Plumas Bancorp

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED June 30, 2006


o		TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 000-49883

PLUMAS BANCORP

(Exact Name of Registrant as Specified in Its Charter)


California		75-2987096
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

35 S. Lindan Avenue, Quincy, California		95971
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code (530) 283-7305

Indicated 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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule12b-2 of the Exchange Act (check one):

Large Accelerated Filer o Accelerated Filer þ Non-Accelerated Filer o

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of August 7, 2006; 5,004,241 shares

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II — OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 1A RISK FACTORS
	ITEM 2. UNREGISTERD SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS
SIGNATURES
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PLUMAS BANCORP
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands, except share data)


	June 30,			December 31,
	2006			2005
Assets
Cash and due from banks	$	17,248		$	17,271
Federal funds sold		455			7,325

Cash and cash equivalents		17,703			24,596
Investment securities (fair value of $82,702 at June 30, 2006 and $97,712 at December 31, 2005)		83,051			97,844
Loans, less allowance for loan losses of $3,701 at June 30, 2006 and $3,256 at December 31, 2005 (Notes 3 and 4)		334,592			319,156
Premises and equipment, net		13,300			11,404
Intangible assets, net		1,488			1,638
Bank owned life insurance		9,085			8,930
Accrued interest receivable and other assets		10,311			9,235

Total assets	$	469,530		$	472,803


Liabilities and Shareholders’ Equity

Deposits:
Non-interest bearing	$	127,254		$	129,734
Interest bearing		289,999			296,826

Total deposits		417,253			426,560
Federal Home Loan Bank advances		5,000			—
Accrued interest payable and other liabilities		4,182			4,796
Junior subordinated deferrable interest debentures		10,310			10,310

Total liabilities		436,745			441,666


Commitments and contingencies (Note 4)		—			—

Shareholders’ equity (Notes 5 and 8):
Serial preferred stock, no par value; 10,000,000 shares authorized, none issued		—			—
Common stock, no par value; 22,500,000 shares authorized; issued and outstanding — 5,004,241 shares at June 30, 2006 and 4,976,654 shares at December 31, 2005		4,579			4,412
Retained earnings		29,651			27,816
Accumulated other comprehensive loss (Note 6)		(1,445	)		(1,091	)

Total shareholders’ equity		32,785			31,137

Total liabilities and shareholders’ equity	$	469,530		$	472,803

See notes to unaudited condensed consolidated financial statements.

PLUMAS BANCORP
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(In thousands, except per share data)


	For the Three Months					For the Six Months
	Ended June 30					Ended June 30
	2006		2005			2006		2005
Interest Income:
Interest and fees on loans	$	6,379	$	5,354		$	12,384	$	10,163
Interest on investment securities:
Taxable		645		678			1,332		1,390
Exempt from Federal income taxes		133		134			264		272
Interest on Federal funds sold		27		3			144		4

Total interest income		7,184		6,169			14,124		11,829

Interest Expense:
Interest on deposits		1,421		915			2,782		1,710
Interest on Federal Home Loan Bank advances		39		131			39		166
Interest on junior subordinated deferrable interest debentures		201		93			384		184
Other		4		3			8		5

Total interest expense		1,665		1,142			3,213		2,065

Net interest income before provision for loan losses		5,519		5,027			10,911		9,764
Provision for Loan Losses		300		300			600		600

Net interest income after provision for loan losses		5,219		4,727			10,311		9,164
Non-Interest Income:
Service charges		948		739			1,709		1,469
Gain (loss) on sale of other real estate and vehicles, net		2		(29	)		2		(45	)
Earnings on Bank owned life insurance policies		97		87			191		179
Other		301		313			558		616

Total non-interest income		1,348		1,110			2,460		2,219

Non-Interest Expenses:
Salaries and employee benefits		2,329		2,263			4,866		4,666
Occupancy and equipment		810		737			1,560		1,493
Other		1,302		1,125			2,326		2,167

Total non-interest expenses		4,441		4,125			8,752		8,326


Income before provision for income taxes		2,126		1,712			4,019		3,057
Provision for Income Taxes		816		629			1,534		1,077

Net income	$	1,310	$	1,083		$	2,485	$	1,980


Basic earnings per share (Notes 5 and 8)	$	0.26	$	0.22		$	0.50	$	0.40

Diluted earnings per share (Notes 5 and 8)	$	0.26	$	0.21		$	0.49	$	0.39

See notes to unaudited condensed consolidated financial statements.

PLUMAS BANCORP
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)


	For the Six Months
	Ended June 30,
	2006			2005
Cash Flows from Operating Activities:
Net income	$	2,485		$	1,980
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		600			600
Change in deferred loan origination costs/fees, net		(398	)		(614	)
Depreciation and amortization		1,025			836
Stock-based compensation expense		87			—
Net loss on sale of available-for-sale investment securities		—			8
Amortization of investment security premiums		223			371
Accretion of investment security discounts		(46	)		(38	)
Net loss on disposal/sale of premises and equipment		8			4
Net (gain) loss on sale of other real estate and vehicles		(2	)		45
Earnings on Bank owned life insurance policies		(191	)		(179	)
Expenses on Bank owned life insurance policies		36			34
(Increase) decrease in accrued interest receivable and other assets		(852	)		115
(Decrease) increase in accrued interest payable and other liabilities		(614	)		697

Net cash provided by operating activities		2,361			3,859


Cash Flows from Investing Activities:
Proceeds from matured and called available-for-sale investment securities		12,346			9,500
Proceeds from matured and called held-to-maturity investment securities		—			1,097
Proceeds from sales of available-for-sale investment securities		—			1,992
Purchases of held-to-maturity investment securities		(155	)		—
Proceeds from principal repayments from available-for-sale government-guaranteed mortgage-backed securities		1,805			1,722
Proceeds from principal repayments from held-to-maturity government-guaranteed mortgage-backed securities		18			51
Net increase in loans		(15,942	)		(42,224	)
Proceeds from sale of other real estate and vehicles		101			154
Purchase of premises and equipment		(2,550	)		(1,235	)

Net cash used in investing activities		(4,377	)		(28,943	)

Continued on next page.

PLUMAS BANCORP
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
(Continued)


	For the Six Months
	Ended June 30,
	2006			2005
Cash Flows from Financing Activities:
Net (decrease) increase in demand, interest bearing and savings deposits	$	(331	)	$	10,765
Net (decrease) increase in time deposits		(8,976	)		4,539
Proceeds from Federal Home Loan Bank advances		5,000			16,465
Proceeds from exercise of stock options		80			223
Payment of cash dividends		(650	)		(527	)

Net cash (used in) provided by financing activities		(4,877	)		31,465

(Decrease) increase in cash and cash equivalents		(6,893	)		6,381
Cash and Cash Equivalents at Beginning of Year		24,596			11,444

Cash and Cash Equivalents at End of Period	$	17,703		$	17,825


Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest expense	$	3,147		$	1,914
Income taxes	$	1,655		$	555
Non-Cash Investing Activities:
Vehicles acquired through foreclosure	$	93		$	90
Loan transferred to other assets	$	211		$	—
Net change in unrealized gain on available-for-sale securities	$	(354	)	$	(162	)

Non-Cash Financing Activities:
Common stock retired in connection with the exercise of stock options	$	345		$	80

See notes to unaudited condensed consolidated financial statements.

PLUMAS BANCORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. GENERAL

Plumas Bancorp (the “Company”) was incorporated on January 17, 2002 and became the sole shareholder of Plumas Bank (the “Bank”) on June 21, 2002. The Company formed Plumas Statutory Trust I for the sole purpose of issuing trust preferred securities on September 26, 2002. The Company formed Plumas Statutory Trust II for the sole purpose of issuing trust preferred securities on September 28, 2005.

The Bank operates twelve branches in California, including branches in Alturas, Chester, Fall River Mills, Greenville, Kings Beach, Loyalton, Portola, Quincy, Susanville, Tahoe City, Truckee and Westwood. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (FDIC) up to applicable legal limits. The Bank’s primary source of revenue is generated from providing loans to customers who are predominately small and middle market businesses and individuals residing in the surrounding areas.

2. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The condensed consolidated financial statements include the accounts of the Company and the accounts of its wholly-owned subsidiary, Plumas Bank. Plumas Statutory Trust I and Plumas Statutory Trust II are not consolidated into the Company’s consolidated financial statements and, accordingly, are accounted for under the equity method. In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company’s financial position at June 30, 2006 and December 31, 2005 and its results of operations for the three-month and six-month periods ended June 30, 2006 and 2005 and its cash flows for the six-month periods ended June 30, 2006 and 2005. Certain reclassifications have been made to prior periods balances to conform to classifications used in 2006.

The unaudited condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting on Form 10-Q. Accordingly, certain disclosures normally presented in the notes to the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The Company believes that the disclosures are adequate to make the information not misleading. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2005 Annual Report to Shareholders on Form 10-K. The results of operations for the three-month and six-month periods ended June 30, 2006 and 2005 may not necessarily be indicative of future operating results. In preparing such financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the periods reported. Actual results could differ significantly from those estimates.

On August 17, 2005 the Company’s Board of Directors approved a three-for-two stock split for shareholders of record at the close of business on September 2, 2005 and effective on September 16, 2005. All share and per share data in the unaudited condensed consolidated financial statements have been retroactively restated to give effect to the stock split.

Management has determined that because all of the commercial banking products and services offered by the Company are available in each branch of the Bank, all branches are located within the same economic environment and management does not allocate resources based on the performance of different lending or transaction activities, it is appropriate to aggregate the Bank branches and report them as a single operating segment. No single customer accounts for more than 10% of the revenues of the Company or the Bank.

3. LOANS

Outstanding loans are summarized below, in thousands:


	June 30,			December 31,
	2006			2005
Commercial	$	36,832		$	42,252
Agricultural		35,291			31,018
Real estate — mortgage		116,203			110,686
Real estate — construction and land development		63,123			56,370
Consumer		85,680			81,320

		337,129			321,646
Deferred loan costs, net		1,164			766
Allowance for loan losses		(3,701	)		(3,256	)

	$	334,592		$	319,156

4. COMMITMENTS AND CONTINGENCIES

The Company is party to claims and legal proceedings arising in the ordinary course of business. In the opinion of the Company’s management, the amount of ultimate liability with respect to such proceedings will not have a material adverse effect on the financial condition or result of operations of the Company taken as a whole.

In the normal course of business, there are various outstanding commitments to extend credit which are not reflected in the financial statements, including loan commitments of $103,854,000 and $107,500,000 and stand-by letters of credit of $533,000 and $1,195,000 at June 30, 2006 and December 31, 2005, respectively.

Of the loan commitments outstanding at June 30, 2006, $42,037,000 are real estate construction loan commitments that are expected to fund within the next twelve months. The remaining commitments primarily relate to revolving lines of credit or other commercial loans, and many of these are expected to expire without being drawn upon. Therefore, the total commitments do not necessarily represent future cash requirements. Each loan commitment and the amount and type of collateral obtained, if any, are evaluated on an individual basis. Collateral held varies, but may include real property, bank deposits, debt or equity securities or business assets.

Stand-by letters of credit are conditional commitments written to guarantee the performance of a customer to a third party. These guarantees are primarily related to the purchases of inventory by commercial customers and are typically short-term in nature. Credit risk is similar to that involved in extending loan commitments to customers and accordingly, evaluation and collateral requirements similar to those for loan commitments are used. The deferred liability related to the Company’s stand-by letters of credit was not significant at June 30, 2006 or December 31, 2005.

5. EARNINGS PER SHARE

Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options, result in the issuance of common stock which shares in the earnings of the Company. The treasury stock method has been applied to determine the dilutive effect of stock options in computing diluted earnings per share.


	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
	2006		2005		2006		2005
Earnings Per Share:
Basic earnings per share	$	0.26	$	0.22	$	0.50	$	0.40
Diluted earnings per share	$	0.26	$	0.21	$	0.49	$	0.39
Weighted Average Number of Shares Outstanding: (in thousands)
Basic shares		5,000		4,945		4,994		4,933
Diluted shares		5,089		5,078		5,090		5,057

There were 10,000 stock options in the three-month period and 7,500 stock options in the six-month period ended June 30, 2006, considered to be antidilutive and therefore omitted from the above calculation of diluted earnings per share. There were no stock options in the three-month and six-month periods ended June 30, 2005 considered to be antidilutive

6. COMPREHENSIVE INCOME

Total comprehensive income for the three months ended June 30, 2006 and 2005 totaled $1,055,000 and $1,639,000, respectively. Comprehensive income is comprised of unrealized (losses) gains, net of taxes, on available-for-sale investment securities, which were $(255,000) and $556,000 for the three months ended June 30, 2006 and 2005, respectively, together with net income.

Total comprehensive income for the six months ended June 30, 2006 and 2005 totaled $2,131,000 and $1,818,000, respectively. Comprehensive income is comprised of unrealized losses, net of taxes, on available-for-sale investment securities, which were $(354,000) and $(162,000) for the six months ended June 30, 2006 and 2005, respectively, together with net income.

At June 30, 2006 and December 31, 2005, accumulated other comprehensive loss totaled $1,445,000 and $1,091,000, respectively, and is reflected, net of taxes, as a component of shareholders’ equity.

7. STOCK-BASED COMPENSATION

At June 30, 2006, the Company had two stock-based compensation plans, the Plumas Bank 2001 and 1991 Stock Option Plans, which are described below. Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (R), Share Based Payment (“SFAS 123 (R)”), using the modified prospective application transition method, which requires recognizing expense for options granted prior to the adoption date equal to the fair value of the unvested amounts over their remaining vesting period based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123 Accounting for Stock Based Compensation and compensation cost for all share based payments granted subsequent to January 1, 2006 based on the grant date fair values estimated in accordance with the provisions of SFAS 123 (R). There were a total of 2,500 options granted during the six-month period ended June 30, 2006 and no options granted during the six-month period ended June 30, 2005. Results for prior periods have not been restated. Prior to January 1, 2006, the Company accounted for the Stock Option Plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based compensation cost was recorded prior to January 1, 2006, as all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of the grant.

As a result of adopting SFAS 123 (R), the Company’s income before provision for income taxes and net income for the three months ended June 30, 2006 was $43,000 and $38,000, respectively, and for the six months ended June 30, 2006 was $87,000 and $76,000, respectively, lower than if we had continued to account for share-based compensation under APB 25. Basic and diluted earnings per share for the quarter ended June 30, 2006 would have been $0.27 and $0.26, respectively, without the adoption of SFAS 123 (R) compared to $0.26 and $0.26, respectively, as reported. Basic and diluted earnings per share for the six months ended June 30, 2006 would have been $0.51 and $0.50, respectively, without the adoption of SFAS 123 (R) compared to $0.50 and $0.49, respectively, as reported.

SFAS 123 (R) requires the cash flows resulting from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as a cash flow from financing in the statement of cash flows. These excess tax benefits were not significant for the Company.

The following table illustrates the pro forma SFAS 123 adjustment on consolidated net income and earnings per share had the Company recorded compensation expense in accordance with SFAS 123 for the three months and six months ended June 30, 2005, dollars in thousands except per share amounts:


	For the Three
	And Six Months
	Ended June 30, 2005
Net income as reported	$	1,083	$	1,980
Deduct: Total stock-based compensation expense determined under the fair value based method for all awards, net of related tax effects		43		87

Pro forma net income	$	1,040	$	1,893


Basic earnings per share — as reported	$	0.22	$	0.40

Basic earnings per share — pro forma	$	0.21	$	0.38


Diluted earnings per share — as reported	$	0.21	$	0.39

Diluted earnings per share — pro forma	$	0.20	$	0.37

8. STOCK OPTION PLANS

In 2001 and 1991, the Company established Stock Option Plans for which 929,339 shares of common stock remain reserved for issuance to employees and directors and 620,037 shares are available for future grants under incentive and nonstatutory agreements as of June 30, 2006. The plans require that the option price may not be less than the fair market value of the stock at the date the option is granted, and that the stock must be paid in full at the time the option is exercised. Payment in full for the option price must be made in cash or with Company common stock previously acquired by the optionee and held by the optionee for a period of at least six months. The options expire on dates determined by the Board of Directors, but not later than ten years from the date of grant. Upon grant, options vest ratably over a three to five year period. All options outstanding at June 30, 2006 are expected to vest.

A summary of the option activity during the six months ended June 30, 2006 within the Stock Options Plans follows:


					Weighted Average
			Weighted Average		Remaining		Intrinsic Value
	Shares		Exercise Price		Contractual Term		(in thousands)
Incentive:
Options outstanding at January 1, 2006		242,845		11.05
Options granted		—		—
Options exercised		44,418		8.96
Options cancelled		4,756		12.68

Options outstanding at June 30, 2006		193,671		11.48		6.9	$	1,360

Options exercisable at June 30, 2006		95,632		9.72		6.1	$	840


Nonstatutory:
Options outstanding at January 1, 2006		113,131		10.59
Options granted		2,500		18.79
Options exercised		—		—
Options cancelled		—		—

Options outstanding at June 30, 2006		115,631		10.77		6.2	$	894

Options exercisable at June 30, 2006		70,386		9.15		5.3	$	658

The intrinsic value represents the value of the Company’s closing stock price on June 30, 2006 in excess of the exercise price multiplied by the number of options outstanding or exercisable.

There were a total of 2,500 options granted during the six-month period ended June 30, 2006 and no option grants made during the six-month period ended June 30, 2005. The fair value of each option grant is estimated on the date of grant using a Black-Scholes option-pricing model that uses assumptions based on expected option life, expected stock volatility, risk free interest rate, and dividend yield. The Company uses historical data to estimate expected option life. Stock volatility is based on the historical volatility of the Company’s stock. The risk-free rate is based on the U. S. Treasury yield curve for the periods within the contractual life of the options in effect at the time of grant. Assumptions used for the grants made in the six-months ended June 30, 2006 are as follows:


Weighted average fair value of options granted	$	4.60
Dividend yield		1.2	%
Expected volatility		16.7	%
Risk-free interest rate		4.6	%
Expected option life in years		5.0

As of June 30, 2006, there was $426,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 1991 Plan and 2001 Plan. That cost is expected to be recognized over a weighted average period of 2.76 years. The total intrinsic value of options exercised during the six months ended June 30, 2006 and 2005 was $493,000 and $534,000 respectively. The total fair value of shares vested during the quarter ended June 30, 2006 and 2005 was $2,000 and $5,000 respectively. The total fair value of shares vested during the six months ended June 30, 2006 and 2005 was $5,000 and $9,000 respectively.

9. RECENT ACCOUNTING DEVELOPMENTS

Accounting for Uncertainty in Income Taxes

In July 2006, the FASB issued Financial Accounting Standards Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attributable for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions. FIN 48 is effective for fiscal years beginning after December 15, 2006. Management has not completed its evaluation of the impact that FIN 48 will have.

PART I — FINANCIAL INFORMATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain matters discussed in this Quarterly Report are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Such risks and uncertainties include, among others, (1) significant increases in competitive pressures in the financial services industry; (2) changes in the interest rate environment resulting in reduced margins; (3) general economic conditions, either nationally or regionally, maybe less favorable than expected, resulting in, among other things, a deterioration in credit quality; (4) changes in regulatory environment; (5) loss of key personnel; (6) fluctuations in the real estate market; (7) changes in business conditions and inflation; (8) operational risks including data processing systems failures or fraud; and (9) changes in securities markets. Therefore, the information set forth herein should be carefully considered when evaluating the business prospects of Plumas Bancorp.

When the Company uses in this Quarterly Report the words “anticipate”, “estimate”, “expect”, “project”, “intend”, “commit”, “believe” and similar expressions, the Company intends to identify forward-looking statements. Such statements are not guarantees of performance and are subject to certain risks, uncertainties and assumptions, including those described in this Quarterly Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected, projected, intended, committed or believed. The future results and stockholder values of the Company may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results and values are beyond the Company’s ability to control or predict. For those statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

INTRODUCTION

On May 18, 2005, Plumas Bancorp (the “Company”) began trading on The NASDAQ Capital Market under the ticker symbol “PLBC”. Prior to May 18, 2005, the Company was traded on the Over-The-Counter Bulletin Board (“OTC BB”) also under the ticker symbol “PLBC”.

The following discussion and analysis sets forth certain statistical information relating to the Company as of June 30, 2006 and December 31, 2005 and for the three and six month periods ended June 30, 2006 and 2005. This discussion should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto included in Plumas Bancorp’s Annual Report filed on Form 10-K for the year ended December 31, 2005.

STOCK SPLIT

CASH DIVIDEND

On April 21, 2006, the Company declared a common stock cash dividend of $0.13 per share. The dividend was paid on May 15, 2006 to its shareholders of record on May 1, 2006.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (R), Share Based Payment (“SFAS 123(R)”) using the modified prospective transition method. Prior to adoption of this statement, the Company accounted for its share-based employee compensation plans under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock-Based Compensation. See Note 7 and 8 to the Condensed Consolidated Financial Statements for additional information related to implementation of SFAS 123(R). There have been no other changes to the Company’s critical accounting policies from those disclosed in the Company’s 2005 Annual Report to Shareholders’ on Form 10-K.

This discussion should be read in conjunction with our unaudited condensed consolidated financial statements, including the notes thereto, appearing elsewhere in this report.

OVERVIEW

The Company’s net income increased $505 thousand, or 26%, to $2.48 million for the six months ended June 30, 2006 from $1.98 million for the same period in 2005. The primary contributor to the increase in net income for the first six months of 2006 was a $1.15 million increase in net interest income. In addition non-interest income increased by $241 thousand primarily as a result of an increase in service charge income of $240 thousand. Partially offsetting these revenue gains were increases of $200 thousand in salaries and benefits, $67 thousand in occupancy and equipment costs, $159 thousand in all other non-interest expense categories and $457 thousand in the provision for income taxes.

Total assets declined $3.3 million from $472.8 million at December 31, 2005 to $469.5 million at June 30, 2006. Net loans increased by $15.4 million, or 5% from $319.2 million at December 31, 2005 to $334.6 million at June 30, 2006. Funding for the increase in loans was provided by a decrease in federal funds sold of $6.9 million, a decrease in investment securities of $14.8 million, and an increase in Federal Home Loan Bank (FHLB) advances totaling $5.0 million as deposits declined $9.3 million, or 2% from $426.6 million at December 31, 2005 to $417.3 million at June 30, 2006.

The annualized return on average assets was 1.08% for the six months ended June 30, 2006 up from 0.92% for the same period in 2006. The annualized return on average equity was 15.4% for the six months ended June 30, 2006 up from 13.8% for the same period in 2005.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2006

Net interest income before provision for loan losses. Net interest income, on a nontax-equivalent basis, was $10.9 million for the six months ended June 30, 2006, an increase of $1.1 million, or 12%, from $9.8 million for the same period in 2005. The increase in net interest income was primarily attributed to volume and rate increases in the Company’s average loan balances partially offset by increases in the rates paid on time deposits, interest bearing checking (NOW) account balances and in the level of and rates paid on the junior subordinated debentures.

Interest income increased $2.3 million, or 19%, to $14.1 million for the six months ended June 30, 2006. Interest and fees on loans increased by $2.2 million from $10.2 million for the six months ended June 30, 2005 to $12.4 million during the current six month period. The Company’s average loan balances were $323 million for the six months ended June 30, 2006, up $36 million, or 13%, from the $287 million for the same period in 2005. The average rate earned on the Company’s loan balances increased 59 basis points to 7.72% during the first six months of 2006 versus 7.13% during the first six months of 2005. The increase in yield is consistent with market conditions in the Company’s service area.

Interest on investment securities decreased by $66 thousand, as an increase in yield was offset by a decline in average investment securities. Interest earned on federal funds sold increased by $140 thousand. This item benefited both from an increase in yield and an increase in average balances outstanding.

Interest expense increased $1.1 million to $3.2 million for the six months ended June 30, 2006, up from $2.1 million for the same period in 2005. The increase in interest expense was primarily attributed to rate increases on time deposits and NOW account balances and the increase in the level of and rates paid on the junior subordinated debentures. Partially offsetting these increases in interest expense was a decrease of $127 thousand in interest from FHLB borrowings, resulting from a reduction in these borrowings during the 2006 period.

For the six months ended June 30, 2006 compared to the same period in 2005, the Company’s average rate paid on time deposits increased 91 basis points to 3.34% from 2.43%. The average rate paid on NOW balances increased 151 basis points to 1.66% for the first six months of 2006 versus 0.15% for the first six months of 2005 primarily as a result of the introduction of the Money Fund Plu$ account in September 2005.

Money Fund Plu$ is a high interest bearing checking account designed to pay rates comparable to those available on a typical brokerage account. Since its introduction, there has been significant growth in the total Money Fund Plu$ balances with an average balance of $33.7 million for the six months ended June 30, 2006 and total balances as of June 30, 2006 of $47.3 million.

Adding to the interest expense was an increase in the average balance of the junior subordinated debentures of $4.1 million to $10.3 million and in the average rate paid of 151 basis points from 6.00% to 7.51%.

As a result of the changes noted above, the net interest margin for the six months ended June 30, 2006 increased 22 basis points, or 4%, to 5.24%, up from 5.02% for the same period in 2005.

The following table presents for the six-month periods indicated the distribution of consolidated average assets, liabilities and shareholders’ equity. It also presents the amounts of interest income from interest-earning assets and the resultant annualized yields expressed in both dollars and annualized yield percentages, as well as the amounts of interest expense on interest-bearing liabilities and the resultant cost expressed in both dollars and annualized rate percentages. Average balances are based on daily averages. Nonaccrual loans are included in the calculation of average loans while nonaccrued interest thereon is excluded from the computation of yields earned:


	For the Six Months Ended June 30, 2006							For the Six Months Ended June 30, 2005
	Average Balance		Interest		Yield/			Average Balance		Interest		Yield/
	(in thousands)		(in thousands)		Rate			(in thousands)		(in thousands)		Rate
Interest-earning assets:
Loans (1) (2)	$	323,307	$	12,384		7.72	%	$	287,257	$	10,163		7.13	%
Investment securities (1)		90,002		1,596		3.58	%		104,328		1,662		3.21	%
Federal funds sold		6,492		144		4.47	%		280		4		2.88	%

Total interest earning assets		419,801		14,124		6.78	%		391,865		11,829		6.08	%

Cash and due from banks		13,677							15,565
Other assets		30,567							26,386

Total assets	$	464,045						$	433,816

Interest-bearing liabilities:
NOW deposits	$	75,748		623		1.66	%	$	43,793		33		0.15	%
Money market deposits		61,010		371		1.23	%		63,035		324		1.04	%
Savings deposits		61,858		224		0.73	%		67,417		200		0.60	%
Time deposits		94,378		1,564		3.34	%		95,877		1,153		2.43	%
FHLB advances		1,525		39		5.16	%		11,449		166		2.92	%
Other interest-bearing liabilities		278		8		5.80	%		232		5		4.35	%
Junior subordinated debentures		10,310		384		7.51	%		6,186		184		6.00	%

Total interest-bearing liabilities		305,107		3,213		2.12	%		287,989		2,065		1.44	%

Non-interest bearing deposits		121,915							113,018
Other liabilities		4,525							3,834
Shareholders’ equity		32,498							28,975

Total liabilities & equity	$	464,045						$	433,816

Cost of funding interest-earning assets (3)						1.54	%						1.06	%
Net interest income and margin (4)			$	10,911		5.24	%			$	9,764		5.02	%


(1)		Not computed on a tax-equivalent basis.

(2)		Loan (costs) fees included in loan interest income for the six-month periods ended June 30, 2006 and 2005 were $(74,000) and $100,000, respectively.

(3)		Total annualized interest expense divided by the average balance of total earning assets.

(4)		Annualized net interest income divided by the average balance of total earning assets.

The following table sets forth changes in interest income and interest expense for the six-month periods indicated and the amount of change attributable to variances in volume, rates and the combination of volume and rates based on the relative changes of volume and rates:


	2006 over 2005 change in net interest income
	for the six months ended June 30
	(in thousands)
	Volume (1)			Rate (2)			Mix (3)			Total
Interest-earning assets:
Loans	$	1,275		$	840		$	106		$	2,221
Investment securities		(228	)		188			(26	)		(66	)
Federal funds sold		89			2			49			140

Total interest income		1,136			1,030			129			2,295

Interest-bearing liabilities:
NOW deposits		24			327			239			590
Money market deposits		(10	)		59			(2	)		47
Savings deposits		(16	)		44			(4	)		24
Time deposits		(18	)		436			(7	)		411
FHLB advances		(144	)		127			(110	)		(127	)
Other interest-bearing liabilities		1			2			—			3
Junior subordinated debentures		123			46			31			200

Total interest expense		(40	)		1,041			147			1,148

Net interest income	$	1,176		$	(11	)	$	(18	)	$	1,147


(1)		The volume change in net interest income represents the change in average balance divided by the previous year’s rate.

(2)		The rate change in net interest income represents the change in rate multiplied by the previous year’s average balance.

(3)		The mix change in net interest income represents the change in average balance multiplied by the change in rate.

Provision for loan losses. The Company recorded $600,000 in provision for loan losses for the six months ended June 30, 2006 and 2005. Management assesses its loan quality monthly to maintain an adequate allowance for loan losses. Based on information currently available, management believes that the allowance for loan losses is adequate to absorb potential risks in the portfolio. However, no assurance can be given that the Company may not sustain charge-offs which are in excess of the allowance in any given period. The Company’s loan portfolio composition and non-performing assets are further discussed under the financial condition section below.

Non-interest income. During the six months ended June 30, 2006, total non-interest income increased $241 thousand, or 11%, to $2.5 million, up from $2.2 million from the comparable period in 2005. This increase was primarily related to an increase in service charges on deposit accounts. Decreases in non-interest income of $47 thousand in investment service fees and $58 thousand in tax refunds were offset by increases in other categories of non-interest income.

Service charges on deposit accounts increased $240 thousand over the same six month period last year. Of this increase, $121 thousand relates to fees from increased customer usage of deposit account overdrafts privileges, the collection of fees resulting from those overdrafts and from an increase in the rate charged. Additionally, during 2006, the Company began recording expenses for ATM transactions in the outside service fee expense category. Prior to this, the Company’s vendor did not separate these costs from ATM income and the net amount was recorded as income. The effect of this change was to increase 2006 non-interest income by $130 thousand and increase non-interest expense by a similar amount.

In the first quarter of 2005, the Company recorded $58 thousand of tax refunds related to previous year’s overpayments. These tax refunds are not expected to reoccur. As a result, in 2006, changes to total non-interest income were negatively impacted by these tax refunds.

The following table describes the components of non-interest income for the six-month periods ending June 30, 2006 and 2005, in thousands:



	For the Six Months
	Ended June 30
							Dollar			Percentage
	2006			2005			Change			Change
Service charges on deposit accounts	$	1,709		$	1,469		$	240			16.3	%
Earnings on life insurance policies		191			179			12			6.7	%
Merchant processing income		131			132			(1	)		-0.8	%
Official check fees		80			46			34			73.9	%
Mortgage loan commission and servicing fees		65			89			(24	)		-27.0	%
Customer service fees		60			52			8			15.4	%
Investment services income		55			102			(47	)		-46.1	%
Federal Home Loan Bank dividends		48			38			10			26.3	%
Safe deposit box and night depository income		36			35			1			2.9	%
Printed check fee income		31			21			10			47.6	%
Other deposit account fees		28			14			14			100.0	%
Gain (loss) on sale of real estate and vehicles		2			(45	)		47			104.4	%
Loss on sale of securities		—			(8	)		8			100.0	%
Loss on sale of loans		(4	)		—			(4	)		—	%
Tax refunds		—			58			(58	)		-100.0	%
Other		28			37			(9	)		-24.3	%

Total non-interest income	$	2,460		$	2,219		$	241			10.9	%

Non-interest expenses. During the six months ended June 30, 2006, total non-interest expense increased $426 thousand, or 5%, to $8.7 million, up from $8.3 million for the comparable period in 2005. The increase in non-interest expense was primarily the result of increases in salaries and employee benefits, occupancy and equipment costs, outside service fees and other expenses.

Salaries and other employee benefits increased $200 thousand, or 4%, over the same six-month period last year. Salaries, payroll taxes and other employee benefits increased as a result of staffing additions related to branch administration and the establishment of a customer call and resource center as well as general salary merit increases and an increase in bonus expense. On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (R), Share Based Payment (“SFAS 123 (R)”), using the modified prospective application transition method. As a result of adopting SFAS 123 (R), the Company recorded $63,000 of employee stock based compensation expense and $24,000 of director stock based compensation expense during the half of 2006. As of June 30, 2006, there was $304,000 of total unrecognized employee compensation costs and $122,000 of total unrecognized director compensation cost related to non-vested share-based compensation arrangements. These costs are expected to be recognized over a weighted average period of 2.76 years. Higher salary and employee benefit costs were reduced to some extent by the deferral of additional salary costs related to increased loan origination activities and reduced workers’ compensation costs.

Occupancy and equipment expense increased by $67 thousand to $1.56 million during the six months ended June 30, 2006 from $1.49 million during the first half of 2005. The largest components of this increase were a $21 thousand increase in utilities expense and a $27 thousand increase in the amortization of leasehold improvements. The increase in outside service fees reflects the ATM expense previously recorded against ATM income. The increase in other expenses was related to an increase in other losses of $49 thousand, from $20 thousand during the 2005 six month period to $69 thousand for the six months ended June 30, 2006. These losses primarily relate to a higher level of charge-offs related to overdrafts on deposit accounts.

Armored car and courier costs decreased $56 thousand, or 30%, as compared to the six months ended June 30, 2005. Courier savings were realized as a result of the Bank’s implementation of “Check 21”. Check 21 is a federal law promoting the transmission of checks electronically between institutions rather than physically transporting the items.

The following table describes the components of non-interest expense for the six-month periods ending June 30, 2006 and 2005.



	For the Six Months
	Ended June 30
					Dollar			Percentage
	2006		2005		Change			Change
Salaries and employee benefits	$	4,866	$	4,666	$	200			4.3	%
Occupancy and equipment		1,560		1,493		67			4.5	%
Professional fees		345		362		(17	)		-4.7	%
Business development		282		238		44			18.5	%
Advertising and shareholder relations		242		224		18			8.0	%
Outside service fees		219		143		76			53.1	%
Telephone and data communication		197		157		40			25.5	%
Director compensation		175		159		16			10.1	%
Deposit premium amortization		150		150		—			—
Stationery and supplies		140		160		(20	)		-12.5	%
Armored car and courier		132		188		(56	)		-29.8	%
Postage		123		124		(1	)		-0.8	%
Insurance		84		117		(33	)		-28.2	%
Loan and collection expenses		80		45		35			77.8	%
Other		157		100		57			57.0	%

Total non-interest expense	$	8,752	$	8,326	$	426			5.1	%

Provision for income taxes. The provision for income taxes was $1.5 million, or 38.2% of income before provision for income taxes for the six months ended June 30, 2006. This compares to $1.1 million or 35.2% of pre-tax income during the first half of 2005. The increase in provision as a percentage of income before provision for income taxes during 2006 includes the effect of employee stock based compensation expense which is included in expense during 2006, but excluded from the calculation of the provision for income taxes.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2006

Net Income. Net income increased by $227 thousand, or 21% from $1.1 million during the second quarter of 2005 to $1.3 million during the three months ended June 30, 2006. This increase in net income included a $492 thousand increase in net interest income and a $238 thousand increase in non-interest income, partially offset by increases of $316 thousand in non-interest expense and $187 thousand in the provision for income taxes.

Net interest income before provision for loan losses. Net interest income, on a nontax-equivalent basis, was $5.5 million for the three months ended June 30, 2006, an increase of $492 thousand, or 10%, from $5.0 million for the same period in 2005. The increase in net interest income was attributed to volume and rate increases in the Company’s average loan portfolio partially offset by increases in rates paid primarily on NOW and time deposits, the decrease in the level of FHLB advances and in the increases in the level of and rates paid on the junior subordinated debentures.

Interest income increased $1.0 million, or 16%, to $7.2 million for the three months ended June 30, 2006. Interest and fees on loans increased by $1.0 million from $5.4 million for the three months ended June 30, 2005 to $6.4 million during the 2006 second quarter. The increase in interest income was primarily attributed to volume and rate increases in the loan portfolio. The Company’s average loan balances were $325 million for the three months ended June 30, 2006, up $25 million, or 8%, from the $300 million for the same period in 2005. The average yield earned on loans increased by 70 basis points from 7.16% during the second quarter of 2005 to 7.86% during the 2006 quarter.

A positive yield variance on investment securities was offset by a decrease in the average balance outstanding, resulting in a decrease of $34 thousand in interest earned on investment securities.

Interest expense increased $523 thousand, or 46%, to $1.6 million for the three months ended June 30, 2006, up from $1.1 million for the same period in 2005. The increase in interest expense was primarily attributed to the increase in the level of and rates paid on NOW deposits and the increase in rates paid on time deposits. A decrease in the level of FHLB advances was offset by rate and volume increases on junior subordinated debentures.

For the three months ended June 30, 2006 compared to the same period in 2005, the Company’s average rate on NOW accounts increased 165 basis points to 1.83% from 0.18%. This increase primarily relates to the introduction of the Money Fund Plu$ product. The average rate paid on time deposits increased from 2.58% during the 2005 second quarter to 3.43% during the quarter ended June 30, 2006.

As a result of the changes noted above, the net interest margin for the three months ended June 30, 2006 increased 31 basis points, or 6%, to 5.34%, up from 5.03% for the same period in 2005.

The following table presents for the three-month periods indicated the distribution of consolidated average assets, liabilities and shareholders’ equity. It also presents the amounts of interest income from interest-earning assets and the resultant annualized yields expressed in both dollars and annualized yield percentages, as well as, the amounts of interest expense on interest-bearing liabilities and the resultant cost expressed in both dollars and annualized rate percentages. Average balances are based on daily averages. Nonaccrual loans are included in the calculation of average loans while nonaccrued interest thereon is excluded from the computation of yields earned:


	For the Three Months Ended June 30, 2006							For the Three Months Ended June 30, 2005
	Average Balance		Interest		Yield/			Average Balance		Interest		Yield/
	(in thousands)		(in thousands)		Rate			(in thousands)		(in thousands)		Rate
Interest-earning assets:
Loans (1) (2)	$	325,408	$	6,379		7.86	%	$	299,895	$	5,354		7.16	%
Investment securities (1)		86,676		778		3.60	%		100,581		812		3.24	%
Federal funds sold		2,286		27		4.74	%		322		3		3.74	%

Total interest earning assets		414,370		7,184		6.95	%		400,798		6,169		6.17	%

Cash and due from banks		13,317							16,397
Other assets		31,446							26,785

Total assets	$	459,133						$	443,980

Interest-bearing liabilities:
NOW deposits	$	78,804		360		1.83	%	$	43,250		19		0.18	%
Money market deposits		57,329		169		1.18	%		62,285		169		1.09	%
Savings deposits		59,794		109		0.73	%		67,614		108		0.64	%
Time deposits		91,561		783		3.43	%		96,381		619		2.58	%
Federal Home Loan Bank advances		3,033		39		5.16	%		17,396		131		3.02	%
Other interest-bearing liabilities		281		4		5.71	%		237		3		5.08	%
Junior subordinated debentures		10,310		201		7.82	%		6,186		93		6.03	%

Total interest-bearing liabilities		301,112		1,665		2.22	%		293,349		1,142		1.56	%

Non-interest bearing deposits		120,741							117,361
Other liabilities		4,410							3,983
Shareholders’ equity		32,870							29,287

Total liabilities & equity	$	459,133						$	443,980

Cost of funding interest-earning assets (3)						1.61	%						1.14	%
Net interest income and margin (4)			$	5,519		5.34	%			$	5,027		5.03	%


(1)		Not computed on a tax-equivalent basis.

(2)		Loan (costs) fees included in loan interest income for the three-month periods ended June 30, 2006 and 2005 were $(18,000) and $51,000, respectively.

(3)		Total interest expense divided by the average balance of total earning assets.

(4)		Net interest income divided by the average balance of total earning assets.

The following table sets forth changes in interest income and interest expense for the three-month periods indicated and the amount of change attributable to variances in volume, rates and the combination of volume and rates based on the relative changes of volume and rates:


	2006 over 2005 change in net interest income
	for the three months ended June 30
	(in thousands)
	Volume (1)			Rate (2)		Mix (3)			Total
Interest-earning assets:
Loans	$	455		$	525	$	45		$	1,025
Investment securities		(112	)		91		(13	)		(34	)
Federal funds sold		18			1		5			24

Total interest income		361			617		37			1,015


Interest-bearing liabilities:
NOW deposits		16			179		146			341
Money market deposits		(13	)		14		(1	)		—
Savings deposits		(12	)		15		(2	)		1
Time deposits		(31	)		205		(10	)		164
FHLB advances		(108	)		93		(77	)		(92	)
Other interest-bearing liabilities		1			—		—			1
Junior subordinated debentures		62			28		18			108

Total interest expense		(85	)		534		74			523

Net interest income	$	446		$	83	$	(37	)	$	492


(1)		The volume change in net interest income represents the change in average balance divided by the previous year’s rate.

(2)		The rate change in net interest income represents the change in rate divided by the previous year’s average balance.

(3)		The mix change in net interest income represents the change in average balance multiplied by the change in rate.

Provision for loan losses. The Company recorded $300,000 in provision for loan losses for the three months ended June 30, 2006 and 2005. Management assesses its loan quality monthly to maintain an adequate allowance for loan losses. Based on information currently available, management believes that the allowance for loan losses is adequate to absorb potential risks in the portfolio. However, no assurance can be given that the Company may not sustain charge-offs which are in excess of the allowance in any given period. The Company’s loan portfolio composition and non-performing assets are further discussed under the financial condition section below.

Non-interest income. During the three months ended June 30, 2006, total non-interest income increased by $238 thousand. This increase resulted from a $209 thousand increase in service charges on deposit accounts and a $21 thousand increase in official check fees. The increase in service charges includes an increase in ATM income previously discussed as well as an increase in fees and charges related to customer overdrafts. During the 2005 quarter the Company experienced $29 thousand in losses on the sale of vehicles and other real estate owned compared to a $2 thousand gain on vehicle sales during the current quarter. This was mostly offset by a decrease of $25 thousand in investment services income.

The following table describes the components of non-interest income for the three-month periods ending June 30, 2006 and 2005, in thousands:


	For the Three Months
	Ended June 30
						Dollar			Percentage
	2006		2005			Change			Change
Service charges on deposit accounts	$	948	$	739		$	209			28.3	%
Earnings on life insurance policies		97		87			10			11.5	%
Merchant processing income		70		70			—			—	%
Official check fees		45		24			21			87.5	%
Mortgage loan commission and servicing fees		35		40			(5	)		-12.5	%
Investment services income		33		58			(25	)		-43.1	%
Customer service fees		32		28			4			14.3	%
Federal Home Loan Bank dividends		25		38			(13	)		-34.2	%
Printed check fee income		20		13			7			53.8	%
Safe deposit box and night depository income		16		16			—			—	%
Other deposit account fees		13		8			5			62.5	%
Gain (loss) on sale of real estate and vehicles		2		(29	)		31			106.9	%
Other		12		18			(6	)		-33.3	%

Total non-interest income	$	1,348	$	1,110		$	238			21.4	%

Non-interest expenses. Non-interest expense increased by $316 thousand from $4.1 million during the second quarter of 2005 to $4.4 million during the current quarter. Increases in non-interest expense included $109 thousand in outside service fees, $73 thousand in occupancy and equipment costs, $66 thousand in salaries and employee benefits, $45 thousand in loan and collection expense and $41 thousand in other expense.

The increase in salaries and employee benefits included an increase in salary expense of $119 thousand related to higher staffing levels and merit increases, an increase in bonus expense of $46 thousand, and employee stock based compensation expense of $31 thousand. These increases in expense were partially offset by the deferral of additional salary costs related to increased loan origination and reduced workers’ compensation expense.

The increase in outside service fees was related to the addition of ATM expense previously netted against ATM income. Occupancy and equipment costs increased by $73 thousand or 10% primarily related to an increase in leasehold improvement expense totaling $25 thousand and other occupancy related costs. Loan and collection costs increased by $45 thousand to $53 thousand for the three months ended June 30, 2006. The level of collection expense in 2005 was abnormally low related to the reimbursement of previously incurred costs. The increase of $41 thousand in other expense includes a higher level of charge-offs related to overdrafts on deposit accounts.

The following table describes the components of non-interest expense for the three-month periods ending June 30, 2006 and 2005.


	For the Three Months
	Ended June 30
					Dollar			Percentage
	2006		2005		Change			Change
Salaries and employee benefits	$	2,329	$	2,263	$	66			2.9	%
Occupancy and equipment		810		737		73			9.9	%
Professional fees		181		197		(16	)		-8.1	%
Outside service fees		175		66		109			165.2	%
Business development		149		138		11			8.0	%
Advertising and shareholder relations		143		117		26			22.2	%
Telephone and data communication		111		82		29			35.4	%
Director compensation		87		81		6			7.4	%
Deposit premium amortization		75		75		—			—	%
Armored car and courier		67		96		(29	)		-30.2	%
Stationery and supplies		66		86		(20	)		-23.3	%
Postage		60		63		(3	)		-4.8	%
Loan and collection expense		53		8		45			562.5	%
Insurance		42		64		(22	)		-34.4	%
Other		93		52		41			78.8	%

Total non-interest expense	$	4,441	$	4,125	$	316			7.7	%

FINANCIAL CONDITION

Loan portfolio composition. The Company continues to manage the mix of its loan portfolio consistent with its identity as a community bank serving the financing needs of all sectors of Northeastern California. Although the Company offers a broad array of financing options, it continues to concentrate its focus on small- to medium-sized commercial businesses. These commercial loans are diversified as to the industries and types of businesses, thus limiting material exposure from any one industry concentration. The Company offers both fixed and floating rate loans and obtains collateral in the form of real property, business assets and deposit accounts, but looks to business and personal cash flows as its primary source of repayment. As of June 30, 2006, agricultural loans increased as a percentage of total loan balances to 10.5% from 9.7% at December 31, 2005 and real estate construction and land development loans increased to 18.7% of total loan balances from 17.5% at December 31, 2005. This increase is consistent with the seasonality of these loans. Real estate mortgage and consumer loan balances as a percentage of total loans increased slightly to 34.5% and 25.4%, respectively from 34.4% and 25.3%, respectively at December 31, 2005. The increased percentages in agricultural, real estate mortgage, construction and land development and consumer loan balances were offset with a decline in the relative percentage of commercial loan balances which were 10.9% at June 30, 2006, down from 13.1% at December 31, 2005.

Nonperforming assets. Nonperforming loans at June 30, 2006 were $1.48 million, a decrease of $183 thousand, or 11%, over the $1.66 million balance at December 31, 2005. Nonperforming assets (which is comprised of nonperforming loans plus foreclosed real estate and vehicle holdings) at June 30, 2006 were $1.51 million, a decrease of $190 thousand, or 11%, over the $1.70 million balance at December 31, 2005.

The decrease in both nonperforming loans and assets at June 30, 2006 from December 31, 2005 relates to the reduction in the balance of two nonaccrual SBA loans totaling $676,000. Of this reduction, the Company recorded a charge-off totaling $68,000, and received proceeds from the sale of assets totaling $405,000. The balance of $203,000 is awaiting payment from the SBA related to the guaranteed portion of one of the loans. These reductions in nonaccrual loans were partially offset by the addition of one real estate secured loan totaling $350,000.

As a result of the above, nonperforming loans as a percentage of total loans decreased to 0.44% at June 30, 2006 from 0.52% at December 31, 2005. In addition, nonperforming assets as a percentage of total assets also decreased to 0.32% at June 30, 2006 from 0.36% at December 31, 2005.

Analysis of allowance for loan losses. Net charge-offs during the six months ended June 30, 2006 totaled $155 thousand, or 0.05% of average loans during the period, compared to $255 thousand, or 0.09% of average loans, for the comparable period in 2005. Net charge-offs during the first half of 2006 were comprised of $319 thousand of charge-offs offset by $164 thousand in recoveries, compared to $344 thousand of charge-offs offset by $89 thousand in recoveries for the same period in 2005. The provision for loan losses was $600 thousand for both six month periods. The allowance for loan losses stood at 1.10% of total loans as of June 30, 2006 up from 1.01% as of December 31, 2005. Based on an evaluation of the credit quality of the loan portfolio and delinquency trends and charge-offs, management believes the allowance for loan losses to be adequate. However, no prediction of the ultimate level of loans charged off in future years can be made with any certainty.

The following table provides certain information for the six-month period indicated with respect to the Company’s allowance for loan losses as well as charge-off and recovery activity.


	For the Six Months
	Ended June 30,
	(in thousands)
	2006			2005
Balance at January 1,	$	3,256		$	2,762


Charge-offs:
Commercial and agricultural		(118	)		(111	)
Real estate mortgage		—			—
Real estate construction		—			—
Consumer		(201	)		(233	)

Total charge-offs		(319	)		(344	)

Recoveries:
Commercial and agricultural		42			19
Real estate mortgage		—			—
Real estate construction		—			—
Consumer		122			70

Total recoveries		164			89

Net charge-offs		(155	)		(255	)

Provision for loan losses		600			600

Balance at June 30,	$	3,701		$	3,107

Net charge-offs during the six-month period to average loans		0.05	%		0.09	%
Allowance for loan losses to total loans		1.10	%		1.01	%

Investment securities. Investment securities decreased $15 million to $83 million at June 30, 2006, down from $98 million at December 31, 2005. The Company’s investment in U.S. Treasury securities as a percentage of the total investment portfolio was 8% at June 30, 2006, down from 10% at December 31, 2005. The Company’s investment in obligations of U.S. agencies remained relatively unchanged at 65% of the investment portfolio at June 30, 2006 and 66% at December 31, 2005. Municipal obligations increased to 17% of the investment portfolio at June 30, 2006, up from 14% at December 31, 2005. Corporate bonds were 10% of the investment portfolio at June 30, 2006 and December 31, 2005. The decrease in the overall investment portfolio resulted from maturities, calls and pay downs that were used to provide funding for loan growth and liquidity and, to a lesser extent, additional unrealized losses on available for sale securities.

Premises and equipment. Premises and equipment increased $1.9 million, or 17%, to $13.3 million at June 30, 2006, from $11.4 million at December 31, 2005. This increase primarily relates to a $1.2 million purchase of land and a building in Quincy, California to be utilized as a future administrative office location, costs of $779 thousand for a new branch office currently under construction in Truckee, California and $186 thousand related to expansion of the Company’s Fall River Mills branch. As of June 30, 2006 land and construction costs for the Truckee branch have amounted to $2.6 million. Construction will continue on this new branch through the summer of 2006 with its completion date anticipated during the third quarter of 2006. The increases in premises noted above were somewhat offset by ongoing depreciation on existing premises and equipment.

Deposits. Total deposits were $417.3 million as of June 30, 2006, a decrease of $9.3 million, or 2%, from the December 31, 2005 balance of $426.6 million. The decrease in deposits resulted from a decline of $14 million in money market and savings deposits, $9 million in time deposits and $2 million non-interest bearing demand deposits. These declines in deposits were partially offset by an increase in interest bearing checking deposits totaling $16 million. The Company continues to manage the mix of its deposits consistent with its identity as a community bank serving the financial needs of its customers. Interest bearing checking deposits increased to 21% of total deposits at June 30, 2006, up from 16% of total deposits at December 31, 2005. Money market and savings deposits decreased to 27% of total deposits at June 30, 2006 from 30% of total deposits at December 31, 2005. Non-interest bearing demand deposits decreased slightly to 30% at June 30, 2006 down from 31% at December 31, 2005. Time deposits decreased to 22% of total deposits as of June 30, 2006 down from 23% as of December 31, 2005. The growth in interest bearing checking deposits relates to the new Money Fund Plu$ checking account introduced in September 2005. This account is intended to pay rates comparable to those available on a typical brokerage account. Since its introduction, there has been significant growth in the total Money Fund Plu$ balances with an increase of $26.1 million in the first six months of 2006 and balances at June 30, 2006 of $47.3 million.

Federal Home Loan Bank advances. FHLB advances were $5 million as of June 30, 2006. There were no outstanding advances at December 31, 2005. During the first six months of 2006 the Company utilized an established line of credit with the Federal Home Loan Bank to meet its short-term liquidity needs.

CAPITAL RESOURCES

Shareholders’ equity as of June 30, 2006 increased $1.7 million, or 5%, to $32.8 million up from $31.1 million as of December 31, 2005. This increase was the result of earnings during the first six months of 2006 of $2.5 million partially offset by dividends paid of $650 thousand and an increase in accumulated other comprehensive losses of $354 thousand. Other changes affecting total shareholders’ equity to a lesser extent during the first six months of 2006 included exercise of stock options and stock based compensation expense.

The Company and the Bank are subject to certain regulatory capital requirements administered by the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (FDIC). Failure to meet these 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 consolidated 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 Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets. Each of these components is defined in the regulations. Management believes that the Company met all its capital adequacy requirements and that the Bank met the requirements to be considered well capitalized under the regulatory framework for prompt corrective action as of June 30, 2006.

The following table presents the Company’s and the Bank’s capital ratios as of June 30, 2006 and December 31, 2005, dollars in thousands:


	June 30, 2006					December 31,2005
	Amount		Ratio			Amount		Ratio
Tier 1 Leverage Ratio

Plumas Bancorp and Subsidiary	$	42,742		9.3	%	$	40,589		8.5	%
Minimum regulatory requirement		18,404		4.0	%		19,013		4.0	%
Plumas Bank		40,726		8.9	%		37,611		7.8	%
Minimum requirement for “Well-Capitalized” institution		22,852		5.0	%		24,060		5.0	%
Minimum regulatory requirement		18,282		4.0	%		19,248		4.0	%

Tier 1 Risk-Based Capital Ratio

Plumas Bancorp and Subsidiary		42,742		10.5	%		40,589		10.3	%
Minimum regulatory requirement		16,321		4.0	%		15,780		4.0	%
Plumas Bank		40,726		10.0	%		37,611		9.6	%
Minimum requirement for “Well-Capitalized” institution		24,446		6.0	%		23,635		6.0	%
Minimum regulatory requirement		16,297		4.0	%		15,757		4.0	%

Total Risk-Based Capital Ratio

Plumas Bancorp and Subsidiary		46,443		11.4	%		43,845		11.1	%
Minimum regulatory requirement		32,643		8.0	%		31,560		8.0	%
Plumas Bank		44,428		10.9	%		40,867		10.4	%
Minimum requirement for “Well-Capitalized” institution		40,744		10.0	%		39,392		10.0	%
Minimum regulatory requirement		32,595		8.0	%		31,514		8.0	%

LIQUIDITY

The Company manages its liquidity to provide the ability to generate funds to support asset growth, meet deposit withdrawals (both anticipated and unanticipated), fund customers’ borrowing needs, satisfy maturity of short-term borrowings and maintain reserve requirements. The Company’s liquidity needs are managed using assets or liabilities, or both. On the asset side the Company maintains cash and due from banks along with an investment portfolio containing U.S. government securities and agency securities that are classified as available-for-sale. On the liability side, liquidity needs are managed by charging competitive offering rates on deposit products and the use of established lines of credit from correspondent financial institutions and the Federal Home Loan Bank.

The Company has unsecured short-term borrowing agreements with two of its correspondent banks in the amounts of $10 million and $5 million. In addition, the Company can borrow up to $90 million from the Federal Home Loan Bank secured by commercial and residential mortgage loans. At June 30, 2006 the Company had outstanding advances from the Federal Home Loan Bank which totaled $5 million. There were no outstanding advances at December 31, 2005.

Customer deposits are the Company’s primary source of funds. Those funds are held in various types of accounts with varying maturities. The Company does not accept brokered deposits. During the first six months of 2006, deposits decreased $9 million, or 2%, from the December 31, 2005 balance of $427 million. The Company has historically experienced a seasonal trend in regards to deposits; whereas the majority of the Company’s annual deposit growth has historically occurred in the late spring, summer and fall months.

The Company’s available-for-sale securities portfolio, cash and due from banks and short-term borrowings from correspondent banks and the Federal Home Loan Bank serve as the primary sources of liquidity, providing adequate funding for loans during periods of high loan demand. During periods of decreased

lending activity, proceeds from the maturity or sale of investment securities, loan payments, and new deposits are invested in short-term earning assets, such as Federal funds sold and investment securities, to serve as a source of funding for future loan growth. Management believes that the Company’s available sources of funds, including short-term borrowings, will provide adequate liquidity for its operations in the foreseeable future.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates and prices such as interest rates, commodity prices and equity prices. As a financial institution, the Company’s market risk arises primarily from interest rate risk exposure. Fluctuation in interest rates will ultimately impact both the level of income and expense recorded on a large portion of the Company’s assets and liabilities, and the market value of all interest earning assets and interest bearing liabilities, dependent upon the stated or estimated maturity date. Since virtually all of the Company’s interest earning assets and all of the Company’s interest bearing liabilities, with the exception of the junior subordinated debentures, are located at the Bank level, virtually all of the Company’s interest rate risk exposure lies at the Bank level. As a result, all significant interest rate risk management procedures are performed at the Bank level. Based upon the nature of its operations, the Bank is not subject to foreign currency exchange or commodity price risk. The Bank’s real estate loan portfolio, concentrated primarily within northeastern California, is subject to risks associated with the local economies.

The fundamental objective of the Bank’s management of its assets and liabilities is to maximize the economic value of the Company while maintaining adequate liquidity and an exposure to interest rate risk deemed by management to be acceptable. Management believes an acceptable degree of exposure to interest rate risk results from the management of assets and liabilities through maturities, pricing and mix to attempt to neutralize the potential impact of changes in market interest rates. The Bank’s profitability is dependent to a large extent upon its net interest income which is the difference between its interest income on interest-earning assets, such as loans and securities, and its interest expense on interest-bearing liabilities, such as deposits and borrowings. The Bank, like other financial institutions, is subject to interest rate risk to the degree that its interest-earning assets reprice differently than its interest-bearing liabilities. The Bank manages its mix of assets and liabilities with the goals of limiting its exposure to interest rate risk, ensuring adequate liquidity, and coordinating its sources and uses of funds.

The Bank seeks to control its interest rate risk exposure in a manner that will allow for adequate levels of earnings and capital over a range of possible interest rate environments. The Bank has adopted formal policies and practices to monitor and manage interest rate risk exposure. As part of this effort, the Bank measures interest rate risk utilizing an internal asset liability management system and employs independent third party reviews to confirm the reasonableness of the assumptions used to measure and report the Bank’s interest rate risk, enabling management to make any adjustments necessary.

Interest rate risk is managed by the Bank’s Asset Liability Committee (“ALCO”), which is comprised of members of senior management. The ALCO monitors interest rate risk by analyzing the potential impact on the net interest income from potential changes in interest rates and considers the impact of alternative strategies or changes in balance sheet structure. The ALCO manages the Bank’s balance sheet in part to maintain the potential impact on net interest income within acceptable ranges despite changes in interest rates. The Bank’s exposure to interest rate risk is reviewed on at least a quarterly basis by ALCO.

In management’s opinion there has not been a material change in the Company’s market risk or interest rate risk profile for the six months ended June 30, 2006 compared to December 31, 2005 as discussed in the Company’s 2005 annual report on Form 10-K.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Company and/or its subsidiaries are a party to claims and legal proceedings arising in the ordinary course of business. In the opinion of the Company’s management, the amount of ultimate liability with respect to such proceedings will not have a material adverse effect on the financial condition or results of operations of the Company taken as a whole.

ITEM 1A RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2005, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.”

ITEM 2. UNREGISTERD SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The voting results of the registrant’s annual meeting of the shareholders held on May 17, 2006 are as follows:

Proposal #1: Election of Directors

On the proposal to elect Directors of Plumas Bancorp, Management’s nominees were elected as Directors of Plumas Bancorp until the 2007 Annual Meeting of Shareholders and until their successors are duly elected and qualified. The voting results were as follows:


			Votes
			Withheld or
	Votes For		Against				Broker
Nominee	Nominee		Nominee		Abstentions		Non-Votes
Douglas N. Biddle		3,933,993		0		1,722		0
Alvin G. Blickenstaff		3,934,668		0		1,047		0
William E. Elliott		3,934,668		0		1,047		0
Gerald W. Fletcher		3,934,668		0		1,047		0
John Flournoy		3,934,668		0		1,047		0
Arthur C. Grohs		3,934,668		0		1,047		0
Jerry V. Kehr		3,934,668		0		1,047		0
Christine McArthur		3,934,668		0		1,047		0
Terrance J. Reeson		3,931,319		0		4,396		0
Thomas Watson		3,934,668		0		1,047		0
Daniel E. West		3,934,668		0		1,047		0

Proposal #2: Amendment and Restatement of the 2001 Stock Option Plan

On the proposal to amend and restate the Plumas Bank 2001 stock option plan to allow restricted stock awards to employees and make other changes. The voting results were as follows:

Votes

Withheld or

Votes For

Against

Broker

Proposal

Amendment

Abstentions

Non-Votes

Amendment and restatement of 2001 Stock Option Plan

1,783,873

119,442

79,899

1,952,501

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following documents are included or incorporated by reference in this Quarterly Report on Form 10Q:


3.1		Articles of Incorporation as amended of Registrant included as exhibit 3.1 to the Registrant’s Form S-4, File No. 333-84534, which is incorporated by reference herein.

3.2		Bylaws of Registrant included as exhibit 3.2 to the Registrant’s Form S-4, File No. 333-84534, which is incorporated by reference herein.

3.3		Amendment of the Articles of Incorporation of Registrant dated November 1, 2002.

3.4		Amendment of the Articles of Incorporation of Registrant dated August 17, 2005.

4		Specimen form of certificate for Plumas Bancorp included as exhibit 4 to the Registrant’s Form S-4, File No. 333-84534, which is incorporated by reference herein.

10.1		Executive Salary Continuation Agreement of Andrew J. Ryback dated August 23, 2005, is included as Exhibit 10.1 to the Registrant’s 8-K filed on October 17, 2005, which is incorporated by this reference herein.

10.2		Split Dollar Agreement of Andrew J. Ryback dated August 23, 2005, is included as Exhibit 10.2 to the Registrant’s 8-K filed on October 17, 2005, which is incorporated by this reference herein.

10.3		Executive Salary Continuation Agreement as amended of William E. Elliott dated October 13, 1993, is included as Exhibit 10.3 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.4		Split Dollar Agreements of William E. Elliott dated January 23, 2002, is included as Exhibit 10.4 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.5		Employment Agreement of Douglas N. Biddle dated January 1, 2006 is included as Exhibit 10.5 to the Registrant’s 8-K filed on March 15, 2006, which is incorporated by this reference herein.

10.6		Executive Salary Continuation Agreement as amended of Douglas N. Biddle dated June 2, 1994, is included as Exhibit 10.6 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.


10.7		Split Dollar Agreements of Douglas N. Biddle dated January 24, 2002, is included as Exhibit 10.7 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.9		Executive Salary Continuation Agreement as amended of Dennis C. Irvine dated June 2, 1994, is included as Exhibit 10.9 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.10		Split Dollar Agreements of Dennis C. Irvine dated January 24, 2002, is included as Exhibit 10.10 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.11		First Amendment to Executive Salary Continuation Agreement of Robert T. Herr dated September 15, 2004, is included as Exhibit 10.11 to the Registrant’s 8-K filed on September 17, 2004, which is incorporated by this reference herein.

10.13		Deferred Fee Agreement as amended of Jerry V. Kehr dated August 19, 1998, is included as Exhibit 10.13 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.14		Amended and Restated Director Retirement Agreement of Jerry V. Kehr dated April 28, 2000, is included as Exhibit 10.14 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.15		Consulting Agreement of Jerry V. Kehr dated May 10, 2000, is included as Exhibit 10.15 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.16		Deferred Fee Agreement of Jerry V. Kehr dated December 21, 2005 is included as Exhibit 10.16 to the Registrant’s 8-K filed on March 15, 2006, which is incorporated by this reference herein.

10.18		Amended and Restated Director Retirement Agreement of Daniel E. West dated May 10, 2000, is included as Exhibit 10.18 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.19		Consulting Agreement of Daniel E. West dated May 10, 2000, is included as Exhibit 10.19 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.20		Split Dollar Agreements of Robert T. Herr dated September 15, 2004, is included as Exhibit 10.20 to the Registrant’s 8-K filed on September 17, 2004, which is incorporated by this reference herein.

10.21		Amended and Restated Director Retirement Agreement of Alvin G. Blickenstaff dated April 19, 2000, is included as Exhibit 10.21 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.22		Consulting Agreement of Alvin G. Blickenstaff dated May 8, 2000, is included as Exhibit 10.22 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.24		Amended and Restated Director Retirement Agreement of Gerald W. Fletcher dated May 10, 2000, is included as Exhibit 10.24 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.25		Consulting Agreement of Gerald W. Fletcher dated May 10, 2000, is included as Exhibit 10.25 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.27		Amended and Restated Director Retirement Agreement of Arthur C. Grohs dated May 9, 2000, is included as Exhibit 10.27 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.


10.28		Consulting Agreement of Arthur C. Grohs dated May 9, 2000, is included as Exhibit 10.28 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.30		Amended and Restated Director Retirement Agreement of Christine McArthur dated May 12, 2000, is included as Exhibit 10.30 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.31		Consulting Agreement of Christine McArthur dated May 12, 2000, is included as Exhibit 10.31 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.33		Amended and Restated Director Retirement Agreement of Terrance J. Reeson dated April 19, 2000, is included as Exhibit 10.33 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.34		Consulting Agreement of Terrance J. Reeson dated May 10, 2000, is included as Exhibit 10.34 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.39		Deferred Fee Agreement of Thomas Watson dated March 3, 2001, is included as Exhibit 10.39 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.40		Form of Indemnification Agreement, is included as Exhibit 10.41 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.41		2001 Stock Option Plan as amended is included as exhibit 99.1 of the Form S-8 filed July 23, 2002, File No. 333-96957.

10.42		1991 Stock Option Plan on Form S-8 filed August 19, 2002, File No. 333-98319.

10.43		Plumas Bank 401(k) Profit Sharing Plan as amended is included as exhibit 99.1 of the Form S-8 filed February 14, 2003, File No. 333-103229.

10.44		Executive Salary Continuation Agreement of Robert T. Herr dated June 4, 2002, is included as Exhibit 10.44 to the Registrant’s 10-Q for March 31, 2003, which is incorporated by this reference herein.

10.46		1991 Stock Option Plan as amended is included as Exhibit 10.46 to the Registrant’s 10-Q for September 30, 2004, which is incorporated by this reference herein.

10.47		Specimen form of Incentive Stock Option Agreement under the 1991 Stock Option Plan is included as Exhibit 10.47 to the Registrant’s 10-Q for September 30, 2004, which is incorporated by this reference herein.

10.48		Specimen form of Non-Qualified Stock Option Agreement under the 1991 Stock Option Plan is included as Exhibit 10.48 to the Registrant’s 10-Q for September 30, 2004, which is incorporated by this reference herein.

10.59		Director Retirement Agreement of Thomas Watson dated May 1, 2003, is included as Exhibit 10.59 to the Registrant’s 10-Q for June 30, 2003, which is incorporated by this reference herein.

10.60		Consulting Agreement of Thomas Watson dated May 1, 2003, is included as Exhibit 10.60 to the Registrant’s 10-Q for June 30, 2003, which is incorporated by this reference herein.

10.62		Deferred Fee Agreement of Thomas Watson dated December 23, 2004, is included as Exhibit 10.62 to the Registrant’s 8-K filed on January 6, 2005, which is incorporated by this reference herein.


10.63		Deferred Fee Agreement of Jerry V. Kehr dated December 24, 2004, is included as Exhibit 10.63 to the Registrant’s 8-K filed on January 6, 2005, which is incorporated by this reference herein.

11		Computation of per share earnings appears in the attached 10-Q under Plumas Bancorp and Subsidiary Notes to Consolidated Financial Statements as Footnote 5 – Earnings Per Share Computation.

31.1		Rule 13a-14(a) [Section 302] Certification of Principal Financial Officer dated August 9, 2006

31.2		Rule 13a-14(a) [Section 302] Certification of Principal Executive Officer dated August 9, 2006.

32.1		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated August 9, 2006.

32.2		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated August 9, 2006.

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.

PLUMAS BANCORP
(Registrant)

Date: August 9, 2006



	/s/ Andrew J. Ryback
	Andrew J. Ryback
	Executive Vice President Chief Financial Officer


	/s/ Douglas N. Biddle
	Douglas N. Biddle
	President and Chief Executive Officer

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