10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended         September 30, 2018

or

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number:         333-191801

PRIME MERIDIAN HOLDING COMPANY

(Exact Name of registrant as specified in its charter)

Florida	27-2980805
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
1897 Capital Circle NE, Second Floor, Tallahassee, Florida	32308
(Address of principal executive offices)	(Zip Code)

(850) 907-2301

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☑
	Emerging growth company ☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of November 8, 2018: 3,130,695

INDEX

PART I. FINANCIAL INFORMATION	PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets September 30, 2018 (unaudited) and December 31, 2017	2
Condensed Consolidated Statements of Earnings Three and Nine Months ended September 30, 2018 and 2017 (unaudited)	3
Condensed Consolidated Statements of Comprehensive Income Three and Nine Months ended September 30, 2018 and 2017 (unaudited)	4
Condensed Consolidated Statements of Stockholders’ Equity Nine Months ended September 30, 2018 and 2017 (unaudited)	5
Condensed Consolidated Statements of Cash Flows Nine Months ended September 30, 2018 and 2017 (unaudited)	6
Notes to Condensed Consolidated Financial Statements (unaudited)	7-28
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	29-39
Item 3. Quantitative and Qualitative Disclosures about Market Risk	39
Item 4. Controls and Procedures	40
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	41
Item 1A. Risk Factors	41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3. Defaults Upon Senior Securities	41
Item 4. Mine Safety Disclosures	41
Item 5. Other Information	41
Item 6. Exhibits	42-43
Signatures	44
Certifications

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Condensed Consolidated Balance Sheets

	September 30,			December 31,
	2018			2017
(in thousands)	(Unaudited)
Assets
Cash and due from banks	$	9,086		$	6,971
Federal funds sold		42,152			20,148
Interest-bearing deposits		5,537			5,278
Total cash and cash equivalents		56,775			32,397
Securities available for sale		44,359			49,809
Loans held for sale		6,782			5,880
Loans, net of allowance for loan losses of $3,674 and $3,136		289,022			250,259
Federal Home Loan Bank stock		355			316
Premises and equipment, net		4,699			4,872
Accrued interest receivable		1,028			978
Bank-owned life insurance		1,789			1,757
Other assets		1,149			912
Total assets	$	405,958		$	347,180
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing demand deposits	$	83,296		$	76,216
Savings, NOW and money-market deposits		230,817			200,027
Time deposits		41,133			22,054
Total deposits		355,246			298,297
Official checks		865			1,146
Other liabilities		984			764
Total liabilities		357,095			300,207
Stockholders' equity:
Preferred stock, undesignated; 1,000,000 shares authorized, none issued or outstanding		-			-
Common stock, $.01 par value; 9,000,000 shares authorized, 3,128,671 and 3,118,977 issued and outstanding		31			31
Additional paid-in capital		38,179			37,953
Retained earnings		11,747			9,285
Accumulated other comprehensive loss		(1,094	)		(296	)
Total stockholders' equity		48,863			46,973
Total liabilities and stockholders' equity	$	405,958		$	347,180

See Accompanying Notes to Condensed Consolidated Financial Statements.

2

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Condensed Consolidated Statements of Earnings (Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except per share amounts)	2018		2017		2018		2017
Interest income:
Loans	$	3,798	$	3,025	$	10,615	$	8,498
Securities		276		252		851		709
Other		198		114		354		271
Total interest income		4,272		3,391		11,820		9,478
Interest expense-
Deposits		662		326		1,559		829
Net interest income		3,610		3,065		10,261		8,649
Provision for loan losses		135		32		544		187
Net interest income after provision for loan losses		3,475		3,033		9,717		8,462
Noninterest income:
Service charges and fees on deposit accounts		83		80		259		241
Mortgage banking revenue		124		80		339		316
Income from bank-owned life insurance		11		12		32		35
Loss on sale of securities available for sale		-		-		-		(1	)
Other income		120		88		332		258
Total noninterest income		338		260		962		849
Noninterest expense:
Salaries and employee benefits		1,341		1,053		3,787		3,107
Occupancy and equipment		237		247		698		727
Professional fees		86		90		267		235
Marketing		193		129		533		440
FDIC/State assessment		38		35		112		123
Software maintenance, amortization and other		167		132		474		394
Other		396		321		1,125		977
Total noninterest expense		2,458		2,007		6,996		6,003
Earnings before income taxes		1,355		1,286		3,683		3,308
Income taxes		337		464		909		1,185
Net earnings	$	1,018	$	822	$	2,774	$	2,123
Earnings per common share:
Basic	$	0.33	$	0.26	$	0.89	$	0.83
Diluted	$	0.33	$	0.26	$	0.89	$	0.83
Cash dividends per common share(1)	$	-	$	-	$	0.10	$	0.07

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

See Accompanying Notes to Condensed Consolidated Financial Statements.

3

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2018			2017			2018			2017
Net earnings	$	1,018		$	822		$	2,774		$	2,123
Other comprehensive (loss) income:
Change in unrealized (loss) gain on securities:
Unrealized (loss) gain arising during the period		(231	)		5			(1,069	)		338
Reclassification adjustment for realized loss		-			-			-			1
Net change in unrealized (loss) gain		(231	)		5			(1,069	)		339
Deferred income tax benefit (expense) on above change		59			(2	)		271			(126	)
Total other comprehensive (loss) income		(172	)		3			(798	)		213
Comprehensive income	$	846		$	825		$	1,976		$	2,336

See Accompanying Notes to Condensed Consolidated Financial Statements.

4

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Condensed Consolidated Statements of Stockholders' Equity

Nine Months Ended September 30, 2018 and 2017

										Accumulated
										Other
					Additional					Compre-			Total
	Common Stock				Paid-in		Retained			hensive			Stockholders'
	Shares		Amount		Capital		Earnings			Loss			Equity
(in thousands)
Balance at December 31, 2016		2,004,707	$	20	$	20,732	$	6,563		$	(233	)	$	27,082
Net earnings for the nine months ended September 30, 2017 (unaudited)		-		-		-		2,123			-			2,123
Dividends paid (unaudited)		-		-		-		(140	)		-			(140	)
Net change in unrealized gain on securities available for sale, net of income taxes (unaudited)		-		-		-		-			213			213
Stock options exercised (unaudited)		2,600		-		26		-			-			26
Common stock issued as compensation to directors (unaudited)		3,104		-		51		-			-			51
Sale of common stock net of stock offering costs $1,043 (unaudited)		1,090,908		11		16,946		-			-			16,957
Stock-based compensation (unaudited)		-		-		15		-			-			15
Balance at September 30, 2017 (unaudited)		3,101,319	$	31	$	37,770	$	8,546		$	(20	)	$	46,327
Balance at December 31, 2017		3,118,977	$	31	$	37,953	$	9,285		$	(296	)	$	46,973
Net earnings for the nine months ended September 30, 2018 (unaudited)		-		-		-		2,774			-			2,774
Dividends paid (unaudited)		-		-		-		(312	)		-			(312	)
Net change in unrealized loss on securities available for sale, net of income tax benefit (unaudited)		-		-		-		-			(798	)		(798	)
Stock options exercised (unaudited)		7,500		-		75		-			-			75
Common stock issued as compensation to directors (unaudited)		2,194		-		46		-			-			46
Stock-based compensation (unaudited)		-		-		105		-			-			105
Balance at September 30, 2018 (unaudited)		3,128,671	$	31	$	38,179	$	11,747		$	(1,094	)	$	48,863

See Accompanying Notes to Condensed Consolidated Financial Statements

5

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flow (Unaudited)

	Nine Months Ended
	September 30,
(in thousands)	2018			2017
Cash flows from operating activities:
Net earnings	$	2,774		$	2,123
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		397			390
Provision for loan losses		544			187
Net amortization of deferred loan fees		23			(118	)
Loss on sale of securities available for sale		-			1
Amortization of premiums and discounts on securities available for sale		303			310
Gain on sale of loans held for sale		(339	)		(316	)
Proceeds from the sale of loans held for sale		58,532			48,413
Loans originated as held for sale		(59,095	)		(52,265	)
Stock issued as compensation		46			51
Stock-based compensation expense		105			15
Income from bank-owned life insurance		(32	)		(35	)
Net increase in accrued interest receivable		(50	)		(77	)
Net decrease (increase) in other assets		34			(153	)
Net decrease in other liabilities and official checks		(61	)		(12	)
Net cash provided by (used in) operating activities		3,181			(1,486	)
Cash flows from investing activities:
Loan originations, net of principal repayments		(39,330	)		(22,461	)
Purchase of securities available for sale		(1,003	)		(20,510	)
Principal repayments of securities available for sale		4,542			4,099
Proceeds from sale of securities available for sale		-			750
Maturities and calls of securities available for sale		539			48
Purchase of Federal Home Loan Bank stock		(39	)		(96	)
Purchase of premises and equipment		(224	)		(396	)
Net cash used in investing activities		(35,515	)		(38,566	)
Cash flows from financing activities:
Net increase in deposits		56,949			21,367
Proceeds from stock options exercised		75			26
Proceeds from sale of common stock, net		-			16,957
Common stock dividends paid		(312	)		(140	)
Net cash provided by financing activities		56,712			38,210
Net increase (decrease) in cash and cash equivalents		24,378			(1,842	)
Cash and cash equivalents at beginning of period		32,397			36,165
Cash and cash equivalents at end of period	$	56,775		$	34,323
Supplemental disclosure of cash flow information
Cash paid during the period:
Interest	$	1,529		$	827
Income taxes	$	882		$	1,223
Noncash transaction-
Accumulated other comprehensive loss, net change in unrealized (loss) gain on securities available for sale, net of taxes	$	(798	)	$	213

See Accompanying Notes to Condensed Consolidated Financial Statements.

6

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited)

(1)    General

Prime Meridian Holding Company (“PMHG”) owns 100% of the outstanding common stock of Prime Meridian Bank (the "Bank") (collectively the "Company"). PMHG’s primary activity is the operation of the Bank. The Bank is a Florida state-chartered commercial bank, and 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 clients through its three banking offices located in Tallahassee and Crawfordville, Florida and its online banking platform.

The accounting and financial reporting policies of the Company conform, in all material respects, to accounting principles generally accepted in the United States (“GAAP”) and to general practices within the banking industry. The condensed consolidated financial statements in the Quarterly Report on Form 10-Q have not been audited by an independent registered public accounting firm, but in the opinion of management, reflect all necessary adjustments for a fair presentation of the Company’s financial position and results of operations. All adjustments were of a normal and recurring nature. The condensed consolidated financial statements have been prepared in accordance with GAAP and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission (the “SEC”). Accordingly, the condensed consolidated financial statements do not include all information and footnotes required by GAAP for complete financial presentation and should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, 2017, included in our Annual Report on Form 10-K filed with the SEC on March 20, 2018. The results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the full year or any future period.

Comprehensive Income. GAAP generally requires 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 condensed consolidated balance sheet, such items along with net earnings, are components of comprehensive income. The only component of other comprehensive (loss) income is the net change in the unrealized (loss) gain on securities available for sale.

Stock-Based Compensation. The Company expenses the fair value of stock options granted. The Company recognizes stock option compensation expense in the condensed consolidated statements of earnings as the options vest.

Mortgage Banking Revenue. Mortgage banking revenue includes gains and losses on the sale of mortgage loans originated for sale and wholesale brokerage fees, net of commissions and deferred loan costs. The Company recognizes mortgage banking revenue from mortgage loans originated in the condensed consolidated statements of earnings upon sale of the loans.

Reclassifications. Certain reclassifications of prior period amounts have been made to conform to the current period presentation.

(continued)

7

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited)

(1)    General, Continued

Recent Accounting Standards Update. In January 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The ASU requires equity investments to be measured at fair value with changes in fair values recognized in net earnings, (public entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes), simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment and eliminates the requirement to disclose fair values, the methods and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost. The ASU also clarifies that the Company should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale debt securities in combination with the Company's other deferred tax assets. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this guidance did not have a material impact on the Company's condensed consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-2, Leases (Topic 842) which will require lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with terms of more than twelve months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. The new ASU will require both types of leases to be recognized on the balance sheet. The ASU also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. For public companies, the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is in the process of determining the effect of the ASU on its condensed consolidated financial statements. Early adoption is permitted.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326). The ASU improves financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by the Company. The ASU requires the Company to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. The Company will continue to use judgment to determine which loss estimation method is appropriate for its circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization's portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

(continued)

8

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(1)    General, Continued

Recent Accounting Standards Update, Continued.

The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is in the process of determining the effect of the ASU on its condensed consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The amendments in this update provide a more robust framework to use in determining when a set of assets and activities is a business. Because the current definition of a business is interpreted broadly and can be difficult to apply, stakeholders indicated that analyzing transactions is inefficient and costly and that the definition does not permit the use of reasonable judgment. The amendments provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. The adoption of this guidance did not have any impact on the Company’s condensed consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-08, “Premium Amortization on Purchased Callable Debt Securities”, to amend the amortization period for certain purchased callable debt securities held at a premium.  Under current GAAP, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument.  The amendments in this update require the premium to be amortized to the earliest call date.  No accounting change is required for securities held at a discount.  For public business entities, the amendments in this update become effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments in this update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company has adhered to this practice since its inception.

In June 2018, the FASB issued ASU No. 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The ASU is intended to reduce the cost and complexity and to improve financial reporting for nonemployee share-based payments. The ASU expands the scope of Topic 718. Compensation Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services.

(continued)

9

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(1)    General, Continued

Recent Accounting Standards Update, Continued.

Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic 505-50, Equity-Equity-Based payments to Non-Employees. The ASU is effective for the Company for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers. The Company is currently evaluating the impact of the ASU, if any, on its condensed consolidated financial statements.

(2)    Securities Available for Sale

Securities are classified according to management's intent. The amortized cost of securities and fair values are as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
(in thousands)
At September 30, 2018
U.S. Government agency securities	$	815	$	-	$	(24	)	$	791
Municipal securities		11,640		31		(209	)		11,462
Mortgage-backed securities		33,369		16		(1,279	)		32,106
Total	$	45,824	$	47	$	(1,512	)	$	44,359
At December 31, 2017
U.S. Government agency securities	$	1,251	$	6	$	(8	)	$	1,249
Municipal securities		12,340		128		(95	)		12,373
Mortgage-backed securities		36,614		23		(450	)		36,187
Total	$	50,205	$	157	$	(553	)	$	49,809

The following table summarizes the sale of securities available for sale.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2018		2017		2018		2017
Proceeds from sale of securities	$	-	$	-	$	-	$	750
Gross gains		-		-		-		-
Gross losses		-		-		-		(1	)
Net loss on sale of securities	$	-	$	-	$	-	$	(1	)

(continued)

10

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(2)    Securities Available for Sale, Continued

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

	Less Than Twelve Months					Over Twelve Months
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value
(in thousands)
At September 30, 2018
Securities Available for Sale
U.S. Government agency securities	$	(4	)	$	240	$	(20	)	$	551
Municipal securities		(116	)		4,807		(93	)		2,568
Mortgage-backed securities		(185	)		5,368		(1,094	)		26,162
Total	$	(305	)	$	10,415	$	(1,207	)	$	29,281
At December 31, 2017
Securities Available for Sale
U.S. Government agency securities	$	(8	)	$	694	$	-		$	-
Municipal securities		(36	)		1,831		(59	)		1,203
Mortgage-backed securities		(308	)		29,742		(142	)		5,667
Total	$	(352	)	$	32,267	$	(201	)	$	6,870

(continued)

11

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(2)    Securities Available for Sale, Continued

The unrealized losses at September 30, 2018 and December 31, 2017 on forty-one and thirty-four securities, respectively, 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. Securities available for sale measured at fair value on a recurring basis are summarized below:

			Fair Value Measurements Using
			Quoted Prices
			In Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	Fair		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
(in thousands)
At September 30, 2018
U.S. Government agency securities	$	791	$	-	$	791	$	-
Municipal securities		11,462		-		11,462		-
Mortgage-backed securities		32,106		-		32,106		-
Total	$	44,359	$	-	$	44,359	$	-
At December 31, 2017
U.S. Government agency securities	$	1,249	$	-	$	1,249	$	-
Municipal securities		12,373		-		12,373		-
Mortgage-backed securities		36,187		-		36,187		-
Total	$	49,809	$	-	$	49,809	$	-

During the three and nine months ended September 30, 2018 and 2017, no securities were transferred in or out of Levels 1, 2 or 3.

The scheduled maturities of securities are as follows:

	At September 30, 2018
	Amortized		Fair
	Cost		Value
(in thousands)
Due in one to five years	$	3,871	$	3,829
Due in five to ten years		5,873		5,859
Due after ten years		2,711		2,565
Mortgage-backed securities		33,369		32,106
Total	$	45,824	$	44,359

(continued)

12

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(3)    Loans

Segments and classes of loans, excluding loans held for sale, are as follows:

	At September 30,			At December 31,
(in thousands)	2018			2017
Real estate mortgage loans:
Commercial	$	84,161		$	79,565
Residential and home equity		120,545			94,824
Construction		31,001			26,813
Total real estate mortgage loans		235,707			201,202
Commercial loans		49,563			44,027
Consumer and other loans		6,980			7,742
Total loans		292,250			252,971
Add (deduct):
Net deferred loan costs		446			424
Allowance for loan losses		(3,674	)		(3,136	)
Loans, net	$	289,022		$	250,259

(continued)

13

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(3)    Loans, Continued

An analysis of the change in allowance for loan losses follows:

	Real Estate Mortgage Loans
				Residential								Consumer
				and Home						Commercial		and Other
(in thousands)	Commercial			Equity			Construction			Loans		Loans			Total
Three-Month Period Ended September 30, 2018
Beginning balance	$	1,001		$	1,309		$	400		$	749	$	82		$	3,541
Provision (credit) for loan losses		(61	)		79			(12	)		126		3			135
Net (charge-offs) recoveries		-			-			(3	)		1		-			(2	)
Ending balance	$	940		$	1,388		$	385		$	876	$	85		$	3,674
Three-Month Period Ended September 30, 2017
Beginning balance	$	811		$	1,108		$	338		$	712	$	59		$	3,028
Provision (credit) for loan losses		49			(18	)		(51	)		28		24			32
Net (charge-offs) recoveries		-			-			-			12		-			12
Ending balance	$	860		$	1,090		$	287		$	752	$	83		$	3,072
Nine-Month Period Ended September 30, 2018
Beginning balance	$	894		$	1,097		$	331		$	724	$	90		$	3,136
Provision (credit) for loan losses		46			291			57			148		2			544
Net (charge-offs) recoveries		-			-			(3	)		4		(7	)		(6	)
Ending balance	$	940		$	1,388		$	385		$	876	$	85		$	3,674
Nine-Month Period Ended September 30, 2017
Beginning balance	$	775		$	1,074		$	258		$	714	$	55		$	2,876
Provision (credit) for loan losses		85			16			29			24		33			187
Net (charge-offs) recoveries		-			-			-			14		(5	)		9
Ending balance	$	860		$	1,090		$	287		$	752	$	83		$	3,072
At September 30, 2018
Individually evaluated for impairment:
Recorded investment	$	611		$	247		$	-		$	208	$	8		$	1,074
Balance in allowance for loan losses	$	-		$	-		$	-		$	208	$	8		$	216
Collectively evaluated for impairment:
Recorded investment	$	83,550		$	120,298		$	31,001		$	49,355	$	6,972		$	291,176
Balance in allowance for loan losses	$	940		$	1,388		$	385		$	668	$	77		$	3,458
At December 31, 2017
Individually evaluated for impairment:
Recorded investment	$	-		$	-		$	-		$	134	$	-		$	134
Balance in allowance for loan losses	$	-		$	-		$	-		$	134	$	-		$	134
Collectively evaluated for impairment:
Recorded investment	$	79,565		$	94,824		$	26,813		$	43,893	$	7,742		$	252,837
Balance in allowance for loan losses	$	894		$	1,097		$	331		$	590	$	90		$	3,002

(continued)

14

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), 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 Company identifies the portfolio segments and classes as follows:

Real Estate Mortgage Loans. Real estate mortgage loans are typically divided into three classes: commercial, residential and home equity, and construction loans.

       Commercial. Loans of this type are typically our more complex loans. This category of real estate loans is comprised of loans secured by mortgages on commercial property that are 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 a market index rate. At times, a rate may be fixed for longer than five years. As part of our credit underwriting standards, the Company 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 and 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 flows and evaluate collateral value. Currently, the collateral securing our commercial real estate loans includes a variety of property types, such as office, warehouse, and retail facilities. Other types include multifamily properties, hotels, mixed-use residential and commercial properties. Generally, commercial real estate loans present a higher risk profile than our consumer real estate loan portfolio.

        Residential and Home Equity. The Company offers first and second one-to-four family mortgage loans and home equity lines of credit; the collateral for these loans is generally 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. The nonowner-occupied investment properties are more similar in risk to commercial real estate loans, and therefore, are underwritten by assessing the property’s income potential and appraised value. In both cases, we underwrite the borrower’s financial condition and evaluate his or her global cash flow position. Borrowers may be affected by numerous factors, including 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, 5-year, or 7-year adjustable rate mortgage; while 15-year or 30-year fixed-rate loans are generally sold in the secondary market.

(continued)

15

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(3)    Loans, Continued 

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

       Commercial Loans. The Bank offers a wide range of commercial loans, including business term loans, equipment financing, lines of credit, and U.S. Small Business Administration (SBA) loans. 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 and do not require a formal valuation of the business collateral. When commercial loans are secured by specifically identified collateral, then the valuation of the 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. The Bank currently offers SBA 504 and SBA 7A loans. SBA 504 loans provide financing for major fixed assets such as real estate and equipment while SBA 7A loans are generally used to establish a new business or assist in the acquisition, operation, or expansion of an existing business. With both SBA loan programs, there are set eligibility requirements and underwriting standards outlined by SBA that can change as the government alters its fiscal policy. 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.

(continued)

16

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

 Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 (3)    Loans, Continued 

Other factors of risk could include changes in the borrower's management and fluctuations in collateral value. Additionally, there may be refinancing risk if a commercial loan includes a balloon payment which must be refinanced or paid off at loan maturity. In reference to our risk management process, our commercial loan portfolio presents a higher risk profile than our consumer real estate and consumer loan portfolios. Therefore, we require that all loans to businesses must have a clearly stated and reasonable payment plan to allow for timely retirement of debt, unless secured by liquid collateral or as otherwise justified. 

Consumer and Other Loans. These loans are made for various consumer purposes, such as the financing of automobiles, boats, and recreational vehicles. The payment structure of these loans is normally on an installment basis. The risk associated with this category of loans stems from the reduced collateral value for a defaulted loan; the collateral 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.

      The following summarizes the loan credit quality:

	Real Estate Mortgage Loans
			Residential						Consumer
			and Home				Commercial		and Other
(in thousands)	Commercial		Equity		Construction		Loans		Loans		Total
At September 30, 2018
Grade:
Pass	$	78,766	$	117,523	$	31,001	$	45,524	$	6,886	$	279,700
Special mention		4,784		2,861		-		3,042		86		10,773
Substandard		611		161		-		997		8		1,777
Doubtful		-		-		-		-		-		-
Loss		-		-		-		-		-		-
Total	$	84,161	$	120,545	$	31,001	$	49,563	$	6,980	$	292,250
At December 31, 2017
Grade:
Pass	$	74,560	$	92,282	$	26,356	$	42,874	$	7,715	$	243,787
Special mention		4,382		2,122		298		591		27		7,420
Substandard		623		420		159		562		-		1,764
Doubtful		-		-		-		-		-		-
Loss		-		-		-		-		-		-
Total	$	79,565	$	94,824	$	26,813	$	44,027	$	7,742	$	252,971

(continued)

17

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

 Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 (3)    Loans, Continued 

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. Loans classified as substandard or special mention are reviewed quarterly by the Company for further deterioration or improvement to determine if they are appropriately classified and whether there is any impairment. All loans are graded upon initial issuance. Furthermore, construction loans, nonowner-occupied commercial real estate loans, and commercial loan relationships in excess of $500,000 are reviewed at least annually. The Company determines the appropriate loan grade during the renewal process and reevaluates the loan grade in situations when a loan becomes past due.

Loans excluded from the review process above are generally classified as pass credits until: (a) they become past due; (b) management becomes aware of deterioration in the credit worthiness of the borrower; or (c) the client 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 necessarily preclude the potential for recovery, but rather signifies it is no longer practical to defer writing off the asset.

At September 30, 2018, there were four nonaccrual loans, totaling $179,000.

(continued)

18

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 (3)    Loans, Continued 

Age analysis of past due loans is as follows:

	Accruing Loans
					Greater Than
	30-59 Days		60-89 Days		90 Days		Total Past				Nonaccrual		Total
(in thousands)	Past Due		Past Due		Past Due		Due		Current		Loans		Loans
At September 30, 2018:
Real estate mortgage loans:
Commercial	$	-	$	-	$	-	$	-	$	84,161	$	-	$	84,161
Residential and home equity		135		-		-		135		120,410		-		120,545
Construction		-		-		-		-		31,001		-		31,001
Commercial loans		16		-		-		16		49,376		171		49,563
Consumer and other loans		-		-		-		-		6,972		8		6,980
Total	$	151	$	-	$	-	$	151	$	291,920	$	179	$	292,250
At December 31, 2017:
Real estate mortgage loans:
Commercial	$	-	$	623	$	-	$	623	$	78,942	$	-	$	79,565
Residential and home equity		-		255		-		255		94,569		-		94,824
Construction		-		-		-		-		26,813		-		26,813
Commercial loans		-		-		-		-		43,893		134		44,027
Consumer and other loans		-		-		-		-		7,742		-		7,742
Total	$	-	$	878	$	-	$	878	$	251,959	$	134	$	252,971

(continued)

19

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(3)    Loans, Continued 

The following summarizes the amount of impaired loans:

	With No Related
	Allowance Recorded				With an Allowance Recorded						Total
			Unpaid				Unpaid						Unpaid
			Contractual				Contractual						Contractual
	Recorded		Principal		Recorded		Principal		Related		Recorded		Principal		Related
(in thousands)	Investment		Balance		Investment		Balance		Allowance		Investment		Balance		Allowance
At September 30, 2018:
Real estate mortgage loans:
Commercial	$	611	$	611	$	-	$	-	$	-	$	611	$	611	$	-
Residential and home equity		247		247		-		-		-		247		247		-
Commercial loans		-		-		208		208		208		208		208		208
Consumer and other loans		-		-		8		8		8		8		8		8
	$	858	$	858	$	216	$	216	$	216	$	1,074	$	1,074	$	216
At December 31, 2017:
Commercial loans	$	-	$	-	$	134	$	134	$	134	$	134	$	134	$	134
Total	$	-	$	-	$	134	$	134	$	134	$	134	$	134	$	134

The average net investment in impaired loans and interest income recognized and received on impaired loans are as follows:

	Three Months Ended September 30,
	2018						2017
	Average		Interest		Interest		Average		Interest		Interest
	Recorded		Income		Income		Recorded		Income		Income
(in thousands)	Investment		Recognized		Received		Investment		Recognized		Received
Real estate mortgage loans:
Commercial	$	611	$	8	$	8	$	-	$	-	$	-
Residential and home equity		255		4		3				6		-
Construction		1		-		-		63		1		1
Commercial loans		159		1		2		22		-		-
Total	$	1,026	$	13	$	13	$	85	$	7	$	1

	Nine Months Ended September 30,
	2018						2017
	Average		Interest		Interest		Average		Interest		Interest
	Recorded		Income		Income		Recorded		Income		Income
(in thousands)	Investment		Recognized		Received		Investment		Recognized		Received
Real estate mortgage loans:
Commercial	$	423	$	8	$	8	$	-	$	-	$	-
Residential and home equity		141		5		3		375		28		28
Construction		-		-		-		66		1		2
Commercial loans		154		1		4		56		-		-
Total	$	718	$	14	$	15	$	497	$	29	$	30

There were no collateral dependent loans measured at fair value on a nonrecurring basis at September 30, 2018 or 2017.

(continued)

20

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(3)    Loans, Continued 

The restructuring of a loan constitutes a troubled debt restructuring (“TDR”) if the creditor grants a concession to the debtor that it would not otherwise consider in the normal course of business. A concession may include an extension of repayment terms which would not normally be granted, a reduction in interest rate or the forgiveness of principal and/or accrued interest. All TDRs are evaluated individually for impairment on a quarterly basis as part of the allowance for loan losses calculation. The Company entered into one new TDR during the nine months ended September 30, 2018 and 2017. The Company had no new TDRs during the quarter ended September 30, 2018 and 2017.

	Nine Months Ended September 30,
	2018								2017
			Pre-		Post-		Current				Pre-		Post-		Current
			Modification		Modification		Modification				Modification		Modification		Modification
	Number		Outstanding		Outstanding		Outstanding		Number		Outstanding		Outstanding		Outstanding
	of		Recorded		Recorded		Recorded		of		Recorded		Recorded		Recorded
	Contracts		Investment		Investment		Investment		Contracts		Investment		Investment		Investment
(dollars in thousands)
Troubled Debt Restructurings -
Commercial real estate:
Modified principal		1	$	619	$	611	$	611	$	1	$	153	$	169	$	165
Total		1	$	619	$	611	$	611	$	1	$	153	$	169	$	165

At September 30, 2018, the Company had $648,000 in loans identified as TDRs. The TDR entered into during the nine months ended September 30, 2018 did not subsequently default during that period.

(4)    Regulatory Capital

The Bank is subject to various regulatory capital requirements administered by the banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

(continued)

21

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(4)    Regulatory Capital, Continued

Effective January 1, 2015, the Bank, became subject to the new Basel III capital level threshold requirements under the Prompt Corrective Action regulations with full compliance with all of the final rule's requirements phased in over a multi-year schedule. These new regulations were designed to ensure that banks maintain strong capital positions even in the event of severe economic downturns or unforeseen losses.

Changes that could affect the Bank going forward include additional constraints on the inclusion of deferred tax assets in capital and increased risk weightings for nonperforming loans and acquisition/development loans in regulatory capital. Beginning January 1, 2016, the Bank became subject to the capital conservation buffer rules which place limitations on distributions, including dividend payments, and certain discretionary bonus payments to executive officers. In order to avoid these limitations, a bank must hold a capital conservation buffer above its minimum risk-based capital requirements. As of September 30, 2018, the Bank’s capital conservation buffer exceeds the minimum requirement designated for September 30, 2018 of 1.875%. The required buffer of 2.5% will be effective January 1, 2019.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and percentages (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of September 30, 2018 that the Bank meets all capital adequacy requirements to which it is subject.

As of September 30, 2018, the Bank is well capitalized under the regulatory framework for prompt      corrective action. To be categorized as adequately capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage percentages as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category. The Bank’s actual capital amounts and percentages are also presented in the following table.

	Actual					For Capital Adequacy Purposes					For Well Capitalized Purposes
(dollars in thousands)	Amount		Percentage			Amount		Percentage			Amount		Percentage
As of September 30, 2018
Tier 1 Leverage Capital	$	36,388		9.21	%	$	15,805		4.00	%	$	19,757		5.00	%
Common Equity Tier 1 Risk-based Capital		36,388		12.40			13,203		4.50			19,072		6.50
Tier 1 Risk-based Capital		36,388		12.40			17,605		6.00			23,473		8.00
Total Risk-based Capital		40,055		13.65			23,473		8.00			29,341		10.00
As of December 31, 2017
Tier 1 Leverage Capital	$	33,146		9.48	%	$	13,983		4.00	%	$	17,479		5.00	%
Common Equity Tier 1 Risk-based Capital		33,146		12.80			11,654		4.50			16,834		6.50
Tier 1 Risk-based Capital		33,146		12.80			15,539		6.00			20,718		8.00
Total Risk-based Capital		36,282		14.01			20,718		8.00			25,898		10.00

(continued)

22

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(5)    Earnings Per Share

Earnings per share, (“EPS”) have been computed on the basis of the weighted-average number of shares of common stock outstanding. For the three and nine months ended September 30, 2018 and 2017, outstanding stock options are considered dilutive securities for purposes of calculating diluted EPS which was computed using the treasury stock method.

	2018						2017
			Weighted-		Per				Weighted-		Per
			Average		Share				Average		Share
(dollars in thousands, except per share amounts)	Earnings		Shares		Amount		Earnings		Shares		Amount
Three Months Ending September 30:
Basic EPS:
Net earnings	$	1,018		3,127,038	$	0.33	$	822		3,100,309	$	0.26
Effect of dilutive securities-incremental shares from assumed conversion of options				3,133						3,235
Diluted EPS:
Net earnings	$	1,018		3,130,171	$	0.33	$	822		3,103,544	$	0.26
Nine Months Ending September 30:
Basic EPS:
Net earnings	$	2,774		3,123,772	$	0.89	$	2,123		2,569,375	$	0.83
Effect of dilutive securities-incremental shares from assumed conversion of options				7,882						9,218
Diluted EPS:
Net earnings	$	2,774		3,131,654	$	0.89	$	2,123		2,578,593	$	0.83

(continued)

23

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(6)    Stock Option Plans

The 2015 Stock Incentive Compensation Plan (the “2015 Plan”) was approved by the Shareholders at the Company’s annual meeting of shareholders on May 20, 2015 and permits the Company to grant the Company’s key employees and directors stock options, stock appreciation rights, performance shares, and phantom stock. Under the 2015 Plan, the number of shares which may be issued is 500,000, but in no instance more than 15% of the issued and outstanding shares of the Company’s common stock.

During the first quarter of 2018, the Company issued 15,667 Incentive Stock Options (“ISO”) to its CEO as part of his compensation for the year ended December 31, 2017. These options vest 100% at the date of issuance, and therefore, are expensed immediately.

During the second quarter of 2018, the Company issued 120,000 Non-Qualified Stock Options (“NSO”) to its Board of Directors. These NSOs vest over 5 years and expire in increments beginning April 1, 2024 and concluding April 1, 2028.

During the second quarter of 2018, the Company issued Incentive Stock Options (“ISO”) to its employees. The Company issued 25,000 ISOs to its CEO and 92,250 ISOs to its remaining employees. These ISOs vest over 5 years and expire in increments beginning April 1, 2024 and concluding April 1, 2028. The NSOs and the ISOs issued during the second quarter of 2018 were issued in recognition of the Company’s 10-year anniversary.

As of September 30, 2018, 264,457 stock options have been granted under the 2015 Plan and 204,844 options are available for grant.

					Weighted-
			Weighted-		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
	Options		Price		Term		Value
Outstanding at December 31, 2016		-	$	-
Options granted		11,540		17.03
Outstanding at September 30, 2017		11,540	$	17.03
Outstanding at December 31, 2017		11,540	$	17.03
Options granted		252,917		19.79
Outstanding at September 30, 2018 (in years)		264,457	$	19.79		8.60	$	430,000
Exercisable at September 30, 2018 (in years)		37,207	$	17.93		3.05	$	130,000

The fair value of shares vested and recognized as compensation expense was $105,000 and $15,000 for the nine months ended September 30, 2018 and 2017, respectively. At September 30, 2018, there was $690,000 in unrecognized compensation expense related to nonvested share-based compensation arrangements granted under the 2015 Plan, with an average remaining life of 54 months.

(continued)

24

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

 (6)    Stock Option Plans, Continued

The fair value of each option granted during the nine months ended September 30, 2018 was estimated on the date of grant using the Black-Scholes option-pricing model with the following range of assumptions:

Weighted average risk-free interest rate	1.47	-	2.63%
Expected dividend yield	0.41	-	0.50%
Expected stock volatility	10.07	-	11.90%
Expected life in years	2.5	-	6.5
Per share fair value of options issued during period	$1.49	-	$3.35

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.                                                                                           

As of May 20, 2015, no further grants will be made under the 2007 Stock Option Plan (the “2007 Plan”). Unexercised stock options that were granted under the 2007 Plan will remain outstanding and will expire under the terms of the individual stock grant. A summary of the activity in the Company’s 2007 Stock Option Plan is as follows:

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Options			Price		Term		Value
Outstanding at December 31, 2016		42,200		$	10.16
Options exercised		(2,600	)		10.00
Options forfeited		(200	)		10.00
Outstanding at September 30, 2017		39,400		$	10.17
Options exercised		(16,850	)	$	10.00
Options forfeited		(350	)	$	10.00
Outstanding at December 31, 2017		22,200		$	10.31
Options exercised		(7,500	)		10.00
Outstanding at September 30, 2018 (in years)		14,700		$	10.46		1.20	$	161,000
Exercisable at September 30, 2018 (in years)		14,700		$	10.46		1.20	$	161,000

At September 30, 2018, there was no unrecognized compensation expense related to nonvested share-based compensation arrangements granted under the 2007 plan.

(continued)

25

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(6)    Stock Option Plans, Continued

In 2012, the Company’s Board of Directors and shareholders adopted the 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’s common stock. Pursuant to the Directors’ Plan, each director is permitted to make an 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 stock, he or she will receive in common stock 110% of the amount of cash fees set by the Board or the Compensation and Nominating Committee. The value of stock to be awarded pursuant to the Directors’ Plan will be the closing price of a share of common stock as traded on the Over-the Counter Bulletin Board, or a price set by the Board or its Compensation and Nominating Committee, acting in good faith, but in no case less than fair market value. The maximum number of shares to be issued pursuant to the Directors’ Plan is limited to 74,805 shares. For the nine months ended September 30, 2018 and 2017, our directors received 2,194 and 3,104 shares of common stock, respectively, in lieu of cash fees calculated at 110% to be $46,000 and $51,000, respectively. At September 30, 2018, 55,908 shares remained available for grant.

(7)    Federal Home Loan Bank Advances

Federal Home Loan Bank (“FHLB”) advances are 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 could borrow up to $37.9 million at September 30, 2018. At September 30, 2018 and December 31, 2017, the Company had no outstanding loans under this line.

(8)    Fair Value of Financial Instruments

The estimated fair values and fair value measurement method with respect to the Company's financial instruments were as follows:

			At September 30, 2018				At December 31, 2017
			Carrying		Fair		Carrying		Fair
(in thousands)	Level		Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents		1	$	56,775	$	56,775	$	32,397	$	32,397
Securities available for sale		2		44,359		44,359		49,809		49,809
Loans held for sale		3		6,782		6,822		5,880		6,039
Loans, net		3		289,022		285,506		250,259		249,628
Federal Home Loan Bank stock		3		355		355		316		316
Accrued interest receivable		3		1,028		1,028		978		978
Financial liabilities-
Deposits		3		355,246		355,553		298,297		298,403
Off-Balance Sheet Items		3		-		-		-		-

Discussion regarding the assumptions used to compute the estimated fair values of financial instruments can be found in Note 1 to the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2017.

(continued)

26

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(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 clients. These financial instruments are commitments to extend credit, construction loans in process, unused lines of credit, standby letters of credit, and guaranteed accounts and may involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the condensed 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, construction loans in process and unused lines of credit are agreements to lend to a client 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 client’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty.

Standby letters of credit are written conditional commitments issued by the Company to guarantee the performance of a client to a third party. These letters of credit are primarily issued to support third-party borrowing arrangements and generally have expiration dates within one year of issuance. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to clients. 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. Some of the Company’s standby letters of credit are secured by collateral and those secured letters of credit totaled $565,000 at September 30, 2018.

Guaranteed accounts are irrevocable standby letters of credit issued by us to guarantee a client’s credit line with our third-party credit card company, First Arkansas Bank & Trust. As a part of this agreement, we are responsible for the established credit limit on certain accounts plus 10%. The maximum potential amount of future payments we could be required to make is represented by the dollar amount disclosed in the table below.

Standby letters of credit and commitments to extend credit typically result in loans with a market interest rate when funded.

(continued)

27

PRIME MERIDIAN HOLDING COMPANY AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements (unaudited), Continued

(9)   Off-Balance Sheet Financial Instruments, Continued

The maximum potential amount of future payments we could be required to make for off-balance sheet financial instruments is represented by the dollar amount disclosed in the table below.

	At September 30, 2018
(in thousands)
Commitments to extend credit	$	5,670
Construction loans in process	$	16,280
Unused lines of credit	$	41,954
Standby letters of credit	$	2,312
Guaranteed accounts	$	1,329

(10)  Premises and Equipment

Effective August 6, 2018, Prime Meridian Holding Company’s (the “Company”) wholly-owned subsidiary, Prime Meridian Bank, (the “Bank”) entered into a Retail Lease (the “Lease”) at its Timberlane location with the new owner of the property, LG Tallahassee Market Square, LLC (the “Landlord”). The Lease allows for the operation of a full-service banking office at 1471 Timberlane Road, Tallahassee, Florida 32312. The term of the Lease is 15 years, with four options to renew for five years each. The Lease requires the Landlord to seek approval from the City of Tallahassee for a lot line adjustment which was received on September 28, 2018. Once this approval is received, the Landlord has six months from this approval date to deliver notice and proof of a Certificate of Completion (the “Delivery Date”), certifying that the Landlord’s improvement obligations are complete. The Delivery Date is expected to be on or before March 28, 2019. The new rent obligations will commence 120 days after the Delivery Date (the “Rent Commencement Date”) and are as follows:

Years			Annual Rent Amount
1	-	5	$	294,000
6	-	10	$	323,400
11	-	15	$	355,740

Prior to the Rent Commencement Date, the Bank will pay rent in accordance with its prior lease as disclosed in the Company’s annual report on Form 10-K for the year ended December 31, 2017.

The Lease is a fully net lease, with the Bank separately paying real and personal property taxes, all special and third-party assessments, common area maintenance charges, maintenance costs and insurance expenses.

(11) Subsequent Event

On October 10, 2018, Hurricane Michael, a Category 4 hurricane, made landfall in the Florida Panhandle. None of the Company’s premises or equipment sustained damage in the storm; however, some of the Company’s loan clients were impacted. After a review of the Company’s loan portfolio, management does not anticipate any material impact to the Company’s financial condition or results of operations at this time.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis is presented to aid the reader in understanding and evaluating the financial condition and results of operations of Prime Meridian Holding Company, and its wholly-owned subsidiary, Prime Meridian Bank. This discussion and analysis should be read with the condensed consolidated financial statements, the footnotes thereto, and the other financial data included in this report and in our annual report on Form 10-K for the year ended December 31, 2017. Results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of results that may be attained for any other period. The following discussion and analysis present our financial condition and results of operations on a consolidated basis, however, because we conduct all of our material business operations through the Bank, the discussion and analysis relate to activities primarily conducted at the subsidiary level.

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

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

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

• banking laws, compliance, and the regulatory environment;

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

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

• litigation, tax, and other regulatory matters;

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

• quality and composition of our loan or investment portfolios;

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

• competition;

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

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

• consumer spending, borrowing and savings habits;

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

29

• natural disasters, public unrest, adverse weather, public health, and other conditions impacting our or our clients’ operations;

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

• application and interpretation of accounting principles and guidelines.

GENERAL

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

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

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

	At or for the
	Nine Months			Year Ended			Nine Months
	Ended			December 31,			Ended
	September 30, 2018			December 31, 2017			September 30, 2017
Average equity as a percentage of average assets		12.83	%		11.84	%		11.31	%
Equity to total assets at end of period		12.04			13.53			13.45
Return on average assets(1)		1.00			0.85			0.87
Return on average equity(1)		7.80			7.17			7.68
Noninterest expense to average assets(1)		2.52			2.45			2.46
Nonperforming loans to total loans at end of period		0.06			0.05			0.02

^{(1)Annualized for the Nine months ended September 30, 2018 and 2017}

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CRITICAL ACCOUNTING POLICIES

Our critical accounting policies which involve significant judgements and assumptions that have a material impact on the carrying value of certain assets and liabilities and used in preparation of the Condensed Consolidated Financial Statements as of September 30, 2018, have remained unchanged from the disclosures presented in our Annual Report on Form 10-K for the year ended December 31, 2017.

FINANCIAL CONDITION

Average assets totaled $394.9 million for the three months ended September 30, 2018, an increase of $50.3 million, or 14.6%, over the comparable period in 2017. The increase in 2018 can be primarily attributed to higher average loan balances.

Investment Securities. Our primary objective in managing our investment portfolio is to maintain a portfolio of high quality, highly liquid investments yielding competitive returns. We use the investment securities portfolio for several purposes. It serves as a vehicle to manage interest rate and prepayment risk, to generate interest and dividend income, to provide liquidity to meet funding requirements, and to provide collateral for pledging of public funds. At September 30, 2018, our available for sale investment portfolio included U.S. government agency securities, municipal securities, and mortgage-backed securities and had a fair market value of $44.4 million and an amortized cost value of $45.8. At September 30, 2018 and December 31, 2017, our investment securities portfolio represented approximately 10.9% and 14.3% of our total assets, respectively. The average yield on the average balance of investment securities for the three months ended September 30, 2018 was 2.41%, compared to 2.18% for the comparable period in 2017.   

Loans. Our primary earning asset is our loan portfolio and our primary source of income is the interest earned on the loan portfolio. Our loan portfolio consists of commercial real estate loans, construction loans, and commercial loans made to small-to-medium sized companies and their owners, as well as residential real estate loans, including first and second mortgages, and consumer loans. Our goal is to maintain a high-quality portfolio of loans through sound underwriting and lending practices. We work diligently to attract new lending clients through direct solicitation by our loan officers, utilizing relationship networks from existing clients, competitive pricing, and innovative structure. Our loans are priced based upon the degree of risk, collateral, loan amount, and maturity. We have no loans to foreign borrowers.

The Company’s net loan portfolio increased $38.8 million, or 15.5%, from December 31, 2017. Loan growth occurred across all categories, except consumer, during the first nine months of 2018. In total, approximately 80.7% of the total loan portfolio was collateralized by commercial and residential real estate mortgages at September 30, 2018, compared to 79.5% at December 31, 2017.

Nonperforming assets. We generally place loans on nonaccrual status when they become 90 days or more past due, unless they are well secured and in the process of collection. We also place loans on nonaccrual status if they are less than 90 days past due if the collection of principal or interest is in doubt. When a loan is placed on nonaccrual status, any interest previously accrued, but not collected, is reversed from income. At September 30, 2018, the Company had four nonaccrual loans totaling $179,000.

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Accounting standards require the Company to identify loans as impaired loans when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. These standards require that impaired loans be valued at the present value of expected future cash flows, discounted at the loan’s effective interest rate, using one of the following methods: the observable market price of the loan or the fair value of the underlying collateral if the loan is collateral dependent. We implement these standards in our monthly review of the adequacy of the allowance for loan losses and identify and value impaired loans in accordance with GAAP. Seven loans totaling $1.1 million were deemed to be impaired under the Company’s policy at September 30, 2018, compared to two loans totaling $134,000 at December 31, 2017. The Company’s nonperforming assets represented 0.04% of total assets at September 30, 2018 and at December 31, 2017.

Allowance for Loan Losses. Management’s policy is to maintain the allowance for loan losses at a level sufficient to absorb probable losses inherent in the loan portfolio as of the balance sheet date. The allowance is increased by the provision for loan losses and decreased by charge-offs, net of recoveries. Management believes that the allowance for loan losses, which was $3.7 million or 1.26% of total loans, at September 30, 2018, is adequate to cover losses inherent in the loan portfolio. Five of the seven impaired loans carried a reserve of $216,000 at September 30, 2018.

Deposits. Deposits are the major source of the Company’s funds for lending and other investment purposes. Total deposits at September 30, 2018 were $355.2 million, an increase of $56.9 million, or 19.1%, from December 31, 2017, with growth coming primarily from interest-bearing accounts. The average balance of noninterest-bearing deposits accounted for 23.5% of the average balance of total deposits for the three months ended September 30, 2018, compared to 25.0% for the three months ended September 30, 2017.

Borrowings. The Company has an agreement with the Federal Home Loan Bank of Atlanta (“FHLB”) and pledges its qualified loans as collateral which would allow the Company, as of September 30, 2018, to borrow up to $37.9 million. In addition, the Company maintains unsecured lines of credit with correspondent banks that totaled $18.8 million at September 30, 2018. There were no loans outstanding under any of these lines at September 30, 2018.

Subsequent Event. On October 10, 2018, Hurricane Michael, a Category 4 hurricane, made landfall in the Florida Panhandle. None of the Company’s premises or equipment sustained damage in the storm; however, some of the Company’s loan clients were impacted. After a review of the Company’s loan portfolio, management does not anticipate any material impact to the Company’s financial condition or results of operations at this time.

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RESULTS OF OPERATIONS

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

As shown in the following table, the Bank reported a higher volume of interest-earning assets and a higher overall yield for the three months ended September 30, 2018, as compared to the same period a year ago. Despite higher funding costs, the Bank’s net interest margin improved 10 basis points to 3.78%.

	For the Three Months Ended September 30,
	2018								2017
				Interest								Interest
	Average			and		Yield/			Average			and		Yield/
(dollars in thousands)	Balance			Dividends		Rate			Balance			Dividends		Rate
Interest-earning assets:
Loans(1)	$	292,026		$	3,722		5.10	%	$	248,678		$	2,972		4.78	%
Mortgage loans held for sale		6,315			76		4.81			4,646			53		4.56
Securities		45,836			276		2.41			46,214			252		2.18
Other(2)		38,081			198		2.08			33,202			114		1.37
Total interest-earning assets		382,258		$	4,272		4.47			332,740		$	3,391		4.08
Noninterest-earning assets		12,626								11,820
Total assets	$	394,884							$	344,560
Interest-bearing liabilities:
Savings, NOW and money-market deposits	$	224,448		$	499		0.89	%	$	200,581		$	285		0.57	%
Time deposits		39,389			163		1.66			22,365			41		0.73
Total interest-bearing deposits		263,837			662		1.00			222,946			326		0.58
Total interest-bearing liabilities		263,837		$	662		1.00			222,946		$	326		0.58
Noninterest-bearing deposits		80,943								74,169
Noninterest-bearing liabilities		1,738								1,583
Stockholders' equity		48,366								45,862
Total liabilities and stockholders' equity	$	394,884							$	344,560
Net earning assets	$	118,421							$	109,794
Net interest income				$	3,610							$	3,065
Interest rate spread							3.47	%							3.50	%
Net interest margin(3)							3.78	%							3.68	%
Ratio of interest-earning assets to average interest-bearing liabilities		144.88	%							149.25	%

⁽¹⁾ Includes nonaccrual loans

⁽²⁾ Other interest-earning assets include federal funds sold, interest-bearing deposits and FHLB stock.

⁽³⁾ Net interest margin is net interest income divided by total average interest-earning assets, annualized

33

As shown in the following 9-month table, increased loan volume and higher loan yields drove the improvement in the company’s net interest margin. Despite higher funding costs, the Bank’s net interest margin improved 16 basis points to 3.83%.

	For the Nine Months Ended September 30,
	2018							2017
			Interest							Interest
	Average		and		Yield/			Average		and		Yield/
(dollars in thousands)	Balance		Dividends		Rate			Balance		Dividends		Rate
Interest-earning assets:
Loans(1)	$	280,075	$	10,422		4.96	%	$	237,240	$	8,379		4.71
Mortgage loans held for sale		5,565		193		4.62			3,390		119		4.68
Securities		47,539		851		2.39			41,993		709		2.25
Other(2)		24,232		354		1.95			31,501		271		1.15
Total interest-earning assets		357,411	$	11,820		4.41			314,124	$	9,478		4.02
Noninterest-earning assets		12,541							11,581
Total assets	$	369,952						$	325,705
Interest-bearing liabilities:
Savings, NOW and money-market deposits	$	214,749	$	1,261		0.78	%	$	196,340	$	722		0.49
Time deposits		29,875		298		1.33			20,884		107		0.68
Deposits		244,624		1,559		0.85			217,224		829		0.51
Other borrowings		-		-					-		-
Total interest-bearing liabilities		244,624	$	1,559		0.85			217,224	$	829		0.51
Noninterest-bearing deposits		76,387							70,254
Noninterest-bearing liabilities		1,494							1,384
Stockholders' equity		47,447							36,843
Total liabilities and stockholders' equity	$	369,952						$	325,705
Net earning assets	$	112,787						$	96,900
Net interest income			$	10,261						$	8,649
Interest rate spread						3.56	%						3.51
Net interest margin(3)						3.83	%						3.67
Ratio of interest-earning assets to average interest-bearing liabilities		146.11%							144.61 %

⁽¹⁾  Includes nonaccrual loans

⁽²⁾  Other interest-earning assets include federal funds sold, interest-bearing deposits and FHLB stock.

⁽³⁾  Net interest margin is net interest income divided by total average interest-earning assets, annualized

Comparison of Operating Results for the Three Months Ended September 30, 2018 and 2017

Net Earnings. Net earnings for the three-month period ended September 30, 2018 were $1,018,000, compared to net earnings of $822,000 for the three-month period ended September 30, 2017. The $196,000, or 23.8%, increase in net earnings is attributed to a 17.8%, or $545,000, increase in net interest income and a $78,000, or 30.0%, increase in noninterest income, partially offset by a 321.9%, or $103,000, increase in the provision for loan losses and a 22.5%, or $451,000, increase in noninterest expense. Additionally, income tax expense decreased $127,000, or 27.4%, year-over-year due to a lower corporate income tax rate. There were two macro factors impacting results favorably in 2018. The first was the enactment of the Tax Cuts and Job Act on December 22, 2017 which has resulted in a lower corporate income tax rate. The other is continued rising interest rates as the overnight funds rate increased in September, 2018 for the eighth time since December, 2015. The Bank’s strong loan production at higher yields during the first nine months of the year has outpaced its increased cost of funds.

Net Interest Income. Our operating results depend primarily on our net interest income, which is the difference between interest and dividend income on interest-earning assets such as loans and securities, and interest expense on interest-bearing liabilities such as deposits. Net interest income for the 2018 third quarter increased $545,000, or 17.8%, from the 2017 third quarter. Strong loan production in 2018 coupled with higher loan yields led the improvement in the Company’s net interest margin.

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                Interest Income. Total interest income increased to $4.3 million for the three months ended September 30, 2018, an $881,000 or 26.0%, increase over the three months ended September 30, 2017. The increase was driven by an increase in average loans and higher yields, as average loan balances grew $43.3 million, or 17.4%, from $248.7 million for the quarter ended September 30, 2017 to $292.0 million for the quarter ended September 30, 2018, while the average yield on loans increased from 4.78% during the third quarter of 2017 to 5.10% during the third quarter of 2018.

Interest Expense. Interest expense was $662,000 for the three months ended September 30, 2018, compared to $326,000 for the three months ended September 30, 2017. The $336,000, or 103.1%, increase is attributed to higher average balances of interest-bearing deposits and higher average rates paid on deposits. Year-over-year, the average balance of interest-bearing deposits increased 18.3%, or $40.9 million, to $263.8 million, while the average rate paid on deposits increased 42 basis points to 1.00%.

Net Interest Margin. The net interest margin was 3.78% for the three months ended September 30, 2018, compared to 3.68% for the same period in 2017. The net interest margin expansion reflected a 39-basis-point increase in the average yield on earning assets and a $49.5 million increase in the average balance of interest-earning assets, partially offset by a 42-basis-point increase in the average cost of interest-bearing deposits and the $40.9 million increase in the average balance of interest-bearing deposits.

Provision for Loan Losses. The provision for loan losses is charged to earnings to increase the total loan loss allowance to a level deemed appropriate by management. The provision is based upon the volume and type of lending conducted by the Bank, industry standards, general economic conditions, particularly as they relate to our market area, and other factors related to our historic loss experience and the collectability of the loan portfolio. The provision for loan losses for the three months ended September 30, 2018 was $135,000, compared to $32,000 for the three months ended September 30, 2017. The lower provision in the third quarter of 2017 resulted from a change in the Company’s loan portfolio mix and changes in the Company’s qualitative factors used by the Company in determining its provision. The provision recorded in the third quarter of 2018 reflects a more normalized number. Management believes that the allowance for loan losses, which was $3.7 million or 1.26% of total loans, at September 30, 2018, is adequate to cover losses inherent in the loan portfolio based on the assessment of the above-mentioned factors affecting the loan portfolio. While management believes the estimates and assumptions used in its determination of the adequacy of the allowance are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future losses will not exceed the amount of the established allowance for loan losses, or that any increased allowance for loan losses that may be required will not adversely impact our financial condition and results of operations. In addition, the determination of the amount of our allowance for loan losses is subject to review by bank regulators, as part of the routine examination process, which may result in additions to our provision for loan losses based upon their judgment of information available to them at the time of examination.

              Noninterest Income. Noninterest income consists of revenues generated from a broad range of financial services and activities, primarily service charges and fees on deposit accounts, mortgage banking revenue and income from bank-owned life insurance. Noninterest income for the three months ended September 30, 2018 totaled $338,000, an increase of $78,000, or 30.0%, from the three months ended September 30, 2017. A $44,000, or 55.0%, increase in mortgage banking revenue and a $32,000, or 36.4%, increase in other income, namely ATM and debit card fee income, were the primary drivers of the increase in noninterest income.

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              Noninterest Expense. Noninterest expense increased $451,000, or 22.5%, for the quarter ended September 30, 2018, compared to the same period a year ago. Salaries and employee benefits were the primary expense drivers, increasing $288,000, or 27.4%. The Bank continues to add personnel as it grows, ending the third quarter of 2018 with 76 full-time equivalents (FTEs) compared to 67 FTEs at September 30, 2017. A $64,000, or 49.6%, increase in marketing expense, a $35,000, or 26.5% increase in software maintenance, amortization and other expense, and a $75,000, or 23.4%, increase in other noninterest expense also contributed to the increase in noninterest expense and are largely reflective of a growing bank.

Income Taxes. Income taxes are based on amounts reported in the statements of earnings after adjustments for nontaxable income and nondeductible expenses and consists of taxes currently due plus deferred taxes on temporary differences in the recognition of income and expense for tax and financial statement purposes. Income taxes were $337,000 for the three months ended September 30, 2018, compared to income taxes of $464,000 for the three months ended September 30, 2017. The enactment of the Tax Cuts and Job Act in December, 2017 has resulted in a lower corporate income tax rate which should continue to benefit the Company for the remainder of 2018.

Comparison of Operating Results for the Nine Months Ended September 30, 2018 and 2017

Net Earnings. Net earnings for the nine-month period ended September 30, 2018 were $2.8 million compared to net earnings of $2.1 million for the nine-month period ended September 30, 2017. The $651,000, or 30.7%, increase in net earnings is attributed to a $1.6 million, or 18.6%, increase in net interest income and a $113,000, or 13.3%, increase in noninterest income, partially offset by a $357,000, or 190.9%, increase in the provision for loan losses and a $993,000, or 16.5%, increase in noninterest expense. Additionally, the new tax rate environment benefitted the Company’s results, with income tax expense decreasing $276,000, or 23.3%.

Net Interest Income. Our operating results depend primarily on our net interest income, which is the difference between interest and dividend income on interest-earning assets such as loans and securities, and interest expense on interest-bearing liabilities such as deposits. Net interest income for the first nine months of 2018 increased $1.6 million, or 18.6%, from the comparable period in 2017. A $43.3 million increase in average earning assets coupled with a 39-basis-point improvement in the average yield on these assets helped drive these results.

Interest Income. Total interest income increased to $11.8 million for the nine months ended September 30, 2018, a $2.3 million, or 24.7%, increase over the nine months ended September 30, 2017. The increase was driven by an increase in average loans and higher yields, as average loan balances have grown $42.8 million, or 18.1%, from $237.2 million for the nine months ended September 30, 2017 to $280.0 million for the nine months ended September 30, 2018, while the average yield on loans increased from 4.71% during the first nine months of 2017 to 4.96% during the first nine months of 2018.

Interest Expense. Interest expense was $1.6 million for the nine months ended September 30, 2018, compared to $829,000 for the nine months ended September 30, 2017. The $730,000, or 88.1%, increase can be primarily attributed to higher average balances of interest-bearing deposits and higher average rates paid on deposits. Year-over-year, the average balance of interest-bearing deposits increased 12.6%, or $27.4 million, to $244.6 million, while the average rate paid on deposits increased 34 basis points to 0.85%.

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Net Interest Margin. The net interest margin was 3.83% for the nine months ended September 30, 2018, compared to 3.67% for the same period in 2017. The net interest margin expansion reflected a 39-basis-point increase in the average yield on earning assets, partially offset by a 34-basis-point increase in the average cost of interest-bearing deposits. Furthermore, the average balance of interest-earning assets grew $43.3 million compared to $27.4 million for the average balance of interest-bearing liabilities.

Provision for Loan Losses. The provision for loan losses is charged to earnings to increase the total loan loss allowance to a level deemed appropriate by management. The provision is based upon the volume and type of lending conducted by the Bank, industry standards, general economic conditions, particularly as they relate to our market area, and other factors related to our historic loss experience and the collectability of the loan portfolio. The provision for loan losses for the nine months ended September 30, 2018 was $544,000, compared to $187,000 for the nine months ended September 30, 2017. The higher provision reflects strong loan growth for the first nine months of 2018, with loans increasing $43.9 million since September 30, 2017. Management believes that the allowance for loan losses, which was $3.7 million or 1.26% of total loans, at September 30, 2018, is adequate to cover losses inherent in the loan portfolio based on the assessment of the above-mentioned factors affecting the loan portfolio. While management believes the estimates and assumptions used in its determination of the adequacy of the allowance are reasonable, there can be no assurance that such estimates and assumptions will not be proven incorrect in the future, or that the actual amount of future losses will not exceed the amount of the established allowance for loan losses, or that any increased allowance for loan losses that may be required will not adversely impact our financial condition and results of operations. In addition, the determination of the amount of our allowance for loan losses is subject to review by bank regulators, as part of the routine examination process, which may result in additions to our provision for loan losses based upon their judgment of information available to them at the time of examination.

              Noninterest Income. Noninterest income consists of revenues generated from a broad range of financial services and activities, primarily service charges and fees on deposit accounts, mortgage banking revenue and income from bank-owned life insurance. Noninterest income for the nine months ended September 30, 2018 totaled $962,000 an increase of $113,000, or 13.3%, from the nine months ended September 30, 2017. Compared to the same period a year ago, noninterest income increased primarily due to a 28.7%, or $74,000, increase in other income, largely due to ATM and debit card fee income. An $18,000, or 7.5%, increase in service charges and fees on deposit accounts and a $23,000, or 7.3%, increase in mortgage banking revenue also contributed to higher noninterest income for the period.

              Noninterest Expense. Noninterest expense increased $993,000, or 16.5%, for the first nine months of 2018, compared to the same period a year ago. Salaries and employee benefits were the primary expense drivers, increasing $680,000, or 21.9%, due to increased personnel. A $93,000, or 21.1%, increase in marketing expense and an $80,000, or 20.3%, increase in software, maintenance, and other expense, also contributed to the growth in noninterest expense, and like the growth in personnel, are largely reflective of a growing bank. Lastly, a $148,000, or 15.1%, increase in other noninterest expense also added to the increase in noninterest expense and can be mostly attributed to increases in the ATM network expense and options expense for Board members.

Income Taxes. Income taxes are based on amounts reported in the statements of earnings after adjustments for nontaxable income and nondeductible expenses and consists of taxes currently due plus deferred taxes on temporary differences in the recognition of income and expense for tax and financial statement purposes. Income taxes were $909,000 for the nine months ended September 30, 2018, compared to income taxes of $1.2 million for the nine months ended September 30, 2017. The enactment of the Tax Cuts and Job Act in December, 2017 has resulted in a lower corporate income tax rate which should continue to benefit the Company for the remainder of 2018.

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LIQUIDITY

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

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

The Bank also has external sources of funds through the FHLB, unsecured lines of credit with correspondent banks, and the State of Florida’s Qualified Public Deposit Program (“QPD”). At September 30, 2018, the Bank had access to approximately $37.9 million of available lines of credit secured by qualifying collateral with the FHLB, in addition to $18.8 million in unsecured lines of credit maintained with correspondent banks. As of September 30, 2018, we had no borrowings under any of these lines. Furthermore, some of our securities are pledged to collateralize certain deposits through our participation in the State of Florida’s QPD program. The market value of securities pledged to the QPD program was $8.3 million at September 30, 2018 and $9.1 million at December 31, 2017. Our primary liquid assets, excluding assets pledged to the QPD program, accounted for 22.9% and 21.1% of total assets at September 30, 2018 and December 31, 2017, respectively.

Our core deposits consist of noninterest-bearing accounts, NOW accounts, money-market accounts, time deposits $250,000 or less, and savings accounts. We closely monitor our level of certificates of deposit greater than $250,000 and large deposits. At September 30, 2018, total deposits were $355.2 million, of which $20.8 million was in certificates of deposits greater than $250,000, excluding Individual Retirement Accounts (IRAs). We maintain a Contingency Funding Plan (“CFP”) that identifies liquidity needs and weighs alternate courses of action designed to address those needs in emergency situations. We perform a monthly cash flow analysis and stress test the CFP to evaluate the expected funding needs and funding capacity during a liquidity stress event. We believe that the sources of available liquidity are adequate to meet all reasonably immediate short-term and intermediate-term demands and do not know of any trends, events, or uncertainties that may result in a significant adverse effect on our liquidity position.

CAPITAL RESOURCES

Stockholders’ equity was $48.9 million at September 30, 2018, compared to $47.0 million at December 31, 2017. 

               At September 30, 2018, the Bank was considered to be “well capitalized” under the FDIC’s Prompt Corrective Action regulations with a 9.21% Tier 1 Leverage Capital Ratio, a 12.40% Equity Tier 1 Risk-Based Capital Ratio, a 12.40% Tier 1 Risk-Based Capital Ratio, and a 13.65% Total Risk-Based Capital Ratio, all above the minimum ratios to be considered “well capitalized.”

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The following is a summary at September 30, 2018 and December 31, 2017 of the regulatory capital requirements to be “well capitalized” and the Bank’s capital position.

	Actual					For Capital Adequacy Purposes					For Well Capitalized Purposes
(dollars in thousands)	Amount		Percentage			Amount		Percentage			Amount		Percentage
As of September 30, 2018
Tier 1 Leverage Capital	$	36,388		9.21	%	$	15,805		4.00	%	$	19,757		5.00	%
Common Equity Tier 1 Risk-based Capital		36,388		12.40			13,203		4.50			19,072		6.50
Tier 1 Risk-based Capital		36,388		12.40			17,605		6.00			23,473		8.00
Total Risk-based Capital		40,055		13.65			23,473		8.00			29,341		10.00
As of December 31, 2017
Tier 1 Leverage Capital	$	33,146		9.48	%	$	13,983		4.00	%	$	17,479		5.00	%
Common Equity Tier 1 Risk-based Capital		33,146		12.80			11,654		4.50			16,834		6.50
Tier 1 Risk-based Capital		33,146		12.80			15,539		6.00			20,718		8.00
Total Risk-based Capital		36,282		14.01			20,718		8.00			25,898		10.00

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

	Threshold Ratios
Capital Category	Total Risk-Based Capital Ratio			Tier 1 Risk-Based Capital Ratio			Common Equity Tier 1 Risk-Based Capital Ratio			Tier 1 Leverage Capital Ratio
Well capitalized		10.00	%		8.00	%		6.50	%		5.00	%
Adequately Capitalized		8.00	%		6.00	%		4.50	%		4.00	%
Undercapitalized	< 8.00		%	< 6.00		%	< 4.50		%	< 4.00		%
Significantly Undercapitalized	< 6.00		%	< 4.00		%	< 3.00		%	< 3.00		%
Critically Undercapitalized	Tangible Equity/Total Assets ≤ 2%

Until such time as PMHG has $1 billion in total consolidated assets, it will not be subject to any consolidated capital requirements.

OFF-BALANCE SHEET ARRANGEMENTS

Refer to Note 9 in the notes to condensed consolidated financial statements included in our Form 10-Q for the period ending September 30, 2018 for a discussion of off-balance sheet arrangements

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable

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Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

We maintain controls and procedures designed to ensure that information required to be disclosed in the reports that PMHG files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon management’s evaluation of those controls and procedures performed within the 90 days preceding the filing of this Report, our Principal Executive Officer and Principal Financial Officer concluded that, subject to the limitations noted below, the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by PMHG in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms.

We intend to continually review and evaluate the design and effectiveness of the Company’s disclosure controls and procedures and to improve the Company’s controls and procedures over time and to correct any deficiencies that we may discover in the future. The goal is to ensure that senior management has timely access to all material financial and nonfinancial information concerning the Company’s business. While we believe the present design of the disclosure controls and procedures is effective to achieve its goal, future events affecting its business may cause the Company to modify its disclosure controls and procedures.

(b) Changes in Internal Controls

We have made no significant changes in our internal controls over financial reporting during the quarter ended September 30, 2018, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

(c) Limitations on the Effectiveness of Controls

Our management, including our Principal Executive Officer and Principal Financial Officer, does not expect that our disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II – OTHER INFORMATION

Item 1. 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.

Item 1A. Risk Factors

           While the Company attempts to identify, manage, and mitigate risks and uncertainties associated with its business to the extent practical under the circumstances, some level of risk and uncertainty will always be present. Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017 describes some of the risks and uncertainties associated with our business. These risks and uncertainties have the potential to materially affect our cash flows, results of operations, and financial condition. We do not believe that there have been any material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the third quarter of 2018, the Company issued 638 shares to members of its Board of Directors in lieu of cash fees calculated at 110% to be $13,000. During the third quarter, PMHG issued 2,800 shares to employees and directors who exercised stock options and paid $28,000 upon such exercises. The shares were issued in accordance with the intrastate exemption from registration pursuant to Section 3(a)(11) of the Securities Act of 1933, because the Company is doing business within the State of Florida and each acquirer and offeree of securities resides within the State of Florida.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits

The following exhibits are filed with or incorporated by reference into this Report.

Exhibit Number	Description of Exhibit	Incorporated by Reference From or Filed Herewith
3.1	Articles of Incorporation	Exhibit 3.1 to Registration Statement on Form S-1 filed on October 18, 2013
3.2	Bylaws	Exhibit 3.2 to Registration Statement on Form S-1 filed on October 18, 2013
3.3	First Amendment to Bylaws dated December 17, 2015	Exhibit 3.3 to Form 10-Q filed on August 11, 2016
4.1	Specimen Common Stock Certificate	Exhibit 4.1 to Registration Statement on Form S-1 filed on October 18, 2013
4.2	2010 Articles of Share Exchange	Exhibit 4.2 to Registration Statement on Form S-1 filed on October 18, 2013
10.1	2007 Stock Option Plan	Exhibit 10.1 to Registration Statement on Form S-1 filed on October 18, 2013
10.2	Form of Non-Qualified Stock Option Agreement Under 2007 Plan	Exhibit 10.2 to Registration Statement on Form S-1 filed on October 18, 2013
10.3	Form of Incentive Stock Option Agreement Under 2007 Plan	Exhibit 10.3 to Registration Statement on Form S-1 filed on October 18, 2013
10.4	2012 Directors’ Compensation Plan (“Directors’ Plan”)	Exhibit 10.4 to Registration Statement on Form S-1 filed on October 18, 2013
10.5	Lease for Branch Location on Timberlane Road	Exhibit 10.1 to Form 8-K filed on August 7, 2018
10.6	Amended and Restated Employment Agreement by and between Prime Meridian Holding Company, Inc. and Prime Meridian Bank, and Sammie D. Dixon, Jr., dated as of July 19, 2018	Exhibit 10.1 to Form 8-K filed on July 27, 2016
10.7	Amended and Restated 2015 Stock Incentive Compensation Plan	Exhibit 10.8 to Form 10-Q filed on November 10, 2016
14.1	Code of Ethics	Exhibit 14.1 to Form 10-K filed on March 28, 2014
21.1	Subsidiaries of the Registrant	Exhibit 21.1 to Registration Statement on Form S-1 filed on October 18, 2013
31.1	Certification Under Section 302 of Sarbanes-Oxley by Sammie D. Dixon, Jr., Principal Executive Officer	Filed herewith
31.2	Certification Under Section 302 of Sarbanes-Oxley by R. Randy Guemple, Principal Financial Officer	Filed herewith
32.1	Certification by the Chief Executive Officer and the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley	Filed herewith
99.1	Charter of the Audit Committee	Exhibit 99.1 to Form 10-K filed on March 28, 2014
99.2	Charter of the Compensation and Nominating Committee	Exhibit 99.2 to Form 10-K filed on March 21, 2017

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101.INS	XBRL Instance Document	Filed herewith
101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith
101.DEF	XBRL Taxonomy Extension Definitions Linkbase  Document	Filed herewith
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase  Document	Filed herewith

*     Furnished, not filed, for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PRIME MERIDIAN HOLDING COMPANY
November 8, 2018
	By:	/s/ Sammie D. Dixon
Date		Sammie D. Dixon, Jr.
		Vice Chairman, Chief Executive Officer, President,
		and Principal Executive Officer
November 8, 2018
	By:	/s/ R. Randy Guemple
Date		R. Randy Guemple
		Chief Financial Officer, Executive Vice President, and Principal Financial Officer

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EX-31.1

Exhibit 31.1

Certification

Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Sammie D. Dixon, Jr., certify that:

1. I have reviewed this report on Form 10-Q for the period ended September 30, 2018 of Prime Meridian Holding Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2018	/s/ Sammie D. Dixon
	Sammie D. Dixon, Jr.
	Vice Chairman, Chief Executive Officer, President, and Principal Executive Officer

EX-31.2

Exhibit 31.2

Certification

Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, R. Randy Guemple, certify that:

1. I have reviewed this report on Form 10-Q for the period ended September 30, 2018 of Prime Meridian Holding Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2018	/s/ R. Randy Guemple
	R. Randy Guemple
	Chief Financial Officer, Executive Vice President, and
	Principal Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer

and Chief Financial Officer

Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), the undersigned officers of Prime Meridian Holding Company (the “Company”), hereby certify that the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 8, 2018	/s/ Sammie D. Dixon
	Name: Sammie D. Dixon, Jr.
	Title:   Vice Chairman, Chief Executive Officer, President and Principal Executive Officer

Dated: November 8, 2018	/s/ R. Randy Guemple
	Name: R. Randy Guemple
	Title:   Chief Financial Officer, Executive Vice President, and Principal Financial Officer

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) and is not being filed as part of the Report or as a separate disclosure document.

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Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 08, 2018
Document Information [Line Items]
Entity Registrant Name	Prime Meridian Holding Co
Entity Central Index Key	0001586454
Trading Symbol	pmhg
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	true
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		3,130,695
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Ex Transition Period	true

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Assets
Cash and due from banks	$ 9,086	$ 6,971
Federal funds sold	42,152	20,148
Interest-bearing deposits	5,537	5,278
Total cash and cash equivalents	56,775	32,397
Securities available for sale	44,359	49,809
Loans held for sale	6,782	5,880
Loans, net of allowance for loan losses of $3,674 and $3,136	289,022	250,259
Federal Home Loan Bank stock	355	316
Premises and equipment, net	4,699	4,872
Accrued interest receivable	1,028	978
Bank-owned life insurance	1,789	1,757
Other assets	1,149	912
Total assets	405,958	347,180
Liabilities:
Noninterest-bearing demand deposits	83,296	76,216
Savings, NOW and money-market deposits	230,817	200,027
Time deposits	41,133	22,054
Total deposits	355,246	298,297
Official checks	865	1,146
Other liabilities	984	764
Total liabilities	357,095	300,207
Stockholders' equity:
Preferred stock, undesignated; 1,000,000 shares authorized, none issued or outstanding
Common stock, $.01 par value; 9,000,000 shares authorized, 3,128,671 and 3,118,977 issued and outstanding	31	31
Additional paid-in capital	38,179	37,953
Retained earnings	11,747	9,285
Accumulated other comprehensive loss	(1,094)	(296)
Total stockholders' equity	48,863	46,973
Total liabilities and stockholders' equity	$ 405,958	$ 347,180

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Loans receivable, allowance for loan losses	$ 3,674	$ 3,136
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	9,000,000	9,000,000
Common stock, shares issued (in shares)	3,128,671	3,118,977
Common stock, shares outstanding (in shares)	3,128,671	3,118,977

XML

Condensed Consolidated Statements of Earnings (Unaudited) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Interest income:
Loans		$ 3,798	$ 3,025	$ 10,615	$ 8,498
Securities		276	252	851	709
Other		198	114	354	271
Total interest income		4,272	3,391	11,820	9,478
Interest expense-
Deposits		662	326	1,559	829
Net interest income		3,610	3,065	10,261	8,649
Provision for loan losses		135	32	544	187
Net interest income after provision for loan losses		3,475	3,033	9,717	8,462
Noninterest income:
Mortgage banking revenue		124	80	339	316
Income from bank-owned life insurance		11	12	32	35
Loss on sale of securities available for sale					(1)
Other income		120	88	332	258
Total noninterest income		338	260	962	849
Noninterest expense:
Salaries and employee benefits		1,341	1,053	3,787	3,107
Occupancy and equipment		237	247	698	727
Professional fees		86	90	267	235
Marketing		193	129	533	440
FDIC/State assessment		38	35	112	123
Software maintenance, amortization and other		167	132	474	394
Other		396	321	1,125	977
Total noninterest expense		2,458	2,007	6,996	6,003
Earnings before income taxes		1,355	1,286	3,683	3,308
Income taxes		337	464	909	1,185
Net earnings		$ 1,018	$ 822	$ 2,774	$ 2,123
Earnings per common share:
Basic (in dollars per share)		$ 0.33	$ 0.26	$ 0.89	$ 0.83
Diluted (in dollars per share)		0.33	0.26	0.89	0.83
Cash dividends per common share(1) (in dollars per share)	[1]			$ 0.10	$ 0.07
Deposit Account [Member]
Noninterest income:
Service charges and fees on deposit accounts		$ 83	$ 80	$ 259	$ 241

[1] Annual cash dividends were paid during the first quarters of 2017 and 2018

XML

Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Net earnings	$ 1,018	$ 822	$ 2,774	$ 2,123
Change in unrealized (loss) gain on securities:
Unrealized (loss) gain arising during the period	(231)	5	(1,069)	338
Reclassification adjustment for realized loss				1
Net change in unrealized (loss) gain	(231)	5	(1,069)	339
Deferred income tax benefit (expense) on above change	59	(2)	271	(126)
Total other comprehensive (loss) income	(172)	3	(798)	213
Comprehensive income	$ 846	$ 825	$ 1,976	$ 2,336

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Beginning balance (in shares) at Dec. 31, 2016	2,004,707
Beginning balance at Dec. 31, 2016	$ 20	$ 20,732	$ 6,563	$ (233)	$ 27,082
Net earnings (unaudited)			2,123		2,123
Dividends paid (unaudited)			(140)		(140)
Net change in unrealized gain on securities available for sale, net of income taxes (unaudited)				213	213
Stock options exercised (unaudited) (in shares)	2,600
Stock options exercised (unaudited)		26			26
Common stock issued as compensation to directors (unaudited) (in shares)	3,104
Stock Issued During Period, Value, Share-based Compensation, Gross		51			51
Sale of common stock net of stock offering costs $1,043 (unaudited) (in shares)	1,090,908
Sale of common stock net of stock offering costs $1,043 (unaudited)	$ 11	16,946			16,957
Stock-based compensation (unaudited)		15			15
Ending balance (unaudited) (in shares) at Sep. 30, 2017	3,101,319
Ending balance (unaudited) at Sep. 30, 2017	$ 31	37,770	8,546	(20)	$ 46,327
Ending balance (unaudited) (in shares) at Dec. 31, 2017	3,118,977				3,118,977
Ending balance (unaudited) at Dec. 31, 2017	$ 31	37,953	9,285	(296)	$ 46,973
Net earnings (unaudited)			2,774		2,774
Dividends paid (unaudited)			(312)		(312)
Net change in unrealized gain on securities available for sale, net of income taxes (unaudited)				(798)	(798)
Stock options exercised (unaudited) (in shares)	7,500
Stock options exercised (unaudited)		75			75
Common stock issued as compensation to directors (unaudited) (in shares)	2,194
Stock Issued During Period, Value, Share-based Compensation, Gross		46			46
Stock-based compensation (unaudited)		105			$ 105
Ending balance (unaudited) (in shares) at Sep. 30, 2018	3,128,671				3,128,671
Ending balance (unaudited) at Sep. 30, 2018	$ 31	$ 38,179	$ 11,747	$ (1,094)	$ 48,863

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) (Parentheticals) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Additional Paid-in Capital [Member]
Sale of common stock, offering costs	$ 1,043

XML

Condensed Consolidated Statements of Cash Flow (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash flows from operating activities:
Net earnings	$ 2,774	$ 2,123
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization	397	390
Provision for loan losses	544	187
Net amortization of deferred loan fees	23	(118)
Loss on sale of securities available for sale		1
Amortization of premiums and discounts on securities available for sale	303	310
Gain on sale of loans held for sale	(339)	(316)
Proceeds from the sale of loans held for sale	58,532	48,413
Loans originated as held for sale	(59,095)	(52,265)
Stock issued as compensation	46	51
Stock-based compensation expense	105	15
Income from bank-owned life insurance	(32)	(35)
Net increase in accrued interest receivable	(50)	(77)
Net decrease (increase) in other assets	34	(153)
Net decrease in other liabilities and official checks	(61)	(12)
Net cash provided by (used in) operating activities	3,181	(1,486)
Cash flows from investing activities:
Loan originations, net of principal repayments	(39,330)	(22,461)
Purchase of securities available for sale	(1,003)	(20,510)
Principal repayments of securities available for sale	4,542	4,099
Proceeds from sale of securities available for sale		750
Maturities and calls of securities available for sale	539	48
Purchase of Federal Home Loan Bank stock	(39)	(96)
Purchase of premises and equipment	(224)	(396)
Net cash used in investing activities	(35,515)	(38,566)
Cash flows from financing activities:
Net increase in deposits	56,949	21,367
Proceeds from stock options exercised	75	26
Proceeds from sale of common stock, net		16,957
Common stock dividends paid	(312)	(140)
Net cash provided by financing activities	56,712	38,210
Net increase (decrease) in cash and cash equivalents	24,378	(1,842)
Cash and cash equivalents at beginning of period	32,397	36,165
Cash and cash equivalents at end of period	56,775	34,323
Supplemental disclosure of cash flow information
Interest	1,529	827
Income taxes	882	1,223
Noncash transaction-
Accumulated other comprehensive loss, net change in unrealized (loss) gain on securities available for sale, net of taxes	$ (798)	$ 213

XML

Note 1 - General

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Significant Accounting Policies [Text Block]

(

1

)    General

Prime Meridian Holding Company (“PMHG”) owns

100%

of the outstanding common stock of Prime Meridian Bank (the "Bank") (collectively the "Company"). PMHG’s primary activity is the operation of the Bank. The Bank is a Florida state-chartered commercial bank, and 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 clients through its

three

banking offices located in Tallahassee and Crawfordville, Florida and its online banking platform.

The accounting and financial reporting policies of the Company conform, in all material respects, to accounting principles generally accepted in the United States (“GAAP”) and to general practices within the banking industry. The condensed consolidated financial statements in the Quarterly Report on Form

10

-Q have

not

been audited by an independent registered public accounting firm, but in the opinion of management, reflect all necessary adjustments for a fair presentation of the Company’s financial position and results of operations. All adjustments were of a normal and recurring nature. The condensed consolidated financial statements have been prepared in accordance with GAAP and with the instructions to Form

10

-Q adopted by the Securities and Exchange Commission (the “SEC”). Accordingly, the condensed consolidated financial statements do

not

include all information and footnotes required by GAAP for complete financial presentation and should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended

December 31, 2017,

included in our Annual Report on Form

10

-K filed with the SEC on

March 20, 2018.

The results of operations for the

three

and

nine

months ended

September 30, 2018

are

not

necessarily indicative of the results to be expected for the full year or any future period.

Comprehensive

Incom

e

.

GAAP generally requires 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 condensed consolidated balance sheet, such items along with net earnings, are components of comprehensive income. The only component of other comprehensive (loss) income is the net change in the unrealized (loss) gain on securities available for sale.

S

tock

-

Based Compensation.

The Company expenses the fair value of stock options granted. The Company recognizes stock option compensation expense in the condensed consolidated statements of earnings as the options vest.

Mortgage Banking Revenue.

Mortgage banking revenue includes gains and losses on the sale of mortgage loans originated for sale and wholesale brokerage fees, net of commissions and deferred loan costs. The Company recognizes mortgage banking revenue from mortgage loans originated in the condensed consolidated statements of earnings upon sale of the loans.

Reclassifications.

Certain reclassifications of prior period amounts have been made to conform to the current period presentation.

Recent Accounting Standards Update.

In

January 2016,

the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")

No.

2016

-

01,

Financial Instruments-Overall

(Subtopic

825

-

10

):

Recognition and Measurement of Financial Assets and Financial Liabilities,

which is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The ASU requires equity investments to be measured at fair value with changes in fair values recognized in net earnings, (public entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes), simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment and eliminates the requirement to disclose fair values, the methods and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost. The ASU also clarifies that the Company should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale debt securities in combination with the Company's other deferred tax assets. For public business entities, the ASU is effective for fiscal years beginning after

December 15, 2017,

including interim periods within those fiscal years. The adoption of this guidance did

not

have a material impact on the Company's condensed consolidated financial statements.

In

February 2016,

the FASB issued ASU

No.

2016

-

2,

Leases (Topic

842

)

which will require lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with terms of more than

twelve

months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. The new ASU will require both types of leases to be recognized on the balance sheet. The ASU also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. For public companies, the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2018.

The Company is in the process of determining the effect of the ASU on its condensed consolidated financial statements. Early adoption is permitted.

In

June 2016,

the FASB issued ASU

No.

2016

-

13,

Financial Instruments-Credit Losses (Topic

326

)

. The ASU improves financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by the Company. The ASU requires the Company to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. The Company will continue to use judgment to determine which loss estimation method is appropriate for its circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization's portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2019.

Early adoption is permitted. The Company is in the process of determining the effect of the ASU on its condensed consolidated financial statements.

In

January 2017,

the FASB issued ASU 

No.

 

2017

-

01,

 Business Combinations (Topic

805

): Clarifying the Definition of a Business. The amendments in this update provide a more robust framework to use in determining when a set of assets and activities is a business. Because the current definition of a business is interpreted broadly and can be difficult to apply, stakeholders indicated that analyzing transactions is inefficient and costly and that the definition does

not

permit the use of reasonable judgment. The amendments provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after

December 

15,

2017.

The adoption of this guidance did

not

have any impact on the Company’s condensed consolidated financial statements.

In

March 2017,

the FASB issued ASU

No.

2017

-

08,

“Premium Amortization on Purchased Callable Debt Securities”, to amend the amortization period for certain purchased callable debt securities held at a premium.  Under current GAAP, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument.  The amendments in this update require the premium to be amortized to the earliest call date.  

No

accounting change is required for securities held at a discount.  For public business entities, the amendments in this update become effective for annual periods, and interim periods within those annual periods, beginning after

December 

15,

2018.

Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments in this update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company has adhered to this practice since its inception.

In

June 2018,

the FASB issued ASU

No.

2018

-

07,

Stock Compensation (Topic

718

): Improvements to Nonemployee Share-Based Payment Accounting. The ASU is intended to reduce the cost and complexity and to improve financial reporting for nonemployee share-based payments. The ASU expands the scope of Topic

718.

Compensation Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services.

Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic

505

-

50,

Equity-Equity-Based payments to Non-Employees. The ASU is effective for the Company for fiscal years beginning after

December 15, 2018,

including interim periods within that fiscal year. Early adoption is permitted, but

no

earlier than a company’s adoption date of Topic

606,

Revenue from Contracts with Customers. The Company is currently evaluating the impact of the ASU, if any, on its condensed consolidated financial statements.

XML

Note 2 - Securities Available for Sale

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

(

2

)

   

Securities Available for Sale

Securities are classified according to management's intent. The amortized cost of securities and fair values are as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
(in thousands)
At September 30, 2018
U.S. Government agency securities	$	815	$	-	$	(24	)	$	791
Municipal securities		11,640		31		(209	)		11,462
Mortgage-backed securities		33,369		16		(1,279	)		32,106
Total	$	45,824	$	47	$	(1,512	)	$	44,359
At December 31, 2017
U.S. Government agency securities	$	1,251	$	6	$	(8	)	$	1,249
Municipal securities		12,340		128		(95	)		12,373
Mortgage-backed securities		36,614		23		(450	)		36,187
Total	$	50,205	$	157	$	(553	)	$	49,809

The following table summarizes the sale of securities available for sale.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2018		2017		2018		2017
Proceeds from sale of securities	$	-	$	-	$	-	$	750
Gross gains		-		-		-		-
Gross losses		-		-		-		(1	)
Net loss on sale of securities	$	-	$	-	$	-	$	(1	)

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

	Less Than Twelve Months					Over Twelve Months
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value
(in thousands)
At September 30, 2018
Securities Available for Sale
U.S. Government agency securities	$	(4	)	$	240	$	(20	)	$	551
Municipal securities		(116	)		4,807		(93	)		2,568
Mortgage-backed securities		(185	)		5,368		(1,094	)		26,162
Total	$	(305	)	$	10,415	$	(1,207	)	$	29,281
At December 31, 2017
Securities Available for Sale
U.S. Government agency securities	$	(8	)	$	694	$	-		$	-
Municipal securities		(36	)		1,831		(59	)		1,203
Mortgage-backed securities		(308	)		29,742		(142	)		5,667
Total	$	(352	)	$	32,267	$	(201	)	$	6,870

The unrealized losses at

September 30, 2018

and

December 31, 2017

on

forty-one

and

thirty-four

securities, respectively, 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. Securities available for sale measured at fair value on a recurring basis are summarized below:

			Fair Value Measurements Using
			Quoted Prices
			In Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	Fair		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
(in thousands)
At September 30, 2018
U.S. Government agency securities	$	791	$	-	$	791	$	-
Municipal securities		11,462		-		11,462		-
Mortgage-backed securities		32,106		-		32,106		-
Total	$	44,359	$	-	$	44,359	$	-
At December 31, 2017
U.S. Government agency securities	$	1,249	$	-	$	1,249	$	-
Municipal securities		12,373		-		12,373		-
Mortgage-backed securities		36,187		-		36,187		-
Total	$	49,809	$	-	$	49,809	$	-

During the

three

and

nine

months ended

September 30, 2018

and

2017,

no

securities were transferred in or out of Levels

1,

2

or

3.

The scheduled maturities of securities are as follows:

	At September 30, 2018
	Amortized		Fair
	Cost		Value
(in thousands)
Due in one to five years	$	3,871	$	3,829
Due in five to ten years		5,873		5,859
Due after ten years		2,711		2,565
Mortgage-backed securities		33,369		32,106
Total	$	45,824	$	44,359

XML

Note 3 - Loans

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

(

3

)

   

Loans

Segments and classes of loans, excluding loans held for sale, are as follows:

	At September 30,			At December 31,
(in thousands)	2018			2017
Real estate mortgage loans:
Commercial	$	84,161		$	79,565
Residential and home equity		120,545			94,824
Construction		31,001			26,813
Total real estate mortgage loans		235,707			201,202
Commercial loans		49,563			44,027
Consumer and other loans		6,980			7,742
Total loans		292,250			252,971
Add (deduct):
Net deferred loan costs		446			424
Allowance for loan losses		(3,674	)		(3,136	)
Loans, net	$	289,022		$	250,259

An analysis of the change in allowance for loan losses follows:

	Real Estate Mortgage Loans
				Residential								Consumer
				and Home						Commercial		and Other
(in thousands)	Commercial			Equity			Construction			Loans		Loans			Total
Three-Month Period Ended September 30, 2018
Beginning balance	$	1,001		$	1,309		$	400		$	749	$	82		$	3,541
Provision (credit) for loan losses		(61	)		79			(12	)		126		3			135
Net (charge-offs) recoveries		-			-			(3	)		1		-			(2	)
Ending balance	$	940		$	1,388		$	385		$	876	$	85		$	3,674
Three-Month Period Ended September 30, 2017
Beginning balance	$	811		$	1,108		$	338		$	712	$	59		$	3,028
Provision (credit) for loan losses		49			(18	)		(51	)		28		24			32
Net (charge-offs) recoveries		-			-			-			12		-			12
Ending balance	$	860		$	1,090		$	287		$	752	$	83		$	3,072
Nine-Month Period Ended September 30, 2018
Beginning balance	$	894		$	1,097		$	331		$	724	$	90		$	3,136
Provision (credit) for loan losses		46			291			57			148		2			544
Net (charge-offs) recoveries		-			-			(3	)		4		(7	)		(6	)
Ending balance	$	940		$	1,388		$	385		$	876	$	85		$	3,674
Nine-Month Period Ended September 30, 2017
Beginning balance	$	775		$	1,074		$	258		$	714	$	55		$	2,876
Provision (credit) for loan losses		85			16			29			24		33			187
Net (charge-offs) recoveries		-			-			-			14		(5	)		9
Ending balance	$	860		$	1,090		$	287		$	752	$	83		$	3,072
At September 30, 2018
Individually evaluated for impairment:
Recorded investment	$	611		$	247		$	-		$	208	$	8		$	1,074
Balance in allowance for loan losses	$	-		$	-		$	-		$	208	$	8		$	216
Collectively evaluated for impairment:
Recorded investment	$	83,550		$	120,298		$	31,001		$	49,355	$	6,972		$	291,176
Balance in allowance for loan losses	$	940		$	1,388		$	385		$	668	$	77		$	3,458
At December 31, 2017
Individually evaluated for impairment:
Recorded investment	$	-		$	-		$	-		$	134	$	-		$	134
Balance in allowance for loan losses	$	-		$	-		$	-		$	134	$	-		$	134
Collectively evaluated for impairment:
Recorded investment	$	79,565		$	94,824		$	26,813		$	43,893	$	7,742		$	252,837
Balance in allowance for loan losses	$	894		$	1,097		$	331		$	590	$	90		$	3,002

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 Company identifies the portfolio segments and classes as follows:

Real Estate Mortgage Loans.

Real estate mortgage loans are typically divided into

three

classes: commercial, residential and home equity, and construction loans.

       Commercial.

Loans of this type are typically our more complex loans. This category of real estate loans is comprised of loans secured by mortgages on commercial property that are 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 a market index rate. At times, a rate

may

be fixed for longer than

five

years. As part of our credit underwriting standards, the Company 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 and 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 flows and evaluate collateral value. Currently, the collateral securing our commercial real estate loans includes a variety of property types, such as office, warehouse, and retail facilities. Other types include multifamily properties, hotels, mixed-use residential and commercial properties. Generally, commercial real estate loans present a higher risk profile than our consumer real estate loan portfolio.

        Residential and Home Equity.

The Company offers

first

and

second

one

-to-

four

family mortgage loans and home equity lines of credit; the collateral for these loans is generally 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. The nonowner-occupied investment properties are more similar in risk to commercial real estate loans, and therefore, are underwritten by assessing the property’s income potential and appraised value. In both cases, we underwrite the borrower’s financial condition and evaluate his or her global cash flow position. Borrowers

may

be affected by numerous factors, including 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,

5

-year, or

7

-year adjustable rate mortgage; while

15

-year or

30

-year fixed-rate loans are generally sold in the secondary market.

Construction.

Typically, these loans have a construction period of

one

to

two

years and the interest is paid monthly. Once the construction period terminates, some of these loans convert to a term loan with a maturity of

one

to

ten

years. This portion of our loan portfolio includes loans to small and midsized businesses to construct owner-user properties, loans to developers of commercial real estate investment properties, and residential developments. This type of loan is also made to individual clients for construction of single-family homes in our market area. An independent appraisal is used to determine the value of the collateral and confirm that the ratio of the loan principal to the value of the collateral will

not

exceed policies of the Bank. As the construction project progresses, loan proceeds are requested by the borrower to complete phases of construction and funding is only disbursed after the project has been inspected by a

third

-party inspector or experienced construction lender. Risks associated with construction loans include fluctuations in the value of real estate, project completion risk, and changes in market trends. The ability of the construction loan borrower to finance the loan or sell the property upon completion of the project is another risk factor that also

may

be affected by changes in market trends since the initial funding of the loan.

Commercial Loans.

The Bank offers a wide range of commercial loans, including business term loans, equipment financing, lines of credit, and U.S. Small Business Administration (SBA) loans. 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 and do

not

require a formal valuation of the business collateral. When commercial loans are secured by specifically identified collateral, then the valuation of the 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. The Bank currently offers SBA

504

and SBA

7A

loans. SBA

504

loans provide financing for major fixed assets such as real estate and equipment while SBA

7A

loans are generally used to establish a new business or assist in the acquisition, operation, or expansion of an existing business. With both SBA loan programs, there are set eligibility requirements and underwriting standards outlined by SBA that can change as the government alters its fiscal policy. Significant factors affecting a commercial borrower's creditworthiness include the quality of management and the ability both to evaluate changes in the supply and demand characteristics affecting the business' markets for products and services and to respond effectively to such changes. These loans

may

be made unsecured or secured, but most are made on a secured basis. Risks associated with our commercial loan portfolio include local, regional, and national market conditions.

Other factors of risk could include changes in the borrower's management and fluctuations in collateral value. Additionally, there

may

be refinancing risk if a commercial loan includes a balloon payment which must be refinanced or paid off at loan maturity. In reference to our risk management process, our commercial loan portfolio presents a higher risk profile than our consumer real estate and consumer loan portfolios. Therefore, we require that all loans to businesses must have a clearly stated and reasonable payment plan to allow for timely retirement of debt, unless secured by liquid collateral or as otherwise justified.

Cons

umer

and Other

Loans

.

These loans are made for various consumer purposes, such as the financing of automobiles, boats, and recreational vehicles. The payment structure of these loans is normally on an installment basis. The risk associated with this category of loans stems from the reduced collateral value for a defaulted loan; the collateral

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.

The following summarizes the loan credit quality:

	Real Estate Mortgage Loans
			Residential						Consumer
			and Home				Commercial		and Other
(in thousands)	Commercial		Equity		Construction		Loans		Loans		Total
At September 30, 2018
Grade:
Pass	$	78,766	$	117,523	$	31,001	$	45,524	$	6,886	$	279,700
Special mention		4,784		2,861		-		3,042		86		10,773
Substandard		611		161		-		997		8		1,777
Doubtful		-		-		-		-		-		-
Loss		-		-		-		-		-		-
Total	$	84,161	$	120,545	$	31,001	$	49,563	$	6,980	$	292,250
At December 31, 2017
Grade:
Pass	$	74,560	$	92,282	$	26,356	$	42,874	$	7,715	$	243,787
Special mention		4,382		2,122		298		591		27		7,420
Substandard		623		420		159		562		-		1,764
Doubtful		-		-		-		-		-		-
Loss		-		-		-		-		-		-
Total	$	79,565	$	94,824	$	26,813	$	44,027	$	7,742	$	252,971

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. Loans classified as substandard or special mention are reviewed quarterly by the Company for further deterioration or improvement to determine if they are appropriately classified and whether there is any impairment. All loans are graded upon initial issuance. Furthermore, construction loans, nonowner-occupied commercial real estate loans, and commercial loan relationships in excess of

$500,000

are reviewed at least annually. The Company determines the appropriate loan grade during the renewal process and reevaluates the loan grade in situations when a loan becomes past due.

Loans excluded from the review process above are generally classified as pass credits until: (a) they become past due; (b) management becomes aware of deterioration in the credit worthiness of the borrower; or (c) the client 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

necessarily preclude the potential for recovery, but rather signifies it is

no

longer practical to defer writing off the asset.

At

September 30, 2018,

there were

four

nonaccrual loans, totaling

$179,000.

Age analysis of past due loans is as follows:

	Accruing Loans
					Greater Than
	30-59 Days		60-89 Days		90 Days		Total Past				Nonaccrual		Total
(in thousands)	Past Due		Past Due		Past Due		Due		Current		Loans		Loans
At September 30, 2018:
Real estate mortgage loans:
Commercial	$	-	$	-	$	-	$	-	$	84,161	$	-	$	84,161
Residential and home equity		135		-		-		135		120,410		-		120,545
Construction		-		-		-		-		31,001		-		31,001
Commercial loans		16		-		-		16		49,376		171		49,563
Consumer and other loans		-		-		-		-		6,972		8		6,980
Total	$	151	$	-	$	-	$	151	$	291,920	$	179	$	292,250
At December 31, 2017:
Real estate mortgage loans:
Commercial	$	-	$	623	$	-	$	623	$	78,942	$	-	$	79,565
Residential and home equity		-		255		-		255		94,569		-		94,824
Construction		-		-		-		-		26,813		-		26,813
Commercial loans		-		-		-		-		43,893		134		44,027
Consumer and other loans		-		-		-		-		7,742		-		7,742
Total	$	-	$	878	$	-	$	878	$	251,959	$	134	$	252,971

The following summarizes the amount of impaired loans:

	With No Related
	Allowance Recorded				With an Allowance Recorded						Total
			Unpaid				Unpaid						Unpaid
			Contractual				Contractual						Contractual
	Recorded		Principal		Recorded		Principal		Related		Recorded		Principal		Related
(in thousands)	Investment		Balance		Investment		Balance		Allowance		Investment		Balance		Allowance
At September 30, 2018:
Real estate mortgage loans:
Commercial	$	611	$	611	$	-	$	-	$	-	$	611	$	611	$	-
Residential and home equity		247		247		-		-		-		247		247		-
Commercial loans		-		-		208		208		208		208		208		208
Consumer and other loans		-		-		8		8		8		8		8		8
	$	858	$	858	$	216	$	216	$	216	$	1,074	$	1,074	$	216
At December 31, 2017:
Commercial loans	$	-	$	-	$	134	$	134	$	134	$	134	$	134	$	134
Total	$	-	$	-	$	134	$	134	$	134	$	134	$	134	$	134

The average net investment in impaired loans and interest income recognized and received on impaired loans are as follows:

	Three Months Ended September 30,
	2018						2017
	Average		Interest		Interest		Average		Interest		Interest
	Recorded		Income		Income		Recorded		Income		Income
(in thousands)	Investment		Recognized		Received		Investment		Recognized		Received
Real estate mortgage loans:
Commercial	$	611	$	8	$	8	$	-	$	-	$	-
Residential and home equity		255		4		3				6		-
Construction		1		-		-		63		1		1
Commercial loans		159		1		2		22		-		-
Total	$	1,026	$	13	$	13	$	85	$	7	$	1

	Nine Months Ended September 30,
	2018						2017
	Average		Interest		Interest		Average		Interest		Interest
	Recorded		Income		Income		Recorded		Income		Income
(in thousands)	Investment		Recognized		Received		Investment		Recognized		Received
Real estate mortgage loans:
Commercial	$	423	$	8	$	8	$	-	$	-	$	-
Residential and home equity		141		5		3		375		28		28
Construction		-		-		-		66		1		2
Commercial loans		154		1		4		56		-		-
Total	$	718	$	14	$	15	$	497	$	29	$	30

There were

no

collateral dependent loans measured at fair value on a nonrecurring basis at

September 30, 2018

or

2017.

The restructuring of a loan constitutes a troubled debt restructuring (“TDR”) if the creditor grants a concession to the debtor that it would

not

otherwise consider in the normal course of business. A concession

may

include an extension of repayment terms which would

not

normally be granted, a reduction in interest rate or the forgiveness of principal and/or accrued interest. All TDRs are evaluated individually for impairment on a quarterly basis as part of the allowance for loan losses calculation. The Company entered into

one

new TDR during the

nine

months ended

September 30, 2018

and

2017.

The Company had

no

new TDRs during the quarter ended

September 30, 2018

and

2017.

	Nine Months Ended September 30,
	2018								2017
			Pre-		Post-		Current				Pre-		Post-		Current
			Modification		Modification		Modification				Modification		Modification		Modification
	Number		Outstanding		Outstanding		Outstanding		Number		Outstanding		Outstanding		Outstanding
	of		Recorded		Recorded		Recorded		of		Recorded		Recorded		Recorded
	Contracts		Investment		Investment		Investment		Contracts		Investment		Investment		Investment
(dollars in thousands)
Troubled Debt Restructurings -
Commercial real estate:
Modified principal		1	$	619	$	611	$	611	$	1	$	153	$	169	$	165
Total		1	$	619	$	611	$	611	$	1	$	153	$	169	$	165

At

September 30, 2018,

the Company had

$648,000

in loans identified as TDRs. The TDR entered into during the

nine

months ended

September 30, 2018

did

not

subsequently default during that period.

XML

Note 4 - Regulatory Capital

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

(

4

)

   

Regulatory Capital

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.

Effective

January 1, 2015,

the Bank, became subject to the new Basel III capital level threshold requirements under the Prompt Corrective Action regulations with full compliance with all of the final rule's requirements phased in over a multi-year schedule. These new regulations were designed to ensure that banks maintain strong capital positions even in the event of severe economic downturns or unforeseen losses.

Changes that could affect the Bank going forward include additional constraints on the inclusion of deferred tax assets in capital and increased risk weightings for nonperforming loans and acquisition/development loans in regulatory capital. Beginning

January 1, 2016,

the Bank became subject to the capital conservation buffer rules which place limitations on distributions, including dividend payments, and certain discretionary bonus payments to executive officers. In order to avoid these limitations, a bank must hold a capital conservation buffer above its minimum risk-based capital requirements. As of

September 30, 2018,

the Bank’s capital conservation buffer exceeds the minimum requirement designated for

September 30, 2018

of

1.875%.

The required buffer of

2.5%

will be effective

January 1, 2019.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and percentages (set forth in the table below) of total and Tier

1

capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier

1

capital (as defined) to average assets (as defined). Management believes, as of

September 30, 2018

that the Bank meets all capital adequacy requirements to which it is subject.

As of

September 30, 2018,

the Bank is well capitalized under the regulatory framework for prompt      corrective action. To be categorized as adequately capitalized, the Bank must maintain minimum total risk-based, Tier

1

risk-based, and Tier

1

leverage percentages as set forth in the table. There are

no

conditions or events since that notification that management believes have changed the Bank’s category. The Bank’s actual capital amounts and percentages are also presented in the following table.

	Actual					For Capital Adequacy Purposes					For Well Capitalized Purposes
(dollars in thousands)	Amount		Percentage			Amount		Percentage			Amount		Percentage
As of September 30, 2018
Tier 1 Leverage Capital	$	36,388		9.21	%	$	15,805		4.00	%	$	19,757		5.00	%
Common Equity Tier 1 Risk-based Capital		36,388		12.40			13,203		4.50			19,072		6.50
Tier 1 Risk-based Capital		36,388		12.40			17,605		6.00			23,473		8.00
Total Risk-based Capital		40,055		13.65			23,473		8.00			29,341		10.00
As of December 31, 2017
Tier 1 Leverage Capital	$	33,146		9.48	%	$	13,983		4.00	%	$	17,479		5.00	%
Common Equity Tier 1 Risk-based Capital		33,146		12.80			11,654		4.50			16,834		6.50
Tier 1 Risk-based Capital		33,146		12.80			15,539		6.00			20,718		8.00
Total Risk-based Capital		36,282		14.01			20,718		8.00			25,898		10.00

XML

Note 5 - Earnings Per Share

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

(

5

)

   

Earnings Per Share

Earnings per share, (“EPS”) have been computed on the basis of the weighted-average number of shares of common stock outstanding. For the

three

and

nine

months ended

September 30, 2018

and

2017,

outstanding stock options are considered dilutive securities for purposes of calculating diluted EPS which was computed using the treasury stock method.

	2018						2017
			Weighted-		Per				Weighted-		Per
			Average		Share				Average		Share
(dollars in thousands, except per share amounts)	Earnings		Shares		Amount		Earnings		Shares		Amount
Three Months Ending September 30:
Basic EPS:
Net earnings	$	1,018		3,127,038	$	0.33	$	822		3,100,309	$	0.26
Effect of dilutive securities-incremental shares from assumed conversion of options				3,133						3,235
Diluted EPS:
Net earnings	$	1,018		3,130,171	$	0.33	$	822		3,103,544	$	0.26
Nine Months Ending September 30:
Basic EPS:
Net earnings	$	2,774		3,123,772	$	0.89	$	2,123		2,569,375	$	0.83
Effect of dilutive securities-incremental shares from assumed conversion of options				7,882						9,218
Diluted EPS:
Net earnings	$	2,774		3,131,654	$	0.89	$	2,123		2,578,593	$	0.83

XML

Note 6 - Stock Option Plans

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

(

6

)

   

Stock Option Plans

The

2015

Stock Incentive Compensation Plan (the

“2015

Plan”) was approved by the Shareholders at the Company’s annual meeting of shareholders on

May 20, 2015

and permits the Company to grant the Company’s key employees and directors stock options, stock appreciation rights, performance shares, and phantom stock. Under the

2015

Plan, the number of shares which

may

be issued is

500,000,

but in

no

instance more than

15%

of the issued and outstanding shares of the Company’s common stock.

During the

first

quarter of

2018,

the Company issued

15,667

Incentive Stock Options (“ISO”) to its CEO as part of his compensation for the year ended

December 31, 2017.

These options vest

100%

at the date of issuance, and therefore, are expensed immediately.

During the

second

quarter of

2018,

the Company issued

120,000

Non-Qualified Stock Options (“NSO”) to its Board of Directors. These NSOs vest over

5

years and expire in increments beginning

April 1, 2024

and concluding

April 1, 2028.

During the

second

quarter of

2018,

the Company issued Incentive Stock Options (“ISO”) to its employees. The Company issued

25,000

ISOs to its CEO and

92,250

ISOs to its remaining employees. These ISOs vest over

5

years and expire in increments beginning

April 1, 2024

and concluding

April 1, 2028.

The NSOs and the ISOs issued during the

second

quarter of

2018

were issued in recognition of the Company’s

10

-year anniversary.

As of

September 30, 2018,

264,457

stock options have been granted under the

2015

Plan and

204,844

options are available for grant.

					Weighted-
			Weighted-		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
	Options		Price		Term		Value
Outstanding at December 31, 2016		-	$	-
Options granted		11,540		17.03
Outstanding at September 30, 2017		11,540	$	17.03
Outstanding at December 31, 2017		11,540	$	17.03
Options granted		252,917		19.79
Outstanding at September 30, 2018 (in years)		264,457	$	19.79		8.60	$	430,000
Exercisable at September 30, 2018 (in years)		37,207	$	17.93		3.05	$	130,000

The fair value of shares vested and recognized as compensation expense was

$105,000

and

$15,000

for the

nine

months ended

September 30, 2018

and

2017,

respectively. At

September 30, 2018,

there was

$690,000

in unrecognized compensation expense related to nonvested share-based compensation arrangements granted under the

2015

Plan, with an average remaining life of

54

months.

The fair value of each option granted during the

nine

months ended

September 30, 2018

was estimated on the date of grant using the Black-Scholes option-pricing model with the following range of assumptions:

Weighted average risk-free interest rate	1.47	-	2.63%
Expected dividend yield	0.41	-	0.50%
Expected stock volatility	10.07	-	11.90%
Expected life in years	2.5	-	6.5
Per share fair value of options issued during period	$1.49	-	$3.35

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.                                                                                           

As of

May 20, 2015,

no

further grants will be made under the

2007

Stock Option Plan (the

“2007

Plan”). Unexercised stock options that were granted under the

2007

Plan will remain outstanding and will expire under the terms of the individual stock grant. A summary of the activity in the Company’s

2007

Stock Option Plan is as follows:

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Options			Price		Term		Value
Outstanding at December 31, 2016		42,200		$	10.16
Options exercised		(2,600	)		10.00
Options forfeited		(200	)		10.00
Outstanding at September 30, 2017		39,400		$	10.17
Options exercised		(16,850	)	$	10.00
Options forfeited		(350	)	$	10.00
Outstanding at December 31, 2017		22,200		$	10.31
Options exercised		(7,500	)		10.00
Outstanding at September 30, 2018 (in years)		14,700		$	10.46		1.20	$	161,000
Exercisable at September 30, 2018 (in years)		14,700		$	10.46		1.20	$	161,000

At

September 30, 2018,

there was

no

unrecognized compensation expense related to nonvested share-based compensation arrangements granted under the

2007

plan.

In

2012,

the Company’s Board of Directors and shareholders adopted the 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’s common stock. Pursuant to the Directors’ Plan, each director is permitted to make an 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 stock, he or she will receive in common stock

110%

of the amount of cash fees set by the Board or the Compensation and Nominating Committee. The value of stock to be awarded pursuant to the Directors’ Plan will be the closing price of a share of common stock as traded on the Over-the Counter Bulletin Board, or a price set by the Board or its Compensation and Nominating Committee, acting in good faith, but in

no

case less than fair market value. The maximum number of shares to be issued pursuant to the Directors’ Plan is limited to

74,805

shares. For the

nine

months ended

September 30, 2018

and

2017,

our directors received

2,194

and

3,104

shares of common stock, respectively, in lieu of cash fees calculated at

110%

to be

$46,000

and

$51,000,

respectively. At

September 30, 2018,

55,908

shares remained available for grant.

XML

Note 7 - Federal Home Loan Bank Advances

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Federal Home Loan Bank, Advances [Text Block]

(

7

)

  

Federal Home Loan Bank Advances

Federal Home Loan Bank (“FHLB”) advances are 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 could borrow up to

$37.9

million at

September 30, 2018.

At

September 30, 2018

and

December 31, 2017,

the Company had

no

outstanding loans under this line.

XML

Note 8 - Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Fair Value Disclosures [Text Block]

(

8

)

   

Fair Value of Financial Instruments

The estimated fair values and fair value measurement method with respect to the Company's financial instruments were as follows:

			At September 30, 2018				At December 31, 2017
			Carrying		Fair		Carrying		Fair
(in thousands)	Level		Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents		1	$	56,775	$	56,775	$	32,397	$	32,397
Securities available for sale		2		44,359		44,359		49,809		49,809
Loans held for sale		3		6,782		6,822		5,880		6,039
Loans, net		3		289,022		285,506		250,259		249,628
Federal Home Loan Bank stock		3		355		355		316		316
Accrued interest receivable		3		1,028		1,028		978		978
Financial liabilities-
Deposits		3		355,246		355,553		298,297		298,403
Off-Balance Sheet Items		3		-		-		-		-

Discussion regarding the assumptions used to compute the estimated fair values of financial instruments can be found in Note

1

to the consolidated financial statements included in the Company’s annual report on Form

10

-K for the year ended

December 31, 2017.

XML

Note 9 - Off-balance Sheet Financial Instruments

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Off-balance Sheet Financial Instruments [Text Block]

(

9

)    Off-

B

alance

S

heet

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 clients. These financial instruments are commitments to extend credit, construction loans in process, unused lines of credit, standby letters of credit, and guaranteed accounts and

may

involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the condensed 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, construction loans in process and unused lines of credit are agreements to lend to a client 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 client’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty.

Standby letters of credit are written conditional commitments issued by the Company to guarantee the performance of a client to a

third

party. These letters of credit are primarily issued to support

third

-party borrowing arrangements and generally have expiration dates within

one

year of issuance. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to clients. 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. Some of the Company’s standby letters of credit are secured by collateral and those secured letters of credit totaled

$565,000

at

September 30, 2018.

Guaranteed accounts are irrevocable standby letters of credit issued by us to guarantee a client’s credit line with our

third

-party credit card company, First Arkansas Bank & Trust. As a part of this agreement, we are responsible for the established credit limit on certain accounts plus

10%.

The maximum potential amount of future payments we could be required to make is represented by the dollar amount disclosed in the table below.

Standby letters of credit and commitments to extend credit typically result in loans with a market interest rate when funded.

The maximum potential amount of future payments we could be required to make for off-balance sheet financial instruments is represented by the dollar amount disclosed in the table below.

	At September 30, 2018
(in thousands)
Commitments to extend credit	$	5,670
Construction loans in process	$	16,280
Unused lines of credit	$	41,954
Standby letters of credit	$	2,312
Guaranteed accounts	$	1,329

XML

Note 10 - Premises and Equipment

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

(

10

)  Premises and Equipment

Effective

August 6, 2018,

Prime Meridian Holding Company’s (the “Company”) wholly-owned subsidiary, Prime Meridian Bank, (the “Bank”) entered into a Retail Lease (the “Lease”) at its Timberlane location with the new owner of the property, LG Tallahassee Market Square, LLC (the “Landlord”). The Lease allows for the operation of a full-service banking office at

1471

Timberlane Road, Tallahassee, Florida

32312.

The term of the Lease is

15

years, with

four

options to renew for

five

years each. The Lease requires the Landlord to seek approval from the City of Tallahassee for a lot line adjustment which was received on

September 28, 2018.

Once this approval is received, the Landlord has

six

months from this approval date to deliver notice and proof of a Certificate of Completion (the “Delivery Date”), certifying that the Landlord’s improvement obligations are complete. The Delivery Date is expected to be on or before

March 28, 2019.

The new rent obligations will commence

120

days after the Delivery Date (the “Rent Commencement Date”) and are as follows:

Years			Annual Rent Amount
1	-	5	$	294,000
6	-	10	$	323,400
11	-	15	$	355,740

Prior to the Rent Commencement Date, the Bank will pay rent in accordance with its prior lease as disclosed in the Company’s annual report on Form

10

-K for the year ended

December 31, 2017.

The Lease is a fully net lease, with the Bank separately paying real and personal property taxes, all special and

third

-party assessments, common area maintenance charges, maintenance costs and insurance expenses.

XML

Note 11 - Subsequent Event

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Subsequent Events [Text Block]

(

11

)

Subsequent Event

On

October 10, 2018,

Hurricane Michael, a Category

4

hurricane, made landfall in the Florida Panhandle.

None

of the Company’s premises or equipment sustained damage in the storm; however, some of the Company’s loan clients were impacted. After a review of the Company’s loan portfolio, management does

not

anticipate any material impact to the Company’s financial condition or results of operations at this time.

XML

Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Comprehensive Income, Policy [Policy Text Block]

Comprehensive

Incom

e

.

GAAP generally requires 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 condensed consolidated balance sheet, such items along with net earnings, are components of comprehensive income. The only component of other comprehensive (loss) income is the net change in the unrealized (loss) gain on securities available for sale.

Share-based Compensation, Option and Incentive Plans, Director Policy [Policy Text Block]

S

tock

-

Based Compensation.

The Company expenses the fair value of stock options granted. The Company recognizes stock option compensation expense in the condensed consolidated statements of earnings as the options vest.

Loans and Leases Receivable, Mortgage Banking Activities, Policy [Policy Text Block]

Mortgage Banking Revenue.

Mortgage banking revenue includes gains and losses on the sale of mortgage loans originated for sale and wholesale brokerage fees, net of commissions and deferred loan costs. The Company recognizes mortgage banking revenue from mortgage loans originated in the condensed consolidated statements of earnings upon sale of the loans.

Reclassification, Policy [Policy Text Block]

Reclassifications.

Certain reclassifications of prior period amounts have been made to conform to the current period presentation.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Standards Update.

In

January 2016,

the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")

No.

2016

-

01,

Financial Instruments-Overall

(Subtopic

825

-

10

):

Recognition and Measurement of Financial Assets and Financial Liabilities,

which is intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The ASU requires equity investments to be measured at fair value with changes in fair values recognized in net earnings, (public entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes), simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment and eliminates the requirement to disclose fair values, the methods and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost. The ASU also clarifies that the Company should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale debt securities in combination with the Company's other deferred tax assets. For public business entities, the ASU is effective for fiscal years beginning after

December 15, 2017,

including interim periods within those fiscal years. The adoption of this guidance did

not

have a material impact on the Company's condensed consolidated financial statements.

In

February 2016,

the FASB issued ASU

No.

2016

-

2,

Leases (Topic

842

)

which will require lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with terms of more than

twelve

months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. The new ASU will require both types of leases to be recognized on the balance sheet. The ASU also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. For public companies, the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2018.

The Company is in the process of determining the effect of the ASU on its condensed consolidated financial statements. Early adoption is permitted.

In

June 2016,

the FASB issued ASU

No.

2016

-

13,

Financial Instruments-Credit Losses (Topic

326

)

. The ASU improves financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by the Company. The ASU requires the Company to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. The Company will continue to use judgment to determine which loss estimation method is appropriate for its circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization's portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2019.

Early adoption is permitted. The Company is in the process of determining the effect of the ASU on its condensed consolidated financial statements.

In

January 2017,

the FASB issued ASU 

No.

 

2017

-

01,

 Business Combinations (Topic

805

): Clarifying the Definition of a Business. The amendments in this update provide a more robust framework to use in determining when a set of assets and activities is a business. Because the current definition of a business is interpreted broadly and can be difficult to apply, stakeholders indicated that analyzing transactions is inefficient and costly and that the definition does

not

permit the use of reasonable judgment. The amendments provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after

December 

15,

2017.

The adoption of this guidance did

not

have any impact on the Company’s condensed consolidated financial statements.

In

March 2017,

the FASB issued ASU

No.

2017

-

08,

“Premium Amortization on Purchased Callable Debt Securities”, to amend the amortization period for certain purchased callable debt securities held at a premium.  Under current GAAP, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument.  The amendments in this update require the premium to be amortized to the earliest call date.  

No

accounting change is required for securities held at a discount.  For public business entities, the amendments in this update become effective for annual periods, and interim periods within those annual periods, beginning after

December 

15,

2018.

Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments in this update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company has adhered to this practice since its inception.

In

June 2018,

the FASB issued ASU

No.

2018

-

07,

Stock Compensation (Topic

718

): Improvements to Nonemployee Share-Based Payment Accounting. The ASU is intended to reduce the cost and complexity and to improve financial reporting for nonemployee share-based payments. The ASU expands the scope of Topic

718.

Compensation Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services.

Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic

505

-

50,

Equity-Equity-Based payments to Non-Employees. The ASU is effective for the Company for fiscal years beginning after

December 15, 2018,

including interim periods within that fiscal year. Early adoption is permitted, but

no

earlier than a company’s adoption date of Topic

606,

Revenue from Contracts with Customers. The Company is currently evaluating the impact of the ASU, if any, on its condensed consolidated financial statements.

XML

Note 2 - Securities Available for Sale (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Available-for-sale Securities Reconciliation [Table Text Block]

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
(in thousands)
At September 30, 2018
U.S. Government agency securities	$	815	$	-	$	(24	)	$	791
Municipal securities		11,640		31		(209	)		11,462
Mortgage-backed securities		33,369		16		(1,279	)		32,106
Total	$	45,824	$	47	$	(1,512	)	$	44,359
At December 31, 2017
U.S. Government agency securities	$	1,251	$	6	$	(8	)	$	1,249
Municipal securities		12,340		128		(95	)		12,373
Mortgage-backed securities		36,614		23		(450	)		36,187
Total	$	50,205	$	157	$	(553	)	$	49,809

Schedule of Realized Gain (Loss) [Table Text Block]

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2018		2017		2018		2017
Proceeds from sale of securities	$	-	$	-	$	-	$	750
Gross gains		-		-		-		-
Gross losses		-		-		-		(1	)
Net loss on sale of securities	$	-	$	-	$	-	$	(1	)

Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Table Text Block]

	Less Than Twelve Months					Over Twelve Months
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value
(in thousands)
At September 30, 2018
Securities Available for Sale
U.S. Government agency securities	$	(4	)	$	240	$	(20	)	$	551
Municipal securities		(116	)		4,807		(93	)		2,568
Mortgage-backed securities		(185	)		5,368		(1,094	)		26,162
Total	$	(305	)	$	10,415	$	(1,207	)	$	29,281
At December 31, 2017
Securities Available for Sale
U.S. Government agency securities	$	(8	)	$	694	$	-		$	-
Municipal securities		(36	)		1,831		(59	)		1,203
Mortgage-backed securities		(308	)		29,742		(142	)		5,667
Total	$	(352	)	$	32,267	$	(201	)	$	6,870

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

			Fair Value Measurements Using
			Quoted Prices
			In Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	Fair		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
(in thousands)
At September 30, 2018
U.S. Government agency securities	$	791	$	-	$	791	$	-
Municipal securities		11,462		-		11,462		-
Mortgage-backed securities		32,106		-		32,106		-
Total	$	44,359	$	-	$	44,359	$	-
At December 31, 2017
U.S. Government agency securities	$	1,249	$	-	$	1,249	$	-
Municipal securities		12,373		-		12,373		-
Mortgage-backed securities		36,187		-		36,187		-
Total	$	49,809	$	-	$	49,809	$	-

Available-for-sale Securities [Table Text Block]

	At September 30, 2018
	Amortized		Fair
	Cost		Value
(in thousands)
Due in one to five years	$	3,871	$	3,829
Due in five to ten years		5,873		5,859
Due after ten years		2,711		2,565
Mortgage-backed securities		33,369		32,106
Total	$	45,824	$	44,359

XML

Note 3 - Loans (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Portfolio of Loans [Table Text Block]

	At September 30,			At December 31,
(in thousands)	2018			2017
Real estate mortgage loans:
Commercial	$	84,161		$	79,565
Residential and home equity		120,545			94,824
Construction		31,001			26,813
Total real estate mortgage loans		235,707			201,202
Commercial loans		49,563			44,027
Consumer and other loans		6,980			7,742
Total loans		292,250			252,971
Add (deduct):
Net deferred loan costs		446			424
Allowance for loan losses		(3,674	)		(3,136	)
Loans, net	$	289,022		$	250,259

Allowance for Credit Losses on Financing Receivables [Table Text Block]

	Real Estate Mortgage Loans
				Residential								Consumer
				and Home						Commercial		and Other
(in thousands)	Commercial			Equity			Construction			Loans		Loans			Total
Three-Month Period Ended September 30, 2018
Beginning balance	$	1,001		$	1,309		$	400		$	749	$	82		$	3,541
Provision (credit) for loan losses		(61	)		79			(12	)		126		3			135
Net (charge-offs) recoveries		-			-			(3	)		1		-			(2	)
Ending balance	$	940		$	1,388		$	385		$	876	$	85		$	3,674
Three-Month Period Ended September 30, 2017
Beginning balance	$	811		$	1,108		$	338		$	712	$	59		$	3,028
Provision (credit) for loan losses		49			(18	)		(51	)		28		24			32
Net (charge-offs) recoveries		-			-			-			12		-			12
Ending balance	$	860		$	1,090		$	287		$	752	$	83		$	3,072
Nine-Month Period Ended September 30, 2018
Beginning balance	$	894		$	1,097		$	331		$	724	$	90		$	3,136
Provision (credit) for loan losses		46			291			57			148		2			544
Net (charge-offs) recoveries		-			-			(3	)		4		(7	)		(6	)
Ending balance	$	940		$	1,388		$	385		$	876	$	85		$	3,674
Nine-Month Period Ended September 30, 2017
Beginning balance	$	775		$	1,074		$	258		$	714	$	55		$	2,876
Provision (credit) for loan losses		85			16			29			24		33			187
Net (charge-offs) recoveries		-			-			-			14		(5	)		9
Ending balance	$	860		$	1,090		$	287		$	752	$	83		$	3,072
At September 30, 2018
Individually evaluated for impairment:
Recorded investment	$	611		$	247		$	-		$	208	$	8		$	1,074
Balance in allowance for loan losses	$	-		$	-		$	-		$	208	$	8		$	216
Collectively evaluated for impairment:
Recorded investment	$	83,550		$	120,298		$	31,001		$	49,355	$	6,972		$	291,176
Balance in allowance for loan losses	$	940		$	1,388		$	385		$	668	$	77		$	3,458
At December 31, 2017
Individually evaluated for impairment:
Recorded investment	$	-		$	-		$	-		$	134	$	-		$	134
Balance in allowance for loan losses	$	-		$	-		$	-		$	134	$	-		$	134
Collectively evaluated for impairment:
Recorded investment	$	79,565		$	94,824		$	26,813		$	43,893	$	7,742		$	252,837
Balance in allowance for loan losses	$	894		$	1,097		$	331		$	590	$	90		$	3,002

Financing Receivable Credit Quality Indicators [Table Text Block]

	Real Estate Mortgage Loans
			Residential						Consumer
			and Home				Commercial		and Other
(in thousands)	Commercial		Equity		Construction		Loans		Loans		Total
At September 30, 2018
Grade:
Pass	$	78,766	$	117,523	$	31,001	$	45,524	$	6,886	$	279,700
Special mention		4,784		2,861		-		3,042		86		10,773
Substandard		611		161		-		997		8		1,777
Doubtful		-		-		-		-		-		-
Loss		-		-		-		-		-		-
Total	$	84,161	$	120,545	$	31,001	$	49,563	$	6,980	$	292,250
At December 31, 2017
Grade:
Pass	$	74,560	$	92,282	$	26,356	$	42,874	$	7,715	$	243,787
Special mention		4,382		2,122		298		591		27		7,420
Substandard		623		420		159		562		-		1,764
Doubtful		-		-		-		-		-		-
Loss		-		-		-		-		-		-
Total	$	79,565	$	94,824	$	26,813	$	44,027	$	7,742	$	252,971

Past Due Financing Receivables [Table Text Block]

	Accruing Loans
					Greater Than
	30-59 Days		60-89 Days		90 Days		Total Past				Nonaccrual		Total
(in thousands)	Past Due		Past Due		Past Due		Due		Current		Loans		Loans
At September 30, 2018:
Real estate mortgage loans:
Commercial	$	-	$	-	$	-	$	-	$	84,161	$	-	$	84,161
Residential and home equity		135		-		-		135		120,410		-		120,545
Construction		-		-		-		-		31,001		-		31,001
Commercial loans		16		-		-		16		49,376		171		49,563
Consumer and other loans		-		-		-		-		6,972		8		6,980
Total	$	151	$	-	$	-	$	151	$	291,920	$	179	$	292,250
At December 31, 2017:
Real estate mortgage loans:
Commercial	$	-	$	623	$	-	$	623	$	78,942	$	-	$	79,565
Residential and home equity		-		255		-		255		94,569		-		94,824
Construction		-		-		-		-		26,813		-		26,813
Commercial loans		-		-		-		-		43,893		134		44,027
Consumer and other loans		-		-		-		-		7,742		-		7,742
Total	$	-	$	878	$	-	$	878	$	251,959	$	134	$	252,971

Impaired Financing Receivables [Table Text Block]

	With No Related
	Allowance Recorded				With an Allowance Recorded						Total
			Unpaid				Unpaid						Unpaid
			Contractual				Contractual						Contractual
	Recorded		Principal		Recorded		Principal		Related		Recorded		Principal		Related
(in thousands)	Investment		Balance		Investment		Balance		Allowance		Investment		Balance		Allowance
At September 30, 2018:
Real estate mortgage loans:
Commercial	$	611	$	611	$	-	$	-	$	-	$	611	$	611	$	-
Residential and home equity		247		247		-		-		-		247		247		-
Commercial loans		-		-		208		208		208		208		208		208
Consumer and other loans		-		-		8		8		8		8		8		8
	$	858	$	858	$	216	$	216	$	216	$	1,074	$	1,074	$	216
At December 31, 2017:
Commercial loans	$	-	$	-	$	134	$	134	$	134	$	134	$	134	$	134
Total	$	-	$	-	$	134	$	134	$	134	$	134	$	134	$	134

Impaired Financing Receivables, Average Recorded Investment, and Interest Income Recognized [Table Text Block]

	Three Months Ended September 30,
	2018						2017
	Average		Interest		Interest		Average		Interest		Interest
	Recorded		Income		Income		Recorded		Income		Income
(in thousands)	Investment		Recognized		Received		Investment		Recognized		Received
Real estate mortgage loans:
Commercial	$	611	$	8	$	8	$	-	$	-	$	-
Residential and home equity		255		4		3				6		-
Construction		1		-		-		63		1		1
Commercial loans		159		1		2		22		-		-
Total	$	1,026	$	13	$	13	$	85	$	7	$	1

	Nine Months Ended September 30,
	2018						2017
	Average		Interest		Interest		Average		Interest		Interest
	Recorded		Income		Income		Recorded		Income		Income
(in thousands)	Investment		Recognized		Received		Investment		Recognized		Received
Real estate mortgage loans:
Commercial	$	423	$	8	$	8	$	-	$	-	$	-
Residential and home equity		141		5		3		375		28		28
Construction		-		-		-		66		1		2
Commercial loans		154		1		4		56		-		-
Total	$	718	$	14	$	15	$	497	$	29	$	30

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	Nine Months Ended September 30,
	2018								2017
			Pre-		Post-		Current				Pre-		Post-		Current
			Modification		Modification		Modification				Modification		Modification		Modification
	Number		Outstanding		Outstanding		Outstanding		Number		Outstanding		Outstanding		Outstanding
	of		Recorded		Recorded		Recorded		of		Recorded		Recorded		Recorded
	Contracts		Investment		Investment		Investment		Contracts		Investment		Investment		Investment
(dollars in thousands)
Troubled Debt Restructurings -
Commercial real estate:
Modified principal		1	$	619	$	611	$	611	$	1	$	153	$	169	$	165
Total		1	$	619	$	611	$	611	$	1	$	153	$	169	$	165

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Note 4 - Regulatory Capital (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations [Table Text Block]

	Actual					For Capital Adequacy Purposes					For Well Capitalized Purposes
(dollars in thousands)	Amount		Percentage			Amount		Percentage			Amount		Percentage
As of September 30, 2018
Tier 1 Leverage Capital	$	36,388		9.21	%	$	15,805		4.00	%	$	19,757		5.00	%
Common Equity Tier 1 Risk-based Capital		36,388		12.40			13,203		4.50			19,072		6.50
Tier 1 Risk-based Capital		36,388		12.40			17,605		6.00			23,473		8.00
Total Risk-based Capital		40,055		13.65			23,473		8.00			29,341		10.00
As of December 31, 2017
Tier 1 Leverage Capital	$	33,146		9.48	%	$	13,983		4.00	%	$	17,479		5.00	%
Common Equity Tier 1 Risk-based Capital		33,146		12.80			11,654		4.50			16,834		6.50
Tier 1 Risk-based Capital		33,146		12.80			15,539		6.00			20,718		8.00
Total Risk-based Capital		36,282		14.01			20,718		8.00			25,898		10.00

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Note 5 - Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	2018						2017
			Weighted-		Per				Weighted-		Per
			Average		Share				Average		Share
(dollars in thousands, except per share amounts)	Earnings		Shares		Amount		Earnings		Shares		Amount
Three Months Ending September 30:
Basic EPS:
Net earnings	$	1,018		3,127,038	$	0.33	$	822		3,100,309	$	0.26
Effect of dilutive securities-incremental shares from assumed conversion of options				3,133						3,235
Diluted EPS:
Net earnings	$	1,018		3,130,171	$	0.33	$	822		3,103,544	$	0.26
Nine Months Ending September 30:
Basic EPS:
Net earnings	$	2,774		3,123,772	$	0.89	$	2,123		2,569,375	$	0.83
Effect of dilutive securities-incremental shares from assumed conversion of options				7,882						9,218
Diluted EPS:
Net earnings	$	2,774		3,131,654	$	0.89	$	2,123		2,578,593	$	0.83

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Note 6 - Stock Option Plans (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

Weighted average risk-free interest rate	1.47	-	2.63%
Expected dividend yield	0.41	-	0.50%
Expected stock volatility	10.07	-	11.90%
Expected life in years	2.5	-	6.5
Per share fair value of options issued during period	$1.49	-	$3.35

The 2007 Stock Option Plan [Member]

Notes Tables

Share-based Compensation, Stock Options, Activity [Table Text Block]

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Options			Price		Term		Value
Outstanding at December 31, 2016		42,200		$	10.16
Options exercised		(2,600	)		10.00
Options forfeited		(200	)		10.00
Outstanding at September 30, 2017		39,400		$	10.17
Options exercised		(16,850	)	$	10.00
Options forfeited		(350	)	$	10.00
Outstanding at December 31, 2017		22,200		$	10.31
Options exercised		(7,500	)		10.00
Outstanding at September 30, 2018 (in years)		14,700		$	10.46		1.20	$	161,000
Exercisable at September 30, 2018 (in years)		14,700		$	10.46		1.20	$	161,000

The 2015 Stock Incentive Compensation Plan [Member]

Notes Tables

Share-based Compensation, Stock Options, Activity [Table Text Block]

					Weighted-
			Weighted-		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
	Options		Price		Term		Value
Outstanding at December 31, 2016		-	$	-
Options granted		11,540		17.03
Outstanding at September 30, 2017		11,540	$	17.03
Outstanding at December 31, 2017		11,540	$	17.03
Options granted		252,917		19.79
Outstanding at September 30, 2018 (in years)		264,457	$	19.79		8.60	$	430,000
Exercisable at September 30, 2018 (in years)		37,207	$	17.93		3.05	$	130,000

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Note 8 - Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Fair Value, by Balance Sheet Grouping [Table Text Block]

			At September 30, 2018				At December 31, 2017
			Carrying		Fair		Carrying		Fair
(in thousands)	Level		Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents		1	$	56,775	$	56,775	$	32,397	$	32,397
Securities available for sale		2		44,359		44,359		49,809		49,809
Loans held for sale		3		6,782		6,822		5,880		6,039
Loans, net		3		289,022		285,506		250,259		249,628
Federal Home Loan Bank stock		3		355		355		316		316
Accrued interest receivable		3		1,028		1,028		978		978
Financial liabilities-
Deposits		3		355,246		355,553		298,297		298,403
Off-Balance Sheet Items		3		-		-		-		-

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Note 9 - Off-balance Sheet Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Fair Value, Off-balance Sheet Risks [Table Text Block]

	At September 30, 2018
(in thousands)
Commitments to extend credit	$	5,670
Construction loans in process	$	16,280
Unused lines of credit	$	41,954
Standby letters of credit	$	2,312
Guaranteed accounts	$	1,329

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Note 10 - Premises and Equipment (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

Years			Annual Rent Amount
1	-	5	$	294,000
6	-	10	$	323,400
11	-	15	$	355,740

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Note 1 - General (Details Textual)	9 Months Ended
	Sep. 30, 2018
Subsidiary, Ownership Percentage By Parent	100.00%
Number of Banking Offices	3

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Note 2 - Securities Available for Sale (Details Textual)	Sep. 30, 2018	Dec. 31, 2017
Debt Securities, Available-for-sale, Unrealized Loss Position, Number of Positions	41	34

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Note 2 - Securities Available for Sale - Summary of Carrying Amount and Fair Values of Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Amortized Cost	$ 45,824	$ 50,205
Gross Unrealized Gains	47	157
Gross Unrealized Losses	(1,512)	(553)
Securities available for sale	44,359	49,809
US Government Agencies Debt Securities [Member]
Amortized Cost	815	1,251
Gross Unrealized Gains		6
Gross Unrealized Losses	(24)	(8)
Securities available for sale	791	1,249
US States and Political Subdivisions Debt Securities [Member]
Amortized Cost	11,640	12,340
Gross Unrealized Gains	31	128
Gross Unrealized Losses	(209)	(95)
Securities available for sale	11,462	12,373
Collateralized Mortgage Backed Securities [Member]
Amortized Cost	33,369	36,614
Gross Unrealized Gains	16	23
Gross Unrealized Losses	(1,279)	(450)
Securities available for sale	$ 32,106	$ 36,187

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Note 2 - Securities Available for Sale - Summary of Sale of Securities Available for Sale (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Proceeds from sale of securities				$ 750
Gross gains
Gross losses				(1)
Net loss on sale of securities				$ (1)

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Note 2 - Securities Available for Sale - Summary of Securities in Continuous Unrealized Loss Position (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Gross Unrealized Losses, Less Than Twelve Months	$ (305)	$ (352)
Fair Value, Less Than Twelve Months	10,415	32,267
Gross Unrealized Losses, Over Twelve Months	(1,207)	(201)
Fair Value, Over Twelve Months	29,281	6,870
US Government Agencies Debt Securities [Member]
Gross Unrealized Losses, Less Than Twelve Months	(4)	(8)
Fair Value, Less Than Twelve Months	240	694
Gross Unrealized Losses, Over Twelve Months	(20)
Fair Value, Over Twelve Months	551
US States and Political Subdivisions Debt Securities [Member]
Gross Unrealized Losses, Less Than Twelve Months	(116)	(36)
Fair Value, Less Than Twelve Months	4,807	1,831
Gross Unrealized Losses, Over Twelve Months	(93)	(59)
Fair Value, Over Twelve Months	2,568	1,203
Collateralized Mortgage Backed Securities [Member]
Gross Unrealized Losses, Less Than Twelve Months	(185)	(308)
Fair Value, Less Than Twelve Months	5,368	29,742
Gross Unrealized Losses, Over Twelve Months	(1,094)	(142)
Fair Value, Over Twelve Months	$ 26,162	$ 5,667

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Note 2 - Securities Available for Sale - Securities Available for Sale Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Securities available for sale	$ 44,359	$ 49,809
US Government Agencies Debt Securities [Member]
Securities available for sale	791	1,249
US States and Political Subdivisions Debt Securities [Member]
Securities available for sale	11,462	12,373
Collateralized Mortgage Backed Securities [Member]
Securities available for sale	32,106	36,187
Fair Value, Measurements, Recurring [Member]
Securities available for sale	44,359	49,809
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	44,359	49,809
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale
Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
Securities available for sale	791	1,249
Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale
Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	791	1,249
Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale
Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member]
Securities available for sale	11,462	12,373
Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale
Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	11,462	12,373
Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale
Fair Value, Measurements, Recurring [Member] | Collateralized Mortgage Backed Securities [Member]
Securities available for sale	32,106	36,187
Fair Value, Measurements, Recurring [Member] | Collateralized Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale
Fair Value, Measurements, Recurring [Member] | Collateralized Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	32,106	36,187
Fair Value, Measurements, Recurring [Member] | Collateralized Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale

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Note 2 - Securities Available for Sale - Scheduled Maturities of Securities with Fair Value and Amortized Cost (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Due in one to five years, amortized cost	$ 3,871
Due in one to five years, Fair value	3,829
Due in five to ten years, amortized cost	5,873
Due in five to ten years, Fair value	5,859
Due after ten years, amortized cost	2,711
Due after ten years, Fair value	2,565
Mortgage-backed securities, amortized cost	33,369
Mortgage-backed securities, Fair value	32,106
Total, amortized cost	45,824	$ 50,205
Total, Fair value	$ 44,359	$ 49,809

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Note 3 - Loans (Details Textual)	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)
Number of Loan Portfolio Segments	3		3
Number of Portfolio Classes	5		5
Impairment Valuation Loan Limit			$ 500,000
Financing Receivable, Recorded Investment, Nonaccrual Status, Number of Loans	4		4
Financing Receivable, Recorded Investment, Nonaccrual Status	$ 179,000		$ 179,000		$ 134,000
Financing Receivable, Modifications, Number of Contracts	0	0	1	1
Financing Receivable, Modifications, Recorded Investment	$ 648,000		$ 648,000
Financing Receivable, Modifications, Subsequent Default, Number of Contracts			0
Nonperforming Financial Instruments [Member] | Collateral Pledged [Member] | Fair Value, Measurements, Nonrecurring [Member]
Loans Receivable, Fair Value Disclosure	$ 0	$ 0	$ 0	$ 0
Minimum [Member] | Loans Receivable [Member]
Loan Maturity Period			1 year
Maximum [Member] | Loans Receivable [Member]
Loan Maturity Period			10 years
Real Estate Mortgage Loans [Member]
Number of Portfolio Classes	3		3
Commercial Real Estate Portfolio Segment [Member]
Period of Fixed Interest Rate			5 years
Financing Receivable, Modifications, Number of Contracts			1	1
Financing Receivable, Modifications, Recorded Investment	$ 611,000	$ 165,000	$ 611,000	$ 165,000
Commercial Real Estate Portfolio Segment [Member] | Minimum [Member]
Loan Maturity Period			3 years
Commercial Real Estate Portfolio Segment [Member] | Maximum [Member]
Loan Maturity Period			5 years
Residential Portfolio Segment [Member] | Period 1 [Member]
Period of Fixed Interest Rate			15 years
Period of Adjustment of Interest Rate			1 year
Residential Portfolio Segment [Member] | Period 2 [Member]
Period of Fixed Interest Rate			30 years
Period of Adjustment of Interest Rate			3 years
Residential Portfolio Segment [Member] | Period 3 [Member]
Period of Adjustment of Interest Rate			5 years
Residential Portfolio Segment [Member] | Period 4 [Member]
Period of Adjustment of Interest Rate			7 years
Real Estate Construction Loan [Member] | Minimum [Member]
Loan Maturity Period			1 year
Real Estate Construction Loan [Member] | Maximum [Member]
Loan Maturity Period			2 years
Commercial Portfolio Segment [Member] | Maximum [Member] | Equipment Loans [Member]
Loan Maturity Period			5 years

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Note 3 - Loans - Composition of Company's Loan Portfolio, Excluding Loans Held for Sale (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Dec. 31, 2016
Total loans	$ 292,250		$ 252,971
Net deferred loan costs	446		424
Allowance for loan losses	(3,674)	$ (3,541)	(3,136)	$ (3,072)	$ (3,028)	$ (2,876)
Loans, net	289,022		250,259
Mortgage Receivable [Member]
Total loans	235,707		201,202
Mortgage Receivable [Member] | Commercial Real Estate Portfolio Segment [Member]
Total loans	84,161		79,565
Allowance for loan losses	(940)	(1,001)	(894)	(860)	(811)	(775)
Mortgage Receivable [Member] | Residential Portfolio Segment [Member]
Total loans	120,545		94,824
Allowance for loan losses	(1,388)	(1,309)	(1,097)	(1,090)	(1,108)	(1,074)
Mortgage Receivable [Member] | Real Estate Construction Loan [Member]
Total loans	31,001		26,813
Allowance for loan losses	(385)	(400)	(331)	(287)	(338)	(258)
Loans and Finance Receivables [Member] | Commercial Portfolio Segment [Member]
Total loans	49,563		44,027
Allowance for loan losses	(876)	(749)	(724)	(752)	(712)	(714)
Loans and Finance Receivables [Member] | Consumer Portfolio Segment [Member]
Total loans	6,980		7,742
Allowance for loan losses	$ (85)	$ (82)	$ (90)	$ (83)	$ (59)	$ (55)

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Note 3 - Loans - Summary of Changes in Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Beginning balance	$ 3,541	$ 3,028	$ 3,136	$ 2,876
Provision (credit) for loan losses	135	32	544	187
Net (charge-offs) recoveries	(2)	12	(6)	9
Ending balance	3,674	3,072	3,674	3,072
Recorded investment, individually evaluated for impairment	1,074		1,074		$ 134
Balance in allowance for loan losses, individually evaluated for impairment	216		216		134
Recorded investment, collectively evaluated for impairment	291,176		291,176		252,837
Balance in allowance for loan losses, collectively evaluated for impairment	3,458		3,458		3,002
Mortgage Receivable [Member] | Commercial Real Estate Portfolio Segment [Member]
Beginning balance	1,001	811	894	775
Provision (credit) for loan losses	(61)	49	46	85
Net (charge-offs) recoveries
Ending balance	940	860	940	860
Recorded investment, individually evaluated for impairment	611		611
Balance in allowance for loan losses, individually evaluated for impairment
Recorded investment, collectively evaluated for impairment	83,550		83,550		79,565
Balance in allowance for loan losses, collectively evaluated for impairment	940		940		894
Mortgage Receivable [Member] | Residential Portfolio Segment [Member]
Beginning balance	1,309	1,108	1,097	1,074
Provision (credit) for loan losses	79	(18)	291	16
Net (charge-offs) recoveries
Ending balance	1,388	1,090	1,388	1,090
Recorded investment, individually evaluated for impairment	247		247
Balance in allowance for loan losses, individually evaluated for impairment
Recorded investment, collectively evaluated for impairment	120,298		120,298		94,824
Balance in allowance for loan losses, collectively evaluated for impairment	1,388		1,388		1,097
Mortgage Receivable [Member] | Real Estate Construction Loan [Member]
Beginning balance	400	338	331	258
Provision (credit) for loan losses	(12)	(51)	57	29
Net (charge-offs) recoveries	(3)		(3)
Ending balance	385	287	385	287
Recorded investment, individually evaluated for impairment
Balance in allowance for loan losses, individually evaluated for impairment
Recorded investment, collectively evaluated for impairment	31,001		31,001		26,813
Balance in allowance for loan losses, collectively evaluated for impairment	385		385		331
Loans and Finance Receivables [Member] | Commercial Portfolio Segment [Member]
Beginning balance	749	712	724	714
Provision (credit) for loan losses	126	28	148	24
Net (charge-offs) recoveries	1	12	4	14
Ending balance	876	752	876	752
Recorded investment, individually evaluated for impairment	208		208		134
Balance in allowance for loan losses, individually evaluated for impairment	208		208		134
Recorded investment, collectively evaluated for impairment	49,355		49,355		43,893
Balance in allowance for loan losses, collectively evaluated for impairment	668		668		590
Loans and Finance Receivables [Member] | Consumer Portfolio Segment [Member]
Beginning balance	82	59	90	55
Provision (credit) for loan losses	3	24	2	33
Net (charge-offs) recoveries			(7)	(5)
Ending balance	85	$ 83	85	$ 83
Recorded investment, individually evaluated for impairment	8		8
Balance in allowance for loan losses, individually evaluated for impairment	8		8
Recorded investment, collectively evaluated for impairment	6,972		6,972		7,742
Balance in allowance for loan losses, collectively evaluated for impairment	$ 77		$ 77		$ 90

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Note 3 - Loans - Summary of Loan Credit Quality (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Loans by credit quality	$ 292,250	$ 252,971
Pass [Member]
Loans by credit quality	279,700	243,787
Special Mention [Member]
Loans by credit quality	10,773	7,420
Substandard [Member]
Loans by credit quality	1,777	1,764
Doubtful [Member]
Loans by credit quality
Unlikely to be Collected Financing Receivable [Member]
Loans by credit quality
Mortgage Receivable [Member]
Loans by credit quality	235,707	201,202
Mortgage Receivable [Member] | Commercial Real Estate Portfolio Segment [Member]
Loans by credit quality	84,161	79,565
Mortgage Receivable [Member] | Commercial Real Estate Portfolio Segment [Member] | Pass [Member]
Loans by credit quality	78,766	74,560
Mortgage Receivable [Member] | Commercial Real Estate Portfolio Segment [Member] | Special Mention [Member]
Loans by credit quality	4,784	4,382
Mortgage Receivable [Member] | Commercial Real Estate Portfolio Segment [Member] | Substandard [Member]
Loans by credit quality	611	623
Mortgage Receivable [Member] | Commercial Real Estate Portfolio Segment [Member] | Doubtful [Member]
Loans by credit quality
Mortgage Receivable [Member] | Commercial Real Estate Portfolio Segment [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans by credit quality
Mortgage Receivable [Member] | Residential Portfolio Segment [Member]
Loans by credit quality	120,545	94,824
Mortgage Receivable [Member] | Residential Portfolio Segment [Member] | Pass [Member]
Loans by credit quality	117,523	92,282
Mortgage Receivable [Member] | Residential Portfolio Segment [Member] | Special Mention [Member]
Loans by credit quality	2,861	2,122
Mortgage Receivable [Member] | Residential Portfolio Segment [Member] | Substandard [Member]
Loans by credit quality	161	420
Mortgage Receivable [Member] | Residential Portfolio Segment [Member] | Doubtful [Member]
Loans by credit quality
Mortgage Receivable [Member] | Residential Portfolio Segment [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans by credit quality
Mortgage Receivable [Member] | Real Estate Construction Loan [Member]
Loans by credit quality	31,001	26,813
Mortgage Receivable [Member] | Real Estate Construction Loan [Member] | Pass [Member]
Loans by credit quality	31,001	26,356
Mortgage Receivable [Member] | Real Estate Construction Loan [Member] | Special Mention [Member]
Loans by credit quality		298
Mortgage Receivable [Member] | Real Estate Construction Loan [Member] | Substandard [Member]
Loans by credit quality		159
Mortgage Receivable [Member] | Real Estate Construction Loan [Member] | Doubtful [Member]
Loans by credit quality
Mortgage Receivable [Member] | Real Estate Construction Loan [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans by credit quality
Loans and Finance Receivables [Member] | Commercial Portfolio Segment [Member]
Loans by credit quality	49,563	44,027
Loans and Finance Receivables [Member] | Commercial Portfolio Segment [Member] | Pass [Member]
Loans by credit quality	45,524	42,874
Loans and Finance Receivables [Member] | Commercial Portfolio Segment [Member] | Special Mention [Member]
Loans by credit quality	3,042	591
Loans and Finance Receivables [Member] | Commercial Portfolio Segment [Member] | Substandard [Member]
Loans by credit quality	997	562
Loans and Finance Receivables [Member] | Commercial Portfolio Segment [Member] | Doubtful [Member]
Loans by credit quality
Loans and Finance Receivables [Member] | Commercial Portfolio Segment [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans by credit quality
Loans and Finance Receivables [Member] | Consumer Portfolio Segment [Member]
Loans by credit quality	6,980	7,742
Loans and Finance Receivables [Member] | Consumer Portfolio Segment [Member] | Pass [Member]
Loans by credit quality	6,886	7,715
Loans and Finance Receivables [Member] | Consumer Portfolio Segment [Member] | Special Mention [Member]
Loans by credit quality	86	27
Loans and Finance Receivables [Member] | Consumer Portfolio Segment [Member] | Substandard [Member]
Loans by credit quality	8
Loans and Finance Receivables [Member] | Consumer Portfolio Segment [Member] | Doubtful [Member]
Loans by credit quality
Loans and Finance Receivables [Member] | Consumer Portfolio Segment [Member] | Unlikely to be Collected Financing Receivable [Member]
Loans by credit quality

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Note 3 - Loans - Summary of Past Due Loans (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Accruing Loans, Past Due	$ 151,000	$ 878,000
Accruing Loans, Current	291,920,000	251,959,000
Nonaccrual Loans	179,000	134,000
Loans by credit quality	292,250,000	252,971,000
Financing Receivables, 30 to 59 Days Past Due [Member]
Accruing Loans, Past Due	151,000
Financing Receivables, 60 to 89 Days Past Due [Member]
Accruing Loans, Past Due		878,000
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accruing Loans, Past Due
Mortgage Receivable [Member]
Loans by credit quality	235,707,000	201,202,000
Mortgage Receivable [Member] | Commercial Real Estate Portfolio Segment [Member]
Accruing Loans, Past Due		623,000
Accruing Loans, Current	84,161,000	78,942,000
Nonaccrual Loans
Loans by credit quality	84,161,000	79,565,000
Mortgage Receivable [Member] | Commercial Real Estate Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accruing Loans, Past Due
Mortgage Receivable [Member] | Commercial Real Estate Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accruing Loans, Past Due		623,000
Mortgage Receivable [Member] | Commercial Real Estate Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accruing Loans, Past Due
Mortgage Receivable [Member] | Residential Portfolio Segment [Member]
Accruing Loans, Past Due	135,000	255,000
Accruing Loans, Current	120,410,000	94,569,000
Nonaccrual Loans
Loans by credit quality	120,545,000	94,824,000
Mortgage Receivable [Member] | Residential Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accruing Loans, Past Due	135,000
Mortgage Receivable [Member] | Residential Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accruing Loans, Past Due		255,000
Mortgage Receivable [Member] | Residential Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accruing Loans, Past Due
Mortgage Receivable [Member] | Real Estate Construction Loan [Member]
Accruing Loans, Past Due
Accruing Loans, Current	31,001,000	26,813,000
Nonaccrual Loans
Loans by credit quality	31,001,000	26,813,000
Mortgage Receivable [Member] | Real Estate Construction Loan [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accruing Loans, Past Due
Mortgage Receivable [Member] | Real Estate Construction Loan [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accruing Loans, Past Due
Mortgage Receivable [Member] | Real Estate Construction Loan [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accruing Loans, Past Due
Loans and Finance Receivables [Member] | Commercial Portfolio Segment [Member]
Accruing Loans, Past Due	16,000
Accruing Loans, Current	49,376,000	43,893,000
Nonaccrual Loans	171,000	134,000
Loans by credit quality	49,563,000	44,027,000
Loans and Finance Receivables [Member] | Commercial Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accruing Loans, Past Due	16,000
Loans and Finance Receivables [Member] | Commercial Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accruing Loans, Past Due
Loans and Finance Receivables [Member] | Commercial Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accruing Loans, Past Due
Loans and Finance Receivables [Member] | Consumer Portfolio Segment [Member]
Accruing Loans, Past Due
Accruing Loans, Current	6,972,000	7,742,000
Nonaccrual Loans	8,000
Loans by credit quality	6,980,000	7,742,000
Loans and Finance Receivables [Member] | Consumer Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Accruing Loans, Past Due
Loans and Finance Receivables [Member] | Consumer Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Accruing Loans, Past Due
Loans and Finance Receivables [Member] | Consumer Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Accruing Loans, Past Due

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Note 3 - Loans - Summary of Impaired Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
With No Related Allowance Recorded, Recorded Investment	$ 858
With No Related Allowance Recorded, Unpaid Contractual Principal Balance	858
With an Allowance Recorded, Recorded Investment	216	134
With an Allowance Recorded, Unpaid Contractual Principal Balance	216	134
Related Allowance	216	134
Total Recorded Investment	1,074	134
Total Unpaid Contractual Principal Balance	1,074	134
Mortgage Receivable [Member] | Commercial Real Estate Portfolio Segment [Member]
With No Related Allowance Recorded, Recorded Investment	611
With No Related Allowance Recorded, Unpaid Contractual Principal Balance	611
With an Allowance Recorded, Recorded Investment
With an Allowance Recorded, Unpaid Contractual Principal Balance
Related Allowance
Total Recorded Investment	611
Total Unpaid Contractual Principal Balance	611
Mortgage Receivable [Member] | Residential Portfolio Segment [Member]
With No Related Allowance Recorded, Recorded Investment	247
With No Related Allowance Recorded, Unpaid Contractual Principal Balance	247
With an Allowance Recorded, Recorded Investment
With an Allowance Recorded, Unpaid Contractual Principal Balance
Related Allowance
Total Recorded Investment	247
Total Unpaid Contractual Principal Balance	247
Loans and Finance Receivables [Member] | Commercial Portfolio Segment [Member]
With No Related Allowance Recorded, Recorded Investment
With No Related Allowance Recorded, Unpaid Contractual Principal Balance
With an Allowance Recorded, Recorded Investment	208	134
With an Allowance Recorded, Unpaid Contractual Principal Balance	208	134
Related Allowance	208	134
Total Recorded Investment	208	134
Total Unpaid Contractual Principal Balance	208	$ 134
Loans and Finance Receivables [Member] | Consumer Portfolio Segment [Member]
With No Related Allowance Recorded, Recorded Investment
With No Related Allowance Recorded, Unpaid Contractual Principal Balance
With an Allowance Recorded, Recorded Investment	8
With an Allowance Recorded, Unpaid Contractual Principal Balance	8
Related Allowance	8
Total Recorded Investment	8
Total Unpaid Contractual Principal Balance	$ 8

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Note 3 - Loans - Summary of Average Net Investment in Impaired Loans and Interest Income Recognized and Received on Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Average Recorded Investment	$ 1,026	$ 85	$ 718	$ 497
Interest Income Recognized	13	7	14	29
Interest Income Received	13	1	15	30
Mortgage Receivable [Member] | Commercial Real Estate Portfolio Segment [Member]
Average Recorded Investment	611		423
Interest Income Recognized	8		8
Interest Income Received	8		8
Mortgage Receivable [Member] | Residential Portfolio Segment [Member]
Average Recorded Investment	255		141	375
Interest Income Recognized	4	6	5	28
Interest Income Received	3		3	28
Mortgage Receivable [Member] | Real Estate Construction Loan [Member]
Average Recorded Investment	1	63		66
Interest Income Recognized		1		1
Interest Income Received		1		2
Loans and Finance Receivables [Member] | Commercial Portfolio Segment [Member]
Average Recorded Investment	159	22	154	56
Interest Income Recognized	1		1
Interest Income Received	$ 2		$ 4

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Note 3 - Loans - Summary of Loans Determined to Be Troubled Debt Restructurings (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)
Number of Contracts	0	0	1	1
Current Modification Outstanding Recorded Investment	$ 648,000		$ 648,000
Commercial Real Estate Portfolio Segment [Member]
Number of Contracts			1	1
Pre-Modification Outstanding Recorded Investment			$ 619,000	$ 153,000
Post-Modification Outstanding Recorded Investment			611,000	169,000
Current Modification Outstanding Recorded Investment	611,000	$ 165,000	$ 611,000	$ 165,000
Commercial Real Estate Portfolio Segment [Member] | Modified Principal [Member]
Number of Contracts			1	1
Pre-Modification Outstanding Recorded Investment			$ 619,000	$ 153,000
Post-Modification Outstanding Recorded Investment			611,000	169,000
Current Modification Outstanding Recorded Investment	$ 611,000	$ 165,000	$ 611,000	$ 165,000

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Note 4 - Regulatory Capital (Details Textual)	Jan. 01, 2019	Sep. 30, 2018
Percentage of Capital Conservation Buffer, Minimum Risk-based Capital Requirement		1.875%
Scenario, Forecast [Member]
Capital Conservation Buffer Rate	2.50%

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Note 4 - Regulatory Capital - Summary of Regulatory Capital Requirements and Bank's Capital Position (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Tier 1 Leverage Capital, actual amount	$ 36,388	$ 33,146
Tier 1 Leverage Capital, actual percentage	9.21%	9.48%
Tier 1 Leverage Capital, For Capital Adequacy Purposes, Amount	$ 15,805	$ 13,983
Tier 1 Leverage Capital, For Capital Adequacy Purposes, Percentage	4.00%	4.00%
Tier 1 Leverage Capital, For Well Capitalized Purposes, Amount	$ 19,757	$ 17,479
Tier 1 Leverage Capital, For Well Capitalized Purposes, Percentage	5.00%	5.00%
Common Equity Tier 1 Risk-based Capital, actual amount	$ 36,388	$ 33,146
Common Equity Tier 1 Risk-based Capital, actual percentage	12.40%	12.80%
Common Equity Tier 1 Risk-based Capital, For Capital Adequacy Purposes, Amount	$ 13,203	$ 11,654
Common Equity Tier 1 Risk-based Capital, For Capital Adequacy Purposes, Percentage	4.50%	4.50%
Common Equity Tier 1 Risk-based Capital, For Well Capitalized Purposes, Amount	$ 19,072	$ 16,834
Common Equity Tier 1 Risk-based Capital, For Well Capitalized Purposes, Percentage	6.50%	6.50%
Tier 1 Risk-based Capital, actual amount	$ 36,388	$ 33,146
Tier 1 Risk-based Capital, actual percentage	12.40%	12.80%
Tier 1 Risk-based Capital, For Capital Adequacy Purposes, Amount	$ 17,605	$ 15,539
Tier 1 Risk-based Capital, For Capital Adequacy Purposes, Percentage	6.00%	6.00%
Tier 1 Risk-based Capital, For Well Capitalized Purposes, Amount	$ 23,473	$ 20,718
Tier 1 Risk-based Capital, For Well Capitalized Purposes, Percentage	8.00%	8.00%
Total Risk-based Capital, actual amount	$ 40,055	$ 36,282
Total Risk-based Capital, actual percentage	13.65%	14.01%
Total Risk-based Capital, For Capital Adequacy Purposes, Amount	$ 23,473	$ 20,718
Total Risk-based Capital, For Well Capitalized Purposes, Amount	$ 29,341	$ 25,898
Total Risk-based Capital, For Well Capitalized Purposes, Percentage	10.00%	10.00%

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Note 5 - Earnings Per Share - Computation of Basic and Diluted Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Net earnings, basic	$ 1,018	$ 822	$ 2,774	$ 2,123
Weighted-average Shares, basic (in shares)	3,127,038	3,100,309	3,123,772	2,569,375
Net earnings, per share amount, basic (in dollars per share)	$ 0.33	$ 0.26	$ 0.89	$ 0.83
Effect of dilutive securities-incremental shares from assumed conversion of options (in shares)	3,133	3,235	7,882	9,218
Net earnings, diluted	$ 1,018	$ 822	$ 2,774	$ 2,123
Weighted-average Shares, diluted (in shares)	3,130,171	3,103,544	3,131,654	2,578,593
Net earnings, per share amount, diluted (in dollars per share)	$ 0.33	$ 0.26	$ 0.89	$ 0.83

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Note 6 - Stock Option Plans (Details Textual) - USD ($)	3 Months Ended		9 Months Ended		40 Months Ended
	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018
Allocated Share-based Compensation Expense, Total			$ 105,000	$ 15,000
Stock Issued During Period, Value, Share-based Compensation, Gross			$ 46,000	$ 51,000
Incentive Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years
Incentive Stock Options [Member] | Chief Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	25,000	15,667
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage		100.00%
Incentive Stock Options [Member] | Remaining Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	92,250
Non-qualified Stock Options [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	120,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years
The 2015 Stock Incentive Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross			252,917	11,540	264,457
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant			204,844		204,844
The 2015 Stock Incentive Compensation Plan [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized			500,000		500,000
Maximum Percentage of Shares Issued			15.00%
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options			$ 690,000		$ 690,000
Share-based Compensation Arrangement By Share-based Payment Award, Options, Nonvested, Weighted Average Remaining Contractual Term			4 years 180 days
The 2007 Stock Option Plan [Member] | Employee Stock Option [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options			$ 0		$ 0
Directors' Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized			74,805		74,805
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross			2,194	3,104
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant			55,908		55,908
Stock Consideration on Percentage of Common Stock Received Upon Cash Fees			110.00%		110.00%
Stock Issued During Period, Value, Share-based Compensation, Gross			$ 46,000	$ 51,000

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Note 6 - Stock Option Plans - Summary of the 2015 Plan (Details) - The 2015 Stock Incentive Compensation Plan [Member] - USD ($)	9 Months Ended		40 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018
Number of Options, Outstanding, beginning balance (in shares)	11,540
Weighted-average Exercise Price, Outstanding, beginning balance (in dollars per share)	$ 17.03
Number of Options, granted (in shares)	252,917	11,540	264,457
Weighted-average Exercise Price, Options granted (in dollars per share)	$ 19.79	$ 17.03
Number of Options, Outstanding, ending balance (in shares)	264,457	11,540	264,457
Weighted-average Exercise Price, Outstanding, ending balance (in dollars per share)	$ 19.79	$ 17.03	$ 19.79
Outstanding at September 30, 2018 (in years) (Year)	8 years 219 days
Outstanding at September 30, 2018 (in years)	$ 430,000		$ 430,000
Exercisable at September 30, 2018 (in years) (in shares)	37,207		37,207
Exercisable at September 30, 2018 (in years) (in dollars per share)	$ 17.93		$ 17.93
Exercisable at September 30, 2018 (in years) (Year)	3 years 18 days
Exercisable at September 30, 2018 (in years)	$ 130,000		$ 130,000

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Note 6 - Stock Option Plans - Black-Scholes Option-pricing Model Assumptions (Details)	9 Months Ended
	Sep. 30, 2018 $ / shares
Minimum [Member]
Weighted average risk-free interest rate	1.47%
Expected dividend yield	0.41%
Expected stock volatility	10.07%
Expected life in years (Year)	2 years 182 days
Per share fair value of options issued during period (in dollars per share)	$ 1.49
Maximum [Member]
Weighted average risk-free interest rate	2.63%
Expected dividend yield	0.50%
Expected stock volatility	11.90%
Expected life in years (Year)	6 years 182 days
Per share fair value of options issued during period (in dollars per share)	$ 3.35

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Note 6 - Stock Option Plans - Summary of the 2007 Stock Option Plan (Details) - The 2007 Stock Option Plan [Member] - USD ($)	3 Months Ended	9 Months Ended
	Dec. 31, 2017	Sep. 30, 2018	Sep. 30, 2017
Number of Options, Outstanding, beginning balance (in shares)	39,400	22,200	42,200
Weighted-average Exercise Price, Outstanding, beginning balance (in dollars per share)	$ 10.17	$ 10.31	$ 10.16
Number of Options, exercised (in shares)	(16,850)	(7,500)	(2,600)
Weighted-average Exercise Price, Options exercised (in dollars per share)	$ 10	$ 10	$ 10
Number of Options, forfeited (in shares)	(350)		(200)
Weighted-average Exercise Price, Options forfeited (in dollars per share)	$ 10		$ 10
Number of Options, Outstanding, ending balance (in shares)	22,200	14,700	39,400
Weighted-average Exercise Price, Outstanding, ending balance (in dollars per share)	$ 10.31	$ 10.46	$ 10.17
Outstanding at September 30, 2018 (in years) (Year)		1 year 73 days
Outstanding at September 30, 2018 (in years)		$ 161,000
Exercisable at September 30, 2018 (in years) (in shares)		14,700
Exercisable at September 30, 2018 (in years) (in dollars per share)		$ 10.46
Exercisable at September 30, 2018 (in years)		$ 161,000

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Note 7 - Federal Home Loan Bank Advances (Details Textual) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Federal Home Loan Bank, Advances, General Debt Obligations, Maximum Amount Available	$ 37,900
Federal Home Loan Bank Advances, Total	$ 0	$ 0

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Note 8 - Fair Value of Financial Instruments - Fair Values and Fair Value Measurement Method of Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Securities available for sale	$ 44,359	$ 49,809
Loans held for sale	6,782	5,880
Accrued interest receivable	1,028	978
Reported Value Measurement [Member]
Cash and cash equivalents		32,397
Securities available for sale		49,809
Loans held for sale		5,880
Loans Receivable, Fair Value Disclosure		250,259
Federal Home Loan Bank stock		316
Accrued interest receivable		978
Deposits		298,297
Off-Balance Sheet Items
Estimate of Fair Value Measurement [Member]
Cash and cash equivalents		32,397
Securities available for sale		49,809
Loans held for sale		6,039
Loans Receivable, Fair Value Disclosure		249,628
Federal Home Loan Bank stock		316
Accrued interest receivable		978
Deposits		298,403
Off-Balance Sheet Items
Fair Value, Inputs, Level 1 [Member] | Reported Value Measurement [Member]
Cash and cash equivalents	56,775
Fair Value, Inputs, Level 1 [Member] | Estimate of Fair Value Measurement [Member]
Cash and cash equivalents	56,775
Fair Value, Inputs, Level 2 [Member] | Reported Value Measurement [Member]
Securities available for sale	44,359
Fair Value, Inputs, Level 2 [Member] | Estimate of Fair Value Measurement [Member]
Securities available for sale	44,359
Fair Value, Inputs, Level 3 [Member] | Reported Value Measurement [Member]
Loans held for sale	6,782
Loans Receivable, Fair Value Disclosure	289,022
Federal Home Loan Bank stock	355
Accrued interest receivable	1,028
Deposits	355,246
Off-Balance Sheet Items
Fair Value, Inputs, Level 3 [Member] | Estimate of Fair Value Measurement [Member]
Loans held for sale	6,822
Loans Receivable, Fair Value Disclosure	285,506
Federal Home Loan Bank stock	355
Accrued interest receivable	1,028
Deposits	355,553
Off-Balance Sheet Items

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Note 9 - Off-balance Sheet Financial Instruments (Details Textual) - Standby Financial Letters of Credit [Member]	9 Months Ended
	Sep. 30, 2018 USD ($)
Debt Instrument, Term	1 year
Debt Instrument, Collateral Amount	$ 565,000
Credit Availability Concentration Risk [Member] | Swap Liabilities [Member]
Concentration Risk, Percentage	10.00%

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Note 9 - Off-balance Sheet Financial Instruments - Summary of Off-balance Sheet Financial Instruments (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2018 USD ($)
Commitments to Extend Credit [Member]
Contractual amounts with off-balance-sheet risk	$ 5,670
Construction Loans In Process [Member]
Contractual amounts with off-balance-sheet risk	16,280
Unused lines of Credit [Member]
Contractual amounts with off-balance-sheet risk	41,954
Standby Financial Letters of Credit [Member]
Contractual amounts with off-balance-sheet risk	2,312
Guaranteed Accounts [Member]
Contractual amounts with off-balance-sheet risk	$ 1,329

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Note 10 - Premises and Equipment (Details Textual)	Aug. 06, 2018
Lessee, Operating Lease, Term of Contract	15 years
Lessee, Operating Lease, Number of Renewal Options	4
Lessee, Operating Lease, Renewal Term	5 years
Lease, Initial Setting-up Period	180 days
Lease Rent Commencement Period	120 days

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Note 10 - Premises and Equipment - Summary of New Rent Obligations (Details)	Sep. 30, 2018 USD ($)
Future rent commitments, years 1-5	$ 294,000
Future rent commitments, years 6-10	323,400
Future rent commitments, years 11-15	$ 355,740