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Prime Meridian Holding Co - Quarter Report: 2014 March (Form 10-Q)

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

 

For the quarterly period ended

 

        March 31, 2014

or

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

 

For the transition period from

         to        

 

Commission File Number:

 

        333-191801

PRIME MERIDIAN HOLDING COMPANY

 

(Exact Name of registrant as specified in its charter)

 

Florida

 

 

27-2980805                         

 

(State or other jurisdiction of incorporation or organization)

  (I.R.S. Employer Identification Number)    

1897 Capital Circle NE, Second Floor, Tallahassee, Florida

 

 

32308                     

 

(Address of principal executive offices)

  (Zip Code)             

(850) 907-2301

 

(Registrant’s telephone number, including area code)

Not Applicable

 

(Former name, former address and former fiscal year, if changed since last report)

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. þ Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 submit and post such files). þ Yes ¨ No

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

 

Large accelerated filer ¨

  Accelerate filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company þ

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of April 28, 2014: 1,692,201


INDEX

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

     1   

Condensed Consolidated Balance Sheets
March 31, 2014 (unaudited) and December 31, 2013

     2   

Condensed Consolidated Statements of Earning
Three months ended March 31, 2014 and 2013 (unaudited)

     3   

Condensed Consolidated Statement of Comprehensive Income
Three months ended March 31, 2014 and 2013 (unaudited)

     4   

Condensed Consolidated Statements of Stockholders’ Equity
Three months ended March 31, 2014 and 2013 (unaudited)

     5   

Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 2014 and 2013 (unaudited)

     6   

Notes to Condensed Consolidated Financial Statements (unaudited)

     7-22   

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

     23-29   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     29   

Item 4. Controls and Procedures

     29   

PART II – OTHER INFORMATION

  

Item 1. Legal Proceedings

     31   

Item 1A. Risk Factors

     31   

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

     31   

Item 3. Defaults Upon Senior Securities

     31   

Item 4. Mine Safety Disclosures

     31   

Item 5. Other Information

     31   

Item 6. Exhibits

     32   

Signatures

     33   


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

 


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Condensed Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

 

     March 31,
2014
    December 31,
2013
 
     (Unaudited)        

Assets

    

Cash and due from banks

   $ 4,148        5,033   

Federal funds sold

     147        147   

Interest-bearing deposits

     33,369        28,986   
  

 

 

   

 

 

 

Total cash and cash equivalents

     37,664        34,166   

Securities available for sale

     43,861        44,071   

Loans held for sale

     946        150   

Loans, net of allowance for loan losses of $1,775 and $1,734

     125,191        121,220   

Federal Home Loan Bank stock

     186        204   

Premises and equipment, net

     3,750        3,757   

Deferred tax asset

     343        426   

Accrued interest receivable

     535        516   

Bank-owned life insurance

     1,575        1,562   

Capitalized offering costs

     255        218   

Other assets

     215        183   
  

 

 

   

 

 

 

Total assets

   $ 214,521        206,473   
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Liabilities:

    

Noninterest-bearing demand deposits

     59,057        59,011   

Savings, NOW and money-market deposits

     114,120        109,760   

Time deposits

     14,295        14,594   
  

 

 

   

 

 

 

Total deposits

     187,472        183,365   

Other borrowings

     5,733        5,719   

Official checks

     1,735        636   

Other liabilities

     403        392   
  

 

 

   

 

 

 

Total liabilities

     195,343        190,112   
  

 

 

   

 

 

 

Stockholders’ equity:

    

Preferred stock, undesignated; 1,000,000 shares authorized, none issued or outstanding

     0        0   

Common stock, $.01 par value; 9,000,000 shares authorized, 1,691,621 and 1,498,937 issued and outstanding

     17        15   

Additional paid-in capital

     17,335        14,929   

Retained earnings

     1,988        1,732   

Accumulated other comprehensive loss

     (162     (315
  

 

 

   

 

 

 

Total stockholders’ equity

     19,178        16,361   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 214,521        206,473   
  

 

 

   

 

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

2


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Condensed Consolidated Statements of Earnings (Unaudited)

(in thousands, except per share amounts)

 

     Three Months Ended
March 31,
 
         2014              2013      

Interest income:

     

Loans

   $ 1,642         1,362   

Securities

     220         211   

Other

     25         13   
  

 

 

    

 

 

 

Total interest income

     1,887         1,586   
  

 

 

    

 

 

 

Interest expense:

     

Deposits

     158         181   

Other borrowings

     14         14   
  

 

 

    

 

 

 

Total interest expense

     172         195   
  

 

 

    

 

 

 

Net interest income

     1,715         1,391   

Provision for loan losses

     29         184   
  

 

 

    

 

 

 

Net interest income after provision for loan losses

     1,686         1,207   
  

 

 

    

 

 

 

Noninterest income:

     

Service charges and fees on deposit accounts

     41         27   

Gain on sale of loans

     28         229   

Income from bank-owned life insurance

     13         14   

Other income

     47         85   
  

 

 

    

 

 

 

Total noninterest income

     129         355   
  

 

 

    

 

 

 

Noninterest expenses:

     

Salaries and employee benefits

     812         602   

Occupancy and equipment

     188         203   

Professional fees

     86         44   

Advertising

     78         68   

Other

     264         192   
  

 

 

    

 

 

 

Total noninterest expenses

     1,428         1,109   
  

 

 

    

 

 

 

Earnings before income taxes

     387         453   

Income taxes

     131         159   
  

 

 

    

 

 

 

Net earnings

   $ 256         294   
  

 

 

    

 

 

 

Basic earnings per share

   $ 0.17         0.20   
  

 

 

    

 

 

 

Diluted earnings per share

   $ 0.17         0.20   
  

 

 

    

 

 

 

Cash dividends per common share

   $ 0         0   
  

 

 

    

 

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

3


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

 

     Three Months Ended
March 31,
 
     2014      2013  

Net earnings

   $ 256         294   
  

 

 

    

 

 

 

Other comprehensive income (loss):

     

Net change in unrealized (loss) gain

     242         (84

Deferred income taxes (benefit) on above change

     89         (30
  

 

 

    

 

 

 

Total other comprehensive income (loss)

     153         (54
  

 

 

    

 

 

 

Comprehensive income

   $ 409         240   
  

 

 

    

 

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

4


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Condensed Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2014 and 2013

(Dollars in thousands)

 

    

 

 

Common Stock

     Additional
Paid-In
Capital
     Retained
Earnings
     Accumulated
Other
Compre-
hensive
(Loss)
Income
    Total
Stockholders’

Equity
 
     Shares      Amount             

Balance at December 31, 2012

     1,496,106       $ 15         14,896         583         545        16,039   

Net earnings for the three months ended March 31, 2013 (unaudited)

     0         0         0         294         0        294   

Net change in unrealized gain on securities available for sale (unaudited)

     0         0         0         0         (54     (54

Common stock issued as compensation to directors (unaudited)

     618         0         7         0         0        7   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Balance at March 31, 2013 (unaudited)

     1,496,724       $ 15         14,903         877         491        16,286   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Balance at December 31, 2013

     1,498,937       $ 15         14,929         1,732         (315     16,361   

Net earnings for the three months ended March 31, 2014 (unaudited)

     0         0         0         256         0        256   

Net change in unrealized loss on securities available for sale (unaudited)

     0         0         0         0         153        153   

Sale of common stock (unaudited)

     192,122         2         2,400         0         0        2,402   

Common stock issued as compensation to directors (unaudited)

     562         0         6         0         0        6   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Balance at March 31, 2014 (unaudited)

     1,691,621       $ 17         17,335         1,988         (162     19,178   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

5


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

     Three Months
Ended March 31,
 
     2014     2013  

Cash flows from operating activities:

    

Net earnings

   $ 256        294   

Adjustments to reconcile net earnings to net cash provided by operating activities:

    

Depreciation and amortization

     95        86   

Provision for loan losses

     29        184   

Net amortization of deferred loan fees

     (13     (14

Deferred income taxes

     (6     (293

Amortization of premiums, discounts on securities available for sale

     120        115   

Gain on sale of loans held for sale

     (28     (229

Proceeds from the sale of loans held for sale

     539        2,130   

Loan originated as held for sale

     (1,307     (1,901

Stock issued as compensation

     6        7   

Income from bank-owned life insurance

     (13     (14

Net increase in accrued interest receivable

     (19     (36

Net (increase) decrease in other assets and capitalized offering costs

     (69     32   

Net increase in other liabilities and official checks

     1,110        108   
  

 

 

   

 

 

 

Net cash provided by operating activities

     700        469   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Loan originations, net of principal repayments

     (3,987     (13,083

Purchase of securities available for sale

     (1,609     (3,723

Principal repayments of securities available for sale

     1,941        2,188   

Redemption of Federal Home Loan Bank stock

     18        6   

Purchase of premises and equipment

     (88     (17
  

 

 

   

 

 

 

Net cash used in investing activities

     (3,725     (14,629
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Net increase in deposits

     4,107        9,987   

Increase in other borrowings

     14        14   

Proceeds from sale of common stock

     2,402        0   
  

 

 

   

 

 

 

Net cash provided by financing activities

     6,523        10,001   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     3,498        (4,159

Cash and cash equivalents at beginning of period

     34,166        26,498   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 37,664        22,339   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information

    

Cash paid during the period for:

    

Interest

   $ 172        197   
  

 

 

   

 

 

 

Income taxes

   $ 40        0   
  

 

 

   

 

 

 

Noncash transaction-

    

Accumulated other comprehensive (loss) income, net change in unrealized (loss) gain on sale of securities available for sale, net of taxes

   $ 153        (54
  

 

 

   

 

 

 

See Accompanying Notes to Condensed Consolidated Financial Statements.

 

6


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited)

 

(1)

General

Prime Meridian Holding Company (the “Holding Company”) owns 100% of the outstanding common stock of Prime Meridian Bank (the “Bank”) (collectively the “Company”). The Holding Company’s primary activity is the operation of the Bank. The Bank is a state (Florida)-chartered commercial bank. The deposit accounts of the Bank are insured up to the applicable limits by the Federal Deposit Insurance Corporation (“FDIC”). The Bank offers a variety of community banking services to individual and corporate customers through its banking offices located in Tallahassee, Florida.

In the opinion of management, the accompanying condensed consolidated financial statements of the Company contain all adjustments (consisting principally of normal recurring accruals) necessary to present fairly the financial position at March 31, 2014, and the results of operations for the three-month periods ended March 31, 2014 and 2013. The results of operations for the three months ended March 31, 2014, are not necessarily indicative of the results to be expected for the full year.

Comprehensive Income.  Accounting principles generally accepted in the United States of America (“GAAP”) generally require that recognized revenue, expenses, gains and losses be included in net earnings. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the consolidated balance sheet, such items along with net earnings, are components of comprehensive income. The only component of other comprehensive income is the net change in the unrealized gains (loss) on the securities available for sale.

Share-Based Compensation.  The Company expenses the fair value of any stock options granted. The Company recognizes share-based compensation in the statements of earnings as the options vest.

(continued)

 

7


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(1)

General, Continued

Recent Accounting Standards Update.  In January 2014, the FASB issued ASU 2014-04, Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure, which is intended to clarify when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan should be derecognized and the real estate recognized. These amendments clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either: (a) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure; or (b) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additional disclosures are required. The amendments are effective beginning January 1, 2015.

Recent Regulatory Developments

Basel III Rules.  On July 2, 2013, the Federal Reserve Board (“FRB”) approved the final rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks. Under the final rules, minimum requirements will increase for both the quantity and quality of capital held by the Bank. The rules include a new common equity Tier 1 capital to risk-weighted assets ratio of 4.5% and a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets. The final rules also raise the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% and require a minimum leverage ratio of 4.0%. The final rules also implement strict eligibility criteria for regulatory capital instruments. On July 9, 2013, the FDIC also approved, as an interim final rule, the regulatory capital requirements for U.S. banks, following the actions of the FRB. The FDIC’s rule is identical in substance to the final rules issued by the FRB.

The phase-in period for the final rules will begin for the Bank on January 1, 2015, with full compliance with all of the final rule’s requirements phased in over a multi-year schedule. The Bank is currently evaluating the provisions of the final rules and their expected impact on the Bank.

(continued)

 

8


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(2)

Securities Available for Sale

Securities are classified according to management’s intent. The carrying amount of securities and approximate fair values are as follows (in thousands):

 

     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair
Value
 

At March 31, 2014:

          

U.S. Government agency securities

   $ 7,170         8         (259     6,919   

Municipal securities

     9,097         36         (162     8,971   

Mortgage-backed securities

     25,930         267         (155     26,042   

Asset-backed securities

     1,921         8         0        1,929   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 44,118         319         (576     43,861   
  

 

 

    

 

 

    

 

 

   

 

 

 

At December 31, 2013:

          

U.S. Government agency securities

     7,290         8         (329     6,969   

Municipal securities

     9,139         14         (269     8,884   

Mortgage-backed securities

     26,225         253         (198     26,280   

Asset-backed securities

     1,916         22         0        1,938   
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 44,570         297         (796     44,071   
  

 

 

    

 

 

    

 

 

   

 

 

 

Securities with gross unrealized losses at March 31, 2014, aggregated by investment category and length of time that individual securities have been in a continuous loss position, are as follows (in thousands):

 

     Less Than Twelve Months      Over Twelve Months  
     Gross
  Unrealized  
Losses
     Fair
  Value  
     Gross
  Unrealized  
Losses
     Fair
  Value  
 

Securities Available for Sale:

           

U.S. Government agency securities

   $ 222         4,989         37         964   

Municipal securities

     121         2,890         41         779   

Mortgage-backed securities

     73         8,260         82         2,151   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 416         16,139         160         3,894   
  

 

 

    

 

 

    

 

 

    

 

 

 

The unrealized losses at March 31, 2014 on twenty-two securities were caused by market conditions. It is expected that the securities would not be settled at a price less than the par value of the investments. Because the decline in fair value is attributable to market conditions and not credit quality, and because the Company has the ability and intent to hold these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

(continued)

 

9


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(2)

Securities Available for Sale, Continued

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Securities available for sale measured at fair value on a recurring basis are summarized below (in thousands):

 

            Fair Value Measurements Using  
     Fair
Value
     Quoted Prices
In Active
Markets for
Identical
Assets
(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 

At March 31, 2014:

           

U.S. Government agency securities

   $ 6,919         0         6,919         0   

Municipal securities

     8,971         0         8,971         0   

Mortgage-backed securities

     26,042         0         26,042         0   

Asset-backed securities

     1,929         0         1,929         0   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 43,861         0         43,861         0   
  

 

 

    

 

 

    

 

 

    

 

 

 

At December 31, 2013:

           

U.S. Government agency securities

     6,969         0         6,969         0   

Municipal securities

     8,884         0         8,884         0   

Mortgage-backed securities

     26,280         0         26,280         0   

Asset-backed securities

     1,938         0         1,938         0   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 44,071         0         44,071         0   
  

 

 

    

 

 

    

 

 

    

 

 

 

During the three months ended March 31, 2014 and the year ended December 31, 2013, no securities were transferred in or out of Level 1, Level 2 or Level 3.

(continued)

 

10


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(2)

Securities Available for Sale, Continued

The scheduled maturities of securities are as follows (in thousands):

 

     Amortized
Cost
     Fair
Value
 

At March 31, 2014:

     

Due in less than one year

   $ 1,000         1,001   

Due in one to five years

     534         538   

Due five to ten years

     7,590         7,379   

Due after ten years

     7,143         6,972   

Mortgage-backed securities

     25,930         26,042   

Asset-backed securities

     1,921         1,929   
  

 

 

    

 

 

 
   $ 44,118         43,861   
  

 

 

    

 

 

 

 

(3)

Loans

The segments of loans are as follows (in thousands):

 

     At March 31,
2014
    At December 31,
2013
 

Real estate mortgage loans:

    

Commercial

   $ 45,831        44,796   

Residential and home equity

     41,134        38,571   

Construction

     11,909        12,933   
  

 

 

   

 

 

 

Total real estate mortgage loans

     98,874        96,300   

Commercial loans

     26,188        24,651   

Consumer and other loans

     1,960        2,072   
  

 

 

   

 

 

 

Total loans

     127,022        123,023   

Less:

    

Net deferred loan fees

     (56     (69

Allowance for loan losses

     (1,775     (1,734
  

 

 

   

 

 

 

Loans, net

   $ 125,191        121,220   
  

 

 

   

 

 

 

(continued)

 

11


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(3)

Loans, Continued

An analysis of the change in the allowance for loan losses follows (in thousands):

 

          Real Estate Mortgage Loans           Consumer
and
Other
Loans
       
          Commercial      Residential
and Home
Equity
     Construction     Commercial
Loans
      Total  

Three-Month Period Ended March 31, 2014:

                 

Beginning balance

      $ 604         545         175        387        23        1,734   

Provision (credit) for loan losses

        13         30         (15     2        (1     29   

Net (charge-offs) recoveries

        0         0         0        12        0        12   
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

      $ 617         575         160        401        22        1,775   
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Three-Month Period Ended March 31, 2013:

                 

Beginning balance

        352         226         237        405        23        1,243   

Provision (credit) for loan losses

        175         251         (118     (108     (16     184   

Net (charge-offs) recoveries

        0         0         0        0        9        9   
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

      $ 527         477         119        297        16        1,436   
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

At March 31, 2014:

                 

Individually evaluated for impairment:

                 

Recorded investment

      $ 1,403         36         0        217        0        1,656   
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance in allowance for loan losses

      $ 0         22         0        75        0        97   
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Collectively evaluated for impairment:

                 

Recorded investment

      $ 44,428         41,098         11,909        25,971        1,960        125,366   
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance in allowance for loan losses

      $ 617         553         160        326        22        1,678   
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

At December 31, 2013:

                 

Individually evaluated for impairment:

                 

Recorded investment

      $ 0         36         0        346        0        382   
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance in allowance for loan losses

      $ 0         23         0        82        0        105   
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Collectively evaluated for impairment:

                 

Recorded investment

      $ 44,796         38,535         12,933        24,305        2,072        122,641   
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance in allowance for loan losses

      $ 604         522         175        305        23        1,629   
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

(continued)

 

12


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(3)

Loans, Continued

The Company has divided the loan portfolio into three portfolio segments and five portfolio classes, each with different risk characteristics and methodologies for assessing risk. All loans are underwritten based upon standards set forth in the policies approved by the Company’s Board of Directors. The portfolio segments and classes are identified by the Company as follows:

Real Estate Mortgage Loans.  Real estate mortgage loans are typically divided into three classes: Commercial, residential and home equity and construction loans. The real estate mortgage loans are as follows:

Commercial Real Estate Loans.  Loans of this type are typically our more complex loans. This category of real estate loans is comprised of loans secured by mortgages on commercial property that is typically owner-occupied, but also includes nonowner occupied investment properties. Commercial loans that are secured by owner-occupied commercial real estate are repaid through operating cash flows of the borrower. The maturity for this type of loan is generally limited to three to five years; however, payments may be structured on a longer amortization basis. Typically, interest rates on our commercial real estate loans are fixed for five years or less after which they adjust based upon a predetermined spread over an index. At times, a rate may be fixed for longer than five years. As part of our credit underwriting standards, the Bank typically requires personal guarantees from the principal owners of the business supported by a review of the principal owners’ personal financial statements and tax returns. As part of the enterprise risk management process, it is understood that risks associated with commercial real estate loans include fluctuations in real estate values, the overall strength of the borrower, the overall strength of the economy, new job creation trends, tenant vacancy rates, environmental contamination, and the quality of the borrowers’ management. In order to mitigate and limit these risks, we analyze the borrowers’ cash flow and evaluate collateral value. Currently, the collateral securing our commercial real estate loans include a variety of property types, such as office, warehouse, and retail facilities. Other types include multifamily properties, hotels, mixed-use residential, and commercial properties. Generally, commercial real estate loans present a higher risk profile than our consumer real estate loans portfolio.

Residential Real Estate Loans.  We offer first and second one-to-four family mortgage loans and home equity lines of credit; the collateral for these loans is generally on the clients’ owner-occupied residences. Although these types of loans present lower levels of risk than commercial real estate loans, risks do still exist because of possible fluctuations in the value of the real estate collateral securing the loan, as well as changes in the borrowers’ financial condition. Borrowers may be affected by numerous factors, including job loss, illness, or other personal hardship. As part of our product mix, the Bank offers both portfolio and secondary market mortgages; portfolio loans generally are based on a 1-year, 3-year or 5-year adjustable rate mortgage; while 15-year or 30-year fixed-rate loans are sold to the secondary market.

(continued)

 

13


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(3)

Loans, Continued

Construction Loans.  Typically, these loans have a term of one to two years and the interest is paid monthly. This portion of our loan portfolio includes loans to small and midsized businesses to construct owner-user properties, loans to developers of commercial real estate investment properties, and residential developments. This type of loan is also made to individual clients for construction of single family homes in our market area. An independent appraisal is used to determine the value of the collateral and confirm that the ratio of the loan principal to the value of the collateral will not exceed policies of the Bank. As the construction project progresses, loan proceeds are requested by the borrower to complete phases of construction and funding is only disbursed after the project has been inspected by a third-party inspector or experienced construction lender. Risks associated with construction loans include fluctuations in the value of real estate, project completion risk, and changes in market trends. The ability of the construction loan borrower to finance the loan or sell the property upon completion of the project is another risk factor that also may be affected by changes in market trends since the initial funding of the loan.

Commercial Loans. The Bank offers a wide range of commercial loans, including business term loans, equipment financing, and lines of credit to small and midsized businesses. Small-to-medium sized businesses, retail, and professional establishments, make up our target market for commercial loans. Our Relationship Managers primarily underwrite these loans based on the borrower’s ability to service the loan from cash flow. Lines of credit and loans secured by accounts receivable and/or inventory are monitored periodically by our staff. Loans secured by “all business assets,” or a “blanket lien” are typically only made to highly qualified borrowers due to the nonspecific nature of the collateral. Valuation of business collateral is generally supported by an appraisal, purchase order, or third party physical inspection. Personal guarantees of the principals of business borrowers are usually required.

Equipment loans generally have a term of five years or less and may have a fixed or variable rate; we use conservative margins when pricing these loans. Working capital loans generally do not exceed one year and typically, they are secured by accounts receivable, inventory, and personal guarantees of the principals of the business. Significant factors affecting a commercial borrower’s creditworthiness include the quality of management and the ability both to evaluate changes in the supply and demand characteristics affecting the business’ markets for products and services and to respond effectively to such changes. These loans may be made unsecured or secured, but most are made on a secured basis. Risks associated with our commercial loan portfolio include local, regional, and national market conditions. Other factors of risk could include changes in the borrower’s management and fluctuations in collateral value. Additionally, there may be refinancing risk if a commercial loan includes a balloon payment which must be refinanced or paid off at loan maturity.

In reference to our risk management process, our commercial loan portfolio presents a higher risk profile than our consumer real estate and consumer loan portfolios. Therefore, we require that all loans to businesses must have a clearly stated and reasonable payment plan to allow for timely retirement of debt, unless secured by liquid collateral or as otherwise justified.

(continued)

 

14


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(3)

Loans, Continued

Consumer Loans and Other.  These loans are made for various consumer purposes, such as the financing of automobiles, boats, and recreational vehicles. The payment structure of these loans is normally on an installment basis. The risk associated with this category of loans stems from the reduced collateral value for a defaulted loan; the collateral may not provide an adequate source of repayment of the principal. The underwriting on these loans is primarily based on the borrower’s financial condition. In many cases, these are unsecured credits that subject us to risk when the borrower’s financial condition declines or deteriorates. Based upon our current trend in consumer loans, management does not anticipate consumer loans will become a substantial component of our loan portfolio at any time in the foreseeable future. Consumer loans are made at fixed- and variable-interest rates and are based on the appropriate amortization for the asset and purpose.

The following summarizes the loan credit quality (in thousands):

 

     Pass      Special
Mentioned
     Substandard      Doubtful      Loss      Total  

At March 31, 2014:

                 

Real estate mortgage loans:

                 

Commercial

   $ 41,964         393         3,474         0         0         45,831   

Residential and home equity

     38,628         1,777         729         0         0         41,134   

Construction

     11,901         0         8         0         0         11,909   

Commercial loans

     24,994         477         717         0         0         26,188   

Consumer and other loans

     1,925         35         0         0         0         1,960   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 119,412         2,682         4,928         0         0         127,022   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

At December 31, 2013:

                 

Real estate mortgage loans:

                 

Commercial

     40,901         1,804         2,091         0         0         44,796   

Residential and home equity

     36,461         1,346         764         0         0         38,571   

Construction

     12,528         396         9         0         0         12,933   

Commercial loans

     23,919         509         223         0         0         24,651   

Consumer and other loans

     1,914         38         120         0         0         2,072   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 115,723         4,093         3,207         0         0         123,023   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Loans excluded from the review process above are generally classified as pass credits until: (a) they become past due; (b) management becomes aware of a deterioration in the credit worthiness of the borrower; or (c) the customer contacts the Company for a modification. In these circumstances, the loan is specifically evaluated for potential classification as to special mention, substandard or even charged-off. The Company uses the following definitions for risk ratings:

Pass – A Pass loan’s primary source of loan repayment is satisfactory, with secondary sources very likely to be realized if necessary.

(continued)

 

15


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(3)

Loans, Continued

Special Mention – A Special Mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or the Company’s credit position at some future date. Special Mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

Substandard – A Substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful – A loan classified Doubtful has all the weaknesses inherent in one classified Substandard with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss – A loan classified Loss is considered uncollectible and of such little value that continuance as a bankable asset is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future.

(continued)

 

16


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(3)

Loans, Continued

Age analysis of past-due loans is as follows (in thousands):

 

     Accruing Loans                
     30-59
Days
Past Due
     60-89
Days
Past Due
     Greater
Than 90
Days
Past Due
     Total
Past
Due
     Current      Nonaccrual
Loans
     Total
Loans
 

At March 31, 2014:

                    

Real estate mortgage loans:

                    

Commercial

   $ 0         0         0         0         44,428         1,403         45,831   

Residential and home equity

     0         0         0         0         41,134         0         41,134   

Construction

     0         0         0         0         11,909         0         11,909   

Commercial loans

     33         0         0         33         26,155         0         26,188   

Consumer and other loans

     8         0         0         8         1,952         0         1,960   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 41         0         0         41         125,578         1,403         127,022   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

At December 31, 2013:

                    

Real estate mortgage loans:

                    

Commercial

     0         0         0         0         44,796         0         44,796   

Residential and home equity

     0         0         0         0         38,571         0         38,571   

Construction

     0         0         0         0         12,933         0         12,933   

Commercial loans

     38         0         0         38         24,613         0         24,651   

Consumer and other loans

     0         0         0         0         2,072         0         2,072   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 38         0         0         38         122,985         0         123,023   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following summarizes the amount of impaired loans (in thousands):

 

     With No Related
Allowance Recorded
     With an Allowance Recorded      Total  
     Recorded
Investment
     Unpaid
Contractual
Principal
Balance
     Recorded
Investment
     Unpaid
Contractual
Principal
Balance
     Related
Allowance
     Recorded
Investment
     Unpaid
Contractual
Principal
Balance
     Related
Allowance
 

At March 31, 2014:

                       

Commercial real estate

   $ 1,403         1,403         0         0         0         1,403         1,403         0   

Residential and home equity

     0         0         35         35         23         35         35         23   

Commercial loans

     56         56         162         162         74         218         218         74   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,459         1,459         197         197         97         1,656         1,656         97   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

At December 31, 2013:

                       

Residential and home equity

     0         0         36         36         23         36         36         23   

Commercial loans

     27         27         319         319         82         346         346         82   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 27         27         355         355         105         382         382         105   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

(continued)

 

17


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(3)

Loans, Continued

The average net investment in impaired loans and interest income recognized and received on impaired loans are as follows (in thousands):

 

     Three Months Ended March 31,  
     2014      2013  
     Average
Recorded
Investment
     Interest
Income
Recognized
     Interest
Income
Received
     Average
Recorded
Investment
     Interest
Income
Recognized
     Interest
Income
Received
 

Commercial real estate

   $ 140         0         0         0         0         0   

Residential and home equity

     35         0         0         266         0         0   

Construction

     0         0         0         0         0         0   

Commercial loans

     220         4         4         0         0         0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 395         4         4         266         0         0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

There were no loans measured at fair value on a nonrecurring basis at March 31, 2014 and December 31, 2013.

There were no loans determined to be troubled debt restructuring (“TDR”) entered into during the three months ended March 31, 2013. The following is a summary of loans determined to be TDR’s entered into during the three months ended March 31, 2014:

 

     Number
of
Contracts
     Pre-
Modification
Outstanding
Recorded
Investment
     Post-
Modification
Outstanding
Recorded
Investment
 

Residential and home equity:

        

Modified interest rates

     0       $ 0         0   

Modified payment schedule for six months

     1         35         35   

Commercial:

        

Modified interest rates

     0         0         0   

Modified payment schedule for six months

     1         122         122   
  

 

 

    

 

 

    

 

 

 

Total

     2       $ 157         157   
  

 

 

    

 

 

    

 

 

 

The allowance for loan losses on all loans that have been restructured and are considered TDR’s is included in the Bank’s specific reserve. The specific reserve is determined on a loan by loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral if the loan is collateral-dependent. TDR’s that have subsequently defaulted are considered collateral-dependent. There were no TDR’s that subsequently defaulted during the three months ended March 31, 2014, which were restructured during the same period.

(continued)

 

18


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(4)

Regulatory Capital

Banks are required to maintain certain minimum regulatory capital requirements. The Bank is considered to be well-capitalized. The following is a summary at March 31, 2014 of the regulatory capital requirements and the Bank’s capital on a percentage basis:

 

     Bank     Regulatory
Requirement
 

Tier I capital to total average assets

     8.68     6.00

Tier I capital to risk-weighted assets

     13.67     8.00

Total capital to risk-weighted assets

     14.92     10.00

 

(5)

Earnings Per Share

Earnings per share has been computed on the basis of the weighted-average number of shares of common stock outstanding. Basic earnings per share has been computed on the basis of the weighted-average number of shares of common stock outstanding during the period. Outstanding stock options are considered dilutive securities for purposes of calculating diluted EPS which was computed using the treasury stock method. (dollars in thousands, except per share amounts):

 

     2014      2013  
     Earnings      Weighted-
Average
Shares
     Per
Share
Amount
     Loss      Weighted-
Average
Shares
     Per
Share
Amount
 

Three Months Ended March 31:

                 

Basic EPS:

                 

Net earnings

   $ 256         1,534,868       $ 0.17       $ 294         1,496,621       $ 0.20   

Effect of dilutive securities-Incremental shares from assumed conversion of options

        5,149               2,121      
     

 

 

          

 

 

    

Diluted EPS:

                 

Net earnings

   $ 256         1,540,017       $ 0.17       $ 294         1,498,742       $ 0.20   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(6)

Stock-Based Compensation

The 2007 Stock Option Plan provides for certain key employees and directors of the Company to have the option to purchase shares of the Company’s common stock. Under this Plan, the total number of shares which may be issued is 152,905. All options granted will have six to ten-year terms and vest over periods up to five years. As of March 31, 2014, there were 18,905 shares available for grant.

(continued)

 

19


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(6)

Stock-Based Compensation, Continued

A summary of the activity in the Company’s Stock Option Plan is as follows:

 

     Number of
Options
    Weighted-
Average
Exercise
Price
    Weighted-
Average
Remaining
Contractual
Term
     Aggregate
Intrinsic
Value
 

Outstanding at December 31, 2012

     136,000      $ 10.00        

Options granted

     2,500        10.00        

Options forfeited

     (1,000     (10.00     
  

 

 

        

Outstanding at March 31, 2013

     137,500      $ 10.00        
  

 

 

   

 

 

      

Outstanding at December 31, 2013

     134,000      $ 10.01        
  

 

 

   

 

 

      

Outstanding at March 31, 2014

     134,000      $ 10.01        4.9 years      
  

 

 

   

 

 

   

 

 

    

Exercisable at March 31, 2014

     130,700      $ 10.00        4.8 years       $ 327,000   
  

 

 

   

 

 

   

 

 

    

 

 

 

At March 31, 2014, there was $4,000 of total unrecognized compensation expense related to nonvested share-based compensation arrangements granted under the plans. The cost is expected to be recognized over a weighted-average period of twenty-nine months. The total fair value of shares vesting and recognized as compensation expense was $0 and $0 for the three months ended March 31, 2014 and 2013, respectively. There was no associated income tax benefit recognized for the periods ending March 31, 2014 and March 31, 2013.

The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

 

     Three Months
Ended
March 31,
 
     2013  

Weighted-average risk-free interest rate

     1.13

Expected dividend yield

     0   

Expected stock volatility

     11.24

Expected life in years

     6.5   

Per share fair value of options issued during the year

   $ 1.17   
  

 

 

 

(continued)

 

20


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(6)

Stock-Based Compensation, Continued

The Company used the guidance in Staff Accounting Bulletin No. 107 to determine the estimated life of options issued. Expected volatility is based on volatility of similar companies’ common stock. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is based on the Company’s history and expectation of dividend payouts.

 

(7)

Fair Value of Financial Instruments

The estimated fair values and fair value measurement method with respect to the Company’s financial instruments were as follows (in thousands):

 

     At March 31, 2014      At December 31, 2013  
     Carrying
Amount
     Fair
Value
     Level      Carrying
Amount
     Fair
Value
     Level  

Financial assets:

                 

Cash and cash equivalents

   $ 37,664         37,664         1         34,166         34,166         1   

Securities available for sale

     43,861         43,861         2         44,071         44,071         2   

Loans held for sale

     946         946         3         150         150         3   

Loans, net

     125,191         123,268         3         121,220         121,964         3   

Federal Home Loan Bank stock

     186         186         3         204         204         3   

Accrued interest receivable

     535         535         3         516         516         3   

Financial liabilities:

                 

Deposits

     187,472         187,529         3         183,365         183,295         3   

Other borrowings

     5,733         5,733         3         5,719         5,719         3   

Discussion regarding the assumptions used to compute the estimated fair values of financial instruments can be found in Note 1 to the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2013.

 

(8)

Off-Balance-Sheet Financial Instruments

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments are commitments to extend credit, construction loans in process, unused lines of credit and standby letters of credit and may involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the consolidated balance sheets. The contract amounts of these instruments reflect the extent of involvement the Company has in these financial instruments.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for available lines of credit, construction loans in process and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.

(continued)

 

21


PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 

(8)

Off-Balance-Sheet Financial Instruments, Continued

Commitments to extend credit and unused lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company upon extension of credit is based on management’s credit evaluation of the counterparty.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These letters of credit are primarily issued to support third-party borrowing arrangements and generally have expiration dates within one year of issuance. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

Standby letters of credit and commitments to extend credit typically result in loans with a market interest rate when funded. A summary of the contractual amounts of the Company’s financial instruments with off-balance-sheet risk at March 31, 2014 are as follows (in thousands):

 

Commitments to extend credit

   $ 6,891   
  

 

 

 

Construction loans in process

   $ 6,426   
  

 

 

 

Unused lines of credit

   $ 22,323   
  

 

 

 

Standby letters of credit

   $ 1,031   
  

 

 

 

 

(9)

Common Stock Offering

The Company filed a Registration Statement with the Securities and Exchange Commission which was effective on December 11, 2013. The Company is offering up to 1,200,000 shares of common stock for $12.50 per share. The Registration Statement has been extended to June 30, 2014. As of March 31, 2014, the Company has sold 192,122 shares of common stock for proceeds of $2.4 million.

 

 

22


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

Management’s discussion and analysis is presented to aid the reader in understanding and evaluating the financial condition and results of operations of Prime Meridian Holding Company, and its wholly-owned subsidiary, Prime Meridian Bank. This discussion and analysis should be read with the condensed consolidated financial statements, the footnotes thereto, and the other financial data included in this report and in our annual report on Form 10-K for the year ended December 31, 2013. Results of operations for the three month period ended March 31, 2014 are not necessarily indicative of results that may be attained for any other period. The following discussion and analysis presents our financial condition and results of operations on a consolidated basis, however, because we conduct all of our material business operations through the Bank, the discussion and analysis relates to activities primarily conducted at the subsidiary level.

Certain information in this report may include “forward-looking statements” as defined by federal securities law. Words such as “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “project,” “is confident that,” and similar expressions are intended to identify these forward-looking statements. These forward-looking statements involve risk and uncertainty and a variety of factors could cause our actual results and experience to differ materially from the anticipated results or other expectations expressed in these forward-looking statements. We do not have a policy of updating or revising forward-looking statements except as otherwise required by law, and silence by management over time should not be construed to mean that actual events are occurring as estimated in such forward-looking statements.

Our ability to predict results or the effect of future plans or strategies is inherently uncertain. Factors that could have a material adverse effect on our and our subsidiary’s operations include, but are not limited to, changes in:

 

   

local, regional, and national economic and business conditions;

   

banking laws, compliance, and the regulatory environment;

   

U.S. and global securities markets, public debt markets, and other capital markets;

   

monetary and fiscal policies of the U.S. Government;

   

litigation, tax, and other regulatory matters;

   

demand for banking services, both loan and deposit products in our market area;

   

quality and composition of our loan or investment portfolios;

   

risks inherent in making loans such as repayment risk and fluctuating collateral values;

   

competition;

   

attraction and retention of key personnel, including our management team and directors;

   

technology, product delivery channels, and end user demands and acceptance of new products;

   

consumer spending, borrowing and savings habits;

   

any failure or breach of our operational systems, information systems or infrastructure, or those of our third party vendors and other service providers, including cyber-attacks;

   

application and interpretation of accounting principles and guidelines;

   

natural disasters, public unrest, adverse weather, public health and other conditions impacting our or our clients’ operations; and

   

other economic, competitive, governmental, regulatory, or technological factors affecting us.

General

Prime Meridian Holding Company (“PMHC” or the “Company”) was incorporated as a Florida corporation on May 25, 2010, and is the one-bank holding company for, and sole shareholder of, Prime Meridian Bank (the “Bank”). The Bank opened for business on February 4, 2008, and was acquired by the Company on September 16, 2010. PMHC has no significant operations other than owning the stock of the Bank.

As a one bank holding company, we generate most of our revenue from interest on loans and investments. Our primary source of funding for our loans is deposits. Our largest expenses are interest on those deposits and salaries and employee benefits. We measure our performance through our net interest margin, return on average assets, and return on average equity, while maintaining appropriate regulatory leverage and risk-based capital ratios.

 

23


Financial Condition

As of March 31, 2014, the Company has grown to $214.5 million in total assets, $187.5 million in deposits, and $125.2 million in portfolio net loans. This compares to $206.5 million in total assets, $183.4 million in deposits, and $121.2 million in portfolio net loans, as of December 31, 2013. We attribute our successful growth to a combination of factors including our relationship banking model, our proactive marketing efforts in the community, and our investment in our operations and systems.

The following table shows selected information for the periods ended or at the dates indicated:

 

     At or for the
     Three Months
Ended
March 31, 2014
  Year
Ended
December 31, 2013
  Three Months
Ended
March 31, 2013

Average equity as a percentage of average assets

   7.71%   8.79%   9.20%

Equity to total assets at end of period

   8.94%   7.92%   9.06%

Return on average assets(1)

   0.47%   0.62%   0.67%

Return on average equity(1)

   6.15%   7.08%   7.28%

Noninterest expenses to average assets(1)

   2.64%   2.63%   2.53%

Nonperforming loans to total loans at end of period

   1.10%   0.00%   0.25%

 

(1) 

Annualized for the three months ended March 31, 2014 and March 31, 2013.

Results of Operations

Net interest income constitutes the principal source of income for the Bank and results from the excess of interest income on interest-earning assets over interest expense on interest-bearing liabilities. The principal interest-earning assets are investment securities and loans receivable. Interest-bearing liabilities primarily consist of time deposits, interest-bearing checking accounts, savings deposits, money-market accounts, and other borrowings. Funds attracted by these interest-bearing liabilities are invested in interest-earning assets. Accordingly, net interest income depends upon the volume of average interest-earning assets and average interest-bearing liabilities and the interest rates earned or paid on these assets and liabilities.

The following table sets forth information regarding: (i) the total dollar amount of interest and dividend income of the Bank from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average costs; (iii) net interest income; (iv) interest rate spread; (v) net interest margin; and (vi) weighted average yields and rates. Yields and costs were derived by dividing annualized income or expense by the average balance of assets or liabilities. The yields and costs depicted in the table include the amortization of fees, which are considered to constitute adjustments to yields (dollars in thousands). As shown in the table, the decrease in yield on interest-earning assets has been partially offset by lower rates on interest-bearing liabilities and a higher ratio of interest-earning assets to interest-bearing liabilities.

 

24


     Three Months Ended March 31,  
     2014     2013  
     Average
Balance
    Interest
and
Dividends
     Average
Yield/
Rate
    Average
Balance
    Interest
and
Dividends
     Average
Yield/
Rate
 

Interest-earning assets:

              

Loans(1)

   $ 124,242      $ 1,642         5.36   $ 101,099      $ 1,362         5.46

Securities

     43,673        220         2.14        44,570        211         1.98   

Other (2)

     40,429        25         0.25        21,662        13         0.25   
  

 

 

   

 

 

      

 

 

   

 

 

    

Total interest-earning assets

     208,344      $ 1,887         3.70        167,331      $ 1,586         3.86   
    

 

 

    

 

 

     

 

 

    

 

 

 

Noninterest-earning assets

     7,724             8,289        
  

 

 

        

 

 

      

Total assets

   $ 216,068           $ 175,620        
  

 

 

        

 

 

      

Interest-bearing liabilities:

              

Savings, NOW and money-market deposits

   $ 116,216        135         0.47      $ 103,537        146         0.57   

Time deposits <$100,000

     3,674        5         0.52        3,372        7         0.78   

Time deposits >$100,000

     10,723        18         0.67        13,035        28         0.85   
  

 

 

   

 

 

      

 

 

   

 

 

    

Deposits

     130,613        158         0.49        119,944        181         0.61   

Other borrowings

     5,724        14         1.00        5,765        14         1.00   
  

 

 

   

 

 

      

 

 

   

 

 

    

Total interest-bearing liabilities

     136,337        172         0.51        125,709        195         0.63   
    

 

 

    

 

 

     

 

 

    

 

 

 

Noninterest-bearing deposits

     62,834             33,211        

Noninterest-bearing liabilities

     240             548        

Stockholders’ equity

     16,657             16,152        
  

 

 

        

 

 

      

Total liabilities and stockholders’ equity

   $ 216,068           $ 175,620        
  

 

 

        

 

 

      

Net interest income

     $ 1,715           $ 1,391      
    

 

 

        

 

 

    

Interest rate spread

          3.18          3.24
       

 

 

        

 

 

 

Net interest margin (3)

          3.36          3.39
       

 

 

        

 

 

 

Ratio of average interest-earning assets to average interest-bearing liabilities

     152.82          133.11     
  

 

 

        

 

 

      

 

(1) 

Includes loans held for sale.

(2) 

Other interest-earning assets included Federal funds sold and Federal Home Loan Bank stock.

(3) 

Net interest margin is net interest income divided by total interest-earning assets, annualized.

Comparison of the Three Months Ended March 31, 2014 and March 31, 2013

Net earnings for the three months ended March 31, 2014, were $256,000 or $0.17 per basic and diluted share compared to net earnings of $294,000, or $0.20 per basic and diluted share in the first three months of 2013. The $38,000 decrease in net earnings was driven primarily by a $229,000 gain on sale of loans that was realized in the first quarter of 2013 compared to a $28,000 gain on sale of loans recorded in the first quarter of 2014. The decrease in gain on sale of loans was partially offset by a 20.6%, or $280,000, increase in loan interest income and an 11.8%, or $23,000, decrease in total interest expense when comparing the first quarter of 2014 to the same period a year ago.

Net Interest Income

Our operating results depend primarily on our net interest income, which is the difference between interest and dividend income on interest-earning assets such as loans and investments, and interest expense on interest-bearing liabilities such as deposits and borrowings. Net interest income was $1.7 million for the three months ended March 31, 2014, compared to $1.4 million for the same period in 2013.

 

25


Interest Income. Despite generally lower yields on loans since 2011, interest income increased to $1.9 million for the three months ended March 31, 2014, compared to $1.6 million for the first quarter of 2013. The increase was driven by an increase in average loans from $101.1 million at March 31, 2013, to $124.2 million at March 31, 2014. Also contributing to the increase in total interest income was a $9,000 increase in investment interest income and a $12,000 increase in other interest income when comparing the three months ended March 31, 2014 to the same period in 2013.

Interest Expense. Interest expense decreased to $172,000 for the three months ended March 31, 2014, compared to $195,000 for the three months ended March 31, 2013. The decrease in interest expense in the first quarter of 2014 was due to a lower interest rate environment and a shift from interest-bearing to noninterest-bearing deposits. During 2014 and 2013, the Bank aggressively managed interest paid on deposits, decreasing the average rate paid on deposits from 0.63% in the first quarter of 2013 to 0.51% in the first quarter of 2014. Furthermore, the average balance of noninterest-bearing deposits to the average balance of deposits increased from 21.7% at March 31, 2013 to 32.5% at March 31, 2014.

Despite the combination of higher interest-earning asset balances, a shift in deposit mix to noninterest-bearing deposits, and decreases in deposit funding costs, the lower average yield on interest earning assets resulted in a slight decline in the Bank’s net interest margin from 3.39% for the three months ended March 31, 2013, to 3.36% for the same period in 2014.

Provision for Loan Losses. The provision for loan losses is charged to earnings to increase the total loan loss allowance to a level deemed appropriate by management. The provision is based upon the volume and type of lending conducted by the Bank, industry standards, general economic conditions, particularly as they relate to our market area, and other factors related to the collectability of the loan portfolio. The provisions for loan losses for the three months ended March 31, 2014 and 2013 were $29,000 and $184,000, respectively. Management believes that the ALLL, which was $1.8 million, or 1.40% of gross loans, at March 31, 2014, was adequate as of that date.

Other Income

Noninterest income consists of revenues generated from a broad range of financial services and activities, primarily service charges on deposit accounts, gains on sales of loans and income from bank-owned life insurance. For the three months ended March 31, 2014, noninterest income decreased to $129,000 from $355,000 for the same period in 2013. The $226,000 decrease was primarily due to a $229,000 gain on sale of loans that was recorded during the three months ended March 31, 2013, compared to a $28,000 gain on sale of loans that was recorded during the same period in 2014. The decrease in noninterest income was partially offset, however, by a $14,000 increase in service charges and fees on deposit accounts.

Noninterest Expense

Noninterest expense increased $319,000 from $1.1 million for the three months ended March 31, 2013, to $1.4 million for the same period in 2014. The increase was primarily due to a 34.9%, or $210,000, increase in salaries and employee benefits. During the three months ended March 31, 2014, the Bank also incurred higher professional fees and higher printing costs related to the filing of its first Form 10-K, and there was a 14.7%, or $10,000, increase in advertising expenses. In addition, other noninterest expenses increased 37.5%, or $72,000, during this period, primarily driven by increases in spending for business development, new technology and software, and computer maintenance. These increases were partially offset by a 7.4%, or $15,000, decrease in occupancy and equipment costs. Full-time equivalent employees have increased from thirty-eight at December 31, 2013, to forty-one at March 31, 2014, as the Bank continues to position itself for future expansion.

Income Taxes

Income tax expense is based on amounts reported in the statement of earnings, after adjustments for nontaxable income and nondeductible expenses, and consists of taxes currently due plus deferred taxes on temporary

 

26


differences in the recognition of income and expense for tax and financial statement purposes. The income tax expense was $131,000 for the three months ended March 31, 2014, compared to $159,000 for the same period in 2013. The decrease was due to a decrease in earnings.

Deposits

The major source of the Bank’s funds for lending and other investment purposes are deposits. Total deposits were $187.5 million at March 31, 2014, compared to $183.4 million at December 31, 2013. We attribute our continued deposit growth to the strong marketing efforts of our team and our knowledge of our primary market and clients.

Loans

Our primary earning asset is our loan portfolio and our primary source of income is the interest earned on the loan portfolio. Our loan portfolio consists of commercial real estate loans, construction loans, and commercial loans made to small-to-medium sized companies and their owners, as well as residential real estate loans, including first and second mortgages, and consumer loans.

We work diligently to attract new lending clients through direct solicitation by our loan officers, utilizing relationship networks from existing clients, competitive pricing, and innovative structure. Evidence of this effort is seen in the organic growth in our loans. As of March 31, 2014, the Bank’s net loans were $125.2 million, representing 58.4% of total assets, compared to net loans of $121.2 million as of December 31, 2013, representing 58.7% of total assets. These loans were priced based upon the degree of risk, collateral, loan amount, and maturity. We have no loans to foreign entities nor do we have any highly leveraged loan transactions.

Nonperforming Assets

Nonperforming assets consist of nonperforming loans and other real estate owned (“OREO”). Nonperforming loans include loans that are on nonaccrual status and nonperforming loans restructured as trouble debt restructurings, where we have granted a concession on the interest rate or original repayment terms due to financial difficulties of the borrower. OREO consists of real property acquired through foreclosure.

We generally place loans on nonaccrual status when they become 90 days or more past due, unless they are well secured and in the process of collection. We also place loans on nonaccrual status if they are less than 90 days past due if the collection of principal or interest is in doubt. When a loan is placed on nonaccrual status, any interest previously accrued, but not collected, is reversed from income.

Accounting standards require the Bank to identify loans as impaired loans when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due accordingly to the contractual terms of the loan agreement. These standards require that impaired loans be valued at the present value of expected future cash flows, discounted at the loan’s effective interest rate, using one of the following methods: the observable market price of the loan or the fair value of the underlying collateral if the loan is collateral dependent. We implement these standards in our monthly review of the adequacy of the allowance for loan losses, and identify and value impaired loans in accordance with regulatory guidance on these standards. Six loans totaling $1,656,000 were deemed to be impaired under the Bank’s policy at March 31, 2014, while eight loans totaling $382,000 were deemed to be impaired under the Bank’s policy at December 31, 2013.

At March 31, 2014 and December 31, 2013, we had $1.4 million and $0 nonaccuring loans.

Our goal is to maintain a high quality of loans through sound underwriting and lending practices. As of March 31, 2014 and December 31, 2013, approximately 78.0% and 78.3%, respectively, of the total loan portfolio was collateralized by commercial and residential real estate mortgages. The level of nonperforming loans and OREO also is relevant to the credit quality of a loan portfolio. As of March 31, 2014 and December 31, 2013, there were $1.4 million and $0 nonperforming loans, respectively.

 

27


Borrowings

The Bank has an agreement with the Federal Home Loan Bank of Atlanta (“FHLB”) and pledges its qualified loans as collateral which would allow the Bank, as of March 31, 2014, to borrow up to $28.3 million. There were no advances outstanding at March 31, 2014. We have entered into a repurchase agreement with a client that requires the Company to pledge securities as collateral for borrowing under the agreement. At March 31, 2014 and December 31, 2013, the outstanding balance of such borrowings totaled $5.7 million and $5.7 million, respectively. For the same time periods, the Company pledged securities with a market value of $5.7 million as collateral for the agreement.

Capital Adequacy

Stockholder’s equity was $19.2 million at March 31, 2014, compared to $16.4 million as of December 31, 2013. We achieved profitability in our eighth quarter of operation and cumulative profitability in April 2012. Higher retained earnings in each subsequent year since 2010 were partially offset by an unrealized loss on available-for-sale-securities of $162,000 in the first quarter of 2014. As of March 31, 2014, no dividends on shares of our common stock had been paid or declared. On December 11, 2013, PMHC commenced a public offering of up to 1,200,000 shares of its common stock for $12.50 per share in order to raise additional capital. This offering is continuing on an ongoing basis through June 30, 2014. PMHC has sold 192,122 shares for proceeds of $2.4 million as of March 31, 2014.

As of March 31, 2014, the Bank was considered to be “well capitalized” with an 8.68% Tier 1 leverage capital ratio, a 13.67% Tier 1 risk-based capital ratio, and a 14.92% total risk-based capital ratio, above the minimum ratios to be considered “well capitalized.”

Liquidity

As a commercial bank, we are expected to maintain an adequate liquidity reserve. Liquidity refers to our ability to maintain cash flow that is adequate to fund operations and meet present and future financial obligations through either the sale or maturity of existing assets or by obtaining additional funding through liability management. The liquidity reserve may consist of cash on hand, cash on demand deposit with correspondent banks, other investments, and short-term marketable securities such as federal funds sold, United States securities, or securities guaranteed by the United States. Some of our securities are pledged to collateralize certain deposits through our participation in the State of Florida’s Qualified Public Deposit Program (“QPD”). We believe that the sources of available liquidity are adequate to meet all reasonably immediate short-term and intermediate-term demands. The market value of securities pledged to the QPD Program as of March 31, 2014, was $2.5 million.

At March 31, 2014, total deposits were $187.5 million, of which $10.6 million were in certificates of deposits of $100,000 or more. Also, as a member of the FHLB, we have access to approximately $28.3 million of available lines of credit secured by qualifying collateral as of March 31, 2014, in addition to $9.1 million in lines of credit we maintain with correspondent banks. As of March 31, 2014, we had no outstanding balances on such lines of credit.

Off-Balance Sheet Arrangements

In the normal course of business, we enter into various transactions that are not included in our consolidated balance sheets. These transactions include commitments to extend credit in the ordinary course of business to approved clients, construction loans in process, unused lines of credit, and standby letters of credit. These instruments may involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

Generally, loan commitments have been granted on a temporary basis for working capital or commercial real estate financing requirements or may be reflective of loans in various stages of funding. These commitments are recorded on our financial statements as they are funded. Commitments typically have fixed expiration dates or other termination clauses and may require payment of a fee. Loan commitments include unused commitments for open-end lines secured by one-to-four family residential properties and commercial properties, commitments to fund loans secured by commercial real estate, construction loans, business lines of credit and other unused commitments.

 

28


Standby letters of credit are written conditional commitments issued by us to guarantee the client will fulfill his or her contractual financial obligations to a third party. In the event the client does not perform in accordance with the terms of the agreement with the third party, we would be required to fund the commitment. The maximum potential amount of future payments we could be required to make is represented by the contractual amount of the commitment. If the commitment is funded, we would be entitled to seek recovery from the client.

We minimize our exposure to loss under loan commitments and standby letters of credit by subjecting them to credit approval and monitoring procedures. The effect on our revenues, expenses, cash flows, and liquidity of the unused portions of these commitments cannot be reasonably predicted because there is no guarantee that the lines of credit will be used.

The following is a summary of the total contractual amount of commitments outstanding as of the respective dates (dollars in thousands):

 

     March 31,
2014
 

Commitments to extend credit

   $ 6,891   

Construction loans in process

     6,426   

Unused lines of credit

     22,323   

Standby financial letters of credit

     1,031   
  

 

 

 

Total of off-balance sheet instruments

   $ 36,671   
  

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

We maintain controls and procedures designed to ensure that information required to be disclosed in the reports that PMHC files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon management’s evaluation of those controls and procedures performed within the 90 days preceding the filing of this Report, our Principal Executive Officer and Principal Financial Officer concluded that, subject to the limitations noted below, the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms.

We intend to continually review and evaluate the design and effectiveness of PMHC’s disclosure controls and procedures and to improve the Company’s controls and procedures over time and to correct any deficiencies that we may discover in the future. The goal is to ensure that senior management has timely access to all material financial and non-financial information concerning the Company’s business. While we believe the present design of the disclosure controls and procedures is effective to achieve its goal, future events affecting its business may cause the Company to modify its disclosure controls and procedures.

(b) Changes in Internal Controls

We have made no significant changes in our internal controls over financial reporting during the quarter ended March 31, 2014, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 

29


(c) Limitations on the Effectiveness of Controls

Our management, including our Principal Executive Officer and Principal Financial Officer, does not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

30


PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we are a party to various matters incidental to the conduct of a banking business. Presently, we believe that we are not a party to any legal proceedings in which resolution would have a material adverse effect on our business, prospects, financial condition, liquidity, results of operation, cash flows, or capital levels.

Item 1A. Risk Factors.

Not applicable.

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

During the quarter ended March 31, 2014, we sold no securities which were not registered under the Securities Act of 1933 and did not repurchase any of our securities.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

 

31


Item 6. Exhibits.

The following exhibits are filed with or incorporated by reference into this Report.

 

Exhibit
Number

   

Description of Exhibit

  

Incorporated by Reference From or Filed Herewith

    3.1      Articles of Incorporation    Exhibit 3.1 to Registration Statement on Form S-1 filed on October 18, 2013
    3.2      Bylaws    Exhibit 3.2 to Registration Statement on Form S-1 filed on October 18, 2013
    4.1      Specimen Common Stock Certificate    Exhibit 4.1 to Registration Statement on Form S-1 filed on October 18, 2013
    4.2      2010 Articles of Share Exchange    Exhibit 4.2 to Registration Statement on Form S-1 filed on October 18, 2013
  10.1      2007 Stock Option Plan    Exhibit 10.1 to Registration Statement on Form S-1 filed on October 18, 2013
  10.2      Form of Non-Qualified Stock Option Agreement Under 2007 Plan    Exhibit 10.2 to Registration Statement on Form S-1 filed on October 18, 2013
  10.3      Form of Incentive Stock Option Agreement Under 2007 Plan    Exhibit 10.3 to Registration Statement on Form S-1 filed on October 18, 2013
  10.4      2012 Directors’ Compensation Plan    Exhibit 10.4 to Registration Statement on Form S-1 filed on October 18, 2013
  10.5      Lease for Branch Location on Timberlane Road    Exhibit 10.5 to Registration Statement on Form S-1 filed on October 18, 2013
  10.6      Agreement for Loan Review Services with Carr, Riggs & Ingram, LLC    Exhibit 10.6 to Registration Statement on Form S-1 filed on October 18, 2013
  31.1      Certification Under Section 302 of Sarbanes-Oxley by Sammie D. Dixon, Jr., Principal Executive Officer    Filed herewith
  31.2      Certification Under Section 302 of Sarbanes-Oxley by Kathleen C. Jones, Principal Financial Officer    Filed herewith
  32.1      Certification by the Chief Executive Officer and the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley    Filed herewith
  99.1      Charter of the Audit Committee    Exhibit 99.1 to Form 10-K filed on March 28, 2014
  99.2      Charter of the Compensation Committee    Exhibit 99.2 to Form 10-K filed on March 28, 2014
  101.INS      XBRL Instance Document    *
  101.SCH      XBRL Taxonomy Extension Schema Document    *
  101.CAL      XBRL Taxonomy Extension Calculation Linkbase Document    *
  101.DEF      XBRL Taxonomy Extension Definitions Linkbase Document    *
  101.LAB      XBRL Taxonomy Extension Label Linkbase Document    *
  101.PRE      XBRL Taxonomy Extension Presentation Linkbase Document    *

 

*

Furnished, not filed, for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

 

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SIGNATURES

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

 

  PRIME MERIDIAN HOLDING COMPANY

May 13, 2014

  By:      

/s/ Sammie D. Dixon, Jr.

               Date

    Sammie D. Dixon, Jr.
    Chief Executive Officer, President
    and Principal Executive Officer

May 13, 2014

  By:      

/s/ Kathleen C. Jones

               Date

    Kathleen C. Jones
    Chief Financial Officer, Executive Vice President,
    and Principal Financial Officer

 

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