What changed in this filing

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Item 1. Business

2022-03-11 compared with 2021-03-12 · 26 added, 64 removed, 169 unchanged (35% of the section changed)

15 unchanged sentences

Revenue from loan interest and fees made up 61.6% of gross revenues in 2021, 60.6% in 2020 and 54.7% in 2019.

Loan demand was stable and loan yields are holding stable considering the affects the COVID-19

pandemic has had on the economy.

A portion of the loan increase is due to PPP loans the Company participated in to help customers affected by the pandemic.

The Company’s primary lending area is East Central and South Mississippi, specifically Neshoba, Newton, Leake, Lamar, Forrest, Scott, Attala, Lauderdale, Oktibbeha, Lafayette, Rankin, Harrison, Jackson, Madison, Winston and Kemper counties and contiguous counties.

Loan demand was stagnant and loan yields compressed due to the low-rate

environment coupled with aggressive loan terms offer by other financial institutions.

The Company’s primary lending area is the entire state of Mississippi and contiguous states.

In 2019, the Company expanded its presence on the Mississippi Gulf Coast through the acquisition of Charter.

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The Company is not dependent upon any single customer or small group of customers, and it has no foreign operations.

The Company’s market area has historically been rural, however, since 2008, the Company has continued to expand into larger metropolitan areas and now serves a number of larger growth areas with Gulfport, population 71,570, Hattiesburg, population 46,251, Biloxi, population 45,568, and Meridian, population 38,602, being the largest markets.

The Company’s market area has historically been rural, however, since 2008, the Company has continued to expand into larger metropolitan areas and now serves a number of larger growth areas with Jackson, population 153,701, Gulfport, population 72,926, Hattiesburg, population 48,730, Biloxi, population 49,449, and Meridian, population 35,052, being the largest markets.

The economy throughout Mississippi is becoming more diverse but agriculture and manufacturing continue to be the largest industries in Mississippi.

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As our footprint expands, the Company’s portfolio risks are more closely aligned with the state economy.

The state economy remains stable after having an increase in unemployment due to the pandemic with unemployment rates slowly improving.

The state economy is expected to remain stable with vaccine distribution occurring currently.

The national economy remains stable as well with certain state’s being affected worse than others.

It is still uncertain how the slowing economies on the local, state and national levels will affect the Company in the future.

The state economy remains stable after having an increase in unemployment due to the pandemic with unemployment rates continuing to slowly improve.

The state economy is expected to remain stable with vaccine distribution occurring in the first and second quarter of 2022, which will lessen restrictions on businesses throughout the state.

The national economy remains stable as well with certain states being affected worse than others.

It is still uncertain how the recovering economies on the local, state and national levels will affect the Company in the future.

The Company continues to invest in technology as we understand it is necessary to compete in today’s market.

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The FRB also has the authority to conduct examinations of the Company and the Bank and to take enforcement action against any bank holding company that engages in any unsafe or unsound practice or that violates certain laws, regulations, or conditions imposed in writing by the FRB.

Financial Reform.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended, (“Dodd- Frank Act”) made extensive changes in the regulation of financial institutions.

There are many provisions in the Dodd-Frank Act mandating regulators to adopt new regulations and conduct studies upon which future regulation may be based, a number of which still have not been implemented.

It is anticipated that these rules and enforcement by the Bank’s regulators will continue to evolve through regulatory amendments, informal interpretations, and enhanced enforcement in the future.

Congress and the President have announced proposed reforms and changes to the Dodd-Frank Act, and it is uncertain how the Dodd- Frank Act provisions may be modified or the ultimate impact any such modifications may have to our business operations.

In November 2017, a bipartisan group of U.S.

Senators, led by Senate Banking Committee Chairman, introduced the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Economic Growth Act”).

The Economic Growth Act, signed into law on May 24, 2019, provides relief from certain regulatory requirements under the Dodd-Frank Act.

Generally, the Economic Growth Act addressed the following areas:

the threshold at which banks are classified as systemically important financial institutions (SIFIs), and therefore subject to stricter oversight;

targeted relief from Dodd-Frank Act requirements for smaller banks;

capital formation;

mortgage lending;

student borrower debt and provisions addressing veterans, consumers and homeowners.

While we expect the Economic Growth Act to have an overall positive impact on our business going forward, we continue to evaluate its impact on our business and that impact remains uncertain.

Capital Standards

1 unchanged sentence

These guidelines are intended to provide a measure of a bank’s capital adequacy that reflects the degree of risk associated with a bank’s operations.

A banking organization’s risk-based capital ratios are obtained by dividing its qualifying capital by its total risk-adjusted assets and off-balance

Since December 31, 1992, the federal banking agencies have required a minimum ratio of qualifying total capital to risk-adjusted assets and off-balance

sheet items of 8%, and a minimum ratio of Tier 1 capital to risk-adjusted assets and off-balance

sheet items of 4%.

At December 31, 2020, the Company’s ratio of qualifying total capital to risk-adjusted assets and off-balance

sheet items was 13.14%, and its ratio of Tier 1 capital to risk-adjusted assets and off-balance

sheet items was 12.55%.

In addition to the risk-based guidelines, federal banking regulators require banking organizations to maintain a minimum amount of Tier 1 capital to total assets, referred to as the leverage ratio.

For a banking organization rated in the highest of the five categories used by regulators to rate banking organizations, the minimum leverage ratio of Tier 1 capital to total assets is 4%.

The Company’s leverage ratio at December 31, 2020 was 7.22%.

The Dodd-Frank Act requires the FRB, the Office of the Comptroller of the Currency (“OCC”) and the FDIC to adopt regulations imposing a continuing “floor” on the risk-based capital requirements.

In December 2010, the Basel Committee released a final framework for a strengthened set of capital requirements, known as “Basel III”.

In July 2013, each of the U.S.

federal banking agencies adopted final rules relevant to us:

(1) the Basel III regulatory capital

and (2) the “standardized approach of Basel II for non-core

banks and bank holding companies, such as the Bank and the Company.

The capital framework under Basel III will replace the existing regulatory capital rules for all banks, savings associations and U.S.

bank holding companies with greater than $500 million in total assets, and all savings and loan holding companies.

Beginning January 1, 2015, the Bank began to comply with the Basel III rules, although the rules were not fully phased-in

until January 1, 2019.

Among other things, the final Basel III rules impact regulatory capital ratios of banking organizations in the following manner:

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

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

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

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

In addition, the Basel III rules will subject a banking organization to certain limitations on capital distributions and discretionary bonus payments to executive officers if the organization does not maintain a capital conservation buffer of common equity Tier 1 capital in an amount greater than 2.5% of its total risk-weighted assets.

The capital conservation buffer increases the minimum common equity Tier 1 capital ratio to 7%, the minimum Tier 1 risk-based capital ratio to 8.5% and the minimum total risk-based capital ratio to 10.5% for banking organizations seeking to avoid the limitations on capital distributions and discretionary bonus payments to executive officers.

The Basel III rules also changed the capital categories for insured depository institutions for purposes of prompt corrective action.

Under the rules, to be well capitalized, an insured depository institution must maintain a minimum common equity Tier 1 capital ratio of at least 6.5%, a Tier 1 risk-based capital ratio of at least 8%, a total risk-based capital ratio of at least 10.0%, and a leverage capital ratio of at least 5%.

In addition, the Basel III rules established more conservative standards for including an instrument in regulatory capital and imposed certain deductions from and adjustments to the measure of common equity Tier 1 capital.

Under those guidelines, assets and off-balance

sheet items are assigned to broad risk categories, each with appropriate weights.

The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance

Under the current risk-based capital adequacy guidelines, we are required to maintain (1) a ratio of common equity Tier 1 capital (“CET1”) to total risk-weighted assets of not less than 4.5%;

(2) a minimum leverage capital ratio of 4%;

(3) a minimum Tier 1 risk-based capital ratio of 6%;

and (4) a minimum total risk-based capital ratio of 8%.

CET1 generally consists of common stock, retained earnings, accumulated other comprehensive income and certain minority interests, less certain adjustments and deductions.

In addition, we must maintain a “capital conservation buffer,” which is a specified amount of CET1 capital in addition to the amount necessary to meet minimum risk-based capital requirements.

The capital conservation buffer is designed to absorb losses during periods of economic stress.

If our ratio of CET1 to risk-weighted capital is below the capital conservation buffer, we will face restrictions on our ability to pay dividends, repurchase our outstanding stock and make certain discretionary bonus payments.

The required capital conservation buffer is 2.5% of CET1 to risk-weighted assets in addition to the amount necessary to meet minimum risk-based capital requirements.

Management believes that, as of December 31, 2021, the Company and the Bank met all capital adequacy requirements under Basel III.

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The CRA requires the assessment by the appropriate regulatory authority of a financial institution’s record in meeting the credit needs of the local community, including low and moderate-income neighborhoods.

The regulations promulgated under CRA emphasize an assessment of actual performance in meeting local credit needs, rather than of the procedures followed by a bank to

evaluate compliance with the CRA.

The regulations promulgated under CRA emphasize an assessment of actual performance in meeting local credit needs, rather than of the procedures followed by a bank to evaluate compliance with the CRA.

CRA compliance is also a factor in evaluations of proposed mergers, acquisitions and applications to open new branches or facilities.

19 unchanged sentences

vote on executive compensation at least every three years and on so-called

“golden parachute”

payments in connection with approvals of mergers and acquisitions.

“golden parachute” payments in connection with approvals of mergers and acquisitions.

The Dodd-Frank Act also authorizes the SEC to promulgate rules that would allow stockholders to nominate their own candidates using a company’s proxy materials.

11 unchanged sentences

The banking business is highly competitive.

The Company’s primary market area is East Central, South and North Mississippi, specifically Neshoba, Newton, Leake, Lamar, Forrest, Scott, Attala, Lauderdale, Oktibbeha, Lafayette, Rankin, Harrison, Jackson, Winston and Kemper counties and contiguous counties.

The Company’s primary market area is the entire state of Mississippi and contiguous states.

In 2019, the Company expanded its presence on the Mississippi Gulf Coast through the acquisition of Charter.

1 unchanged sentence

credit to borrowers who are considered to be low risk, as defined within the Bank’s lending policy.

The Company competes with local, regional and national financial institutions in these counties and in surrounding counties in Mississippi in obtaining deposits, lending activities and providing many types of financial services.

The Company competes with local, regional and national financial institutions throughout the state in obtaining deposits, lending activities and providing many types of financial services.

The Company also competes with larger regional banks for the business of companies located in the Company’s market area.

2 unchanged sentences

financial intermediaries.

Many of these financial institutions have resources

significantly greater than those of the Company.

Many of these financial institutions have resources significantly greater than those of the Company.

In addition, financial intermediaries, such as money-market mutual funds and large retailers, are not subject to the same regulations and laws that govern the operation of traditional depository institutions.

13 unchanged sentences

Current Reports on Form 8-K

and any amendments thereto, along with other information about the Company, are available, free of charge, on our website, http://www.citizensholdingcompany.com.

and any amendments thereto, along with other information about the Company, are available, free of charge, on our website https://www.thecitizensbankphila.com/investor-relations/sec-filings/

The information contained on our website is not incorporated into this report.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business