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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

(Mark One)

 

☒

QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
March 31, 2022

 

 

☐

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.)

 

 

5525 Kietzke Lane, Suite 100, Reno, Nevada

89511

(Address of Principal Executive Offices)

(Zip Code)

 

 

Registrant’s Telephone Number, Including Area Code (775) 786-0907

 

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

 

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

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act:

 

Large Accelerated Filer ☐    Accelerated Filer ☐     Non-Accelerated Filer ☐     Smaller Reporting Company ☒    Emerging Growth Company ☐

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐  No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class:

Trading Symbol

Name of Each Exchange on which Registered:

Common Stock, no par value

PLBC

The NASDAQ Stock Market LLC

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of May 2, 2022. 5,842,966 shares.

 

 
 

 

 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

PLUMAS BANCORP AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share data)

 

  

March 31,

  

December 31,

 
  

2022

  

2021

 
         

Assets

        

Cash and cash equivalents

 $389,023  $380,584 

Investment securities available for sale

  316,188   305,914 

Loans held for sale

  13,953   31,277 

Loans, less allowance for loan losses of $10,402 at March 31, 2022 and $10,352 at December 31, 2021

  830,176   829,385 

Real estate acquired through foreclosure

  487   487 

Premises and equipment, net

  18,220   16,424 

Bank owned life insurance

  15,938   15,844 

Goodwill

  5,502   5,502 

Accrued interest receivable and other assets

  32,745   28,657 

Total assets

 $1,622,232  $1,614,074 
         

Liabilities and Shareholders’ Equity

        
         

Deposits:

        

Non-interest bearing

 $752,246  $736,582 

Interest bearing

  715,412   702,417 

Total deposits

  1,467,658   1,438,999 

Repurchase agreements

  9,858   17,283 

Accrued interest payable and other liabilities

  11,333   13,400 

Junior subordinated deferrable interest debentures

  10,310   10,310 

Total liabilities

  1,499,159   1,479,992 
         

Commitments and contingencies (Note 5)

          
         

Shareholders’ equity:

        

Common stock, no par value; 22,500,000 shares authorized; issued and outstanding – 5,836,766 shares at March 31, 2022 and 5,816,991 at December 31, 2021

  26,990   26,801 

Retained earnings

  110,467   105,681 

Accumulated other comprehensive (loss) income, net

  (14,384)  1,600 

Total shareholders’ equity

  123,073   134,082 

Total liabilities and shareholders’ equity

 $1,622,232  $1,614,074 

 

See notes to unaudited condensed consolidated financial statements.

 

 

1
 
 

 

PLUMAS BANCORP AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)

 

   

For the Three Months Ended

  
   

March 31,

  
   

2022

    

2021

  

Interest Income:

                

Interest and fees on loans

   $ 10,616     $ 9,781  

Interest on investment securities

     1,531       901  

Other

     168       52  

Total interest income

     12,315       10,734  

Interest Expense:

                

Interest on deposits

     194       174  

Interest on junior subordinated deferrable interest debentures

     88       79  

Other

     18       2  

Total interest expense

     300       255  

Net interest income before provision for loan losses

     12,015       10,479  

Provision for Loan Losses

     300       375  

Net interest income after provision for loan losses

     11,715       10,104  

Non-Interest Income:

                

Gain on sale of loans

     1,701       591  

Interchange revenue

     762       715  

Service charges

     566       540  

Other

     621       504  

Total non-interest income

     3,650       2,350  

Non-Interest Expenses:

                

Salaries and employee benefits

     4,082       3,524  

Occupancy and equipment

     1,137       890  

Other

     2,454       1,878  

Total non-interest expenses

     7,673       6,292  

Income before provision for income taxes

     7,692       6,162  

Provision for Income Taxes

     1,974       1,721  

Net income

   $ 5,718     $ 4,441  
                 

Basic earnings per share

   $ 0.98     $ 0.86  

Diluted earnings per share

   $ 0.97     $ 0.85  

 

See notes to unaudited condensed consolidated financial statements.

 

2
 
 

 

PLUMAS BANCORP AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

 

   

For the Three Months Ended

  
   

March 31,

  
   

2022

    

2021

  
                 

Net income

   $ 5,718     $ 4,441  

Other comprehensive income:

                

Change in net unrealized gain on securities

     (23,349 )     (3,584 )

Change in unrealized gain on cash flow hedge

     656       667  

Net unrealized holding loss

     (22,693 )     (2,917 )

Related tax effect:

                

Change in net unrealized gain on securities

     6,902       1,060  

Change in unrealized gain on cash flow hedge

     (193 )     (198 )

Income tax effect

     6,709       862  

Other comprehensive loss

     (15,984 )     (2,055 )

Total comprehensive (loss) income

   $ (10,266 )   $ 2,386  

 

See notes to unaudited condensed consolidated financial statements.

 

3
 
 

 

PLUMAS BANCORP AND SUBSIDIARY 

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY 

(in thousands, except shares)

 

   

Common Stock

    

Retained

    

Accumulated Other Comprehensive Income (loss)

    

Total Shareholders’

  
   

Shares

    

Amount

    

Earnings

    

(Net of Taxes)

    

Equity

  
                                         

Balance, December 31, 2020

     5,182,232     $ 7,656     $ 87,753     $ 4,745     $ 100,154  

Net Income

                   4,441             4,441  

Other comprehensive loss

                         (2,055 )     (2,055 )

Cash dividends on common stock

                   (726 )           (726 )

Exercise of stock options and tax effect

     14,500       142                   142  

Stock-based compensation expense

             60                   60  

Balance, March 31, 2021

     5,196,732     $ 7,858     $ 91,468     $ 2,690     $ 102,016  
                                         

Balance, December 31, 2021

     5,816,991     $ 26,801     $ 105,681     $ 1,600     $ 134,082  

Net Income

                   5,718             5,718  

Other comprehensive loss

                         (15,984 )     (15,984 )

Cash dividends on common stock

                   (932 )           (932 )

Exercise of stock options and tax effect

     19,775       131                   131  

Stock-based compensation expense

             58                   58  

Balance, March 31, 2022

     5,836,766     $ 26,990     $ 110,467     $ (14,384 )   $ 123,073  

 

See notes to unaudited condensed consolidated financial statements.  

  

 

4
 
 

 

PLUMAS BANCORP AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

   

For the Three Months Ended

  
   

March 31,

  
   

2022

    

2021

  

Cash Flows from Operating Activities:

                

Net income

   $ 5,718     $ 4,441  

Adjustments to reconcile net income to net cash provided by operating activities:

                

Provision for loan losses

     300       375  

Change in deferred loan origination costs/fees, net

     (1,064 )     1,343  

Depreciation and amortization

     458       376  

Stock-based compensation expense

     58       60  

Amortization of investment security premiums

     260       261  

Loss on sale of other vehicles

     27       3  

Gain on sale of loans held for sale

     (1,701 )     (591 )

Loans originated for sale

     (9,182 )     (8,018 )

Proceeds from loan sales

     26,618       8,254  

Earnings on bank-owned life insurance

     (93 )     (90 )

Decrease in accrued interest receivable and other assets

     3,524       1,052  

(Decrease) increase in accrued interest payable and other liabilities

     (2,066 )     1,126  

Net cash provided by operating activities

     22,857       8,592  
                 

Cash Flows from Investing Activities:

                

Proceeds from principal repayments from available-for-sale mortgage-backed securities

     7,780       11,656  

Proceeds from matured and called available-for-sale securities

     255       250  

Purchases of available-for-sale securities

     (41,897 )     (40,776 )

Purchase of FRB stock

     (2 )     (2 )

Net decrease (increase) in loans

     1,021       (23,342 )

Proceeds from sale of other vehicles

     126       58  

Purchase of premises and equipment

     (2,133 )     (55 )

Net cash used in investing activities

     (34,850 )     (52,211 )

 

Continued on next page.

 

5
 

 

PLUMAS BANCORP AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

(Continued)

 

   

For the Three Months Ended

  
   

March 31,

  
   

2022

    

2021

  

Cash Flows from Financing Activities:

                

Net increase in demand, interest bearing and savings deposits

   $ 29,210     $ 95,175  

Net (decrease) increase in time deposits

     (552 )     69  

Net decrease in securities sold under agreements to repurchase

     (7,425 )     (2,327 )

Cash dividends paid on common stock

     (932 )     (726 )

Proceeds from exercise of stock options

     131       142  

Net cash provided by financing activities

     20,432       92,333  

Increase in cash and cash equivalents

     8,439       48,714  

Cash and Cash Equivalents at Beginning of Year

     380,584       184,909  

Cash and Cash Equivalents at End of Period

   $ 389,023     $ 233,623  
                 

Supplemental Disclosure of Cash Flow Information:

                

Cash paid during the period for:

                

Interest expense

   $ 299     $ 269  

Income taxes

   $ 10     $ -  
                 

Non-Cash Investing Activities:

                

Real estate and vehicles acquired through foreclosure

   $ 129     $ 224  
                 

Non-Cash Financing Activities:

                

Common stock retired in connection with the exercise of stock options

   $ 84     $ -  

 

See notes to unaudited condensed consolidated financial statements.  

 

6
 

 

PLUMAS BANCORP AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

1. THE BUSINESS OF PLUMAS BANCORP

 

During 2002, Plumas Bancorp (the "Company") was incorporated as a bank holding company for the purpose of acquiring Plumas Bank (the "Bank") in a one bank holding company reorganization. This corporate structure gives the Company and the Bank greater flexibility in terms of operation, expansion and diversification. The Company formed Plumas Statutory Trust I ("Trust I") for the sole purpose of issuing trust preferred securities on September 26, 2002. The Company formed Plumas Statutory Trust II ("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, Portola, Quincy, Redding, Susanville, Tahoe City,  Truckee and Yuba City. The Bank's Yuba City branch was acquired upon the acquisition of Feather River Bancorp on July 1, 2021. The Bank’s administrative headquarters are in Quincy, California. In December 2015 the Bank opened a branch in Reno, Nevada, its first branch outside of California, and in 2018 the Bank purchased a branch located in Carson City, Nevada. In addition, the Bank operates a lending office specializing in government-guaranteed lending in Auburn, California, and commercial/agricultural lending offices in Chico, California and Klamath Falls, Oregon. 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. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Consolidation and Basis of Presentation

 

The consolidated financial statements include the accounts of the Company and the consolidated accounts of its wholly-owned subsidiary, Plumas Bank. All significant intercompany balances and transactions have been eliminated.

 

Plumas Statutory Trust I and Trust II are not consolidated into the Company's consolidated financial statements and, accordingly, are accounted for under the equity method. The Company's investment in Trust I of $366,000 and Trust II of $184,000 are included in accrued interest receivable and other assets on the consolidated balance sheet. The junior subordinated deferrable interest debentures issued and guaranteed by the Company and held by Trust I and Trust II are reflected as debt on the consolidated balance sheet.

 

The accounting and reporting policies of Plumas Bancorp and subsidiary conform with accounting principles generally accepted in the United States of America and prevailing practices within the banking industry. 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  March 31, 2022 and the results of its operations and its cash flows for the three- month period ended March 31, 2022 and 2021. Our condensed consolidated balance sheet at  December 31, 2021 is derived from audited financial statements.

 

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 annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) 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 2021 Annual Report to Shareholders on Form 10-K. The results of operations for the three-month period ended March 31, 2022 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.

 

7
 
 

Segment Information

 

Management has determined that since all of the 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 customer accounts for more than 10 percent of revenues for the Company or the Bank.

 

Revenue from Contracts with Customers

 

The Company records revenue from contracts with customers in accordance with Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“Topic 606”). Under Topic 606, the Company must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) the Company satisfies a performance obligation. Significant revenue has not been recognized in the current reporting period that results from performance obligations satisfied in previous periods.

 

Most of the Company’s revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as the Company’s loans and investment securities. The Company has evaluated the nature of its contracts with customers and determined that further disaggregation of revenue from contracts with customers into more granular categories beyond what is presented in the Condensed Consolidated Statements of Income was not necessary. The Company generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed, charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers.

 

Loans Held for Sale

 

Included in the loan portfolio are loans which are 75% to 90% guaranteed by the Small Business Administration (SBA), US Department of Agriculture Rural Business-Cooperative Service (RBS) and Farm Service Agency (FSA). The guaranteed portion of these loans may be sold to a third party, with the Bank retaining the unguaranteed portion. The Company can receive a premium in excess of the adjusted carrying value of the loan at the time of sale.

 

As of  March 31, 2022 and December 31, 2021 the Company had $14.0 million and $31.3 million, respectively in SBA government guaranteed loans held for sale. Loans held for sale are recorded at the lower of cost or fair value and therefore may be reported at fair value on a non-recurring basis. The fair values for loans held for sale are based on either observable transactions of similar instruments or formally committed loan sale prices.

 

Goodwill and Other Intangible Assets

 

Goodwill arises from business combinations and is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill acquired in a purchase business combination and determined to have an indefinite useful life is not amortized, but is tested for impairment at least annually or more frequently if events and circumstances exists that indicate that a goodwill impairment test should be performed.  Core deposit intangible represents estimated future benefit of deposits related to an acquisition and is booked separately from the related deposits and is evaluated periodically for impairment. The core deposit intangible asset is amortized on an accelerated method over its estimated useful life of ten years.

 

Pending Accounting Pronouncements

 

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held-to- maturity securities, loan commitments, and financial guarantees. The CECL model does not apply to available-for-sale (“AFS”) debt securities. For AFS debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU No. 2016- 13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. On October 16, 2019, the FASB approved a proposal to change the effective date of ASU No. 2016-13 for smaller reporting companies, as defined by the SEC, and other non-SEC reporting entities, delaying the effective date to fiscal years beginning after December 31, 2022, including interim periods within those fiscal periods. As the Company is a smaller reporting company and has not adopted provisions of the standard early, the delay is applicable to the Company. The Company has begun its implementation efforts by establishing an implementation team chaired by the Company’s Chief Credit Officer and composed of members of the Company’s credit administration and accounting departments. We have purchased software to support the CECL calculation of the allowance for loan losses under ASU No. 2016-13. During the second quarter of 2021 we engaged a consultant to perform a model validation of our CECL model and to assist us in documenting all aspects of the CECL model. The Company’s preliminary evaluation indicates the provisions of ASU No. 2016-13 are expected to impact the Company’s Consolidated Financial Statements, in particular the level of the reserve for credit losses. However, the Company continues to evaluate the extent of the potential impact.

 

8
 
 
 

3.   INVESTMENT SECURITIES AVAILABLE FOR SALE

 

The amortized cost and estimated fair value of investment securities at March 31, 2022 and December 31, 2021 consisted of the following, in thousands:

 

Available-for-Sale

 

March 31, 2022

 
      

Gross

  

Gross

     
  

Amortized

  

Unrealized

  

Unrealized

  

Fair

 
  

Cost

  

Gains

  

Losses

  

Value

 

Debt securities:

                

U.S. Government-sponsored agencies collateralized by mortgage obligations - residential

 $172,591  $241  $(9,244) $163,588 

U.S. Government-agencies collateralized by mortgage obligations - commercial

  63,385   -   (4,506)  58,879 

Obligations of states and political subdivisions

  101,895   370   (8,544)  93,721 
  $337,871  $611  $(22,294) $316,188 

 

Unrealized losses on available-for-sale investment securities totaling $21,683,000 were recorded, net of $6,409,000 in tax benefit, as accumulated other comprehensive loss within shareholders' equity at March 31, 2022.  No securities were sold during the three months ended March 31, 2022.

 

Available-for-Sale

 

December 31, 2021

 
      

Gross

  

Gross

     
  

Amortized

  

Unrealized

  

Unrealized

  

Fair

 
  

Cost

  

Gains

  

Losses

  

Value

 

Debt securities:

                

U.S. Government-sponsored agencies collateralized by mortgage obligations - residential

 $150,646  $1,636  $(1,248) $151,034 

U.S. Government-agencies collateralized by mortgage obligations - commercial

  58,282   11   (1,068)  57,225 

Obligations of states and political subdivisions

  95,320   2,592   (257)  97,655 
  $304,248  $4,239  $(2,573) $305,914 

 

Unrealized gains on available-for-sale investment securities totaling $1,666,000 were recorded, net of $493,000 in tax expense, as accumulated other comprehensive income within shareholders' equity at December 31, 2021. No securities were sold during the three months ended March 31, 2021.

 

There were no transfers of available-for-sale investment securities during the three months ended March 31, 2022 and twelve months ended December 31, 2021. There were no securities classified as held-to-maturity at March 31, 2022 or December 31, 2021.

 

9
 
 

Investment securities with unrealized losses at March 31, 2022 and December 31, 2021 are summarized and classified according to the duration of the loss period as follows, in thousands:

 

March 31, 2022

 

Less than 12 Months

  

12 Months or More

  

Total

 
  

Fair

  

Unrealized

  

Fair

  

Unrealized

  

Fair

  

Unrealized

 
  

Value

  

Losses

  

Value

  

Losses

  

Value

  

Losses

 

Debt securities:

                        

U.S. Government-sponsored agencies collateralized by mortgage obligations - residential

 $131,022  $7,894  $10,918  $1,350  $141,940  $9,244 

U.S. Government-agencies collateralized by mortgage obligations - commercial

  50,097   3,520   8,783   986   58,880   4,506 

Obligations of states and political subdivisions

  66,517   7,899   2,410   645   68,927   8,544 
  $247,636  $19,313  $22,111  $2,981  $269,747  $22,294 

 

December 31, 2021

 

Less than 12 Months

  

12 Months or More

  

Total

 
  

Fair

  

Unrealized

  

Fair

  

Unrealized

  

Fair

  

Unrealized

 
  

Value

  

Losses

  

Value

  

Losses

  

Value

  

Losses

 

Debt securities:

                        

U.S. Government-sponsored agencies collateralized by mortgage obligations -residential

 $70,742  $1,076  $2,324  $172  $73,066  $1,248 

U.S. Government-agencies collateralized by mortgage obligations - commercial

  54,214   1,068   -   -   54,214   1,068 

Obligations of states and political subdivisions

  22,434   241   515   16   22,949   257 
  $147,390  $2,385  $2,839  $188  $150,229  $2,573 

 

At March 31, 2022, the Company held 313 securities of which 212 were in a loss position for less than twelve months and 15 were in a loss position for  twelve months or more. Of the 313 securities 96 are U.S. Government-sponsored agencies collateralized by residential mortgage obligations, 23 were U.S. Government agencies collateralized by commercial mortgage obligations and 194 were obligations of states and political subdivisions. The unrealized losses relate principally to market rate conditions. All of the securities continue to pay as scheduled. When analyzing an issuer’s financial condition, management considers the length of time and extent to which the market value has been less than cost; the historical and implied volatility of the security; the financial condition of the issuer of the security; and the Company’s intent and ability to hold the security to recovery. As of March 31, 2022, management does not have the intent to sell these securities, nor does it believe it is more likely than not that it will be required to sell these securities before the recovery of its amortized cost basis. Based on the Company’s evaluation of the above and other relevant factors, the Company does not believe the securities that are in an unrealized loss position as of March 31, 2022 are other than temporarily impaired.

 

The amortized cost and estimated fair value of investment in debt securities at March 31, 2022 by contractual maturity are shown below, in thousands.

 

  

Amortized Cost

  

Estimated Fair Value

 

Within one year

 $947  $952 

After one year through five years

  3,963   3,985 

After five years through ten years

  10,591   10,614 

After ten years

  86,394   78,170 

Investment securities not due at a single maturity date:

        

Government- agencies commercial mortgage-backed securities

  63,385   58,879 

Government-sponsored agencies residential mortgage-backed securities

  172,591   163,588 
  $337,871  $316,188 

 

Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

 

Investment securities with amortized costs totaling $149,938,000 and $134,749,000 and estimated fair values totaling $140,921,000 and $134,791,000 at March 31, 2022 and December 31, 2021, respectively, were pledged to secure deposits and repurchase agreements. 

  

10
 
 
 

4. LOANS AND THE ALLOWANCE FOR LOAN LOSSES

 

Outstanding loans are summarized below, in thousands:

 

  

March 31,

  

December 31,

 
  

2022

  

2021

 
         

Commercial

 $96,787  $99,804 

Agricultural

  123,416   126,456 

Real estate – residential

  15,637   15,837 

Real estate – commercial

  423,511   418,609 

Real estate – construction and land development

  55,668   51,526 

Equity lines of credit

  32,602   32,793 

Auto

  86,768   89,046 

Other

  4,297   4,516 

Total loans

  838,686   838,587 

Deferred loan costs, net

  1,892   1,150 

Allowance for loan losses

  (10,402)  (10,352)

Total net loans

 $830,176  $829,385 

 

Changes in the allowance for loan losses, in thousands, were as follows:

 

  

March 31,

  

December 31,

 
  

2022

  

2021

 
         

Balance, beginning of period

 $10,352  $9,902 

Provision charged to operations

  300   1,125 

Losses charged to allowance

  (373)  (938)

Recoveries

  123   263 

Balance, end of period

 $10,402  $10,352 

 

The recorded investment in impaired loans totaled $4,674,000 and $4,857,000 at March 31, 2022 and December 31, 2021, respectively. The Company had specific allowances for loan losses of $23,000 on impaired loans of $171,000 at March 31, 2022 as compared to specific allowances for loan losses of $28,000 on impaired loans of $273,000 at December 31, 2021. The balance of impaired loans in which no specific reserves were required totaled $4,503,000 and $4,584,000 at March 31, 2022 and December 31, 2021, respectively. The average recorded investment in impaired loans for the three months ended March 31, 2022 and March 31, 2021 was $4,632,000 and $1,828,000, respectively. The Company recognized  $15,000 in interest income for impaired loans during the three months ended March 31, 2022 and 2021. No interest was recognized on nonaccrual loans accounted on a cash basis during the three months ended March 31, 2022 and 2021.

 

Included in impaired loans are troubled debt restructurings. The Company evaluates loan extensions or modifications in accordance with FASB ASC 340-10 with respect to the classification of the loan as a TDR. Under ASC 340-10, if the Company grants a loan extension or modification to a borrower experiencing financial difficulties for other than an insignificant period of time that includes a below–market interest rate, principal forgiveness, payment forbearance or other concession intended to minimize the economic loss to the Company, the loan extension or loan modification is classified as a TDR. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal then due and payable, management measures any impairment on the restructured loan in the same manner as for impaired loans as noted above. To determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

 

The carrying value of troubled debt restructurings at March 31, 2022 and December 31, 2021 was $891,000 and $897,000, respectively. The Company has allocated  $23,000 and $28,000 of specific reserves on loans to customers whose loan terms have been modified in troubled debt restructurings as of March 31, 2022 and December 31, 2021. The Company has not committed to lend additional amounts on loans classified as troubled debt restructurings at March 31, 2022 and December 31, 2021.

  

There were no troubled debt restructurings that occurred during the three months ending March 31, 2022 or March 31, 2021. There were no troubled debt restructurings for which there was a payment default within twelve months following the modification during the three months ended March 31, 2022 and 2021, respectively.

 

11
 
 

At March 31, 2022 and December 31, 2021, nonaccrual loans totaled $4,733,000 and $4,863,000, respectively.  Interest foregone on nonaccrual loans totaled $69,000 and $75,000 for the three months ended March 31, 2022 and 2021, respectively. There were no loans past due 90 days or more and on accrual status at March 31, 2022 and December 31, 2021.

 

Salaries and employee benefits totaling $1,062,000 and $707,000 have been deferred as loan origination costs during the three months ended March 31, 2022 and 2021, respectively. 

 

The Company assigns a risk rating to all loans and periodically, but not less than annually, performs detailed reviews of all criticized and classified loans over $100,000 to identify credit risks and to assess the overall collectability of the portfolio. These risk ratings are also subject to examination by independent specialists engaged by the Company and the Company’s regulators. During these internal reviews, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which borrowers operate and the fair values of collateral securing these loans. These credit quality indicators are used to assign a risk rating to each individual loan.

 

The risk ratings can be grouped into three major categories, defined as follows:

 

Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

 

Substandard – A substandard loan is not adequately protected by the current sound worth and paying capacity of the borrower or the value of the collateral pledged, if any. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Well defined weaknesses include a project's lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time or the project's failure to fulfill economic expectations. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

 

Doubtful – Loans classified doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.

 

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.

 

Purchased Credit Impaired Loans (PCI):

 

Upon the acquisition of Feather River Bancorp the Company acquired loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.  The carrying amount of those loans at March 31, 2022 and December 31, 2021 was $404,000 and $496,000, respectively.  The carrying amount at March 31, 2022 reflects an outstanding balance of $425,000 net of an unaccretable discount of $21,000. The carrying amount at December 31, 2021 reflects an outstanding  balance of  $517,000 net of an unaccretable discount of $21,000.    

 

Accretable yield, or income expected to be collected, is as follows:           .

 

(in thousands)

    

Balance at December 31, 2021

 $28 

Additions

  - 

Removals1

  - 

Accretion

  (2)

Balance at March 31, 2022

 $26 

 

1 Represents the accretable difference that is relieved when a loan exits the PCI population due to payoff, full charge-off, or transfer to repossessed assets, etc.

 

12
 
 

The following table shows the loan portfolio allocated by management's internal risk ratings at the dates indicated, in thousands:

 

March 31, 2022

 

Commercial Credit Exposure

 
  

Credit Risk Profile by Internally Assigned Grade

 

Grade:

 

Commercial

  

Agricultural

  

Real Estate-Residential

  

Real Estate-Commercial

  

Real Estate-Construction

  

Equity LOC

  

Total

 

Pass

 $92,583  $121,963  $15,402  $419,203  $55,598  $32,060  $736,809 

Special Mention

  4,092   1,028   -   59   -   -   5,179 

Substandard

  112   425   235   4,249   70   542   5,633 

Doubtful

  -   -   -   -   -   -   - 

Total

 $96,787  $123,416  $15,637  $423,511  $55,668  $32,602  $747,621 

 

 

December 31, 2021

 

Commercial Credit Exposure

 
  

Credit Risk Profile by Internally Assigned Grade

 

Grade:

 

Commercial

  

Agricultural

  

Real Estate-Residential

  

Real Estate-Commercial

  

Real Estate-Construction

  

Equity LOC

  

Total

 

Pass

 $96,052  $124,866  $15,594  $414,175  $51,455  $32,349  $734,491 

Special Mention

  3,721   1,072   150   62   -   -   5,005 

Substandard

  31   518   93   4,372   71   444   5,529 

Doubtful

  -   -   -   -   -   -   - 

Total

 $99,804  $126,456  $15,837  $418,609  $51,526  $32,793  $745,025 

 

 

  

Consumer Credit Exposure

  

Consumer Credit Exposure

 
  

Credit Risk Profile Based on Payment Activity

  

Credit Risk Profile Based on Payment Activity

 
  

March 31, 2022

  

December 31, 2021

 
  

Auto

  

Other

  

Total

  

Auto

  

Other

  

Total

 

Grade:

                        

Performing

 $86,271  $4,283  $90,554  $88,525  $4,492  $93,017 

Non-performing

  497   14   511   521   24   545 

Total

 $86,768  $4,297  $91,065  $89,046  $4,516  $93,562 

 

13
 
 

The following tables show the allocation of the allowance for loan losses at the dates indicated, in thousands:

 

Three Months Ended March 31, 2022:

 

Commercial

  

Agricultural

  

Real Estate-Residential

  

Real Estate-Commercial

  

Real Estate-Construction

  

Equity LOC

  

Auto

  

Other

  

Total

 

Allowance for Loan Losses

                                    

Beginning balance

 $1,074  $791  $168  $4,549  $1,325  $426  $1,911  $108  $10,352 

Charge-offs

  0   -   -   (19)  -   -   (335)  (19)  (373)

Recoveries

  6   -   0   0   -   0   114   3   123 

Provision

  (187)  156   (36)  (208)  220   128   190   37   300 

Ending balance

 $893  $947  $132  $4,322  $1,545  $554  $1,880  $129  $10,402 

Three Months Ended March 31, 2021:

                                    

Allowance for Loan Losses

                                    

Beginning balance

 $950  $757  $164  $5,089  $554  $499  $1,768  $121  $9,902 

Charge-offs

  (154)  -   -   -   -   -   (218)  (20)  (392)

Recoveries

  42   -   1   3   -   1   19   11   77 

Provision

  (61)  (59)  4   40   103   (16)  359   5   375 

Ending balance

 $777  $698  $169  $5,132  $657  $484  $1,928  $117  $9,962 

March 31, 2022:

                                    

Allowance for Loan Losses

                                    

Ending balance: individually evaluated for impairment

 $-  $-  $23  $-  $-  $-  $-  $-  $23 

Ending balance: collectively evaluated for impairment

  893   947   109   4,322   1,545   554   1,880   129   10,379 

Ending balance

 $893  $947  $132  $4,322  $1,545  $554  $1,880  $129  $10,402 

Loans

                                    

Ending balance: individually evaluated for impairment

 $-  $237  $699  $3,276  $100  $362  $-  $-  $4,674 

Ending balance: collectively evaluated for impairment

  96,787   123,179   14,938   420,235   55,568   32,240   86,768   4,297   834,012 

Ending balance

 $96,787  $123,416  $15,637  $423,511  $55,668  $32,602  $86,768  $4,297  $838,686 

 

14
 
 

December 31, 2021:

 

Commercial

  

Agricultural

  

Real Estate-Residential

  

Real Estate-Commercial

  

Real Estate-Construction

  

Equity LOC

  

Auto

  

Other

  

Total

 

Allowance for Loan Losses

                                    

Ending balance: individually evaluated for impairment

 $-  $-  $23  $-  $5  $-  $-  $-  $28 

Ending balance: collectively evaluated for impairment

  1,074   791   145   4,549   1,320   426   1,911   108   10,324 

Ending Balance

 $1,074  $791  $168  $4,549  $1,325  $426  $1,911  $108  $10,352 

Loans

                                    

Ending balance: individually evaluated for impairment

 $-  $238  $557  $3,697  $102  $263  $-  $-  $4,857 

Ending balance: collectively evaluated for impairment

  99,804   126,218   15,280   414,912   51,424   32,530   89,046   4,516   833,730 

Ending balance

 $99,804  $126,456  $15,837  $418,609  $51,526  $32,793  $89,046  $4,516  $838,587 

 

15
 
 

The following table shows an aging analysis of the loan portfolio by the time past due, in thousands:

 

              

Total

         

March 31, 2022

     

90 Days

      

Past Due

         
  

30-89 Days

  

and Still

      

and

         
  

Past Due

  

Accruing

  

Nonaccrual

  

Nonaccrual

  

Current

  

Total

 
                         

Commercial

 $1,028  $-  $86  $1,114  $95,673  $96,787 

Agricultural

  -   -      -   123,416   123,416 

Real estate – residential

  -   -   235   235   15,402   15,637 

Real estate – commercial

  345   -   3,289   3,634   419,877   423,511 

Real estate - construction & land

  -   -   70   70   55,598   55,668 

Equity Lines of Credit

  111   -   542   653   31,949   32,602 

Auto

  1,613   -   497   2,110   84,658   86,768 

Other

  84   -   14   98   4,199   4,297 

Total

 $3,181  $-  $4,733  $7,914  $830,772  $838,686 

 

              

Total

         

December 31, 2021

    

90 Days

      

Past Due

         
  30-89 Days  and Still      and         
  

Past Due

  

Accruing

  

Nonaccrual

  

Nonaccrual

  

Current

  

Total

 
                         

Commercial

 $705  $-  $-  $705  $99,099  $99,804 

Agricultural

  345   -   -   345   126,111   126,456 

Real estate – residential

  150   -   93   243   15,594   15,837 

Real estate - commercial

  68   -   3,710   3,778   414,831   418,609 

Real estate - construction & land

  -   -   71   71   51,455   51,526 

Equity Lines of Credit

  450   -   444   894   31,899   32,793 

Auto

  1,679   -   521   2,200   86,846   89,046 

Other

  122   -   24   146   4,370   4,516 

Total

 $3,519  $-  $4,863  $8,382  $830,205  $838,587 

 

16
 
 

The following tables show information related to impaired loans at March 31, 2022, in thousands:

 

      

Unpaid

      

Average

  

Interest

 
  

Recorded

  

Principal

  

Related

  

Recorded

  

Income

 

As of March 31, 2022:

 

Investment

  

Balance

  

Allowance

  

Investment

  

Recognized

 
                     

With no related allowance recorded:

                    

Commercial

 $-  $-  $-  $-  $- 

Agricultural

  237   237   -   237   4 

Real estate – residential

  528   548   -   498   7 

Real estate – commercial

  3,276   3,391   -   3,307   - 

Real estate – construction & land

  100   100   -   101   2 

Equity Lines of Credit

  362   406   -   318   - 

Auto

  -   -   -   -   - 

Other

  -   -   -   -   - 

With an allowance recorded:

                    

Commercial

 $-  $-  $-  $-  $- 

Agricultural

  -   -   -   -   - 

Real estate – residential

  171   171   23   171   2 

Real estate – commercial

  -   -   -   -   - 

Real estate – construction & land

  -   -   -   -   - 

Equity Lines of Credit

  -   -   -   -   - 

Auto

  -   -   -   -   - 

Other

  -   -   -   -   - 

Total:

                    

Commercial

 $-  $-  $-  $-  $- 

Agricultural

  237   237   -   237   4 

Real estate – residential

  699   719   23   669   9 

Real estate – commercial

  3,276   3,391   -   3,307   - 

Real estate – construction & land

  100   100   -   101   2 

Equity Lines of Credit

  362   406   -   318   - 

Auto

  -   -   -   -   - 

Other

  -   -   -   -   - 

Total

 $4,674  $4,853  $23  $4,632  $15 

 

17
 
 

The following tables show information related to impaired loans at December 31, 2021, in thousands:

 

      

Unpaid

      

Average

  

Interest

 
  

Recorded

  

Principal

  

Related

  

Recorded

  

Income

 

As of December 31, 2021:

 

Investment

  

Balance

  

Allowance

  

Investment

  

Recognized

 
                     

With no related allowance recorded:

                    

Commercial

 $-  $-  $-  $-  $- 

Agricultural

  238   238   -   241   18 

Real estate – residential

  386   399   -   387   29 

Real estate – commercial

  3,697   3,834   -   2,188   - 

Real estate – construction & land

  -   -   -   -   - 

Equity Lines of Credit

  263   304   -   275   - 

Auto

  -   -   -   -   - 

Other

  -   -   -   -   - 

With an allowance recorded:

                    

Commercial

 $-  $-  $-  $-  $- 

Agricultural

  -   -   -   -   - 

Real estate – residential

  171   171   23   173   7 

Real estate – commercial

  -   -   -   -   - 

Real estate – construction & land

  102   102   5   105   6 

Equity Lines of Credit

  -   -   -   -   - 

Auto

  -   -   -   -   - 

Other

  -   -   -   -   - 

Total:

                    

Commercial

 $-  $-  $-  $-  $- 

Agricultural

  238   238   -   241   18 

Real estate – residential

  557   570   23   560   36 

Real estate – commercial

  3,697   3,834   -   2,188   - 

Real estate – construction & land

  102   102   5   105   6 

Equity Lines of Credit

  263   304   -   275   - 

Auto

  -   -   -   -   - 

Other

  -   -   -   -   - 

Total

 $4,857  $5,048  $28  $3,369  $60 

 
 

5. 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 $163.1 million and $162.5 million and stand-by letters of credit of $0 and $12 thousand at March 31, 2022 and December 31, 2021, respectively.

 

Of the loan commitments outstanding at March 31, 2022, $29.7 million 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 December 31, 2021.

 

18
 
 
 

6. 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 Ended

  
   

March 31,

  

(In thousands, except per share data)

  

2022

    

2021

  

Net Income:

                

Net income

   $ 5,718     $ 4,441  

Earnings Per Share:

                

Basic earnings per share

   $ 0.98     $ 0.86  

Diluted earnings per share

   $ 0.97     $ 0.85  

Weighted Average Number of Shares Outstanding:

                

Basic shares

     5,824       5,187  

Diluted shares

     5,920       5,253  

 

Shares of common stock issuable under stock options for which the exercise prices were greater than the average market prices were not included in the computation of diluted earnings per share due to their antidilutive effect.  Stock options not included in the computation of diluted earnings per share, due to shares not being in-the-money and having an antidilutive effect, were approximately 0 and 5,000 for the  three- month period ended March 31, 2022 and 2021, respectively.

 
 

7. STOCK-BASED COMPENSATION

 

In May 2013, the Company established the 2013 Stock Option Plan for which 328,267 shares of common stock are reserved and 126,550 shares are available for future grants as of March 31, 2022. The 2013 Plan requires 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, with Company common stock previously acquired by the optionee and held by the optionee for a period of at least nine months or in options of the Optionee that are fully vested and exercisable or in any combination of the foregoing. The options expire on dates determined by the Board of Directors, but not later than ten years from the date of grant.

 

No options were granted during the three months ended March 31, 2022 and 2021.

 

The Company determines the fair value of options on the date of grant using a Black-Scholes-Merton option pricing model that uses assumptions based on expected option life, expected stock volatility and the risk-free interest rate. The expected volatility assumptions used by the Company are based on the historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected life of the Company’s stock options. The Company bases its expected life assumption on its historical experience and on the terms and conditions of the stock options it grants to employees. 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 the grant.

 

A summary of the activity within the 2013 Plan follows: 

 

   

Shares

    

Weighted Average Exercise Price

    

Weighted Average Remaining Contractual Term in Years

    

Intrinsic Value

  

Options outstanding at January 1, 2022

     223,617     $ 19.71                  

Options cancelled

     -       -                  

Options exercised

     (21,900 )     9.82                  

Options outstanding at March 31, 2022

     201,717     $ 20.79       4.6     $ 3,491,721  

Options exercisable at March 31, 2022

     142,017     $ 20.42       4.2     $ 2,510,861  

Expected to vest after March 31, 2022

     52,936     $ 21.66       5.6     $ 870,367  

 

19
 
 

As of March 31, 2022, there was $211,000 of total unrecognized compensation cost related to non-vested, share-based compensation. That cost is expected to be recognized over a weighted average period of 1.6 years.

 

The total fair value of options vested during the three months ended March 31, 2022 and 2021 was $101,000 and $107,000, respectively. The total intrinsic value of options at time of exercise was $858,000 and $252,000 for the three months ended March 31, 2022 and 2021, respectively.

 

Compensation cost related to stock options recognized in operating results under the stock option plan was $58,000 and $60,000 for the three months ended March 31, 2022 and 2021, respectively. The associated income tax benefit recognized was $4,000 for each of the three months ended March 31, 2022 and 2021.

 

Cash received from option exercises under the plan for the three months ended March 31, 2022 and 2021 were $131,000 and $142,000, respectively. The tax benefit realized for the tax deductions from option exercise totaled $40,000 and $0 for the three months ended March 31, 2022 and 2021, respectively. 

 
 

8. INCOME TAXES

 

The Company files its income taxes on a consolidated basis with its subsidiary. Income tax expense is the total of current year income tax due or refundable and the change in deferred tax assets and liabilities.

 

Deferred tax assets and liabilities are recognized for the tax consequences of temporary differences between the reported amount of assets and liabilities and their tax bases. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. A valuation allowance is recognized if, based on the weight of available evidence management believes it is more likely than not that some portion or all of the deferred tax assets will not be realized. On the consolidated balance sheet, net deferred tax assets are included in accrued interest receivable and other assets.

 

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.  Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

 

Interest expense and penalties associated with unrecognized tax benefits, if any, are classified as income tax expense in the consolidated statements of income. There have been no significant changes to unrecognized tax benefits or accrued interest and penalties for the three months ended March 31, 2022.

 
 

9 FAIR VALUE MEASUREMENT

 

The Company measures fair value under the fair value hierarchy described below.

 

Level 1: Quoted prices for identical instruments traded in active exchange markets.

 

Level 2: Quoted prices (unadjusted) for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable or can be corroborated by observable market data.

 

 Level 3: Model based techniques that use one significant assumption not observable in the market. These unobservable assumptions reflect the Company’s estimates of assumptions that market participants would use on pricing the asset or liability. Valuation techniques include management judgment and estimation which may be significant.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

 

Management monitors the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period.

 

Management evaluates the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total assets, total liabilities or total earnings.

 

20
 
 

Fair Value of Financial Instruments

 

The carrying amounts and estimated fair values of financial instruments, at March 31, 2022 follows, in thousands:

  

           

Fair Value Measurements at March 31, 2022, Using:

  
   

Carrying Value

    

Level 1

    

Level 2

    

Level 3

    

Total Fair Value

  

Financial assets:

                                        

Cash and cash equivalents

   $ 389,023     $ 389,023     $ -     $ -     $ 389,023  

Investment securities

     316,188       -       316,188       -       316,188  

Interest rate swaps

     1,263       -       1,263       -       1,263  

Loan, held for sale

     13,953       -       14,607       -       14,607  

Loans, net

     830,176       -       -       810,838       810,838  

FHLB stock

     4,450       -       -       -       N/A  

FRB Stock

     1,360       -       -       -       N/A  

Accrued interest receivable

     5,071       66       1,192       3,813       5,071  

Financial liabilities:

                                        

Deposits

     1,467,658       1,403,848       64,533       -       1,468,381  

Repurchase agreements

     9,858       -       9,858       -       9,858  

Junior subordinated deferrable interest debentures

     10,310       -       -       7,934       7,934  

Accrued interest payable

     79       9       56       14       79  

 

The carrying amounts and estimated fair values of financial instruments, at December 31, 2021 follows, in thousands:

 

           

Fair Value Measurements at December 31, 2021 Using:

  
   

Carrying Value

    

Level 1

    

Level 2

    

Level 3

    

Total Fair Value

  

Financial assets:

                                        

Cash and cash equivalents

   $ 380,584     $ 380,584                     $ 380,584  

Investment securities

     305,914               305,914               305,914  

Interest rate swaps

     607               607               607  

Loans held for sale

     31,277               33,284               33,284  

Loans, net

     829,385                       844,764       844,764  

FHLB stock

     4,450                               N/A  

FRB Stock

     1,358                               N/A  

Accrued interest receivable

     5,800       3       1,082       4,715       5,800  

Financial liabilities:

                                        

Deposits

     1,438,999       1,374,637       65,398               1,440,035  

Repurchase agreements

     17,283               17,283               17,283  

Junior subordinated deferrable interest debentures

     10,310                       7,342       7,342  

Accrued interest payable

     78       9       56       13       78  

 

Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on judgments regarding current economic conditions, risk characteristics of various financial instruments and other factors. Those estimates that are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision are included in Level 3. Changes in assumptions could significantly affect the fair values presented.

 

These estimates do not reflect any premium or discount that could result from offering the Company's entire holdings of a particular financial instrument for sale at one time, nor do they attempt to estimate the value of anticipated future business related to the instruments. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of these estimates.

 

21
 
 

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of March 31, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:

 

Assets and liabilities measured at fair value on a recurring basis at March 31, 2022 are summarized below, in thousands:

 

           

Fair Value Measurements at

  
           

March 31, 2022 Using

  
           

Quoted

                  
           

Prices in

                  
           

Active

    

Significant

          
           

Markets for

    

Other

    

Significant

  
           

Identical

    

Observable

    

Unobservable

  
           

Assets

    

Inputs

    

Inputs

  
   

Total Fair Value

    

(Level 1)

    

(Level 2)

    

(Level 3)

  

Assets:

                                

U.S. Government-sponsored agencies collateralized by mortgage obligations- residential

   $ 163,588     $ -     $ 163,588     $ -  

U.S. Government-agencies collateralized by mortgage obligations-commercial

     58,879       -       58,879       -  

Obligations of states and political subdivisions

     93,721       -       93,721       -  

Interest rate swaps

     1,263       -       1,263       -  
    $ 317,451     $ -     $ 317,451     $ -  

 

 Assets and liabilities measured at fair value on a recurring basis at December 31, 2021 are summarized below, in thousands:

 

           

Fair Value Measurements at

  
           

December 31, 2021 Using

  
           

Quoted

                  
           

Prices in

                  
           

Active

    

Significant

          
           

Markets for

    

Other

    

Significant

  
           

Identical

    

Observable

    

Unobservable

  
           

Assets

    

Inputs

    

Inputs

  
   

Total Fair Value

    

(Level 1)

    

(Level 2)

    

(Level 3)

  

Assets:

                                

U.S. Government-sponsored agencies collateralized by mortgage obligations-residential

   $ 151,034     $ -     $ 151,034     $ -  

U.S. Government agencies collateralized by mortgage obligations-commercial

     57,225       -       57,225       -  

Obligations of states and political subdivisions

     97,655       -       97,655       -  

Interest rate swaps

     607       -       607       -  
    $ 306,521     $ -     $ 306,521     $ -  

  

The fair value of securities available-for-sale equals quoted market price, if available. If quoted market prices are not available, fair value is determined using quoted market prices for similar securities or matrix pricing. The fair value of the interest rate swap agreements was derived from discounted cash flow analysis based on the terms of the contract and the forward interest rate curve adjusted for our credit risk. There were no changes in the valuation techniques used during 2022 or 2021. Transfers between hierarchy measurement levels are recognized by the Company as of the beginning of the reporting period. Changes in fair market value are recorded in other comprehensive income.

 

22
 
 

Assets and liabilities measured at fair value on a non-recurring basis at March 31, 2022 are summarized below, in thousands:

  

           

Fair Value Measurements at

  
           

March 31, 2022 Using

  
           

Quoted

                          
           

Prices in

                    

Total

  
           

Active

    

Significant

            

Losses

  
           

Markets for

    

Other

    

Significant

    

Three Months

  
           

Identical

    

Observable

    

Unobservable

    

Ended

  
           

Assets

    

Inputs

    

Inputs

    

March 31,

  
   

Total Fair Value

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

2022

  

Assets:

                                        

Other real estate:

                                        

Real estate – commercial

   $ 487     $ -     $ -     $ 487     $ -  

 

Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2021 are summarized below, in thousands:

 

           

Fair Value Measurements at

  
            December 31, 2021 Using  
           

Quoted

                          
           

Prices in

                    

Total

  
           

Active

    

Significant

            

Losses

  
           

Markets for

    

Other

    

Significant

    

Three Months

  
           

Identical

    

Observable

    

Unobservable

    

Ended

  
    Total     Assets     Inputs     Inputs     March 31,  
   

Fair Value

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

2021

  

Assets:

                                        

Other real estate:

                                        

Real estate – commercial

   $ 487       -       -     $ 487       -  

 

The Company has no liabilities which are reported at fair value.

 

The following methods were used to estimate fair value.

 

Collateral-Dependent Impaired Loans: The Bank does not record loans at fair value on a recurring basis. However, from time to time, fair value adjustments are recorded on these loans to reflect partial write-downs, through charge-offs or specific reserve allowances, that are based on fair value estimates of the underlying collateral. The fair value estimates for collateral-dependent impaired loans are generally based on recent real estate appraisals or broker opinions, obtained from independent third parties, which are frequently adjusted by management to reflect current conditions and estimated selling costs (Level 3). No impairment charges were recognized during the three months ended March 31, 2022 and 2021 related to the above impaired loans. 

 

Other Real Estate: Nonrecurring adjustments to certain real estate properties classified as other real estate owned are measured at the lower of carrying amount or fair value, less costs to sell. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized. Fair values are generally based on third party appraisals of the property which are commonly adjusted by management to reflect current conditions and selling costs (Level 3).

 

23
 
 

Appraisals for both collateral-dependent impaired loans and other real estate are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the Loan Administration Department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. On a quarterly basis, the Company compares the actual selling price of similar collateral that has been liquidated to the most recent appraised value for unsold properties to determine what additional adjustment, if any, should be made to the appraisal value to arrive at fair value. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.

 

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at March 31, 2022 and December 31, 2021 (dollars in thousands): 

 

                                   

Range

    

Range

  
   

Fair Value

    

Fair Value

    

Valuation

            

(Weighted Average)

    

(Weighted Average)

  

Description

  

3/31/2022

    

12/31/2021

    

Technique

    

Significant Unobservable Input

    

3/31/2022

    

12/31/2021

  
                                                                 

Other Real Estate:

                                                                
                                                                 

RE – Commercial

   $ 487     $ 487    

Third Party appraisals

    

Management Adjustments to Reflect Current Conditions and Selling Costs

       17% - 51%       (37.0 )%     17% - 51%       (37.0 )%
                                                                 

 

24
 
 

 

 

10. BUSINESS COMBINATIONS - ACQUSITION OF FEAHTER RIVER BANCORP, INC.

 

On July 1, 2021, pursuant to a previously announced Agreement and Plan of Reorganization and Merger dated as of March 10, 2021 (the “Merger Agreement”) between the Company and Feather River Bancorp, Inc. (“FRB”), FRB merged with and into the Company with the Company continuing as the surviving corporation (the “Merger”). Immediately after the Merger, Bank of Feather River, the wholly owned bank subsidiary of FRB (“BFR”), merged with and into the Bank, with the Bank continuing as the surviving bank. The Merger and Bank Merger are collectively referred to as the “Transaction.”

 

As part of its business strategy, the Company regularly reviews its business strategies and opportunities to enhance the value of its franchise, including through acquisitions. The Transaction is consistent with the Company’s business strategy, which will (1) expand Plumas’s geographic presence into new markets in Northern California, (2) diversify and bring new expertise to Plumas’s agricultural lending business, and (3) strengthen the Company’s talent base.

 

Pursuant to the terms of the definitive merger agreement between the Company and FRB, each issued and outstanding share of common stock of FRB (the “Common Shares”), was converted into the right to receive, at the election of each holder of Common Shares, either (i) shares of common stock of the Company (“Plumas Common Stock”) or (ii) cash (the “Merger Consideration”). Shareholder elections were subject to proration such that aggregate Merger Consideration payable by the Company was comprised of (i) $4,738,583 in cash (the “Aggregate Cash Amount”) and (ii) 598,020 shares of Plumas Common Stock (the “Aggregate Plumas Share Amount”). Holders of Common Shares received either $19.14 in cash or 0.614 shares of Plumas Common Stock. The value of the total deal consideration was approximately $23.4 million, which is based upon the volume-weighted average trading price of Plumas common stock for the 10 trading days ending on the last trading day immediately preceding July 1, 2021, the closing date of the Merger.

 

Immediately after the Transaction, the newly combined company, operating as Plumas Bancorp with its banking subsidiary, Plumas Bank, had total assets of approximately $1.5 billion.

 

The following table reflects the estimated fair values of the assets acquired and liabilities assumed related to the FRB Acquisition as of July 1, 2021 (in thousands):

 

 

Assets:

    

Cash and cash equivalents

 

$

28,369

 

Loans

  

160,409

 

Core deposit intangible

  

1,037

 

Goodwill

  

5,502

 

Bank premises and equipment

  

2,657

 

Right of use asset

  

2,359

 

Other assets

  

4,627

 

Total assets acquired

 

$

204,960

 
     

Liabilities:

    

Deposits:

    

Non-interest bearing

 

$

89,479

 

Interest bearing

    

Savings accounts

  

9,353

 

Money market accounts

  

45,600

 

Time accounts

  

32,279

 

Total deposits

  

176,711

 
     

Lease Liabilities

  

2,359

 

Deferred tax liability

  

402

 

Other liabilities

  

2,093

 

Total liabilities assumed

 

$

181,565

 

Merger consideration (cash payments of $4.7 million and $18.7 million in stock)

 

$

23,395

 

 

                                                                                                                                                                                                                                                                                                                                                                         

25
 
 

The following table presents the net assets acquired from FRB and the estimated fair value adjustments as of July 1, 2021 (in thousands):

 

 

 

Book value of net assets acquired from FRB

 

$

16,292

 
     

Fair value adjustments:

    

Loans

  

2,453

 

Bank premises and equipment

  

(1,218

)

Right of use asset

  

2,359

 

Lease liability

  

(2,359

)

Core deposit intangible asset

  

1,037

 

Total purchase accounting adjustments

 

$

2,272

 

Deferred tax liabilities (tax effect of purchase accounting adjustments at 29.56%)

  

(671

)

Fair value of net assets acquired from FRB

 

$

17,893

 
     

Merger consideration

  

23,395

 

Less: fair value of net assets acquired from FRB

  

(17,893

)

Goodwill

  

5,502

 

 

 

As a result of the Acquisition, we recorded $5.5 million in goodwill, which represents the excess of the total purchase price paid over the fair value of the assets acquired, net of the fair values of liabilities assumed. Goodwill mainly reflects expected value created through the combined operations of Plumas Bank and Bank of Feather River. Goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations into Plumas Bank.  None of the goodwill recognized is expected to be deductible for income tax purposes.

 

 

26
 

 

 

 

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 (the “Company”).

 

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

 

The following discussion and analysis sets forth certain statistical information relating to the Company as of March 31, 2022 and December 31, 2021 and for the three- month period ended March 31, 2022 and 2021. 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, 2021.

 

Plumas Bancorp trades on The NASDAQ Capital Market under the ticker symbol “PLBC”.

 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES 

 

There have been no changes to the Company’s critical accounting policies from those disclosed in the Company’s 2021 Annual Report to Shareholders on Form 10-K.

 

 

27
 

 

U.S. Small Business Administration Paycheck Protection Program

 

The Coronavirus Aid, Relief and Economic Security Act (CARES Act) provided for the Paycheck Protection Program (PPP) and additional legislation has extended this program into 2021; we have actively participated in the PPP program.  The remaining principal balance of PPP loans at March 31, 2022 was $19 million. 

 

Merger Agreement with Feather River Bancorp, Inc.

 

On July 1, 2021, pursuant to a previously announced Agreement and Plan of Reorganization and Merger dated as of March 10, 2021 (the “Merger Agreement”) between the Company and Feather River Bancorp, Inc. (“FRB”), FRB merged with and into the Company with the Company continuing as the surviving corporation (the “Merger”). Immediately after the Merger, Bank of Feather River, the wholly owned bank subsidiary of FRB (“BFR”), merged with and into the Bank, with the Bank continuing as the surviving bank.  BFR has become our Yuba City branch. The Merger and Bank Merger are collectively referred to as the “Transaction.”

 

As part of its business strategy, the Company regularly reviews its business strategies and opportunities to enhance the value of its franchise, including through acquisitions. The Transaction is consistent with the Company’s business strategy, which will (1) expand Plumas’ geographic presence into new markets in Northern California, (2) diversify and bring new expertise to Plumas’ agricultural lending business, and (3) strengthen the Company’s talent base.

 

Pursuant to the terms of the definitive merger agreement between the Company and FRB, each issued and outstanding share of common stock of FRB (the “Common Shares”), was converted into the right to receive, at the election of each holder of Common Shares, either (i) shares of common stock of the Company (“Plumas Common Stock”) or (ii) cash (the “Merger Consideration”). Shareholder elections were subject to proration such that aggregate Merger Consideration payable by the Company was comprised of (i) $4,738,583 in cash (the “Aggregate Cash Amount”) and (ii) 598,020 shares of Plumas Common Stock (the “Aggregate Plumas Share Amount”). Holders of Common Shares received either $19.14 in cash or 0.614 shares of Plumas Common Stock. The value of the total deal consideration was approximately $23.4 million, which is based upon the volume-weighted average trading price of Plumas common stock for the 10 trading days ending on the last trading day immediately preceding July 1, 2021, the closing date of the Merger.

 

Immediately after the Transaction, the newly combined company, operating as Plumas Bancorp with its banking subsidiary, Plumas Bank, had total assets of approximately $1.5 billion.  The estimated fair value of assets acquired at July 1, 2021 was $205.0 million consisting of $28.4 million in cash, $160.4 million in net loans, $1.0 million in core deposit intangible, $5.5 million in goodwill and $9.7 million in other assets. The estimated fair value of deposits assumed totaled $176.7 million consisting of $89.5 million in non-interest bearing transaction accounts, $9.3 million in savings accounts, $45.6 million in money market accounts and $32.3 million in time deposits.

 

28
 

 

RESULTS OF OPERATIONS FOR THE three MONTHS ENDED March 31, 2022

 

Net Income. The Company recorded net income of $5.7 million for the three months ended March 31, 2022 up $1.3 million from net income of $4.4 million for the three months ended March 31, 2021.  Increases of $1.5 million in net interest income and $1.3 million in non-interest income and a decline of $75 thousand in the provision for loan losses were partially offset by  increases of $1.4 million in non-interest expense and $253 thousand in the provision for income taxes.  The annualized return on average assets was 1.42% for the three months ended March 31, 2022  down from 1.55% for the three months ended March 31, 2021. The annualized return on average equity decreased from 17.7% during the first quarter of  2021 to 17.6% during the current quarter.

The following is a detailed discussion of each component of the change in net income.

Net interest income before provision for loan losses.   Driven by the acquisition of BFR and organic growth, net interest income increased by $1.5 million from $10.5 million during the three months ended March 31, 2021 to $12.0 million for the three months ended March 31, 2022.

 

The increase in net interest income includes an increase of $1.6 million in interest income partially offset by an increase of $45 thousand in interest expense. Interest and fees on loans increased by $558 thousand related to an increase in average loan balances primarily related to the acquisition of BFR. The effect of the increase in average balance was partially offset by a decline in yield which included a reduction in PPP fees.  During the current quarter we recorded amortization of loan fees, net of loan costs, on PPP loans totaling $0.6 million, a decrease of $1.0 million from $1.6 million during the first quarter of 2021.  PPP fees included in income include both the normal amortization of fees on loans in our PPP portfolio and the effect of PPP loan forgiveness. 

 

Average loan balances increased by $116 million, while the average yield on loans decreased by 50 basis points from 5.53% during the first quarter of 2021 to 5.03% during the current quarter. The reduction in loan yield includes the effect of a reduction in market rates during 2021 and a decline in PPP fee income as described above.  Interest and fees on loans held for sale increased by $277 thousand related to an increase in average balance of  $20.7 million from $2.0 million for the three months ended March 31, 2021 to $22.7 million for the three months ended March 31, 2022.

 

Interest on investment securities increased by $630 thousand, mostly related to an increase in average investment securities of $123 million to $311 million. Interest on interest-bearing deposits, which mostly relates to cash held at the Federal Reserve Bank of San Francisco (FRBSF),  increased by $116 thousand related to both an increase in the rate paid on these balances and an increase in average balance.  The rate paid on interest-bearing deposits balances increased from 0.11% during the first quarter of 2021 to 0.19% during the current quarter mostly related to an increase in the rate paid on balances held at the FRBSF effective March 17, 2022, from 15 basis points to 40 basis points. Average interest-bearing deposit balances increased by $158 million to $353.2 million during the current quarter.

 

Net interest margin for the three months ended March 31, 2022 decreased 65 basis points to 3.21%, down from 3.86% for the same period in 2021

 

29
 

 

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

    

For the Three Months Ended

  
   

March 31, 2022

    

March 31, 2021

  
   

Average

                    

Average

                  
   

Balance

    

Interest

    

Yield/

    

Balance

    

Interest

    

Yield/

  
   

(in thousands)

    

(in thousands)

    

Rate

    

(in thousands)

    

(in thousands)

    

Rate

  

Interest-earning assets:

                                                

Loans (2) (3)

   $ 831,289     $ 10,311       5.03 %   $ 715,648     $ 9,753       5.53 %

Loans held for sale

     22,727       305       5.44 %     2,022       28       5.62 %

Taxable investment securities

     214,609       997       1.88 %     128,160       557       1.76 %

Non-taxable investment securities (1)

     96,844       534       2.24 %     60,382       344       2.31 %

Interest-bearing deposits

     353,155       168       0.19 %     194,837       52       0.11 %

Total interest-earning assets

     1,518,624       12,315       3.29 %     1,101,049       10,734       3.95 %

Cash and due from banks

     54,507                       27,481                  

Other assets

     60,704                       36,594                  

Total assets

   $ 1,633,835                     $ 1,165,124                  
                                                 

Interest-bearing liabilities:

                                                

Money market deposits

   $ 262,619     $ 66       0.10 %   $ 188,616     $ 69       0.15 %

Savings deposits

     384,689       81       0.09 %     256,013       67       0.11 %

Time deposits

     64,148       47       0.30 %     40,590       38       0.38 %

Total deposits

     711,456       194       0.11 %     485,219       174       0.15 %

Junior subordinated debentures

     10,310       88       3.46 %     10,310       79       3.11 %

Repurchase agreements

     13,861       18       0.53 %     12,878       2       0.06 %

Total interest-bearing liabilities

     735,627       300       0.17 %     508,407       255       0.20 %

Non-interest-bearing deposits

     754,285                       541,253                  

Other liabilities

     11,900                       13,564                  

Shareholders' equity

     132,023                       101,900                  

Total liabilities & equity

   $ 1,633,835                     $ 1,165,124                  

Cost of funding interest-earning assets (4)

                     0.08 %                     0.09 %

Net interest income and margin (5)

           $ 12,015       3.21 %           $ 10,479       3.86 %

 

(1)

Not computed on a tax-equivalent basis.

(2)

Average nonaccrual loan balances of $5.0 million for 2022 and $2.3 million for 2021 are included in average loan balances for computational purposes.

(3)

Net fees included in loan interest income for the three-month period ended March 31, 2022 and 2021 were $311,000 and $1,458,000, respectively.

(4)

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

(5)

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

 

30
 

 

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:

 

   

2022 over 2021 change in net interest income

  
   

for the three months ended March 31,

  
   

(in thousands)

  
   

Volume (1)

    

Rate (2)

    

Mix (3)

    

Total

  
                                 

Interest-earning assets:

                                

Loans

   $ 1,576     $ (876 )   $ (142 )   $ 558  

Loans held for sale

     287       (1 )     (9 )     277  

Taxable investment securities

     376       38       26       440  

Non-taxable investment securities

     208       (11 )     (7 )     190  

Interest-bearing deposits

     42       41       33       116  

Total interest income

     2,489       (809 )     (99 )     1,581  

Interest-bearing liabilities:

                                

Money market deposits

     27       (22 )     (8 )     (3 )

Savings deposits

     34       (13 )     (7 )     14  

Time deposits

     22       (8 )     (5 )     9  

Junior subordinated debentures

     -       9       -       9  

Repurchase agreements

     -       15       1       16  

Total interest expense

     83       (19 )     (19 )     45  

Net interest income

   $ 2,406     $ (790 )   $ (80 )   $ 1,536  

 

 

(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. During the three months ended March 31, 2022 and 2021 we recorded a provision for loan losses of $300 thousand and $375 thousand, respectively. See “Analysis of Asset Quality and Allowance for Loan Losses” for a discussion of loan quality trends and the provision for loan losses.

 

Non-interest income. During the three months ended March 31, 2022, non-interest income totaled $3.6 million, an increase of  $1.3 million from the three months ended March 31, 2021. The largest component of this increase was an increase in gain on sale of SBA loans of  $1.1 million to $1.7 million. We did not sell SBA loans during the second and third quarters of 2021 resulting in an inventory of loans held for sale of $31.3 million at December 31, 2021 and $14.0 million at March 31, 2022. Loans held for sale at December 31, 2020 and March 31, 2021 were $0.7 million and $2.5 million, respectively. During the three months ended March 31, 2022 and 2021, $9.2 million and $8.0 million in guaranteed portions of SBA loans were originated for sale.  Guaranteed portions of loans sold totaled $26.6 million during the current quarter and $8.3 million during the three months ended March 31, 2021. 

 

Other non-interest income increased by $132 thousand mostly related to $90 thousand in insurance proceeds related to fire damage at our Greenville, California branch. This branch was heavily damaged in the wildfires that swept through Northern California during the summer of 2021.  We are currently repairing the damage at this branch.

 

31
 

 

The following table describes the components of non-interest income for the three-month periods ended March 31, 2022 and 2021, dollars in thousands: 

 

   

For the Three Months Ended

                  
   

March 31,

                  
   

2022

    

2021

    

Dollar Change

    

Percentage Change

  

Gain on sale of loans, net

     1,701       591       1,110       187.8 %

Interchange income

     762       715       47       6.6 %

Service charges on deposit accounts

     566       540       26       4.8 %

Loan servicing fees

     209       227       (18 )     (7.9 )%

Earnings on life insurance policies

     93       90       3       3.3 %

Other

     319       187       132       70.6 %

Total non-interest income

   $ 3,650     $ 2,350     $ 1,300       55.3 %

 

Non-interest expense.  During the three months ended March 31, 2022, total non-interest expense increased by $1.4 million from the comparable period in 2021. The largest components of this increase were increases of  $558 thousand in salary and benefits, $247 thousand in occupancy and equipment, $166 thousand in outside services and $123 thousand in deposit insurance expense.  The larger increases in salary and benefit expense include $559 thousand in salary expense, $158 thousand in payroll taxes and  $90 thousand in bonus expense. The largest decrease in salary and benefit expense was a $355 thousand increase in the deferral of loan origination costs.  The increase in salary expense includes $240 thousand related to our new Yuba City branch.  Included in occupancy and equipment cost was $151 thousand related to our Yuba City branch.  Increases in outside service fees include increases in item processing, statement processing, online banking expenses and network administration costs mostly related to growth in the bank.  The single largest increase in outside services was $78 thousand related to outsourcing of various Human Resources functions effective April 1, 2021.The increase in deposit insurance expense includes both an increase in deposit balances and an increase in the rate charged to Plumas Bank by the FDIC.

 

Professional fees, which declined by $63 thousand, were abnormally high during the first three months of 2021 as they included $163 thousand in legal and investment banking fees related to our acquisition of Feather River Bancorp. Excluding these one-time expenses, professional fees would have increased by $100 thousand of which $42 thousand is related to converting our loan files to a digital document imaging system, $35 thousand was related to an increase in audit costs and $36 thousand was related to an increase in consulting costs. We expect to complete the conversion of hard copy files to digital files by year end.

 

The following table describes the components of non-interest expense for the three-month periods ended March 31, 2022 and 2021, dollars in thousands: 

 

   

For the Three Months Ended

                  
   

March 31,

                  
   

2022

    

2021

    

Dollar Change

    

Percentage Change

  

Salaries and employee benefits

   $ 4,082     $ 3,524     $ 558       15.8 %

Occupancy and equipment

     1,137       890       247       27.8 %

Outside service fees

     908       742       166       22.4 %

Professional fees

     279       342       (63 )     (18.4 )%

Deposit insurance

     197       74       123       166.2 %

Telephone and data communication

     191       155       36       23.2 %

Armored car and courier

     148       108       40       37.0 %

Director compensation and expense

     141       91       50       54.9 %

Business development

     115       66       49       74.2 %

Advertising and shareholder relations

     112       68       44       64.7 %

Amortization of Core Deposit Intangible

     72       42       30       71.4 %

Loan collection expenses

     68       49       19       38.8 %

Other

     223       141       82       58.2 %

Total non-interest expense

   $ 7,673     $ 6,292     $ 1,381       21.9 %
                                 

 

Provision for income taxes. The Company recorded an income tax provision of $2.0 million, or 25.7% of pre-tax income for the three months ended March 31, 2022. This compares to an income tax provision of $1.7 million, or 27.9% of pre-tax income for the three months ended March 31, 2021. The percentages for 2022 and 2021 differ from statutory rates as tax exempt items of income such as earnings on Bank owned life insurance and municipal loan and securities interest decrease taxable income and during 2021 nondeductible merger expenses which increase taxable income.

 

32
 

 

FINANCIAL CONDITION

 

Total assets at March 31, 2022 were $1.6 billion, an increase of $8 million from December 31, 2021. Net loans increased by $791 thousand from $829.4 million at December 31, 2021 to $830.2 million at March 31, 2022. Loans held for sale decreased by $17.3 million from $31.3 million at December 31, 2021 to $14.0 million at March 31, 2022. Investment securities increased by $10.3 million from $305.9 million at December 31, 2021 to $316.2 million at March 31, 2022. Cash and cash equivalents totaled $389.0 million at March 31, 2022 up $8.4 million from $380.6 million at December 31, 2021.  Total gross loans and deposits at our recently acquired Yuba City branch, were $148 million and $159 million, respectively.

 

Deposits totaled $1.5 billion at March 31, 2022, an increase of $28.7 million from December 31, 2021. Related to a $16.0 million decrease in other comprehensive income, shareholders’ equity decreased by $11.0 million from $134.1 million at December 31, 2021 to $123.1 million at March 31, 2022.

 

Loan Portfolio. Gross loans totaled $838.7 million, an increase of $99 thousand from December 31, 2021. PPP loans declined by $15.9 million from $34.6 million at December 31, 2021 to $18.7 million at March 31, 2022.  Unearned fees, net of costs, on PPP loans declined by $604 thousand from $1.3 million at December 31, 2021 to $668 thousand at March 31, 2022 . 

 

The  largest areas of growth in the Company’s loan portfolio were $4.9 million in commercial real estate loans and $4.1 million in construction loans.  Declines in loan balances include $3.0 million in commercial loans, which include PPP loans, $3.0 million in agricultural loans, $2.3 million in automobile loans and $0.6 million in other loan categories.  Although the Company offers a broad array of financing options, it continues to concentrate its focus on small to medium sized commercial businesses. These loans offer diversification as to industries and types of businesses, thus limiting material exposure in any industry concentrations. 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 shown in the following table the Company's largest lending categories are commercial real estate loans, agricultural loans, commercial loans and auto loans.  

 

           

Percent of

            

Percent of

  
           

Loans in Each

            

Loans in Each

  
   

Balance at End

    

Category to

    

Balance at End

    

Category to

  

(dollars in thousands)

  

of Period

    

Total Loans

    

of Period

    

Total Loans

  
   

03/31/2022

    

03/31/2022

    

12/31/2021

    

12/31/2021

  

Commercial

   $ 96,787       11.5 %   $ 99,804       11.9 %

Agricultural

     123,416       14.7 %     126,456       15.1 %

Real estate – residential

     15,637       1.9 %     15,837       1.9 %

Real estate – commercial

     423,511       50.5 %     418,609       49.9 %

Real estate – construction & land

     55,668       6.6 %     51,526       6.1 %

Equity Lines of Credit

     32,602       3.9 %     32,793       3.9 %

Auto

     86,768       10.4 %     89,046       10.6 %

Other

     4,297       0.5 %     4,516       0.6 %

Total Gross Loans

   $ 838,686       100 %   $ 838,587       100 %

 

The Company’s real estate related loans, including real estate mortgage loans, real estate construction and land development loans, consumer equity lines of credit, and agricultural loans secured by real estate, comprised 73% of the total loan portfolio at March 31, 2022. Moreover, the business activities of the Company currently are focused in the California counties of Plumas, Nevada, Placer, Lassen, Modoc, Shasta, Sierra, and Sutter and in Washoe and Carson City Counties in Northern Nevada. Consequently, the results of operations and financial condition of the Company are dependent upon the general trends in these economies and, in particular, the commercial real estate markets. In addition, the concentration of the Company's operations in these areas of Northeastern California and Northwestern Nevada exposes it to greater risk than other banking companies with a wider geographic base in the event of catastrophes, such as earthquakes, fires and floods in these regions.

 

The rates of interest charged on variable rate loans are set at specific increments in relation to the Company's lending rate or other indexes such as the published prime interest rate or U.S. Treasury rates and vary with changes in these indexes. The frequency in which variable rate loans reprice can vary from one day to several years. At March 31, 2022 and December 31, 2021, approximately 77% and 76%, respectively of the Company's loan portfolio was comprised of variable rate loans. Loans indexed to the prime interest rate, excluding loans at their floor rate, were approximately 20% of the Company’s loan portfolio; these loans reprice within one day to three months of a change in the prime rate. At March 31, 2022 and December 31, 2021, 48% and 55%, respectively of the variable loans were at their respective floor rate. While real estate mortgage, agricultural, commercial and consumer lending remain the foundation of the Company's historical loan mix, some changes in the mix have occurred due to the changing economic environment and the resulting change in demand for certain loan types.

 

33
 

 

Analysis of Asset Quality and Allowance for Loan Losses. The Company attempts to minimize credit risk through its underwriting and credit review policies. The Company’s credit review process includes internally prepared credit reviews as well as contracting with an outside firm to conduct periodic credit reviews. The Company’s management and lending officers evaluate the loss exposure of classified and impaired loans on a quarterly basis, or more frequently as loan conditions change. The Management Asset Resolution Committee (MARC) reviews the asset quality of criticized and past due loans monthly and reports the findings to the full Board of Directors. In management's opinion, this loan review system helps facilitate the early identification of potential criticized loans. MARC also provides guidance for the maintenance and timely disposition of OREO properties including developing financing and marketing programs to incent individuals to purchase OREO. MARC consists of the Bank’s Chief Executive Officer, Chief Financial Officer and Chief Credit Officer, and the activities are governed by a formal written charter. The MARC meets monthly and reports to the Board of Directors.

 

The allowance for loan losses is established through charges to earnings in the form of the provision for loan losses. Loan losses are charged to and recoveries are credited to the allowance for loan losses. The allowance for loan losses is maintained at a level deemed appropriate by management to provide for known and inherent risks in the loan portfolio. The adequacy of the allowance for loan losses is based upon management's continuing assessment of various factors affecting the collectability of loans including current economic conditions, maturity of the portfolio, size of the portfolio, industry concentrations, borrower credit history, collateral, the existing allowance for loan losses, independent credit reviews, current charges and recoveries to the allowance for loan losses and the overall quality of the portfolio as determined by management, regulatory agencies, and independent credit review consultants retained by the Company. There is no precise method of predicting specific losses or amounts which may ultimately be charged off on particular segments of the loan portfolio. The collectability of a loan is subjective to some degree, but must relate to the borrower’s financial condition, cash flow, quality of the borrower’s management expertise, collateral and guarantees, and state of the local economy.

 

Formula allocations are calculated by applying loss factors to outstanding loans with similar characteristics. Loss factors are based on the Company’s historical loss experience as adjusted for changes in the business cycle and may be adjusted for significant factors that, in management's judgment, affect the collectability of the portfolio as of the evaluation date. Historical loss data from the beginning of the latest business cycle are incorporated in the loss factors. 

 

The discretionary allocation is based upon management’s evaluation of various loan segment conditions that are not directly measured in the determination of the formula and specific allowances. The conditions may include, but are not limited to, general economic and business conditions affecting the key lending areas of the Company, credit quality trends, collateral values, loan volumes and concentrations, and other business conditions.   We added a  pandemic qualitative factor to our allowance for loan loss calculation during 2020.

 

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held-to- maturity securities, loan commitments, and financial guarantees. The CECL model does not apply to available-for-sale (“AFS”) debt securities. For AFS debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU No. 2016- 13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. On October 16, 2019, the FASB approved a proposal to change the effective date of ASU No. 2016-13 for smaller reporting companies, as defined by the SEC, and other non-SEC reporting entities, delaying the effective date to fiscal years beginning after December 31, 2022, including interim periods within those fiscal periods. As the Company is a smaller reporting company and has not adopted provisions of the standard early, the delay is applicable to the Company. The Company has begun its implementation efforts by establishing an implementation team chaired by the Company’s Chief Credit Officer and composed of members of the Company’s credit administration and accounting departments. We have purchased software to support the CECL calculation of the allowance for loan losses under ASU No 2016-13. During the second quarter of 2021 we engaged a consultant to perform a model validation of our CECL model and to assist us in documenting all aspects of the CECL model. The Company’s preliminary evaluation indicates the provisions of ASU No. 2016-13 are expected to impact the Company’s Consolidated Financial Statements, in particular the level of the reserve for credit losses. However, the Company continues to evaluate the extent of the potential impact.

 

34
 

 

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

 

   

For the Three Months Ended

    

For the Year Ended

  

(dollars in thousands)

  

March 31,

    

December 31,

  
   

2022

    

2021

    

2021

    

2020

    

2019

  

Balance at beginning of period

   $ 10,352     $ 9,902     $ 9,902     $ 7,243     $ 6,958  

Charge-offs:

                                        

Commercial

     19       154       188       131       587  

Agricultural

     -       -       -       -       -  

Real estate – residential

     -       -       -       -       -  

Real estate – commercial

     -       -       -       -       -  

Real estate – construction & land

     -       -       -       -       -  

Equity Lines of Credit

     -       -       -       -       6  

Auto

     335       218       703       574       867  

Other

     19       20       47       82       61  

Total charge-offs

     373       392       938       787       1,521  

Recoveries:

                                        

Commercial

     6       42       72       34       26  

Agricultural

     -       -       -       -       -  

Real estate – residential

     -       1       3       15       3  

Real estate – commercial

     -       3       8       8       4  

Real estate – construction & land

     -       -       -       -       -  

Equity Lines of Credit

     -       1       4       4       5  

Auto

     114       19       136       200       258  

Other

     3       11       40       10       10  

Total recoveries

     123       77       263       271       306  

Net charge-offs

     250       315       675       516       1,215  

Provision for loan losses

     300       375       1,125       3,175       1,500  

Balance at end of period

   $ 10,402     $ 9,962     $ 10,352     $ 9,902     $ 7,243  

Net charge-offs during the period to average loans (annualized for the three-month periods)

     0.12 %     0.18 %     0.09 %     0.07 %     0.21 %

Allowance for loan losses to total loans

     1.24 %     1.36 %     1.23 %     1.39 %     1.17 %

 

During the three months ended March 31, 2022 and 2021 we recorded a provision for loan losses of $300 thousand and $375 thousand, respectively. Net charge-offs totaled $250 thousand during the three months ended March 31, 2022, a decrease of $65 thousand from $315 thousand during the three months ended March 31, 2021.

 

The following table provides a breakdown of the allowance for loan losses at March 31, 2022 and December 31, 2021:

 

           

Percent of

            

Percent of

  
           

Loans in Each

            

Loans in Each

  
   

Balance at End

    

Category to

    

Balance at End

    

Category to

  

(dollars in thousands)

  

of Period

    

Total Loans

    

of Period

    

Total Loans

  
   

3/31/2022

    

3/31/2022

    

12/31/2021

    

3/31/2021

  

Commercial

   $ 893       11.5 %   $ 1,074       11.9 %

Agricultural

     947       14.7 %     791       15.1 %

Real estate – residential

     132       1.9 %     168       1.9 %

Real estate – commercial

     4,322       50.5 %     4,549       49.9 %

Real estate – construction & land development

     1,545       6.6 %     1,325       6.1 %

Equity Lines of Credit

     554       3.9 %     426       3.9 %

Auto

     1,880       10.4 %     1,911       10.6 %

Other

     129       0.5 %     108       0.6 %

Total

   $ 10,402       100 %   $ 10,352       100 %

 

The allowance for loan losses totaled $10.4 million at March 31, 2022  and  December 31, 2021. At least quarterly, the Company evaluates each specific reserve and if it determines that the loss represented by the specific reserve is uncollectable it records a charge-off for the uncollectable portion. Specific reserves related to impaired loans totaled $23 thousand at March 31, 2022 and $28 thousand at December 31, 2021.  The allowance for loan losses as a percentage of total loans was 1.24% at March 31, 2022 and 1.23% at December 31, 2021.

 

The Company places loans 90 days or more past due on nonaccrual status unless the loan is well secured and in the process of collection. A loan is considered to be in the process of collection if, based on a probable specific event, it is expected that the loan will be repaid or brought current. Generally, this collection period would not exceed 90 days. When a loan is placed on nonaccrual status the Company's general policy is to reverse and charge against current income previously accrued but unpaid interest. Interest income on such loans is subsequently recognized only to the extent that cash is received, and future collection of principal is deemed by management to be probable. Where the collectability of the principal or interest on a loan is considered to be doubtful by management, it is placed on nonaccrual status prior to becoming 90 days delinquent.

 

35
 

 

Impaired loans are measured based on the present value of the expected future cash flows discounted at the loan's effective interest rate or the fair value of the collateral if the loan is collateral dependent. The amount of impaired loans is not directly comparable to the amount of nonperforming loans disclosed later in this section. The primary difference between impaired loans and nonperforming loans is that impaired loan recognition considers not only loans 90 days or more past due, restructured loans and nonaccrual loans but also may include identified problem loans other than delinquent loans where it is considered probable that we will not collect all amounts due to us (including both principal and interest) in accordance with the contractual terms of the loan agreement.

 

A restructuring of a debt constitutes a troubled debt restructuring (TDR) if the Company, for economic or legal reasons related to the debtor's financial difficulties, grants a concession to the debtor that it would not otherwise consider. Restructured workout loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms. Loans that are reported as TDRs are considered impaired and measured for impairment as described above.

 

Loans restructured (TDRs) not included in nonperforming loans in the following table totaled $0.9 million at March 31, 2022 and December 31, 2021, 2020 and 2019. For additional information related to restructured loans see Note 4 to the condensed consolidated financial statements contained within this Form 10-Q.

 

The following table sets forth the amount of the Company's nonperforming assets as of the dates indicated.

 

   

At

                          
   

March 31,

    

At December 31,

  
   

2022

    

2021

    

2020

    

2019

  
   

(dollars in thousands)

  
                                 

Nonaccrual loans

   $ 4,733     $ 4,863     $ 2,536     $ 2,050  

Loans past due 90 days or more and still accruing

     -       -       -       -  

Total nonperforming loans

     4,733       4,863       2,536       2,050  

Other real estate owned

     487       487       403       707  

Other vehicles owned

     23       47       31       56  

Total nonperforming assets

   $ 5,243     $ 5,397     $ 2,970     $ 2,813  

Interest income forgone on nonaccrual loans

   $ 69     $ 381     $ 119     $ 158  

Interest income recorded on a cash basis on nonaccrual loans

   $ -     $ -     $ -     $ -  

Nonperforming loans to total loans

     0.56 %     0.58 %     0.36 %     0.33 %

Nonperforming assets to total assets

     0.32 %     0.33 %     0.27 %     0.33 %

 

Nonperforming loans at March 31, 2022 were $4.7 million, a decrease of $130 thousand from $4.9 million at December 31, 2021.  There were no specific reserves on nonaccrual loans at March 31, 2022 or December 31, 2021.  Performing loans past due thirty to eighty-nine days were $3.2 million at March 31, 2022 down from $3.5 million at December 31, 2021.

 

A substandard loan is not adequately protected by the current sound worth and paying capacity of the borrower or the value of the collateral pledged, if any. Total substandard loans increased by $104 thousand from $5.5 million at December 31, 2021 to $5.6 million at March 31, 2022. Loans classified as special mention increased by $174 thousand from $5.0 million at December 31, 2021 to $5.2 million at March 31, 2022. 

 

At March 31, 2022 and December 31, 2021, the Company's recorded investment in impaired loans totaled $4.7 million and $4.9 million, respectively. The specific allowance for loan losses related to impaired loans totaled $23 thousand and  $28 thousand at March 31, 2022 and December 31, 2021.

 

It is the policy of management to make additions to the allowance for loan losses so that it remains appropriate to absorb the inherent risk of loss in the portfolio. Management believes that the allowance at March 31, 2022 is appropriate. However, the determination of the amount of the allowance is judgmental and subject to economic conditions which cannot be predicted with certainty. Accordingly, the Company cannot predict whether charge-offs of loans in excess of the allowance may occur in future periods.

 

Loans Held for Sale. Included in the loan portfolio are loans which are 75% to 90% guaranteed by the Small Business Administration (SBA), US Department of Agriculture Rural Business Cooperative Service (RBS) and Farm Services Agency (FSA). The guaranteed portion of these loans may be sold to a third party, with the Bank retaining the unguaranteed portion. The Company can receive a premium in excess of the adjusted carrying value of the loan at the time of sale.

 

As of  March 31, 2022 and December 31, 2021 the Company had $14.0 million and $31.3 million, respectively in SBA government guaranteed loans held for sale. Loans held for sale are recorded at the lower of cost or fair value and therefore may be reported at fair value on a non-recurring basis. The fair values for loans held for sale are based on either observable transactions of similar instruments or formally committed loan sale prices.

 

36
 

 

OREO represents real property acquired by the Bank either through foreclosure or through a deed in lieu thereof from the borrower. Repossessed assets include vehicles and other commercial assets acquired under agreements with delinquent borrowers. OREO holdings represented 3 properties totaling $0.5 million at March 31, 2022 and  December 31, 2021. Nonperforming assets as a percentage of total assets were 0.32% at March 31, 2022 and 0.33% at December 31, 2021.

 

The following table provides a summary of the change in the number and balance of OREO properties for the three months ended March 31, 2022 and 2021 (dollars in thousands): 

 

   

Three Months Ended March 31,

  
   

#

    

2022

    

#

    

2021

  

Beginning Balance

     3     $ 487       3     $ 403  

Additions

     -       -       1       177  

Dispositions

     -       -       -       -  

Ending Balance

     3     $ 487       4     $ 580  

 

Investment Portfolio and Federal Funds Sold. Total investment securities were $316 million as of March 31, 2022 and $306 million as of December 31, 2021. Unrealized losses on available-for-sale investment securities totaling $21.7 million were recorded, net of $6.4 million in tax benefit, as accumulated other comprehensive loss within shareholders' equity at March 31, 2022.   Unrealized gains on available-for-sale investment securities totaling $1.7 million were recorded, net of $493 thousand in tax expense, as accumulated other comprehensive income within shareholders' equity at December 31, 2021. No securities were sold during the three months ended March 31, 2022 and 2021. The change from an unrealized gain of $1.7 million  to an unrealized loss of $21.7 million is related to a significant increase in market rates. During the first quarter of 2022 the Federal Reserve began increasing the Federal Funds rate to combat inflationary pressures in the economy.

 

The investment portfolio at March 31, 2022 consisted of $163.6 million in securities of U.S. Government-sponsored agencies, $58.9 million in securities of U.S. Government-agencies and 194 municipal securities totaling $93.7 million. The investment portfolio at December 31, 2021 consisted of $151.0 million in securities of U.S. Government-sponsored agencies, $57.2 million in securities of U.S. Government-agencies and 188 municipal securities totaling $97.7 million.

 

There were no Federal funds sold at March 31, 2022 and December 31, 2021; however, the Bank maintained interest earning balances at the Federal Reserve Bank totaling $328.5 million at March 31, 2022 and $320.5 million at December 31, 2021. The balance, at March 31, 2022, earns interest at the rate of 0.40%.

 

The Company classifies its investment securities as available-for-sale or held-to-maturity. Currently all securities are classified as available-for-sale. Securities classified as available-for-sale may be sold to implement the Company's asset/liability management strategies and in response to changes in interest rates, prepayment rates and similar factors. 

 

Deposits. Total deposits increased by $28.7 million from $1.4 billion at December  31, 2021 to $1.5 billion at March 31, 2022. The increase in deposits includes increases of $15.7 million in demand deposits and $17.1 million in savings accounts.  Money market accounts declined by $3.6 million and time deposits declined by $0.5 million. 

 

37
 

 

The following table shows the distribution of deposits by type at March 31, 2022 and December 31, 2021.

 

           

Percent of

            

Percent of

  
           

Deposits in Each

            

Deposits in Each

  
   

Balance at End

    

Category to

    

Balance at End

    

Category to

  

(dollars in thousands)

  

of Period

    

Total Deposits

    

of Period

    

Total Deposits

  
   

03/31/2022

    

03/31/2022

    

12/31/2021

    

12/31/2021

  

Non-interest bearing

   $ 752,246       51.3 %   $ 736,582       51.2 %

Money Market

     257,404       17.5 %     261,005       18.1 %

Savings

     394,198       26.9 %     377,050       26.2 %

Time

     63,810       4.3 %     64,362       4.5 %

Total Deposits

   $ 1,467,658       100 %   $ 1,438,999       100 %

 

Deposits represent the Bank's primary source of funds. Deposits are primarily core deposits in that they are demand, savings and time deposits generated from local businesses and individuals. These sources are considered to be relatively stable, long-term relationships thereby enhancing steady growth of the deposit base without major fluctuations in overall deposit balances. The Company experiences, to a small degree, some seasonality with the slower growth period between November through April, and the higher growth period from May through October. To assist in meeting any funding demands, the Company maintains a secured borrowing arrangement with the Federal Home Loan Bank of San Francisco (FHLB). There were no brokered deposits at March 31, 2022 or December 31, 2021.

 

Short-term Borrowing Arrangements. The Company is a member of the FHLB and can borrow up to $264 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $516 million. The Company is required to hold FHLB stock as a condition of membership. At March 31, 2022  the Company held $4.5 million of FHLB stock which is recorded as a component of other assets. Based on this level of stock holdings the Company can borrow up to $164.8 million. To borrow the full $264 million in available credit the Company would need to purchase $2.7 million in additional FHLB stock. In addition to its FHLB borrowing line, the Company has unsecured short-term borrowing agreements with three of its correspondent banks in the amounts of $50 million, $20 million and $10 million.  There were no outstanding borrowings to the FHLB or the correspondent banks at March 31, 2022 and December 31, 2021. 

 

Note Payable.  During 2021 and until January 25, 2022, the Company maintained a $15 million line of credit facility with one of its correspondent banks (the "Note").  Interest on the Note was payable at the "Prime Rate".  There were no borrowings on the Note during the current quarter or during the year ended December 31, 2021. The Note was secured by 100 shares of Plumas Bank stock representing the Company's 100% ownership interest in Plumas Bank. Under the Note, the Bank was subject to several negative and affirmative covenants including, but not limited to, providing timely financial information, maintaining specified levels of capital, restrictions on additional borrowings, and meeting or exceeding certain capital and asset quality ratios.

 

On January 25, 2022 the Company replaced this facility with a $15 million Loan Agreement (the “Loan Agreement”) and Promissory Note (the “Term Note”). The Term Note matures on January 25, 2035 and can be prepaid at any time.  During the initial three years of the Loan Agreement the Term Note functions as an interest only revolving line of credit.  Beginning on year four the Term Note converts into a term loan requiring semi-annual principal and interest payments and no further advances can be made. The proceeds of this lending facility shall be used by the Company for general corporation purposes, and to provide capital injections into the Bank. The Term Note bears interest at a fixed rate of 3.85% for the first 5 years and then at a floating interest rate linked to WSJ Prime Rate for the remaining eight year term. The Loan Agreement provides for a $187,500 loan fee. The Note is secured by the common stock of the Bank. The Loan Agreement contains certain financial and non-financial covenants, which include, but are not limited to, a minimum leverage ratio at the Bank, a minimum total risk-based capital ratio at the Bank, a maximum Texas Ratio at the Bank, a minimum level of Tier 1 capital at the Bank  and a return on average assets needed to generate a 1.25X debt service coverage ratio. The Loan Agreement also contains customary events of default, including, but not limited to, failure to pay principal or interest, the commencement of certain bankruptcy proceedings, and certain adverse regulatory events affecting the Company or the Bank. Upon the occurrence of an event of default under the Loan Agreement, the Company’s obligations under the Loan Agreement may be accelerated. The Company was in compliance with all covenants related to the Term Note at March 31, 2022 and has not borrowed on the Term Note.

 

Repurchase Agreements. The Bank offers a repurchase agreement product for its larger  customers which use securities sold under agreements to repurchase as an alternative to interest-bearing deposits. Securities sold under agreements to repurchase totaling $9.9 million and $17.3 million at March 31, 2022 and December 31, 2021, respectively are secured by U.S. Government agency securities with a carrying amount of $20.7 million and $23.0 million at March 31, 2022 and December 31, 2021, respectively. Interest paid on this product is similar to that which is paid on the Bank’s money market accounts; however, these are not deposits and are not FDIC insured.

 

Junior Subordinated Deferrable Interest Debentures. Plumas Statutory Trust I and II are business trust subsidiaries formed by the Company with capital at March 31, 2022 of $366,000 and $184,000, respectively, for the sole purpose of issuing trust preferred securities fully and unconditionally guaranteed by the Company.

 

During 2002, Trust I issued 6,000 Floating Rate Capital Trust Pass-Through Securities ("Trust Preferred Securities"), with a liquidation value of $1,000 per security, for gross proceeds of $6,000,000. During 2005, Trust II issued 4,000 Trust Preferred Securities with a liquidation value of $1,000 per security, for gross proceeds of $4,000,000. The entire proceeds were invested by Trust I in the amount of $6,186,000 and Trust II in the amount of $4,124,000 in Floating Rate Junior Subordinated Deferrable Interest Debentures (the "Subordinated Debentures") issued by the Company, with identical maturity, repricing and payment terms as the Trust Preferred Securities. The Subordinated Debentures represent the sole assets of Trusts I and II.

 

Trust I’s Subordinated Debentures mature on September 26, 2032 and bear an effective interest rate of 4.15%, with  payments due quarterly. Trust II’s Subordinated Debentures mature on September 28, 2035 and bear an effective interest rate of 2.23%, with payments due quarterly. The effective interest rate includes the effect of interest rate swaps that are associated with these borrowings.  See Interest Rate Swaps below. The interest rate of the Trust Preferred Securities issued by Trust I adjust on each quarterly anniversary date to equal the 3-month LIBOR plus 3.40%. The Trust Preferred Securities issued by Trust II adjust on each quarterly anniversary date to equal the 3-month LIBOR plus 1.48%. Both Trusts I and II have the option to defer payment of the distributions for a period of up to five years, as long as the Company is not in default on the payment of interest on the Subordinated Debentures.

 

Interest expense recognized by the Company for the three months ended March 31, 2022 and 2021 related to the subordinated debentures was $88 thousand and $79 thousand, respectively.

 

 

38
 

 

Interest Rate Swaps

 

From time to time, we may use interest rate swaps or other instruments to manage our interest rate exposure and reduce the impact of future interest rate changes.  These financial instruments are not used for trading or speculative purposes.  On May 26, 2020 we entered into two separate interest rate swap agreements, effectively converting the $10 million in Subordinated Debentures to fixed obligations.  The swaps have a 10 year maturity and fix the LIBOR rate on the Subordinated Debentures at approximately 75 basis points. These agreements have been designated and qualify as cash flow hedging instruments and, as such changes in the fair value are recorded in accumulated other comprehensive income/loss to the extent the agreements are effective hedges.  At March 31, 2022  and December 31, 2021 the carrying value of the swaps, which was included in other assets, was an unrealized gain of $1.3 million and $607 thousand, respectively. 

 

Capital Resources

  

Shareholders’ equity decreased by $11.0 million from $134.1 million at December 31, 2021 to $123.1 million at March 31, 2022. The $11.0 million decrease was related to a reduction in accumulated other comprehensive income of $16.0 million and shareholder dividends of $0.9 million partially offset by earnings during the first three months of 2022 of $5.7 million and $0.2 million representing stock option activity.

 

It is the policy of the Company to periodically distribute excess retained earnings to the shareholders through the payment of cash dividends. Such dividends help promote shareholder value and capital adequacy by enhancing the marketability of the Company’s stock. All authority to provide a return to the shareholders in the form of a cash or stock dividend or split rests with the Board of Directors. The Board will periodically, but on no regular schedule, review the appropriateness of a cash dividend payment. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. The Company is subject to various restrictions on the payment of dividends. A quarterly cash dividend of $0.16 was paid on February 15, 2022 and quarterly cash dividends of  $0.14 per share were paid on November 15, 2021,  August 16, 2021,  May 17, 2021 and February 15, 2021.

 

Capital Standards. The Company uses a variety of measures to evaluate its capital adequacy. Management reviews these capital measurements on a monthly basis and takes appropriate action to ensure that they are within established internal and external guidelines. The FDIC has promulgated risk-based capital guidelines for all state non-member banks such as the Bank. These guidelines establish a risk-adjusted ratio relating capital to different categories of assets and off-balance sheet exposures.

 

In July, 2013, the federal bank regulatory agencies adopted rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. depository organizations, sometimes called “Basel III,” that increased the minimum regulatory capital requirements for bank holding companies and depository institutions and implemented strict eligibility criteria for regulatory capital instruments. The Basel III capital rules include a minimum common equity Tier 1 ratio of 4.5%, a Tier 1 capital ratio of 6.0%, a total risk-based capital ratio of 8.0%, and a minimum leverage ratio of 4.0% (calculated as Tier 1 capital to average consolidated assets). The minimum capital levels required to be considered “well capitalized” include a common equity Tier 1 ratio of 6.5%, a Tier 1 risk-based capital ratio of 8.0%, a total risk-based capital ratio of 10.0%  and a leverage ratio of 5.0%.  In addition, the Basel III capital rules require that banking organizations maintain a capital conservation buffer of 2.5% above the minimum capital requirements in order to avoid restrictions on their ability to pay dividends, repurchase stock or pay discretionary bonuses. Including the capital conservation buffer of 2.5%, the Basel III capital rules require the following minimum ratios for a bank holding company or bank to be considered well capitalized: a common equity Tier 1 capital ratio of 7.0%; a Tier 1 capital ratio of 8.5%, and a total capital ratio of 10.5%. At March 31, 2022 and  December 31, 2021, the Bank’s capital ratios exceeded the thresholds necessary to be considered “well capitalized” under the Basel III framework.

 

Under the FRB’s Small Bank Holding Company and Savings and Loan Holding company Policy Statement (the “Policy Statement”), qualifying bank holding companies with less than $3 billion in consolidated assets are exempt from the Basel III consolidated capital rules. The Company qualifies for treatment under the Policy Statement and is not currently subject to the Basel III consolidated capital rules at the bank holding company level. The Basel III capital rules continue to apply to the Bank.

 

In 2019, the federal bank regulators issued a rule establishing a “community bank leverage ratio” (the ratio of a bank’s tier 1 capital to average total consolidated assets) that qualifying institutions with less than $10 billion in assets may elect to use in lieu of the generally applicable leverage and risk-based capital requirements under Basel III. A qualifying banking organization that elects to use the new ratio will be considered to have met all applicable federal regulatory capital and leverage requirements, including the minimum capital levels required to be considered “well capitalized, ” if it maintains a community bank leverage ratio capital exceeding 9%.  The new rule became effective on January 1, 2020.  Plumas Bank has chosen not to opt into the community bank leverage ratio at this time.

 

The following table sets forth the Bank's actual capital amounts and ratios (dollar amounts in thousands):

 

                   

Minimum Amount of Capital Required

  
                                   

To be Well-Capitalized

  
                   

For Capital

    

Under Prompt

  
   

Actual

    

Adequacy Purposes (1)

    

Corrective Provisions

  
   

Amount

    

Ratio

    

Amount

    

Ratio

    

Amount

    

Ratio

  

March 31, 2022

                                                

Common Equity Tier 1 Ratio

   $ 138,803       14.8 %   $ 42,179       4.5 %   $ 60,926       6.5 %

Tier 1 Leverage Ratio

     138,803       8.5 %     65,199       4.0 %     81,498       5.0 %

Tier 1 Risk-Based Capital Ratio

     138,803       14.8 %     56,239       6.0 %     74,986       8.0 %

Total Risk-Based Capital Ratio

     149,546       16.0 %     74,986       8.0 %     93,732       10.0 %
                                                 

December 31, 2021

                                                

Common Equity Tier 1 Ratio

   $ 134,015       14.4 %   $ 42,024       4.5 %   $ 60,701       6.5 %

Tier 1 Leverage Ratio

     134,015       8.4 %     64,066       4.0 %     80,083       5.0 %

Tier 1 Risk-Based Capital Ratio

     134,015       14.4 %     56,032       6.0 %     74,709       8.0 %

Total Risk-Based Capital Ratio

     144,708       15.5 %     74,709       8.0 %     93,387       10.0 %

 

(1) Does not include amounts required to maintain the capital conservation buffer under the new capital rules

 

Management believes that Plumas Bank currently meets all its capital adequacy requirements.

 

The current and projected capital positions of the Bank and the impact of capital plans and long-term strategies are reviewed regularly by management. The Company policy is to maintain the Bank’s ratios above the prescribed well-capitalized ratios at all times.

 

39
 

 

Off-Balance Sheet Arrangements

 

Loan Commitments. In the normal course of business, there are various commitments outstanding to extend credits that are not reflected in the financial statements. Commitments to extend credit and letters of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Annual review of commercial credit lines, letters of credit and ongoing monitoring of outstanding balances reduces the risk of loss associated with these commitments. As of March 31, 2022, the Company had $163.1 million in unfunded loan commitments and no letters of credit. This compares to $162.5 million in unfunded loan commitments and $12 thousand in letters of credit at December 31, 2021. Of the $163.1 million in unfunded loan commitments, $106.1 million and $57.0 million represented commitments to commercial and consumer customers, respectively. Of the total unfunded commitments at March 31, 2022, $92.5 million were secured by real estate, of which $45.2 million was secured by commercial real estate and $47.3 million was secured by residential real estate mostly in the form of equity lines of credit. The commercial loan commitments not secured by real estate primarily represent business lines of credit, while the consumer loan commitments not secured by real estate primarily represent revolving credit card lines and overdraft protection lines. Since some of the commitments are expected to expire without being drawn upon the total commitment amounts do not necessarily represent future cash requirements.

 

Operating Leases. The Company leases three depository branches, one of which is a land lease on which we own the building, three lending offices, two administrative offices and two non-branch automated teller machine locations.  The expiration dates of the leases vary, with the first such lease expiring during 2022 and the last such lease expiring during 2044. Including variable lease expense, total rent expense was $154 thousand and $95 thousand during the three months ended March 31, 2022 and 2021, respectively.

 

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, in addition to cash and due from banks, the Company maintains an investment portfolio which includes unpledged U.S. Government-sponsored 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.

 

The Company is a member of the FHLB and can borrow up to $264 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $516 million. See “Short-term Borrowing Arrangements” for additional information on our FHLB borrowing capacity. In addition to its FHLB borrowing line, the Company has unsecured short-term borrowing agreements with three of its correspondent banks in the amounts of $50 million, $20 million and $10 million. There were no outstanding borrowings to the FHLB or the correspondent banks at March 31, 2022 and December 31, 2021. 

 

Customer deposits are the Company’s primary source of funds. Total deposits increased by $28.7 million from $1.4 billion at December  31, 2021 to $1.5 billion at March 31, 2022. Deposits are held in various forms with varying maturities. The Company’s securities portfolio, Federal funds sold, FHLB advances, and cash and due from banks serve as the primary sources of liquidity, providing adequate funding for loans during periods of high loan demand. During periods of decreased lending, funds obtained from the maturing or sale of investments, loan payments, and new deposits are invested in short-term earning assets, such as cash held at the FRB, 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 borrowings, will provide adequate liquidity for its operations in the foreseeable future.

 

40
 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not required.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of March 31, 2022.  The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.  Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2022.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2022 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

 

41
 

 

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, the Company and/or its subsidiary 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 Form 10-Q you should carefully consider the risk factors that appeared under Item 1A, “Risk Factors” in the Company’s 2021 Annual Report. There are no material changes from the risk factors included within the Company’s 2021 Annual Report.

 

 

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

 

          (a) None.

 

(b) None.

 

(c) None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

42
 

 

ITEM 6. EXHIBITS

 

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

 

2.1 Agreement and Plan of Reorganization and Merger dated as of March 10, 2021, by and between Plumas Bancorp and Feather River included as exhibit 2.1 to the Registrant’s 8-K filed on March 11, 2021, which is incorporated by this reference herein.
   

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 as amended on March 16, 2011 included as Exhibit 3.2 to the Registrant’s Form 10-K for December 31, 2010, which is incorporated by this reference herein.

  

  

3.3

Amendment of the Articles of Incorporation of Registrant dated November 1, 2002, is included as Exhibit 3.3 to the Registrant’s 10-Q for September 30, 2005, which is incorporated by this reference herein.

 

 

3.4

Amendment of the Articles of Incorporation of Registrant dated August 17, 2005, is included as Exhibit 3.4 to the Registrant’s 10-Q for September 30, 2005, which is incorporated by this reference herein.

 

 

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.

 

 
4.1 Description of Securities of Plumas Bancorp Registered Under Section 12 of the Exchange Act, is included as Exhibit 4.1 to the Registrant's 10-K for December 31, 2019, which is incorporated by this reference herein.
   

10.1

Executive Salary Continuation Agreement of Andrew J. Ryback dated December 17, 2008, is included as Exhibit 10.1 to the Registrant’s 10-K for December 31, 2008, 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 

 Amendment to Salary Continuation Agreement of Andrew J. Ryback dated February 1, 2022 is included as Exhibit 10.1 to the Registrant’s 8-K filed on February 1, 2022, which is incorporated by this reference herein.
   

10.4

 Promissory Note and Loan Agreement dated March 2, 2021, is included as Exhibit 10.14 to the Registrant's 10-Q filed on May 5, 2021, which is incorporated by this reference herein.
   

10.5

 Amendment to Salary Continuation Agreement of Richard Belstock dated February 1, 2022 is included as Exhibit 10.2 to the Registrant’s 8-K filed on February 1, 2022, which is incorporated by this reference herein.
   

10.6

 Amendment to Salary Continuation Agreement of BJ North dated February 1, 2022 is included as Exhibit 10.3 to the Registrant’s 8-K filed on February 1, 2022, which is incorporated by this reference herein.
   

10.7

 Amendment to Salary Continuation Agreement of Jeffery Moore dated February 1, 2022 is included as Exhibit 10.4 to the Registrant’s 8-K filed on February 1, 2022, which is incorporated by this reference herein.

  

  
10.8 Amendment to Salary Continuation Agreement of  Aaron Boigon dated February 1, 2022 is included as Exhibit 10.5 to the Registrant’s 8-K filed on February 1, 2022, which is incorporated by this reference herein.
   

10.9

 Loan Agreement dated January 25, 2022 is included as Exhibit 10.1 to the Registrant's 8-K filed on January 26, 2022, which is incorporated by this reference herein.

  

  

10.10

 Promissory Note dated January 25, 2022 is included as Exhibit 10.2 to the Registrant's 8-K filed on January 26, 2022, which is incorporated by this reference herein.

  

  

10.11

 Salary Continuation Agreement of Richard L. Belstock dated April 1, 2016, is included as Exhibit 10.2 to the Registrant’s 8-K filed on April 4, 2016, which is incorporated by this reference herein.

  

  

10.12

Salary Continuation Agreement of BJ North dated April 1, 2016, is included as Exhibit 10.4 to the Registrant’s 8-K filed on April 4, 2016, which is incorporated by this reference herein.

  

  

10.13

Director Retirement Agreement of Steven M. Coldani dated December 21, 2016, is included as Exhibit 10.13 to the Registrant’s 10-K filed on March 17, 2017, which is incorporated by this reference herein.
   
10.14 Salary Continuation Agreement of Jeff Moore dated April 1, 2020, is included as Exhibit 10.14 to the Registrant’s 10-K filed on March 3, 2021, which is incorporated by this reference herein.
   
10.15 Salary Continuation Agreement of Aaron Boigon dated April 1, 2019, is included as Exhibit 10.4 to the Registrant’s 8-K filed on April 2, 2019, 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.

 

43
 

 

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.
   

10.24

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.

  

  

10.33

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.

  

  
10.41 Form of Indemnification Agreement (Plumas Bancorp) is included as Exhibit 10.1 to the Registrant's 8-K dated August 20, 2020,which is incorporated by this reference herein.

  

 

10.42

 Form of Indemnification Agreement (Plumas Bank) is included as Exhibit 10.2 to the Registrant's 8-K dated August 20, 2020,which is incorporated by this reference herein.

 

 

10.47 

2013 Stock Option Plan is included as Exhibit 99.1 of the Form S-8 filed September 12, 2013, which is incorporated by this reference herein.

  

  

10.48

Specimen Form of Incentive Stock Option Agreement under the 2013 Stock Option Plan is included as Exhibit 99.2 of the Form S-8 filed September 12, 2013, which is incorporated by this reference herein.

  

  

10.49

Specimen Form of Nonqualified Stock Option Agreement under the 2013 Stock Option Plan is included as Exhibit 99.3 of the Form S-8 filed September 12, 2013, which is incorporated by this reference herein.

  

  

10.51

First Amendment to Split Dollar Agreement of Andrew J. Ryback, is included as Exhibit 10.51 to the Registrant’s 10-K for December 31, 2008, which is incorporated by this reference herein.
   
10.52 Employment Agreement by and among Andrew Ryback, Plumas Bancorp and Plumas Bank dated as of December 16, 2021, is included as Exhibit 10.1 to the Registrant's 8-K filed on December 17, 2021, which is incorporated by this reference herein.
   

10.66

Director Retirement Agreement of Robert McClintock, is included as Exhibit 10.66 to the Registrant’s 10-K filed on March 23, 2012, which is incorporated by this reference herein.

 

  

10.67

First Amendment to the Plumas Bank Amended and Restated Director Retirement Agreement for Terrance J. Reeson adopted on September 19, 2007, is included as Exhibit 10.67 to the Registrant’s 8-K filed on September 25, 2007, which is incorporated by this reference herein.
   

10.69

First Amendment to the Plumas Bank Amended and Restated Director Retirement Agreement for Daniel E. West adopted on September 19, 2007, is included as Exhibit 10.69 to the Registrant’s 8-K filed on September 25, 2007, which is incorporated by this reference herein.

  

  

10.70

First Amendment to the Plumas Bank Amended and Restated Director Retirement Agreement for Gerald W. Fletcher adopted on October 9, 2007, is included as Exhibit 10.70 to the Registrant’s 10-Q for September 30, 2007, which is incorporated by this reference herein.

   

  

31.1*

Rule 13a-14(a) [Section 302] Certification of Principal Financial Officer dated May 5, 2022.

  

  

31.2*

Rule 13a-14(a) [Section 302] Certification of Principal Executive Officer dated May 5, 2022.

  

  

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 May 5, 2022.
   

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 May 5, 2022.

 

44
 

 

101.INS* Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
   

101.SCH*

 Inline XBRL Taxonomy Extension Schema Document

  

  

101.CAL*

 Inline XBRL Taxonomy Extension Calculation Linkbase Document

  

  

101.DEF*

 Inline XBRL Taxonomy Extension Definition Linkbase Document

  

  

101.LAB*

 Inline XBRL Taxonomy Extension Label Linkbase Document

  

  

101.PRE*

 Inline XBRL Taxonomy Extension Presentation Linkbase Document
   
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

 

*

Filed herewith

 

 

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: May 5, 2022

 

 

/s/ Richard L. Belstock

 

Richard L. Belstock

 

Chief Financial Officer

 

 

 

/s/ Andrew J. Ryback

 

Andrew J. Ryback

 

Director, President and Chief Executive Officer

 

45