##### 



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 June 30, 2004
 [  ]
    
    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.  Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).  Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of August 9, 2004; 3,265,820 shares




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##### 



PART I  FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENT
 PLUMAS BANCORP CONSOLIDATED BALANCE SHEET
  Unaudited
    
    AuditedJune 30,
    
    December 31,2004
    
    2003AssetsCash and due from banks
    
    $
    27,603
    
    
    $
    24,717Federal funds sold
    
    
    5,440
    
    
    
    5,295Loans held for sale
    
    
    170
    
    
    
    276Investment securities (market value of $113,749 at
June 30, 2004 and $116,102 at December 31, 2003)
    
    
    113,988
    
    
    
    115,883Loans, less allowance for loan losses of $2,627 at June
30, 2004 and $2,564 at December 31, 2003 (Notes 3 and
4)
    
    
    227,759
    
    
    
    214,863Bank premises and equipment, net
    
    
    10,057
    
    
    
    10,306Intangible assets, net
    
    
    2,090
    
    
    
    2,238Accrued interest receivable and other assets
    
    
    17,143
    
    
    
    16,684Total assets
    
    $
    404,250
    
    
    $
    390,262Liabilities and Shareholders EquityDeposits:Non-interest bearing
    
    $
    109,770
    
    
    $
    96,830Interest bearing
    
    
    259,859
    
    
    
    259,012Total deposits
    
    
    369,629
    
    
    
    355,842Accrued interest payable and other liabilities
    
    
    2,943
    
    
    
    2,485Junior subordinated deferrable interest debentures
    
    
    6,186
    
    
    
    6,186Total liabilities
    
    
    378,758
    
    
    
    364,513Commitments and contingencies (Note 4)
    
    
    
    
    
    
    Shareholders equity (Notes 5 and 8):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 - 3,258,728 shares
at June 30, 2004 and 3,242,027 shares at December 31,
2003
    
    
    3,990
    
    
    
    3,945Retained earnings
    
    
    22,758
    
    
    
    21,638Accumulated other comprehensive (loss) income (Note 6)
    
    
    (1,256
    )
    
    
    166Total shareholders equity
    
    
    25,492
    
    
    
    25,749Total liabilities and shareholders equity
    
    $
    404,250
    
    
    $
    390,262
 See notes to consolidated financial statements. 2




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##### 



PLUMAS BANCORP CONSOLIDATED STATEMENT OF INCOME
  Unaudited
    
    UnauditedFor the Three Months
    
    For the Six MonthsEnded June 30
    
    Ended June 302004
    
    2003
    
    2004
    
    2003Interest Income:Interest and fees on loans
    
    $
    3,798
    
    
    $
    4,159
    
    
    $
    7,675
    
    
    $
    8,104Interest on investment securities:Taxable
    
    
    796
    
    
    
    429
    
    
    
    1,540
    
    
    
    938Exempt from Federal income taxes
    
    
    110
    
    
    
    33
    
    
    
    182
    
    
    
    66Interest on Federal funds sold
    
    
    24
    
    
    
    21
    
    
    
    57
    
    
    
    54Interest on loans held for sale
    
    
    7
    
    
    
    51
    
    
    
    17
    
    
    
    84Total interest income
    
    
    4,735
    
    
    
    4,693
    
    
    
    9,471
    
    
    
    9,246Interest Expense:Interest on deposits
    
    
    619
    
    
    
    714
    
    
    
    1,253
    
    
    
    1,503Other
    
    
    71
    
    
    
    71
    
    
    
    144
    
    
    
    149Total interest expense
    
    
    690
    
    
    
    785
    
    
    
    1,397
    
    
    
    1,652Net interest income before provision for loan
losses
    
    
    4,045
    
    
    
    3,908
    
    
    
    8,074
    
    
    
    7,594Provision for Loan Losses
    
    
    150
    
    
    
    225
    
    
    
    300
    
    
    
    450Net interest income after provision for loan losses
    
    
    3,895
    
    
    
    3,683
    
    
    
    7,774
    
    
    
    7,144Non-Interest Income:Service charges
    
    
    801
    
    
    
    502
    
    
    
    1,416
    
    
    
    976Gain on sale of loans, net
    
    
    
    
    
    
    31
    
    
    
    49
    
    
    
    59Gain on sale of available-for-sale investment securities, net
    
    
    56
    
    
    
    54
    
    
    
    147
    
    
    
    116Gain on sale of other real estate and write-off of judgment
receivable, net
    
    
    143
    
    
    
    25
    
    
    
    90
    
    
    
    20Earnings on cash surrender value of life insurance policies
    
    
    100
    
    
    
    54
    
    
    
    207
    
    
    
    109Other income
    
    
    237
    
    
    
    210
    
    
    
    448
    
    
    
    399Total non-interest income
    
    
    1,337
    
    
    
    876
    
    
    
    2,357
    
    
    
    1,679Non-Interest Expense:Salaries and employee benefits
    
    
    2,219
    
    
    
    1,723
    
    
    
    4,429
    
    
    
    3,495Occupancy and equipment
    
    
    678
    
    
    
    588
    
    
    
    1,352
    
    
    
    1,105Other expense
    
    
    1,016
    
    
    
    925
    
    
    
    1,893
    
    
    
    1,722Total non-interest expense
    
    
    3,913
    
    
    
    3,236
    
    
    
    7,674
    
    
    
    6,322Income before income taxes
    
    
    1,319
    
    
    
    1,323
    
    
    
    2,457
    
    
    
    2,501Income Tax Expense
    
    
    469
    
    
    
    523
    
    
    
    881
    
    
    
    985Net income
    
    $
    850
    
    
    $
    800
    
    
    $
    1,576
    
    
    $
    1,516Basic earnings per share (Notes 5 and 8)
    
    $
    0.26
    
    
    $
    0.25
    
    
    $
    0.48
    
    
    $
    0.47Diluted earnings per share (Notes 5 and 8)
    
    $
    0.25
    
    
    $
    0.24
    
    
    $
    0.47
    
    
    $
    0.46
 See notes to consolidated financial statements. 3




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##### 



PLUMAS BANCORP CONSOLIDATED STATEMENT OF CASH FLOWS
  UnauditedFor the Six MonthsEnded June 30,2004
    
    2003Cash Flows from Operating Activities:Net income
    
    $
    1,576
    
    
    $
    1,516Adjustments to reconcile net income to net cash provided by operating
activities:Provision for loan losses
    
    
    300
    
    
    
    450Deferred loan origination fees, net
    
    
    (41
    )
    
    
    (64
    )Depreciation, amortization and accretion, net
    
    
    809
    
    
    
    621Net realized gain on available-for-sale investment securities
    
    
    (147
    )
    
    
    (116
    )Amortization of investment security premiums
    
    
    504
    
    
    
    338Accretion of investment security discounts
    
    
    (37
    )
    
    
    (7
    )Net loss on sale of premises and equipment
    
    
    2
    
    
    
    1Net gains on sale of other real estate and write-off of judgment receivable
    
    
    (90
    )
    
    
    (20
    )Net decrease in loans held for sale
    
    
    106
    
    
    
    624Increase in cash surrender value of life insurance
    
    
    (173
    )
    
    
    (92
    )Net decrease (increase) in accrued interest receivable and other assets
    
    
    237
    
    
    
    212Net decrease in accrued interest payable and other liabilities
    
    
    458
    
    
    
    238Deferred taxes, net
    
    
    
    
    
    
    (18
    )Net cash provided by operating activities
    
    
    3,504
    
    
    
    3,683Cash Flows from Investing Activities:Proceeds from matured and called available-for-sale investment securities
    
    
    9,220
    
    
    
    8,500Proceeds from matured and called held-to-maturity investment securities
    
    
    1,275
    
    
    
    2,602Proceeds from sales of available-for-sale investment securities
    
    
    16,536
    
    
    
    6,521Purchases of available-for-sale investment securities
    
    
    (23,103
    )
    
    
    (10,386
    )Purchases of held-to-maturity investment securities
    
    
    (6,031
    )
    
    
    Proceeds from principal repayments from available-for-sale
government-guaranteed mortgage-backed securities
    
    
    1,171
    
    
    
    448Proceeds from principal repayments from held-to-maturity
government-guaranteed mortgage-backed securities
    
    
    86
    
    
    
    134Net decrease (increase) in loans
    
    
    (13,300
    )
    
    
    (7,820
    )Proceeds from sale of other real estate
    
    
    710
    
    
    
    145Purchase of premises and equipment
    
    
    (413
    )
    
    
    (293
    )Deposits on single premium cash surrender value life insurance policies
    
    
    
    
    
    
    (1,695
    )Net cash provided by (used in) investing activities
    
    
    (13,849
    )
    
    
    (1,844
    )
 Continued on next page. 4




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##### 



CONSOLIDATED STATEMENT OF CASH FLOWS   UnauditedFor the Six MonthsEnded June 30,2004
    
    2003Cash Flows from Financing Activities:Net increase (decrease) in demand, interest bearing and savings deposits
    
    $
    15,151
    
    
    $
    222Net increase (decrease) in time deposits
    
    
    (1,364
    )
    
    
    (1,628
    )Proceeds from exercise of stock options
    
    
    45
    
    
    
    123Payment of cash dividends
    
    
    (456
    )
    
    
    (387
    )Net cash provided by (used in) financing activities
    
    
    13,376
    
    
    
    (1,670
    )Increase (decrease) in cash and cash equivalents
    
    
    3,031
    
    
    
    169Cash and Cash Equivalents at Beginning of Year
    
    
    30,012
    
    
    
    37,930Cash and Cash Equivalents at End of Period
    
    $
    33,043
    
    
    $
    38,099Supplemental Disclosure of Cash Flow Information:Cash paid during the period for:Interest expense
    
    $
    1,369
    
    
    $
    1,606Income taxes
    
    $
    335
    
    
    $
    932Non-Cash Investing Activities:Real estate acquired through foreclosure
    
    $
    145
    
    
    $
    Net change in unrealized gain on available-for-sale securities
    
    $
    (1,422
    )
    
    $
    131Non-Cash Financing Activities:Common stock retired in connection with the exercise of stock options
    
    $
    133
    
    
    $
    74
 See notes to consolidated financial statements. 5




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##### 



PLUMAS BANCORP NOTES TO 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 June 30, 2004 and December
31, 2003 and the results of operations and cash flows for the three months
ended June 30, 2004 and 2003 and the results of operations and cash flows for
the six months ended June 30, 2004 and 2003. Certain reclassifications have
been made to prior years 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 six-month periods ended June 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. 3. LOANS Outstanding
loans are summarized below, in thousands; June 30,
    
    December 31,2004
    
    2003Commercial
    
    $
    50,260
    
    
    $
    51,073Agricultural
    
    
    30,395
    
    
    
    26,537Real estate  mortgage
    
    
    82,955
    
    
    
    67,532Real estate  construction and land development
    
    
    19,331
    
    
    
    26,194Consumer
    
    
    47,934
    
    
    
    46,621230,875
    
    
    
    217,957Deferred loans fees, net
    
    
    (489
    )
    
    
    (530
    )Allowance for loan losses
    
    
    (2,627
    )
    
    
    (2,564
    )$
    227,759
    
    
    $
    214,863
 6




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##### 



4. COMMITMENTS AND CONTINGENCIES 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 $80,408,000 and $60,203,000 and letters of credit of
$1,743,000 and $1,802,000 at June 30, 2004 and December 31, 2003, respectively. Of the loan commitments outstanding at June 30, 2004, $30,612,000 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. 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 Six MonthsEnded June 30
    
    Ended June 302004
    
    2003
    
    2004
    
    2003Earnings Per Share:Basic earnings per share
    
    $
    0.26
    
    
    $
    0.25
    
    
    $
    0.48
    
    
    $
    0.47Diluted earnings per share
    
    $
    0.25
    
    
    $
    0.24
    
    
    $
    0.47
    
    
    $
    0.46Weighted Average Number of
Shares Outstanding:Basic shares
    
    
    3,259,656
    
    
    
    3,228,280
    
    
    
    3,254,872
    
    
    
    3,223,138Diluted shares
    
    
    3,344,598
    
    
    
    3,466,437
    
    
    
    3,339,813
    
    
    
    3,468,899
 6. COMPREHENSIVE INCOME Total comprehensive (loss) income for the three months ended June 30, 2004 and
2003 totaled $(1,151,000) and $1,014,000, respectively. Comprehensive (loss)
income is comprised of net unrealized gains (losses), net of taxes, on
available-for-sale investment securities, which were $(2,001,000) and $214,000
for the three months ended June 30, 2004 and 2003, respectively, together with
net income. Total comprehensive income for the six months ended June 30, 2004 and 2003
totaled $154,000 and $1,647,000, respectively. Comprehensive income is
comprised of net unrealized gains (losses), net of taxes, on available-for-sale
investment securities, which were $(1,422,000) and $131,000 for the six months
ended June 30, 2004 and 2003, respectively, together with net income. At June 30, 2004 and December 31, 2003, accumulated other comprehensive (loss)
income totaled $(1,256,000) and $166,000, respectively, and is reflected as a
component of shareholders equity. 7




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##### 



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 June 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 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 Six MonthsEnded June 30
    
    Ended June 302004
    
    2003
    
    2004
    
    2003Net income as reported, in thousands
    
    $
    850
    
    
    $
    800
    
    
    $
    1,576
    
    
    $
    1,516Deduct: Total stock-based compensation
expense determined under the fair value
based method for all awards, net of
related tax effects, in thousands
    
    
    22
    
    
    
    22
    
    
    
    45
    
    
    
    43Pro forma net income, in thousands
    
    $
    759
    
    
    $
    778
    
    
    $
    694
    
    
    $
    1,473Basic earnings per share  as reported
    
    $
    0.26
    
    
    $
    0.25
    
    
    $
    0.48
    
    
    $
    0.47Basic earnings per share  pro forma
    
    $
    0.25
    
    
    $
    0.24
    
    
    $
    0.46
    
    
    $
    0.46Diluted earnings per share  as reported
    
    $
    0.25
    
    
    $
    0.24
    
    
    $
    0.47
    
    
    $
    0.46Diluted earnings per share  pro forma
    
    $
    0.25
    
    
    $
    0.24
    
    
    $
    0.46
    
    
    $
    0.45
 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 Three Months EndedJune 30, 2004
    
    June 30, 2003Weighted average fair value of options granted
    
    $
    4.32
    
    
    $
    4.23Dividend yield
    
    
    1.5
    %
    
    
    1.3
    %Expected volatility
    
    
    15.5
    %
    
    
    17.3
    %Risk-free interest rate
    
    
    2.8
    %
    
    
    2.3
    %Expected option life in years
    
    
    5.0
    
    
    
    5.0
 For the Six Months EndedJune 30, 2004
    
    June 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
 8




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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 June 30, 2004 and
December 31, 2003 and for the three months ended June 30, 2004 and 2003 and for
the six months ended June 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 $60 thousand, or 4%, to $1.6 million for the
six months ended June 30, 2004 from $1.5 million for the same period in 2003.
The primary contributors to the increase in net income for the first six months
of 2004 were a $480 thousand increase in net interest income, a $150 thousand
decrease in the provision for loan losses, a $678 thousand increase in
non-interest income and a $104 thousand decrease in the provision for income
taxes, mostly offset by a $1.3 million increase in non-interest expenses. Total assets at June 30, 2004 were $404 million, an increase of $14 million, or
4%, from the $390 million at December 31, 2003. The growth in assets was
funded by growth in the Companys deposits. Deposits also grew $14 million, or
4%, to $370 million at June 30, 2004 from the $356 million at December 31,
2003. The return on average assets was 0.79% for the six months ended June 30, 2004
compared to 0.94% for the same period in 2003. The return on average equity
was 11.5% for the six months ended June 30, 2004 compared to 12.5% for the same
period in 2003. Although the Companys earnings increased during the first six
months of 2004 when compared to the same period in 2003, the continued growth
in assets 9




---



##### 



combined with a historically low rate environment have resulted in declines in
the return on average asset and equity ratios. Total average assets for the
six months ended June 30, 2004 increased $75 million, or 23%, from the same
period in 2003. Total average equity for the six months ended June 30, 2004
increased $3 million, or 13%, from the same period in 2003. RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2004 Net interest income before provision for loan losses.Net interest income, on
a nontax-equivalent basis, was $8.1 million for the six months ended June 30,
2004, an increase of $480 thousand, or 6%, from $7.6 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, somewhat offset
by declines in the yield on the Companys interest-earning assets. Interest income increased $225 thousand or 2%, to $9.5 million for the six
months ended June 30, 2004, up from $9.2 million for the same period in 2003.
The increase in interest income was primarily attributed to volume increases in
investment and loan balances largely offset by falling yields on loan balances.
The Companys average investment balances were $115 million for the six months
ended June 30, 2004, up $53 million, or 85%, from the $62 million for the same
period in 2003. The Companys average loan balances were $218 million for the
six months ended June 30, 2004, up $6 million, or 3%, from the $212 million for
the same period in 2003. The Companys average loan yield was 7.03% for the
six months ended June 30, 2004, down 68 basis points, or 9%, from the 7.71%
yield for the same period in 2003. In addition, the Companys average
investment yield was 3.00% for the six months ended June 30, 2004, down 24
basis points, or 7%, from the 3.24% yield for the same period in 2003. Interest expense decreased $255 thousand, or 17%, to $1.4 million for the six
months ended June 30, 2004, down from $1.7 million for the same period in 2003.
The decrease in interest expense was primarily attributed to rate decreases
for time deposits partially offset by volume increases in all of the Companys
deposit products. The Companys average rate paid on time deposits was 1.80%
for the six months ended June 30, 2004, down 56 basis points, or 24%, from the
2.36% paid for the same period in 2003. The net interest margin for the six months ended June 30, 2004 decreased 68
basis points, or 13%, to 4.67%, down from 5.35% for the same period in 2003. 10




---



##### 



The following table presents for the six-month periods indicated the
distribution of consolidated average assets, liabilities and shareholders
equity. It also presents the amounts of interest income from interest-earning
assets and the resultant 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 Six Months Ended June 30, 2004
    
    
    
    
    
    For the Six Months Ended June 30, 2003Yield
    
    
    
    
    
    
    
    
    
    YieldAverage Balance
    
    Interest
    
    /
    
    Average Balance
    
    Interest
    
    /(in thousands)
    
    (in thousands)
    
    Rate
    
    (in thousands)
    
    (in thousands)
    
    RateInterest-earning assets:Loans (1) (2)
    
    $
    218,270
    
    
    $
    7,692
    
    
    
    7.03
    %
    
    $
    211,849
    
    
    $
    8,188
    
    
    
    7.71
    %Investment securities (1)
    
    
    114,631
    
    
    
    1,722
    
    
    
    3.00
    %
    
    
    61,867
    
    
    
    1,004
    
    
    
    3.24
    %Federal funds sold
    
    
    12,088
    
    
    
    57
    
    
    
    0.94
    %
    
    
    9,344
    
    
    
    54
    
    
    
    1.15
    %Total earning assets
    
    
    344,989
    
    
    
    9,471
    
    
    
    5.48
    %
    
    
    283,060
    
    
    
    9,246
    
    
    
    6.52
    %Cash and demand deposits with banks
    
    
    25,077
    
    
    
    
    
    
    
    
    
    
    
    19,655Other assets
    
    
    25,901
    
    
    
    
    
    
    
    
    
    
    
    17,940Total assets
    
    $
    395,967
    
    
    
    
    
    
    
    
    
    
    $
    320,655Interest-bearing liabilities:NOW deposits
    
    $
    42,977
    
    
    
    30
    
    
    
    0.14
    %
    
    $
    33,510
    
    
    
    49
    
    
    
    0.29
    %Money market deposits
    
    
    65,598
    
    
    
    242
    
    
    
    0.74
    %
    
    
    57,402
    
    
    
    289
    
    
    
    1.00
    %Savings deposits
    
    
    61,819
    
    
    
    138
    
    
    
    0.45
    %
    
    
    45,302
    
    
    
    191
    
    
    
    0.84
    %Time deposits
    
    
    93,189
    
    
    
    843
    
    
    
    1.80
    %
    
    
    82,242
    
    
    
    974
    
    
    
    2.36
    %Other borrowings (3)
    
    
    6,392
    
    
    
    144
    
    
    
    4.49
    %
    
    
    6,370
    
    
    
    149
    
    
    
    4.67
    %Total interest-bearing liabilities
    
    
    269,975
    
    
    
    1,397
    
    
    
    1.03
    %
    
    
    224,826
    
    
    
    1,652
    
    
    
    1.47
    %Non-interest bearing deposits
    
    
    96,168
    
    
    
    
    
    
    
    
    
    
    
    69,546Other liabilities
    
    
    2,569
    
    
    
    
    
    
    
    
    
    
    
    2,181Shareholders equity
    
    
    27,255
    
    
    
    
    
    
    
    
    
    
    
    24,102Total liabilities & equity
    
    $
    395,967
    
    
    
    
    
    
    
    
    
    
    $
    320,655Cost of funding interest-earning assets (4)
    
    
    
    
    
    
    
    
    
    
    0.81
    %
    
    
    
    
    
    
    
    
    
    
    1.16
    %Net interest income and margin (5)
    
    
    
    
    
    $
    8,074
    
    
    
    4.67
    %
    
    
    
    
    
    $
    7,594
    
    
    
    5.35
    %
   (1)
    
    Not computed on a tax-equivalent basis.(2)
    
    Loan fees included in loan interest income for the six-month periods
ended June 30, 2004 and 2003 amounted to $244 and $360, 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. 11




---



##### 



The following table sets forth changes in interest income and interest expense,
for the six-month periods indicated and the amount of change attributable to
variances in volume, rates and the combination of volume and rates based on the
relative changes of volume and rates: 2004 over 2003 change in net interest income(in thousands)Volume (1)
    
    Rate (2)
    
    Mix (3)
    
    TotalInterest-earning assets:Loans
    
    $
    248
    
    
    $
    (722
    )
    
    $
    (22
    )
    
    $
    (496
    )Investment securities
    
    
    856
    
    
    
    (75
    )
    
    
    (63
    )
    
    
    718Federal funds sold
    
    
    16
    
    
    
    (10
    )
    
    
    (3
    )
    
    
    3Total interest income
    
    
    1,120
    
    
    
    (807
    )
    
    
    (88
    )
    
    
    225Interest-bearing liabilities:NOW deposits
    
    
    14
    
    
    
    (26
    )
    
    
    (7
    )
    
    
    (19
    )Money market deposits
    
    
    41
    
    
    
    (77
    )
    
    
    (11
    )
    
    
    (47
    )Savings deposits
    
    
    70
    
    
    
    (90
    )
    
    
    (33
    )
    
    
    (53
    )Time deposits
    
    
    130
    
    
    
    (230
    )
    
    
    (31
    )
    
    
    (131
    )Other borrowings
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )Total interest expense
    
    
    255
    
    
    
    (428
    )
    
    
    (82
    )
    
    
    (255
    )Net interest income
    
    $
    865
    
    
    $
    (379
    )
    
    $
    (6
    )
    
    $
    480
   (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 thousand in provision for
loan losses for the six months ended June 30, 2004, down $150 thousand, or 33%,
from the $450 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 six months ended June 30, 2004, total
non-interest income increased $678 thousand, or 40%, to $2.4 million, up from
$1.7 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. 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 12




---



##### 



increased by $98 thousand to $207 thousand for the six months ended June 30,
2004 from $109 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 six
months ended June 30, 2004, non-interest expense increased $1.4 million, or
21%, to $7.7 million, up from $6.3 million for the comparable period in 2003. Salaries and employee benefits increased $934 thousand, or 27%, over the same
six-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 $247 thousand, or 22%, over the same
six-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 security and
monitoring systems and network operating system. The following table describes the components of non-interest expense for the
six-month periods ending June 30, 2004 and 2003. UnauditedFor the Six MonthsEnded June 30
(In Thousands)2004
    
    2003Salaries and employee benefits
    
    $
    4,429
    
    
    $
    3,495Occupancy and equipment
    
    
    1,352
    
    
    
    1,105Professional fees
    
    
    362
    
    
    
    285Business development
    
    
    197
    
    
    
    201Armored car and courier
    
    
    182
    
    
    
    165Telephone and data communication
    
    
    167
    
    
    
    158Advertising and promotion
    
    
    159
    
    
    
    133Stationery and supplies
    
    
    149
    
    
    
    136Deposit premium amortization
    
    
    148
    
    
    
    67Director compensation
    
    
    142
    
    
    
    126Postage
    
    
    125
    
    
    
    128Insurance
    
    
    116
    
    
    
    115Loan and collection expenses
    
    
    73
    
    
    
    144Other expense
    
    
    73
    
    
    
    64Total non-interest expense
    
    $
    7,674
    
    
    $
    6,322
 RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2004 Net interest income before provision for loan losses.Net interest income, on
a nontax-equivalent basis, was $4.0 million for the three months ended June 30,
2004, an increase of $137 thousand, or 4%, from $3.9 million for the same
period in 2003. The increase in net interest income was primarily attributed
to volume 13




---



##### 



increases in the Companys average investment balances combined with declines
in rates paid on the Companys deposits, largely offset by declines in the
yield on the Companys loan balances. Interest income increased $42 thousand, or 1%, to $4.7 million for the three
months ended June 30, 2004. The increase in interest income was primarily
attributed to volume increases in investment balances largely offset by falling
yields on loan balances. The Companys average investment balances were $119
million for the three months ended June 30, 2004, up $59 million, or 101%, from
the $59 million for the same period in 2003. The Companys average loan yield
was 6.96% for the three months ended June 30, 2004, down 90 basis points, or
11%, from the 7.86% yield for the same period in 2003. Interest expense decreased $95 thousand, or 12%, to $690 thousand for the three
months ended June 30, 2004, down from $785 thousand for the same period in
2003. The decrease in interest expense was primarily attributed to rate
decreases for time deposits partially offset by volume increases in all of the
Companys deposit products. The Companys average rate paid on time deposits
was 1.79% for the three months ended June 30, 2004, down 49 basis points, or
21%, from the 2.28% paid for the same period in 2003. The net interest margin for the three months ended June 30, 2004 decreased 91
basis points, or 16%, to 4.67%, down from 5.58% for the same period in 2003. 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: 14




---



##### 



For the Three Months Ended June 30, 2004
    
    For the Three Months Ended June 30, 2003Yield
    
    
    
    
    
    
    
    
    
    YieldAverage Balance
    
    Interest
    
    /
    
    Average Balance
    
    Interest
    
    /(in thousands)
    
    (in thousands)
    
    Rate
    
    (in thousands)
    
    (in thousands)
    
    RateInterest-earning assets:Loans (1) (2)
    
    $
    219,339
    
    
    $
    3,805
    
    
    
    6.96
    %
    
    $
    214,830
    
    
    $
    4,210
    
    
    
    7.86
    %Investment securities (1)
    
    
    118,585
    
    
    
    906
    
    
    
    3.06
    %
    
    
    59,058
    
    
    
    462
    
    
    
    3.14
    %Federal funds sold
    
    
    9,523
    
    
    
    24
    
    
    
    1.01
    %
    
    
    7,061
    
    
    
    21
    
    
    
    1.19
    %Total earning assets
    
    
    347,447
    
    
    
    4,735
    
    
    
    5.47
    %
    
    
    280,949
    
    
    
    4,693
    
    
    
    6.70
    %Cash and demand deposits with banks
    
    
    25,463
    
    
    
    
    
    
    
    
    
    
    
    20,129Other assets
    
    
    27,086
    
    
    
    
    
    
    
    
    
    
    
    17,644Total assets
    
    $
    399,996
    
    
    
    
    
    
    
    
    
    
    $
    318,722Interest-bearing liabilities:NOW deposits
    
    $
    43,080
    
    
    
    14
    
    
    
    0.13
    %
    
    $
    33,620
    
    
    
    24
    
    
    
    0.29
    %Money market deposits
    
    
    65,199
    
    
    
    117
    
    
    
    0.72
    %
    
    
    55,346
    
    
    
    131
    
    
    
    0.95
    %Savings deposits
    
    
    62,669
    
    
    
    70
    
    
    
    0.45
    %
    
    
    45,363
    
    
    
    93
    
    
    
    0.82
    %Time deposits
    
    
    93,439
    
    
    
    418
    
    
    
    1.79
    %
    
    
    81,845
    
    
    
    466
    
    
    
    2.28
    %Other borrowings (3)
    
    
    6,393
    
    
    
    71
    
    
    
    4.45
    %
    
    
    6,372
    
    
    
    71
    
    
    
    4.47
    %Total interest-bearing liabilities
    
    
    270,780
    
    
    
    690
    
    
    
    1.02
    %
    
    
    222,546
    
    
    
    785
    
    
    
    1.41
    %Non-interest bearing deposits
    
    
    99,126
    
    
    
    
    
    
    
    
    
    
    
    69,954Other liabilities
    
    
    2,638
    
    
    
    
    
    
    
    
    
    
    
    2,075Shareholders equity
    
    
    27,452
    
    
    
    
    
    
    
    
    
    
    
    24,147Total liabilities & equity
    
    $
    399,996
    
    
    
    
    
    
    
    
    
    
    $
    318,722Cost of funding interest-earning assets (4)
    
    
    
    
    
    
    
    
    
    
    0.80
    %
    
    
    
    
    
    
    
    
    
    
    1.12
    %Net interest income and margin (5)
    
    
    
    
    
    $
    4,045
    
    
    
    4.67
    %
    
    
    
    
    
    $
    3,908
    
    
    
    5.58
    %
 15




---



##### 



(1)
    
    Not computed on a tax-equivalent basis.(2)
    
    Loan fees included in loan interest income for the three-month periods
ended June 30, 2004 and 2003 amounted to $108 and $207, 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. 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
    
    $
    89
    
    
    $
    (483
    )
    
    $
    (11
    )
    
    $
    (405
    )Investment securities
    
    
    466
    
    
    
    (11
    )
    
    
    (11
    )
    
    
    444Federal funds sold
    
    
    7
    
    
    
    (3
    )
    
    
    (1
    )
    
    
    3Total interest income
    
    
    562
    
    
    
    (497
    )
    
    
    (23
    )
    
    
    42Interest-bearing liabilities:NOW deposits
    
    
    7
    
    
    
    (13
    )
    
    
    (4
    )
    
    
    (10
    )Money market deposits
    
    
    24
    
    
    
    (32
    )
    
    
    (6
    )
    
    
    (14
    )Savings deposits
    
    
    35
    
    
    
    (42
    )
    
    
    (16
    )
    
    
    (23
    )Time deposits
    
    
    66
    
    
    
    (100
    )
    
    
    (14
    )
    
    
    (48
    )Other borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total interest expense
    
    
    132
    
    
    
    (187
    )
    
    
    (40
    )
    
    
    (95
    )Net interest income
    
    $
    430
    
    
    $
    (310
    )
    
    $
    17
    
    
    $
    137
   (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 $150,000 in provision for loan
losses for the three months ended June 30, 2004, down $75,000, or 33%, from the
$225,000 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 June 30, 2004, total
non-interest income increased $461 thousand, or 53%, to $1.3 million, up from
$876 thousand for the comparable period in 2003. The increase in non-interest
income was primarily the result of increases in service charge revenue, gains
on the sale of investment securities and real estate and earnings on bank-owned
life insurance policies (BOLI). 16




---



##### 



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. During June of 2004, the Company recorded gains of $135 thousand 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. Lastly, 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 $45 thousand to $100
thousand for the three months ended June 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 June 30, 2004, non-interest expense increased $677 thousand, or
21%, to $3.9 million, up from $3.2 million for the comparable period in 2003. Salaries and employee benefits increased $496 thousand, or 29%, 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 $90 thousand, or 15%, 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 security and
monitoring systems and network operating system. The following table describes the components of non-interest expense for the
three-month periods ending June 30, 2004 and 2003. 17




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##### 



UnauditedFor the Three MonthsEnded June 30
(In Thousands)2004
    
    2003Salaries and employee benefits
    
    $
    2,219
    
    
    $
    1,724Occupancy and equipment
    
    
    678
    
    
    
    588Professional fees
    
    
    176
    
    
    
    145Business development
    
    
    105
    
    
    
    119Advertising and promotion
    
    
    103
    
    
    
    89Armored car and courier
    
    
    93
    
    
    
    86Telephone and data communication
    
    
    92
    
    
    
    68Deposit premium amortization
    
    
    77
    
    
    
    34Stationery and supplies
    
    
    76
    
    
    
    75Director compensation
    
    
    69
    
    
    
    63Postage
    
    
    60
    
    
    
    62Insurance
    
    
    61
    
    
    
    62Loan and collection expenses
    
    
    48
    
    
    
    84Other expense
    
    
    56
    
    
    
    37Total non-interest expense
    
    $
    3,913
    
    
    $
    3,236
 FINANCIAL CONDITION Loan portfolio composition.The Company continues to manage the mix of its
loan portfolio consistent with its identity as a community bank serving the
financing needs of all sectors of Northeastern California. Although the
Company offers a broad array of financing options, it continues to concentrate
its focus on small- to medium-sized commercial businesses. These commercial
loans are diversified as to the industries and types of businesses, thus
limiting material exposure from any one industry concentration. The Company
offers both fixed and floating rate loans and obtains collateral in the form of
real property, business assets and deposit accounts, but looks to business and
personal cash flows as its primary source of repayment. As of June 30, 2004,
real estate mortgage loan balances as a percentage of total loans increased to
35.9% from 31.0% at December 31, 2004. Also during the first six months of
2004, agricultural loan balances increased to 13.2% of total loans from 12.2%
at the end of December 2003. The increased percentages in real estate mortgage
and agricultural loan balances were offset with declines in the relative
percentage of commercial, consumer and real estate construction and land
development loan balances which were 21.8%, 20.7% and 8.4%, respectively at
June 30, 2004, versus 23.4%, 21.4% and 12.0%, respectively at December 31,
2003. Nonperforming assets.Nonperforming loans at June 30, 2004 were $2,024,000, an
increase of $1,177,000, or 139%, 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. These agricultural loans are
collateralized by various equipment and real estate holdings. In addition to
the collateral, $765 thousand of the loan balances are government guaranteed
under the United States Department of Agriculture (USDA) Business and Industry
program. At June 30, 2004, nonperforming loans to this one borrower
represented 64% 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 0.88% at June 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 holdings) as a percent of total assets were 0.54% at
June 30, 2004 up from 0.22% at December 31, 2003. Analysis of allowance for loan losses.Net charge-offs during the six months
ended June 30, 2004 totaled $237 thousand, or 0.10% of total loans, compared to
$280 thousand, or 0.13% of total loans, for the 18




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comparable period in 2003. Net charge-offs during the first half of 2004 were
comprised of $328,000 of charge-offs less $91,000 in recoveries, compared to
$382,000 of charge-offs less $102,000 in recoveries for the comparable period in 2003. The
allowance for loan losses stood at 1.14% of total loans as of June 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. 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. UnauditedFor the Six MonthsEnded June 30(in thousands)2004
    
    2003Balance at January 1,
    
    $
    2,564
    
    
    $
    2,471Charge-offs:Commercial and agricultural
    
    
    (16
    )
    
    
    (74
    )Real estate mortgage
    
    
    
    
    
    
    (26
    )Real estate construction
    
    
    
    
    
    
    Consumer
    
    
    (312
    )
    
    
    (282
    )Total charge-offs
    
    
    (328
    )
    
    
    (382
    )Recoveries:Commercial and agricultural
    
    
    4
    
    
    
    14Real estate mortgage
    
    
    1
    
    
    
    Real estate construction
    
    
    
    
    
    
    Consumer
    
    
    86
    
    
    
    88Total recoveries
    
    
    91
    
    
    
    102Net charge-offs
    
    
    (237
    )
    
    
    (280
    )Provision for loan losses
    
    
    300
    
    
    
    450Balance at June 30,
    
    $
    2,627
    
    
    $
    2,641Net charge-offs during the six-month period to average loans
    
    
    0.10
    %
    
    
    0.13
    %Allowance for loan losses to total Loans
    
    
    1.14
    %
    
    
    1.23
    %
 Investment securities and Federal funds sold.Combined investment securities
and Federal funds sold balances increased $3 million to $119 at June 30, 2004,
from $116 million at December 31, 2003. Federal funds sold balances remained
unchanged at $5 million at both June 30, 2004 and December 31, 2003. The Companys investment in U.S. Treasury securities and obligations of U.S.
agencies decreased to 75.5% of the investment portfolio at June 30, 2004,
versus 82.6% at December 31, 2003. The Companys investment in corporate bonds
increased to 12.9% of the investment portfolio at June 30, 2004, versus 10.8%
at December 31, 2003. Tax-exempt municipal obligation bonds increased to 11.6%
at June 30, 2004, up from 6.6% at December 31, 2003. 19




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Accrued interest receivable and other assets.Accrued interest receivable and
other assets increased $459 thousand, or 3%, to $17.1 million as of June 30,
2004, up from $16.7 million at December 31, 2003. This increase related
primarily to a $1 million additional investment in stock of the Federal Home
Loan Bank (FHLB) of San Francisco offset by a $600 thousand decline in real
estate investment holdings. 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. Deposits.Total deposits were $370 million as of June 30, 2004, an increase of
$13.8 million, or 4%, 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 40.8% of total deposits at June 30, 2004, up from 38.9% of total deposits at
December 31, 2003. Money market and savings deposits decreased slightly to
34.3% of total deposits at June 30, 2004 compared to 34.9% as of December 31,
2003. Time deposits decreased to 24.9% of total deposits as of June 30, 2004
down from 26.2% as of December 31, 2003. CAPITAL RESOURCES Shareholders equity as of June 30, 2004 decreased $257 thousand, or 1%, to
$25.5 million from $25.7 million as of December 31, 2003. This decrease was
the result of a $1.4 million decline in accumulated other comprehensive income
and payment in May of a $456 thousand cash dividend mostly offset by earning of
$1.6 million during the first half 2004. The accumulated other comprehensive
losses at June 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 and the Bank met all their capital
adequacy requirements as of June 30, 2004. Plumas BancorpActualMinimumCapital
    
    
    
    
    
    Capital(In Thousands)
    
    Ratio
    
    RequirementLeverage
    
    $
    30,658
    
    
    
    7.7
    %
    
    
    4.0
    %Tier 1 Risk-Based
    
    
    30,658
    
    
    
    10.3
    %
    
    
    4.0
    %Total Risk-Based
    
    
    33,285
    
    
    
    11.2
    %
    
    
    8.0
    %
 20




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##### 



Plumas BankActual
    
    MinimumCapitalCapital
    
    Ratio
    
    Requirement(In Thousands)Leverage
    
    $
    30,190
    
    
    
    7.6
    %
    
    
    4.0
    %Tier 1 Risk-Based
    
    
    30,190
    
    
    
    10.2
    %
    
    
    4.0
    %Total Risk-Based
    
    
    32,817
    
    
    
    11.1
    %
    
    
    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 June 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 half of 2004, deposits
increased $14 million, or 4%, 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. 21




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##### 



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of loss in a financial instrument arising from adverse
changes in market rates and prices such as interest rates, commodity prices and
equity prices. As a financial institution, the Companys market risk arises
primarily from interest rate risk exposure. Fluctuation in interest rates will
ultimately impact both the level of income and expense recorded on a large
portion of the Companys assets and liabilities, and the market value of all
interest earning assets and interest bearing liabilities, dependent upon the
stated or estimated maturity date. Since virtually all of the Companys
interest earning assets and all of the Companys interest bearing liabilities,
with the exception of the junior subordinated debentures, are located at the
Bank level, virtually all of the Companys interest rate risk exposure lies at
the Bank level. As a result, all significant interest rate risk management
procedures are performed at the Bank level. Based upon the nature of its
operations, the Bank is not subject to foreign currency exchange or commodity
price risk. The Banks real estate loan portfolio, concentrated primarily
within northeastern California, is subject to risks associated with the local
economies. The fundamental objective of the Banks management of its assets and
liabilities is to maximize the economic value of the Company while maintaining
adequate liquidity and an exposure to interest rate risk deemed by management
to be acceptable. Management believes an acceptable degree of exposure to
interest rate risk results from the management of assets and liabilities
through maturities, pricing and mix to attempt to neutralize the potential
impact of changes in market interest rates. The Banks profitability is
dependent to a large extent upon its net interest income which is the
difference between its interest income on interest-earning assets, such as
loans and securities, and its interest expense on interest-bearing liabilities,
such as deposits and borrowings. The Bank, like other financial institutions,
is subject to interest rate risk to the degree that its interest-earning assets
reprice differently than its interest-bearing liabilities. The Bank manages
its mix of assets and liabilities with the goals of limiting its exposure to
interest rate risk, ensuring adequate liquidity, and coordinating its sources
and uses of funds. The Bank seeks to control its interest rate risk exposure in a manner that will
allow for adequate levels of earnings and capital over a range of possible
interest rate environments. The Bank has adopted formal policies and practices
to monitor and manage interest rate risk exposure. As part of this effort, the
Bank measures interest rate risk utilizing 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 three months ended June 30,
2004 compared to December 31, 2003 as discussed in the Companys 2003 annual
report on Form 10-K. 22




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##### 



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. 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 The voting results of the registrants annual meeting of the shareholders held
on May 19, 2004 are as follows: Proposal: Election of Directors On the proposal to elect Directors of Plumas Bancorp, Managements nominees
were elected as Directors of Plumas Bancorp until the 2005 Annual
Meeting of Shareholders and until their successors are duly elected and qualified.
The voting results were as follows: VotesWithheld orVotes For
    
    Against
    
    
    
    
    
    BrokerNominee
    
    Nominee
    
    Nominee
    
    Abstentions
    
    Non-VotesAlvin G. Blickenstaff
    
    
    2,565,161
    
    
    
    4,418
    
    
    
    689,149
    
    
    
    0Jerry V. Kehr
    
    
    2,564,711
    
    
    
    4,868
    
    
    
    689,149
    
    
    
    0William E. Elliott
    
    
    2,565,161
    
    
    
    4,418
    
    
    
    689,149
    
    
    
    0Gerald W. Fletcher
    
    
    2,565,161
    
    
    
    4,418
    
    
    
    689,149
    
    
    
    0Arthur C. Grohs
    
    
    2,565,161
    
    
    
    4,418
    
    
    
    689,149
    
    
    
    0Christine McArthur
    
    
    2,557,117
    
    
    
    12,462
    
    
    
    689,149
    
    
    
    0Terrance J. Reeson
    
    
    2,565,161
    
    
    
    4,418
    
    
    
    689,149
    
    
    
    0Walter Sphar
    
    
    2,565,161
    
    
    
    4,418
    
    
    
    689,149
    
    
    
    0Thomas Watson
    
    
    2,565,161
    
    
    
    4,418
    
    
    
    689,149
    
    
    
    0Daniel E. West
    
    
    2,564,711
    
    
    
    4,868
    
    
    
    689,149
    
    
    
    0
 23




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##### 



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.10.2
    
    Incentive Stock Option Agreement as amended of William E. Elliott
dated November 18, 1998, is included as Exhibit 10.2 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.10.5
    
    Incentive Stock Option Agreement as amended of Douglas N. Biddle
dated November 18, 1998, is included as Exhibit 10.5 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.10.8
    
    Incentive Stock Option Agreement as amended of Dennis C. Irvine
dated November 18, 1998, is included as Exhibit 10.8 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this
reference herein.10.9
    
    Executive Salary Continuation Agreement as amended of Dennis C.
Irvine dated June 2, 1994, is included as Exhibit 10.9 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this
reference herein.10.10
    
    Split Dollar Agreements of Dennis C. Irvine dated January 24, 2002,
is included as Exhibit 10.10 to the Registrants 10-QSB for June 30,
2002, which is incorporated by this reference herein.10.11
    
    Incentive Stock Option Agreement as amended of Robert T. Herr dated
July 19, 2000, is included as Exhibit 10.11 to the Registrants
10-QSB for June 30, 2002, which is incorporated by this reference
herein.10.12
    
    Non-Qualified Stock Option Agreement as amended of Jerry V. Kehr
dated November 18, 1998, is included as Exhibit 10.12 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this
reference herein.10.13
    
    Deferred Fee Agreement as amended of Jerry V. Kehr dated August 19,
1998, is included as Exhibit 10.13 to the Registrants 10-QSB for
June 30, 2002, which is incorporated by this reference herein.10.14
    
    Amended and Restated Director Retirement Agreement of Jerry V. Kehr
dated April 28, 2000, is included as Exhibit 10.14 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this
reference herein.
 24




---



##### 



10.15
    
    Consulting Agreement of Jerry V. Kehr dated May 10, 2000, is
included as Exhibit 10.15 to the Registrants 10-QSB for June 30,
2002, which is incorporated by this reference herein.10.16
    
    Non-Qualified Stock Option Agreement as amended of Daniel E. West
dated November 19, 1997, is included as Exhibit 10.16 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this
reference herein.10.17
    
    Non-Qualified Stock Option Agreement as amended of Daniel E. West
dated November 18, 1998, is included as Exhibit 10.17 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.10.20
    
    Non-Qualified Stock Option Agreement as amended of Alvin G.
Blickenstaff dated November 18, 1998, is included as Exhibit 10.20
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.10.23
    
    Non-Qualified Stock Option Agreement as amended of Gerald W.
Fletcher dated November 18, 1998, is included as Exhibit 10.23 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.10.26
    
    Non-Qualified Stock Option Agreement as amended of Arthur C. Grohs
dated November 18, 1998, is included as Exhibit 10.26 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.10.29
    
    Non-Qualified Stock Option Agreement as amended of Christine
McArthur dated August 16, 2000, is included as Exhibit 10.29 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.10.32
    
    Non-Qualified Stock Option Agreement as amended of Terrance J.
Reeson dated November 18, 1998, is included as Exhibit 10.32 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
 25




---



##### 



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.10.35
    
    Non-Qualified Stock Option Agreement as amended of Walter Sphar
dated November 18, 1998, is included as Exhibit 10.35 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.10.38
    
    Non-Qualified Stock Option Agreement as amended of Thomas Watson
dated November 21, 2001, is included as Exhibit 10.38 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this
reference herein.10.39
    
    Deferred Fee Agreement of Thomas Watson dated March 3, 2001, is
included as Exhibit 10.39 to the Registrants 10-QSB for June 30,
2002, which is incorporated by this reference herein.10.40
    
    Form of Indemnification Agreement, is included as Exhibit 10.41 to
the Registrants 10-QSB for June 30, 2002, which is incorporated by
this reference herein.10.41
    
    2001 Stock Option Plan as amended is included as exhibit 99.1 of the
Form S-8 filed July 23, 2002, File No. 333-9695710.42
    
    1991 Stock Option Plan as amended is included as exhibit 99.1 of the
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
    
    Incentive Stock Option Agreement of William E. Elliott dated
December 18, 2002, is included as Exhibit 10.46 to the Registrants
10-Q for June 30, 2003, which is incorporated by this reference
herein.10.47
    
    Incentive Stock Option Agreement of Douglas N. Biddle dated December
18, 2002, is included as Exhibit 10.47 to the Registrants 10-Q for
June 30, 2003, which is incorporated by this reference herein.10.48
    
    Incentive Stock Option Agreement of Dennis C. Irvine dated December
18, 2002, is included as Exhibit 10.48 to the Registrants 10-Q for
June 30, 2003, which is incorporated by this reference herein.10.49
    
    Incentive Stock Option Agreement of Robert T. Herr dated December
18, 2002, is included as Exhibit 10.49 to the Registrants 10-Q for
June 30, 2003, which is incorporated by this reference herein.10.50
    
    Non-Qualified Stock Option Agreement of Jerry V. Kehr dated December
18, 2002, is included as Exhibit 10.50 to the Registrants 10-Q for
June 30, 2003, which is incorporated by this reference herein.10.51
    
    Non-Qualified Stock Option Agreement of Daniel E. West dated
December 18, 2002, is included as Exhibit 10.51 to the Registrants
10-Q for June 30, 2003, which is incorporated by this reference
herein.10.52
    
    Non-Qualified Stock Option Agreement of Alvin G. Blickenstaff dated
December 18, 2002, is included as Exhibit 10.52 to the Registrants
10-Q for June 30, 2003, which is incorporated by this reference
herein.10.53
    
    Non-Qualified Stock Option Agreement of Gerald W. Fletcher dated
December 18, 2002, is included as Exhibit 10.53 to the Registrants
10-Q for June 30, 2003, which is incorporated
 26




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by this reference herein.10.54
    
    Non-Qualified Stock Option Agreement of Arthur C. Grohs dated
December 18, 2002, is included as Exhibit 10.54 to the Registrants
10-Q for June 30, 2003, which is incorporated by this reference
herein.10.55
    
    Non-Qualified Stock Option Agreement of Christine McArthur dated
December 18, 2002, is included as Exhibit 10.55 to the Registrants
10-Q for June 30, 2003, which is incorporated by this reference
herein.10.56
    
    Non-Qualified Stock Option Agreement of Terrance J. Reeson dated
December 18, 2002, is included as Exhibit 10.56 to the Registrants
10-Q for June 30, 2003, which is incorporated by this reference
herein.10.57
    
    Non-Qualified Stock Option Agreement of Walter Sphar dated December
18, 2002, is included as Exhibit 10.57 to the Registrants 10-Q for
June 30, 2003, which is incorporated by this reference herein.10.58
    
    Non-Qualified Stock Option Agreement of Thomas Watson dated December
18, 2002, is included as Exhibit 10.58 to the Registrants 10-Q for
June 30, 2003, which is incorporated by this reference herein.10.59
    
    Director Retirement Agreement of Thomas Watson dated May 1, 2003, is
included as Exhibit 10.59 to the Registrants 10-Q for June 30,
2003, which is incorporated by this reference herein.10.60
    
    Consulting Agreement of Thomas Watson dated May 1, 2003, is included
as Exhibit 10.60 to the Registrants 10-Q for June 30, 2003, which
is incorporated by this reference herein.10.61
    
    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 August 11, 2004.31.2
    
    Rule 13a-14(a) [Section 302] Certification of Chief Administrative
Officer dated August 11, 2004.31.3
    
    Rule 13a-14(a) [Section 302] Certification of Chief Executive
Officer dated August 11, 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 August 11, 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 August 11, 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 August 11, 2004.
  (b)
    
    Reports on Form 8-K  On April 21, 2004, the Company filed a Current Report on Form 8-K. The Current
Report included as an exhibit, the press release dated April 21, 2004, filed by
the Company containing unaudited financial information, first quarter earnings
2004 earnings. 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: August 11, 2004. /s/ William E. Elliott
William E. ElliottPresident/Chief Executive Officer/s/ Douglas N. Biddle
Douglas N. BiddleExecutive Vice President Chief Administrative Officer/s/ Andrew J. Ryback
Andrew J. RybackSenior Vice President Chief Financial Officer
 28