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HomeAll NewsMost read newsBusiness Leaders Biography
Birthday : 02/23/1965
Place of birth : Houston (Texas) - United States
Biography : Mr. Michael S. Dell is a Strategic Advisor at MSD Acquisition Corp., a Chairman at VMware, Inc., a N
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PRIME MERIDIAN : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/11/2021 | 09:59am EDT
Management's discussion and analysis is presented to aid the reader in
understanding and evaluating the financial condition and results of operations
of Prime Meridian Holding Company, and its wholly-owned subsidiary, Prime
Meridian Bank. This discussion and analysis should be read with the condensed
consolidated financial statements, the footnotes thereto, and the other
financial data included in this report and in our annual report on Form 10-K for
the year ended December 31, 2020. Results of operations for the three months
ended March 31, 2021 are not necessarily indicative of results that may be
attained for any other period. The following discussion and analysis present our
financial condition and results of operations on a consolidated basis, however,
because we conduct all of our material business operations through the Bank, the
discussion and analysis relate to activities primarily conducted at the
subsidiary level.



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



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



  • local, regional, and national economic and business conditions;


  • banking laws, compliance, and the regulatory environment;

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

    markets;


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


  • litigation, tax, and other regulatory matters;

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

    area;


  • quality and composition of our loan or investment portfolios;


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


  • competition;

• attraction and retention of key personnel, including our management team and

directors;

• technology, product delivery channels, and end user demands and acceptance of

    new products;


  • consumer spending, borrowing and savings habits;


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

• natural disasters, public unrest, adverse weather, pandemics, public health,

and other conditions impacting our or our clients' operations;

• other economic, competitive, governmental, regulatory, or technological

factors affecting us; and

• application and interpretation of accounting principles and guidelines.





                                       25
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GENERAL



Prime Meridian Holding Company ("PMHG") was incorporated as a Florida
corporation on May 25, 2010, and is the one-bank holding company for, and sole
shareholder of, Prime Meridian Bank (the "Bank") (collectively, the "Company").
The Bank opened for business on February 4, 2008 and was acquired by PMHG on
September 16, 2010. PMHG has no significant operations other than owning the
stock of the Bank. The Bank offers a broad array of commercial and retail
banking services through four full-service offices located in Tallahassee,
Crawfordville, and Lakeland, Florida and through its online banking platform.



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



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

                                                                       At or for the
                                                 Three Months              Year               Three Months
                                                    Ended                  Ended                 Ended
                                                March 31, 2021       December 31, 2020       March 31, 2020
Average equity as a percentage of average
assets                                                     9.00 %                  9.64 %              11.02 %
Equity to total assets at end of period                    8.48                    9.31                10.39
Return on average assets(1)                                1.32                    0.75                 0.56
Return on average equity(1)                               14.72                    7.77                 5.09
Noninterest expense to average assets(1)                   1.95                    2.01                 2.30
Nonperforming loans to total loans at end of
period                                                     0.16                    0.26                 0.61
Nonperforming assets to total assets                       0.11                    0.19                 0.57



(1) Annualized for the three months ended March 31, 2021 and 2020



CRITICAL ACCOUNTING POLICIES



Our critical accounting policies which involve significant judgments and
assumptions that have a material impact on the carrying value of certain assets
and liabilities and used in preparation of the Condensed Consolidated Financial
Statements as of March 31, 2021, have remained unchanged from the disclosures
presented in our Annual Report on Form 10-K for the year ended December 31,
2020.



COVID-19 RESPONSE



The COVID-19 pandemic has negatively impacted the global economy, disrupted
global supply chains, lowered equity market valuations, created significant
volatility and disruption in financial markets and significantly increased
unemployment levels.  The extent to which the COVID-19 pandemic impacts our
business, results of operations, and financial condition, as well as our
regulatory capital and liquidity ratios, will depend on future developments, the
duration of the pandemic, the effectiveness and adoption of available vaccines,
and the actions taken by governmental authorities to slow the spread of the
disease or to mitigate its effects.  At this time, we continue to monitor and
adhere to national guidelines and local safety ordinances to ensure the safety
of our clients and employees.


Management expects that credit quality deterioration directly related to the
pandemic could materialize in the future. Since March of 2020,  the Company
has reported a peak of 70 requests for payment deferrals or modifications on
loans totaling $42.4 million. Approximately 91% of the requests have been for
loans secured with real estate.  That number has declined to eight current loan
modification requests totaling $11.2 million as of March 31, 2021. The
table below gives more detail on loan modification activity at March 31, 2021.



Active Loan Deferral Requests

March 31, 2021

Dollars in thousands

                                                                                                                               Payment
                                                                   Average         Interest Only        Interest Only         Deferral           Weighted         Percent of Total
Collateral or Loan      Number of Loans      Dollar Amount      Balance Loans        Cumulative        Cumulative 6-12      Cumulative 12       Average LTV        Loan Collateral
Type                       Modified          Loans Modified       Modified            3-Months              Months             Months         Loans
Modified           or Type
1-4 family owner
occupied                               1     $           42     $          42     $             42     $              -     $           -                33.0 %                 0.4 %
1-4 family non-owner
occupied                               2              1,048               524                1,048                    -                 -                73.5                   9.4
CRE owner occupied                     4              3,073               768                    -                3,073                 -                62.4                  27.6
CRE non-owner
occupied                               1              6,987             6,987                    -                6,987                 -                62.4                  62.6
Total                                  8     $       11,150     $       1,394     $          1,090     $         10,060     $           -                   -                 100.0 %









                                       26
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FINANCIAL CONDITION



Average assets totaled $674.8 million for the three months ended March 31, 2021,
an increase of $164.6 million, or 32.3%, over the comparable period in 2020,
with the majority of growth coming from loans.  PPP loans accounted for
approximately 53.7% of the growth in the average loan balance.



Investment Securities. Our primary objective in managing our investment
portfolio is to maintain a portfolio of high quality, highly liquid investments
yielding competitive returns. We use the investment securities portfolio for
several purposes. It serves as a vehicle to manage interest rate and prepayment
risk, to generate interest and dividend income, to provide liquidity to meet
funding requirements, and to provide collateral for pledging to secure the
deposit of public funds at the Bank. At March 31, 2021, our debt securities
available for sale investment portfolio included U.S. government agency
securities, municipal securities, mortgage-backed securities, and asset-backed
securities. As of the same date, this portfolio had a fair market value of
$58.9 million and an amortized cost value of $58.4 million. At March 31,
2021 and December 31, 2020, our investment securities portfolio represented
approximately 8.2% and 9.6% of our total assets, respectively. The average yield
on the average balance of investment securities for the three months ended March
31, 2021 was 1.67%, compared to 2.42% for the comparable period in 2020.



Loans. Our primary earning asset is our loan portfolio and our primary source of
income is the interest earned on the loan portfolio. Our loan portfolio consists
of commercial real estate loans, construction loans, and commercial loans made
to small-to-medium sized companies and their owners, as well as residential real
estate loans, including first and second mortgages, and consumer loans. Our goal
is to maintain a high-quality portfolio of loans through sound underwriting and
lending practices. We work diligently to attract new lending clients through
direct solicitation by our loan officers, utilizing relationship networks from
existing clients, competitive pricing, and innovative structure. Our loans are
priced based upon the degree of risk, collateral, loan amount, and maturity.



The Company's gross loan portfolio increased $4.9 million since December 31,
2020, as a large number of non-PPP loan pay-offs and round one PPP loan
forgiveness offset round two PPP originations and non-PPP loan
production. Driving this reduction was a large volume ($31.4 million) of non-PPP
loan payoffs, partially offset by the funding of $25.0 million in new non-PPP
loans during the first quarter. At March 31, 2021, PPP loans comprised $78.6
million, or 16.1%, of total loans.  Management expects that the majority of
these loans will be forgiven by the end of 2021. In total, approximately 69.4%
of the total loan portfolio was collateralized by commercial and residential
real estate mortgages at March 31, 2021 and December 31, 2020. Subtracting out
the PPP loans, the percentage of the total loan portfolio collateralized by
commercial and residential real estate mortgages was 82.7% at March 31, 2021.



Nonperforming assets.  Four loans totaling $797,000 were deemed to be impaired
under the Company's policy at March 31, 2021 with reserves on impaired loans
totaling $229,000. The Company's nonperforming assets represented 0.11% of total
assets at March 31, 2021 and 0.19% at December 31, 2020.  We generally place
loans on nonaccrual status when they become 90 days or more past due, unless
they are well secured and in the process of collection. We also place loans on
nonaccrual status if they are less than 90 days past due if the collection of
principal or interest is in doubt. When a loan is placed on nonaccrual status,
any interest previously accrued, but not collected, is reversed from income. At
March 31, 2021, the Bank had four nonaccrual loans in the aggregate amount of
$797,000, compared to five nonaccrual loans totaling $1.3 million at December
31, 2020. Accounting standards require the Company to identify loans as impaired
loans 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.
These standards require that impaired loans be valued at the present value of
expected future cash flows, discounted at the loan's effective interest rate,
using one of the following methods: the observable market price of the loan or
the fair value of the underlying collateral if the loan is collateral dependent.
We implement these standards in our monthly review of the adequacy of the
allowance for loan losses and identify and value impaired loans in accordance
with GAAP.



Allowance for Loan Losses. Management's policy is to maintain the allowance for
loan losses at a level sufficient to absorb probable losses inherent in the loan
portfolio as of the balance sheet date. The allowance is increased by the
provision for loan losses and decreased by charge-offs, net of recoveries.
During the first quarter of 2021, the Bank did not take any additional provision
for loan losses as the total portfolio loan balance (excluding PPP loans)
decreased by $7.0 million. The Company's four impaired loans carried aggregate
specific reserves of $229,000 at March 31, 2021.  The Company reported $5,000 in
net recoveries during the quarter ended March 31, 2021 compared to net
charge-off's of $343,000, or 0.39% annualized of average loans, in the first
quarter of 2020.  Management believes that the allowance for loan losses, which
was $6.1 million or 1.49% of gross loans (excluding PPP loans) at March 31,
2021 is adequate to cover losses inherent in the loan portfolio.



Deposits. Deposits are the major source of the Company's funds for lending and
other investment purposes. Total deposits at March 31, 2021 were $651.4 million,
an increase of $70.8 million, or 12.2%, from December 31, 2020, with growth
coming from both noninterest-bearing and interest-bearing accounts and split
almost equally between growth of existing client accounts and PPP-sourced
deposits. The average balance of noninterest-bearing deposits accounted for
28.6% of the average balance of total deposits for the three months ended March
31, 2021, compared to 22.3% for the three months ended March 31, 2020. While
management expects some shrinkage in deposits as PPP funds are spent, management
expects the majority of the increase in total deposits will remain long-term.



Borrowings. The Company has an agreement with the Federal Home Loan Bank of
Atlanta ("FHLB") and pledges its qualified loans as collateral which would allow
the Company, as of March 31, 2021, to borrow up to $58.4 million. In addition,
the Company maintains unsecured lines of credit with correspondent banks that
totaled $28.0 million at March 31, 2021. There were no loans outstanding under
any of these lines at March 31, 2021.



In 2020, the Company entered into a Promissory Note (the "Note") and a Security
Agreement with Thomasville National Bank ("TNB"). Pursuant to the Note, the
Company obtained a $15 million revolving line of credit with a 5-year term. The
initial interest rate on the line of credit is 3.25% and will adjust daily to
the then-current Wall Street Journal Prime Rate. Pursuant to the Security
Agreement, the Company has pledged to TNB all of the outstanding shares of
common stock of the Company's wholly-owned subsidiary, the Bank. From time to
time, the Bank sells loan participations to TNB on market terms. The Company had
$750,000 outstanding under this line at March 31, 2021.





                                       27
--------------------------------------------------------------------------------



RESULTS OF OPERATIONS



Net interest income constitutes the principal source of income for the Bank and
results from the excess of interest income on interest-earning assets over
interest expense on interest-bearing liabilities. The principal interest-earning
assets are investment securities and loans. Interest-bearing liabilities
primarily consist of time deposits, interest-bearing checking accounts, savings
deposits, and money-market accounts. Funds attracted by these interest-bearing
liabilities are invested in interest-earning assets. Accordingly, net interest
income depends upon the volume of average interest-earning assets and average
interest-bearing liabilities as well as the interest rates earned or paid on
these assets and liabilities. The following tables set forth information
regarding: (i) the total dollar amount of interest and dividend income of the
Company from interest-earning assets and the resultant average yields; (ii) the
total dollar amount of interest expense on interest-bearing liabilities and the
resultant average costs; (iii) net interest income; (iv) interest-rate spread;
(v) net interest margin; and (vi) weighted-average yields and rates. Yields and
costs were derived by dividing annualized income or expense by the average
balance of assets or liabilities. The yields and costs depicted in the table
include the amortization of fees, which are considered to constitute adjustments
to yields.



As shown in the following table, the Company's average yield on interest-earning
assets declined 40 basis points comparing the three months ended March 31, 2021
to the three months ended March 31, 2020.  Declines in market interest rates
were offset by a decrease in funding costs, thus leading to a steady net
interest margin when comparing the two periods.



                                                         For the Three Months Ended March 31,
                                                    2021                                       2020
                                                  Interest                                   Interest
                                    Average         and          Yield/        Average         and          Yield/
(dollars in thousands)              Balance      Dividends       Rate(5)       Balance      Dividends       Rate(5)
Interest-earning assets:
Loans(1)                           $ 484,455     $    5,699          4.71 %   $ 352,421     $    4,363          4.95 %
Loans held for sale                   13,370            106          3.17         6,051             66          4.36
Debt securities available for
sale                                  59,629            249          1.67        63,583            384          2.42
Other(2)                              89,646             49          0.22        62,157            232          1.49

Total interest-earning assets 647,100 $ 6,103 3.77 %

    484,212     $    5,045          4.17 %
Noninterest-earning assets            27,743                                     26,021
Total assets                       $ 674,843                                  $ 510,233

Interest-bearing liabilities:
Savings, NOW and money-market
deposits                           $ 379,031     $      401          0.42 %   $ 277,254     $      544          0.78 %
Time deposits                         54,456            136          1.00        69,906            355          2.03
Total interest-bearing deposits      433,487            537          0.50       347,160            899          1.04
Other borrowings                          17              -             -         1,273              3          0.94
Total interest-bearing
liabilities                          433,504     $      537          0.50       348,433     $      902          1.04
Noninterest-bearing deposits         173,997                                     99,857
Noninterest-bearing liabilities        6,638                                      5,690
Stockholders' equity                  60,704                                     56,253
Total liabilities and
stockholders' equity               $ 674,843                                  $ 510,233

Net earning assets                 $ 213,596                                  $ 135,779
Net interest income                              $    5,566                                 $    4,143
Interest rate spread (3)                                             3.27 %                                     3.13 %
Net interest margin(4)                                               3.44 %                                     3.42 %

Ratio of interest-earning assets
to average interest-bearing
liabilities                           149.27 %                                   138.97 %




(1)   Includes nonaccrual loans
(2)   Other interest-earning assets include
federal funds sold, interest-bearing deposits and
FHLB stock.
(3)  Interest rate spread is the difference
between the total interest-earning asset yield
and the rate paid on total interest-bearing
liabilities.
(4)   Net interest margin is net interest income
divided by total average interest-earning assets,
annualized
(5)   Annualized








                                       28
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Comparison of Operating Results for the Three Months Ended March 31, 2021and
2020




Earnings Summary
(dollars in thousands)
                                                        Change 1Q'21 vs. 1Q'20
                              1Q'21       1Q'20          Amount         Percentage
Net Interest Income         $ 5,566     $ 4,143     $     1,423               34.3 %
Provision for loan losses         -         636            (636 )           (100.0 )
Noninterest income              672         367             305               83.1
Noninterest expense           3,297       2,938             359               12.2
Income Taxes                    707         220             487              221.4
Net Income                  $ 2,234     $   716     $     1,518              212.0 %





Compared to the same period a year ago, the increase in net earnings was driven
by PPP origination fees and the absence of a provision for loan losses.  Lower
funding costs on deposits and higher noninterest income also contributed to
higher net earnings in the first quarter of 2021.



Net Interest Income



Our operating results depend primarily on our net interest income, which is the
difference between interest and dividend income on interest-earning assets such
as loans and securities, and interest expense on interest-bearing liabilities
such as deposits.




Interest income
(dollars in thousands)
                                                    Change 1Q'21 vs. 1Q'20
                           1Q'21       1Q'20          Amount        Percentage
Interest income:
Loans                    $ 5,805     $ 4,429     $     1,376              31.1 %
Securities                   249         384            (135 )           (35.2 )
Other                         49         232            (183 )           (78.9 )
Total interest income    $ 6,103     $ 5,045     $     1,058              21.0 %





Compared to the first quarter of 2020, the increase in total interest income is
mostly attributed to a higher volume of loans and origination fees on first and
second round PPP loans. Average loan balances increased $132.0 million, or
37.5%, from the first quarter of 2020, with more than half of the loan growth
coming from PPP loan originations.  Excluding PPP loans, the average loan
balance still increased approximately $61.2 million, or 17.4%, from the same
period last year, boosted primarily by commercial, construction, and
residential real estate loan originations.  Decreases in interest income from
securities and other interest-earning assets since the first quarter of 2020 is
primarily a function of lower rates.




Interest expense:
(dollars in thousands)                            Change 1Q'21 vs. 1Q'20
                          1Q'21      1Q'20         Amount         

Percentage

Total interest expense   $  537     $  902     $     (365 )            (40.5 )%





Despite higher balances of interest-bearing liabilities, total interest expense
declined $91,000 from the fourth quarter of 2020 and $365,000 from the first
quarter of 2020 due to lower funding costs. The average rate paid on deposits
declined 11 basis points from the fourth quarter of 2020 and 54 basis points
when compared to the first quarter of 2020.



                                       29
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Net Interest Margin



The Company's net interest margin remained level in the first quarter of 2021 as
unfavorable asset pricing was offset by the increased volume of
interest-earnings assets and PPP origination fees and a continued reduction in
the cost of deposits.



Provision for Loan Losses



The provision for loan losses is charged to earnings to increase the total loan
loss allowance to a level deemed appropriate by management. The provision is
based upon the volume and type of lending conducted by the Bank, industry
standards, general economic conditions, particularly as they relate to our
market areas, and other factors related to our historic loss experience and the
collectability of the loan portfolio. The Company did not record any provision
for loan losses during the first quarter of 2021 due to the $7.0 million
reduction in total portfolio loan balances (excluding PPP loans) during the
first quarter of this year.  Driving the $7.0 million reduction was a large
volume ($31.4 million) of non-PPP loan payoffs, partially offset by the funding
of $25.0 million in new non-PPP loans during the first quarter.



While management believes the estimates and assumptions used in its
determination of the adequacy of the allowance are reasonable, there can be no
assurance that such estimates and assumptions will not be proven incorrect in
the future, or that the actual amount of future losses will not exceed the
amount of the established allowance for loan losses, or that any increased
allowance for loan losses that may be required will not adversely impact our
financial condition and results of operations. In addition, the determination of
the amount of our allowance for loan losses is subject to review by bank
regulators, as part of the routine examination process, which may result in
additions to our provision for loan losses based upon their judgment of
information available to them at the time of examination.




Noninterest income
(dollars in thousands)                                                           Change 1Q'21 vs. 1Q'20
                                                    1Q'21          1Q'20         Amount          Percentage
Service charges and fees on deposit accounts   $       53     $       64     $      (11 )             (17.2 )%
Debit card/ATM revenue, net                           109             81             28                34.6
Mortgage banking revenue                              301            148            153               103.4
Income from bank-owned life insurance                  63             40             23                57.5
Gain on sale of debt securities                       108              -            108                   -
Other income                                           38             34              4                11.8
Total noninterest income                       $      672     $      367     $      305                83.1 %





On a linked quarter basis and compared to the first quarter of 2020, the
increase in noninterest income was driven by the $108,000 gain on sale of debt
securities and mortgage banking revenue which has more than doubled since the
first quarter of 2020.  The gain on sale of debt securities related to a $6
million portfolio bond transaction which was executed in the first quarter while
the mortgage team continues to report strong production by units, volume, and
gain on sales revenue.  Growth in debit card/ATM revenue also continues to
contribute positively to the bottom line.




Noninterest expense
(dollars in thousands)                                             Change 1Q'21 vs. 1Q'20
                                          1Q'21       1Q'20        Amount          Percentage

Salaries and employee benefits $ 1,852 $ 1,618 $ 234

             14.5 %
Occupancy and equipment                     386         338            48                14.2
Professional fees                           130          91            39                42.9
Marketing                                   140         201           (61 )             (30.3 )
FDIC Assessment                              70          52            18                34.6
Software maintenance and amortization       250         193            57                29.5
Other                                       469         445            24                 5.4
Total noninterest expense               $ 3,297     $ 2,938     $     359                12.2 %





Compared to the first quarter of 2020, a $234,000 increase in salaries and
employee benefits expense was the primary driver of the $359,000 increase in
noninterest expense. This combined with modest increases in other categories was
only partially offset by a $61,000 decrease in marketing expense which is
attributed to the continued limitations on gatherings imposed by COVID-19
restrictions.



Income Taxes



Income taxes are based on amounts reported in the condensed consolidated
statements of earnings after adjustments for nontaxable income and nondeductible
expenses and consist of taxes currently due plus deferred taxes on temporary
differences in the recognition of income and expense for tax and financial
statement purposes. Income taxes were $707,000 for the three months ended March
31, 2021, compared to income taxes of $220,000 for the three months ended March
31, 2020, with the increase attributed to higher pre-tax earnings in 2021.



                                       30
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LIQUIDITY



Liquidity describes our ability to meet financial obligations, including lending
commitments and contingencies, which arise during the normal course of business.
Liquidity is primarily needed to meet the borrowing and deposit withdrawal
requirements of the Company's clients, as well as meet current and planned
expenditures. Management monitors the liquidity position daily.



Our liquidity is derived primarily from our deposit base, scheduled amortization
and prepayments of loans and investment securities, funds provided by
operations, and capital. Additionally, as a commercial bank, we are expected to
maintain an adequate liquidity reserve. The liquidity reserve may consist of
cash on hand, cash on demand deposit with correspondent banks, federal funds
sold, and unpledged marketable securities such as United States government
agency securities, municipal securities, mortgage-backed securities, and
asset-backed securities.



The Bank also has external sources of funds through the FHLB, unsecured lines of
credit with correspondent banks, a revolving line of credit, and the State of
Florida's Qualified Public Deposit Program ("QPD"). At March 31, 2021, the Bank
had access to approximately $58.4 million of available lines of credit secured
by qualifying collateral with the FHLB, in addition to $28.0 million in
unsecured lines of credit maintained with correspondent banks and a $15 million
revolving line of credit with TNB. As of March 31, 2021, the Company's
outstanding borrowings under these lines totaled $750,000.  Furthermore, some of
our securities are pledged to collateralize certain deposits through our
participation in the State of Florida's QPD program. The market value of
securities pledged to the QPD program was $12.4 million at March 31,
2021 compared to $13.9 million at December 31, 2020. Our primary liquid assets,
excluding assets pledged to the QPD program, accounted for 26.1% and 18.1% of
total assets at March 31, 2021 and December 31, 2020, respectively.



Our core deposits consist of noninterest-bearing accounts, NOW accounts,
money-market accounts, time deposits $250,000 or less, and savings accounts. We
closely monitor our level of certificates of deposit greater than $250,000 and
other large deposits. At March 31, 2021, total deposits were $651.4 million, of
which $22.5 million were in certificates of deposits greater than $250,000,
excluding Individual Retirement Accounts (IRAs). We maintain a Contingency
Funding Plan ("CFP") that identifies liquidity needs and weighs alternate
courses of action designed to address those needs in emergency situations. We
perform a monthly cash flow analysis and stress test the CFP to evaluate the
expected funding needs and funding capacity during a liquidity stress event. We
believe that the sources of available liquidity are adequate to meet all
reasonably immediate short-term and intermediate-term demands and do not know of
any trends, events, or uncertainties that may result in a significant adverse
effect on our liquidity position.



CAPITAL RESOURCES



Stockholders' equity was $61.1 million at March 31, 2021 compared to
$60.3 million at December 31, 2020. In 2020, the Company obtained a $15 million
revolving line of credit with TNB. At its discretion, the Company may take draws
on that line and may contribute the proceeds as capital to the Bank.  The
Company had $750,000 outstanding under this line at March 31, 2021 The Company
contributed $1.1 million to the capital of the Bank during the first quarter of
2021.



At March 31, 2021, the Bank was considered to be "well capitalized" under the
FDIC's Prompt Corrective Action regulations with a 9.07% Tier 1 Leverage Capital
Ratio, a 13.72% Equity Tier 1 Risk-Based Capital Ratio, a 13.72% Tier 1
Risk-Based Capital Ratio, and a 14.98% Total Risk-Based Capital Ratio, all above
the minimum ratios to be considered "well capitalized."



The following is a summary at March 31, 2021 and December 31, 2020 of the
regulatory capital requirements to be "well capitalized" and the Bank's capital
position.



                                                                 For Capital Adequacy               For Well Capitalized
                                       Actual                          Purposes                           Purposes
(dollars in thousands)         Amount       Percentage         Amount          Percentage        Amount           Percentage
As of March 31, 2021
Tier 1 Leverage Capital       $ 61,289             9.07 %   $     27,017              4.00 %   $    33,771               5.00 %
Common Equity Tier 1
Risk-based Capital              61,289            13.72           20,096              4.50          29,028               6.50
Tier 1 Risk-based Capital       61,289            13.72           26,795              6.00          35,727               8.00
Total Risk-based Capital        66,878            14.98           35,727              8.00          44,659              10.00

As of December 31, 2020
Tier 1 Leverage Capital       $ 57,800             9.09 %   $     25,421              4.00 %   $    31,776               5.00 %
Common Equity Tier 1
Risk-based Capital              57,800            13.29           19,575              4.50          28,275               6.50
Tier 1 Risk-based Capital       57,800            13.29           26,100              6.00          34,799               8.00
Total Risk-based Capital        63,245            14.54           34,799              8.00          43,499              10.00




                                       31
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The Bank is also subject to the following capital level threshold requirements under the FDIC's Prompt Corrective Action regulations.



                                                           Threshold Ratios
                                                                         Common
                                                                         Equity
                                           Total          Tier 1         Tier 1        Tier 1
                                         Risk-Based     Risk-Based     Risk-Based     Leverage
                                          Capital        Capital        Capital       Capital
Capital Category                           Ratio          Ratio          Ratio         Ratio

Well capitalized                           10.00%         8.00%          6.50%         5.00%

Adequately Capitalized                     8.00%          6.00%          4.50%         4.00%

Undercapitalized                          < 8.00%        < 6.00%        < 4.50%       < 4.00%

Significantly Undercapitalized            < 6.00%        < 4.00%        < 3.00%       < 3.00%

Critically Undercapitalized                        Tangible Equity/Total Assets ? 2%



Until such time as PMHG has $3 billion in total consolidated assets, it will not be subject to any consolidated capital requirements.

OFF-BALANCE SHEET ARRANGEMENTS

Refer to Note 9 in the notes to condensed consolidated financial statements included in this Form 10-Q for the period ending March 31, 2021 for a discussion of off-balance sheet arrangements.

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