Prime Meridian Holding (PMHG) 8-K Prime Meridian Holding Company Reports

Exhibit 99.1

FOR IMMEDIATE RELEASE

Prime Meridian Holding Company Reports

fourth Quarter and year end 2018 Results

TALLAHASSEE, FL., January 30, 2019 (GLOBE NEWSWIRE) – Prime Meridian Holding Company (OTCQX: PMHG) the parent bank holding company for Prime Meridian Bank today announced unaudited financial results for the quarter and year ended December 31, 2018. The Company reported net earnings of $1.3 million, or $0.40 per basic and diluted share, for the quarter ended December 31, 2018, compared to net earnings of $694,000, or $0.21 per basic and diluted share, for the quarter ended December 31, 2017. For the year ended December 31, 2018, the Company reported net earnings of $4.0 million, or $1.29 per basic and diluted share, compared to $2.8 million, or $1.04 per basic and diluted share, for the same period a year ago.

The Company also announced today that its Board of Directors has declared an annual cash dividend of $0.12 per share on the Company’s common stock. The dividend is payable on March 5, 2019 to shareholders of record on February 14, 2019.

“Our tenth year was record-breaking for Prime Meridian Bank,” said Sammie D. Dixon, Jr., Vice Chairman, President and CEO. “We surpassed $400 million in assets with a year-over-year increase in net income of 43.5%, inclusive of the beneficial effect of the 2017 tax reduction legislation.”

He also cited the continued consolidation of competitors, both in the immediate area and throughout the state of Florida, as, “growth opportunities for us. Our reputation and culture of relationship banking stand in contrast to the recent changes in our industry,” he said.

Another by-product of the reduction in number of community banks is, “We gain good team members to build bench strength,” Dixon continued.

Despite some uncertainty in the economy, Dixon is steadfast the Bank’s credit culture does not change. “If the structure of a loan does not align with our strategy, it won’t happen,” he said. “We are not interested in growth for growth’s sake.”

“In the competitive landscape we stay the course on everything we do,” Dixon continued. “We remain true to our model and the principles on which we were founded over 10 years ago.”

Fourth Quarter 2018 Highlights

● On November 20, 2018, Prime Meridian Bank filed application with -- and subsequently received approval from -- the FDIC to establish a full-service branch in Lakeland, Florida at 3340 South Florida Avenue. Details of the branch and its operational staff will be made available during the first quarter of 2019.

● October’s Hurricane Michael was a significant event in Florida. Fortunately, the Bank's staff was mostly unaffected and its offices were not damaged. Some of our financed properties in the panhandle, however, did sustain damage though not resulting in material financial effects to the Bank. Unfortunately, some institutions in neighboring counties did not fare as well. After the storm, senior management engaged in discussions with other banks that suffered losses in order to improve our disaster recovery planning for future storms.

● In the fourth quarter the Bank set up and began testing Certificate of Deposit Account Registry Service (CDARS) and Insured Cash Sweep (ICS) accounts – two deposit tools which allow our large depositors access to multi-million-dollar FDIC insurance. These tools are intended to boost an already strong deposit base for the Bank.

● In Leon County throughout 2018 Prime Meridian Bank consistently maintained a solid third place position in both mortgage dollar volume and number of mortgage originations. “We are very proud of our mortgage team,” said Dixon.

Full Year 2018 Highlights 

Financial Highlights - Prime Meridian Holding Company and Subsidiary
(dollars in thousands except per share amounts)
	Year Ended December 31,
	2018			2017
Net Earnings	$	4,042		$	2,817
Book value per share	$	16.19		$	15.06
Earnings per share - Basic	$	1.29		$	1.04
Earnings per share - Diluted	$	1.29		$	1.04
Weighted-average basic shares outstanding		3,125,689			2,704,382
Weighted-average diluted shares outstanding		3,131,546			2,711,699
Return on average assets		1.07	%		0.85	%
Return on average equity		8.43	%		7.17	%
Average yield on earning assets		4.44	%		4.05	%
Net interest margin		3.81	%		3.68	%
Efficiency ratio(1)		61.58	%		62.80	%
Nonpeforming assets/total assets		0.09	%		0.04	%

¹ Efficiency Ratio represents noninterest expense divided by the sum of net interest income plus noninterest income.

Income Statement

Earnings Summary
(dollars in thousands)
							Change 4Q18 vs.
	4Q18		3Q18		4Q17		3Q18			4Q17			YE18		YE17		Change YOY
Net Interest Income	$	3,666	$	3,610	$	3,121		1.6	%		17.5	%	$	13,927	$	11,770		18.3	%
Provision for Loan Losses		47		135		69		-65.2	%		-31.9	%		591		256		130.9	%
Noninterest income		344		338		304		1.8	%		13.2	%		1,306		1,153		13.3	%
Noninterest expense		2,384		2,458		2,112		-3.0	%		12.9	%		9,380		8,115		15.6	%
Income Taxes		311		337		550		-7.7	%		-43.5	%		1,220		1,735		-29.7	%
Net Income	$	1,268	$	1,018	$	694		24.6	%		82.7	%	$	4,042	$	2,817		43.5	%

The Company reported record net earnings for the quarter and year ended December 31, 2018, boosted by organic loan growth, higher transactional volume for debit cards, and a lower corporate tax rate.

Several positive macroeconomic factors benefitted the Company (and most banks) in 2018. In December, 2018, the Federal Reserve increased rates for the ninth time since December, 2015, when the current tightening cycle began. The Bank’s increased volume of new loan production has outpaced the increases in its funding costs, thus improving net interest income. Additionally, the Tax Cuts and Job Acts of 2017 resulted in a lower corporate income tax rate in 2018, which was a positive stimulus to most U.S. companies. On a more local level, continued consolidation in our immediate market provided opportunities for the Company to capitalize on its relationship banking model.

Interest Income

Interest income
(dollars in thousands)							Change 4Q18 vs.
	4Q18		3Q18		4Q17		3Q18			4Q17			YE18		YE17		Change YOY
Interest income:
Loans	$	3,854	$	3,798	$	3,091		1.5	%		24.7	%	$	14,469	$	11,589		24.9	%
Securities		280		276		274		1.5	%		2.2	%		1,131		983		15.1	%
Other		280		198		108		41.4	%		159.3	%		634		379		67.3	%
Total interest income	$	4,414	$	4,272	$	3,473		3.3	%		27.1	%	$	16,234	$	12,951		25.3	%

Organic growth in the Company’s loan portfolio and higher yields drove the increase in interest income over the third quarter of 2018 and the fourth quarter of 2017. Other interest income was fueled by increased investment in federal funds sold and the higher rate paid on such funds.

Year over year, the Company’s average net loan portfolio increased $43.1 million, or 17.9%. This organic growth, in conjunction with higher average yields, accounted for over 85% of the increase in total interest income. Additional investment in federal funds sold and interest income on mortgage-backed securities also helped drive the increase in interest income.

Interest Expense

Interest expense:
(dollars in thousands)							Change 4Q18 vs.
	4Q18		3Q18		4Q17		3Q18			4Q17			YE18		YE17		Change YOY
Total interest expense	$	748	$	662	$	352		13.0	%		112.5	%	$	2,307	$	1,181		95.3	%

The increase in the Company’s cost of funds quarter over quarter and year over year was driven by growing balances of time deposits and money market accounts and higher rates paid on those deposits. For the year ended December 31, 2018, the average balance of interest-bearing deposits increased $31.5 million, or 14.3%, while the average rates paid on deposits increased 38 basis points.

Net Interest Margin

Margin Analysis
(dollars in thousands)										Change 4Q18 vs.
	4Q18			3Q18			4Q17			3Q18			4Q17			YE18			YE17			Change YOY
Average balance interest-earnings assets	$	390,867		$	382,258		$	337,359		$	8,609		$	53,508		$	365,843		$	319,980		$	45,863
Average yield on interest-earning assets		4.52	%		4.47	%		4.12	%		0.05	%		0.40	%		4.44	%		4.05	%		0.39	%
Average balance interest-bearing liabilities	$	272,243		$	263,837		$	228,418		$	8,406		$	43,825		$	251,586		$	220,053		$	31,533
Average yield on interest-bearing liabilities		1.10	%		1.00	%		0.62	%		0.10	%		0.48	%		0.92	%		0.54	%		0.38	%
Net interest margin		3.75	%		3.78	%		3.70	%		-0.03	%		0.05	%		3.81	%		3.68	%		0.13	%

Compared to the prior quarter, the margin compression in the fourth quarter of 2018 is explained by a change in the earning assets mix, with a higher balance of federal funds sold in the fourth quarter.

Comparing the quarter and year ended December 31, 2018 to comparable periods in 2017, the improvement in net interest margin was primarily driven by higher loan yields and a change in the earning assets mix, with a higher percentage of loans in 2018. The combination of these two events outpaced the increase in interest-bearing liabilities and the cost of funds.

Provision for Loan Losses

The provision for loan losses was $47,000 for the quarter ended December 31, 2018, representing an $88,000, or 65.2%, decrease over the quarter ended September 30, 2018, due to nominal loan growth of $1.1 million in the fourth quarter. Compared to the fourth quarter of 2017, the provision for loan losses decreased $22,000, or 31.9%. This decline is attributed to higher loan growth from the third quarter to the fourth quarter in 2017, when compared to the same time periods in 2018.

For the year ended December 31, 2018, the provision for loan losses increased $335,000, or 130.9%, due to the Company’s 15.9% increase in net loans and additional reserves taken on impaired loans during the year.

Noninterest Income

Noninterest income
(dollars in thousands)							Change 4Q18 vs.
	4Q18		3Q18		4Q17		3Q18			4Q17			YE18		YE17		Change YOY
Service charges and fees on deposit accounts	$	74	$	83	$	81		-10.8	%		-8.6	%	$	333	$	322		3.4	%
Mortgage banking revenue		108		124		119		-12.9	%		-9.2	%		447		435		2.8	%
Income from bank-owned life insurance		34		11		11		209.1	%		209.1	%		66		46		43.5	%
Other income		128		120		93		6.7	%		37.6	%		460		350		31.4	%
Total noninterest income	$	344	$	338	$	304		1.8	%		13.2	%	$	1,306	$	1,153		13.3	%

Noninterest income stayed relatively flat from the third quarter of 2018 to the fourth quarter of 2018. The modest decline in service charges and fees on deposit accounts is mostly due to lower non-sufficient funds fees while the decrease in mortgage banking revenue is attributed to a modest slowdown in secondary market loan production and exceptionally strong mortgage loan production in the third quarter of 2018. The Bank’s additional investment in bank-owned life insurance (“BOLI”) resulted in higher income from this asset during the fourth quarter, while income from ATM and debit cards increased other income due to higher transaction volume.

Comparing the fourth quarter of 2017 to 2018, a decline in FHA loan originations led to lower mortgage banking revenue in 2018. The additional investment in BOLI and increased transaction volume for ATM and debit cards in 2018 helped compensate for the declines in mortgage banking revenue and services charges and fees on deposit accounts over the prior year fourth quarter.

Year over year, the driver of noninterest income was the $110,000 increase in other income, which is principally due to a higher volume of ATM and debit card transactions.

Noninterest Expense

Noninterest expense
(dollars in thousands)							Change 4Q18 vs.
	4Q18		3Q18		4Q17		3Q18			4Q17			YE18		YE17		Change YOY
Salaries and employee benefits	$	1,319	$	1,341	$	1,129		-1.6	%		16.8	%		5,106		4,236		20.5	%
Occupancy and equipment		234		237		220		-1.3	%		6.4	%		932		947		-1.6	%
Professional fees		107		86		85		24.4	%		25.9	%		374		320		16.9	%
Marketing		144		193		134		-25.4	%		7.5	%		677		574		17.9	%
FDIC/State Assessment		51		38		35		34.2	%		45.7	%		163		158		3.2	%
Software maintenance, amortization and other		160		167		141		-4.2	%		13.5	%		634		535		18.5	%
Other		369		396		368		-6.8	%		0.3	%		1,494		1,345		11.1	%
Total noninterest expense	$	2,384	$	2,458	$	2,112		-3.0	%		12.9	%	$	9,380	$	8,115		15.6	%

The decrease in noninterest expense from the third quarter of 2018 to the fourth quarter of 2018 is due in large part to the timing of certain expenses, such as marketing expense and incentive accruals. When comparing the fourth quarter and year ended December 31, 2018 to the comparable periods in 2017, the primary driver of noninterest expense growth is higher salaries and employee benefits expense as the Bank continues to grow and add personnel. Full-time equivalent employees increased from 71 at December 31, 2017 to 79 at December 31, 2018. In addition to the 20.5% growth in salaries and employee benefits, modest gains in marketing expense, software, maintenance, amortization, and other expense, and other noninterest expense fueled the growth in noninterest expense.

Income Taxes

The Tax Cuts and Job Acts of 2017 resulted in a lower corporate income tax rate in 2018, thus helping boost net earnings for both the quarter and the year. The effective tax rate was 44.2% for the fourth quarter of 2017 and 38.1% for the year 2017, compared to 19.7% for the fourth quarter of 2018 and 23.2% for the year 2018. Income taxes decreased $239,000 quarter over quarter and $515,000 year over year when comparing 2017 to 2018.

Balance Sheet

At December 31, 2018, the Company reported $401.7 million in total assets, $349.1 million in deposits, and $290.1 million in portfolio net loans. This compares to $347.2 million in total assets, $298.3 million in deposits, and $250.3 million in portfolio net loans at December 31, 2017. Loan growth occurred across all categories, except consumer loans, from December 31, 2017 to December 31, 2018, with the majority of the increase attributed to growth in the residential and home equity category. The composition of the Bank’s loan portfolio was as follows on the indicated dates:

Prime Meridian Holding Company and Subsidiary
Loans by Class
(dollars in thousands )
	December 31, 2018						December 31, 2017
	unaudited						audited
	Amount			% of Total			Amount			% of Total
Commercial real estate	$	82,494			28.1	%	$	79,565			31.5	%
Residential real estate and home equity		121,454			41.4			94,824			37.4
Construction		31,601			10.8			26,813			10.6
Commercial		51,018			17.4			44,027			17.4
Consumer		6,747			2.3			7,742			3.1
Total Loans		293,314			100.0	%		252,971			100.0	%
Net deferred loan costs		460						424
Allowance for loan losses		(3,661	)					(3,136	)
Loans, net	$	290,113					$	250,259

Total stockholders’ equity was $50.8 million, or 12.7% of total assets, at December 31, 2018, compared to $47.0 million, or 13.5% of total assets, at December 31, 2017.  Book value per share increased from $15.06 at December 31, 2017 to $16.19 at December 31, 2018, with 3,138,945 common shares outstanding.

As of December 31, 2018, the Bank was considered to be “well capitalized” with a Tier 1 Leverage Capital Ratio of 9.28%, a 12.90% Common Equity Tier 1 Risk-Based Capital Ratio, a 12.90% Tier 1 Risk-Based Capital Ratio, and a 14.15% Total Risk-Based Capital Ratio.

Asset Quality

Loans totaling $1.2 million were deemed to be impaired under the Bank’s policy at December 31, 2018, while loans totaling $134,000 were deemed to be impaired under the Bank’s policy at December 31, 2017. At December 31, 2018, the Bank had six nonaccrual loans in the aggregate amount of $342,000 compared to two nonaccrual loans totaling $134,000 at December 31, 2017. Net charge-offs totaled $66,000 for the year ended December 31, 2018 and nonperforming assets as a percentage of total assets was 0.09%. Management believes that the allowance for loan losses which was $3.7 million, or 1.25% of gross loans, at December 31, 2018 is adequate.

About Prime Meridian Holding Company

Headquartered in Tallahassee, Florida, Prime Meridian Holding Company offers a broad range of banking services through its wholly owned subsidiary, Prime Meridian Bank, a Florida state-chartered non-member bank. Founded in 2008, the Bank serves its primary market of the Tallahassee Metropolitan Statistical Area, but also serves clients in the North Florida and South Georgia markets. The Bank currently has three office locations, two in Tallahassee, and a third location in Crawfordville, Florida. As of December 31, 2018, the consolidated Company had 79 full-time equivalent employees. For more information about Prime Meridian Holding Company, please visit our website at www.primemeridianbank.com

Tables Follow

Prime Meridian Holding Company and Subsidiary
Condensed Consolidated Statements of Earnings (Unaudited)
(in thousands except per share amounts)
	4Q18		3Q18		2Q18		1Q18		4Q17
Interest income:
Loans	$	3,854	$	3,798	$	3,543	$	3,274	$	3,091
Securities		280		276		287		288		274
Other		280		198		82		74		108
Total interest income		4,414		4,272		3,912		3,636		3,473
Interest Expense-
Deposits		748		662		500		397		352
Total interest expense		748		662		500		397		352
Net interest income		3,666		3,610		3,412		3,239		3,121
Provision for loan losses		47		135		155		254		69
Net interest income after provision for loan losses		3,619		3,475		3,257		2,985		3,052
Noninterest income:
Service charges and fees on deposit accounts		74		83		89		87		81
Mortgage banking revenue		108		124		105		110		119
Income from bank-owned life insurance		34		11		10		11		11
Other income		128		120		110		102		93
Total noninterest income		344		338		314		310		304
Noninterest expense:
Salaries and employee benefits		1,319		1,341		1,218		1,228		1,129
Occupancy and equipment		234		237		226		235		220
Professional fees		107		86		97		84		85
Marketing		144		193		133		207		134
FDIC/State Assessment		51		38		38		36		35
Software maintenance, amortization and other		160		167		159		148		141
Other		369		396		370		359		368
Total noninterest expense		2,384		2,458		2,241		2,297		2,112
Earnings before income taxes		1,579		1,355		1,330		998		1,244
Income taxes		311		337		328		244		550
Net earnings	$	1,268	$	1,018	$	1,002	$	754	$	694
Basic earnings per share	$	0.40	$	0.33	$	0.32	$	0.24	$	0.21
Diluted earnings per share	$	0.40	$	0.33	$	0.32	$	0.24	$	0.21

Prime Meridian Holding Company and Subsidiary
Condensed Consolidated Statements of Earnings
(in thousands, except per share amounts)
	Three Months Ended December 31,				Year Ended December 31,
	unaudited				unaudited		audited
	2018		2017		2018		2017
Interest income:
Loans	$	3,854	$	3,091	$	14,469	$	11,589
Securities		280		274		1,131		983
Other		280		108		634		379
Total interest income		4,414		3,473		16,234		12,951
Interest expense-
Deposits		748		352		2,307		1,181
Total interest expense		748		352		2,307		1,181
Net interest income		3,666		3,121		13,927		11,770
Provision for loan losses		47		69		591		256
Net interest income after provision for loan losses		3,619		3,052		13,336		11,514
Noninterest income:
Service charges and fees on deposit accounts		74		81		333		322
Mortgage banking revenue		108		119		447		435
Income from bank-owned life insurance		34		11		66		46
Other income		128		93		460		350
Total noninterest income		344		304		1,306		1,153
Noninterest expense:
Salaries and employee benefits		1,319		1,129		5,106		4,236
Occupancy and equipment		234		220		932		947
Professional fees		107		85		374		320
Marketing		144		134		677		574
FDIC/State assessment		51		35		163		158
Software maintenance, amortization and other		160		141		634		535
Other		369		368		1,494		1,345
Total noninterest expense		2,384		2,112		9,380		8,115
Earnings before income taxes		1,579		1,244		5,262		4,552
Income taxes		311		550		1,220		1,735
Net earnings	$	1,268	$	694	$	4,042	$	2,817
Earnings per common share:
Basic	$	0.40	$	0.21	$	1.29	$	1.04
Diluted	$	0.40	$	0.21	$	1.29	$	1.04
Cash dividends per common share(1)	$	-	$	-	$	0.10	$	0.07

⁽¹⁾ Annual cash dividends were paid during the first quarters of 2018 and 2017

Prime Meridian Holding Company and Subsidiary
Condensed Consolidated Balance Sheets
(in thousands)
	December 31, 2018		September 30, 2018		June 30, 2018		March 31, 2018		December 31, 2017
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Audited)
Assets
Cash & cash equivalents	$	48,038	$	56,775	$	32,429	$	22,175	$	32,397
Securities available for sale		45,384		44,359		46,657		48,014		49,809
Loans, held for sale		4,767		6,782		7,321		6,394		5,880
Loans, net		290,113		289,022		285,473		272,611		250,259
Federal Home Loan Bank stock		355		355		355		355		316
Premises & equipment, net		4,656		4,699		4,828		4,936		4,872
Accrued interest receivable		1,034		1,028		1,027		985		978
Bank-owned life insurance		6,323		1,789		1,778		1,768		1,757
Other assets		1,032		1,149		1,137		1,060		912
Total Assets	$	401,702	$	405,958	$	381,005	$	358,298	$	347,180
Liabilities and Stockholders' Equity
Noninterest-bearing demand deposits	$	80,097	$	83,296	$	76,564	$	73,736	$	76,216
Savings, NOW and money-market deposits		227,674		230,817		220,363		212,153		200,027
Time deposits		41,296		41,133		34,896		23,393		22,054
Total Deposits		349,067		355,246		331,823		309,282		298,297
Official checks		837		865		602		1,368		1,146
Other liabilities		978		984		644		708		764
Total Liabilities		350,882		357,095		333,069		311,358		300,207
Total Stockholders' Equity		50,820		48,863		47,936		46,940		46,973
Total Liabilities and Stockholders' Equity	$	401,702	$	405,958	$	381,005	$	358,298	$	347,180

Prime Meridian Holding Company and Subsidiary
Financial Highlights (Unaudited)
(dollars in thousands, except per share amounts)
	Q4'18			Q318			Q2'18			Q1'18			Q4'17
Per Share Data:
Earnings per share - Basic	$	0.40		$	0.33		$	0.32		$	0.24		$	0.21
Earnings per share - Diluted	$	0.40		$	0.33		$	0.32		$	0.24		$	0.21
Book value per share	$	16.19		$	15.61		$	15.33		$	15.03		$	15.06
Shares outstanding		3,138,945			3,128,671			3,125,233			3,122,769			3,118,977
Weighted-average basic shares outstanding		3,125,689			3,127,038			3,123,594			3,120,613			3,105,003
Weighted-average diluted shares outstanding		3,131,546			3,130,171			3,126,022			3,123,505			3,107,301
Selected Performance Ratios and Other Data:
Return on average assets(1)		1.07	%		1.03	%		1.10	%		0.86	%		0.80	%
Return on average equity(1)		8.43			8.42			8.49			6.45			5.97
Average yield on earning assets		4.52			4.47			4.46			4.30			4.12
Net interest margin		3.75			3.78			3.89			3.83			3.70
Efficiency ratio(2)		59.45			62.26			60.14			64.72			61.66
Asset Quality Data:
Nonaccrual loans	$	342,000		$	179,000		$	90,000		$	369,000		$	134,000
Total nonperforming assets		342,000			179,000			90,000			369,000			134,000
Nonpeforming assets/total assets		0.09	%		0.04	%		0.02	%		0.10	%		0.04	%
Capital Ratios:
Total Tangible Common Equity / Total Assets (Company)		12.65	%		12.04	%		12.58	%		13.10	%		13.53	%
Tier 1 Leverage Capital Ratio (Bank)		9.28			9.21			9.68			9.69			9.48
Common Equity Tier I Capital Ratio (Bank)		12.90			12.40			12.28			12.38			12.80
Tier I Risk Based Capital Ratio (Bank)		12.90			12.40			12.28			12.38			12.80
Total Capital Ratio (Bank)		14.15			13.65			13.51			13.61			14.01

¹ ROAA and ROAE are annualized

² Efficiency Ratio represents noninterest expense divided by the sum of net interest income plus noninterest income.

CONTACT:            Randy Guemple, Chief Financial Officer

(850) 907-2301

Prime Meridian Holding Company

Website: www.primemeridianbank.com