credit loss (“CECL”) model and believes the CECL model will result in more timely recognition of credit losses since the CECL model incorporates expected credit losses versus incurred credit losses. The scope of FASB’s CECL model includes loans, held-to-maturity debt instruments, lease receivables, loan commitments and financial guarantees that are not accounted for at fair value. Additionally, ASU 2016-13 amended the accounting for credit losses on available-for-sale securities and purchased financial assets with credit deterioration (“PCD”). In the remainder of these Notes to Consolidated Financial Statements, references to “CECL” or to “FASB ASU 2016-13” shall mean the accounting standards and principles set forth in ASC 326 after giving effect to ASU 2016-13 and the clarifications thereto discussed in the next paragraph.

The Company adopted ASU 2016-13 and all related subsequent amendments thereto effective January 1, 2023 using the modified retrospective approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. To implement CECL, entities are required to apply a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company recorded a one-time cumulative-effect adjustment as disclosed in the table below.

Additionally, the Company made an accounting policy election to exclude accrued interest receivable from the amortized cost basis of loans and thus the measurement of the ACL in the Company’s loan portfolio. Accrued interest receivable on loans is reported as a component of accrued interest receivable on the Consolidated Balance Sheets and totaled $1,938 and $1,981 at June 30, 2023 and December 31, 2022, respectively, and is excluded from estimated credit losses.

In the ordinary course of business, the ~~Corporation~~Company enters into commitments to extend credit to its customers. The unused portion of these commitments is not reflected in the accompanying financial statements. As of ~~September~~June 30, ~~2017,~~ 2023, the ~~Corporation~~Company had entered into loan commitments with certain customers with an aggregate unused balance of ~~$38,122,030~~$68,680 compared to an aggregate unused balance of ~~$37,194,220~~$75,602 at December 31, ~~2016.~~ 2022. There were ~~$2,713,880 of~~$3,488 letters of credit outstanding at ~~September~~June 30, ~~2017~~ 2023 and ~~$3,456,180~~$5,438 at December 31, ~~2016.~~ 2022. The fair value of such commitments is not considered material because letters of credit and loan commitments often are not used in their entirety, if at all, before they expire. The balances of such letters and commitments should not be used to project actual future liquidity requirements. However, the ~~Corporation~~Company does incorporate expectations about the utilization under its credit-related commitments ~~and~~ into its asset and liability management program.

The ~~Corporation~~Company is a party to lawsuits and other claims that arise in the ordinary course of business, all of which are being vigorously contested. In the regular course of business, management evaluates estimated losses or costs related to litigation, and provisions are made for anticipated losses whenever management believes that such losses are probable and can be reasonably estimated. At the present time, management believes, based on the advice of legal counsel, that the final resolution of pending legal proceedings will not likely have a material impact on the ~~Corporation’s~~Company’s consolidated financial condition or results of operations.

Net income per share - basic has been computed based on the weighted average number of shares outstanding during each period. Net income per share - diluted has been computed based on the weighted average number of shares outstanding during each period plus the dilutive effect of outstanding stock options and restricted stock using the treasury stock method. Net income per share was computed as follows:

The ~~Corporation~~Company has adopted the 2013 Incentive Compensation Plan (the ~~“2013~~“2013 Plan”), which the ~~Corporation~~Company intends to use for ~~all~~ future equity grants to employees, directors or consultants until the termination or expiration of the 2013 Plan.

No options were outstanding under the ~~adoption~~2013 Plan as of the 2013 Plan, the Corporation utilized two stock-based compensation plans, the 1999 Directors’ Stock Compensation Plan (the “Directors’ Plan”) for directors, and the 1999 Employees’ Long-Term Incentive Plan (the “Employees’ Plan”) for employees, both of which have expired.

~~The following table is a summary of the stock option activity for the nine months ended September~~June 30, ~~2017.~~2023.

~~The intrinsic value of options previously granted under~~During 2023, the Directors’ Plan at September 30, 2017, was $258,885 and since there were no options granted under the 2013 Plan during the three-month period ended September 30, 2017, the intrinsic value for the 2013 Plan at September 30, 2017 is $0, for an aggregate intrinsic value at September 30, 2017 of $258,885.

~~During the quarter ended September 30, 2017, the Corporation’s~~Company’s directors received restricted stock grants totaling ~~7,500~~9,000 shares of common stock under the 2013 Plan. These grants vest over a~~one-year~~one-year period ending April ~~26, 2018~~ 28, 2024 during which time the recipients have rights to vote the shares and to receive dividends. The grant date fair value of these shares was ~~$180,225~~$112 and ~~will be recognized~~is expensed ratably over the~~one-year~~one-year vesting ~~period at a cost of $15,018 per month less deferred taxes of $5,602 per month. Also during~~period.

During 2023, the ~~quarter ended September 30, 2017, there were 1,500~~Company’s Chief Executive Officer (“CEO”) received restricted stock grants totaling 3,868 shares of ~~restricted~~common stock ~~that vested pursuant~~under the 2013 Plan. These grants vest over a four-year period ending March 1, 2027 during which time the CEO has rights to ~~an incentive plan~~vote the shares and to receive dividends. The grant date fair value of these shares was $60 and is expensed ratably over the four-year vesting period.

For the three months ended June 30, 2023 and 2022, the Company recorded a provision for ~~senior management.~~income taxes totaling ($79) and $497, respectively. The effective tax rate was (35.75%) and 16.36% for the three months ended June 30, 2023 and 2022, respectively.

For the six months ended June 30, 2023 and 2022, the Company recorded a provision for income taxes totaling $75 and $887, respectively. The effective tax rate was 4.95% and 16.23% for the six months ended June 30, 2023 and 2022, respectively.

The ~~Corporation files a consolidated United States~~provision for income taxes includes both federal ~~income tax return. The Corporation is currently open to audit under the statute of limitations by the Internal Revenue Service for all tax years after 2013. The Corporation’s consolidated~~and state income taxes and differs from the statutory rate due to favorable permanent differences primarily related to tax ~~returns are also open to audit under the statute of limitations for the same period.~~

The amortized cost and estimated fair value of securitiesavailable-for-sale and the corresponding amounts of gross unrealized gains and losses recognized were as follows:

The amortized cost and estimated fair value of securities held-to-maturity and the corresponding amounts of gross unrealized gains and losses recognized were as follows:

During the third quarter of 2022, the Company reclassified $413,921 of securities available-for-sale to securities held-to-maturity. At the date of this transfer, the net unrealized holding loss on the transferred securities totaled approximately $71,319 ($53,525 net of tax).

The securities were transferred at fair value, which became the cost basis for the securities held-to-maturity. The net unrealized holding loss is amortized over the remaining life of the securities in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security. There were no gains or losses recognized as a result of the transfer. At June 30, 2023, the net unamortized, unrealized loss on transferred securities included in accumulated other comprehensive income ~~were~~(loss) in the accompanying balance sheet totaled approximately $67,294 ($50,505, net of tax) compared to $69,612 ($52,244, net of tax) at December 31, 2022.

ASU 2016-13 applies to all financial instruments carried at amortized cost, including securities held-to-maturity, and makes targeted improvements to the accounting for credit losses on securities available-for-sale.

Under ASU 2016-13, the allowance for credit losses is an estimate measured using relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets.

In order to comply with ASU 2016-13, the Company conducted a review of its investment portfolio and determined that for certain classes of securities it would be appropriate to assume the expected credit loss to be zero. This zero-credit loss assumption applies to debt issuances of the U.S. Treasury and agencies and instrumentalities of the United States government. The reasons behind the adoption of the zero-credit loss assumption are as follows:

The Company will continuously monitor any changes in economic conditions, credit downgrades, changes to explicit or implicit guarantees granted to certain debt issuers, and any other relevant information that would indicate potential credit deterioration and prompt the Company to reconsider its zero-credit loss assumption.

At the date of adoption, the Company’s estimated allowance for credit losses on securities available-for-sale and held-to-maturity under ASU 2016-13 was deemed immaterial due to the composition of these portfolios. Both portfolios consist primarily of U.S. government agency guaranteed mortgage-backed securities for which the risk of loss is minimal. Therefore, the Company did not recognize a cumulative effect adjustment through retained earnings related to the available-for-sale or held-to-maturity securities.

ASU 2016-13 makes targeted improvements to the accounting for credit losses on securities available-for-sale. The concept of other-than-temporarily impaired has been replaced with the allowance for credit losses. Unlike securities held-to-maturity, securities available-for-sale are evaluated on an individual level and pooling of securities is not allowed.

Quarterly, the Company evaluates if any security has a fair value less than its amortized cost. Once these securities are identified, in order to determine whether a decline in fair value resulted from a credit loss or other factors, the Company performs further analysis to ensure that the changes in unrealized losses are, in fact, temporary in nature by correlating the changes to the yield curve movement.

Should it be determined that a credit loss exists, the credit portion of the allowance will be measured using a discounted cash flow (“DCF”) analysis using the effective interest rate as of the security’s purchase date. The amount of credit loss the Company records will be limited to the amount by which the amortized cost exceeds the fair value.

The DCF analysis utilizes contractual maturities, as well as third-party credit ratings and cumulative default rates published annually by Moody’s Investor Service.

At June 30, 2023, the results of the analysis did not identify any available-for-sale securities that violate the credit loss triggers; therefore, no DCF analysis was performed and no credit loss was recognized on any of the securities available-for-sale.

ASU 2016-13 requires institutions to measure expected credit losses on financial assets carried at amortized cost on a collective or pool basis when similar risks exist. The Company uses several levels of segmentation in order to measure expected credit losses:

As discussed above, the Company has determined that for certain classes of securities it would be appropriate to conclude the expected credit loss to be zero, which include debt issuances of the U.S. Treasury and agencies and instrumentalities of the United States government. This assumption will be reviewed and attested to quarterly. The Company is using an internally built model to verify the accuracy of third-party provided calculations.

At June 30, 2023, the Company’s securities held-to-maturity totaled $396,931. The potential credit loss exposure was $92,885 and consisted of municipal securities. After applying appropriate probability of default and loss given default assumptions, the total amount of current expected credit losses was deemed immaterial. Therefore, no reserve was recorded at June 30, 2023.

At June 30, 2023, the Company had no securities held-to-maturity that were past due 30 days or more as to principal or interest payments. The Company had no securities held-to-maturity classified as nonaccrual at June 30, 2023.

The Company monitors the credit quality of municipal securities held-to-maturity on a quarterly basis through credit ratings. The following table presents the amortized cost of the Company’s securities held-to-maturity by credit rating, as determined by Moody’s Investor Services, at June 30, 2023 and December 31, 2022:

(1) Not rated securities were municipals that did not have a current Moody’s rating as of the dates reported above. However, all not rated securities are investment grade and are rated between AAA and AA- by Standard and Poor’s rating agency.

The tables below show the Company’s gross unrealized losses and fair value of available-for-sale and held-to-maturity investments for which an ACL has not been recorded, aggregated by investment category and length of impairment at June 30, 2023 and December 31, 2022.

The unrealized losses shown above are due to increases in market rates over the yields available at the time of purchase of the underlying securities and not credit quality. The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

The amortized cost and estimated fair value of securities by contractual maturity at ~~September~~June 30, ~~2017 and December 31, 2016~~ 2023 are shown below. Actual maturities may differ from contractual maturities because issuers have the right to call or prepay certain obligations.

At June 30, 2023 and ~~fair~~December 31, 2022, securities with a carrying value of~~available-for-sale~~ $444,663 and~~held-to-maturity~~ ~~investments, aggregated by investment category~~ $462,954, respectively, were pledged to secure government and ~~length of time that individual investments were in a continuous loss position at September 30, 2017~~public deposits and ~~December 31, 2016.~~

~~A summary of unrealized loss information for~~ securities~~available-for-sale,~~ ~~categorized by security type follows (in thousands):~~ sold under agreement to repurchase.

(in thousands, except number of ~~United States government agencies, mortgage backed securities and state, county and municipal bonds are the result of an upward trend in interest rates, mainly in themid-term~~ sector. None of the unrealized losses disclosed in the previous table are related to credit deterioration. The Corporation has determined that none of the securities in this classification were other-than-temporarily impaired at September 30, 2017 nor at December 31, 2016.

The composition of ~~net loans (in thousands)~~LHFI at ~~September~~June 30, ~~2017~~ 2023 and December 31, ~~2016~~ 2022 was as follows:

The amortized cost basis of period-end, nonaccrual and past due ~~if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed onnon-accrual~~ ~~status, when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed onnon-accrual~~ status regardless of whether such loans are considered past due. When interest accruals are discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

~~Period-end,non-accrual~~ ~~loans (in thousands),~~LHFI, segregated by class, were as follows:

The following disclosures are presented under GAAP in effect prior to the adoption of CECL. The Company has included these disclosures to address the applicable prior period.

No material interest income was recognized in the income statement on nonaccrual LHFI for each of the periods ended June 30, 2023 and 2022.

An aging analysis of ~~past due loans (in thousands)~~the amortized cost basis of LHFI (including nonaccrual LHFI), segregated by class, ~~as of September 30, 2017,~~ was as follows:

~~An aging analysis of past due loans (in thousands), segregated by class, as of December 31, 2016 was as follows:~~Impaired LHFI

~~Loans are considered~~Prior to the adoption of FASB ASC Topic 326, the Company’s individually evaluated impaired ~~when, based on current information~~LHFI included all commercial substandard relationships of $100 or more, which were specifically reviewed for impairment and ~~events, it is probable the Corporation will be unable to collect~~deemed impaired, and all ~~amounts due~~LHFI classified as troubled-debt restructurings (“TDRs”) in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. In determining which loans to evaluate for impairment, management looks at all loans over $100,000 that are past due loans, bankruptcy filings and any situation that might lend itself to causeFASB ASC Subtopic 310-10-50-20 “Impaired Loans.” Once a ~~borrower to be unable to repay the loan according to the original agreement terms. If a loan is determined~~LHFI was deemed to be impaired, the full difference between book value and the ~~collateral is deemed to be insufficient to fully repay~~most likely estimate of the ~~loan,~~collateral’s net realizable value was charged off or a specific reserve ~~will be~~was established. ~~Interest payments~~

No material interest income was recognized in the income statement on impaired LHFI for the periods ended June 30, 2023 and 2022.

The following disclosures are presented under GAAP in effect prior to the adoption of CECL that are no longer applicable or required. The Company has included these disclosures to address the applicable prior periods.

Loans formerly accounted for under FASB ASC 310-20, “Nonrefundable Fees and Other Cost” (“ASC 310-20”), and which are impaired loans ~~are typically applied to principal unless collectability of the principal amount is reasonably assured,~~recognized in ~~which case interest is recognized on a cash basis. Impaired loans or portions thereof, arecharged-off~~ ~~when deemed uncollectible.~~

~~Impaired loans (in thousands) as of September 30, 2017,~~conformity with ASC 310, “Receivables” (“ASC 310”), segregated by class, were as ~~follows:~~follows as of December 31, 2022:

~~The following table presents troubled debt restructurings (in thousands, except for number of loans), segregated by class:~~Loan Modifications

~~Changes~~The Company adopted ASU 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures on January 1, 2023. The amendments in this ASU were applied prospectively, and therefore, loan modification and charge off information is provided only for those items occurring after the January 1, 2023 adoption date.

Based on the guidance in ASU 2022-02, a loan modification or refinancing results in a new loan if the terms of the new loan are at least as favorable to the lender as the terms with customers with similar collection risks that are not refinancing or restructuring their loans and the modification to the terms of the loans are more than minor. If a loan modification or refinancing does not result in a new loan, it is classified as a loan modification. There are additional disclosures for the modification of loans with borrowers experiencing financial difficulty that results in a direct change in the ~~Corporation’s troubled debt restructurings (in thousands, except for number~~timing or amount of ~~loans)~~contractual cash flows. The disclosures are ~~set forth~~applicable to situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions or a combination of any of these terms. If the Company modifies any loans to borrowers in financial distress that involves principal forgiveness, the amount of principal forgiven is charged off against the ACL.

The Company had no loan modifications to borrowers experiencing financial difficulties in the ~~table below:~~second quarter of 2023.

At June 30, 2023, LHFI classified as modified loans totaled $2,035. At June 30, 2023, modified loans were primarily comprised of interest rate concessions. The Company had $-0- thousand in unused commitments on modified loans at June 30, 2023.

The allocated ~~allowance for loan losses~~ACL attributable to ~~restructured~~modified loans was ~~$174,274~~$90 at ~~September~~June 30, ~~2017 and December 31, 2016.~~ 2023. The ~~Corporation~~Company had no ~~remaining availability under~~ commitments to lend additional funds on ~~these~~this troubled debt ~~restructurings~~restructuring as of ~~September~~June 30, ~~2017.~~

There were no loans modified within the last twelve months for which there was a payment default during the three and six months ended June 30, 2023.

At June 30, 2023 and December 31, 2022, the amortized cost of loans secured by Real Estate – 1-4 Family Mortgage in the process of foreclosure was $-0- and $-0-, respectively.

The ~~Corporation~~following tables present the amortized cost basis of collateral-dependent loans by class of loans and collateral type as of June 30, 2023:

A loan is collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the sale of the collateral. The following provides a qualitative description by class of loan of the collateral that secures the Company’s collateral-dependent LHFI:

The Company utilizes a risk grading matrix to assign a risk grade to each of its loans when originated and is updated as factors related to the strength of the loan changes. Loans are graded on a scale of 1 to 9. A description of the general characteristics of the 9 risk grades is as follows.

Grade 1. MINIMAL ~~RISK—~~RISK - These loans are without loss exposure to the ~~Corporation.~~Company. This classification is reserved for only the best, well secured loans to borrowers with significant capital strength, low leverage, stable earnings and growth and other readily available financing alternatives. This type of loan would also include loans secured by a program of the government.

Grade 2. MODEST ~~RISK—~~RISK - These loans include borrowers with solid credit quality and moderate risk of loss. These loans may be fully secured by certificates of deposit with another reputable financial institution or secured by readily marketable securities with acceptable margins.

Grade 3. AVERAGE ~~RISK—~~RISK - This is the rating assigned to ~~the majority~~most of the loans held by the ~~Corporation.~~Company. This includes loans with average loss exposure and average overall quality. These loans should liquidate through possessing adequate collateral and adequate earnings of the borrower. In addition, these loans are properly documented and are in accordance with all aspects of the current loan policy.

Grade 4. ACCEPTABLE ~~RISK—~~RISK - Borrower generates sufficient cash flow to fund debt service but most working asset and capital expansion needs are provided from external sources. Profitability and key balance sheet ratios are usually close to peers but one or more may ~~be higher than~~not align with peers.

Grade 5. MANAGEMENT ~~ATTENTION—~~ATTENTION - Borrower has ~~significant~~potential weaknesses resulting from performance trends or management concerns. The financial condition of the borrower has taken a negative turn and may be temporarily strained. Cash flow is weak but cash reserves remain adequate to meet debt service. Management weakness is evident.

Grade 6. OTHER LOANS ESPECIALLY MENTIONED (“OLEM”)— - Loans in this category are fundamentally sound but possess some weaknesses. OLEM loans have ~~potential~~ weaknesses, which may, if not checked or corrected, weaken the asset or inadequately protect the ~~bank’s~~Bank's credit position at some future date. These loans have an identifiable weakness in credit, collateral, or repayment ability but there is no expectation of loss.

Grade 7. SUBSTANDARD ~~ASSETS—~~ASSETS - Assets classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets classified as substandard must have a well-defined weakness based upon objective evidence. Assets classified as substandard are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. The possibility that liquidation would not be timely requires a substandard classification even if there is little likelihood of total loss. ~~This classification does not mean that the loan will incur a total or partial loss. Substandard loans may or may not be impaired.~~

Grade 8. ~~DOUBTFUL—~~ DOUBTFUL - A loan classified as doubtful has all the weaknesses of a substandard classification and the added characteristic that the weakness makes collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable or improbable. The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors ~~which~~ that may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined. A doubtful classification could reflect the fact that the primary source of repayment is gone and serious doubt exists as to the quality of a secondary source of repayment.

Grade 9. ~~LOSS—~~ LOSS - Loans classified as loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may occur in the future. Also included in this classification is the defined loss portion of loans rated substandard assets and doubtful assets.

These internally assigned grades are updated on a continual basis throughout the course of the year and represent management’s most updated judgment regarding grades at ~~September~~June 30, ~~2017.~~2023.

The following table details the ~~amount~~amortized cost basis of ~~gross loans (in thousands),~~LHFI, segregated by loan origination year, grade and class, as of ~~September~~June 30, ~~2017:~~2023:

There were no revolving loans converted to term loans during the three and six months ended June 30, 2023.

The following disclosures are presented under GAAP in effect prior to the adoption of CECL. The Company has included these disclosures to address the applicable prior period.

A discussion of the Company’s policies regarding internal risk-rating of loans is discussed above and is applicable to these tables. The following table ~~details~~presents the Company’s loan portfolio by internal risk-rating grades as of December 31, 2022:

The Company’s ACL methodology for LHFI is based upon guidance within ASC Subtopic 326-20 as well as applicable regulatory guidance. The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Credit quality within the LHFI portfolio is continuously monitored by Management and is reflected within the ACL for loans. The ACL is an estimate of expected losses inherent within the Company’s existing LHFI portfolio. The ACL for LHFI is adjusted through the PCL, LHFI and reduced by the charge off of loan amounts, net of recoveries.

The methodology for estimating the amount of ~~gross~~expected credit losses reported in the ACL has two basic components: a collective, or pooled, component for estimated expected credit losses for pools of loans ~~(in thousands)~~that share similar risk characteristics, and an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans. In estimating the ACL for the collective component, loans are segregated byinto loan ~~grade~~pools based on loan product types and ~~class, as of December 31, 2016:~~similar risk characteristics.

The ~~allowance~~loans secured by real estate segment includes loans for ~~loan losses is established through a provision~~both commercial and residential properties. The underwriting process for ~~loan losses charged to expense, which represents management’s best estimate~~these loans includes analysis of ~~probable losses~~the financial position and strength of both the borrower and guarantor, experience with similar projects in the past, market demand and prospects for successful completion of the proposed project within the ~~existing portfolio~~established budget and schedule, values of ~~loans.~~underlying collateral, availability of permanent financing, maximum loan-to-value ratios, minimum equity requirements, acceptable amortization periods and minimum debt service coverage requirements, based on property type. The ~~allowance,~~borrower’s financial strength and capacity to repay their obligations remain the primary focus of underwriting. Financial strength is evaluated based upon analytical tools that consider historical and projected cash flows and performance in ~~the judgment~~addition to a financial analysis of ~~management,~~any proposed project. Additional support offered by guarantors is ~~necessary~~also considered. Ultimate repayment of these loans is sensitive to ~~reserve for estimated loan losses~~interest rate changes, general economic conditions, liquidity and ~~risks inherent in the loan portfolio.~~availability of long-term financing.

The ~~allowance on~~business loan segment includes loans within the ~~majority~~Company’s geographic markets made to many types of the loan portfolio is calculated using a historical chargeoff percentage applied to the current loan balances by loan segment. This historical period is the average of the previous twenty quarters with the most current quarters weighted more heavily to show the effect of the most recent chargeoff activity. This percentage is also adjustedbusinesses for ~~economic factors~~various purposes, such as ~~local unemployment~~short term working capital loans that are usually secured by accounts receivable and ~~general business conditions,~~inventory and term financing for equipment and fixed asset purchases that are secured by those assets. The Company’s credit underwriting process for commercial and industrial loans includes analysis of historical and projected cash flows and performance, evaluation of financial strength of both ~~local~~borrowers and ~~nationwide.~~guarantors as reflected in current and detailed financial information and evaluation of underlying collateral to support the credit.

The ~~group~~consumer LHFI portfolio segment is comprised of loans that are centrally underwritten based on a credit scoring system as well as an evaluation of the borrower’s repayment capacity, credit, and collateral. Property appraisals are obtained to assist in evaluating collateral. Loan-to-value and debt-to-income ratios, loan amount, and lien position are also considered in assessing whether to originate a loan. These borrowers are particularly susceptible to downturns in economic trends such as conditions that negatively affect housing prices and demand and levels of unemployment.

The following table provides a description of each of the Company’s portfolio segments, loan classes, loan pools and the ACL methodology and loss drivers:

The Loss Rate model is designed to operate at the portfolio segment level. These segments are relatively homogenous groups of loans with similar characteristics. Based on the average inputs of each segment, the model then calculates both quarterly and lifetime loss rates for the entire segment by loan. The lifetime loss rate is then multiplied by the amortized cost of each loan within a class to get a quantitative reserve.

The Company chose the Weighted Average Remaining Maturity (“WARM”) method for two loan classes that are relatively non-complex. The WARM methodology factors in the remaining life of each applicable loan class that must be calculated to be ~~impaired are individually evaluated~~used within the quantitative model.

The Company determined that reasonable and supportable forecasts could be made for ~~possible loss~~a twelve-month period for all of its loan pools. To the extent the lives of the loans in the LHFI portfolio extend beyond this forecast period, the Company uses a reversion period of four quarters and reverts to the historical mean on a straight-line basis over the remaining life of the loans. The econometric models currently in production reflect segment or pool level sensitivities of probability of default to changes in macroeconomic variables. By measuring the relationship between defaults and changes in the economy, the quantitative reserve incorporates reasonable and supportable forecasts of future conditions that will affect the value of its assets, as required by FASB ASC Topic 326.

In addition to the items mentioned above, the Company incorporates qualitative factors into the ACL methodology, including the following:

The qualitative reserve is calculated by taking the quantitative reserve rate and multiplying this rate by the qualitative factor (“Q-factor”) scalar. The Q-factor scalar takes the average of all the Q-factors selected for a specific ~~reserve~~loan class. Each Q-factor is ~~established~~given a rating between 0 to ~~cover any loss contingency. Loans that are determined~~100 basis points (“bps”), with the 0 being no risk to ~~be a loss with no benefit of remaining in~~100 bps being the ~~portfolio are charged off to the allowance. These specific reserves are reviewed periodically for continued impairment~~highest risk impact. Each Q-factor is evaluated and ~~adequacy of the specific reserve~~adjusted quarterly using both internal and ~~are adjusted when necessary.~~

The following table details activity in the ~~allowance for loan losses~~ACL by portfolio segment for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017:~~2023:

The following table details activity in the ~~allowance for loan losses~~ACL by portfolio segment, based on the Company’s former allowance methodology prior to the adoption of ASC 326,for the ~~nine~~three andsix months ended ~~September~~June 30, ~~2016:~~2022:

The ~~Corporation’s~~Company recorded ~~investment in loans~~a provision for credit losses of $372 during the second quarter of 2023, as compared to a provision for credit losses of ~~September 30, 2017 and December 31, 2016 related to each balance~~$56 recorded in the second quarter of 2022. The Company’s allowance for ~~possible loan~~credit losses model considers economic projections, primarily the national unemployment rate, recessionary risks, GDP and CRE price fluctuations. The provision activity during the current quarter was primarily driven by ~~portfolio segment and disaggregated~~increased recessionary risks due to inflationary pressures partially offset by a decline in loans.

The following table represents gross charge-offs by year of origination for the date presented:

The Company maintains a separate ACL for Off-Balance Sheet Credit Exposure, which is included in the “Other liabilities” line item on the ~~basis~~Consolidated Balance Sheets. The Company estimates the amount of expected losses on off-balance sheet credit exposure by calculating a likelihood of funding over the contractual period for exposures that are not unconditionally cancellable by the Company and applying the loss factors used in the ACL on loans methodology described above to unfunded commitments for each loan type. No credit loss estimate is reported for off-balance-sheet credit exposures that are unconditionally cancellable by the Company.

The following table provides a roll-forward of the ~~Corporation’s impairment methodology was as follows (in thousands):~~ACL for off-balance sheet credit exposure for the period presented:

The Company recorded a PCL for off-balance sheet credit exposure for the three and six months ended June 30, 2023 of $45 and $4, respectively. The Company’s allowance for credit losses model considers economic projections, primarily the national unemployment rate, recessionary risks, GDP and CRE price fluctuations. The provision during the current quarter was primarily driven by increased recessionary risk due to inflationary pressures partially offset by a decrease in unfunded loan commitments.

On June 9, 2021, the Company obtained a secured revolving line of credit (“Line”) in the amount of $20,000 with First Horizon Bank. The proceeds of the Line were used to enhance the Bank’s capital structure. The Line bears interest at a floating interest rate linked to WSJ Prime Rate with an initial interest rate of 3.25%, which is payable quarterly on the first day of each calendar quarter, commencing on July 1, 2021, with the final installment of interest being due and payable concurrently on the same date that the principal balance is due. As of June 30, 2023, when the line was renewed, the interest rate was 8.25%. The Line also bears an unused line fee at a rate equal to 0.25%, applied to the unused balance of the Line. The Line is fully secured by the common stock of the Bank. The renewed Line matures on June 9, 2024, at which time all unpaid interest and principal is due and payable.

The fair value topic of the ASC establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. This topic clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. This topic also requires disclosure about how fair value was determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

~~The following table presents assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2017:~~

The following table presents assets and liabilities that were measured at fair value on a recurring basis as of ~~December 31, 2016:~~June 30, 2023:

The following table ~~reports the activity in~~presents assets and liabilities that were measured at fair value on a recurring basis ~~using significant unobservable inputs:~~as of December 31, 2022:

The ~~Corporation~~Company recorded no gains or losses in earnings for the period ended ~~September~~June 30, ~~2017~~ 2023 or December 31, ~~2016~~ 2022 that were attributable to the change in unrealized gains or losses relating to assets still held at the reporting date.

Loans considered impaired are reserved for at the time the loan is identified as impaired taking into account the fair value of the collateral less estimated selling costs. Collateral may be real estate and/or business assets including but not limited to, equipment, inventory and accounts receivable. The ~~following table presents information as~~fair value of ~~September 30, 2017 about significant~~real estate is determined based on appraisals by qualified licensed appraisers. The fair value of the business assets is generally based on amounts reported on the business’s financial statements. Appraised and reported values may be adjusted based on management’s historical knowledge, changes in market conditions from the time of valuation and management knowledge of the client and the client’s business. Since not all valuation inputs are observable, these nonrecurring fair value determinations are classified Level 3. The unobservable inputs ~~(Level 3) used~~may vary depending on the individual assets with the fair value of real estate based on appraised value being the predominant approach. The Company reviews the certified appraisals for appropriateness and adjusts the value downward to consider selling, closing and liquidation costs, which typically approximates 25% of the appraised value. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors previously identified.

OREO is primarily comprised of real estate acquired in partial or full satisfaction of loans. OREO is recorded at its estimated fair value less estimated selling and closing costs at the date of transfer, with any excess of the related loan balance over the fair value less expected selling costs charged to the ACL. Subsequent changes in fair value are reported as adjustments to the carrying amount and are recorded against earnings. The Company outsources the valuation of ~~assets~~OREO with material balances to third party appraisers. The Company reviews the third-party appraisal for appropriateness and ~~liabilities measured at~~adjusts the value downward to consider selling and closing costs, which typically approximate 25% of the appraised value.

~~For~~measurement for assets measured at fair value on a nonrecurring basis ~~during 2017~~ that were still held on the ~~Corporation’s~~ balance ~~sheet at September 30, 2017,~~sheets as of the ~~following table provides~~dates presented and the ~~hierarchy~~ level ~~and~~within the fair value ~~of the related assets:~~hierarchy each is classified:

~~The following table presents information as of September 30, 2017 about significant unobservable inputs (Level 3) used in the valuation of assets and liabilities measured at~~

~~For assets measured at fair value on a nonrecurring basis~~was remeasured during ~~2016 that were still held on~~ the ~~Corporation’s balance sheet at December 31, 2016, the following table provides the hierarchy level and the fair value of the related assets:~~

~~Impaired loans~~period, with a carrying value of ~~$4,654,471~~$2,439 and ~~$7,064,185~~$2,190, had an allocated ~~allowance for loan losses~~ACL of ~~$537,897~~$99 and ~~$786,893~~$116 at ~~September~~June 30, ~~2017~~ 2023 and December 31, ~~2016,~~ 2022, respectively. The allocated allowance is based on the carrying value of the impaired loan and the fair value of the underlying collateral less estimated costs to sell.

After monitoring the carrying amounts for subsequent declines or impairments after foreclosure, ~~or deed in lieu, sometimes referred~~management determined that no fair value adjustment to ~~as other real estate owned (“OREO”),~~OREO was necessary during the ~~nine-month~~three- and six-month period ended ~~September~~June 30, ~~2017,~~ 2023 and ~~recorded at fair value, less costs to sell, was $11,200, of which $11,200 was sold during this period. There were no writedowns during~~ the period on properties owned. OREO acquired during 2016 and recorded at fair value, less costs to sell, was $2,187,125. There were $220,419 in additional writedowns during 2016 on OREO acquired in previous years.year ended December 31, 2022, respectively.

The financial instruments topic of the ASC requires disclosure of financial instruments’ fair values, as well as the methodology and significant assumptions used in estimating fair values. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. The financial instruments topic of the ASC excludes certain financial instruments from its disclosure requirements. ~~Accordingly,~~The following represents the ~~aggregate~~carrying value and estimated fair ~~value amounts presented do not represent the underlying~~ value of the ~~Corporation and may not be indicative of amounts that might ultimately be realized upon disposition or settlement of those assets and liabilities.~~

The following represents the carrying value and estimated fair value of the ~~Corporation’s~~Company’s financial instruments at ~~September 30, 2017:~~December 31, 2022:

~~The following represents the carrying value and estimated fair value of the Corporation’s financial instruments at December 31, 2016:~~

~~The fair value estimates, methods and assumptions used by the Corporation in estimating its fair value disclosures for financial statements were as follows:~~

The carrying amounts reported in the balance sheet for these instruments approximate fair value because of their immediate and shorter-term maturities, which are considered to be three months or less when purchased.

Fair values for investment securities are based on quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments (Level 2). When neither quoted prices nor comparable instruments are available, unobservable inputs are needed to form an expected future cash flow analysis to establish fair values (Level 3).

The Corporation owns certain beneficial interests in one collateralized debt obligation secured by community bank trust preferred securities. These interests do not trade in a liquid market, and therefore, market quotes are not a reliable indicator of their ultimate realizability. The Corporation utilizes a discounted cash flow model using inputs of (1) market yields of trust-preferred securities as the discount rate and (2) expected cash flows which are estimated using assumptions related to defaults, deferrals and prepayments to determine the fair values of these

beneficial interests. Many of the factors that adjust the timing and extent of cash flows are based on judgment and not directly observable in the markets. Therefore, these fair values are classified as Level 3 valuations for accounting and disclosure purposes. Since observable transactions in these securities are rare, the Corporation uses assumptions that a market participant would use in valuing these instruments. These assumptions primarily include cash flow estimates and market discount rates. The cash flow estimates are sensitive to the assumptions related to the ability of the issuers to pay the underlying trust preferred securities according to their terms. The market discount rates depend on transactions, which are rare given the lack of interest of investors in these types of beneficial interests.

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

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

~~The fair value of FHLB advances is based on a discounted cash flow analysis.~~

~~Due to the short term nature of these instruments, which is generally three months or less, the carrying amount is equal to the fair value.~~

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

~~In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU2014-09,~~~~“Revenue from Contracts with Customers”~~~~(“ASU2014-09”).~~ ~~ASU2014-09~~ provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In August 2015, the FASB issued ASU~~2015-14,~~ ~~which defers the effective date of this standard to annual and interim periods beginning after December 15, 2017. The Company is currently evaluating the impact, if any, ASU2014-09~~ ~~will have on its financial position, results of operations, and its financial statement disclosures.~~

~~On September 16, 2016, the FASB issued ASUNo. 2016-13,~~~~Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~~~(“ASU2016-13”).~~ The update will significantly change the way entities recognize impairment on many financial assets by requiring immediate recognition of estimated credit losses expected to occur over the asset’s remaining life. The FASB describes this impairment recognition model as the current expected credit loss (“CECL”) model and believes the CECL model will result in more timely recognition of credit losses since the CECL model incorporates expected credit losses versus incurred credit losses. The scope of FASB’s CECL model would include loans,~~held-to-maturity~~ debt instruments, lease receivables, loan commitments and financial guarantees that are not accounted for at fair value. For public business entities, this update becomes effective for interim and annual periods beginning after December 15, 2019. Management is currently evaluating the impact this ASU will have on the Company’s consolidated financial statements and will continue to monitor FASB’s progress on this topic.

~~In August 2016, the FASB issued ASUNo. 2016-15,~~~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~ ~~(“ASU2016-15”).~~ ~~ASU2016-15~~ is intended to reduce the diversity in practice in how certain cash receipts and cash payments are presented and classified in the Statement of Cash Flows, including (1) debt prepayment or debt extinguishment costs, (2) settlement of~~zero-coupon~~ debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, (6) distributions received from equity method investees, (7) beneficial interests in securitization transactions and (8) separately identifiable cash flows and application of the predominance principle. For public business entities, this amendment becomes effective for interim and annual periods beginning after December 15, 2017. The ASU only impacts the presentation of specific items within the Statement of Cash Flows and is not expected to have a material impact to the Company.

~~In February 2016, the FASB issued ASUNo. 2016-02,~~~~Leases (Topic 842)~~ ~~(“ASU2016-02”). ASU2016-02~~ ~~amends the accounting model and disclosure requirements for leases. The current accounting model for leases distinguishes between capital leases, which are recognizedon-balance~~ sheet, and operating leases, which are not. Under the new standard, the lease classifications are defined as finance leases, which are similar to capital leases under current GAAP, and operating leases. Further, a lessee will recognize a lease liability and a~~right-of-use~~ ~~asset for all leases with a term greater than 12 months on its balance sheet regardless of the~~

lease’s classification, which may significantly increase reported assets and liabilities. The accounting model and disclosure requirements for lessors remains substantially unchanged from current GAAP. ASU~~2016-02~~ ~~is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Management is currently evaluating the impact ASU2016-02~~ ~~will have on the Company’s financial position and results of operations.~~

~~In January 2017, FASB issued ASU2017-01,~~~~“Business Combinations (Topic 805), Clarifying the Definition of a Business”~~~~(“ASU2017-01”),that changes the definition of a business when evaluating whether transactions should be accounted for as the acquisition of assets or the acquisition of a business. ASU2017-01~~ requires an entity to evaluate if substantially all of the fair value of the assets acquired are concentrated in a single asset or a group of similar identifiable assets; if so, the acquired assets or group of similar identifiable assets is not considered a business. In addition, the guidance requires that, to be considered a business, the acquired assets must include an input and a substantive process that together significantly contribute to the ability to create output. The ASU removes the evaluation of whether a market participant could replace any of the missing elements. ASU~~2017-01~~ ~~is effective for interim and annual periods beginning after December 15, 2017 and is not expected to have a material impact on the Company’s financial statements.~~

~~In March 2017, the FASB issued ASUNo. 2017-08,~~~~Receivables- Nonrefundable Fees and Other Costs (Subtopic310-20)~~ ~~(“ASU2017-08”). ASU2017-08~~ shortens the amortization period for certain callable debt securities held at a premium. Specifically, amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments in this update more closely align the amortization period of premiums and discounts to expectations incorporated in market pricing on the underlying securities due to market participants pricing securities to the call date that produces the worst yield when the coupon is above current market rates, and pricing securities to maturity when the coupon is below market rates in anticipation that the borrower will act in its economic best interest. Therefore, the amendments more closely align interest income recorded on bonds held at a premium or a discount with the economics of the underlying instrument. ASU~~2017-08~~ ~~is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Management is currently evaluating the impact ASU2017-08~~ ~~will have on the Company’s financial position and results of operations.~~

~~In May 2017, the FASB issued ASU2017-09,~~~~“Compensation—Stock Compensation (Subtopic 718): Scope of Modification Accounting”~~~~(“ASU2017-09”).~~ ~~ASU2017-09~~ ~~provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU2017-09~~ ~~will be effective for interim and annual periods beginning after December 15, 2018. The Company is evaluating the effect that ASU2017-09~~ ~~will have on its financial position, results of operations and its financial statement disclosures.~~

In addition to historical information, this Quarterly Report on Form10-Q (the “Quarterly Report”) contains statements that constitute~~forward-looking~~ forward‑looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are based on ~~management’s~~management's beliefs, plans, expectations and assumptions and on information currently available to management. The words “may,” “should,” “expect,” “anticipate,” “intend,” “plan,” “continue,” “believe,” “seek,” “estimate” and similar expressions used in this Quarterly Report that do not relate to historical facts are intended to identify~~forward-looking~~ forward‑looking statements. These statements appear in a number of places in this Quarterly Report. The ~~Corporation~~Company notes that a variety of factors could cause the actual results or experience to differ materially from the anticipated results or other expectations described or implied by such forward-looking statements.

The risks and uncertainties that may affect the operation, performance, development and results of the business of Citizens Holding Company (the ~~”Company”~~“Company”) and the Company’s ~~wholly-owned~~wholly owned subsidiary, The Citizens Bank of Philadelphia, Mississippi (the “Bank” and collectively with the Company, the “Company”), 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;

●	adverse changes in asset quality and loan demand, and the potential insufficiency of the ACL 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 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;

●	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;

~~adverse changes in asset quality and loan demand,~~

●	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;

●	risks associated with national and global events, such as the conflict between Russia and Ukraine and supply chain disruptions;

●	risks associated with the recent failures 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; and

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

Except as required by law, the ~~potential insufficiency of the allowance for loan losses;~~

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

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 and the risk of failure to achieve our business strategies;~~

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

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

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 fromtime-to-time~~ ~~in the Company’s filings with the Securities and Exchange Commission.~~

~~The Corporation~~ does not undertake any obligation to update or revise any forward-looking statements subsequent to the date of this Quarterly Report, or if earlier, the date on which such statements were made.

Management’s discussion and analysis is intended to provide greater insight into the results of operations and the financial condition of the ~~Corporation.~~Company. The following discussion should be read in conjunction with the consolidated financial statements and notes appearing elsewhere in this Quarterly Report. All dollar amounts appearing in this section of our Quarterly Report are in thousands unless otherwise noted or the context otherwise requires.

OVERVIEW

The Company is aone-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 direct subsidiaries other than the Bank.

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 ~~September~~June 30, ~~2017,~~2023, the Bank was the largest bank headquartered in Neshoba County, Mississippi, with total assets of ~~$1.026 billion~~$1,288,649 and total deposits of ~~$754.768 million~~

$1,103,121. All significant intercompany transactions have been eliminated in consolidation. 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.

CRITICAL ACCOUNTING POLICIES

For an overview of the Company’s critical accounting policies, see the section captioned “Critical Accounting Policies” included in Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the Company’s 2022 Annual Report. Additionally, as described more fully in our unaudited financial statements in Part I of this Quarterly report, especially Note 1, Impact of Recently-Issued Accounting Standards and Pronouncements and Note 8, ACL on LHFI, on January 1, 2023, the Company adopted ASC 326. This standard replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and some off-balance sheet credit exposures such as unfunded commitments to extend credit.

LIQUIDITY

The ~~Corporation~~Company has an asset and liability management program that assists management in maintaining net interest margins during times of both rising and falling interest rates and in maintaining sufficient liquidity. A measurement of liquidity is the ratio of net deposits and short-term liabilities divided by the sum of net cash, short-term investments and marketable assets. This measurement for liquidity of the ~~Corporation~~Company at ~~September~~June 30, ~~2017,~~2023, was ~~36.20%~~13.39% and at December 31, ~~2016,~~2022, was ~~37.64%~~14.58%. The decrease was due to ana decrease in ~~short term marketable assets at September~~interest bearing cash and cash equivalents partially offset by an increase in the fair market value of investment securities as of June 30, ~~2017.~~2023. Management believes it maintains adequate liquidity for the ~~Corporation’s~~Company’s current needs.

The ~~Corporation’s~~Company’s primary source of liquidity is customer deposits, which were ~~$754,768,366~~$1,103,072 at ~~September~~June 30, ~~2017,~~2023, and ~~$760,152,340~~$1,126,402 at December 31, ~~2016.~~2022. Other sources of liquidity include investment securities, the ~~Corporation’s~~Company’s line of credit with the Federal Home Loan Bank (“FHLB”), the Company’s secured line of credit with First Horizon Bank (“FHN”), the Federal Reserve Bank Term Funding Program (“BTFP”) and federal funds lines with correspondent banks. The ~~Corporation~~Company had ~~$518,236,091~~$196,866 invested inavailable-for-sale investment securities at ~~September~~June 30, ~~2017,~~2023, and ~~$496,124,574~~$201,322 at December 31, ~~2016. This~~2022. The decrease in securities available-for-sale is the result of paydowns on investment securities partially offset by an increase ~~is due to~~in the ~~Corporation investing its funds not needed for loan funding in longer term investments.~~ fair market value of investment securities.

The ~~Corporation~~Company also had ~~$29,640,509~~$862 in interest bearing deposits at other banks at ~~September~~June 30, ~~2017~~2023 and ~~$48,603,182~~$1,646 at December 31, ~~2016.~~2022. The ~~decrease in interest bearing deposits was the result of these funds being invested in long term investments. The Corporation~~Company had secured and unsecured federal funds lines with correspondent banks in the amount of ~~$45,000,000~~$50,000 at ~~both September~~June 30, ~~2017~~2023 and $45,000 at December 31, ~~2016.~~2022. In addition, the ~~Corporation~~Company has the ability to draw on its line of credit with the ~~FHLB.~~FHLB and FHN. At ~~September~~June 30, ~~2017,~~2023, the ~~Corporation~~Company had unused and available ~~$145,516,824~~$190,612 of its line of

credit with the FHLB and at December 31, ~~2016,~~2022, the ~~Corporation~~Company had unused and available ~~$123,592,789~~$160,488 of its line of credit with the FHLB. The increase in the amount available under the ~~Corporation’s~~Company’s line of credit with the FHLB from the end of ~~2016~~2022 to ~~September~~June 30, ~~2017,~~2023, was the result of an increase in the amount of loans eligible for the collateral pool securing the ~~Corporation’s~~Company’s line of credit with the FHLB. In addition to the line of credit previously mentioned with the FHLB that is secured by pledged loans, the Company can also pledge investment securities at their current face value, less a predetermined discount amount, typically between 3 to 10%. This is similar to the BTFP except the Company can structure the terms of the line of credit with the FHLB and the BTFP is a one-year line of credit secured by investment securities at par. The ~~Corporation~~Company has approximately $132,739 and $133,033 of unpledged securities at June 30, 2023 and December 31, 2022, respectively. The secured line of credit with FHN was originated on June 9, 2021. At June 30, 2023, the Company had nounused and available $2,000 of its secured line of credit with FHN. The Company had federal funds purchased of $4,000 and $-0- as of ~~both September~~June 30, ~~2017~~2023 and December 31, ~~2016.~~2022, respectively. The ~~Corporation~~Company may purchase federal funds from correspondent banks on a temporary basis to meet ~~short term~~short-term funding needs.

When the ~~Corporation~~Company has more funds than it needs for its ~~reserve requirements or~~ short-term liquidity needs, the ~~Corporation~~Company increases its investment portfolio, increases the balances in interest bearing due from bank accounts or sells federal funds. It is management’s policy to maintain an adequate portion of its portfolio of assets and liabilities on a short-term basis to ~~insure~~ensure rate flexibility and to meet loan funding and liquidity needs. When deposits decline or do not grow sufficiently to fund loan demand, management will seek funding either through federal funds purchased or advances from the FHLB.

CAPITAL RESOURCES

Total shareholders’ equity was ~~$91,942,431~~$40,141 at ~~September~~June 30, ~~2017,~~2023, as compared to ~~$85,059,395~~$39,025 at December 31, ~~2016.~~2022. The increase ~~in shareholders’ equity was the~~is a result of a change in AOCI caused by a decrease in the accumulated other comprehensive loss brought about by the investment securities market value adjustment as well as the increase in earnings in excess of dividends paid. The market value adjustment, which was an increase was due to general market conditions, specifically the decrease in medium termmedium-term interest rates ~~which caused~~that has occurred since December 31, 2022. To help manage the AOCI volatility, the Company transferred securities to held-to-maturity during the third quarter 2022 to help further mitigate any future negative impacts on shareholders’ equity that could result from continued interest rate hikes. The unrealized loss that was frozen in AOCI at the time of the transfer will be amortized out of AOCI back into shareholders’ equity over the remaining life of the securities. Management does not intend to sell any securities at an ~~increase~~unrealized loss position. Additionally, as noted in the ~~market price~~Liquidity section of Item 2. of this Quarterly Report, the ~~Corporation’s investment portfolio.~~Company has sufficient liquidity options available if the need for short-term funds arises.

The ~~Corporation~~Company paid aggregate cash dividends in the amount of ~~$3,522,327,~~$2,244, or ~~$0.72~~$0.40 per share, during the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2017~~2023 compared to ~~$0.72~~$2,688, or $0.48 per share, for the same period in ~~2016.~~2022.

Quantitative measures established by federal regulations to ensure capital adequacy require the ~~Corporation~~Company and Bank to maintain minimum amounts and ratios of Total and Tier 1 capital (primarily common stock and retained earnings, less goodwill) to risk weighted assets, and of Tier 1 capital to average assets. Management believes that as of ~~September~~June 30, ~~2017,~~2023, the ~~Corporation meets~~Company and Bank meet all capital adequacy requirements to which ~~it is~~they are subject and according to these requirements the ~~Corporation is~~Company and Bank are considered to be well capitalized.

											Minimum Capital
						Minimum Capital					Requirement to be
						Requirement to be					Adequately
	Actual					Well Capitalized					Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
June 30, 2023
Citizens Holding Company
Tier 1 leverage ratio	$	107,933		8.17	%	$	66,033		5.00	%	$	52,826		4.00	%
Common Equity tier 1 capital ratio		107,933		8.17			85,842		6.50			59,429		4.50
Tier 1 risk-based capital ratio		107,933		13.50			64,532		8.00			48,399		6.00
Total risk-based capital ratio		114,136		14.28			80,665		10.00			64,532		8.00
The Citizens Bank of Philadelphia
Tier 1 leverage ratio	$	125,193		9.48		$	66,007		5.00		$	52,806		4.00
Common Equity tier 1 capital ratio		125,193		7.96			85,809		6.50			59,406		4.50
Tier 1 risk-based capital ratio		125,193		15.53			64,477		8.00			48,358		6.00
Total risk-based capital ratio		131,396		16.30			80,596		10.00			64,477		8.00

December 31, 2022
Citizens Holding Company
Tier 1 leverage ratio	$	108,756		7.96	%	$	68,352		5.00	%	$	54,682		4.00	%
Common Equity tier 1 capital ratio		108,756		7.96			88,858		6.50			61,517		4.50
Tier 1 risk-based capital ratio		108,756		13.19			65,951		8.00			49,463		6.00
Total risk-based capital ratio		114,020		13.83			82,438		10.00			65,951		8.00
The Citizens Bank of Philadelphia
Tier 1 leverage ratio	$	126,105		9.23		$	68,333		5.00		$	54,667		4.00
Common Equity tier 1 capital ratio		126,105		9.23			88,833		6.50			61,500		4.50
Tier 1 risk-based capital ratio		126,105		15.34			65,759		8.00			49,320		6.00
Total risk-based capital ratio		131,370		15.98			82,199		10.00			65,759		8.00

         Minimum Capital
      Minimum Capital
Requirement to be
Adequately
Capitalized

      Requirement to be
   Actual Well Capitalized
   Amount    Ratio Amount    Ratio Amount    Ratio
September 30, 2017

Citizens Holding Company

Tier 1 leverage ratio
   $ 94,193    9.33 % $ 50,496    5.00 % $ 40,397    4.00 %
Common Equity tier 1 capital ratio
   94,193    9.33 % 65,645    6.50 % 45,446    4.50 %
Tier 1 risk-based capital ratio
   94,193    18.36 % 41,050    8.00 % 30,788    6.00 %
Total risk-based capital ratio
   97,597    19.02 % 51,313    10.00 % 41,050    8.00 %
December 31, 2016

Citizens Holding Company

Tier 1 leverage ratio
   $ 92,629    9.22 % $ 50,258    5.00 % $ 40,207    4.00 %
Common Equity tier 1 capital ratio
   92,629    9.22 % 65,336    6.50 % 45,232    4.50 %
Tier 1 risk-based capital ratio
   92,629    17.92 % 41,354    8.00 % 31,016    6.00 %
Total risk-based capital ratio
   96,532    18.67 % 51,693    10.00 % 41,354    8.00 %

The Dodd-Frank Act requires the Federal Reserve Bank (“FRB”), the Office of the Comptroller of the Currency (“OCC”) and the Federal Deposit Insurance ~~Corporation~~Company (“FDIC”) to adopt regulations imposing a continuing “floor” on the risk based capital requirements. In December 2010, the Basel Committee released a final framework for a strengthened set of capital requirements, known as “Basel III”. In early July 2013, each of the U.S. federal banking agencies adopted final rules relevant to us: (1) the Basel III regulatory capital reforms; and (2) the ~~“standardized~~"standardized approach of Basel II fornon-core banks and bank holding companies”, such as the Bank and the Company. The capital framework under Basel III ~~will replace~~replaced the existing regulatory capital rules for all banks, savings associations and U.S. bank holding companies with greater than $500 million in total assets, and all savings and loan holding companies.

Beginning January 1, 2015, the Company and the Bank ~~were required~~began to comply with the final Basel III rules, ~~although the rules will not be fullyphased-in~~ ~~until~~which became effective on January 1, 2019. Among other things, the final Basel III rules ~~will~~ impact regulatory capital ratios of banking organizations in the following ~~manner, when fully phased-in:~~manner:

●

Create a ~~new~~ requirement to maintain a ratio of common equity Tier 1 capital to total risk-weighted assets of not less than 4.5%;

●

Increase the minimum leverage capital ratio to 4% for all banking organizations (currently 3% for certain banking organizations);

●

Increase the minimum Tier 1 risk-based capital ratio from 4% to 6%; and

●

Maintain the minimum total risk-based capital ratio at 8%.

~~Increase the minimum leverage capital ratio to 4% for all banking organizations (currently 3% for certain banking organizations);~~

~~Increase the minimum Tier 1 risk-based capital ratio from 4% to 6%; and~~

~~Maintain the minimum total risk-based capital ratio at 8%.~~

In addition, the final Basel III rules ~~when fully phased-in, will~~ subject a banking ~~organization~~organizations to certain limitations on capital distributions and discretionary bonus payments to executive officers if the organization ~~did~~does not maintain a capital conservation buffer of common equity Tier 1 capital in an amount greater than 2.5% of its total risk-weighted assets. The effect of the capital conservation buffer ~~when fully phased-in, will be to increase~~increases the minimum common equity Tier 1 capital ratio to 7%, the minimum Tier 1 risk-based capital ratio to 8.5% and the minimum total risk-based capital ratio to 10.5% for banking organizations seeking to avoid the limitations on capital distributions and discretionary bonus payments to executive officers.

The final Basel III rules also changed the capital categories for insured depository institutions for purposes of prompt corrective action. Under the final rules, to be well capitalized, an insured depository institution must maintain a minimum common equity Tier 1 capital ratio of at least 6.5%, a Tier 1 risk-based capital ratio of at least 8%, a total risk-based capital ratio of at least 10.0%, and a leverage capital ratio of at least 5%. In addition, the final Basel III rules established more conservative standards for including an instrument in regulatory capital and imposed certain deductions from and adjustments to the measure of common equity Tier 1 capital.

Management believes that, as of ~~September~~June 30, ~~2017,~~2023, the Company and the Bank ~~would meet~~met all capital adequacy requirements under Basel ~~III and the banking agencies’ proposals on a fullyphased-in~~ basis, if such requirements were currently effective. The changes to the calculation of risk-weighted assets required by Basel III did not have a material impact on the Corporation’s capital ratios as presented. Management will continue to monitor these and any future proposals submitted by the Corporation’s and Bank’s regulators.

III.

RESULTS OF OPERATIONS

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

											For the Three Months					For the Six Months
	For the Three Months					For the Nine Months					Ended June 30,					Ended June 30,
	Ended September 30,					Ended September 30,					2023			2022		2023		2022
	2017			2016		2017			2016
Interest Income, including fees	$	7,544,364		$	7,573,627	$	22,855,734		$	22,778,695
Interest Income											$	11,158		$	9,560	$	22,191	$	18,614
Interest Expense		825,017			753,488		2,462,281			2,277,625		3,744			797		7,099		1,564

Net Interest Income		6,719,347			6,820,139		20,393,453			20,501,070		7,414			8,763		15,092		17,050
Provision for Loan Losses		(73,808	)		184,018		(254,614	)		97,468
Provision for credit losses (PCL)												417			56		464		149

Net Interest Income after Provision for Loan Losses		6,793,155			6,636,121		20,648,067			20,403,602
Net Interest Income After PCL												6,997			8,707		14,628		16,901
Other Income		2,126,172			2,079,658		6,183,624			5,803,485		2,261			2,763		4,624		5,296
Other Expense		6,887,220			6,557,413		20,906,987			19,857,197		9,037			8,432		17,737		16,733

Income Before Provision For Income Taxes		2,032,107			2,158,366		5,924,704			6,349,890
Provision for Income Taxes		424,638			406,076		1,096,457			1,292,427
Income Before Income Taxes												221			3,038		1,515		5,464
Income taxes												(79	)		497		75		887

Net Income	$	1,607,469		$	1,752,290	$	4,828,247		$	5,057,463	$	300		$	2,541	$	1,440	$	4,577

Net Income Per share - Basic	$	0.33		$	0.36	$	0.99		$	1.04	$	0.05		$	0.45	$	0.26	$	0.82

Net Income Per Share - Diluted	$	0.33		$	0.36	$	0.99		$	1.04

Net Income Per Share-Diluted											$	0.05		$	0.45	$	0.26	$	0.82

See Note 3 to the ~~Corporation’s~~Company’s Consolidated Financial Statements for an explanation regarding the ~~Corporation’s~~Company’s calculation of Net Income Per Share - basic and - diluted.

Annualized return on average equity (“ROE”) was ~~7.42%~~3.02% for the three months ended ~~September~~June 30, ~~2017,~~2023, and ~~7.64%~~15.97% for the corresponding period in ~~2016. For~~2022. Annualized ROE was 7.26% for the ~~nine~~six months ended ~~September~~June 30, ~~2017, ROE was 7.18% compared to 7.40%~~2023, and 11.52% for the ~~nine months ended September 30, 2016. In both instances, the~~corresponding period in 2022. The decrease in ROE for the three and six months ended June 30, 2023 compared to the same period in 2022 was ~~caused by~~primarily the result of a increase in equity ~~balances for both periods.~~due to the decline in net income and unrealized losses on investments in AOCI.

Book value per share increased to ~~$18.78~~$7.17 at ~~September~~June 30, ~~2017,~~2023, compared to ~~$17.42~~$6.97 at December 31, ~~2016.~~2022. The increase in book value per share ~~reflects earnings in excess of dividends and a decrease in other comprehensive loss due~~is directly attributable to the increase in ~~fair value of~~shareholders’ equity resulting from the ~~Corporation’s investment securities.~~increase in AOCI caused by the decrease in medium-term interest rates. Average assets for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023 were ~~$1,009,780,775~~$1,320,107 compared to ~~$996,266,145~~$1,343,234 for the year ended December 31, ~~2016. This increase was due mainly to an increase inavailable-for-sale~~ ~~securities offset by a decrease in interest bearing due from bank accounts.~~

2022.

NET INTEREST INCOME / NET INTEREST MARGIN (“NIM”)

~~One~~

The main component of the ~~Corporation’s~~Company’s earnings is net interest income, which is the difference between the interest and fees earned on loans and investments and the interest paid for deposits and borrowed funds. The net interest margin is net interest income expressed as a percentage of average earning assets. The primary concerns in managing net interest income are the volume, mix and repricing of assets and liabilities.

Net interest income was $7,414 and $15,092 for the three and six months ended June 30, 2023 as compared to $8,763 and $17,050 for the same respective time periods in 2022.

The annualized net interest margin was ~~2.98%~~2.55% for the ~~quarter~~three months ended ~~September~~June 30, ~~2017~~2023, compared to ~~3.10%~~2.78% for the corresponding period of ~~2016. For~~2022. Additionally, the ~~nine months ended September 30, 2017,~~ annualized net interest margin was ~~3.03% compared to 3.11%~~2.54% for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2023 and 2.74% for the corresponding period of 2022. The decrease in net interest margin for ~~both periods~~the three and six months ended ~~September~~June 30, ~~2017,~~2023, when compared to the same periods in ~~2016,~~2022, was mainly due to rising funding costs during late 2022 and 2023. In addition, the ~~result~~shift from non-interest bearing deposits to higher interest-bearing deposits as of June 30, 2023 increased the ~~decrease in yields on earning assets~~cost of funds to 147 and ~~a small increase in rates paid on deposits and borrowed funds, as detailed below. Earning assets averaged $934,204,576~~145 basis point (“bps”) for the three and six months ended ~~September~~June 30, ~~2017. This represents an increase of $11,200,285, or 1.2%, over average earning assets of $923,004,291~~2023 compared to 33 bps for the three and six months ended ~~September~~June 30, ~~2016.~~2022. The ~~increase in average earning assets~~linked-quarter interest expense increased for the three and six months ended ~~September 30, 2017, is~~June 30,2023 by $2,948, or 369.85%, and 5,535, or 353.88%, respectively. Management expects continued pressure on NIM throughout 2023 as deposit competition remains tight.

The following table sets forth average balance sheet data, including all major categories of interest-earning assets and interest-bearing liabilities, together with the ~~result~~interest earned or interest paid and the average yield or average rate paid on each such category for the periods presented:

TABLE 1 - AVERAGE BALANCE SHEETS AND INTEREST RATES

	Three Months Ended June 30,
	Average Balance				Income/Expense				Average Yield/Rate
	2023		2022		2023		2022		2023			2022
Loans:
LHFI⁽¹⁾	$	578,300	$	590,407	$	7,556	$	6,667		5.23	%		4.52	%

Investment Securities
Taxable		442,254		474,366		2,263		1,901		2.05	%		1.60	%
Tax-exempt		202,258		214,330		1,337		1,229		2.64	%		2.29	%
Total Investment Securities		644,512		688,697		3,600		3,130		2.23	%		1.82	%

Federal Funds Sold and Other		26,571		22,634		297		37		4.47	%		0.65	%

Total Interest Earning Assets⁽¹⁾⁽²⁾		1,249,383		1,301,738		11,453		9,834		3.67	%		3.02	%

Non-Earning Assets		80,598		32,786

Total Assets	$	1,329,981	$	1,334,523

Deposits:
Interest-bearing Demand Deposits⁽³⁾		507,028	$	490,712	$	1,190	$	207		0.94	%		0.17	%
Savings		127,098		134,774		93		33		0.29	%		0.10	%
Time		189,631		202,027		1,166		288		2.46	%		0.57	%
Total Deposits		823,756		827,513		2,449		528		1.19	%		0.26	%

Borrowed Funds
Short-term Borrowings		144,157		106,153		948		83		2.63	%		0.31	%
Long-term Borrowings		18,000		18,000		347		186		7.71	%		4.13	%
Total Borrowed Funds		162,157		124,153		1,295		269		3.19	%		0.87	%
Total Interest-Bearing Liabilities ⁽³⁾		985,913		951,665		3,744		797		1.52	%		0.33	%

Non-Interest Bearing Liabilities
Demand Deposits		290,463		305,677
Other Liabilities		13,926		13,533
Shareholders' Equity		39,680		63,648
Total Liabilities and Shareholders' Equity	$	1,329,981	$	1,334,523

Interest Rate Spread										2.15	%		2.69	%

Net Interest Margin					$	7,709	$	9,037		2.55	%		2.78	%

Less
Tax Equivalent Adjustment						295		274

Net Interest Income					$	7,414	$	8,763

	Six Months Ended June 30,
	Average Balance				Income/Expense				Average Yield/Rate
	2023		2022		2023		2022		2023			2022
Loans:
Loans, net of unearned⁽¹⁾	$	573,481	$	584,301	$	14,906	$	13,093		5.20	%		4.48	%

Investment Securities
Taxable		440,011		468,287		4,568		3,598		2.08	%		1.54	%
Tax-exempt		202,144		212,632		2,668		2,412		2.64	%		2.27	%
Total Investment Securities		642,155		680,919		7,236		6,010		2.25	%		1.77	%

Federal Funds Sold and Other		24,411		27,684		636		50		5.21	%		0.36	%

Total Interest Earning Assets⁽¹⁾⁽²⁾		1,240,047		1,292,904		22,778		19,153		3.67	%		2.96	%

Non-Earning Assets		80,060		50,662

Total Assets	$	1,320,107	$	1,343,566

Deposits:
Interest-bearing Demand Deposits⁽³⁾	$	509,958	$	484,017	$	2,170	$	395		0.85	%		0.16	%
Savings		125,251		132,248		169		64		0.27	%		0.10	%
Time		191,786		210,857		1,931		625		2.01	%		0.59	%
Total Deposits		826,995		827,122		4,270		1,084		1.03	%		0.26	%

Borrowed Funds
Short-term Borrowings		133,963		102,706		2,136		143		3.19	%		0.28	%
Long-term Borrowings		18,000		18,000		693		337		7.70	%		3.74	%
Total Borrowed Funds		151,963		120,706		2,829		480		3.72	%		0.80	%
Total Interest-Bearing Liabilities ⁽³⁾		978,958		947,828		7,099		1,564		1.45	%		0.33	%

Non-Interest Bearing Liabilities
Demand Deposits		287,451		303,067
Other Liabilities		14,039		13,204
Shareholders' Equity		39,659		79,467
Total Liabilities and Shareholders' Equity	$	1,320,107	$	1,343,566

Interest Rate Spread										2.22	%		2.63	%

Net Interest Margin					$	15,679	$	17,589		2.54	%		2.74	%

Less
Tax Equivalent Adjustment						587		539

Net Interest Income					$	15,092	$	17,050

⁽¹⁾

^{Overdrafts, while not considered an earning asset, are included in Loans, net of unearned in the average volume calculation due to the immaterial impact on the yield.}

⁽²⁾

^{Earnings Assets in the table above includes the dividend paying stock of the Federal Home Loan Bank.}

⁽³⁾

^{Demand deposits are not included in the average volume calculation as they are not interest bearing liabilities. They are included within the non-interest bearing liabilities section above.}

The average balances of ~~an increase~~nonaccruing assets are included in ~~investment securities offset by a decrease in~~the tables above. Interest income and weighted average yields on tax-exempt loans and securities have been computed on a fully tax equivalent basis assuming a federal tax rate of 21% and a state tax rate of 3.95%, which is net of federal tax benefit.

Net interest ~~bearing due~~margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes in volume, mix and pricing decisions. External factors include changes in market interest rates, competition and the shape of the interest rate yield curve. For the three and six months ended June 30, 2023, rapidly increasing deposit costs have been the larger driver of decreased profitability. Management believes net interest margin should contract some more in the third quarter and then level off for the remainder of 2023. Management remains focused on loan growth to help offset the increased funding costs.

The following table sets forth a summary of the changes in interest earned, on a tax equivalent basis, and interest paid resulting from ~~bank accounts.~~

~~Interest bearing deposits averaged $613,556,724~~changes in volume and rates for the Company for the three and six months ended ~~September~~June 30, 2017. This represents a decrease of $7,855,457, or 1.3%, from the average of interest bearing deposits of $621,412,181 for the three months ended September 30, 2016. This was due, in large part, to a decrease in interest-bearing NOW, money market accounts and certificates of deposit partially offset by an increase in savings accounts.

Other borrowed funds averaged $144,026,510 for the three months ended September 30, 2017. This represents an increase of $20,297,790, or 16.4%, over the other borrowed funds of $123,728,720 for the three months ended September 30, 2016. This increase in other borrowed funds was due to a $16,173,285 increase in the securities sold under agreements to repurchase and a $4,260,870 increase in FHLB advances partially offset by a $11,365 decrease in the Agribusiness Enterprise Loan Liability and a $125,000 decrease in Federal Funds Purchased for the three months ended September 30, 2017, when2023 compared to the ~~three months ended September 30, 2016.~~

Interest bearing deposits averaged $619,077,200 for the nine months ended September 30, 2017. This represents a decrease of $3,190,650, or 0.5%, from the average of interest bearing deposits of $622,267,850 for the nine months ended September 30, 2016. This was due,same respective periods in ~~large part, to an increase in interest-bearing NOW, money market accounts and savings accounts partially offset by a decrease in certificates of deposit.~~

Other borrowed funds averaged $142,245,990 for the nine months ended September 30, 2017. This represents an increase of $18,477,609, or 15.1%, over the other borrowed funds of $123,678,381 for the nine months ended September 30, 2016. This increase in other borrowed funds was due to a $16,502,061 increase in the securities sold under agreements to repurchase and a $2,051,282 increase in FHLB advances partially offset by a $12,595 decrease in the Agribusiness Enterprise Loan Liability and a $63,139 decrease in Federal Funds Purchased for the nine months ended September 30, 2017, when compared to the nine months ended September 30, 2016.

Net interest income was $6,719,347 for the three months ended September 30, 2017, a decrease of $100,792 from $6,820,139 for the three months ended September 30, 2016, primarily due to an increase in interest rates paid on earning assets and by an increase in earning assets. The changes in volume in earning assets and in deposits and in borrowed funds are discussed above. As for changes in interest rates in the three months ended September 30, 2017, the yields on earning assets decreased and the rates paid on deposits and borrowed funds increased from the same period in 2016. The yield on all interest-bearing assets decreased 10 basis points to 3.33% in the three months ended September 30, 2017 from 3.43% for the same period in 2016. At the same time, the rate paid on all interest-bearing liabilities for the three months ended September 30, 2017 increased 4 basis points to 0.44% from 0.40% in the same period in 2016. As longer term interest bearing assets and liabilities mature and reprice, management believes that the yields on interest bearing assets and rates on interest bearing liabilities will both increase.

Net interest income was $20,393,453 for the nine months ended September 30, 2017, a decrease of $107,617 from $20,501,070 for the nine months ended September 30, 2016, primarily due to a decrease in interest rates paid on earning assets partially offset by an increase in earning assets. The changes in volume in earning assets and in deposits and in borrowed funds are discussed above. As for changes in interest rates in the nine months ended September 30, 2017, the yields on earning assets decreased and the rates paid on deposits and borrowed funds increased from the same period in 2016. The yield on all interest-bearing assets decreased 6 basis points to 3.38% in the nine months ended September 30, 2017 from 3.44% for the same period in 2016. At the same time, the rate paid on all interest-bearing liabilities for the nine months ended September 30, 2017 increased 3 basis points to 0.43% from 0.40% in the same period in 2016. As longer term interest bearing assets and liabilities mature and reprice, management believes that the yields on interest bearing assets and rates on interest bearing liabilities will both increase.

~~The following table shows the interest and fees and corresponding yields for loans only.~~2022:

   For the Three Months For the Nine Months
   Ended September 30, Ended September 30,
   2017 2016 2017 2016
Interest and Fees
   $ 4,585,668 $ 4,825,800 $ 14,017,718 $ 14,344,314
Average Gross Loans
   392,016,275 409,041,715 394,201,872 412,566,347
Annualized Yield
   4.68 % 4.72 % 4.74 % 4.64 %

TABLE 2 - VOLUME/RATE ANALYSIS
(in thousands)
	Three Months Ended June 30, 2023
	2023 Change from 2022
	Volume			Rate			Total
INTEREST INCOME

LHFI	$	(137	)	$	1,026		$	889
Taxable Securities		(129	)		491			362
Non-Taxable Securities		(69	)		177			108
Federal Funds Sold and Other		6			254			260

TOTAL INTEREST INCOME	$	328		$	1,947		$	1,619

INTEREST EXPENSE

Interest-bearing demand deposits	$	7		$	976		$	983
Savings Deposits		(2	)		62			60
Time Deposits		(18	)		896			878
Short-term borrowings		30			835			865
Long-term borrowings		-			161			161

TOTAL INTEREST EXPENSE	$	17		$	2,930		$	2,947


NET INTEREST INCOME	$	(345	)	$	(983	)	$	(1,328	)

The decrease in interest rates on loan accounts in the three months and the increase for the nine months ended September 30, 2017, reflects the increase in all loan interest rates for both new and refinanced loans in the period.

	Six Months Ended June 30, 2023
	2023 Change from 2022
	Volume			Rate			Total
INTEREST INCOME

Loans	$	(242	)	$	2,055		$	1,813
Taxable Securities		(217	)		1,187			970
Non-Taxable Securities		(119	)		375			256
Federal Funds Sold and Other		(6	)		592			586

TOTAL INTEREST INCOME	$	(585	)	$	4,210		$	3,625

INTEREST EXPENSE

Interest-bearing demand deposits	$	21		$	1,754		$	1,775
Savings Deposits		(3	)		108			105
Time Deposits		(57	)		1,363			1,306
Short-term borrowings		44			1,949			1,993
Long-term borrowings		-			356			356

TOTAL INTEREST EXPENSE	$	5		$	5,530		$	5,535


NET INTEREST INCOME	$	(589	)	$	(1,321	)	$	(1,910	)

CREDIT LOSS EXPERIENCE

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

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

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

The ~~Corporation’s allowance for loan losses~~Company’s ACL is designed to provide for loan losses that can be reasonably anticipated. The ~~allowance for loan losses~~ACL is established through charges to operating expenses in the form of provisions for ~~loan~~credit losses. Actual loan losses or recoveries are charged or credited to the ~~allowance for loan losses. The Board of Directors~~ACL. Management determines the amount of the ~~allowance.~~allowance, and the Board of Directors reviews and approves the ACL. Among the factors considered in determining the ~~allowance for loan losses~~ACL are the current financial condition of the ~~Corporation’s~~Company’s borrowers and the value of security, if any, for their loans. Estimates of future economic conditions and their impact on various industries and individual borrowers are also taken into consideration, as are the ~~Corporation’s~~Company’s historical loan loss experience and reports of banking regulatory authorities. As these estimates, factors and evaluations are primarily judgmental, no assurance can be given as to whether the ~~Corporation~~Company will sustain loan losses in excess or below its allowance or that subsequent evaluation of the loan portfolio may not require material increases or decreases in such allowance.

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

   Quarter Ended Year Ended Amount of    Percent of
   September 30, December 31, Increase    Increase
   2017 2016 (Decrease)    (Decrease)
BALANCES:


Gross Loans
   $ 393,342,557 $ 394,051,139 $ (708,582 )    -0.18 %
Allowance for Loan Losses
   3,403,933 3,902,796 (498,863 )    -12.78 %
Nonaccrual Loans
   7,832,726 8,879,393 (1,046,667 )    -11.79 %
Ratios:

Allowance for loan losses to gross loans
   0.87 % 0.99 %
Net loans charged off to allowance for loan losses
   7.18 % 64.21 %

	Quarter Ended			Year Ended			Amount of			Percent of
	June 30,			December 31,			Increase			Increase
	2023			2022			(Decrease)			(Decrease)

BALANCES:
Gross loans	$	574,734		$	585,591		$	(10,857	)		(1.85	%)
ACL		6,397			5,264			1,133			21.52	%
Nonaccrual loans		2,995			2,988			7			0.23	%
Ratios:
ACL to gross loans		1.11	%		0.90	%
Net loans recovered to ACL(1)		(1.11	%)		(11.91	%)

(1) Quarter ended amount annualized.

The ~~provision for loan losses~~PCL for the three months ended ~~September~~June 30, ~~2017~~2023 was ~~negative $73,808,~~$417. The PCL was primarily driven by an increase in qualitative factor adjustments due to continued inflationary risk concerns in both the local and national economy partially offset by a net decrease in loan balances of ~~$257,826 from~~$10,857 during the ~~$184,018 provision for the same period in 2016.~~quarter. The provision for loan losses for the nine months ended September 30, 2017, was a negative $254,614, a decrease of $352,082 from the $97,468 provision for the same period in 2016. The change in the Corporation’s loan loss provisions for the three and nine months ended September 30, 2017 is a result of management’s assessment of inherent loss in the loan portfolio, including the impact caused by current local, national and international economic conditions. The Corporation’sCompany’s model used to calculate the ~~provision~~PCL is ~~based on~~described in depth in Note 8 of the ~~percentage of historical charge-offs applied~~Consolidated Financial Statements. The ACL to LHFI was 1.11% and 0.86% at June 30, 2023 and 2022, respectively, and 0.90% at December 31, 2022 representing a level management considers commensurate with the ~~current~~present risk in the loan balances by loan segment and specific reserves applied to certain impaired loans. Nonaccrual loans decreased during this period due to the amount of payments received and loans charged off in excess of new loans being added to the nonaccrual loan list.portfolio.

For the three months ended ~~September~~June 30, ~~2017,~~2023, net loan losses ~~charged~~recovered to the ACL totaled $11, a decrease of $203 in net recoveries from the $214 in net recoveries in the same period in 2022. For the six months ended June 30, 2023, net loan losses recovered to the allowance for loan losses totaled ~~$28,265, an increase~~$64, a decrease of ~~$851,306~~$320 in net recoveries from ~~the $879,571 charged off~~$384 in the same period in ~~2016. The decrease was mainly due to a charge off on a single loan in the amount of $815,907 on commercial real estate in 2016.~~2022.

For the nine months ended September 30, 2017, net loan losses charged to the allowance for loan losses totaled $244,250, a decrease of $2,213,479 from the $2,457,729 charged off in the same period in 2016. The net loan losses for the nine-month period ended September 30, 2016 contained $2,339,308 in losses on two long-term commercial real estate loans that the Corporation has previously provided for a specific reserve against this loss through the provision for loan loss.

Management reviews quarterly with the ~~Corporation’s~~Company’s Board of Directors the adequacy of the ~~allowance for loan losses.~~ACL. The ~~loan loss provision~~PCL is adjusted when specific items reflect a need for such an adjustment. Management believes that there were no material loan losses during the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2023 that have not been charged ~~off.~~off or appropriately reserved for in the ACL. Management also believes that the ~~Corporation’s allowance~~Company’s ACL will be adequate to absorb probable losses inherent in the ~~Corporation’s~~Company’s loan portfolio. However, it remains possible that additional ~~provisions for loan loss~~PCL’s may be required.

OTHER INCOME

Other income includes service charges on deposit accounts, wire transfer fees, safe deposit box rentals and other revenue not derived from interest on earning assets. Other income for the three months ended ~~September~~June 30, ~~2017~~2023 was ~~$2,126,172, an increase~~$2,261, a decrease of ~~$46,514,~~$502, or ~~2.2%~~(18.17%), from ~~$2,079,658~~$2,763 in the same period in ~~2016.~~2022. Service charges on deposit accounts were ~~$1,115,474~~$890 in the three months ended ~~September~~June 30, ~~2017,~~2023, compared to ~~$1,009,486~~$967 for the same period in ~~2016. Other~~2022. Included in the service charges on deposit accounts line item for the three months ended June 30, 2023, overdraft income decreased by $67, or (9.60%) from the same period in 2022. Interchange fees which are included in the other service charges and fees ~~increased~~line item on the Comprehensive Statements of Income decreased by ~~$44,042,~~$27, or ~~6.7%~~2.78%, to ~~$702,686 in~~$945 for the three months ended ~~September~~June 30, ~~2017,~~2023, compared to ~~$658,644~~$972 for the same period in ~~2016.~~2022. Other operating income not derived from service charges or fees decreased ~~$103,516,~~$402, or ~~25.2%~~(57.26%) to ~~$308,012~~$300 in the three months ended ~~September~~June 30, ~~2017,~~2023, compared to ~~$411,528~~$702 for the same period in ~~2016.~~2022. This decrease was primarily due ~~mainly~~ to ~~a reduction in income from security sales and a decrease~~the decline in mortgage loan origination income ~~from long-term~~due to increased mortgage ~~loans originated~~interest rates. Mortgage loan origination income decreased for ~~sale~~the three months ended June 30, 2023 by $121, or (57.62%), to $89 compared to $210 for the ~~secondary market and income on bank owned life insurance.~~same period in 2022.

Other income for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 was ~~$6,183,624, an increase~~$4,624, a decrease of ~~$380,139,~~$672, or ~~6.6%~~(12.69%), from ~~$5,803,485~~$5,296 in the same period in ~~2016.~~2022. Service charges on deposit accounts were ~~$3,176,877~~$1,804 in the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, compared to ~~$2,794,790~~$1,912 for the same period in ~~2016. Other~~2022. Included in the service charges on deposit accounts line item for the three months ended June 30, 2023, overdraft income decreased by $88, or (6.42%) from the same period in 2022. Interchange fees which are included in the other service charges and fees ~~increased~~line item on the Comprehensive Statements of Income decreased by ~~$140,788~~$25, or ~~7.6%~~1.32%, to ~~$1,992,929 in~~$1,868 for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, compared to ~~$1,852,141~~$1,893 for the same period in ~~2016.~~2022. Other operating income not derived from service charges or fees decreased ~~$142,736,~~$553, or ~~12.3%~~(43.72%) to ~~$1,013,818~~$712 in the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, compared to ~~$1,156,554~~$1,265 for the same period in ~~2016.~~2022. This decrease was primarily due ~~mainly~~ to ~~a decrease~~the decline in mortgage loan origination income ~~from long-term~~due to increased mortgage ~~loans originated~~interest rates. Mortgage loan origination income decreased for ~~sale~~the six months ended June 30, 2023 by $239, or (57.73%), to $175 compared to $414 for the ~~secondary market and income on bank owned life insurance partially offset by an increase~~same period in ~~income from security sales and other income.~~2022.

The following is a detail of the other major income classifications that were included in other ~~operation~~operating income on the income statement:

									For the Three Months				For the Six Months
	Three months				Nine months				Ended June 30,				Ended June 30,
Other income									2023		2022		2023		2022
	Ended September 30,				Ended September 30,
Other operating income	2017		2016		2017		2016
BOLI Income	$	120,000	$	144,000	$	360,000	$	424,000	$	121	$	120	$	240	$	241
Mortgage Loan Origination Income		87,069		117,186		249,435		359,815		89		210		175		414
Income from security sales, net		15,612		60,053		104,708		97,191
Gain on sale of OREO										-		16		-		81
Other Income		85,331		90,289		299,675		275,548		90		356		297		529

Total Other Income	$	308,012	$	411,528	$	1,013,818	$	1,156,554

Total other income									$	300	$	702	$	712	$	1,265

OTHER EXPENSES

Other expenses include salaries and employee benefits, occupancy and equipment, and other operating expenses. Aggregatenon-interest expenses for the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 were ~~$6,887,220~~$9,037 and ~~$6,557,413,~~$8,432, respectively, an increase of ~~$329,807~~$605, or ~~5.0%~~7.18%. Salaries and benefits increased $298, or 6.75%, to ~~$3,744,831~~$4,710 for the three months ended ~~September~~June 30, ~~2017, from $3,460,948~~2023 when compared to the same period in 2022. Occupancy expense increased by $145, or 8.47%, to $1,856 for the three months ended June 30, 2023, compared to $1,711 for the same period of 2022. The increase in occupancy expense is the result of the Company replacing ATMs and ITMs at several branch locations throughout the second quarter of 2023. For the three months ended June 30, 2023, other expense increased $162, or 12.38% to $2,471 compared to $2,309 for the same period in ~~2016.~~2022. The increase in other expense is primarily the result of an increase in professional fees coupled with check fraud losses of $50 that occurred during the second quarter of 2023 that are included in the Other expense line item on the Consolidated Statements of Income.

Aggregate non-interest expenses for the six months ended June 30, 2023 and 2022 were $17,737 and $16,733, respectively, an increase of $1,004, or 6.00%. Salaries and benefits increased $554, or 6.26%, to $9,405 for the six months ended June 30, 2023 when compared to the same period in 2022. Occupancy expense increased by ~~$5,880,~~$215, or ~~0.4%~~6.17%,

to ~~$1,335,676~~$3,701 for the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2023, compared to ~~$1,329,796~~$3,486 for the same period of ~~2016. Other operating expenses increased by $40,044 to $1,806,713 for~~2022. The increase in occupancy expense is the ~~three~~result of the Company replacing ATMs and ITMs at several branch locations throughout the first six months. For the six months ended ~~September~~June 30, ~~2017,~~2023, other expense increased $235, or 5.35% to $4,631 compared to ~~$1,766,669~~$4,396 for the same period in 2022. The increase in other expense is primarily the result of ~~2016. A detail~~an increase in professional fees coupled with check fraud losses of $188 that occurred during the ~~major~~first six months of 2023 that are included in the Other expense ~~classifications is set forth below.~~line item on the Consolidated Statements of Income.

The following is a detail of the major expense classifications that make up the other ~~operating~~ expense line item in the income statement:

									For the Three Months				For the Six Months
	Three months				Nine months				Ended June 30,				Ended June 30,
Other Expense									2023		2022		2023		2022
	ended September 30,				ended September 30,
Other Operating Expense	2017		2016		2017		2016
Advertising	$	142,032	$	161,329	$	532,292	$	597,711	$	191	$	172	$	238	$	303
Office Supplies		290,110		215,304		712,397		500,176		248		250		479		459
Legal and Audit Fees		135,403		143,828		400,483		371,005
Telephone expense		124,112		119,070		399,926		337,127
Professional Fees										249		223		529		442
Technology expense										111		109		220		225
Postage and Freight		133,251		128,086		396,042		365,463		144		168		288		306
Loan Collection Expense		106,947		42,496		149,355		332,342		22		13		46		20
Other Losses		12,039		7,871		213,606		219,005
Regulatory and related expense		107,932		200,887		322,104		620,087		231		208		427		412
Debit Card/ATM expense		103,240		160,526		307,069		348,253		995		202		1,201		390
Write down on OREO										-		-		-		42
Travel and Convention		54,198		60,909		197,318		199,224		10		63		78		115
Other expenses		597,449		526,363		2,137,778		1,758,268		270		901		1,125		1,682

Total Other Expense	$	1,806,713	$	1,766,669	$	5,768,370	$	5,648,661

Total other expense									$	2,471	$	2,309	$	4,631	$	4,396

The ~~Corporation’s~~Company’s efficiency ratio for the three and six months ended ~~September~~June 30, ~~2017~~2023 was ~~75.67%~~92.64% and 89.41%, compared to ~~65.70%~~71.83% and 73.51% for the same period in ~~2016. For the nine months ended September 30, 2017 and 2016, the Corporation’s efficiency ratio was 76.35% and 71.26%,~~2022, respectively. The efficiency ratio is the ratio ofnon-interest expenses divided by the sum of net interest income (on a fully tax equivalent basis) andnon-interest income.

BALANCE SHEET ANALYSIS

         Amount of    Percent of
   September 30,    December 31,    Increase    Increase
   2017    2016    (Decrease)    (Decrease)
Cash and Due From Banks
   $ 20,791,594    $ 21,688,557    $ (896,963 )    -4.14 %
Interest Bearing deposits with Other Banks
   29,640,509    48,603,182    (18,962,673 )    -39.02 %
Investment Securities
   518,236,091    496,124,574    22,111,517    4.46 %
Loans, net
   389,674,425    390,148,343    (473,918 )    -0.12 %
Premises and Equipment
   20,752,738    18,664,084    2,088,654    11.19 %
Total Assets
   1,026,124,497    1,025,211,907    912,590    0.09 %
Total Deposits
   754,768,366    760,152,340    (5,383,974 )    -0.71 %
Total Shareholders’ Equity
   91,942,431    85,059,395    6,883,036    8.09 %

					Amount of			Percent of
	June 30,		December 31,		Increase			Increase
	2023		2022		(Decrease)			(Decrease)

Cash and due from banks	$	17,086	$	26,948	$	(9,862	)		(36.60%	)
Interest bearing deposits with other banks		862		1,646		(784	)		(47.63%	)
Investment securities held to maturity		396,931		406,590		(9,659	)		(2.38%	)
Investment securities available for sale		196,866		201,322		(4,456	)		(2.21%	)
Net LHFI		568,337		580,327		(11,990	)		(2.07%	)
Total assets		1,289,339		1,324,003		(34,664	)		(2.62%	)

Total deposits		1,103,072		1,126,402		(23,330	)		(2.07%	)

Total shareholders' equity		40,141		39,025		1,116			2.86	%

CASH AND CASH EQUIVALENTS

Cash and ~~cash equivalents,~~due from banks, which consist of cash, balances at correspondent banks and items in process of collection, balance at ~~September~~June 30, ~~2017~~2023 was ~~$20,791,594,~~$17,086, which was a decrease of ~~$896,963~~$9,862 from the balance of ~~$21,688,557~~$26,948 at December 31, ~~2016. The decrease was due to an increase in the balances at correspondent banks due to an increase in the amount of checks drawn on~~2022. Interest bearing deposits with other banks ~~in the normal process of clearing funds between these banks.~~decreased by $784, or (47.63%), to $862 at June 30, 2023 compared to $1,646 at December 31, 2022.

INVESTMENT SECURITIES

The ~~Corporation’s~~Company’s investment securities portfolio primarily consists of United States agency debentures, mortgage-backed securities and obligations of states, counties and municipalities. The ~~Corporation’s~~Company’s investments securities portfolio at ~~September~~June 30, ~~2017, increased~~2023 decreased by ~~$22,111,517,~~$15,576, or ~~4.5%~~2.40%, to ~~$518,236,091~~$633,475 from ~~$496,124,574~~$649,051 at December 31, ~~2016. This increase was due to purchases in excess of maturities, sales and calls and increases in~~2022 when comparing the ~~market value~~amortized cost of the ~~Corporation’s investment~~Company’s investments securities. The decrease is primarily a result of the mortgage-backed securities ~~portfolio.~~portfolio monthly paydowns.

~~LOANS~~

LHFI

The ~~Corporation’s~~Company’s gross loan balance decreased by ~~$473,918~~$10,857, or (1.85%), during the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, to ~~$389,674,425~~$574,734 from ~~$390,148,343~~$585,591 at December 31, ~~2016. Loan~~2022. The year-to-date decline in loan growth ~~for~~primarily reflects paydown activity in excess of new loans coupled with management’s strategic reduction of substandard loans during the ~~nine months ended September 30, 2017 was adversely impacted by weak demand for loans that meet our underwriting standards and increased competition for available loans that do.~~quarter. No material changes were made to the loan products offered by the ~~Corporation~~Company during this period.

~~PREMISES AND EQUIPMENT~~

During the nine months ended September 30, 2017, the Corporation’s premises and equipment increased by $2,088,654, or 11.2%, to $20,752,738 from $18,664,084 at December 31, 2016. The increase was due to costs related to the new branch construction in Biloxi partially offset by depreciation expense for the period.

DEPOSITS

~~DEPOSITS~~

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

~~DEPOSITS~~

					Amount of			Percent of
	June 30,		December 31,		Increase			Increase
	2023		2022		(Decrease)			(Decrease)

Noninterest-Bearing Deposits	$	281,812	$	299,112	$	(17,300	)		(5.78	%)
Interest-Bearing Deposits		500,235		515,337		(15,102	)		(2.93	%)
Savings Deposits		121,961		133,030		(11,069	)		(8.32	%)
Certificates of Deposit		199,064		178,923		20,141			11.26	%

Total deposits	$	1,103,072	$	1,126,402	$	(23,330	)		(2.07	%)

         Amount of    Percent of
   September 30,    December 31,    Increase    Increase
   2017    2016    (Decrease)    (Decrease)
Noninterest-Bearing Deposits
   $ 152,450,812    $ 149,512,941    $ 2,937,871    1.96 %
Interest-Bearing Deposits
   338,083,326    340,180,286    (2,096,960 )    -0.62 %
Savings Deposits
   76,628,605    73,745,005    2,883,600    3.91 %
Certificates of Deposit
   187,605,623    196,714,108    (9,108,485 )    -4.63 %








Total deposits
   $ 754,768,366    $ 760,152,340    $ (5,383,974 )    -0.71 %

~~Non-interest-bearing~~ ~~and savings increased while~~All deposit accounts except for certificates of ~~deposit and interest-bearing~~ deposits decreased during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2023. The decrease in deposit accounts is directly attributable to customers moving noninterest-bearing deposits to certificates of deposits due to the current rate environment coupled with the aforementioned increased deposit competition. Management continually monitors the interest rates on ~~loan and~~time deposit products to ensure that the ~~Corporation~~Company is managing liquidity in line with ~~the rates dictated by the market and~~ our asset and liability management objectives. These rate adjustments impact deposit balances.

OFF-BALANCE SHEET ARRANGEMENTS

Please refer to Note 2 to the ~~consolidated financial statements~~Consolidated Financial Statements included in this Quarterly Report for a discussion of the nature and extent of the ~~Corporation’s~~Company’s off-balance sheet arrangements, which consist solely of commitments to fund loans and letters of credit.

~~CONTRACTUAL OBLIGATIONS~~

~~There~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Asset/Liability Management and Interest Rate Risk

The principal objective of our asset and liability management function is to evaluate the interest rate risk within the balance sheet and pursue a controlled assumption of interest rate risk while maximizing net income and preserving adequate levels of liquidity and capital. The Board of Directors of the Bank has oversight of our asset and liability management function, which is managed by our Chief Financial Officer. Our Chief Financial Officer meets with our senior executive management team regularly to review, among other things, the sensitivity of our assets and liabilities to market rate changes, local and national market conditions and market interest rates. That group also reviews our liquidity, capital, deposit mix, loan mix and investment positions.

As a financial institution, our primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the fair value of all interest earning assets and interest-bearing liabilities, other than those which have ~~been no material changes outside~~a short term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair values.

We manage our exposure to interest rates primarily by structuring our balance sheet in the ordinary course of ~~the Corporation’s business to the contractual obligations set forth in Note 12 to the Corporation’s financial statements contained in the Corporation’s Annual Report on Form10-K~~business. We do not typically enter into derivative contracts for the ~~year ended December 31, 2016.~~

purpose of managing interest rate risk, but we may elect to do so should the situation warrant. Based upon the nature of our operations, we are not subject to material foreign exchange or commodity price risk. We do not own any trading assets.

~~ITEM~~ ~~3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.~~

~~The following discussion~~

We use an interest rate risk simulation model to test the interest rate sensitivity of operations outlines specific risks that could affect the Corporation’s ability to compete, change the Corporation’s risk profile or eventually impact the Corporation’s financial condition or results. The risks the Corporation faces generally are similar to those experienced, to varying degrees, by all financial services companies.

The Corporation’s strategies and its management’s ability to react to changing competitive and economic environments have historically enabled the Corporation to compete effectively and manage risks to acceptable levels. The Corporation has outlined potential risks below that it presently believes could be important; however, other risks may prove tobe important in the future. New risks may emerge at any timenet interest income and the Corporation cannot predict with certainty all potential developments that could affect the Corporation’s financial condition or results of operation. The following discussion highlights potential risks, which could intensify over time orbalance sheet. Instantaneous parallel rate shift ~~dynamically~~scenarios are modeled and utilized to evaluate risk and establish exposure limits for acceptable changes in ~~a way that might~~projected net interest margin. These scenarios, known as rate shocks, simulate an instantaneous change ~~the Corporation’s risk profile.~~

~~Competition Risks~~

~~The market~~ in ~~which the Corporation competes is saturated with community banks seeking~~interest rates and use various assumptions, including, but not limited to, provide a service-oriented banking experience to individuals and businesses compared with what the Corporation believes is the more rigid and less friendly environment found in larger banks. This requires the Corporation to offer most, if not all, of the products and conveniences that are offered by the larger banks, but with a service differentiation. In doing so, it is imperative that the Corporation identify the lines of business that the Corporationcan excel in, prudently utilize the Corporation’s available capital to acquire the people and platforms required thereof, and executeprepayments on ~~these strategies.~~

~~Credit Risks~~

~~Like all lenders, the Corporation faces the risk that the Corporation’s customers may not repay their~~ loans and ~~that~~securities, deposit decay rates, pricing decisions on loans and deposits, and reinvestment and replacement of asset and liability cash flows. We also analyze the ~~realizable~~economic value of ~~collateral may be insufficient to avoid~~equity as a loss of principal. In the Corporation’s business, some level of credit loss is unavoidable and overall levels of credit loss can vary over time. The Corporation’s ability to manage credit risk depends primarily upon the Corporation’s ability to assess the creditworthiness of customers and the value of collateral, including real estate. The Corporation controls credit risk by diversifying the Corporation’s loan portfolio and managing its composition, and by recording and managing an allowance for expected loan losses in accordance with applicable accounting rules. At the end of September 30, 2017, the Corporation had approximately $3.4 million of available reserves to cover such losses. The models and approaches the Corporation uses to originate and manage loans are regularly reviewed, if necessary or advisable, updated to consider changes in the competitive environment, in real estate prices and other collateral values, and in the economy, among other things, based on the Corporation’s experience originating loans and servicing loan portfolios.

~~Financing, Funding and Liquidity Risks~~

~~One of the most important aspects of management’s efforts to sustain long-term profitability for the Corporation is the management~~secondary measure of interest rate risk. ~~Management’s goal~~This is a complementary measure to ~~maximize~~ net interest income ~~within acceptable levels~~where the calculated value is the result of ~~interest-rate risk and liquidity.~~

the fair value of assets less the fair value of liabilities. The Corporation’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 Corporation can reprice the yields on interest-earning assets and the costseconomic value of equity is a longer-term view of interest ~~bearing liabilities as a result~~rate risk because it measures the present value of ~~changes in market interest rates. Interest rates in the financial markets affect the Corporation’s decisions on pricing its assets and liabilities, which impacts net interest income, an important~~all future cash ~~flow stream for the Corporation. As a result, a substantial part~~flows. The impact of the Corporation’s risk-management activities are devoted to managing interest-rate risk. Currently, the Corporation does not have any significant risks related to foreign currency exchange, commodities or equity risk exposures.

~~Interest Rate and Yield Curve Risks~~

~~A significant portion of the Corporation’s business involves borrowing and lending money. Accordingly,~~ changes in interest rates ~~directly impact~~on this calculation is analyzed for the ~~Corporation’s revenues~~risk to our future earnings and ~~expenses, and potentially could compress~~is used in conjunction with the ~~Corporation’s~~analyses on net interest ~~margin.~~ income.

The ~~Corporation actively manages its balance sheet to control~~following table summarizes the ~~risks of a reduction~~simulated change in net interest ~~margin brought about by ordinary fluctuations~~income assuming a static balance sheet versus unchanged rates as of June 30, 2023 and December 31, 2022:

	June 30, 2023						December 31, 2022
	Following			Months			Following			Months
	12 months			13-24			12 months			13-24
+400 basis points		-14.0	%		-6.2	%		-12.0	%		-2.2	%
+300 basis points		-9.8			-3.9			-7.9			-0.4
+200 basis points		-5.6			-1.7			-3.9			1.0
+100 basis points		-2.0			-0.1			-0.8			1.6
Flat rates		-			-			-			-
-100 basis points		1.2			-0.8			1.3			-1.2
-200 basis points		3.7			-0.5			2.6			-2.5

The following table presents the change in ~~rates.~~our economic value of equity as of June 30, 2023 and December 31, 2022, assuming immediate parallel shifts in interest rates:

~~Like all financial services companies,~~

	Economic Value of Equity at Risk (%)
	June 30, 2023			December 31, 2022
+400 basis points		-39.5	%		-33.1	%
+300 basis points		-30.5			-24.7
+200 basis points		-20.7			-16.6
+100 basis points		-10.4			-8.3
Flat rates		-			-
-100 basis points		6.9			5.1
-200 basis points		9.3			5.7

Many assumptions are used to calculate the ~~Corporation faces~~impact of interest rate fluctuations. Actual results may be significantly different than our projections due to several factors, including the ~~risk~~timing and frequency of ~~abnormalities in~~rate changes, market conditions and the shape of the yield curve. The ~~yield curve shows~~computations of interest rate risk shown above do not include actions that our management may undertake to manage the risks in response to anticipated changes in interest rates, ~~applicable~~and actual results may also differ due to short and long term debt. The curve is steep when short-term rates are much lower than long-term rates, it is flat when short-term rates are equal, or nearly equal, to long-term rates, and it is inverted when short-term rates exceed long-term rates. Historically, the yield curve has been positively sloped. A flat or inverted yield curve tends to decrease net interest margin, as funding costs increase relativeany actions taken in response to the ~~yield on assets. Currently,~~changing rates.

As part of our asset/liability management strategy, our management has emphasized the ~~yield curve is positively sloped.~~

~~Regulatory and Legal Risks~~

~~The Corporation operates in a heavily regulated industry and therefore is subject to many banking, deposit, and consumer lending laws~~origination of shorter duration loans as well as ~~the rules and regulations promulgated by the FDIC, FRB, Securities and Exchange Commission and the NASDAQ stock market. Failure~~variable rate loans to ~~comply with applicable regulations could result in financial or operational penalties. Inaddition, efforts to comply with applicable regulations may increase the Corporation’s costs and/or~~ limit the Corporation’s ability to pursue certain business opportunities. Federal and state regulations significantly limit the types of activities in which the Corporation, as a financial institution, may engage. In addition, the Corporation is subjectnegative exposure to a wide array of other regulations that govern other aspects of how the Corporation conducts business, such as in the areas of employment and intellectual property. Federal and state legislative and regulatory authorities occasionally consider changing these regulationsrate increase. We also desire to acquire deposit transaction accounts, particularly non-interest or ~~adopting new ones. Such actions could limit the amount of interest or fees the Corporation can charge, could restrict the Corporation’s ability~~low interest-bearing non-maturity deposit accounts, whose cost is less sensitive to ~~collect loans or realize on collateral or could materially affect us in other~~

ways. Additional federal and state consumer protection regulations could also expand the privacy protections afforded to customers of financial institutions, restricting the Corporation’s ability to share or receive customer information and increasing the Corporation’s costs. In addition, changes in ~~accounting rules can significantly affect how the Corporation records and reports assets, liabilities, revenues, expenses and earnings.~~interest rates.

The Corporation also faces litigation risks from customers (individually or in class actions) and from federal or state regulators. Litigation is an unavoidable part of doing business, and the Corporation manages those risks through internal controls, personnel training, insurance, litigation management, the Corporation’s compliance and ethics processes and other means. However, the commencement, outcome and magnitude of litigation cannot be predicted or controlled with any certainty.

~~Accounting Estimate Risks~~

The preparation of the Corporation’s consolidated financial statements in conformity with GAAP requires management to make significant estimates that affect the financial statements. The Corporation’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 Corporation may significantly increase the allowance for credit losses or sustain credit losses that are significantly higher than the provided allowance, or the Corporation may make some other adjustment that will differ materially from the estimates that the Corporation previously made.

~~Expense Control~~

Expenses and other costs directly affect the Corporation’s earnings. The Corporation’sability to successfully manage expenses is important to its long-term profitability. Many factors can influence the amount of the Corporation’s expenses, as well as how quickly they grow. As the Corporation’s businesses change or expand, additional expenses can arise from asset purchases, structural reorganization, evolving business strategies, and changing regulations, among other things. The Corporation manages expense growth and risk through a variety of means, including actual versus budget management, imposition of expense authorization, and procurement coordination and processes.

ITEM 4. CONTROLS AND PROCEDURES.

The management of the ~~Corporation,~~Company, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures in ensuring that the information required to be disclosed in ~~our filings~~the reports we file or submit 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 ~~Corporation’s~~Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely ~~decision~~decisions regarding required disclosure. Based on such evaluation, our principal executive officer and principal financial officer have concluded that such disclosure controls and procedures were effective as of ~~September~~June 30, ~~2017~~2023 (the end of the period covered by this Quarterly Report).

There were no changes to the ~~Corporation’s~~Company’s internal control over financial reporting that occurred in the three months ended ~~September~~June 30, ~~2017,~~2023, that have materially affected, or are reasonably likely to materially affect, the ~~Corporation’s~~Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.

~~ITEM 1.~~ LEGAL PROCEEDINGS.

The ~~Corporation~~Company is a party to lawsuits and other claims that arise in the ordinary course of business, all of which are being vigorously contested. In the regular course of business, management evaluates estimated losses or costs related to litigation, and provisions are made for anticipated losses whenever management believes that such losses are probable and can be reasonably estimated. At the present time, management believes, based on the advice of legal counsel, that the final resolution of pending legal proceedings will not likely have a material impact on the ~~Corporation’s~~Company’s consolidated financial condition or results of operations.

ITEM 1A.

~~ITEM 1A.~~ RISK FACTORS.

~~The Corporation’s business, futurefinancial condition and results of operations are subject to a number of~~In evaluating an investment in our common stock, investors should consider carefully, among other things, the risk factors ~~risks and uncertainties, which are~~previously disclosed in Part I, Item 1A ~~“Risk Factors,” in Part I~~ of our Annual Report on Form10-K for the year ended December 31, ~~2016, which~~2022, as well as the ~~Corporation~~information contained in this Quarterly Report on Form 10-Q and our other reports and registration statements filed with the ~~Securities and Exchange Commission on March 15, 2017. Additional information regarding some of those risks and uncertainties is contained~~SEC.

Other than the risk factor set forth below, there has been no material change in the notes to the condensed consolidated financial statements appearing in Part I, Item 1 of this Quarterly Report, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing in Part I, Item 2 of this Quarterly Report and in “Quantitative and Qualitative Disclosures About Market Risk” appearing in Part I, Item 3 of this Quarterly Report. The risks and uncertaintiesrisk factors previously disclosed in ~~the Corporation’s~~our Annual Report on Form10-K for the year ended December 31, ~~2016,~~2022.

Risks Related to Recent Events Impacting the ~~Corporation’s quarterly reports on Form10-Q~~Financial Services Industry

The recent high-profile bank failures of Silicon Valley Bank and ~~other reports filed~~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 ~~the SEC are not necessarily~~larger financial institutions or invest in higher yielding short-term fixed income securities, all of ~~the risks and uncertainties that may affect the Corporation’s business, financial condition~~which could materially adversely impact our liquidity, cost of funding, loan funding capacity, net interest margin, capital and results of ~~operations~~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 ~~future.~~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.

~~There~~

These rapid bank failures have ~~been no material changes~~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 ~~risk factors as disclosed~~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 ~~Corporation’s Annual Report on Form10-K~~ ~~for~~broader banking industry, there can be no guarantee that these steps will stabilize the ~~Corporation’s year ended December 31, 2016.~~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.

ITEM 6.

EXHIBITS.

~~ITEM 6. EXHIBITS.~~

Exhibits



~~31(a)~~	10(1)	First Amendment to Loan Agreement and Revolving Credit Note, as of June 26, 2023, between Citizens Holding Company and First Horizon Bank

31(a)

Certification of the Chief Executive Officer pursuant to Rule13a-14(a)/15d-14(a).


~~31(b)~~		31(b)	Certification of the Chief Financial Officer pursuant to Rule13a-14(a)/15d-14(a).


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


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


~~101~~		101	Financial Statements submitted in Inline XBRL format.

~~EXHIBIT INDEX~~

~~Exhibit~~ ~~Number~~	~~Description of~~104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

~~31(a)~~	~~Certification of the Chief Executive Officer pursuant to Rule13a-14(a)/15d-14(a)~~

~~31(b)~~	~~Certification of the Chief Financial Officer pursuant to Rule13a-14(a)/15d-14(a)~~

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

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

~~101~~	~~Financial Statements submitted in XBRL format.~~

SIGNATURES

~~SIGNATURES~~

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


CITIZENS HOLDING COMPANY

~~BY:~~	BY:	/s/ ~~Greg L. McKee~~Stacy M. Brantley
			~~Greg L. McKee~~
		Stacy M. Brantley President and Chief Executive Officer
		(Principal Executive Officer)

~~BY:~~		~~/s/ Robert T. Smith~~
	BY:	/s/ Phillip R. Branch		~~Robert T. Smith~~
		Phillip R. Branch Treasurer and Chief Financial Officer
		(Principal Financial Officer and Chief Accounting Officer)

		DATE: ~~November 9, 2017~~August 14, 2023

Mississippi
~~Mississippi~~		64-0666512
(State or other jurisdiction of	(IRS Employer Identification No.)
~~incorporation~~Company or organization)
~~(IRS Employer~~ ~~Identification No.)~~

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

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.20 par value	CIZN	NASDAQ Global Market


Title		Outstanding
Common Stock, $0.20 par value		~~4,894,705~~ 5,616,438


PART I.		FINANCIAL INFORMATION	1
		1

Item 1.		Consolidated Financial ~~Statements~~Statements.	1
			1

		Consolidated Statements of Financial Condition, ~~September~~as of June 30, ~~2017~~2023 (Unaudited) and December 31, ~~2016~~2022 (Audited)	1
			1

		Consolidated Statements of Income for the Three and ~~nine~~Six months ended ~~September~~June 30, ~~2017~~2023 (Unaudited) and ~~2016~~2022 (Unaudited)	2
			2

		Consolidated Statements of Comprehensive Income (Loss) for the Three and ~~nine~~Six months ended ~~September~~June 30, ~~2017~~2023 (Unaudited) and ~~2016~~2022 (Unaudited)	3
			3

		Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six months ended ~~September~~June 30, ~~2017~~2023 (Unaudited) and ~~2016~~2022 (Unaudited)	4
			4

		Notes to Consolidated Financial Statements (Unaudited)	5
		5

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operations.	30
		30

Item 3.		Quantitative and Qualitative Disclosures About Market ~~Risk~~Risk.	43
		46

Item 4.		Controls and Procedures.	44

49

PART II.		OTHER INFORMATION	45

50Item 1.	Legal Proceedings.	45

Item 1A.	Risk Factors.	45
~~Item 1.~~		~~Legal Proceedings~~		50

~~Item 1A.~~		~~Risk Factors~~		50

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

~~Item 3.~~		Defaults Upon Senior Securities.*

~~Item 4.~~		Mine Safety Disclosures.*

~~Item 5.~~		Other Information.*

~~Item 6.~~		~~Exhibits.~~
51Item 6.	Exhibits.	45


		* None or Not Applicable

~~SIGNATURES~~
53 SIGNATURES		46


	September 30, 2017			December 31, 2016
	(Unaudited)			(Audited)
ASSETS
Cash and due from banks	$	20,791,594		$	21,688,557
Interest bearing deposits with other banks		29,640,509			48,603,182
Investment securities available for sale, at fair value		518,236,091			496,124,574
Loans, net of allowance for loan losses of $3,403,933 in 2017 and $3,902,796 in 2016		389,674,425			390,148,343
Premises and equipment, net		20,752,738			18,664,084
Other real estate owned, net		4,174,291			4,443,010
Accrued interest receivable		4,052,086			4,720,189
Cash surrender value of life insurance		24,338,620			23,890,333
Deferred tax assets, net		7,382,774			10,634,669
Other assets		7,081,369			6,294,966

TOTAL ASSETS	$	1,026,124,497		$	1,025,211,907

LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits:
Noninterest-bearing demand	$	152,450,812		$	149,512,941
Interest-bearing NOW and money market accounts		338,083,326			340,180,286
Savings deposits		76,628,605			73,745,005
Certificates of deposit		187,605,623			196,714,108

Total deposits		754,768,366			760,152,340
Securities sold under agreement to repurchase		149,451,950			150,282,913
Federal Home Loan Bank advances		20,000,000			20,000,000
Accrued interest payable		176,973			199,368
Deferred compensation payable		8,513,978			8,209,427
Other liabilities		1,270,799			1,308,464

Total liabilities		934,182,066			940,152,512
SHAREHOLDERS’ EQUITY
Common stock; $0.20 par value, 22,500,000 shares authorized, 4,894,705 shares issued and outstanding at September 30, 2017 and 4,882,579 shares issued and outstanding at December 31, 2016		978,941			976,516
Additionalpaid-in capital		4,058,083			3,802,204
Retained earnings		92,305,609			90,999,689
Accumulated other comprehensive loss, net of tax benefit of $3,212,560 in 2017 and $6,376,702 in 2016		(5,400,202	)		(10,719,014	)

Total shareholders’ equity		91,942,431			85,059,395

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,026,124,497		$	1,025,211,907

	December 31, 2022			Impact of FASB ASU				January 1, 2023
	(as reported)			2016-13 Adoption				(adjusted)
Assets:
ACL	$	(5,264	)	$	(634	)		$	(5,898	)
Deferred tax assets, net		29,574			327				29,901
Liabilities:
ACL on off-balance sheet exposures		-			677		²		677
Shareholders' equity:
Retained earnings	$	102,525		$	(984	)		$	101,541


	Directors’ Plan					2013 Plan
				Weighted				Weighted
	Number			Average		Number		Average
	of			Exercise		of		Exercise
	Shares			Price		Shares		Price
Outstanding at December 31, 2016		78,000		$	21.08		—	$	—
Granted		—			—		—		—
Exercised		(6,000	)		20.94		—		—
Expired		(9,000	)		22.00		—		—

Outstanding at September 30, 2017		63,000		$	20.96		—	$	—

			Gross		Gross
June 30, 2023	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
Securities available-for-sale
Mortgage backed securities	$	101,834	$	-	$	10,731	$	91,103
State, County, Municipals		134,210		10		28,898		105,322
Other securities		500	$	-	$	59	$	441
Total	$	236,544	$	10	$	39,688	$	196,866


			Gross		Gross
September 30, 2017	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
Securitiesavailable-for-sale
Obligations of U.S. Government agencies	$	183,095,272	$	—	$	3,090,044	$	180,005,228
Mortgage backed securities		223,005,218		85,489		3,812,513		219,278,194
State, County, Municipals		117,883,069		1,003,224		2,972,681		115,913,612
Other investments		2,865,294		173,763		—		3,039,057

Total	$	526,848,853	$	1,262,476	$	9,875,238	$	518,236,091


			Gross		Gross
December 31, 2016	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
Securitiesavailable-for-sale
Obligations of U.S. Government agencies	$	207,080,794	$	—	$	7,114,186	$	199,966,608
Mortgage backed securities		152,765,924		340,419		4,841,633		148,264,710
State, County, Municipals		150,503,811		1,269,356		6,851,017		144,922,150
Other investments		2,869,761		101,345		—		2,971,106

Total	$	513,220,290	$	1,711,120	$	18,806,836	$	496,124,574

	June 30, 2023		December 31, 2022
Aaa	$	16,811	$	18,096
Aa1 to Aa3		41,485		40,174
Not Rated (1)		34,589		34,570
	$	92,885	$	92,840

June 30, 2023
Available-for-sale	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses		Value		Losses		Value		Losses

Mortgage backed securities	$	36,816	$	1,464	$	54,287	$	9,267	$	91,103	$	10,731
State, County, Municipal		12,246		322		91,816		28,576	$	104,062		28,898
Other securities		-		-		441		59		441		59
Total	$	49,062	$	1,786	$	146,544	$	37,902	$	195,606	$	39,688

Held-to-maturity	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses		Value		Losses		Value		Losses

Obligations of U.S. government agencies	$	-	$	-	$	3,599	$	434	$	3,599	$	434
Mortgage backed securities		-		-		271,443		28,570		271,443		28,570
State, County, Municipal		-		-		88,133		4,752		88,133		4,752
Total	$	-	$	-	$	363,175	$	33,756	$	363,175	$	33,756

					Nonaccrual With No Allowance for Credit Loss		Nonaccrual		Loans Past Due 90 Days or More Still Accruing
	September 30, 2017		December 31, 2016
Real Estate:
June 30, 2023
Loans secured by real estate:
Land Development and Construction	$	42	$	133	$	-	$	-	$	-
Farmland		382		234		27		119		-
1-4 Family Mortgages		2,169		1,954		178		1,771		145
Commercial Real Estate		5,066		6,293		180		766		-

Total Real Estate Loans		7,659		8,614		385		2,656		145
Business Loans:
Commercial and Industrial Loans		82		239		124		303		-

Farm Production and Other Farm Loans						-		-		-
Total Business Loans		82		239		124		303		-
Consumer Loans:
Other Consumer Loans		92		26

Consumer Loans						-		36		-
Credit Cards						-		-		15
Total Consumer Loans		92		26		-		36		15

Total Nonaccrual Loans	$	7,833	$	8,879

Total					$	509	$	2,995	$	160


											Accruing
			Loans								Loans
	Loans		90 or more								90 or more
	30-89 Days		Days		Total Past		Current		Total		Days
	Past Due		Past Due		Due Loans		Loans		Loans		Past Due
Real Estate:
June 30, 2023													30 - 89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due		Current Loans		Total
Loans secured by real estate:
Land Development and Construction	$	54	$	—	$	54	$	22,288	$	22,342	$	—	$	247	$	-	$	247	$	57,376	$	57,623
Farmland		183		31		214		17,822		18,036		—		72		19		91		11,405		11,496
1-4 Family Mortgages		3,338		233		3,571		93,860		97,431		—		976		400		1,376		90,164		91,540
Commercial Real Estate		2,032		155		2,187		181,426		183,613		—		437		-		437		319,466		319,903

Total Real Estate Loans		5,607		419		6,026		315,396		321,422		—		1,732		419		2,151		478,411		480,562
Business Loans:
Commercial and Industrial Loans		254		247		501		53,653		54,154		247		141		266		407		76,939		77,346
Farm Production and Other Farm Loans		53		—		53		1,016		1,069		—		6		-		6		412		418

Total Business Loans		307		247		554		54,669		55,223		247		147		266		413		77,351		77,764
Consumer Loans:
Consumer Loans														116		-		116		13,415		13,531
Credit Cards		8		1		9		1,193		1,202		1		74		15		89		2,788		2,877
Other Consumer Loans		588		70		658		14,837		15,495		51

Total Consumer Loans		596		71		667		16,030		16,697		52		190		15		205		16,203		16,408

Total Loans	$	6,510	$	737	$	7,247	$	386,095	$	393,342	$	299

Total													$	2,069	$	700	$	2,769	$	571,965	$	574,734


			Recorded		Recorded
	Unpaid		Investment		Investment		Total				Average
	Principal		With No		With		Recorded		Related		Recorded
	Balance		Allowance		Allowance		Investment		Allowance		Allowance
Real Estate:
1-4 Family Mortgages	$	468	$	—	$	468	$	468	$	136	$	167
Commercial Real Estate		4,186		—		4,186		4,186		402		417

Total Real Estate Loans		4,654		—		4,654		4,654		538		584
Business Loans:
Commercial and Industrial Loans		—		—		—		—		—		15

Total Business Loans		—		—		—		—		—		15
Total Loans	$	4,654	$	—	$	4,654	$	4,654	$	538	$	599


Impaired loans (in thousands) as of December 31, 2016, segregated by class, were as follows:
			Recorded		Recorded										Recorded		Recorded
	Unpaid		Investment		Investment		Total				Average		Unpaid		Investment		Investment		Total				Average
	Principal		With No		With		Recorded		Related		Recorded		Principal		With No		With		Recorded		Related		Recorded
	Balance		Allowance		Allowance		Investment		Allowance		Allowance		Balance		Allowance		Allowance		Investment		Allowance		Investment
Real Estate:
Land Development and Construction	$	—	$	—	$	—	$	—	$	—	$	43	$	-	$	-	$	-	$	-	$	-	$	86
Farmland		163		—		163		163		28		87		30		30		-		30		-		32
1-4 Family Mortgages		1,448		—		1,448		1,448		252		218		190		190		-		190		-		479
Commercial Real Estate		5,327		—		5,327		5,327		469		1,577		3,023		795		2,066		2,861		116		1,996
Total Real Estate Loans														3,243		1,015		2,066		3,081		116	$	2,593

Total Real Estate Loans		6,938		—		6,938		6,938		749		1,925
Business Loans:
Commercial and Industrial Loans		126		—		126		126		38		19		304		196		-		196		-	$	214
Total Business Loans														304		196		-		196		-	$	214

Total Business Loans		126		—		126		126		38		19

Total Loans	$	7,064	$	—	$	7,064	$	7,064	$	787	$	1,944	$	3,547	$	1,211	$	2,066	$	3,277	$	116	$	2,807


			Pre-Modification		Post-Modification
September 30, 2017			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Loans		Investment		Investment
Commercial real estate		3	$	4,871	$	3,160

Total		3	$	4,871	$	3,160


			Pre-Modification		Post-Modification
December 31, 2016			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Loans		Investment		Investment
Commercial real estate		3	$	4,871	$	3,288

Total		3	$	4,871	$	3,288


	Number		Recorded
	of Loans		Investment
Totals at January 1, 2017		3	$	3,288
Reductions due to:
Principal paydowns				(128	)

Total at September 30, 2017		3	$	3,160

June 30, 2023	Inventory		Real Estate		Receivables		Total
Loans secured by real estate:
Land Development and Construction	$	-	$	247	$	-	$	247
Farmland		-		27		-		27
1-4 Family Mortgages		-		178		-		178
Commercial Real Estate		-		2,619		-		2,619
Total Real Estate Loans		-		3,071		-		3,071
Business Loans:
Commercial and Industrial Loans		92		-		32		124
Farm Production and Other Farm Loans		-		-		-		-
Total Business Loans		92		-		32		124

Total	$	92	$	3,071	$	32	$	3,195

Term Loans Amortized Cost Basis by Origination Year													Term Loans Amortized Cost Basis by Origination Year
June 30, 2023														2023		2022		2021		2020		2019		Prior		Revolving Loans		Total Loans
Loans secured by real estate:
Land Development and Construction
Satisfactory - Categories 1-4														$	8,956	$	6,215	$	3,460	$	10,320	$	930	$	929	$	24,741	$	55,551
Special Mention - Category 5 & 6															-		872		679		-		-		-		-		1,551
Substandard - Category 7															-		520		-		-		-		1		-		521
Doubtful - Category 8															-		-		-		-		-		-		-		-
Loss 9															-		-		-		-		-		-		-		-
Total Land Development and Construction															8,956		7,607		4,139		10,320		930		930		24,741		57,623

Farmland
Satisfactory - Categories 1-4															1,043		1,725		1,383		1,954		3,158		840		1,000		11,103
Special Mention - Category 5 & 6															-		-		87		-		135		38		-		260
Substandard - Category 7															-		34		14		8		28		49		-		133
Doubtful - Category 8															-		-		-		-		-		-		-		-
Loss 9															-		-		-		-		-		-		-		-
Total Farmland															1,043		1,759		1,484		1,962		3,321		927		1,000		11,496
			Special
1-4 Family Mortgages
Satisfactory - Categories 1-4															5,620		20,038		12,390		12,315		10,445		8,523		16,850		86,181
Special Mention - Category 5 & 6															-		193		97		125		302		789		149		1,655
Substandard - Category 7															42		36		280		368		164		2,225		589		3,704
Doubtful - Category 8															-		-		-		-		-		-		-		-
Loss 9															-		-		-		-		-		-		-		-
Total 1-4 Family Mortgages															5,662		20,267		12,767		12,808		10,911		11,537		17,588		91,540
	Satisfactory		Mention		Substandard		Doubtful		Loss		Total
	1,2,3,4		5,6		7		8		9		Loans
Real Estate:
Land Development and Construction	$	21,375	$	835	$	132	$	—	$	—	$	22,342
Farmland		16,599		641		796		—		—		18,036
1-4 Family Mortgages		83,316		5,454		8,661		—		—		97,431
Commercial Real Estate		154,274		22,259		7,080		—		—		183,613

Satisfactory - Categories 1-4															33,197		53,441		59,556		55,449		28,943		34,035		18,866		283,487
Special Mention - Category 5 & 6															9,340		2,468		2,264		958		1,473		306		-		16,809
Substandard - Category 7															-		247		3,707		-		267		15,386		-		19,607
Doubtful - Category 8															-		-		-		-		-		-		-		-
Loss 9															-		-		-		-		-		-		-		-
Total Commercial Real Estate															42,537		56,156		65,527		56,407		30,683		49,727		18,866		319,903
Total Real Estate Loans		275,564		29,189		16,669		—		—		321,422			58,198		85,789		83,917		81,497		45,845		63,121		62,195		480,562
Business Loans:
Commercial and Industrial Loans		50,747		3,018		389		—		—		54,154
Satisfactory - Categories 1-4															5,626		22,677		5,145		14,639		6,591		11,556		6,449		72,683
Special Mention - Category 5 & 6															-		127		-		307		6		1,007		2,783		4,230
Substandard - Category 7															-		19		102		-		46		194		72		433
Doubtful - Category 8															-		-		-		-		-		-		-		-
Loss 9															-		-		-		-		-		-		-		-
Total Commercial & Industrial															5,626		22,823		5,247		14,946		6,643		12,757		9,304		77,346

Farm Production and Other Farm Loans		986		12		71		—		—		1,069

Satisfactory - Categories 1-4															-		232		-		9		-		90		79		410
Special Mention - Category 5 & 6															-		-		-		-		-		-		-		-
Substandard - Category 7															-		-		6		-		-		2		-		8
Doubtful - Category 8															-		-		-		-		-		-		-		-
Loss 9															-		-		-		-		-		-		-		-
Total Farm Production & Other Farm															-		232		6		9		-		92		79		418
Total Business Loans		51,733		3,030		460		—		—		55,223			5,626		23,055		5,253		14,955		6,643		12,849		9,383		77,764
Consumer Loans:
Credit Cards		1,201		—		1		—		—		1,202
Other Consumer Loans		15,158		73		264		—		—		15,495

Satisfactory - Categories 1-4															3,889		4,727		1,961		824		913		299		260		12,873
Special Mention - Category 5 & 6															-		-		-		-		-		-		-		-
Substandard - Category 7															592		39		25		2		-		-		-		658
Doubtful - Category 8															-		-		-		-		-		-		-		-
Loss 9															-		-		-		-		-		-		-		-
Total Consumer Loans		16,359		73		265		—		—		16,697			4,481		4,766		1,986		826		913		299		260		13,531

Total Loans	$	343,656	$	32,292	$	17,394	$	—	$	—	$	393,342
Credit Cards
Performing															-		-		-		-		-		-		2,876		2,876
Nonperforming															-		-		-		-		-		-		1		1
Total Credit Card															-		-		-		-		-		-		2,877		2,877
Gross LHFI														$	68,305	$	113,610	$	91,156	$	97,278	$	53,401	$	76,269	$	74,715	$	574,734

Less ACL																													(6,397	)
Net LHFI																												$	568,337

			Special
	Satisfactory		Mention		Substandard		Doubtful		Loss		Total
	1,2,3,4		5,6		7		8		9		Loans
Real Estate:
Land Development and Construction	$	50,015	$	2,427	$	289	$	-	$	-	$	52,731
Farmland		10,832		269		336		-		-		11,437
1-4 Family Mortgages		85,861		1,816		4,471		-		-		92,148
Commercial Real Estate		274,901		7,975		33,665		-		-		316,541
Total Real Estate Loans		421,609		12,487		38,761		-		-		472,857

Business Loans:
Commercial and Industrial Loans		91,016		4,902		577		-		5		96,500
Farm Production and Other Farm Loans		491		-		13		-		-		504
Total Business Loans		91,507		4,902		590		-		5		97,004

Consumer Loans:
Credit Cards		2,670		-		68		-		-		2,738
Other Consumer Loans		12,934		7		51		-		-		12,992
Total Consumer Loans		15,604		7		119		-		-		15,730


Total Loans	$	528,720	$	17,396	$	39,470	$	-	$	5	$	585,591

Portfolio Segment	Loan Class	Methodology	Loss Drivers
Loans secured by real estate
	Land Development and Construction	Loss Rate	CRE Price Index, Real GDP, US Unemployment
	Farmland	Loss Rate	CRE Price Index, Real GDP, US Unemployment
	1-4 Family Mortgages	Loss Rate	CRE Price Index, Real GDP, US Unemployment
	Commercial Real Estate	Loss Rate	CRE Price Index, Real GDP, US Unemployment

Business loans
	Commercial and Industrial Loans	Loss Rate	US Unemployment, Nominal GDP
	Farm Production and Other Farm Loans	Loss Rate	US Unemployment, Nominal GDP

Consumer loans
	Consumer Loans	Loss Rate	Moody's Expected Consumer Credit Loss Model
	Credit Cards	WARM	Company loss history
	Overdrafts	WARM	Company loss history


	Real			Business
September 30, 2017	Estate			Loans		Consumer			Total
Beginning Balance, January 1, 2017	$	3,117,134		$	257,554	$	528,108		$	3,902,796
(Reversal of) provision for loan losses		(482,980	)		199,355		29,011			(254,614	)
Chargeoffs		126,757			146,139		41,788			314,684
Recoveries		26,188			754		43,493			70,435

Net chargeoffs (recoveries)		100,569			145,385		(1,705	)		244,249

Ending Balance	$	2,533,585		$	311,524	$	558,824		$	3,403,933

Period end allowance allocated to:
Loans individually evaluated for impairment	$	537,897		$	—	$	—		$	537,897
Loans collectively evaluated for impairment		1,995,688			311,524		558,824			2,866,036

Ending Balance, September 30, 2017	$	2,533,585		$	311,524	$	558,824		$	3,403,933

													Revolving		Total Charge-
	2023		2022		2021		2020		2019		Prior		Loans		Offs
Gross Charge-Offs
June 30, 2023
Loans secured by real estate:
Commercial Real Estate	$	-	$	-	$	-	$	-	$	5	$	14	$	-	$	19
Total Real Estate Loans		-		-		-		-		5		14		-		19

Business Loans
Commercial and Industrial Loans		-		-		-		-		-		67		-		67
Total Business Loans		-		-		-		-		-		67		-		67

Total Consumer Loans		-		11		1		4		-		-		-		16

Total Credit Card		-		-		-		-		-		-		50		50

Net LHFI	$	-	$	11	$	1	$	4	$	5	$	81	$	50	$	152

	June 30, 2023		December 31, 2022
Funded balance	$	18,000	$	18,000
Unfunded balance		2,000		2,000
Total credit facility	$	20,000	$	20,000

								Accumulated
	*Number*				*Additional*			*Other*
	*of Shares*		*Common*		*Paid-In*			*Comprehensive*			*Retained*
	*Issued*		*Stock*		*Capital*			*(Loss) Income*			*Earnings*			*Total*
Balance, January 1, 2023		5,603,570	$	1,122	$	18,448		$	(83,070	)	$	102,525		$	39,025
FASB ASU 2016-13 adoption adjustment												(984	)		(984	)
Net income		-		-		-			-			1,140			1,140
Dividends paid ($0.24 per share)		-		-		-			-			(1,346	)		(1,346	)
Restricted stock granted		3,868		-		-			-			-			-
Stock compensation expense		-		-		40			-			-			40
Other comprehensive loss, net		-		-		-			3,248			-			3,248
Balance, March 31, 2023		5,607,438	$	1,122	$	18,488		$	(79,822	)	$	101,335		$	41,123
Net income		-		-		-			-			300			300
Dividends paid ($0.16 per share)		-		-		-			-			(898	)		(898	)
Restricted stock granted		9,000		1		(1	)		-			-			-
Stock compensation expense		-		-		32			-			-			32
Other comprehensive loss, net		-		-		-			(416	)		-			(416	)
Balance, June 30, 2023		5,616,438	$	1,123	$	18,519		$	(80,238	)	$	100,737		$	40,141

Level 1
	~~Level 1~~	Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2	~~Level 2~~	Inputs other than quoted prices in active markets for identical assets and liabilities included in Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active; or

Level 3	~~Level 3~~	Unobservable inputs for an asset or liability, such as discounted cash flow models or valuations.


	Fair Value Measurements Using:
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Totals
Securities available for sale
Obligations of U.S. Government Agencies	$	—	$	180,005,228	$	—	$	180,005,228
Mortgage-backed securities		—		219,278,194		—		219,278,194
State, county and municipal obligations		—		115,913,612		—		115,913,612
Other investments		—		—		3,039,057		3,039,057

Total	$	—	$	515,197,034	$	3,039,057	$	518,236,091


	Fair Value Measurements Using:
	Significant Unobservable Inputs
	(Level 3)
	Structured Financial Product
	As of September 30,
	2017			2016
Beginning Balance	$	2,971,106		$	2,915,709
Principal payments received		(5,067	)		(46,326	)
Unrealized gains included in other comprehensive income		73,018			71,576

Ending Balance	$	3,039,057		$	2,940,959


Financial instrument	Fair Value		Valuation Technique	Significant Unobservable Inputs	Range of Inputs
Trust preferred securities	$	3,039,057	Discounted cash flows	Default rate	0-100%


											Minimum Capital
						Minimum Capital					Requirement to be Adequately Capitalized
						Requirement to be
	Actual					Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2017
Citizens Holding Company
Tier 1 leverage ratio	$	94,193		9.33	%	$	50,496		5.00	%	$	40,397		4.00	%
Common Equity tier 1 capital ratio		94,193		9.33	%		65,645		6.50	%		45,446		4.50	%
Tier 1 risk-based capital ratio		94,193		18.36	%		41,050		8.00	%		30,788		6.00	%
Total risk-based capital ratio		97,597		19.02	%		51,313		10.00	%		41,050		8.00	%
December 31, 2016
Citizens Holding Company
Tier 1 leverage ratio	$	92,629		9.22	%	$	50,258		5.00	%	$	40,207		4.00	%
Common Equity tier 1 capital ratio		92,629		9.22	%		65,336		6.50	%		45,232		4.50	%
Tier 1 risk-based capital ratio		92,629		17.92	%		41,354		8.00	%		31,016		6.00	%
Total risk-based capital ratio		96,532		18.67	%		51,693		10.00	%		41,354		8.00	%


					Amount of			Percent of
	September 30,		December 31,		Increase			Increase
	2017		2016		(Decrease)			(Decrease)
Cash and Due From Banks	$	20,791,594	$	21,688,557	$	(896,963	)		-4.14	%
Interest Bearing deposits with Other Banks		29,640,509		48,603,182		(18,962,673	)		-39.02	%
Investment Securities		518,236,091		496,124,574		22,111,517			4.46	%
Loans, net		389,674,425		390,148,343		(473,918	)		-0.12	%
Premises and Equipment		20,752,738		18,664,084		2,088,654			11.19	%
Total Assets		1,026,124,497		1,025,211,907		912,590			0.09	%
Total Deposits		754,768,366		760,152,340		(5,383,974	)		-0.71	%
Total Shareholders’ Equity		91,942,431		85,059,395		6,883,036			8.09	%

Large accelerated filer ☐

Accelerated filer

Non-accelerated filer ☑
Emerging growth company ☐

Smaller Reporting Company

~~Emerging growth company~~