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PM

Prime Meridian Holding Co (PMHG)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 showed stable profitability with net earnings of $1.931M ($0.59 basic/diluted), up 5.5% sequentially but down 22.8% year-over-year as higher funding costs compressed NIM to 3.51% .
  • Net interest income declined modestly to $7.133M (−1.7% q/q; −5.6% y/y), while noninterest income fell 7.9% q/q; operating expenses rose 4.2% q/q driven by software/core conversion and marketing .
  • Balance sheet growth continued: total assets $862.7M (+$8.2M q/q), deposits $751.7M (+$3.0M q/q), loans net $666.8M (+$20.7M q/q); capital remained strong (TCE Ratio 9.44% Company; Bank 9.38%) .
  • Management highlighted recent technology upgrades expected to enhance efficiency, continuing focus on client relationships, and operating in pro-business regions as drivers of future opportunity .
  • Potential stock catalysts: dividend increase to $0.25 (paid in Q1), loan growth in residential/construction, and efficiency gains from core conversion; headwinds include sustained elevated cost of funds and NIM pressure .

What Went Well and What Went Wrong

What Went Well

  • Sequential earnings improvement: Net earnings rose to $1.931M (+5.5% q/q), supported by a lower credit loss expense ($211k vs. $707k in Q4) .
  • Balance sheet growth and liquidity: Loans net +$20.7M q/q to $666.8M; deposits +$3.0M q/q to $751.7M; available borrowing capacity $170.9M and total liquidity sources $521.5M .
  • Strategic execution: Core technology upgrades completed in Q4 now enabling operational efficiencies; management remains focused on client relationships and shareholder value in attractive pro-business regions (“stick to the mission…record turnouts”) .

What Went Wrong

  • Margin compression: NIM fell to 3.51% (from 3.61% in Q4 and 3.92% in Q1’23), with average cost of interest-bearing liabilities rising to 2.75% from 1.24% a year ago .
  • Noninterest income down 7.9% q/q: Driven by lower mortgage banking revenue and deposit service charges (NSF fees), partially offset by higher debit card revenue .
  • Operating expenses +4.2% q/q and +8.7% y/y: Elevated software maintenance/amortization (post-core conversion), higher marketing and salaries/benefits; efficiency ratio worsened to 63.81% .

Financial Results

MetricQ1 2023Q3 2023Q4 2023Q1 2024
Net Interest Income ($USD Thousands)$7,555 $7,187 $7,253 $7,133
Noninterest Income ($USD Thousands)$441 $499 $492 $453
Net Earnings ($USD Thousands)$2,501 $2,120 $1,830 $1,931
EPS - Basic ($)$0.79 $0.66 $0.56 $0.59
EPS - Diluted ($)$0.78 $0.66 $0.55 $0.59
Net Interest Margin (%)3.92% 3.68% 3.61% 3.51%
Efficiency Ratio (%)55.72% 61.45% 59.99% 63.81%

Segment/Balance Sheet Breakdown

Loans by Class ($USD Thousands, % of Total)Dec 31, 2023 AmountDec 31, 2023 %Mar 31, 2024 AmountMar 31, 2024 %
Commercial Real Estate$223,795 34.3% $226,634 33.7%
Residential & Home Equity$254,574 39.1% $264,638 39.3%
Construction$81,640 12.5% $87,593 13.0%
Commercial$85,983 13.2% $88,426 13.2%
Consumer$5,936 0.9% $5,545 0.8%
Total Loans$651,928 100.0% $672,836 100.0%
Allowance for Credit Losses$(5,609) —$(5,796) —
Loans, net$646,127 —$666,826 —

Deposits and Funding ($USD Thousands)

CategoryQ4 2023Q1 2024
Noninterest-bearing Demand Deposits$189,426 $201,083
Savings/NOW/Money Market$476,826 $462,601
Time Deposits$82,436 $88,029
Total Deposits$748,688 $751,713
FHLB Advances$15,000 $20,000

KPIs and Asset Quality

KPIQ1 2023Q3 2023Q4 2023Q1 2024
ROAA (%)1.23 1.03 0.87 0.91
ROAE (%)14.20 11.31 9.85 9.61
Avg Yield on Earning Assets (%)4.78 5.21 5.40 5.44
NIM (%)3.92 3.68 3.61 3.51
Efficiency Ratio (%)55.72 61.45 59.99 63.81
Nonperforming Assets/Total Assets (%)0.17 0.19 0.40 0.40
Nonaccrual Loans ($USD Thousands)$1,348 $1,112 $2,335 $3,446

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal Revenue/Margin/OpEx GuidanceFY/Q1 2024None providedNone providedMaintained (no formal guidance)
Dividend per Common ShareFY/Q1 2024$0.22 (FY 2023 annual cash dividend paid during Q1 2023) $0.25 (paid in Q1 2024; $818k total) Raised

Notes: The company does not issue formal quantitative guidance in the 8-K; dividend increased to $0.25 in 2024 from $0.22 in 2023 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2023, Q4 2023)Current Period (Q1 2024)Trend
Cost of Funds & NIMNIM 3.68% (Q3); commentary on narrowing spread due to rising rates and funding mix shift NIM 3.51%; average cost of interest-bearing liabilities up to 2.75%; continued pressure Continued compression
Deposit Mix & LiquidityShift to higher-cost time deposits; off-balance sheet funding capacity $384.6M; uninsured deposit metrics disclosed Deposits +$3.0M q/q; liquidity sources $521.5M; borrowing capacity $170.9M Stable deposits; robust liquidity
Loan GrowthLoans up $38.4M since YE22 (Q3); CRE/residential drives growth Loans up $20.9M q/q; residential & construction leading Growth sustained
Technology/Core ConversionNoted prep for efficiency; system improvements Core conversion completed in Q4; increased software expense in Q1; efficiency benefits starting Transition to leveraging efficiencies
Asset QualityNonaccrual loans rose to $1.11M (Q3); NPA/Assets 0.19% Nonaccrual loans $3.446M; NPA/Assets 0.40%; ACL 0.86% of gross loans Nonaccruals up; reserves adequate per mgmt
Regional/Macro ContextFocus on fundamentals; managing rate environment Operating in attractive pro-business regions; sticking to relationship-led growth Positive local backdrop emphasis

Management Commentary

  • “We completed technology upgrades during the fourth quarter of last year which will produce operational efficiencies we are just now starting to leverage.” — Sammie D. Dixon, Jr., Vice Chairman, President, and CEO .
  • “Despite today’s uncertain economic outlook, the message to our team is to stick to the mission of building client relationships and shareholder value. Record turnouts at our recent client appreciation events are a testament to this strategy.” — Sammie D. Dixon, Jr. .
  • “We are operating in one of the most attractive pro-business regions in the country and we think the future holds great opportunity.” — Sammie D. Dixon, Jr. .

Q&A Highlights

  • No earnings call transcript was included in the filings for Q1 2024; analysis is based on the 8-K press release and financial tables .
  • Management messaging focused on operational efficiency post-core conversion, client relationship growth, and navigating the rate environment .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2024 EPS and revenue was unavailable at the time of request due to data access limits; therefore, no beat/miss assessment versus consensus can be provided.
  • Given reported NIM pressure and higher cost of funds, estimates for forward net interest income and margins may need to reflect continued funding mix normalization and elevated deposit pricing, partially offset by loan growth and efficiency initiatives .

Key Takeaways for Investors

  • Sequential improvement in net earnings despite NIM compression reflects disciplined credit provisioning (credit loss expense down to $211k) and balance sheet growth; watch for sustainability as funding costs remain elevated .
  • Loan growth concentrated in residential and construction signals demand in core markets; monitor CRE mix and nonaccrual trends as NPAs/Assets remained at 0.40% .
  • Deposit dynamics: modest total growth (+$3.0M q/q), with rising noninterest-bearing and time deposits offset by declines in savings/NOW/MM; funding mix implications for NIM persist .
  • Operating leverage near-term constrained by elevated software/IT costs post-core conversion; efficiency gains targeted over coming quarters as upgrades are leveraged .
  • Strong capital and liquidity (Company TCE 9.44%; Bank TCE 9.38%; total liquidity sources $521.5M) support growth and dividend capacity; dividend increased to $0.25 in 2024 .
  • With consensus estimates unavailable, trading may focus on qualitative signals (loan/deposit trends, NIM trajectory, expense normalization) and dividend support; headline catalysts include continued growth in residential construction lending and any evidence of efficiency ratio improvement .
  • Medium-term thesis: Relationship-led growth in attractive Florida MSAs, efficiency benefits from recent tech upgrades, and stable capital provide a foundation; risks include prolonged higher-for-longer deposit costs and further nonaccrual upticks .