##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED September 30, 2010
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO
 COMMISSION FILE NUMBER: 000-49883
 PLUMAS BANCORP
  California
    
    75-2987096(State or Other Jurisdiction of Incorporation or
    
    (I.R.S. Employer Identification No.)Organization)35 S. Lindan Avenue, Quincy, California
    
    95971(Address of Principal Executive Offices)
    
    (Zip Code)
 (530) 283-7305
 þ o
 o o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
    
    Smaller Reporting Company þ
 o þ




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TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSCONDENSED CONSOLIDATED BALANCE SHEETCONDENSED CONSOLIDATED STATEMENT OF OPERATIONSCONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4T. CONTROLS AND PROCEDURESPART II  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGSITEM 1A RISK FACTORSITEM 2. UNREGISTERD SALES OF EQUITY SECURITIES AND USE OF PROCEEDSITEM 3. DEFAULTS UPON SENIOR SECURITIESITEM 4. (REMOVED AND RESERVED)ITEM 5. OTHER INFORMATIONITEM 6. EXHIBITSSIGNATURESExhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2    Table of Contents  
 PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 PLUMAS BANCORP
 
 CONDENSED CONSOLIDATED BALANCE SHEET  (Unaudited)
 September 30,
    
    
    December 31,2010
    
    
    2009AssetsCash and cash equivalents
    
    $
    63,228
    
    
    $
    59,493Investment securities
    
    
    63,523
    
    
    
    87,950Loans, less allowance for loan losses of $6,622 at
September 30, 2010 and $9,568 at December 31, 2009
    
    
    313,521
    
    
    
    323,408Premises and equipment, net
    
    
    14,724
    
    
    
    14,544Intangible assets, net
    
    
    518
    
    
    
    648Bank owned life insurance
    
    
    10,376
    
    
    
    10,111Real estate and vehicles acquired through foreclosure
    
    
    9,075
    
    
    
    11,269Accrued interest receivable and other assets
    
    
    15,601
    
    
    
    20,694Total assets
    
    $
    490,566
    
    
    $
    528,117Liabilities and Shareholders EquityDeposits:Non-interest bearing
    
    $
    118,402
    
    
    $
    111,958Interest bearing
    
    
    313,657
    
    
    
    321,297Total deposits
    
    
    432,059
    
    
    
    433,255Short-term borrowings
    
    
    
    
    
    
    20,000Long-term debt
    
    
    
    
    
    
    20,000Accrued interest payable and other liabilities
    
    
    9,508
    
    
    
    6,321Junior subordinated deferrable interest debentures
    
    
    10,310
    
    
    
    10,310Total liabilities
    
    
    451,877
    
    
    
    489,886Commitments and contingencies (Note 5)
    
    
    
    
    
    
    Shareholders equity:Serial preferred stock, no par value; 10,000,000
shares authorized; 11,949 issued and outstanding at
September 30, 2010 and December 31, 2009
    
    
    11,660
    
    
    
    11,595Common stock, no par value; 22,500,000 shares
authorized; issued and outstanding   4,776,339
shares at September 30, 2010 and December 31, 2009
    
    
    5,985
    
    
    
    5,970Retained earnings
    
    
    20,437
    
    
    
    20,044Accumulated other comprehensive income
    
    
    607
    
    
    
    622Total shareholders equity
    
    
    38,689
    
    
    
    38,231Total liabilities and shareholders equity
    
    $
    490,566
    
    
    $
    528,117
   2




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##### Table of Contents



PLUMAS BANCORP
 
 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS  (Unaudited)
 For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Interest Income:Interest and fees on loans
    
    $
    4,764
    
    
    $
    5,090
    
    
    $
    14,266
    
    
    $
    15,556Interest on investment securities:Taxable
    
    
    390
    
    
    
    440
    
    
    
    1,323
    
    
    
    1,185Exempt from Federal income taxes
    
    
    4
    
    
    
    123
    
    
    
    119
    
    
    
    360Other
    
    
    8
    
    
    
    
    
    
    
    27
    
    
    
    Total interest income
    
    
    5,166
    
    
    
    5,653
    
    
    
    15,735
    
    
    
    17,101Interest Expense:Interest on deposits
    
    
    616
    
    
    
    810
    
    
    
    2,114
    
    
    
    2,350Interest on borrowings
    
    
    1
    
    
    
    21
    
    
    
    135
    
    
    
    56Interest on junior subordinated deferrable
interest debentures
    
    
    84
    
    
    
    84
    
    
    
    235
    
    
    
    294Other
    
    
    1
    
    
    
    2
    
    
    
    3
    
    
    
    6Total interest expense
    
    
    702
    
    
    
    917
    
    
    
    2,487
    
    
    
    2,706Net interest income before
provision for loan losses
    
    
    4,464
    
    
    
    4,736
    
    
    
    13,248
    
    
    
    14,395Provision for Loan Losses
    
    
    1,300
    
    
    
    2,550
    
    
    
    3,700
    
    
    
    11,300Net interest income after provision
for loan losses
    
    
    3,164
    
    
    
    2,186
    
    
    
    9,548
    
    
    
    3,095Non-Interest Income:Service charges
    
    
    917
    
    
    
    970
    
    
    
    2,747
    
    
    
    2,823Sale of merchant processing portfolio
    
    
    
    
    
    
    
    
    
    
    1,435
    
    
    
    Gain on sale of investments
    
    
    200
    
    
    
    
    
    
    
    780
    
    
    
    Gain on sale of loans
    
    
    360
    
    
    
    205
    
    
    
    600
    
    
    
    215Earnings on Bank owned life insurance policies
    
    
    112
    
    
    
    108
    
    
    
    334
    
    
    
    323Other
    
    
    199
    
    
    
    252
    
    
    
    644
    
    
    
    680Total non-interest income
    
    
    1,788
    
    
    
    1,535
    
    
    
    6,540
    
    
    
    4,041Non-Interest Expenses:Salaries and employee benefits
    
    
    2,257
    
    
    
    2,827
    
    
    
    7,369
    
    
    
    8,417Occupancy and equipment
    
    
    792
    
    
    
    903
    
    
    
    2,327
    
    
    
    2,836Provision for OREO losses
    
    
    7
    
    
    
    531
    
    
    
    353
    
    
    
    887Other
    
    
    1,591
    
    
    
    1,482
    
    
    
    4,760
    
    
    
    4,901Total non-interest expenses
    
    
    4,647
    
    
    
    5,743
    
    
    
    14,809
    
    
    
    17,041Income (loss) before provision
(benefit) for income taxes
    
    
    305
    
    
    
    (2,022
    )
    
    
    1,279
    
    
    
    (9,905
    )Provision (Benefit) for Income Taxes
    
    
    109
    
    
    
    (882
    )
    
    
    373
    
    
    
    (4,258
    )Net income (loss)
    
    $
    196
    
    
    $
    (1,140
    )
    
    $
    906
    
    
    $
    (5,647
    )Preferred Stock Dividends and Discount Accretion
    
    
    (171
    )
    
    
    (171
    )
    
    
    (513
    )
    
    
    (458
    )Net income (loss) available to
common shareholders
    
    $
    25
    
    
    $
    (1,311
    )
    
    $
    393
    
    
    $
    (6,105
    )Basic earnings (loss) per share
    
    $
    0.01
    
    
    $
    (0.27
    )
    
    $
    0.08
    
    
    $
    (1.28
    )Diluted earnings (loss) per share
    
    $
    0.01
    
    
    $
    (0.27
    )
    
    $
    0.08
    
    
    $
    (1.28
    )
   3




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PLUMAS BANCORP
 
 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS  (Unaudited)
 For the Nine MonthsEnded September 30,2010
    
    
    2009Cash Flows from Operating Activities:Net income (loss)
    
    $
    906
    
    
    $
    (5,647
    )Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:Provision for loan losses
    
    
    3,700
    
    
    
    11,300Change in deferred loan origination costs/fees, net
    
    
    (109
    )
    
    
    (65
    )Depreciation and amortization
    
    
    1,296
    
    
    
    1,468Stock-based compensation expense
    
    
    15
    
    
    
    193Amortization of investment security premiums
    
    
    370
    
    
    
    174Accretion of investment security discounts
    
    
    (48
    )
    
    
    (42
    )Net (gain) loss on sale of other real estate
    
    
    (47
    )
    
    
    157Net (gain) loss on sale of vehicles owned
    
    
    (17
    )
    
    
    42Gain on sale of investments
    
    
    (780
    )
    
    
    Gain on sale of loans held for sale
    
    
    (600
    )
    
    
    (215
    )Loans originated for sale
    
    
    (12,184
    )
    
    
    (5,442
    )Proceeds from secured borrowing
    
    
    2,911
    
    
    
    Proceeds from loan sales
    
    
    9,072
    
    
    
    5,478Earnings on Bank owned life insurance policies
    
    
    (265
    )
    
    
    (257
    )Provision for losses on other real estate
    
    
    353
    
    
    
    887Decrease (increase) in accrued interest receivable and other assets
    
    
    4,943
    
    
    
    (4,673
    )(Decrease) increase in accrued interest payable and other liabilities
    
    
    (69
    )
    
    
    637Net cash provided by operating activities
    
    
    9,447
    
    
    
    3,995Cash Flows from Investing Activities:Proceeds from matured and called available-for-sale investment securities
    
    
    25,841
    
    
    
    8,000Proceeds from matured and called held-to-maturity investment securities
    
    
    
    
    
    
    1,729Purchases of available-for-sale investment securities
    
    
    (29,344
    )
    
    
    (51,132
    )Purchases of held-to-maturity investment securities
    
    
    
    
    
    
    (1,520
    )Proceeds from principal repayments from available-for-sale
government-guaranteed mortgage-backed securities
    
    
    6,384
    
    
    
    5,662Proceeds from sale of available-for-sale securities
    
    
    21,979
    
    
    
    Net decrease (increase) in loans
    
    
    8,698
    
    
    
    (2,029
    )Proceeds from sale of other vehicles
    
    
    157
    
    
    
    219Proceeds from sale of other real estate
    
    
    3,105
    
    
    
    1,595Purchase of premises and equipment
    
    
    (1,186
    )
    
    
    (201
    )Net cash provided by (used in) investing activities
    
    
    35,634
    
    
    
    (37,677
    )
   4




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PLUMAS BANCORP
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 For the Nine MonthsEnded September 30,2010
    
    
    2009Cash Flows from Financing Activities:Net (decrease) increase in demand, interest bearing and savings deposits
    
    $
    (1,816
    )
    
    $
    41,944Net increase in time deposits
    
    
    620
    
    
    
    10,501Net decrease in borrowings
    
    
    (40,000
    )
    
    
    (14,000
    )Net proceeds from exercise of stock options
    
    
    
    
    
    
    5Payment of cash dividends on preferred stock
    
    
    (150
    )
    
    
    (325
    )Issuance of preferred stock, net of discount
    
    
    
    
    
    
    11,517Issuance of common stock warrant
    
    
    
    
    
    
    407Net cash (used in) provided by financing activities
    
    
    (41,346
    )
    
    
    50,049Increase in cash and cash equivalents
    
    
    3,735
    
    
    
    16,367Cash and Cash Equivalents at Beginning of Year
    
    
    59,493
    
    
    
    18,791Cash and Cash Equivalents at End of Period
    
    $
    63,228
    
    
    $
    35,158Supplemental Disclosure of Cash Flow Information:Cash paid during the period for:Interest expense
    
    $
    2,271
    
    
    $
    2,693Income taxes
    
    $
    
    
    
    $
    65Non-Cash Investing Activities:Real estate and vehicles acquired through foreclosure
    
    $
    1,312
    
    
    $
    14,207Net change in unrealized income on available-for-sale securities
    
    $
    (15
    )
    
    $
    161
   5




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PLUMAS BANCORP
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
 1. GENERAL
    2. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
     6




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3. INVESTMENT SECURITIES
  September 30, 2010Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDebt securities:U.S. Treasury securities
    
    $
    1,034,000
    
    
    $
    8,000
    
    
    
    
    
    
    $
    1,042,000U.S. Government agencies
    
    
    38,342,000
    
    
    
    416,000
    
    
    
    
    
    
    
    38,758,000U.S. Government agencies
collateralized by mortgage
obligations
    
    
    22,808,000
    
    
    
    620,000
    
    
    
    
    
    
    
    23,428,000Obligations of states and
political subdivisions
    
    
    305,000
    
    
    
    
    
    
    $
    (10,000
    )
    
    
    295,000$
    62,489,000
    
    
    $
    1,044,000
    
    
    $
    (10,000
    )
    
    $
    63,523,000
  December 31, 2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDebt securities:U.S. Treasury securities
    
    $
    1,059,000
    
    
    
    
    
    
    $
    (7,000
    )
    
    $
    1,052,000U.S. Government agencies
    
    
    55,520,000
    
    
    $
    420,000
    
    
    
    (51,000
    )
    
    
    55,889,000U.S. Government agencies
collateralized by mortgage
obligations
    
    
    18,925,000
    
    
    
    362,000
    
    
    
    
    
    
    
    19,287,000Obligations of states and
political subdivisions
    
    
    11,387,000
    
    
    
    360,000
    
    
    
    (25,000
    )
    
    
    11,722,000$
    86,891,000
    
    
    $
    1,142,000
    
    
    $
    (83,000
    )
    
    $
    87,950,000
   Less than 12 MonthsFair
    
    
    UnrealizedValue
    
    
    LossesDebt securities:Obligations of states and political subdivisions
    
    $
    295,000
    
    
    $
    10,000
  7




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Less than 12 MonthsFair
    
    
    UnrealizedValue
    
    
    LossesDebt securities:U.S. Treasury securities
    
    $
    1,052,000
    
    
    $
    7,000U.S. Government agencies
    
    
    10,787,000
    
    
    
    51,000Obligations of states and political subdivisions
    
    
    1,208,000
    
    
    
    25,000$
    13,047,000
    
    
    $
    83,000
   EstimatedAmortized
    
    
    FairCost
    
    
    ValueOne year or less
    
    $
    2,047,000
    
    
    $
    2,062,000After one year through five years
    
    
    37,329,000
    
    
    
    37,738,000After five years through ten years
    
    
    305,000
    
    
    
    295,00039,681,000
    
    
    
    40,095,000Investment securities not due at a single maturity date:Government-guaranteed mortgage-backed securities
    
    
    22,808,000
    
    
    
    23,428,000$
    62,489,000
    
    
    $
    63,523,000
   8




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4. LOANS
  September 30,
    
    
    December 31,2010
    
    
    2009Commercial
    
    $
    42,344
    
    
    $
    37,056Agricultural
    
    
    39,451
    
    
    
    41,722Real estate  mortgage
    
    
    157,031
    
    
    
    161,397Real estate  construction and land development
    
    
    31,694
    
    
    
    38,061Consumer
    
    
    49,355
    
    
    
    54,442319,875
    
    
    
    332,678Deferred loan costs, net
    
    
    268
    
    
    
    298Allowance for loan losses
    
    
    (6,622
    )
    
    
    (9,568
    )$
    313,521
    
    
    $
    323,408
    September 30,
    
    
    December 31,2010
    
    
    2009Balance, beginning of year
    
    $
    9,568
    
    
    $
    7,224Provision charged to operations
    
    
    3,700
    
    
    
    14,500Losses charged to allowance
    
    
    (7,208
    )
    
    
    (12,500
    )Recoveries
    
    
    562
    
    
    
    344Balance, end of period
    
    $
    6,622
    
    
    $
    9,568
  September 30,
    
    
    December 31,2010
    
    
    2009Balance of impaired loans carried at cost
    
    $
    17,911
    
    
    $
    5,512Balance of impaired loans carried at fair value
    
    
    8,847
    
    
    
    9,435Total recorded investment in impaired loans
(net of allocated allowance of $1,168 at September
30, 2010 and $4,281 at December 31, 2009)
    
    $
    26,758
    
    
    $
    14,947
  5. COMMITMENTS AND CONTINGENCIES
   9




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6. PREFERRED STOCK AND JUNIOR SUBORDINATED DEBENTURES
   7. EARNINGS (LOSS) PER SHARE
  For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,(In thousands, except per share data)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Net Income (loss):Net income (loss)
    
    $
    196
    
    
    $
    (1,140
    )
    
    $
    906
    
    
    $
    (5,647
    )Dividends accrued and discount accreted on
preferred shares
    
    
    (171
    )
    
    
    (171
    )
    
    
    (513
    )
    
    
    (458
    )Net income (loss) available to common shareholders
    
    $
    25
    
    
    $
    (1,311
    )
    
    $
    393
    
    
    $
    (6,105
    )Earnings Per Share:Basic earnings (loss) per share
    
    $
    0.01
    
    
    $
    (0.27
    )
    
    $
    0.08
    
    
    $
    (1.28
    )Diluted earnings (loss) per share
    
    $
    0.01
    
    
    $
    (0.27
    )
    
    $
    0.08
    
    
    $
    (1.28
    )Weighted Average Number of Shares Outstanding:Basic shares
    
    
    4,776
    
    
    
    4,776
    
    
    
    4,776
    
    
    
    4,776Diluted shares
    
    
    4,776
    
    
    
    4,776
    
    
    
    4,776
    
    
    
    4,776
  10




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8. COMPREHENSIVE INCOME (LOSS)
    9. STOCK-BASED COMPENSATION
     WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    ContractualExercise
    
    
    Term
    
    
    Intrinsic ValueShares
    
    
    Price
    
    
    (in years)
    
    
    (in thousands)Options outstanding at December 31, 2009
    
    
    403,966
    
    
    $
    13.56Options granted
    
    
    
    
    
    
    Options exercised
    
    
    
    
    
    
    Options cancelled
    
    
    (89,236
    )
    
    $
    14.01Options outstanding at September 30, 2010
    
    
    314,730
    
    
    $
    13.43
    
    
    
    3.9
    
    
    $
    Options exercisable at September 30, 2010
    
    
    258,137
    
    
    $
    13.26
    
    
    
    3.7
    
    
    $
    Expected to vest after September 30, 2010
    
    
    49,219
    
    
    $
    14.19
    
    
    
    5.0
    
    
    $
    
  11




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10. INCOME TAXES
      12




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11. FAIR VALUE MEASUREMENT
 Fair Value of Financial Instruments
  September 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    63,228
    
    
    $
    63,228
    
    
    $
    59,493
    
    
    $
    59,493,000Investment securities
    
    
    63,523
    
    
    
    63,523
    
    
    
    87,950
    
    
    
    87,950,000Loans
    
    
    313,521
    
    
    
    311,302
    
    
    
    323,408
    
    
    
    325,589,000Bank owned life insurance
    
    
    10,376
    
    
    
    10,376
    
    
    
    10,111
    
    
    
    10,111,000Accrued interest receivable
    
    
    1,944
    
    
    
    1,944
    
    
    
    2,487
    
    
    
    2,487,000Financial liabilities:Deposits
    
    $
    432,059
    
    
    $
    432,627
    
    
    $
    433,255
    
    
    $
    433,311,000Short-term borrowings
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    20,000Long-term debt
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    19,817Junior subordinated deferrable
interest debentures
    
    
    10,310
    
    
    
    2,981
    
    
    
    10,310
    
    
    
    2,909Accrued interest payable
    
    
    692
    
    
    
    692
    
    
    
    476
    
    
    
    476
   Cash and cash equivalents:
 Investment securities:
 Loans:
  Bank owned life insurance:
 Deposits:
  13




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##### Table of Contents



Short-term borrowings:
 Long-term debt:
 Junior subordinated deferrable interest debentures:
 Commitments to extend credit and letters of credit:
        14




---



##### Table of Contents



Fair Value Measurements at September 30, 2010 UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantTotal Fair
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    UnobservableValue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    Inputs (Level 3)Assets:U.S. Treasury securities
    
    $
    1,042,000
    
    
    $
    1,042,000U.S. Government agencies
    
    
    38,758,000
    
    
    
    38,758,000U.S. Government agencies collateralized
by mortgage obligations
    
    
    23,428,000
    
    
    
    
    
    
    $
    23,428,000Obligations of states and political subdivisions
    
    
    295,000
    
    
    
    295,000$
    63,523,000
    
    
    $
    40,095,000
    
    
    $
    23,428,000
  Fair Value Measurements at December 31, 2009 UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantTotal Fair
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    UnobservableValue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    Inputs (Level 3)Assets:U.S. Treasury securities
    
    $
    1,052,000
    
    
    $
    1,052,000U.S. Government agencies
    
    
    55,889,000
    
    
    
    55,889,000U.S. Government agencies
collateralized
by mortgage obligations
    
    
    19,287,000
    
    
    
    
    
    
    $
    19,287,000Obligations of states
and political
subdivisions
    
    
    11,722,000
    
    
    
    11,722,000$
    87,950,000
    
    
    $
    68,663,000
    
    
    $
    19,287,000
   15




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Fair Value Measurements at September 30, 2010 UsingQuoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    Total GainsTotal Fair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    (Losses)Assets:Impaired loans
    
    $
    8,847,000
    
    
    
    
    
    
    $
    8,847,000
    
    
    
    
    
    
    $
    (774,000
    )Other real estate
    
    
    9,055,000
    
    
    
    
    
    
    
    9,055,000
    
    
    
    
    
    
    
    (353,000
    )$
    17,902,000
    
    
    
    
    
    
    $
    17,902,000
    
    
    
    
    
    
    $
    (1,127,000
    )
 Fair Value Measurements at December 31, 2009 UsingQuoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    Total GainsTotal Fair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    (Losses)Assets:Impaired
loans
    
    $
    9,435,000
    
    
    
    
    
    
    $
    9,435,000
    
    
    
    
    
    
    $
    (5,127,000
    )Other real estate
    
    
    11,204,000
    
    
    
    
    
    
    
    11,204,000
    
    
    
    
    
    
    
    (4,457,000
    )$
    20,639,000
    
    
    
    
    
    
    $
    20,639,000
    
    
    
    
    
    
    $
    (9,584,000
    )
    12. BORROWING ARRANGEMENTS
   16




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##### Table of Contents



13. ADOPTION OF NEW FINANCIAL ACCOUTNING STANDARDS
 Accounting for Transfers of Financial Assets
  Transfers and Servicing
  Fair Value Measurements and Disclosures
  Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit
Losses
   17




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PART I  FINANCIAL INFORMATION
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   INTRODUCTION
   CRITICAL ACCOUNTING POLICIES
   IMPACT OF RECENT LEGISLATION.
   18




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OVERVIEW
         19




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##### Table of Contents



RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010
 Net interest income before provision for loan losses.
     20




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21




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##### Table of Contents



For the Nine Months Ended September 30, 2010
    
    
    For the Nine Months Ended September 30, 2009Average Balance
    
    
    Interest
    
    
    Yield/
    
    
    Average Balance
    
    
    Interest
    
    
    Yield/(in thousands)
    
    
    (in thousands)
    
    
    Rate
    
    
    (in thousands)
    
    
    (in thousands)
    
    
    RateInterest-earning assets:Loans (1) (2)
    
    $
    325,558
    
    
    $
    14,266
    
    
    
    5.86
    %
    
    $
    360,412
    
    
    $
    15,556
    
    
    
    5.77
    %Investment securities (1)
    
    
    71,470
    
    
    
    1,442
    
    
    
    2.70
    %
    
    
    57,376
    
    
    
    1,545
    
    
    
    3.60
    %Other
    
    
    15,521
    
    
    
    27
    
    
    
    0.23
    %
    
    
    16
    
    
    
    
    
    
    
    0.32
    %Total interest-earning assets
    
    
    412,549
    
    
    
    15,735
    
    
    
    5.10
    %
    
    
    417,804
    
    
    
    17,101
    
    
    
    5.47
    %Cash and due from banks
    
    
    41,538
    
    
    
    
    
    
    
    
    
    
    
    26,467Other assets
    
    
    49,389
    
    
    
    
    
    
    
    
    
    
    
    34,437Total assets
    
    $
    503,476
    
    
    
    
    
    
    
    
    
    
    $
    478,708Interest-bearing liabilities:NOW deposits
    
    $
    102,348
    
    
    
    327
    
    
    
    0.43
    %
    
    $
    93,584
    
    
    
    481
    
    
    
    0.69
    %Money market deposits
    
    
    42,239
    
    
    
    179
    
    
    
    0.57
    %
    
    
    41,030
    
    
    
    259
    
    
    
    0.84
    %Savings deposits
    
    
    50,499
    
    
    
    63
    
    
    
    0.17
    %
    
    
    50,282
    
    
    
    69
    
    
    
    0.18
    %Time deposits
    
    
    126,302
    
    
    
    1,545
    
    
    
    1.64
    %
    
    
    101,364
    
    
    
    1,541
    
    
    
    2.03
    %Total deposits
    
    
    321,388
    
    
    
    2,114
    
    
    
    0.88
    %
    
    
    286,260
    
    
    
    2,350
    
    
    
    1.10
    %Short-term borrowings
    
    
    1,319
    
    
    
    5
    
    
    
    0.51
    %
    
    
    25,006
    
    
    
    56
    
    
    
    0.30
    %Long-term borrowings
    
    
    13,333
    
    
    
    130
    
    
    
    1.30
    %
    
    
    
    
    
    
    
    
    
    
    
    %Other interest-bearing liabilities
    
    
    123
    
    
    
    3
    
    
    
    3.26
    %
    
    
    215
    
    
    
    6
    
    
    
    3.73
    %Junior subordinated debentures
    
    
    10,310
    
    
    
    235
    
    
    
    3.05
    %
    
    
    10,310
    
    
    
    294
    
    
    
    3.81
    %Total interest-bearing liabilities
    
    
    346,473
    
    
    
    2,487
    
    
    
    0.96
    %
    
    
    321,791
    
    
    
    2,706
    
    
    
    1.12
    %Non-interest bearing deposits
    
    
    109,135
    
    
    
    
    
    
    
    
    
    
    
    106,714Other liabilities
    
    
    8,956
    
    
    
    
    
    
    
    
    
    
    
    5,723Shareholders equity
    
    
    38,912
    
    
    
    
    
    
    
    
    
    
    
    44,480Total liabilities & equity
    
    $
    503,476
    
    
    
    
    
    
    
    
    
    
    $
    478,708Cost of funding interest-earning assets (3)
    
    
    
    
    
    
    
    
    
    
    0.81
    %
    
    
    
    
    
    
    
    
    
    
    0.86
    %Net interest income and margin (4)
    
    
    
    
    
    $
    13,248
    
    
    
    4.29
    %
    
    
    
    
    
    $
    14,395
    
    
    
    4.61
    %
 
 (1)
    
    Not computed on a tax-equivalent basis.(2)
    
    Net loan costs included in loan interest income for the nine-month periods ended September
30, 2010 and 2009 were $27 thousand and $133 thousand, respectively.(3)
    
    Total annualized interest expense divided by the average balance of total earning assets.(4)
    
    Annualized net interest income divided by the average balance of total earning assets.  22




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##### Table of Contents



2010 over 2009 change in net interest incomefor the nine months ended September 30(in thousands)Volume (1)
    
    
    Rate (2)
    
    
    Mix (3)
    
    
    TotalInterest-earning assets:Loans
    
    $
    (1,504
    )
    
    $
    237
    
    
    $
    (23
    )
    
    $
    (1,290
    )Investment securities
    
    
    380
    
    
    
    (387
    )
    
    
    (96
    )
    
    
    (103
    )Other
    
    
    36
    
    
    
    
    
    
    
    (9
    )
    
    
    27Total interest income
    
    
    (1,088
    )
    
    
    (150
    )
    
    
    (128
    )
    
    
    (1,366
    )Interest-bearing liabilities:NOW deposits
    
    
    45
    
    
    
    (182
    )
    
    
    (17
    )
    
    
    (154
    )Money market deposits
    
    
    8
    
    
    
    (85
    )
    
    
    (3
    )
    
    
    (80
    )Savings deposits
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    (6
    )Time deposits
    
    
    379
    
    
    
    (301
    )
    
    
    (74
    )
    
    
    4Short-term borrowings
    
    
    (53
    )
    
    
    39
    
    
    
    (37
    )
    
    
    (51
    )Long-term borrowings
    
    
    
    
    
    
    
    
    
    
    130
    
    
    
    130Other interest-bearing liabilities
    
    
    (3
    )
    
    
    (1
    )
    
    
    1
    
    
    
    (3
    )Junior subordinated debentures
    
    
    
    
    
    
    (59
    )
    
    
    
    
    
    
    (59
    )Total interest expense
    
    
    376
    
    
    
    (595
    )
    
    
    
    
    
    
    (219
    )Net interest income
    
    $
    (1,464
    )
    
    $
    445
    
    
    $
    (128
    )
    
    $
    (1,147
    )
 
 (1)
    
    The volume change in net interest income represents the change in average balance divided by
the previous years rate.(2)
    
    The rate change in net interest income represents the change in rate multiplied by the previous
years average balance.(3)
    
    The mix change in net interest income represents the change in average balance multiplied by
the change in rate. Provision for loan losses.
    23




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##### Table of Contents



Non-interest income.
    For the Nine MonthsEnded September 30,
    
    
    Dollar
    
    
    Percentage2010
    
    
    2009
    
    
    Change
    
    
    ChangeService charges on deposit accounts
    
    $
    2,747
    
    
    $
    2,823
    
    
    $
    (76
    )
    
    
    -2.7
    %Sale of merchant processing portfolio
    
    
    1,435
    
    
    
    
    
    
    
    1,435
    
    
    
    100
    %Gain on sale of securities
    
    
    780
    
    
    
    
    
    
    
    780
    
    
    
    100
    %Gain on sale of loans
    
    
    600
    
    
    
    215
    
    
    
    385
    
    
    
    179.1
    %Earnings on life insurance policies
    
    
    334
    
    
    
    323
    
    
    
    11
    
    
    
    3.4
    %Merchant processing income
    
    
    142
    
    
    
    211
    
    
    
    (69
    )
    
    
    -32.7
    %Loan service fees
    
    
    133
    
    
    
    88
    
    
    
    45
    
    
    
    51.1
    %Customer service fees
    
    
    100
    
    
    
    92
    
    
    
    8
    
    
    
    8.7
    %Safe deposit box and night depository income
    
    
    48
    
    
    
    49
    
    
    
    (1
    )
    
    
    -2.0
    %Investment services income
    
    
    44
    
    
    
    61
    
    
    
    (17
    )
    
    
    -27.9
    %Other
    
    
    177
    
    
    
    179
    
    
    
    (2
    )
    
    
    -1.1
    %Total non-interest income
    
    $
    6,540
    
    
    $
    4,041
    
    
    $
    2,499
    
    
    
    61.8
    %
  24




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##### Table of Contents



Non-interest expenses.
       25




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##### Table of Contents



For the Nine MonthsEnded September 30,
    
    
    Dollar
    
    
    Percentage2010
    
    
    2009
    
    
    Change
    
    
    ChangeSalaries and employee benefits
    
    $
    7,369
    
    
    $
    8,417
    
    
    $
    (1,048
    )
    
    
    -12.5
    %Occupancy and equipment
    
    
    2,327
    
    
    
    2,836
    
    
    
    (509
    )
    
    
    -17.9
    %Outside service fees
    
    
    896
    
    
    
    588
    
    
    
    308
    
    
    
    52.4
    %FDIC insurance and assessments
    
    
    800
    
    
    
    905
    
    
    
    (105
    )
    
    
    -11.6
    %OREO Expense
    
    
    534
    
    
    
    201
    
    
    
    333
    
    
    
    165.7
    %Professional fees
    
    
    509
    
    
    
    598
    
    
    
    (89
    )
    
    
    -14.9
    %Provision for OREO losses
    
    
    353
    
    
    
    887
    
    
    
    (534
    )
    
    
    -60.2
    %Telephone and data communication
    
    
    257
    
    
    
    301
    
    
    
    (44
    )
    
    
    -14.6
    %Loan and collection expenses
    
    
    225
    
    
    
    252
    
    
    
    (27
    )
    
    
    -10.7
    %Business development
    
    
    197
    
    
    
    241
    
    
    
    (44
    )
    
    
    -18.3
    %Advertising and shareholder relations
    
    
    180
    
    
    
    249
    
    
    
    (69
    )
    
    
    -27.7
    %Armored car and courier
    
    
    180
    
    
    
    210
    
    
    
    (30
    )
    
    
    -14.3
    %Director compensation
    
    
    174
    
    
    
    221
    
    
    
    (47
    )
    
    
    -21.3
    %Postage
    
    
    162
    
    
    
    154
    
    
    
    8
    
    
    
    5.2
    %Deposit premium amortization
    
    
    130
    
    
    
    130
    
    
    
    
    
    
    
    
    %Stationery and supplies
    
    
    103
    
    
    
    139
    
    
    
    (36
    )
    
    
    -25.9
    %(Gain) loss on sale of OREO and OVO
    
    
    (64
    )
    
    
    200
    
    
    
    (264
    )
    
    
    -132.0
    %Other
    
    
    477
    
    
    
    512
    
    
    
    (35
    )
    
    
    -6.8
    %Total non-interest expense
    
    $
    14,809
    
    
    $
    17,041
    
    
    $
    (2,232
    )
    
    
    -13.1
    %
 Provision for income taxes.
   26




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##### Table of Contents



RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010
 Net Income (loss).
  Net interest income before provision for loan losses.
    27




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##### Table of Contents



For the Three Months Ended September 30, 2010
    
    
    For the Three Months Ended September 30, 2009Average Balance
    
    
    Interest
    
    
    Yield/
    
    
    Average Balance
    
    
    Interest
    
    
    Yield/(in thousands)
    
    
    (in thousands)
    
    
    Rate
    
    
    (in thousands)
    
    
    (in thousands)
    
    
    RateInterest-earning assets:Loans (1) (2)
    
    $
    322,950
    
    
    $
    4,764
    
    
    
    5.85
    %
    
    $
    356,210
    
    
    $
    5,090
    
    
    
    5.67
    %Investment securities (1)
    
    
    64,809
    
    
    
    394
    
    
    
    2.41
    %
    
    
    68,329
    
    
    
    563
    
    
    
    3.27
    %Other
    
    
    13,816
    
    
    
    8
    
    
    
    0.23
    %
    
    
    
    
    
    
    
    
    
    
    0.80
    %Total interest-earning assets
    
    
    401,575
    
    
    
    5,166
    
    
    
    5.10
    %
    
    
    424,539
    
    
    
    5,653
    
    
    
    5.28
    %Cash and due from banks
    
    
    42,662
    
    
    
    
    
    
    
    
    
    
    
    35,511Other assets
    
    
    48,084
    
    
    
    
    
    
    
    
    
    
    
    37,091Total assets
    
    $
    492,321
    
    
    
    
    
    
    
    
    
    
    $
    497,141Interest-bearing liabilities:NOW deposits
    
    $
    99,187
    
    
    
    60
    
    
    
    0.24
    %
    
    $
    110,617
    
    
    
    212
    
    
    
    0.76
    %Money market deposits
    
    
    40,847
    
    
    
    45
    
    
    
    0.44
    %
    
    
    40,660
    
    
    
    82
    
    
    
    0.80
    %Savings deposits
    
    
    51,418
    
    
    
    22
    
    
    
    0.17
    %
    
    
    50,638
    
    
    
    22
    
    
    
    0.17
    %Time deposits
    
    
    124,052
    
    
    
    488
    
    
    
    1.56
    %
    
    
    104,822
    
    
    
    494
    
    
    
    1.87
    %Total deposits
    
    
    315,504
    
    
    
    615
    
    
    
    0.77
    %
    
    
    306,737
    
    
    
    810
    
    
    
    1.05
    %Short-term borrowings
    
    
    
    
    
    
    
    
    
    
    
    %
    
    
    19,886
    
    
    
    21
    
    
    
    0.42
    %Long-term borrowings
    
    
    217
    
    
    
    1
    
    
    
    1.83
    %
    
    
    
    
    
    
    
    
    
    
    
    %Other interest-bearing liabilities
    
    
    115
    
    
    
    1
    
    
    
    3.45
    %
    
    
    209
    
    
    
    2
    
    
    
    3.79
    %Junior subordinated debentures
    
    
    10,310
    
    
    
    85
    
    
    
    3.27
    %
    
    
    10,310
    
    
    
    84
    
    
    
    3.23
    %Total interest-bearing liabilities
    
    
    326,146
    
    
    
    702
    
    
    
    0.85
    %
    
    
    337,142
    
    
    
    917
    
    
    
    1.08
    %Non-interest bearing deposits
    
    
    116,396
    
    
    
    
    
    
    
    
    
    
    
    110,459Other liabilities
    
    
    10,334
    
    
    
    
    
    
    
    
    
    
    
    6,308Shareholders equity
    
    
    39,445
    
    
    
    
    
    
    
    
    
    
    
    43,232Total liabilities & equity
    
    $
    492,321
    
    
    
    
    
    
    
    
    
    
    $
    497,141Cost of funding interest-earning assets (3)
    
    
    
    
    
    
    
    
    
    
    0.69
    %
    
    
    
    
    
    
    
    
    
    
    0.85
    %Net interest income and margin (4)
    
    
    
    
    
    $
    4,464
    
    
    
    4.41
    %
    
    
    
    
    
    $
    4,736
    
    
    
    4.43
    %
 
 (1)
    
    Not computed on a tax-equivalent basis.(2)
    
    Net loan costs included in loan interest income for the three-month periods ended September
30, 2010 and 2009 were $7 thousand and $47 thousand, respectively.(3)
    
    Total interest expense divided by the average balance of total earning assets.(4)
    
    Net interest income divided by the average balance of total earning assets.  28




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##### Table of Contents



2010 over 2009 change in net interest incomefor the three months ended September 30(in thousands)Volume (1)
    
    
    Rate (2)
    
    
    Mix (3)
    
    
    TotalInterest-earning assets:Loans
    
    $
    (475
    )
    
    $
    165
    
    
    $
    (16
    )
    
    $
    (326
    )Investment securities
    
    
    (29
    )
    
    
    (148
    )
    
    
    8
    
    
    
    (169
    )Other
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8Total interest income
    
    
    (496
    )
    
    
    17
    
    
    
    (8
    )
    
    
    (487
    )Interest-bearing liabilities:NOW deposits
    
    
    (22
    )
    
    
    (145
    )
    
    
    15
    
    
    
    (152
    )Money market deposits
    
    
    
    
    
    
    (37
    )
    
    
    
    
    
    
    (37
    )Savings deposits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Time deposits
    
    
    91
    
    
    
    (82
    )
    
    
    (15
    )
    
    
    (6
    )Short-term borrowings
    
    
    (21
    )
    
    
    (21
    )
    
    
    21
    
    
    
    (21
    )Long-term borrowings
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Other interest-bearing liabilities
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )Junior subordinated debentures
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Total interest expense
    
    
    47
    
    
    
    (284
    )
    
    
    22
    
    
    
    (215
    )Net interest income
    
    $
    (543
    )
    
    $
    301
    
    
    $
    (30
    )
    
    $
    (272
    )
 
 (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.
 Non-interest income.
  29




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##### Table of Contents



For the ThreeMonthsEnded September 30,
    
    
    Dollar
    
    
    Percentage2010
    
    
    2009
    
    
    Change
    
    
    ChangeService charges on deposit accounts
    
    
    917
    
    
    
    970
    
    
    
    (53
    )
    
    
    -5.5
    %Gain on sale of loans
    
    
    360
    
    
    
    205
    
    
    
    155
    
    
    
    75.6
    %Gain on sale of securities
    
    
    200
    
    
    
    
    
    
    
    200
    
    
    
    100
    %Earnings on life insurance policies
    
    
    112
    
    
    
    108
    
    
    
    4
    
    
    
    3.7
    %Loan service fees
    
    
    55
    
    
    
    34
    
    
    
    21
    
    
    
    61.8
    %Customer service fees
    
    
    35
    
    
    
    33
    
    
    
    2
    
    
    
    6.1
    %Merchant processing income
    
    
    28
    
    
    
    99
    
    
    
    (71
    )
    
    
    -71.7
    %Safe deposit box and night depository income
    
    
    16
    
    
    
    15
    
    
    
    1
    
    
    
    6.7
    %Investment services income
    
    
    8
    
    
    
    14
    
    
    
    (6
    )
    
    
    -42.9
    %Other
    
    
    57
    
    
    
    57
    
    
    
    
    
    
    
    
    %Total non-interest income
    
    $
    1,788
    
    
    $
    1,535
    
    
    $
    253
    
    
    
    16.5
    %
 Non-interest expenses.
      30




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##### Table of Contents



For the ThreeMonthsEnded September 30,
    
    
    Dollar
    
    
    Percentage2010
    
    
    2009
    
    
    Change
    
    
    ChangeSalaries and employee benefits
    
    $
    2,257
    
    
    $
    2,827
    
    
    $
    (570
    )
    
    
    -20.2
    %Occupancy and equipment
    
    
    792
    
    
    
    903
    
    
    
    (111
    )
    
    
    -12.3
    %Outside service fees
    
    
    294
    
    
    
    192
    
    
    
    102
    
    
    
    53.1
    %FDIC insurance and assessments
    
    
    294
    
    
    
    236
    
    
    
    58
    
    
    
    24.6
    %Professional fees
    
    
    143
    
    
    
    174
    
    
    
    (31
    )
    
    
    -17.8
    %OREO Expense
    
    
    129
    
    
    
    75
    
    
    
    54
    
    
    
    72.0
    %Telephone and data communication
    
    
    81
    
    
    
    100
    
    
    
    (19
    )
    
    
    -19.0
    %Loan and collection expenses
    
    
    78
    
    
    
    91
    
    
    
    (13
    )
    
    
    -14.3
    %Business development
    
    
    65
    
    
    
    71
    
    
    
    (6
    )
    
    
    -8.5
    %Advertising and shareholder relations
    
    
    63
    
    
    
    76
    
    
    
    (13
    )
    
    
    -17.1
    %Armored car and courier
    
    
    63
    
    
    
    73
    
    
    
    (10
    )
    
    
    -13.7
    %Director compensation
    
    
    60
    
    
    
    73
    
    
    
    (13
    )
    
    
    -17.8
    %Postage
    
    
    53
    
    
    
    47
    
    
    
    6
    
    
    
    12.8
    %Deposit premium amortization
    
    
    43
    
    
    
    43
    
    
    
    
    
    
    
    
    %Stationery and supplies
    
    
    39
    
    
    
    38
    
    
    
    1
    
    
    
    2.6
    %Provision for OREO losses
    
    
    7
    
    
    
    531
    
    
    
    (524
    )
    
    
    -98.7
    %(Gain) loss on sale of OREO and OVO
    
    
    (97
    )
    
    
    59
    
    
    
    (156
    )
    
    
    -264.4
    %Other
    
    
    283
    
    
    
    134
    
    
    
    149
    
    
    
    111.2
    %Total non-interest expense
    
    $
    4,647
    
    
    $
    5,743
    
    
    $
    (1,096
    )
    
    
    -19.1
    %
 Provision for income taxes.
 FINANCIAL CONDITION
 Fair value.
 Notes to Condensed Consolidated Financial Statements
 Loan portfolio composition.
  31




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##### Table of Contents



Asset Quality.
     32




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##### Table of Contents



Nonperforming loans.
     (in thousands)9/30/2010
    
    
    12/31/09Nonaccrual Loans:Commercial and agricultural
    
    $
    4,151
    
    
    $
    1,625Real estate mortgage
    
    
    10,951
    
    
    
    5,983Real estate construction
    
    
    9.637
    
    
    
    6,507Consumer
    
    
    174
    
    
    
    148Total nonaccrual loans
    
    
    24,913
    
    
    
    14,263Accruing loans past due 90 days or more
    
    
    7
    
    
    
    28Nonperforming loans
    
    $
    24,920
    
    
    $
    14,291Impaired loans (accruing)
    
    $
    3,013
    
    
    $
    4,965Total loans considered to be impaired
    
    $
    27,926
    
    
    $
    19,228Related allowance for credit losses on impaired loans
    
    $
    1,168
    
    
    $
    4,281
  33




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##### Table of Contents



Nonperforming assets.
   Nine MonthsEndedSeptember 30, 2010(in thousands)Balance, December 31, 2009
    
    $
    11,204Additions
    
    
    1,216Dispositions
    
    
    (3,012
    )Write-downs
    
    
    (353
    )Balance September 30, 2010
    
    $
    9,055
 Analysis of allowance for loan losses.
    34




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##### Table of Contents



For the Nine MonthsEnded September 30,(in thousands)2010
    
    
    2009Balance at January 1,
    
    $
    9,568
    
    
    $
    7,224Charge-offs:Commercial and agricultural
    
    
    (812
    )
    
    
    (472
    )Real estate mortgage
    
    
    (2,706
    )
    
    
    (938
    )Real estate construction
    
    
    (3,360
    )
    
    
    (8,519
    )Consumer
    
    
    (330
    )
    
    
    (451
    )Total charge-offs
    
    
    (7,208
    )
    
    
    (10,380
    )Recoveries:Commercial and agricultural
    
    
    16
    
    
    
    14Real estate mortgage
    
    
    395
    
    
    
    8Real estate construction
    
    
    65
    
    
    
    Consumer
    
    
    86
    
    
    
    184Total recoveries
    
    
    562
    
    
    
    206Net charge-offs
    
    
    (6,646
    )
    
    
    (10,174
    )Provision for loan losses
    
    
    3,700
    
    
    
    11,300Balance at September 30,
    
    $
    6,622
    
    
    $
    8,350Annualized net charge-offs during the nine-month period to average loans
    
    
    2.73
    %
    
    
    3.77
    %Allowance for loan losses to total loans
    
    
    2.07
    %
    
    
    2.43
    %
 Investment securities.
 Premises and equipment.
 Deposits.
  35




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##### Table of Contents



Borrowing arrangements.
    CAPITAL RESOURCES
     36




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##### Table of Contents



37




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##### Table of Contents



September 30, 2010
    
    
    December 31, 2009Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTier 1 Leverage RatioPlumas Bancorp and Subsidiary
    
    $
    43,018
    
    
    
    8.9
    %
    
    $
    40,564
    
    
    
    7.9
    %Minimum regulatory requirement
    
    
    19,441
    
    
    
    4.0
    %
    
    
    20,652
    
    
    
    4.0
    %Plumas Bank
    
    
    43,107
    
    
    
    8.9
    %
    
    
    38,172
    
    
    
    7.4
    %Minimum requirement for
Well-Capitalized institution
under the prompt corrective
action plan
    
    
    24,310
    
    
    
    5.0
    %
    
    
    25,848
    
    
    
    5.0
    %Minimum regulatory requirement
    
    
    19,448
    
    
    
    4.0
    %
    
    
    20,678
    
    
    
    4.0
    %Tier 1 Risk-Based Capital RatioPlumas Bancorp and Subsidiary
    
    
    43,018
    
    
    
    12.4
    %
    
    
    40,564
    
    
    
    10.4
    %Minimum regulatory requirement
    
    
    13,920
    
    
    
    4.0
    %
    
    
    15,641
    
    
    
    4.0
    %Plumas Bank
    
    
    43,107
    
    
    
    12.4
    %
    
    
    38,172
    
    
    
    9.8
    %Minimum requirement for
Well-Capitalized institution
under the prompt corrective
action plan
    
    
    20,867
    
    
    
    6.0
    %
    
    
    23,433
    
    
    
    6.0
    %Minimum regulatory requirement
    
    
    13,912
    
    
    
    4.0
    %
    
    
    15,622
    
    
    
    4.0
    %Total Risk-Based Capital RatioPlumas Bancorp and Subsidiary
    
    
    47,398
    
    
    
    13.6
    %
    
    
    45,512
    
    
    
    11.6
    %Minimum regulatory requirement
    
    
    27,839
    
    
    
    8.0
    %
    
    
    31,281
    
    
    
    8.0
    %Plumas Bank
    
    
    47,484
    
    
    
    13.7
    %
    
    
    43,113
    
    
    
    11.0
    %Minimum requirement for
Well-Capitalized institution
under the prompt corrective
action plan
    
    
    34,779
    
    
    
    10.0
    %
    
    
    39,056
    
    
    
    10.0
    %Minimum regulatory requirement
    
    
    27,823
    
    
    
    8.0
    %
    
    
    31,244
    
    
    
    8.0
    %
 LIQUIDITY
     38




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4T. CONTROLS AND PROCEDURES
    39




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A RISK FACTORS
  
 ITEM 2. UNREGISTERD SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. (REMOVED AND RESERVED)
 
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  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 January 21, 2009, is included as exhibit 3.2 to the
Registrants 10-K for December 31, 2008, 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.
  40




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##### Table of Contents



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
    
    
    Certificate of Determination of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, is
included as exhibit 4.1 to Registrants 8-K filed on January 30, 2009, 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.10.8
    
    
    Director Retirement Agreement of John Flournoy dated March 21, 2007, is included as Exhibit 10.8
to Registrants 10-Q for March 31, 2007, which is incorporated by this reference herein.10.11
    
    
    First Amendment to Executive Salary Continuation Agreement of Robert T. Herr dated
September 15, 2004, is included as Exhibit 10.11 to the Registrants 8-K filed on September 17,
2004, which is incorporated by this reference herein.10.18
    
    
    Amended and Restated Director Retirement Agreement of Daniel E. West dated May 10, 2000, is
included as Exhibit 10.18 to the Registrants 10-QSB for June 30, 2002, which is incorporated by
this reference herein.10.19
    
    
    Consulting Agreement of Daniel E. West dated May 10, 2000, is included as Exhibit 10.19 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this reference herein.10.20
    
    
    Split Dollar Agreements of Robert T. Herr dated September 15, 2004, is included as Exhibit 10.20
to the Registrants 8-K filed on September 17, 2004, which is incorporated by this reference
herein.10.21
    
    
    Amended and Restated Director Retirement Agreement of Alvin G. Blickenstaff dated April 19,
2000, is included as Exhibit 10.21 to the Registrants 10-QSB for June 30, 2002, which is
incorporated by this reference herein.10.22
    
    
    Consulting Agreement of Alvin G. Blickenstaff dated May 8, 2000, is included as Exhibit 10.22 to
the Registrants 10-QSB for June 30, 2002, which is incorporated by this reference herein.10.24
    
    
    Amended and Restated Director Retirement Agreement of Gerald W. Fletcher dated May 10, 2000, is
included as Exhibit 10.24 to the Registrants 10-QSB for June 30, 2002, which is incorporated by
this reference herein.10.25
    
    
    Consulting Agreement of Gerald W. Fletcher dated May 10, 2000, is included as Exhibit 10.25 to
the Registrants 10-QSB for June 30, 2002, which is incorporated by this reference herein.10.27
    
    
    Amended and Restated Director Retirement Agreement of Arthur C. Grohs dated May 9, 2000, is
included as Exhibit 10.27 to the Registrants 10-QSB for June 30, 2002, which is incorporated by
this reference herein.10.28
    
    
    Consulting Agreement of Arthur C. Grohs dated May 9, 2000, is included as Exhibit 10.28 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this reference herein.10.33
    
    
    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.
  41




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##### Table of Contents



10.35
    
    
    Letter Agreement, dated January 30, 2009 by and between Plumas Bancorp, Inc. and the United
States Department of the Treasury and Securities Purchase Agreement  Standard Terms attached
thereto, is included as exhibit 10.1 to Registrants 8-K filed on January 30, 2009, which is
incorporated by this reference herein.10.36
    
    
    Form of Senior Executive Officer letter agreement, is included as exhibit 10.2 to Registrants
8-K filed on January 30, 2009, which is incorporated by this reference herein.10.37
    
    
    Deferred Fee Agreement of Alvin Blickenstaff is included as Exhibit 10.37 to the Registrants
10-Q for March 31, 2009, which is incorporated by this reference herein.10.40
    
    
    2001 Stock Option Plan as amended is included as exhibit 99.1 of the Form S-8 filed July 23,
2002, File No. 333-96957, which is incorporated by this reference herein.10.41
    
    
    Form of Indemnification Agreement (Plumas Bancorp) is included as Exhibit 10.41 to the
Registrants 10-Q for March 31, 2009, which is incorporated by this reference herein.10.42
    
    
    Form of Indemnification Agreement (Plumas Bank) is included as Exhibit 10.42 to the Registrants
10-Q for March 31, 2009, which is incorporated by this reference herein.10.43
    
    
    Plumas Bank 401(k) Profit Sharing Plan as amended is included as exhibit 99.1 of the Form S-8
filed February 14, 2003, File No. 333-103229, which is incorporated by this reference herein.10.44
    
    
    Executive Salary Continuation Agreement of Robert T. Herr dated June 4, 2002, is included as
Exhibit 10.44 to the Registrants 10-Q for March 31, 2003, which is incorporated by this
reference herein.10.46
    
    
    1991 Stock Option Plan as amended is included as Exhibit 10.46 to the Registrants 10-Q for
September 30, 2004, which is incorporated by this reference herein.10.47
    
    
    Specimen form of Incentive Stock Option Agreement under the 1991 Stock Option Plan is included
as Exhibit 10.47 to the Registrants 10-Q for September 30, 2004, which is incorporated by this
reference herein.10.48
    
    
    Specimen form of Non-Qualified Stock Option Agreement under the 1991 Stock Option Plan is
included as Exhibit 10.48 to the Registrants 10-Q for September 30, 2004, which is incorporated
by this reference herein.10.49
    
    
    Amended and Restated Plumas Bancorp Stock Option Plan is included as Exhibit 10.49 to the
Registrants 10-Q for September 30, 2006, which is incorporated by this reference herein.10.50
    
    
    Executive Salary Continuation Agreement of Rose Dembosz, is included as exhibit 10.50 to the
Registrants 10-K for December 31, 2008, 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.10.56
    
    
    Second Amendment to Executive Salary Continuation Agreement of Robert T. Herr dated
June 4, 2002 and Amended September 15, 2004, is included as exhibit 10.56 to the Registrants
10-K for December 31, 2008, which is incorporated by this reference herein.10.57
    
    
    First Amendment to Split Dollar Agreements of Robert T. Herr dated September 15, 2004, is
included as exhibit 10.57 to the Registrants 10-K for December 31, 2008, which is incorporated
by this reference herein.10.58
    
    
    Executive Salary Continuation Agreement of Robert T. Herr dated December 17, 2008, is included
as exhibit 10.58 to the Registrants 10-K for December 31, 2008, which is incorporated by this
reference herein.
  42




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##### Table of Contents



10.64
    
    
    First Amendment to the Plumas Bank Amended and Restated Director Retirement Agreement for Alvin
Blickenstaff adopted on September 19, 2007, is included as Exhibit 10.64 to the Registrants 8-K
filed on September 25, 2007, which is incorporated by this reference herein.10.65
    
    
    First Amendment to the Plumas Bank Amended and Restated Director Retirement Agreement for Arthur
C. Grohs adopted on September 19, 2007, is included as Exhibit 10.65 to the Registrants 8-K
filed on September 25, 2007, 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.11
    
    
    Computation of per share earnings appears in the attached 10-Q under Plumas Bancorp and
Subsidiary Notes to Condensed Consolidated Financial Statements as Footnote 7  Earnings Per
Share.31.1
    
    
    Rule 13a-14(a) [Section 302] Certification of Principal Financial Officer dated October 27, 2010.31.2
    
    
    Rule 13a-14(a) [Section 302] Certification of Principal Executive Officer dated October 27, 2010.32.1
    
    
    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 October 27, 2010.32.2
    
    
    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 October 27, 2010.
  43




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##### Table of Contents



PLUMAS BANCORP
  /s/ Richard L. BelstockRichard L. BelstockInterim  Chief Financial Officer/s/ Andrew J. RybackAndrew J. RybackInterim President and Chief Executive Officer  44