ANNUAL REPORT | 2013
Executive Management
Team
Caroline Arrant
HR Specialist
Marsha Asbury-Turner Associate Relationship Manager
Sammie D. Dixon, Jr.
CEO and President
Sammie D. Dixon, Jr.
Chief Executive Officer & President
John M. Baker
Edward Blissard
Ennis Blissard
Ingrid Burgett
Amanda Darvill
Chris Edwards
Georgia Gunn
Tyler Harris
Laura Jo Hewitt
Candice Hopkins
John Hutchison
Cody Lewis
Karen Linville
Jill Macmillan
Christine Manuri
Bethany Markley
Caleb Martin
Arden Miller
Jaina Patel
Sandy Perkins
Robert Peterson
Linda Pettis
Maurice Platt
Marketing Director
Courier
Assistant Vice President, Branch Manager
Operations Specialist
Vice President, Associate Relationship Manager
Vice President, Market Leader/Commercial Lender
Loan Operations Specialist
Assistant Vice President, Associate Relationship Manager
Vice President, Lending Officer
Vice President, BSA/Compliance Officer
Compliance
Chris L. Jensen, Jr.
Executive Vice President, Senior Lender
Kathleen C. Jones
Executive Vice President, Chief Financial Officer
Taylor Joyner
Branch Manager
Michele Lawhon
Head Teller
Vice President, Commercial Lender
Branch Manager
Executive Administrator
Assistant Vice President, Associate Relationship Manager
Teller
Teller
Madeline McGrotha
Accounting Assistant
Assistant Vice President, Treasury Management
Personal Banker
Susan Payne Turner
Executive Vice President, Chief Risk Officer
Vice President, Operations
Teller
Loan Processor
Head Teller
Philip Pomeroy
Vice President, Commercial Lender
Katie Proctor
Tara Sanders
Senior Vice President, Commercial Banker
Loan Operations Specialist
Suzanne Sconyers
Personal Banker
Mary Stafford
Vice President, Business Development
Teresa Standland
Vice President, Senior Loan Operations Manager
Monté Ward
Mesha Ware
Clint Weber
Senior Vice President, Bank Operations
Operations Specialist
Vice President, Credit Administration
Tamela Williamson
Assistant Vice President, Assistant Controller
Chris L. Jensen, Jr.
Executive Vice President
Senior Lender
Kathleen C. Jones
CFO and Executive Vice
President
MAIn OffICE
1897 Capital Circle NE
Tallahassee, FL 32308
Telephone: (850) 907-2301
TIMBERLAnE OffICE
1471 Timberlane Road, Suite 124
Tallahassee, FL 32312
Telephone: (850) 907-2300
TryMyBank.com
Dear Friends and Shareholders,
Since our beginning six years ago, we have never been more excited to report the forward strides
the Company has made.
•
Total assets of the Company were $206.5 million as of December 31, 2013, up from
$169.7 million as of December 31, 2012.
• Net Income for the year ended December 31, 2013 was $1.1 million, an increase of
12.9% over the year ended December 31, 2012. The increase was driven by a 25.8%
increase in Loan Interest Income and a 12.9% decrease in Total Interest Expense.
The year yielded many extraordinary accomplishments:
•
Prime Meridian Holding Company became a public company.
• A $15 million stock offering was initiated.*
•
Renovations completed, we now occupy the second floor of our 1897 Capital Circle
NE location, new home to executive management and bank operations.
• A newly designed website – including a robust investor relations area – was released.
• Mobile Banking and Check Deposit Apps, as well as Instant Issue Debit Cards, became
operational.
We submitted our Form S-1 (a formal registration statement filing) and obtained a Securities and
Exchange Commission notice of effectiveness on December 11, 2013. This marked a milestone in
the life of Prime Meridian Holding Company as a public company and the beginning of our public
offering of common stock.
The purpose of the capital raise is to fund organic growth and to position the Company for potential
acquisitions or future expansion over the next 18 months.
In July, Prime Meridian Bank was the featured cover article in an issue of Florida Banking Magazine.
The article recognized our growth and our “earned” reputation for asset quality and the strong
leadership of our executive management team.
Our reputation as a steady, safe and sound institution are by-products of our ongoing efforts to
nurture and imprint our culture as we continue to grow, while adhering to our five core principles of
Passion, Grace, Integrity, Tenacity, and Accountability.
Though the impacts of local, regional, and national forces on our region’s economy are still being
evaluated, we remain optimistic the Company will maintain momentum and the financial strength
to grow and thrive.
We deeply value our original shareholders and appreciate the confidence of our new shareholders
as we move forward.
Warm regards,
Sammie D. Dixon, Jr.
Chief Executive Officer
Richard A. Weidner, CPA
Chairman of the Board
Board of Directors
Prime Meridian Bank
Richard A. Weidner, CPA
Sammie D. Dixon, Jr.
Kathleen C. Jones
Chairman of the Board
CEO and President
Executive Vice President
and CFO
Chris L. Jensen, Jr.
Executive Vice President
and Senior Lender
William D. Crona, CPA
Steven L. Evans
R. Randy Guemple, CPA Robert H. Kirby
Frank L. Langston
Todd A. Patterson, D.O.
L. Collins Proctor, Sr.
Garrison A. Rolle, M.D.
Steven D. Smith
Marjorie R. Turnbull
Rated 5-StaRS BauerFinancial.com
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Prime Meridian Holding Company
Tallahassee, Florida:
We have audited the accompanying consolidated balance sheets of Prime Meridian Holding
Company and Subsidiary (the "Company") as of December 31, 2013 and 2012, and the related
consolidated statements of earnings, comprehensive income, stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the Company at December 31, 2013 and 2012, and the results
of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted
accounting principles.
HACKER, JOHNSON & SMITH PA
Tampa, Florida
March 28, 2014
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Consolidated Balance Sheets
($ in thousands, except per share amounts)
Assets
Cash and due from banks
Federal funds sold
Interest-bearing deposits
Total cash and cash equivalents
Securities available for sale
Loans, net of allowance for loan losses of $1,734 and $1,243
Federal Home Loan Bank stock
Premises and equipment, net
Deferred tax asset
Accrued interest receivable
Bank-owned life insurance
Capitalized offering costs
Other assets
Total assets
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing demand deposits
Savings, NOW and money-market deposits
Time deposits
Total deposits
Other borrowings
Official checks
Deferred tax liability
Other liabilities
Total liabilities
Commitments and contingencies (Notes 4, 8 and 15)
Stockholders' equity:
Preferred stock, undesignated; 1,000,000 shares authorized,
none issued or outstanding
Common stock, $.01 par value; 9,000,000 shares authorized,
1,498,937 and 1,496,106 issued and outstanding
Additional paid-in capital
Retained earnings
Accumulated other comprehensive (loss) income
Total stockholders' equity
At December 31,
2013
2012
$ 5,033
147
28,986
2,920
148
23,430
34,166
26,498
44,071
121,370
204
3,757
426
516
1,562
218
183
43,805
93,400
209
3,437
-
422
1,507
-
380
$ 206,473
169,658
59,011
109,760
14,594
29,328
100,885
16,516
183,365
146,729
5,719
636
-
392
5,760
712
252
166
190,112
153,619
-
-
15
14,929
1,732
(315)
15
14,896
583
545
16,361
16,039
Total liabilities and stockholders' equity
$ 206,473
169,658
See Accompanying Notes to Consolidated Financial Statements.
2
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Consolidated Statements of Earnings
(In thousands, except per share amounts)
Year Ended December 31,
Interest income:
Loans
Securities
Other
Total interest income
Interest expense:
Deposits
Other borrowings
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Noninterest income:
Service charges and fees on deposit accounts
Gain on sale of securities available for sale
Gain on sale of loans
Income from bank-owned life insurance
Other income
Total noninterest income
Noninterest expenses:
Salaries and employee benefits
Occupancy and equipment
Professional fees
External data processing
Advertising
Other
Total noninterest expenses
Earnings before income taxes
Income taxes
Net earnings
Basic earnings per share
Diluted earnings per share
Cash dividends per common share
See Accompanying Notes to Consolidated Financial Statements.
3
2013
$ 6,076
838
56
6,970
646
58
704
6,266
513
5,753
104
14
250
55
436
859
2,650
897
128
-
170
1,016
4,861
1,751
602
$ 1,149
$ 0.77
$ 0.76
$ -
2012
4,831
864
45
5,740
747
61
808
4,932
473
4,459
103
881
-
7
259
1,250
2,082
856
137
47
160
820
4,102
1,607
589
1,018
0.68
0.68
-
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
(In thousands)
Net earnings
Other comprehensive loss:
Change in unrealized gain on securities:
Unrealized (loss) gain arising during the year
Reclassification adjustment for realized gains
Net change in unrealized (loss) gain
Year Ended December 31,
2013
2012
$ 1,149
1,018
(1,349)
(14)
751
(881)
(1,363)
(130)
Deferred income taxes (benefit) on above change
503
48
Total other comprehensive loss
Comprehensive income
(860)
(82)
$ 289
936
See Accompanying Notes to Consolidated Financial Statements.
4
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2013 and 2012
($ in thousands, except share amounts)
Accumulated
Other
Compre-
Additional Accumulated hensive
Income
(Deficit)
(Loss)
Earnings
Total
Stockholders'
Equity
Common Stock
Shares
Paid-In
Amount Capital
Balance at December 31, 2011
1,496,106
$ 15
14,889
(435)
627
15,096
Net earnings
Net change in unrealized gain on
available for sale securities,
net of income tax of $48
-
-
-
-
-
1,018
-
1,018
-
-
(82)
(82)
Stock-based compensation
-
-
7
-
Balance at December 31, 2012
1,496,106
15
14,896
583
-
545
-
7
16,039
1,149
-
1,149
Net earnings
Net change in unrealized gain
on available for sale securities,
net of income tax of $503
-
-
Common stock issued as
compensation to directors
2,831
-
-
-
-
30
-
(860)
(860)
-
-
-
30
3
Stock-based compensation
-
-
3
-
Balance at December 31, 2013
1,498,937
$ 15
14,929
1,732
(315)
16,361
See Accompanying Notes to Consolidated Financial Statements.
5
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net earnings
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization
Provision for loan losses
Net amortization of deferred loan fees
Deferred income taxes (benefit)
Gain on sale of securities available for sale
Amortization of premiums, discounts on securities available for sale
Proceeds from the sale of loans held for sale
Gain on sale of loans held for sale
Loan originated as held for sale
Stock issued as compensation to directors
Stock-based compensation expense
Income from bank-owned life insurance
Net increase in accrued interest receivable
Increase in capitalize offering cost
Net decrease (increase) in other assets
Net increase in other liabilities and official checks
Year Ended
December 31,
2012
2013
$ 1,149
1,018
360
513
(91)
(175)
(14)
455
2,182
(250)
(2,082)
30
3
(55)
(94)
(218)
197
150
388
473
(75)
177
(881)
386
-
-
-
-
7
(7)
(64)
-
(230)
394
Net cash provided by operating activities
2,060
1,586
Cash flows from investing activities:
Loan originations, net of principal repayments
Purchase of securities available for sale
Principal repayments of securities available for sale
Proceeds from the sales of securities available for sale
Redemption of Federal Home Loan Bank stock
Purchase of premises and equipment
Purchase of bank-owned life insurance
Net cash used in investing activities
Cash flows from financing activities:
Net increase in deposits
Decrease in Federal Home Loan Bank advances
Increase (decrease) in other borrowings
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
(28,242)
(11,650)
8,082
1,498
5
(680)
-
(17,120)
(23,966)
6,853
13,594
63
(832)
(1,500)
(30,987)
(22,908)
36,636
-
(41)
31,156
(2,000)
(367)
36,595
28,789
7,668
7,467
26,498
19,031
Cash and cash equivalents at end of year
$ 34,166
26,498
(continued)
6
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Consolidated Statements of Cash Flows, Continued
(In thousands)
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest
Income taxes
Noncash transaction-
Year Ended
December 31,
2012
2013
$ 708
$ 452
832
645
Accumulated other comprehensive (loss) income, net change
in unrealized gain on sale of securities available for sale,
net of taxes
$(860)
(82)
See Accompanying Notes to Consolidated Financial Statements.
7
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements
At December 31, 2013 and 2012 and for the Years Then Ended
(1) Summary of Significant Accounting Policies
Organization. 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 two
banking offices located in Tallahassee, Florida.
The following is a description of the significant accounting policies and practices followed by the
Company, which conform to accounting principles, generally accepted in the United States of
America ("GAAP") and prevailing practices within the banking industry.
Use of Estimates. In preparing consolidated financial statements in conformity with GAAP,
management is required to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the consolidated balance sheet and reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those
estimates. A material estimate that is particularly susceptible to significant change in the near
term relates to the determination of the allowance for loan losses.
Principles of Consolidation. The consolidated financial statements include the accounts of the
Holding Company and the Bank. All significant intercompany accounts and transactions have
been eliminated in consolidation.
Cash and Cash Equivalents. For purposes of the statement of cash flows, cash and cash equivalents
include cash and balances due from banks, federal funds sold and interest-bearing deposits, all of
which have original maturities of less than ninety days.
At December 31, 2013 and 2012, the Company was required by law or regulation to maintain
cash reserves with the Federal Reserve Bank, in accounts with other banks or in the vault in the
amounts of $986,000 and $692,000, respectively.
(continued)
8
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Securities. Securities may be classified as either trading, held to maturity or available for sale.
Trading securities are held principally for resale and recorded at their fair values. Unrealized
gains and losses on trading securities are included immediately in earnings. Held-to-maturity
securities are those which the Company has the positive intent and ability to hold to maturity and
are reported at amortized cost. Available-for-sale securities consist of securities not classified as
trading securities nor as held-to-maturity securities. Unrealized holding gains and losses on
available-for-sale securities are excluded from operations and reported in accumulated other
comprehensive income (loss). Gains and losses on the sale of available-for-sale securities are
recorded on the trade date determined using the specific-identification method. Premiums and
discounts on securities available for sale are recognized in interest income using the interest
method over the period to maturity.
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.
Loans Held for Sale. Loans held for sale include mortgage loans and Small Business
Administration ("SBA") loans originated which are intended for sale in the secondary market and
are carried at the lower of book value or estimated fair value in the aggregate. At December 31,
2013 loans held for sale were $150,000. There were no loans held for sale on December 31,
2012. Loans held for sale are included in loans at December 31, 2013 and 2012.
Loans. Loans that management has the intent and ability to hold for the foreseeable future or until
maturity or pay-off are reported at their outstanding principal adjusted for any charge-offs, the
allowance for loan losses, and any deferred fees or costs.
Commitment and loan origination fees are capitalized and certain direct origination costs are
deferred. Both are recognized as an adjustment of the yield of the related loan.
The accrual of interest on all portfolio classes is discontinued at the time the loan is ninety days
delinquent unless the loan is well collateralized and in process of collection. In all cases, loans
are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is
considered doubtful. All interest accrued but not collected for loans that are placed on
nonaccrual or charged-off is reversed against interest income. The interest on these loans is
accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.
Loans are returned to accrual status when all the principal and interest amounts contractually due
are brought current and future payments are reasonably assured.
(continued)
9
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Allowance for Loan Losses. The allowance for loan losses is established as losses are estimated to
have occurred through a provision for loan losses charged to earnings. Loan losses are charged
against the allowance when management believes the uncollectability of a loan balance is
confirmed. Subsequent recoveries, if any, are credited to the allowance. There were no changes
in the Company's accounting policies or methodology during the year ended December 31, 2013.
The allowance for loan losses is evaluated on a regular basis by management and is based upon
management's periodic review of the collectability of the loans in light of historical experience,
the nature and volume of the loan portfolio, adverse situations that may affect the borrower's
ability to repay, estimated value of any underlying collateral and prevailing economic conditions.
This evaluation is inherently subjective as it requires estimates that are susceptible to significant
revision as more information becomes available.
The allowance consists of specific and general components. The specific component relates to
loans that are considered impaired. For such loans, an allowance is established when the
discounted cash flows or collateral value of the impaired loan is lower than the carrying value of
that loan. The general component covers all other loans and is based on the following factors:
The historical loss component of the allowance is determined by losses recognized by portfolio
segment over the preceding three years. This is supplemented by the risks for each portfolio
segment. Risk factors impacting loans in each of the portfolio segments include any deterioration
of property values, reduced consumer and business spending as a result of continued high
unemployment and reduced credit availability and lack of confidence in a sustainable recovery.
The historical experience is adjusted for the following qualitative factors: (a) changes in lending
policies and procedures, risk selection and underwriting standards; (b) changes in national,
regional and local economic conditions that affect the collectability of the loan portfolio; (c)
changes in the experience, ability and depth of lending management and other relevant staff; (d)
changes in the volume and severity of past due loans, nonaccrual loans or loans classified special
mention, substandard, doubtful or loss; (e) quality of loan review and Board of Directors
oversight; (f) changes in the nature and volume of the loan portfolio and terms of loans; (g) the
existence and effect of any concentrations of credit and changes in the level of such
concentrations; (h) the effect of other external factors, trends or uncertainties that could affect
management's estimate of probable losses, such as competition and industry conditions.
(continued)
10
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Allowance for Loan Losses, Continued. A loan is considered impaired when, based on current
information and events, it is probable that the Company will be unable to collect the scheduled
payments of principal or interest when due according to the contractual terms of the loan
agreement. Factors considered by management in determining impairment include payment
status, collateral value, and the probability of collecting scheduled principal and interest
payments when due. Loans that experience insignificant payment delays and payment shortfalls
generally are not classified as impaired. Management determines the significance of payment
delays and payment shortfalls on a case-by-case basis, taking into consideration all of the
circumstances surrounding the loan and the borrower, including the length of the delay, the
reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in
relation to the principal and interest owed. Impairment is measured on a loan by loan basis for all
loans 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.
Premises and Equipment. Land is stated at cost. Buildings, leasehold improvements, furniture,
fixtures and equipment, and software are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization expense are computed using the straight-line
method over the estimated useful life of each type of asset, or the lease term if shorter.
Transfer of Financial Assets. Transfers of financial assets or a participating interest in an entire
financial asset are accounted for as sales, when control over the assets has been surrendered.
Control over transferred assets is deemed to be surrendered when (1) the assets have been
isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain
it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the
Company does not maintain effective control over the transferred assets through an agreement to
repurchase them before their maturity. A participating interest is a portion of an entire financial
asset that (1) conveys proportionate ownership rights with equal priority to each participating
interest holder (2) involves no recourse (other than standard representations and warranties) to, or
subordination by, any participating interest holder, and (3) does not entitle any participating
interest holder to receive cash before any other participating interest holder.
Off-Balance-Sheet Financial Instruments. In the ordinary course of business, the Company has
entered into off-balance-sheet financial instruments consisting of commitments to extend credit,
construction loans in process, unused lines of credit and standby letters of credit. Such financial
instruments are recorded in the consolidated financial statements when they are funded.
(continued)
11
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Income Taxes. There are two components of income tax expense: current and deferred. Current
income tax expense reflects taxes to be paid or refunded for the current period by applying the
provisions of the enacted tax law to the taxable income or excess of deductions over revenues.
The Company determines deferred income taxes using the liability (or balance sheet) method.
Under this method, the net deferred tax asset or liability is based on the tax effects of the
differences between the book and tax bases of assets and liabilities, and enacted changes in tax
rates and laws are recognized in the period in which they occur. Deferred income tax expense
results from changes in deferred tax assets and liabilities between periods.
Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that
the tax position will be realized or sustained upon examination. The term more likely than not
means a likelihood of more than 50 percent; the terms examined and upon examination also
include resolution of the related appeals or litigation processes, if any. A tax position that meets
the more-likely-than-not recognition threshold is initially and subsequently measured as the
largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon
settlement with a taxing authority that has full knowledge of all relevant information. The
determination of whether or not a tax position has met the more-likely-than-not recognition
threshold considers the facts, circumstances, and information available at the reporting date and
is subject to management's judgment. As of December 31, 2013, management is not aware of
any uncertain tax positions that would have a material effect on the Company's consolidated
financial statements. Deferred tax assets are reduced by a valuation allowance if, based on the
weight of evidence available, it is more likely than not that some portion or all of a deferred tax
asset will not be realized.
The Company recognizes interest and penalties on income taxes as a component of income tax
expense.
The Company files consolidated income tax returns. Income taxes are allocated to the Holding
Company and Bank as if separate income tax returns were filed.
Derivative Financial Instruments. Derivative financial instruments are recognized as assets or
liabilities in the consolidated balance sheets and measured at fair value. The Company enters
into commitments to originate loans whereby the interest-rate on the loan is determined prior to
funding (rate lock commitments). Rate-lock commitments on mortgage loans that are intended
to be sold are considered to be derivatives. Accordingly, such commitments, along with any
related fees received from potential borrowers, are recorded at fair value in derivative assets or
liabilities, with changes in fair value recorded in the net gain or loss on sale of mortgage loans.
Fair value is based on fees currently charged to enter into similar agreements, and for fixed-rate
commitments, the difference between current levels of interest rates and the committed rates is
also considered. At December 31, 2013 and 2012, there were no fees received related to rate-lock
commitments.
12
(continued)
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Fair Value Measurements. GAAP defines fair value, establishes a framework for measuring fair
value and enhances disclosures about fair value measurements.
Fair value is the exchange price that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. GAAP also establishes a fair
value hierarchy which requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. The hierarchy describes three levels of
inputs that may be used to measure fair value:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical
assets or liabilities.
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either
directly or indirectly. These include quoted prices for similar assets or liabilities in active
markets; quoted prices for identical or similar assets or liabilities that are not active; and model-
driven valuations whose inputs are observable or whose significant value drivers are observable.
Valuations may be obtained from, or corroborated by, third-party pricing services.
Level 3: Unobservable inputs to measure fair value of assets and liabilities for which there is
little, if any market activity at the measurement date, using reasonable inputs and assumptions
based upon the best information at the time, to the extent that inputs are available without undue
cost and effort.
The following describes valuation methodologies used for assets measured at fair value:
Securities Available for Sale. Where quoted prices are available in an active market, securities
are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid
government bonds, certain mortgage products and exchange-traded equities. If quoted market
prices are not available, then fair values are estimated by using pricing models, quoted prices of
securities with similar characteristics, or discounted cash flows. Examples of such instruments,
which would generally be classified within Level 2 of the valuation hierarchy, include U.S.
Government agency securities, municipal securities and mortgage-backed securities. In certain
cases where there is limited activity or less transparency around inputs to the valuation, securities
are classified within Level 3 of the valuation hierarchy. Securities classified within Level 3
include certain asset-backed securities.
(continued)
13
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Fair Value Measurements, Continued.
Impaired Loans. Estimates of fair value for impaired loans is based on the estimated value of the
underlying collateral which is determined based on a variety of information, including the use of
available appraisals, estimates of market value by licensed appraisers or local real estate brokers
and the knowledge and experience of the Company's management related to values of properties in
the Company's market areas. Management takes into consideration the type, location and
occupancy of the property as well as current economic conditions in the area the property is located
in assessing estimates of fair value. Accordingly, fair value estimates for impaired loans are
classified as Level 3.
Fair Values of Financial Instruments. The following methods and assumptions were used by the
Company in estimating fair values of financial instruments:
Cash and Cash Equivalents. The carrying amounts of cash and cash equivalents approximate
their fair value (Level 1).
Securities. Fair values for securities are based on the framework for measuring fair value (Level
2 and 3).
Loans. For variable-rate loans that reprice frequently and have no significant change in credit
risk, fair values are based on carrying values. Fair values for fixed-rate mortgage (e.g. one-to-
four family residential), commercial real estate and commercial loans are estimated using
discounted cash flow analyses, using interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality. Fair values for nonperforming loans are estimated
using discounted cash flow analysis or underlying collateral values, where applicable (Level 3).
Federal Home Loan Bank Stock. The fair value of the Company's investment in Federal Home
Loan Bank stock is based on its redemption value (Level 3).
Accrued Interest Receivable. The carrying amounts of accrued interest approximate their fair
values (Level 3).
Deposits. The fair values disclosed for demand, NOW, money-market and savings deposits are,
by definition, equal to the amount payable on demand at the reporting date (that is, their carrying
amounts). Fair values for fixed-rate time deposits are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on time deposits to a schedule of
aggregated expected monthly maturities of time deposits (Level 3).
Other Borrowings. The carrying amounts of other borrowings approximate their fair value
(Level 3).
(continued)
14
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Fair Values of Financial Instruments, Continued.
Off-Balance-Sheet Instruments. Fair values for off-balance-sheet lending commitments are
based on fees currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the counterparties' credit standing (Level 3).
Advertising. The Company expenses all media advertising as incurred.
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.
Comprehensive Income. GAAP require that recognized revenue, expenses, gains and losses be
included in 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 sheets, such items, along with net earnings, are components
of comprehensive income.
Recent Pronouncements. In July 2012, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2012-02, Testing Indefinite-Lived Intangible Assets for
Impairment, which, among other things, gives an entity the option to first assess qualitative
factors to determine whether the existence of events or circumstances leads to a determination
that it is more likely than not that an indefinite-lived intangible asset is impaired. The adoption of
this guidance had no effect on the Company's consolidated financial statements.
In January 2013, the FASB issued ASU No. 2013-01, Clarifying the Scope of Disclosures about
Offsetting Assets and Liabilities, which limits the scope of the new balance sheet offsetting
disclosures in ASU 2011-11 to derivatives, repurchase agreements, and securities lending
transactions to the extent that they are (1) offset in the financial statements or (2) subject to an
enforceable master netting arrangement or similar agreement. The adoption of this guidance had
no effect on the Company's consolidated financial statements.
In February 2013, the FASB Issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of
Accumulated Other Comprehensive Income, which requires entities to present information about
reclassification adjustments from accumulated other comprehensive income in their annual
financial statements in a single note or on the face of the financial statements. The adoption of
this guidance had no effect on the Company's consolidated financial statements.
(continued)
15
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Recent Pronouncements, Continued. In February 2013, the FASB Issued ASU No. 2013-04,
Obligations Resulting from Joint and Several Liability Arrangements for Which the Total
Amount of the Obligation Is Fixed at the Reporting Date. ASU 2013-04 provides guidance for
the recognition, measurement, and disclosure of obligations resulting from joint and several
liability arrangements for obligations within the scope of this ASU, which is effective January 1,
2014. Upon adoption, this guidance is not expected to impact the Company's consolidated
financial statements.
In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit
When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward
Exists, which among other things, require an unrecognized tax benefit, or a portion of an
unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred
tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward,
except as denoted within the ASU. The amendments in this ASU are effective for fiscal years,
and interim periods within those years, beginning after December 15, 2013. Upon adoption, this
guidance is not expected to impact the Company's consolidated financial statements.
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)
16
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(2) Securities Available for Sale
Securities have been classified according to management's intention. The carrying amount of
securities and their fair values are summarized as follows (in thousands):
Gross
Amortized Unrealized Unrealized
Gains
Losses
Gross
Cost
At December 31, 2013:
U.S. Government agency securities $ 7,290
9,139
Municipal securities
26,225
Mortgage-backed securities
1,916
Asset-backed securities
8
14
253
22
(329)
(269)
(198)
-
Fair
Value
6,969
8,884
26,280
1,938
$ 44,570
297
(796)
44,071
At December 31, 2012:
U.S. Government agency securities
Municipal securities
Mortgage-backed securities
Asset-backed securities
7,592
5,585
27,865
1,899
117
7
785
-
(7)
(34)
(4)
-
7,702
5,558
28,646
1,899
$ 42,941
909
(45)
43,805
Securities available for sale measured at fair value on a recurring basis are summarized below (in
thousands):
At December 31, 2013:
U.S. Government agency securities
Municipal securities
Mortgage-backed securities
Asset-backed securities
Fair Value Measurements Using
Quoted Prices
In Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
-
-
-
-
6,969
8,884
26,280
1,938
-
-
-
-
Fair
Value
$ 6,969
8,884
26,280
1,938
$ 44,071
-
44,071
-
At December 31, 2012:
U.S. Government agency securities
Municipal securities
Mortgage-backed securities
Asset-backed securities
7,702
5,558
28,646
1,899
-
-
-
-
7,702
5,558
28,646
-
-
-
-
1,899
$ 43,805
-
41,906
1,899
17
(continued)
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(2) Securities Available for Sale, Continued
During the year ended December 31, 2013, securities of $1.8 million were transferred from Level 3
to Level 2 due to changes in the inputs used to value the securities. During year ended December
31, 2012, no securities were transferred in or out of Level 1, Level 2 or Level 3.
The table below presents a reconciliation for asset-backed securities measured at fair value on a
recurring basis using significant unobservable inputs (Level 3) for the years ended December
31, 2013 and 2012. These instruments were valued using pricing models and discounted cash
flow methodologies incorporating assumptions that, in management's judgment,
reflect the assumptions a marketplace participant would use (in thousands):
Balance, beginning of year
Total gains or (losses) - realized/unrealized-
Purchases
Transfer in to/out of Level 3
Balance, end of year
The scheduled maturities of securities are as follows (in thousands):
At December 31, 2013:
Due in less than one year
Due in one to five years
Due five to ten years
Due after ten years
Mortgage-backed securities
Asset-backed securities
Year Ended
December 31,
2012
2013
$ 1,899
-
(1,899)
$ -
-
1,899
-
1,899
Amortized
Cost
Fair
Value
$ 1,005
2,857
5,716
6,851
26,225
1,916
1,006
2,844
5,402
6,601
26,280
1,938
$ 44,570
44,071
(continued)
18
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(2) Securities Available for Sale, Continued
The following summarizes sales of securities available for sale (in thousands):
Proceeds received from sales
Gross gains
Gross losses
Net gain from sale of securities
Year Ended
December 31,
2013
2012
$ 1,498
13,594
14
-
881
-
$ 14
881
At December 31, 2013 and 2012, securities with a fair value of $8,352,000 and $8,451,000,
respectively, were pledged as collateral for public deposits and for other borrowings with
customers.
Securities with unrealized losses aggregated by investment category and length of time that
individual securities have been in a continuous unrealized loss position, are as follows (in
thousands):
Less Than Twelve
Months
Gross
Unrealized
Losses
$(329)
(269)
(198)
Fair
Value
5,984
5,758
12,326
$(796)
24,068
(7)
(34)
(4)
2,746
4,679
2,445
$ (45)
9,870
(continued)
At December 31, 2013:
U.S. Government agency securities
Municipal securities
Mortgage-backed securities
At December 31, 2012:
U.S. Government agency securities
Municipal securities
Mortgage-backed securities
19
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(2) Securities Available for Sale, Continued
The unrealized losses at December 31, 2013 and 2012 on twenty-five and eight 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.
(3) Loans
The segments and classes of loans are as follows (in thousands):
Real estate mortgage loans:
Commercial
Residential and home equity
Construction
At December 31,
2013
2012
$ 44,796
38,721
12,933
35,490
30,886
6,437
Total real estate mortgage loans
96,450
72,813
Commercial loans
Consumer and other loans
Total loans
Less:
Net deferred loan fees
Allowance for loan losses
24,651
2,072
19,794
2,105
123,173
94,712
(69)
(1,734)
(69)
(1,243)
Loans, net
$ 121,370
93,400
(continued)
20
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, 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 class 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 divorce, 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. All portfolio residential loans are underwritten based upon the
guidelines of the secondary market, predominantly Freddie Mac and Fannie Mae.
21
(continued)
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, 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.
(continued)
22
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, 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; it 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.
An analysis of the change in the allowance for loan losses follows (in thousands):
Year Ended December 31, 2013:
Beginning balance
Provision (credit) for loan losses
Net (charge-offs) recoveries
Real Estate Mortgage Loans
Residential
and
Home
Equity Construction Commercial
Commercial
Consumer
and
Other Total
$ 352
252
-
226
319
-
237
(15)
(47)
405
(44)
26
23
1
1,243
513
(1) (22)
Ending balance
$ 604
545
175
387
23 1,734
At December 31, 2013:
Individually evaluated for impairment:
Recorded investment
$ -
Balance in allowance for loan losses $ -
36
23
-
-
346
82
-
-
382
105
Collectively evaluated for impairment:
Recorded investment
$ 44,796
Balance in allowance for loan losses $ 604
38,685
522
12,933
175
24,305
305
2,072 122,791
1,629
23
Year Ended December 31, 2012:
Beginning balance
Provision for loan losses
Net (charge-offs) recoveries
311
41
-
285
(59)
-
66
336
(165)
225
147
33
16
8
903
473
(1) (133)
Ending balance
$ 352
226
237
405
23 1,243
At December 31, 2012:
Individually evaluated for impairment:
Recorded investment
$ -
Balance in allowance for loan losses $ -
Collectively evaluated for impairment:
-
-
101
-
131
-
-
-
232
-
Recorded investment
Balance in allowance for loan losses
$ 35,490
$ 352
30,886
226
6,336
237
19,663
405
2,105
23
94,480
1,243
(continued)
23
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(3) Loans, Continued
The following summarizes the loan credit quality (in thousands):
Credit Risk Profile by Internally Assigned Grade:
At December 31, 2013:
Grade:
Pass
Special mention
Substandard
Doubtful
Loss
Real Estate Mortgage Loans
Residential
Consumer
and
and
Home
Equity Construction Commercial Other
Commercial
Total
$ 40,901
1,804
2,091
-
-
36,611
1,346
764
-
-
12,528
396
9
-
-
23,919
509
223
-
-
1,914 115,873
4,093
3,207
-
-
38
120
-
-
Total
$ 44,796
38,721
12,933
24,651
2,072 123,173
At December 31, 2012:
Grade:
Pass
Special mention
Substandard
Doubtful
Loss
35,490
-
-
-
-
30,333
553
-
-
-
5,984
352
101
-
-
19,581
183
30
-
-
2,105
-
-
-
-
93,493
1,088
131
-
-
Total
$ 35,490
30,886
6,437
19,794
2,105
94,712
The Company categorizes loans into risk categories based on relevant information about the ability of
borrowers to service their debt such as: current financial information, historical payment
experience, credit documentation, public information, and current economic trends, among other
factors.
The Company analyzes loans individually by classifying the loans as to credit risk. Loans classified
as substandard or special mention are reviewed quarterly by the Company for further
deterioration or improvement to determine if they are appropriately classified and whether there
is any impairment. All loans are graded upon initial issuance. Further construction and nonowner
occupied commercial real estate loans are reviewed at least annually and commercial
relationships in excess of $500,000. In addition, during the renewal process of any loan, as well
as if a loan becomes past due, the Company will determine the appropriate loan grade.
(continued)
24
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(3) Loans, Continued
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.
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)
25
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(3) Loans, Continued
At December 31, 2013, there was one loan over thirty days past due, no loans past due ninety days or
more but still accruing and no loans on nonaccrual. Age analysis of past-due loans at December
31, 2012 is as follows (in thousands):
Accruing Loans
Greater
Than 90 Total
Past
Past Due Past Due Past Due Due
30-59
Days
60-89
Days
Days
Current
Nonaccrual
Loans
Total
Loans
At December 31, 2013:
Real estate mortgage:
Commercial
Residential and home equity
Construction
Commercial
Consumer/other
Total
At December 31, 2012:
Real estate mortgage:
Commercial
Residential and home equity
Construction
Commercial
Consumer/other
$ -
-
-
38
-
-
-
-
-
-
$ 38
-
-
-
-
-
-
-
-
-
-
-
Total
$ -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
44,796
38,721
12,933
24,613
2,072
-
-
-
-
-
44,796
38,721
12,933
24,651
2,072
- 123,135
-
123,173
-
-
-
-
-
35,490
30,886
6,336
19,794
2,105
-
-
101
-
-
35,490
30,886
6,437
19,794
2,105
-
94,611
101
94,712
The following summarizes the amount of impaired loans (in thousands):
With No Related
Allowance Recorded
Unpaid
Contractual
Recorded Principal
Investment Balance
With an Allowance Recorded
Unpaid
Contractual
Recorded
Investment
Principal Related
Balance Allowance
Total
Unpaid
Contractual
Recorded Principal Related
Investment Balance Allowance
At December 31, 2013:
Residential and home equity
Commercial loans
$ -
27
-
27
Total
$ 27
27
At December 31, 2012:
Construction
Commercial loans
101
131
266
-
$ 232
266
36
319
355
-
-
-
36
319
23
82
36
346
36
346
23
82
355
105
382
382
105
-
-
-
-
-
-
101
131
266
-
-
-
232
266
-
(continued)
26
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(3) Loans, Continued
The average net investment in impaired loans and interest income recognized and received on
impaired loans by loan class are as follows (in thousands):
Year Ended December 31, 2013:
Real estate mortgage loans-
Residential and home equity
Commercial
Total
Year Ended December 31, 2012:
Real estate mortgage loans-
Commercial
Interest
Interest
Average
Income
Income
Recorded
Investment Recognized Received
$ 36
298
$ 334
3
23
26
3
23
26
$ 78
-
-
There were no loans measured at fair value on a nonrecurring basis at December 31, 2013. Impaired
collateral-dependent loans measured at fair value on a nonrecurring basis by loan class at
December 31, 2012 are as follows (in thousands):
At Year End
Fair
Value
Level 1 Level 2
Level 3
Losses
Recorded
During the
Year
Total
Losses
Commercial real estate
loans
$ 101
-
-
101
165
165
(continued)
27
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(3) Loans, Continued
The following is a summary of loans determined to be TDR's entered into during the years ended
December 31, 2013 and 2012:
Troubled Debt Restructurings:
Year Ended December 31, 2013:
Commercial:
Modified interest rates
Modified payment schedule for six months
Total
Year Ended December 31, 2012:
Commercial-
Modified to interest only for three months
Pre-
Post-
Modification Modification
Number Outstanding Outstanding
of
Contracts
Recorded
Investment
Recorded
Investment
3
1
4
$ 133
122
$ 255
133
122
255
1
$ 131
131
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 years ended December 31, 2013 and 2012, which were
restructured during the same period.
The Company grants the majority of its loans to borrowers throughout Leon County, Florida.
Although the Company has a diversified loan portfolio, a significant portion of its borrowers'
ability to honor their contracts is dependent upon the economy of this area. The Company does
not have any significant concentrations to any one industry or customer.
(continued)
28
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(4) Premises and Equipment
A summary of premises and equipment follows (in thousands):
Land
Building
Leasehold improvements
Furniture, fixtures and equipment
Computer and software
Total, at cost
At December 31,
2013
2012
$ 400
2,387
364
706
1,276
400
2,021
362
512
1,164
5,133
4,459
Less accumulated depreciation and amortization
(1,376)
(1,022)
Premises and equipment, net
$ 3,757
3,437
The Company leases certain office facilities under operating leases which expire in 2017. These
leases require monthly lease payments and common area maintenance charges and have options
to renew. These leases contain escalation clauses during the term of the leases. Rent expense
under these operating leases during the years ended December 31, 2013 and 2012 was $114,000
and $125,000, respectively. Future minimum rental commitments under these noncancelable
leases are as follows (in thousands):
Year Ending December 31,
2014
2015
2016
2017
Amount
$ 85
85
85
50
$ 305
(continued)
29
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(5) Deposits
The aggregate amount of time deposits with a minimum denomination of $100,000 was
approximately $10.9 million and $13.0 million at December 31, 2013 and 2012, respectively.
A schedule of maturities of time deposits follows (in thousands):
Year Ending
December 31,
2014
2015
2016
2017
Amount
$ 12,377
1,239
494
484
$ 14,594
(6) Other Borrowings
The Company entered into a repurchase agreement with a customer. This agreement requires the
Company to pledge securities as collateral for borrowings under this agreement. A summary of
other borrowings follows ($ in thousands):
Balance outstanding at year-end
Average balance outstanding during the year
Average interest rate paid
Maximum amount outstanding at any month-end
during year
Pledged securities
At December 31,
2013
2012
$ 5,719
5,789
1.0%
5,760
6,397
0.95%
5,813
5,882
7,148
5,864
FHLB advances will be collateralized by a blanket lien on qualifying residential real estate,
commercial real estate, home equity lines of credit and multi-family loans. The Company may
borrow up to $23.9 million and $16.8 million as of December 31, 2013 and 2012, respectively
from the Federal Home Loan Bank of Atlanta ("FHLB"), there were no advances outstanding at
December 31, 2013 and 2012. The Company also has available credit of $9.1 million in lines of
credit with correspondent banks.
(continued)
30
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(7) Income Taxes
The components of the income taxes are as follows (in thousands):
Current:
Federal
State
Total current
Deferred:
Federal
State
Total deferred
Total income taxes
Year Ended
December 31,
2012
2013
$ 658
119
777
(146)
(29)
(175)
$ 602
341
71
412
154
23
177
589
The reasons for the difference between the statutory Federal income tax rate of 34% and the effective
tax rates are summarized as follows (dollars in thousands):
Year Ended December 31,
2012
2013
% of
Pretax
% of
Pretax
Amount Earnings Amount Earnings
$ 595
34.0% $ 546
34.0%
60
-
(30)
(23)
3.4
-
(1.7)
(1.3)
49
1
(14)
7
3.0
0.1
(0.9)
.5
$ 602
34.4% $ 589
36.7%
(continued)
Income taxes at statutory rate
Increase (decrease) resulting from:
State taxes, net of Federal tax benefit
Stock-based compensation
Tax-exempt income
Other nondeductible expenses
31
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(7) Income Taxes, Continued
Tax effects of temporary differences that give rise to the deferred tax assets and liabilities are as
follows (in thousands):
Deferred tax assets:
Allowance for loan losses
Organizational and start-up costs
Stock-based compensation
Unrealized loss on securities available for sale
Other
Deferred tax assets
Deferred tax liabilities:
Accrual to cash conversion
Deferred loan costs
Premises and equipment
Unrealized gains on securities available for sale
Deferred tax liabilities
At December 31,
2013
2012
$ 517
130
18
184
63
912
324
144
17
-
47
532
(145)
(88)
(253)
-
(164)
(76)
(225)
(319)
(486)
(784)
Net deferred tax asset (liability)
$ 426
(252)
The Company files consolidated income tax returns in the U.S. federal jurisdiction, and the State of
Florida. The Company is no longer subject to U.S. federal, or state and local income tax
examinations by taxing authorities for years before 2010.
(continued)
32
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(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.
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. The Bank may hold collateral supporting those
commitments, and at December 31, 2013 such collateral amounted to $802,000.
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 December 31, 2013 are as follows (in thousands):
Commitments to extend credit
Construction loans in process
Unused lines of credit
Standby letters of credit
33
$ 701
$ 7,134
$ 21,990
$ 1,039
(continued)
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(9) Stock Option Plan
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 four to ten-year
terms and vest over periods up to five years. As of December 31, 2013, there were 18,905 shares
available for grant.
A summary of the activity in the Company's Stock Option Plan is as follows:
Weighted-
Weighted- Average
Average Remaining Aggregate
Exercise Contractual Intrinsic
Value
Term
Price
Number of
Options
Outstanding at December 31, 2011
Options granted
Options forfeited
Outstanding at December 31, 2012
Options granted
Options forfeited
136,250
2,500
(2,750)
$ 10.00
10.00
10.00
136,000
2,500
(4,500)
10.00
10.00
10.00
Outstanding at December 31, 2013
134,000
$ 10.01
5.1 years
Exercisable at December 31, 2013
104,200
$ 10.00
5.0 years $ 260,500
At December 31, 2013, there was $5,000 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 thirty-two months. The total fair value of
shares vesting and recognized as compensation expense was $3,000 and $7,000 in the years
ended December 31, 2013 and 2012, respectively. The associated income tax benefit recognized
was $1,000 and $3,000 for the years ended December 31, 2013 and 2012, respectively.
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:
Weighted-average risk-free interest rate
Expected dividend yield
Expected stock volatility
Expected life in years
Per share fair value of options issued during the year
34
Year Ended
December 31,
2013
2012
1.13%
-
11.24%
6.5
$ 1.17
1.30%
-
11.37%
6.5
1.55
(continued)
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(9) Stock Option Plan, 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.
(10) Profit Sharing Plan
The Company sponsors a 401(k) profit sharing plan available to all employees electing to participate
after meeting certain length-of-service requirements. The Company's contributions to the profit
sharing plan are discretionary and determined annually. Contribution to the plan for the years
ended December 31, 2013 and 2012 were $65,000 and $0, respectively.
(11) Related Party Transactions
The Company enters into transactions during the ordinary course of business with officers and
directors of the Company and entities in which they hold a significant financial interest. The
following summarizes these transactions (in thousands):
Loans:
Beginning balance
Originated during the year
Principal repayments
Ending balance
Deposits at year end
Year Ended
December 31,
2012
2013
$ 3,558
354
(178)
3,413
465
(320)
$ 3,734
3,558
$ 13,292
13,066
The Company leases an office facility from a related party. Rent expense under the operating lease
during the years ended December 31, 2013 and 2012 were $114,000 and $125,000, respectively.
In addition, the Bank has contracted with a related party to perform loan reviews of the Bank's
loan portfolio. The expenses related to the loan retrieves during the years ended December 31,
2013 and 2012 were $24,000 and $15,000, respectively.
(continued)
35
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(12) Fair Value of Financial Instruments
The approximate carrying amounts and estimated fair values of the Company's financial instruments
are as follows (in thousands):
Financial assets:
Cash and cash equivalents
Securities available for sale
Loans, net
Federal Home Loan Bank stock
Accrued interest receivable
Financial liabilities:
Deposits
Other borrowings
Off-balance-sheet financial
instruments
Level
1
2 and 3
3
3
3
3
3
3
At December 31,
2012
2013
Fair
Carrying
Fair
Carrying
Value
Amount
Value
Amount
$ 34,166
44,071
121,370
204
516
34,166
44,071
122,097
204
516
26,498
43,805
93,400
209
422
26,498
43,805
93,927
209
422
183,225
5,719
183,295
5,719
146,729
5,760
146,826
5,760
-
-
-
-
(13) Dividend Restrictions
The Holding Company is limited in the amount of cash dividends it may declare and pay by the
amount of dividends it can receive from the Bank. The Bank is limited in the amount of cash
dividends that may be paid. The amount of cash dividends that may be paid is based on the
Bank's net earnings of the current year combined with the Bank's retained earnings of the
preceding two years, as defined by state banking regulations. However, for any dividend
declaration, the Bank must consider additional factors such as the amount of current period net
earnings, liquidity, asset quality, capital adequacy and economic conditions. It is likely that these
factors would further limit the amount of dividend which the Bank could declare. In addition,
bank regulators have the authority to prohibit banks from paying dividends if they deem such
payment to be an unsafe or unsound practice.
(14) Regulatory Matters
The Bank is subject to various regulatory capital requirements administered by the banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a direct material
effect on the Company's and the Bank's financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Bank must meet specific capital
guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain
off-balance sheet items as calculated under regulatory accounting practices. The Bank's capital
amounts and classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
(continued)
36
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(14) Regulatory Matters, Continued
Quantitative measures established by regulation to ensure capital adequacy require the Bank to
maintain minimum amounts and percentage (set forth in the table below) of total and Tier I
capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of December 31, 2013, that the
Bank meets all capital adequacy requirements to which it is subject.
As of December 31, 2013, the most recent notification from the regulatory authorities categorized the
Bank as well capitalized under the regulatory framework for prompt corrective action. To be
categorized as adequately capitalized the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage percents as set forth in the table. There are no conditions or
events since that notification that management believes have changed the Bank's category. The
Bank's actual capital amounts and percents are also presented in the table ($ in thousands):
Actual
Amount Percentage Amount
For Capital
Adequacy Purposes
Percentage
For Well
Capitalized
Purposes
Percentage
Amount
As of December 31, 2013:
Tier I Capital
to Average Assets
$ 16,611
8.41%
$ 7,898
4.00%
$ 9,872
5.00%
Tier I Capital to Risk-
Weighted Assets
Total Capital to Risk-
Weighted Assets
As of December 31, 2012:
Tier I Capital
16,611
12.41
5,355
18,286
13.66
10,711
to Average Assets
15,437
9.67
6,387
Tier I Capital to Risk-
Weighted Assets
Total Capital to Risk-
Weighted Assets
15,437
14.78
4,177
16,680
15.97
8,354
4.00
8.00
4.00
4.00
8.00
8,033
6.00
13,388
10.00
7,983
6,265
5.00
6.00
10,442
10.00
(15) Legal Contingencies
Various legal claims arise from time to time in the normal course of business which, in the opinion of
management, will not have a material effect on the Company's financial statements. As of
December 31, 2013, there is no pending or threatened litigation of which management is aware.
(continued)
37
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(16) Earnings Per Share
Earnings per share has been computed on the basis of the weighted-average number of shares of
common stock outstanding. 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):
2013
Weighted-
Average
Shares
Per
Share
Amount
Earnings
2012
Per
Weighted-
Share
Average
Amount
Shares
Earnings
Year Ended December 31:
Basic EPS:
Net earnings
Effect of dilutive securities-
Incremental shares from
assumed conversion of
options (antidilutive in
2012)
Diluted EPS:
$ 1,149
1,497,737
$ 0.77
$ 1,018
1,496,106
$ 0.68
20,881
-
Net earnings
$ 1,149
1,518,618
$ 0.76
$ 1,018
1,496,106
$ 0.68
(17) 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 through February 28, 2014. The Registration Statement has
been extended to March 31, 2014.
(18) Subsequent Events
During March of 2014, the Company determined that a purchased loan participation secured by
commercial real estate in the amount of $1.4 million was impaired. The lead Bank has ordered
an appraisal and the Company has not determined if there is a loss related to this loan.
(continued)
38
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(19) Parent Company Only Financial Information
The Holding Company's unconsolidated financial information follows:
Condensed Balance Sheets
(In thousands)
Assets
Cash
Investment in subsidiary
Other assets
Total assets
Liabilities-
Accounts payable
Stockholders' Equity
Stockholders' equity
Total liabilities and stockholders' equity
Condensed Statements of Operations
(In thousands)
Revenues
Expenses
Income tax benefit
Loss before earnings of subsidiary
Net earnings of subsidiary
Net earnings
39
At December 31,
2012
2013
$ 13
16,296
270
20
15,982
37
$ 16,579
16,039
218
-
16,361
16,039
$ 16,579
16,039
Year Ended
December 31,
2013
2012
$ -
(37)
15
-
(36)
13
(22)
(23)
1,171
1,041
$ 1,149
1,018
(continued)
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(19) Parent Company Only Financial Information, Continued
Condensed Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net earnings
Adjustments to reconcile net earnings to net
cash used in operating activities:
Equity in earnings of subsidiary
Stock issued as compensation
Increase in other assets
Increase in liabilities
Net cash used in operating activities
Net decrease in cash
Cash at beginning of the year
Cash at end of year
Supplemental disclosure of cash flow information-
Noncash items:
Net change in accumulated other comprehensive
(loss) income of subsidiary, net change in unrealized
gain on securities available for sale,
net of tax
Year Ended
December 31,
2013
2012
$ 1,149
1,018
(1,171)
30
(233)
218
(1,041)
-
(13)
-
(7)
(36)
(7)
(36)
20
56
$ 13
20
$ (860)
(82)
Stock-based compensation expense of subsidiary
$ 3
7
40
Dear Friends and Shareholders,
the Company has made.
Since our beginning six years ago, we have never been more excited to report the forward strides
•
Total assets of the Company were $206.5 million as of December 31, 2013, up from
$169.7 million as of December 31, 2012.
• Net Income for the year ended December 31, 2013 was $1.1 million, an increase of
12.9% over the year ended December 31, 2012. The increase was driven by a 25.8%
increase in Loan Interest Income and a 12.9% decrease in Total Interest Expense.
The year yielded many extraordinary accomplishments:
•
Prime Meridian Holding Company became a public company.
• A $15 million stock offering was initiated.*
•
Renovations completed, we now occupy the second floor of our 1897 Capital Circle
NE location, new home to executive management and bank operations.
• A newly designed website – including a robust investor relations area – was released.
• Mobile Banking and Check Deposit Apps, as well as Instant Issue Debit Cards, became
operational.
We submitted our Form S-1 (a formal registration statement filing) and obtained a Securities and
Exchange Commission notice of effectiveness on December 11, 2013. This marked a milestone in
the life of Prime Meridian Holding Company as a public company and the beginning of our public
offering of common stock.
The purpose of the capital raise is to fund organic growth and to position the Company for potential
acquisitions or future expansion over the next 18 months.
In July, Prime Meridian Bank was the featured cover article in an issue of Florida Banking Magazine.
The article recognized our growth and our “earned” reputation for asset quality and the strong
leadership of our executive management team.
Our reputation as a steady, safe and sound institution are by-products of our ongoing efforts to
nurture and imprint our culture as we continue to grow, while adhering to our five core principles of
Passion, Grace, Integrity, Tenacity, and Accountability.
Though the impacts of local, regional, and national forces on our region’s economy are still being
evaluated, we remain optimistic the Company will maintain momentum and the financial strength
We deeply value our original shareholders and appreciate the confidence of our new shareholders
to grow and thrive.
as we move forward.
Warm regards,
Sammie D. Dixon, Jr.
Chief Executive Officer
Richard A. Weidner, CPA
Chairman of the Board
Board of Directors
Prime Meridian Bank
Richard A. Weidner, CPA
Sammie D. Dixon, Jr.
Kathleen C. Jones
Chairman of the Board
CEO and President
Executive Vice President
and CFO
Chris L. Jensen, Jr.
Executive Vice President
and Senior Lender
William D. Crona, CPA
Steven L. Evans
R. Randy Guemple, CPA Robert H. Kirby
Frank L. Langston
Todd A. Patterson, D.O.
L. Collins Proctor, Sr.
Garrison A. Rolle, M.D.
Steven D. Smith
Marjorie R. Turnbull
Rated 5-StaRS BauerFinancial.com
ANNUAL REPORT | 2013
Executive Management
Team
HR Specialist
Caroline Arrant
Marsha Asbury-Turner Associate Relationship Manager
John M. Baker
Edward Blissard
Ennis Blissard
Ingrid Burgett
Amanda Darvill
Sammie D. Dixon, Jr.
Chris Edwards
Georgia Gunn
Tyler Harris
Laura Jo Hewitt
Candice Hopkins
John Hutchison
Chris L. Jensen, Jr.
Kathleen C. Jones
Taylor Joyner
Michele Lawhon
Cody Lewis
Karen Linville
Jill Macmillan
Marketing Director
Courier
Assistant Vice President, Branch Manager
Operations Specialist
Vice President, Associate Relationship Manager
Chief Executive Officer & President
Vice President, Market Leader/Commercial Lender
Loan Operations Specialist
Assistant Vice President, Associate Relationship Manager
Vice President, Lending Officer
Vice President, BSA/Compliance Officer
Compliance
Executive Vice President, Senior Lender
Executive Vice President, Chief Financial Officer
Branch Manager
Head Teller
Vice President, Commercial Lender
Branch Manager
Executive Administrator
Christine Manuri
Bethany Markley
Caleb Martin
Madeline McGrotha
Arden Miller
Jaina Patel
Susan Payne Turner
Sandy Perkins
Robert Peterson
Linda Pettis
Maurice Platt
Philip Pomeroy
Katie Proctor
Tara Sanders
Suzanne Sconyers
Mary Stafford
Teresa Standland
Monté Ward
Mesha Ware
Clint Weber
Tamela Williamson
Assistant Vice President, Associate Relationship Manager
Teller
Teller
Accounting Assistant
Assistant Vice President, Treasury Management
Personal Banker
Executive Vice President, Chief Risk Officer
Vice President, Operations
Teller
Loan Processor
Head Teller
Vice President, Commercial Lender
Senior Vice President, Commercial Banker
Loan Operations Specialist
Personal Banker
Vice President, Business Development
Vice President, Senior Loan Operations Manager
Senior Vice President, Bank Operations
Operations Specialist
Vice President, Credit Administration
Assistant Vice President, Assistant Controller
TryMyBank.com
Sammie D. Dixon, Jr.
CEO and President
Chris L. Jensen, Jr.
Executive Vice President
Senior Lender
Kathleen C. Jones
CFO and Executive Vice
President
MAIn OffICE
1897 Capital Circle NE
Tallahassee, FL 32308
Telephone: (850) 907-2301
TIMBERLAnE OffICE
1471 Timberlane Road, Suite 124
Tallahassee, FL 32312
Telephone: (850) 907-2300