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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2023

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

For the transition period from to

Commission File Number 001-12103

PEOPLES FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Mississippi	64-0709834
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

Lameuse and Howard Avenues, Biloxi, Mississippi 39533	228-435-5511
(Address of principal executive offices) (Zip code)	(Registrant's telephone number, including area code)

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

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

Common, $1.00 Par Value

(Title of each class)

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

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to file such files). Yes ☒ NO ☐

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

Large accelerated filer ☐ Accelerated filer ☐ Non-Accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐

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

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

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

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

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

At June 30, 2023, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s voting stock held by non-affiliates, based on the last sale price reported on the OTCQX Best Market, was approximately $34,753,000.

On March 06, 2024, the registrant had outstanding 4,661,686 shares of common stock, par value of $1.00 per share.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Definitive Proxy Statement issued in connection with the Annual Meeting of Shareholders to be held April 24, 2024, are incorporated by reference into Part III of this report.

Peoples Financial Corporation

Form 10-K

Table of Contents

PART I

Item 1.	DESCRIPTION OF BUSINESS	3
Item 1A.	RISK FACTORS	28
Item 1B.	UNRESOLVED STAFF COMMENTS	28
Item 1C	CYBERSECURITY	28
Item 2.	PROPERTIES	29
Item 3.	LEGAL PROCEEDINGS	30
Item 4.	MINE SAFETY DISCLOSURES	30

PART II

Item 5.	MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	31
Item 6.	[RESERVED]	32
Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	32
Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	49
Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	49
Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	112
Item 9A.	CONTROLS AND PROCEDURES	114
Item 9B.	OTHER INFORMATION	115

Part III

Item 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	115
Item 11.	EXECUTIVE COMPENSATION	115
Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	115
Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	116
Item 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	116

PART IV

Item 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	116
Item 16.	FORM 10-K SUMMARY	117

Signatures		118

Peoples Financial Corporation (the "Company") is a corporation that was organized as a one bank holding company in 1985. The Company is headquartered in Biloxi, Mississippi. At December 31, 2023, the Company operated in the state of Mississippi through its wholly owned subsidiary, The Peoples Bank, Biloxi, Mississippi (the “Bank”). The Company is engaged, through this subsidiary, in the banking business. The Bank is the Company's principal asset and primary source of revenue.

The main office, operations center and asset management and trust services of the Bank are located in downtown Biloxi, MS. At December 31, 2023, the Bank also had 17 branches located throughout Harrison, Hancock, Jackson and Stone Counties. The Bank has automated teller machines ("ATM") at its main office, all branch locations and at one non-proprietary location.

The Company’s wholly-owned bank subsidiary was originally chartered in 1896 in Biloxi, Mississippi, as The Peoples Bank of Biloxi. The Bank is a state chartered bank whose deposits are insured under the Federal Deposit Insurance Act. The Bank is not a member of the Federal Reserve System. The legal name of the Bank was changed to The Peoples Bank, Biloxi, Mississippi, during 1991.

Most of the Bank's business originates from Harrison, Hancock, Stone and Jackson Counties in Mississippi; however, some business is obtained from other counties in southern Mississippi, southern Louisiana and southern Alabama.

In 1985, PFC Service Corp. ("PFC") was chartered and began operations as the second wholly-owned subsidiary of Peoples Financial Corporation. The purpose of PFC was principally the leasing of automobiles and equipment. PFC is inactive at this time.

The Bank currently offers a variety of services to individuals and small to middle market businesses within its trade area. The Company’s trade area is defined as those portions of Mississippi, Louisiana and Alabama which are within a fifty mile radius of the Waveland, Wiggins and Gautier branches, the Bank’s three most outlying locations.

The Bank’s primary lending focus is to offer business, commercial, real estate, construction, personal and installment loans, with an emphasis on commercial lending.

Each loan officer has board approved lending limits on the principal amount of secured and unsecured loans that can be approved for a single borrower without prior approval of the senior credit committee. All loans, however, must meet the credit underwriting standards and loan policies of the Bank.

Deposit services include interest bearing and non-interest bearing checking accounts, savings accounts, certificates of deposit, and IRA accounts. The Bank generally provides depository accounts to individuals; small and middle market businesses; and state, county and local government entities in its trade area at interest rates consistent with market conditions.

The Bank's Asset Management and Trust Services Department (“Trust Department”) offers personal trust, agencies and estate services, including living and testamentary trusts, executorships, guardianships, and conservatorships. Benefit accounts maintained by the Trust Department primarily include self-directed individual retirement accounts. Escrow management, stock transfer and bond paying agency accounts are available to corporate customers. On March 17, 2022, the bank subsidiary signed a definitive agreement with Trustmark National Bank (“Trustmark”) to acquire substantially all of the Trustmark’s corporate trust business. This book of business was added to the bank subsidiary’s existing corporate trust portfolio in its Asset Management and Trust Services Department. The purchase was closed on August 15, 2022.

The Bank also offers a variety of other services including safe deposit box rental, wire transfer services, night drop facilities, collection services, cash management and internet banking. The Bank has 23 ATMs at its branch locations and another other off-site, proprietary location, providing bank customers access to their depository accounts. The Bank is a member of the PULSE network.

The Bank has a large number of customers acquired over a period of many years and is not dependent upon a single customer or upon a few customers. The Bank also provides services to customers representing a wide variety of industries including seafood, retail, hospitality, hotel/motel, gaming and construction. While the Company has pursued external growth strategies on a limited basis, its primary focus has been on internal growth by the Bank through the establishment of new branch locations and an emphasis on strong customer relationships.

At December 31, 2023, the Bank employed 140 total employees, with 137 full-time employees and 3 part-time employees. The Company has no employees who are not employees of the Bank. Through the Bank, employees receive salaries and benefits, which include 401(k) and ESOP plans, a cafeteria plan, life, health and disability insurance. The Company considers its relationship with its employees to be good.

The Bank is in direct competition with numerous local and regional commercial banks as well as other non-bank institutions. Interest rates paid and charged on deposits and loans are the primary competitive factors within the Bank’s trade area. The Bank also competes for deposits and loans with insurance companies, finance companies, brokerage houses and credit unions. The principal competitive factors in the markets for deposits and loans are interest rates paid and charged. The Bank also competes through efficiency, quality of customer service, the range of services and products it provides, the convenience of its branch and ATM locations and the accessibility of its staff. The Bank intends to continue its strategy of being a local, community bank offering traditional bank services and providing quality service in its local trade area.

The Bank holds no patents, licenses (other than licenses required to be obtained from appropriate bank regulatory agencies), franchises or concessions.

The Bank has not engaged in any research activities relating to the development of new services or the improvement of existing services except in the normal course of its business activities. The Bank presently has no plans for any new line of business requiring the investment of a material amount of total assets.

The Company maintains an internet website at www.thepeoples.com. The Company’s Annual Report to Shareholders is available on the Company’s website. Also available through the website is a link to the Company’s filings with the Securities and Exchange Commission (“SEC”). Information on the Company’s website is not incorporated into this Annual Report on Form 10-K or the Company’s other securities filings and is not part of them.

As a bank holding company under the Bank Holding Company Act of 1956, the Company is subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of Atlanta (the “Federal Reserve”). The Company is required to file semi-annual reports with the Federal Reserve and such other information as the Federal Reserve may require. The Company is also required to file certain reports with, and otherwise comply with the rules and regulations of, the SEC under the federal securities laws.

The Bank is incorporated under the laws of the State of Mississippi and is subject to the applicable provisions of Mississippi banking laws and the laws of the various states in which it operates, as well as federal law. The Bank is subject to the supervision of the Mississippi Department of Banking and Consumer Finance (the “MDBCF”) and to regular examinations by that department. Deposits in the Bank are insured by the Federal Deposit Insurance Corporation (the “FDIC”), and the Bank is thus subject to the provisions of the Federal Deposit Insurance Act and to supervision and examination by the FDIC. State and federal laws also govern the activities in which the Bank engages, the investments that it makes and the aggregate amount of loans that may be granted to one borrower. The MDBCF and the FDIC also regulate the branching authority of the Bank. In addition, various consumer and compliance laws and regulations affect the Bank’s operations.

The earnings of the Company’s subsidiaries, and therefore the earnings of the Company, are affected by general economic conditions, management policies, changes in state and federal legislation and actions of various regulatory authorities, including those referred to above. The following discussion summarizes some of the significant federal and state laws to which the Company and the Bank are subject. This discussion is a brief summary of the regulatory environment in which the Company and its subsidiaries operate and is not intended as a complete discussion of all statutes and regulations affecting such operations. Regulation of financial institutions is intended primarily for the protection of depositors, the deposit insurance fund and the banking system, and generally is not intended for the protection of shareholders.

The statutes, regulations and policies that govern the operations of the Company and the Bank are under continuous review and are subject to amendment from time to time by Congress, the Mississippi State Legislature and federal and state regulatory agencies. Any such future statutory or regulatory changes could adversely affect the Company’s operations and financial condition.

The Bank is subject to regulation and supervision by the MDBCF and by the FDIC, which regulation and supervision extends to all aspects of its operations, including but not limited to requirements concerning an allowance for credit losses, lending and mortgage operations, interest rates received on loans and paid on deposits, the payment of dividends to the Company, loans to officers and directors, mergers and acquisitions, capital adequacy, and the opening and closing of branches.

The Bank is subject to periodic examinations by the MDBCF and by the FDIC. In these examinations, the examiners assess compliance with state and federal banking regulations and the safety and soundness standards in such matters as loan underwriting and documentation, asset quality, earnings standards, internal controls and audit systems, interest rate risk exposure, and employee compensation and benefits.

The MDBCF and the FDIC have enforcement responsibility over the Bank and the authority to bring actions against the Bank and certain institution-affiliated parties, including officers, directors, and employees, for violations of laws or regulations and for engaging in unsafe and unsound practices. Formal enforcement actions include the issuance of a capital directive or cease and desist order, civil money penalties, removal of officers and/or directors, and receivership or conservatorship of the institution.

The FDIC insures deposits at federally insured depository institutions like the Bank. Deposit accounts in the Bank are insured by the FDIC’s Deposit Insurance Fund (the “DIF”) generally up to a maximum of $250,000 per separately insured depositor and up to a maximum of $250,000 for self-directed retirement accounts. The FDIC charges banks deposit insurance assessments to maintain the Deposit Insurance Fund. Under the FDIC’s risk-based assessment system, banks that are deemed to be less risky pay lower assessments. Assessments for institutions with assets of less than $10 billion, such as the Bank, are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution’s failure within three years.

In October 2022, the FDIC adopted a final rule that increased the initial base deposit insurance assessment rate schedules uniformly by 2 basis points beginning with the first quarterly assessment period of 2023. The FDIC increased the insurance assessment rates in response to the 2020 decline in the DIF reserve ratio below the statutory minimum of 1.35% established by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The increased assessment is expected to improve the likelihood that the reserve ratio would be restored to 1.35% by September 30, 2028 which is prescribed under the FDIC’s restoration plan. The FDIC has the authority to increase insurance assessments and to impose special assessments. Any significant increases or special assessments could have an adverse effect on the results of operations of the Bank. Effective January 1, 2023 the FDIC’s assessment rates range for most depository institutions (which are subject to change) was 3 basis points to 30 basis points.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not know of any practice, condition or violation that may lead to termination of the Bank’s deposit insurance.

The Bank is required to comply with applicable capital adequacy requirements adopted by the FDIC and the other federal bank regulatory agencies (the “Federal Capital Rules”). The Federal Capital Rules apply to all depository institutions as well as to all top-tier bank holding companies that are not subject to the Federal Reserve’s Small Bank Holding Company Policy Statement, which the Company is not. The capital requirements are quantitative measures established by regulation that require the Bank to maintain minimum amounts and ratios of capital. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional, discretionary actions by bank regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.

The Federal Capital Rules require the maintenance of “common equity Tier 1” capital, Tier 1 capital and Total capital to risk-weighted assets of at least 4.5%, 6% and 8%, respectively. The Federal Capital Rules also establish a minimum leverage ratio of at least 4% Tier 1 capital to average consolidated assets. In addition to the above minimum requirements, the Federal Capital Rules limit capital distributions and certain discretionary bonus payments if a banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement effectively increases the minimum required risk-based capital ratios to 7% for common equity Tier 1 capital, 8.5% for Tier 1 capital and 10.5% for Total capital.

In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, a financial institution’s assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes and residual interests), are multiplied by a risk weight factor assigned by the capital regulations based on the risk deemed inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one- to four-family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to non-residential mortgage loans that are 90 days past due or otherwise on non-accrual status, and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.

Under federal statute, the federal bank regulatory agencies are required to take “prompt corrective action” with respect to institutions that do not meet specified minimum capital requirements. For these purposes, the statute establishes five capital categories: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Under the prompt corrective action regulations, in order to be considered well-capitalized, a bank must have a ratio of common equity Tier 1 capital to risk-weighted assets of 6.5%, a ratio of Tier 1 capital to risk-weighted assets of 8%, a ratio of total capital to risk-weighted assets of 10%, and a leverage ratio of 5%. In order to be considered adequately capitalized, a bank must have the minimum capital ratios required by the regulatory capital rule described above. Institutions with lower capital ratios are assigned to lower capital categories. Based on safety and soundness concerns, a bank may be assigned to a lower capital category than would otherwise apply based on its capital ratios. A bank that is not well-capitalized is subject to certain restrictions on brokered deposits and interest rates on deposits. A bank that is not at least adequately capitalized is subject to numerous additional restrictions, and a guaranty by its holding company is required. A bank with a ratio of tangible equity to total assets of 2.0% or less is subject to the appointment of the FDIC as receiver if its capital level does not improve within 90 days.

The Economic Growth, Regulatory Relief and Consumer Protection Act, enacted in 2018, introduced an optional simplified measure of capital adequacy for qualifying community banking organizations with total consolidated assets of less than $10 billion by instructing the federal banking regulators to establish a single “Community Bank Leverage Ratio” (“CBLR”) of tangible equity capital divided by average consolidated assets of between 8 and 10 percent in satisfaction of any other leverage or capital requirements to which such organizations are subject.

The federal banking regulators jointly issued a final rule, effective January 1, 2020, which provided that a community banking organization with less than $10 billion in assets may elect to use the CBLR capital framework so long as the bank has a Tier 1 leverage ratio of greater than 9% and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A qualifying banking organization that elects to use the CBLR will be deemed to satisfy the generally applicable leverage and risk-based regulatory capital requirements, will be considered to have met the well-capitalized ratio requirements under the prompt corrective action regulations, and will not be required to report or calculate risk-based capital. As of December 31, 2023, the Bank qualified to use the CBLR and made the election to opt in to the CBLR framework during the third quarter ended September 30, 2023.

As of December 31, 2023, the Bank was in compliance with all regulatory capital requirements and qualified as “well-capitalized” under the prompt corrective action regulations.

The Bank is subject to the Federal Reserve’s Regulation W, which implements the restrictions of Sections 23A and 23B of the Federal Reserve Act on transactions between a bank and its “affiliates.” The “affiliates” of the Bank, as defined in Regulation W, are the Company and its non-bank subsidiary. Section 23A and the implementing provisions of Regulation W generally place limits on the amount of a bank’s loans or extensions of credit to, investments in, or certain other transactions with its affiliates, and on the amount of advances to third parties collateralized by the securities or obligations of affiliates. Section 23B and Regulation W generally require a bank’s transactions with affiliates to be on terms substantially the same, or at least as favorable to the bank, as those prevailing at the time for comparable transactions with non-affiliated companies.

The Bank is also subject to certain restrictions on extensions of credit to executive officers, directors, principal shareholders and the related interests of those persons. Such extensions of credit must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties and must not involve more than the normal risk of repayment or present other unfavorable features.

All insured depository institutions have a responsibility under the Community Reinvestment Act of 1977 (the “CRA”) and the federal regulations thereunder to help meet the credit needs of their communities, including low- and moderate-income neighborhoods. In connection with its examination of the Bank, the FDIC is required to assess the Bank’s record of meeting the credit needs of its entire community. The CRA requires the Bank’s record of compliance with the CRA to be taken into account in the evaluation of applications by the Bank or the Company for approval of an expansionary proposal, such as a merger or other acquisition of another bank or the opening of a new branch office. The Bank received a “satisfactory” rating in its most recent CRA assessment by the FDIC.

On October 24, 2023, the Office of the Comptroller of the Currency (“OCC”), Federal Reserve, and the FDIC issued a final rule to modernize their respective CRA regulations. The revised rules substantially alter the methodology for assessing compliance with the CRA, with material aspects taking effect January 1, 2026, and revised data reporting requirements taking effect January 1, 2027. Among other things, the revised rules evaluate lending outside traditional assessment areas generated by the growth of non-branch delivery systems, such as online and mobile banking, apply a metrics-based benchmarking approach to assessment, and clarify eligible CRA activities. The final rules are likely to make it more challenging and/or costly for the Bank to receive a rating of at least “satisfactory” on its CRA exam.

In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. A failure to comply with the Equal Credit Opportunity Act or the Fair Housing Act, or the regulations thereunder, could result in enforcement actions by the FDIC or the Department of Justice.

The Bank is required under federal privacy statutes and regulations to maintain the privacy of its customers’ non-public, personal information. Such privacy requirements direct financial institutions to:

• inform customers regarding the conditions under which their non-public, personal information may be disclosed to non-affiliated third parties; and

• give customers an option to prevent disclosure of such information to non-affiliated third parties.

Under the Fair and Accurate Credit Transactions Act of 2003, the Bank’s customers may also opt out of information sharing between and among the Bank and its affiliates.

The Bank’s lending and deposit-taking operations are subject to numerous other federal and state laws designed to protect consumers. The Consumer Financial Protection Bureau (“CFPB”) issues regulations and standards under the federal consumer protection laws, which include, among others, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the Truth in Lending Act, the Electronic Fund Transfer Act, the Truth in Savings Act, the Fair Credit Reporting Act, the National Flood Insurance Act, the Flood Protection Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition on unfair, deceptive or abusive acts or practices. The Bank’s consumer financial products and services are subject to examination by the FDIC for compliance with these and other CFPB regulations and standards.

Cybersecurity
The federal bank regulatory agencies have adopted guidelines for establishing information security standards and cybersecurity programs for implementing safeguards under the supervision of a banking organization’s board of directors. This guidance, along with related regulatory materials, increasingly focuses on risk management, processes related to information technology and the use of third parties in the provision of financial products and services. The federal bank regulatory agencies expect financial institutions to establish appropriate security controls and to ensure that their risk management processes address the risk posed by compromised customer credentials. They also expect financial institutions to maintain sufficient business continuity planning processes to ensure rapid recovery, resumption, and maintenance of the institution’s operations after a cyberattack. If we fail to meet the expectations set forth in such regulatory guidance, we could be subject to various regulatory sanctions, including financial penalties.

In November 2021, the federal bank regulatory agencies issued a final rule to improve the sharing of information about cyber incidents that may affect the U.S. banking system. The rule, which became effective on May 1, 2022, requires a banking organization to notify its primary federal regulator within 36 hours of determining that a “computer-security incident” has materially affected, or is reasonably likely to materially affect, the viability of the banking organization’s operations, its ability to deliver banking products and services, or the stability of the financial sector. In addition, the rule requires a bank service provider to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer security incident that has materially affected, or is reasonably likely to materially affect, banking organization customers for four or more hours.

The Bank is subject to the Bank Secrecy Act and other anti-money laundering laws and regulations, including the USA PATRIOT Act of 2001 and the Anti-Money Laundering Act of 2020. These laws and regulations require each financial institution to implement policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing and to verify the identity of their customers. Violations of these requirements can result in substantial civil and criminal sanctions. In addition, federal banking regulators are required, when reviewing bank holding company acquisition and bank merger applications, to take into account the effectiveness of the anti-money laundering activities of the applicants.

The federal banking agencies have issued guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

The federal banking agencies will review, as part of their examination process, the incentive compensation arrangements of depository institutions and their holding companies. The findings of the supervisory review will be included in reports of examination. Any deficiencies in compensation practices that are identified may be incorporated into the organization’s supervisory ratings, which can affect its ability to make acquisitions or perform other actions. The guidance also provides that enforcement actions may be taken against a banking organization if its incentive compensation arrangements or related risk-management control or governance processes pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.

The scope and content of the banking regulators’ policies on executive compensation are continuing to develop and are likely to continue evolving in the near future. It cannot be determined at this time whether compliance with such policies will adversely affect the ability of the Bank and the Company to hire, retain and motivate their key employees.

As a bank holding company under the Bank Holding Company Act, the Company is subject to regulation, supervision, and examination by the Federal Reserve. The Company is required to file semi-annual reports with the Federal Reserve and provide such additional information as the Federal Reserve may require. The Federal Reserve has extensive enforcement authority over bank holding companies, including, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a holding company divest subsidiaries (including its bank subsidiaries). In general, enforcement actions may be initiated for violations of law and regulations and unsafe or unsound practices.

The Federal Capital Rules apply to all depository institutions as well as to bank holding companies with consolidated assets of $3 billion or more. The Federal Capital Rules generally do not apply on a consolidated basis to a bank holding company that is a small bank holding company, which is a holding company with total consolidated assets of less than $3 billion, unless it: (1) is engaged in significant nonbanking activities either directly or through a nonbank subsidiary; (2) conducts significant off-balance sheet activities (including securitization and asset management or administration) either directly or through a nonbank subsidiary; or (3) has a material amount of debt or equity securities outstanding (other than trust preferred securities) that are registered with the SEC. Since the Company’s common stock is registered with the SEC, it is not a small bank holding company, and the Federal Capital Rules apply to the Company. The Federal Reserve may apply the regulatory capital standards at its discretion to any bank holding company, regardless of asset size, if such action is warranted for supervisory purposes.

Under the Bank Holding Company Act, the Company is required to obtain the prior approval of the Federal Reserve to acquire ownership or control of more than 5% of the voting shares or substantially all of the assets of any bank holding company or bank or to merge or consolidate with another bank holding company. Federal law authorizes bank holding companies to make interstate acquisitions of banks without geographic limitation.

In general, the Bank Holding Company Act limits the activities of a bank holding company to those of banking, managing or controlling banks, or any other activity that the Federal Reserve has determined to be so closely related to banking or to managing or controlling banks that an exception is allowed for those activities. Bank holding companies that qualify and elect to be treated as “financial holding companies” may engage in a broad range of additional activities that are (i) financial in nature or incidental to such financial activities or (ii) complementary to a financial activity and do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally. These activities include securities underwriting and dealing, insurance agency and underwriting, and making merchant banking investments. The Company has not made an election to be treated as a financial holding company.

Under the Bank Holding Company Act, a bank holding company is required to act as a source of financial and managerial strength for each of its subsidiary banks and to commit resources to support each subsidiary bank. Under this source of strength doctrine, the Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank. The Federal Reserve may charge the bank holding company with engaging in unsafe and unsound practices if it fails to commit resources to such a subsidiary bank or if it undertakes actions that the Federal Reserve believes might jeopardize its ability to commit resources to such subsidiary bank. A capital injection may be required at times when the holding company does not have the resources to provide it. In addition, any loans by a bank holding company to a subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. In the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, the bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the institution’s general unsecured creditors, including the holders of its note obligations.

The Company is a legal entity that is separate and distinct from its subsidiaries. The primary source of funds for dividends paid to the Company’s shareholders is dividends paid to the Company by the Bank.

Various federal and state laws limit the amount of dividends that the Bank may pay to the Company without regulatory approval. Under Mississippi law, the Bank must obtain the non-objection of the Commissioner of the MDBCF prior to paying any dividend on the Bank’s common stock. In addition, the Bank may not pay any dividends if, after paying the dividend, it would be undercapitalized under applicable capital requirements. Furthermore, if the Bank does not maintain the capital conservation buffer required by applicable regulatory capital rules, its ability to pay dividends to the Company would be limited. The FDIC also has the authority to prohibit the Bank from engaging in business practices that the FDIC considers to be unsafe or unsound, which, depending on the financial condition of the Bank, could include the payment of dividends.

The Company is subject to various restrictions relating to the payment of dividends. The Federal Reserve has issued guidance indicating that bank holding companies should generally pay dividends only if the company’s net income available to common shareholders over the preceding year has been sufficient to fully fund the dividends, and the prospective rate of earnings retention appears consistent with the company’s capital needs, asset quality and overall financial condition. The Federal Reserve’s guidance also states that a bank holding company should inform and consult with its regional Federal Reserve Bank in advance of declaring or paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in a material adverse change to the organization’s capital structure. The Federal Reserve has indicated that, in some instances, it may be appropriate for a bank holding company to eliminate its dividends.

The Company’s common stock is registered under Section 12(g) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and the Company is subject to the periodic reporting and other requirements of the SEC under Section 12(g) of the Exchange Act and SEC regulations. The common stock of the Company is listed on the OTCQX Best Market, such listing subjecting the Company to compliance with the market’s requirements with respect to reporting and other rules and regulations.

The following pages present certain statistical information regarding the Company. This information is not audited and should be read in conjunction with the Company's Consolidated Financial Statements and Notes to Consolidated Financial Statements found in Item 8 of this Annual Report on Form 10-K.

Distribution of Assets, Liabilities and Shareholders' Equity and Interest Rates and Differentials

Net Interest Income, the difference between Interest Income and Interest Expense, is the most significant component of the Company's earnings. For interest analytical purposes, Management adjusts Net Interest Income to a "taxable equivalent" basis using a Federal Income Tax rate of 21% in 2023, 2022 and 2021 on tax-exempt items (primarily interest on municipal securities).

Another significant statistic in the analysis of Net Interest Income is the net yield on earning assets. The net yield is the difference between the rate of interest earned on earning assets and the effective rate paid for all funds, non-interest bearing as well as interest bearing. Since a portion of the Bank's deposits do not bear interest, such as demand deposits, the rate paid for all funds is lower than the rate on interest bearing liabilities alone.

Recognizing the importance of interest differential to total earnings, management places great emphasis on managing interest rate spreads. Although interest differential is affected by national, regional and local economic conditions, including the level of credit demand and interest rates, there are significant opportunities to influence interest differential through appropriate loan and investment policies which are designed to maximize the differential while maintaining sufficient liquidity and availability of incremental funds for purposes of meeting existing commitments and investment in lending and investment opportunities that may arise.

The information included on pages 21 and 22 presents the change in interest income and interest expense along with the reason(s) for these changes. The change attributable to volume is computed as the change in volume times the old rate. The change attributable to rate is computed as the change in rate times the old volume. The change in rate/volume is computed as the change in rate times the change in volume.

In the normal course of business, the Company assumes risk in extending credit to its customers. This credit risk is managed through compliance with the loan policy, which is approved by the Board of Directors. The policy establishes guidelines relating to underwriting standards, including, but not limited to, financial analysis, collateral valuation, lending limits, pricing considerations and loan grading. The Company’s Loan Review and Special Assets Departments play key roles in monitoring the loan portfolio and managing problem loans. New loans and, on a periodic basis, existing loans are reviewed to evaluate compliance with the loan policy. Loan delinquencies and deposit overdrafts are closely monitored in order to identify developing problems as early as possible. Lenders experienced in workout scenarios consult with loan officers and customers to address non-performing loans. A watch list of credits which pose a potential loss to the Company is prepared based on the loan grading system. This list forms the foundation of the Company’s allowance for credit loss on loans computation.

Management relies on its guidelines and existing methodology to monitor the performance of its loan portfolio and identify and estimate potential losses based on the best available information. The potential effect of declines in real estate values and actual losses incurred by the Company were key factors in our analysis. Much of the Company’s loan portfolio is secured by real estate requiring careful consideration of real estate changes in value to properly monitor risk.

The Company has adopted the CECL (Current Expected Credit Losses) methodology for estimating allowances for credit losses effective January 1, 2023. Under CECL, the allowance for credit losses (ACL) is a valuation account, measured as the difference between the Bank’s amortized cost basis and the net amount expected to be collected on the financial assets (i.e., lifetime credit losses). The CECL methodology described in FASB Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326), applies to financial assets measured at amortized cost, and off-balance-sheet credit exposures (collectively, financial assets) including: financing receivables such as loans held for investment, held to maturity debt securities, off-balance-sheet credit exposures (unfunded commitments) including off-balance sheet loan commitments; standby letters of credit; and other similar instruments.

Further information concerning the provision for credit losses on loans, unfunded commitments and securities is presented in "Management's Discussion and Analysis" in Item 7 of this Annual Report on Form 10-K and in “Note A - Business and Summary of Significant Accounting Policies” to the 2023 Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.

The Company’s results and key ratios for 2019 – 2023 are summarized in the "Selected Financial Data" in Item 6 and "Management's Discussion and Analysis" in Item 7 of this Annual Report on Form 10-K.

The Company paid a cash dividend of $0.53, $0.19, and $0.16 per share for the years ended December 31, 2023, 2022 and 2021, respectively.

Distribution of Average Assets, Liabilities and Shareholders’ Equity (1) (In thousands)

(2) Gross loans and discounts, net of unearned income and allowance for credit losses.

(1) All interest earned is reported on a taxable equivalent basis using a tax rate of 21% for 2023, 2022 and 2021. See disclosure of non-GAAP financial measures on page 35.

(1) Loan fees of $397 and $659 for 2023 and 2022, respectively, are included in these figures. Of the loan fees recognized in 2023 and 2022, $0 and $125, respectively, were related to PPP loans.

(2) All interest earned is reported on a taxable equivalent basis using a tax rate of 21% for 2023 and 2022. See disclosure of non-GAAP financial measures on page 35.

(1) Loan fees of $659 and $1,444 for 2022 and 2021, respectively, are included in these figures. Of the loan fees recognized in 2022 and 2021, $125 and $958 were related to PPP loans.

(2) All interest earned is reported on a taxable equivalent basis using a tax rate of 21% for 2022 and 2021. See disclosure of non-GAAP financial measures on page 35.

Note: The weighted average yields are calculated on the basis of cost. Average yields on investments in states and political subdivisions are based on their contractual yield. Available for sale securities are stated at fair value and held to maturity securities are stated at amortized cost.

Certain items previously reported have been reclassified to conform to the current year’s reporting format due to the adoption of CECL.

Certificates of deposit in amounts of $250,000 or more by the amount of time remaining until maturity as of December 31, 2023, are as follows (in thousands):

Information about the Company’s capital resources is included in “Note J – Shareholders’ Equity” to the 2023 Consolidated Financial Statements in this Annual Report on Form 10-K.

As a smaller reporting company, the Company is not required to provide this information.

The Bank, as part of its risk management process, has implemented an information security program that encompasses the Bank’s cybersecurity efforts. The Bank’s goals of confidentiality, availability and integrity of its information are key to this process and program. The Bank’s goals of protecting confidential information and safeguarding our digital assets are foundational objectives of the program.

The Boards of Directors of the Company and Bank and the Audit Committee of the Company are responsible for ultimate oversight of cybersecurity risks managed daily by management pursuant to the Bank’s information security program. The Boards of Directors of the Bank and Company annually approve this information security program and regularly receive a report from the Bank’s Information Security Officer that outlines the steps undertaken to protect the information and data assets of the Bank and Company. Additionally, the Information Security Officer updates the Boards of Directors of the Bank and Company monthly through supplementary reports on issues related to Cybersecurity readiness.

The Bank’s information security program is developed and implemented by the Bank’s Information Security Officer. Together with an Information Security Committee comprised of relevant information technology and business unit stakeholders within Bank management, the Information Security Officer of the Bank works to manage, control and mitigate cybersecurity risks. The Bank’s employees are regularly trained on cybersecurity awareness, and testing is performed to monitor the success of the training. The Board of Directors of the Company and the Bank receive training on an annual basis.

The Bank engages trusted third parties to audit and examine its processes, review the security of its network infrastructure, and assist the Bank in designing and implementing robust cybersecurity systems. These trusted third parties help the Bank and the Company improve and test their cybersecurity readiness. The Bank engages third party vendors to monitor and test its network infrastructure. These third-party vendors take an active role in ensuring that the Bank’s systems are protected by testing, reviewing and advising the Bank to strengthen cybersecurity controls when necessary.

The Bank has a vendor oversight risk management process that helps to validate the security and integrity of information collected and maintained by third party vendors that the Bank uses to provide banking services. A key goal of the Bank’s vendor management program includes assessing risks, which include but are not limited to operational, strategic, reputational, cyber, and credit risks. These processes are supported by specialized vendors that assist the Bank’s management and Board of Directors with properly assessing these risks. Finally, the Bank also has an incident response and business continuity program that is intended to address operational concerns, including cybersecurity risks, during contingency scenarios that may create unknown circumstances. This program is tested annually.

Although the Company and Bank have not, as of the date of this Annual Report on Form 10-K, experienced a cybersecurity threat or incident that materially affected their business strategy, results of operations or financial condition, there can be no guarantee that the Company or Bank will not experience such an incident in the future.

As regulated financial institutions, the Company and Bank are also subject to financial privacy laws and their cybersecurity practices are subject to oversight by the federal banking agencies. For additional information, see “Regulation and Supervision –Cybersecurity” included in Part I. Item 1 – Business of this report.

The principal properties of the Company are its 17 business locations, including the Main Office, which is located at 152 Lameuse Street in Biloxi, MS, 39530. The Armed Forces Retirement Home (“AFRH”) Branch located at 1800 Beach Drive, Gulfport, MS 39507, is located in space provided by the AFRH. All other branch locations are owned by the Company. We believe that our facilities are in good condition and are adequate to meet our operating needs for the foreseeable future. The addresses of the other branch locations are:

The Bank is involved in various legal matters and claims which are being defended and handled in the ordinary course of business. None of these matters are expected, in the opinion of Management, to have a material adverse effect upon the financial position or results of operations of the Company.

Additionally, on June 30, 2023, Stilwell Activist Investments, L.P., issued a letter to the Company and each of the directors of the Company demanding that they immediately commence litigation on behalf of the Company for an alleged breach by the Company’s Board of Directors of its fiduciary duties in allegedly failing to properly oversee and supervise Chevis and Tanner Swetman’s management of the Company. At its July meeting, the Board of Directors of the Company established a Special Litigation Committee made up of the independent directors to investigate the allegations made in the letter. Rather than wait for the Special Litigation Committee to conclude its inquiry, Stilwell Activist Investments, L.P., filed a Complaint against the Company and Directors Chevis Swetman, Padrick D. Dennis, Jeffrey H. O’Keefe, Paige Reed Riley, Ronald Barnes, and George Sliman, III, making the same allegations that appear in the demand letter. The Court stayed the lawsuit pending the Special Litigation Committee’s inquiry. The Special Litigation Committee concluded that pursuing the claims is not in the Company’s best interest, and the Company plans accordingly to file a motion to dismiss.

The plaintiff, Stilwell Activist Investments, L.P., is a shareholder of record of the Company and is controlled by Joseph Stilwell, an individual who beneficially owns 12.7% of the issued and outstanding common stock of the Company according to an Amended Schedule 13D filed by Mr. Stilwell and his related entities with the SEC on January 19, 2024, disclosing Company stock beneficially owned by Mr. Stilwell’s group. Mr. Stilwell and his related entities, including Stilwell Activist Investments, L.P., have nominated an individual for election to the Board of Directors of the Company at its last three annual meetings, but each individual nominated was not elected to the Board of Directors of the Company. Mr. Stilwell and his related entities, including Stilwell Activist Investments, L.P., have again nominated an individual, Mr. Stewart F. Peck, for election to the Board of Directors of the Company at its 2024 annual meeting to be held on April 24, 2024.

Information relating to legal proceedings is included in Note M – Contingencies to the 2023 Consolidated Financial Statements which is in Item 8 in this Annual Report on Form 10-K, which is incorporated herein by reference.

ITEM 5 - MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Dividends to the Company’s shareholders can generally be paid only from dividends paid to the Company by the Bank. Consequently, dividends are dependent upon the earnings, capital needs, regulatory policies and statutory limitations affecting the Bank. The Bank may not declare or pay any cash dividends without prior written approval of the Mississippi Department of Banking and Consumer Finance.

At March 06, 2024, there were 370 holders of the common stock of the Company, which does not reflect persons or entities that hold the common stock in nominee or “street” name through various brokerage firms or other nominee accounts. At March 06, 2024, there were 4,661,686 shares of common stock issued and outstanding.

On July 31, 2023, the Board authorized the repurchase of up to $1,000,000 in additional shares of the Company’s outstanding common stock, subject to an expiration date of December 31, 2023. Prior to the expiration date, the Company repurchased 16,500 shares at an average price per share of $12.65. Under this program, 5,500 shares of the Company common stock were repurchased in September 2023 and 11,000 shares were repurchased in November 2023.

At December 31, 2023 the plan expired and no remaining shares could be repurchased under the Board-approved plan, despite the fact that less than $1,000,000 of shares of the Company’s common stock were purchased under the plan.

Information concerning the Company’s repurchase of its outstanding common stock during the year ended December 31, 2023, is set forth in the following table:

The Company’s common stock is traded under the symbol PFBX on the OTCQX Best Market (“OTCQX”).

Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Peoples Financial Corporation (the “Company”) is a one-bank holding company headquartered in Biloxi, Mississippi. The following presents Management’s discussion and analysis of the consolidated financial condition and results of operations of the Company and its consolidated subsidiaries for the years ended December 31, 2023, 2022 and 2021. These comments highlight the significant events for these years and should be considered in combination with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in this annual report.

Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about a company’s anticipated future financial performance. This act provides a safe harbor for such disclosure which protects the companies from unwarranted litigation if actual results are different from management expectations. This report contains forward-looking statements and reflects industry conditions, company performance and financial results. These forward-looking statements are subject to a number of factors and uncertainties which could cause the Company’s actual results and experience to differ from the anticipated results and expectations expressed in such forward-looking statements. Such factors and uncertainties include, but are not limited to: changes in interest rates and market prices, changes in local economic and business conditions, increased competition for deposits and loans, changes in the availability of funds resulting from reduced liquidity, changes in statutes, government regulations or regulatory policies or practices in general and specifically as a result of the COVID-19 pandemic and acts of terrorism, weather or other events beyond the Company’s control.

The Financial Accounting Standards Board (“FASB”) issued new accounting standards updates in 2023, which are disclosed in Note A to the Consolidated Financial Statements. The Company does not expect that the update discussed in the Notes will have a material impact on its financial position, results of operations or cash flows. Further disclosure relating to this and other updates is included in Note A.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“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 financial statements and the reported amounts of revenues and expenses during the reporting period. The Company evaluates these estimates and assumptions on an on-going basis using historical experience and other factors, including the current economic environment. We adjust such estimates and assumptions when facts and circumstances dictate. Certain critical accounting policies affect the more significant estimates and assumptions used in the preparation of the consolidated financial statements.

Investments which are classified as available for sale are stated at fair value. The determination of the fair value of securities may require Management to develop estimates and assumptions regarding the amount and timing of cash flows. On January 1, 2023 the Company adopted the Accounting Standards Codification (“ASC”) 326, “Financial Instruments-Credit Losses”, more commonly referred to as CECL which requires an assessment of the Company’s available for sale and held to maturity debt securities for expected credit losses.

Allowance for credit losses on loans and leases and unfunded lending commitments

On January 1, 2023 the Company adopted Accounting Standards Codification (“ASC”) 326, “Financial Instruments-Credit Losses”, more commonly referred to as CECL. Under CECL, the allowance for credit losses (ACL) is a valuation account, measured as the difference between the Bank’s amortized cost basis and the net amount expected to be collected on the financial assets (i.e., lifetime credit losses).

The CECL methodology described in FASB Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326), applies to financial assets measured at amortized cost, and off-balance-sheet credit exposures (collectively, financial assets).

CECL requires the Bank to measure expected credit losses on financial assets carried at amortized cost on a collective or pool basis when similar risk characteristics exist. The Bank has determined that Call Report categories will be utilized, and Management will maintain the option to further segment the portfolio if we deem it beneficial to the analysis.

Estimating an appropriate ACL involves a high degree of Management judgment. As such, it is Management’s responsibility to record the Bank’s best estimate of expected credit losses and provide it to the Board of Directors.

The analysis is prepared and reported to the Board of Directors on a quarterly basis. The option and decision to prepare the analysis more frequently will remain with Management.

The Company’s most critical accounting policy relates to its allowance for credit losses on loans and leases and unfunded lending commitments, which reflects the estimated losses resulting from the inability of its borrowers to make loan payments. The allowance for credit losses on loans and leases and unfunded lending commitments is established and maintained at an amount sufficient to absorb losses on loans and leases held for investment. Credit losses arise not only from credit risk, but also from other risks inherent in the lending process including, but not limited to, collateral risk, operation risk, concentration risk and economic risk. As such, all related risks of lending are considered when assessing the adequacy of the allowance for credit losses on loans and leases and unfunded commitments.

Management believes that the allowance for credit losses on loans and unfunded lending commitments is adequate and appropriate for all periods presented in these financial statements. All credit relationships with an outstanding balance of $100,000 or greater that are included in Management’s loan watch list are individually reviewed for credit losses.

Other real estate (“ORE”) includes real estate acquired through foreclosure. Each other real estate property is carried at fair value, less estimated costs to sell. Fair value is principally based on appraisals performed by third-party valuation specialists. If Management determines that the fair value of a property has decreased subsequent to foreclosure, the Company records a write-down which is included in non-interest expense.

Employee benefit plan liabilities and pension costs are determined utilizing actuarially determined present value calculations. The valuation of the benefit obligation and net periodic expense is considered critical, as it requires Management and its actuaries to make estimates regarding the amount and timing of expected cash outflows including assumptions about mortality, expected service periods and the rate of compensation increases.

The Company uses the asset and liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. As part of the process of preparing the consolidated financial statements, the Company is required to estimate income taxes in each of the jurisdictions in which it operates. This process involves estimating the actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as the provision for credit losses, for tax and financial reporting purposes. These differences result in deferred tax assets and liabilities that are included in the consolidated statement of condition. The Company must also assess the likelihood that the deferred tax assets will be recovered from future taxable income, and, to the extent Management believes that recovery is not likely, the Company must establish a valuation allowance. Significant Management judgment is required in determining the provision for income taxes, the deferred tax assets and liabilities and any valuation allowance recorded against the net deferred tax assets. To the extent the Company establishes a valuation allowance or adjusts this allowance in a period, the Company must include an expense or a benefit within the tax provisions in the consolidated statement of income.

This report contains non-GAAP financial measures determined by methods other than in accordance with GAAP. Such non-GAAP financial measures include taxable equivalent interest income and taxable equivalent net interest income. Management uses these non-GAAP financial measures because it believes they are useful for evaluating our operations and performance over periods of time, as well as in managing and evaluating our business and in discussions about our operations and performance. Management believes these non-GAAP financial measures provide users of our financial information with a meaningful measure for assessing our financial results, as well as comparison to financial results for prior periods. These non-GAAP financial measures should not be considered as a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled financial measures used by other companies. A reconciliation of these operating performance measures to GAAP performance measures for the years ended December 31, 2023, 2022 and 2021 is included below.

The Company is a community bank serving the financial and trust needs of its customers in our trade area, which is defined as those portions of Mississippi, Louisiana and Alabama which are within a fifty mile radius of the Waveland, Wiggins and Gautier branches, the bank subsidiary’s three most outlying locations. Maintaining a strong core deposit base and providing commercial and real estate lending in our trade area are the traditional focuses of the Company. Growth has largely been achieved through de novo branching activity, and it is expected that these strategies will continue to be emphasized in the future.

Concerns about inflation and its potential impact on the economy and individual households are among the issues being considered by the Federal Reserve. Raising the Federal funds rate has been a strategy pursued in 2023 and 2022 to address this issue. The Federal Reserve has raised interest rates a total of 100 basis points during 2023 and 425 basis points during 2022 in an effort to promote maximum employment, keep prices stable and have moderate long-term interest rates.

Assisting our customers during the pandemic was a priority. The Company granted modifications by extending payments 90 days or allowing interest only payments to certain customers as a result of the economic challenges of business closures and unemployment resulting from COVID-19. We also actively participated in the Paycheck Protection Program (“PPP”), a specific stimulus resource designed to provide assistance to small businesses. The Company recorded loan fees associated with the PPP loan program in the amount of approximately $125,000 in 2022 and $958,000 in 2021.

The Company reported net income of $9,166,000 for 2023 compared with net income of $8,941,000 for 2022 and $8,911,000 for 2021, respectively. Results in 2023 included an increase in net interest income, a decrease in the allowance for credit losses, which were partially offset by an increase in non-interest expense, and the recording of tax expense. Results in 2022 included an increase in net interest income, an increase in the allowance for loans losses which were partially offset by an increase in non-interest income, a decrease in non-interest expense, and the recording of a large tax benefit as compared with 2021.

Managing the net interest margin is a key component of the Company’s earnings strategy. During 2022, the Federal Reserve increased rates by 425 basis points and increased again 50 basis points in the first quarter of 2023, 25 basis points in the second quarter of 2023 and another 25 basis points in the third quarter of 2023 in an effort to slow inflation. As a result, net interest income increased $4,924,000 in 2023 as compared with 2022. This increase was attributable to higher interest income on securities, overnight fed funds and loans somewhat offset by a higher cost of funds. As a result, total interest income increased $8,921,000 in 2023 as compared with 2022. The increase in rates increased total interest expense $3,997,000 in 2023 as compared with 2022.

Monitoring asset quality, estimating potential losses in our loan portfolio and addressing non-performing loans continue to be a major focus of the Company. A reduction of the provision for the allowance for credit losses of $272,000 was recorded in 2023 compared to a provision in the allowance for loan losses of $80,000 in 2022. On June 30, 2023, following a foreclosure, a large loan was charged off in the amount of $186,000 and the related property was moved into other real estate. This increased the Bank’s other real estate balance to $952,000. In October 2023, funds were received to settle the sale of one property in other real estate reducing the balance to $1. An increase in the allowance for loan losses of $80,000 was recorded in 2022 as compared to a reduction in the allowance for loan losses of $5,663,000 in 2021. The reduction during 2021 was the result of a large recovery of previously charged-off principal. The Company is working diligently to address and reduce its non-performing assets. The Company’s nonaccrual loans totaled $213,000 and $1,441,000 at December 31, 2023 and 2022, respectively. Most of these loans are collateral-dependent, and the Company has rigorously evaluated the value of its collateral to determine potential losses.

Non-interest income decreased $1,000 in 2023 as compared with 2022 results and increased $425,000 in 2022 as compared with 2021 results. The decrease in 2023 was primarily the result of a decrease in service charge and other income offset mostly by an increase in trust income related to the recent acquisition. The increase in 2022 was primarily the result of an increase in other income and an increase in trust income related to the recent acquisition.

Non-interest expenses increased $498,000 in 2023 as compared with 2022 and decreased $767,000 in 2022 as compared with 2021. The increase in 2023 was primarily due to higher net occupancy, legal, accounting, compliance and trust expenses. The decrease in 2022 was primarily due to a partial recovery in other expense related to a settlement of a lawsuit from 2021. The increase in other expense in 2021 was primarily due to the settlement of a lawsuit for $1,125,000 and other legal and consulting costs associated with the contested 2021 annual shareholders’ meeting.

Total assets at December 31, 2023 decreased $63,901,000 as compared with December 31, 2022. Total deposits decreased $97,290,000 primarily as several large public fund account balances decreased due to placement with other financial institutions. This decrease in deposits caused a decrease in net securities of $54,997,000. The decrease in net securities was also affected by unrealized losses on available for sale securities. In order to remain liquid as securities have matured the funds have been placed in cash and due from banks to reduce borrowings. This decrease in deposits resulted in a decrease in cash and due from banks of $10,042,000 while loans increased $461,000.

Net interest income, the amount by which interest income on loans, investments and other interest-earning assets exceeds interest expense on deposits and other borrowed funds, is the single largest component of the Company's income. Management's objective is to provide the largest possible amount of income while balancing interest rate, credit, liquidity and capital risk. Changes in the volume and mix of interest-earning assets and interest-bearing liabilities combined with changes in market rates of interest directly affect net interest income.

The Company’s average interest-earning assets decreased approximately $15,788,000, or 1.91%, from approximately $827,136,000 for 2022 to approximately $811,348,000 for 2023. Average taxable held to maturity securities increased approximately $65,114,000, average nontaxable held to maturity securities decreased approximately $1,335,000 and average taxable available for sale securities decreased approximately $61,187,000 as investment maturities and calls exceeded purchases of these securities. Average fed funds sold decreased approximately $15,961,000. These decreases were caused by the decrease in savings and interest-bearing DDA balances during the same period due to the runoff of several large public fund depositors. Average loans decreased approximately $1,612,000 as principal payments, paydowns, maturities, and charge-offs on existing loans exceeded new loans. The decrease in average loans and the decrease in average deposits, as discussed below, caused less new purchases in investments in securities and an increase in borrowed funds. The average yield on interest-earning assets was 4.05% for 2023 compared with 2.90% for 2022. The yield on average investment securities increased as a result of the increase in prime rate during 2023 as discussed in the Overview.

Average interest-bearing liabilities increased approximately $381,000, or 0.06%, from approximately $609,334,000 for 2022 to approximately $609,715,000 for 2023. Average savings and interest-bearing DDA balances increased approximately $39,464,000 primarily as several large public fund customers maintained higher balances throughout the year with the bank subsidiary prior to withdrawing funds. The average rate paid on interest-bearing liabilities increased from 0.35% for 2022 to 1.01% for 2023. This increase was the result of increased rates in 2022 and 2023.

The Company’s net interest margin on a tax-equivalent basis, which is net interest income as a percentage of average earning assets, was 2.64% for 2022 as compared with 3.29% for 2023.

The Company’s average interest-earning assets increased approximately $106,912,000, or 15%, from approximately $720,224,000 for 2021 to approximately $827,136,000 for 2022. Average taxable held to maturity securities increased approximately $33,831,000, average nontaxable held to maturity securities increased approximately $4,941,000 and average taxable available for sale securities increased approximately $107,166,000 as investment purchases exceeded maturities, sales and calls of these securities. Average loans decreased approximately $27,744,000 as principal payments, paydowns, maturities, and charge-offs on existing loans exceeded new loans. Funds available from the decrease in average loans and the increase in average deposits were used to increase the investment in securities. The average yield on interest-earning assets was 2.90% for 2022 compared with 2.85% for 2021. The yield on average investment securities increased as a result of the increase in prime rate during 2022 as discussed in the Overview.

Average interest-bearing liabilities increased approximately $127,566,000, or 26%, from approximately $481,768,000 for 2021 to approximately $609,334,000 for 2022. Average savings and interest-bearing DDA balances increased approximately $120,123,000 primarily as several large public fund customers maintained higher balances with the bank subsidiary and some of the PPP loan proceeds were deposited and maintained in customers’ accounts. The average rate paid on interest-bearing liabilities increased from 0.17% for 2021 to 0.35% for 2022. This increase was the result of increased rates in 2022.

The Company’s net interest margin on a tax-equivalent basis, which is net interest income as a percentage of average earning assets, was 2.74% for 2021 as compared with 2.64% for 2022.

The tables below analyze the changes in tax-equivalent net interest income for the years ended December 31, 2023, 2022 and 2021.

(1) Loan fees of $397, $659 and $1,444 for 2023, 2022 and 2021, respectively, are included in these figures. Of the loan fees recognized in 2023, 2022 and 2021, $0, $125 and $958, respectively, were related to PPP loans.

(3) All interest earned is reported on a taxable equivalent basis using a tax rate of 21% in 2023, 2022 and 2021. See disclosure of Non-GAAP financial measures on page 35.

In the normal course of business, the Company assumes risk in extending credit to its customers. This credit risk is managed through compliance with the loan policy, which is approved by the Board of Directors. The policy establishes guidelines relating to underwriting standards, including but not limited to financial analysis, collateral valuation, lending limits, pricing considerations and loan grading. The Company’s Loan Review and Special Assets Departments play key roles in monitoring the loan portfolio and managing problem loans. New loans and, on a periodic basis, existing loans are reviewed to evaluate compliance with the loan policy. Loan delinquencies and deposit overdrafts are closely monitored in order to identify developing problems as early as possible. Lenders experienced in workout scenarios consult with loan officers and customers to address non-performing loans. A watch list of credits which pose a potential loss to the Company is prepared based on the loan grading system. This list forms the foundation of the Company’s allowance for credit loss on loans computation.

In general, the Bank uses a broad range of data to estimate expected credit losses under CECL, including information about past events, current conditions, and reasonable and supportable forecasts relevant to assessing the collectability of the cash flows of financial assets. The following represents an overview of key factors regarding CECL: CECL requires the Bank to measure expected credit losses on financial assets carried at amortized cost on a collective or pool basis when similar risk characteristics exist. The Bank has determined that Call Report categories will be utilized, and Management will maintain the option to further segment the portfolio if we deem it beneficial to the analysis.

As stated above, CECL also applies to held to maturity debt securities since they are carried at amortized cost and are within the scope of the standard. Therefore, it is the responsibility of management to establish any required allowances for credit losses on the Bank’s held to maturity debt securities as of the date the Bank adopts CECL and to maintain such allowances thereafter. Because CECL requires the Bank to measure expected credit losses on a collective or pool basis when similar risk characteristics exist, held to maturity debt securities that share similar risk characteristics are collectively assessed for credit losses.

Estimating an appropriate ACL involves a high degree of management judgment. As such, it is Management’s responsibility to record the Bank’s best estimate of expected credit losses and provide it to the Board of Directors. The analysis is prepared and reported to the Board of Directors on a quarterly basis. The option and decision to prepare the analysis more frequently will remain with management.

Estimation Methods for Expected Credit Losses-Accounting Standards Codification (“ASC”) 326, “Financial Instruments-Credit Losses,” does not require the use of a specific loss estimation method for purposes of determining ACLs. Various methods may be used to estimate the expected collectability of financial assets, with those methods generally applied consistently overtime. The same loss estimation method does not need to be applied to all financial assets. Loss-rate methods can involve a variety of approaches, and Management incorporates the methods below:

The starting point for the calculation consists of assets that are outstanding at the end of a given time frame and are made up of assets that were originated in various years. Additional assets may be added to pools of loans under an open pool method.

A loss-rate method that estimates expected credit losses over the remaining life of the financial assets and uses a weighted average of the assets’ contractual terms to estimate the pool’s remaining contractual term. The WARM method uses average annual net charge-off rates and the amortization adjusted remaining life considering prepayments plus qualitative adjustments to estimate the ACLs.

The estimation of ACLs is to reflect consideration of all significant factors relevant to the expected collectability of the Bank’s financial assets as of the reporting date. Management begins their expected credit loss estimation process by determining the Bank’s historical loss information.

Management is to consider the need to qualitatively adjust expected credit loss estimates for information not already captured in the loss estimation process. These qualitative factor adjustments may increase or decrease management’s estimate of expected credit losses.

Historical loss experience generally provides a quantitative starting point for Management’s estimate of expected credit losses. Consistent with FASB ASU Topic 326, Management must consider relevant qualitative factors that may cause the CECL estimate of the financial asset portfolio as of the evaluation date to differ from the historical loss experience.

Management is to consider the qualitative factors that are relevant to the Bank as of the reporting date, which may include but are not limited to the:

The Company’s on-going, systematic evaluation resulted in the Company recording a negative provision for the allowance for credit losses on unfunded commitments of $(17,000), a negative provision for the allowance for credit losses on held to maturity securities of $(11,000) and a negative provision for the allowance for credit losses on loans and leases of $(244,000) in 2023. The Company recorded a provision of $80,000 for the allowance for loan losses in 2022 and recorded a total negative provision for (reduction of) the allowance for loan losses of $(5,663,000) in 2021, respectively.

During the year ended December 31, 2023 one large loan on nonaccrual prior to foreclosure was moved to other real estate then later sold during the year along with a recovery of another loan in the amount of $468,000. The Company’s analysis includes evaluating the current values of collateral securing all nonaccrual loans. Nonaccrual loans totaled $213,000 and $1,441,000 with specific reserves on these loans of $39,500 and $124,000 as of December 31, 2023 and 2022, respectively. The specific reserves allocated to nonaccrual loans are relatively low as collateral values appear sufficient to cover loan losses, or the loan balances have been charged down to their realizable value.

The allowance for credit losses on loans and leases as a percentage of loans was 1.35%, 1.40% and 1.38% at December 31, 2023, 2022, and 2021, respectively. The Company believes that its allowance of credit losses on loans and leases is appropriate as of December 31, 2023.

The allowance for credit losses on loans and leases is an estimate, and as such, events may occur in the future which may affect its accuracy. The Company anticipates that it is possible that additional information will be gathered in future quarters on loan performance, which may require an adjustment to the allowance for credit losses on loans and leases. Management will continue to closely monitor its portfolio and take such action as it deems appropriate to accurately report its financial condition and results of operations.

Total non-interest income decreased $1,000 in 2023 as compared with 2022. Service charges on deposit accounts decreased $248,000 and other income decreased $174,000 which included some nonrecurring income items in 2022 offset mostly by Trust department income and fees which increased $351,000 in 2023 as compared with 2022 as a result of the recent trust acquisition.

Total non-interest income increased $425,000 in 2022 as compared with 2021. Trust department income and fees increased $152,000 in 2022 as compared with 2021 as a result of the recent trust acquisition. Other income increased $185,000 in 2022 as compared with 2021. Service charges on deposit accounts increased $33,000 as customer transactions have begun to return to pre-COVID-19 activity.

Total non-interest expense increased $498,000 in 2023 as compared with 2022. Net occupancy increased $332,000 primarily due to increases in insurance expense in 2023. Other expenses increased $494,000 primarily as legal, compliance, accounting, dues and subscriptions and trust expenses increased while ATM and data processing expenses decreased. Legal expenses increased $576,000 due to a nonrecurring partial recovery received at the end of 2022 in the amount of $486,000. Salaries and employee benefits decreased $197,000 primarily due to a reduction in estimated expenses on other postretirement benefits due to the increase in the discount rate.

Total non-interest expense decreased $767,000 in 2022 as compared with 2021. Salaries and employee benefits increased $727,000 primarily due to merit bonuses and increases in benefits. Net occupancy decreased $163,000 primarily due to decreases in insurance expense in 2022. Other expense decreased $1,322,000, primarily as legal and consulting and other real estate decreased, while data processing and ATM expense increased. Legal and consulting costs decreased due to the settlement of a lawsuit for $1,125,000 in 2021 in which a partial recovery was received at the end of 2022 in the amount of $486,000 along with non-recurring expenses in 2021 relating to the contested 2021 annual shareholders’ meeting. Other real estate expenses decreased $7,000 as a result of decreased expense of holding and selling ORE in 2022 as compared to 2021. Data processing costs increased $37,000 due to the implementation of new applications in the current year. ATM expense increased $131,000 as a result of costs associated with debit card processing charges since conversion to a new provider.

During 2014, Management established a valuation allowance against its net deferred tax asset of approximately $8,140,000. As of December 31, 2021, the valuation allowance was still in place. The 2018 Tax Cuts and Jobs Act began limiting NOL usage to 80% of taxable income, which resulted in the Company recording income tax expense for 2021.

During the fourth quarter of 2022, the Company determined that it was more likely than not that it would realize a certain amount of its deferred tax assets. As of December 31, 2022, the Company no longer has a net operating loss carryforward and its projections of future income indicate that reversal of a portion of the valuation allowance was appropriate. Accordingly, an income tax benefit of $2,446,000 was recorded in the fourth quarter of 2022.

As of December 31, 2023 the Company has recorded income tax expenses in the amount of $2,121,000.

Note I to the Consolidated Financial Statements presents a reconciliation of income taxes for these three years and further analysis of the valuation allowance.

Cash and due from banks decreased $10,042,000 at December 31, 2023 compared with December 31, 2022 as the Company has experienced a decrease in deposits due to several larger public fund accounts moving to other financial institutions offering a more competitive interest rate on deposits.

Available for sale securities decreased $10,691,000 and held to maturity securities decreased $44,306,000, respectively at December 31, 2023 compared with December 31, 2022 as the Company decreased its held to maturity and available for sale investment purchases due to the decrease in deposits.

Gross loans increased $461,000 at December 31, 2023 compared with December 31, 2022, as new loans outpaced principal payments, maturities, and charge-offs on existing loans.

Total deposits decreased $97,290,000 at December 31, 2023, as compared with December 31, 2022. Typically, significant increases or decreases in total deposits and/or significant fluctuations among the different types of deposits from year to year are anticipated by Management as customers in the casino industry and county and municipal entities reallocate their resources periodically. The Company also experienced the loss of certain public funds deposits following competitive bid processes whereby those accounts were awarded to other local banks.

Strength, security and stability have been the hallmark of the Company since its founding in 1985 and of its bank subsidiary since its founding in 1896. A strong capital foundation is fundamental to the continuing prosperity of the Company and the security of its customers and shareholders. The primary and risk-based capital ratios are important indicators of the strength of a Company’s capital. These figures are presented in the Five-Year Comparative Summary of Selected Financial Information which is included in the Company’s annual report. The Company has established the goal of being classified as “well-capitalized” by the banking regulatory authorities.

During the third quarter of 2023, the community bank leverage ratio (CBLR) framework was elected. The CBLR framework is an optional framework that is designed to reduce burden by removing the requirements for calculating and reporting risk-based capital ratios for qualifying community banking organizations that opt into the framework. The framework provides a simple measure of capital adequacy for qualifying community banking organizations, consistent with section 201 of the Economic Growth, Regulatory Relief and Consumer Protection Act.

Significant transactions affecting shareholders’ equity during 2023 are described in Note J to the Consolidated Financial Statements. The Statement of Changes in Shareholders’ Equity also presents all activity in the Company’s equity accounts.

Liquidity represents the Company’s ability to adequately provide funds to satisfy demands from depositors, borrowers and other commitments by either converting assets to cash or accessing new or existing sources of funds. Note L to the Consolidated Financial Statements discloses information relating to financial instruments with off-balance-sheet risk, including letters of credit and outstanding unused loan commitments. Management monitors these funds requirements in such a manner as to satisfy these demands and provide the maximum earnings on its earning assets. The Company manages and monitors its liquidity position through a number of methods, including through the computation of liquidity risk targets and the preparation of various analyses of its funding sources and utilization of those sources on a monthly basis. The Company also uses proforma liquidity projections which are updated on a monthly basis in the management of its liquidity needs and also conducts periodic contingency testing on its liquidity plan.

Deposits, payments of principal and interest on loans, proceeds from maturities of investment securities and earnings on investment securities are the principal sources of funds for the Company. Borrowings from the FHLB, federal funds sold and federal funds purchased are utilized by the Company to manage its daily liquidity position. The Company has also been approved to participate in the Federal Reserve Bank’s Discount Window Primary Credit Program as well as its Bank Term Funding Program, which it intends to use only as a contingency. As of December 31, 2023, the Company was able to borrow up to $6,700,000 from the Federal Reserve Bank Discount Window Primary Credit Program. The borrowing limit is based on the amount of collateral pledged, with certain loans from the Bank’s portfolio serving as collateral. The Company has $93,700,000 available under a line of credit with the Federal Home Loan Bank of Dallas. The Company has additional contingency funding capacity with various other financial institutions in the amount of $30,500,000.

The Company maintains a well-capitalized balance sheet which includes strong capital and liquidity. The Bank provides a full range of banking, financial and trust services in our local markets. Approximately half of the Bank’s deposits are fully FDIC insured, and the vast majority of uninsured deposits are public funds deposits secured by Bank securities pledged at fair value. The Company evaluates on an ongoing and continuous basis its financial health by preparing for various moderate to severe economic scenarios.

Determining liquidity adequacy requires an ongoing analysis of the Company’s current and expected liquidity position, including historical funding obligations and anticipated funding needs, as well as an understanding of retention prospects for all Bank deposits. In particular, consideration is given to public funds and other large depositors for potential runoffs due to expected uses or other withdrawals from Bank accounts.

The Company was advised during the second quarter that the Bank would not be retaining certain public funds deposits following competitive bid processes whereby those accounts were awarded to other local banks. While the majority of those deposits were withdrawn during the third quarter, approximately $21 million remained on the Company’s balance sheet at the end of the fourth quarter, the Company expects the funds to be withdrawn from the Bank during the first quarter of next year.

Funding obtained to replace the withdrawn deposits may be at a higher cost than the interest rate paid on the deposits to be withdrawn and therefore may impact the Bank’s net interest margin going forward. However, the Company anticipates that the Bank will be able to fund those deposit withdrawals through growth in other deposit accounts, proceeds from maturities of investment securities and earnings on investment securities, and through other borrowings with the FHLB or other counterparties, without having to liquidate any securities within its existing portfolio at a loss.

The Company also anticipates that a similar competitive bid will be held in January of 2024 for other public deposits currently placed with the Bank. If the Bank fails to win that bid, any withdrawal of those funds, which totaled approximately $39 million at the end of the fourth quarter, will not be withdrawn until next year. The Company participates in competitive bids throughout the year and anticipates bidding on new public fund customers as the opportunity arises.

The Company also uses other sources of funds, including borrowings from the FHLB. The Company generally anticipates relying on deposits, purchases of federal funds and borrowings from the FHLB for its liquidity needs in 2024.

The Board of Directors requires management to implement and administer appropriate internal controls commensurate with Company’s risk profile. Management carefully monitors the Company’s liquidity risk, particularly with respect to volatile and large deposits. The Company has not encountered, and does not anticipate problems with meeting its liquidity needs.

The Company is a party to off-balance-sheet arrangements in the normal course of business to meet the financing needs of its customers. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet arrangements. Since some of the commitments and irrevocable letters of credit may expire without being drawn upon, the total amount does not necessarily represent future cash requirements. As discussed previously, the Company carefully monitors its liquidity needs and considers its cash requirements, especially for loan commitments, in making decisions on investments and obtaining funds from its other sources. Further information relating to off-balance-sheet instruments can be found in Note L to the Consolidated Financial Statements.

As a smaller reporting company, the Company is not required to provide this information.

December 31,	2023		2022

Assets
Cash and due from banks	$	22,794	$	32,836

Available for sale securities, amortized cost of $379,195-2023; $397,926-2022		339,477		350,168

Held to maturity securities, fair value of $138,523 - 2023; $180,050 - 2022		150,941		195,217

Less: Allowance for credit losses on held to maturity securities		30		-

Held to maturity securities, net		150,911		195,217

Other investments		350		350

Federal Home Loan Bank Stock, at cost		2,334		2,175

Loans		238,339		237,878

Less: Allowance for credit losses on loans and leases		3,224		3,338

Loans, net		235,115		234,540

Bank premises and equipment, net of accumulated depreciation		19,470		18,499

Other real estate		-		259

Accrued interest receivable		3,520		3,274

Cash surrender value of life insurance		21,375		20,768

Intangible asset		538		600

Other assets		1,854		2,953

Total assets	$	797,738	$	861,639

December 31,	2023			2022

Liabilities and Shareholders' Equity
Liabilities:

Deposits:

Demand, non-interest bearing	$	174,933		$	198,097

Savings and demand, interest bearing		483,662			546,565

Time, $250,000 or more		7,518			8,773

Other time deposits		22,377			32,345

Total deposits		688,490			785,780

Borrowings from Federal Home Loan Bank		18,500			-

Employee and director benefit plans liabilities		19,581			19,198

Other liabilities		1,884			1,467

Total liabilities		728,455			806,445

Shareholders' Equity:
Common stock, $1 par value, 15,000,000 shares authorized, 4,661,686 and 4,678,186 shares issued and outstanding at December 31, 2023 and 2022		4,662			4,678

Surplus		65,780			65,780

Undivided profits		37,574			31,154

Accumulated other comprehensive income (loss)		(38,733	)		(46,418	)

Total shareholders' equity		69,283			55,194

Total liabilities and shareholders' equity	$	797,738		$	861,639

Years Ended December 31,	2023			2022		2021

Interest income:

Interest and fees on loans	$	12,945		$	11,135	$	12,592

Interest and dividends on securities:

U. S. Treasuries		6,560			3,173		663

U.S. Government agencies		-			-		95

Mortgage-backed securities		3,621			2,586		2,076

Collateralized mortgage obligations		3,495			1,919		860

States and political subdivisions		4,278			4,460		3,903

Other investments		122			27		8

Interest on balances due from depository institutions		1,608			408		95

Total interest income		32,629			23,708		20,292

Interest expense:

Deposits		5,746			1,985		806

Borrowings from Federal Home Loan Bank		409			173		24

Total interest expense		6,155			2,158		830

Net interest income		26,474			21,550		19,462

Provision for (reduction of) allowance for credit losses		(272	)		80		(5,663	)

Net interest income after provision for (reduction of) allowance for credit losses	$	26,746		$	21,470	$	25,125

Years Ended December 31,	2023		2022			2021
Non-interest income:

Trust department income and fees	$	2,352	$	2,001		$	1,849

Service charges on deposit accounts		3,430		3,678			3,645

(Loss) gain on liquidation, sales and calls of securities		-		-			(45	)

Increase in cash surrender value of life insurance		485		445			435

Gain on sale of buildings		30		-			-

Other income		597		771			586

Total non-interest income		6,894		6,895			6,470

Non-interest expense:

Salaries and employee benefits		11,144		11,341			10,614

Net occupancy		2,087		1,755			1,918

Equipment rentals, depreciation and maintenance		2,774		2,905			2,914

Other expense		6,348		5,854			7,176

Total non-interest expense		22,353		21,855			22,622

Income before income taxes		11,287		6,510			8,973

Income tax (benefit) expense		2,121		(2,431	)		62

Net income	$	9,166	$	8,941		$	8,911

Basic and diluted earnings per share	$	1.96	$	1.91		$	1.84
Dividends declared per share	$	0.53	$	0.19		$	0.16

												Accumulated
	*Number of*											*Other*
	*Common*			*Common*					*Undivided*			*Comprehensive*
	*Shares*			*Stock*			*Surplus*		*Profits*			*Income (Loss)*			*Total*

Balance, January 1, 2021		4,878,557		$	4,879		$	65,780	$	18,140		$	5,872		$	94,671

Net income										8,911						8,911

Cash dividend ($0.16 per share)										(769	)					(769	)

Other comprehensive loss													(7,703	)		(7,703	)

Stock repurchase		(200,371	)		(201	)				(3,180	)					(3,381	)


Balance, December 31, 2021		4,678,186			4,678			65,780		23,102			(1,831	)		91,729

Net income										8,941						8,941

Cash dividend ($0.19 per share)										(889	)					(889	)

Other comprehensive loss													(44,587	)		(44,587	)


Balance, December 31, 2022		4,678,186			4,678			65,780		31,154			(46,418	)		55,194
Cumulative effect of accounting change										(81	)
Total shareholders' equity at beginning of period, as adjusted		4,678,186			4,678			65,780		31,073			(46,418	)		55,113

Net income										9,166						9,166

Cash dividend ($0.53 per share)										(2,473	)					(2,473	)

Other comprehensive income													7,685			7,685

Stock repurchase		(16,500	)		(16	)				(192	)					(208	)


Balance, December 31, 2023		4,661,686		$	4,662		$	65,780	$	37,574		$	(38,733	)	$	69,283

Years Ended December 31,	2023			2022			2021

Cash flows from operating activities:
Net income	$	9,166		$	8,941		$	8,911
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,551			1,664			1,681
(Reduction of) provision for allowance for loan losses		(272	)		80			(5,663	)
Write-down of other real estate		-			155			299
Loss (gain) on sales of other real estate		97			(87	)		(284	)
Amortization of intangible asset		62			21			-
(Accretion) amortization of available for sale securities		(237	)		(12	)		412
(Accretion) amortization of held to maturity securities		(2,091	)		71			442
Loss (gain) on liquidation, sales and calls of securities		-			-			45
Gain on sale or disposition of bank premises and equipment		(30	)		-			-
Increase in cash surrender value of life insurance		(486	)		(445	)		(434	)
Change in accrued interest receivable		(246	)		(433	)		(741	)
Change in deferred tax expense (benefit)		756			(2,446	)		-
Change in other assets		343			215			344
Change in employee and director benefit plan liabilities and other liabilities		438			184			(428	)

Net cash provided by operating activities	$	9,051		$	7,908		$	4,584

Years Ended December 31,	2023			2022			2021
Cash flows from investing activities:
Proceeds from maturities, liquidation, sales and calls of available for sale securities	$	54,123		$	89,879		$	54,627
Purchases of available for sale securities		(35,153	)		(108,832	)		(259,231	)
Proceeds from maturities of held to maturity securities		209,307			23,751			4,937
Purchases of held to maturity securities		(162,970	)		(108,831	)		(39,899	)
Purchase of Federal Home Loan Bank Stock		(159	)		(22	)		(4	)
Proceeds from sales of other real estate		1,114			1,564			1,583
Purchase of trust department book of business		-			(621	)		-
Loans, net change		(1,272	)		1,231			43,793
Acquisition of bank premises and equipment		(2,537	)		(2,173	)		(1,944	)
Proceeds from sale of bank premises and equipment		46			-			-
Investment in cash surrender value of life insurance		(121	)		(173	)		(107	)

Net cash provided by (used in) investing activities		62,378			(104,227	)		(196,245	)

Cash flows from financing activities:
Demand and savings deposits, net change		(86,067	)		122,778			132,450
Time deposits, net change		(11,223	)		(41,836	)		21,890
Cash dividends paid		(2,473	)		(889	)		(769	)
Stock repurchase		(208	)		-			(3,381	)
Borrowings from Federal Home Loan Bank		769,350			567,750			79,523
Repayments to Federal Home Loan Bank		(750,850	)		(568,639	)		(79,603	)

Net cash (used in) provided by financing activities		(81,471	)		79,164			150,110

Net (decrease) increase in cash and cash equivalents		(10,042	)		(17,155	)		(41,551	)
Cash and cash equivalents, beginning of year		32,836			49,991			91,542

Cash and cash equivalents, end of year	$	22,794		$	32,836		$	49,991

Supplemental disclosures of noncash investing activities
Transfer from loans to other real estate owned	$	952		$	-		$	14

We have audited the accompanying consolidated statement of condition of Peoples Financial Corporation and Subsidiaries (the “Company”) as of December 31, 2023, and the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023, and the consolidated results of their operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note A to the financial statements, the Company has changed its method of accounting for credit losses in 2023 due to the adoption of ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

“EisnerAmper” is the brand name under which EisnerAmper LLP and Eisner Advisory Group LLC and its subsidiary entities provide professional services. EisnerAmper LLP and Eisner Advisory Group LLC are independently owned firms that practice in an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations and professional standards. EisnerAmper LLP is a licensed CPA firm that provides attest services, and Eisner Advisory Group LLC and its subsidiary entities provide tax and business consulting services. Eisner Advisory Group LLC and its subsidiary entities are not licensed CPA firms.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The Company’s loan portfolio totaled $238 million as of December 31, 2023, and the allowance for credit losses on loans was $3.2 million. The Company’s unfunded loan commitments totaled $40 million, with an allowance for credit loss of $55,000. These amounts are included in the allowance for credit losses (“ACL”). As more fully described in Notes A and C to the Company’s consolidated financial statements, the Company estimates its exposure to expected credit losses as of the statement of condition date, for existing financial instruments held at amortized cost, and off-balance sheet exposures, such as unfunded loan commitments, letters of credit and other financial guarantees that are not unconditionally cancellable by the Company. The Company measures expected credit losses of financial assets on a collective (pool) basis when the financial assets share similar risk characteristics.

We identified the valuation of the ACL as a critical audit matter as the determination of the ACL requires management to exercise significant judgment and could have a material impact on the Company’s financial statements. Management must consider numerous subjective factors, including determining qualitative factors used to adjust the calculated allowance for credit losses, loan credit risk grading and identifying loans requiring individual evaluation among others. As disclosed by management, different assumptions and conditions could result in a materially different amount for the estimate of the ACL. As such, there is a high degree of auditor judgement and subjectivity, and significant audit effort was required in performing procedures in auditing the ACL.

Addressing the critical audit matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. The primary procedures we performed to address this critical audit matter included:

We have served as the Company’s auditor since 2023. (Note: Partners of Postlethwaite & Netterville, APAC joined EisnerAmper LLP in 2023. Postlethwaite & Netterville, APAC had served as the Company’s auditor since 2022 which is the year the engagement letter was signed for the audit of the 2023 financial statements).

We have audited the accompanying consolidated statement of condition of Peoples Financial Corporation and subsidiaries (the Company) as of December 31, 2022, the related consolidated statements of operations, comprehensive income (loss), and cash flows for each of the two years in the period ended December 31, 2022, and changes in shareholders’ equity for the year ended December 31, 2022, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Estimate of allowance for loan losses – reserves related to loans collectively evaluated for impairment

As described in Notes A and C to the financial statements, the Company’s allowance for loan losses (“ALL”) totaled $3,109,000 relating to loans collectively evaluated for impairment (general reserve). The Company estimated the general reserve using the historical loss method which utilizes historical loss rates of pools of loans with similar risk characteristics applied to the respective loan pool balances. These amounts are then adjusted for certain qualitative factors related to current economic and general conditions currently observed by management.

We identified the estimate of the general reserve portion of the ALL as a critical audit matter because auditing this portion of the ALL required significant auditor judgment and involved significant estimation uncertainty requiring industry knowledge and experience.

The primary audit procedures we performed to address this critical audit matter included:

We have audited the accompanying consolidated statements of condition of Peoples Financial Corporation and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), and cash flows for each of the three years in the period ended December 31, 2022, and changes in shareholders’ equity for each of the two years in the period ended December 31, 2022, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Estimate of allowance for loan losses – reserves related to loans collectively evaluated for impairment

The primary audit procedures we performed to address this critical audit matter included:

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Wipfli LLP (“Wipfli”) had served as the independent registered public accounting firm for the Company since October 2019 following its acquisition of Porter Keadle Moore, LLC, a predecessor firm which had served as the independent registered public accounting firm for the Company since 2006. However, as announced on its Form 8-K Report filed on October 3, 2022, the Board of the Company, through its Audit Committee, conducted a competitive process to determine the Company’s independent registered public accounting firm commencing with the Company’s fiscal year ending December 31, 2023. The Audit Committee invited several independent registered public accounting firms to participate in this process, including Wipfli.

Following review of proposals from the independent registered public accounting firms that participated in the process, on September 28, 2022, upon recommendation from the Audit Committee, the Board of the Company approved the engagement of Postlethwaite & Netterville (“P&N”) as the Company’s independent registered public accounting firm for the Company’s fiscal year ending December 31, 2023, which was ratified at the 2023 Annual Meeting.

Wipfli continued as the Company’s independent registered public accounting firm for the year ended December 31, 2022. Wipfli’s reports on the Company’s consolidated financial statements as of and for the fiscal years ended December 31, 2021 and 2022 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.

During the fiscal years ended December 31, 2021 and 2022, there were: (i) no disagreements within the meaning of Item 304(a)(1)(v) of Regulation S-K and the related instructions between the Company and Wipfli on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or, procedure which, if not resolved to Wipfli’s satisfaction, would have caused Wipfli to make reference in their reports; and (ii) no “reportable events” within the meaning of Item 604(a)(1)(v) of Regulation S-K.

The Company provided Wipfli a copy of the March 22, 2023 Form 8-K/A, as well as the September 28, 2022, Form 8-K it amended, prior to their filings with the Securities and Exchange Commission (the “Commission”) and requested that Wipfli furnish it with a letter addressed to the SEC stating whether or not it agreed with the above statements in this Current Report. A copy of Wipfli’s letter to the Commission is filed as Exhibit 16.1 on Form 8-K/A filed on March 22, 2023.

During the fiscal years ended December 31, 2021 and 2022 and the subsequent interim period through March 15, 2023, neither the Company nor anyone on its behalf consulted with P&N regarding: (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report or oral advice was provided to the Company that P&N concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue; (ii) any matter that was the subject of a disagreement within the meaning of Item 304(a)(1)(iv) of Regulation S-K and the related instructions; or (iii) any reportable event within the meaning of Item 304(a)(1)(v) of Regulation SK.

The Company has since been notified P&N has combined with EisnerAmper LLP (“EisnerAmper”) (“the Practice Combination”), and independent audits previously conducted by P&N will be conducted by EisnerAmper as a result of the Practice Combination. Therefore, P&N effectively resigned as the Company’s independent registered public accounting firm and EisnerAmper, as the successor to P&N following the Practice Combination, will serve as the Company’s independent registered public accounting firm. On December 6, 2023 the Company’s Board of Directors approved the retention of EisnerAmper as the Company’s independent registered public accounting firm. As of December 6, 2023, EisnerAmper was registered with the Public Company Accounting Oversight Board.

From the date of P&N’s appointment as the Company’s independent registered public accounting firm through December 6, 2023, there were no disagreements with P&N on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved by P&N’s satisfaction, would have caused P&N to make reference to the subject matter of the disagreement in their reports on the company’s consolidated financial statement for 2023. Additionally, during the interim periods through December 06, 2023, there were no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S- K. The Company provided P&N a copy of the December 6, 2023 Form 8-K prior to its filing with the Securities and Exchange Commission (the “Commission”) and requested that P&N furnish it with a letter addressed to the SEC stating whether or not it agreed with the above statements in this Current Report. A copy of P&N’s letter to the Commission is filed as Exhibit 16.1 on Form 8-K filed on December 6, 2023.

During the fiscal years ended December 31, 2021 and 2022 and interim periods through December 6, 2023, the Company did not consult with EisnerAmper on any matter that (i) involved the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's financial statements, in each case where a written report was provided or oral advice was provided that EisnerAmper concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) was either the subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K, or a reportable event, as that term is defined in Item 304(a)(1)(v) of Regulation S-K.

As of December 31, 2023, an evaluation was performed under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective to ensure that the information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting that occurred during the period ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13(a) - 15(f) and 15(d) – 15(f) of the Securities Exchange Act of 1934. In meeting its responsibility, management relies on its accounting and other related control systems. The internal control systems are designed to ensure that transactions are properly authorized and recorded in the Company’s financial records and to safeguard the Company’s assets from material loss or misappropriation.

Management of the Company, including its Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of internal control over financial reporting as of December 31, 2023, using the criteria set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our assessment included a review of the documentation of controls, evaluations of the design of the internal control system and tests of operating effectiveness of the internal controls. Based on the assessment, management has concluded that the Company had effective internal control over financial reporting as of December 31, 2023.

Except as provided below, the information required by this item will be contained in Sections II, III, VIII and IX of our definitive proxy statement to be filed on March 20, 2024, relating to our 2024 Annual Meeting of stockholders to be held April 24, 2024, and is incorporated herein by reference.

The Company’s Board of Directors has adopted a Code of Conduct that applies to not only the Chief Executive Officer and the Chief Financial Officer, but also all of the officers, directors and employees of the Company and its subsidiaries. A copy of this Code of Conduct can be found at the Company’s internet website at www.thepeoples.com. The Company intends to disclose any amendments to its Code of Conduct, and any waiver from a provision of the Code of Conduct granted to the Company’s Chief Executive Officer or Chief Financial Officer on the Company’s internet website within four business days following such amendment or waiver. The information contained on or connected to the Company’s internet website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this or any other report that the Company may file with or furnish to the SEC.

The information in Section VI contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 24, 2024 which will be filed by the Company in definitive form with the Commission on March 20, 2024, is incorporated herein by reference.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information in Sections IV and V contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 24, 2024, which was filed by the Company in definitive form with the Commission on March 20, 2024, is incorporated herein by reference.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information in Sections III and VII contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 24, 2024, filed by the Company in definitive form with the Commission on or about March 20, 2024, is incorporated herein by reference.

The information in Section II and Section XI contained in the Proxy Statement in connection with the Annual Meeting of Shareholders to be held April 24, 2024, which will be filed by the Company in definitive form with the Commission on March 20, 2024, is incorporated herein by reference.

All other schedules have been omitted as not applicable or not required or because the information has been included in the financial statements or applicable note.

Pursuant to the requirements of Section 13 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.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

For the Years Ended December 31,	2023		2022		2021

ASSETS:

Cash and due from banks	$	24,868	$	27,367	$	28,763

Available for sale securities:
Taxable securities		331,458		392,645		285,479
Non-taxable securities		3,873		4,740		5,802
Other securities		2,215		2,155		2,151

Held to maturity securities:
Taxable securities		170,161		105,047		66,216
Non-taxable securities		36,222		37,557		32,616

Other investments		350		350		350

Net loans (2)		230,927		232,430		259,071

Balances due from depository institutions		33,230		49,191		64,415

Other assets		47,278		42,947		43,662

TOTAL ASSETS	$	880,582	$	894,429	$	788,525

LIABILITIES AND SHAREHOLDERS' EQUITY:

Non-interest bearing deposits	$	189,084	$	197,789	$	192,071
Interest bearing deposits		602,333		605,859		480,549
Total deposits		791,417		803,648		672,620

Other liabilities		28,747		26,727		23,208

Total liabilities		820,164		830,375		695,828

Shareholders' equity		60,418		64,054		92,697

TOTAL LIABILITIES AND SHARE- HOLDERS' EQUITY	$	880,582	$	894,429	$	788,525

For the Years Ended December 31,	2023		2022		2021

INTEREST EARNING ASSETS:

Loans (2)	$	234,189	$	235,801	$	263,545

Balances due from depository institutions		33,230		49,191		64,415

Available for sale securities:
Taxable securities		331,458		392,645		285,479
Non-taxable securities		3,873		4,740		5,802
Other securities		2,215		2,155		2,151

Held to maturity securities:
Taxable securities		170,161		105,047		66,216
Non-taxable securities		36,222		37,557		32,616

TOTAL INTEREST EARNING ASSETS	$	811,348	$	827,136	$	720,224

INTEREST BEARING LIABILITIES:

Savings and negotiable interest bearing deposits	$	566,737	$	527,273	$	407,150

Time deposits		35,596		78,392		73,399

Borrowings from FHLB		7,382		3,669		1,219

TOTAL INTEREST BEARING LIABILITIES	$	609,715	$	609,334	$	481,768

For the Years Ended December 31,	2023		2022		2021

INTEREST EARNED ON:

Loans	$	12,945	$	11,135	$	12,592

Balances due from depository institutions		1,608		408		95

Available for sale securities:
Taxable securities		11,250		8,482		5,004
Non-taxable securities		118		145		178
Other securities		122		27		8

Held to maturity securities:
Taxable securities		5,793		2,713		1,702
Non-taxable securities		1,036		1,050		952

TOTAL INTEREST EARNED (1)	$	32,872	$	23,960	$	20,531

INTEREST PAID ON:

Savings and negotiable interest bearing deposits	$	5,507	$	1,636	$	525

Time deposits		239		349		281

Other borrowed funds		409		173		24

TOTAL INTEREST PAID	$	6,155	$	2,158	$	830

For the Years Ended December 31,	2023			2022			2021

AVERAGE RATE EARNED ON:

Loans		5.53	%		4.72	%		4.78	%

Balances due from depository institutions		4.84	%		0.83	%		0.15	%

Available for sale securities:
Taxable securities		3.39	%		2.16	%		1.75	%
Non-taxable securities		3.04	%		3.07	%		3.07	%
Other securities		5.51	%		1.25	%		0.37	%

Held to maturity securities:
Taxable securities		3.40	%		2.58	%		2.57	%
Non-taxable securities		2.86	%		2.79	%		2.92	%

TOTAL (weighted average rate)(1)		4.05	%		2.90	%		2.85	%

AVERAGE RATE PAID ON:

Savings and negotiable interest bearing deposits		0.97	%		0.31	%		0.13	%

Time deposits		0.67	%		0.45	%		0.37	%

Other borrowed funds		5.54	%		4.72	%		1.97	%

TOTAL (weighted average rate)		1.01	%		0.35	%		0.17	%

For the Years Ended December 31,	2023		2022		Increase (Decrease)			Volume			Rate			Rate/Volume

INTEREST EARNED ON:

Loans (1)	$	12,945	$	11,135	$	1,810		$	(76	)	$	1,899		$	(13	)

Balances due from depository institutions		1,608		408		1,200			(132	)		1,972			(640	)

Available for sale securities:
Taxable securities		11,250		8,482		2,768			(1,322	)		4,845			(755	)
Non-taxable securities		118		145		(27	)		(26	)		(1	)		-
Other securities		122		27		95			1			91			3

Held to maturity securities:
Taxable securities		5,793		2,713		3,080			1,682			863			535
Non-taxable securities		1,036		1,050		(14	)		(37	)		24			(1	)

TOTAL INTEREST EARNED (2)	$	32,872	$	23,960	$	8,912		$	90		$	9,693		$	(871	)

INTEREST PAID ON:

Savings and negotiable interest bearing deposits	$	5,507	$	1,636	$	3,871		$	122		$	3,488		$	261

Time deposits		239		349		(110	)		(191	)		178			(97	)

Other borrowed funds		409		173		236			175			30			31

TOTAL INTEREST PAID	$	6,155	$	2,158	$	3,997		$	106		$	3,696		$	195

	Maturity
						After one year but					After five years
	Within one year						within five years					but within ten years					After ten years
December 31, 2023	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield

Available for sale securities:

U.S. Treasuries, Mortgage-backed securities and Collateralized Mortgage Obligations	$	45,355		5.94	%	$	127,274		3.59	%	$	79,158		3.97	%	$	6,462		1.56	%

States and political subdivisions		-		-			5,942		3.03	%		39,665		1.88	%		35,621		2.23	%


Total	$	45,355		5.94	%	$	133,216		2.56	%	$	118,823		3.42	%	$	42,083		1.99	%

Held to maturity securities:
U.S. Treasuries, Mortgage-backed securities and Collateralized Mortgage Obligations	$	19,943		3.47	%	$	39,958		3.48	%	$	-		-		$	-		-

States and political subdivisions		3,369		3.07	%		23,284		2.62	%		30,970		2.64	%		33,417		2.69	%

Total	$	23,312		3.41	%	$	63,242		3.11	%	$	30,970		2.64	%	$	33,417		2.69	%

	Maturity
			Over one year through 5		Over 5 years through
December 31, 2023	One year or less		years		15 years		Over 15 years		Total

Real estate, residential	$	1,257	$	20,139	$	52,544	$	356	$	74,296

Real estate, construction		11,959		4,491		6,985		3,918		27,353

Real estate, nonresidential		2,748		40,775		60,790		10,701		115,014

Commercial and industrial		2,743		5,849		3,904		-		12,496

Other		1,161		7,653		366		-		9,180

Total	$	19,868	$	78,907	$	124,589	$	14,975	$	238,339


Loans with pre-determined interest rates	$	15,368	$	71,274	$	108,420	$	7,750	$	202,812

Loans with floating interest rates		4,500		7,633		16,169		7,225		35,527

Total	$	19,868	$	78,907	$	124,589	$	14,975	$	238,339

	Real Estate,			Real Estate,			Real Estate,			Commercial
	Residential			Construction			Nonresidential			and Industrial			Other			Total

December 31, 2023:
Allowance for credit losses on loans	$	971		$	173		$	1,807		$	54		$	219			3,224
Nonaccrual loans		213			-			-			-			-			213
Total loans		74,296			27,353			115,014			12,496			9,180			238,339
Average loans		71,091			27,129			116,447			11,758			7,764			234,189
Net charge-offs (recoveries)		-			(9	)		250			(467	)		86			(140	)
Allowance for credit losses on loans to total loans ratio		1.31	%		0.63	%		1.57	%		0.43	%		2.39	%		1.35	%
Nonaccrual Loans to total loans ratio		0.29	%		-			-			-			-			0.09	%
Allowance for credit losses on loans to nonaccrual loans ratio		455.87	%		-			-			-			-			1513.62	%
Net charge-offs (recoveries) to average loans ratio		-			(0.03	)%		0.21	%		(4.06	)%		1.11	%		(0.06	)%

December 31, 2022:
Allowance for loan losses	$	1,018		$	392		$	1,534		$	143		$	251			3,338
Nonaccrual loans		90			-			1,344			-			7			1,441
Total loans		67,512			30,146			122,233			10,497			7,490			237,878
Average loans		63,017			29,739			122,823			11,858			8,364			235,801
Net charge-offs (recoveries)		-			-			(48	)		(15	)		115			52
Allowance for loan losses to total loans ratio		1.51	%		1.30	%		1.25	%		1.36	%		3.35	%		1.40	%
Nonaccrual loans to total loans ratio		0.13	%		-			1.10	%		-			0.09	%		0.61	%
Allowance for loan losses to nonaccrual loans ratio		1131.11	%		-			114.14	%		-			3585.71	%		231.64	%
Net charge-offs (recoveries) to average loans ratio		-			-			(0.04	)%		(0.11	)%		1.39	%		0.02	%

	2023					2022
			% of					% of
			Loans to					Loans to
			Total					Total
December 31,	Amount		Loans			Amount		Loans

Real estate, residential	$	971		30	%	$	1,018		30	%

Real estate, construction		173		5	%		392		12	%

Real estate, nonresidential		1,807		56	%		1,534		46	%

Commercial and industrial (1)		54		2	%		143		4	%

Other		219		7	%		251		8	%

Total	$	3,224		100	%	$	3,338		100	%

Remaining maturity:

3 months or less	$	1,740
Over 3 months through 6 months		2,005
Over 6 months through 12 months		2,186
Over 12 months		1,587

Total	$	7,518

Bay St. Louis Office	408 Highway 90 East, Bay St. Louis, MS 39520
Cedar Lake Office	1740 Popps Ferry Road, Biloxi, MS 39532
Diamondhead Office	5429 West Aloha Drive, Diamondhead, MS 39525
D’Iberville-St. Martin Office	10491 Lemoyne Boulevard, D’Iberville, MS 39540
Downtown Gulfport Office	1105 30th Avenue, Gulfport, MS 39501
Gautier Office	2609 Highway 90, Gautier, MS 39553
Handsboro Office	0412 E. Pass Road, Gulfport, MS 39507
Long Beach Office	298 Jeff Davis Avenue, Long Beach, MS 39560
Ocean Springs Office	2015 Bienville Boulevard, Ocean Springs, MS 39564
Orange Grove Office	12020 Highway 49 North, Gulfport, MS 39503
Pass Christian Office	301 East Second Street, Pass Christian, MS 39571
Saucier Office	17689 Second Street, Saucier, MS 39574
Waveland Office	470 Highway 90, Waveland, MS 39576
West Biloxi Office	2560 Pass Road, Biloxi, MS 39531
Wiggins Office	1312 S. Magnolia Drive, Wiggins, MS 39577

Period	Total Number of of Shares Purchased		Average Price Per Share		Total Dollar Amount of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Dollar Amount of Shares that May Yet Be Purchased Under the Plans or Programs

September 1 - 30, 2023		5,500	$	12.75	$	70,125	$	929,875

November 1 - 30, 2023		11,000	$	12.60	$	208,725	$	791,275

December 1 - 30, 2023		-	$	-	$	208,725	$	-

	For the Year Ended
	December 31, 2023 Compared With December 31, 2022
	Volume			Rate			Rate/Volume			Total
Interest earned on:
Loans	$	(76	)	$	1,899		$	(13	)	$	1,810

Balances due from depository institutions		(132	)		1,972			(640	)		1,200

Held to maturity securities:
Taxable		1,682			863			535			3,080
Non taxable		(37	)		24			(1	)		(14	)

Available for sale securities:
Taxable		(1,322	)		4,845			(755	)		2,768
Non taxable		(26	)		(1	)		-			(27	)
Other		1			91			3			95

Total	$	90		$	9,693		$	(871	)	$	8,912

Interest paid on:
Savings and interest-bearing DDA	$	122		$	3,488		$	261		$	3,871

Time deposits		(191	)		178			(97	)		(110	)

Borrowings from FHLB		175			30			31			236

Total	$	106		$	3,696		$	195		$	3,997

	For the Year Ended
	December 31, 2022 Compared With December 31, 2021
	Volume			Rate			Rate/Volume			Total
Interest earned on:
Loans	$	(1,326	)	$	(147	)	$	16		$	(1,457	)

Balances due from depository institutions		(22	)		439			(104	)		313

Held to maturity securities:
Taxable		998			8			5			1,011
Non taxable		144			(41	)		(6	)		97

Available for sale securities:
Taxable		1,878			1,163			438			3,479
Non taxable		(33	)		-			-			(33	)
Other		-			19			-			19

Total	$	1,639		$	1,441		$	349		$	3,429

Interest paid on:
Savings and interest-bearing DDA	$	155		$	738		$	218		$	1,111

Time deposits		19			46			3			68

Borrowings from FHLB		48			33			68			149

Total	$	222		$	817		$	289		$	1,328

	January 1, 2023
	Pre-Adoption Allowance		Impact of Adoption			Post-Adoption Allowance		Impact of Adoption on Retained Earnings, Net of Tax

Securities held to maturity:
U.S. Treasuries	$	-	$	-		$	-	$	-
States and political subdivisions		-		41			41		(32	)
Total	$	-	$	41		$	41	$	(32	)
Loans:
Real Estate, residential	$	913	$	396		$	1,309	$	(313	)
Real Estate, construction		392		(58	)		334		46
Real Estate, non-residential		1,639		(215	)		1,424		170
Commerical & Industrial		143		(84	)		59		66
Consumer/Other		251		(49	)		202		39
Total	$	3,338	$	(10	)	$	3,328	$	8
Off-balance-sheet credit exposures	$	-	$	72		$	72	$	(57	)

			Gross		Gross
	Amortized		Unrealized		Unrealized			Estimated
December 31, 2023	Cost		Gains		Losses			Fair Value
Available for sale securities:
U.S. Treasuries	$	123,945	$	55	$	(8,542	)	$	115,458

Mortgage-backed securities		52,374		14		(4,603	)		47,785

Collateralized mortgage obligations		101,316		17		(6,327	)		95,006

States and political subdivisions		101,560		-		(20,332	)		81,228
Total available for sale securities	$	379,195	$	86	$	(39,804	)	$	339,477

			Gross		Gross					Allowance			Net
	Amortized		Unrealized		Unrealized			Estimated		for Credit			Carrying
December 31, 2023	Cost		Gains		Losses			Fair Value		Losses			Amount
Held to maturity securities:
U.S. Treasuries	$	59,901	$	41	$	(907	)	$	59,035	$	-		$	59,901

States and political subdivisions		91,040		23		(11,575	)		79,488		(30	)		91,010
Total held to maturity securities	$	150,941	$	64	$	(12,482	)	$	138,523	$	(30	)	$	150,911

	State and political
	subdivisions
Balance, December 31, 2022	$	-
Adjustment for adoption of ASU 2016-13		41
Provision for credit losses		(11	)
Charge-offs of securities		-
Recoveries		-
Balance, December 31, 2023	$	30

	December 31, 2023
Aaa	$	59,901
Aa1/Aa2/Aa3		38,496
A1/A2		3,195
Baa1/Baa2		1,003
Not rated		48,346
Total	$	150,941

	Amortized Cost		Fair Value
Available for sale securities:
Due in one year or less	$	29,771	$	29,712
Due after one year through five years		100,806		91,688
Due after five years through ten years		48,189		39,665
Due after ten years		46,739		35,621
Mortgage-backed securities		52,374		47,785
Collaterized mortgage obligations		101,316		95,006
Total	$	379,195	$	339,477

Held to maturity securities:
Due in one year or less	$	23,312	$	23,133
Due after one year through five years		63,242		60,943
Due after five years through ten years		30,970		27,483
Due after ten years		33,417		26,964
Total	$	150,941	$	138,523

	Less Than Twelve Months				Over Twelve Months				Total
			Gross				Gross				Gross
			Unrealized				Unrealized				Unrealized
Available for Sale	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
December 31, 2023:
U.S. Treasuries	$	24,750	$	22	$	85,660	$	8,520		110,410	$	8,542

Mortgage-backed securities		2,811		20		38,521		4,583		41,332		4,603

Collateralized mortgage obligations		-		-		90,290		6,327		90,290		6,327

States and political subdivisions		-		-		81,088		20,332		81,088		20,332
Total	$	27,561	$	42	$	295,559	$	39,762	$	323,120	$	39,804

	2023			2022
Balance, January 1	$	6,947		$	5,978
Change in directors/officers loans during the year		-			124
New loans and advances		452			1,324
Repayments		(446	)		(479	)

Balance, December 31	$	6,953		$	6,947

													Loans Past
													Due Greater
	Number of Days Past Due												Than 90
					Greater		Total				Total		Days and
	30 - 59		60 - 89		Than 90		Past Due		Current		Loans		Still Accruing
December 31, 2023:
Real estate, residential	$	207	$	540	$	-	$	747	$	73,549	$	74,296	$	-
Real estate, construction		131		-		-		131		27,222		27,353		-
Real estate, nonresidential		58		-		-		58		114,956		115,014		-
Commercial and industrial		21		-		-		21		12,475		12,496		-
Other		75		30		-		105		9,075		9,180		-

Total	$	492	$	570	$	-	$	1,062	$	237,277	$	238,339	$	-
December 31, 2022:
Real estate, residential	$	34	$	49	$	-	$	83	$	67,429	$	67,512	$	-
Real estate, construction		79		2		-		81		30,065		30,146		-
Real estate, nonresidential		-		-		1,101		1,101		121,132		122,233		-
Commercial and industrial		-		-		-		-		10,497		10,497		-
Other		14		-		-		14		7,476		7,490		-

Total	$	127	$	51	$	1,101	$	1,279	$	236,599	$	237,878	$	-

	Term Loans														Revolving
	Amortized Cost Basis by Origination Year														Loans
													Revolving		Converted to
	2023		2022		2021		2020		2019		Prior		Loans		Term Loans		Total
December 31, 2023:
Real Estate, Residential Loans:
A, B, or C	$	11,865	$	17,053	$	12,158	$	4,695	$	5,451	$	17,502	$	4,147	$	401	$	73,272
S		-		-		-		-		-		66		-		-		66
D		-		-		122		-		-		623		-		-		745
E		-		-		-		45		27		141		-		-		213
F		-		-		-		-		-		-		-		-		-
Total Real Estate Residential Loans	$	11,865	$	17,053	$	12,280	$	4,740	$	5,478	$	18,332	$	4,147	$	401	$	74,296

Real Estate, Construction Loans:
A, B, or C	$	1,069	$	2,119	$	2,133	$	1,379	$	38	$	3,966	$	12,827	$	-	$	23,531
S		-		-		-		-		-		-		3,735		-		3,735
D		-		-		-		87		-		-		-		-		87
E		-		-		-		-		-		-		-		-		-
F		-		-		-		-		-		-		-		-		-
Total Real Estate, Construction Loans	$	1,069	$	2,119	$	2,133	$	1,466	$	38	$	3,966	$	16,562	$	-	$	27,353

Real Estate,Nonresidential Loans:
A, B, or C	$	12,387	$	20,951	$	11,056	$	15,008	$	5,497	$	34,330	$	14,959	$	728	$	114,916
S		-		-		-		-		-		-		-		-		-
D		-		-		-		-		-		98		-		-		98
E		-		-		-		-		-		-		-		-		-
F		-		-		-		-		-		-		-		-		-
Total Real Estate, Nonresidential Loans	$	12,387	$	20,951	$	11,056	$	15,008	$	5,497	$	34,428	$	14,959	$	728	$	115,014

Commercial and industrial
A, B, or C	$	850	$	1,008	$	831	$	263	$	2,742	$	39	$	6,763	$	-	$	12,496
S		-		-		-		-		-		-		-		-		-
D		-		-		-		-		-		-		-		-		-
E		-		-		-		-		-		-		-		-		-
F		-		-		-		-		-		-		-		-		-
Total Commercial and Industrial Loans	$	850	$	1,008	$	831	$	263	$	2,742	$	39	$	6,763	$	-	$	12,496

Consumer/Other Loans
A, B, or C	$	5,346	$	1,417	$	841	$	439	$	234	$	304	$	508	$	52	$	9,141
S		-		-		-		-		-		-		-		-		-
D		7		6		-		-		18		3		5		-		39
E		-		-		-		-		-		-		-		-		-
F		-		-		-		-		-		-		-		-		-
Total Consumer/Other Loans	$	5,353	$	1,423	$	841	$	439	$	252	$	307	$	513	$	52	$	9,180

	Loans With A Grade Of:
	A, B or C		S		D		E		F		Total
December 31, 2022:
Real estate, residential	$	66,490	$	77	$	822	$	123	$	-	$	67,512

Real estate, construction		30,115		-		2		29		-		30,146

Real estate, nonresidential		120,423		-		466		1,344		-		122,233

Commercial and industrial		10,497		-		-		-		-		10,497

Other		7,476		-		7		7		-		7,490


Total	$	235,001	$	77	$	1,297	$	1,503	$	-	$	237,878

	CECL						Incurred Loss

	December 31, 2023						December 31, 2022
	Nonaccrual Loans with		Nonaccrual Loans		Total Nonaccrual
	No Allowance		with an Allowance		Loans
Real estate, residential	$	168	$	45	$	213	$	90
Real estate, nonresidential		-		-		-		1,344
Other		-		-		-		7
Total	$	168	$	45	$	213	$	1,441

	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
December 31, 2022:
With no related allowance recorded:
Real estate, residential	$	525	$	500	$	-	$	533	$	25
Real estate, construction		102		29		-		46		7
Real estate, nonresidential		363		243		-		273		-
Other		7		7		-		7		-

Total		997		779		-		859		32

With a related allowance recorded:
Real estate, residential		57		49		40		50		-
Real estate, nonresidential		1,101		1,101		84		1,103		-

Total		1,158		1,150		124		1,153		-

Total by class of loans:
Real estate, residential		525		500		-		533		25
Real estate, construction		159		78		40		96		7
Real estate, nonresidential		1,464		1,344		84		1,376		-
Other		7		7		-		7		-

Total	$	2,155	$	1,929	$	124	$	2,012	$	32

	Real Estate, Residential			Real Estate, Construction			Real Estate, Nonresidential			Commercial and Industrial			Other			Total
December 31, 2023
Allowance for credit losses on loans and leases
Beginning balance	$	1,018		$	392		$	1,535		$	143		$	250		$	3,338
Cumulative effect of change in accounting principle		396			(58	)		(215	)		(84	)		(49	)		(10	)
Charge-offs		-			-			(270	)		-			(197	)		(467	)
Recoveries		-			9			20			467			111			607
Net provision for loan losses		(443	)		(170	)		737			(472	)		104			(244	)
Ending Balance	$	971		$	173		$	1,807		$	54		$	219		$	3,224

Reserve for unfunded lending commitments
Beginning balance	$	-		$	-		$	-		$	-		$	-		$	-
Cumulative effect of change in accounting principle		4			30			5			15			18			72
Provision for losses on unfunded commitments		(2	)		4			-			(5	)		(14	)		(17	)
Ending balance-reserve for unfunded commitments	$	2		$	34		$	5		$	10		$	4		$	55
Total allowance for credit losses on loans and unfunded commitments	$	973		$	207		$	1,812		$	64		$	223		$	3,279

Allowance for credit losses on loans and leases
Individually evaluated	$	40		$	-		$	-		$	-		$	21		$	61
Collectively evaluated		931			173			1,807			54			198			3,163
Total allowance for credit losses on loans:	$	971		$	173		$	1,807		$	54		$	219		$	3,224
Reserve for unfunded lending commitments
Individually evaluated	$	-		$	-		$	-		$	-		$	-		$	-
Collectively evaluated		2			34			5			10			4			55
Reserve for unfunded lending commitments:	$	2		$	34		$	5		$	10		$	4		$	55
Total allowance for credit losses, December 31, 2023	$	973		$	207		$	1,812		$	64		$	223		$	3,279

Loans, December 31, 2023
Individually evaluated	$	958		$	87		$	98		$	-		$	39		$	1,182
Collectively evaluated		73,338			27,266			114,916			12,496			9,141			237,157
Total loans, December 31, 2023	$	74,296		$	27,353		$	115,014		$	12,496		$	9,180		$	238,339

December 31,	Estimated Useful Lives (in years)			2023		2022

Land				$	5,534	$	5,554
Building	5	-	40		35,739		31,891
Furniture, fixtures and equipment	3	-	10		10,474		16,585
Construction-in-progress					573		2,428
Totals, at cost					52,320		56,458
Less: Accumulated depreciation					32,850		37,959
Totals				$	19,470	$	18,499

Years Ended December 31,	2023		2022			2021

Current	$	410	$	15		$	62
Deferred:
Federal		-		1,188			1,482
Change in valuation allowance		1,711		(3,634	)		(1,482	)
Total deferred		1,711		(2,446	)		-
Totals	$	2,121	$	(2,431	)	$	62

						For Capital					To Be Well
	Actual					Adequacy Purposes					Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2022:
Total Capital (to Risk Weighted Assets)	$	101,221		21.18	%	$	38,239		8.00	%	$	47,799		10.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		97,883		20.48	%		21,510		4.50	%		31,069		6.50	%
Tier 1 Capital (to Risk Weighted Assets)		97,883		20.48	%		28,680		6.00	%		38,239		8.00	%
Tier 1 Capital (to Average Assets)		97,883		10.78	%		36,328		4.00	%		45,410		5.00	%

For the Year Ended December 31,	2023			2022

Net Postretirement Benefit Cost	$	(191	)	$	118

January 1,	2023			2022
Equivalent APBO Single Discount Rate		5.20	%		2.80	%
Rate of Increase in Future Compensation Levels		N/A			N/A
Current Pre 65 Health Care Trend Rate		8.64	%		5.50	%
Current Post 64 Health Care Trend Rate-Non Grandfathered		5.32	%		5.50	%
Current Post 64 Health Care Trend Rate-Grandfathered		7.35	%		5.50	%
Ultimate Health Care Trend Rate		4.59	%		4.50	%
Year Ultimate Trend Rate Reached	2042			2026

	Accumulated
	Postretirement
	Benefit			Fair Value of			Funded
Reconciliation of Funded Status	Obligation			Plan Assets			Status
December 31, 2022:	$	(3,121	)	$	-		$	(3,121	)
Service cost		(60	)		-			(60	)
Interest cost		(145	)		-			(145	)
Gains/(Losses)		39			-			39
Benefits paid		118			(118	)		-
Participant contributions		(62	)		62			-
Employer Contributions		-			56			56
December 31, 2023	$	(3,231	)	$	-		$	(3,231	)

							Accumulated Other
	Net			Prior Service			Comprehensive
	Gain/Loss			Cost/(Credit)			Income
December 31, 2022:	$	(1,701	)	$	(537	)	$	(2,238	)
Amortization payment		222			174			396
Liability (Gain)/Loss		(39	)		-			(39	)
December 31, 2023	$	(1,518	)	$	(363	)	$	(1,881	)