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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-Q (Mark One)x
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED September 30, 2004o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD FROM
TO
 COMMISSION FILE NUMBER: 000-49883 PLUMAS BANCORP  California
(State or Other Jurisdiction of Incorporation or
Organization)
    
    75-2987096
(I.R.S. Employer Identification No.)35 S. Lindan Avenue, Quincy, California
(Address of Principal Executive Offices)
    
    95971
(Zip Code)
 Registrants Telephone Number, Including Area Code (530) 283-7307 Indicated by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No o Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes o No x Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of November 8, 2004; 3,267,365 shares




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TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTCONDENSED CONSOLIDATED BALANCE SHEETCONDENSED CONSOLIDATED STATEMENT OF INCOMECONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSPART I  FINANCIAL INFORMATIONITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGSITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDSITEM 3. DEFAULTS UPON SENIOR SECURITIESITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSITEM 5. OTHER INFORMATIONITEM 6. EXHIBITS AND REPORTS ON FORM 8-KSIGNATURESEXHIBIT 10.46EXHIBIT 10.47EXHIBIT 10.48EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 31.3EXHIBIT 32.1EXHIBIT 32.2EXHIBIT 32.3    Table of Contents  
 PART I  FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENT
 PLUMAS BANCORP 
 CONDENSED CONSOLIDATED BALANCE SHEET
  Unaudited
    
    AuditedSeptember 30,
    
    December 31,2004
    
    2003AssetsCash and due from banks
    
    $
    21,613
    
    
    $
    24,717Federal funds sold
    
    
    22,110
    
    
    
    5,295Loans held for sale
    
    
    232
    
    
    
    276Investment securities (market value of $109,719 at
September 30, 2004 and $116,102 at December 31, 2003)
    
    
    109,638
    
    
    
    115,883Loans, less allowance for loan losses of $2,725 at
September 30, 2004 and $2,564 at December 31, 2003
(Notes 3 and 4)
    
    
    248,202
    
    
    
    214,863Bank premises and equipment, net
    
    
    9,996
    
    
    
    10,306Intangible assets, net
    
    
    2,014
    
    
    
    2,238Accrued interest receivable and other assets
    
    
    16,397
    
    
    
    16,684Total assets
    
    $
    430,202
    
    
    $
    390,262Liabilities and Shareholders EquityDeposits:Non-interest bearing
    
    $
    116,397
    
    
    $
    96,830Interest bearing
    
    
    277,058
    
    
    
    259,012Total deposits
    
    
    393,455
    
    
    
    355,842Accrued interest payable and other liabilities
    
    
    3,080
    
    
    
    2,485Junior subordinated deferrable interest debentures
    
    
    6,186
    
    
    
    6,186Total liabilities
    
    
    402,721
    
    
    
    364,513Commitments and contingencies (Note 4)
    
    
    
    
    
    
    Shareholders equity:Serial preferred stock, no par value; 10,000,000
shares authorized, no shares issued or outstanding
    
    
    
    
    
    
    Common stock, no par value; 15,000,000 shares
authorized; issued and outstanding  3,267,365 shares
at September 30, 2004 and 3,242,027 shares at December
31, 2003
    
    
    4,012
    
    
    
    3,945Retained earnings
    
    
    23,689
    
    
    
    21,638Accumulated other comprehensive (loss) income (Note 6)
    
    
    (220
    )
    
    
    166Total shareholders equity
    
    
    27,481
    
    
    
    25,749Total liabilities and shareholders equity
    
    $
    430,202
    
    
    $
    390,262
 See notes to condensed consolidated financial statements. 2




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PLUMAS BANCORP 
 CONDENSED CONSOLIDATED STATEMENT OF INCOME
  Unaudited
    
    UnauditedFor the Three Months
    
    For the Nine MonthsEnded September 30
    
    Ended September 302004
    
    2003
    
    2004
    
    2003Interest Income:Interest and fees on loans
    
    $
    4,179
    
    
    $
    3,971
    
    
    $
    11,855
    
    
    $
    12,075Interest on investment securities:Taxable
    
    
    780
    
    
    
    422
    
    
    
    2,320
    
    
    
    1,360Exempt from Federal income taxes
    
    
    126
    
    
    
    34
    
    
    
    308
    
    
    
    100Interest on Federal funds sold
    
    
    44
    
    
    
    39
    
    
    
    101
    
    
    
    93Interest on loans held for sale
    
    
    19
    
    
    
    67
    
    
    
    36
    
    
    
    151Total interest income
    
    
    5,148
    
    
    
    4,533
    
    
    
    14,620
    
    
    
    13,779Interest Expense:Interest on deposits
    
    
    639
    
    
    
    598
    
    
    
    1,892
    
    
    
    2,101Other
    
    
    80
    
    
    
    72
    
    
    
    224
    
    
    
    221Total interest expense
    
    
    719
    
    
    
    670
    
    
    
    2,116
    
    
    
    2,322Net interest income before provision for loan
losses
    
    
    4,429
    
    
    
    3,863
    
    
    
    12,504
    
    
    
    11,457Provision for Loan Losses
    
    
    300
    
    
    
    175
    
    
    
    600
    
    
    
    625Net interest income after provision for loan losses
    
    
    4,129
    
    
    
    3,688
    
    
    
    11,904
    
    
    
    10,832Non-Interest Income:Service charges
    
    
    789
    
    
    
    492
    
    
    
    2,205
    
    
    
    1,468Gain on sale of loans
    
    
    
    
    
    
    8
    
    
    
    49
    
    
    
    67Gain on sale of available-for-sale investment securities, net
    
    
    82
    
    
    
    73
    
    
    
    229
    
    
    
    189(Loss) gain on sale of other real estate and write-off of
judgment receivable, net
    
    
    (19
    )
    
    
    
    
    
    
    70
    
    
    
    20Earnings on cash surrender value of life insurance policies
    
    
    108
    
    
    
    55
    
    
    
    315
    
    
    
    164Other
    
    
    299
    
    
    
    265
    
    
    
    747
    
    
    
    664Total non-interest income
    
    
    1,259
    
    
    
    893
    
    
    
    3,615
    
    
    
    2,572Non-Interest Expenses:Salaries and employee benefits
    
    
    2,221
    
    
    
    1,887
    
    
    
    6,650
    
    
    
    5,382Occupancy and equipment
    
    
    675
    
    
    
    590
    
    
    
    2,027
    
    
    
    1,695Other
    
    
    1,024
    
    
    
    821
    
    
    
    2,917
    
    
    
    2,543Total non-interest expenses
    
    
    3,920
    
    
    
    3,298
    
    
    
    11,594
    
    
    
    9,620Income before income taxes
    
    
    1,468
    
    
    
    1,283
    
    
    
    3,925
    
    
    
    3,784Income Tax Expense
    
    
    537
    
    
    
    501
    
    
    
    1,418
    
    
    
    1,486Net income
    
    $
    931
    
    
    $
    782
    
    
    $
    2,507
    
    
    $
    2,298Basic earnings per share (Notes 5 and 8)
    
    $
    0.29
    
    
    $
    0.24
    
    
    $
    0.77
    
    
    $
    0.71Diluted earnings per share (Notes 5 and 8)
    
    $
    0.28
    
    
    $
    0.24
    
    
    $
    0.75
    
    
    $
    0.69
 See notes to condensed consolidated financial statements. 3




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PLUMAS BANCORP 
 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
  UnauditedFor the Nine MonthsEnded September 30,2004
    
    2003Cash Flows from Operating Activities:Net income
    
    $
    2,507
    
    
    $
    2,298Adjustments to reconcile net income to net cash provided by operating
activities:Provision for loan losses
    
    
    600
    
    
    
    625Decrease in deferred loan origination fees
    
    
    (109
    )
    
    
    (169
    )Depreciation and amortization
    
    
    1,220
    
    
    
    947Net gain on available-for-sale investment securities
    
    
    (229
    )
    
    
    (189
    )Amortization of investment security premiums
    
    
    710
    
    
    
    930Accretion of investment security discounts
    
    
    (61
    )
    
    
    (235
    )Net loss on sale of premises and equipment
    
    
    2
    
    
    
    2Net gains on sale of other real estate and write-off of judgment receivable
    
    
    (70
    )
    
    
    (20
    )Net decrease in loans held for sale
    
    
    44
    
    
    
    1,361Increase in cash surrender value of life insurance
    
    
    (266
    )
    
    
    (138
    )Net decrease (increase) in accrued interest receivable and other assets
    
    
    286
    
    
    
    (346
    )Net increase in accrued interest payable and other liabilities
    
    
    595
    
    
    
    308Provision for deferred taxes
    
    
    (8
    )
    
    
    171Net cash provided by operating activities
    
    
    5,221
    
    
    
    5,545Cash Flows from Investing Activities:Proceeds from matured and called available-for-sale investment securities
    
    
    13,320
    
    
    
    8,500Proceeds from matured and called held-to-maturity investment securities
    
    
    1,275
    
    
    
    4,677Proceeds from sales of available-for-sale investment securities
    
    
    31,378
    
    
    
    17,605Purchases of available-for-sale investment securities
    
    
    (36,652
    )
    
    
    (38,240
    )Purchases of held-to-maturity investment securities
    
    
    (6,231
    )
    
    
    (457
    )Proceeds from principal repayments from available-for-sale
government-guaranteed mortgage-backed securities
    
    
    2,029
    
    
    
    566Proceeds from principal repayments from held-to-maturity
government-guaranteed mortgage-backed securities
    
    
    49
    
    
    
    135Net increase in loans
    
    
    (34,067
    )
    
    
    (7,988
    )Proceeds from sale of other real estate
    
    
    853
    
    
    
    145Purchase of premises and equipment
    
    
    (688
    )
    
    
    (652
    )Deposits on single premium cash surrender value life insurance policies
    
    
    
    
    
    
    (1,695
    )Net cash used in investing activities
    
    
    (28,734
    )
    
    
    (17,404
    )
 Continued on next page. 4




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PLUMAS BANCORP
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Continued) UnauditedFor the Nine MonthsEnded September 30,2004
    
    2003Cash Flows from Financing Activities:Net increase in demand, interest bearing and savings deposits
    
    $
    35,822
    
    
    $
    17,203Net increase (decrease) in time deposits
    
    
    1,791
    
    
    
    (1,741
    )Proceeds from exercise of stock options
    
    
    67
    
    
    
    160Payment of cash dividends
    
    
    (456
    )
    
    
    (387
    )Net cash provided by financing activities
    
    
    37,224
    
    
    
    15,235Increase in cash and cash equivalents
    
    
    13,711
    
    
    
    3,376Cash and Cash Equivalents at Beginning of Period
    
    
    30,012
    
    
    
    37,930Cash and Cash Equivalents at End of Period
    
    $
    43,723
    
    
    $
    41,306Supplemental Disclosure of Cash Flow Information:Cash paid during the period for:Interest expense
    
    $
    2,049
    
    
    $
    2,300Income taxes
    
    $
    1,485
    
    
    $
    1,452Non-Cash Investing Activities:Real estate acquired through foreclosure
    
    $
    145
    
    
    $
    175Vehicles acquired through repossession
    
    $
    92
    
    
    $
    Net change in unrealized gain (loss) on available-for-sale securities
    
    $
    (386
    )
    
    $
    (178
    )Non-Cash Financing Activities:Common stock retired in connection with the exercise of stock options
    
    $
    176
    
    
    $
    74
 See notes to condensed consolidated financial statements. 5




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PLUMAS BANCORP 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. GENERAL Plumas Bancorp (the Company) was incorporated on January 17, 2002 and
subsequently obtained approval from various state and federal agencies to be a
bank holding company in connection with the merger of Plumas Bank (the Bank).
The Company became the sole shareholder of the Bank on June 21, 2002 pursuant
to a Plan of Reorganization and Merger Agreement dated April 3, 2002. Pursuant
to that plan, on June 21, 2002 each outstanding share of the Banks common
stock was exchanged for one share of common stock of the Company. The Company
formed Plumas Statutory Trust I for the sole purpose of issuing trust preferred
securities on September 26, 2002. The Bank operates twelve branches in California, including branches in Alturas,
Chester, Fall River Mills, Greenville, Kings Beach, Loyalton, Portola, Quincy,
Susanville, Tahoe City, Truckee and Westwood. The Banks deposits are insured
by the Federal Deposit Insurance Corporation (FDIC) up to applicable legal
limits. The Banks primary source of revenue is generated from providing loans
to customers who are predominately small and middle market businesses and
individuals residing in the surrounding areas. 2. CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements include the accounts of the Company and
the accounts of its wholly-owned subsidiary, Plumas Bank. Plumas Statutory
Trust I is not consolidated into the Companys consolidated financial
statements and, accordingly, is accounted for under the equity method. In the
opinion of management, the unaudited consolidated financial statements contain
all adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the Companys financial position at September 30, 2004 and
December 31, 2003 and the results of operations and cash flows for the three
and nine month periods ended September 30, 2004 and 2003. Certain
reclassifications have been made to prior periods balances to conform to
classifications used in 2004. Certain disclosures normally presented in the notes to the consolidated
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been omitted. These
interim financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Companys
2003 Annual Report to Shareholders on Form 10-K. The results of operations for
the three-month and nine-month periods ended September 30, 2004 and 2003 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. Management has determined that since all of the commercial banking products and
services offered by the Company are available in each branch of the Bank, all
branches are located within the same economic environment and management does
not allocate resources based on the performance of different lending or
transaction activities, it is appropriate to aggregate the Bank branches and
report them as a single operating segment. 6




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3. LOANS Outstanding loans are summarized below, in thousands: September 30,
    
    December 31,2004
    
    2003Commercial
    
    $
    47,599
    
    
    $
    51,073Agricultural
    
    
    33,006
    
    
    
    26,537Real estate  mortgage
    
    
    93,692
    
    
    
    67,532Real estate  construction and land development
    
    
    23,352
    
    
    
    26,194Consumer
    
    
    53,699
    
    
    
    46,621251,348
    
    
    
    217,957Deferred loans fees, net
    
    
    (421
    )
    
    
    (530
    )Allowance for loan losses
    
    
    (2,725
    )
    
    
    (2,564
    )$
    248,202
    
    
    $
    214,863
 4. COMMITMENTS AND CONTINGENCIES The Company is party to claims and legal proceedings arising in the ordinary
course of business. In the opinion of the Companys management, the amount of
ultimate liability with respect to such proceedings will not have a material
adverse effect on the financial condition or result of operations of the
Company taken as a whole. In the normal course of business, there are various outstanding commitments to
extend credit which are not reflected in the financial statements, including
loan commitments of $95,087,000 and $60,203,000 and letters of credit of
$2,375,000 and $1,802,000 at September 30, 2004 and December 31, 2003,
respectively. Of the loan commitments outstanding at September 30, 2004, $40,314,000 are real
estate construction loan commitments that are expected to fund within the next
twelve months. The remaining commitments primarily relate to revolving lines
of credit or other commercial loans, and many of these are expected to expire
without being drawn upon. Therefore, the total commitments do not necessarily
represent future cash requirements. Each loan commitment and the amount and
type of collateral obtained, if any, are evaluated on an individual basis.
Collateral held varies, but may include real property, bank deposits, debt or
equity securities or business assets. Stand-by letters of credit are conditional commitments written to guarantee the
performance of a customer to a third party. These guarantees are primarily
related to the purchases of inventory by commercial customers and are typically
short-term in nature. Credit risk is similar to that involved in extending
loan commitments to customers and accordingly, evaluation and collateral
requirements similar to those for loan commitments are used. The deferred
liability related to the Companys stand-by letters of credit was not
significant at of September 30, 2004. 7




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5. EARNINGS PER SHARE COMPUTATION Basic earnings per share are computed by dividing net income by the weighted
average common shares outstanding for the period. Diluted earnings per share
reflect the potential dilution that could occur if outstanding stock options
were exercised. Diluted earnings per share are computed by dividing net income
by the weighted average common shares outstanding for the period plus the
dilutive effect of options. For the Three Months
    
    For the Nine MonthsEnded September 30,
    
    Ended September 30,2004
    
    2003
    
    2004
    
    2003Earnings Per Share:Basic earnings per share
    
    $
    0.29
    
    
    $
    0.24
    
    
    $
    0.77
    
    
    $
    0.71Diluted earnings per share
    
    $
    0.28
    
    
    $
    0.24
    
    
    $
    0.75
    
    
    $
    0.69Weighted Average Number of
Shares Outstanding:Basic shares
    
    
    3,264,404
    
    
    
    3,236,521
    
    
    
    3,258,073
    
    
    
    3,227,648Diluted shares
    
    
    3,344,363
    
    
    
    3,327,606
    
    
    
    3,338,031
    
    
    
    3,314,789
 There were 56,275 option shares in the third quarter of 2004 and 56,707 and
5,000 option shares in the nine months ended September 30, 2004 and 2003,
respectively, considered to be antidilutive and therefore omitted from the
above calculations of diluted earnings per share. There were no option shares
in the third quarter of 2003 considered antidilutive. 6. COMPREHENSIVE INCOME Total comprehensive income for the three months ended September 30, 2004 and
2003 totaled $1,967,000 and $473,000, respectively. Comprehensive income is
comprised of net unrealized gains (losses), net of taxes, on available-for-sale
investment securities, which were $1,036,000 and $(309,000) for the three
months ended September 30, 2004 and 2003, respectively, together with net
income. Total comprehensive income for the nine months ended September 30, 2004 and
2003 totaled $2,121,000 and $2,120,000, respectively. Comprehensive income is
comprised of net unrealized gains (losses), net of taxes, on available-for-sale
investment securities, which were $(386,000) and $(178,000) for the nine months
ended September 30, 2004 and 2003, respectively, together with net income. At September 30, 2004 and December 31, 2003, accumulated other comprehensive
(loss) income totaled $(220,000) and $166,000, respectively, and is reflected
as a component of shareholders equity. 7. ACCOUNTING PRONOUCEMENTS For a description of significant accounting policies, see Note 2 to the
consolidated financial statements included in the Companys 2003 Annual Report
on Form 10-K. 8. STOCK-BASED COMPENSATION At September 30, 2004, the Company had two stock-based compensation plans, the
Plumas Bank 2001 and 1991 Stock Option Plans. The Company accounts for these
plans under the recognition and measurement principles of APB Opinion No. 25,
Accounting for Stock Issued to Employees, and related Interpretations. No
stock-based compensation cost is reflected in net income, as all options
granted under these plans had an exercise price equal to the market value of
the underlying common stock on the date of grant. Pro forma adjustments to the Companys consolidated net earnings and earnings
per share are disclosed during the years in which the options become vested.
The following table illustrates the effect on net 8




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income and earnings per share if the Company had applied the fair value
recognition provisions of FASB Statements No. 123, Accounting for Stock-Based
Compensation, to stock-based compensation: For the Three Months
    
    For the Nine MonthsEnded September 30,
    
    Ended September 30,2004
    
    2003
    
    2004
    
    2003Net income as reported, in thousands
    
    $
    931
    
    
    $
    782
    
    
    $
    2,507
    
    
    $
    2,298Deduct: Total stock-based compensation
expense determined under the fair value
based method for all awards, net of
related tax effects, in thousands
    
    
    23
    
    
    
    23
    
    
    
    68
    
    
    
    65Pro forma net income, in thousands
    
    $
    908
    
    
    $
    759
    
    
    $
    2,439
    
    
    $
    2,233Basic earnings per share  as reported
    
    $
    0.29
    
    
    $
    0.24
    
    
    $
    0.77
    
    
    $
    0.71Basic earnings per share  pro forma
    
    $
    0.28
    
    
    $
    0.23
    
    
    $
    0.74
    
    
    $
    0.69Diluted earnings per share  as reported
    
    $
    0.28
    
    
    $
    0.24
    
    
    $
    0.75
    
    
    $
    0.69Diluted earnings per share  pro forma
    
    $
    0.27
    
    
    $
    0.23
    
    
    $
    0.73
    
    
    $
    0.68
 The fair value of each option grant is estimated on the date of grant using an
option-pricing model with the following assumptions: For the Nine Months EndedSeptember 30, 2004
    
    September 30, 2003Weighted average fair value of options granted
    
    $
    4.32
    
    
    $
    4.06Dividend yield
    
    
    1.5
    %
    
    
    1.4
    %Expected volatility
    
    
    15.5
    %
    
    
    17.3
    %Risk-free interest rate
    
    
    2.8
    %
    
    
    2.5
    %Expected option life in years
    
    
    5.0
    
    
    
    5.0
 There were no option grants made during the three-month periods ending
September 30, 2004 and 2003. 9




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PART I  FINANCIAL INFORMATION 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS Certain matters discussed in this Quarterly Report are forward-looking
statements that are subject to risks and uncertainties that could cause actual
results to differ materially from those projected in the forward-looking
statements. Such risks and uncertainties include, among others, (1)
significant increases in competitive pressures in the financial services
industry; (2) changes in the interest rate environment resulting in reduced
margins; (3) general economic conditions, either nationally or regionally,
maybe less favorable than expected, resulting in, among other things, a
deterioration in credit quality; (4) changes in regulatory environment; (5)
loss of key personnel; (6) fluctuations in the real estate market; (7) changes
in business conditions and inflation; (8) operational risks including data
processing systems failures or fraud; and (9) changes in securities markets.
Therefore, the information set forth herein should be carefully considered when
evaluating the business prospects of Plumas Bancorp. When the Company uses in this Quarterly Report the words anticipate,
estimate, expect, project, intend, commit, believe and similar
expressions, the Company intends to identify forward-looking statements. Such
statements are not guarantees of performance and are subject to certain risks,
uncertainties and assumptions, including those described in this Quarterly
Report. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, expected, projected, intended,
committed or believed. The future results and stockholder values of the
Company may differ materially from those expressed in these forward-looking
statements. Many of the factors that will determine these results and values
are beyond the Companys ability to control or predict. For those statements,
the Company claims the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995. INTRODUCTION Plumas Bancorp (the Company) is traded on the OTC Bulletin Board under the
ticker symbol PLBC. The following discussion and analysis sets forth certain
statistical information relating to the Company as of September 30, 2004 and
December 31, 2003 and for the three and nine month periods ended September 30,
2004 and 2003. This discussion should be read in conjunction with the
financial statements and related notes included elsewhere in this Quarterly
Report on Form 10-Q and the financial statements and notes thereto included in
Plumas Bancorps Annual Report filed on Form 10-K for the year ended December
31, 2003. OVERVIEW The Companys net income increased $209 thousand, or 9%, to $2.5 million for
the nine months ended September 30, 2004 from $2.3 million for the same period
in 2003. The primary contributors to the increase in net income for the first
nine months of 2004 were a $1.1 million increase in net interest income and a
$1.0 million increase in non-interest income. The increases were mostly offset
by a $1.3 million increase in salaries and benefits, an increase in occupancy
and equipment of $332 thousand and an increase in other non-interest expenses
of $374 thousand. Total assets at September 30, 2004 were $430 million, an increase of $40
million, or 10%, from the $390 million at December 31, 2003. The growth in
assets was funded by growth in the Companys deposits. Deposits grew $38
million, or 11%, to $393 million at September 30, 2004 from the $356 million at
December 31, 2003. The annualized return on average assets was 0.83% for the nine months ended
September 30, 2004 compared to 0.94% for the same period in 2003. The
annualized return on average equity was 12.5% for 10




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##### Table of Contents



both the nine months ended September 30, 2004 and 2003. Although the Companys
earnings increased during the first nine months of 2004 when compared to the
same period in 2003, the continued growth in assets combined with a
historically low interest rate environment have resulted in declines in the
return on average assets. Total average assets for the nine months ended
September 30, 2004 increased $76 million, or 23%, from the same period in 2003.
Total average equity for the nine months ended September 30, 2004 increased $2
million, or 9%, from the same period in 2003. RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 Net interest income before provision for loan losses.Net interest income, on
a nontax-equivalent basis, was $12.5 million for the nine months ended
September 30, 2004, an increase of $1.1 million, or 9%, from $11.4 million for
the same period in 2003. The increase in net interest income was primarily
attributed to volume increases in the Companys average investment and loan
balances combined with declines in rates paid on the Companys deposits. These
contributing factors were partially offset by declines in the yield on the
Companys loan portfolio and increases in the average balance of the Companys
interest-bearing deposit balances. Interest income increased $840 thousand or 6%, to $14.6 million for the nine
months ended September 30, 2004, up from $13.8 million for the same period in
2003. The increase in interest income was primarily attributed to volume
increases in investment and loan balances partially offset by falling yields on
loan balances. The Companys average investment balances were $114 million for
the nine months ended September 30, 2004, up $52 million, or 85%, from the $62
million for the same period in 2003. The Companys average loan balances were
$225 million for the nine months ended September 30, 2004, up $12 million, or
6%, from the $214 million for the same period in 2003. The Companys average
loan yield was 7.02% for the nine months ended September 30, 2004, down 61
basis points, or 8%, from the 7.63% yield for the same period in 2003. Interest expense decreased $206 thousand, or 9%, to $2.1 million for the nine
months ended September 30, 2004, down from $2.3 million for the same period in
2003. The decrease in interest expense was primarily attributed to rate
decreases for all of the Companys interest-bearing deposits partially offset
by volume increases. The Companys average rate paid on interest-bearing
deposits and other borrowings was 1.04% for the nine months ended September 30,
2004, down 33 basis points, or 24%, from the 1.37% paid for the same period in
2003. As a result of the changes noted above, the net interest margin for the nine
months ended September 30, 2004 decreased 58 basis points, or 11%, to 4.73%,
down from 5.31% for the same period in 2003. 11




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##### Table of Contents



The following table presents for the nine-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 yields expressed in both dollars and yield
percentages, as well as, the amounts of interest expense on interest-bearing
liabilities and the resultant cost expressed in both dollars and rate
percentages. Nonaccrual loans are included in the calculation of average loans
while nonaccrued interest thereon is excluded from the computation of yields
earned: For the Nine Months Ended September 30, 2004
    
    For the Nine Months Ended September 30, 2003Yield
    
    
    
    
    
    
    
    
    
    YieldAverage Balance
    
    Interest
    
    /
    
    Average Balance
    
    Interest
    
    /(in thousands)
    
    (in thousands)
    
    Rate
    
    (in thousands)
    
    (in thousands)
    
    RateInterest-earning assets:Loans (1)(2)
    
    $
    225,484
    
    
    $
    11,890
    
    
    
    7.02
    %
    
    $
    213,503
    
    
    $
    12,226
    
    
    
    7.63
    %Investment securities (1)
    
    
    114,346
    
    
    
    2,628
    
    
    
    3.06
    %
    
    
    61,854
    
    
    
    1,460
    
    
    
    3.14
    %Federal funds sold
    
    
    12,117
    
    
    
    101
    
    
    
    1.11
    %
    
    
    11,815
    
    
    
    93
    
    
    
    1.05
    %Total earning assets
    
    
    351,947
    
    
    
    14,619
    
    
    
    5.53
    %
    
    
    287,172
    
    
    
    13,779
    
    
    
    6.39
    %Cash and demand deposits with banks
    
    
    24,943
    
    
    
    
    
    
    
    
    
    
    
    20,851Other assets
    
    
    25,658
    
    
    
    
    
    
    
    
    
    
    
    18,408Total assets
    
    $
    402,548
    
    
    
    
    
    
    
    
    
    
    $
    326,431Interest-bearing liabilities:NOW deposits
    
    $
    43,475
    
    
    
    43
    
    
    
    0.13
    %
    
    $
    34,067
    
    
    
    64
    
    
    
    0.25
    %Money market deposits
    
    
    64,972
    
    
    
    358
    
    
    
    0.73
    %
    
    
    57,731
    
    
    
    395
    
    
    
    0.91
    %Savings deposits
    
    
    63,320
    
    
    
    214
    
    
    
    0.45
    %
    
    
    46,393
    
    
    
    247
    
    
    
    0.71
    %Time deposits
    
    
    93,187
    
    
    
    1,277
    
    
    
    1.83
    %
    
    
    81,907
    
    
    
    1,395
    
    
    
    2.27
    %Other borrowings (3)
    
    
    6,395
    
    
    
    224
    
    
    
    4.67
    %
    
    
    6,373
    
    
    
    221
    
    
    
    4.60
    %Total interest-bearing liabilities
    
    
    271,349
    
    
    
    2,116
    
    
    
    1.04
    %
    
    
    226,471
    
    
    
    2,322
    
    
    
    1.37
    %Non-interest bearing deposits
    
    
    101,789
    
    
    
    
    
    
    
    
    
    
    
    73,186Other liabilities
    
    
    2,671
    
    
    
    
    
    
    
    
    
    
    
    2,247Shareholders equity
    
    
    26,739
    
    
    
    
    
    
    
    
    
    
    
    24,527Total liabilities & equity
    
    $
    402,548
    
    
    
    
    
    
    
    
    
    
    $
    326,431Cost of funding interest-earning assets (4)
    
    
    
    
    
    
    
    
    
    
    0.80
    %
    
    
    
    
    
    
    
    
    
    
    1.08
    %Net interest income and margin (5)
    
    
    
    
    
    $
    12,503
    
    
    
    4.73
    %
    
    
    
    
    
    $
    11,457
    
    
    
    5.31
    %
   (1)
    
    Not computed on a tax-equivalent basis.(2)
    
    Loan fees included in loan interest income for the nine-month periods
ended September 30, 2004 and 2003 amounted to $340 and $319, respectively.(3)
    
    For the purpose of this schedule the interest expense related to the
Companys junior subordinated debentures is included in other borrowings.(4)
    
    Total interest expense divided by the average balance of total earning
assets.(5)
    
    Net interest income divided by the average balance of total earning assets. 12




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##### Table of Contents



The following table sets forth changes in interest income and interest expense,
for the nine-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: 2004 over 2003 change in net interest income(in thousands)Volume (1)
    
    Rate (2)
    
    Mix (3)
    
    TotalInterest-earning assets:Loans
    
    $
    686
    
    
    $
    (968
    )
    
    $
    (54
    )
    
    $
    (336
    )Investment securities
    
    
    1,239
    
    
    
    (38
    )
    
    
    (33
    )
    
    
    1,168Federal funds sold
    
    
    2
    
    
    
    5
    
    
    
    1
    
    
    
    8Total interest income
    
    
    1,927
    
    
    
    (1,001
    )
    
    
    (86
    )
    
    
    840Interest-bearing liabilities:NOW deposits
    
    
    18
    
    
    
    (30
    )
    
    
    (9
    )
    
    
    (21
    )Money market deposits
    
    
    50
    
    
    
    (77
    )
    
    
    (10
    )
    
    
    (37
    )Savings deposits
    
    
    90
    
    
    
    (90
    )
    
    
    (33
    )
    
    
    (33
    )Time deposits
    
    
    192
    
    
    
    (273
    )
    
    
    (37
    )
    
    
    (118
    )Other borrowings
    
    
    
    
    
    
    2
    
    
    
    1
    
    
    
    3Total interest expense
    
    
    350
    
    
    
    (468
    )
    
    
    (88
    )
    
    
    (206
    )Net interest income
    
    $
    1,577
    
    
    $
    (533
    )
    
    $
    2
    
    
    $
    1,046
   (1)
    
    The volume change in net interest income represents the change in average
balance divided by the previous years rate.(2)
    
    The rate change in net interest income represents the change in rate
divided by the previous years average balance.(3)
    
    The mix change in net interest income represents the change in average
balance multiplied by the change in rate. Provision for loan losses.The Company recorded $600 thousand in provision for
loan losses for the nine months ended September 30, 2004, down $25 thousand, or
4%, from the $625 thousand provision for the same period in 2003. Management
assesses its loan quality monthly to maintain an adequate allowance for loan
losses. Based on information currently available, management believes that the
allowance for loan losses is adequate to absorb potential risks in the
portfolio. However, no assurance can be given that the Company may not sustain
charge-offs which are in excess of the allowance in any given period. The
Companys loan portfolio composition and non-performing assets are further
discussed under the financial condition section below. Non-interest income.During the nine months ended September 30, 2004, total
non-interest income increased $1.0 million, or 41%, to $3.6 million, up from
$2.6 million for the comparable period in 2003. The increase in non-interest
income was primarily the result of increases in service charge revenue,
earnings on bank-owned life insurance policies (BOLI) and gains on the sale
of investment securities and real estate. A large portion of the growth in service charge revenue resulted from an
increase in the Banks overall number of fee generating accounts. As a result
of the acquisition in mid-November 2003 of five branches from a competitor, the
Bank began servicing over 7,300 new deposit accounts. In addition, during
April 2004 the Bank implemented a new overdraft privilege program for select
deposit relationships thereby increasing service charge revenue. 13




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##### Table of Contents



During the last half of 2003, the Bank increased its holding in BOLI by $3.2
million to provide additional coverage for an executive officer of the Company.
As a result, the tax-exempt earnings from these policies increased by $151
thousand to $315 thousand for the nine months ended September 30, 2004 up from
$164 thousand for the same period in 2003. Lastly, the Company recorded gains of $135 thousand in June 2004 on the sale of
two unused banking offices that were acquired from a competitor as part of a
$45.5 million deposit purchase in mid-November 2003. Non-interest expenses.Non-interest expenses consist of salaries and related
employee benefits, occupancy and equipment expenses, professional fees,
business development expenses, telephone expense, stationery and supplies
expense, armored car and courier expense, advertising and promotion expense,
loan expenses, directors fees, and other operating expenses. For the nine
months ended September 30, 2004, non-interest expense increased $2.0 million,
or 21%, to $11.6 million, up from $9.6 million for the comparable period in
2003. Salaries and employee benefits increased $1.3 million, or 24%, over the same
nine-month period last year. This increase was due primarily to the staffing
additions related to the Banks three new branch offices, expansion of the
Companys centralized lending function, staffing additions to manage the
overall growth, increased employee benefit costs related to health-care and
salary continuation plans and the deferral of fewer salary dollars as part of
the loan origination process. Occupancy and equipment increased $332 thousand, or 20%, over the same
nine-month period last year. This increase was due primarily to additional
depreciation and operating costs associated with three new branches. These new
branches began serving the communities of Tahoe City, Kings Beach and Loyalton
in November 2003. Other increases in occupancy and equipment relate to
depreciation on capitalized upgrades to the Companys network systems. Deposit premium amortization increased $123 thousand, or 122%, over the same
nine-month period last year. This increase was the result of additional
premium amortization related to $45.5 million of deposits purchased in November
2003. The following table describes the components of non-interest expense for the
nine-month periods ending September 30, 2004 and 2003. 14




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##### Table of Contents



For the Nine MonthsEnded September 30,(in thousands)2004
    
    2003Salaries and employee benefits
    
    $
    6,650
    
    
    $
    5,382Occupancy and equipment
    
    
    2,027
    
    
    
    1,695Professional
and other fees
    
    
    522
    
    
    
    334Business development
    
    
    284
    
    
    
    281Armored car and courier
    
    
    277
    
    
    
    257Telephone and data communication
    
    
    256
    
    
    
    245Advertising and public relations
    
    
    238
    
    
    
    207Deposit premium amortization
    
    
    224
    
    
    
    101Stationery and supplies
    
    
    223
    
    
    
    218Director compensation
    
    
    213
    
    
    
    190Postage
    
    
    185
    
    
    
    190Loan and collection expenses
    
    
    191
    
    
    
    257Insurance
    
    
    174
    
    
    
    174Other expense
    
    
    130
    
    
    
    89Total non-interest expense
    
    $
    11,594
    
    
    $
    9,620
 15




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##### Table of Contents



RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 Net interest income before provision for loan losses.Net interest income, on
a nontax-equivalent basis, was $4.4 million for the three months ended
September 30, 2004, an increase of $566 thousand, or 15%, from $3.9 million for
the same period in 2003. The increase in net interest income was primarily
attributed to volume increases in the Companys average loan and investment
balances, partially offset by declines in the yield on the Companys loan
balances. Interest income increased $615 thousand, or 14%, to $5.1 million for the three
months ended September 30, 2004. The increase in interest income was primarily
attributed to volume increases in loan and investment balances supported by
increased yields on investments and Federal funds, and partially offset by
falling yields on loan balances. The Companys average loan balances were $240
million for the three months ended September 30, 2004, up $23 million, or 11%,
from the $217 million for the same period in 2003. The Companys average
investment balances were $114 million for the three months ended September 30,
2004, up $52 million, or 84%, from the $62 million for the same period in 2003.
The Companys average loan yield was 6.94% for the three months ended
September 30, 2004, down 45 basis points, or 6%, from the 7.39% yield for the
same period in 2003. The Companys investment yield was 3.16% for the three
months ended September 30, 2004, up 23 basis points, or 8%, from the 2.93%
yield for the same period in 2003. Interest expense increased $49 thousand, or 7%, to $719 thousand for the three
months ended September 30, 2004, up from $670 thousand for the same period in
2003. The increase in interest expense was primarily attributed to the 19%
volume increase in the Companys interest-bearing deposits, partially offset by
the 21 basis point rate decrease in time deposits. As a result of the changes noted above, the net interest margin for the three
months ended September 30, 2004 decreased 39 basis points, or 8%, to 4.80%,
down from 5.19% for the same period in 2003. 16




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##### Table of Contents



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 yields expressed in both dollars and yield
percentages, as well as, the amounts of interest expense on interest-bearing
liabilities and the resultant cost expressed in both dollars and rate
percentages. 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 September 30, 2004
    
    For the Three Months Ended September 30, 2003Yield
    
    
    
    
    
    
    
    
    
    YieldAverage Balance
    
    Interest
    
    /
    
    Average Balance
    
    Interest
    
    /(in thousands)
    
    (in thousands)
    
    Rate
    
    (in thousands)
    
    (in thousands)
    
    RateInterest-earning assets:Loans (1) (2)
    
    $
    239,912
    
    
    $
    4,198
    
    
    
    6.94
    %
    
    $
    216,811
    
    
    $
    4,038
    
    
    
    7.39
    %Investment securities (1)
    
    
    113,776
    
    
    
    906
    
    
    
    3.16
    %
    
    
    61,828
    
    
    
    456
    
    
    
    2.93
    %Federal funds sold
    
    
    12,172
    
    
    
    44
    
    
    
    1.43
    %
    
    
    16,757
    
    
    
    39
    
    
    
    0.92
    %Total earning assets
    
    
    365,863
    
    
    
    5,148
    
    
    
    5.58
    %
    
    
    295,396
    
    
    
    4,533
    
    
    
    6.09
    %Cash and demand deposits with banks
    
    
    24,675
    
    
    
    
    
    
    
    
    
    
    
    23,243Other assets
    
    
    26,196
    
    
    
    
    
    
    
    
    
    
    
    19,222Total assets
    
    $
    416,734
    
    
    
    
    
    
    
    
    
    
    $
    337,861Interest-bearing liabilities:NOW deposits
    
    $
    44,471
    
    
    
    13
    
    
    
    0.12
    %
    
    $
    35,181
    
    
    
    16
    
    
    
    0.18
    %Money market deposits
    
    
    63,720
    
    
    
    117
    
    
    
    0.73
    %
    
    
    58,389
    
    
    
    105
    
    
    
    0.71
    %Savings deposits
    
    
    66,322
    
    
    
    75
    
    
    
    0.45
    %
    
    
    48,575
    
    
    
    55
    
    
    
    0.45
    %Time deposits
    
    
    93,183
    
    
    
    434
    
    
    
    1.85
    %
    
    
    81,237
    
    
    
    422
    
    
    
    2.06
    %Other borrowings (3)
    
    
    6,401
    
    
    
    80
    
    
    
    4.96
    %
    
    
    6,379
    
    
    
    72
    
    
    
    4.48
    %Total interest-bearing liabilities
    
    
    274,097
    
    
    
    719
    
    
    
    1.04
    %
    
    
    229,761
    
    
    
    670
    
    
    
    1.16
    %Non-interest bearing deposits
    
    
    113,031
    
    
    
    
    
    
    
    
    
    
    
    80,466Other liabilities
    
    
    2,875
    
    
    
    
    
    
    
    
    
    
    
    3,143Shareholders equity
    
    
    26,731
    
    
    
    
    
    
    
    
    
    
    
    24,491Total liabilities & equity
    
    $
    416,734
    
    
    
    
    
    
    
    
    
    
    $
    337,861Cost of funding interest-earning assets (4)
    
    
    
    
    
    
    
    
    
    
    0.78
    %
    
    
    
    
    
    
    
    
    
    
    0.90
    %Net interest income and margin (5)
    
    
    
    
    
    $
    4,429
    
    
    
    4.80
    %
    
    
    
    
    
    $
    3,863
    
    
    
    5.19
    %
   (1)
    
    Not computed on a tax-equivalent basis.(2)
    
    Loan fees included in loan interest income for the three-month periods
ended September 30, 2004 and 2003 amounted to $96 and $206, respectively.(3)
    
    For the purpose of this schedule the interest expense related to the
Companys junior subordinated debentures is included in other borrowings.(4)
    
    Total interest expense divided by the average balance of total earning
assets.(5)
    
    Net interest income divided by the average balance of total earning assets. 17




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##### Table of Contents



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: 2004 over 2003 change in net interest income(in thousands)Volume (1)
    
    Rate (2)
    
    Mix (3)
    
    TotalInterest-earning assets:Loans
    
    $
    430
    
    
    $
    (244
    )
    
    $
    (26
    )
    
    $
    160Investment securities
    
    
    383
    
    
    
    36
    
    
    
    31
    
    
    
    450Federal funds sold
    
    
    (11
    )
    
    
    22
    
    
    
    (6
    )
    
    
    5Total interest income
    
    
    802
    
    
    
    (186
    )
    
    
    (1
    )
    
    
    615Interest-bearing liabilities:NOW deposits
    
    
    4
    
    
    
    (5
    )
    
    
    (2
    )
    
    
    (3
    )Money market deposits
    
    
    10
    
    
    
    2
    
    
    
    
    
    
    
    12Savings deposits
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    20Time deposits
    
    
    62
    
    
    
    (44
    )
    
    
    (6
    )
    
    
    12Other borrowings
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    8Total interest expense
    
    
    96
    
    
    
    (39
    )
    
    
    (8
    )
    
    
    49Net interest income
    
    $
    706
    
    
    $
    (147
    )
    
    $
    7
    
    
    $
    566
   (1)
    
    The volume change in net interest income represents the change in average
balance divided by the previous years rate.(2)
    
    The rate change in net interest income represents the change in rate
divided by the previous years average balance.(3)
    
    The mix change in net interest income represents the change in average
balance multiplied by the change in rate. Provision for loan losses.The Company recorded $300,000 in provision for loan
losses for the three months ended September 30, 2004, up $125,000, or 71%, from
the $175,000 provision for the same period in 2003. Management assesses its
loan quality monthly to maintain an adequate allowance for loan losses. Based
on information currently available, management believes that the allowance for
loan losses is adequate to absorb potential risks in the portfolio. However,
no assurance can be given that the Company may not sustain charge-offs which
are in excess of the allowance in any given period. The Companys loan
portfolio composition and non-performing assets are further discussed under the
financial condition section below. Non-interest income.During the three months ended September 30, 2004, total
non-interest income increased $366 thousand, or 41%, to $1.3 million, up from
$893 thousand for the comparable period in 2003. The increase in non-interest
income was primarily the result of increases in service charge revenue and
earnings on bank-owned life insurance policies (BOLI). A large portion of the growth in service charge revenue resulted from an
increase in the Banks overall number of fee generating accounts. As a result
of the acquisition in mid-November 2003 of five branches from a competitor, the
Bank began servicing over 7,300 new deposit accounts. In addition, during
April 2004 the Bank implemented a new overdraft privilege program for select
deposit relationships thereby increasing service charge revenue. The Bank increased its holding in BOLI by $3.2 million to provide additional
coverage for an executive officer of the Company. As a result, the tax-exempt
earnings from these policies increased by $53 18




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##### Table of Contents



thousand to $108 thousand for the three months ended September 30, 2004 from
$55 thousand for the same period in 2003. Non-interest expenses.Non-interest expenses consist of salaries and related
employee benefits, occupancy and equipment expenses, professional fees,
business development expenses, telephone expense, stationery and supplies
expense, armored car and courier expense, advertising and promotion expense,
loan expenses, directors fees, and other operating expenses. For the three
months ended September 30, 2004, non-interest expense increased $622 thousand,
or 19%, to $3.9 million, up from $3.3 million for the comparable period in
2003. Salaries and employee benefits increased $334 thousand, or 18%, over the same
three-month period last year. This increase was due primarily to the staffing
additions related to the Banks three new branch offices, expansion of the
Companys centralized lending function, staffing additions to manage the
overall growth, increased employee benefit costs related to health-care and
salary continuation plans and the deferral of fewer salary dollars as part of
the loan origination process. Occupancy and equipment increased $85 thousand, or 14%, over the same
three-month period last year. This increase was due primarily to additional
depreciation and operating costs associated with three new branches. These new
branches began serving the communities of Tahoe City, Kings Beach and Loyalton
in November 2003. Other increases in occupancy and equipment relate to
depreciation on capitalized upgrades to the Companys network systems. Deposit premium amortization increased $42 thousand, or 124%, over the same
three-month period last year. This increase was the result of additional
premium amortization related to $45.5 million of deposits purchased in November
2003. The following table describes the components of non-interest expense for the
three-month periods ending September 30, 2004 and 2003. For the Three MonthsEnded September 30,(in thousands)2004
    
    2003Salaries and employee benefits
    
    $
    2,221
    
    
    $
    1,887Occupancy and equipment
    
    
    675
    
    
    
    590Professional
and other fees
    
    
    197
    
    
    
    125Armored car and courier
    
    
    95
    
    
    
    92Telephone and data communication
    
    
    88
    
    
    
    88Business development
    
    
    87
    
    
    
    81Loan and collection expenses
    
    
    80
    
    
    
    36Advertising and promotion
    
    
    79
    
    
    
    74Deposit premium amortization
    
    
    76
    
    
    
    34Stationery and supplies
    
    
    75
    
    
    
    82Director compensation
    
    
    71
    
    
    
    63Postage
    
    
    60
    
    
    
    61Insurance
    
    
    58
    
    
    
    59Other expense
    
    
    58
    
    
    
    26Total non-interest expense
    
    $
    3,920
    
    
    $
    3,298
 19




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##### Table of Contents



FINANCIAL CONDITION Loan portfolio composition.The Company continues to manage the mix of its
loan portfolio consistent with its identity as a community bank serving the
financing needs of all sectors of Northeastern California. Although the
Company offers a broad array of financing options, it continues to concentrate
its focus on small- to medium-sized commercial businesses. These commercial
loans are diversified as to the industries and types of businesses, thus
limiting material exposure from any one industry concentration. The Company
offers both fixed and floating rate loans and obtains collateral in the form of
real property, business assets and deposit accounts, but looks to business and
personal cash flows as its primary source of repayment. As of September 30,
2004, real estate mortgage loan balances as a percentage of total loans
increased to 37.3% from 31.0% at December 31, 2003. Also during the first nine
months of 2004, agricultural loan balances increased to 13.1% of total loans
from 12.2% at December 31, 2003. The increased percentages in real estate
mortgage and agricultural loan balances were offset with declines in the
relative percentage of commercial and real estate construction and land
development loan balances which were 18.9% and 9.3%, respectively at September
30, 2004, versus 23.4% and 12.0%, respectively at December 31, 2003. Consumer
loan balances as a percentage of total loans remained unchanged at 21.4% as of
both September 30, 2004 and December 31, 2003. Nonperforming assets.Nonperforming loans at September 30, 2004 were
$1,679,000, an increase of $832,000, or 98%, over the $847,000 balance at
December 31, 2003. In April 2004, the Bank classified as nonaccrual, several agricultural loans to
one borrower totaling $1.3 million which as of September 30, 2004 had an unpaid
balance of $1 million. These agricultural loans are collateralized by various
equipment and real estate holdings. At September 30, 2004, nonperforming loans
to this one borrower represented 60% of the Banks total nonperforming loans
outstanding. Management believes that these nonperforming loan balances will
be satisfactory resolved without significant loss to the Company. As a result of the above, nonperforming loans as a percent of total loans
increased to 0.67% at September 30, 2004 up from the 0.39% at December 31,
2003. In addition, nonperforming assets (which is comprised of nonperforming
loans plus foreclosed real estate and vehicle holdings) as a percent of total
assets were 0.41% at September 30, 2004 up from 0.22% at December 31, 2003. Analysis of allowance for loan losses.Net charge-offs during the nine months
ended September 30, 2004 totaled $439 thousand, or 0.17% of total loans,
compared to $454 thousand, or 0.21% of total loans, for the comparable period
in 2003. Net charge-offs during the first nine months of 2004 were comprised
of $560 thousand of charge-offs less $121 thousand in recoveries, compared to
$598 thousand of charge-offs less $144 thousand in recoveries for the
comparable period in 2003. The allowance for loan losses stood at 1.08% of
total loans as of September 30, 2004, versus 1.18% of total loans as of
December 31, 2003. Based on an evaluation of the credit quality of the loan
portfolio and delinquency trends and charge-offs, management believes the
allowance for loan losses to be adequate. 20




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##### Table of Contents



The following table provides certain information for the six-month period
indicated with respect to the Companys allowance for loan losses as well as
charge-off and recovery activity. For the Nine MonthsEnded September 30,(in thousands)2004
    
    2003Balance at January 1,
    
    $
    2,564
    
    
    $
    2,471Charge-offs:Commercial and agricultural
    
    
    (95
    )
    
    
    (187
    )Real estate mortgage
    
    
    
    
    
    
    (26
    )Real estate construction
    
    
    
    
    
    
    Consumer
    
    
    (465
    )
    
    
    (385
    )Total charge-offs
    
    
    (560
    )
    
    
    (598
    )Recoveries:Commercial and agricultural
    
    
    7
    
    
    
    20Real estate mortgage
    
    
    1
    
    
    
    Real estate construction
    
    
    
    
    
    
    Consumer
    
    
    113
    
    
    
    124Total recoveries
    
    
    121
    
    
    
    144Net charge-offs
    
    
    (439
    )
    
    
    (454
    )Provision for loan losses
    
    
    600
    
    
    
    625Balance at September 30,
    
    $
    2,725
    
    
    $
    2,642Net charge-offs during the nine-month period to average loans
    
    
    0.19
    %
    
    
    0.21
    %Allowance for loan losses to total Loans
    
    
    1.08
    %
    
    
    1.23
    %
 Investment securities and Federal funds sold.Combined investment securities
and Federal funds sold balances increased $10.6 million to $132 million at
September 30, 2004, from $121 million at December 31, 2003. Federal funds sold
balances increased $17 million to $22 million at September 30, 2004 up from $5
million at December 31, 2003. The Companys investment in U.S. Treasury securities and obligations of U.S.
agencies decreased to 79.1% of the investment portfolio at September 30, 2004,
versus 82.6% at December 31, 2003. The Companys investment in corporate bonds
decreased to 8.7% of the investment portfolio at September 30, 2004, versus
10.8% at December 31, 2003. Tax-exempt municipal obligation bonds increased to
12.2% at September 30, 2004, up from 6.6% at December 31, 2003. Accrued interest receivable and other assets.Accrued interest receivable and
other assets decreased $287 thousand, or 2%, to $16.4 million as of September
30, 2004, down from $16.7 million at December 31, 2003. This decrease related
primarily to the Companys receipt of payment on a $1.4 million judgment
receivable balance and a $600 thousand decline in real estate investment
holdings. These declines were partially offset by an additional $1 million
investment in stock of the Federal Home Loan Bank (FHLB) of San Francisco and
various other asset increases. The additional stock investment was a
requirement of the FHLBs recent revised capital plan. The Bank chose to make the additional
investment in the FHLB in order to continue to have access to FHLB services,
which are primarily borrowing arrangements. 21




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##### Table of Contents



Deposits.Total deposits were $393 million as of September 30, 2004, an
increase of $38 million, or 11%, from the December 31, 2003 balance of $356
million. The Company continues to manage the mix of its deposits consistent
with its identity as a community bank serving the financial needs of its
customers. Non-interest bearing demand deposits and interest checking deposits
increased to 41.3% of total deposits at September 30, 2004, up from 38.9% of
total deposits at December 31, 2003. Money market and savings deposits
decreased slightly to 34.5% of total deposits at September 30, 2004 compared to
34.9% as of December 31, 2003. Time deposits decreased to 24.2% of total
deposits as of September 30, 2004 down from 26.2% as of December 31, 2003. CAPITAL RESOURCES Shareholders equity as of September 30, 2004 increased $1.7 million, or 7%, to
$27.5 million up from $25.7 million as of December 31, 2003. This increase was
the result of earnings during the first nine months of $2.5 million somewhat
offset by a $386 thousand decline in accumulated other comprehensive income and
payment in May of a $456 thousand cash dividend. The accumulated other
comprehensive losses at September 30, 2004, were the result of the adverse
affects of the rising interest rate environment on the market value of the
Banks available-for-sale investment portfolio. Management believes that these
accumulated other comprehensive losses are not permanent and will reverse over
time as these shorter-term securities approach maturity. The Company and the Bank are subject to certain regulatory capital requirements
administered by the Board of Governors of the Federal Reserve System and the
Federal Deposit Insurance Corporation (FDIC). Failure to meet these minimum
capital requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a direct
material effect on the Companys consolidated financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve
quantitative measures of the Banks assets, liabilities and certain
off-balance-sheet items as calculated under regulatory accounting practices.
The Companys and the Banks capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios of
total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to
average assets. Each of these components is defined in the regulations.
Management believes that the Company met the requirements to be considered well
capitalized under regulatory framework for prompt corrective action and that
the Bank met all its capital adequacy requirements as of September 30, 2004. Plumas BancorpActual
    
    To be ConsideredCapital
    
    
    
    
    
    Well Capitalized(in
    
    
    
    
    
    Under Promptthousands)
    
    Ratio
    
    Corrective ActionLeverage
    
    $
    31,687
    
    
    
    7.7
    %
    
    
    5.0
    %Tier 1 Risk-Based
    
    
    31,687
    
    
    
    10.2
    %
    
    
    6.0
    %Total Risk-Based
    
    
    34,412
    
    
    
    11.1
    %
    
    
    10.0
    %
 Plumas BankActual
    
    MinimumCapital
    
    
    
    
    
    Capital(in thousands)
    
    Ratio
    
    RequirementLeverage
    
    $
    31,291
    
    
    
    7.6
    %
    
    
    4.0
    %
 22




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##### Table of Contents



Plumas BankActual
    
    MinimumCapital
    
    
    
    
    
    Capital(in thousands)
    
    Ratio
    
    RequirementTier 1 Risk-Based
    
    
    31,291
    
    
    
    10.1
    %
    
    
    4.0
    %Total Risk-Based
    
    
    34,016
    
    
    
    10.9
    %
    
    
    8.0
    %
 LIQUIDITY The Company manages its liquidity to provide the ability to generate funds to
support asset growth, meet deposit withdrawals (both anticipated and
unanticipated), fund customers borrowing needs, satisfy maturity of short-term
borrowings and maintain reserve requirements. The Companys liquidity needs
are managed using assets or liabilities, or both. On the asset side, in
addition to Federal Funds sold, the Company maintains an investment portfolio
containing U.S. government securities and agency securities that are classified
as available-for-sale. On the liability side, liquidity needs are managed by
charging competitive offering rates on deposit products and the use of
established lines of credit from correspondent financial institutions and the
Federal Home Loan Bank. The Company has unsecured short-term borrowing agreements with two of its
correspondent banks in the amounts of $10 million and $5 million. In addition,
the Company can borrow up to $9.9 million from the Federal Home Loan Bank
secured by residential mortgage loans. There were no short-term borrowings
outstanding at September 30, 2004. Customer deposits are the Companys primary source of funds. Those funds are
held in various types of accounts with varying maturities. The Company does
not accept brokered deposits. During the first nine months of 2004, deposits
increased $38 million, or 11%, from the December 31, 2003 balance of $356
million. The Company has historically experienced a seasonal trend in regards
to deposits; whereas the majority of the Companys annual deposit growth occurs
in the summer and fall months. The Companys available-for-sale securities portfolio, Federal funds sold, 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 activity, proceeds from the maturity or sale of investment
securities, loan payments, and new deposits are invested in short-term earning
assets, such as Federal funds sold and investment securities, to serve as a
source of funding for future loan growth. Management believes that the
Companys available sources of funds, including short-term borrowings, will
provide adequate liquidity for its operations in the foreseeable future. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK Market risk is the risk of loss in a financial instrument arising from adverse
changes in market rates and prices such as interest rates, commodity prices and
equity prices. As a financial institution, the Companys market risk arises
primarily from interest rate risk exposure. Fluctuation in interest rates will
ultimately impact both the level of income and expense recorded on a large
portion of the Companys assets and liabilities, and the market value of all
interest earning assets and interest bearing liabilities, dependent upon the
stated or estimated maturity date. Since virtually all of the Companys
interest earning assets and all of the Companys interest bearing liabilities,
with the exception of the junior subordinated debentures, are located at the
Bank level, virtually all of the Companys interest rate risk exposure lies at
the Bank level. As a result, all significant interest rate risk management
procedures are performed at the Bank level. Based upon the nature of its
operations, the Bank is not subject to foreign currency exchange or commodity
price risk. The Banks real estate loan portfolio, concentrated primarily
within northeastern California, is subject to risks associated with the local
economies. The fundamental objective of the Banks management of its assets and
liabilities is to maximize the economic value of the Company while maintaining
adequate liquidity and an exposure to interest rate risk deemed by management
to be acceptable. Management believes an acceptable degree of exposure to
interest rate risk results from the management of assets and liabilities
through maturities, pricing and mix to attempt to neutralize the potential
impact of changes in market interest rates. The Banks profitability is
dependent to a large extent upon its net interest income which is the
difference between its interest income on interest-earning assets, such as
loans and securities, and its interest expense on interest-bearing liabilities,
such as deposits and borrowings. The Bank, like other financial institutions,
is subject to interest 23




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##### Table of Contents



rate risk to the degree that its interest-earning assets reprice differently
than its interest-bearing liabilities. The Bank manages its mix of assets and
liabilities with the goals of limiting its exposure to interest rate risk,
ensuring adequate liquidity, and coordinating its sources and uses of funds. The Bank seeks to control its interest rate risk exposure in a manner that will
allow for adequate levels of earnings and capital over a range of possible
interest rate environments. The Bank has adopted formal policies and practices
to monitor and manage interest rate risk exposure. As part of this effort, the
Bank measures interest rate risk utilizing both an internal asset liability
management system as well as employing independent third party reviews to
confirm the reasonableness of the assumptions used to measure and report the
Banks interest rate risk, enabling management to make any adjustments
necessary. Interest rate risk is managed by the Banks Asset Liability Committee (ALCO),
which includes members of senior management. The ALCO monitors interest rate
risk by analyzing the potential impact on the net interest income from
potential changes in interest rates and considers the impact of alternative
strategies or changes in balance sheet structure. The ALCO manages the Banks
balance sheet in part to maintain the potential impact on net interest income
within acceptable ranges despite changes in interest rates. The Banks
exposure to interest rate risk is reviewed on at least a quarterly basis by
ALCO. In managements opinion there has not been a material change in the Companys
market risk or interest rate risk profile for the nine months ended September
30, 2004 compared to December 31, 2003 as discussed in the Companys 2003
annual report on Form 10-K. 
 ITEM 4. CONTROLS AND PROCEDURES The Companys Chief Executive Officer, Chief Administrative Officer and Chief
Financial Officer, based on their evaluation within 90 days prior to the date
of this report of the Companys disclosure controls and procedures (as defined
in Exchange Act Rule 13a15(e), have concluded that the Companys disclosure
controls and procedures are adequate and effective for purposes of Rule
13a15(e) in timely alerting them to material information relating to the
Company required to be included in the Companys filings with the SEC under the
Securities Exchange Act of 1934. There were no significant changes in the Companys internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of their evaluation. 24




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##### Table of Contents



PART II  OTHER INFORMATION 
 ITEM 1. LEGAL PROCEEDINGS From time to time, the Company and/or its subsidiaries are a party to claims
and legal proceedings arising in the ordinary course of business. In the
opinion of the Companys management, the amount of ultimate liability with
respect to such proceedings will not have a material adverse effect on the
financial condition or results of operations of the Company taken as a whole. 
 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 
 ITEM 5. OTHER INFORMATION None. 
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K The following documents are included or incorporated by reference in this
Quarterly Report on Form 10Q: 3.1
    
    Articles of Incorporation as amended of Registrant included as
exhibit 3.1 to the Registrants Form S-4, File No. 333-84534, which
is incorporated by reference herein.3.2
    
    Bylaws of Registrant included as exhibit 3.2 to the Registrants
Form S-4, File No. 333-84534, which is incorporated by reference
herein.4
    
    Specimen form of certificate for Plumas Bancorp included as exhibit
4 to the Registrants Form S-4, File No. 333-84534, which is
incorporated by reference herein.10.1
    
    Employment Agreement of William E. Elliott dated May 16, 2001, is
included as Exhibit 10.1 to the Registrants 10-QSB for June 30,
2002, which is incorporated by this reference herein.10.3
    
    Executive Salary Continuation Agreement as amended of William E.
Elliott dated October 13, 1993, is included as Exhibit 10.3 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this
reference herein.10.4
    
    Split Dollar Agreements of William E. Elliott dated January 23,
2002, is included as Exhibit 10.4 to the Registrants 10-QSB for
June 30, 2002, which is incorporated by this reference herein.10.6
    
    Executive Salary Continuation Agreement as amended of Douglas N.
Biddle dated June 2, 1994, is included as Exhibit 10.6 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this
reference herein.10.7
    
    Split Dollar Agreements of Douglas N. Biddle dated January 24, 2002,
is included as Exhibit 10.7 to the Registrants 10-QSB for June 30,
2002, which is incorporated by this reference herein.10.9
    
    Executive Salary Continuation Agreement as amended of Dennis C.
Irvine dated June 2, 1994, is included as Exhibit 10.9 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this
reference herein.10.10
    
    Split Dollar Agreements of Dennis C. Irvine dated January 24, 2002,
is included as Exhibit 10.10 to the Registrants 10-QSB for June 30,
2002, which is incorporated by this reference herein.
 25




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##### Table of Contents



10.13
    
    Deferred Fee Agreement as amended of Jerry V. Kehr dated August 19,
1998, is included as Exhibit 10.13 to the Registrants 10-QSB for
June 30, 2002, which is incorporated by this reference herein.10.14
    
    Amended and Restated Director Retirement Agreement of Jerry V. Kehr
dated April 28, 2000, is included as Exhibit 10.14 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this
reference herein.10.15
    
    Consulting Agreement of Jerry V. Kehr dated May 10, 2000, is
included as Exhibit 10.15 to the Registrants 10-QSB for June 30,
2002, which is incorporated by this reference herein.10.18
    
    Amended and Restated Director Retirement Agreement of Daniel E. West
dated May 10, 2000, is included as Exhibit 10.18 to the Registrants
10-QSB for June 30, 2002, which is incorporated by this reference
herein.10.19
    
    Consulting Agreement of Daniel E. West dated May 10, 2000, is
included as Exhibit 10.19 to the Registrants 10-QSB for June 30,
2002, which is incorporated by this reference herein.10.21
    
    Amended and Restated Director Retirement Agreement of Alvin G.
Blickenstaff dated April 19, 2000, is included as Exhibit 10.21 to
the Registrants 10-QSB for June 30, 2002, which is incorporated by
this reference herein.10.22
    
    Consulting Agreement of Alvin G. Blickenstaff dated May 8, 2000, is
included as Exhibit 10.22 to the Registrants 10-QSB for June 30,
2002, which is incorporated by this reference herein.10.24
    
    Amended and Restated Director Retirement Agreement of Gerald W.
Fletcher dated May 10, 2000, is included as Exhibit 10.24 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this
reference herein.10.25
    
    Consulting Agreement of Gerald W. Fletcher dated May 10, 2000, is
included as Exhibit 10.25 to the Registrants 10-QSB for June 30,
2002, which is incorporated by this reference herein.10.27
    
    Amended and Restated Director Retirement Agreement of Arthur C.
Grohs dated May 9, 2000, is included as Exhibit 10.27 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this
reference herein.10.28
    
    Consulting Agreement of Arthur C. Grohs dated May 9, 2000, is
included as Exhibit 10.28 to the Registrants 10-QSB for June 30,
2002, which is incorporated by this reference herein.10.30
    
    Amended and Restated Director Retirement Agreement of Christine
McArthur dated May 12, 2000, is included as Exhibit 10.30 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this
reference herein.10.31
    
    Consulting Agreement of Christine McArthur dated May 12, 2000, is
included as Exhibit 10.31 to the Registrants 10-QSB for June 30,
2002, which is incorporated by this reference herein.10.33
    
    Amended and Restated Director Retirement Agreement of Terrance J.
Reeson dated April 19, 2000, is included as Exhibit 10.33 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this
reference herein.10.34
    
    Consulting Agreement of Terrance J. Reeson dated May 10, 2000, is
included as Exhibit 10.34 to the Registrants 10-QSB for June 30,
2002, which is incorporated by this reference herein.10.36
    
    Amended and Restated Director Retirement Agreement of Walter Sphar
dated April 20, 2000, is included as Exhibit 10.36 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this
reference herein.10.37
    
    Consulting Agreement of Walter Sphar dated May 9, 2000, is included
as Exhibit 10.37 to the Registrants 10-QSB for June 30, 2002, which
is incorporated by this reference herein.10.39
    
    Deferred Fee Agreement of Thomas Watson dated March 3, 2001, is
included as Exhibit 10.39 to the Registrants 10-QSB for June 30,
2002, which is incorporated by this reference herein.
 26




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##### Table of Contents



10.40
    
    Form of Indemnification Agreement, is included as Exhibit 10.41 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this reference
herein.10.41
    
    2001 Stock Option Plan as amended is included as exhibit 99.1 of the Form S-8
filed July 23, 2002, File No. 333-9695710.42
    
    1991 Stock Option Plan on Form S-8 filed August 19, 2002, File No. 333-9831910.43
    
    Plumas Bank 401(k) Profit Sharing Plan as amended is included as exhibit 99.1 of
the Form S-8 filed February 14, 2003, File No. 333-10322910.44
    
    Executive Salary Continuation Agreement of Robert T. Herr dated June 4, 2002, is
included as Exhibit 10.44 to the Registrants 10-Q for March 31, 2003, which is
incorporated by this reference herein.10.45
    
    Branch Purchase and Assumption Agreement dated April 25, 2003, is included as
Exhibit 10.45 to the Registrants 10-Q for March 31, 2003, which is incorporated
by this reference herein.10.46
    
    1991 Stock Option Plan as amended.10.47
    
    Specimen form of Incentive Stock Option Agreement under the 1991 Stock Option Plan.10.48
    
    Specimen form of Non-Qualified Stock Option Agreement under the 1991 Stock Option
Plan.10.59
    
    Director Retirement Agreement of Thomas Watson dated May 1, 2003, is included as
Exhibit 10.59 to the Registrants 10-Q for June 30, 2003, which is incorporated by
this reference herein.10.60
    
    Consulting Agreement of Thomas Watson dated May 1, 2003, is included as Exhibit
10.60 to the Registrants 10-Q for June 30, 2003, which is incorporated by this
reference herein.10.61
    
    Third Amendment to Executive Salary Continuation Agreement of William E. Elliott
dated November 12, 2003, is included as Exhibit 10.61 to the Registrants 10-K for
December 31, 2003, which is incorporated by this reference herein.11
    
    Computation of per share earnings appears in the attached 10-Q under Plumas
Bancorp Notes to Consolidated Financial Statements as Footnote 5  Earnings Per
Share Computation.31.1
    
    Rule 13a-14(a) [Section 302] Certification of Chief Financial Officer dated
November 10, 2004.31.2
    
    Rule 13a-14(a) [Section 302] Certification of Chief Administrative Officer dated
November 10, 2004.31.3
    
    Rule 13a-14(a) [Section 302] Certification of Chief Executive Officer dated
November 10, 2004.32.1
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated November
10, 2004.32.2
    
    Certification of Chief Administrative Officer pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated
November 10, 2004.32.3
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated November
10, 2004.
  (b)
    
    Reports on Form 8-K On July 21, 2004, the Company filed a Current Report on Form 8-K. The Current
Report included as an exhibit, the press release dated July 21, 2004, filed by
the Company containing unaudited financial information and second quarter 2004
earnings. On September 17, 2004, the Company filed a Current Report on Form 8-K. On
September 15, 2004, the Company amended a Salary Continuation Agreement and
entered into a Split Dollar Agreement with Robert T. Herr, Executive Vice
President and Chief Loan Administrator of the Company. The Current Report
included as exhibits both of these agreements. 27




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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. PLUMAS BANCORP
(Registrant) Date: November 10, 2004. /s/ William E. ElliottWilliam E. ElliottPresident/Chief Executive Officer/s/ Douglas N. BiddleDouglas N. BiddleExecutive Vice President Chief Administrative Officer/s/ Andrew J. RybackAndrew J. RybackSenior Vice President Chief Financial Officer
 28