Prime Meridian Holding Co (Form: S-1, Received: 10/18/2013 15:06:28)

Large accelerated filer:

Accelerated filer:

Nonaccelerated filer:

Smaller reporting company:

Registration No.

As filed with the Securities and Exchange Commission on October 18, 2013.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

PRIME MERIDIAN HOLDING COMPANY

(Exact name of registrant as specified in its charter)

Florida

6022

58-2452995

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification Number)

1897 Capital Circle NE, Second Floor

Tallahassee, Florida 32308

(850) 907-2301

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Sammie D. Dixon, Jr.

1897 Capital Circle NE, Second Floor

Tallahassee, Florida 32308

(850) 907-2301

(Name, address, including zip code, and telephone number, including area code of agent for service)

Copies of all communications, including copies of all communications

sent to agent for service, should be sent to:

A. George Igler, Esq.

Robert J. Angerer, Jr., Esq.

Adams and Reese LLP

2457 Care Drive

Tallahassee, Florida 32308

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨

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

CALCULATION OF REGISTRATION FEE



Title of Each Class of Securities to be Registered	Proposed Amount to be Registered	Proposed Maximum Price Per Share	Proposed Maximum Aggregate Offering Price	Registration Fee
Common Stock	1,200,000	$12.50	$15,000,000	$1,932 ¹

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

¹	The calculation of the registration fee has been made pursuant to Fee Rate Advisory #1 for Fiscal Year 2013 (2012-174), which prescribes a fee rate for registration statements of $136.40 per million dollars of securities to be offered.

The information in this preliminary Prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary Prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED OCTOBER 18, 2013

LOGO

PROSPECTUS

PRIME MERIDIAN HOLDING COMPANY

Up To 1,200,000 Shares of Common Stock

Prime Meridian Holding Company is selling up to 1,200,000 shares of its Common Stock for $12.50 per share. The minimum amount of shares to be purchased by any investor is 500 shares and the maximum amount of shares to be purchased by any investor is 80,000. We reserve the right, in our sole discretion, to accept subscriptions for a lesser or greater number of shares. This Offering will continue on an ongoing basis until no later than February 28, 2014, unless extended by us in our sole discretion until no later than June 30, 2014. We may elect, in our sole discretion, to end this Offering prior to the expiration date. There is no minimum number of shares we must sell in this Offering. The proceeds from this Offering will be immediately available to us regardless of the number of shares sold.

Shares of our Common Stock are not listed on any national securities exchange, the Nasdaq Stock Market, or quoted in any other securities market.

There is no underwriter involved in this Offering. We have reserved the right to engage a Sale Agent as disclosed further in this Prospectus. Certain of our directors and officers will offer and sell the shares of Common Stock on a best-efforts basis without compensation. We believe they will not be deemed to be brokers or dealers due to Rule 3a4-1 under the Securities Exchange Act of 1934.

Investing in our Common Stock involves a high degree of risk which is described in the “ Risk Factors ” section beginning on page 10 of this Prospectus.

These securities are not deposits, accounts, or other obligations of a bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this Prospectus. Any representation to the contrary is a criminal offense.

We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements.


	Per Share		Total
Public Offering Price	$	12.50	$	15,000,000
Underwriting Discount	$	0.00	$	0
Proceeds to us, before expenses	$	12.50	$	15,000,000

The date of this Prospectus is , 2013.

FORWARD-LOOKING STATEMENTS

This Prospectus, including information incorporated herein by reference, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 actual effect of future plans or strategies is inherently uncertain. Factors that could have a material adverse effect on our operations and the operations of our subsidiary, Prime Meridian Bank, include, but are not limited to, changes in:

• the “Risk Factors” described beginning on page 10;

• general economic conditions;

• legislative/regulatory changes;

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

• the quality and composition of our loan or investment portfolios;

• competition;

• demand for loan and deposit products;

• demand for financial services in our primary trade area;

• litigation, tax, and other regulatory matters;

• accounting principles and guidelines; and

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

ABOUT THIS PROSPECTUS

You should rely only on the information contained in this Prospectus (and in the documents incorporated by reference herein). We have not authorized any other person to provide you with different information. We are not making an offer to sell our Common Stock in any jurisdiction in which the offer or sale is not permitted.

Neither we, nor any of our officers, directors, agents, or representatives makes any representation to you about the legality of an investment in our Common Stock. You should not interpret the contents of this Prospectus to be legal, business, investment, or tax advice. You should consult with your own advisors for that type of advice and consult with them about the legal, business, financial, tax, and other issues that you should consider before investing in our Common Stock.

No action is being taken in any jurisdictions outside the United States to permit a public offering of the Common Stock or possession or distribution of this Prospectus in those jurisdictions. Persons who come into possession of this Prospectus in jurisdictions outside the United States are required to inform themselves about, and to observe, any restrictions that apply in those jurisdictions to this Offering or the distribution of this Prospectus.

As used herein, “PMHC” or “Company” refers to Prime Meridian Holding Company on a parent-only basis, “Bank” refers to our wholly-owned subsidiary, Prime Meridian Bank, and “Prime Meridian,” “we,” “us,” and “ours” refer to the Company and the Bank on a consolidated basis.

WHERE YOU CAN FIND MORE INFORMATION

Following the completion of this Offering, we will be subject to filing annual, quarterly, and current reports, and certain other information required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”) with the Securities and Exchange Commission. You will be able to read and copy any of these filed documents at the Securities and Exchange Commission’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, DC, 20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information. Our Securities and Exchange Commission filings will also be available to the public through the Securities and Exchange Commission’s website at www.sec.gov .

Our internet address is www.primemeridianbank.com and may also be reached at www.TryMyBank.com . We will make available through our website, free of charge, our periodic and current reports, and other information we file with the Securities and Exchange Commission and amendments thereto as soon as reasonably practicable after the Company files such material with, or furnishes such material to, the Securities and Exchange Commission, as applicable. Neither our website, nor the information on our website, is included or incorporated in or is otherwise a part of this Prospectus.

This Prospectus is part of a Registration Statement and does not contain all of the information included in the related Registration Statement. Whenever a reference is made in this Prospectus to any contract or other document of ours, you should refer to the exhibits that are a part of the Registration Statement for a copy of the referenced contract or document. Statements contained in this Prospectus concerning the provisions of any documents are necessarily summaries of those documents, and each statement is qualified in its entirety by reference to the copy of the document filed with the Securities and Exchange Commission. You should review the information and exhibits included in the Registration Statement for further information about us and the securities being offered.

IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY

As a company with less than $1.0 billion in gross revenue during our last fiscal year, we qualify as an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). An EGC may take advantage of reduced regulatory and reporting requirements that are otherwise generally applicable to public companies. As an EGC: (i) we are permitted to provide only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations; (ii) we are exempt from the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act; (iii) we are permitted to provide less extensive disclosure about our executive compensation arrangements; and (iv) we are not required to hold nonbinding advisory votes on executive compensation or golden parachute arrangements.

We may take advantage of these provisions for up to five years, unless we earlier cease to be an EGC. We will cease to be an EGC if we have more than $1.0 billion in annual gross revenues, have more than $700.0 million in market value of our Common Stock held by nonaffiliates as of any June 30, or issue more than $1.0 billion of nonconvertible debt in a three-year period. We may choose to take advantage of some but not all of these reduced burdens. We have elected in this Prospectus to take advantage of scaled disclosure requirements relating to the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the disclosure about our executive compensation arrangements.

PROSPECTUS SUMMARY

The following Summary highlights selected information that is contained elsewhere in this Prospectus. This Summary may not contain all the information you should consider before investing in our Common Stock. You should read this entire Prospectus carefully, including “Risks Factors” and the financial statements, before making an investment decision.

General

Prime Meridian Holding Company is headquartered in Tallahassee, Florida and offers a broad range of banking services to the Tallahassee Metropolitan Statistical Area (“MSA”) through our wholly-owned banking subsidiary, Prime Meridian Bank. While our primary market area centers around Tallahassee, we also serve the surrounding North Florida, South Georgia, and South Alabama areas. We believe that our market area exhibits attractive demographic attributes by being located in the county of Florida’s State Capital.

The Company is located at 1897 Capital Circle NE, Second Floor, Tallahassee, Florida 32308 in the Bank’s second and newest location, which opened on February 21, 2012. The Bank continues to serve clients from its original office, located at 1471 Timberlane Road, Suite 124, Tallahassee, Florida 32312. The Bank opened for business on February 4, 2008. The Company was incorporated on May 25, 2010, under the laws of the State of Florida and became the parent bank holding company of the Bank on September 16, 2010. Since opening in 2008, the Bank has conducted a general banking business and has grown to 36 full time equivalent (“FTE”) employees as of June 30, 2013.

In order to provide a high level of service, we adopted a strategy to build a culture and brand that would cultivate more than just a place for someone to complete a transaction; we wanted a culture that supported client relationship banking. We have found that as a result of relationship banking, many of our clients refer us to others, which we believe is a client’s greatest compliment.

Five core principles were developed and adopted by our team to support our actions and guide our decisions. These principles are frequently reviewed with our team as part of our effort to maintain our culture and they are as follows:

•

Passion – A level of intense excellence and commitment that goes over and above merely meeting the commercial considerations and legal requirements - Never give up. Never settle for mediocrity. Never let fear hamper us from taking chances. Above all, Never let a cynic stand in our way.

•

Grace – Providing a high level of service, with courtesy and compassion. Having an awareness of how our actions, body language, and words affect others. Learning to master a mindful, calm response to any situation.

•

Integrity – Doing the right thing, simply because it is the right thing to do, based on a firm adherence to the Bank’s three way test: (1) Is it right by the client? (2) Is it right by the Bank? (3) Is it legally, morally, and ethically correct?

•

Tenacity – A culture of looking at new ideas, tackling challenges and overcoming obstacles in order to meet our clients’ needs.

•

Accountability – Accepting full and ultimate responsibility for the situation or action at hand.

These core principles and the Bank’s three way test also serve as the foundation for our motto and operating strategy of, “Let’s think of a few good reasons why it CAN be done!” which is the overarching concept for our Company and team.

Our Competitive Strengths

We have positioned the Company to accomplish its mission statement of: “Building bankers to serve our clients and community in order to optimize shareholder value.” The result has yielded the following competitive strengths:

Experienced and engaged management team with the support of a local Board of Directors: Our management team is led by Sammie D. Dixon, Jr., the Chief Executive Officer and President of the Company and the Bank, who began his banking career in 1997 and was one of the founders of the Bank. During his banking career, he was a Senior Vice President and Commercial Sales Manager for Regions Bank in Tallahassee, Florida. He also served as Chief Executive Officer and President for Bank of Thomas County, Georgia. The other three members of our executive management team are Kathleen C. Jones, Chris L. Jensen, Jr., and Susan Payne Turner. Mrs. Jones is the Bank’s and Company’s Executive Vice President and Chief Financial Officer and has also been with the Bank since its inception. Prior to joining the Bank, she spent 36 years with SunTrust Bank and its predecessor institutions; she served as the North Florida Regional Senior Vice President and Senior Banking Operations Manager. Mr. Jensen has been in banking for more than 30 years and has been with the Bank since its inception; he serves as the Bank’s Executive Vice President and Senior Lender and the Company’s Executive Vice President. Previously in his career, he served as Tallahassee’s and Panama City’s Market President for SouthTrust Bank and later, Tallahassee Market President for Regions Bank. Mrs. Turner is a Senior Vice President and the Chief Risk Officer at the Bank. She brings 28 years of banking experience in many areas including operations, marketing, compliance, financials, and she previously served as the Chief Financial Officer of another community bank. Mr. Dixon, Mrs. Jones, and Mr. Jensen also serve on the Bank’s and Company’s Board of Directors, along with eleven other directors from our community, including the Chairman of both Boards, Richard A. Weidner, CPA. As of June 30, 2013, our directors and executive officers beneficially owned 27.50% of the Company’s Common Stock. We have an average of 29 years of experience within our executive management team, which coupled with the energy and enthusiasm of our entire banking team, provides us with a competitive strength.

Strong Brand and Culture. We believe our reputation and brand within our market have resulted in a pleasant banking environment for our clients. We have developed a reputation of being actively involved in our community. Between our Board and management, we are involved in over thirty-five (35) not-for-profit organizations in our community; donating both time and resources to assist those who help our community become a better place to live and work. We understand that brand and culture are extremely important for how a company is perceived by its community. Every aspect of our brand is strategically considered and implemented to ensure that the foundation of our existence remains constant. We want our culture to build bankers who will provide the superior level of service that each client deserves. It is important to us to motivate our team members and encourage them to have a thoughtful approach to their client relationships.

range of business needs and who positively foster the client relationships. In addition to our expertise, the ability to approve loans at a local level has generated a faster response time for clients. We believe the quicker response time has resulted in a pricing advantage for us; we frequently find we are the lender of choice, even when our pricing is higher.

Effective and Flexible Technology. In the banking industry of today, utilizing current technology is a necessity and we value our electronic suite of products; they are considered to be part of our core banking products. Being able to provide our clients with remote deposit capture, mobile capture, internet banking, and mobile banking creates greater banking flexibility. As we continue to expand and prepare for future technology needs, we have invested resources to have the proper infrastructure in place. We also host our data and items processing in-house, resulting in greater control and accountability for our daily functions.

Stable and Scalable Platform. Since the recent economic crisis began in 2008, many of our competitors have suffered significant operating and regulatory challenges resulting in decreased service to their customers. Since the Bank opened its doors for operation, we have maintained a well capitalized stable banking platform with sound asset quality. As of June 30, 2013, we had an 8.59% tangible common equity ratio, an 8.97% tier 1 leverage capital ratio, a 12.91% tier 1 risk-based capital ratio, and a 14.14% total risk-based capital ratio. Contributing to our stability is our track record of sound asset quality trends coupled with a strong credit culture. As of June 30, 2013, we have had no foreclosures or other real estate owned (“OREO”), our level of nonperforming assets, consisting of nonaccrual loans and OREO as a percentage of total assets was 0.00%, and restructured loans as a percentage of total loans equaled 0.11%. Our total net charge-offs since inception of the Bank have been $515,000 and our year-to-date annualized net charge-offs equated to 0.06% of total assets. We believe these results are because of our underwriting standards, experienced loan officers, diligent monitoring of our loan portfolio, and our close ties to our clients. Additionally, our management team brings prior experience from larger banks. We have utilized their knowledge to build a scalable corporate infrastructure with the capacity and capability to support continued organic growth and future acquisitions, while also improving operational efficiencies.

Our Operating Strategy

Our business strategy and plan focuses on traditional, relationship-based banking. It is supported by our core principles that guide our activities as we follow policies and procedures that allow us to operate our community bank under sound and prudent banking practices. The principles which guide us are passion, grace, integrity, tenacity, and accountability. It is through these principles that we developed our three-way test of accountability: Is it right by the client? Is it right by the Bank? and Is it legally, morally, and ethically correct? These principles and questions of accountability support our motto, “Let’s think of a few good reasons why it CAN be done!” As a result, we have been able to offer high-quality service, build long-term relationships, and create a disciplined risk management system.

The creativity and flexibility in our organizational structure has generated a strong risk management culture and a high level of understanding about our market from our management team. The banking experience of our team and high-quality client service distinguishes us from other banks. We believe it is through this foundation that we will be able to expand our products and services to our clients resulting in steady, long-term growth. Our culture is focused on meeting our clients’ needs at a level that contributes to an increased depth of relationship which in turn supports client retention, enhanced profitability, and clients sharing their banking experiences with family, friends, and other businesses.

We are committed to being a successful community bank and being a good business partner within our communities. We believe our active community involvement and business development strategies, in conjunction with our client relationship culture, comprise a successful plan for developing new relationships and enhancing existing ones.

Growth

Our deposits increased by $31.2 million from year-end 2011 to 2012, a 26.96% increase. During this same time period, assets increased by 21.70% to $169.7 million. These increases are from organic growth supported through core deposits and loans.

Core Deposits. We believe that our growth in core deposits is attributed to our efforts to provide a superior client relationship banking experience. Core deposits are deposits made by clients in the Bank’s market area who tend to be loyal and consistent. These deposits are more stable, cost less, and reprice more slowly than other deposits when interest rates rise. We believe that we have created a strong business development and sales culture which in turn creates an effective platform for future organic growth. As a result of these efforts, noninterest-bearing deposits increased to 26.55% of total deposits as of June 30, 2013.

Loans. Even though 2012 was a year of generally soft loan demand and economic uncertainty, organic growth provided us with the opportunity to soundly grow our loans by 22.02% while maintaining our prudent credit underwriting standards. As of June 30, 2013, loans were at $115.8 million, a 22.28% increase from December 31, 2012. We have kept our focus on serving the credit needs of our communities and have relied on sound banking principles to identify qualified borrowers. Due to financial challenges faced by many of our competitors, we have seen increased opportunities in our market.

Lending Activities

Our Bank has presented a range of lending services and products, providing loans to small businesses, commercial and small to medium-sized companies and their owners. In addition, we have provided loans to not-for-profit organizations and consumers, while maintaining strong and disciplined credit policies and procedures. Included in our array of loan products are commercial real estate loans, commercial loans for equipment financing and lines of credit. All loan products are provided on a nondiscriminatory basis throughout our lending area. Loans for retail lending include residential first and second mortgage loans, home equity lines of credit, and consumer installment loans for cars, trucks, boats, and other recreational vehicles. Many of our connections in retail consumer lending are driven by our relationships with commercial clients and shareholders.

Our lending products are marketed through campaigns that focus on our team and the reasons clients should “Try My Bank,” a common slogan used in our advertisements and as a website link: www.TryMyBank.com. Clients must meet our sound credit requirements in order to be considered qualified borrowers. Our client relationships and the networks these relationships offer are additional channels to provide information about our lending products. Our business development and marketing strategy targets businesses which have annual revenues up to $25 million. Even though we are successful with having loan and deposit relationships with these businesses, we also are here to serve the needs of consumers. Some of the largest employers in the Tallahassee area are state and local government and agencies, higher education institutions, and health care providers.

Loan Portfolio Composition. The mix of our loan portfolio can be categorized into five main segments which include commercial real estate, residential real estate (first and second mortgages), construction loans, commercial loans, and consumer loans which are described in more detail as follows:

Commercial Real Estate Loans. Loans of this type are typically our more complex loans; this category consists of real estate loans secured by mortgages on commercial property.

Residential Real Estate Loans. This category of loans includes first and second one-to-four family mortgage loans plus home equity lines of credit. As of June 30, 2013, 81% of our residential mortgages were first mortgages and 19% were second mortgages.

Construction Loans. Typically, these loans have a term of one to two years and interest is paid monthly. This portion of our loan portfolio includes loans to small-to-medium sized businesses to construct owner-user properties, loans to developers of commercial real estate investment properties, and residential development loans.

Consumer Loans. Consumer loans are the smallest portion of our loan portfolio. These loans are made for various consumer purposes, such as automobiles, boats, and recreational vehicles.

The Bank’s loan portfolio as of June 30, 2013, consisted of approximately 35.8% commercial real estate loans, 31.5% residential real estate loans, 10.6% construction loans, 20.7% commercial loans, and 1.4% consumer and other loans. Commercial loans are primarily underwritten on borrowers’ abilities to service debt out of their income.

Deposits

Our primary sources of deposits are PMHC shareholders and directors, and other residents and businesses located in Tallahassee and other areas of Leon County, Florida. We focus on core deposits, consisting of personal checking, NOW accounts, savings accounts, business checking, money-market accounts, and certificates of deposits. We have not accepted brokered deposits, nor have we participated in the Certificate of Deposit Account Registry Service (“CDARS”).

Competition

Our competition is made up of a wide range of financial institutions, including credit unions, local, regional, and national commercial banks. From June 30, 2008 to June 30, 2013, total deposits in the Tallahassee area grew from approximately $4.5 billion to $4.8 billion. During this time period, five institutions serving the Tallahassee MSA were consolidated into out-of-state institutions altering the financial landscape of our market areas. Today, there are 32 financial institutions serving Tallahassee; 17 of these are banks and 15 are credit unions. Four of the banks are headquartered in Leon County, including Prime Meridian Bank.

Although competition in our market remains strong, we believe that our client relationship philosophy and culture has assisted us in maintaining a strong level of growth. We also are actively engaged in Small Business Administration guaranteed financing to support local borrowers who might not otherwise qualify for conventional financing, while mitigating our credit risk and earning fee income by selling the guaranteed portion of some of these loans.

Many of our competitors are much larger financial institutions with greater financial resources. It is not our goal to compete on all products and services, but to support the product mix that best suits our strategic plan. This strategy has yielded solid growth for our Bank.

Other important competitive factors that have contributed to our success in our market area include convenient office hours, electronic banking products, quality of client service, community reputation, quality of our banking team, capacity and willingness to extend credit, and our ability to offer cash management and other commercial banking services. Many of our competitors’ approaches and processes may appear to be more efficient, however, these efficiencies may not allow for the same level of personal service we provide, in a wide range of products and services, to our clients. Although offering competitive rates is important, we believe that our greatest competitive advantages are our experienced management team, client relationship culture, and personal service.

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THE OFFERING

Common Stock Offered:

Up to 1,200,000 shares of Common Stock $0.01 par value.

Common Stock Outstanding After This Offering:

Up to 2,697,494 shares of Common Stock. The number of shares which may be outstanding after this Offering is based on the actual number of shares outstanding as of June 30, 2013, which was 1,497,494 shares. This number excludes stock options held by our officers and directors, outstanding as of June 30, 2013, to purchase 136,000 shares of Common Stock at a weighted-average exercise price of $10.01 per share.

Sales Price:

The sales price is not indicative of the market value for the Common Stock, either before or after the Offering, and is greater than the book value of $10.59 per share as of June 30, 2013, and the pro forma post-Offering book value of $11.33, if all of the offered shares are sold at that price.

Minimum Purchase Amount:

Each investor must purchase a minimum of 500 shares of Common Stock to participate in this Offering. However, we may, in our sole discretion, accept subscriptions for a lesser number of shares.

Maximum Purchase Amount:

No investor may purchase more than 80,000 shares of Common Stock in this Offering. In addition, no investor may purchase shares of Common Stock in this Offering if such purchase would require regulatory approval until and unless such investor obtains such approvals.

Dilution:

If you purchase shares of our Common Stock in this Offering, the book value of your shares will be diluted because the Offering price per share of our Common Stock exceeds the pro forma book value per share of our Common Stock after this Offering.

Expiration of Offering:

The Offering will expire at 5:00 p.m., Eastern Time, on February 28, 2014, unless we, in our sole discretion, extend the expiration date until no later than June 30, 2014.

No Revocation:

Once we receive a subscription, it may not be revoked.

Discretion to Accept or Reject Subscriptions:

We reserve the right to reject, in whole or in part, any or all subscriptions we receive in the Offering.

No Board of Directors Recommendation:

Our Board of Directors is making no recommendation regarding participation in this Offering.

Use of Proceeds:

We intend to use the net proceeds of this Offering for general corporate purposes, including maintaining liquidity for the Company and continuing to support the growth of the Bank while maintaining strong capital levels. We may also consider branching or acquisition opportunities in the North Florida, South Georgia, and South Alabama markets. See “Use of Proceeds.” Because there is no minimum number of shares that must be sold in this Offering, all funds collected will be immediately available to the Company.

Where You Can Find More Information:

Our principal executive offices are located at 1897 Capital Circle NE, Second Floor, Tallahassee, Florida 32308. If you have any questions regarding the Offering or need additional copies of this Prospectus, please contact our Chief Executive Officer and President Sammie D. Dixon, Jr. at (850) 907-2301.

SUMMARY OF SELECTED FINANCIAL DATA

The summary financial data presented below as of and for the years ended December 31, 2012 and 2011, is derived from our audited financial statements, except for performance ratios, asset quality ratios and other data. Our audited financial statements as of and for the years ended December 31, 2012 and 2011, are included in this Prospectus. The summary financial data presented below as of and for the six month periods ended June 30, 2013 and 2012, is derived from our unaudited financial statements, also included in this Prospectus. The following Summary Financial Data should be read in conjunction with the other financial disclosures and discussions contained elsewhere in this Prospectus. Our historical results are not necessarily indicative of results to be expected in future periods.


	Unaudited At or For the Six Months Ending June 30,						At or For the Years Ending December 31,
	2013			2012			2012			2011
	(Dollars in thousands, except per share data.)
Balance Sheet Data:
Total assets	$	184,211		$	144,346		$	169,658		$	139,403
Total loans, net		114,202			79,862			93,400			76,678
Total deposits		161,744			121,063			146,729			115,573
Total shareholders’ equity		15,861			15,601			16,039			15,096

Income Statement Data:
Net interest income		2,965			2,337			4,932			4,008
Provision for loan and lease losses		323			240			473			143
Noninterest income		558			1,042			1,250			149
Noninterest expense		2,329			2,024			4,102			3,025
Income taxes		308			412			589			373
Net earnings		563			703			1,018			616

Per Common Share Outstanding Data:
Basic net earnings per common share	$	0.38		$	0.47		$	0.68		$	0.41
Diluted net earnings per common share	$	0.37		$	0.47		$	0.68		$	0.41
Book value per common share	$	10.59		$	10.43		$	10.72		$	10.09
Common shares outstanding		1,497,494			1,496,106			1,496,106			1,496,106
Average common shares outstanding:
Per basic		1,497,004			1,496,106			1,496,106			1,496,106
Per diluted		1,507,570			1,496,106			1,496,106			1,496,106

Performance Ratios:
Return on average assets		0.64	%		1.01	%		0.69	%		0.52	%
Return on average equity		6.92	%		9.13	%		6.51	%		4.31	%
Net interest margin		3.56	%		3.58	%		3.54	%		3.51	%

Asset Quality Ratios:
Allowance to loans		1.32	%		1.43	%		1.31	%		1.16	%
Allowance for loan losses to nonperforming loans		—			—			1,230.69	%		—
Nonperforming loans to total loans		—			—			0.11	%		—
Nonperforming assets to total assets		—			—			0.06	%		—
Net recoveries (charge-offs) to average loans		0.06	%		(0.10	%)		0.16	%		(0.03	%)
Trouble debt restructurings to loans		0.11	%		—			0.14	%		—

Capital Ratios:
Total risk-based capital ratio (Bank)		14.14	%		18.06	%		15.97	%		17.05	%
Tier 1 risk-based capital ratio (Bank)		12.91	%		16.81	%		14.78	%		16.04	%
Tier 1 leverage capital ratio (Bank)		8.97	%		10.85	%		9.67	%		10.61	%
Total equity to total assets (Bank)		8.59	%		10.76	%		9.42	%		10.77	%

Other Data:
Number of full-time employees		36			34			34			29
Number of full-service branch offices		2			2			2			1

RISK FACTORS

The occurrence of some of the following events could reduce our profitability and return on equity and may cause the value of our stock to decrease. You should not invest in the shares unless you can afford to lose some of or all of your investment. Before investing, we encourage you to read this entire Prospectus, including the following risk factors.

RISKS RELATED TO OUR BUSINESS OPERATIONS

Some of our borrowers will not repay their loans, and losses from loan defaults may exceed the allowance we establish for that purpose, which may have an adverse effect on our business.

Consistent with the financial institution industry, some of our borrowers inevitably will not repay loans that we make to them. This risk is inherent in the banking business. The risk of credit losses on loans varies with, among other things, general economic conditions, the type of loan being made, the creditworthiness of the borrower over the term of the loan and, in the case of a collateralized loan, the value and marketability of the collateral for the loan. If a significant number of loans are not repaid, it will have an adverse effect on our earnings and overall financial condition.

Like all financial institutions, we maintain an allowance for loan and lease losses to account for possible loan defaults and nonperformance. The allowance for loan and lease losses reflects our best estimate of probable losses in the loan portfolio at the relevant time. This evaluation is based primarily upon the following: a review of our historical loan loss experience as adjusted for certain qualitative factors discussed in this Prospectus; known risks contained in the loan portfolio; known risks for each segment of our loan portfolio; composition and growth of the loan portfolio; and certain economic factors. Despite our best efforts, and particularly due to the fact that we have a limited loan loss history, the determination of an appropriate level of loan loss allowance is an inherently difficult process and is based on numerous assumptions and estimations. As a result, our allowance for loan losses may not be adequate to cover our actual losses, and future provisions for loan losses may adversely affect our earnings.

Our recent results may not be indicative of our future results.

We may not be able to sustain our historical rate of growth any further. In addition, our recent growth may distort some of our historical financial ratios and statistics. Various factors, such as economic conditions, regulatory and legislative considerations and limitations, and competition, may also impede or prohibit our efforts to expand our market presence. If we experience a significant decrease in our historical rate of growth, our results from operations and financial condition may be adversely affected due to a high percentage of our operating costs being fixed expenses.

If the economic recovery in our market continues at or below the current pace for a prolonged period, our financial results could be adversely affected.

Our success will depend in large part on economic conditions in Tallahassee and Leon County, Florida. A prolonged slow economic recovery in our market could result in nonperforming assets, which may result in operating losses, impaired liquidity, and the erosion of capital. A variety of factors could create this scenario, including adverse developments in the local industries, reduction in state government staffing, or national disasters such as hurricanes, floods, or tornadoes.

Changes in interest rates affect our profitability and assets.

Our profitability depends to a large extent on the Bank’s net interest income, which is the difference between income on interest-earning assets such as loans and investment securities, and expenses on interest-bearing liabilities such as deposits and borrowings. We are unable to predict changes in market interest rates, which are affected by many factors beyond our control including inflation, economic recession, unemployment, money supply, domestic and international events, and changes in the United States and other financial markets. Our net interest income may be reduced if: (i) more interest-earning assets than interest-bearing liabilities reprice or mature during a time when interest rates are declining; or (ii) more interest-bearing liabilities than interest-earning assets reprice or mature during a time when interest rates are rising.

Changes in the difference between short and long-term interest rates may also harm our business. For example, short-term deposits may be used to fund longer-term loans. When differences between short-term and long-term interest rates shrink or disappear, as has occurred in the current zero interest target rate policy environment, the spread between rates paid on deposits and received on loans could narrow significantly, decreasing our net interest income.

Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.

Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, and other sources, could have a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities on terms that are acceptable to us could be impaired by factors that affect us specifically, the financial services industry, or economy in general. Factors that could negatively impact our access to liquidity sources include a decrease of our business activity as a result of a downturn in the markets in which our loans are concentrated, adverse regulatory action against us, or our inability to attract and retain deposits. Our ability to borrow could be impaired by factors that are not specific to us, such as a disruption in the financial markets and diminished expectations or growth in the financial services industry.

Our loan portfolio includes commercial, real estate, and consumer and other loans that may have higher risks.

Our commercial real estate, residential real estate, construction, commercial, and consumer and other loans at June 30, 2013, were $41.4 million, $36.5 million, $12.3 million, $24 million, and $1.6 million, respectively, or 35.8%, 31.5%, 10.6%, 20.7%, and 1.4% of total loans. Commercial loans and commercial real estate loans generally carry larger balances and can involve a greater degree of financial and credit risk than other loans. As a result, banking regulators continue to give greater scrutiny to lenders with a high concentration of commercial real estate loans in their portfolios, and such lenders are expected to implement stricter underwriting standards, internal controls, risk management policies, and portfolio stress testing, as well as higher capital levels and loss allowances. The increased financial and credit risk associated with these types of loans are a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the size of loan balances, the effects of general economic conditions on income-producing properties, and the increased difficulty of evaluating and monitoring these types of loans.

Our continued pace of growth may require us to raise additional capital in the future, but that capital may not be available when it is needed.

We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations. Our ability to raise additional capital will depend on conditions in the capital markets at that time, which are outside our control, and on our financial performance. Accordingly, there is no assurance as to our ability to raise additional capital if needed on terms acceptable to us. If we cannot raise additional capital to support our growth, our ability to further expand our operations through internal growth and acquisitions could be materially impaired.

Both our industry and our primary service area are highly competitive.

There are a number of national and regional financial institutions that compete with us in our primary service area, both within Tallahassee and in all of Leon County, Florida. By virtue of their larger capital resources, such institutions have significantly greater lending limits than we have, and these financial institutions have the ability to offer a greater mix of financial products and services than we are able to provide. In addition, we are also competing with other financial institutions, such as savings and loan associations and credit unions, for deposits and loans. Most of our competitors benefit from a more established market presence, greater capital, and a larger asset and lending base. As a result, we cannot anticipate the extent to which such competition may negatively affect our ability to operate profitably.

Our lending limit per borrower will continue to be lower than many of our competitors which may discourage potential clients and limit our loan growth.

The Bank’s legally mandated lending limit is lower than that of many of our larger competitors because we have less capital. At June 30, 2013, our legal lending limit for loans was approximately $3.9 million to any one borrower on a secured basis and $2.4 million on an unsecured basis. Although we have not experienced this to date, our lower lending limit may discourage potential borrowers with loan needs that exceed our limit from doing business with us. This may restrict our ability to grow. We attempt to serve the needs of these borrowers by selling loan participations to other institutions, but this strategy may not always succeed.

A significant portion of our loan portfolio is secured by real estate in our geographic markets and events that negatively impact the real estate market in our primary market could hurt our business.

Our interest-earning assets are heavily concentrated in mortgage loans secured by real estate, particularly real estate located in Leon County, Florida. As of June 30, 2013, approximately 77.9% of our loans had real estate as a primary or secondary component of collateral. The real estate collateral, in each case, provides an alternate source of repayment in the event of default by the borrower; however, the value of the collateral may decline during the time the credit is extended. Real estate values and real estate markets are generally affected by a variety of factors including changes in economic conditions; fluctuations in interest rates; the availability of credit; changes in tax laws and other governmental statutes, regulations, and policies; and acts of nature. If we are required to liquidate the collateral securing a loan during a period of reduced real estate values to satisfy the debt, our earnings and capital could be adversely affected.

This concentration of loans subjects us to risks if there is a downturn in the economy or a recession similar to the one our country has just experienced. A downturn could result in decreased loan originations and increased delinquencies and foreclosures, which could more greatly affect us than if our lending were more geographically diversified. In addition, since a large portion of our portfolio is secured by properties located in Leon County, Florida, the occurrence of a natural disaster, such as a hurricane, or a man-made disaster could result in a decline in loan originations, a decline in the value or destruction of mortgaged properties, and an increase in the risk of delinquencies, foreclosures or loss on loans originated by us.

Future economic growth in our market area may be slower compared to previous years.

The State of Florida’s population growth historically has exceeded national averages. Consequently, the state has experienced substantial growth in new business formation and public works spending. Although recently home prices have increased due to a moderate economic growth and migration into our market area, growth in our market area may still be restrained in the near term. Any decrease in existing and new home sales limits lending opportunities and negatively affects our income. Additionally, a decline in property values could lead to valuation adjustments on our loan portfolio.

Our business strategy depends on continued growth; therefore, our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.

We intend to continue pursuing a growth strategy for our business. Our business prospects must be considered in light of the risks, expenses, and difficulties that are frequently encountered by companies in significant growth stages of development. In light of the prevailing economic conditions, we cannot assure you we will be able to expand our market presence in our existing market, successfully enter new markets, or that any such expansion will not adversely affect our results of operations. Failure to manage our growth effectively could have a material adverse effect on our business, future prospects, financial condition, or results of operations and could negatively affect successful implementation of our business strategy.

We may face risks with respect to future expansion.

We may engage in additional de novo branch expansion, expansion through acquisitions of existing branches of other financial institutions, or the acquisition of existing financial institutions in North Florida, South Georgia, or South Alabama. We have not allocated the expected net proceeds of the Offering for any specific purpose. We may consider and enter into new lines of business or offer new products or services. Branch expansion, acquisitions, and mergers involve a number of risks, including, but not limited to: (i) the time and costs associated with identifying and evaluating potential acquisitions and merger partners; (ii) inaccurate estimates and judgments regarding credit, operations, management, and market risks of the target institutions; (iii) the time and costs of evaluating new markets, hiring experienced local management, opening new offices, and the time lags between these activities and the generation of sufficient assets and deposits to support the costs of the expansion; (iv) our ability to finance an acquisition and possible dilution to our existing shareholders; (v) the diversion of our management’s attention to the negotiation of a transaction, and the integration of the operations

and personnel of the combining businesses; (vi) our ability to penetrate into new markets when we lack experience in those markets; (vii) the strain of growth on our infrastructure, staff, internal controls and managements, which may require additional personnel, time, and expenditures; (viii) exposure to potential asset quality issues with acquired institutions; (ix) the introduction of new products and services into our business that could prove costly; and (x) the possibility of unknown or contingent liabilities.

We may incur substantial costs to expand and we can give no assurance such expansion will result in the levels of profits we seek. There can be no guarantee that integration efforts of any future mergers or acquisitions will be successful. Also, we may issue equity securities, including Common Stock and securities convertible into shares of our Common Stock in connection with a future acquisition, which could cause ownership and economic dilution to our current shareholders and to investors purchasing Common Stock in this Offering.

We are dependent on key executive officers, the loss of which may be detrimental to our operations.

We are dependent on certain executive officers of the Bank, namely our Chief Executive Officer and President, our Executive Vice President and Chief Financial Officer and our Executive Vice President and Senior Lender, for their leadership and oversight in all aspects of our operations and the unexpected loss of any of these personnel could adversely affect our operations.

LEGAL AND REGULATORY RISKS

We are subject to government regulation and monetary policy that could constrain our growth and profitability.

We are subject to extensive federal government supervision and regulations that impose substantial limitations with respect to lending activities, purchases of investment securities, the payment of dividends, and many other aspects of the banking business. Many of these regulations are intended to protect depositors, the public, and the Federal Deposit Insurance Corporation (“FDIC”), but not our shareholders. Future legislative enactments or governmental policy could adversely affect the banking industry and our operations. Federal economic and monetary policy may also affect our ability to attract deposits, make loans, and achieve our planned operating results.

Recent legislative and regulatory initiatives could affect our operations.

The Dodd-Frank Act, enacted in 2010, has and will continue to increase the regulation and oversight of the financial services industry. The Dodd-Frank Act addresses, among other things, systemic risk, capital adequacy, deposit insurance assessments, consumer financial protection, interchange fees, derivatives, lending limits, thrift charters, and changes among the banking regulatory agencies. Some provisions of the Dodd-Frank Act became effective immediately upon its enactment. Many provisions, however, will require regulations to be promulgated by various federal agencies in order to be implemented, some of which have already been proposed and enacted by the applicable federal agencies. Certain provisions will not apply to banking organizations with less than $10 billion of assets; however, the provisions of the Dodd-Frank Act may have unintended effects on smaller banks, which will not be clear until implementation.

The changes resulting from the Dodd-Frank Act may impact the profitability of our business activities, require changes to some of our business practices, or otherwise adversely affect our business, as would other regulatory initiatives that may become effective. These changes may also require us to invest significant management attention and resources to evaluate and make any changes necessary to comply with new statutory and regulatory requirements. It may also require us to hold higher levels of regulatory capital and/or liquidity and it may cause us to adjust our business strategy and limit our future business opportunities. We cannot predict the effects of this legislation and the corresponding regulations on us, our competitors, or on the financial markets and economy, although it may significantly increase costs and impede efficiency of internal business processes.

Additionally, as of July 2013, the FDIC approved revisions to its capital adequacy guidelines and prompt corrective action rules that implement the revised standards of the Basel Committee on Banking Supervision, commonly called Basel III, and address relevant provisions of the Dodd-Frank Act. Basel III and the regulations of the federal banking agencies require bank holding companies and banks to undertake significant activities to demonstrate compliance with the new and higher capital standards that will be phased in beginning in January 2015. Compliance with these rules will impose additional costs on the Company and the Bank.

Our information systems may experience an interruption or security breach.

We rely heavily on communications and information systems to conduct our business. We also provide our clients the ability to bank electronically through online banking, remote capture, mobile capture, and mobile banking. The secure transmission of confidential information over the internet is a critical element of banking online. Our network could be vulnerable to unauthorized access, computer viruses, phishing schemes, and other security problems. Any failure, interruption, or breach in the security of these systems could result in disruptions in our client relationship management, general ledger, deposit, loan, and other systems. While we have policies and procedures designed to prevent or limit the effect of possible failure, interruption, or security breach of our information systems, there can be no assurance that any such failure, interruption or security breach will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failure, interruption, or security breach of our information systems could damage our reputation, result in a loss of client business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability. While we do carry insurance to protect against losses resulting from such technology issues or breaches, we could be exposed to claims, litigation, and other possible liabilities that could exceed the maximum policy limits.

Florida financial institutions face a higher risk of noncompliance and enforcement actions with the Bank Secrecy Act and other Anti-Money Laundering statutes and regulations.

Since September 11, 2001, banking regulators have intensified their focus on Anti-Money Laundering and Bank Secrecy Act compliance requirements, particularly the Anti-Money Laundering provisions of the USA PATRIOT Act. There is also increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control. Since 2004, federal banking regulators and examiners have been extremely aggressive in their supervision and examination of financial institutions located in the State of Florida with respect to institutions’ Bank Secrecy Act and Anti-Money Laundering compliance. Consequently, a number of formal enforcement actions have been issued against Florida financial institutions.

In order to comply with regulations, guidelines, and examination procedures in this area, the Bank has been required to adopt new policies and procedures and to install new systems. If the Bank or future Bank acquisitions have policies, procedures, and systems that are deemed deficient, then the Bank would be subject to liability, including fines and regulatory actions such as restrictions on its ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of its business plan including its acquisition plans.

Higher FDIC deposit insurance premiums and assessments could adversely affect our financial condition.

The deposits of the Bank are insured by the FDIC up to legal limits and, accordingly, subject the Bank to the payment of FDIC deposit insurance assessments. The Bank’s regular assessments are determined by its risk classification, which is based on its regulatory capital levels and the level of supervisory concern that it poses. High levels of bank failures since the beginning of the financial crisis and increases in the statutory deposit insurance limits have increased resolution costs to the FDIC and put significant pressure on the Deposit Insurance Fund. In order to maintain a strong funding position and restore the reserve ratios of the Deposit Insurance Fund, the FDIC increased deposit insurance assessment rates and charged a special assessment to all FDIC-insured financial institutions. While the Bank’s most recent assessment decreased, increases in assessment rates or special assessments may occur in the future, especially if there are significant additional financial institution failures. Any future special assessments, increases in assessment rates, or required prepayments in FDIC insurance premiums could reduce our profitability or limit our ability to pursue certain business opportunities, which could materially and adversely affect our business, financial condition, results of operations, and prospects.

RISKS RELATED TO OWNERSHIP OF SHARES OF OUR COMMON STOCK

The limited trading market may make it difficult for you to sell your shares in the future.

Prior to this Offering, there has been very limited trading activity in shares of our Common Stock. We do not anticipate listing our shares on any stock exchange in the near future. We do not expect that our stock will be quoted on any stock market or that an active trading market in our Common Stock will develop following the Offering. A public market having depth and liquidity depends on having enough buyers and sellers at any given time. Without an active trading market, shareholders may find it difficult to find buyers for their shares. Investors should be aware that they may be required to bear the financial risks of this investment for an indefinite period of time.

Our Board of Directors owns a significant percentage of our shares and will be able to make decisions to which you may be opposed.

Before this Offering, our directors and executive officers as a group owned 411,774 shares of Common Stock, or 27.50% of our outstanding Common Stock. In addition, the directors and executive officers have stock options to acquire 122,000 shares of Common Stock, which, if fully exercised, would result in them owning 32.96% of our outstanding Common Stock prior to this Offering. Even after the Offering, our directors and executive officers are expected to own sufficient shares, to exert a significant influence on the election of Board members and on the direction of the Company. This influence could negatively affect the price of our shares or be inconsistent with other shareholders’ desires.

Our Offering price has been determined by our Board of Directors and may not accurately reflect the value of our stock .

The Offering price per share has been set by the Board of Directors in consultation with FIG Partners, LLC. In these consultations, the Board considered, among other things, our financial and operational condition, the liquidity of our Common Stock, and the general market conditions for Common Stock in one-bank holding companies of comparable size and scope as Prime Meridian. Our conclusions in this regard may be inaccurate. Consequently, you may lose a portion of your investment simply as a result of an inaccurately determined Offering price.

Investors in this Offering will experience immediate and substantial dilution.

If you purchase Common Stock in this Offering, you will pay more for your shares than the amounts paid by existing shareholders for their shares. As a result, you will incur immediate and substantial dilution of $1.17 per share, representing the difference between the Offering price of $12.50 per share and our pro forma book value per share after giving effect to this Offering. Accordingly, if we were liquidated at our book value, you would not receive the full amount of your investment.

We do not intend, and face statutory restrictions on our ability, to pay dividends in the immediate future.

We have not paid any dividends on our Common Stock since our inception, and we do not intend to pay dividends in the immediate future. Instead, we anticipate that all of our future earnings will be used for working capital, to support our operations, and to finance the growth and development of our business. In addition, because the Bank is our only material asset, PMHC’s ability to pay dividends to our shareholders depends on our receipt of dividends from the Bank, which is also subject to restrictions on dividends as a result of banking laws, regulations, and policies. Accordingly, if the receipt of dividends over the near term is important to you, you should not invest in our Common Stock.

Investing in this Offering will not give you the right to participate in any future offerings of our capital stock and your ownership could be diluted.

As a shareholder, you are not automatically entitled to purchase additional shares of Common Stock in future issuances of our Common Stock; therefore, you may not be able to maintain your current percentage of ownership in PMHC. If we decide to issue additional shares of Common Stock or conduct an additional offering of stock, your ownership in the Company could be diluted and your potential share of future profits may be reduced.

We are an “emerging growth company,” and the reduced reporting requirements applicable to EGCs may make our Common Stock less attractive to investors.

We are an EGC as defined in the JOBS Act. As long as we are classified as an EGC we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. These include reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an EGC for up to five years, although we could lose that status sooner if our gross revenues

exceed $1.0 billion, if we issue more than $1.0 billion in nonconvertible debt in a three year period, or if the market value of our Common Stock held by nonaffiliates exceeds $700 million as of any June 30, in which case we would no longer be an EGC as of the following December 31. We cannot predict if investors will find our Common Stock less attractive because we may utilize these exemptions, or if we choose to utilize additional exemptions in the future. If some investors find our Common Stock less attractive, there may be a less active trading market for our Common Stock and our stock price may be more volatile.

Management has broad discretion concerning the application of net proceeds.

The net proceeds of this Offering will be added to our capital accounts, and used for general corporate purposes, including capital to continue to support the growth of the Bank, or to acquire targets in the North Florida, South Georgia, or South Alabama. This growth may also include the opening of branch offices, increasing the size and volume of loans, or other such activities that may require additional capital. Our management may determine that it is in the best interest of the Company or the Bank to apply the net proceeds of this Offering in a manner that is inconsistent with an investor’s wishes. We have not allocated the expected net proceeds for any specific purpose. Failure to apply these funds effectively might harm your investment.

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DILUTION

If you invest in our Common Stock, your ownership interest will be diluted to the extent that the Offering price per share of our Common Stock exceeds the pro forma book value per share of our Common Stock immediately following this Offering. As of June 30, 2013, the book value of our Common Stock was $10.59 per share. The pro forma book value, as of June 30, 2013, per share of our Common Stock assuming the sale of all 1,200,000 shares of Common Stock in this Offering would be $11.33.

Therefore, this Offering will result in an immediate increase of $0.74 in the pro forma book value per share of our Common Stock owned by our existing shareholders and an immediate dilution of $1.17 in the book value per share of our Common Stock to investors purchasing shares in this Offering, or approximately 9.4% of the Offering price of $12.50 per share.

The following table illustrates the calculation of the amount of dilution per share as of June 30, 2013, that a purchaser of our Common Stock in this Offering will incur if we sell all 1,200,000 shares of Common Stock in this Offering:


Offering price per share	$	12.50
Book value per share as of June 30, 2013	$	10.59
Increase in book value per share attributable to new investors	$	0.74
Pro forma book value per share	$	11.33
Dilution per share to new investors in this Offering	$	1.17

CAPITALIZATION

The following table sets forth our capitalization as of June 30, 2013, as adjusted to give effect to the assumed $14,700,000 in net proceeds from the sale of 1,200,000 shares at price of $12.50 per share. You should read the following table in connection with the sections titled “Summary of Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing elsewhere in this prospectus.


	Actual at June 30, 2013			As Adjusted for Sale of 1,200,000 Shares
	(Dollars in thousands)

Stockholders’ equity:

Common Stock, $0.01 par value, 9,000,000 shares authorized, 1,497,494 shares issued and outstanding at June 30, 2013, and 2,697,494 outstanding at the closing of the Offering	$	15		$	27
Additional paid-in capital		14,911			29,599
Retained Earnings		1,146			1,146
Unrealized gain (losses) on securities		(211	)		(211	)

Total stockholders’ equity	$	15,861		$	30,561

USE OF PROCEEDS

In the event we raise $5 million or less in this Offering, then we intend to use the net proceeds of this Offering for general corporate purposes, which may include maintaining liquidity at the Company and providing capital to the Bank to fund balance sheet growth or working capital needs, while also maintaining strong capital levels. Should we raise between $5 million and $10 million in the Offering, we may also consider branching or branch acquisition opportunities in North Florida, South Georgia, or South Alabama markets. Should we raise more than $10 million in this Offering, we intend to also consider acquisition of another financial institution within the next 18 months. We have not specifically allocated the amount of net proceeds to us that will be used for these purposes and our management will have broad discretion over how these proceeds are used. We are conducting this Offering at this time because we believe that it will allow us to execute our growth strategies.

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DESCRIPTION OF BUSINESS

Overview

Prime Meridian Holding Company is headquartered in Tallahassee, Florida and it is through our wholly-owned banking subsidiary, Prime Meridian Bank, that we offer a broad range of services. Our primary market is the Tallahassee MSA; in addition, we also serve the surrounding North Florida, South Georgia, and South Alabama areas. We believe that our market exhibits attractive demographic attributes by being located in the county of Florida’s State Capital.

The Bank opened for business in February 2008, when Florida and the United States were facing the most unstable economy since The Great Depression. Because of this economic environment, we knew managing the risks of our Bank would determine our success. Today, it is still our central focus to avoid high risks while being aggressive in addressing any problem loans that may arise. We have not originated subprime loans or high loan-to-value ratio mortgages. We believe we have acted quickly in both recognizing problem loans and charging them off, as necessary. While our past performance does not guarantee our future performance, as of today, our strategy has resulted in a loan portfolio with very few nonperforming loans or assets. Since the Bank’s inception, we have only charged-off $515,000 and less than half of this amount has been since 2010. As of June 30, 2013, our level of nonperforming assets consisting of nonaccrual loans and OREO as a percentage of total assets was 0.00%, restructured loans as a percentage of total loans equated to 0.11% and year-to-date annualized net charge-offs were 0.06% of average loans. The execution of this strategy has allowed us to become profitable in difficult economic times, all while serving the needs of our market. We continue to forecast strong revenues coupled with operational efficiencies that we believe will produce attractive risk-adjusted returns for our shareholders.

As a result of developing a niche in our market, the Bank has experienced significant organic growth; we have concentrated our asset generation efforts on commercial real estate loans, construction loans, and business loans. We have focused our deposit generation on relationship-based core deposits. Since the Bank opened for business on February 4, 2008 through June 30, 2013, total assets have grown to $184 million. During this same time period, loans grew to $116 million and total deposits grew to $162 million. We achieved profitability in our eighth quarter of operation and cumulative profitability in April 2012. Our team has worked diligently to make the Bank successful; our group of experienced bankers has helped bring our newest team members to a competent level of banking knowledge. We believe our management’s experience and long-standing presence in the area provide us insight into the local market, and as a result, the ability to tailor our products and services to meet the needs of our clients.

Our History

Prime Meridian Bank, a Florida commercial bank, was chartered on February 4, 2008, with a commitment to provide a banking option to our market with a high level of client service while maintaining sound and prudent banking practices. In 2010, our holding company, PMHC, was formed and the Bank’s shareholders exchanged their shares of Common Stock for shares of Common Stock of PMHC, with the Bank becoming a wholly-owned subsidiary of PMHC. This occurred through a statutory share exchange on, September 16, 2010.

In an effort to provide a superior level of service, we are building a culture and brand that cultivates a client relationship and creates an inviting atmosphere as opposed to simply processing a customer transaction. We want a culture that supports relationship banking. This culture has served us well and we have found that as a result of relationship banking, many of our clients refer others to us. There is no greater compliment than to have our existing clients share their positive banking experiences with their family and friends.

Five core principles were developed and adopted by our team to support our actions and guide our decisions. These principles are frequently reviewed with our team, as part of our effort to maintain our culture. Below are our governing principles and a description of how they apply to our operations:

•

Tenacity – A culture of looking at new ideas, tackling challenges, and overcoming obstacles in order to meet our clients’ needs.

•

Accountability – Accepting full and ultimate responsibility for the situation or action at hand.

These core principles and the Bank’s three way test also serve as the foundation for our motto, “Let’s think of a few good reasons why it CAN be done!” which is an overarching concept for our Company and team. We stress the question “Why?” because, while we clearly recognize that “how” is imperative, without understanding “why” something should be done after taking into consideration the risk factors involved, “how it can be done” does not necessarily matter. Our mission statement is also supported by our core principles: “Building bankers to serve our clients and community in order to optimize shareholder value.”

As a result of our efforts and culture, we have experienced an outstanding level of organic growth. Currently, we provide banking services to our clients from two banking offices located in Tallahassee, Florida. The Bank’s deposits are insured by the FDIC and we operate under the supervision and regulations of the FDIC and the Florida Office of Financial Regulation (“OFR”).

Our Competitive Strengths

We have positioned PMHC to create shareholder value and build bankers to serve our clients and community. The result has yielded the following competitive strengths:

Experienced and Engaged Management Team with the Support of a Local Board of Directors: Our management team is led by Sammie D. Dixon, Jr., the President and Chief

Executive Officer of the Company and the Bank, who began his banking career in 1997 and was one of the founders of the Bank. During his banking career, he was a Senior Vice President and Commercial Sales Manager for Regions Bank in Tallahassee, Florida. He also served as Chief Executive Officer and President for Bank of Thomas County, Georgia. The other three members of our executive management team are Kathleen C. Jones, Chris L. Jensen, Jr., and Susan Payne Turner. Mrs. Jones has also been with the Bank since its inception and is the Bank’s and Company’s Executive Vice President and Chief Financial Officer. Prior to joining the Bank, she spent 36 years with SunTrust Bank and its predecessor institutions; she served as the North Florida Regional Senior Vice President and Senior Banking Operations Manager. Mr. Jensen has been in banking for more than 30 years, has been with the Bank since its inception, and serves as the Bank’s and Company’s Executive Vice President and the Bank’s Senior Lender. Previously in his career, he served as Tallahassee’s and Panama City’s Market President for SouthTrust Bank and later, Tallahassee Market President for Regions Bank. Mrs. Turner is a Senior Vice President and the Chief Risk Officer at the Bank. She brings 28 years of banking experience in many areas including operations, marketing, compliance, and financials; she previously served as the Chief Financial Officer of another community bank. Mr. Dixon, Mrs. Jones, and Mr. Jensen also serve on the Bank’s and Company’s Board of Directors, along with eleven other directors from our community, including the Chairman of both Boards, Richard A. Weidner, CPA. As of June 30, 2013, our directors and executive officers beneficially owned 27.50% of PMHC’s Common Stock. We have an average of 29 years of experience within our executive management team, which coupled with the energy and enthusiasm of our entire banking team, provides us with a competitive strength.

Expertise in Commercial Lending. As a result of the recent unstable and sluggish economic environment, generating well underwritten, quality loans has been a priority, but doing so has been difficult for many financial institutions. In the current environment, our lenders have been able to drive quality commercial loan growth. This is a result of being able to provide clients with access to knowledgeable, experienced lenders who are able to respond to a broad range of business needs and who positively foster the client relationships. In addition to our expertise, the ability to approve loans at a local level has generated a faster response time for clients. We believe the quicker response time has resulted in a pricing advantage for us; we frequently find we are the lender of choice, even when our pricing is higher.

Stable and Scalable Platform. Since the recent economic crisis began in 2008, many of our competitors have suffered significant operating and regulatory challenges resulting in decreased service to their customers. Since the Bank opened its doors for operation, we have maintained a well capitalized stable banking platform with sound asset quality. As of June 30, 2013, we had an 8.59% tangible common equity ratio, an 8.97% tier 1 leverage capital ratio, a 12.91% tier 1 risk-based capital ratio, and a 14.14% total risk-based capital ratio. Contributing to our stability is our track record of sound asset quality trends coupled with a strong credit culture. As of June 30, 2013, we have had no foreclosures or other real estate owned (“OREO”), our level of nonperforming assets, consisting of nonaccrual loans and OREO, as a percentage of total assets was 0.00%, and restructured loans as a percentage of total loans equaled 0.11%. Our total net charge-offs since inception of the Bank have been $515,000 and our year-to-date annualized net charge-offs equated to 0.06% of total assets. We believe these results are because of our underwriting standards, experienced loan officers, diligent monitoring of our loan portfolio, and our close ties to our clients. Additionally, our management team brings prior experience from larger banks. We have utilized their knowledge to build a scalable corporate infrastructure with the capacity and capability to support continued organic growth and future acquisitions, while also improving operational efficiencies.

Our Operating Strategy

Our business strategy and plan focuses on traditional, relationship-based banking. It is supported by our core principles that guide our activities to operate our community bank under sound and prudent banking practices. The principles which guide us are passion, grace, integrity, tenacity, and accountability. It is through these principles that we developed our test of accountability which consists of these three questions: Is it right by the client? Is it right by the bank? Is it legally, morally, and ethically correct? As a result of our foundation, we developed our motto: “Let’s think of a few good reasons why it CAN be done!”

Our organizational structure focuses on a strong risk management culture. We stay abreast of our market by having our Board and management team highly involved in our communities. The banking experience of our team and high-quality client service distinguishes us from other banks. We believe it is through this foundation that we will be able to expand our products and services to our clients resulting in steady, long-term growth. Our culture is focused on meeting our clients’ needs at a level that contributes to an increased depth of relationship which in turn supports client retention, enhanced profitability, and sharing banking experience with family, friends, and other businesses.

The Bank provides a range of consumer and commercial banking services to individuals and businesses. In addition to electronic banking services such as mobile banking and online banking, we offer basic services which include demand interest-bearing and noninterest-bearing accounts, savings accounts, money-market deposit accounts, NOW accounts, time deposits, safe deposit services, wire transfers, escrow accounts, debit cards, direct deposits, notary services, night depository, cashier’s checks, domestic collections, bank drafts, automated teller services, drive-in tellers, banking by mail, credit cards through a third party, and a full range of commercial and consumer loans, both collateralized and uncollateralized. In addition, the Bank makes secured and unsecured commercial and real estate loans, and issues standby letters of credit. The Bank provides debit and automated teller machine (“ATM”) cards and is a member of

the MoneyPASS and Pulse networks thereby permitting clients to utilize the convenience of a large ATM network system, including more than 400,000 member machines nationwide. The Bank does not have trust powers.

Our loan target market includes owner occupied and nonowner occupied commercial real estate, small businesses, developers, consumers, and professionals. Small business clients are typically a commercial entity with sales of $25 million or less; these clients have the opportunity to generate significant revenue for banks.

Our revenues are primarily derived from interest earned, and fees received in connection with real estate and other loans, from interest and dividends from investment securities, service charge income generated from demand accounts, ATM fees, and other services. The principal sources of funds for the Bank’s lending activities are its deposits, loan repayments, and proceeds from investment securities. The principal expenses of the Bank are the interest paid on deposits, salaries, and general operating expenses.

We are committed to being a successful community bank and being a good business partner within our community. We believe our active community involvement and business development strategies, in conjunction with our client relationship culture, comprise a successful plan for developing new relationships and enhancing existing ones.

Growth

Our deposits increased by $31.2 million from year-end 2011 to 2012, a 26.96% increase. During this same time period, total assets increased by 21.70% to $169.7 million. Deposits also increased by $15.0 million from December 31, 2012 to June 30, 2013, a 10.23% increase. During that same period, total assets increased by $14.6 million to $184.2 million. These increases are from organic growth supported through core deposits and loans.

Core Deposits. We believe that our growth in core deposits can be attributed to our efforts to provide a superior client relationship banking experience. Core deposits are deposits made by clients in the Bank’s market area who tend to be loyal and consistent. These deposits are more stable, cost less, and reprice more slowly than other deposits when interest rates rise. We believe that we have created a strong business development and sales culture which in turn creates an effective platform for future organic growth. As a result of these efforts, noninterest-bearing deposits increased to 26.55% of total deposits as of June 30, 2013.

Loans. Even though 2012 was a year of generally soft loan demand and economic uncertainty, organic growth provided us with the opportunity to soundly grow our loans by 22.02%; while maintaining our prudent credit underwriting standards. As of June 30, 2013, loans were $115.8 million. We have kept our focus on serving the credit needs of our communities and have relied on sound banking practices to identify qualified borrowers. Due to financial challenges faced by many of our competitors, we have seen increased opportunities in our market.

Our Market and Economic Condition

Our current market is primarily defined as the Tallahassee MSA and the surrounding North Florida, South Georgia, and South Alabama areas. Tallahassee is the State Capital, and home to two state universities, and one of the largest community colleges in Florida. The population of the Tallahassee MSA is approximately 375,000.

Like all Florida communities, we have seen the impact of the recent economic recession, specifically the dramatic decrease in housing and real estate values. As of July 2013, the national unemployment rate was 7.4%, Florida’s unemployment rate was 7.1% and Tallahassee’s rate was approximately 6.0%. Although trends have begun to improve, sustained elevated unemployment rates could result in nonperforming loans and reduced asset quality. As of June 30, 2013, we had no nonperforming loans or nonperforming assets. Also as of June 30, 2013, we had no accruing loans that were between 30 and 89 days delinquent. As of December 31, 2012, we reported one real estate mortgage loan in nonaccrual status, with a recorded investment of $101,000, or 0.1% of the portfolio. This was the only nonperforming asset charged off in June of 2013. Another unexpected downturn may lead to valuation adjustments on our loan portfolio as we continue to reassess the market value of our loan portfolio, the losses associated with the loans in default, and the net realizable value of real estate owned could impact earnings.

When a bank takes collateral through foreclosures and similar proceedings, it is required to mark the related loan to the then-fair market value of the collateral, which may result in a loss. These loans also increase a bank’s risk profile and the amount of capital bank regulators believe is appropriate in light of such risks. Although our loan experience has been good to date with no foreclosures or OREO, should we incur nonperforming assets in the future, the resolution of those nonperforming assets would require a commitment of time from management which could be detrimental to the performance of their other responsibilities. Should we have these nonperforming assets, we may determine to sell them to improve our credit quality and reduce the time and costs of carrying these assets. The results of these sales cannot be determined and may result in additional write-downs. As part of our overall risk management process we constantly monitor and review any potential trends that could negatively impact the real estate values.

As a result of the recent worldwide financial crisis, the U.S. federal, state, and foreign governments have taken or are considering taking extraordinary actions in an attempt to deal with the financial crisis and the severe decline in the global economy. To the extent adopted, many of these actions have been in effect for only a limited time and have produced limited or no relief to the capital, credit, and real estate markets. There is no assurance that these actions or other actions under consideration will ultimately be successful. Although the Dodd-Frank Act was adopted in 2010, it still requires numerous studies and rulemaking by regulatory agencies. We cannot predict the effects of this recent legislation or new regulations on us, our competitors, counterparties, or on the financial markets and economy.

Competition

Although competition in our market remains strong, we believe our client relationship philosophy and culture has assisted us in maintaining a strong level of organic growth. We also are actively engaged in Small Business Administration guaranteed financing to support local borrowers who might not otherwise qualify for conventional financing, while mitigating our credit risk and earning fee income by selling the guaranteed portion of some of these loans.

In today’s market, significant competitive factors among financial institutions are generally, interest rates, both on loans and deposits, and prices on fee based services. Since many of our competitors are much larger financial institutions with greater financial resources. It is not our goal to compete on all products and services, but to support the product mix that best suits our strategic plan. This strategy has yielded solid growth for our Bank.

Other important competitive factors that have contributed to our success in our market area include convenient office hours, electronic banking products, quality of client service, community reputation, quality of our banking team, capacity and willingness to extend credit, and our ability to offer cash management and other commercial banking services. Many of our competitors’ approaches and processes may appear to be more efficient, however, these efficiencies do not allow for the same level of personal service we provide, in a wide range of products and services, to our clients. Although offering competitive rates is important, we believe that our greatest competitive advantages are our experienced management team, client relationship culture, and personal service.

Lending Activities

General. As our Bank has offered lending services to our community, we have presented a range of products, providing loans to small businesses, commercial and small to medium sized companies and their owners. In addition, we have provided loans to not-for-profit organizations and consumers, while maintaining strong and disciplined credit policies and procedures. Included in our array of loan products are commercial real estate loans, commercial loans for equipment financing, and lines of credit. All loan products are provided on a nondiscriminatory basis throughout our lending area. Loans for retail lending include residential first and second mortgage loans, home equity lines of credit and consumer installment loans for cars, trucks, boats, and other recreational vehicles. Most of our retail consumer lending connections are driven by our relationships with commercial clients.

Our lending products are marketed through campaigns that focus on our team and the reason clients should “Try My Bank” which is a common slogan used throughout our advertisements and as a website link: www.TryMyBank.com. Clients must meet our sound credit requirements in order to be considered qualified borrowers. Our client relationships and the networks these relationships offer are also additional channels to provide information about our lending products. We target our business development and marketing strategy targets businesses which have annual revenues up to $25 million. Even though we are successful with having loan and deposit relationships with these businesses, we also are here to serve the needs of consumers. Some of the largest employers in the Tallahassee area are state and local government and agencies, higher education institutions, and health care providers.

Commercial Real Estate Loans. Loans of this type are typically our more complex loans; this category of real estate loans is comprised of loans secured by mortgages on commercial property. Commercial loans that are secured by owner-occupied commercial real estate are repaid through operating cash flows of the borrower. The typical maturity for this type of loan is three to five years; however, payments may be amortized over a longer period. 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, we typically require 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 our enterprise risk management process, we understand 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 loans.

Residential Real Estate Loans. We offer first and second one-to-four family mortgage loans and home equity lines of credit; the collateral for these loans is generally on the clients’ owner-occupied residences. Although these types of loans present lower levels of risk than commercial real estate loans, risks do still exist because of possible fluctuations in the value of the real estate collateral securing the loan, as well as changes in the borrowers’ financial condition. Borrowers may be affected by numerous factors, including divorce, job loss, illness, or other personal hardship. As part of our product mix, we offer both portfolio and secondary market mortgages. Portfolio loans generally consist of 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. All of our portfolio residential loans are underwritten based upon the guidelines of the secondary market, predominantly Freddie Mac and Fannie Mae.

Construction Loans. Typically, these loans have a term of one to two years and the interest is paid monthly. This portion of our loan portfolio includes loans to small-to-medium sized businesses to construct owner-user properties, loans to developers of commercial real estate investment properties, and loans to residential developers. 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 move to permanent financing of 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 after the initial funding of the loan.

Commercial Loans. We offer a wide range of commercial loans, including business term loans, equipment financing, and lines of credit. Small-to-medium sized businesses, retail, and professional establishments, make up our target market for commercial loans. Our lenders 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, are secured by accounts receivable, inventory, and the personal guarantees of the principals of the business. Significant factors affecting a commercial borrower’s credit-worthiness 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 the ability 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 residential 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.

Consumer Loans. Our consumer loan portfolio is the smallest portion of our loan portfolio, representing 1.4% of our total loan portfolio at June 30, 2013. 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 some cases, consumer loans 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, we do not anticipate that our consumer loans will become a substantial component of our loan portfolio at any time in the immediate future. Consumer loans are made at fixed and variable interest rates and are based on the appropriate amortization for the asset and purpose.

Loan Underwriting and Servicing

Monitoring credit risks in our loan portfolio is a large component of our enterprise risk management process; therefore, we monitor prepayment risks, interest rate risks, risks resulting from uncertainties in the future value of collateral, risks resulting from changes in economic and industry conditions, and risks inherent in dealing with individual borrowers. In particular, longer maturities increase the risk that economic conditions will change and adversely affect collectability.

In order to mitigate and minimize credit losses, we generally rely on the cash flow of a borrower as the source of repayment and on the value of the underlying collateral as the secondary source of repayment. In addition, when possible, we utilize shorter loan terms in order to reduce the risk of a decline in the collateral value. Also, our underwriting process is an important component in mitigating credit risks. We require that a loan be properly secured by collateral and that the loan officer perform an annual review of the borrower’s current financial information. A renewal or new business loan will not be considered until the required financial documents which include itemized balance sheet, fiscal year-end operating statements, and income tax returns are compiled and thoroughly reviewed by our lending staff.

All policies for loan-to-value (“LTV”) ratios follow the Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”) lending guidelines. Credit scores are a tool in the evaluation of loan requests but the Bank does not utilize a scoring model for approving loans. Rather, credit history with the Bank and others is reviewed on all loan decisions. Minimum debt service coverage ratios of 1.20X are required on most commercial loan types.

The Bank has not originated sub-prime loans, as defined by federal definitions. Interest-only loans are occasionally granted (outside of standard personal and business lines of credit) where there is a defined repayment source at a future time and the borrower has the capacity to service the required debt service. Examples would include short-term business loans for seasonal purchases, bridge financing pending a property or asset sale, and home construction financing for homebuilders where the loan will be repaid from the sale of the house.

On occasion, we also make unsecured loans. We underwrite each unsecured loan based on the borrower’s and any guarantor’s cash flow plus past credit history. In addition, we typically limit the terms of such unsecured extension of credit to two years for commercial loans and three years for consumer loans. With respect to sources of repayment, we require identification of primary and secondary sources to help ensure retirement of debts on schedule. Furthermore, we obtain the borrower’s financial data and income tax returns to document favorable debt to net worth ratios and sufficient liquidity to repay the debts in a timely fashion.

Loan Quality, Credit Policy and Procedures

We follow what we believe are prudent and disciplined standards for credit underwriting. It is important to us that our lenders have the knowledge base to also understand the credit needs of clients in our market area so that they are able to offer flexible loan solutions in a responsive and timely manner. We pursue a diversified loan portfolio and regularly monitor our loans to note trends in concentrations and to make adjustments, when needed. Our lending policies do not provide for any loans that are highly speculative, subprime, or that have high loan-to-value ratios. These loan policies coupled with our experienced credit managers are the foundation of our credit culture which we believe is critical to developing the long term value of our organization.

When a loan is submitted to one of our loan officers, he or she considers the amount financed, term, collateral, pricing, and creditworthiness of the borrower. The review also evaluates the debt service capacity and the secondary sources of repayment. For loans that are secured by real estate, the market valuation of the property, the level of the borrower’s equity or proposed capital investment, projected income producing property revenue and overall property marketability are included. We also require in these instances, a first or second lien which secures the property and when we have accepted a second lien, we require that a Notice of Limitation of Future Advance letter be sent to the first or senior lien holder. The requirement of a title insurance policy insuring our interest in the real estate collateral must also be received and reviewed, and if the real estate property securing a loan is valued over $250,000 then we require an independent qualified appraiser to complete the appraisal.

In evaluating individual loan requests, we include the borrower’s current and future cash flow, income sources and stability, credit history with us and others, liquidity, contingent debts, collateral, and overall liability structure. New credit requests are critically reviewed. Depending upon the situation, borrowers are sometimes required to deposit funds to demonstrate the ability to repay loans secured by nonincome producing properties. No loans have bank-funded interest reserves.

As part of our monitoring efforts, we review acquisition, development and construction, and nonowner occupied commercial real estate loans. In addition, we conduct annual reviews on all commercial relationships in excess of $500,000. Activity and concentration reports are provided monthly and presented to the Board of Directors Loan Committee and the Board of Directors. We carefully underwrite construction loans, reviewing such areas as the selling market, contracts on the property, surrounding development trends, overall market trends, and most importantly, the ability of the borrower to service the debt for an extended time if necessary. These loans are secured with mortgages on the real estate and generally include other credit enhancements.

Our policy has been to originate commercial real estate mortgage loans predominantly in our primary market area. Commercial real estate mortgage loans are generally made in amounts up to 80% of the appraised value or cost, if applicable, of the property securing the loan. This type of loan entails additional risks compared to residential mortgage loans.

Credit Concentrations: Credit concentrations are defined as amounts loaned to a number of borrowers engaged in similar activities which would cause them to be similarly impacted by economic or other conditions. Our loan policies establish concentration limits following regulatory guidance with respect to industry and loan product types; it is essential that the loan

portfolio reflect diversification. We consistently review the composition of our loan portfolio especially noting credit concentrations. Increased risks can be associated with heavy concentrations; therefore, our Credit Officer monitors the portfolio and submits information to the Bank’s Loan Committee for evaluation. As of June 30, 2013, December 31, 2012, and December 31, 2011, loans collateralized with mortgages on real estate represented 78%, 77%, and 72%, respectively, of the loan portfolio and were to borrowers in varying activities and businesses.

Loan Approval Process. We believe there is an appropriate balance between prudent, disciplined underwriting and flexibility in our decision-making and responsiveness to our clients. Therefore, based upon position, capability, and experience, our loan officers and senior management have different lending authorities which are reflected in our loan policies. Our policies require that all loans have a minimum of two officers’ signatures. When a credit exceeds an officer’s lending authority limits, then the loan is referred to the Bank’s Senior Loan Committee, Board of Directors Loan Committee, or full Board of Directors. Each lender is aware of his or her limits and the Chief Executive Officer and Senior Lender, together, have a maximum in-house limit of $1 million. Loans presented in excess of $1 million but not more than $3 million are subject to approval of the Bank’s Board of Directors Loan Committee. Loans in excess of $3 million are subject to review and approval of the full Board of Directors. Officer and Loan Committee limits are reviewed and approved periodically by the Board of Directors Loan Committee and Board of Directors of the Bank. We believe our credit approval process fosters thorough underwriting and an efficient decision making process; our processes also allow us to manage concentrations of credit to individual borrowers and industries.

The Bank uses the borrower’s credit history with us and other financial institutions for all loan decisions; we do not utilize a scoring model to approve loans.

Credit Risk Management. For a credit risk management process to be effective, we believe that a partnership must exist between our credit administration and our lenders. We have regularly scheduled loan meetings that are attended by all of our lenders, related loan operations staff, credit administration staff, and the Senior Lender. In addition, the Board of Directors Loan Committee meets at least monthly and more frequently as needed. During these meetings, asset quality and delinquencies are reviewed. It is our policy to provide notification of delinquency and collection actions on applicable past due loans. Our team proactively supports collection activities in order to maximize accountability and efficiency. Our policies and procedures require that we perform annual asset reviews of our larger commercial and commercial real estate loans. During this review process, we analyze recent financial statements of the property and/or borrower to determine the current level of occupancy, revenues and expenses and to investigate any deterioration in the value of the real estate collateral or in the borrower’s financial condition. As a result of this review, we update the risk rating assigned to each loan. Our lenders are encouraged to bring potential credit issues to the attention of credit administration staff who in turn will review the findings.

We require downgraded or classified loans to be reviewed in detail quarterly, and the results to be presented to the Board of Directors Loan Committee. Part of our review process includes an evaluation of market conditions, property trends, borrower and guarantor status, level of reserves required, and loan accrual status. We also have an annual independent, third-party review performed on our risk ratings and our credit administration functions. We have invested in a comprehensive software program to assist in managing our Enterprise Risk Management system which provides the Board and management with basic loan portfolio stress testing

capabilities. The system captures loan specific debt service coverage ratio and LTV inputs and applies two stress scenarios to these inputs (“Mild” and “Severe”). Management can elect to apply the stress scenarios to the loan portfolio as a whole, or it may apply unique scenarios to loan groups. Based upon the mathematical results of the stress scenarios, the system will prompt a simulated migration of an individual loan risk rating according to minimum thresholds for the debt service coverage ratio and LTV ratios established by management. Management has the additional flexibility to incorporate Allowance for Loan and Lease Losses coverage assumptions to account for the additional credit risks resulting from the stress simulation.

Classification of Assets and Potential Problem Loans

Generally. Interest on our loans accrues and is credited to income based upon the principal balance outstanding. It is our policy to discontinue the accrual of interest income and classify a loan as nonaccrual when principal or interest is past due 90 days or more, unless management determines that a loan should be moved to nonaccrual status earlier because the loan is in the process of collection, or when in the opinion of management, principal or interest is not likely to be paid in accordance with the terms of the obligation. Consumer installment loans are generally charged-off after 90 days of delinquency, unless adequately collateralized and in the process of collection. Loans are not returned to accrual status until principal and interest payments are brought current and future payments appear reasonably certain. Interest accrued and unpaid at the time a loan is placed on nonaccrual status is reversed from interest income.

Since opening for business, we have never had to acquire an OREO property. According to our Loan Policy, when real estate is acquired as a result of foreclosure or by deed in lieu of foreclosure, it should be classified as OREO. In the event the Bank acquires OREO, the properties would be initially recorded at the fair value less cost to sell at the date of foreclosure establishing a new cost basis. After foreclosure, valuations would be periodically performed by management and the real estate is carried at the lower of the new cost basis or fair value less cost to sell. Revenue and expenses from operations would be included in the statements of earnings.

Classified Assets . Federal regulations and the Bank’s policies require the classification of loans and other assets such as debt and equity securities, considered to be of lesser quality, be categorized as “Substandard,” “Doubtful,” or “Loss” assets. An asset would be considered “Substandard” if it is inadequately protected by the current net worth and paying capacity of the borrower or by the collateral pledged, if any. “Substandard” assets include those characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Assets that would be classified as “Doubtful” have all of the weaknesses inherent in those classified as “Substandard,” with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly questionable and improbable. Assets that would be classified as “Loss,” are those considered uncollectible and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. In addition, the Bank’s policies require that assets that do not currently expose the Bank to sufficient risk to warrant classification as “Substandard,” but possess other weaknesses be designated as “Special Mention” by management.

Troubled Debt Restructurings . As of June 30, 2013, the Bank has only granted one client a concession, which was determined to be a troubled debt restructuring. In the future, the Bank may periodically grant concessions to its clients in an attempt to protect as much of its investment as possible and minimize the risk of loss. These concessions may include

restructuring the terms of a client’s loan, thereby adjusting the client’s payment requirements. The Bank defines a concession to a client as a modification of existing loan terms for economic or legal reasons that it would not otherwise consider. Concessions are typically granted through an agreement with the client or are imposed by a court of law. Concessions include modifying original loan terms to reduce or defer cash payments required as part of the loan agreement, including but not limited to:

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A reduction of the stated interest rate for the remaining original life of the debt;

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Reduction of the face amount or maturity amount of the debt as stated in the agreement;

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Extension of the maturity date or dates at a stated interest rate lower than the current market rate for new debt with similar risk characteristics; or

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Reduction of accrued interest receivable on the debt.

In determining whether the client is experiencing financial difficulties, the Bank considers numerous indicators, including but not limited to whether the client is currently in default on its existing loan, or is in an economic position where it is probable the client will be in default on its loan in the immediate future without a modification.

Deposit Activities

Deposits are the major source of the Bank’s funds for lending and other investment purposes. Deposits are gathered principally from within the Bank’s primary market area through the offering of a broad variety of deposit products, including checking accounts, money-market accounts, regular savings accounts, term certificate of deposit accounts (including “jumbo” certificates in denominations of $100,000 or more), and retirement savings plans. The Bank considers the majority of its regular savings, demand, NOW, and money-market deposit accounts to be core deposits. The majority of our deposits are generated within the Leon County, Florida area.

Maturity terms, service fees, and withdrawal penalties are established by the Bank on a periodic basis. The determination of rates and terms is predicated on funds acquisition and liquidity requirements, rates paid by competitors, growth goals, and federal regulations.

FDIC regulations limit the ability of certain insured depository institutions to accept, renew, or rollover deposits by offering rates of interest which are significantly higher than the prevailing rates of interest on deposits offered by other insured depository institutions having the same type of charter in such depository institutions’ normal market area. Under these regulations, “well capitalized” depository institutions may accept, renew, or roll over deposits at such rates without restriction, “adequately capitalized” depository institutions may accept, renew or rollover deposits at such rates with a waiver from the FDIC (subject to certain restrictions on payments of rates), and “undercapitalized” depository institutions may not accept, renew, or roll over deposits at such rates. The regulations define “well capitalized,” “adequately capitalized” and “undercapitalized” as those terms are defined by the agencies implementing the prompt corrective action provisions of applicable law (s ee “Supervision and Regulation – Capital Adequacy Requirements”). As of June 30, 2013, the Bank met the definition of a “well capitalized” depository institution.

The Bank has not participated in the Certificate of Deposit Account Registry Service (“CDARS”), nor do we have any brokered deposits. We do offer certificates of deposit, including time deposits of $100,000 or more, public fund deposits and other large deposit accounts. These tend to be short-term in nature and more sensitive to changes in interest rates than other types of deposits; therefore, they may be a less stable source of funds. In the event that existing short-term deposits are not renewed, the resulting loss of the deposited funds could adversely affect our liquidity. In a rising interest rate market, short-term deposits may prove to be a costly source of funds because their short-term nature requires renewal at increasingly higher interest rates, which may adversely affect the Bank’s earnings. However, the opposite is true in a falling interest rate market where such short-term deposits are more favorable to the Bank.

Investments

The Bank invests a portion of its assets in U.S. Government agency obligations, government-sponsored enterprises (“GSE”), mortgage-backed securities, municipal securities, and asset-backed securities. Our investments are managed in relation to loan demand and deposit growth. Available funds are placed in low risk investments and provide liquidity to fund increases in loan demand or to offset fluctuations in deposits.

With respect to our investment portfolio, the total portfolio may be invested in U.S. Treasuries, general obligations of government agencies, and bank-qualified municipal securities because such securities generally represent a minimal investment risk. Occasionally, the Bank may purchase certificates of deposit from national and state banks. The Bank also invests in mortgage-backed securities which generally have a shorter life than the stated maturity.

We monitor changes in financial markets. In addition to portfolio investments, we monitor our daily cash position to ensure that all available funds earn interest at the earliest possible date. A portion of the investment account is designated as secondary reserves and invested in liquid securities that can be readily converted to cash with minimum risk of market loss. These investments usually consist of U.S. Treasury obligations, U.S. Government agencies and federal funds. The remainder of the investment account may be placed in investment securities of a different type and longer maturity. Whenever possible, our strategy is to stagger the maturities of our securities to produce a steady cash-flow in the event the Bank needs cash, or economic conditions change to a more favorable rate environment.

Overnight Surplus Funds

Daily surplus funds are invested overnight with the Federal Reserve Bank of Atlanta (“FRB”) in its Excess Balance Account (“EBA”) program. The funds settle at the end of the business day through the Bank’s primary correspondent bank and are passed on to the FRB to be returned the next morning to the Bank’s account at the correspondent bank. The Bank maintains several correspondent banking relationships in order to facilitate client-driven activity such as wire transfers, vault services, disaster recovery cash services, disaster recovery items processing, and foreign letters of credit. The daily balances maintained in these ancillary correspondent bank accounts are typically minimal and not required to facilitate items settlement. Any excess funds in these accounts are invested on an unsecured basis as overnight fed funds sold.

Enterprise Risk Management

As evidenced by many of the challenges that the financial industry and some of our competitors have faced, we understand and place significant emphasis on risk management. We have invested resources in comprehensive software, which we are utilizing to monitor every component of the Bank. We believe that using a process that encompasses the entire Bank from a global view, down to the details of each procedure, will keep us properly focused. We recognize that enterprise risk management is an ongoing process.

We believe that our solid asset quality statistics support our emphasis on risk management. With respect to lending, our risk management philosophy focuses on structuring credits to provide for multiple sources of repayment; this philosophy, coupled with strong underwriting policies and processes administered by experienced lenders, assists us with managing and mitigating our lending risks. As loans are reviewed, any borrowers who display deteriorating financial conditions are moved to an increased level of monitoring and a plan for implementing corrective actions is developed to minimize losses. We also have an annual independent, third-party loan review performed. In addition, our risk management software has the capability to stress test our portfolio utilizing mild and severe environments.

Our program also focuses on other specific areas of risk management including asset liability management, regulatory compliance, vendor management, policy review tracking, audit functions, and internal controls. Our asset liability management process is extensive; we use independent models by reputable third parties to run our interest rate risk model. We may utilize hedging techniques whenever our models indicate short term (net interest income) or long term (economic value of equity) risk to interest rate movements.

Our enterprise risk management program assists with monitoring operational controls and compliance control functions. We have also engaged an experienced independent public accounting firm to assist us with testing controls for operations and compliance. In addition, another experienced independent firm has been engaged to review and assess our controls with respect to technology and to perform penetration testing to assist us in managing the risks associated with information security.

Correspondent Banking

Correspondent banking provides the opportunity for the Bank to have access to services, that we have determined are not economical or practical for it to perform for itself. We purchase correspondent services offered by larger banks, including check collections, purchase of federal funds, security safekeeping, investment services, coin and currency supplies. We also use correspondent banks for overline and liquidity loan participations and sales of loan participations.

Effect of Governmental Policies

The Bank’s earnings are affected by the policies of various banking regulatory authorities of the United States, especially the Federal Reserve and FDIC. The Federal Reserve, among other things, regulates the supply of credit and deals with general economic conditions within the United States. The instruments of monetary policy employed by the Federal Reserve for these purposes influence the overall level of investments, loans, other extensions of credit and deposits, and the interest rates paid on liabilities and received on assets.

As is the case generally with all banking institutions, the Bank’s operations are materially and significantly influenced by these general economic conditions and by related monetary and fiscal policies of financial institution regulatory agencies, including the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the FDIC. Deposit flows and the cost of funds are influenced by interest rates on competing investments and general market rates of interest. Lending activities are affected by the demand for real estate financing and other types of loans, which in turn, is affected by the interest rates and other factors affecting local demand and availability of funds.

Interest and Usury

The Bank is subject to numerous state and federal statutes that affect the interest rates that may be charged on loans. These laws do not, under present market conditions, deter the Bank from continuing to originate loans.

Employees

As of December 31, 2012, we had 34 Full Time Equivalent employees (including executive officers) and at June 30, 2013, we had 36 FTE employees (including executive officers). The employees are not represented by a collective bargaining unit. We consider relations with our employees to be good.

Properties

Our main office is a free standing facility located at 1897 Capital Circle NE, Tallahassee, Florida, which we own and moved into in February 2012. The main floor houses the headquarters of the Bank and has two drive-up windows and an automated teller machine (“ATM”). The second floor houses the Executive Offices and headquarters of the Company. In addition, we continue to lease our original office, at 1471 Timberlane Road, Suite 124, Tallahassee, Florida, which has drive-up access and is equipped with an ATM.

Legal Proceedings

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

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Below is a presentation of summary financial as of and for the years ended December 31, 2012 and 2011, derived from our audited financial statements, except for performance ratios, asset quality ratios and other data. Our audited financial statements as of and for the years ended December 31, 2012 and 2011, are included in this Prospectus. The summary financial data presented below as of and for the six month periods ended June 30, 2013 and 2012, is derived from our unaudited financial statements, also included in this Prospectus. The following Summary Financial Data should be read in conjunction with the other financial disclosures and discussions contained elsewhere in this Prospectus. Our historical results are not necessarily indicative of results to be expected in future periods.


	Unaudited At or For the Six Months Ending June 30,						At or For the Years Ending December 31,
	2013			2012			2012			2011
	(Dollars in thousands, except per share data.)
Balance Sheet Data:
Total assets	$	184,211		$	144,346		$	169,658		$	139,403
Total loans, net		114,202			79,862			93,400			76,678
Total deposits		161,744			121,063			146,729			115,573
Total shareholders’ equity		15,861			15,601			16,039			15,096

Income Statement Data:
Net interest income		2,965			2,337			4,932			4,008
Provision for loan and lease losses		323			240			473			143
Noninterest income		558			1,042			1,250			149
Noninterest expense		2,329			2,024			4,102			3,025
Income taxes		308			412			589			373
Net earnings		563			703			1,018			616

Per Common Share Outstanding Data:
Basic net earnings per common share	$	0.38		$	0.47		$	0.68		$	0.41
Diluted net earnings per common share	$	0.37		$	0.47		$	0.68		$	0.41
Book value per common share	$	10.59		$	10.43		$	10.72		$	10.09
Common shares outstanding		1,497,494			1,496,106			1,496,106			1,496,106
Average common shares outstanding:
Per basic		1,497,004			1,496,106			1,496,106			1,496,106
Per diluted		1,507,570			1,496,106			1,496,106			1,496,106

Performance Ratios:
Return on average assets		0.64	%		1.01	%		0.69	%		0.52	%
Return on average equity		6.92	%		9.13	%		6.51	%		4.31	%
Net interest margin		3.56	%		3.58	%		3.54	%		3.51	%

Asset Quality Ratios:
Allowance to loans		1.32	%		1.43	%		1.31	%		1.16	%
Allowance for loan losses to nonperforming loans		—			—			1,230.69	%		—
Nonperforming loans to total loans		—			—			0.11	%		—
Nonperforming assets to total assets		—			—			0.06	%		—
Net recoveries (charge-offs) to average loans		0.06	%		(0.10	%)		0.16	%		(0.03	%)
Trouble debt restructurings to loans		0.11	%		—			0.14	%		—

Capital Ratios:
Total risk-based capital ratio (Bank)		14.14	%		18.06	%		15.97	%		17.05	%
Tier 1 risk-based capital ratio (Bank)		12.91	%		16.81	%		14.78	%		16.04	%
Tier 1 leverage capital ratio (Bank)		8.97	%		10.85	%		9.67	%		10.61	%
Total equity to total assets (Bank)		8.59	%		10.76	%		9.42	%		10.77	%

Other Data:
Number of full-time employees		36			34			34			29
Number of full-service branch offices		2			2			2			1

General

The following discussion and analysis presents our financial condition and results of operations on a consolidated basis. However, because we conduct all of our material business operations through the Bank, the discussion and analysis relates to activities primarily conducted at the subsidiary level.

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 plus related employee benefits. We measure our performance through our net interest margin, return on average assets, and return on average common equity, while maintaining appropriate regulatory leverage and risk-based capital ratios.

Our financial condition and results of operations are sensitive to accounting measurements and estimates of matters that are inherently uncertain. When applying accounting policies in areas that are subjective in nature, the Bank must use its best judgment to arrive at the carrying value of certain assets. The most critical accounting policy applied is related to the valuation of the loan portfolio. A variety of estimates impact the carrying value of the loan portfolio, including: the calculation of the ALLL; valuation of underlying collateral; the timing of loan charge-offs; and the amount and amortization of loan fees and deferred origination costs.

Application of Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and with prevailing practices within the banking industry. Application of these principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under current circumstances. These assumptions form the basis for our judgments about the carrying values of assets and liabilities that are not readily available from independent, objective sources. We evaluate our estimates on an ongoing basis. Use of alternative assumptions may have resulted in significantly different estimates. Actual results may differ from these estimates.

We have identified the following accounting policies and estimates. However, they are based upon our judgments and assumptions, which are subjective and may be complex in how they apply to our accounting policies and estimates. In order to understand our financial condition and results of operations, it is critical to comprehend how these assumptions apply to our financial statements.

Allowance for Loan and Lease Losses . Our allowance for loan and lease losses (“ALLL”) is established through a provision for loan losses charged to earnings as specific loan losses are identified by management and as inherent loan losses are determined to exist. Loan losses are charged against the ALLL when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the ALLL.

Our ALLL is evaluated for adequacy by management on a monthly basis and is based upon management’s periodic review of the collectability of the loan portfolio in light of historical experience in the industry, 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, prevailing economic conditions and industry standards. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

Specific loan losses are identified and evaluated in accordance with ASC 310-10 – “Receivables.” A loan is considered impaired when, based on current information and events, it is probable that we 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 status include payment status and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not considered as impaired. We look at 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.

When a loan is considered impaired, the amount of the impairment is measured on a loan-by-loan basis by comparing the recorded investment in the loan to any of the following measurements: the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. If the recorded investment in the loan is higher than the calculated impairment basis, the difference is maintained as a specific loan loss allocation, or it is charged off if the amount is determined to be uncollectible. As the Bank grows, management may elect to collectively evaluate large groups of smaller balance homogeneous loans for impairment, instead of on a loan-by-loan basis.

Inherent loan losses are evaluated in accordance with ASC 450-20 – “Contingencies.” Management currently uses three years of historical loan loss data; however, because of limited loss experience we also take into account the following qualitative factors: (i) changes in lending policies and procedures, risk selection and underwriting standards; (ii) changes in national, regional and local economic conditions that affect the collectability of the loan portfolio; (iii) changes in the experience, ability, and depth of lending management and other relevant staff; (iv) changes in the volume and severity of past due loans, nonaccrual loans or loans classified “Special Mention,” “Substandard,” “Doubtful” or “Loss;” (v) quality of loan review and Board of Directors oversight; (vi) changes in the nature and volume of the loan portfolio and terms of loans; (vii) the existence and effect of any concentrations of credit and changes in the level of such concentrations; and (viii) the effect of other external factors, trends or uncertainties that could affect management’s estimate of probable losses, such as competition and industry conditions. As evidence of inherent loan loss increases, the appropriate qualitative risk factors may be increased to support any additional risk in the portfolio.

Results of Operations for the six month periods ended June 30, 2013 and June 30, 2012

Net interest income constitutes the principal source of income for Prime Meridian 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 federal funds sold, time deposits in banks, investment securities, and loans receivable. Interest-bearing liabilities primarily consist of time deposits, interest-bearing checking accounts, savings deposits, money-market accounts, and Federal Home Loan Bank (“FHLB”) advances. Funds attracted by these interest-bearing liabilities are invested in interest-earning assets. Accordingly, net interest income depends upon the volume of average interest-earning assets and average interest-bearing liabilities and the interest rates earned or paid on them.

The table below sets forth information regarding: (i) the total dollar amount of interest and dividend income of Prime Meridian from interest-earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average costs; (iii) net interest income; (iv) interest rate spread; (v) net interest margin; and (vi) weighted average yields and rates. Yields and costs were derived by dividing annualized income or expense by the average balance of assets or liabilities. The yields and costs depicted in the table include the amortization of fees which are considered to constitute adjustments to yields (dollars in thousands).


	June 30,
	2013								2012
	Average Balance			Interest and Dividends		Average Yield/ Rate			Average Balance			Interest and Dividends		Average Yield/ Rate

Interest-earning assets:
Loans	$	107,044		$	2,897		5.46	%	$	79,034		$	2,276		5.76	%
Securities		43,995			415		1.89			37,596			462		2.46
Other ⁽¹⁾		17,841			22		0.25			16,982			21		0.25


Total interest-earning assets		168,880			3,334		4.00			133,612			2,759		4.16


Noninterest-earning assets		8,183								5,978


Total Assets	$	177,063							$	139,590


Interest-bearing liabilities:
Savings, NOW and MMKT	$	102,617		$	276		0.54	%	$	75,887			289		0.76	%
Time Deposits <$100,000		3,425			13		0.74			3,854			23		1.20
Time Deposits ³ $100,000		12,489			51		0.97			15,539			78		1.06

Deposits		118,531			340		0.57			95,280			390		0.82
Other borrowings		5,772			29		1.00			7,025			32		0.90


Total interest-bearing liabilities		124,303			369		0.60	%		102,305			422		0.83	%


Noninterest-bearing deposits		36,127								21,750
Noninterest-bearing liabilities		358								128
Stockholders’ equity		16,275								15,407


Total liabilities and Stockholders’ equity	$	177,063							$	139,590


Net earning assets	$	44,578							$	31,307


Net interest income				$	2,965							$	2,337


Interest rate spread							3.40	%							3.33	%
Net interest margin ⁽²⁾							3.56	%							3.58	%
Ratio of average interest-earning assets to average interest bearing liabilities		1.36	%							1.31	%

(1)	Other interest-earning assets included federal funds sold and Federal Home Loan Bank stock.

(2)	Net interest margin is net interest income divided by total interest-earning assets.

Comparison of the six month periods ended June 30, 2013, and 2012

General Operating Results. Net earnings for the six-month period ended June 30, 2013, were $563,000, or $0.38 per basic and $0.37 per diluted common share, compared to net earnings of $703,000, or $0.47 per basic and diluted common share, for the comparable period in 2012. The $140,000 decrease in net earnings resulted primarily from an increase of $83,000 in provision for loan losses, a decrease of $484,000 in noninterest income, an increase of $305,000 in noninterest expense, which is partially offset by an increase in net interest income of $628,000 and a decrease of $104,000 in income tax expense.

Interest Income. Interest income increased $575,000 to $3.3 million for the six-month period ended June 30, 2013, compared to the six-month period ended June 30, 2012. The increase was due to a $35.3 million increase in average interest-earning assets outstanding for the six-months ended June 30, 2013, offset slightly by a decrease in the average yield earned on interest-earning assets from 4.16% for the six-months ended June 30, 2012, to 4.00% for the six-months ended June 30, 2013.

Interest Expense. Interest expense decreased $53,000 for the six-month period ended June 30, 2013, compared to the six-month period ended June 30, 2012. The decrease was primarily due to a reduction in the cost of funds from 0.83% through June 30, 2012, to 0.60% for the same period in 2013. Average interest-bearing liabilities increased from $102.3 million outstanding during the six-months ended June 30, 2012, to $124.3 million outstanding during the comparable period for 2013.

Provision for Loan Losses. The provision for loan losses is charged to operations to increase the total loan loss allowance to a level deemed appropriate by management. The provision is based upon the volume and type of lending conducted by the Bank, industry standards, general economic conditions, particularly as they relate to our market area, and other factors related to the collectability of our loan portfolio. The provisions for loan losses for the six-month periods ended June 30, 2013 and 2012, were $323,000 and $240,000, respectively. Management believes that the ALLL, which was $1.5 million, or 1.32% of gross loans, at June 30, 2013, is adequate.

Noninterest Income. Noninterest income decreased $484,000 during the six-month period ended June 30, 2013. The decrease was primarily due to an $881,000 gain on sale of securities in March and April of 2012. While no securities were sold during the six-month period ended June 30, 2013, the decrease was partly offset by a $246,000 increase on gain from the sale of SBA loans.

Noninterest Expense. Noninterest expense increased by $305,000 from $2.0 million for the six-month period ended June 30, 2012, to $2.3 million for the six-month period ended June 30, 2013. The increase was primarily due to the Bank’s continued growth resulting in additional salaries and employee benefits.

Income Taxes. The income taxes were $308,000 for the six-month period ended June 30, 2013. The income taxes were $412,000 for the six-month period ended June 30, 2012.

Results of Operations for the years ended December 31, 2012 and December 31, 2011

The following table sets forth, information regarding: (i) the total dollar amount of interest and dividend income 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 include the amortization of fees which are considered to constitute adjustments to yields (dollars in thousands).


	December 31,
	2012								2011
	Average Balance			Interest and Dividends		Average Yield/ Rate			Average Balance			Interest and Dividends		Average Yield/ Rate

Interest-earning assets:
Loans	$	83,739		$	4,831		5.77	%	$	68,779		$	3,994		5.81	%
Securities		38,267			864		2.25			33,623			984		2.93
Other ⁽¹⁾		17,964			45		0.25			11,623			31		0.26


Total interest-earning assets		139,970			5,740		4.10			114,025			5,009		4.39


Noninterest-earning assets		6,626								4,210


Total Assets	$	146,596							$	118,235


Interest-bearing liabilities:
Savings, NOW and MMKT	$	81,086		$	570		0.70	%	$	62,727		$	696		1.11	%
Time Deposits <$100,000		3,700			41		1.10			3,084			50		1.61
Time Deposits ³ $100,000		14,546			136		0.94			17,129			199		1.16

Deposits		99,332			747		0.75			82,940			945		1.14

Other borrowings		6,397			61		0.95			7,365			56		0.76


Total interest-bearing liabilities		105,729			808		0.76			90,305			1,001		1.11


Noninterest-bearing deposits		24,954								13,523
Noninterest-bearing liabilities		266								102
Stockholders’ equity		15,647								14,305


Total liabilities and Stockholders’ equity	$	146,596							$	118,235


Net earning assets	$	34,241							$	23,720


Net Interest income				$	4,932							$	4,008


Interest rate spread							3.34	%							3.28	%
Net interest margin ⁽²⁾							3.54	%							3.51	%
Ratio of average interest-earning assets to average interest bearing liabilities		1.32	%							1.26	%

(1)	Other interest-earning assets included Federal funds sold and federal Home Loan Bank stock.

(2)	Net interest margin is net interest income divided by total interest-earning assets.

Rate/Volume Analysis

The following table sets forth certain information regarding changes in interest income and interest expense for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to: (i) changes in rate (change in rate multiplied by prior volume); (ii) changes in volume (changes in volume multiplied by prior rate); and (iii) changes in rate-volume (change in rate multiplied by change in volume).


	Rate			Volume			Rate/Volume		Total
	(In thousands)
Year Ended December 31, 2012 vs. 2011:
Interest-earning assets:
Loans	$	(30	)		856			11		837
Securities		(127	)		3			4		(120	)
Other interest-earning assets		—			14			—		14


Total	$	(157	)		873			15		731


Interest-bearing liabilities:

Savings, NOW and MMKT		(289	)		162			1		(126	)
Time deposits <$100,000		(16	)		7			—		(9	)
Time deposits ³ $100,000		(29	)		(34	)		—		(63	)

Deposits	$	(334	)		135			1		(198	)
Other borrowings		(1	)		6			—		5

Total	$	(335	)		141			1		(193	)


Net change in net interest income	$	178			732			14		924

Comparison of the years ended December 31, 2012 and 2011

General Operating Results. Net earnings for the year ended December 31, 2012, were $1.0 million, or $0.68 per basic and diluted share, compared to net earnings of $616,000, or $0.41 per basic and diluted share, for 2011. The $402,000 increase in net earnings resulted primarily from loan growth of $16.7 million, resulting in an increased in interest earned on the loan portfolio of $837,000. Additionally, the Bank realized a $881,000 gain on sales of securities. These increases were partially offset by an increase in noninterest expense of $1.1 million.

Interest Income. Interest income increased $731,000 to $5.7 million for the year ended December 31, 2012, compared to $5.0 million for the year ended December 31, 2011. The increase was due to the $15.0 million increase in average outstanding loans resulting in increased earnings on the loan portfolio of $837,000, which was partially offset by a $120,000 decrease in interest earned on securities.

Interest Expense. Interest expense decreased by nearly $200,000 from $1.0 million for the year ended December 31, 2011, to $808,000 for the year ended December 31, 2012. The decrease was primarily due to aggressively managing interest paid on deposits, which was reduced from 1.11% in 2011 to 0.76% in 2012. The total interest margin increased from 3.51% in 2011, to 3.54% in 2012, partially due to noninterest-bearing deposits increasing from 15.74% of total deposits in 2011 to 19.99% of total deposits in 2012.

Provision for Loan Losses. The provision for loan losses is charged to operations to increase the total loan loss allowance to a level deemed appropriate by management. The provision is based upon the volume and type of lending conducted by the Bank, industry standards, general economic conditions, particularly as they relate to our market area, and other factors related to the collectability of the loan portfolio. The provisions for loan losses for the years ended December 31, 2012 and 2011, were $473,000 and $143,000, respectively. Management believes that the ALLL, which was $1.2 million, or 1.31% of gross loans, at December 31, 2012, was adequate.

Noninterest Income. Noninterest income increased by $1.1 million during 2012 to $1.3 million, compared to $149,000 in 2011. The increase was primarily due to a $881,000 gain on sales of securities, a $36,000 increase in service charges and fees on deposit accounts, and a $177,000 increase in other income.

Noninterest Expense. Noninterest expenses increased by $1.1 million from $3.0 million for the year ended December 31, 2011, to $4.1 million for 2012. The increase was primarily due to increases of $558,000 in salaries and employee benefits, and an increase of $460,000 in occupancy and equipment expense, partially offset by a decrease of $100,000 in data processing costs.

Income Taxes. The income taxes were $589,000 for the year ended December 31, 2012, compared to $373,000 for 2011. The increase was primarily due to an increase in earnings.

Financial Condition

As of June 30, 2013, Prime Meridian has grown to $184.2 million in total assets, $161.7 million in deposits, and $114.2 million in portfolio net loans. This compares to $169.7 million in total assets, $146.7 million in deposits, and $93.4 million in portfolio net loans, as of December 31, 2012, and $139.4 million in total assets, $115.6 million in deposits, and $76.7 million in portfolio net loans as of December 31, 2011. We attribute our successful growth to a combination of factors including the manner in which we conduct our banking business, the continuing enhancement of our team, our marketing efforts, and the change in ownership of other local banks to out-of-market regional bank holding companies.

Loans

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

We work diligently to attract new lending clients through direct solicitation by our loan officers, utilizing relationship networks from existing clients, competitive pricing, and innovative structure. Evidence of this effort is seen in the organic growth in our loans. As of June 30, 2013, the Bank’s net loans were $114.2 million, representing 63% of total assets, compared to net loans of $93.4 million, as of December 31, 2012, representing 56% of total assets. These loans were priced based upon the degree of risk, collateral, loan amount, and maturity. The Bank has no foreign loans or highly leveraged loan transactions.

The composition of our loan portfolio as of the dates indicated was as follows (dollars in thousands):


	As of June 30,						As of December 31,
	2013						2012						2011
	Amount			% of Total			Amount			% of Total			Amount			% of Total
Real estate mortgage loans:
Commercial real estate	$	41,445			35.8	%	$	35,490			37.5	%	$	26,638			34.3	%
Residential real estate and home equity		36,485			31.5			30,886			32.6			24,443			31.5
Construction		12,305			10.6			6,437			6.8			4,982			6.4

Total real estate mortgage		90,235			77.9			72,813			76.9			56,063			72.2

Commercial		23,990			20.7			19,794			20.9			20,204			26.0
Consumer and other		1,594			1.4			2,105			2.2			1,351			1.8


Total loans		115,819			100.0	%		94,712			100.0	%		77,618			100.0	%


Deferred loan costs, net		(83	)					(69	)					(37	)
Less: Allowance for loan and lease losses		(1,534	)					(1,243	)					(903	)


Loans receivable, net	$	114,202					$	93,400					$	76,678

Maturities of Loans. The following tables show the contractual maturities of the Bank’s loan portfolio at the dates indicated. Loans with scheduled maturities are reported in the maturity category in which the payment is due. Demand loans with no stated maturity and overdrafts are reported in the “due one year or less” category. Loans that have adjustable rates are shown as amortizing to final maturity rather than when the interest rates are next subject to change. The tables do not include prepayment or scheduled principal repayments (dollars in thousands).


Type of Loan	Due in		Due in		Due
	1 Year		1 to		After
	or Less		5 Years		5 Years		Total
At June 30, 2013
Real estate mortgage loans:
Commercial real estate	$	4,528	$	23,801	$	13,116	$	41,445
Residential real estate and home equity		5,017		14,963		16,505		36,485
Construction		4,956		5,361		1,988		12,305


Total real estate mortgage		14,501		44,125		31,609		90,235

Commercial		7,127		13,726		3,137		23,990
Consumer		535		1,059		—		1,594


Total	$	22,163	$	58,910	$	34,746	$	115,819


At December 31, 2012
Real estate mortgage loans:
Commercial real estate	$	5,263	$	22,523	$	7,704	$	35,490
Residential real estate and home equity		3,494		17,567		9,825		30,886
Construction		2,830		3,607		—		6,437


Total real estate mortgage		11,587		43,697		17,529		72,813

Commercial		7,446		9,869		2,479		19,794
Consumer		867		1,238		—		2,105


Total	$	19,900	$	54,804	$	20,008	$	94,712

Sensitivity. For loans due after one year or more, the following tables present the sensitivities to changes in interest rates at the dates indicated (dollars in thousands):


Type of Loans	Fixed		Floating
	Interest		Interest
	Rate		Rate		Total
At June 30, 2013
Real estate mortgage loans:
Commercial real estate	$	22,776	$	14,141	$	36,917
Residential real estate and home equity		15,433		16,035		31,468
Construction		4,648		2,701		7,349


Total real estate mortgage		42,857		32,877		75,734

Commercial		7,555		9,308		16,863
Consumer		950		109		1,059


Total	$	51,362	$	42,294	$	93,656


At December 31, 2012
Real estate mortgage loans:
Commercial real estate	$	25,245	$	4,982	$	30,227
Residential real estate and home equity		21,510		5,882		27,392
Construction		3,401		206		3,607


Total real estate mortgage		50,156		11,070		61,226

Commercial		6,887		5,461		12,348
Consumer		728		510		1,238


Total	$	57,771	$	17,041	$	74,812

Nonperforming Assets

Nonperforming assets consist of nonperforming loans and OREO. Nonperforming loans consist of loans that are on nonaccrual status and nonperforming loans restructured as trouble debt restructurings, which are loans on which we have granted a concession on the interest rate or original repayment terms due to financial difficulties of the borrower. OREO consists of real property acquired through foreclosure. We account for troubled debt restructurings in accordance with ASC 310, “Receivables.”

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

Accounting standards require the Bank to identify loans, where full repayment of principal and interest is doubtful, as impaired loans. 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 have implemented these standards in our monthly review of the adequacy of the allowance for loan losses, and identify and value impaired loans in accordance with guidance on these standards. One loan totaling $124,000 was deemed to be impaired under the Bank’s policy at June 30, 2013, while loans totaling $232,000 and $0 were deemed to be impaired under the Bank’s policy at December 31, 2012, and 2011, respectively.

At June 30, 2013, December 31, 2012, and December 31, 2011, we had no accruing loans that were contractually past due 90 days or more as to principal and interest, and we had only one troubled debt restructuring at June 30, 2013, for $124,000.

We seek to maintain a high quality of loans through sound underwriting and lending practices. As of June 30, 2013, December 31, 2012, and December 31, 2011, approximately 77.9%, 76.9%, and 72.2%, respectively, of the total loan portfolio was collateralized by commercial and residential real estate mortgages. The level of nonperforming loans and other OREO also is relevant to the credit quality of a loan portfolio. As of June 30, 2013, December 31, 2012, and December 31, 2011, there were $0, $101,000, and $0, respectively, in nonperforming loans.

The goal of the loan review process is to identify and address classified and nonperforming loans as early as possible. The following table sets forth certain information on nonaccrual loans and foreclosed assets, the ratio of such loans and foreclosed assets to total assets as of the dates indicated, and certain other related information (dollars in thousands).


	At June 30,			At December 31,
	2013			2012			2011

Total nonperforming loans		—			101			—

OREO		—			—			—


Total nonperforming loans and foreclosed assets		—			101			—

Total nonperforming loans as a percentage of total loans		—			0.11	%		—
Total nonperforming assets as a percentage of total assets		—			0.06	%		—
Total accruing loans over 90 days delinquent as a percentage of total assets		—			—			—

Loans restructured as troubled debt restructurings	$	124			131			—


Trouble debt restructurings to loans		0.11	%		0.14	%		—

Allowance for Loan and Lease Losses

As of June 30, 2013, our ALLL was allocated entirely to inherent loan losses using historical loss experience and qualitative risk factors. We had no allocations for specific loan losses at that time. Our ALLL was allocated as follows, as of the indicated dates (dollars in thousands).


	As of June 30,					As of December 31,
	2013					2012					2011
	Amount		% of Loans to Total Loans			Amount		% of Loans to Total Loans			Amount		% of Loans to Total Loans

Commercial real estate	$	549		35.8	%	$	352		37.5	%	$	311		34.3	%
Residential real estate and home equity		483		31.5			226		32.6			285		31.5
Construction		163		10.6			237		6.8			66		6.4
Commercial		318		20.7			405		20.9			225		26.0
Consumer		21		1.4			23		2.2			16		1.8


Total	$	1,534		100.0	%	$	1,243		100.0	%	$	903		100.0	%

The following table sets forth certain information with respect to activity in our ALLL during the periods indicated (dollars in thousands):


	Six Months Ended At June 30,			Year Ended December 31,
	2013			2012			2011
ALLL at beginning of period	$	1,243		$	903		$	742


Charge-offs:

Commercial real estate	$	—		$	—		$	—
Commercial		—			—			—
Construction		(47	)		(165	)		—
Residential and home equity		—			—			—
Consumer		—			(1	)		(1	)


Total charge-offs	$	(47	)	$	(166	)	$	(1	)


Recoveries:

Commercial real estate	$	—		$	—		$	—
Commercial		15			33			19
Residential		—			—			—
Consumer		—			—			—


Total recoveries	$	15		$	33		$	19


Provision for loan losses charged to operations	$	323		$	473		$	143


ALLL at end of period	$	1,534		$	1,243		$	903


Ratio of net charge-offs (recoveries) during the period to average loans outstanding during the period		0.06	%		0.16	%		(0.03	%)


ALLL as a percentage of total loans at end of period		1.32	%		1.31	%		1.16	%


ALLL as a percentage of nonperforming loans		—			1,230.69	%		—

Since the inception of the Bank, we have charged off $515,000. Included in that amount are $47,000, which was charged off in the first half of 2013, and $165,000 which was charged off in the quarter ending December 31, 2012, on a loan that was originally in the amount of $475,000 and was secured by real estate. Loan payments and proceeds from the sale of the real estate by the borrower resulted in $298,000 in principal reductions. At June 30, 2013 and December 31, 2012, the recorded investment in this loan was zero and $101,000. The loan was considered impaired at December 31, 2012.

We believe that our ALLL at June 30, 2013, appropriately reflects the risk inherent in the portfolio. The methodologies used in the calculation are in compliance with regulatory policy and GAAP.

Securities

Our securities portfolio is used to make various term investments, maintain a source of liquidity, and serve as collateral for certain types of deposits and borrowings. We manage our investment portfolio according to a written investment policy approved by our Board of Directors in order to accomplish these goals.

At the dates indicated below, the investment portfolio has been classified as Available-for-Sale with no securities classified as Held-to-Maturity. The following table sets forth the carrying amount of the investment portfolio as of the dates indicated (dollars in thousands):


	At June 30,		At December 31,
	2013		2012		2011
*Available for Sale:*
U.S. Government agency securities	$	7,228	$	7,702	$	1,012
Mortgage-backed securities		26,810		28,646		30,085
Asset-backed securities		1,945		1,899		—
Municipal securities		5,802		5,558		8,824


Total securities available for sale	$	41,785	$	43,805	$	39,921


Federal Home Loan Bank stock	$	203	$	209	$	272
Federal funds sold	$	148	$	148	$	207
Interest-earning deposits	$	15,368	$	23,430	$	17,230

The carrying amount and weighted average yields for investments at the dates indicated are shown below (dollars in thousands):


	U.S. Government Agency Securities		Municipals		Mortgage Backed		Asset Backed		Total		Weighted- Average Yields ^*

*As of June 30, 2013*
Due within 1 year	$	—	$	—	$	—	$	—	$	—		—	%
Due in 1 to 5 years		—		—		—		—		—		—
Due in 5 to 10 years		4,551		1,280		—		—		5,831		2.85
Due after 10 years		2,677		4,522		—		—		7,199		3.20

No defined maturity		—		—		26,810		1,945		28,755		1.90


Total	$	7,228	$	5,802	$	26,810	$	1,945	$	41,785		2.24	%


*As of December 31, 2012*
Due within 1 year	$	—	$	—	$	—	$	—	$	—		—	%
Due in 1 to 5 years		—		—		—		—		—		—
Due in 5 to 10 years		4,806		1,346		—		—		6,152		1.93
Due after 10 years		2,896		4,212		—		—		7,108		2.33

No defined maturity		—		—		28,646		1,899		30,545		2.00


Total	$	7,702	$	5,558	$	28,646	$	1,899	$	43,805		2.04	%

*	All securities are listed at actual yield and not on a tax equivalent basis.

Cash Surrender Value of Bank-Owned Life Insurance

At December 31, 2012 and at June 20, 2013, we maintained investments of $1.5 million in Bank-Owned Life Insurance policies due to attractive risk-adjusted return in and for protection against the loss of key executives. At December 31, 2011, the Bank held a “key man” life insurance policy on its Chief Executive Officer in the amount of $1,000,000, but had no Bank-Owned Life Insurance policies as of that date.

Deposits

The major source of the Bank’s funds for lending and other investment purposes are deposits. Total deposits were $161.7 million at June 30, 2013, compared to $146.7 million at December 31, 2012, and $115.6 million at December 31, 2011. We attribute this growth to the continued efforts of our team, our knowledge of our primary market and clients, and our marketing efforts.

The following table sets forth the distribution by type of our deposit accounts as follows at the dates indicated (dollars in thousands):


	At June 30,					At December 31,
	2013					2012					2011
Deposit Types	Amount		% of Deposits			Amount		% of Deposits			Amount		% of Deposits
Noninterest-bearing deposits	$	42,942		26.6	%	$	29,328		20.0	%	$	18,187		15.7	%
Money-market accounts		88,036		54.4			88,078		60.0			69,755		60.4
NOW		13,119		8.1			11,511		7.9			5,098		4.4
Savings		2,304		1.4			1,296		0.9			597		0.5


Subtotal		146,401		90.5			130,213		88.8			93,637		81.0


Time deposits:
0.00-0.50%		7,772		4.8			6,834		4.7			1,121		1.0
0.51-1.00%		5,006		3.1			4,455		3.0			11,610		10.0
1.01-1.50%		774		0.5			3,419		2.3			5,795		5.0
1.51-2.00%		1,350		0.8			1,372		0.9			2,879		2.5
2.01-2.50%		441		0.3			436		0.3			531		0.5


Total time deposits		15,343		9.5			16,516		11.2			21,936		19.0


Total deposits	$	161,744		100.0	%	$	146,729		100.0	%	$	115,573		100.0	%

We have $17.7 million in noninterest-bearing checking accounts with two clients, we do not have a concentration of funds from any one source. The loss of either or both of these clients should not have a material adverse effect on the Bank. Management believes that substantially all of our depositors are residents in our primary market area.

The following table presents the maturities of our time deposits of $100,000 or more as of June 30, 2013, (dollars in thousands):


Due in three months or less	$	1,435
Due from three months to six months		1,847
Due from six months to one year		3,188
Due over one year		4,886


Total	$	11,356

Borrowings

Deposits are the primary source of funds for our lending and investment activities and general business purposes; however, as an alternate source of liquidity, we may obtain advances from the FHLB of Atlanta, sell investment securities subject to our obligation to repurchase them, purchase federal funds, and engage in overnight borrowing from the Federal Reserve, correspondent banks, or client repurchase agreements. The level of short-term borrowings can fluctuate on a daily basis depending on funding needs and the source of funds to satisfy the needs.

The Bank has an agreement with the FHLB, and pledges its qualified loans as collateral, which would allow the Bank, as of June 30, 2013, to borrow up to $22.7 million. There were no advances outstanding at June 30, 2013.

We have entered into a repurchase agreement with a client that requires the Company to pledge securities as collateral for borrowing under the agreement. At June 30, 2013, December 31, 2012, and December 31, 2011, the outstanding balance of such borrowings totaled $5.8 million, $5.8 million, and $6.1 million, respectively. For the same time periods, the Company pledged securities with a carrying value of $6.0 million, $5.9 million, and $6.2 million, respectively, as collateral for the agreement.

The following summarizes our borrowings for the respective time periods (dollars in thousands):


	At June 30,			At December 31,
	2013			2012			2011
Balance outstanding at period-end	$	5,789		$	5,760		$	6,127
Average balance outstanding during the period	$	5,772		$	6,397		$	7,365
Average interest rate paid		1.00	%		0.95	%		0.77	%
Maximum amount outstanding at any month-end during period	$	5,789		$	7,148		$	9,111

Liquidity

As a commercial bank, we are expected to maintain an adequate liquidity reserve. Liquidity refers to our ability to maintain cash flow that is adequate to fund operations and meet present and future financial obligations through either the sale or maturity of existing assets or by obtaining additional funding through liability management. The liquidity reserve may consist of cash on hand, cash on demand deposit with correspondent banks, other investments, and short-term marketable securities such as federal funds sold, United States securities, or securities guaranteed by the United States. Some of our securities are pledged to collateralize certain deposits through our participation in the State of Florida’s Qualified Public Deposit Program (“QPD”). We believe that the sources of available liquidity are adequate to meet all reasonably immediate short-term and intermediate-term demands. The market value of securities pledged to the QPD Program as of June 30, 2013, was $2.5 million.

As discussed above, at June 30, 2013, total deposits were approximately $161.7 million, of which $11.3 million were in certificates of deposits of $100,000 or more. Also, as a member of FHLB, we have access to approximately $22.7 million of available lines of credit secured by qualifying collateral as of June 30, 2013, in addition to $9.1 million in lines of credit we maintain with correspondent banks. As of June 30, 2013, we had no outstanding lines of credit.

Asset Liability Management

A principal objective of the Bank’s asset liability management strategy is to manage its exposure to changes in interest rates within Board approved Policy Limits by matching the maturity and re-pricing characteristics of interest-earning assets and interest-bearing liabilities. This strategy is overseen through the direction of the Bank’s Asset and Liability Committee (“ALCO”), which establishes policies and monitors results to control interest rate sensitivity.

We model our current interest rate exposure in various rate scenarios, review our model assumptions, and then stress test those assumptions. Based on the results, we then formulate strategies regarding asset generation, funding sources and their pricing parameters, as well as evaluate off-balance sheet commitments in order to maintain interest rate risk within Board approved target limits. We utilize industry recognized Asset Liability models driven by third-party providers. ALCO uses both internally and externally generated reports to analyze the Bank’s interest rate sensitivity. From these reports, the ALCO can estimate both the effect on Net Interest Income and the effect on Economic Value of Equity (“EVE”) in various interest rate scenarios.

As a part of the Bank’s Interest Rate Risk Management Policy, our ALCO examines the extent to which the Bank’s assets and liabilities are “interest rate sensitive” and monitors its interest rate sensitivity. An asset or liability is considered to be interest rate sensitive, for income purposes, if its projected income/expense amount will change if interest rates change. Likewise, it is considered interest rate sensitive for EVE if its economic value will change if interest rates change.

In an asset sensitive portfolio, the Bank’s income will increase in a rising rate environment as assets will re-price faster than liabilities. Conversely, if the Bank is liability sensitive and the liabilities re-price faster than the assets, income will fall in a rising rate environment. In a rising rate environment, if the Bank is asset sensitive, the EVE will increase. If the Bank is liability sensitive, the EVE will fall in a rising rate environment.

In modeling the Bank’s interest rate exposure, the Bank makes a number of important assumptions about the behavior of assets and liabilities. The critical assumptions fall into three main categories, Nonmaturity Assumptions, Prepayment Assumptions, and Options.

Nonmaturity Assumptions

Nonmaturity Deposit Betas – The Beta of a nonmaturity deposit is a measure of the re-pricing behavior of the deposit. Based on the Bank’s own historical experience, the Bank determines how much the price of a deposit will change as a percentage of the change in the market rates. For example, a 50% Beta means that the deposit price will change by 50% of the market rate change.

Nonmaturity Decay – We determine how “sticky” deposits are by assigning a “maturity” to the deposits, e.g. 120 months. These assumptions are also based on our own experience by looking at both the age of the current deposit base and the historic monthly account closings experience. The lower the Beta (more fixed rate nature) and the higher the Decay (longer duration), the less sensitive a bank becomes.

Prepayment Assumptions

We also determine how likely each asset or liability is to prepay or be withdrawn prior to its contracted maturity date. As refinancing rates become increasingly attractive, clients are able to prepay loans and refinance at lower rates and prepayment speeds increase. Prepayments would slow as rates rise; however, time deposits would display the opposite behavior, in an increasing rate environment, if clients are able to withdraw their CDs without a penalty we would expect clients to reinvest in a higher rate. In a decreasing rate environment, clients generally hold their time deposits to maturity.

Prepayment speed changes are not linear, they will continue to increase as rates fall but will plateau as rates rise. Asset prices will not change linearly with market rate changes. The higher the prepayment speed of assets or withdrawal speed of term liabilities, the more liability sensitive the Bank becomes. The Bank monitors its prepayments and withdrawals and updates the assumptions used in the risk models on a monthly basis.

In addition, certain balance sheet instruments such as interest-rate floors or caps on loans, be they periodic or lifetime, and other optionality on investments, limit or increase income and create value changes of the instrument as interest rates change.

Options

We monitor our exposure to option-type effects and manage our option risk. Currently, the most significant assumptions which affect the Bank’s interest rate sensitivity are the Nonmaturity Deposit assumptions, followed by the Prepayment Assumptions. The amount of option risk, aside from prepayment risk, is minimal.

We monitor our exposure on a monthly basis under thirteen different rate scenarios, including rates rising or declining by 4% and the current yield curve flattening or steepening. We compare these results to the Board-established limits to determine if a limit has been compromised. If a limit is exceeded, we have policies and strategies in place to reduce the exposure back to acceptable levels. In addition, we also stress test all of our assumptions under these rate scenarios to determine at what point the Board approved target limits would be compromised, even if they are not currently compromised using the historically determined assumptions. If the limits are in danger of being compromised with relatively small assumption changes we would adjust our strategy to reduce exposure to provide an assumptions “error buffer.” All these assumptions, reports, stress tests, and strategies are reviewed by ALCO at least quarterly and all limit exceptions are reported to the Board.

Currently, we have not entered into any interest rate swaps or similar off-balance sheet hedging instruments in connection with our asset liability management. Further discussion on off-balance sheet arrangements can be found in Note 9 of the Notes to Consolidated Financial Statements.

Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, unused lines of credit, and standby letters of credit is represented by the contractual amount of those instruments.

Our strategy is to maintain an interest rate risk position within the tolerance limits set by the Board of Directors to protect our net interest margin even under extreme market fluctuations. Principal among our asset liability management strategies has been the emphasis on managing

our interest rate sensitive liabilities in a manner designed to attempt to reduce our exposure during periods of fluctuating interest rates. We believe that the type and amount of our interest rate sensitive liabilities should reduce the potential impact that a rise in interest rates might have on our net interest income.

We look to maintain a core deposit base by providing quality services to our clients, without significantly increasing our cost of funds or operating expenses. We anticipate that these accounts will continue to comprise a significant portion of the Bank’s total deposit base. We also maintain a portfolio of liquid assets in order to reduce overall exposure to changes in market interest rates. Likewise, we maintain a “floor” or minimum rate, on certain of our floating or published based rate loans. These floors allow us to continue to earn a higher rate when the floating rate falls below the established floor rate. All interest rate caps and floors are clearly and closely related to the loan agreement; therefore, they are not bifurcated and valued separately.

The following table sets forth certain information relating to the Bank’s interest-earning assets and interest-bearing liabilities at June 30, 2013, which are estimated to mature or are scheduled to re-price within the period shown (dollars in thousands):


	Under 3 Months			3 to 12 Months			1 to 5 Years			Over Five Years			Total
Interest-earning deposits	$	15,360		$	8		$	—		$	—		$	15,368
Federal funds sold		148			—			—			—			148

Loans ⁽¹⁾		38,709			16,701			57,749			2,660			115,819
Securities ⁽²⁾		3,962			3,508			19,020			15,634			42,124


Total rate-sensitive assets (earning assets)	$	58,179		$	20,217		$	76,769		$	18,294		$	173,459


Money-market ⁽³⁾		88,036			—			—			—			88,036
Savings and NOW deposits ⁽³⁾		15,423			—			—			—			15,423
Time deposits ⁽³⁾		2,181			7,662			5,500			—			15,343
Other borrowings		5,789			—			—			—			5,789


Total rate-sensitive liabilities	$	111,429		$	7,662		$	5,500		$	—		$	124,591


Gap (re-pricing differences)	$	(53,250	)	$	12,555		$	71,269		$	18,294		$	48,868


Cumulative Gap	$	(53,250	)	$	(40,695	)	$	30,574		$	48,868


Cumulative Gap/total assets		(28.91	%)		(22.09	%)		16.60	%		26.53	%


Cumulative Gap/total earnings assets		(31.01	%)		(23.70	%)		17.81	%		28.46	%


Total assets	$	184,211


Total earning assets	$	171,706

⁽¹⁾	In preparing the table above, adjustable-rate loans were included in the period in which the interest rates are next scheduled to adjust rather than in the period in which the loans mature. Fixed-rate loans were scheduled according to their contractual maturities.

⁽²⁾	Securities were scheduled at amortized cost based on their remaining maturity or repricing frequency. Fixed-rate mortgage-backed securities are scheduled ratably over nine years.

⁽³⁾	Excludes noninterest-bearing deposit accounts. Money-market, NOW, and savings deposits are scheduled based on FDICIA studies on nonmaturity deposits. All other time deposits were scheduled through the maturity dates.

Off-Balance Sheet Arrangements

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

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

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

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

The following is a summary of the total contractual amount of commitments outstanding as of the respective dates:


	At June 30,		At December 31,
	2013		2012		2011

Commitments to extend credit	$	4,030	$	10,556	$	3,634
Construction loans in process		4,077		4,110		452
Unused lines of credit		25,773		20,006		17,511
Standby financial letters of credit		1,680		1,432		442


Total of off-balance sheet instruments	$	35,560	$	36,104	$	22,039

Impact of Inflation and Changing Prices

The financial statements and related financial data concerning Prime Meridian presented in this Prospectus have been prepared in accordance with GAAP, which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, changes in interest rates have a more significant impact on the performance of a financial institution than do the effects of changes in the general rate of inflation and changes in prices. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services.

MANAGEMENT

The Boards of Directors of PMHC and the Bank are each composed of the same fourteen members. The members of both Boards of Directors are elected each year for one year terms. Our shareholders elect the PMHC Board of Directors, while PMHC (as the sole shareholder), elects the Board of Directors of the Bank. Executive officers of the Company and of the Bank are elected by the respective Board of Directors and hold office until their successors are elected.

The following table lists the names and ages of all directors and executive officers of the Company and indicates all positions and offices with the Company and the Bank held by each person. Also included in the table is the year in which each person commenced service with Prime Meridian, and a brief description of the current occupation of each director or executive officer. There are no arrangements or understandings between such persons and any other person pursuant to which any person was elected as a director or executive officer.


Name	Age	Position with the Company	Position with the Bank	Year Joined Prime Meridian	Principal Occupation

William D. Crona	64	Director	Director	2010	Financial Consultant, Investor, and CPA

Sammie D. Dixon, Jr.	43	CEO, President, Director	CEO, President, Director	2010	Chief Executive Officer and President

Steven L. Evans	65	Director	Director	2010	Retired IBM Executive

R. Randy Guemple	61	Director	Director	2010	Retired Banker and Certified Public Accountant

Kathleen C. Jones	60	CFO, EVP Director	CFO, EVP Director	2010	Executive Vice President, Chief Financial Officer

Chris L. Jensen, Jr.	56	EVP, Director	SLO, EVP, Director	2010	Executive Vice President, Senior Lender

Robert H. Kirby	46	Director	Director	2010	Businessman, Partner in Rehab Technologies

Frank L. Langston	55	Director	Director	2010	Principal of TALCOR Commercial Real Estate Services, Inc.

Todd A. Patterson, D.O.	62	Director	Director	2010	Osteopathic Physician

L. Collins Proctor, Sr.	43	Director	Director	2010	Chief Operating Officer of kWControl Holdings, LLC

Garrison A. Rolle, M.D.	51	Director	Director	2010	Orthopedic Surgeon

Steven D. Smith	59	Director	Director	2010	Businessman, Krispy Kreme Doughnut franchisee

Marjorie R. Turnbull	72	Director	Director	2010	Consultant

Susan Payne Turner	46	N/A	SVP, Chief Risk Officer	2013	Senior Vice President, Chief Risk Officer

Richard A. Weidner	68	Chairman	Chairman	2010	CPA, Partner with Carr, Riggs & Ingram, LLC

The following sets forth a brief description of each director and executive officer’s principal occupation and business experience, and certain other information.

EXECUTIVE OFFICERS

Sammie D. Dixon, Jr., is PMHC’s and the Bank’s Chief Executive Officer and President, as well as a member of both Boards of Directors. Prior to joining the Bank, from June 2005 to December 2006, he was the Senior Vice President and Commercial Sales Manager for Regions Bank in Tallahassee, Florida. From August 2003 to June 2005, he served as Chief Executive Officer and President for Bank of Thomas County, Georgia. From April 1999 to 2003, Mr. Dixon held various positions with Bank of Florida – Southwest in Naples, Florida. Mr. Dixon began his banking career with NationsBank in 1997. Mr. Dixon is active in the community as a member of the Rotary Club of Tallahassee, a Board member of Big Bend Hospice Foundation, a member of the Tallahassee Memorial Hospital Foundation Board of Trustees, a Board member of the Economic Development Council of Tallahassee/Leon County, and attends Saint Peter’s Anglican Church. Mr. Dixon’s banking experience and intimate knowledge of the Bank qualifies him to serve on our Board of Directors.

Kathleen C. Jones, is PMHC’s and the Bank’s Chief Financial Officer and Executive Vice President and a member of both of their Boards of Directors. Prior to joining the Bank, she spent 36 years with SunTrust Bank and its predecessor institutions. Mrs. Jones retired from SunTrust Bank in 2007, at the position of the North Florida Regional Senior Vice President and Senior Banking Operations Manager. She is a 1978 graduate of Florida State University where she received a Bachelor of Science in Finance. She also is a 1988 graduate of the Graduate School of Banking of the South in Baton Rouge, Louisiana. Mrs. Jones is a member of Thomasville Road Baptist Church. Mrs. Jones’ banking experience and intimate knowledge of the Company’s financial operations qualify her to serve on our Board of Directors.

Chris L. Jensen, Jr., is the Bank’s Executive Vice President and Senior Lender, an Executive Vice President of the Company, as well as a director of PMHC and the Bank. Prior to joining the Bank, from February 2005 to 2007, he served as Tallahassee Market President for Regions Bank. Before that, Mr. Jensen held various management positions with SouthTrust Bank from 1997 to 2005, culminating with the position of Tallahassee’s Market President. He also served as Senior Lender for First Bank of Tallahassee in its de novo stage in 1990. Mr. Jensen has over 30 years of lending experience in Tallahassee and the surrounding markets. He is active in the community and currently serves on the Boards of several local groups including the Young Actors Theatre, the Suwannee River Area Council for the Boy Scouts of America and the Rotary Club of Tallahassee. Mr. Jensen’s banking experience and intimate knowledge of the Bank’s lending activities and market qualifies him to serve on our Board of Directors.

Susan Payne Turner, is Senior Vice President and Chief Risk Officer for the Bank. She was formerly a Regional Retail Leader for Centennial Bank, where her responsibilities included management of retail for ten branches located in Leon, Wakulla, Calhoun and Liberty Counties. Prior to this position, Mrs. Turner was Chief Financial Officer for a community bank with responsibilities in: financials, budgeting, staff management and development; AML/BSA compliance; deposit compliance; facility expansion; GLBA-Technology; and audit/exam initiatives. Mrs. Turner began her banking career while working part-time in high school and has worked in many areas of banking including operations, marketing, compliance, financials and human resources. She is a graduate of Florida State University and received her Master’s in Business Administration from Troy University in 2005. Mrs. Turner also graduated from the

Graduate School of Banking at LSU. Currently, she is the Chair for Tallahassee Community College Foundation and Chair for the Wakulla County Senior Citizens’ Council, and also serves on the Wakulla County Chamber of Commerce Board. Mrs. Turner is Treasurer for the Coastal Optimist Club.

DIRECTORS

William D. Crona, is a certified public accountant. In 2005, he retired from a 23 year career with the accounting firm of Law, Redd, Crona and Munroe, CPAs, in Tallahassee, Florida, where he served as a partner. He currently is a private financial consultant and investor in the Tallahassee area. Mr. Crona serves on the boards of the Apalachee Land Conservancy, Manchebo Beach Resort Hotel, Calloway Corporation, TEC Incorporated, SAVA, the City of Tallahassee Citizen Advisory Board, Terra, and Verdicorp, Inc. Mr. Crona’s financial and accounting experience, as well as his familiarity with our market area, qualifies him to serve on our Board of Directors.

Steven L. Evans, retired from a 30 year career with IBM in 2003. Mr. Evans is a graduate of the University of Michigan and played baseball in the St. Louis Cardinal organization for six years prior to joining IBM. In 1986, he and his family moved to Tallahassee, Florida, to assume responsibility for IBM’s Florida Public Sector Industry and to serve as IBM’s Senior State Executive. In 1994, Mr. Evans became an IBM Vice President with responsibility across North America. Mr. Evans currently serves on the Boards of Florida Taxwatch Research Institute, Tallahassee Memorial Hospital, Tallahassee Chamber of Commerce, MGT of America, FSU-Jim Moran Institute for Global Entrepreneurialism, FSU Marine Research Lab Advisor, FSU University Center Club, and Municipal Code Corporation. Mr. Evans’ business experience and significant involvement in our community qualify him to serve on our Board of Directors.

R. Randy Guemple, is a retired bank Executive Vice President, Chief Operating Officer, and Chief Financial Officer of First Bank of Florida in West Palm Beach, Florida. Mr. Guemple is currently Chairman of the Board of Trustees for the Tallahassee Memorial Healthcare Foundation, Inc. and Emeritus Director of Elder Care Services, Inc. He is also the current Executive Director of the Leon County Educational Facilities Authority and an active member of the Tallahassee Kiwanis Club. He is a former baseball player at Florida State University. Mr. Guemple’s banking and finance experience qualify him to serve on our Board of Directors. Based upon Mr. Guemple’s experience, the Board of Directors believes he would be qualified to be designated as the Audit Committee Financial Expert.

Robert H. Kirby, was elected to the Boards of PMHC and the Bank in May 2010. He is a partner in Rehab Technologies, LLC, a medical equipment sales and leasing business, Southern Fidelity Mortgage Group of Huntsville, LLC, a mortgage brokerage company, and Huxford Land Company, LLC, a land and timber company. Mr. Kirby received a Bachelor’s degree from the University of the South, Sewanee, Tennessee and a Masters of Business Administration from the University of Alabama, Tuscaloosa, Alabama. He serves on the Boards of a number of private companies and nonprofit organizations, including Maclay School and Tall Timbers Research, Inc. Mr. Kirby’s business experience and knowledge of our market area qualifies him to serve on our Board of Directors.

Frank L. Langston, has been a principal with the real estate services company TALCOR Commercial Real Estate Services, Inc., located in Tallahassee since 1990. After attending Auburn University, Mr. Langston entered the management training program of First Florida Banks in Tampa. While assigned to the Marketing Department, Mr. Langston gained valuable first hand real estate experience in locating bank branch locations around the state. In addition, he participated in strategic planning, new product development, and market analysis. From 1981 to 1984, Mr. Langston served as Marketing Director with the responsibility of business development for the Tallahassee Office. In May 1989, he entered the commercial real estate business specializing in retail and office sales and leasing, and bank-owned real estate. Mr. Langston is a Certified Commercial Investment Member, a Florida licensed broker-salesman, and an Alabama licensed broker. He is also a member of the National Association of Realtors, the Florida Association of Realtors, and the Tallahassee Association of Realtors. He currently serves on the Advisory Board of the Masters of Real Estate Development Program at Auburn University. His business experience and knowledge of the real estate market in the Bank’s market area qualifies him to serve on our Board of Directors.

Todd A. Patterson, D.O., is a retired osteopathic physician and the former Director of the Neonatal Intensive Care Unit for Tallahassee Memorial Hospital. He is also one of the founders of the Tallahassee Ronald McDonald House. Dr. Patterson received his Bachelor’s degree from Hobart & William Smith College, in Geneva, New York, and his Doctorate of Osteopathy from the College of Osteopathic Medicine & Surgery, in Des Moines, Iowa. He serves on the Boards of the Tallahassee Memorial Hospital Foundation and Big Bend Hospice. Dr. Patterson’s business experience and knowledge of our market area qualifies him to serve on our Board of Directors.

L. Collins Proctor, Sr., is a partner and Chief Operating Officer of kW Control – Holdings, LLC, a regional energy management company servicing government, education, corporate, and nonprofit clients. Mr. Proctor is also a co-founder of Red Brick Partners, LLC, a Tallahassee-based real estate and private equity investment firm started in 2006. Prior to 2006, Mr. Proctor owned and managed a regional real estate acquisition and construction advisory firm with which he was associated for ten years. Mr. Proctor received his Bachelors of Arts from Vanderbilt University in 1991, and his Masters in Business Administration from Emory University in 1997, between which times he served five years with NationsBank in its leveraged leasing group. Mr. Proctor also serves on the Board of the Tallahassee Downtown Improvement Authority (DIA). Mr. Proctor’s business and banking experience and knowledge of our market area qualifies him to serve on our Board of Directors.

Garrison A. Rolle, M.D., is an orthopedic surgeon who joined the Tallahassee Orthopedic Group in 1997. He previously served on AmSouth Bank’s Advisory Board of Directors in Tallahassee, and was formerly a director of Regions Bank in Tallahassee. In the early 1980’s, Dr. Rolle played football for the University of Florida, while pursuing his Bachelors of Science degree. In 1990, he received his Doctorate in Medicine from the University of Florida. Dr. Rolle’s business and banking experience and knowledge of our market area qualifies him to serve on our Board of Directors.

Steven D. Smith, is the owner and operator of a number of Krispy Kreme Doughnut franchises throughout the Florida Panhandle area, including Tallahassee, Florida. He currently serves as Chairman of the Board for Pursuit Channel, an outdoor network delivered to approximately 38 million U.S. households. He was also a director of Chipola Community Bank in Marianna, Florida, from 2004 until it was placed into receivership in 2013, after numerous

attempts to raise capital and find merger partners. Mr. Smith is also the owner of a number of other local businesses and is a 1974 graduate of Livingston University in Livingston, Alabama. His business and banking experience and knowledge of our market area qualifies him to serve on our Board of Directors.

Marjorie R. Turnbull, currently is a consultant for nonprofit organizations. Previously, she served as the Vice President for Institutional Advancement and Executive Director of the Tallahassee Community College Foundation from 1995 until her retirement in 2006. From 1994 to 2000, Mrs. Turnbull represented Leon County, District 9, in the Florida House of Representatives. Prior to her service in the Florida House of Representatives, she was a member of the Leon County Commission from 1988 to 1994, Deputy Assistant Secretary for Health Planning for the State of Florida, and a member of the staff of the Florida House of Representatives. Mrs. Turnbull is a member of the Board of Directors for the Florida College System Foundation, the Board of Trustees of Florida A&M University, as well as the Institutional Review Board of Tallahassee Memorial Hospital. She has also served in the past as President of the Council of Neighborhood Associations, the Tallahassee Symphony Orchestra, and the Children’s Home Society. Mrs. Turnbull’s extensive knowledge of our community and government activities qualifies her to serve on our Board of Directors.

Richard A. Weidner, serves as the Chairman of the Boards of PMHC and the Bank. He is a certified public accountant and a partner and member of the Executive Committee of Carr, Riggs & Ingram, LLC, an accounting firm with more than 100 partners and 750 employees. In 2002, this firm acquired Williams, Cox, Weidner & Cox, PA, which Mr. Weidner helped establish in 1972. From approximately 1998 to 2001, Mr. Weidner served as an Advisory Board member for SunTrust Bank. Mr. Weidner currently serves on the Audit Committee of the Tallahassee Community College Foundation Board and on the Children’s Home Society Foundation Advisory Board. He is a past Treasurer of the Tallahassee Chamber of Commerce, past President of the Tallahassee YMCA, and past Treasurer of the Maclay School Board of Directors. He has also served on the Leon County Library Advisory Board and was a United Way Campaign Captain. Mr. Weidner’s business and accounting experience and knowledge of our market area qualifies him to serve on our Board of Directors.

EXECUTIVE COMPENSATION

General

PMHC does not compensate any of its executive officers and has no other employees. The Bank’s executive compensation program is designed to attract and retain qualified management, meet short-term financial goals, and enhance long-term shareholder value. Currently, we strive to pay each Bank executive officer the base salary that would be paid on the open market for a similarly qualified officer of that position. The Bank’s Compensation Committee determines the level of base salary and any incentive bonus for the executive officers based upon competitive norms derived from surveys published by independent banking institutes and private companies specializing in the analysis of financial institutions. Such surveys provide information regarding compensation of financial institution officers and employees based on the size and geographic location of the financial institution and serve as a benchmark for determining executive salaries. Actual salary changes and discretionary bonus awards are based upon the Compensation Committee’s evaluation of the Bank’s performance, the officer’s responsibilities, and individual performance standards of each executive officer.

Summary Compensation Table

The following table provides information regarding the compensation of our named executive officers for our fiscal years ended December 31, 2012, 2011, and 2010.


Name and Principal Position	Year		Salary		Bonus		Stock Awards		Option Awards		All Other Compensation*		Total

Sammie D. Dixon, Jr. CEO and President		2012	$	225,000	$	—	$	—	$	—	$	6,600	$	231,600
		2011	$	200,000	$	—	$	—	$	—	$	6,600	$	206,600
		2010	$	178,333	$	—	$	—	$	—	$	6,600	$	184,933

Kathleen C. Jones CFO and EVP		2012	$	155,000	$	—	$	—	$	—	$	—	$	155,000
		2011	$	145,000	$	—	$	—	$	—	$	—	$	145,000
		2010	$	131,000	$	—	$	—	$	—	$	—	$	131,000

Chris L. Jensen, Jr. SLO and EVP		2012	$	120,833	$	—	$	—	$	—	$	6,600	$	127,433
		2011	$	100,000	$	—	$	—	$	—	$	6,600	$	106,600
		2010	$	132,917	$	—	$	—	$	—	$	6,600	$	139,517

*	Includes car allowances.

Outstanding Equity Awards

The 2007 Stock Option Plan (“Plan”) was approved by the shareholders of the Bank at a Special Meeting of the Shareholders held on December 27, 2007, prior to the share exchange pursuant to which PMHC acquired the Bank. Upon PMHC’s acquisition of the Bank, PMHC assumed the Plan. The Board of Directors believes that stock-based incentives are important factors in attracting, retaining, and rewarding employees and directors of the Bank and directors of the Company and closely aligning their interests with those of shareholders. The following is a summary of the material terms of the Plan. This summary is qualified in its entirety by the complete terms of the Plan.

The Plan provides for grants of options to purchase Common Stock. Options to purchase Common Stock may be either incentive stock options (“ISOs”), which are intended to satisfy the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) or nonqualified options, which are not intended to satisfy the requirements of Section 422 of the Code (“NQOs”).

There are 152,905 shares of Common Stock reserved for issuance under the Plan. Any shares subject to an option, that remain unissued after the cancellation, expiration, or exchange of an option will again become available for use under the Plan.

The Plan is administered by PMHC’s Board of Directors, which has the sole authority to grant options under the Plan. Our Board is authorized to interpret the Plan, to determine the employees and directors to receive grants, the number of shares to be granted, the terms of option grants, the provisions of the respective options (which need not be identical) and to take such other action in the administration and operation of the Plan as our Board deems equitable under the circumstances. Our Board of Directors has also reserved to itself the right to amend or terminate the Plan. However, no amendment may be implemented without approval of the shareholders to the extent such approval is required under applicable law, Code Section 422,

Rule 16b-3, or any applicable stock exchange rule. Furthermore, in no case can options be re-priced either by cancellation and re-grant or by lowering the exercise price of a previously granted award.

The following table provides information regarding stock options held by each of our named executive officers as of December 31, 2012. All of the stock options shown in the table below were granted under the Plan and have a per share exercise price equal to or greater than the fair market value of our Common Stock on the grant date. No stock options were exercised by the named executive officers during 2012.


Name and Principal Position	Date of Grant	# of Securities Underlying Unexercised Option (#) Exercisable		# of Securities Underlying Unexercised Option (#) Unexercisable		Option Exercise Price		Option Expiration Date

Sammie D. Dixon, Jr.	1/1/09		4,000			$	10.00		1/1/15
CEO and President	1/1/09		4,000				10.00		1/1/16
	1/1/09		4,000				10.00		1/1/17
	1/1/09		4,000				10.00		1/1/18
	1/1/09		—		4,000		10.00		1/1/19

Kathleen C. Jones	1/1/09		2,500			$	10.00		1/1/15
CFO and EVP	1/1/09		2,500				10.00		1/1/16
	1/1/09		2,500				10.00		1/1/17
	1/1/09		2,500				10.00		1/1/18
	1/1/09		—		2,500		10.00		1/1/19

Chris L. Jensen, Jr.	1/1/09		2,500			$	10.00		1/1/15
SLO and EVP	1/1/09		2,500				10.00		1/1/16
	1/1/09		2,500				10.00		1/1/17
	1/1/09		2,500				10.00		1/1/18
	1/1/09		—		2,500		10.00		1/1/19

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves or has served as a member of the board of directors, compensation committee, or other board committee performing equivalent functions of any entity that has one or more executive officers serving as one of our directors, or on our Compensation Committee.

DIRECTOR COMPENSATION

PMHC does not pay directors fees. The Bank pays cash fees to its directors of $350 per Board meeting attended and $50 per Board committee meeting attended. In 2012, the Bank paid a total of $47,650 in fees to its directors.

In 2012, PMHC’s Board of Directors and shareholders adopted the Directors’ Compensation Plan (“Directors’ Plan”). The Directors’ Plan permits the Company’s and the Bank’s directors to elect to receive any compensation to be paid to them in shares of the Company Common Stock. Pursuant to the Directors’ Plan, each director is permitted to make an annual election to receive shares of stock instead of cash. To encourage directors to elect to receive stock, the Directors’ Plan provides that if a director elects to receive shares of Common

Stock, he or she will receive 110% of the amount of fees set by the Board or the Compensation Committee. The value of Common Stock to be awarded pursuant to the Directors’ Plan will be the closing price of a share of Common Stock if the stock is traded on any market or exchange, or a price set by the Board or its Compensation Committee, acting in good faith. The maximum number of shares to be issued pursuant to the Directors’ Plan is limited to 74,805 shares, which is approximately 5% of the total shares outstanding as of the Record Date. Directors became eligible to participate in the Directors’ Plan on January 1, 2013.

The following table sets forth compensation paid, earned, or awarded during 2012 to each of our directors other than executive officers Mr. Dixon, Mrs. Jones and Mr. Jensen, whose compensation is described in the “Summary Compensation Table” above.


Name	Total Fees Earned or Paid in Cash
William D. Crona	$	5,050

Steven L. Evans	$	5,400

R. Randy Guemple	$	6,050

Robert H. Kirby	$	4,850

Frank L. Langston	$	5,150

Todd A. Patterson, D.O.	$	5,150

L. Collins Proctor, Sr.	$	4,850

Garrison A. Rolle, M.D.	$	4,400

Steven D. Smith	$	4,700

Marjorie R. Turnbull	$	4,400

Richard A. Weidner	$	4,450

[Remainder of page intentionally left blank.]

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

AND MANAGEMENT

Principal Shareholders

As of June 30, 2013, PMHC knows of no beneficial owner of more than five percent of its Common Stock, the only class of voting securities. We are not aware of any arrangements or any pledge of securities of the Company through which a change in control of the Company may result at some subsequent date. The following table sets forth the number of shares and percentages of Common Stock that the directors and executive officers beneficially owned as of June 30, 2013.


Name	Number of Shares ⁽¹⁾		Right to Acquire ⁽²⁾		Beneficial Ownership Percentage ⁽³⁾

William D. Crona		40,000		7,000		3.12	%
Sammie D. Dixon, Jr.		33,643		20,000		3.53
Steven L. Evans		21,713		7,000		1.91
R. Randy Guemple		20,000		7,000		1.79
Chris L. Jensen, Jr.		31,300		12,500		2.90
Kathleen C. Jones		16,500		12,500		1.92
Robert H. Kirby		35,922		7,000		2.85
Frank L. Langston		25,500		7,000		2.16
Todd A. Patterson, D.O.		36,142		7,000		2.87
L. Collins Proctor, Sr.		20,000		7,000		1.79
Garrison A. Rolle, M.D.		25,336		7,000		2.15
Steven D. Smith		30,372		7,000		2.48
Marjorie R. Turnbull		15,000		7,000		1.46
Richard A. Weidner		60,346		7,000		4.48

Total (14 people)		411,774		122,000		32.96	%

(1)	Includes shares for which the named person:

•

has sole voting and investment power;

•

has shared voting and investment power with a spouse, or

•

holds in an IRA or other retirement plan program, unless otherwise indicated in these footnotes.

(2)	Shares covered by stock options.

(3)	Based on 1,497,494 shares issued and outstanding and only the listed individual exercising his or her stock options.

Certain Transactions

Both PMHC and the Bank encourage our directors, executive officers, and their immediate family members to establish client relationships with the Bank. Loans made to directors, executive officers, and their immediate families, as well as, any principal shareholders, require approval of a majority of the disinterested directors approving the loan. All transactions between the Company or the Bank and their directors, executive officers, the immediate family members of directors and executive officers, employees, and any principal shareholders, were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with nonaffiliated persons. In these transactions, management’s opinion did not involve above average risk of collectability or present any other unfavorable features.

As of June 30, 2013 and December 31, 2012, respectively, loans to directors, executive officers, and their immediate family members represented $3.8 million and $3.5 million, or approximately 3.28% and 3.70% of the Bank’s total loan portfolio. All of these loans are current and performing according to their terms.

We currently lease our Timberlane Road office space from MS Timberlane, Inc. a company for which Director Crona also serves as a director. The payments we made under that lease for the six month period ended June 30, 2013 and for the year ended December 31, 2012 and 2011 were $63,653, $124,788 and $122,988, respectively. In addition, we have contracted with Carr, Riggs & Ingram, LLC to perform loan reviews of the Bank’s loan portfolio. As described above, our Chairman, Mr. Weidner, is a partner and member of the Executive Committee of Carr, Riggs & Ingram, LLC.

DIVIDENDS

We have not paid any dividends on our Common Stock since inception, and we do not intend to pay dividends in the immediate future. Instead, we anticipate that all of our future earnings will be used for working capital, to support our operations, and to finance the growth and development of our business. In addition, because the Bank is our only material asset, our ability to pay dividends to our shareholders primarily depends on our receipt of dividends from the Bank, which is also subject to restrictions on dividends as a result of banking laws, regulations and policies.

The payment of any dividends by the Company will be at the discretion of our Board of Directors as it deems prudent and consistent with safe and sound banking practices. Dividends declarations will depend on, among other things, the earnings, financial condition, risk levels, cash flow from operations, capital requirements, strategic and expansion plans, income tax laws then in effect, State of Florida corporation law and bank regulatory requirements, and restrictions that may be imposed by current and future financing arrangements for both the Company and the Bank.

MARKET FOR OUR COMMON EQUITY

AND RELATED SHAREHOLDER MATTERS

Market Information

Our Common Stock is not quoted in any over-the-counter market or on any stock exchange, nor is our Common Stock otherwise actively traded. Thus, there is no established trading market for our Common Stock.

As of June 30, 2013, we had approximately 317 shareholders of record of our Common Stock.

Equity Compensation Plan Information

The following table sets forth information relating to PMHC’s equity compensation plans as of June 30, 2013.


Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights		Weighted-Average Exercise Price of Options, Warrants, and Rights		Number of Securities Remaining Available for Issuance Under Equity Compensation Plans

Equity Compensation Plans Approved by Security Holders

2007 Stock Option Plan		136,000	$	10.01		16,905

2012 Directors’ Compensation Plan		—		—		—

Equity Compensation Plans Not Approved by Security Holders		N/A		N/A		N/A


Total		136,000	$	10.01		16,905

PLAN OF DISTRIBUTION AND THE OFFERING

General

PMHC is offering, through certain of our directors and officers, shares of our $0.01 par value Common Stock at an Offering price of $12.50 per share, but based upon the success of those efforts, reserves the right to engage a Sale Agent to assist in offering these shares. We will not accept subscriptions for which an investor would require regulatory approval until and unless that investor obtains such approvals. The maximum number of shares we will sell is 1,200,000, for aggregate Offering proceeds of $15,000,000. In addition, we reserve the right to reject, in whole or in part, any or all subscriptions we receive in the Offering.

The shares are being offered only to investors in those states where we have registered this Offering or an exemption from securities registration is available. To properly subscribe for shares in the Offering, the appropriate sections of the Stock Order Form must be completed.

Expiration Dates of the Offering

This Offering will expire on February 28, 2014, unless extended in the discretion of the Board of Directors until no later than June 30, 2014. We also reserve the right to terminate the Offering at any time.

Distribution

Shares are being offered only by certain of our directors and officers, none of whom will receive any commissions or other remuneration in connection with these activities. They may, however, be reimbursed for reasonable expenses incurred as a result of such activities. We are

offering the shares on a best efforts basis, and we are not required to issue any minimum number of shares in the Offering. In reliance on Rule 3a4-1 of the Securities Exchange Act, we believe that our directors and officers who are engaged in the sale of the shares will not be deemed to be brokers and/or dealers. At our discretion, however, we may elect to engage a Sale Agent to sell our securities on a best-efforts basis and such Sale Agent would receive a commission for such sales, which based upon current market conditions is 5% to 7%.

Subscriptions will be accepted subject to availability, and in the Board’s discretion. However, subscriptions will only be accepted if accompanied by a properly completed Stock Order Form and full payment of the subscription price for the shares to be purchased.

No Conditions to Closing

There are no conditions or minimum amount required to close this Offering. We will accept subscriptions and issue shares regardless of the amount of subscriptions we receive.

Procedures for Subscribing for Shares

Persons who wish to participate in this Offering must deliver to us a properly completed and executed Stock Order Form, together with payment of the aggregate subscription price for the shares being purchased. Payment must be by check or money order made payable to “Prime Meridian Holding Company.” Payment should be made sufficiently in advance of the expiration of any Offering period to ensure that payment is received by such date.

The Stock Order Form and payment of the subscription price should be delivered to:

Prime Meridian Holding Company

Sammie D. Dixon, Jr., Chief Executive Officer

1897 Capital Circle NE, Second Floor

Tallahassee, Florida 32308

Offering Price

The Board of Directors established the Offering price for the shares after consultation with FIG Partners, LLC and by considering several factors, including our financial and operational condition, the liquidity character of the stock, the price paid for the most recent sales of our Common Stock, and the current economic environment and related market conditions for stock in bank holding companies of comparable size and scope as PMHC. The Offering price does not necessarily bear any relationship to the book value of our assets, past operations, cash flows, profits, financial condition, or any other established criteria for value. You should not consider the Offering price as an indication of our present or future value.

Purchase Limitations

The Board of Directors of PMHC reserves the right to reject any subscriptions, in whole or in part, which means we have discretion to limit your purchase. The minimum subscription size we will accept is for 500 shares, or $6,250. The maximum subscription size we will accept is for 80,000 shares or $1,000,000. Shares also will not be issued to any person who, in our

opinion, would be required to obtain prior clearance or approval from any state or federal regulatory authority to own or control such securities, unless such person has obtained such approval.

Furthermore, no person will be allowed to purchase shares which when aggregated with current holdings, would result in the person owning more than 9.9% of the outstanding shares at the conclusion of the Offering, without prior approval of PMHC’s regulators. This prohibition applies to persons acting individually or together with associates of, or persons acting in concert with such person. Under federal regulations, a rebuttable presumption of concerted action will occur, or an individual will be considered to be a related party, under the following situations:

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a person will be presumed to be acting in concert with the members of the person’s immediate family (which includes a person’s spouse, father, mother, step-parent, children, step-children, brothers, step-brothers, sisters, step-sisters, and grandchildren; the father, mother, brothers, and sisters of the person’s spouse; and the spouses of the foregoing);

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a company and any controlling shareholder, partner, trustee, or management official of that company, if both the company and the person own voting securities of the company;

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companies under common control;

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persons that are parties to any agreement, contract, understanding, relationship, or other arrangement, whether written or otherwise, regarding the acquisition, voting, or transfer of control of voting securities of a bank or bank holding company, other than through a revocable proxy as described in Section 225.42(a)(5) of the Federal Reserve Regulations 12 CFR 225.42(a)(5);

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persons that have made, or propose to make, a joint filing under Sections 13 or 14 of the Securities Exchange Act of 1934 (15 U.S.C. Sections 78m or 78n), and the rules promulgated thereunder by the Securities and Exchange Commission; or

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a person and any trust for which the person serves as trustee.

Closings

We expect to conduct multiple closings of this Offering at the discretion of the Board and issue shares promptly after each closing. If the Offering terminates for any reason without the release of any subscription proceeds to us, all subscription proceeds will promptly be returned to subscribers, without accrued interest or deduction for expenses.

DESCRIPTION OF SECURITIES

Common Stock

PMHC has 9,000,000 shares of authorized Common Stock, par value $0.01, per share. As of June 30, 2013, there were 1,497,494 shares of the Common Stock issued and outstanding. Each share of Common Stock has the same relative rights and is identical in all respects with every other share of Common Stock. The holders of Common Stock are entitled to elect the members of the Board of Directors and are entitled to vote as a class on all matters required or permitted to be submitted to the shareholders. Holders of Common Stock do not have cumulative voting rights, which means that each holder may cast only one vote for each share owned on any particular matter or director.

The holders of Common Stock are entitled to dividends and other distributions if, as, and when, declared by our Board of Directors out of assets legally available for that purpose. Upon the liquidation, dissolution or winding up of the Company, the holder of each share of Common Stock is entitled to share ratably, based on the number of shares held, in the Company’s assets remaining after payment of all of our debts and liabilities. All shares of Common Stock outstanding are fully paid and nonassessable. Holders of our Common Stock do not have preemptive or other rights to subscribe for or purchase any additional shares of Common Stock which we may issue in the future. If additional shares of our Common Stock are issued, such new shares would have the same voting and other rights and privileges as the currently issued and outstanding shares of Common Stock, including the right to cast one vote per share on all matters and to participate in dividends when and to the extent declared and paid. There are no redemptive or sinking fund provisions applicable to the Common Stock.

Preferred Stock

PMHC has 1,000,000 shares of authorized, but undesignated Preferred Stock. To issue Preferred Stock will require the approval of the shareholders of PMHC. Preferred Stock may have certain preferences over the Common Stock regarding voting, dividend, and liquidation rights.

If shares of Preferred Stock or securities that are convertible into, exchangeable for, or exercisable for shares of Common Stock are authorized and issued, our existing shareholders could, depending upon the price realized, experience dilution of earnings per share and voting power. If shares of our Preferred Stock are issued, such new shares would have the rights, preferences and limitations as determined by the Board of Directors, and as approved by our shareholders.

INDEMNIFICATION

receiving an improper personal benefit. However, a corporation may indemnify against the reasonable expenses associated with such proceeding. A corporation may not indemnify against breaches of the duty of loyalty. Florida law provides for mandatory indemnification against all reasonable expenses incurred in the successful defense of any claim made or threatened, regardless of whether such claim was by or in the right of the corporation, unless limited by the corporation’s Articles of Incorporation. A court may order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, regardless of whether the director or officer met the good faith and reasonable belief standards of conduct set out in the statute. Unless otherwise stated in the Articles of Incorporation, officers of a corporation are also entitled to the benefit of the above statutory provisions.

Consistent with Florida law, both the PMHC’s and the Bank’s Bylaws provide for the indemnification of our directors or officers to the fullest extent permitted by applicable law.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, or persons controlling the Company pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in that Act and is therefore unenforceable.

SUPERVISION AND REGULATION

General

As a one-bank holding company, we are subject to an extensive body of state and federal banking laws and regulations which impose specific requirements and restrictions on virtually all aspects of our operations. We are affected by government monetary policy and by regulatory measures affecting the banking industry in general.

The following is a brief summary of some of the statutes, rules, and regulations that affect Prime Meridian’s operations. This summary is qualified in its entirety by reference to the particular statutory and regulatory provision referred to below, and is not intended to be an exhaustive description of the statutes or regulations applicable to our business. Any change in applicable laws or regulations may have a material adverse effect on our business.

Prime Meridian Holding Company

PMHC is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended (“BHCA”). As such, we are required to file semi-annual and annual reports and other information with the Federal Reserve regarding our business operations and those of our subsidiary. We are also subject to the supervision of, and to periodic inspections by, the Federal Reserve.

The BHCA generally requires every bank holding company to obtain the prior approval of the Federal Reserve before:

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acquiring all or substantially all of the assets of a bank;

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acquiring direct or indirect ownership or control of 5% or more of the voting shares of any bank or bank holding company; or

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merging or consolidating with another bank holding company.

Depending on the particular circumstances, the BHCA and the Change in Bank Control Act, together with regulations promulgated by the Federal Reserve, require that either the Federal Reserve’s approval must be obtained or notice must be furnished to the Federal Reserve and not disapproved prior to any person or company, excluding a bank holding company, acquiring control of a bank holding company, subject to certain exemptions. Control is conclusively presumed to exist when an individual or company acquires 25% or more of any class of voting securities of a bank holding company. Control is rebuttably presumed to exist if a person acquires 10% or more, but less than 25%, of any class of voting securities and either the bank holding company has registered securities under Section 12 of the Securities Exchange Act of 1934 or no other person owns a greater percentage of that class of voting securities immediately after the transaction.

Additionally, the BHCA provides that the Federal Reserve may not approve any of these transactions if it would result in a monopoly, substantially lessen competition, or otherwise function as a restraint of trade, unless the anti-competitive effects of the proposed transaction are clearly outweighed by the public interest in meeting the convenience and needs of the community to be served. The Federal Reserve is also required to consider the financial and managerial resources and future prospects of the bank holding companies and banks concerned and the convenience and needs of the community to be served. The Federal Reserve’s consideration of financial resources generally focuses on capital adequacy, which is discussed below. As a result of the USA PATRIOT Act, the Federal Reserve is also required to consider the record of a bank holding company and its subsidiary bank(s) in combating money laundering activities in its evaluation of bank holding company merger or acquisition transactions.

Except as authorized by the BHCA and Federal Reserve regulations or order, a bank holding company is generally prohibited from acquiring direct or indirect control of 5% or more of the voting shares of any company engaged in any business other than the business of banking or managing and controlling banks. The primary exception allows a bank holding company to own shares in any company whose activities have been determined by the Federal Reserve to be so closely related to banking or to managing or controlling banks that ownership of shares of that company is appropriate. Activities the Federal Reserve has determined by regulation to be so closely related to the business of banking as to be permissible for bank holding companies, include:

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making or servicing loans and certain types of leases;

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engaging in certain insurance activities;

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performing certain data processing services;

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acting in certain circumstances as a fiduciary or investment or financial advisor;

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providing management consulting services;

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owning savings associations; and

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making investments in corporations or projects designed primarily to promote community welfare.

In accordance with Federal Reserve Policy, a bank holding company is expected to act as a source of financial strength to its subsidiary banks. In adhering to the Federal Reserve’s policy, we may be required to provide financial support to the Bank at a time when, absent such Federal Reserve Policy, it might not be deemed advisable to provide such assistance. Under the BHCA, the Federal Reserve may also require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve’s determination that the activity or control constitutes a serious risk to the

financial soundness or stability of any subsidiary depository institution of the bank holding company. Further, federal bank regulatory authorities have additional discretion to require a bank holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository institution’s financial condition. The Dodd-Frank Act codified the Federal Reserve’s policy on serving as a source of financial strength. Such support may be required at times when, absent this Federal Reserve policy, a holding company may not be inclined to provide it. A bank holding company, in certain circumstances, could be required to guarantee the capital plan of an undercapitalized banking subsidiary.

The Federal Reserve’s authority was expanded through FIRREA to prohibit activities of bank holding companies and their nonbanking subsidiaries which represent unsafe and unsound banking practices, or which constitute violations of laws or regulations. FIRREA increased the amount of civil money penalties which the Federal Reserve can assess for activities conducted on a knowing and reckless basis, if those activities caused a substantial loss to a depository institution. The penalties can be as high as $1.0 million for each day the activity continues. FIRREA also expanded the scope of the individuals and entities against which such penalties may be assessed.

Prime Meridian Bank

As a state-chartered commercial bank, the Bank is subject to the supervision and regulation of the OFR and the FDIC. Our deposits are insured by the FDIC for a maximum of $250,000 per account ownership category. For this protection, we must pay a semi-annual statutory assessment and comply with the rules and regulations of the FDIC. The assessment levied on a bank for deposit insurance varies, depending on the capital position of each bank, and other supervisory factors. Currently, we are subject to the statutory assessment.

The Federal Deposit Insurance Act provides that, in the event of the “liquidation or other resolution” of a bank, the claims of depositors of the bank, including the claims of the FDIC as subrogee of insured depositors and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against a bank. If a bank fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, nondeposit creditors and shareholders.

Areas regulated and monitored by the bank regulatory authorities include:

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security devices and procedures;

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adequacy of capitalization and loss reserves;

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loans;

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investments;

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borrowings;

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deposits;

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mergers;

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issuances of securities;

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payment of dividends;

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establishment of branches;

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corporate reorganizations;

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transactions with affiliates;

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maintenance of books and records; and

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adequacy of staff training to carry out safe lending and deposit gathering practices.

Restrictions on Transactions with Affiliates and Loans to Insiders

Sections 23A and 23B of the Federal Reserve Act restrict transactions by banks with their affiliates. An affiliate of a bank is any company or entity which controls, is controlled by, or is under common control with the bank. Generally, Sections 23A and 23B (i) limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10% of that bank’s capital stock and surplus (i.e., tangible capital); and (ii) require that all such transactions be on terms substantially the same, or at least as favorable to the bank or subsidiary, as those provided to a nonaffiliate. The term “covered transaction” includes the making of loans, purchase of assets, issuance of a guarantee, and other similar types of transactions.

The Dodd-Frank Act expanded the scope of Section 23A, and going forward, will include investment funds managed by an institution as an affiliate as well as other hurdles. In addition, the Dodd-Frank Act expanded coverage of transactions with insiders by including credit exposure arising from derivative transactions (which transactions are also covered by the expansion of Section 23A). The Bank has not engaged in derivative transactions. The Dodd-Frank Act prohibits an insured depository institution from purchasing or selling an asset to an executive officer, director, or principal shareholder (or any related interest of such a person) unless the transaction is on market terms. If the transaction exceeds 10% of the institution’s capital, it must be approved in advance by a majority of the disinterested directors.

A bank’s authority to extend credit to executive officers, directors and shareholders with greater than 10% ownership, as well as entities controlled by such persons, is subject to Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated thereunder by the Federal Reserve. Among other things, these loans must be made on terms substantially the same as those offered to unaffiliated individuals. The amount of loans a bank may make to these persons is based, in part, on the bank’s capital position certain approval procedures must be followed in making loans which exceed specified amounts.

Anti-tying Restrictions

Bank holding companies and affiliates are prohibited from tying the provision of services, such as extensions of credit, to other services offered by a holding company or its affiliates.

Capital Adequacy Requirements

Banks are subject to regulatory capital requirements imposed by the Federal Reserve and the FDIC. Until a bank holding company’s assets reach $500 million, the risk-based capital and leverage guidelines issued by the Federal Reserve are applied to bank holding companies on a nonconsolidated basis, unless the bank holding company is engaged in nonbank activities involving significant leverage or has a significant amount of outstanding debt held by the general public. Instead, a bank holding company with less than $500 million in assets generally applies the risk-based capital and leverage capital guidelines on a bank only basis and must only meet a debt-to-equity ratio at the holding company level. The FDIC risk-based capital guidelines apply directly to insured state-chartered banks, regardless of whether they are subsidiaries of a bank holding company. Both agencies’ requirements are substantially similar and establish minimum capital ratios in relation to assets, on an aggregate basis adjusted both for credit risks and off-balance sheet exposures. The risk weights assigned to assets are based primarily on credit risks.

Under the guidelines, balance sheet and off-balance sheet assets are assigned one of four risk weights (0%, 20%, 50%, and 100%) primarily based on the relative credit risk of the counterparty. For example, claims guaranteed by the U.S. government or one of its agencies are risk-weighted at 0%. Off-balance sheet items, such as loan commitments and derivative financial instruments, are also assigned one of the above risk weights after calculating balance sheet equivalent amounts. Another example, certain loan commitments are converted at 50% and then risk-weighted at 100%. Derivative financial instruments are converted to balance sheet equivalents based on notional values, replacement costs and remaining contractual terms. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Capital is then classified into two categories, Tier 1 and Tier 2. Tier 1 capital consists of common and qualifying preferred shareholders’ equity, less goodwill and other adjustments. Tier 2 capital consists of mandatory convertible, subordinated, and other qualifying term debt, preferred stock not qualifying for Tier 1 capital, and a limited amount of allowance for credit losses, up to a designated percentage of risk-weighted assets. Under the risk-based guidelines, financial institutions must maintain a specified minimum ratio of “qualifying” capital to risk-weighted assets. At least 50% of an institution’s qualifying capital must be “core” or “Tier 1” capital, and the balance may be “supplementary” or “Tier 2” capital. In addition, the guidelines require banks to maintain a minimum leverage ratio standard of capital adequacy.

The leverage standard requires top-rated institutions to maintain a minimum Tier 1 leverage capital to assets ratio of 3%. All other institutions are required to maintain a Tier 1 leverage capital ratio of 4% or greater, based upon their particular circumstances and risk profiles. To be considered well capitalized, the leverage ratio for a bank holding company must be at least 5%. The guidelines further state that bank holding companies making acquisitions will be expected to maintain strong capital positions substantially above the minimum levels.

Federal banking regulators have adopted regulations revising the risk-based capital guidelines to further ensure that the guidelines take adequate account of interest rate risk. Interest rate risk is the adverse effect that changes in market interest rates may have on a bank’s financial condition and is inherent to the business of banking. Under the regulations, when evaluating a bank’s capital adequacy, the revised capital standards now explicitly include a bank’s exposure to declines in the economic value of its capital due to changes in interest rates. The exposure of a bank’s economic value generally represents the change in the present value of its assets, less the change in the value of its liabilities, plus the change in the value of its interest rate off-balance sheet contracts.

Federal bank regulatory agencies possess broad powers to take prompt corrective action when an insured depository institution and its holding company’s capital levels are deemed too low. The extent of these powers depends upon whether the institution in question is considered “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” or “critically under-capitalized.” Generally, when an institution is deemed to be less than “well capitalized,” the scope and severity of the agencies’ powers increase, ultimately permitting the agency to appoint a receiver for the institution. Business activities may also be influenced by an institution’s capital classification. For instance, only a “well capitalized” depository institution may accept brokered deposits without prior regulatory approval and can engage in various expansion activities with prior notice, rather than prior regulatory approval. However, rapid growth, poor loan portfolio performance or poor earnings performance, or a combination of these factors, could change the capital position of the Bank in a relatively short period of time. Failure

to meet these capital requirements could subject the Bank to prompt corrective action provisions of the FDIC, which may include filing a plan with the appropriate bank regulatory authorities describing the means and a schedule for achieving the minimum capital requirements. In addition, the Bank would not be able to receive regulatory approval of any application that required consideration of capital adequacy, such as a branch or merger application, unless we could demonstrate a reasonable plan to meet the capital requirement within an acceptable period of time.

Effective January 1, 2015, community banks will become subject to new capital requirements, which will phase in an increase in the minimum capital ratios a bank must maintain for various capital categories and change the risk weighting of certain assets. In December 2010 and January 2011, the International Basel Committee on Banking Supervision (“Basel Committee”) published the final texts of reforms on capital, leverage and liquidity, which is referred to as “Basel III.” In early July 2013, the FDIC approved revisions to the capital adequacy guidelines and prompt corrective action rules that implement Basel III and address relevant provisions of the Dodd-Frank Act, including revising the definition of what constitutes “capital” for purposes of calculating those ratios.

The proposed new minimum capital level requirements applicable to the Company and the Bank will be: (i) a (new) common equity tier 1 capital ratio of 4.5%; (ii) a tier 1 capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a tier 1 leverage ratio of 4% for all institutions. The rules eliminate the inclusion of certain instruments, such as trust preferred securities, from tier 1 capital. Instruments issued prior to May 19, 2010 will be grandfathered for companies with consolidated assets of $15 billion or less. The rules also establish a “capital conservation buffer” of 2.5% above the new regulatory minimum capital requirements, which must consist entirely of common equity tier 1 capital and would result in the following minimum ratios: (i) a common equity tier 1 capital ratio of 7.0%, (ii) a tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. The new capital conservation buffer requirement will be phased in beginning in January 2016 at 0.625% of risk-weighted assets and would increase by that amount each year until fully implemented in January 2019. An institution would be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations would establish a maximum percentage of eligible retained income that could be utilized for such actions.

As of June 30, 2013, the Bank was considered to be “well capitalized” with a 8.97% tier 1 leverage ratio; 12.91% tier 1 leverage risk-based capital ratio and 14.14% total risk-based capital ratio, well above the current capital minimum ratios to be considered “well capitalized.”

Branching

Under the Dodd-Frank Act, which was enacted on July 21, 2010, the national branching requirements were relaxed, and national banks and state banks are able to establish branches in any state if that state would permit the establishment of the branch by a state bank chartered in that state. Florida law permits a state bank to establish a branch of the bank anywhere in the state. Accordingly, under the Dodd-Frank Act, a bank with its headquarters outside the State of Florida may establish branches anywhere within Florida.

Deposit Insurance Assessments

Banks must pay assessments to the FDIC for federal deposit insurance protection. The FDIC has adopted a risk-based assessment system as required by FDICIA. Under this system, FDIC-insured depository institutions pay insurance premiums at rates based on their risk classification. Institutions assigned to higher risk classifications (that is, institutions that pose a higher risk of loss to their respective deposit insurance funds) pay assessments at higher rates than institutions that pose a lower risk. An institution’s risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to the regulators. In addition, the FDIC can impose special assessments in certain instances. The FDIC may terminate its insurance of deposits if it finds that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC.

Beginning April 1, 2009, the base assessment rates ranged from 10-14 basis points for Risk Category I institutions, up to 45 basis points for Risk Category IV institutions. Changes to the risk-based assessment system included increasing premiums for institutions that rely on excessive amounts of brokered deposits, including CDARS, increasing premiums for excessive use of secured liabilities, including Federal Home Loan Bank advances, lowering premiums for smaller institutions with very high capital levels, and adding financial ratios and debt issuer ratings to the premium calculations for banks with over $10 billion in assets, while providing a reduction for their unsecured debt. Either an increase in the Risk Category of the Bank or adjustments to the base assessment rates could have a material adverse effect on our earnings.

In addition, all institutions with deposits insured by the FDIC are required to pay assessments to fund interest payments on bonds issued by the Financing Corporation (“FICO”), a mixed-ownership government corporation established to recapitalize a predecessor to the Deposit Insurance Fund.

The Dodd-Frank Act, changes the basis for deposit assessments from a tax based on deposits to one based on assets. The assessment base will be calculated based on the average consolidated total assets of the financial institution minus its tangible equity. The Dodd-Frank Act also increases the minimum reserve ratio of the Deposit Insurance Fund, but the burden of the increase will be on institutions with total assets in excess of $10 billion.

Dividends

Our ability to pay cash dividends depends upon the amount of dividends that the Company is able to pay and that the Bank is permitted to pay by statutes or regulations. Additionally, the Florida Business Corporation Act provides that we may only pay dividends if the dividend payment would not render the company insolvent, or unable to meet our obligations as they come due. These provisions could have the effect of limiting our ability to pay dividends on the shares issued in this Offering.

As a Florida state-chartered bank, the Bank is subject to regulatory restrictions on the payment of dividends, including a prohibition of dividend payments from the Bank’s capital under certain circumstances without the prior approval of the OFR and the FDIC. Except with the prior approval of the OFR, all dividends of any Florida bank must be paid out of retained net profits from the current period and the previous two years, after deducting expenses, including losses and bad debts. In addition, a Florida state-chartered bank is required to transfer at least 20% of its net income to surplus until their surplus equals the amount of paid-in capital.

The Federal Reserve expects bank holding companies to serve as a source of strength to their subsidiary bank(s), which may require them to retain capital for investment in their subsidiary bank(s), rather than pay dividends to shareholders. As stated previously, the Bank may not pay dividends to PMHC, if, after paying those dividends, the Bank would fail to meet the required minimum levels under the risk-based capital guidelines and the minimum leverage ratio requirements. Payment of dividends by the Bank may be restricted at any time at the discretion of its applicable regulatory authorities, if they deem such dividends to constitute an unsafe and/or unsound banking practice.

Fiscal and Monetary Policies

The Bank’s business and earnings may be significantly affected by the fiscal and monetary policies of the federal government and its agencies. We are particularly affected by the policies of the Federal Reserve, which regulates the supply of money and credit in the United States. The instruments of monetary policy available to the Federal Reserve include (i) conducting open market operations in United States government securities; (ii) changing the discount rates of borrowings of depository institutions; (iii) imposing or changing reserve requirements against depository institutions’ deposits; and (iv) imposing or changing reserve requirements against certain borrowing by banks and their affiliates. These methods are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. For that reason alone, the policies of the Federal Reserve have a material effect on our earnings.

Other Laws

State usury and credit laws limit the amount of interest and other charges collected or contracted by a bank on loans. Our loans are subject to federal laws applicable to credit transactions, such as the:

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Federal Truth-In-Lending Act , which governs disclosures of credit terms to consumer borrowers;

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Community Reinvestment Act , which requires financial institutions to meet their obligations to provide for the total credit needs of the communities they serve, including loans to low and moderate-income borrowers;

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Home Mortgage Disclosure Act, requiring financial institutions to disclose information, enabling public officials to determine whether a financial institution is fulfilling its obligations to meet the housing needs of the community it serves;

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Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed, or other prohibitive factors in extending credit;

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Real Estate Settlement Procedures Act , which requires lenders to disclose certain information regarding the nature and cost of real estate settlements, and prohibits certain lending practices, as well as limits escrow account amounts in real estate transactions;

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Fair Credit Reporting Act, regulating the consumer credit reporting industry by requiring banks that deny credit based upon a credit report to advise the person that information in the credit report contributed to the denial;

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The Fair Housing Act , prohibits discrimination in residential real estate related transactions based on race, color, national origin, religion, sex, familial status or handicap; and

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The rules and regulations of various federal agencies charged with the responsibility of implementing such federal laws.

Our operations are also subject to the following:

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Gramm-Leach-Bliley Act of 1999 , which contains privacy provisions that requires us to maintain privacy policies intended to safeguard consumer financial information, to disclose these policies to our clients, and allow clients to “opt out” of having their financial service providers disclose their confidential financial information to nonaffiliated third parties, subject to certain exceptions;

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Right to Financial Privacy Act , which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and

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Electronic Funds Transfer Act and Regulation E , which govern automatic deposits and withdrawals and clients’ rights and liabilities arising from the use of debit cards, automated teller machines, wire transaction and other electronic banking services.

Financial Modernization

The Gramm-Leach-Bliley Act of 1999 also sought to achieve significant modernization of the federal bank regulatory framework by allowing the consolidation of banking institutions with other types of financial services firms, subject to various restrictions and requirements. In general, the Gramm-Leach-Bliley Act repealed most of the federal statutory barriers, which separated commercial banking firms from insurance and securities firms and authorized the consolidation of such firms in a “financial services holding company.” We have no immediate plans to utilize the structural options created by the Gramm-Leach-Bliley Act, but may develop such plans in the future.

Anti-Money Laundering

After the September 11, 2001 terrorist attacks, the United States government acted in several ways to tighten control on activities perceived to be connected to money laundering and terrorist funding. A series of orders were issued, which identify terrorists and terrorist organizations, require the blocking of property and assets, and prohibit all transactions or dealings with such terrorists, terrorist organizations, and those that assist or sponsor them. Enacted in 2001, The USA PATRIOT Act accomplished the following:

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substantially broadens existing anti-money laundering legislation and the extraterritorial jurisdiction of the United States;

•

imposes new compliance and due diligence obligations;

•

creates new crimes and penalties;

•

compels the production of documents located both inside and outside the United States, including those of foreign institutions that have a correspondent relationship in the United States; and

•

clarifies the safe harbor from civil liability to clients.

In addition, the Treasury issued regulations in cooperation with the federal banking agencies, the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Department of Justice, that:

•

require customer identification and verification;

•

expand the money-laundering program requirement to the major financial services sectors, including insurance and unregistered investment companies, such as hedge funds; and

•

facilitate and permits the sharing of information between law enforcement and financial institutions, as well as among financial institutions themselves.

The Treasury has also created the Treasury USA PATRIOT Act Task Force to work with other financial regulators, the regulated community, law enforcement, and consumers to continually improve the regulations. Recently, state and federal regulators have increased enforcement of the USA PATRIOT Act, the Bank Secrecy Act, and other Anti-Money Laundering laws and regulations.

Dodd-Frank Wall Street Reform and Consumer Protection Act

On July 21, 2010, President Obama signed the Dodd-Frank Act into law. The Dodd-Frank Act has had a broad impact on the financial services industry, imposing significant regulatory and compliance changes. These include the designation of certain financial companies as systemically significant, the imposition of increased capital, leverage, and liquidity requirements, and numerous other provisions designed to improve supervision and oversight of, and strengthen safety and soundness within, the financial services sector. Additionally, the Dodd-Frank Act has established a new framework of authority to conduct systemic risk oversight within the financial system to be distributed among new and existing federal regulatory agencies, including the Financial Stability Oversight Council, the Federal Reserve, the OCC, and the FDIC. The following items provide a brief description of certain key provisions of the Dodd-Frank Act.

•

Limitation on debit card transaction fees. The amount a provider can charge for debit card transaction fees, commonly referred to as interchange fees, is now limited to $0.21, plus 0.05% of the price of the transaction (plus $0.01, if the provider has certain fraud prevention standards in place).

•

Limitation on federal preemption. The ability of national banks and federal thrifts to rely upon federal preemption of state consumer financial laws has been significantly reduced.

•

Mortgage loan origination and risk retention. Additional regulatory requirements have been put in place that may affect our operations and result in increased compliance costs. For example, new standards have been created for all mortgage loan originations, requiring verification of a borrower’s ability to repay. In addition, the Dodd-Frank Act generally requires lenders or securitizers to retain an economic interest in the credit risk relating to loans the lender sells or mortgage and other asset-backed securities that the securitizer issues. The risk retention requirement generally will be 5%, but could be increased or decreased by regulation.

•

Imposition of restrictions on certain activities. New regulations are now required for the over-the-counter derivatives market, including requirements for clearing, exchange trading, capital, margin, and reporting. Additionally, the Dodd-Frank Act requires that certain swaps and derivatives activities be “pushed out” of insured depository institutions and conducted in nonbank affiliates.

•

Expanded FDIC resolution authority. While insured depository institutions have long been subject to the FDIC’s resolution process, the Dodd-Frank Act creates a new mechanism for the FDIC to conduct the orderly liquidation of certain “covered financial companies,” including bank and thrift holding companies and systemically significant nonbank financial companies.

•

Consumer Financial Protection Bureau (“CFPB”). A new independent CFPB has been created within the Federal Reserve. The CFPB is tasked with establishing and implementing rules and regulations under certain federal consumer protection laws with respect to the conduct of providers of certain consumer financial products and services. The CFPB has rulemaking authority over many of the statutes governing products and services offered to bank and thrift consumers.

•

Deposit insurance. The Dodd-Frank Act permanently raised the deposit insurance limit for insured deposit accounts from $100,000 to $250,000 per account ownership category.

•

Transactions with affiliates and insiders. The Dodd-Frank Act generally enhances the restrictions on transactions with affiliates under Section 23A and 23B of the Federal Reserve Act, including an expansion of the definition of “covered transactions.”

•

Enhanced lending limits. The Dodd-Frank Act strengthens the existing limits on a depository institution’s credit exposure to one borrower.

•

Corporate governance. The Dodd-Frank Act addresses many investor protection, corporate governance, and executive compensation matters that will affect most U.S. publicly traded companies. The Dodd-Frank Act: (i) grants stockholders of U.S. publicly traded companies an advisory vote on executive compensation; (ii) enhances independence requirements for compensation committee members; (iii) requires companies listed on national securities exchanges to adopt incentive-based compensation clawback policies for executive officers; and (iv) provides the Securities and Exchange Commission with authority to adopt proxy access rules that would allow stockholders of publicly traded companies to nominate candidates for election as a director and have those nominees included in a company’s proxy materials.

Many of the requirements of the Dodd-Frank Act will continue to be implemented over time and most will be subject to regulations implemented over the course of several years. To date, only a portion of the expected rules have been promulgated. Given the uncertainty associated with the manner in which the provisions of the Dodd-Frank Act will be implemented by the various federal banking regulatory agencies, the full extent of the impact such requirements will have on our operations is unclear.

Future Legislation

Various other legislative and regulatory initiatives, including proposals to overhaul the bank regulatory system, are from time to time introduced in Congress and state legislatures, as well as bank regulatory agencies. The latest example was the passing of the Dodd-Frank Act. Future legislation regarding financial institutions may change banking statutes and the operating environment of PMHC and the Bank in substantial and unpredictable ways, such as increasing or decreasing the cost of doing business, limiting or expanding permissible activities, or affecting the competitive landscape. The nature and extent of future legislative and regulatory changes affecting financial institutions is very unpredictable at this time.

LEGAL MATTERS

Certain legal matters, including, among other things, the validity of the shares of Common Stock offered hereby, have been passed upon by Adams and Reese LLP, Tallahassee, Florida, legal counsel to PMHC.

EXPERTS

The audited financial statements of Prime Meridian as of December 31, 2012, and 2011, are included herein in reliance upon the report of Hacker, Johnson & Smith, P.A., an independent registered public accounting firm, upon the authority of that firm as experts in accounting and auditing.

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Registered Public Accounting Firm			F-2

Consolidated Balance Sheets, June 30, 2013 (Unaudited) and December 31, 2012 and 2011			F-3

Consolidated Statements of Earnings for the Six Months Ended June 30, 2013 and 2012 (Unaudited) and the Year Ended December 31, 2012 and 2011			F-4

Consolidated Statements of Comprehensive Income for the Six Months Ended June 30, 2013 and 2012 (Unaudited) and the Year Ended December 31, 2012 and 2011			F-5

Consolidated Statements of Stockholder’s Equity for the Years Ended December 31, 2012 and 2011 and the Six Months Ended June 30, 2013 and 2012 (Unaudited)			F-6

Consolidated Statements of Cash Flows for the Six Month Ended June 30, 2013 and 2012 (Unaudited) and the Year Ended December 31, 2012 and 2011			F-7-F-8

Notes to Consolidated Financial Statements, At June 30, 2013 (Unaudited) and December 31, 2012 and 2011 and for the Six Months Ended June 30, 2013 and 2012 (Unaudited) and the Years Ended December 31, 2012 and 2011			F-9-F-43

F-1

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, 2012 and 2011, 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, 2012 and 2011, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

HACKER, JOHNSON & SMITH PA

Tampa, Florida

October 16, 2013

F-2

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Consolidated Balance Sheets

($ in thousands, except per share amounts)


	June 30,			At December 31,
	2013			2012		2011
	(Unaudited)
Assets

Cash and due from banks	$	6,683			2,920		1,594
Federal funds sold		148			148		207
Interest-bearing deposits		15,368			23,430		17,230


Total cash and cash equivalents		22,199			26,498		19,031

Securities available for sale		41,785			43,805		39,921
Loans, net of allowance for loan losses of $1,534, $1,243 and $903		114,202			93,400		76,678
Deferred tax asset		338			—		—
Federal Home Loan Bank stock		203			209		272
Premises and equipment, net		3,363			3,437		2,993
Accrued interest receivable		475			422		358
Bank-owned life insurance		1,535			1,507		—
Other assets		111			380		150


Total assets	$	184,211			169,658		139,403


Liabilities and Stockholders’ Equity

Liabilities:
Noninterest-bearing demand deposits		42,942			29,328		18,187
Savings, NOW and money-market deposits		103,459			100,885		75,450
Time deposits		15,343			16,516		21,936


Total deposits		161,744			146,729		115,573

Federal Home Loan Bank advances		—			—		2,000
Other borrowings		5,789			5,760		6,127
Official checks		451			712		362
Deferred tax liability		—			252		123
Other liabilities		366			166		122


Total liabilities		168,350			153,619		124,307


Commitments and contingencies (Notes 4, 9 and 16)

Stockholders’ equity:
Preferred stock, undesignated; 1,000,000 shares authorized, none issued or outstanding		—			—		—
Common stock, $.01 par value; 9,000,000 shares authorized, 1,497,494, 1,496,106 and 1,496,106 issued and outstanding		15			15		15
Additional paid-in capital		14,911			14,896		14,889
Retained earnings (accumulated deficit)		1,146			583		(435	)
Accumulated other comprehensive (loss) income		(211	)		545		627


Total stockholders’ equity		15,861			16,039		15,096


Total liabilities and stockholders’ equity	$	184,211			169,658		139,403

See Accompanying Notes to Consolidated Financial Statements.

F-3

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Consolidated Statements of Earnings

(In thousands)


	Six Months Ended June 30,				Year Ended December 31,
	2013		2012		2012		2011
	(Unaudited)
Interest income:
Loans	$	2,897		2,276		4,831		3,994
Securities		415		462		864		984
Other		22		21		45		31


Total interest income		3,334		2,759		5,740		5,009


Interest expense:
Deposits		340		390		747		945
Other borrowings		29		32		61		56


Total interest expense		369		422		808		1,001


Net interest income		2,965		2,337		4,932		4,008

Provision for loan losses		323		240		473		143


Net interest income after provision for loan losses		2,642		2,097		4,459		3,865


Noninterest income:
Service charges and fees on deposit accounts		45		49		103		67
Gain on sale of securities available for sale		—		881		881		—
Gain on sale of loans		246		—		—		—
Income from bank-owned life insurance		28		—		7		—
Other income		239		112		259		82


Total noninterest income		558		1,042		1,250		149


Noninterest expenses:
Salaries and employee benefits		1,270		992		2,082		1,524
Occupancy and equipment		370		392		856		396
Professional fees		88		81		137		124
Data processing		—		58		47		147
Advertising		81		85		160		123
Other		520		416		820		711


Total noninterest expenses		2,329		2,024		4,102		3,025


Earnings before income taxes		871		1,115		1,607		989

Income taxes		308		412		589		373


Net earnings	$	563		703		1,018		616


Basic earnings per share	$	0.38		0.47		0.68		0.41


Diluted earnings per share	$	0.37		0.47		0.68		0.41


Cash dividends per common share	$	—		—		—		—

See Accompanying Notes to Consolidated Financial Statements.

F-4

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Consolidated Statements of Comprehensive Income

(In thousands)


	Six Months Ended June 30,						Year Ended December 31,
	2013			2012			2012			2011
	(Unaudited)

Net earnings	$	563			703			1,018			616


Other comprehensive income:
Change in unrealized (loss) gain on securities:
Unrealized (loss) gain arising during the period		(1,203	)		562			751			1,167
Reclassification adjustment for realized gains		—			(881	)		(881	)		—


Net change in unrealized (loss) gain		(1,203	)		(319	)		(130	)		1,167

Deferred income taxes (benefit) on above change		447			118			48			(431	)


Total other comprehensive (loss) income		(756	)		(201	)		(82	)		736


Comprehensive (loss) income	$	(193	)		502			936			1,352

See Accompanying Notes to Consolidated Financial Statements.

F-5

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Consolidated Statements of Stockholders’ Equity

Years Ended December 31, 2012 and 2011 and Six Months Ended June 30, 2013

($ in thousands)


	Common Stock				Additional Paid-In		Accumulated (Deficit)			Accumulated Other Comprehensive Income			Total Stockholders’
	Shares		Amount		Capital		Earnings			(Loss)			Equity

Balance at December 31, 2010		1,496,106	$	15		14,870		(1,051	)		(109	)		13,725

Net earnings		—		—		—		616			—			616

Net change in unrealized loss on available for sale securities, net of income tax of $431		—		—		—		—			736			736

Stock-based compensation		—		—		19		—			—			19


Balance at December 31, 2011		1,496,106		15		14,889		(435	)		627			15,096

Net earnings		—		—		—		1,018			—			1,018

Net change in unrealized gain on available for sale securities, net of income tax of $48		—		—		—		—			(82	)		(82	)

Stock-based compensation		—		—		7		—			—			7


Balance at December 31, 2012		1,496,106		15		14,896		583			545			16,039

Net earnings (unaudited)		—		—		—		563			—			563

Net change in unrealized gain on available for sale securities, net of income tax of $447 (unaudited)		—		—		—		—			(756	)		(756	)

Common stock issued as compensation to directors (unaudited)		1,388		—		14		—			—			14

Stock-based compensation (unaudited)		—		—		1		—			—			1


Balance at June 30, 2013 (unaudited)		1,497,494	$	15		14,911		1,146			(211	)		15,861

See Accompanying Notes to Consolidated Financial Statements.

F-6

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Consolidated Statements of Cash Flows

(In thousands)


	Six Months Ended June 30,						Year Ended December 31,
	2013			2012			2012			2011
	(Unaudited)
Cash flows from operating activities:
Net earnings	$	563			703			1,018			616
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		166			196			388			181
Provision for loan losses		323			240			473			143
Net amortization of deferred loan fees		(40	)		(21	)		(75	)		(70	)
Deferred income taxes (benefit)		(143	)		50			177			373
Gain on sale of securities available for sale		—			(881	)		(881	)		—
Amortization of premiums, discounts on securities available for sale		227			187			386			318
Proceeds from the sale of loans held for sale		2,114			—			—			—
Gain on sale of loans held for sale		(246	)		—			—			—
Loan originated as held for sale		(1,868	)		—			—			—
Stock issued as compensation		14			—			—			—
Stock-based compensation expense		1			4			7			19
Income from bank-owned life insurance		(28	)		—			(7	)		—
Net increase (decrease) in accrued interest receivable		(53	)		19			(64	)		(91	)
Net (increase) decrease in other assets		269			26			(230	)		134
Net increase in other liabilities and official checks		(61	)		369			394			54


Net cash provided by operating activities		1,238			892			1,586			1,677


Cash flows from investing activities:
Loan originations, net of principal repayments		(21,085	)		(3,403	)		(17,120	)		(12,007	)
Purchase of securities available for sale		(3,723	)		(14,785	)		(23,966	)		(19,677	)
Principal repayments of securities available for sale		4,313			5,127			6,853			4,188
Proceeds from the calls and sales of securities available for sale		—			13,603			13,594			1,620
Redemption (purchase) of Federal Home Loan Bank stock		6			2			63			(21	)
Purchase of premises and equipment		(92	)		(802	)		(832	)		(2,431	)
Purchase of bank-owned life insurance		—			—			(1,500	)		—


Net cash used in investing activities		(20,581	)		(258	)		(22,908	)		(28,328	)


Cash flows from financing activities:
Net increase in deposits		15,015			5,490			31,156			30,079
Decrease in Federal Home Loan Bank advances		—			(1,000	)		(2,000	)		(1,000	)
Increase (decrease) in other borrowings		29			(397	)		(367	)		6,127


Net cash provided by financing activities		15,044			4,093			28,789			35,206


Net (decrease) increase in cash and cash equivalents		(4,299	)		4,727			7,467			8,555

Cash and cash equivalents at beginning of period		26,498			19,031			19,031			10,476


Cash and cash equivalents at end of period	$	22,199			23,758			26,498			19,031

(continued)

F-7

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Consolidated Statements of Cash Flows, Continued

(In thousands)


	Six Months Ended June 30,						Year Ended December 31,
	2013			2012			2012			2011
	(Unaudited)
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest	$	369			422			832			1,006


Income taxes	$	156			415			645			—


Noncash transaction-Accumulated other comprehensive (loss) income, net change in unrealized (loss) gain on sale of securities available for sale, net of taxes	$	(756	)		(201	)		(82	)		736

See Accompanying Notes to Consolidated Financial Statements.

F-8

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements

At June 30, 2013 (Unaudited), December 31, 2012 and 2011 and for the Six Months Ended June 30, 2013 and 2012 (Unaudited) and the Years Ended December 31, 2012 and 2011

(1)

Summary of Significant Accounting Policies

Organization. Prime Meridian Holding Company (the “Holding Company”) owns 100% of the outstanding common stock of Prime Meridian Bank (the “Bank”) (collectively the “Company”).

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

The following is a description of the significant accounting policies and practices followed by the Company, which conform to accounting principles, generally accepted in the United States of America (“GAAP”) and prevailing practices within the banking industry.

Use of Estimates. In preparing consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A material estimate that is particularly susceptible to significant change in the near term relates to the determination of the allowance for loan losses.

Principles of Consolidation. The consolidated financial statements include the accounts of the Holding Company and the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.

Cash and Cash Equivalents. For purposes of the statement of cash flows, cash and cash equivalents include cash and balances due from banks, federal funds sold and interest-bearing deposits, all of which have original maturities of less than ninety days.

At June 30, 2013, December 31, 2012 and 2011, 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 $452,000, $692,000 and $93,000, respectively.

(continued)

F-9

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(1)

Summary of Significant Accounting Policies, Continued

Securities. Securities may be classified as either trading, held to maturity or available for sale. Trading securities are held principally for resale and recorded at their fair values. Unrealized gains and losses on trading securities are included immediately in earnings. Held-to-maturity securities are those which the Company has the positive intent and ability to hold to maturity and are reported at amortized cost. Available-for-sale securities consist of securities not classified as trading securities nor as held-to-maturity securities. Unrealized holding gains and losses on available-for-sale securities are excluded from operations and reported in accumulated other comprehensive income. Gains and losses on the sale of available-for-sale securities are recorded on the trade date determined using the specific-identification method. Premiums and discounts on securities available for sale are recognized in interest income using the interest method over the period to maturity.

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

Loans Held for Sale. Loans held for sale include 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. There were no loans held for sale at June 30, 2013, December 31, 2012 and 2011.

Loans. Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs.

Commitment and loan origination fees are capitalized and certain direct origination costs are deferred. Both are recognized as an adjustment of the yield of the related loan.

The accrual of interest on all portfolio classes is discontinued at the time the loan is ninety days delinquent unless the loan is well collateralized and in process of collection. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. All interest accrued but not collected for loans that are placed on nonaccrual or charged-off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

(continued)

F-10

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(1)

Summary of Significant Accounting Policies, Continued

Allowance for Loan Losses. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. There were no changes in the Company’s accounting policies or methodology during the year ended December 31, 2012.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of specific and general components. The specific component relates to loans that are considered impaired. For such loans, an allowance is established when the discounted cash flows or collateral value of the impaired loan is lower than the carrying value of that loan. The general component covers all other loans and is based on the following factors:

The historical loss component of the allowance is determined by losses recognized by portfolio segment over the preceding three years. This is supplemented by the risks for each portfolio segment. Risk factors impacting loans in each of the portfolio segments include broad deterioration of property values, reduced consumer and business spending as a result of continued high unemployment and reduced credit availability and lack of confidence in a sustainable recovery. The historical experience is adjusted for the following qualitative factors: (a) changes in lending policies and procedures, risk selection and underwriting standards; (b) changes in national, regional and local economic conditions that affect the collectability of the loan portfolio; (c) changes in the experience, ability and depth of lending management and other relevant staff; (d) changes in the volume and severity of past due loans, nonaccrual loans or loans classified special mention, substandard, doubtful or loss; (e) quality of loan review and Board of Directors oversight; (f) changes in the nature and volume of the loan portfolio and terms of loans; (g) the existence and effect of any concentrations of credit and changes in the level of such concentrations; (h) the effect of other external factors, trends or uncertainties that could affect management’s estimate of probable losses, such as competition and industry conditions.

(continued)

F-11

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(1)

Summary of Significant Accounting Policies, Continued

Allowance for Loan Losses, Continued. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for all loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral-dependent.

Premises and Equipment. Land is stated at cost. Buildings, leasehold improvements, furniture, fixtures and equipment, and software are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expense are computed using the straight-line method over the estimated useful life of each type of asset, or the lease term if shorter.

Transfer of Financial Assets. Transfers of financial assets or a participating interest in an entire financial asset are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. A participating interest is a portion of an entire financial asset that (1) conveys proportionate ownership rights with equal priority to each participating interest holder (2) involves no recourse (other than standard representations and warranties) to, or subordination by, any participating interest holder, and (3) does not entitle any participating interest holder to receive cash before any other participating interest holder.

Off-Balance-Sheet Financial Instruments. In the ordinary course of business, the Company has entered into off-balance-sheet financial instruments consisting of commitments to extend credit, construction loans in process, unused lines of credit and standby letters of credit. Such financial instruments are recorded in the consolidated financial statements when they are funded.

(continued)

F-12

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(1)

Summary of Significant Accounting Policies, Continued

Income Taxes. There are two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods.

Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. As of June 30, 2013 and December 31, 2012, 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.

Fair Value Measurements. GAAP defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements.

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The hierarchy describes three levels of inputs that may be used to measure fair value:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

(continued)

F-13

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(1)

Summary of Significant Accounting Policies, Continued

Fair Value Measurements, Continued.

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.

Impaired Loans . Estimates of fair value for impaired loans is based on the estimated value of the underlying collateral which is determined based on a variety of information, including the use of available appraisals, estimates of market value by licensed appraisers or local real estate brokers and the knowledge and experience of the Company’s management related to values of properties in the Company’s market areas. Management takes into consideration the type, location and occupancy of the property as well as current economic conditions in the area the property is located in assessing estimates of fair value. Accordingly, fair value estimates for impaired loans are classified as Level 3.

Fair Values of Financial Instruments. The following methods and assumptions were used by the Company in estimating fair values of financial instruments:

Cash and Cash Equivalents. The carrying amounts of cash and cash equivalents approximate their fair value (Level 1).

Securities. Fair values for securities are based on the framework for measuring fair value (Level 2 and 3).

(continued)

F-14

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(1)

Summary of Significant Accounting Policies, Continued

Fair Values of Financial Instruments, Continued.

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).

Federal Home Loan Bank Advances. Fair values are estimated using discounted cash flow analysis based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements (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.

(continued)

F-15

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(1)

Summary of Significant Accounting Policies, Continued

Recent Pronouncements. In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment, which, among other things, gives an entity the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that an indefinite-lived intangible asset is impaired. The adoption of this guidance had no effect on the Company’s consolidated financial statements.

In January 2013, the FASB issued ASU No. 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which limits the scope of the new balance sheet offsetting disclosures in ASU 2011-11 to derivatives, repurchase agreements, and securities lending transactions to the extent that they are (1) offset in the financial statements or (2) subject to an enforceable master netting arrangement or similar agreement. The adoption of this guidance had no effect on the Company’s consolidated financial statements.

In February 2013, the FASB Issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires entities to present information about reclassification adjustments from accumulated other comprehensive income in their annual financial statements in a single note or on the face of the financial statements. The adoption of this guidance had no effect on the Company’s consolidated financial statements.

In February 2013, the FASB Issued ASU No. 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date . ASU 2013-04 provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for obligations within the scope of this ASU, which is effective January 1, 2014. Upon adoption, this guidance is not expected to impact our consolidated financial statements.

In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which among other things, require an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as denoted within the ASU. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Upon adoption, this guidance is not expected to impact our consolidated financial statements.

(continued)

F-16

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(1)

Summary of Significant Accounting Policies, Continued

Recent Regulatory Developments

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

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

(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):


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
*At June 30, 2013 (Unaudited):*
U.S. Government agency securities	$	7,442		11		(225	)		7,228
Municipal securities		6,084		—		(282	)		5,802
Mortgage-backed securities		26,691		321		(202	)		26,810
Asset-backed securities		1,907		38		—			1,945


	$	42,124		370		(709	)		41,785


*At December 31, 2012:*
U.S. Government agency securities		7,592		117		(7	)		7,702
Municipal securities		5,585		7		(34	)		5,558
Mortgage-backed securities		27,865		785		(4	)		28,646
Asset-backed securities		1,899		—		—			1,899


	$	42,941		909		(45	)		43,805

(continued)

F-17

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(2)

Securities Available for Sale, Continued


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
*At December 31, 2011:*
U.S. Government agency securities	$	1,010		2		—			1,012
Municipal securities		8,165		659		—			8,824
Mortgage-backed securities		29,752		383		(50	)		30,085


	$	38,927		1,044		(50	)		39,921

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


			Fair Value Measurements Using
	Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
*At June 30, 2013 (Unaudited):*
U.S. Government agency securities	$	7,228		—		7,228		—
Municipal securities		5,802		—		5,802		—
Mortgage-backed securities		26,810		—		26,810		—
Asset-backed securities		1,945		—		1,945		—


	$	41,785		—		41,785		—


*At December 31, 2012:*
U.S. Government agency securities		7,702		—		7,702		—
Municipal securities		5,558		—		5,558		—
Mortgage-backed securities		28,646		—		28,646		—
Asset-backed securities		1,899		—		—		1,899


	$	43,805		—		41,906		1,899


*At December 31, 2011:*
U.S. Government agency securities		1,012		—		1,012		—
Municipal securities		8,824		—		8,824		—
Mortgage-backed securities		30,085		—		30,085		—


	$	39,921		—		39,921		—

During the six months period ended June 30, 2013, securities of $1.9 million were transferred from Level 3 to Level 2 due to changes in the inputs used to value the securities. During the six months period ended June 30, 2012 and the years ended December 31, 2012 and 2011, no securities were transferred in or out of Level 1, Level 2 or Level 3.

(continued)

F-18

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(2)

Securities Available for Sale, Continued

There were no assets measured at fair value using Level 3 inputs on a recurring basis during the six months period ended June 30, 2012 and the year ended December 31, 2011. 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 year ended December 31, 2012. These instruments were valued using pricing models and discounted cash flow methodologies incorporating assumptions that, in management’s judgment, reflect the assumptions a marketplace participant would use (in thousands):


	Six Months Ended June 30,			Year Ended December 31,
	2013			2012
	(Unaudited)

Balance, beginning of period	$	1,899			—
Total gains or (losses) - realized/unrealized:
Included in operations		—			—
Included in other comprehensive loss		—			—
Purchases		—			1,899
Transfer in to/out of Level 3		(1,899	)		—


Balance, end of period	$	—			1,899

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


	Amortized Cost		Fair Value
*At June 30, 2013 (Unaudited):*
Due five to ten years	$	6,080		5,831
Due ten to fifteen years		7,440		7,199
Mortgage-backed securities		26,691		26,810
Asset-backed securities		1,907		1,945


	$	42,124		41,785


*At December 31, 2012:*
Due five to ten years		6,122		6,152
Due ten to fifteen years		7,055		7,108
Mortgage-backed securities		27,865		28,646
Asset-backed securities		1,899		1,899


	$	42,941		43,805

(continued)

F-19

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(2)

Securities Available for Sale, Continued

There were no securities sold during the six months ended June 30, 2013 and the year ended December 31, 2011. The following summarizes sales of securities available for sale (in thousands):


	Six Months Ended June 30,		Year Ended December 31,
	2012		2012
	(Unaudited)

Proceeds received from sales	$	13,594	$	13,594


Gross gains	$	881		881
Gross losses		—		—


Net gain from sale of securities	$	881		881

At June 30, 2013, December 31, 2012 and 2011, securities with a fair value of $8,534,000, $8,451,000 and $6,629,000, respectively, were pledged as collateral for public deposits and for other borrowings with customers.

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


	Less Than Twelve Months
	Gross Unrealized Losses			Fair Value
*At June 30, 2013 (Unaudited):*
U.S. Government agency securities	$	(225	)		6,231
Municipal securities		(282	)		5,802
Mortgage-backed securities		(202	)		10,141


	$	(709	)		22,174


*At December 31, 2012:*
U.S. Government agency securities		(7	)		2,746
Municipal securities		(34	)		4,679
Mortgage-backed securities		(4	)		2,445


	$	(45	)		9,870

(continued)

F-20

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(2)

Securities Available for Sale, Continued

The unrealized losses at June 30, 2013 and December 31, 2012 on nineteen and eight securities were caused by market conditions. It is expected that the securities would not be settled at a price less than the par value of the investments. Because the decline in fair value is attributable to market conditions and not credit quality, and because the Company has the ability and intent to hold these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

(3)

Loans

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


	At June 30,			At December 31,
	2013			2012			2011
	(Unaudited)
Real estate mortgage loans:
Commercial	$	41,445			35,490			26,638
Residential and home equity		36,485			30,886			24,443
Construction		12,305			6,437			4,982


Total real estate mortgage loans		90,235			72,813			56,063

Commercial loans		23,990			19,794			20,204
Consumer and other loans		1,594			2,105			1,351


Total loans		115,819			94,712			77,618

Less:
Net deferred loan fees		(83	)		(69	)		(37	)
Allowance for loan losses		(1,534	)		(1,243	)		(903	)


Loans, net	$	114,202			93,400			76,678

(continued)

F-21

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(3)

Loans, Continued

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

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

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

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

(continued)

F-22

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(3)

Loans, Continued

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

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

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

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

(continued)

F-23

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(3)

Loans, Continued

Consumer 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
	Commercial		Residential and Home Equity			Construction			Commercial			Consumer and Other			Total
*Six Months Ended June 30, 2013 (Unaudited):*
Beginning balance	$	352		226			237			405			23			1,243
Provision (credit) for loan losses		197		257			(27	)		(102	)		(2	)		323
Net (charge-offs) recoveries		—		—			(47	)		15			—			(32	)


Ending balance	$	549		483			163			318			21			1,534


*Six Months Ended June 30, 2012 (Unaudited):*
Beginning balance		311		285			66			225			16			903
Provision for loan losses		64		43			120			7			6			240
Net (charge-offs) recoveries		—		—			—			18			—			18


Ending balance	$	375		328			186			250			22			1,161


*Year Ended December 31, 2012:*
Beginning balance		311		285			66			225			16			903
Provision for loan losses		41		(59	)		336			147			8			473
Net (charge-offs) recoveries		—		—			(165	)		33			(1	)		(133	)


Ending balance	$	352		226			237			405			23			1,243


*Year Ended December 31, 2011:*
Beginning balance		280		209			101			141			11			742
Provision for loan losses		31		76			(35	)		65			6			143
Net (charge-offs) recoveries		—		—			—			19			(1	)		18


Ending balance	$	311		285			66			225			16			903

(continued)

F-24

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(3)

Loans, Continued


	Real Estate Mortgage Loans
	Commercial		Residential and Home Equity		Construction		Commercial		Consumer and Other		Total
*At June 30, 2013 (Unaudited):*
Individually evaluated for impairment:
Recorded investment	$	—		—		—		124		—		124

Balance in allowance for loan losses	$	—		—		—		—		—		—

Collectively evaluated for impairment:
Recorded investment	$	41,445		36,485		12,305		23,866		1,594		115,695

Balance in allowance for loan losses	$	549		483		163		318		21		1,534


*Year Ended December 31, 2012:*
Individually evaluated for impairment:
Recorded investment	$	—		—		101		131		—		232

Balance in allowance for loan losses	$	—		—		165		—		—		165

Collectively evaluated for impairment:
Recorded investment	$	35,490		30,886		6,336		19,663		2,105		94,480

Balance in allowance for loan losses	$	352		326		72		405		23		1,078


*Year Ended December 31, 2011:*
Individually evaluated for impairment:
Recorded investment	$	—		—		—		—		—		—

Balance in allowance for loan losses	$	—		—		—		—		—		—

Collectively evaluated for impairment:
Recorded investment	$	26,638		24,443		4,982		20,204		1,351		77,618

Balance in allowance for loan losses	$	311		285		66		225		16		903

(continued)

F-25

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(3)

Loans, Continued

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


	Real Estate Mortgage Loans
	Commercial		Residential and Home Equity		Construction		Commercial		Consumer and Other		Total
*Credit Risk Profile by Internally Assigned Grade:*
*At June 30, 2013 (Unaudited):*
Grade:
Pass	$	39,619		35,029		12,305		21,022		1,553		109,528
Special mention		1,826		1,447		—		2,795		41		6,109
Substandard		—		9		—		173		—		182
Doubtful		—		—		—		—		—		—
Loss		—		—		—		—		—		—


Total	$	41,445		36,485		12,305		23,990		1,594		115,819


*At December 31, 2012:*
Grade:
Pass		35,490		30,333		5,984		19,581		2,105		93,493
Special mention		—		553		352		183		—		1,088
Substandard		—		—		101		30		—		131
Doubtful		—		—		—		—		—		—
Loss		—		—		—		—		—		—


Total	$	35,490		30,886		6,437		19,794		2,105		94,712

*At December 31, 2011:*
Grade:
Pass		26,638		23,865		4,982		19,886		1,351		76,722
Special mention		—		578		—		189		—		767
Substandard		—		—		—		129		—		129
Doubtful		—		—		—		—		—		—
Loss		—		—		—		—		—		—


Total	$	26,638		24,443		4,982		20,204		1,351		77,618

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.

(continued)

F-26

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(3)

Loans, Continued

The Company analyzes loans individually by classifying the loans as to credit risk. Loans classified as substandard or special mention are reviewed quarterly by the Company for further deterioration or improvement to determine if they are appropriately classified and whether there is any impairment. All loans are graded upon initial issuance. Further construction and nonowner occupied commercial real estate loans are reviewed at least annually and commercial relationships in excess of $500,000. In addition, during the renewal process of any loan, as well as if a loan becomes past due, the Company will determine the appropriate loan grade.

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

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

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

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

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

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

(continued)

F-27

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(3)

Loans, Continued

At June 30, 2013 and December 31, 2011, there were no loans over thirty days past due, no loans past due ninety days or more but still accruing and no loans on nonaccrual. Age analysis of past-due loans at December 31, 2012 is as follows (in thousands):


	Accruing Loans
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current		Nonaccrual Loans		Total Loans
Real estate mortgage:
Commercial	$	—		101		—		101		35,389		101		35,490
Residential and home equity		—		—		—		—		30,886		—		30,886
Construction		—		—		—		—		6,437		—		6,437
Commercial		—		—		—		—		19,794		—		19,794
Consumer/other		—		—		—		—		2,105		—		2,105


Total	$	—		101		—		101		94,611		101		94,712

During the year ended December 31, 2011, the Company had no impaired loans. The following summarizes the amount of impaired loans (in thousands):


	With No Related Allowance Recorded				With an Allowance Recorded						Total
	Recorded Investment		Unpaid Contractual Principal Balance		Recorded Investment		Unpaid Contractual Principal Balance		Related Allowance		Recorded Investment		Unpaid Contractual Principal Balance		Related Allowance
*At June 30, 2013 (Unaudited):*
Commercial loans	$	124		124		—		—		—		124		124		—


*At December 31, 2012:*
Commercial real estate loans		101		266		—		—		—		101		266		—
Commercial loans		131		—		—		—		—		131		—		—


	$	232		266		—		—		—		232		266		—

(continued)

F-28

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(3)

Loans, Continued

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


	Average Recorded Investment		Interest Income Recognized		Interest Income Received
*Six Months Ended June 30, 2013 (Unaudited):*
Commercial loans	$	129		2		2


*Six Months Ended June 30, 2012 (Unaudited):*
Construction	$	315		4		4


Year Ended December 31, 2012:
Real estate mortgage loans-Commercial		78		—		—
Commercial		—		—		—


Total	$	78		—		—

There were no loans measured at fair value on a nonrecurring basis at June 30, 2013 and December 31, 2011. Impaired collateral-dependent loans measured at fair value on a nonrecurring basis by loan class at December 31, 2012 are as follows (in thousands):


	At Year End										Losses Recorded During the Year
	Fair Value		Level 1		Level 2		Level 3		Total Losses		Losses Recorded During the Year

Commercial real estate loans	$	101		—		—		101		165		165

(continued)

F-29

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(3)

Loans, Continued

No loans were determined to be trouble debt restructurings (“TDR”) entered into during the six months ended June 30, 2013 and during the year ended December 31, 2012.

The following is a summary of loans determined to be TDR’s entered into during the year ended December 31, 2012:


	Year Ended December 31, 2012
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
*Troubled Debt Restructurings:*
Commercial-Modified to interest only for three months		1	$	131		131

The allowance for loan losses on all loans that have been restructured and are considered TDR’s is included in the Bank’s specific reserve. The specific reserve is determined on a loan by loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral if the loan is collateral-dependent. TDR’s that have subsequently defaulted are considered collateral-dependent. There were no TDR’s that subsequently defaulted during the six months ended June 30, 2013 or the year ended December 31, 2012, which were restructured during the same period.

The Company grants the majority of its loans to borrowers throughout Leon County, Florida. Although the Company has a diversified loan portfolio, a significant portion of its borrowers’ ability to honor their contracts is dependent upon the economy of this area. The Company does not have any significant concentrations to any one industry or customer.

(continued)

F-30

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(4)

Premises and Equipment

A summary of premises and equipment follows (in thousands):


	At June 30,			At December 31,
	2013			2012			2011
	(Unaudited)

Land	$	400			400			400
Building		2,070			2,021			1,923
Leasehold improvements		362			362			369
Furniture, fixtures and equipment		521			512			261
Computer and software		1,200			1,164			672


Total, at cost		4,553			4,459			3,625

Less accumulated depreciation and amortization		(1,190	)		(1,022	)		(632	)


Premises and equipment, net	$	3,363			3,437			2,993

The Company leases certain office facilities under operating leases which expire in 2013 and 2017. These leases require monthly lease payments and common area maintenance charges and have options to renew. These leases contain escalation clauses during the term of the leases. Rent expense under these operating leases during the six months ended June 30, 2013 and 2012 and the years ended December 31, 2012 and 2011 was $64,000, $56,000, $125,000 and $123,000, respectively. Future minimum rental commitments under these noncancelable leases are as follows (in thousands):


Year Ending June 30,	Amount		Year Ending December 31,		Amount
	(Unaudited)

2014	$	85		2013	$	109
2015		85		2014		85
2016		85		2015		85
2017		43		2016		85
2018		—		2017		43


	$	298			$	407

(continued)

F-31

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(5)

Deposits

The aggregate amount of time deposits with a minimum denomination of $100,000 was approximately $11.4 million, $13.0 million and $18.2 million at June 30, 2013, December 31, 2012 and 2011, respectively.

A schedule of maturities of time deposits follows (in thousands):


Year Ending June 30,	At June 30,		Year Ending December 31,		At December 31,
Year Ending June 30,	2013		Year Ending December 31,		2012
	(Unaudited)

2014	$	9,843		2013	$	13,167
2015		4,560		2014		1,737
2016		72		2015		985
2017		868		2016		387
2018		—		2017		240


	$	15,343			$	16,516

(6)

Federal Home Loan Bank Advances

There were no Federal Home Loan Bank of Atlanta (“FHLB”) advances outstanding at June 30, 2013 and December 31, 2012. The maturities and interest rates of the advances from the FHLB at December 31, 2011 consisted of the following ($ in thousands):


Maturity Year Ending December 31,	Interest Rate			Amount

2012		0.41	%	$	1,000
2012		0.33	%		1,000


				$	2,000

FHLB advances were collateralized by a blanket lien on qualifying residential real estate, commercial real estate, home equity lines of credit and multi-family loans. Under this blanket lien, the Company may borrow up to $22.7 million and $16.8 million as of June 30, 2013 and December 31, 2012, respectively.

(continued)

F-32

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(7)

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. At June 30, 2013, December 31, 2012 and 2011, the outstanding balance of such borrowings totaled $5,789,000, $5,760,000 and $6,127,000, respectively, and the Company pledged securities with a carrying value of $5,918,000, $5,864,000 and $6,197,000, respectively, as collateral for this agreement.

The following summarizes our borrowings for the respective time periods (dollars in thousands):


	At June 30,		At December 31,
	2013		2012		2011
	(Unaudited)

Balance outstanding at period-end	$	5,789		5,760		6,127
Average balance outstanding during the period		5,772		6,397		7,365
Average interest rate paid		1.00		0.95		0.77
Maximum amount outstanding at any month-endduring period		5,789		7,148		9,111

(8)

Income Taxes

The components of the income taxes are as follows (in thousands):


	Six Months Ended June 30,					Year Ended December 31,
	2013			2012		2012		2011
	(Unaudited)
Current:
Federal	$	388			297		341		—
State		63			65		71		—


Total current		451			362		412		—


Deferred:
Federal		(125	)		44		154		319
State		(18	)		6		23		54


Total deferred		(143	)		50		177		373


Total income taxes	$	308			412		589		373

(continued)

F-33

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(8)

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):


	Six Months Ended June 30,												Year Ended December 31,
	2013						2012						2012						2011
	Amount			% of Pretax Earnings			Amount			% of Pretax Earnings			Amount			% of Pretax Earnings			Amount		% of Pretax Earnings

Income taxes at statutory rate	$	296			34.0	%	$	379			34.0	%	$	546			34.0	%	$	336		34.0	%
Increase (decrease) resulting from:
State taxes, net of Federal tax benefit		30			3.4			47			4.1			49			3.0			36		3.7
Stock-based compensation		—			—			—			—			1			0.1			—		—
Tax-exempt income		(13	)		(1.5	)		(7	)		(0.6	)		(14	)		(0.9	)		1		0.2
Other nondeductible expenses		(5	)		(.6	)		(7	)		(0.6	)		7			.5			—		—


	$	308			35.3	%	$	412			36.9	%	$	589			36.7	%	$	373		37.9	%

Tax effects of temporary differences that give rise to the deferred tax assets and liabilities are as follows (in thousands):


	At June 30,			At December 31,
	2013			2012			2011
	(Unaudited)
Deferred tax assets:
Net operating loss carryforwards	$	—			—			145
Allowance for loan losses		446			324			211
Organizational and start-up costs		137			144			158
Stock-based compensation		18			17			16
Unrealized loss on securities available for sale		128			—			—
Other		60			47			14


Deferred tax assets		789			532			544


Deferred tax liabilities:
Accrual to cash conversion		(153	)		(164	)		(134	)
Deferred loan costs		(77	)		(76	)		(58	)
Premises and equipment		(221	)		(225	)		(108	)
Unrealized gains on securities available for sale		—			(319	)		(367	)


Deferred tax liabilities		(451	)		(784	)		(667	)


Net deferred tax asset (liability)	$	338			(252	)		(123	)

(continued)

F-34

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(8)

Income Taxes, Continued

The Company files consolidated income tax returns in the U.S. federal jurisdiction, and the State of Florida. The Company is no longer subject to U.S. federal, or state and local income tax examinations by taxing authorities for years before 2010.

(9)

Off-Balance-Sheet Financial Instruments

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

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

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

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These letters of credit are primarily issued to support third-party borrowing arrangements and generally have expiration dates within one year of issuance. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Bank may hold collateral supporting those commitments, and at June 30, 2013 and December 31, 2012 such collateral amounted to $1,453,000 and $1,287,000, respectively.

(continued)

F-35

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(9)

Off-Balance-Sheet Financial Instruments, Continued

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 are as follows (in thousands):


	At June 30,		At December 31,
	2013		2012
	(Unaudited)

Commitments to extend credit	$	4,030		10,556


Construction loans in process	$	4,077		4,110


Unused lines of credit	$	25,773		20,006


Standby letters of credit	$	1,680		1,432

(10)

Stock Option Plan

The 2007 Stock Option Plan provides for certain key employees and directors of the Company to have the option to purchase shares of the Company’s common stock. Under this Plan, the total number of shares which may be issued is 152,905. All options granted will have four to ten-year terms and vest over periods up to five years. As of June 30, 2012 and December 31, 2012, there were 16,905 shares available for grant.

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


	Six Months Ended June 30,			Year Ended December 31,
	2013			2012			2011
	(Unaudited)

Weighted-average risk-free interest rate		1.13	%		1.30	%		2.62	%
Expected dividend yield		—			—			—
Expected stock volatility		11.37	%		11.37	%		14.28	%
Expected life in years		6.5			6.5			4-5.5
Per share fair value of options issued during the year	$	1.22			1.55			1.36-1.72

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

(continued)

F-36

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(10)

Stock Option Plan, Continued

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


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

Outstanding at December 31, 2010		128,250		$	10.00
Options granted		13,000			10.00
Options forfeited		(5,000	)		10.00


Outstanding at December 31, 2011		136,250			10.00
Options granted		2,500			10.00
Options forfeited		(2,750	)		10.00


Outstanding at December 31, 2012		136,000			10.00
Options granted (unaudited)		2,500			10.59
Options forfeited (unaudited)		(2,500	)		10.00


Outstanding at June 30, 2013 (unaudited)		136,000		$	10.01		5.7 years


Exercisable at June 30, 2013 (unaudited)		104,900		$	10.00		5.5 years	$	262,250

At June 30, 2013 and December 31, 2012, there was $14,600 and $12,000 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 seventeen months and twenty months, respectively. The total fair value of shares vesting and recognized as compensation expense was $1,000, $4,000, $7,000 and $19,000 in the six months ended June 30, 2013 and 2012 and the years ended December 31, 2012 and 2011, respectively. The associated income tax benefit recognized was $0, $1,000, $2,000 and $5,000 for the six months ended June 30, 2013 and 2012 and for the years ended December 31, 2012 and 2011, respectively.

(11)

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. For the six months ended June 30, 2013 and the years ended December 31, 2012 and 2011, there were no contributions made to the plan by the Company.

(continued)

F-37

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(12)

Related Party Transactions and Economic Dependence

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):


	Six Months Ended June 30,						Year Ended December 31,
	2013			2012			2012			2011
	(Unaudited)
Loans:
Beginning balance	$	3,558			3,413			3,413			2,175
Originated during the year		707			263			465			2,111
Principal repayments		(414	)		(514	)		(320	)		(873	)


Ending balance	$	3,851			3,162			3,558			3,413


Deposits at year end	$	11,985			12,310			13,066			24,348

The Company leases an office facility from a related party. Rent expense under the operating lease during the six month period ended June 30, 2013 and for the years ended December 31, 2012 and 2011 were $64,000, $125,000 and $123,000, respectively. In addition, the Bank has contracted with a related party to perform loan reviews of the Bank’s loan portfolio.

(13)

Fair Value of Financial Instruments

The approximate carrying amounts and estimated fair values of the Company’s financial instruments are as follows (in thousands):


		At June 30,				At December 31,
		2013				2012				2011
	Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	1	$	22,199		22,199		26,498		26,498		19,031		19,031
Securities available for sale	2 and 3		41,785		41,785		43,805		43,805		39,921		39,921
Loans, net	3		114,202		115,461		93,400		93,927		76,678		77,154
Federal Home Loan Bank stock	3		203		203		209		209		272		272
Accrued interest receivable	3		475		475		422		422		358		358

Financial liabilities:
Deposits	3		161,744		161,834		146,729		146,826		115,573		115,710
Federal Home Loan Bank advances	3		—		—		—		—		2,000		1,997
Other borrowings	3		5,789		5,789		5,760		5,760		6,127		6,127
Off-balance-sheet financial instruments	3		—		—		—		—		—		—

(continued)

F-38

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(14)

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.

(15)

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 June 30, 2013 and December 31, 2012, that the Bank meets all capital adequacy requirements to which it is subject.

(continued)

F-39

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(15)

Regulatory Matters, Continued

As of June 30, 2013 and December 31, 2012, the most recent notification from the regulatory authorities categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as adequately capitalized the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage percents as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category. The Bank’s actual capital amounts and percents are also presented in the table ($ in thousands):


	Actual					For Capital Adequacy Purposes					For Well Capitalized Purposes
	Amount		Percentage			Amount		Percentage			Amount		Percentage
*As of June 30, 2013 (Unaudited):*
Tier I Capital to Average Assets	$	16,019		8.97	%	$	7,143		4.00	%	$	8,929		5.00	%
Tier I Capital to Risk-Weighted Assets		16,019		12.91			7,143		4.00			10,715		6.00
Total Capital to Risk-Weighted Assets		17,553		14.14			9,931		8.00			12,414		10.00

*As of December 31, 2012:*
Tier I Capital to Average Assets		15,437		9.67			6,387		4.00			7,983		5.00
Tier I Capital to Risk-Weighted Assets		15,437		14.78			4,177		4.00			6,265		6.00
Total Capital to Risk-Weighted Assets		16,680		15.97			8,354		8.00			10,442		10.00

*As of December 31, 2011:*
Tier I Capital to Average Assets		14,390		10.61			5,424		4.00			6,780		5.00
Tier I Capital to Risk-Weighted Assets		14,390		16.04			3,589		4.00			5,383		6.00
Total Capital to Risk-Weighted Assets		15,293		17.05			7,177		8.00			8,972		10.00

(16)

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, 2012, there is no pending or threatened litigation of which management is aware.

(continued)

F-40

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(17)

Earnings Per Share

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


	2013						2012
	Earnings		Weighted- Average Shares		Per Share Amount		Earnings		Weighted- Average Shares		Per Share Amount
*Six Months Ended June 30 (Unaudited):*
Basic EPS:
Net earnings	$	563		1,497,004	$	0.38	$	703		1,496,106	$	0.47
Effect of dilutive securities-Incremental shares from assumed conversion of options (antidilutive in 2012)				10,566						—

Diluted EPS:
Net earnings	$	563		1,507,570	$	0.37	$	703		1,496,106	$	0.47


	2012						2011
	Earnings		Weighted- Average Shares		Per Share Amount		Earnings		Weighted- Average Shares		Per Share Amount
*Year Ended December 31:*
Basic EPS:
Net earnings	$	1,018		1,496,106	$	0.68	$	616		1,496,106	$	0.41
Effect of dilutive securities-Incremental shares from assumed conversion of options (antidilutive in 2012 and 2011)				—						—

Diluted EPS:
Net earnings	$	1,018		1,496,106	$	0.68	$	616		1,496,106	$	0.41

(continued)

F-41

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(18)

Parent Company Only Financial Information

The Holding Company’s unconsolidated financial information follows:

Condensed Balance Sheets

(In thousands)


	At June 30,		At December 31,
	2013		2012		2011
	(Unaudited)
Assets

Cash	$	9		20		56
Investment in subsidiary		15,805		15,982		15,016
Other assets		47		37		24


Total assets	$	15,861		16,039		15,096


Stockholders’ Equity

Stockholders’ equity		15,861		16,039		15,096


Total liabilities and stockholders’ equity	$	15,861		16,039		15,096

Condensed Statements of Operations

(In thousands)


	Six Months Ended June 30,						Year Ended December 31,
	2013			2012			2012			2011
	(Unaudited)

Revenues	$	—			—			—			—
Expenses		(25	)		(32	)		(36	)		(29	)
Income tax benefit		10			20			13			12


Loss before earnings of subsidiary		(15	)		(12	)		(23	)		(17	)

Net earnings of subsidiary		578			715			1,041			632


Net earnings	$	563			703			1,018			615

(continued)

F-42

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(18)

Parent Company Only Financial Information, Continued

Condensed Statements of Cash Flows

(In thousands)


	Six Months Ended June 30,						Year Ended December 31,
	2013			2012			2012			2011
	(Unaudited)
Cash flows from operating activities:
Net earnings	$	563			703			1,018			615
Adjustments to reconcile net earnings to net cash used in operating activities:
Equity in earnings of subsidiary		(578	)		(715	)		(1,041	)		(632	)
Stock issued as compensation		14			—			—			—
(Increase) decrease in other assets		(10	)		(20	)		(13	)		(16	)


Net cash used in operating activities		(11	)		(32	)		(36	)		(33	)


Net decrease in cash		(11	)		(32	)		(36	)		(33	)

Cash at beginning of the year		20			56			56			89


Cash at end of year	$	9			24			20			56


Supplemental disclosure of cash flow information-Noncash items:
Net change in accumulated other comprehensive income of subsidiary, net change in unrealized gain (loss) on securities available for sale, net of tax	$	(756	)		(201	)		(82	)		736


Stock-based compensation expense of subsidiary	$	1			4			7			19

F-43

You should rely only on the information contained in this Prospectus. We have not authorized anyone to provide you with information different from that contained in this Prospectus. We are offering to sell, and seeking offers to buy, securities only in jurisdictions where offers and sales are permitted. The information contained in this Prospectus is accurate only as of the date of this Prospectus, regardless of the time of delivery or of any sale of our common stock.

TABLE OF CONTENTS


Forward-Looking Statements			i
About this Prospectus			i
Where You Can Find More Information			ii
Implications of Being an Emerging Growth Company			ii
Prospectus Summary			1
The Offering			7
Summary of Selected Financial Data			9
Risk Factors			10
Dilution			19
Capitalization			19
Use of Proceeds			20
Description of Business			21
Management’s Discussion and Analysis of Financial Condition and Results of Operation			38
Management			57
Executive Officers			58
Directors			59
Executive Compensation			61
Director Compensation			63
Security Ownership of Certain Beneficial Owners and Management			65
Dividends			66
Market for our Common Equity and Related Shareholder Matters			66
Plan of Distribution and the Offering			67
Description of Securities			70
Indemnification			70
Supervision and Regulation			71
Legal Matters			82
Experts			82
Financial Statements			Appendix A

LOGO

PRIME MERIDIAN

HOLDING COMPANY

Up to 1,200,000 Shares

of Common Stock

$12.50 per Share

, 2013

PART II—INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses payable in connection with the sale and distribution of the securities being registered. All of such expenses will be paid by us. All of the amounts shown are estimates, except for the Securities and Exchange Commission registration fee.


Securities Exchange Commission registration fee	$	1,932
Accounting fees and expenses		20,000
Legal fees and expenses		85,000
Blue sky fees and expenses		15,000
Printing and shipping		25,000
Edgar Filing		20,000
Transfer agent and registrar expenses		7,500
Miscellaneous		125,568


Total		300,000

ITEM 14.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under Florida law, a corporation may indemnify its directors and officers against liability if the director or officer acted in good faith and with a reasonable belief that his actions were in the best interests of the corporation, or at least not adverse to the corporation’s best interests, and, in a criminal proceeding, if the individual had no reasonable cause to believe that the conduct in question was unlawful. Under Florida law, a corporation may not indemnify an officer or director against liability in connection with a claim by or in the right of the corporation in which such officer or director was adjudged liable to the corporation or in connection with any other proceeding in which the officer or director was adjudged liable for receiving an improper personal benefit. However, a corporation may indemnify against the reasonable expenses associated with such proceeding. A corporation may not indemnify against breaches of the duty of loyalty. Florida law provides for mandatory indemnification against all reasonable expenses incurred in the successful defense of any claim made or threatened, regardless of whether such claim was by or in the right of the corporation, unless limited by the corporation’s Articles of Incorporation. A court may order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, regardless of whether the director or officer met the good faith and reasonable belief standards of conduct set out in the statute. Unless otherwise stated in the Articles of Incorporation, officers of a corporation are also entitled to the benefit of the above statutory provisions.

Consistent with Florida law, both the Company’s and the Bank’s Bylaws provide for the indemnification of our directors or officers to the fullest extent permitted by applicable law.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to our directors and officers, or to persons controlling us, pursuant to our Bylaws or Florida law, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

ITEM 15.

RECENT SALES OF UNREGISTERED SECURITIES

In 2010, the Company sold 214,577 shares of common stock upon the exercise of outstanding stock purchase warrants. The aggregate proceeds from these sales were $2.02 million. The shares were issued in accordance with the contractual terms of the warrants and as part of a private placement pursuant to Section 4(2) of the Securities Act of 1933. The Company concluded such exemption was available due to the lack of any public solicitation and the familiarity of members of the Company’s Board of Directors with the purchasers.

II-1

ITEM 16.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following exhibits are filed with the Securities and Exchange Commission and are incorporated by reference into this Form S-1.


Exhibit Number		Description of Exhibit

3.1		Articles of Incorporation

3.2		Bylaws

4.1		Specimen Common Stock Certificate

4.2		2010 Articles of Share Exchange

5.1		Opinion of Adams and Reese LLP

10.1		2007 Stock Option Plan (“2007 Plan”)

10.2		Form of Non-Qualified Stock Option Agreement Under 2007 Plan

10.3		Form of Incentive Stock Option Agreement Under 2007 Plan

10.4		2012 Directors’ Compensation Plan (“2012 Plan”)

10.5		Lease for Branch Location on Timberlane Road

10.6		Agreement for Loan Review Services with Carr, Riggs & Ingram, LLC

21.1		Subsidiaries of the Registrant

23.1		Consent of Adams and Reese LLP (contained in Exhibit 5.1)

23.2		Consent of Hacker, Johnson & Smith, P.A.

99.9		Stock Order Form

ITEM 17.

UNDERTAKINGS

(a) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of Prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of Prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.

(b) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

To include any Prospectus required by section 10(a)(3) of the Securities Act of 1933;

II-2

ii.

To reflect in the Prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of Prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective Registration Statement.

iii.

To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement;

That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:

If the registrant is relying on Rule 430B (Section 230.430B of the Act):

Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or

ii.

If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this Registration Statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

II-3

ii.

Any free writing Prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

iii.

The portion of any other free writing Prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

iv.

Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

II-4

SIGNATURES

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Sammie D. Dixon, Jr. and Kathleen C. Jones and each of them (with full power to each of them to act alone), his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement, including any Registration Statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Tallahassee, State of Florida on October 18, 2013.


PRIME MERIDIAN HOLDING COMPANY

By:		/s/ Sammie D. Dixon, Jr.
		Sammie D. Dixon, Jr.
		Chief Executive Officer, President, and Principal Executive Officer

By:		/s/ Kathleen C. Jones
		Kathleen C. Jones
		Chief Financial Officer, Executive Vice President, and Principal Financial Officer

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following person in the capacities indicated on October 18, 2013.


Name and Signature	Title	Date

/s/ William D. Crona
William D. Crona	Director	October 18, 2013

/s/ Sammie D. Dixon, Jr.	CEO, President, Principal Executive Officer, & Director
Sammie D. Dixon, Jr.	CEO, President, Principal Executive Officer, & Director	October 18, 2013


Steven L. Evans	Director	, 2013


R. Randy Guemple	Director	, 2013

/s/ Chris L. Jensen, Jr.
Chris L. Jensen, Jr.	Director	October 18, 2013

/s/ Kathleen C. Jones	CFO, EVP, Principal Financial Officer & Director
Kathleen C. Jones	CFO, EVP, Principal Financial Officer & Director	October 18, 2013

II-5



/s/ Robert H. Kirby
Robert H. Kirby	Director	October 18, 2013

/s/ Frank L. Langston
Frank L. Langston	Director	October 18, 2013

/s/ Todd A. Patterson, D.O.
Todd A. Patterson, D.O.	Director	October 18, 2013

/s/ L. Collins Proctor, Sr.
L. Collins Proctor, Sr.	Director	October 18, 2013

/s/ Garrison A. Rolle, M.D.
Garrison A. Rolle, M.D.	Director	October 18, 2013


Steven D. Smith	Director	, 2013

/s/ Marjorie R. Turnbull
Marjorie R. Turnbull	Director	October 18, 2013

/s/ Richard A. Weidner
Richard A. Weidner	Chairman	October 18, 2013

II-6

Exhibit 3.1

ARTICLES OF INCORPORATION

PRIME MERIDIAN HOLDING COMPANY

The undersigned, acting as Incorporator for the purpose of forming a corporation under and by virtue of the Laws of the State of Florida, adopts the following Articles of Incorporation.

ARTICLE I

The name of the corporation shall be Prime Meridian Holding Company (“Corporation”). Its initial place of business and mailing address shall be 1471 Timberlane Road, Tallahassee, Florida 32312.

ARTICLE II

The general nature of the business to be transacted by the Corporation shall be that of a bank holding company and any other businesses permitted under the laws of the United States of America and the State of Florida.

ARTICLE III

The total number of shares authorized to be issued by the Bank shall be 10,000,000. Such shares shall consist of 9,000,000 shares of common stock with $0.01 par value per share, and 1,000,000 shares of undesignated preferred stock.

ARTICLE IV

The term for which said Bank shall exist shall be perpetual, unless terminated pursuant to the laws of the State of Florida.

ARTICLE V

The number of directors shall not be fewer than five. A majority of the full board of directors or of the shareholders may, at any time during the year following the annual meeting of shareholders, increase the number of directors by not more than two directors, and appoint persons to fill resulting vacancies.

In witness of the foregoing, the undersigned Incorporator executed these Articles of Incorporation this 25 ^th day of May, 2010.

/s/ Richard Pearlman

Richard Pearlman, Incorporator

CERTIFICATE DESIGNATING

REGISTERED AGENT/REGISTERED OFFICE

Pursuant to the provisions of Section 607.0501, Florida Statutes, the undersigned corporation, organized under the Laws of the State of Florida, submits the following statement in designating the Registered Office/Registered Agent, in the State of Florida.

The name of the corporation is: PRIME MERIDIAN HOLDING COMPANY

The name and address of the registered agent and office is:

Igler & Dougherty, P.A.

2457 Care Drive

Tallahassee, Florida 32308

Having been named as Registered Agent and to accept service of process for the above stated corporation at the place designated in this certificate, I hereby accept the appointment as Registered Agent and agree to act in this capacity. I further agree to comply with the provisions of all statutes relating to the proper and complete performance of my duties, and I am familiar with and accept the obligations of my position as Registered Agent.


IGLER & DOUGHERTY, P.A.

By:		/s/ Richard Pearlman
		Richard Pearlman, Attorney

Date: May 25, 2010

Exhibit 3.2

BYLAWS

PRIME MERIDIAN HOLDING COMPANY

ARTICLE I

OFFICES

The home office of Prime Meridian Holding Company (“Corporation”) shall be located at such place as the Board of Directors may determine from time to time.

ARTICLE II

STOCKHOLDERS

Section 1 – ANNUAL MEETING. The Annual Meeting of the shareholders shall be held on such date as the Board of Directors shall determine, for the purpose of electing directors and for the transaction of such other business as may lawfully come before the meeting.

Section 2 – SPECIAL MEETINGS. Special Meetings of shareholders of the Corporation may be called by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption), the Chairman of the Board, the Chief Executive Officer or the President of the Corporation, or by shareholders holding at least 10% of the outstanding shares of the Corporation. Business transacted at any Special Meeting of shareholders shall be limited to the purposes stated in the notice thereof.

Section 3 – PLACE OF MEETING . All meetings of the shareholders shall be held at the home office of the Corporation or such other place within the State of Florida as shall be designated from time to time by the Board of Directors and stated in the notice of such meeting.

Section 4 – NOTICE OF MEETING. Written notice, signed by the Chief Executive Officer, President or Chairman of the Board, stating the place, day and hour of the meeting and in the case of a Special Meeting the purpose or purposes for which the meeting is called, shall be mailed not less than 10 nor more than 60 days before the date of the meeting to each shareholder of record entitled to vote at such meeting. Such notice shall be mailed to each shareholder at his address as it appears on the records of the Corporation. Any shareholder may waive notice of a meeting before, at or after the meeting.

Section 5 – VOTING LISTS. The officer or agent having charge of the stock transfer books for shares of the Corporation shall, at least five days before each meeting of shareholders, make a complete list of the shareholders entitled to vote at such meeting or any adjournment

thereof. The list shall be arranged in alphabetical order, with the address and the number of shares held by each shareholder. The list of shareholders shall be produced at any shareholders’ meeting at the request of any shareholder.

Section 6 – QUORUM. Except as otherwise provided in these Bylaws, or the Corporation’s Articles of Incorporation, a majority of the outstanding shares of the Corporation entitled to vote shall constitute a quorum at a meeting of shareholders. The shareholders present at a duly convened meeting may continue to transact business until adjournment thereof, notwithstanding the subsequent withdrawal of shareholders sufficient to leave less than a quorum.

Section 7 – VOTING OF SHARES. Each shareholder entitled to vote shall be entitled to one vote in person or by proxy for each share of voting stock recorded in his name on the books of the Corporation. Such right to vote shall be subject to the right of the Board of Directors to close the transfer books or to fix a record date for voting shareholders, as hereinafter provided.

Section 8 – PROXIES. At any meeting of shareholders, a shareholder may be represented by a proxy appointed by an instrument executed in writing by the shareholder, or by his duly authorized attorney-in-fact; but no proxy shall be valid after one year from its date, unless the instrument appointing the proxy provides for a longer period. Such instrument shall be filed with the Corporation before or at the time of the meeting. In the event that any such instrument shall designate two or more persons to act as proxies, a majority of such persons present at the meeting, or if only one be present, that one shall have all of the powers conferred by the instrument upon all persons so designated, unless the instrument shall otherwise provide.

Section 9 – RECORD DATE. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors shall fix in advance a date as the record date for any such determination of shareholders. Such date in any case shall be not more than 60 days and, in case of a meeting of shareholders, not fewer than 10 days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section, such determination shall apply equally to any adjournment.

Section 10 – INSPECTOR OF ELECTION. The Board of Directors may appoint any person(s) other than nominees for office, as inspector(s) of election to act at a meeting of shareholders or any adjournment thereof. The number of inspectors shall be either one or three. Any such appointment shall not be altered at the meeting except as hereinafter provided. If inspectors of election are not so appointed, the Chairman of the Board, the Chief Executive Officer, or the President may, or at the request of 10% of the votes represented at the meeting shall, make such appointment at the meeting. If appointed at the meeting, the majority of the votes present shall determine whether one or three inspector(s) are to be appointed. In case any person appointed as inspector fails to appear or fails or refuses to act, the vacancy may be filled by the Board of Directors in advance of the meeting, or at the meeting by the Chairman of the Board, the Chief Executive Officer or the President.

Page 2 of 12

Unless otherwise prescribed by law or regulation, the duties of such inspector(s) shall include: (i) determining the number of shares entitled to vote, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies; (ii) receiving votes, ballots, or consents; (iii) hearing and determining all challenges and questions arising in connection with the right to vote; (iv) counting and tabulating all votes, ballots or consents; (v) determining and certifying the results of balloting; and (vi) such other acts as may be proper or necessary in order to conduct the election or vote, with fairness to all shareholders.

Section 11 – NOMINATING COMMITTEE. The Board of Directors will serve as the nominating committee for the selection of candidates to be Board members. The nominating committee shall deliver written nominations to the Corporate Secretary at least 90 days prior to the date of the Annual Meeting. No nominations for director, except those made by the nominating committee, shall be voted upon at the Annual Meeting, unless other nominations are made by shareholders in writing and delivered to the Corporate Secretary of the Corporation at least 90 days prior to the date of the Annual Meeting. Ballots bearing the names of all persons nominated shall be provided for use at the Annual Meeting. If the nominating committee shall fail or refuse to act at least 90 days prior to the Annual Meeting, nominations for directors may be made at the Annual Meeting by the Board of Directors or any shareholder entitled to vote.

Section 12 – NEW BUSINESS. Any new business to be taken up at the Annual Meeting shall be stated in writing and filed with the Corporation at least 30 days before the date of the Annual Meeting, and all business so stated, proposed, and filed shall be considered at the Annual Meeting; but no other proposal shall be acted upon at the Annual Meeting. Any shareholder may make any other proposal at the Annual Meeting and the same may be discussed and considered, but unless stated in writing and filed with the Corporation at least 30 business days before the meeting, such proposal shall not be acted upon except at an adjourned, special, or future Annual Meeting of the shareholders, taking place at least 30 days or more thereafter.

Section 13 – ACTION WITHOUT A MEETING. Any action which is required or permitted to be taken by the shareholders may be taken without a meeting if consent in writing, setting forth the action to be taken, and signed by such shareholders pursuant to Section 607.0704, Florida Statutes . Any such written consent shall be filed in the minutes of the proceedings of the shareholders of the Corporation.

ARTICLE III

BOARD OF DIRECTORS

Section 1 – GENERAL POWERS. The business and affairs of the Corporation shall be conducted under the direction of its Board of Directors. In addition to the powers and authority expressly conferred upon them by Florida law, the Articles of Incorporation of the Corporation or these Bylaws, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation. The Board of Directors shall elect annually from among its members a Chairman of the Board. The Chairman shall preside at meetings of the Board of Directors and meetings of shareholders.

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Section 2 – NUMBER OF DIRECTORS. The Board of Directors of the Corporation shall be comprised of not less than five (5) nor more than twenty-five (25) directors and shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the full Board as set forth herein.

Section 3 – QUALIFICATIONS. Unless otherwise approved by the Board, no person shall be eligible for election or shall serve as a director or officer of the Corporation who has been adjudicated a bankrupt or convicted of a criminal offense involving dishonesty or a breach of trust. A director shall automatically cease to be a director when he is adjudicated a bankrupt or is convicted of a criminal offense involving dishonesty or a breach of trust, but no action of the Board of Directors shall be invalidated because of the participation of any such director in such action.

Section 4 – REMOVAL OF DIRECTORS. Directors may be removed:

(a) for any reason at a meeting of shareholders, noticed and called expressly for that purpose, by a vote of the holders of at least a majority of the shares then entitled to vote at an election of directors; or

(b) by a majority vote of “disinterested directors,” a director may be removed from the Board for “cause.” For purposes of this Section, a disinterested director is defined to be a director who is not the subject of the removal action and “cause” shall mean a director’s:

(i)

act of willful misconduct, self dealing, malfeasance, gross negligence, personal dishonesty, breach of fiduciary duty including personal profit, intentional failure to perform stated duties, or willful violation of any law, rule, or regulation (other than traffic violations or similar offenses);

(ii)

conduct which could negatively reflect on the Corporation in its market area or in the banking or regulatory communities;

(iii)

act or failure to act which is inconsistent with an oral or written commitment made to the Board and which jeopardizes the Corporation’s financial condition, business opportunities or reputation in its market area or in the banking and regulatory communities; or

(iv)

failure to telephonically or personally attend any three consecutive Board meetings, failure to telephonically or personally attend any two consecutive meetings of any Board committee on which that director serves, or failure to personally attend two-thirds of the Board meetings in a calendar year.

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Section 5 – DIRECTOR’S OATH. Each director, at the request of the Corporation, shall take an oath that he or she will diligently and honestly administer the affairs of the Corporation.

Section 6 – ANNUAL MEETING. The Board of Directors shall hold its Annual Meeting immediately following the Annual Meeting of shareholders, for the purpose of the election of officers and the transaction of such other business as may come before the meeting; and, if a majority of the directors be present at such place and time, no other notice of such meeting shall be required to be given to the directors. The place and time of such meeting may also be changed and fixed by written consent of all of the directors.

Section 7 – REGULAR MEETINGS. Regular Meetings of the Board of Directors shall be held, without notice at the home office of the Corporation or such other places within the State of Florida, and at such times, as shall be determined, from time to time, by the Board of Directors.

Section 8 – SPECIAL MEETINGS. Special Meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, the Chief Executive Officer, the President, or any three directors. The person or persons authorized to call Special Meetings of the Board of Directors may reasonably fix the time and place for holding any Special Meetings of the Board of Directors called by them.

Section 9 – NOTICE. Notice of any Special Meeting shall be given at least three days prior thereto by telephone or by written notice delivered personally or by telefax, telegram, mailgram or confirmed e-mail to each director at his home or business address. If notice be given by telegram, mailgram or confirmed e-mail, such notice shall be deemed to be delivered when the telegram, mailgram or confirmed e-mail is delivered to the telegraph company or transmitted, as the case may be. Any director may give a waiver of notice of any such meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened.

Section 10 – QUORUM. A majority of the number of directors fixed by Section 2 of this Article III shall constitute a quorum for the transaction of business of any meeting of the Board of Directors, but a smaller number may adjourn a meeting, from time to time, without further notice until a quorum is secured.

Section 11 – MANNER OF ACTING. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless a greater number is required by law or these Bylaws.

Section 12 – VACANCIES ON BOARD. In the event of any vacancy on the Board of Directors, including any vacancy created by a failure to qualify or by any increase in the number of directors authorized, the Board of Directors may, but shall not be required to, fill such vacancy by the affirmative vote of a majority of the remaining directors.

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Section 13 – PRESENCE AT MEETINGS. Members of the Board of Directors, or members of any committee established in accordance with Article V herein, shall be deemed present in person at a meeting of such Board or committee if a conference telephone or similar communication equipment call in which all persons participating in the meeting can hear one another is used.

Section 14 – ACTION WITHOUT A MEETING. Any action of the Board of Directors or of any committee thereof, which is required or permitted to be taken at a meeting, may be taken without a meeting if consent in writing, setting forth the action to be taken, and signed by all members of the Board of Directors or of the committee, as the case may be, is filed in the minutes of the proceedings of the Board of Directors or such committee.

Section 15 – COMPENSATION. By resolution of the Board of Directors, the directors may be paid their expenses, if any, for attendance at each meeting of the Board of Directors (including any committee thereof), and may be paid a fixed sum for attendance at each meeting of the Board of Directors (including any committee thereof), or a stated salary for their service as Directors. No such payment, however, shall preclude any Director from serving the Corporation in any other proper capacity and receiving reasonable compensation therefor.

Section 16 – RESIGNATION. Any director may resign at any time by sending or delivering a written notice of such resignation to the Corporation, addressed to the Chairman of the Board, the Chief Executive Officer or the President. Unless otherwise specified, such resignation shall take effect upon receipt by the Chairman of the Board, Chief Executive Officer or the President.

ARTICLE IV

OFFICERS

Section 1 – POSITIONS. The officers of the Corporation shall be a Chief Executive Officer, a President, one or more Vice Presidents, and a Chief Financial Officer, each of whom shall be elected by the Board of Directors. The Board of Directors may also elect or authorize the appointment of such other officers as the business of the Corporation may require.

Section 2 – ELECTION AND TERM OF OFFICE. Except as otherwise provided in any written employment agreement which has been approved by the Board of Directors the officers of the Corporation shall be elected annually by the Board of Directors at its Annual Meeting. Each officer shall hold office for the term set forth in his written employment agreement, if any, or until his successor shall have been duly elected and shall have qualified, or until his death, or until he shall resign or shall have been removed in the manner hereinafter provided. Election or appointment of an officer, employee, or agent shall not of itself create contractual rights. The Board of Directors may authorize the Corporation to enter into an employment contract with any officer, but no such contract shall impair the right of the Board of Directors to remove any officer at any time in accordance with Section 3 of this Article.

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Section 3 – REMOVAL. Any officer elected or appointed by the Board of Directors may be removed by the Board of Directors whenever, in its judgment, the best interests of the Corporation will be served thereby, but such removal, other than for cause, shall be without prejudice to the contract rights, if any, of the person so removed.

Section 4 – VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term.

Section 5 – DUTIES OF OFFICERS. The officers of the Corporation shall have such authority and perform such duties as usually pertain to their respective offices and such additional powers and duties specifically conferred by law, by the Articles of Incorporation, by these Bylaws, or as may be assigned to them from time to time by the Board of Directors.

Section 6 – DELEGATION OF DUTIES. In the absence of or the disability of any officer of the Corporation, or for any other reason deemed sufficient by the Board of Directors, the Board may delegate the officer’s powers or duties to any other officer or to any other director.

Section 7 – REMUNERATION. The remuneration of the executive officers shall be fixed from time to time by the Board of Directors.

Section 8 – GENERAL POWERS. The officers are authorized to do and perform such acts as are necessary in the carrying on of the business of the Corporation, subject always to any limitations imposed by the Board of Directors.

ARTICLE V

COMMITTEES

Section 1 – CREATION OF COMMITTEES. The Board of Directors may by resolution designate an Executive Committee and one or more other committees, including, but not limited to, an Audit Committee, each to consist of three or more of the directors of the Corporation. Members of such committees shall serve until the next Annual Meeting of the Board of Directors or until a successor is appointed. Members may be removed from any such committee by the Board of Directors whenever, in its judgment, the best interests of the Corporation will be served thereby.

Section 2 – EXECUTIVE COMMITTEE. The Executive Committee, if such a committee shall be created, shall consult with and advise the officers of the Corporation in the management of its business, and shall have and may exercise to the extent provided in the resolution of the Board of Directors creating such Executive Committee such powers of the Board of Directors as can be lawfully delegated by the Board.

Section 3 – OTHER COMMITTEES. Other committees created by the Board of Directors shall have such functions and may exercise such powers of the Board of Directors as can be lawfully delegated and to the extent provided in the resolution or resolutions creating such committee or committees.

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Section 4 – MEETINGS OF COMMITTEES. Regular meetings of any committee may be held without notice of such time and at such place as shall from time to time be determined by the majority of the members of such committee. Special meetings of any such committee may be called by the Chairman of the Board, the Chief Executive Officer, the President, the Chairman of such committee, or a majority of the members of such committee upon two days notice to each of the other members of such committee, or on such shorter notice as may be agreed to in writing by each of the other members of such committee. Such notice shall be given either personally or in the manner provided in Section 9 of Article III of these Bylaws.

Section 5 – VACANCIES ON COMMITTEES. Vacancies on any committee shall be filled by the Board of Directors then in office at any regular or special meeting.

Section 6 – QUORUM OF COMMITTEES. At all meetings of any such committee, a majority of the committee’s members then serving shall constitute a quorum for the transaction of business.

Section 7 – MANNER OF ACTING OF COMMITTEES. The act of the majority of the members of any committee, present at a meeting at which there is a quorum, shall be the act of such committee.

Section 8 – MINUTES OF COMMITTEES. Each committee shall keep regular minutes of its proceedings and report the same to the Board of Directors at the Board’s next regularly scheduled meeting.

ARTICLE VI

STOCK CERTIFICATES

Section 1 – GENERAL. Every holder of capital stock in the Corporation shall be entitled to have a certificate, signed by any two of the President, the Chief Executive Officer, the Chairman of the Board, or the Corporate Secretary. Such certificate shall be dated and sealed with the seal of the Corporation, exhibit the holder’s name and certify the number of shares owned by him in the Corporation. The certificates shall be consecutively numbered and entered in the books of the Corporation as they are issued.

Section 2 – TRANSFER OF SHARES. Transfer of shares of the capital stock of the Corporation shall be made upon its stock transfer books. Authority for such transfer shall be given only by the holder of record of the shares or by his lawfully constituted representative. Such transfer shall be made only upon surrender of the certificate for shares. The person in whose name the certificate for shares of capital stock stands on the books of the Corporation shall be deemed by the Corporation to be the owner thereof for all purposes and the Corporation shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Florida.

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Section 3 – STOLEN OR LOST CERTIFICATES. The Board of Directors may authorize a new certificate or certificates to be issued in place of any certificate or certificates issued by the Corporation and which are alleged to have been stolen, lost, or destroyed, only upon the making of an affidavit of that fact by the person claiming the certificate of stock to be stolen, lost, or destroyed. When authorizing the issuance of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such stolen, lost, or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been stolen, lost, or destroyed.

ARTICLE VII

RESTRICTION ON SALE OF STOCK

In the event the Corporation should elect S Corporation status under the Internal Revenue Code, no transfer of shares of the Corporation’s stock to any person or entity which would destroy such status (a “Disqualifying Transfer”) shall be valid unless approved by the affirmative vote of at least a majority of the outstanding shares of stock of the Corporation. This restriction shall be noted conspicuously on the back of all of the certificates representing shares of stock in the Corporation.

ARTICLE VIII

CORPORATE SEAL

The seal of the Corporation shall be two concentric circles between which shall be the name of the Corporation. The year of incorporation and the name of this state shall, and an emblem may, appear in the center.

ARTICLE IX

FISCAL YEAR

The Corporation’s fiscal year end date shall be December 31.

ARTICLE X

INDEMNIFICATION

Section 1 – GENERAL. The Corporation shall indemnify its officers, directors, employees, but not its agents unless specifically approved in writing by the Board of Directors to

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the fullest extent authorized by Section 607.0850 of the Florida Business Corporation Act as it now exists or may hereafter be amended (the “FBCA”), but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment. This includes, but is not limited to, any person who was or is made a party or is threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative (“Proceeding”), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another Corporation or of a partnership, joint venture, trust, or other enterprise, including service with respect to employee benefit plans, whether the basis of such Proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee, or agent, reasonably incurred or suffered by such person in connection therewith. Such indemnification shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that the Corporation shall indemnify any such person seeking indemnity in connection with an action, suit or Proceeding (or part thereof) initiated by such person only if such action, suit or Proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. Such right shall be a contract right and shall include the right to be paid by the Corporation for all expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of such proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it should be determined ultimately that such director or officer is not entitled to be indemnified under this Article or otherwise.

Section 2 – FAILURE TO PAY CLAIM. If a claim under Section 1 of this Article is not paid in full by the Corporation within 90 days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the FBCA for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the FBCA, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its shareholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct.

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Section 3 – OTHER RIGHTS. The rights conferred on any individual by Sections 1 and 2 of this Article shall not be exclusive of any other right which such individual may have or hereafter acquire under any statute, provision of these Bylaws of the Corporation, agreement, vote of shareholders or disinterested directors, or otherwise.

Section 4 – INSURANCE. The Corporation may maintain insurance, at its expense, to protect itself and any such director, officer, employee, or agent of the Corporation or another Corporation, partnership, joint venture, trust, or other enterprise against any such expense, liability, or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability, or loss under the FBCA.

Section 5 – PERSONAL LIABILITY. A director of the Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for any statement, vote, decision, or failure to act regarding corporate management or policy except as provided in the FBCA or other applicable state or Federal law governing the Corporation. If the FBCA is amended after adoption of these Bylaws and such amendment further eliminates or limits the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the FBCA, as so amended.

Any repeal or modification of the foregoing paragraph by the shareholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.

ARTICLE XI

AMENDMENTS

These Bylaws may be altered, amended or repealed in a manner consistent with the laws of the State of Florida at any time by a majority of the full Board of Directors.

ARTICLE XII

SEVERABILITY

Each provision of these Bylaws shall be separable from any and all other provisions of these Bylaws, and if any such provision shall be adjudged to be invalid or unenforceable, such validity or unenforceability shall not affect any other provision hereof or the powers granted by the Articles of Incorporation or Bylaws.

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CERTIFICATION

These Bylaws have been adopted by the Board of Directors as the Bylaws of Prime Meridian Holding Company on this 15 ^th day of July, 2010, and shall be effective as of said date.

/s/ Sammie D. Dixon, Jr.

Sammie D. Dixon, Jr.

Chief Executive Officer

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Exhibit 4.1


NUMBER		SHARES
PMH

PRIME MERIDIAN HOLDING COMPANY

INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA

COMMON STOCK

THIS CERTIFIES THAT

is the owner of:

FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK OF PRIME MERIDIAN HOLDING COMPANY

$0.01 PAR VALUE PER SHARE

The shares represented by this Certificate are transferable only on the stock transfer books of Prime Meridian Holding Company by the holder of record hereof, or by his duly authorized attorney or legal representative, upon the surrender of this Certificate properly endorsed. This Certificate, and the shares represented hereby, are issued and shall be held subject to all the provisions of the Articles of Incorporation of Prime Meridian Holding Company, and any amendments thereto (copies of which are on file with the Corporate Secretary of Prime Meridian Holding Company and the Secretary of State of the State of Florida) to all of which provisions the holder by acceptance hereof assents. The shares evidenced by this Certificate are not of an insurable type and are not insured by the Federal Deposit Insurance Corporation.

IN WITNESS WHEREOF, Prime Meridian Holding Company has caused this Certificate to be executed by the signature of its duly authorized officers and has caused its corporate seal to be hereunto affixed.

Dated: ,

SEAL



Chairman of the Board				Chief Executive Officer

For value received hereby sell(s), assign(s) and transfer(s) unto:


Please insert social security number
or other identifying number of assignee:


(Please print or typewrite name and address including postal zip code of assignee)

shares represented by the within certificate, and do hereby irrevocably constitute(s) and appoint(s) as the Attorney to transfer the said shares on the books of Prime Meridian Holding Company with full power of substitution in the premises.

Date ,



				Signature

Notice: The signature to this assignment must correspond with the name as written upon the face of the Certificate in every particular without alteration or enlargement or any change whatever.

Exhibit 4.2

ARTICLES OF SHARE EXCHANGE

PRIME MERIDIAN HOLDING COMPANY,

the surviving Florida corporation,

with

PRIME MERIDIAN BANK,

a Florida-chartered Commercial Bank

Pursuant to Section 607.1105 of the Florida Business Corporation Act (the “Act”) Prime Meridian Holding Company (“PMHC”) and Prime Meridian Bank (the “Bank”) hereby adopt the following Articles of Share Exchange.

1. The Plan of Reorganization Share Exchange dated July 15, 2010 (“Plan”), between PMHC and the Bank, was approved and adopted by the shareholders of the Bank on September 16, 2010, and was adopted by the Board of Directors of PMHC on July 15, 2010, as Section 607.1103(7) of the Act did not require approval by the shareholders of PMHC.

2. Pursuant to the Plan, all issued and outstanding shares of Bank common stock will be exchanged for a like number of shares of PMHC common stock and the Bank will become a wholly-owned subsidiary of PMHC.

3. The Plan is attached hereto and incorporated herein by reference as if fully set forth herein.

4. Pursuant to Section 607.1105(1)(b) of the Act, the date and time of the effectiveness of the Articles of Share Exchange shall be as of the close of business on September 16, 2010.

IN WITNESS WHEREOF, the parties have set their hands this 16 ^th day of September, 2010.


PRIME MERIDIAN HOLDING COMPANY

By:		/s/ Sammie D. Dixon, Jr.
		Sammie D. Dixon, Jr.
		Chief Executive Officer


PRIME MERIDIAN BANK

By:		/s/ Sammie D. Dixon, Jr.
		Sammie D. Dixon, Jr.
		Chief Executive Officer

PLAN OF REORGANIZATION

AND

SHARE EXCHANGE

THIS PLAN OF REORGANIZATION AND SHARE EXCHANGE (“Plan”) is entered into this July 15, 2010 by and between Prime Meridian Holding Company, a Florida corporation (“PMHC”) and Prime Meridian Bank, a Florida state chartered commercial bank (“Bank”).

Distribution to Shareholders . On the Effective Date, as defined herein, all of the shareholders of the Bank not seeking appraisal rights in connection with the adoption of the Plan shall exchange all of the outstanding shares of stock of the Bank for a like number of shares of PMHC and the Bank shall become a wholly-owned subsidiary of PMHC.

Satisfaction of Rights of the Bank’s Shareholders . All shares of PMHC stock into which shares of Bank stock have been converted and become exchangeable for under this Plan shall be deemed to have been paid in full satisfaction of such converted shares.

Fractional Shares . Fractional shares of PMHC stock will not be issued to the holders of Bank stock.

Vote Required. The Plan must be approved by at least a majority of the outstanding shares of Bank stock entitled to vote at a meeting of shareholders called for such purpose.

Appraisers’ Shares. No share of Bank common stock as to which appraisal rights have been validly exercised and perfected and for which cash is payable pursuant to law (“Appraiser Shares”) shall be exchanged for PMHC common stock. In lieu thereof, the holders of Appraiser Shares shall be entitled to payment in accordance with the applicable provisions of Sections 607.1301–607.1333, Florida Statutes (“Appraisal Statute”), which is applicable to Florida corporations. If any holder of Appraiser Shares shall effectively withdraw or lose his or her appraisal rights under the Appraiser Statute, such Appraisal Shares shall then be exchanged for PMHC common stock in accordance with the provisions hereof. Appraiser Shares acquired by the Bank pursuant to payment shall be held by the Bank as authorized but unissued shares. Unless waived by PMHC’s Board of Directors, properly exercised Appraiser Shares shall not exceed more than 10% of the total number of Bank shares outstanding.

Supplemental Action. If at any time after the Effective Date, PMHC shall determine that any further conveyances, agreements, documents, instruments, and assurances or any further action is necessary or desirable to carry out the provisions of this Plan, the appropriate officers of PMHC or the Bank, as the case may be, whether past or remaining in office, shall execute and deliver any and all proper conveyances, agreements, documents, instruments, and assurances and perform all necessary or proper acts to carry out the provisions of this Plan.

Warrants and Options . At the Effective Date (as defined below), the Bank’s warrant plan, outstanding warrants, stock option plan and outstanding stock options shall be assumed by PMHC and shall be come PMHC’s warrant plan, outstanding warrants, stock option plan and outstanding stock options on the same terms.

Filing with the Florida Secretary of State and Effective Date . Upon the approval by the Federal Reserve Bank of Atlanta of the Notice to become a bank holding company filed by PMHC, PMHC and the Bank shall cause their respective Chief Executive Officer, President, or Vice President to execute Articles of Share Exchange in the form attached to this Plan and upon such execution, this Plan shall be deemed incorporated by reference into the Articles of Share Exchange as if fully set forth in such Articles and shall become an exhibit to such Articles of Share Exchange. Thereafter, the Articles of Share Exchange shall be delivered for filing to the Florida Secretary of State. In accordance with Section 607.1105 of the Florida Business Corporation Act (the “FBCA”), the Articles of Share Exchange shall specify the “Effective Date.”

Amendment and Waiver . Any of the terms or conditions of this Plan may be waived at any time by PMHC or the Bank by action taken by the Board of Directors of such party, or may be amended or modified in whole or in part at any time before the vote of the shareholders of the Bank by an agreement in writing executed in the same manner (but not necessarily by the same persons), or at any time thereafter so long as such change is in accordance with Section 607.1103 of the FBCA.

10.

Termination . At any time before the Effective Date (whether before or after filing the Articles of Share Exchange), this Plan may be terminated and the share exchange abandoned by mutual consent of the Boards of Directors of both corporations, notwithstanding favorable action by the shareholders of the Bank.

IN WITNESS WHEREOF, the parties hereto have duly executed this Plan of Reorganization and Share Exchange as of the date first above written.


PRIME MERIDIAN HOLDING COMPANY

By:		/s/ Sammie D. Dixon, Jr.
		Sammie D. Dixon, Jr.
		Chief Executive Officer


PRIME MERIDIAN BANK

By:		/s/ Sammie D. Dixon, Jr.
		Sammie D. Dixon, Jr.
		Chief Executive Officer

Exhibit 5.1

Adams and Reese LLP

Attorneys at Law

Alabama

Florida

Louisiana

Mississippi

South Carolina

Tennessee

Texas

Washington, DC

October 18, 2013

Board of Directors

Prime Meridian Holding Company

1897 Capital Circle NE, Second Floor

Tallahassee, Florida 32308

RE:

Prime Meridian Holding Company

Registration Statement on Form S-1 for 1,200,000 Shares of Common Stock

Ladies and Gentlemen:

We have acted as counsel for Prime Meridian Holding Company (“Company”) in connection with the proposed public offering of the shares of its $0.01 par value Common Stock covered by the above-described Registration Statement.

In connection therewith, we have examined the following:

•

The Articles of Incorporation of the Company, as filed with the Secretary of State of Florida;

•

The Bylaws of the Company;

•

A Resolution of the Company’s Board of Directors, certified as correct and complete by the Corporate Secretary of the Company, authorizing the sale of up to 1,200,000 shares of common stock;

•

Certificate of Active Status with respect to the Company, issued by the Secretary of State of the State of Florida; and

•

The Registration Statement, including all exhibits and amendments thereto.

2457 Care Drive | Tallahassee, Florida 32308 | 850.878.2411 | Fax 850.878.1230

Board of Directors

October 18, 2013

Page 2

Based upon such examination and upon examination of such other instruments and records as we have deemed necessary, we are of the opinion that:

•

The Company has been duly incorporated and is validly existing under the laws of the State of Florida.

•

The 1,200,000 shares of $0.01 par value common stock covered by the Registration Statement have been legally authorized and when issued in accordance with the terms described in said Registration Statement, will be validly issued, fully paid and non-assessable.

We consent to the filing of this opinion as an exhibit to the aforementioned Registration Statement on Form S-1 and to the reference to this firm under the caption “Legal Matters” in the prospectus. In giving this consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, or the rules and regulations of the Securities and Exchange Commission thereunder.

Sincerely,

ADAMS AND REESE LLP

/s/ Adams and Reese LLP

Exhibit 10.1

PRIME MERIDIAN BANK

2007 STOCK OPTION PLAN

1. PURPOSE

The purpose of the Prime Meridian Bank (“Bank”) 2007 Stock Option Plan (“Plan”) is to advance the interests of the Bank and its shareholders by providing key employees and the directors of the Bank, upon whose judgment, initiative and efforts the successful conduct of the business of the Bank largely depends, with an additional incentive to perform in a superior manner and to attract people of experience and ability.

2. DEFINITIONS

(a) “Board of Directors” or “Board” means the duly elected Board of Directors of the Bank.

(b) “Affiliate” means: (i) a member of a controlled group of corporations of which the Bank is a member; or (ii) an unincorporated trade or business which is under common control with the Bank as determined in accordance with Section 414(c) of the Internal Revenue Code 1986, as amended (“Code”) and the regulations issued thereunder. For purposes hereof, a “controlled group of corporations” shall mean a controlled group of corporations as defined in Section 1563(a) of the Code determined without regard to Sections 1563(a)(4) and (e)(3)(C).

(c) “Award” means an Award of Non-Statutory Stock Options or Incentive Stock Options granted under the provisions of the Plan.

(d) “Plan Year or Years” means a calendar year or years commencing on or after January 1, 2008.

(e) “Date of Grant” means the actual date on which an Award is granted by the Board.

(f) “Common Stock” means the common stock of the Bank, par value, $5.00 per share.

(g) “Fair Market Value” means, when used in connection with the Common Stock on a certain date, the reported closing price of the Common Stock as reported by the National Association of Securities Dealers Automated Quotation System (as published by the Wall Street Journal, if published) on the day prior to such date or if the Common Stock was not traded on such date, on the next preceding day on which the Common Stock was traded thereon. If the Common Stock is not traded on a national market reported by the National Association of Securities Dealers Automated Quotation System, the Fair Market Value means the average of the closing bid and ask sale prices on the last previous date on which a sale is reported in an over-the-counter transaction. In the absence of an arms length transaction during such 90 days, Fair Market Value means the greater of $10.00, or the book value of a share of the common stock.

(h) “Disability” means the permanent and total inability by reason of mental or physical infirmity, or both, of an employee to perform the work customarily assigned to the Participant.

Additionally, a medical doctor selected or approved by the Board of Directors must advise the Board that it is either not possible to determine when such Disability will terminate or that it appears probable that such Disability will be permanent during the remainder of said Participant’s lifetime.

(i) “Termination for Cause” means the termination resulting from an individual’s intentional failure to perform stated duties, breach of a fiduciary duty involving personal dishonesty, action or conduct that could have a negative impact on the Bank’s reputation or image, or willful violation of any law, rule, or regulation (other than minor traffic violations or similar offenses) or final cease-and-desist order issued to the Bank.

(j) “Participant” means an employee of the Bank or a director of the Bank chosen by the Board to participate in the Plan.

(k) “Change in Control” of the Bank means: (i) the acquisition, by any person (as such term is used in Sections13[d] and 14[d] of the Securities Exchange Act of 1934 in effect on the date first written above), directly or indirectly, or acting through one or more other persons, of the ownership, control or power to vote a majority of the then outstanding voting securities of the Bank; or (ii) controls in any manner the election of the directors of the Bank.

(l) “Normal Retirement” means retirement at the normal or early retirement date as set forth in any tax qualified plan of the Bank.

(m) “Vest” means the right to exercise an option in whole or in part during some specified period of time.

3.	ADMINISTRATION

The Plan shall be administered by the Board of Directors, or a designated committee thereof. The Board is authorized, subject to the provisions of the Plan, to establish such rules and regulations as it deems necessary for the proper administration of the Plan and to make whatever determinations and interpretations in connection with the Plan it deems as necessary or advisable. All determinations and interpretations made by the Board shall be binding and conclusive on all Participants in the Plan and on their legal representatives and beneficiaries.

4. TYPES OF AWARDS

Awards under the Plan may be granted in any one or a combination of the following, as defined below in Sections 7 and 8 of the Plan:

(a)

Incentive Stock Options; and

(b)

Non-Statutory Stock Options.

5. STOCK SUBJECT TO THE PLAN

Subject to adjustment as provided in Section 12 herein, the maximum number of shares reserved for issuance under the Plan is 152,905. To the extent that options granted under the Plan are exercised, the shares covered will be unavailable for future grants under the Plan. To the extent that options granted under the Plan terminate, expire, or are canceled without having been exercised, new Awards may be made with respect to such shares.

6. ELIGIBILITY

Officers and other employees of the Bank shall be eligible to receive Incentive Stock Options or Non-Statutory Stock Options under the Plan. Directors who are not employees or officers of the Bank shall be eligible to receive only Non-Statutory Stock Options under the Plan.

7. NON-STATUTORY STOCK OPTIONS

7.1 Grant of Non-Statutory Stock Options. The Board may, from time to time, grant Non-Statutory Stock Options to any Participant. Non-Statutory Stock Options granted under this Plan are subject to the following terms and conditions:

(a)

Price. The purchase price per share of Common Stock deliverable upon the exercise of each Non-Statutory Stock Option shall not be less than the greater of 100% of the Fair Market Value of the Common Stock on the date the option is granted or the par value of the Common Stock. Shares may be purchased only upon full payment of the purchase price. Payment of the purchase price may be made in cash or by check.

(b)

Terms of Options. The term during which each Non-Statutory Stock Option may vest shall be determined by the Board, but in no event shall a Non-Statutory Stock Option be exercisable in whole or in part more than 10 years from the Date of Grant. Further, for options granted within the first three years of the Bank’s operation, no more than one-third of the shares granted under any option shall vest in any year.

The Board shall determine the date on which each Non-Statutory Stock Option shall become exercisable in installments. The shares comprising each installment may be purchased in whole or in part at any time after such installment becomes purchasable. Notwithstanding the above, in the event of a Change in Control of the Bank, all Non-Statutory Stock Options shall become immediately exercisable; provided, however, in the event the Change in Control of the Bank occurs within the first three years of the Bank’s operations, no acceleration of any Non-Statutory Stock Options shall occur.

(c)

Termination of Employment. Upon the termination of a Participant’s service for any reason other than Termination for Cause, the Participant’s Non-Statutory

Stock Options shall be exercisable only as to those shares which were immediately purchasable by the Participant at the date of termination but only for a period of three months following termination, provided that in no event shall the period extend beyond the expiration of the Non-Statutory Stock Option term. In the event of Termination for Cause, all rights (vested or unvested) of the terminated Participant under the Participant’s Non-Statutory Stock Options shall expire upon termination.

8. INCENTIVE STOCK OPTIONS

8.1

Grant of Incentive Stock Options. The Board may, from time to time, grant Incentive Stock Options to eligible officers or employees. Incentive Stock Options granted pursuant to the Plan shall be subject to the following terms and conditions:

(a)

Price. The purchase price per share of Common Stock deliverable upon the exercise of each Incentive Stock Option shall be not less than the greater of 100% of the Fair Market Value of the Common Stock on the date the Incentive Stock Option is granted or the par value of the Common Stock. However, if an employee owns stock equal to more than 10% of the total combined voting power of all classes of Common Stock of the Bank (or, under Section 424(d) of the Code, is deemed to own Common Stock representing more than 10% of the total combined voting power of all such classes of Common Stock), the purchase price per share of Common Stock deliverable upon the exercise of each Incentive Stock Option shall not be less than 110% of the Fair Market Value of the Common Stock on the date the Incentive Stock Option is granted. Shares may be purchased only upon payment of the full purchase price. Payment of the purchase price may be made in cash or by check.

(b)

Amounts of Options. Incentive Stock Options may be granted to any eligible employee in such amounts as determined by the Board; provided that the amount granted is consistent with the terms of Section 422 of the Code. In the case of an option intended to qualify as an Incentive Stock Option, the aggregate Fair Market Value (determined as of the time the option is granted) of the Common Stock with respect to which Incentive Stock Options granted are exercisable for the first time by the Participant during any calendar year (under all plans of the Participant’s employer corporation and its parent and subsidiary corporations) shall not exceed $100,000. The provisions of this Section 8.1(b) shall be construed and applied in accordance with Section 422(d) of the Code and the regulations, if any, promulgated thereunder.

(c)

Term of Options. The term during which each Incentive Stock Option may vest shall be determined by the Board, but in no event shall an Incentive Stock Option be exercisable in whole or in part more than 10 years from the Date of Grant. Further, during the first three years of the Bank’s operation, no more than one-third of the shares granted under any option shall vest in any year. Notwithstanding the above, in the event of a Change in Control of the Bank all Incentive Stock Options shall become immediately exercisable consistent with

the time period for exercise provided in Section 8.1(d); provided, however, in the event the Change in Control of the Bank occurs within the first three years of the Bank’s operations, no acceleration of any Incentive Stock Options shall occur. No Incentive Stock Option granted under this Plan is transferable except by will or the laws of descent and distribution and is exercisable in the Participant’s lifetime only by the employee to which it is granted.

(d)

Termination of Employment. Upon the termination of an employee’s service for any reason other than Termination for Cause, the Participant’s Incentive Stock Options shall be exercisable only as to those shares which were immediately purchasable by the Participant at the date of termination, but only for a period of three months following termination. In the event of Termination for Cause, all rights (vested or unvested) of the terminated employee under the Participant’s Incentive Stock Options shall expire upon termination.

9. RIGHTS OF A SHAREHOLDER: NONTRANSFERABILITY

An optionee shall have no rights as a shareholder with respect to any shares covered by a Non-Statutory and/or Incentive Stock Option until the date of issuance of a stock certificate for such shares. Nothing in this Plan or in any Award granted confers on any person any right to continue in the employ of the Bank, to continue to serve on the Board, or to continue to perform services for the Bank, or interferes in any way with the right of the Bank to terminate the Participant’s services as a director, an officer, or other employee at any time.

No Award under the Plan shall be transferable by the optionee other than by will or the laws of descent and distribution and may only be exercised during the Participant’s lifetime by the optionee, or by a guardian or legal representative. No such transfer of the Award by the Participant by will, or the laws of descent and distribution shall be effective to bind the Bank, unless the Bank shall have been furnished with written notice thereof and such other evidence as the Board administering may deem necessary or desirable to establish the validity of the transfer. The Award shall not be pledged, hypothecated, sold, assigned, transferred, or otherwise encumbered or disposed of except as provided herein. Any purported pledge, hypothecation, sale, assignment, transfer, or other encumbrance or disposition of the Award contrary to the provisions hereof shall be null and void and without effect. The levy of any execution, attachment, or similar process upon the Award shall be null and void and without effect.

10. AGREEMENT WITH GRANTEES

Each Award of options will be evidenced by a written agreement, executed by the Participant and the Bank which describes the conditions for receiving the Awards including the date of Award, the purchase price, applicable vesting periods, and any other terms and conditions as may be required by the Board of Directors or applicable securities law.

11. DEATH

In the event of Participant’s death, the personal representative or legal guardian of the Participant’s estate shall have reasonable time to exercise any stock option Award to which Participant had the right to exercise as of the date of Participant’s death.

12. DILUTION AND OTHER ADJUSTMENTS

In the event of any change in the outstanding shares of Common Stock of the Bank by reason of any stock dividend or split, recapitalization, merger, consolidation, reorganization, combination or exchange of shares, or other similar corporate change, the Board will make such adjustments to previously granted Awards, to prevent dilution or enlargement of the rights of the Participant, including any or all of the following:

(a)

adjustments in the aggregate number or kind of shares of Common Stock which may be awarded under the Plan;

(b)

adjustments in the aggregate number or kind of shares of Common Stock covered by Awards already made under the Plan; and/or

(c)

adjustments in the purchase price of outstanding Incentive and/or Non-Statutory Stock Options.

No such adjustments may, however, materially change the value of benefits available to a Participant under a previously granted Award.

13. REGULATORY CAPITAL REQUIREMENTS

The Florida Office of Financial Regulation or the Federal Deposit Insurance Corporation may, under their supervisory powers, direct the Bank to require Participants receiving options under the Plan to either exercise or forfeit their rights to receive Common Stock from any unexercised Options, or parts thereof, if the Bank’s capital falls below the minimum capital requirements, as determined by the Florida Office of Financial Regulation or the Federal Deposit Insurance Corporation.

14. AMENDMENT OF THE PLAN

The Board of Directors may at any time, and from time to time, modify or amend the Plan in any respect; provided, however, that (i) shareholder approval is required for any such modification or amendments which:

(a)

increases the maximum number of shares for which options may be granted under the Plan (subject, however, to the provisions of Section 12 hereof);

(b)

reduces the exercise price at which Awards may be granted, provided, however in no event may any amendment result in the exercise price being reduced to less than the greater of the Fair Market Value of the Common Stock on the Date of Grant or the par value of the Common Stock;

(c)

extends the period during which options may be granted or exercised beyond the times originally prescribed, provided, however, in no event may an amendment

result in options being granted under this Plan after the expiration of 10 years from the Effective Date of the Plan, nor result in the exercise period for any option being extended to greater than 10 years from the Date of Grant; or

(d)

changes the persons eligible to participate in the Plan.

and (ii) all material changes to the Plan must have prior approval from the Florida Office of Financial Regulation. Failure to ratify or approve amendments or modifications pursuant to Subsections (a) through (d) of this Section by shareholders or the Florida Office of Financial Regulation shall be effective only as to the specific amendment or modification requiring such ratification. Other provisions, sections, and subsections of this Plan will remain in full force and effect.

No such termination, modification, or amendment may affect the rights of a Participant under an outstanding Award.

15. TERMINATION OF THE PLAN

The right to grant Awards under the Plan will terminate upon the earlier of ten (10) years after the Effective Date of the Plan or the issuance of Common Stock or the exercise of options or related rights equaling the maximum number of shares reserved under the Plan as set forth in Section 5. The Board of Directors has the right to suspend or terminate the Plan at any time; provided that no such action will, without the consent of a Participant, adversely affect the Participant’s rights under a previously granted Award.

16. APPLICABLE LAW AND VENUE

The Plan will be administered in accordance with the laws of the State of Florida. Venue for any actions concerning any Awards or the interpretation or applicability of the Plan shall be brought only in Leon County, Florida.

Exhibit 10.2

PRIME MERIDIAN BANK

NON-QUALIFIED STOCK OPTION AGREEMENT

THIS NON-QUALIFIED STOCK OPTION AGREEMENT (“Option Agreement”) is made and entered into this day of , 20 , by and between Prime Meridian Bank (the “Bank”) and (“Participant”);

WITNESSETH:

Pursuant to the 2007 Stock Option Plan (“Plan”) adopted by the Board of Directors of the Bank and approved by the shareholders of the Bank, the Board of Directors has selected Participant to participate in the Plan and desires to grant Participant certain non-qualified stock options to purchase shares of the Bank’s authorized $5.00 par value common stock (“Stock”), subject to the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual promises, agreements, and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. INCORPORATION OF PLAN PROVISIONS

This Option Agreement is subject to and is to be construed in all respects in a manner which is consistent with the terms of the Plan, the provisions of which are hereby incorporated by reference into this Option Agreement. Unless specifically provided otherwise, all terms used in this Option Agreement shall have the same meaning as in the Plan.

2. GRANT OF OPTION

Subject to the further terms and conditions of this Option Agreement, Participant was granted a non-qualified stock option (“Option”) to purchase ( ) shares of Stock, effective on , 20 (“Date of Grant”). This Option is not intended to qualify as an incentive stock option as provided in §422 of the Internal Revenue Code of 1986, as amended.

3. FAIR MARKET VALUE OF STOCK

The Board of Directors has determined, in good faith and in its best judgment, that the fair market value per share of Stock as of the Date of Grant was $10.00.

4. OPTION PRICE

The Board of Directors has determined that the price for each share of Stock purchased under this Option Agreement shall be $10.00.

5. EXPIRATION OF OPTION

The option to acquire Stock pursuant to this Option Agreement shall expire (to the extent not previously fully exercised) upon the first to occur of the following:

(a) The tenth anniversary of the Date of Grant;

(b) The date which is three months following the date upon which Participant ceases service with the Bank, otherwise than as a result of Participant’s termination for cause (as defined in the Plan);

(d) The date upon which Participant ceases his or her service with the Bank, for any reason, with respect to any portion of this Option that is not then exercisable on the date Participant ceases his or her service with the Bank.

In addition, each installment of the Option, as provided in Section 6 below, shall expire five years after it vests.

6. EXERCISE OF OPTION

Unless the Option shall earlier lapse or expire pursuant to Section 5 hereof, this Option shall be exercisable with respect to the full number of shares subject to this Option Agreement as follows:

(i)

First anniversary of the Date of Grant, 1,400 shares (20%);

(ii)

Second anniversary of the Date of Grant, 1,400 shares (20%);

(iii)

Third anniversary of the Date of Grant, 1,400 shares (20%);

(iv)

Fourth anniversary of the Date of Grant, 1,400 shares (20%); and

(v)

Fifth anniversary of the Date of Grant, 1,400 shares (20%).

Notwithstanding the foregoing installment, exercise schedule, and except as otherwise limited in the Plan, in the event of a Change-in-Control of the Bank, as defined in the Plan, the Option or portion thereof subject to this Option Agreement, whether or not exercisable at such time, shall become immediately exercisable, and shall remain exercisable until such time as the Option may expire pursuant to Section 5 herein. Provided that in the event a Change-in-Control occurs during the first three years that the Bank is in operations, there shall be no acceleration of the vesting of the Option.

To the extent such Option becomes exercisable in accordance with the foregoing, Participant may exercise the Option, in whole or in part, from time to time. The option exercise price must be paid by Participant in cash or check.

7. MANNER OF EXERCISE

This Option may be exercised by providing written notice to the Chief Financial Officer of the Bank specifying the number of shares to be purchased and signed by Participant or such other person who may be entitled to acquire Stock under this Option Agreement. If any such notice is signed by a person other than Participant, such person shall also provide such other information and documentation as the Bank may reasonably require to assure that such person is entitled to acquire Stock under the terms of the Plan and this Option Agreement. After receipt of the notice and any other assurances requested by the Bank under this Section 7, and upon receipt of the full Option exercise price, the Bank shall issue to the person giving notice of exercise under this Option Agreement the number of shares specified in such notice.

8. RESTRICTIONS ON TRANSFERABILITY

The Option granted hereunder shall not be transferable by Participant otherwise than by will or by the laws of descent and distribution, and such Option shall be exercisable during Participant’s lifetime only by Participant.

9. FURTHER RESTRICTIONS ON EXERCISE AND SALE OF STOCK

Upon the receipt of shares of Stock as a result of the exercise of the Option, Participant shall, if so requested by the Bank, hold such shares of Stock for investment and not with a view of resale or distribution to the public and, if so requested by the Bank, shall deliver to the Bank a written statement satisfactory to the Bank to that effect. The Bank shall at its expense take such action as it deems necessary or appropriate to register the original issuance of such Stock to Participant under the Securities Act of 1933, as amended, or under any other applicable securities laws or to qualify such Stock for an exemption under any such laws prior to the issuance of such Stock to Participant; however, the Bank shall have no obligation whatsoever to take any such action or to maintain any registration statement for the benefit of Participant’s transfer, resale, or other disposition of such Stock after its original issuance.

10. DILUTION AND OTHER ADJUSTMENTS

In the event that dividends are payable in Stock or in the event there are splits, subdivisions, or combinations of shares of Stock, the number of shares available under the Plan shall be increased or decreased proportionately, as the case may be, and the number of shares deliverable upon the exercise thereafter of any Option theretofore granted shall be increased or decreased proportionately, as the case may be, without change in the aggregate purchase price.

IN WITNESS WHEREOF, the Bank has caused this Option Agreement to be executed by a member of the Board of Directors or a duly authorized officer of the Bank, and Participant has executed this Option Agreement, as of the date first written above.


PRIME MERIDIAN BANK		PARTICIPANT

By:
	Richard A. Weidner
	Chairman of the Board

Exhibit 10.3

PRIME MERIDIAN BANK

INCENTIVE STOCK OPTION AGREEMENT

THIS INCENTIVE STOCK OPTION AGREEMENT (“Option Agreement”) is made and entered into this day of , 20 , by and between Prime Meridian Bank (the “Bank”) and (“Participant”);

WITNESSETH:

Pursuant to the 2007 Stock Option Plan (“Plan”) adopted by the Board of Directors of the Bank and approved by the shareholders of the Bank, the Board of Directors has selected Participant to participate in the Plan and desires to grant Participant certain incentive stock options to purchase shares of the Bank’s authorized $5.00 par value common stock (“Stock”), subject to the terms and conditions hereinafter set forth.

1. INCORPORATION OF PLAN PROVISIONS

2. GRANT OF OPTION

Subject to the further terms and conditions of this Option Agreement, Participant was granted a stock option (“Option”) to purchase twelve thousand, five hundred (12,500) shares of Stock, effective on , 20 (“Date of Grant”). This Option is intended to be an Incentive Stock Option as provided in §422 of the Internal Revenue Code of 1986, as amended.

3. FAIR MARKET VALUE OF STOCK

The Board of Directors has determined, in good faith and in its best judgment, that the fair market value per share of Stock as of the Date of Grant was $10.00.

4. OPTION PRICE

The Board of Directors has determined that the price for each share of Stock purchased under this Option Agreement shall be $10.00.

5. EXPIRATION OF OPTION

The option to acquire Stock pursuant to this Option Agreement shall expire (to the extent not previously fully exercised) upon the first to occur of the following:

(a) The tenth anniversary of the Date of Grant;

(b) The date which is three months following the date upon which Participant ceases employment with the Bank, otherwise than as a result of Participant’s termination for cause (as defined in the Plan);

(d) The date upon which Participant ceases his or her employment with the Bank, for any reason, with respect to any portion of this option that is not then exercisable on the date Participant ceases his or her employment with the Bank.

In addition, each installment of the Option, as provided in Section 6 below, shall expire five years after it vests.

6. EXERCISE OF OPTION

Unless the Option shall earlier lapse or expire pursuant to Section 5 hereof, this Option shall become exercisable with respect to the full number of shares subject to this Option Agreement as follows:

(i)

First anniversary of the Date of Grant: 2,500 shares;

(ii)

Second anniversary of the Date of Grant: 2,500 shares;

(iii)

Third anniversary of the Date of Grant: 2,500 shares;

(iv)

Fourth anniversary of the Date of Grant: 2,500 shares; and

(v)

Fifth anniversary of the Date of Grant: 2,500 shares.

Notwithstanding the foregoing installment, exercise schedule, and expect as otherwise limited in the Plan, in the event of a Change-in-Control of the Bank, as defined in the Plan, the Option or portion thereof subject to this Option Agreement, whether or not exercisable at such time, shall become immediately exercisable, and shall remain exercisable until such time as the Option may expire pursuant to Section 5 herein. Provided that in the event a Change-in-Control occurs during the first three years that the Bank is in operations, there shall be no acceleration of the vesting of the Option.

7. MANNER OF EXERCISE

8. RESTRICTIONS ON TRANSFERABILITY

9. FURTHER RESTRICTIONS ON EXERCISE AND SALE OF STOCK

10. DILUTION AND OTHER ADJUSTMENTS


PRIME MERIDIAN BANK		PARTICIPANT

By:
	Sammie D. Dixon, Jr.
	Chief Executive Officer

Exhibit 10.4

PRIME MERIDIAN HOLDING COMPANY, INC.

DIRECTORS’ COMPENSATION PLAN

Prime Meridian Holding Company, Inc. (the “Company”) believes that it is in the best interest of the Company, its wholly-owned subsidiary, Prime Meridian Bank (the “Bank”), and the Company’s shareholders to have members of the respective Boards of Directors (“Directors”) fairly compensated for their services and the responsibilities which they assume and which will encourage stock ownership by such Directors in order to align the interests of each Director with the interests of the Company’s shareholders. Accordingly, the Company hereby adopts this Directors’ Compensation Plan (the “Plan”), subject to receipt of the approval of the Company’s shareholders.

Each Director of the Company or the Bank will be compensated for service as a Director as follows:

Section 1. Annual Payments to Directors. Each Director may receive compensation for:

(a)

serving as a Director of the Company or the Bank;

(b)

serving as a member of a committee of the Board of Directors of the Company or the Bank; or

(c)

serving as the Chairperson of either Board of Directors or their committee.

The amounts of any compensation paid to Directors, and the timing of any such payments, shall be set by the Board of Directors or the Compensation Committee of the Company from time to time.

Section 2. Payment Increase for Directors who Elect Payment in Shares of Company Common Stock. Payments to a Director, who elects to receive all of his or her Director’s compensation payable in any fiscal year in the form of shares of the common stock of the Company (“Company Stock”) as provided in Section 4 below, shall be increased to 110% of the specified payment amount.

Section 3. Payment Method. Unless a Director has elected to be paid in Company Stock as provided in Section 4 below, payments of Directors’ fees shall be made by check. Payments in Company Stock pursuant to a valid election under Section 4 below shall be made by delivery by the Company or its stock registrar and transfer agent of a certificate made out in the name of the electing Director for the number of shares of Company Stock determined by dividing: (i) the total amount of Director compensation payable, by (ii) the per share price of the Company Stock as of two business days preceding the date on which payment is to be made (the “Stock Price Determination Date”). The per share price on the Stock Price Determination Date shall be:

(a)

the closing price of a share of Company Stock on the Stock Price Determination Date, as quoted by the Nasdaq Stock Market (or other nationally recognized quotation service);

(b)

if the Company Stock is not traded on the Nasdaq Stock Market but is registered on a national securities exchange the closing sales price of a share of Company Stock on such national securities exchange;

(c)

if the Company Stock is not traded on a national securities exchange or through any other nationally recognized quotation service, then the fair market value of a share of Company Stock as determined by the Board of Directors or the Compensation Committee of the Company, acting in good faith.

In no instance, however, shall the Fair Market Value of the Stock ever be less than its book value.

The Company shall issue such shares from the Company’s authorized but unissued shares. To provide for such issuances the Company shall establish a reserve of 74,805 shares of common stock. The number of shares of common stock to be issued under this Plan shall be limited to those 74,805 shares. If for any reason the Company elects not to deliver shares which have been registered for sale under the Securities Act of 1933, as amended, or under applicable state securities laws, the certificates evidencing such shares will contain a legend restricting sale as follows:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED, PLEDGED, OR HYPOTHECATED EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION THAT IS NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS SET FORTH IN THE SECURITIES ACT OF 1933, AS AMENDED, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

Section 4. Election to be Paid in Shares of Company Stock. Directors shall be eligible to receive Director’s fees payable in shares of Company Stock as follows:

(a)

In order to elect to receive Director’s fees for a fiscal year in Company Stock, a Director must deliver to the Company an election prior to the beginning of the Company’s fiscal year for which the election is to apply, provided that when a

Page 2 of 4

Director is first elected to the Board of the Company or the Bank, such election can be made at any time within 30 days of his or her election to such Board (or within 30 days after the approval by the Company’s stockholders of this Plan). Once an election is received it shall be irrevocable for the fiscal year to which it applies, and all of an the Director’s compensation for an electing Director for that fiscal year will be paid in the form of Company Stock as provided in Section 3 above.

(b)

The electing Director shall be responsible for the payment of all federal, state and local income and other taxes resulting from the issuance of shares of Company Stock pursuant to this Plan and should consult with his or her own tax advisor relating to his or her filing and payment obligations as a result of receiving such Company Stock. The Company will not withhold tax payments on the stock issuances pursuant to this Plan and will issue Form 1099’s to each Director annually which will set forth the value of the shares of Company Stock at the time of issuance, which will be reported as income to the recipient and which will also be filed with the Internal Revenue Service.

(c)

Each electing Director agrees by his or her election to participate in this Plan that he or she will hold the shares of Company Stock received in this Plan for investment and will not sell or otherwise dispose of any of it until the earlier of a time when: (ii) the electing Director ceases to be a Director of the Company or Bank; or (ii) a Change of Control of the Company as defined below has occurred. For purposes of the foregoing, a Change of Control of the Company shall be deemed to have occurred when: (i) a shareholder or group of shareholders acting in concert, beneficially owns more than 50% of the outstanding shares of Company Stock; or (ii) a majority of the members of the Board of Directors of the Company are persons who are currently not members of the Company’s Board, or members elected or nominated by members of the Company’s Board.

Section 5. Shareholder Rights. No Director shall have any rights as a shareholder of the Company as a result of any compensation payable under this Plan until the actual delivery of the shares of Company Stock to such Director.

Section 6. No Contract of Employment or Director Status. Participation in this Plan shall not constitute a contract of employment or an agreement to continue a participant’s status as a Director.

Section 7. Gender. Pronouns used within this Plan shall be deemed to include both the masculine and feminine gender and words used in the singular shall be deemed to include both the singular and the plural, unless the context indicates otherwise.

Section 8. Construction. This Plan shall be construed under the laws of the State of Florida (excluding its choice-of-law rules) to the extent not superseded by federal law. Venue for the enforcement of any provision of this Plan shall be in Leon County, Florida.

Page 3 of 4

In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

In the event of a conflict between the terms of this Plan and any Option Agreement, Stock Agreement or SAR Agreement, the terms of the Plan shall prevail.

Adopted by the Board of Directors of Prime Meridian Holding Company, Inc. on this 15 ^th day of March, 2012


By:		/s/ Richard A. Weidner
		Richard A. Weidner,
		Chairman of the Board

Approved by the Shareholders of Prime Meridian Holding Company, Inc. on this 17 ^th day of April, 2012


By:		/s/ Richard A. Weidner
		Richard A. Weidner,
		Chairman of the Board

Page 4 of 4

Exhibit 10.5

ASSIGNMENT AND ASSUMPTION OF LEASE

This Assignment and Assumption of Lease is entered into this 6th day of December, 2007, by Red Hills Holdings, Inc. (“Assignor”) and Prime Meridian Bank (“Assignee”), as joined by MS Timberlane, Inc. (“Lessor”).

RECITALS

Assignor currently the leases approximately 4,018 net rentable square feed located at 1471 Timberline Road, Tallahassee, Florida 32312 (“Premises”) pursuant to that certain Lease Agreement dated as of April 19, 2007 (“Lease”)

Assignor desires to assign to Assignee all of Assignor’s interest in and to the Lease and Premises.

Assignee desires to acquire all of Assignor’s interest in and to the Lease and Premises.

FOR VALUABLE CONSIDERATION , it is agreed as follows:

Assignor hereby assigns, grants and conveys to Assignee all of Assignor’s rights, title and interest in and to the Lease and for the Premises.

Assignee hereby accepts all of Assignor’s rights, title and interest in and to the Lease and for the Premises.

Lessor hereby approves, consents and accepts the assignment of the Lease from Assignor to Assignee and the conveyance of all of Assignor’s rights and title and interest in and for the Lease and to the Premises, and agrees to continue to be bound to the terms of the Lease as Lessor.

IN WITNESS WHEREOF , Lessor, Assignor and Assignee have executed this Assignment and Assumption of Lease effective as of the date first above written, each representing to the other that they have full authority to execute the same in the capacity indicated.


RED HILLS HOLDINGS, INC.

By:		/s/ Sammie D. Dixon, Jr.
		Sammie D. Dixon, Jr., Chief Executive Officer


PRIME MERIDIAN BANK

By:		/s/ Sammie D. Dixon, Jr.
		Sammie D. Dixon, Jr., Chief Executive Officer


MS TIMBERLANE, INC.

By:		/s/ William D. Crona
		William D. Crona, Director

LEASE AGREEMENT

THIS LEASE AGREEMENT (this “Lease”) is made and entered into on this the 19 ^th day of April, 2007, by and between MS Timberlane, Inc. , a Florida corporation (the “Landlord”), whose address for purposes hereof is 1415 Timberlane Road, Suite 217, Tallahassee, Florida 32312, Attention: William D. Crona., and Red Hills Holdings, Inc. a Florida Corporation (the “Tenant”), whose address for purposes hereof shall be 1471 Timberlane Road, Suite 124 Tallahassee, FL 32312 .

WITNESSETH:

1.	LEASED PREMISES; ACCEPTANCE OF LEASED PREMISES.

1.1

Leased Premises. Subject to and upon the terms, provisions and conditions hereinafter set forth, and each in consideration of the duties, covenants and obligations of the other hereunder, Landlord does hereby lease, demise and let to Tenant and Tenant does hereby lease from Landlord approximately 4,018 net rentable square feet (the “Premises” or “Leased Premises”) located at 1471 Timberlane Road, Tallahassee, Florida 32312, being more particularly described on the floor plan of the Leased Premises attached hereto and made a part hereof as Exhibit A. The Leased Premises .are situate in a building (the “Project”) which is constructed on a portion of the real property (the “Property”) described in Exhibit A-1 attached hereto and made a part hereof. The term “Leased Premises” shall also be deemed to include all of Tenant’s drive-in teller sites and automated teller machine (“ATM”) sites, if any, located on the Property. Tenant is also granted the non-exclusive right to use, with other tenants in the Project, the common areas of the Project (as defined below), specifically including restrooms, lobbies and other Common Areas, without additional charge.

Based on a net rentable square footage of 4,018, and the total square footage of the project of 14,350 square feet, Tenant’s pro rata share of the Project is agreed to be 28% (“Tenant’s Pro-rata Share”).

1.2

Delivery of Leased Premises to Tenant.

1.2.1

Landlord represents to Tenant that it has satisfied the conditions set forth in 1.2.1.1 at or prior to execution of this Lease.

1.2.1.1

Landlord has satisfied the following conditions:

(a)

The Leased Premises are unoccupied and are, to the best of Landlord’s knowledge, free of hazardous materials, in full compliance with all applicable laws, rules, ordinances and regulations relating to the use, occupation and construction thereof, provided however, that Landlord has made no independent investigation as to whether the leased premises may be used for Tenant’s intended purposes.

(b)

Following construction of tenants desired improvements Landlord shall deliver to Tenant all keys to the Leased Premises.

(c)

The HVAC equipment, as well as, all other equipment and systems servicing the Leased Premises are in good order and repair and Landlord has warranted such to Tenant.

(d)

The roof is in good order and repair and is in a water-tight condition.

(e)

The Leased Premises are in a broom clean condition and the Leased Premises are free and clear of any and all furniture, trade fixtures, merchandise and other items of personalty (except for items brought onto the Leased Premises by Tenant), debris and trash.

(f)

Landlord has delivered to Tenant a fully executed memorandum of lease in a form acceptable to Tenant.

1.2.1.2

Landlord has delivered to Tenant a completed W-9 form reflecting Landlord’s federal tax ID number.

1.2.2

Landlord has, concurrent with the mutual execution of this Lease by the Tenant, delivered possession of the Premises to Tenant and Tenant, by execution of this Lease, accepts the Premises in the condition as represented in this Section 1.2 and Tenant agrees that all of Landlord’s conditions set forth in Section 1.2.1.1 have been met.

2.	LEASE TERM.

2.1

Initial Term. Subject to and upon the terms and conditions set forth herein, or in any exhibit or addendum hereto, this Lease shall have an initial term of ten (10) years, commencing August 1, 2007 (the “Commencement Date’’) and ending ten (10) years thereafter (the “Initial Term”). As used hereinafter, “Lease Term’’ shall mean the Initial Term together with any and all Renewal Terms (as defined hereinbelow), as exercised by Tenant.

2.2

Renewal Terms. Tenant is hereby granted the option to renew this Lease for two (2) additional terms of five (5) year(s) each (together, the “Renewal Terms”) on the following basis:

2.2.1

First Renewal Term. Provided this Lease is in full force and effect and Tenant is not then in default which is continuing after any applicable cure period, Tenant shall have the right to extend the term of this Lease at the end of the Initial Term, for a first renewal term of five (5) years (the “First Renewal Term”), for the Leased Premises, provided as follows: (a) Tenant shall notify Landlord in writing not

less than six (6) months prior to the expiration of the Initial Term that Tenant desires such extension; (b) such extension shall be upon the same terms, provisions, covenants, and conditions as are contained in this Lease except that the rental rate shall be determined in accordance with the provisions set forth in Section 2.2.3 below. If Tenant does not renew this Lease for this First Renewal Term, then Tenant shall have no further renewal rights with respect to later renewal rights contained herein.

2.2.2

Second Renewal Term. If (i) Tenant shall have exercised its option for a First Renewal Term pursuant to the provisions of Section 2.2.1 of this Lease, and (ii) if this Lease is in full force and effect, and Tenant is not then in default which is continuing beyond any applicable cure period, Tenant shall have the right to extend the term of this Lease for a second renewal term of five (5) years (the “Second Renewal Term”), commencing on the day following the expiration of the First Renewal Term for the Leased Premises, provided as follows:

(a) Tenant shall notify Landlord in writing not less than six (6) months prior to the expiration of the First Renewal Term that Tenant desires such extension; (b) such extension shall be upon the same terms, provisions, covenants, and conditions as are contained in this Lease, except as to the rental rate as provided in Section 2.2.3 of this Lease.

2.2.3

Rental for Renewal Terms; Determination. (a) The Base Rental for the First Renewal Period shall be determined by multiplying the Base Rental for the last year of Initial Term by a fraction, the numerator of the fraction is the Consumer Price Index (utilizing the CPI-U tables 1982-1984=100 as published by the US Department of Labor) as of the month immediately preceding the last month of the Initial Term, and the denominator of said fraction is the Consumer Price Index as of April 1, 2013. As an example, if the annual Base Rental as of the last month of the Initial Term is $80,000 and the Consumer Price Index for the immediately preceding month is 205.6 and the Consumer Price Index for April 1, 2013 is 199.4, the Base Rental shall be adjusted to $80,000 x 205.6/199.4 = 82,487.46. (b) The Base Rental for the Second Renewal Period shall be determined by multiplying the Base Rental for the last year of First Renewal Term by a fraction, the numerator of the fraction is the Consumer Price Index (utilizing the CPI-U tables 1982-1984=100 as published by the US Department of Labor) as of the month immediately preceding the last month of the First Renewal Term, and the denominator of said fraction is the Consumer Price Index as of the first month of the first year of the First Renewal Term. Notwithstanding the above, the rental rates for the first renewal term and the second renewal term will not exceed twenty three dollars ($23.00) per square foot and twenty six dollars ($26.00) per square foot respectively.

USE.

3.1.

Permitted Use. The Leased Premises may be used and occupied by Tenant for general office, commercial and/or retail banking, mortgage and brokerage activities, and all services offered in conjunction with a retail bank (including a drive-through facility), and for such other lawful purposes as may be incidental thereto.

3.2

Legal Use and Violation of Insurance Coverage. Tenant agrees not to occupy or use, or permit any portion of the Leased Premises to be occupied or used, for any business or purpose that is unlawful, disreputable or deemed to be extra hazardous, or permit anything to be done that would in any way increase the rate of fire insurance coverage on the Project and/or its contents. Tenant agrees specifically that no food, soft drink or other vending machine will be installed within the Leased Premises, except for Tenant’s own use.

3.3

Nuisance. Tenant agrees to conduct its business and to exercise reasonable efforts to control its agents, employees, invitees and visitors in such manner as not to create any nuisance, or interfere with, annoy or disturb any other tenant or Landlord in the operation of the Project.

3.4

Restriction in Favor of Tenant. In order to induce Tenant to enter into this Lease, Landlord agrees for itself, its successors and assigns, its officers, directors and shareholders (holding more than ten percent (10%) of its stock), its parent, affiliated and subsidiary corporations or other entity or partner or other party affiliated with it, that none of the foregoing shall use, suffer, permit or consent to the use or occupancy of any part of the Project (except for the Leased Premises) for commercial banking (including the use or operation of an ATM), which otherwise competes with Tenant’s business as long as this Lease is in effect (each being referred to individually as a “Direct Competitor”); provided, however, the foregoing restriction shall not apply to the business of existing tenants; and provided further, in no event shall the restriction used herein be deemed to prohibit Landlord from leasing any space in the Project to insurance agents, mortgage brokers, and real estate agents.

4.	RENTAL.

4.1

Base Rental. During the Initial Term, Tenant shall pay a base annual rental (herein called the “Base Rental”) as follows:


Years	Rate Per Square Foot	Annual Amount
1 – 5	$19.00 p.s.f.	$76,342.00 per year

6 - 10	$20.00 p.s.f.	$80,360.00 per year

The Base Rental shall be due and payable in twelve (12) equal installments on the first day of each calendar month during the initial Lease Term and any extensions or renewals thereof, and Tenant hereby agrees to pay such rent to Landlord

monthly in advance without demand, at such address as may be designated by Landlord. If the Lease Term as heretofore established commences on other than the first day of a month or terminates on other than the last day of a month, then the Base Rental provided for herein for such month or . months shall be prorated and the installment or installments so prorated shall be paid in advance. All installments of rent which are more than ten (10) days past due shall bear interest at the Prime Rate (hereinafter defined), from the date due until paid. The term “Prime Rate” for purposes of this Lease Agreement, shall mean the rateset forth in the Wall Street Journal, on the date or dates on which reference to the Prime Rate is being made, and shall not be subject to adjustment, but shall in no event exceed the maximum rate provided by applicable law.

4.2

Reimbursement of Utility and Electricity Costs; No Additional Rent Owed by Tenant. In addition to the Base Rental set forth in Section 4.1 above, Tenant acknowledges and agrees that it shall be required to reimburse the Landlord for Tenant’s pro-rata share of utilities (including, without limitation, electricity costs, sewer costs, garbage pick up, stormwater fees, fire commercial service, and water charges) incurred by the Landlord to the extent that such costs relate to the Leased Premises. Notwithstanding anything to the contrary in this Section 4.2 or any other provision of this Lease, Landlord acknowledges and agrees that during the Lease Term, Tenant shall in no event be obligated to pay for, or reimburse Landlord for, any other costs or expenses associated with the operation of the Project, including ad valorem taxes on the Premise or Projector that otherwise may be incurred by Landlord with respect to the Leased Premises, including, without limitation, any common area maintenance charges such as dumpster service, common area janitorial, landscaping maintence, water service fees, and sewer fees.

4.3

Sales Tax. In addition, Tenant shall also pay all applicable sales tax due on the Base Rental and any other obligations of Tenant hereunder, which are subject to Sales Tax under Florida Law. Such sales tax shall be included and paid with each installment of Base Rental.

5.	GRAPHICS.

5.1

Signs. Tenant shall have the right, with Landlord’s prior approval (such approval not to be unreasonably withheld, conditioned or delayed), to erect on the North side of the Project facing Timberlane Road, a sign denoting Tenant’s name or the name of any successor company of the Tenant, as well as such other signs as shall be requested by Tenant, provided that all such signs shall comply with all applicable laws and ordinances. Tenant shall also have the right to its pro-rata share of space on any pylon sign or any other sign that may be erected or installed by Landlord in connection with the Project. Upon vacating the premises, Tenant shall remove all signage and restore area (pylon sign/building fascia) to the condition that existed as of the Commencement Date; normal wear & tear excepted. In the event that Tenant shall sublease or assign its rights in the Premises, subject to the provisions herein, Tenant shall have the right to assign and transfer its ownership in the sign to its subtenant or assignee.

5.2

Competitor’s Signs. Landlord will not permit a Direct Competitor (as defined in Paragraph 3.4 above) of Tenant to place a sign on any portion of the Project, on any exterior face of the Project.

6.	CARE OF THE LEASED PREMISES BY TENANT.

6.1

Condition of Leased Premises at Commencement; Notice to Landlord. Tenant’s taking possession of the Leased Premises shall be conclusive evidence as against the Tenant that the Leased Premises were in good order and satisfactory condition when the Tenant took possession, except as to latent defects. At all times during the Lease Term, Tenant agrees to give Landlord prompt notice of any apparent defective condition in or about the Leased Premises.

6.2

Care of the Premises.

A. Tenant shall not permit any act to be performed or any practice to be adopted or followed in or about said premises which shall cause or likely to cause any injury or damage to any person or to said premises or the building or ·to the sidewalks and pavements or any other portion of the Project.

B. Tenant shall not permit, allow, or cause any noxious, disturbing or offensive odors, fumes, or gases, or any smoke, dust, steam, or vapors, or any loud or disturbing noises, sounds or vibrations to originate in or to be emitted from said premises.

C. Tenant shall at all times keep the sidewalks and entryways adjoining the premises clean and free from rubbish and the common driveways, parking area, hallways and sidewalks shall not be used for storage.

D. Tenant shall keep the premises clear and free of rodents, bugs, and vermin and, at the request of the Landlord, participate and cooperate in carrying out any program of extermination that Landlord may reasonably direct and Tenant shall bear the reasonable cost of thereof; or, if conducted in cooperation with other Tenants, then Tenant shall bear its pro-rata share of the cost on the basis of the floor areas involved.

E. Tenant shall not use or permit the use of any portion of said premises as sleeping or living quarters or as lodging rooms, or keep or harbor thereon any live animals, fish, or birds or use the same for any illegal purposes.

F. Tenant shall not permit or knowingly allow or cause the sinks, toilets or urinals in the premises or building to be used for any other purposes except that for which they were designed and installed and the expenses of repairing any breakage or damage or removal of any stoppage resulting from a contrary use thereof shall be paid by Tenant on demand.

G. Tenant shall not through the operation of its business allow or cause sewer pipes in other areas of the Project to become clogged with Tenant’s sewage or debris.

H. Tenant shall store all trash, rubbish, or garbage in or about the premises of said Project.

I. Tenant shall keep all pipes in its portion of the building open and maintain all pipes, wires, and other parts of the interior of Leased Premises in good condition and repair.

6.3

No Waste. Tenant shall not commit or allow any waste to be committed on any portion of the Leased Premises, and at the termination of this Lease, Tenant shall deliver the Leased Premises to Landlord in as good condition as at the Commencement Date of this Lease, ordinary wear and use excepted.

7.	REPAIRS AND ALTERATIONS BY TENANT.

7.1

Repairs and Obligations of Landlord; Representations of Landlord. As of the date on which possession of the Leased Premises is delivered to Tenant, Landlord shall be responsible for compliance of the Leased Premises and the Project with all applicable governing codes and laws, life/fire safety, physical handicap, earthquake safety, environmental issues and the Americans with Disabilities Act. In addition, as of the date on which possession of the Leased Premises is delivered to Tenant, Landlord will certify that the HVAC system, plumbing and electrical systems are in proper working condition. If the Leased Premises (other than the Tenant Improvements), other portions of the Project or the Property are found to be in noncompliance, Landlord shall promptly remedy the violation at Landlord’s sole cost and expenses. Landlord shall promptly cure at its sole cost and expense any omission or defects in the Leased Premises or the Project that were not known or readily discoverable upon acceptance of possession, and promptly, after receiving written notice thereof by Tenant, correct any and all such defects or omission at Landlord’s sole cost and expense. Landlord shall, through the duration of this lease, be responsible for maintaining the roof, exterior walls of the building, HVAC, and exterior plumbing and electrical.

7.2

Repair by Tenant. Subject to the terms of Section 7.1 above, Tenant shall, at all times throughout the term of this Lease and at its sole expense, keep and maintain the Leased Premises in a clean, safe, sanitary and first class condition and in compliance with all applicable laws, codes, ordinances, rules and regulations, except as otherwise required to be performed by Landlord herein. Tenant shall, at Tenant’s own cost and expense, repair any damage done to the Leased Premises, or any part thereof, including replacement of damaged portions or items, caused by Tenant or Tenant’s agents, guests, employees, invitees, licensees, customers or visitors, and Tenant covenants and agrees to make all such repairs as may be required to restore the Project to as good a condition as it was in prior to such

damage except to the extent that such damage may be actually covered by insurance, in which event, the provisions of Section 14.1 of this Lease shall control. All such work or repairs by Tenant shall be effected in compliance with all applicable laws; provided, however, if Tenant fails to make such repairs or replacements within a reasonable period of time after demand by Landlord, Landlord may, at its option, make repairs or replacements, and Tenant shall pay to Landlord the reasonable and actual cost thereof within thirty (30) days of Landlord’s demand therefor, as additional rent. When Landlord provides such written demand to Tenant for reimbursement, Landlord shall simultaneously deliver to Tenant (a) copies of all applicable bills and invoices, (b) copies of all canceled checks evidencing payment of such bills and invoices, and (c) evidence that all contractors providing materials or work have been fully paid.

7.3

Alterations or Additions by Tenant. Except for (a) non-structural modifications, which shall not require approval, and (b) the Tenant Improvements (as described in Section 7.4 below), Tenant agrees with Landlord not to make or allow to be made any alterations to the Leased Premises, install any vending machines on the Leased Premises (other than for Tenant’s use), without first obtaining the prior written consent of Landlord in each such instance, which consent shall not be unreasonably withheld or delayed. Notwithstanding anything to the contrary in this Lease, Tenant may install in the Leased Premises such fixtures (trade or otherwise) and/or equipment as Tenant deems necessary, advisable, or proper, and all of said items shall remain Tenant’s property whether or not affixed or attached to the Leased Premises. Tenant may remove said fixtures from time to time during the Lease Term or any renewal option(s). Landlord shall not mortgage, pledge or encumber said fixtures, equipment or improvements. Tenant shall within thirty (30) days after expiration of the Lease Term or any renewal period, repair any damage to the Leased Premises cause by Tenant’s removal of any such fixtures or equipment, restoring premises to condition that existed as of the commencement date of this lease, ordinary wear and tear excepted.

7.4

Tenant Improvements. Notwithstanding anything to the contrary in this Lease, Tenant, shall have the right, but not the obligation, to cause certain tenant improvements (the “Tenant Improvements”) to be made to the Leased Premises (including, without limitation, the construction of a drive-through facility). Regardless of any provision herein to the contrary, tenant, at its sole expense, shall be responsible for any and all tenant improvements, including those improvements that are required for bank compliance.

7.5

Property of Landlord. Except as provided in Section 28 of this Lease, any and all alterations to the Leased Premises shall become the property of Landlord upon termination of this Lease (except for movable equipment or furniture owned by Tenant). Landlord acknowledges that certain property and money that Tenant will hold under its control in the performance of its business as a bank and financial institution will not belong to Tenant and nothing contained in this Lease shall be or be construed to allow Landlord to interfere with the rights of the owners of such property, whether held in trust, in safe deposit boxes, or otherwise, to the possession of such property or money.

INTERRUPTION OF SERVICES. Landlord shall not be liable for interruption of the supply of any services occasioned by accidental failure of power supply, sewer system, water, utilities, or any other cause beyond the control of the Landlord, nor shall Landlord be liable for damages incurred as the result of interruption of such services when required to provide repairs, maintenance, improvements, etc., provided however, that to the extent feasible, such interruptions shall be scheduled so as to minimize the disruption of Tenant’s business.

9.	LAWS, REGULATIONS AND RULES.

9.1

Applicable Ordinances. Tenant shall comply with all applicable laws, ordinances, rules and regulations of any governmental entity, agency or authority having jurisdiction over the Leased Premises or Tenant’s use of the Leased Premises.

9.2

Project Rules. Tenant shall comply with the rules and regulations reasonably adopted by Landlord as they may be reasonably amended by Landlord from time to time (the “Project Rules”), and will use its best efforts to cause all of its agents, employees, invitees and visitors to do so. All changes to the Project Rules will be furnished by Landlord to Tenant in writing prior to their effectiveness.

10.

ENTRY BY LANDLORD. Tenant shall permit Landlord or its agents or representatives to enter into and upon any part of the Leased Premises upon prior notice and at all reasonable hours (and in emergencies at all times) to inspect the condition, occupancy or use, to show the Leased Premises to prospective purchasers, mortgagees, tenants or insurers, or to clean or make repairs, alterations or additions. Tenant shall not be entitled to any abatement or reduction of rent by reason of this right of entry; provided, however, any proposed entry by Landlord for the purpose of showing the Leased Premises shall be subject to Tenant’s approval and with eight (8) hours advance notice by Landlord, such approval by Tenant not to be unreasonably withheld. Notwithstanding anything herein to contrary, Landlord shall comply with all applicable banking laws and rules regarding access to the Leased Premises and shall not enter and/or inspect any safety deposit box, vault, and/or other storage device containing confidential materials of third parties.

11.

ASSIGNMENT AND SUBLETTING. Except for assignments or subleases:

a) that landlord reasonably determines would conflict with any existing exclusive and/or non compete right within the Property, and

b) parents, affiliates or subsidiaries of Tenant (all of the foregoing of which shall be deemed a permitted assignment or sublease and shall not require the consent of Landlord),

Tenant shall not have the right to assign, sublet, transfer or encumber this Lease, or any interest therein, without the prior written consent of Landlord, which consent will not be unreasonably withheld. Any attempted assignment, subletting, transfer or encumbrance by Tenant in violation of the terms and covenants of this Section shall be void. No assignment, subletting, or other transfer, whether consented to by Landlord or not, or permitted hereunder, shall relieve Tenant of its liability hereunder.

12.

MECHANIC’S LIEN.

12.1

Tenant Not to Permit Liens. Tenant will not permit any mechanic’s or materialman’s lien or liens or any other liens of whatsoever nature to be placed upon the Leased Premises or the Project and the Landlord’s interest in the leased premises shall not be subject to mechanics liens for improvements ordered by Tenant pursuant to Florida Statute Section 713.10, and this provision shall be incorporated into the memorandum of lease to be recorded in the public records of Leon County Florida. Nothing in this Lease shall be deemed or construed in any way as constituting the consent or request of Landlord, express or implied, to any person for the performance of any labor or the furnishing of any materials to all or part of the Leased Premises, nor as giving Tenant any right, power or authority to contract for or permit the rendering of any services or the furnishing thereof that would or might give rise to any mechanic’s or materialman’s or other liens against the Leased Premises.

12.2

Right of Tenant to Bond Liens; Rights of Landlord. In the event that any such lien is claimed against the Leased Premises or the Project (or any part thereof), and if Tenant, in good faith, disputes the amount of the claim or debt which is the alleged basis for any such lien or for any other reason disputes the lien claimant’s right to such lien, Tenant shall not be in default under this Lease if Tenant, within thirty (30) days of receiving notice of the recording of such lien, furnishes Landlord a bond, issued by a corporate surety satisfactory to Landlord, in the amount which the lien claimant claims is secured by the lien, or deposits with Landlord such amount in cash. Tenant agrees that if a final determination is made by a court of competent jurisdiction that some or all of the amount claimed by the lien claimant to be secured by the lien is due to the lien claimant and is secured by a lien, Landlord may pay such amount from the bond or the cash deposit if Tenant does not pay such amount to the lien claimant within thirty (30) days of such final determination. If any such lien is claimed against the Leased Premises and Tenant does not furnish such bond to, or make such cash deposit with Landlord, then, in addition to any other right or remedy of Landlord, Landlord may, but shall not be obligated to, discharge such lien. Any amount paid by Landlord for such purpose shall be paid by Tenant to Landlord as additional rent within ten (10) days of Landlord’s demand therefor.

13.

INSURANCE.

13.1.

Casualty Insurance. Landlord shall, at all times during the Lease Term, maintain a policy or policies of insurance, issued by and binding upon some solvent insurance company, insuring the Project against loss or damage by fire, or other insurable hazards and contingencies within the concept of “extended

coverage” for the full insurable value thereof, in each case, exclusive of excavation costs, foundation costs, pilings, underground conduits, and other similar underground items with such coverage and with such limitations and conditions to coverage as may be customary for properties of similar nature, value, use and risk; provided that Landlord shall not be obligated to insure any furniture, equipment, machinery, goods, supplies or other personal property or trade fixtures that Tenant may bring or obtain upon the Leased Premises, or any additional improvements that Tenant may construct thereon. If the annual premiums charged Landlord for such casualty insurance exceed the standard premium rates because the nature of Tenant’s operations result in extra-hazardous exposure, then Tenant shall upon receipt of appropriate premium invoices reimburse Landlord for such increases in such premium; provided that this provision shall not be construed so as to allow or permit, and Tenant hereby agrees not to (i) use, or allow the use of, the Leased Premises for any hazardous use, or (ii) allow, install, store or permit any hazardous or regulated materials on or in the Leased ·Premises without in each instance the Landlord’s express written consent. Tenant shall maintain at its expense, in an amount equal to the full replacement cost, fire and extended coverage insurance on all of its personal property, including removable trade fixtures, located in the Leased Premises.

13.2.

Liability Insurance. Tenant and Landlord shall, each at its own expense, maintain a policy or policies of comprehensive general liability insurance with the premiums thereon fully paid on or before the due date, issued by and binding upon some insurance company authorized to do business in Florida, such insurance to afford protection of not less than $1,000,000 combined single limit coverage for bodily injury, property damage or combination thereof. Landlord shall not be required to maintain insurance against thefts within the Leased Premises or the Project.

13.3.

Tenant’s Right to Self-Insure. Notwithstanding anything to the contrary in this Lease, Landlord acknowledges and agrees that the insurance to be maintained by Tenant may be in the form of a general coverage or floater policy covering these and other premises and, with the exception of general liability insurance to be maintained by Tenant, Tenant may self-insure any or all of the amounts required to be carried herein with deductibles in amounts to be determined by Tenant in Tenant’s sole discretion.

14.

CASUALTY DAMAGE.

14.1.

Fire or Other Casualty. If the Leased Premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give prompt written notice to Landlord, whereupon Landlord, within thirty (30) days after such damage, shall be required to provide Tenant with a written schedule of the timing of the repairs that are to be made, including, without limitation, the anticipated completion date. In case the Project shall sustain substantial damage (whether or not the Leased Premises shall have been damaged by such casualty but the operation of Tenant’s business is nevertheless interrupted) or in the event any mortgagee of Landlord’s

should require that the insurance proceeds payable as a result of a casualty be applied to the payment of the mortgage debt, either Landlord or Tenant may, at its option, terminate this Lease by notifying the other party in writing of such termination within one hundred eighty (180) days after the date of such damage. If this Lease is not thus terminated, Landlord shall commence and proceed with reasonable diligence to restore the Project to substantially the same condition in which it was immediately prior to the happening of the casualty, and Tenant’s Lease shall remain in full force and effect. If the Project shall sustain less than substantial damage, Landlord shall commence and proceed with reasonable diligence to restore the Project to substantially the same condition in which it was immediately prior to the happening of the casualty, and this Lease shall remain in full force and effect.

14.2.

Substantial Damage. For purposes of this Section, “substantial damage” to the Project or the Leased Premises shall require that the Project or the Leased Premises, respectively, be damaged to at least fifty percent (50%) of its value. In the event that the Landlord shall determine that restoration will take longer than sixty (60) days to repair from the date of commencement of repairs, Landlord shall notify Tenant of such determination within fifteen (15) days of such fire or casualty and either Landlord or Tenant may, within sixty (60) days of such fire or casualty, cancel and terminate this Lease upon written notice to the other. In the event of any casualty to the Leased Premises, as contemplated by this Section, the Rental payable by Tenant hereunder shall equitably abate from the date of such casualty until the completion of Landlord’s required restoration of the Leased Premises or until the date of cancellation of this Lease.

15.

CONDEMNATION.

15.1

Taking. If the whole or substantially the whole of the Project or the Leased Premises should be taken for any public or quasi-public use, by right of eminent domain or otherwise or should be sold in lieu of condemnation, then this Lease shall terminate as of the date when physical possession of the Project or the Leased Premises is taken by the condemning authority. The taking shall be deemed to constitute “substantially the whole” if such portion constitutes fifty percent (50%) or more of the Project or the Leased Premises, respectively. If less than the whole or substantially the whole of the Project or the Leased Premises is thus taken or sold, either Landlord or Tenant (whether or not the Leased Premises are affected thereby) may terminate this Lease by giving written notice thereof to the other party within thirty (30) days of such taking, in which event this Lease shall terminate as of the date when physical possession of such portion of the Project or Leased Premises is taken by the condemning authority. If this Lease is not so terminated upon any such partial taking or sale, the Rental payable hereunder shall be diminished by an equitable amount from the time of the taking based on the portion of the Leased Premises taken, if any, and Landlord shall, to the extent that it is reasonably possible to do so in accordance with applicable regulations and principles of construction and engineering, commence and proceed with reasonable diligence to restore the Project and the Leased Premises to substantially their former condition.

15.2.

Rights of Tenant. Tenant reserves unto itself the right to prosecute Tenant’s claim for an award for damages for the termination of this Lease caused by such appropriation or taking, together with damages based on the value of Tenant’s improvements and Tenant’s fixtures and other personal property erected or installed on the Leased Premises and damages Tenant may sustain to the interest in the business operated by Tenant on the Leased Premises, including, but not limited to, goodwill, patronage, and the removal, relocation, and replacement costs and expenses caused by such appropriation or taking, and Tenant may file such claims as are permitted by law for the loss of its leasehold interest, business dislocation damages, moving expense, or other damages caused by such taking or appropriation. Tenant’s right to receive compensation or damages for its fixtures or its personal property shall not be affected in any manner by this Lease.

16.

WAIVER OF SUBROGATION RIGHTS. Landlord and Tenant shall obtain from their respective insurers endorsements whereby the insurers agree to waive any right of subrogation against Landlord or Tenant, as the case may be, in connection with fire or other risks or casualties covered by said insurance. Landlord agrees that it shall make no claim nor authorize any claim to be made against Tenant, its employees, servants or agents in connection with or as a result of fire, explosion or any other casualty damaging the Leased Premises or other buildings in the Project, excepting, however, such claims as may be permitted pursuant to the terms of the Lease by reason of Tenant’s failure to make repairs to the Leased Premises. Tenant agrees that it shall make no claim nor authorize any claim to be made against Landlord, its employees, servants or agents in connection with or as a result of fire, explosion, or other casualty damaging the contents or fixtures installed in the Leased Premises, excepting, however, such claims as may be permitted pursuant to the terms of Lease by reason of Landlord’s failure to make repairs to the Leased Premises.

17.

INDEMNITY.

17.1.

Indemnification by Tenant. Tenant agrees to indemnify, defend and save Landlord harmless from all claims (including reasonable costs and expenses of defending against such claims) resulting from damages to property, or from injury to or death of persons: (a) occurring in the Leased Premises during the Lease Term (including any Renewal Terms exercised by Tenant); or (b) occurring in or about any other portion of the Project during the Lease Term (including any Renewal Terms exercised by Tenant), to the extent resulting wholly or in part from the negligent or willful act or omission of Tenant or its officers, agents, employees, contractors, subcontractors, customers or invitees; provided, however, the foregoing indemnity shall not apply to the extent such claims result from the negligent or willful act or omission of Landlord or Landlord’s officers, agents, employees, contractors, subcontractors, customers or invitees.

17.2.

Indemnification by Landlord. Landlord agrees to indemnify, defend and save Tenant harmless from all claims (including reasonable costs and expenses of defending against such claims) resulting from damages to property, or from injury to or death of persons occurring in the Project during the Lease Term (including any Renewal Terms exercised by Tenant), to the extent resulting wholly or in part from the negligent or willful act or omission of Landlord or its officers, agents, employees, contractors, subcontractors, customers or invitees; provided, however, the foregoing indemnity shall not apply to the extent such claims result from the negligent or willful act or omission of Tenant or Tenant’s officers, agents, employees, contractors, subcontractors, customers or invitees. Notwithstanding any provision in this Lease to the contrary, Tenant shall not have any liability with respect to, and Landlord shall protect, indemnify, defend and hold Tenant harmless for, from and against any and all claims, costs, expenses, suits, judgments, actions, investigations, proceedings and liabilities arising out of or in connection with (i) any hazardous materials present on the Property, the Project or the Leased Premises prior to the Commencement Date, (ii) any hazardous materials brought onto the Project or the Leased Premises by Landlord or any of its agents, during the Lease Term or (iii) the migration of any hazardous materials described in clauses (i) or (ii) at any time before, during or after the Lease Term.

17.3.

No Liability. Neither Landlord nor Tenant shall be responsible or liable to the other, their respective officers, employees, agents, contractors, subcontractors, customers or invitees, for bodily injury, death or property damage to the extent occasioned by the acts or omissions of any other tenant or occupant in the Project or such tenant’s officers, employees, agents, contractors, subcontractors, customers or invitees within the Project.

18.

DAMAGES FROM CERTAIN CAUSES. Landlord shall not be liable to Tenant for any loss or damage to any property, or injury to or death of any person, occasioned by theft, fire, act of God or the public enemy, injunction, riot, strike, insurrection, war, requisition or order of governmental body or authority or any other cause beyond the control of Landlord.

19.

EVENTS OF DEFAULT/REMEDIES.

19.1.

Events of Default by Tenant. The happening of anyone or more of the following listed events (“Tenant Events of Default”) shall constitute a breach of this Lease by Tenant:

(a)

The failure of Tenant to pay any rent or any other sum of money when due and where such failure shall continue for a period of ten (10) days after Landlord has given Tenant written notice of such failure;

(b)

Except for the payment of rent and other sums of money hereunder, the failure of Tenant, within thirty (30) days after receipt of written notice from Landlord, to comply with any provision of this Lease; provided, however, if such failure to comply cannot be cured within such thirty (30) day period, Tenant shall not be in default so long as Tenant is diligently working towards remedying such failure;

(c)

The taking of the leasehold on execution or other process of law in any action against Tenant;

(d)

If the Tenant shall (i) apply for or consent to the appointment of a receiver, trustee or liquidator of the Tenant or of all or a substantial part of its assets, (ii) admit in writing its inability to pay its debts as they come due, {iii) make a general assignment for the benefit of creditors, (iv) file a petition or an answer seeking reorganization or arrangement with creditors or to take advantage of any insolvency law other than the Federal Bankruptcy Code, (v) file an answer admitting the material allegations of a petition filed against the Tenant in any reorganization or insolvency proceeding, other than a proceeding commenced pursuant to the Federal Bankruptcy Code, or if any order, judgment or decree shall be entered by any court of competent jurisdiction, except for a bankruptcy court or a federal court sitting as a bankruptcy court, adjudicating the Tenant insolvent, or approving a petition seeking reorganization of the Tenant, or appointing a receiver, trustee or liquidator of the Tenant or of all or a substantial part of its assets.

19.2.

Landlord’s Remedies for Tenant Default. Upon the occurrence of any Tenant Event or Events of Default, and if Tenant fails to cure any such Tenant Event of Default within the time provided therein, or if such default (other than a default in the payment of the Base Rental or any other sum due to Landlord) is of such a nature that it could not reasonably be cured within such thirty (30) day period and Tenant does not proceed with reasonable diligence and in good faith to cure such default providing reasonable evidence of its efforts to Landlord as and when requested, Landlord shall have the option, at Landlord’s election, to pursue any one or more of the following remedies:

(a)

Landlord may cancel and terminate this Lease and dispossess Tenant;

(b)

Landlord may elect to enter and repossess the Leased Premises and relet the Leased Premises for Tenant’s account, holding Tenant liable in damages for all expenses incurred in any such reletting and for any difference between the amount of rent received from such reletting and the amount due and payable under the terms of this Lease; or

(c)

Landlord may enter upon the Leased Premises and do whatever Tenant is obligated to do under the terms of this Lease (and Tenant shall reimburse Landlord on demand for any expenses which Landlord may incur in effecting compliance with Tenant’s obligations under this Lease, and Landlord shall not be liable for any damages resulting to the Tenant from such action).

19.3.

Property of Others. Landlord acknowledges that certain property and money held by Tenant under its control in the performance of its business as a bank and financial institution does not and will not belong to Tenant, and nothing contained in this Lease shall be or be construed to allow Landlord to interfere with the rights of the owners of such property, whether held in trust, in safe deposit boxes, or otherwise. Landlord’s remedies for a Tenant Default do not run to such rights and property of others.

19.4.

Landlord Events of Default; Remedies of Tenant.

19.4.1.

Landlord Events of Default. The following events (herein individually referred to as a “Landlord Event of Default”) each shall be deemed to be events of nonperformance by Landlord under this Lease: (1) Landlord’s failure to make any payments of money due Tenant hereunder within ten (10) days after the receipt of written notice from Tenant that the same is overdue, or (2) Landlord’s failure to perform any non-monetary obligation of Landlord hereunder within the thirty (30) days after receipt of written notice from Tenant to Landlord specifying such default and demanding that the same be cured; provided that, if such default cannot with due diligence be wholly cured within the such thirty (30) days Landlord shall have such longer period as may be reasonably necessary to cure the default, so long as Landlord proceeds promptly to commence the cure of the same within such thirty (30) day period and diligently prosecutes the cure to completion.

19.4.2.

Remedies of Tenant. Upon the occurrences of a Landlord Event of Default, at Tenant’s option, in addition to any other remedies which Tenant may have at law or in equity, and without its actions being deemed a cure of Landlord’s default, Tenant may, at is sole option (i) exercise “self help” and pay or perform such obligations and offset Tenant’s reasonable and actual costs of performance against the Base Rental owed by Tenant hereunder; or (ii) sue for damages; or (iii) terminate this Lease, and Tenant shall have no further obligation to pay any Base Rental due hereunder or perform any other obligation required of Tenant hereunder, in each case, for any period on and after the termination date.

19.5.

Remedies are Cumulative. All the remedies of either party in the event of the other party’s default shall be cumulative and, in addition, such non-defaulting party may pursue any other remedies permitted by law or in equity. Forbearance by such non-defaulting party to enforce one or more of the remedies upon the other party’s default shall not constitute a waiver of such default.

20.

PEACEFUL ENJOYMENT.

20.1.

Rights of Tenant. Tenant shall, and may, peacefully enjoy the Leased Premises against all persons claiming by, through or under Landlord, subject to the other terms hereof, provided that Tenant pays the Rental and performs all of Tenant’s covenants and agreements in this Lease.

20.2.

Representations of Landlord. Landlord covenants that on or before the date on which Tenant takes possession of the Leased Premises, it will have good title to the Project (including the Leased Premises); free and clear of all liens and encumbrances, excepting only the lien for current taxes not yet due, such mortgage or mortgages as are permitted by the terms of this Lease, zoning ordinances and other building and fire ordinances and governmental regulations relating to the use of such property, and easements, restrictions and other conditions of record. Landlord shall not, without Tenant’s prior written approval, diminish access, ingress or egress to the Leased Premises, diminish the amount of available parking or the proximity of such parking to the Leased Premises, diminish the ability of Tenant or its invitees to access any entrance to the Leased Premises or diminish the visibility of the Leased Premises from any public street adjacent to the Leased Premises in any material manner which may negatively impact Tenant’s business or its right to the quiet use and possession of the Leased Premises.

20.3.

Limitation on Peaceful Enjoyment. The foregoing covenant and any and all other covenants of the Landlord shall be binding upon Landlord and its successors only with respect to breaches occurring during its or their respective periods of ownership of the Leased Premises.

21.

HOLDING OVER.

21.1

Rental Amount. If Tenant holds over without Landlord’s written consent after expiration or other termination of this Lease, or if Tenant continues to occupy the Leased Premises after termination of Tenant’s right of possession, Tenant shall throughout the entire holdover period pay rent at a rate equal to one-hundred twenty-five percent (125%) of the Rental paid by Tenant during the last preceding Lease Year. Tenant shall be deemed a “Tenant-at-Will” during the first two months of said holdover period; thereafter, Tenant shall be a ‘‘Tenant-at sufferance” and shall be subject to all reasonable and actual damages to which Landlord may be entitled. The term “Lease Year”, as used herein, shall mean a period of twelve (12) consecutive calendar months included in the Lease Term (including any Renewal Terms), commencing on the Commencement Date and ending on the day immediately preceding the anniversary of said Commencement Date.

21.2

No Extension of Term. No possession by Tenant after the expiration of the Lease Term shall be construed to extend the Lease Term unless Landlord has consented to such possession in writing.

22.

SUBORDINATION TO MORTGAGE.

22.1

Subject to Mortgages. Provided that the mortgagee in question shall execute and deliver a non-disturbance agreement in the form as the Landlord, Tenant and the mortgagee may agree, this Lease is and shall be subject and subordinate to any mortgage, or other lien created by Landlord, whether now existing or hereafter arising upon the Leased Premises, or upon the Project and to any renewals, refinancing and extensions thereof, but Tenant agrees that any such mortgagee shall have the right at any time to subordinate such mortgage, or the lien thereof, to this Lease on such terms and subject to such conditions as such mortgagee may deem appropriate in its discretion.

22.2

Subordination of Lease. Tenant agrees upon demand to execute such further instruments subordinating this Lease to any mortgage or other lien now existing or hereafter placed upon the Leased Premises or the Project as a whole, or attorning to the holder of any such liens, provided that the holder of such liens shall execute and deliver a non-disturbance agreement in the form as the Landlord, Tenant and the mortgagee may agree. Tenant agrees to execute such subordination and non-disturbance agreement within fifteen (15) business days following request by Landlord.

22.3

Form of Agreement. Tenant agrees that it shall cooperate with Landlord in its efforts to obtain permanent financing for the Project, and that it shall not unreasonably refuse to execute any commercially reasonable form of subordination and non-disturbance agreement.

22.4

Estoppel Certificates. Tenant agrees that it will from time to time upon request by Landlord execute and deliver to such persons as Landlord shall request, a statement in recordable form certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as so modified), stating the dates to which rent and other charges payable under this Lease have been paid, and stating that to the knowledge of Tenant, Landlord is not in default hereunder (or if Tenant alleges a default stating the nature of such alleged default). Tenant agrees to execute such estoppel certificates within fifteen (15) business days following request by Landlord.

22.5

Attornment. Tenant shall, in the event of the sale or assignment of Landlord’s interest in the Project, or in the event of any proceedings brought for the foreclosure of, or in the event of exercise of the power of sale under, any mortgage made by Landlord covering the Leased Premises, attorn to the purchaser and recognize the purchaser as Landlord under this Lease, provided that such purchaser shall execute and deliver to Tenant a non-disturbance agreement in the form as such purchaser and Tenant may agree.

23.

NO LANDLORD’S LIEN. Notwithstanding anything to the contrary in this Lease, Landlord acknowledges that the trade fixtures, furnishings equipment and personal property of the Tenant shall in no event become the property of the Landlord.

Furthermore, Landlord waives any right, title or interest in Tenant’s personal property located on the Leased Premises, including any landlord’s lien or other right or interest that would arise in law or at equity or attach to Tenant’s personal property as a result of Tenant entering into this Lease. In addition, Landlord acknowledges that certain property and money held by Tenant under its control in the performance of its business as a bank and trust company will not belong to Tenant and nothing contained in this Lease shall be or be construed to allow Landlord to interfere with the rights of the owners of such property, whether held in trust, in safe deposit boxes, or otherwise, to the possession of such property or money. Landlord’s right to remove, store and dispose of Tenant’s property does not run to such property of others.

24.

ATTORNEY’S FEES. In any action which may be sought to enforce the provisions of this Lease, the prevailing party in such action shall be entitled to recover from the other reasonable attorneys’ fees in addition to its court costs and disbursements incidental thereto.

25.

NO IMPLIED WAIVER.

25.1

No Waiver. The failure of either party to insist at any time upon the strict performance of any covenant or agreement or to exercise any option, right, power or remedy contained in this Lease shall not be construed as a waiver or a relinquishment thereof for the future.

25.2

Partial Payment. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly installment of rent due under this Lease shall be deemed to be other than payment on account of the earliest rent due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such rent or pursue any other remedy provided in this Lease.

26.

FORCE MAJEURE. Whenever a period of time is herein prescribed for the taking of any action by either party hereto, such party shall not be liable or responsible for, and there shall be excluded from the computation of such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations or restrictions, financing, or any other cause whatsoever beyond the control of such party; provided, however, nothing herein shall extend the time for Tenant to make payment of rent or other charges due hereunder.

27.

RELATIONSHIP OF PARTIES. Nothing contained in this Lease shall be deemed or construed by the parties hereto, nor by any third party, as creating the relationship of principal and agent or of partnership or of joint venture between the parties hereto, it being understood and agreed that neither the method of computation of rent, nor any other provisions contained herein, nor any acts of the parties herein, shall be deemed to create any relationship between the parties hereto other than the relationship of Landlord and Tenant.

28.

SURRENDER OF PREMISES . The Tenant shall, at the end of the Lease Term, surrender to the Landlord the Leased Premises, broom clean and in good order, condition and repair except for ordinary wear and tear and damage for which the Tenant is not obligated to make repairs under this Lease. Upon such termination, the Tenant may remove from the Leased Premises all trade fixtures installed by the Tenant installed after the date hereof (which shall include but not be limited to vault doors and controls, vault alarm/security system including sensors and controls, teller equipment, and all items of equipment which are related to the banking industry), merchandise, furniture, furnishings, and other property of the Tenant and shall promptly, at its own cost and expense, repair any damage caused by such removal. The premises must be restored to the condition that they were on the commencement date, reasonable wear and tear excepted; provided, however, Tenant shall in no event be obligated to remove the Tenant Improvements.

29.

MISCELLANEOUS.

29.1.

Severability. If any term or provision of this Lease, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and enforced to the fullest extent permitted by law.

29.2.

Recordation. Tenant agrees not to record this Lease or any amendment, exhibit or schedule hereto, without the prior written consent of Landlord. Tenant may, however record a memorandum hereof which has first been approved and executed by each of Landlord and Tenant which describes the Leased Premises, refers to the existence of this Lease, incorporates the provision of section 12.1 hereof, and summarizes certain of the terms and conditions hereof but does not describe rent or any other financial provisions hereof. It is understood that any such memorandum shall be for purposes of recordation only, and shall not in any way modify, amend, supersede, or otherwise affect this Lease or its terms.

29.3.

Governing Law. This Lease and the rights and obligations of the parties hereto are governed by the laws of the State of Florida.

29.4.

Time of Performance. Except as may be otherwise expressly provided herein, time is of the essence of this Lease with respect to all required acts of Tenant.

29.5.

Transfers of Landlord. Landlord shall have the right to transfer and assign, in whole or in part, all its rights and obligations hereunder and in the Project and the Leased Premises referred to herein, and in such event and upon such transfer (not to include, however, assignments by Landlord in the nature of security to a third party lender) Landlord shall be released from any further obligations hereunder, and Tenant agrees to look solely to such successor in interest of Landlord for the performance of such obligations; provided that: (a) Landlord shall not be relieved of any existing, unsatisfied and matured obligation or liability which it has to Tenant at the time of such transfer or assignment, and such obligation or liability

shall remain in full force and effect until it is satisfied in full, and Tenant shall retain all its rights under this Lease with regard to such obligation or liability; (b) the transferee or assignee of Landlord’s rights under this Lease shall be bound by, and must agree to honor, all of the terms, provisions and conditions of this Lease; and(c) Landlord must give Tenant written notice of such transfer or assignment within thirty {30) days of its effective date.

29.6.

Commissions. Each party warrants and represents to the other party that no broker was involved on either party’s behalf in negotiating or consummating this Lease. Each party agrees to indemnify and hold ·the other party harmless from and against any and all claims for brokerage commissions arising out of any communications or negotiations had by the indemnifying party with any broker regarding the Leased Premises.

29.7.

Parking.

29.7.1

Reserved. Tenant is hereby granted the exclusive use of six (6) reserved parking spaces for use by its customers and executive officers at no charge, which spaces shall be located in front of the Project facing Market Square Shopping Center, and shall be acceptable to Tenant in all respects. Landlord shall clearly post signs or other designations of such exclusive use.

29.7.2

Unreserved. Tenant is hereby granted the non-exclusive use of all other unreserved parking spaces, which service the Project and Property. These spaces will be provided free of charge for use by Tenant’s employees or customers.

29.7.3

Parking Area Maintenance. Landlord shall maintain the parking areas on the Property in a first class manner and in such a manner so as to be in compliance with all applicable laws and regulations, such maintenance to include, but not be limited to, re-paving, re-striping and posting of any signs as required hereunder.

29.8

Effect of Delivery of this Lease. Landlord has delivered a copy of this Lease to Tenant for Tenant’s review only, and the delivery hereof does not constitute an offer to Tenant or an option to lease. This Lease shall not be effective until a copy executed by both Landlord and Tenant is delivered to and accepted by Landlord.

29.9

Section Headings. The section or subsection headings are used for convenience of reference only and do not define, limit or extend the scope or intent of the sections of this Lease.

29.10

No Other Representations. Neither party has made any representations or promises, except as contained herein, or in some further writings, signed by the party making such representation or promise. This Lease contains the entire agreement of the parties and no prior written or oral agreements, promises or inducements not embodied herein shall be of any force or effect.

29.11

Successors and Assigns. Each provision hereof shall extend to and shall, as the case may require, bind and inure to the benefit of the Landlord and its successors and assigns, and of the Tenant, and its successors, assigns and subtenants.

29.12

Notices.

29.12.1

Notices To Landlord. The Tenant shall pay the Rental and shall forward all notices to Landlord at the following address (or at such other place as Landlord may hereafter designate in writing), with a copy of such notice simultaneously faxed:

MS Timberlane, Inc.

1415 Timberlane Road, Suite 217

Tallahassee, Florida 32312

Attention: William D. Crona

Fax: (850) 893-8996

29.12.2

Notices To Tenant. The Landlord shall forward all notices to Tenant at the following address (or at such other place as Tenant may hereafter designate in writing), with a copy of such notice simultaneously faxed:

with a copy to:

29.12.3

Form of Notice. Any notice provided for in this Lease shall be deemed given when deposited, certified mail, return receipt requested.

29.13

Reference To Lease. Reference to this Lease shall be deemed to include this Lease and any referenced and attached Exhibits and Schedules.

29.14

Condition of Regulatory Approval: In the event that Tenant does not obtain regulatory approval from the state of Florida for its bank charter on or before December 31, 2007, then this Lease shall be null and void and each party shall no longer have any further obligations under its terms.

IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed in their names and on their behalf in multiple original counterparts effective as of the day and year first above written.


LANDLORD:

MS TIMBERLANE, INC.

By:		/s/ William D. Crona
		William D. Crona
Its:		Director

TENANT:

By:		/s/ Sammie D. Dixon, Jr.
		Sammie D. Dixon, Jr., CEO
		Red Hills Holdings, Inc.

EXHIBIT A-1

LEASE

[Legal Description of Project]

A portion of that certain real estate described as follows:

Commence at a concrete monument marking the Southwest comer of Lot 4, of Johnson Subdivision, a subdivision as per map on plat thereof, recorded in Plat Book 2, page 71 of the Public Records of Leon County, Florida, and run thence North 89 degrees 40 minutes 52 seconds East along the South boundary of said Lot 4 a distance of 709.01 feet to a concrete monument on the Northwesterly right-of-way boundary of I-10, thence North 75 degrees 14 minutes 17 seconds East along said Northwesterly right-of-way boundary 218.30 feet to a concrete monument, thence North 00 degrees 11 minutes 32 seconds West 428.29 feet to a concrete monument for the POINT OF BEGINNING. From said POINT OF BEGINNING, continue North 00 degrees 11 minutes 32 seconds West 230.0 feet to a concrete monument on the South right-of-way boundary of Timberlane Road, thence North 89 degrees 45 minutes 17 seconds East along said South right-of-way boundary 235.0 feet to a concrete monument, thence South 00 degrees 11 minutes 32 seconds East 230.0 feet to a concrete monument, thence South 89 degrees 45 minutes 17 seconds West 235.0 feet to the POINT OF BEGINNING.

Exhibit 10.6

LOGO

December 10, 2012

Audit Committee of the Board of Directors

Sammie Dixon, CEO

Prime Meridian Bank

1471 Timberlane Road

Tallahassee, FL 32312

Dear Mr. Dixon,

We look forward to providing loan review consulting services to Prime Meridian Bank (the Bank). This letter outlines our understanding of terms and objectives of the engagement.

We will provide loan review consulting services, which will consist of credit quality reviews (using the Bank’s loan loss reserve methodology) and certain other procedures as requested and listed in the attached scope.

The loan review consulting services, which are not in accordance with generally accepted auditing standards, shall be performed in conformity with the Statements on Standards for Consulting Services of the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of the specific users of the report, which are management and the Board of Directors of the Bank.

We will document the results of the engagement in a written report communicating our scope of services, coverage percentage, risk ratings, loan documentation exceptions, and other observations and recommendations related to the lending functions. We will not express any other matter. Please also note that our engagement cannot be expected to detect fraud.

You are responsible for management decisions and functions, and for designating an individual with suitable skill, knowledge, or experience to oversee the adequacy, timing, progress and results of the services performed and accepting responsibility for such services. In addition, said individual should coordinate the process of providing and receiving information and facilitate the type and frequency of reporting to management and the Board of Directors.

We will not perform management functions, make management decisions, or act or appear to act in a capacity equivalent to that of a member of management or an employee and, if applicable, will comply with the AICPA, U.S. Securities and Exchange Commission (SEC), Public Company Accounting Oversight Board (PCAOB), or regulatory independence guidance.

The work papers and related reports prepared for the engagement are the property of the Bank. However, the loan review work papers will be maintained in the Marianna office of CRI for seven years. Authorized employees will have reasonable and timely access to all work papers. In addition, we will grant immediate and full access to all work papers and reports to the Bank’s regulator upon authorization form the Bank. Access to the requested work papers will be provided in our office or other location as may be designated by you. In the event of engagement termination, we will make our work papers available for a successor auditor’s review upon issuance of the final report and payment of all fees.

In the unlikely event of a dispute between the Bank and CRI, the parties will attempt to resolve the dispute through an informal good faith mediation process supervised by a mutually-acceptable neutral. CRI and the Bank have not agreed to alter or allocate consequential damages, if any, which arise out of errors, omissions or negligence of either party, in any way other than provided by law.

As a condition to confidential information being furnished by one party to the other party, both parties agree to treat all such material (whether prepared by such parties, their advisors or otherwise and irrespective of the form of communication) (herein collectively referred to as the “Confidential Material”) in accordance with the provisions of these engagement terms, and to take or abstain from taking certain other actions hereinafter set forth. The term “Confidential Material” also shall be deemed to include all reproductions, summaries, extracts, notes, analyses, compilations, studies, interpretation or other documents prepared by the receiving party which contain, reflect or are based upon, in whole or in part, the information furnished to the receiving party in connection with this engagement (“Derivative Material”).

Each party hereby agrees that (i) all Confidential Material furnished or disclosed to it by the other party is and shall remain the property of the disclosing party ( unless otherwise agreed in writing), (ii) the disclosing party is only loaning the Confidential Material to the receiving party, (iii) the receiving party has not received and will not receive any rights or claims with respect to the Confidential Material, and (iv) all Derivative Material shall become and remain the property of the disclosing party, as applicable, immediately upon its creation and that the same is the disclosing party’s unpublished work.

Each party hereby agrees that the Confidential Material will be kept confidential, and that it will not use, duplicate or disclose, or permit the use, duplication or disclosure of, any of the Confidential Material in any manner whatsoever, other than for the sole purpose of performing the services outlined herein; provided, that a party may make any disclosure of such information to which the disclosing party gives its prior written consent. It is further understood and agreed that neither party will disclose any Confidential Material to any persons outside of its organization and that it will take all necessary measures to avoid such disclosure. The term “person” as herein shall be broadly interpreted to include the media and any individual, corporation, partnership, group, governmental agency or other entity.

The receiving party shall use the same degree of care as it uses to protect its own confidential information of like nature, but no less than a reasonable degree of care, to maintain in confidence the confidential information of the disclosing party. The forgoing obligations shall not apply to any information that (i) is at the time of disclosure, or thereafter becomes, part of the public domain through a source other the receiving party, (ii) is subsequently learned from a third party that does not impose an obligation of confidentiality on the receiving party, (iii) was known to the receiving party at the time of disclosure, (iv) is generated independently by the receiving party, or (v) is required to be disclosed by law, subpoena or other process.

In the event that the receiving party is requested or required (by oral questions, interrogatories, requests for information or documents in legal proceedings, subpoena, civil investigative demand or other similar process) to disclose any of the Confidential Material, it shall (to the extent permitted by applicable law) provide the disclosing party with prompt written notice of any such request or requirement so that the disclosing party may seek (at its sole cost and expense) a protective order or other appropriate remedy and/or waive compliance with the provisions of this letter agreement. If, in the absence of a protective order or other remedy or the receipt of a waiver by the disclosing party, the receiving party is nonetheless, in the written opinion of its outside counsel, legally compelled to disclose Confidential Material to any tribunal or else stand liable for contempt or suffer other censure or penalty, we may, without liability hereunder, disclose to such tribunal only that portion of the Confidential Material which such outside counsel advises it is legally required to be disclosed, provided that such party will exercise its best efforts to preserve the confidentiality of the Confidential Material, including, without limitation, by cooperating with the disclosing party (at the disclosing party’s sole cost and expense) to obtain an appropriate protective order or other reliable assurance that such tribunal will accord the Confidential Material confidential treatment.

We will not solicit for employment any full-time, permanent Bank employee during the term of this engagement and for a period of twelve (12) months following its termination except as may be agreed to in writing by both parties. The Bank shall not solicit for employment any full-time, permanent CRI employee who is involved in the performance of the services described herein during the term of this engagement and for a period of twelve (12) months following its termination except as may be agreed to in writing by both parties.

We sincerely appreciate this opportunity to be of service to you. If the forgoing is in accordance with your understanding, please sign the copy of this letter in the space provided and returned the signed letter to us.

Very truly yours,

LOGO

Carr, Riggs, & Ingram, LLC

Certified Public Accountants

Response :

This letter correctly sets forth the understanding of Prime Meridian Bank:

/s/ Sammie D. Dixon, Jr.

CEO

December 10, 2012

Date

Scope

•

Obtain a report indicating the 41 loans to be reviewed as determined by management and obtain all loans for review. (See attached loan listing.)

•

For loans selected for review, obtain applicable loan and credit files and payment histories. Review collateral documentation, credit documentation, and payment histories in order to assess credit quality, loan rating/grading, and compliance with loan policy. Prepare a listing of all loans reviewed, including recommended downgrades and rating rationale for any recommended rating changes.

•

For loans selected for review, examine loan file documentation for critical collateral documents, current financial information for borrowers and guarantors, and proper level of loan approval. Prepare a listing of loan file documentation exceptions.

•

Review the most current regulatory report and latest loan review report.

•

Review the Allowance for Loan and Lease Losses (ALLL) methodology for conformity with Generally Accepted Accounting Principles (GAAP) and current Federal Financial Institutions Examination Council (FFIEC) guidance. Test the mathematical accuracy of the ALLL calculation as applied. Make applicable recommendations based on such review.

Exhibit 21.1

Subsidiaries of the Registrant

Prime Meridian Bank

Incorporated Under the Laws of the State of Florida

EXHIBIT 23.2

Consent of Public Accounting Firm

The Board of Directors

Prime Meridian Holding Company

We consent to the use of our report dated October 16, 2013, with respect to the consolidated balance sheets of Prime Meridian Holding Company and subsidiary as of December 31, 2012 and 2011, and the related consolidated statements of earnings, comprehensive income, changes in stockholders’ equity, and cash flows for the years then ended, included herein, and to the reference to our firm under the heading “Experts” in the prospectus.

/s/ Hacker, Johnson & Smith PA

HACKER, JOHNSON & SMITH PA

Tampa, Florida

October 17, 2013

Exhibit 99.9


STOCK ORDER FORM		PRIME MERIDIAN HOLDING COMPANY

Note: Please read the Stock Order Form Guide and Instructions which accompany this Form.

Deadline: Prime Meridian Holding Company’s offering began on . The offering must be completed on or before February 28, 2014, unless extended in our sole discretion until no later than June 30, 2014.

Number of Shares

(1) Number of Shares

Price Per Share

(2) Total Amount Due

$12.50

The minimum number of shares that any investor may purchase is 500 shares. The maximum number of shares that any investor may purchase is 80,000 shares. Securities will not be issued, without prior approval, to any person who, in the Board of Directors’ opinion, would be required to obtain prior clearance or approval from any state or federal regulatory authority.

Method of Payment

(3)	Enclosed is a check or bank draft drawn on a U.S. bank, a cashier’s check or money order payable to Prime Meridian Holding Company for: $ .

Stock Registration

ONE OWNERSHIP PER ORDER FORM

(4)	Form of stock ownership


¨	Individual	¨	Tenants in Common

¨	Joint Tenants	¨	*Uniform Transfer or Gift to Minors

¨	Tenants by the Entireties (husband and wife only)	¨	Fiduciary/Trust (Under Agreement Dated ) Subject to approval. See restrictions herein.

* Minor’s Social Security Number Required

OFFICE USE: Date Received Check # Amount $ Order # Category Initials

Acknowledgments

By signing below:

1.	I acknowledge receipt of the Prospectus dated . I acknowledge and certify that I have read and understand the disclosures set forth herein and in the Prospectus. I have relied only on the Prospectus in making my investment decision and on no other written or oral information.

2.	I understand that I may not change or revoke my order once it is received by Prime Meridian Holding Company.

3.	I certify that:

(i)

the social security number or taxpayer identification number given herein is correct; and

(ii)

I am not subject to backup withholding.

If you have been notified by the Internal Revenue Service that you are subject to backup withholding because of under-reporting interest or dividends on your tax return, you must cross out Item (ii) above.

4.	I acknowledge that I have not waived any rights under the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended.

5.	I acknowledge that Prime Meridian Holding Company has the right to accept or reject this Stock Order Form in whole or part, in its absolute discretion.

6.	I represent that:

(i)

I am subscribing to purchase shares in good faith, in my own right and not as an agent for any undisclosed person;

(ii)

I have a net worth sufficient to enable me to bear the loss of the investment that I am proposing to make in the shares, am experienced in the evaluation of and investment of my funds in business entities with limited operating histories such as Prime Meridian Holding Company, and, either alone or with one or more Purchaser Representatives (as such term is defined in Securities and Exchange Commission Rule 501[h]), I have such knowledge and experience in financial matters as to be capable of evaluating the relative risks and merits of this prospective investment; and

(iii)

Any shares purchased by me will be held for investment and not with a view to their resale.

THIS FORM MUST BE SIGNED AND DATED . THIS ORDER IS NOT VALID IF THE ORDER FORM IS NOT SIGNED. YOUR ORDER WILL BE FILLED AS PROVIDED BY THE PROSPECTUS.

All purchasers must sign this form. When purchasing as a custodian, etc., include your full title.

The securities offered are not savings accounts, deposits or other obligations of a bank. The securities offered are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, and are subject to investment risk, including the possible loss of your entire investment.


RETURN THIS FORM TO:		Prime Meridian Holding Company
		Attention: Sammie D. Dixon, Jr.
		Chief Executive Officer and President
		1897 Capital Circle NE, Second Floor
		Tallahassee, Florida 32308

PRIME MERIDIAN HOLDING COMPANY

ORDER FORM GUIDE AND INSTRUCTIONS

Instructions

Items 1 and 2 – Fill in the number of shares that you wish to purchase and the total payment due. The amount due is determined by multiplying the number of shares by the purchase price of $12.50 per share. The minimum purchase is 500 shares and the maximum purchase is 80,000 shares

Shares will not be issued, without prior approval, to any person who, in the Board of Directors’ opinion, would be required to obtain prior clearance or approval from any state or federal regulatory authority to own or control our securities. Prime Meridian Holding Company has reserved the right to reject any subscription received in the offering, in whole or in part, in its absolute discretion.

I tem 3 – Payment for shares may be made by check or bank draft drawn on a U.S. bank, a cashier’s check or money order, or funds transferred via wire transfer payable to “Prime Meridian Holding Company.” PLEASE DO NOT MAIL CASH.

Item 4 – The stock transfer industry has developed a uniform system of shareholder registrations that we will use in the issuance of Prime Meridian Holding Company common stock. Print the name(s) in which you want the securities registered and the mailing address of the registration. Include the first name, middle initial, and last name of the shareholder. Avoid the use of two initials. Please omit words that do not affect ownership rights, such as “Mrs.,” “Mr.,” “Dr.,” “special account,” etc.

PLEASE DATE AND SIGN THE STOCK ORDER FORM WHERE INDICATED ON THE BACK.

PLEASE SEE YOUR LEGAL OR FINANCIAL ADVISOR IF YOU ARE UNSURE ABOUT THE CORRECT REGISTRATION OF YOUR STOCK.

Individual – The securities are to be registered in an individual’s name only. You may not list beneficiaries for this ownership.

Tenants in Common – Tenants in common may identify two or more owners. When securities are held by tenants in common, upon the death of one co-tenant, ownership of the securities will be held by the surviving co-tenant(s) and by the heirs of the deceased co-tenant. All parties must agree to the transfer or sale of securities held by tenants in common. You may not list beneficiaries for this ownership.

Uniform Transfer or Gift to Minors – For residents of many states, securities may be held in the name of a custodian for the benefit of a minor under the Uniform Transfers to Minors Act. For residents in other states, securities may be held in a similar type of ownership under the Uniform Gift to Minors Act of the individual states. For either type of ownership, the minor is the actual owner of the securities with the adult custodian being responsible for the investment until the child reaches legal age.

On the first line, print the first name, middle initial, and last name of the custodian, with the abbreviation “CUST” and “Unif Tran Min Act” or “Unif Gift Min Act” after the name. Print the first name, middle initial, and last name of the minor on the second “NAME” line. Standard U.S. Postal Service state abbreviations should be used to describe the appropriate state. For example, securities held by John Doe as custodian for Susan Doe under the Florida Transfer to Minor Act will be abbreviated John Doe, CUST Susan Doe Unif Tran Min Act. FL. Use the minor’s Social Security Number. Only one custodian and one minor may be designated.

Joint Tenants – Joint Tenants with right of survivorship identifies two or more individuals. When securities are held by joint tenants with rights of survivorship, ownership automatically passes to the surviving joint tenant(s) upon the death of any joint tenant. You may not list beneficiaries for this ownership.

Tenants by the Entireties – Husband and wife only. Essentially the same as Joint Tenants.

Fiduciary/Trust – Generally, fiduciary relationships (such as trusts, estates, guardianships, etc.) are established under a form of trust agreement or pursuant to a court order. Without a legal document establishing a fiduciary relationship, your securities may not be registered in a fiduciary capacity. Any trust ownership shall be subject to review and approval by legal counsel for the corporation.

On the first “NAME” line, print the first name, middle initial, and last name of the fiduciary if the fiduciary is an individual. If the fiduciary is a corporation, list the corporate title on the first “NAME” line. Following the name, print the fiduciary “title” such as trustee, executor, personal representative, etc.

On the second “NAME” line, print either the name of the maker, donor, or testator, OR the name of the beneficiary. Following the name, indicate the type of legal document establishing the fiduciary relationship (agreement, court order, etc.). In the blank after “Under Agreement Dated,” fill in the date of the document governing the relationship. The date of the document need not be provided for a trust created by a will.

An example of fiduciary ownership of stock in the case of a trust is: “John D. Smith, Trustee for Thomas A. Smith Trust Under Agreement Dated June 9, 1997.”

Definition of Associate

A person’s associates consist of the following: (1) any corporation or other organization (other than Prime Meridian Holding Company) of which such person is a director, officer, or partner or is directly or indirectly the beneficial owner of 10% or more of any class of equity securities; (2) any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; provided, however, that such term shall not include any tax-qualified employee stock benefit plan of Prime Meridian Holding Company in which such person has a substantial beneficial interest or serves as a trustee or in a similar fiduciary capacity; and (3) any relative or spouse of such person, or any relative of such person, who either has the same home as such person or who is a director or officer of Prime Meridian Holding Company.