TryMyBank.comMEMBERPRIME MERIDIAN BANKANNUAL REPORT | 2014TeamCaroline Arrant HR SpecialistMarsha Asbury-Turner Associate Relationship ManagerJohn M. Baker Marketing DirectorDenise BellControllerHeather BentonLoan Operations SpecialistEdward Blissard CourierEnnis Blissard Vice President, Branch AdministrationIngrid Burgett Operations SpecialistKevin ByrdHead TellerAmanda Darvill Vice President, Associate Relationship ManagerApril Brueckheimer DeanMortgage Loan OfficerSammie D. Dixon, Jr. Chief Executive Officer & PresidentChris Edwards Vice President, Market Leader/Relationship ManagerJay GraysonTellerGeorgia Gunn Loan Operations SpecialistTyler Harris Assistant Vice President, Associate Relationship ManagerLaura Jo Hewitt Vice President, Relationship ManagerNan HillisExecutive Vice President, Chief Strategy OfficerCandice Hopkins Vice President, BSA/Compliance OfficerBrian JenningsTellerChris L. Jensen, Jr. Executive Vice President, Senior Relationship ManagerAngela JohnsonAccounting AssistantRosalind JohnsonLoan Operations TechnicianKathleen C. Jones Executive Vice President, Chief Financial OfficerTaylor JoynerBranch ManagerShirley LindseyTeller/Personal BankerKaren Linville Branch ManagerJill Macmillan Executive AdministratorChristine Manuri Assistant Vice President, Associate Relationship ManagerCaleb Martin Head TellerArden Miller Assistant Vice President, Treasury ManagementLew MooreMarket PresidentBrianna PagePersonal BankerJaina Patel Personal BankerSusan Payne Turner Executive Vice President, HR\Chief Risk OfficerSandy Perkins Vice President, OperationsRobert Peterson TellerLinda Pettis Loan ProcessorPhilip Pomeroy Vice President, Relationship ManagerChristie PowisMortgage Loan OfficerKatie Proctor Senior Vice PresidentTara Sanders Loan Operations SpecialistSuzanne Sconyers Personal BankerSarah ShifflettData/Items ProcessingChartzi SpellTellerMary Stafford Vice President, Business DevelopmentTeresa Standland Vice President, Loan Operations ManagerMonté Ward Senior Vice President, Bank OperationsMesha Ware Operations SpecialistClint Weber Senior Vice President, Credit AdministrationExecutive ManagementPrime Meridian BankMAIN OFFICE 1897 Capital Circle NETallahassee, FL 32308Telephone: (850) 907-2301TIMBERLANE OFFICE1471 Timberlane Road, Suite 124Tallahassee, FL 32312Telephone: (850) 907-2300Kathleen C. JonesCFO and Executive Vice PresidentSusan Payne TurnerExecutive Vice PresidentChief Risk OfficerNan C. HillisExecutive Vice PresidentChief Strategy OfficerChris L. Jensen, Jr.Executive Vice President Senior LenderSammie D. Dixon, Jr.CEO and President $210.4TOTAL ASSETS OF THE COMPANY AS OF DEC. 31, 201473COMMUNITY ORGANIZATIONS SUPPORTED$5.4CAPITAL (IN MILLIONS) RAISED DURING OUR 2014 STOCK OFFERING50NUMBER OFPRIME MERIDIAN BANK EMPLOYEES20NUMBER OF CONSECUTIVE QUARTERS RANKED 5 STARS BY BAUER FINANCUIALMarjorie R. TurnbullSteven D. Smith Garrison A. Rolle, M.D. L. Collins Proctor, Sr.Todd A. Patterson, D.O. Steven L. EvansWilliam D. Crona, CPAKathleen C. JonesExecutive Vice President and CFOSammie D. Dixon, Jr.CEO and PresidentRichard A. Weidner, CPAChairman of the BoardChris L. Jensen, Jr.Executive Vice President and Senior LenderBoard of DirectorsFrank L. Langston R. Randy Guemple, CPARobert H. KirbyRATED 5-STARS BauerFinancial.comDear Fellow Shareholders,Prime Meridian Bank continued performing at a steady pace in 2014. We grew many important metrics: capital, net income, deposits, loans and – most importantly – our people. We are proud of the core banking team assembled (now 50 employees). They are the force which will drive our planned growth. The team is being led in a culture of strong purpose. We have improved our technology and gained strength from the important challenges we faced.Last year:• Prime Meridian Holding Company (the “Company”) concluded its stock offering and completed its first year as an SEC-reporting company.• We successfully navigated an impaired loan participation, and maintained a strong deposit base, despite the expected loss of a large short term deposit. We ended the year with total assets of $210.4 million on a consolidated basis, compared to $206.4 million at the end of the prior year.For the year ended December 31, 2014, the Company reported net earnings of $1.0 million, or $0.59 per basic and $0.58 per diluted share, compared to net earnings of $1.1 million, or $0.77 per basic and $0.76 per diluted share, for the year ended December 31, 2013. • Proceeds from the Company stock offering and exercised stock options totaled $5.4 million during the year ended December 31, 2014.• The Company realized net earnings of $1.0 million for the year ended December 31, 2014, despite a net loan charge-off of $403,000 in connection with a $1.4 million impaired loan participation.• Net Interest Income grew 19.0% during 2014 to $7.5 million, due to a combination of higher loan balances and interest expense management.• Total assets of the Company were $210.4 million as of December 31, 2014, with a net loan portfolio of $151.9 million.• The Company grew its net loan portfolio by nearly $31 million, an increase of 25.3% over the previous year end.Bank management instituted a purpose initiative, “Banking Done Right, Right Away,” to guide its daily work. Led by the Bank’s Brand Team, we continue to enhance an already-strong culture, “to ensure positive experiences for every client, every day, through every transaction.”On behalf of you — the shareholder — the Company eagerly awaits the new opportunities ahead. We are prepared. It is with great pride that we present the enclosed 2014 Annual Report.Warm regards,Sammie D. Dixon, Jr. Richard A. Weidner, CPAChief Executive Officer Chairman of the BoardP.S. Vote your shares online or by phone. See enclosed Proxy Card for instructions.$154VALUE OF LOANS (IN MILLIONS) FUNDED AS OF DEC. 31, 2014 Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Prime Meridian Holding Company
Tallahassee, Florida:
We have audited the accompanying consolidated balance sheets of Prime Meridian Holding
Company and Subsidiary (the "Company") as of December 31, 2014 and 2013, and the related
consolidated statements of earnings, comprehensive income, stockholders' equity and cash flows for
the years then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the Company at December 31, 2014 and 2013, and the
results of its operations and its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.
HACKER, JOHNSON & SMITH PA
Tampa, Florida
March 26, 2015
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Consolidated Balance Sheets
($ 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 held for sale
Loans, net of allowance for loan losses of $2,098 and $1,734
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
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,
1,941,617 and 1,498,937 issued and outstanding
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Total stockholders' equity
Total liabilities and stockholders' equity
See Accompanying Notes to Consolidated Financial Statements.
2
At December 31,
2014
2013
$ 3,757
3,611
187
5,033
147
28,986
7,555
34,166
42,397
1,871
151,869
186
3,563
362
624
1,613
0
318
44,071
150
121,220
204
3,757
426
516
1,562
218
183
$210,358
206,473
43,148
122,166
18,657
59,011
109,760
14,594
183,971
183,365
2,699
368
453
5,719
636
392
187,491
190,112
0
0
19
20,056
2,738
54
15
14,929
1,732
(315)
22,867
16,361
$ 210,358
206,473
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Consolidated Statements of Earnings
(In thousands, except per share amounts)
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 SBA loans
Mortgage banking revenue
Income from bank-owned life insurance
Gain on sale of securities available for sale
Other income
Total noninterest income
Noninterest expenses:
Salaries and employee benefits
Occupancy and equipment
Professional fees
Advertising
Software maintenance
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
Year Ended December 31,
2014
2013
$ 7,134
922
60
6,076
838
56
8,116
6,970
625
36
661
7,455
747
6,708
138
0
309
51
60
152
710
3,210
899
395
186
178
1,030
646
58
704
6,266
513
5,753
104
246
325
55
14
115
859
2,650
897
128
206
146
834
5,898
4,861
1,520
1,751
514
602
$ 1,006
1,149
$ 0.59
0.77
$ 0.58
0.76
$ 0
0
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
(In thousands)
Net earnings
Other comprehensive gain (loss):
Change in unrealized gain on securities:
Unrealized gain (loss) arising during the year
Reclassification adjustment for realized gains
Net change in unrealized gain (loss)
Year Ended December 31,
2014
2013
$ 1,006
1,149
646
(60)
(1,349)
(14)
586
(1,363)
Deferred income taxes on above change
(217)
503
Total other comprehensive income (loss)
369
(860)
Comprehensive income
$ 1,375
289
See Accompanying Notes to Consolidated Financial Statements.
4
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2014 and 2013
($ in thousands, except share amounts)
Common Stock
Amount
Shares
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income
(Loss)
Total
Stockholders'
Equity
Balance at December 31, 2012
1,496,106
$ 15
14,896
583
545
16,039
Net earnings
0
0
0
1,149
0
1,149
Net change in unrealized gain
on available for sale securities,
net of income tax of $503
Common stock issued as
0
0
0
0
(860)
(860)
compensation to directors
2,831
0
30
0
0
30
Stock-based compensation
0
0
3
0 0
3
Balance at December 31, 2013
1,498,937 15 14,929
1,732
(315)
16,361
Net earnings
0
0
0
1,006
0
1,006
Net change in unrealized gain
on available for sale securities,
net of income tax of $217
0
0
0
0
369
369
Proceeds from sale of common
stock, net of $365 in
offering costs
Proceeds from stock options
exercised
425,619
14,200
Common stock issued as
compensation to directors
2,861
4
0
0
4,951 0 0
4,955
142
32
0
0
0
0
142
32
Stock-based compensation
0 0 2 0 0
2
Balance at December 31, 2014
1,941,617 $ 19
20,056
2,738 54
22,867
See Accompanying Notes to Consolidated Financial Statements.
5
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Consolidated Statements of Cash Flows
(In thousands)
Year Ended
December 31,
2013
2014
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 SBA loans and 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
Decrease (increase) in capitalized offering cost
Net (increase) decrease in other assets
Net (decrease) increase in other liabilities and official checks
$ 1,006 1,149
400
747
(9)
(153)
(60)
453
16,380
(273)
(17,828)
32
2
(51)
(108)
218
(135)
(207)
360
513
(91)
(175)
(14)
455
2,182
(250)
(2,082)
30
3
(55)
(94)
(218)
197
150
Net cash provided by operating activities
414
2,060
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
Maturities and calls of securities
Redemption of Federal Home Loan Bank stock
Proceeds from sale of other real estate owned
Purchase of premises and equipment
Net cash used in investing activities
Cash flows from financing activities:
Net increase in deposits
Decrease in other borrowings
Proceeds from sale of common stock
Proceeds from stock options exercised
Net cash provided by financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
6
(32,259)
(12,364)
8,150
4,587
1,494
18
872
(206)
(28,242)
(11,650)
8,082
1,498
0
5
0
(680)
(29,708)
(30,987)
606
(3,020)
4,955
142
36,636
(41)
0
0
2,683
36,595
(26,611)
7,668
34,166
26,498
$ 7,555
34,166
(continued)
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 transactions
Year Ended
December 31,
2013
2014
$ 659
708
$ 551
452
Accumulated other comprehensive (loss) income, net change
in unrealized gain on sale of securities available for sale,
net of taxes
$ 369
(860)
Loans transferred from Other Real Estate Owned
$ 872
0
See Accompanying Notes to Consolidated Financial Statements.
7
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements
At December 31, 2014 and 2013 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 its 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, 2014 and 2013, 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 $1,026,000 and
$986,000, respectively.
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 or 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.
(continued)
8
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
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. Gains on loans held for sale are reported on the Consolidated Statement
of Earnings under noninterest income in either gain on sale of SBA loans or mortgage banking revenue. At
December 31, 2014 loans held for sale were $1,871,000, compared to $150,000 at December 31, 2013.
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 loans that are 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 of the principal and interest amounts
contractually due are brought current and future payments are reasonably assured.
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 confirms that a loan balance cannot be collected. 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, 2014.
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 thirty-six months. 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 unemployment and reduced credit availability, and a lack of
confidence in the economy. 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)
9
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.
Other Real Estate Owned. Assets acquired through, or in lieu of, loan foreclosure are held for sale and are
initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis.
Subsequent to foreclosure, valuations are periodically performed by management and are carried at the lower of
the new cost basis or fair value less cost to sell. Revenue and expenses from operations and changes in the
valuation allowance are included in other real estate owned expenses.
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, standby letters of credit, and guaranteed accounts. Such financial instruments
are recorded in the consolidated financial statements when they are funded.
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
10
(continued)
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
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, 2014, 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.
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 has established 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.
11
(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 Bank’s management related to values of equipment or properties in the Bank’s market areas.
Management takes into consideration the type, location or occupancy of the equipment or 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).
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).
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.
Mortgage Banking Revenue. Mortgage banking revenue includes gains on the sale of mortgage loans
originated for sale. The Company recognizes mortgage banking revenue from mortgage loans originated in the
consolidated statement of earnings upon sale of the loans.
(continued)
12
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, 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
insubstance 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. Upon adoption, this guidance is not
expected to impact the Bank’s 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 began 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.
(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, 2014:
U.S. Government agency securities
Municipal securities
Mortgage-backed securities
$ 6,943
9,497
25,870
19
113
228
(99)
(79)
(95)
Fair
Value
6,863
9,531
26,003
At December 31, 2013:
U.S. Government agency securities
Municipal securities
Mortgage-backed securities
Asset-backed securities
$ 42,310
360
(273)
42,397
7,290
9,139
26,225
1,916
8
14
253
22
(329)
(269)
(198)
0
6,969
8,884
26,280
1,938
$ 44,570
297
(796)
44,071
13
(continued)
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
Securities available for sale measured at fair value on a recurring basis are summarized below (in thousands):
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)
0
0
0
0
6,863
9,531
26,003
42,397
0
0
0
0
0
6,969
8,884
26,280
1,938
44,071
0
0
0
0
0
0
0
0
0
Fair
Value
$6,863
9,531
26,003
$ 42,397
6,969
8,884
26,280
1,938
$ 44,071
At December 31, 2014:
U.S. Government agency securities
Municipal securities
Mortgage-backed securities
At December 31, 2013:
U.S. Government agency securities
Municipal securities
Mortgage-backed securities
Asset-backed securities
During the year ended December 31, 2014, no securities were transferred in or out of Level I, Level 2 or Level
3. During 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.
For the year ended December 31, 2014, there were no securities measured at fair value on a recurring basis
using significant observable inputs (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.
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-
Transfer into/out of Level 3
Balance, end of year
$ 1,899
(1,899)
$ 0
(continued)
14
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(2) Securities Available for Sale, Continued
The scheduled maturities of securities are as follows (in thousands):
At December 31, 2014:
Due in one to five years
Due five to ten years
Due after ten years
Mortgage-backed securities
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
Amortized
Cost
Fair
Value
$ 2,303
6,908
7,229
25,870
$ 42,310
2,312
6,834
7,248
26,003
42,397
Year Ended
December 31,
2014
2013
$ 4,587
1,498
60
0
14
0
$ 60
14
At December 31, 2014 and 2013, securities with a fair value of $7,054,000 and $8,352,000, respectively, were
pledged as collateral for public deposits and for other borrowings with clients.
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):
At December 31, 2014:
U.S. Government agency securities
Municipal securities
Mortgage-backed securities
At December 31, 2013:
U.S. Government agency securities
Municipal securities
Mortgage-backed securities
Less Than Twelve More Than Twelve
Months Months
Gross
Unrealized
Losses
$ 0
(2)
(47)
Fair
Value
0
269
8,250
Gross
Unrealized
Losses
$ (99)
(77)
(48)
Fair
Value
5,945
3,026
1,705
$ (49)
8,519
$ (224)
10,676
(329)
(269)
(198)
5,984
5,758
12,326
0
0
0
0
0
0
$ (796)
24,068
$ 0
0
15
(continued)
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(2) Securities Available for Sale, Continued
The unrealized losses at December 31, 2014 and 2013 on twenty-two and twenty-five 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
Total real estate mortgage loans
Commercial loans
Consumer and other loans
Total loans
Less:
Net deferred loan fees
Allowance for loan losses
Loans, net
At December 31,
2014
2013
$ 52,661
51,858
15,876
44,796
38,571
12,933
120,395
96,300
30,755
2,877
24,651
2,072
154,027
123,023
(60)
(2,098)
(69)
(1,734)
$ 151,869
121,220
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. The real estate mortgage loans are as follows:
Commercial. 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 non-owner 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 includes 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 loan portfolio.
(continued)
16
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(3) Loans, Continued
Residential and Home Equity. 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 generally sold to the secondary
market.
Construction. Typically, these loans have a construction period of one to two years and the interest is paid
monthly. Once the construction period terminates, some of these loans convert to a term loan with a
maturity of one to five years. 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)
17
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(3) Loans, Continued
Consumer and Other Loans. 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):
Real Estate Mortgage Loans
Residential
and
Home
Equity Construction Commercial Loans Total
Consumer
and
Other
Commercial
Year Ended December 31, 2014:
Beginning balance
Provision for loan losses
Net (charge-offs) recoveries
$ 604
502
(404)
545
146
0
175
36
0
387
30
36
23
33
(15)
1,734
747
(383)
Ending balance
$ 702
691
211
453
41
2,098
At December 31, 2014:
Individually evaluated for impairment:
Recorded investment
$ 0
Balance in allowance for loan losses $ 0
Collectively evaluated for impairment:
Recorded investment
$ 52,661
Balance in allowance for loan losses $ 702
0
0
51,858
691
0
0
15,876
211
229
8
92 6
237
98
30,526
361
2,869 153,790
2,000
35
Year Ended December 31, 2013:
Beginning balance
Provision (credit) for loan losses
Net (charge-offs) recoveries
352
252
0
226
319
0
237
(15)
(47)
405
(44)
26
23
1
(1)
1,243
513
(22)
Ending balance
$ 604
545
175
387
23
1,734
At December 31, 2013:
Individually evaluated for impairment:
Recorded investment
$ 0
Balance in allowance for loan losses $ 0
Collectively evaluated for impairment:
Recorded investment
$ 44,796
Balance in allowance for loan losses $ 604
36
23
38,685
522
0
0
12,933
175
346
82
0
0
382
105
24,305
305
2,072 122,791
1,629
23
(continued)
18
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(15) Loans, Continued
The following summarizes the loan credit quality (in thousands):
Real Estate Mortgage Loans
Residential
and
Home
Equity Construction
Consumer
and
Commercial Other
Loans
Loans
Total
Commercial
Credit Risk Profile by Internally Assigned Grade:
At December 31, 2014:
Grade:
Pass
Special mention
Substandard
Doubtful
Loss
$ 50,654 47,357
3,065
0
1,436
2,007
0
0
0
0
15,714
154
8
0
0
30,006
520
229
0
0
2,801 146,532
3,807
3,688
0
0
68
8
0
0
Total
$ 52,661 51,858
15,876 30,755
2,877 154,027
At December 31, 2013:
Grade:
Pass
Special mention
Substandard
Doubtful
Loss
40,901
1,804
2,091
0
0
36,461
1,346
764
0
0
12,528
396
9
0
0
23,919
509
223
0
0
1,914 115,723
4,093
3,207
0
0
38
120
0
0
Total
$ 44,796 38,571
12,933
24,651
2,072 123,023
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 non-owner occupied commercial real estate loans and commercial
relationships in excess of $500,000 are reviewed at least annually. The Company determines the appropriate
loan grade during the renewal process and reevaluates the loan grade in situations when a loan becomes past
due.
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.
19
(continued)
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(15) Loans, Continued
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 necessarily preclude the potential for recovery, but rather
signifies it is no longer practical to defer writing off the asset.
At December 31, 2014, there was one loan over thirty days past due, no loans past due ninety days or more but
still accruing and two loans on nonaccrual. Age analysis of past-due loans at December 31, 2014 and 2013 is as
follows (in thousands):
Accruing Loans
30-59
Days
Greater
60-89 Than 90 Total
Past
Days
Days
Past Due Past Due Past Due Due Current
Nonaccrual Total
Loans
Loans
At December 31, 2014:
Real estate mortgage:
Commercial
Residential and home equity
Construction
Commercial
Consumer/other
Total
At December 31, 2013:
Real estate mortgage:
Commercial
Residential and home equity
Construction
Commercial
Consumer/other
Total
$ 0
0
0
18
0
$ 18
0
0
0
0
0
0
0
0
0
0
0
0
0
52,661
0
51,858
0
15,876
18
30,566
2,877
0
0 153,838
0
0
0
171
0
171
52,661
51,858
15,876
30,755
2,877
154,027
0
0
0
38
0
$ 38
0
0
0
0
0
0
0
0
0
0
0
0
44,796
0
38,571
0
12,933
0
24,613
0
0
2,072
0 122,985
0
0
0
0
0
0
44,796
38,571
12,933
24,651
2,072
123,023
(continued)
20
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(15) Loans, Continued
The following summarizes the amount of impaired loans (in thousands):
With No Related
Allowance Recorded
Unpaid
Contractual
With an Allowance Recorded
Unpaid
Contractual
Unpaid
Contractual
Total
At December 31, 2014:
Recorded Principal
Investment Balance
Recorded
Investment Balance Allowance
Principal Related
Recorded Principal Related
Investment Balance Allowance
Commercial loans
Consumer
Total
$ 0
0
$ 0
0
0
0
229
8
237
229
8
237
92
6
98
229
8
237
229 92
8 6
237 98
At December 31, 2013:
Residential and home equity
Commercial loans
Total
$ 0
0
27 27
27
$ 27
36
319
355
36
319
355
23
82
105
36
346
382
36 23
346 82
382 105
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, 2014:
Commercial
Consumer
Total
Year Ended December 31, 2013:
Residential and home equity
Commercial
Total
Interest
Interest
Average
Recorded
Income
Income
Investment Recognized Received
$ 244
8
14
1
14
1
$ 252
15
15
36
298
3
23
3
23
$ 334
26
26
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, 2014 are as
follows (in thousands):
Commercial loans
Consumer loans
Total
At Year End
Fair
Value
$ 118
2
120
Level 1 Level 2
0
0
0
0
0
0
Total
Level 3 Losses
20
118
6
2
26
120
Losses
Recorded
During the
Year
20
6
26
(continued)
21
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(15) Loans, Continued
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.
(15) 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,
2014
2013
$ 400
2,399
364
778
1,399
5,340
400
2,387
364
706
1,276
5,133
Less accumulated depreciation and amortization
(1,777)
(1,376)
Premises and equipment, net
$ 3,563
3,757
The Company leases certain office facilities under an operating lease which expires in 2017. This lease requires
monthly lease payments and common area maintenance charges and has options to renew. This lease contains
escalation clauses during the term of the lease. Rent expense under this operating lease during the years ended
December 31, 2014 and 2013 was $88,000 and $114,000, respectively. Future minimum rental commitments
under this noncancelable lease are as follows (in thousands):
Year Ending December 31,
2015
2016
2017
2018
(15) Deposits
Amount
$ 85
85
91
98
$ 359
The aggregate amount of time deposits with a minimum denomination of $100,000 was approximately $15.2
million and $10.9 million at December 31, 2014 and 2013, respectively.
A schedule of maturities of time deposits follows (in thousands):
Year Ending
December 31,
2015
2016
2017
Amount
$ 10,727
7,420
510
$ 18,657
(continued)
22
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(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,
2014
2013
$ 2,699
3,592
1.0%
5,733
3,558
5,719
5,789
1.0%
5,813
5,882
The Company has pledged collateral to the Federal Home Loan Bank of Atlanta (“FHLB”) for future advances
which 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 $30.7 million as of December
31, 2014 from the FHLB. There were no advances outstanding at December 31, 2014 or 2013. The Company
also has available credit of $8.7 million in lines of credit with correspondent banks. All draws under these lines
are subject to approval by the correspondent bank.
(7) Income Taxes
The components of the income taxes are as follows (in thousands):
Year Ended
December 31,
2013
2014
$ 560
107
658
119
667
777
(123)
(30)
(146)
(29)
(153)
(175)
$ 514
602
(continued)
Current:
Federal
State
Total current
Deferred:
Federal
State
Total deferred
Total income taxes
23
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(7) Income Taxes, Continued
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):
Income taxes at statutory rate
Increase (decrease) resulting from:
State taxes, net of Federal tax benefit
Tax-exempt income
Other nondeductible expenses
Year Ended December 31,
2013
2014
% of
Pretax
% of
Pretax
Amount Earnings Amount Earnings
$ 517 34.0%
$ 595
34.0%
51
(42)
3.3
(2.7)
(12) (0.8)
60
(30)
(23)
3.4
(1.7)
(1.3)
$ 514 33.8% $ 602 34.4%
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,
2014
2013
$ 710
116
18
0
60
517
130
18
184
63
904
912
(139)
(109)
(261)
(33)
(145)
(88)
(253)
0
(542)
(486)
Net deferred tax asset (liability)
$ 362
426
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 2011.
24
(continued)
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, standby letters of credit, and guaranteed accounts 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 written conditional commitments issued by
the Company to guarantee the performance of a client 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. 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. The Bank may hold
collateral supporting those commitments, and at December 31, 2014 such collateral amounted to $945,000.
Guaranteed accounts are irrevocable standby letters of credit issued by us to guarantee a client’s credit line with
our third party credit card company, First Arkansas Bank & Trust. As a part of this agreement, we are
responsible for the established credit limit on certain accounts plus 10%. The maximum potential amount of
future payments we could be required to make is represented by the dollar amount disclosed in the table below.
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, 2014 are as follows (in thousands):
Commitments to extend credit
Construction loans in process
Unused lines of credit
Standby letters of credit
Guaranteed Accounts
$ 2,508
$ 7,265
$ 23,020
$ 1,225
$ 113
25
(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 108,400. All options granted have ten-year terms and vest over periods up to five years. As of
December 31, 2014, there were 30,305 shares available for grant.
A summary of the activity in the Company’s Stock Option Plan is as follows:
Outstanding at December 31, 2012
Options granted
Options forfeited
Weighted-
Weighted- Average
Average Remaining Aggregate
Exercise Contractual Intrinsic
Value
Term
Price
$ 10.00
10.72
10.00
Number of
Options
136,000
2,500
(4,500)
Outstanding at December 31, 2013
134,000
10.01
Options exercised
Options forfeited
(14,200)
10.00
(11,400) $ 10.00
Outstanding at December 31, 2014
108,400
$ 10.01
4.2 years
Exercisable at December 31, 2014
105,400 10.00
4.1 years $263,500
At December 31, 2014, there was $3,000 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-one months. The total fair value of shares vesting and recognized as
compensation expense was $2,000 and $3,000 in the years ended December 31, 2014 and 2013, respectively.
The associated income tax benefit recognized was $0 and $1,000 for the years ended December 31, 2014 and
2013, respectively.
(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. Contributions to the plan for the years ended December 31, 2014 and
2013 were $102,000 and $65,000, respectively.
(continued)
26
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(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,
2013
2014
$ 3,734
885
(1,605)
3,558
354
(178)
$ 3,014
3,734
$ 16,510
13,292
The Company leases an office facility from a related party. Rent expense under the operating lease during the
years ended December 31, 2014 and 2013 was $88,000 and $114,000, 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 reviews during the years ended December 31, 2014 and 2013 were $20,000 and $24,000, respectively.
(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 held 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
3
3
3
3
3
3
3
At December 31,
2013
2014
Fair
Carrying
Fair
Carrying
Value
Amount
Value
Amount
$ 7,555
42,397
1,871
151,869
186
624
7,555
42,397
1,923
148,588
186
624
34,166
44,071
150
121,220
204
516
34,166
44,071
150
121,947
204
516
183,971
2,699
184,057
2,699
183,365
5,719
183,435
5,719
0
0
0
0
(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.
(continued)
27
PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(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.
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, 2014, that the Bank meets all capital adequacy requirements to
which it is subject
As of December 31, 2014, the Bank is 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 percentages 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 percentages 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, 2014:
Tier I Capital
to Average Assets
$ 19,589
9.52% $ 8,227
4.00%
$ 10,284
5.00%
Tier I Capital to Risk-
Weighted Assets
Total Capital to Risk-
Weighted Assets
As of December 31, 2013:
Tier I Capital
19,589
12.84
6,102
21,498
14.09
12,206
to Average Assets
16,611
8.41
7,898
Tier I Capital to Risk-
Weighted Assets
Total Capital to Risk-
Weighted Assets
16,611
12.41
5,355
18,286
13.66
10,711
4.00
8.00
4.00
4.00
8.00
9,154
6.00
15,257
10.00
9,872
8,033
5.00
6.00
13,388
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, 2014,
there is no pending or threatened litigation of which management is aware.
(continued)
28
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):
2014
Weighted-
Average
Shares
Per
Share
Amount
Earnings
2013
Per
Share
Amount
Weighted-
Average
Shares
Earnings
Year Ended December 31:
Basic EPS:
Net earnings
Effect of dilutive securities-
Incremental shares from
assumed conversion of
options
Diluted EPS:
Net earnings
$ 1,006 1,709,746
$ 0.59
$ 1,149
1,497,737
$ 0.77
16,916
20,881
$ 1,006
1,726,662
$ 0.58
$ 1,149
1,518,618
$ 0.76
(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 offered up to 1,200,000 shares of common stock for $12.50 per share
through December 31, 2014, when the Stock Offering was closed. The Company sold 425,619 shares and
raised $4.96 million, net of expenses.
(18) Reclassification
Certain noninterest expenses were reclassified from other noninterest expense to advertising for the year ended
December 31, 2013 to conform to 2014 presentation. The reclassification of expenses had no effect on net
earnings.
29
(continued)
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
At December 31,
2013
2014
$ 3,132
19,643
92
13
16,296
270
$ 22,867
16,579
0
218
22,867
16,361
$ 22,867
16,579
Year Ended
December 31,
2014
2013
$ 0
(110)
41
0
(37)
15
(69)
(22)
1,075
1,171
$ 1,006
1,149
(continued)
30
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)
Year Ended
December 31,
2014
2013
$ 1,006
1,149
(1,075)
32
177
(218)
(1,171)
30
(233)
218
(78)
(7)
4,955
142
0
0
5,097
0
300
(2,200)
0
0
(1,900)
0
3,119
(7)
13
20
$ 3,132
13
$ 369
(860)
$ 2
3
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 (decrease) in other assets
(Decrease) increase in liabilities
Net cash used in operating activities
Cash flow from financing activities:
Proceeds from sale of common stock
Proceeds from stock options exercised
Net cash provided by financing activities
Cash flow from investment activities:
Cash dividend received from bank subsidiary
Capital infusion in subsidiary
Net cash provided by investing 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
Stock-based compensation expense of subsidiary
31
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$210.4TOTAL ASSETS OF THE COMPANY AS OF DEC. 31, 201473COMMUNITY ORGANIZATIONS SUPPORTED$5.4CAPITAL (IN MILLIONS) RAISED DURING OUR 2014 STOCK OFFERING50NUMBER OFPRIME MERIDIAN BANK EMPLOYEES20NUMBER OF CONSECUTIVE QUARTERS RANKED 5 STARS BY BAUER FINANCUIALMarjorie R. TurnbullSteven D. Smith Garrison A. Rolle, M.D. L. Collins Proctor, Sr.Todd A. Patterson, D.O. Steven L. EvansWilliam D. Crona, CPAKathleen C. JonesExecutive Vice President and CFOSammie D. Dixon, Jr.CEO and PresidentRichard A. Weidner, CPAChairman of the BoardChris L. Jensen, Jr.Executive Vice President and Senior LenderBoard of DirectorsFrank L. Langston R. Randy Guemple, CPARobert H. KirbyRATED 5-STARS BauerFinancial.comDear Fellow Shareholders,Prime Meridian Bank continued performing at a steady pace in 2014. We grew many important metrics: capital, net income, deposits, loans and – most importantly – our people. We are proud of the core banking team assembled (now 50 employees). They are the force which will drive our planned growth. The team is being led in a culture of strong purpose. We have improved our technology and gained strength from the important challenges we faced.Last year:• Prime Meridian Holding Company (the “Company”) concluded its stock offering and completed its first year as an SEC-reporting company.• We successfully navigated an impaired loan participation, and maintained a strong deposit base, despite the expected loss of a large short term deposit. We ended the year with total assets of $210.4 million on a consolidated basis, compared to $206.4 million at the end of the prior year.For the year ended December 31, 2014, the Company reported net earnings of $1.0 million, or $0.59 per basic and $0.58 per diluted share, compared to net earnings of $1.1 million, or $0.77 per basic and $0.76 per diluted share, for the year ended December 31, 2013. • Proceeds from the Company stock offering and exercised stock options totaled $5.4 million during the year ended December 31, 2014.• The Company realized net earnings of $1.0 million for the year ended December 31, 2014, despite a net loan charge-off of $403,000 in connection with a $1.4 million impaired loan participation.• Net Interest Income grew 19.0% during 2014 to $7.5 million, due to a combination of higher loan balances and interest expense management.• Total assets of the Company were $210.4 million as of December 31, 2014, with a net loan portfolio of $151.9 million.• The Company grew its net loan portfolio by nearly $31 million, an increase of 25.3% over the previous year end.Bank management instituted a purpose initiative, “Banking Done Right, Right Away,” to guide its daily work. Led by the Bank’s Brand Team, we continue to enhance an already-strong culture, “to ensure positive experiences for every client, every day, through every transaction.”On behalf of you — the shareholder — the Company eagerly awaits the new opportunities ahead. We are prepared. It is with great pride that we present the enclosed 2014 Annual Report.Warm regards,Sammie D. Dixon, Jr. Richard A. Weidner, CPAChief Executive Officer Chairman of the BoardP.S. Vote your shares online or by phone. See enclosed Proxy Card for instructions.$154VALUE OF LOANS (IN MILLIONS) FUNDED AS OF DEC. 31, 2014 TryMyBank.comMEMBERPRIME MERIDIAN BANKANNUAL REPORT | 2014TeamCaroline Arrant HR SpecialistMarsha Asbury-Turner Associate Relationship ManagerJohn M. Baker Marketing DirectorDenise BellControllerHeather BentonLoan Operations SpecialistEdward Blissard CourierEnnis Blissard Vice President, Branch AdministrationIngrid Burgett Operations SpecialistKevin ByrdHead TellerAmanda Darvill Vice President, Associate Relationship ManagerApril Brueckheimer DeanMortgage Loan OfficerSammie D. Dixon, Jr. Chief Executive Officer & PresidentChris Edwards Vice President, Market Leader/Relationship ManagerJay GraysonTellerGeorgia Gunn Loan Operations SpecialistTyler Harris Assistant Vice President, Associate Relationship ManagerLaura Jo Hewitt Vice President, Relationship ManagerNan HillisExecutive Vice President, Chief Strategy OfficerCandice Hopkins Vice President, BSA/Compliance OfficerBrian JenningsTellerChris L. Jensen, Jr. Executive Vice President, Senior Relationship ManagerAngela JohnsonAccounting AssistantRosalind JohnsonLoan Operations TechnicianKathleen C. Jones Executive Vice President, Chief Financial OfficerTaylor JoynerBranch ManagerShirley LindseyTeller/Personal BankerKaren Linville Branch ManagerJill Macmillan Executive AdministratorChristine Manuri Assistant Vice President, Associate Relationship ManagerCaleb Martin Head TellerArden Miller Assistant Vice President, Treasury ManagementLew MooreMarket PresidentBrianna PagePersonal BankerJaina Patel Personal BankerSusan Payne Turner Executive Vice President, HR\Chief Risk OfficerSandy Perkins Vice President, OperationsRobert Peterson TellerLinda Pettis Loan ProcessorPhilip Pomeroy Vice President, Relationship ManagerChristie PowisMortgage Loan OfficerKatie Proctor Senior Vice PresidentTara Sanders Loan Operations SpecialistSuzanne Sconyers Personal BankerSarah ShifflettData/Items ProcessingChartzi SpellTellerMary Stafford Vice President, Business DevelopmentTeresa Standland Vice President, Loan Operations ManagerMonté Ward Senior Vice President, Bank OperationsMesha Ware Operations SpecialistClint Weber Senior Vice President, Credit AdministrationExecutive ManagementPrime Meridian BankMAIN OFFICE 1897 Capital Circle NETallahassee, FL 32308Telephone: (850) 907-2301TIMBERLANE OFFICE1471 Timberlane Road, Suite 124Tallahassee, FL 32312Telephone: (850) 907-2300Kathleen C. JonesCFO and Executive Vice PresidentSusan Payne TurnerExecutive Vice PresidentChief Risk OfficerNan C. HillisExecutive Vice PresidentChief Strategy OfficerChris L. Jensen, Jr.Executive Vice President Senior LenderSammie D. Dixon, Jr.CEO and President