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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2008
 or
 o
    
    Transaction report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Commission file number: 000-49883
 
 PLUMAS BANCORP
  California
(State or other jurisdiction of 
incorporation or organization)
    
    75-2987096 (IRS
Employer Identification No.)35 S. Lindan Avenue, Quincy, CA
(Address of principal executive offices)
    
    95971
(Zip Code)
 (530) 283-7305
 
  Title of Each Class:
    
    Name of Each Exchange on which Registered:Common Stock, no par value
    
    The NASDAQ Stock Market LLC
 None.
 
  o þ
  o þ
  þ 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
 PagePART IItem 1. Business
    
    
    4Item 1A. Risk Factors
    
    
    23Item 1B. Unresolved Staff Comments
    
    
    23Item 2. Properties
    
    
    24Item 3. Legal Proceedings
    
    
    25Item 4. Submission of Matters to a Vote of Security Holders
    
    
    25PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    26Item 6. Selected Financial Data
    
    
    28Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    29Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    51Item 8. Financial Statements and Supplementary Data
    
    
    51Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    52Item 9A. Controls and Procedures
    
    
    52Item 9B. Other Information
    
    
    53PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    53Item 11. Executive Compensation
    
    
    53Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    53Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    54Item 14. Principal Accountant Fees and Services
    
    
    54PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    54Signatures
    
    
    58Exhibit 3.2Exhibit 10.1Exhibit 10.50Exhibit 10.51Exhibit 10.52Exhibit 10.53Exhibit 10.54Exhibit 10.55Exhibit 10.56Exhibit 10.57Exhibit 10.58Exhibit 23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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PART I
 Forward-Looking Information
 This Annual Report on Form 10-K includes forward-looking statements and information is subject to
the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements (which involve Plumas Bancorps
(the Companys) plans, beliefs and goals, refer to estimates or use similar terms) involve
certain risks and uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. Such risks and uncertainties include, but are not limited to, the
following factors:
 
    
    Competitive pressure in the banking industry, competition in the markets the Company
operates in and changes in the legal, accounting and regulatory environment
 
    
    Changes in the interest rate environment and volatility of rate sensitive assets and
liabilities
 
    
    Declines in the health of the economy, nationally or regionally, which could reduce the
demand for loans, reduce the ability of borrowers to repay loans and/or reduce the value
of real estate collateral securing most of the Companys loans
 
    
    Credit quality deterioration, which could cause an increase in the provision for loan
and lease losses
 
    
    Devaluation of fixed income securities
 
    
    Asset/liability matching risks and liquidity risks
 
    
    Loss of key personnel
 
    
    Operational interruptions including data processing systems failure and fraud
 The Company undertakes no obligation to revise or publicly release the results of any revision to
these forward-looking statements. For additional information concerning risks and uncertainties
related to the Company and its operations, please refer to Item 1A of this Form 10-K entitled Risk
Factors and other information in this Report.
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ITEM 1. BUSINESS
 General
 The Company. Bank Holding Company Act
   www.plumasbank.com www.sec.gov
 The Bank.
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Commitment to our Communities.
  Recent Developments.
 Capital Purchase Program  TARP  Preferred Stock and Stock Warrant.
   6




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Trust Preferred Securities.
      7




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Business Concentrations.
 Competition.
     8




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Employees.
 Supervision and Regulation
 The Company.
    The Bank.
   9




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Capital Standards.
    10




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Requirement for theBank to be:Adequately
    
    
    Well
    
    
    Plumas
    
    
    PlumasCapitalized
    
    
    Capitalized
    
    
    Bank
    
    
    BancorpTier 1 leverage capital ratio
    
    
    4.0
    %
    
    
    5.0
    %
    
    
    9.7
    %
    
    
    9.8
    %Tier 1 risk-based capital ratio
    
    
    4.0
    %
    
    
    6.0
    %
    
    
    10.8
    %
    
    
    11.0
    %Total risk-based capital ratio
    
    
    8.0
    %
    
    
    10.0
    %
    
    
    12.1
    %
    
    
    12.2
    %
 Prompt Corrective Action.
  Premiums for Deposit Insurance.
   11




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Federal Home Loan Bank System.
 
    
    a membership stock requirement with an initial cap of $25 million (100% of membership
asset value as defined), or
 
    
    an activity based stock requirement (based on percentage of outstanding advances).
   Federal Reserve System.
 Impact of Monetary Policies.
 Extensions of Credit to Insiders and Transactions with Affiliates. Federal Reserve Act Regulation O
 
    
    a banks or bank holding companys executive officers, directors and principal
shareholders (i.e., in most cases, those persons who own, control or have power to vote
more than 10% of any class of voting securities),
 
    
    any company controlled by any such executive officer, director or shareholder, or
 
    
    any political or campaign committee controlled by such executive officer, director or
principal shareholder.
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Consumer Protection Laws and Regulations.
 Community Reinvestment Act .
 Equal Credit Opportunity Act
 Truth in Lending Act
 Fair Housing Act
 Home Mortgage Disclosure Act
 Right to Financial Privacy Act
 Real Estate Settlement Procedures Act
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Recent Legislation and Other Changes.
    
    
    ESTABLISHMENT OF STANDARDS  During the period in which any TARP obligation remains
outstanding, each TARP recipient shall be subject to the standards in the regulations
issued by the Treasury with respect to executive compensation limitations for TARP
recipients, and the provisions of section 162(m)(5) of the Internal Revenue Code of 1986,
as applicable (nondeductibility of executive compensation in excess of $500,000).
 
    
    COMPLIANCE WITH STANDARDS  The Treasury is required to see that each TARP recipient
meet the required standards for executive compensation and corporate governance.
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
    
    SPECIFIC REQUIREMENTS FOR THE REQUIRED STANDARDS 
 
    
    Limits on compensation that exclude incentives for senior executive officers of
the TARP recipient to take unnecessary and excessive risks that threaten the value
of the financial institution during the period in which any TARP obligation
remains outstanding.
 
    
    A clawback requirement by such TARP recipient of any bonus, retention award, or
incentive compensation paid to a senior executive officer and any of the next 20
most highly-compensated employees of the TARP recipient based on statements of
earnings, revenues, gains, or other criteria that are later found to be materially
inaccurate.
 
    
    A prohibition on such TARP recipient making any golden parachute payment to a
senior executive officer or any of the next 5 most highly-compensated employees of
the TARP recipient during the period in which any TARP obligation remains
outstanding.
 
    
    A prohibition on any compensation plan that would encourage manipulation of the
reported earnings of such TARP recipient to enhance the compensation of any of its
employees.
 
    
    A requirement for the establishment of an independent Compensation Committee
that meets at least twice a year to discuss and evaluate employee compensation
plans in light of an assessment of any risk posed to the TARP recipient from such
plans. For a non SEC company that is a TARP recipient that has received
$25,000,000 or less of TARP assistance, the duties of the compensation committee
may be carried out by the board of directors of such TARP recipient.
    
    
    A new Capital Assistance Program to help ensure that our banking institutions have
sufficient capital to withstand the challenges ahead, paired with a supervisory process to
produce a more consistent and forward-looking assessment of the risks on banks balance
sheets and their potential capital needs.
 
    
    A new Public-Private Investment Fund on an initial scale of up to $500 billion, with
the potential to expand up to $1 trillion, to catalyze the removal of legacy assets from
the balance sheets of financial institutions. This fund will combine public and private
capital with government financing to help free up capital to support new lending.
 
    
    A new Treasury and Federal Reserve initiative to dramatically expand  up to $1
trillion  the existing Term Asset-Backed Securities Lending Facility (TALF) in order to
reduce credit spreads and restart the securitized credit markets that in recent years
supported a substantial portion of lending to households, students, small businesses, and
others.
 
    
    An extension of the FDICs Temporary Liquidity Guarantee Program to October 31, 2009. A
new framework of governance and oversight to help ensure that banks receiving funds are
held responsible for appropriate use of those funds through stronger conditions on lending,
dividends and executive compensation along with enhanced reporting to the public.
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
    
    accelerated from 2011 to 2008 the date that the Federal Reserve Bank could pay interest
on deposits of banks held with the Federal Reserve to meet reserve requirements;
 
    
    to the extent that the U. S. Treasury purchases mortgage securities as part of TARP,
the Treasury shall implement a plan to minimize foreclosures including using guarantees
and credit enhancements to support reasonable loan modifications, and to the extent loans
are owned by the government to consent to the reasonable modification of such loans;
 
    
    limits executive compensation for executives for TARP participating financial
institutions including a maximum corporate tax deduction limit of $500,000 for each of the
top five highest paid executives of such institution, requiring clawbacks of incentive
compensation that were paid based on inaccurate or false information, limiting golden
parachutes for involuntary and certain voluntary terminations to 2.99x their average
annual salary and bonus for the last five years, and prohibiting the payment of incentive
compensation that encourages management to take unnecessary and excessive risks with
respect to the institution;
 
    
    extends the mortgage debt forgiveness provision of the Mortgage Forgiveness Debt Relief
Act of 2007 by three years (2012) to ease the income tax burden on those involved with
certain foreclosures; and
 
    
    qualified financial institutions may count losses on FNMA and FHLMC preferred stock
against ordinary income, rather than capital gain income.
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®
   17




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
    
    Prohibit a lender from making a loan without regard to borrowers ability to repay the
loan from income and assets other than the homes value. A lender complies, in part, by
assessing repayment ability based on the highest scheduled payment in the first seven
years of the loan. To show that a lender violated this prohibition, a borrower does not
need to demonstrate that it is part of a pattern or practice.
 
    
    Require creditors to verify the income and assets they rely upon to determine repayment
ability.
 
    
    Ban any prepayment penalty if the payment can change in the initial four years. For
other higher-priced loans, a prepayment penalty period cannot last for more than two
years.
 
    
    Require creditors to establish escrow accounts for property taxes and homeowners
insurance for all first-lien mortgage loans.
  
    
    Creditors and mortgage brokers are prohibited from coercing a real estate appraiser to
misstate a homes value.
 
    
    Companies that service mortgage loans are prohibited from engaging in certain
practices, such as pyramiding late fees. In addition, servicers are required to credit
consumers loan payments as of the date of receipt and provide a payoff statement within a
reasonable time of request.
 
    
    Creditors must provide a good faith estimate of the loan costs, including a schedule of
payments, within three days after a consumer applies for any mortgage loan secured by a
consumers principal dwelling, such as a home improvement loan or a loan to refinance an
existing loan. Currently, early cost estimates are only required for home-purchase loans.
Consumers cannot be charged any fee until after they receive the early disclosures,
except a reasonable fee for obtaining the consumers credit history.
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
    
    Banks would be prohibited from increasing the rate on a pre-existing credit card
balance (except under limited circumstances) and must allow the consumer to pay off that
balance over a reasonable period of time.
 
    
    Banks would be prohibited from applying payments in excess of the minimum in a manner
that maximizes interest charges.
 
    
    Banks would be required to give consumers the full benefit of discounted promotional
rates on credit cards by applying payments in excess of the minimum to any higher-rate
balances first, and by providing a grace period for purchases where the consumer is
otherwise eligible.
 
    
    Banks would be prohibited from imposing interest charges using the two-cycle method,
which computes interest on balances on days in billing cycles preceding the most recent
billing cycle.
 
    
    Banks would be required to provide consumers a reasonable amount of time to make
payments.
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
    
    Authorized a bank or trust acting in any capacity under a court or
private trust to arrange for the deposit of securities in a securities depository
or federal reserve bank, and provided how they may be held by the securities
depository;
 
    
    Reduced from 5% to 1% the amount of eligible assets to be maintained
at an approved depository by an office of a foreign (other nation) bank for the
protection of the interests of creditors of the banks business in this state or
for the protection of the public interest;
 
    
    Enabled the DFI to issue an order against a bank licensee parent or
subsidiary;
 
    
    Provided that the examinations may be conducted in alternate
examination periods if the DFI concludes that an examination of the state bank by
the appropriate federal regulator carries out the purpose of this section, but the
DFI may not accept two consecutive examination reports made by federal regulators;
 
    
    Provided that the DFI may examine subsidiaries of every California
state bank, state trust company, and foreign (other nation) bank to the extent and
whenever and as often as the DFI shall deem advisable;
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
    
    Enabled the DFI issue an order or a final order to now include any
bank holding company or subsidiary of the bank, trust company, or foreign banking
corporation that is violating or failing to comply with any applicable law, or is
conducting activities in an unsafe or injurious manner;
 
    
    Enabled the DFI to take action against a person who has engaged in or
participated in any unsafe or unsound act with regard to a bank, including a
former employee who has left the bank.
  
    
    any offer (but not a sale) not involving a public offering by a bank organized
under the laws of this state of its securities.
 
    
    the execution and delivery of any agreement for the sale of the securities
pursuant to the offer if no part of the consideration for the securities is paid
to or received by the bank and none of the securities are issued until the sale of
the securities is authorized by the commissioner or exempted from authorization.
 
    
    any stock split by a bank organized under the laws of this state that is
effected pursuant to an amendment to its articles, an agreement of merger, or a
certificate of ownership that has been approved by the commissioner, unless this
exemption is withheld by order of the commissioner.
 
    
    any offer or sale of securities by a bank organized under the laws of this
state that is either (1) to a person actually approved by the commissioner
pursuant to Section 702 of the Financial Code to acquire control of the bank if
all of the material terms and conditions of the offer and sale of securities are
disclosed in the application for approval specified in Section 702 and the offer
and sale of securities is in accordance with the terms and subject to the
conditions of the approval to acquire control or (2) in a transaction exempted
from the approval requirement of Section 701 by a regulation or an order of the
commissioner, unless this exemption is withheld by order of the commissioner.
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Recent Accounting Pronouncements
 Business Combinations
  The Hierarchy of Generally Accepted Accounting Principles
  Employers Disclosures about Postretirement Benefit Plan Assets
  
 ITEM 1A. RISK FACTORS
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
   23




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ITEM 2. PROPERTIES
  Owned Properties35 South Lindan Avenue 
Quincy, California (1)
    
    32 Central Avenue
Quincy, California (1)
    
    80 W. Main St. 
Quincy, California (1)424 N. Mill Creek 
Quincy, California (1)
    
    336 West Main Street
Quincy, California
    
    120 North Pine Street
Portola, California43163 Highway 299E 
Fall River Mills, California
    
    121 Crescent Street
Greenville, California
    
    315 Birch Street
Westwood, California (2)255 Main Street 
Chester, California
    
    510 North Main Street
Alturas, California
    
    3000 Riverside Drive
Susanville, California8475 North Lake Boulevard 
Kings Beach, California
    
    11638 Donner Pass Road
Truckee, CaliforniaLeased Properties243 North Lake Boulevard 
Tahoe City, California
    
    604 Main Street
Loyalton, California
    
    2175 Civic Center Drive
Redding, California1895 Plumas St., Suite 3
Reno, Nevada (3)
    
    470 Nevada St., Suite 108
Auburn, California (3)
 (1)
    
    Non-branch administrative or credit administrative offices.(2)
    
    The Westwood branch is a mortgaged property with an outstanding balance of $43,000 at December 31, 2008.(3)
    
    Commercial lending offices.  Year Ending December 31,2009
    
    $
    319,0002010
    
    
    283,0002011
    
    
    262,0002012
    
    
    262,0002013
    
    
    194,000Thereafter
    
    
    728,000$
    2,048,000
   24




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ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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PART II
 
 ITEM 5.
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCK-HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
  Quarter
    
    Dividends
    
    
    High
    
    
    Low4th Quarter 2008
    
    $
    0.08
    
    
    $
    11.00
    
    
    $
    3.803rd Quarter 2008
    
    
    
    
    
    $
    11.97
    
    
    $
    8.972nd Quarter 2008
    
    $
    0.16
    
    
    $
    14.93
    
    
    $
    10.341st Quarter 2008
    
    
    
    
    
    $
    14.41
    
    
    $
    9.754th Quarter 2007
    
    $
    0.15
    
    
    $
    14.48
    
    
    $
    11.503rd Quarter 2007
    
    
    
    
    
    $
    13.82
    
    
    $
    11.502nd Quarter 2007
    
    $
    0.15
    
    
    $
    16.49
    
    
    $
    12.381st Quarter 2007
    
    
    
    
    
    $
    17.01
    
    
    $
    14.50
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Securities Authorized for Issuance under Equity Compensation Plans.
 Number of securities remainingavailable for future issuanceNumber of securities to
    
    
    Weighted-average
    
    
    under equity compensationbe issued upon exercise
    
    
    exercise price of
    
    
    plans (excluding securitiesof outstanding options
    
    
    outstanding options
    
    
    reflected in column (a))Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    466,956
    
    
    $
    13.38
    
    
    
    407,229Equity compensation
plans not approved by
security holders
    
    None
    
    
    Not Applicable
    
    
    NoneTotal
    
    
    466,956
    
    
    $
    13.38
    
    
    
    407,229
  Issuer Purchases of Equity Securities.
 Total Numberof SharesPurchased asPart of
    
    
    MaximumTotal
    
    
    
    
    
    
    Publicly
    
    
    Number of SharesNumber of
    
    
    Average
    
    
    Announced
    
    
    That May Yet BeShares
    
    
    Price Paid
    
    
    Plans or
    
    
    Purchased Under thePeriod
    
    Purchased
    
    
    per Share (1)
    
    
    Programs
    
    
    Plans or Programs (2)October 1, 2008 to October 31, 2008
    
    
    22,556
    
    
    $
    10.33
    
    
    
    22,556
    
    
    
    142,827November 1, 2008 to November 30, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142,827December 1, 2008 to December 31, 2008
    
    
    5,094
    
    
    $
    7.55
    
    
    
    5,094
    
    
    
    0Total
    
    
    27,650
    
    
    $
    9.82
    
    
    
    27,650
 (1)
    
    Includes commissions.(2)
    
    On December 20, 2007 the Company announced that for 2008 the Board
authorized a common stock repurchase plan for up to 244,000 shares, or
5% of the Companys shares outstanding on December 20, 2007. This plan
terminated on December 31, 2008.  27




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ITEM 6. SELECTED FINANCIAL DATA
  At or for the year ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(dollars in thousands except per share information)Statement of IncomeInterest income
    
    $
    25,440
    
    
    $
    30,284
    
    
    $
    29,483
    
    
    $
    25,497
    
    
    $
    20,110Interest expense
    
    
    5,364
    
    
    
    8,536
    
    
    
    6,954
    
    
    
    4,793
    
    
    
    2,914Net interest income
    
    
    20,076
    
    
    
    21,748
    
    
    
    22,529
    
    
    
    20,704
    
    
    
    17,196Provision for loan losses
    
    
    4,600
    
    
    
    800
    
    
    
    1,000
    
    
    
    1,100
    
    
    
    750Noninterest income
    
    
    5,091
    
    
    
    5,448
    
    
    
    5,159
    
    
    
    5,073
    
    
    
    5,099Noninterest expense
    
    
    20,475
    
    
    
    19,671
    
    
    
    18,290
    
    
    
    17,549
    
    
    
    15,898Provision (benefit) for income taxes
    
    
    (212
    )
    
    
    2,502
    
    
    
    3,196
    
    
    
    2,600
    
    
    
    2,001Net income
    
    $
    304
    
    
    $
    4,223
    
    
    $
    5,202
    
    
    $
    4,528
    
    
    $
    3,646Balance sheet (end of period)Total assets
    
    $
    457,175
    
    
    $
    453,115
    
    
    $
    473,239
    
    
    $
    472,803
    
    
    $
    417,346Total loans
    
    $
    366,017
    
    
    $
    352,949
    
    
    $
    354,712
    
    
    $
    321,646
    
    
    $
    266,913Allowance for loan losses
    
    $
    7,224
    
    
    $
    4,211
    
    
    $
    3,917
    
    
    $
    3,256
    
    
    $
    2,722Total deposits
    
    $
    371,493
    
    
    $
    391,940
    
    
    $
    402,176
    
    
    $
    426,560
    
    
    $
    378,567Total shareholders equity
    
    $
    35,437
    
    
    $
    37,139
    
    
    $
    35,852
    
    
    $
    31,137
    
    
    $
    27,891Balance sheet (period average)Total assets
    
    $
    447,720
    
    
    $
    464,974
    
    
    $
    468,988
    
    
    $
    452,225
    
    
    $
    409,335Total loans
    
    $
    355,416
    
    
    $
    353,384
    
    
    $
    335,226
    
    
    $
    302,596
    
    
    $
    233,759Total deposits
    
    $
    382,279
    
    
    $
    403,772
    
    
    $
    415,700
    
    
    $
    403,818
    
    
    $
    373,267Total shareholders equity
    
    $
    37,343
    
    
    $
    37,041
    
    
    $
    33,682
    
    
    $
    29,548
    
    
    $
    26,829Capital ratiosLeverage ratio
    
    
    9.8
    %
    
    
    10.0
    %
    
    
    9.5
    %
    
    
    8.5
    %
    
    
    7.6
    %Tier 1 risk-based capital
    
    
    11.0
    %
    
    
    11.6
    %
    
    
    10.9
    %
    
    
    10.3
    %
    
    
    10.1
    %Total risk-based capital
    
    
    12.2
    %
    
    
    12.7
    %
    
    
    11.8
    %
    
    
    11.1
    %
    
    
    10.9
    %Asset quality ratiosNonperforming loans/total loans
    
    
    7.31
    %
    
    
    0.75
    %
    
    
    0.29
    %
    
    
    0.52
    %
    
    
    0.45
    %Nonperforming assets/total assets
    
    
    6.78
    %
    
    
    0.70
    %
    
    
    0.22
    %
    
    
    0.36
    %
    
    
    0.30
    %Allowance for loan losses/total loans
    
    
    1.97
    %
    
    
    1.19
    %
    
    
    1.10
    %
    
    
    1.01
    %
    
    
    1.02
    %Net loan charge-offs
    
    $
    1,587
    
    
    $
    506
    
    
    $
    339
    
    
    $
    566
    
    
    $
    552Performance ratiosReturn on average assets
    
    
    0.07
    %
    
    
    0.91
    %
    
    
    1.11
    %
    
    
    1.00
    %
    
    
    0.89
    %Return on average equity
    
    
    0.8
    %
    
    
    11.4
    %
    
    
    15.4
    %
    
    
    15.2
    %
    
    
    13.5
    %Net interest margin
    
    
    4.99
    %
    
    
    5.18
    %
    
    
    5.32
    %
    
    
    5.06
    %
    
    
    4.77
    %Loans to Deposits
    
    
    98.5
    %
    
    
    90.1
    %
    
    
    88.2
    %
    
    
    75.4
    %
    
    
    70.5
    %Efficiency ratio
    
    
    81.4
    %
    
    
    72.3
    %
    
    
    66.1
    %
    
    
    68.1
    %
    
    
    71.3
    %Per share informationBasic earnings
    
    $
    0.06
    
    
    $
    0.85
    
    
    $
    1.04
    
    
    $
    0.92
    
    
    $
    0.75Diluted earnings
    
    $
    0.06
    
    
    $
    0.84
    
    
    $
    1.02
    
    
    $
    0.89
    
    
    $
    0.73Cash dividends
    
    $
    0.24
    
    
    $
    0.30
    
    
    $
    0.26
    
    
    $
    0.22
    
    
    $
    0.19Dividend payout ratio
    
    
    400
    %
    
    
    35.3
    %
    
    
    25.0
    %
    
    
    23.9
    %
    
    
    25.1
    %Book value
    
    $
    7.42
    
    
    $
    7.63
    
    
    $
    7.14
    
    
    $
    6.26
    
    
    $
    5.69Common shares outstanding at period end
    
    
    4,775,339
    
    
    
    4,869,130
    
    
    
    5,023,205
    
    
    
    4,976,654
    
    
    
    4,901,197
  28




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##### Table of Contents



ITEM 7.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 General
    Critical Accounting Policies
  Allowance for Loan Losses.
    Available for Sale Securities.
  29




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##### Table of Contents



Income Taxes.
  Accounting for
Uncertainty in Income Taxes
 Impairment of Core Deposit Intangible.
 Stock-Based Compensation.
  30




---



##### Table of Contents



Overview
       31




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##### Table of Contents



Results of Operations
 Net Interest Income
  Year ended December 31,2008
    
    
    2007
    
    
    2006Interest
    
    
    Rates
    
    
    
    
    
    
    Interest
    
    
    Rates
    
    
    
    
    
    
    Interest
    
    
    RatesAverage
    
    
    income/
    
    
    earned/
    
    
    Average
    
    
    income/
    
    
    earned/
    
    
    Average
    
    
    income/
    
    
    earned/balance
    
    
    expense
    
    
    paid
    
    
    balance
    
    
    expense
    
    
    paid
    
    
    balance
    
    
    expense
    
    
    paid(dollars in thousands)AssetsFederal funds sold
    
    $
    118
    
    
    $
    3
    
    
    
    2.54
    %
    
    $
    3,517
    
    
    $
    171
    
    
    
    4.86
    %
    
    $
    3,616
    
    
    $
    164
    
    
    
    4.54
    %Investment securities(1)
    
    
    46,658
    
    
    
    1,887
    
    
    
    4.04
    
    
    
    62,690
    
    
    
    2,404
    
    
    
    3.83
    
    
    
    84,794
    
    
    
    3,047
    
    
    
    3.59Total loans (2)(3)
    
    
    355,416
    
    
    
    23,550
    
    
    
    6.63
    
    
    
    353,384
    
    
    
    27,709
    
    
    
    7.84
    
    
    
    335,226
    
    
    
    26,272
    
    
    
    7.84Total earning assets
    
    
    402,192
    
    
    
    25,440
    
    
    
    6.33
    %
    
    
    419,591
    
    
    
    30,284
    
    
    
    7.22
    %
    
    
    423,636
    
    
    
    29,483
    
    
    
    6.96
    %Cash and due from banks
    
    
    12,174
    
    
    
    
    
    
    
    
    
    
    
    12,850
    
    
    
    
    
    
    
    
    
    
    
    13,547Other assets
    
    
    33,354
    
    
    
    
    
    
    
    
    
    
    
    32,533
    
    
    
    
    
    
    
    
    
    
    
    31,805Total assets
    
    $
    447,720
    
    
    
    
    
    
    
    
    
    
    $
    464,974
    
    
    
    
    
    
    
    
    
    
    $
    468,988Liabilities and shareholders
equityInterest bearing demand deposits
    
    $
    73,338
    
    
    
    548
    
    
    
    0.75
    %
    
    $
    77,254
    
    
    
    1,335
    
    
    
    1.73
    %
    
    $
    80,685
    
    
    
    1,489
    
    
    
    1.85
    %Money market deposits
    
    
    37,626
    
    
    
    312
    
    
    
    0.83
    
    
    
    39,431
    
    
    
    327
    
    
    
    0.83
    
    
    
    56,496
    
    
    
    661
    
    
    
    1.17Savings deposits
    
    
    48,573
    
    
    
    161
    
    
    
    0.33
    
    
    
    50,448
    
    
    
    245
    
    
    
    0.49
    
    
    
    59,802
    
    
    
    423
    
    
    
    0.71Time deposits
    
    
    110,743
    
    
    
    3,501
    
    
    
    3.16
    
    
    
    121,808
    
    
    
    5,304
    
    
    
    4.35
    
    
    
    93,515
    
    
    
    3,314
    
    
    
    3.54Short-term borrowings
    
    
    11,857
    
    
    
    202
    
    
    
    1.70
    
    
    
    8,735
    
    
    
    467
    
    
    
    5.35
    
    
    
    4,446
    
    
    
    237
    
    
    
    5.33Junior subordinated debentures
    
    
    10,310
    
    
    
    623
    
    
    
    6.04
    
    
    
    10,310
    
    
    
    835
    
    
    
    8.10
    
    
    
    10,310
    
    
    
    810
    
    
    
    7.86Other
    
    
    309
    
    
    
    17
    
    
    
    5.50
    
    
    
    303
    
    
    
    23
    
    
    
    7.59
    
    
    
    285
    
    
    
    20
    
    
    
    7.02Total interest bearing liabilities
    
    
    292,756
    
    
    
    5,364
    
    
    
    1.83
    %
    
    
    308,289
    
    
    
    8,536
    
    
    
    2.77
    %
    
    
    305,539
    
    
    
    6,954
    
    
    
    2.28
    %Noninterest bearing demand deposits
    
    
    111,999
    
    
    
    
    
    
    
    
    
    
    
    114,831
    
    
    
    
    
    
    
    
    
    
    
    125,202Other liabilities
    
    
    5,622
    
    
    
    
    
    
    
    
    
    
    
    4,813
    
    
    
    
    
    
    
    
    
    
    
    4,565Shareholders equity
    
    
    37,343
    
    
    
    
    
    
    
    
    
    
    
    37,041
    
    
    
    
    
    
    
    
    
    
    
    33,682Total liabilities and
shareholders equity
    
    $
    447,720
    
    
    
    
    
    
    
    
    
    
    $
    464,974
    
    
    
    
    
    
    
    
    
    
    $
    468,988Net interest income
    
    
    
    
    
    $
    20,076
    
    
    
    
    
    
    
    
    
    
    $
    21,748
    
    
    
    
    
    
    
    
    
    
    $
    22,529Net interest spread(4)
    
    
    
    
    
    
    
    
    
    
    4.50
    %
    
    
    
    
    
    
    
    
    
    
    4.45
    %
    
    
    
    
    
    
    
    
    
    
    4.68
    %Net interest margin(5)
    
    
    
    
    
    
    
    
    
    
    4.99
    %
    
    
    
    
    
    
    
    
    
    
    5.18
    %
    
    
    
    
    
    
    
    
    
    
    5.32
    %
 
 (1)
    
    Interest income is reflected on an actual basis and is not computed on a tax-equivalent
basis.(2)
    
    Average nonaccrual loan balances of $5.2 million for 2008, $1.7 million for 2007 and $1.2
million for 2006 are included in average loan balances for computational purposes.(3)
    
    Loan origination fees and costs are included in interest income as adjustments of the loan
yields over the life of the loan using the interest method. Loan interest income includes net
loan costs of $288,000, $360,000 and $407,000 for 2008, 2007 and 2006, respectively.(4)
    
    Net interest spread represents the average yield earned on interest-earning assets less the
average rate paid on interest-bearing liabilities.(5)
    
    Net interest margin is computed by dividing net interest income by total average earning
assets.  32




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##### Table of Contents



2008 compared to 2007
    
    
    2007 compared to 2006Increase (decrease) due to change in:
    
    
    Increase (decrease) due to change in:Average
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    AverageVolume(1)
    
    
    Rate(2)
    
    
    Mix(3)
    
    
    Total
    
    
    Volume(1)
    
    
    Rate(2)
    
    
    Mix(3)
    
    
    Total(dollars in thousands)Interest-earning assets:Federal funds sold
    
    $
    (165
    )
    
    $
    (82
    )
    
    $
    79
    
    
    $
    (168
    )
    
    $
    (4
    )
    
    $
    12
    
    
    $
    (1
    )
    
    $
    7Investment securities
    
    
    (615
    )
    
    
    131
    
    
    
    (33
    )
    
    
    (517
    )
    
    
    (794
    )
    
    
    205
    
    
    
    (54
    )
    
    
    (643
    )Loans
    
    
    159
    
    
    
    (4,294
    )
    
    
    (24
    )
    
    
    (4,159
    )
    
    
    1,423
    
    
    
    13
    
    
    
    1
    
    
    
    1,437Total interest income
    
    
    (621
    )
    
    
    (4,245
    )
    
    
    22
    
    
    
    (4,844
    )
    
    
    625
    
    
    
    230
    
    
    
    (54
    )
    
    
    801Interest-bearing
liabilities:Interest bearing demand
deposits
    
    
    (68
    )
    
    
    (758
    )
    
    
    39
    
    
    
    (787
    )
    
    
    (63
    )
    
    
    (95
    )
    
    
    4
    
    
    
    (154
    )Money market deposits
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    (200
    )
    
    
    (192
    )
    
    
    58
    
    
    
    (334
    )Savings deposits
    
    
    (9
    )
    
    
    (78
    )
    
    
    3
    
    
    
    (84
    )
    
    
    (66
    )
    
    
    (133
    )
    
    
    21
    
    
    
    (178
    )Time deposits
    
    
    (482
    )
    
    
    (1,453
    )
    
    
    132
    
    
    
    (1,803
    )
    
    
    1,003
    
    
    
    758
    
    
    
    229
    
    
    
    1,990Short-term borrowings
    
    
    167
    
    
    
    (318
    )
    
    
    (114
    )
    
    
    (265
    )
    
    
    228
    
    
    
    1
    
    
    
    1
    
    
    
    230Junior subordinated
debentures
    
    
    
    
    
    
    (212
    )
    
    
    
    
    
    
    (212
    )
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    25Other borrowings
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    (6
    )
    
    
    1
    
    
    
    2
    
    
    
    
    
    
    
    3Total interest expense
    
    
    (407
    )
    
    
    (2,825
    )
    
    
    60
    
    
    
    (3,172
    )
    
    
    903
    
    
    
    366
    
    
    
    313
    
    
    
    1,582Net interest income
    
    $
    (214
    )
    
    $
    (1,420
    )
    
    $
    (38
    )
    
    $
    (1,672
    )
    
    $
    (278
    )
    
    $
    (136
    )
    
    $
    (367
    )
    
    $
    (781
    )
 (1)
    
    The volume change in net interest income represents the change in average balance multiplied 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. 2008 compared to 2007.
     33




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##### Table of Contents



2007 compared to 2006.
     34




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##### Table of Contents



Provision for Loan Losses
    35




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##### Table of Contents



Non-Interest Income
  Years Ended December 31,
    
    
    Change during Year2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007(dollars in thousands)Service charges on deposit
accounts
    
    $
    3,951
    
    
    $
    3,806
    
    
    $
    3,676
    
    
    $
    145
    
    
    $
    130Earnings on bank owned life
insurance policies
    
    
    421
    
    
    
    415
    
    
    
    393
    
    
    
    6
    
    
    
    22Merchant processing
    
    
    286
    
    
    
    282
    
    
    
    318
    
    
    
    4
    
    
    
    (36
    )Investment services
    
    
    125
    
    
    
    162
    
    
    
    104
    
    
    
    (37
    )
    
    
    58Customer service fees
    
    
    114
    
    
    
    119
    
    
    
    113
    
    
    
    (5
    )
    
    
    6Gain on sale of loans, net
    
    
    111
    
    
    
    47
    
    
    
    42
    
    
    
    64
    
    
    
    5Federal Home Loan Bank
dividends
    
    
    105
    
    
    
    109
    
    
    
    104
    
    
    
    (4
    )
    
    
    5Loan servicing fees
    
    
    96
    
    
    
    140
    
    
    
    14
    
    
    
    (44
    )
    
    
    126Official check fees
    
    
    93
    
    
    
    157
    
    
    
    170
    
    
    
    (64
    )
    
    
    (13
    )Safe deposit box and night
depository income
    
    
    67
    
    
    
    67
    
    
    
    69
    
    
    
    
    
    
    
    (2
    )Impairment loss on investment
security
    
    
    (415
    )
    
    
    
    
    
    
    
    
    
    
    (415
    )
    
    
    Other income
    
    
    137
    
    
    
    144
    
    
    
    156
    
    
    
    (7
    )
    
    
    (12
    )Total non-interest income
    
    $
    5,091
    
    
    $
    5,448
    
    
    $
    5,159
    
    
    $
    (357
    )
    
    $
    289
 2008 compared to 2007.
   2007 compared to 2006.
  36




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##### Table of Contents



Non-Interest Expense
  Years Ended December 31,
    
    
    Change during Year2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007(dollars in thousands)Salaries and employee benefits
    
    $
    10,884
    
    
    $
    11,200
    
    
    $
    10,043
    
    
    $
    (316
    )
    
    $
    1,157Occupancy and equipment
    
    
    3,838
    
    
    
    3,552
    
    
    
    3,323
    
    
    
    286
    
    
    
    229Outside service fees
    
    
    735
    
    
    
    671
    
    
    
    591
    
    
    
    64
    
    
    
    80Professional fees
    
    
    688
    
    
    
    738
    
    
    
    780
    
    
    
    (50
    )
    
    
    (42
    )Provision for OREO losses
    
    
    618
    
    
    
    
    
    
    
    
    
    
    
    618
    
    
    
    Business development
    
    
    467
    
    
    
    530
    
    
    
    555
    
    
    
    (63
    )
    
    
    (25
    )Advertising and promotion
    
    
    448
    
    
    
    520
    
    
    
    552
    
    
    
    (72
    )
    
    
    (32
    )Telephone and data
communications
    
    
    400
    
    
    
    362
    
    
    
    374
    
    
    
    38
    
    
    
    (12
    )Loan expenses
    
    
    380
    
    
    
    192
    
    
    
    139
    
    
    
    188
    
    
    
    53Director compensation and
retirement
    
    
    323
    
    
    
    349
    
    
    
    370
    
    
    
    (26
    )
    
    
    (21
    )Armored car and courier
    
    
    289
    
    
    
    279
    
    
    
    270
    
    
    
    10
    
    
    
    9FDIC insurance
    
    
    258
    
    
    
    48
    
    
    
    53
    
    
    
    210
    
    
    
    (5
    )Stationery and supplies
    
    
    236
    
    
    
    278
    
    
    
    282
    
    
    
    (42
    )
    
    
    (4
    )Insurance
    
    
    235
    
    
    
    177
    
    
    
    173
    
    
    
    58
    
    
    
    4Core deposit intangible
amortization
    
    
    216
    
    
    
    301
    
    
    
    301
    
    
    
    (85
    )
    
    
    Postage
    
    
    208
    
    
    
    242
    
    
    
    249
    
    
    
    (34
    )
    
    
    (7
    )Other operating expense
    
    
    252
    
    
    
    232
    
    
    
    235
    
    
    
    20
    
    
    
    (3
    )Total non-interest expense
    
    $
    20,475
    
    
    $
    19,671
    
    
    $
    18,290
    
    
    $
    804
    
    
    $
    1,381
 2008 compared to 2007.
   37




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##### Table of Contents



2007 compared to 2006.
   38




---



##### Table of Contents



Provision for income taxes.
  39




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##### Table of Contents



Financial Condition
 Loan Portfolio.
    At December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(dollars in thousands)Real estate  mortgage
    
    $
    151,943
    
    
    $
    128,357
    
    
    $
    116,329
    
    
    $
    110,686
    
    
    $
    102,125Real estate  construction
    
    
    73,820
    
    
    
    76,478
    
    
    
    75,930
    
    
    
    56,370
    
    
    
    31,964Commercial
    
    
    42,528
    
    
    
    39,584
    
    
    
    36,182
    
    
    
    42,252
    
    
    
    42,689Consumer
    
    
    61,706
    
    
    
    72,768
    
    
    
    90,694
    
    
    
    81,320
    
    
    
    59,068Agriculture
    
    
    36,020
    
    
    
    35,762
    
    
    
    35,577
    
    
    
    31,018
    
    
    
    31,067Total loans
    
    
    366,017
    
    
    
    352,949
    
    
    
    354,712
    
    
    
    321,646
    
    
    
    266,913Less:Deferred (costs) fees
    
    
    (279
    )
    
    
    (564
    )
    
    
    (1,182
    )
    
    
    (766
    )
    
    
    260Allowance for loan losses
    
    
    7,224
    
    
    
    4,211
    
    
    
    3,917
    
    
    
    3,256
    
    
    
    2,722Net loans
    
    $
    359,072
    
    
    $
    349,302
    
    
    $
    351,977
    
    
    $
    319,156
    
    
    $
    263,931
  40




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##### Table of Contents



Within
    
    
    After One
    
    
    AfterOne Year
    
    
    Through Five Years
    
    
    Five Years
    
    
    Total(dollars in thousands)Real estate  mortgage
    
    $
    22,552
    
    
    $
    31,695
    
    
    $
    97,696
    
    
    $
    151,943Real estate  construction
    
    
    43,487
    
    
    
    17,119
    
    
    
    13,214
    
    
    
    73,820Commercial
    
    
    11,179
    
    
    
    16,854
    
    
    
    14,495
    
    
    
    42,528Consumer
    
    
    11,627
    
    
    
    24,519
    
    
    
    25,560
    
    
    
    61,706Agriculture
    
    
    16,556
    
    
    
    13,030
    
    
    
    6,434
    
    
    
    36,020Total
    
    $
    105,401
    
    
    $
    103,217
    
    
    $
    157,399
    
    
    $
    366,017Loans maturing after one year with:Fixed interest rates
    
    
    
    
    
    $
    42,091
    
    
    $
    60,973
    
    
    $
    103,064Variable interest rates
    
    
    
    
    
    
    61,126
    
    
    
    96,426
    
    
    
    157,552Total
    
    
    
    
    
    $
    103,217
    
    
    $
    157,399
    
    
    $
    260,616
 Analysis of Asset Quality and Allowance for Loan Losses.
     41




---



##### Table of Contents




    
    specific allocation for problem graded loans (classified loans),
 
    
    general or formula allocation,
 
    
    and discretionary allocation based on loan portfolio segmentation.
  
    
    Statement of Financial Accounting Standards (SFAS) No. 5  Accounting for
Contingencies,
 
    
    SFAS No. 114  Accounting by Creditors for Impairment of a Loan and
 
    
    SFAS 118  Accounting by Creditors for Impairment of a Loan  Income Recognition and
Disclosures.
     42




---



##### Table of Contents



At December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(dollars in thousands)Balance at beginning of period
    
    $
    4,211
    
    
    $
    3,917
    
    
    $
    3,256
    
    
    $
    2,722
    
    
    $
    2,524Charge-offs:Commercial and agricultural
    
    
    477
    
    
    
    83
    
    
    
    126
    
    
    
    297
    
    
    
    103Real estate mortgage
    
    
    95
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate construction
    
    
    522
    
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    689
    
    
    
    657
    
    
    
    519
    
    
    
    442
    
    
    
    600Total charge-offs
    
    
    1,783
    
    
    
    786
    
    
    
    645
    
    
    
    739
    
    
    
    703Recoveries:Commercial and agricultural
    
    
    11
    
    
    
    53
    
    
    
    46
    
    
    
    21
    
    
    
    15Real estate mortgage
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    171
    
    
    
    227
    
    
    
    260
    
    
    
    152
    
    
    
    136Total recoveries
    
    
    196
    
    
    
    280
    
    
    
    306
    
    
    
    173
    
    
    
    151Net charge-offs
    
    
    1,587
    
    
    
    506
    
    
    
    339
    
    
    
    566
    
    
    
    552Provision for loan losses
    
    
    4,600
    
    
    
    800
    
    
    
    1,000
    
    
    
    1,100
    
    
    
    750Balance at end of period
    
    $
    7,224
    
    
    $
    4,211
    
    
    $
    3,917
    
    
    $
    3,256
    
    
    $
    2,722Net charge-offs during the period
to average loans
    
    
    0.45
    %
    
    
    0.14
    %
    
    
    0.10
    %
    
    
    0.19
    %
    
    
    0.24
    %Allowance for loan losses to total loans
    
    
    1.97
    %
    
    
    1.19
    %
    
    
    1.10
    %
    
    
    1.01
    %
    
    
    1.02
    %
    43




---



##### Table of Contents



At December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(dollars in thousands)Nonaccrual loans
    
    $
    26,444
    
    
    $
    2,618
    
    
    $
    972
    
    
    $
    1,661
    
    
    $
    1,171Loans past due 90 days or
more and still accruing
    
    
    297
    
    
    
    14
    
    
    
    41
    
    
    
    
    
    
    
    36Total nonperforming loans
    
    
    26,741
    
    
    
    2,632
    
    
    
    1,013
    
    
    
    1,661
    
    
    
    1,207Other real estate owned
    
    
    4,148
    
    
    
    402
    
    
    
    
    
    
    
    
    
    
    
    Other vehicles owned
    
    
    129
    
    
    
    135
    
    
    
    47
    
    
    
    40
    
    
    
    33Total nonperforming assets
    
    $
    31,018
    
    
    $
    3,169
    
    
    $
    1,060
    
    
    $
    1,701
    
    
    $
    1,240Interest income forgone on
nonaccrual loans
    
    $
    576
    
    
    $
    161
    
    
    $
    53
    
    
    $
    39
    
    
    $
    25Interest income recorded on a
cash basis on nonaccrual loans
    
    $
    74
    
    
    $
    118
    
    
    $
    116
    
    
    $
    16
    
    
    $
    63Nonperforming loans to total
Loans
    
    
    7.31
    %
    
    
    0.75
    %
    
    
    0.29
    %
    
    
    0.52
    %
    
    
    0.45
    %Nonperforming assets to total
Assets
    
    
    6.78
    %
    
    
    0.70
    %
    
    
    0.22
    %
    
    
    0.36
    %
    
    
    0.30
    %Allowance for loan losses to nonperforming
Loans
    
    
    27
    %
    
    
    160
    %
    
    
    387
    %
    
    
    196
    %
    
    
    226
    %
    Investment Portfolio and Federal Funds Sold.
   44




---



##### Table of Contents



December 31,2008
    
    
    2007
    
    
    2006(dollars in thousands)Available-for-sale (fair value)U.S. Treasuries
    
    $
    1,508
    
    
    $
    3,481
    
    
    $
    5,344U.S. Government agencies
    
    
    10,392
    
    
    
    19,662
    
    
    
    30,063Corporate debt securities
    
    
    1,550
    
    
    
    3,923
    
    
    
    7,868U.S. Government agency mortgage-backed
Securities
    
    
    12,357
    
    
    
    14,738
    
    
    
    17,440Total
    
    $
    25,807
    
    
    $
    41,804
    
    
    $
    60,715
 December 31,2008
    
    
    2007
    
    
    2006(dollars in thousands)Held-to-maturity (amortized cost)Municipal obligations
    
    $
    12,567
    
    
    $
    13,488
    
    
    $
    14,080
  45




---



##### Table of Contents



After One Through
    
    
    After Five ThroughOne Year or Less
    
    
    Five Years
    
    
    Ten Years
    
    
    After Ten Years
    
    
    Total(dollars in thousands)
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    YieldAvailable-for-sale (Fair Value)U.S. Treasuries
    
    $
    1,508
    
    
    
    3.13
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    1,508
    
    
    
    3.13
    %U.S. Government agencies
    
    
    
    
    
    
    
    %
    
    
    10,392
    
    
    
    4.69
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    10,392
    
    
    
    4.69
    %Corporate debt securities
    
    
    1,550
    
    
    
    3.68
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    1,550
    
    
    
    3.68
    %U.S. Government agency
mortgage-backed securities
    
    
    
    
    
    
    
    %
    
    
    6,053
    
    
    
    3.73
    %
    
    
    6,304
    
    
    
    4.66
    %
    
    
    
    
    
    
    
    %
    
    
    12,357
    
    
    
    4.46
    %Total
    
    $
    3,058
    
    
    
    3.41
    %
    
    $
    16,445
    
    
    
    4.33
    %
    
    $
    6,304
    
    
    
    4.66
    %
    
    $
    
    
    
    
    
    %
    
    $
    25,807
    
    
    
    4.29
    %Held-to-maturity
(Amortized Cost)Municipal obligations
    
    $
    
    
    
    
    
    %
    
    $
    1,977
    
    
    
    5.17
    %
    
    $
    10,300
    
    
    
    5.78
    %
    
    $
    290
    
    
    
    6.25
    %
    
    $
    12,567
    
    
    
    5.70
    %
  46




---



##### Table of Contents



Deposits.
    2008
    
    
    2007
    
    
    2006Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Rate %
    
    
    Balance
    
    
    Rate %
    
    
    Balance
    
    
    Rate %(dollars in thousands)Non-interest-bearing deposits
    
    $
    111,999
    
    
    
    
    
    
    $
    114,831
    
    
    
    
    
    
    $
    125,202Interest-bearing deposits:Interest bearing demand deposits
    
    
    73,338
    
    
    
    0.75
    %
    
    
    77,254
    
    
    
    1.73
    %
    
    
    80,685
    
    
    
    1.85
    %Money market accounts
    
    
    37,626
    
    
    
    0.83
    %
    
    
    39,431
    
    
    
    0.83
    %
    
    
    56,496
    
    
    
    1.17
    %Savings
    
    
    48,573
    
    
    
    0.33
    %
    
    
    50,448
    
    
    
    0.49
    %
    
    
    59,802
    
    
    
    0.71
    %Time deposits
    
    
    110,743
    
    
    
    3.16
    %
    
    
    121,808
    
    
    
    4.35
    %
    
    
    93,515
    
    
    
    3.54
    %Total interest bearing deposits
    
    
    270,280
    
    
    
    1.67
    %
    
    
    288,941
    
    
    
    2.50
    %
    
    
    290,498
    
    
    
    2.03
    %Total deposits
    
    $
    382,279
    
    
    
    1.18
    %
    
    $
    403,772
    
    
    
    1.79
    %
    
    $
    415,700
    
    
    
    1.42
    %
 
 (dollars in thousands)
    
    AmountRemaining Maturity:Three months or less
    
    $
    17,085Over three months to six months
    
    
    8,095Over six months to 12 months
    
    
    6,761Over 12 months
    
    
    4,238Total
    
    $
    36,179
   47




---



##### Table of Contents



Short-term borrowing arrangements.
   Capital Resources
      48




---



##### Table of Contents



Capital Standards.
    49




---



##### Table of Contents



December 31, 2008
    
    
    December 31, 2007Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTier 1 Leverage RatioPlumas Bancorp and Subsidiary
    
    $
    43,885
    
    
    
    9.8
    %
    
    $
    46,209
    
    
    
    10.0
    %Minimum regulatory requirement
    
    
    17,907
    
    
    
    4.0
    %
    
    
    18,439
    
    
    
    4.0
    %Plumas Bank
    
    
    43,372
    
    
    
    9.7
    %
    
    
    45,415
    
    
    
    9.9
    %Minimum requirement for
Well-Capitalized institution
under the prompt corrective
action plan
    
    
    22,365
    
    
    
    5.0
    %
    
    
    23,024
    
    
    
    5.0
    %Minimum regulatory requirement
    
    
    17,892
    
    
    
    4.0
    %
    
    
    18,419
    
    
    
    4.0
    %Tier 1 Risk-Based Capital RatioPlumas Bancorp and Subsidiary
    
    
    43,885
    
    
    
    11.0
    %
    
    
    46,209
    
    
    
    11.6
    %Minimum regulatory requirement
    
    
    16,021
    
    
    
    4.0
    %
    
    
    15,881
    
    
    
    4.0
    %Plumas Bank
    
    
    43,372
    
    
    
    10.8
    %
    
    
    45,415
    
    
    
    11.5
    %Minimum requirement for
Well-Capitalized institution
under the prompt corrective
action plan
    
    
    23,996
    
    
    
    6.0
    %
    
    
    23,790
    
    
    
    6.0
    %Minimum regulatory requirement
    
    
    15,997
    
    
    
    4.0
    %
    
    
    15,860
    
    
    
    4.0
    %Total Risk-Based Capital RatioPlumas Bancorp and Subsidiary
    
    
    48,919
    
    
    
    12.2
    %
    
    
    50,475
    
    
    
    12.7
    %Minimum regulatory requirement
    
    
    32,042
    
    
    
    8.0
    %
    
    
    31,763
    
    
    
    8.0
    %Plumas Bank
    
    
    48,399
    
    
    
    12.1
    %
    
    
    49,681
    
    
    
    12.5
    %Minimum requirement for
Well-Capitalized institution
under the prompt corrective
action plan
    
    
    39,994
    
    
    
    10.0
    %
    
    
    39,651
    
    
    
    10.0
    %Minimum regulatory requirement
    
    
    31,995
    
    
    
    8.0
    %
    
    
    31,720
    
    
    
    8.0
    %
  Off-Balance Sheet Arrangements
 Loan Commitments.
 Operating Leases.
   50




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##### Table of Contents



Liquidity
    
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  PageReport of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheet as of December 31, 2008 and 2007
    
    
    F-2Consolidated Statement of Income for the years ended December 31, 2008, 2007 and 2006
    
    
    F-3Consolidated Statement of Changes in Shareholders Equity for the years ended
December 31, 2008, 2007 and 2006
    
    
    F-5Consolidated Statement of Cash Flows for the years ended December 31, 2008, 2007 and 2006
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-10
  51




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
  F - 1




---



##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 
 CONSOLIDATED BALANCE SHEET
 December 31, 2008 and 2007
 2008
    
    
    2007ASSETSCash and due from banks
    
    $
    18,791,000
    
    
    $
    13,207,000Federal funds sold
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    18,791,000
    
    
    
    13,207,000Investment securities (Note 4)
    
    
    38,374,000
    
    
    
    55,292,000Loans, less allowance for loan losses of $7,224,000
in 2008 and $4,211,000 in 2007 (Notes 5, 8, 10 and 14)
    
    
    359,072,000
    
    
    
    349,302,000Premises and equipment, net (Note 6)
    
    
    15,764,000
    
    
    
    14,666,000Intangible assets, net (Note 17)
    
    
    821,000
    
    
    
    1,037,000Bank owned life insurance (Note 15)
    
    
    9,766,000
    
    
    
    9,428,000Real estate and vehicles acquired through foreclosure
    
    
    4,277,000
    
    
    
    537,000Accrued interest receivable and other assets (Note 13)
    
    
    10,310,000
    
    
    
    9,646,000Total assets
    
    $
    457,175,000
    
    
    $
    453,115,000LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Non-interest bearing
    
    $
    112,783,000
    
    
    $
    111,240,000Interest bearing (Note 7)
    
    
    258,710,000
    
    
    
    280,700,000Total deposits
    
    
    371,493,000
    
    
    
    391,940,000Short-term borrowings (Note 8)
    
    
    34,000,000
    
    
    
    7,500,000Accrued interest payable and other liabilities (Note 15)
    
    
    5,935,000
    
    
    
    6,226,000Junior subordinated deferrable interest debentures
(Note 9)
    
    
    10,310,000
    
    
    
    10,310,000Total liabilities
    
    
    421,738,000
    
    
    
    415,976,000Commitments and contingencies (Note 10)Shareholders equity (Note 11):Serial preferred stock  no par value; 10,000,000
shares authorized; none issued
    
    
    
    
    
    
    Common stock  no par value; 22,500,000 shares
authorized; issued and outstanding  4,775,339
shares in 2008 and 4,869,130 shares in 2007
    
    
    5,302,000
    
    
    
    5,042,000Retained earnings
    
    
    29,818,000
    
    
    
    32,204,000Accumulated other comprehensive income (loss)
(Notes 4 and 16)
    
    
    317,000
    
    
    
    (107,000
    )Total shareholders equity
    
    
    35,437,000
    
    
    
    37,139,000Total liabilities and shareholders equity
    
    $
    457,175,000
    
    
    $
    453,115,000
 The accompanying notes are an integral
part of these consolidated financial statements.
  F - 2




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 
 CONSOLIDATED STATEMENT OF INCOME
 For the Years Ended December 31, 2008, 2007 and 2006
 2008
    
    
    2007
    
    
    2006Interest income:Interest and fees on loans
    
    $
    23,550,000
    
    
    $
    27,709,000
    
    
    $
    26,272,000Interest on investment securities:Taxable
    
    
    1,398,000
    
    
    
    1,900,000
    
    
    
    2,516,000Exempt from Federal income taxes
    
    
    489,000
    
    
    
    504,000
    
    
    
    531,000Interest on Federal funds sold
    
    
    3,000
    
    
    
    171,000
    
    
    
    164,000Total interest income
    
    
    25,440,000
    
    
    
    30,284,000
    
    
    
    29,483,000Interest expense:Interest on deposits
    
    
    4,522,000
    
    
    
    7,211,000
    
    
    
    5,887,000Interest on short-term borrowings
(Note 8)
    
    
    219,000
    
    
    
    490,000
    
    
    
    257,000Interest on junior subordinated
deferrable interest debentures
(Note 9)
    
    
    623,000
    
    
    
    835,000
    
    
    
    810,000Total interest expense
    
    
    5,364,000
    
    
    
    8,536,000
    
    
    
    6,954,000Net interest income before
provision for loan losses
    
    
    20,076,000
    
    
    
    21,748,000
    
    
    
    22,529,000Provision for loan losses (Note 5)
    
    
    4,600,000
    
    
    
    800,000
    
    
    
    1,000,000Net interest income after
provision for loan losses
    
    
    15,476,000
    
    
    
    20,948,000
    
    
    
    21,529,000Non-interest income:Service charges
    
    
    3,951,000
    
    
    
    3,806,000
    
    
    
    3,676,000Gain on sale of loans
    
    
    111,000
    
    
    
    47,000
    
    
    
    42,000Impairment loss on investment
security (Note 4)
    
    
    (415,000
    )
    
    
    
    
    
    
    Earnings on Bank owned life
insurance policies (Note 15)
    
    
    421,000
    
    
    
    415,000
    
    
    
    393,000Other
    
    
    1,023,000
    
    
    
    1,180,000
    
    
    
    1,048,000Total non-interest income
    
    
    5,091,000
    
    
    
    5,448,000
    
    
    
    5,159,000
   F - 3




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 CONSOLIDATED STATEMENT OF INCOME
 For the Years Ended December 31, 2008, 2007 and 2006
 2008
    
    
    2007
    
    
    2006Non-interest expenses:Salaries and employee benefits
(Notes 5 and 15)
    
    $
    10,884,000
    
    
    $
    11,200,000
    
    
    $
    10,043,000Occupancy and equipment
(Notes 6 and 10)
    
    
    3,838,000
    
    
    
    3,552,000
    
    
    
    3,323,000Other (Note 12)
    
    
    5,753,000
    
    
    
    4,919,000
    
    
    
    4,924,000Total non-interest expenses
    
    
    20,475,000
    
    
    
    19,671,000
    
    
    
    18,290,000Income before income
taxes
    
    
    92,000
    
    
    
    6,725,000
    
    
    
    8,398,000Provision (benefit) for income taxes
(Note 13)
    
    
    (212,000
    )
    
    
    2,502,000
    
    
    
    3,196,000Net income
    
    $
    304,000
    
    
    $
    4,223,000
    
    
    $
    5,202,000Basic earnings per share (Note 11)
    
    $
    0.06
    
    
    $
    0.85
    
    
    $
    1.04Diluted earnings per share (Note 11)
    
    $
    0.06
    
    
    $
    0.84
    
    
    $
    1.02Cash dividends per share (Note 11)
    
    $
    0.24
    
    
    $
    0.30
    
    
    $
    0.26
 The accompanying notes are an integral
part of these consolidated financial statements.
  F - 4




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 
 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
 For the Years Ended December 31, 2008, 2007 and 2006
 AccumulatedOtherComprehensive
    
    
    Total
    
    
    TotalCommon Stock
    
    
    Retained
    
    
    (Loss) Income
    
    
    Shareholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Earnings
    
    
    (Net of Taxes)
    
    
    Equity
    
    
    IncomeBalance, January 1, 2006
    
    
    4,976,654
    
    
    $
    4,412,000
    
    
    $
    27,816,000
    
    
    $
    (1,091,000
    )
    
    $
    31,137,000Comprehensive income (Note 16):Net income
    
    
    
    
    
    
    
    
    
    
    5,202,000
    
    
    
    
    
    
    
    5,202,000
    
    
    $
    5,202,000Other comprehensive income, net of tax:Net change in unrealized losses
on available-for-sale investment
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    399,000
    
    
    
    399,000
    
    
    
    399,000Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,601,000Cash dividends  $0.26 per share
    
    
    
    
    
    
    
    
    
    
    (1,302,000
    )
    
    
    
    
    
    
    (1,302,000
    )Retirement of common stock in connection
with the exercise of stock options
(Note 11)
    
    
    (21,255
    )
    
    
    (417,000
    )
    
    
    
    
    
    
    
    
    
    
    (417,000
    )Stock options exercised and related
tax benefit (Note 11)
    
    
    67,806
    
    
    
    659,000
    
    
    
    
    
    
    
    
    
    
    
    659,000Stock-based compensation expense
    
    
    
    
    
    
    174,000
    
    
    
    
    
    
    
    
    
    
    
    174,000Balance, December 31, 2006
    
    
    5,023,205
    
    
    
    4,828,000
    
    
    
    31,716,000
    
    
    
    (692,000
    )
    
    
    35,852,000Comprehensive income (Note 16):Net income
    
    
    
    
    
    
    
    
    
    
    4,223,000
    
    
    
    
    
    
    
    4,223,000
    
    
    $
    4,223,000Other comprehensive income, net of tax:Net change in unrealized losses
on available-for-sale investment
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    585,000
    
    
    
    585,000
    
    
    
    585,000Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,808,000Cash dividends  $0.30 per share
    
    
    
    
    
    
    
    
    
    
    (1,491,000
    )
    
    
    
    
    
    
    (1,491,000
    )Retirement of common stock in connection
with the exercise of stock options
(Note 11)
    
    
    (4,630
    )
    
    
    (70,000
    )
    
    
    
    
    
    
    
    
    
    
    (70,000
    )Stock options exercised and related
tax benefit (Note 11)
    
    
    19,292
    
    
    
    152,000
    
    
    
    
    
    
    
    
    
    
    
    152,000Stock-based compensation expense
    
    
    
    
    
    
    288,000
    
    
    
    
    
    
    
    
    
    
    
    288,000Repurchase and retirement of
common stock (Note 11)
    
    
    (168,737
    )
    
    
    (156,000
    )
    
    
    (2,244,000
    )
    
    
    
    
    
    
    (2,400,000
    )Balance, December 31, 2007
    
    
    4,869,130
    
    
    
    5,042,000
    
    
    
    32,204,000
    
    
    
    (107,000
    )
    
    
    37,139,000
   F - 5




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
 For the Years Ended December 31, 2008, 2007 and 2006
 AccumulatedOtherComprehensive
    
    
    Total
    
    
    TotalCommon Stock
    
    
    Retained
    
    
    (Loss) Income
    
    
    Shareholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Earnings
    
    
    (Net of Taxes)
    
    
    Equity
    
    
    IncomeBalance, December 31, 2007
    
    
    4,869,130
    
    
    $
    5,042,000
    
    
    $
    32,204,000
    
    
    $
    (107,000
    )
    
    $
    37,139,000Cumulative effect of change in accounting principle,
adoption of EITF 06-4 (Note 15)
    
    
    
    
    
    
    
    
    
    
    (420,000
    )
    
    
    
    
    
    
    (420,000
    )Comprehensive income (Note 16):Net income
    
    
    
    
    
    
    
    
    
    
    304,000
    
    
    
    
    
    
    
    304,000
    
    
    $
    304,000Other comprehensive income, net of tax:Net change in unrealized (losses)/gains
on available-for-sale investment
securities (Note 4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    424,000
    
    
    
    424,000
    
    
    
    424,000Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    728,000Cash dividends  $0.24 per share
    
    
    
    
    
    
    
    
    
    
    (1,153,000
    )
    
    
    
    
    
    
    (1,153,000
    )Stock options exercised and related
tax benefit (Note 11)
    
    
    12,476
    
    
    
    68,000
    
    
    
    
    
    
    
    
    
    
    
    68,000Stock-based compensation expense
    
    
    
    
    
    
    292,000
    
    
    
    
    
    
    
    
    
    
    
    292,000Repurchase and retirement of
common stock (note 11)
    
    
    (106,267
    )
    
    
    (100,000
    )
    
    
    (1,117,000
    )
    
    
    
    
    
    
    (1,217,000
    )Balance, December 31, 2008
    
    
    4,775,339
    
    
    $
    5,302,000
    
    
    $
    29,818,000
    
    
    $
    317,000
    
    
    $
    35,437,000
 2008
    
    
    2007
    
    
    2006Disclosure of reclassification amount, net of taxes (Note 16):Unrealized holding gain arising during the year
    
    $
    668,000
    
    
    $
    585,000
    
    
    $
    399,000Reclassification adjustment for impairment loss included in net income
    
    
    (244,000
    )
    
    
    
    
    
    
    Net unrealized holding gain arising during the year
    
    $
    424,000
    
    
    $
    585,000
    
    
    $
    399,000
 The accompanying notes are an integral
part of these consolidated financial statements.
  F - 6




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 
 CONSOLIDATED STATEMENT OF CASH FLOWS
 For the Years Ended December 31, 2008, 2007 and 2006
 2008
    
    
    2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    304,000
    
    
    $
    4,223,000
    
    
    $
    5,202,000Adjustments to reconcile net income to net
cash provided by operating activities:Provision for loan losses
    
    
    4,600,000
    
    
    
    800,000
    
    
    
    1,000,000Change in deferred loan origination
costs/fees, net
    
    
    285,000
    
    
    
    618,000
    
    
    
    (416,000
    )Stock-based compensation expense
    
    
    292,000
    
    
    
    288,000
    
    
    
    174,000Excess tax benefits from stock-based
compensation
    
    
    
    
    
    
    (9,000
    )
    
    
    (61,000
    )Depreciation and amortization
    
    
    1,984,000
    
    
    
    2,197,000
    
    
    
    2,171,000Amortization of investment security
premiums
    
    
    56,000
    
    
    
    149,000
    
    
    
    387,000Accretion of investment security discounts
    
    
    (55,000
    )
    
    
    (63,000
    )
    
    
    (89,000
    )Impairment loss on investment security
    
    
    415,000Provision for losses on other real estate
    
    
    618,000Net loss on sale of premises and equipment
    
    
    13,000
    
    
    
    39,000Net loss (gain) on sale of other vehicles owned
    
    
    18,000
    
    
    
    (17,000
    )
    
    
    (23,000
    )Gain on life insurance death benefit
    
    
    
    
    
    
    (63,000
    )Earnings on bank owned life insurance
policies
    
    
    (421,000
    )
    
    
    (415,000
    )
    
    
    (393,000
    )Expenses on bank owned life insurance
policies
    
    
    83,000
    
    
    
    80,000
    
    
    
    74,000Decrease (increase) in accrued interest
receivable and other assets
    
    
    297,000
    
    
    
    (426,000
    )
    
    
    (41,000
    )(Decrease) increase in accrued interest
payable and other liabilities
    
    
    (711,000
    )
    
    
    1,325,000
    
    
    
    166,000Provision for deferred income taxes
    
    
    (1,459,000
    )
    
    
    (787,000
    )
    
    
    (456,000
    )Net cash provided by operating
activities
    
    
    6,319,000
    
    
    
    7,939,000
    
    
    
    7,695,000
   F - 7




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 CONSOLIDATED STATEMENT OF CASH FLOWS
 For the Years Ended December 31, 2008, 2007 and 2006
 2008
    
    
    2007
    
    
    2006Cash flows from investing activities:Proceeds from matured and called available-
for-sale investment securities
    
    $
    16,475,000
    
    
    $
    27,876,000
    
    
    $
    19,931,000Proceeds from matured and called held-to-maturity investment securities
    
    
    920,000
    
    
    
    585,000Purchases of available-for-sale investment
securities
    
    
    (2,990,000
    )
    
    
    (11,009,000
    )Purchases of held-to-maturity investment
securities
    
    
    
    
    
    
    
    
    
    
    (155,000
    )Proceeds from principal repayments from
available-for-sale government-guaranteed
mortgage-backed securities
    
    
    2,819,000
    
    
    
    2,961,000
    
    
    
    3,521,000Proceeds from principal repayments from
held-to-maturity government-guaranteed
mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    134,000Net (increase) decrease in loans
    
    
    (19,520,000
    )
    
    
    355,000
    
    
    
    (33,831,000
    )Proceeds from sale of vehicles
    
    
    376,000
    
    
    
    429,000
    
    
    
    211,000Proceeds from the sale of premises and
equipment
    
    
    
    
    
    
    20,000
    
    
    
    8,000Purchases of premises and equipment
    
    
    (2,566,000
    )
    
    
    (1,116,000
    )
    
    
    (5,173,000
    )Proceeds from bank owned life insurance
    
    
    
    
    
    
    419,000Purchase of bank owned life insurance
    
    
    
    
    
    
    
    
    
    
    (200,000
    )Net cash (used in) provided by
investing activities
    
    
    (4,486,000
    )
    
    
    20,520,000
    
    
    
    (15,554,000
    )Cash flows from financing activities:Net increase (decrease) in demand,
interest-bearing and savings deposits
    
    
    9,658,000
    
    
    
    (37,881,000
    )
    
    
    (26,025,000
    )Net (decrease) increase in time deposits
    
    
    (30,105,000
    )
    
    
    27,645,000
    
    
    
    1,641,000Net increase (decrease) in short-term
borrowings
    
    
    26,500,000
    
    
    
    (12,500,000
    )
    
    
    20,000,000Proceeds from exercise of stock options
    
    
    68,000
    
    
    
    73,000
    
    
    
    181,000Excess tax benefits from stock-based
compensation
    
    
    
    
    
    
    9,000
    
    
    
    61,000Repurchase and retirement of common stock
    
    
    (1,217,000
    )
    
    
    (2,400,000
    )Payment of cash dividends
    
    
    (1,153,000
    )
    
    
    (1,491,000
    )
    
    
    (1,302,000
    )Net cash provided by (used in) financing
activities
    
    
    3,751,000
    
    
    
    (26,545,000
    )
    
    
    (5,444,000
    )Increase (decrease) in cash and cash
equivalents
    
    
    5,584,000
    
    
    
    1,914,000
    
    
    
    (13,303,000
    )Cash and cash equivalents at beginning of year
    
    
    13,207,000
    
    
    
    11,293,000
    
    
    
    24,596,000Cash and cash equivalents at end of year
    
    $
    18,791,000
    
    
    $
    13,207,000
    
    
    $
    11,293,000
   F - 8




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 CONSOLIDATED STATEMENT OF CASH FLOWS
 For the Years Ended December 31, 2008, 2007 and 2006
 2008
    
    
    2007
    
    
    2006Supplemental disclosure of cash flow information:Cash paid during the year for:Interest expense
    
    $
    5,804,000
    
    
    $
    8,184,000
    
    
    $
    6,882,000Income taxes
    
    $
    1,385,000
    
    
    $
    3,495,000
    
    
    $
    3,370,000Non-cash investing activities:Real estate acquired through foreclosure
    
    $
    4,364,000
    
    
    $
    402,000Vehicles acquired through repossession
    
    $
    388,000
    
    
    $
    500,000
    
    
    $
    196,000Reclassification of loans to other assets
    
    $
    113,000
    
    
    
    
    
    
    $
    230,000Net change in unrealized gain/loss on
available-for-sale investment securities
    
    $
    424,000
    
    
    $
    585,000
    
    
    $
    399,000Non-cash financing activities:Common stock retired in connection
with the exercise of stock options
    
    
    
    
    
    $
    70,000
    
    
    $
    417,000Tax benefit from stock options exercised
    
    
    
    
    
    $
    9,000
    
    
    $
    61,000
 The accompanying notes are an integral
part of these consolidated financial statements.
  F - 9




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    THE BUSINESS OF PLUMAS BANCORP
    2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Consolidation and Basis of Presentation
    Reclassifications
   F - 10




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
 Segment Information
  Use of Estimates
  Cash and Cash Equivalents
  Investment Securities
  
    
    Available-for-sale securities reported at fair value, with unrealized gains and
losses excluded from earnings and reported, net of taxes, as accumulated other
comprehensive income (loss) within shareholders equity.
 
    
    Held-to-maturity securities, which management has the positive intent and ability to
hold, reported at amortized cost, adjusted for the accretion of discounts and
amortization of premiums.
   F - 11




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
 Investment Securities
   Investment in Federal Home Loan Bank Stock
  Loans Held for Sale, Loan Sales and Servicing
    F - 12




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
 Loans Held for Sale, Loan Sales and Servicing
 Government Guaranteed Loans
   Mortgage Loans
  Loans
   F - 13




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
 Loans
     Allowance for Loan Losses
    F - 14




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
 Allowance for Loan Losses
   Allowance for Losses Related to Undisbursed Commitments
  Other Real Estate
  Intangible Assets
   F - 15




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
 Premises and Equipment
  Income Taxes
   Accounting for Uncertainty in Income Taxes
 Accounting for
Uncertainty in Income Taxes Accounting for Contingencies
   F - 16




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
 Accounting
for Uncertainty in Income Taxes
  Earnings Per Share
  Stock-Based Compensation
     F - 17




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
 Stock-Based Compensation
  2008
    
    
    2007
    
    
    2006Expected life of stock options
    
    5.2 years
    
    
    6.6 years
    
    
    5.0 yearsInterest ratestock options
    
    
    2.98
    %
    
    
    4.71
    %
    
    
    4.67
    %Volatilitystock options
    
    
    25.3
    %
    
    
    26.8
    %
    
    
    21.4
    %Dividend yields
    
    
    2.61
    %
    
    
    1.72
    %
    
    
    1.40
    %Weighted-average fair value
of options granted during the
year
    
    $
    2.54
    
    
    $
    4.53
    
    
    $
    4.56
 Impact of New Financial Accounting Standards
 Business Combinations
 Business Combinations
 The Hierarchy of Generally Accepted Accounting Principles
 The Hierarchy of Generally Accepted Accounting
Principles
  F - 18




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
 Impact of New Financial Accounting Standards )
 Employers Disclosures about Postretirement Benefit Plan Assets
 Employers
Disclosures about Postretirement Benefit Plan Assets
  F - 19




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    FAIR VALUE MEASUREMENTS
 Fair Value of Financial Instruments
  December 31, 2008
    
    
    December 31, 2007Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    18,791,000
    
    
    $
    18,791,000
    
    
    $
    13,207,000
    
    
    $
    13,207,000Investment securities
    
    
    38,374,000
    
    
    
    38,606,000
    
    
    
    55,292,000
    
    
    
    55,367,000Loans
    
    
    359,072,000
    
    
    
    363,811,000
    
    
    
    349,302,000
    
    
    
    348,672,000Cash surrender value of life
insurance policies
    
    
    9,766,000
    
    
    
    9,766,000
    
    
    
    9,428,000
    
    
    
    9,428,000Accrued interest receivable
    
    
    2,063,000
    
    
    
    2,063,000
    
    
    
    2,619,000
    
    
    
    2,619,000Financial liabilities:Deposits
    
    $
    371,493,000
    
    
    $
    371,761,000
    
    
    $
    391,940,000
    
    
    $
    391,975,000Short-term borrowings
    
    
    34,000,000
    
    
    
    34,000,000
    
    
    
    7,500,000
    
    
    
    7,500,000Junior subordinated deferrable
interest debentures
    
    
    10,310,000
    
    
    
    2,420,000
    
    
    
    10,310,000
    
    
    
    9,314,000Accrued interest payable
    
    
    487,000
    
    
    
    487,000
    
    
    
    927,000
    
    
    
    927,000
    Cash and cash equivalents
 Investment securities
  F - 20




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    FAIR VALUE
MEASUREMENTS (Continued)
 Loans
 Bank owned life insurance
 Deposits
 Short-term
borrowings
 Junior subordinated deferrable interest debentures
 Commitments to extend credit and letters of credit
 ), Fair Value
Measurements.
 Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active.
  F - 21




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    FAIR VALUE
MEASUREMENTS (Continued)
       Fair Value Measurements at December 31, 2008 UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsDecember 31, 2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Available-for-sale
securities
    
    $
    25,807,000
    
    
    $
    13,450,000
    
    
    $
    12,357,000
    
    
    $
    
   F - 22




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    FAIR VALUE
MEASUREMENTS (Continued)
  Fair Value Measurements at December 31, 2008 UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsDecember 31, 2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Impaired loans
    
    $
    23,312,000
    
    
    $
    
    
    
    $
    23,312,000
    
    
    $
    
  4.
    
    INVESTMENT SECURITIES
  Available-for-Sale
 2008Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDebt securities:U.S. Treasury securities
    
    $
    1,498,000
    
    
    $
    10,000
    
    
    
    
    
    
    $
    1,508,000U.S. Government agencies
    
    
    10,001,000
    
    
    
    391,000
    
    
    
    
    
    
    
    10,392,000U.S. Government agencies
collateralized by mortgage
obligations
    
    
    12,183,000
    
    
    
    189,000
    
    
    $
    (15,000
    )
    
    
    12,357,000Corporate debt securities
    
    
    1,585,000
    
    
    
    1,000
    
    
    
    (36,000
    )
    
    
    1,550,000$
    25,267,000
    
    
    $
    591,000
    
    
    $
    (51,000
    )
    
    $
    25,807,000
   F - 23




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 4.
    
    INVESTMENT SECURITIES(Continued)
 Available-for-Sale
  2007Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDebt securities:U.S. Treasury Securities
    
    $
    3,489,000
    
    
    
    
    
    
    $
    (8,000
    )
    
    $
    3,481,000U.S. Government agencies
    
    
    19,522,000
    
    
    $
    191,000
    
    
    
    (51,000
    )
    
    
    19,662,000U.S. Government agencies
collateralized by mortgage
obligations
    
    
    15,001,000
    
    
    
    12,000
    
    
    
    (275,000
    )
    
    
    14,738,000Corporate debt securities
    
    
    3,975,000
    
    
    
    
    
    
    
    (52,000
    )
    
    
    3,923,000$
    41,987,000
    
    
    $
    203,000
    
    
    $
    (386,000
    )
    
    $
    41,804,000
  Held-to-Maturity
 2008Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDebt securities:Obligations of states and
political subdivisions
    
    $
    12,567,000
    
    
    $
    278,000
    
    
    $
    (46,000
    )
    
    $
    12,799,000
 2007Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDebt securities:Obligations of states and
political subdivisions
    
    $
    13,488,000
    
    
    $
    95,000
    
    
    $
    (20,000
    )
    
    $
    13,563,000
   F - 24




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 4.
    
    INVESTMENT SECURITIES(Continued)
  Less than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesDebt securities:Obligations of states
and political subdivisions
    
    $
    1,366,000
    
    
    $
    39,000
    
    
    $
    809,000
    
    
    $
    7,000
    
    
    $
    2,175,000
    
    
    $
    46,000U.S. Government
agencies collateralized by mortgage
obligations
    
    
    
    
    
    
    
    
    
    
    3,419,000
    
    
    
    15,000
    
    
    
    3,419,000
    
    
    
    15,000Corporate debt securities
    
    
    
    
    
    
    
    
    
    
    1,050,000
    
    
    
    36,000
    
    
    
    1,050,000
    
    
    
    36,000$
    1,366,000
    
    
    $
    39,000
    
    
    $
    5,278,000
    
    
    $
    58,000
    
    
    $
    6,644,000
    
    
    $
    97,000
  Less than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesDebt securities:U.S. Treasury securities
    
    
    
    
    
    
    
    
    
    $
    3,481,000
    
    
    $
    8,000
    
    
    $
    3,481,000
    
    
    $
    8,000U.S. Government
agencies
    
    $
    1,001,000
    
    
    $
    5,000
    
    
    
    8,469,000
    
    
    
    46,000
    
    
    
    9,470,000
    
    
    
    51,000Obligations of states
and political subdivisions
    
    
    421,000
    
    
    
    1,000
    
    
    
    3,873,000
    
    
    
    19,000
    
    
    
    4,294,000
    
    
    
    20,000U.S. Government
agencies collateralized by mortgage
obligations
    
    
    
    
    
    
    
    
    
    
    12,640,000
    
    
    
    275,000
    
    
    
    12,640,000
    
    
    
    275,000Corporate debt securities
    
    
    
    
    
    
    
    
    
    
    3,923,000
    
    
    
    52,000
    
    
    
    3,923,000
    
    
    
    52,000$
    1,422,000
    
    
    $
    6,000
    
    
    $
    32,386,000
    
    
    $
    400,000
    
    
    $
    33,808,000
    
    
    $
    406,000
  F - 25




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 4.
    
    INVESTMENT SECURITIES(Continued)
   Available-for-Sale
    
    
    Held-to-MaturityEstimated
    
    
    
    
    
    
    EstimatedAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    ValueWithin one year
    
    $
    3,083,000
    
    
    $
    3,058,000After one year through
five years
    
    
    10,001,000
    
    
    
    10,392,000
    
    
    $
    1,977,000
    
    
    $
    2,017,000After five years through
ten years
    
    
    
    
    
    
    
    
    
    
    10,300,000
    
    
    
    10,504,000After ten years through
fifteen years
    
    
    
    
    
    
    
    
    
    
    290,000
    
    
    
    278,00013,084,000
    
    
    
    13,450,000
    
    
    
    12,567,000
    
    
    
    12,799,000Investment securities
not due at a single
maturity date:Government-guaranteed mortgage-backed securities
    
    
    12,183,000
    
    
    
    12,357,000$
    25,267,000
    
    
    $
    25,807,000
    
    
    $
    12,567,000
    
    
    $
    12,799,000
   F - 26




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 5.
    
    LOANS AND THE ALLOWANCE FOR LOAN LOSSES
  December 31,2008
    
    
    2007Commercial
    
    $
    42,528,000
    
    
    $
    39,584,000Agricultural
    
    
    36,020,000
    
    
    
    35,762,000Real estate  mortgage
    
    
    151,943,000
    
    
    
    128,357,000Real estate  construction and land
development
    
    
    73,820,000
    
    
    
    76,478,000Installment
    
    
    61,706,000
    
    
    
    72,768,000366,017,000
    
    
    
    352,949,000Deferred loan costs, net
    
    
    279,000
    
    
    
    564,000Allowance for loan losses
    
    
    (7,224,000
    )
    
    
    (4,211,000
    )$
    359,072,000
    
    
    $
    349,302,000
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Balance, beginning of year
    
    $
    4,211,000
    
    
    $
    3,917,000
    
    
    $
    3,256,000Provision charged to operations
    
    
    4,600,000
    
    
    
    800,000
    
    
    
    1,000,000Losses charged to allowance
    
    
    (1,783,000
    )
    
    
    (786,000
    )
    
    
    (645,000
    )Recoveries
    
    
    196,000
    
    
    
    280,000
    
    
    
    306,000Balance, end of year
    
    $
    7,224,000
    
    
    $
    4,211,000
    
    
    $
    3,917,000
   F - 27




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 5.
    
    LOANS AND THE ALLOWANCE FOR LOAN LOSSES(Continued)
   Servicing Assets and Interest-Only Strips Receivable
   Year Ended December 31,2008
    
    
    2007
    
    
    2006Servicing Assets:Balance at beginning of year
    
    $
    76,000
    
    
    $
    69,000
    
    
    $
    97,000Increase from loan sales
    
    
    62,000
    
    
    
    24,000
    
    
    
    15,000Amortization charged to income
    
    
    (30,000
    )
    
    
    (17,000
    )
    
    
    (43,000
    )Balance at end of year
    
    $
    108,000
    
    
    $
    76,000
    
    
    $
    69,000
 2008
    
    
    2007
    
    
    2006Interest-Only Strips Receivable:Balance at beginning of year
    
    $
    247,000
    
    
    $
    238,000
    
    
    $
    326,000Increase from loan sales
    
    
    46,000
    
    
    
    68,000
    
    
    
    67,000Amortization charged to income
    
    
    (80,000
    )
    
    
    (59,000
    )
    
    
    (155,000
    )Balance at end of year
    
    $
    213,000
    
    
    $
    247,000
    
    
    $
    238,000
   F - 28




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 6.
    
    PREMISES AND EQUIPMENT
  December 31,2008
    
    
    2007Land
    
    $
    2,397,000
    
    
    $
    2,397,000Premises
    
    
    14,220,000
    
    
    
    12,621,000Furniture, equipment and leasehold improvements
    
    
    9,912,000
    
    
    
    8,723,000Construction in progress
    
    
    
    
    
    
    309,00026,529,000
    
    
    
    24,050,000Less accumulated depreciation
and amortization
    
    
    (10,765,000
    )
    
    
    (9,384,000
    )$
    15,764,000
    
    
    $
    14,666,000
  7. DEPOSITS
  December 31,2008
    
    
    2007Interest-bearing demand deposits
    
    $
    72,589,000
    
    
    $
    74,811,000Money market
    
    
    39,225,000
    
    
    
    32,149,000Savings
    
    
    48,604,000
    
    
    
    45,343,000Time, $100,000 or more
    
    
    36,179,000
    
    
    
    51,588,000Other time
    
    
    62,113,000
    
    
    
    76,809,000$
    258,710,000
    
    
    $
    280,700,000
  F - 29




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 7.
    
    DEPOSITS(Continued)
  Year Ending December 31,2009
    
    $
    86,350,0002010
    
    
    8,257,0002011
    
    
    2,064,0002012
    
    
    1,283,0002013
    
    
    306,000Thereafter
    
    
    32,000$
    98,292,000
   8.
    
    SHORT-TERM BORROWING ARRANGEMENTS
    F - 30




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 9.
    
    JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
       F - 31




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10.
    
    COMMITMENTS AND CONTINGENCIES
 Leases
  Year Ending
December 31,2009
    
    $
    319,0002010
    
    
    283,0002011
    
    
    262,0002012
    
    
    262,0002013
    
    
    194,000Thereafter
    
    
    728,000$
    2,048,000
  Financial Instruments With Off-Balance-Sheet Risk
    December 31,2008
    
    
    2007Commitments to extend credit
    
    $
    78,787,000
    
    
    $
    96,867,000Letters of credit
    
    $
    534,000
    
    
    $
    655,000
  F - 32




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10.
    
    COMMITMENTS AND CONTINGENCIES(Continued)
    Concentrations of Credit Risk
   Contingencies
   F - 33




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11.
    
    SHAREHOLDERS EQUITY
 Dividend Restrictions
     F - 34




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11.
    
    SHAREHOLDERS EQUITY(Continued)
 Earnings Per Share
  WeightedAverageNumber ofNet
    
    
    Shares
    
    
    Per ShareFor the Year Ended
    
    Income
    
    
    Outstanding
    
    
    AmountDecember 31, 2008Basic earnings per share
    
    $
    304,000
    
    
    
    4,817,411
    
    
    $
    0.06Effect of dilutive stock options
    
    
    
    
    
    
    18,022Diluted earnings per share
    
    $
    304,000
    
    
    
    4,835,433
    
    
    $
    0.06December 31, 2007Basic earnings per share
    
    $
    4,223,000
    
    
    
    4,963,192
    
    
    $
    0.85Effect of dilutive stock options
    
    
    
    
    
    
    41,957Diluted earnings per share
    
    $
    4,223,000
    
    
    
    5,005,149
    
    
    $
    0.84December 31, 2006Basic earnings per share
    
    $
    5,202,000
    
    
    
    5,001,389
    
    
    $
    1.04Effect of dilutive stock options
    
    
    
    
    
    
    83,532Diluted earnings per share
    
    $
    5,202,000
    
    
    
    5,084,921
    
    
    $
    1.02
   F - 35




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11.
    
    SHAREHOLDERS EQUITY(Continued)
 Stock Options
  WeightedWeighted
    
    
    AverageAverage
    
    
    RemainingExercise
    
    
    ContractualShares
    
    
    Price
    
    
    Term
    
    
    Intrinsic ValueOptions outstanding at January 1, 2006
    
    
    355,976
    
    
    $
    10.90Options granted
    
    
    7,500
    
    
    
    17.52Options exercised
    
    
    (67,806
    )
    
    
    8.41Options cancelled
    
    
    (4,756
    )
    
    
    12.68Options outstanding at December 31, 2006
    
    
    290,914
    
    
    $
    11.62Options granted
    
    
    155,700
    
    
    
    16.37Options exercised
    
    
    (19,292
    )
    
    
    7.47Options cancelled
    
    
    (31,550
    )
    
    
    15.69Options outstanding at December 31, 2007
    
    
    395,772
    
    
    $
    13.37Options granted
    
    
    90,300
    
    
    
    12.40Options exercised
    
    
    (12,476
    )
    
    
    5.38Options cancelled
    
    
    (6,640
    )
    
    
    14.30Options outstanding at December 31, 2008
    
    
    466,956
    
    
    $
    13.38
    
    
    
    5.6
    
    
    $
    38,000Options exercisable at December 31, 2008
    
    
    255,883
    
    
    $
    12.37
    
    
    
    4.8
    
    
    $
    38,000Expected to vest after December 31, 2008
    
    
    211,073
    
    
    $
    14.60
    
    
    
    6.6
    
    
    $
    
  F - 36




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11.
    
    SHAREHOLDERS EQUITY(Continued)
 Stock Options
    Regulatory Capital
      F - 37




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11.
    
    SHAREHOLDERS EQUITY(Continued)
 Regulatory Capital
 December 31,2008
    
    
    2007Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioLeverage RatioPlumas Bancorp and Subsidiary
    
    $
    43,885,000
    
    
    
    9.8
    %
    
    $
    46,209,000
    
    
    
    10.0
    %Minimum regulatory requirement
    
    $
    17,907,000
    
    
    
    4.0
    %
    
    $
    18,439,000
    
    
    
    4.0
    %Plumas Bank
    
    $
    43,372,000
    
    
    
    9.7
    %
    
    $
    45,415,000
    
    
    
    9.9
    %Minimum requirement for Well-Capitalized institution under the
prompt corrective action plan
    
    $
    22,365,000
    
    
    
    5.0
    %
    
    $
    23,024,000
    
    
    
    5.0
    %Minimum regulatory requirement
    
    $
    17,892,000
    
    
    
    4.0
    %
    
    $
    18,419,000
    
    
    
    4.0
    %Tier 1 Risk-Based Capital RatioPlumas Bancorp and Subsidiary
    
    $
    43,885,000
    
    
    
    11.0
    %
    
    $
    46,209,000
    
    
    
    11.6
    %Minimum regulatory requirement
    
    $
    16,021,000
    
    
    
    4.0
    %
    
    $
    15,881,000
    
    
    
    4.0
    %Plumas Bank
    
    $
    43,372,000
    
    
    
    10.8
    %
    
    $
    45,415,000
    
    
    
    11.5
    %Minimum requirement for Well-Capitalized institution under the
prompt corrective action plan
    
    $
    23,996,000
    
    
    
    6.0
    %
    
    $
    23,790,000
    
    
    
    6.0
    %Minimum regulatory requirement
    
    $
    15,997,000
    
    
    
    4.0
    %
    
    $
    15,860,000
    
    
    
    4.0
    %Total Risk-Based Capital RatioPlumas Bancorp and Subsidiary
    
    $
    48,919,000
    
    
    
    12.2
    %
    
    $
    50,475,000
    
    
    
    12.7
    %Minimum regulatory requirement
    
    $
    32,042,000
    
    
    
    8.0
    %
    
    $
    31,763,000
    
    
    
    8.0
    %Plumas Bank
    
    $
    48,399,000
    
    
    
    12.1
    %
    
    $
    49,681,000
    
    
    
    12.5
    %Minimum requirement for Well-Capitalized institution under the
prompt corrective action plan
    
    $
    39,994,000
    
    
    
    10.0
    %
    
    $
    39,651,000
    
    
    
    10.0
    %Minimum regulatory requirement
    
    $
    31,995,000
    
    
    
    8.0
    %
    
    $
    31,720,000
    
    
    
    8.0
    %
 Share Repurchase Plan
   F - 38




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11.
    
    SHAREHOLDERS EQUITY(Continued)
 Share Repurchase Plan
  12.
    
    OTHER EXPENSES
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Outside service fees
    
    $
    735,000
    
    
    $
    671,000
    
    
    $
    591,000Professional fees
    
    
    688,000
    
    
    
    738,000
    
    
    
    780,000Provision for losses on other real estate
    
    
    618,000Business development
    
    
    467,000
    
    
    
    530,000
    
    
    
    555,000Advertising and promotion
    
    
    448,000
    
    
    
    520,000
    
    
    
    552,000Telephone and data communications
    
    
    400,000
    
    
    
    362,000
    
    
    
    374,000Loan expenses
    
    
    380,000
    
    
    
    192,000
    
    
    
    139,000Director compensation and retirement
    
    
    323,000
    
    
    
    349,000
    
    
    
    370,000Armored car and courier
    
    
    289,000
    
    
    
    279,000
    
    
    
    270,000FDIC Insurance
    
    
    258,000
    
    
    
    48,000
    
    
    
    53,000Stationery and supplies
    
    
    236,000
    
    
    
    278,000
    
    
    
    282,000Insurance
    
    
    235,000
    
    
    
    177,000
    
    
    
    173,000Core deposit intangible amortization
    
    
    216,000
    
    
    
    301,000
    
    
    
    301,000Postage
    
    
    208,000
    
    
    
    242,000
    
    
    
    249,000Other operating expenses
    
    
    252,000
    
    
    
    232,000
    
    
    
    235,000$
    5,753,000
    
    
    $
    4,919,000
    
    
    $
    4,924,000
 13. INCOME TAXES
  Federal
    
    
    State
    
    
    Total2008Current
    
    $
    788,000
    
    
    $
    459,000
    
    
    $
    1,247,000Deferred
    
    
    (1,002,000
    )
    
    
    (457,000
    )
    
    
    (1,459,000
    )(Benefit) provision for income
taxes
    
    $
    (214,000
    )
    
    $
    2,000
    
    
    $
    (212,000
    )
  F - 39




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 13.
    
    INCOME TAXES(Continued)
 Federal
    
    
    State
    
    
    Total2007Current
    
    $
    2,374,000
    
    
    $
    915,000
    
    
    $
    3,289,000Deferred
    
    
    (587,000
    )
    
    
    (200,000
    )
    
    
    (787,000
    )Provision for income taxes
    
    $
    1,787,000
    
    
    $
    715,000
    
    
    $
    2,502,0002006Current
    
    $
    2,736,000
    
    
    $
    916,000
    
    
    $
    3,652,000Deferred
    
    
    (434,000
    )
    
    
    (22,000
    )
    
    
    (456,000
    )Provision for income taxes
    
    $
    2,302,000
    
    
    $
    894,000
    
    
    $
    3,196,000
  December 31,2008
    
    
    2007Deferred tax assets:Allowance for loan losses
    
    $
    2,871,000
    
    
    $
    1,586,000Future benefit for state income tax deduction
    
    
    
    
    
    
    160,000Deferred compensation
    
    
    1,713,000
    
    
    
    1,668,000Core deposit premium
    
    
    302,000
    
    
    
    297,000Unrealized loss on available-for-sale
investment securities
    
    
    
    
    
    
    76,000Other
    
    
    369,000
    
    
    
    70,000Total deferred tax assets
    
    
    5,255,000
    
    
    
    3,857,000Deferred tax liabilities:Prepaid costs
    
    $
    (117,000
    )
    
    $
    (139,000
    )Deferred loan costs
    
    
    (944,000
    )
    
    
    (1,085,000
    )Premises and equipment
    
    
    (351,000
    )
    
    
    (353,000
    )Future liability for state income tax deduction
    
    
    (152,000
    )Unrealized gain on available-for-sale
investment securities
    
    
    (223,000
    )Other
    
    
    (189,000
    )
    
    
    (161,000
    )Total deferred tax liabilities
    
    
    (1,976,000
    )
    
    
    (1,738,000
    )Net deferred tax assets
    
    $
    3,279,000
    
    
    $
    2,119,000
   F - 40




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 13.
    
    INCOME TAXES(Continued)
  2008
    
    
    2007
    
    
    2006Federal income tax, at statutory rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %State franchise tax, net of Federal tax effect
    
    
    1.7
    %
    
    
    7.0
    %
    
    
    7.0
    %Interest on obligations of states and political
subdivisions
    
    
    (256.3
    )%
    
    
    (3.2
    )%
    
    
    (2.3
    )%Net increase
in cash surrender value of bank owned life insurance
    
    
    (125.1
    )%
    
    
    (1.7
    )%
    
    
    (1.3
    )%Other
    
    
    114.7
    %
    
    
    1.1
    %
    
    
    0.7
    %Effective tax rate
    
    
    (231.0
    )%
    
    
    37.2
    %
    
    
    38.1
    %
    14.
    
    RELATED PARTY TRANSACTIONS
  Balance, January 1, 2008
    
    $
    750,000Disbursements
    
    
    828,000Amounts repaid
    
    
    (194,000
    )Balance, December 31, 2008
    
    $
    1,384,000Undisbursed commitments to related
parties, December 31, 2008
    
    $
    671,000
  F - 41




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 15.
    
    EMPLOYEE BENEFIT PLANS
 Profit Sharing Plan
  
    
    A contribution which matches the participants contribution, up to a maximum
of 3% of the employees compensation.
    
    An additional discretionary contribution.
  Salary Continuation and Retirement Agreements
 Accounting for Deferred Compensation and Postretirement
Benefit Aspects of Endorsed Split-Dollar Life Insurance Arrangements
   F - 42




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 16.
    
    COMPREHENSIVE INCOME
   Before
    
    

Tax
Benefit
    
    

AfterTax
    
    
    (Expense)
    
    
    TaxFor the Year Ended December 31, 2008Total other comprehensive income:Unrealized holding gains
    
    $
    1,138,000
    
    
    $
    (470,000
    )
    
    $
    668,000Reclassification adjustment for
impairment loss included in
net income
    
    
    (415,000
    )
    
    
    171,000
    
    
    
    (244,000
    )Total other comprehensive income
    
    $
    723,000
    
    
    $
    (299,000
    )
    
    $
    424,000For the Year Ended December 31, 2007Total other comprehensive income:Unrealized holding gains
    
    $
    996,000
    
    
    $
    (411,000
    )
    
    $
    585,000For the Year Ended December 31, 2006Total other comprehensive income:Unrealized holding gains
    
    $
    679,000
    
    
    $
    (280,000
    )
    
    $
    399,000
  F - 43




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 17.
    
    INTANGIBLE ASSETS
    December 31, 2008
    
    
    December 31, 2007Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationCore Deposit Intangibles
    
    $
    1,709,000
    
    
    $
    888,000
    
    
    $
    2,983,000
    
    
    $
    1,946,000
  Year Ending December 31,2009
    
    $
    173,0002010
    
    
    173,0002011
    
    
    173,0002012
    
    
    173,0002013
    
    
    129,000$
    821,000
  F - 44




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 18.
    
    PARENT ONLY CONDENSED FINANCIAL STATEMENTS
 CONDENSED BALANCE SHEET
 December 31, 2008 and 2007
 2008
    
    
    2007ASSETSCash and cash equivalents
    
    $
    662,000
    
    
    $
    698,000Investment in bank subsidiary
    
    
    44,672,000
    
    
    
    46,345,000Other assets
    
    
    576,000
    
    
    
    541,000Total assets
    
    $
    45,910,000
    
    
    $
    47,584,000LIABILITIES AND SHAREHOLDERS EQUITYOther liabilities
    
    $
    163,000
    
    
    $
    135,000Junior subordinated deferrable interest debentures
    
    
    10,310,000
    
    
    
    10,310,000Total liabilities
    
    
    10,473,000
    
    
    
    10,445,000Shareholders equity:Common stock
    
    
    5,302,000
    
    
    
    5,042,000Retained earnings
    
    
    29,818,000
    
    
    
    32,204,000Accumulated other comprehensive income (loss)
    
    
    317,000
    
    
    
    (107,000
    )Total shareholders equity
    
    
    35,437,000
    
    
    
    37,139,000Total liabilities and shareholders equity
    
    $
    45,910,000
    
    
    $
    47,584,000
 CONDENSED STATEMENT OF INCOME
 For the Years Ended December 31, 2008, 2007 and 2006
 2008
    
    
    2007
    
    
    2006Income:Dividends declared by bank subsidiary
    
    $
    3,000,000
    
    
    $
    4,300,000Earnings from investment in Plumas
Statutory Trusts I and II
    
    
    19,000
    
    
    
    18,000
    
    
    $
    24,000Total income
    
    
    3,019,000
    
    
    
    4,318,000
    
    
    
    24,000Expenses:Interest on junior subordinated
deferrable interest debentures
    
    
    623,000
    
    
    
    835,000
    
    
    
    810,000Other expenses
    
    
    730,000
    
    
    
    765,000
    
    
    
    793,000Total expenses
    
    
    1,353,000
    
    
    
    1,600,000
    
    
    
    1,603,000Income (loss) before equity in
undistributed income of subsidiary
    
    
    1,666,000
    
    
    
    2,718,000
    
    
    
    (1,579,000
    )Equity in undistributed (loss) income of
subsidiary
    
    
    (1,911,000
    )
    
    
    896,000
    
    
    
    6,183,000(Loss) income before income taxes
    
    
    (245,000
    )
    
    
    3,614,000
    
    
    
    4,604,000Income tax benefit
    
    
    549,000
    
    
    
    609,000
    
    
    
    598,000Net income
    
    $
    304,000
    
    
    $
    4,223,000
    
    
    $
    5,202,000
  F - 45




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 18.
    
    PARENT ONLY CONDENSED FINANCIAL STATEMENTS(Continued)
 CONDENSED STATEMENT OF CASH FLOWS
 For the Years Ended December 31, 2008, 2007 and 2006
 2008
    
    
    2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    304,000
    
    
    $
    4,223,000
    
    
    $
    5,202,000Adjustments to reconcile net income to
net cash provided by operating activities:Undistributed loss (income) of
subsidiary
    
    
    1,911,000
    
    
    
    (896,000
    )
    
    
    (6,183,000
    )Excess tax benefits from stock-based
compensation
    
    
    
    
    
    
    (9,000
    )
    
    
    (61,000
    )Stock-based compensation expense
    
    
    58,000
    
    
    
    164,000
    
    
    
    174,000(Increase) decrease in other assets
    
    
    (35,000
    )
    
    
    118,000
    
    
    
    307,000Increase in other liabilities
    
    
    28,000
    
    
    
    50,000
    
    
    
    69,000Net cash provided by (used in)
operating activities
    
    
    2,266,000
    
    
    
    3,650,000
    
    
    
    (492,000
    )Cash flows from financing activities:Payment of cash dividends
    
    
    (1,153,000
    )
    
    
    (1,491,000
    )
    
    
    (1,302,000
    )Proceeds from the exercise of stock
options
    
    
    68,000
    
    
    
    73,000
    
    
    
    181,000Excess tax benefits from stock-based
compensation
    
    
    
    
    
    
    9,000
    
    
    
    61,000Repurchase and retirement of common stock
    
    
    (1,217,000
    )
    
    
    (2,400,000
    )Net cash used in financing
activities
    
    
    (2,302,000
    )
    
    
    (3,809,000
    )
    
    
    (1,060,000
    )Decrease in cash and cash
equivalents
    
    
    (36,000
    )
    
    
    (159,000
    )
    
    
    (1,552,000
    )Cash and cash equivalents at beginning
of year
    
    
    698,000
    
    
    
    857,000
    
    
    
    2,409,000Cash and cash equivalents at end of year
    
    $
    662,000
    
    
    $
    698,000
    
    
    $
    857,000Non-cash investing activities:Net change in unrealized gain/loss on
investment securities available-for-sale
    
    $
    424,000
    
    
    $
    585,000
    
    
    $
    399,000Non-cash financing activities:Common stock retired in connection
with the exercise of stock options
    
    
    
    
    
    $
    70,000
    
    
    $
    417,000Tax benefit from stock options exercised
    
    
    
    
    
    $
    9,000
    
    
    $
    61,000
  F - 46




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PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 19.
    
    SUBSEQUENT EVENT
       F - 47




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PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 19.
    
    SUBSEQUENT EVENT(Continued)
    F - 48




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##### Table of Contents



ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
  REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
    /s/ D. N. BIDDLE

Mr. Douglas N. BiddlePresident and Chief Executive Officer/s/ ANDREW RYBACK

Mr. Andrew J. RybackExecutive Vice President and Chief Financial OfficerDated March 18, 2009
  52




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##### Table of Contents



ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
   53




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##### Table of Contents



ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a) 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, 2009.3.3
    
    Amendment of the Articles of Incorporation of Registrant dated November 1, 2002, is
included as exhibit 3.3 to the Registrants 10-Q for September 30, 2005, which is
incorporated by this reference herein.3.4
    
    Amendment of the Articles of Incorporation of Registrant dated August 17, 2005, is
included as exhibit 3.4 to the Registrants 10-Q for September 30, 2005, which is
incorporated by this reference herein.4
    
    Specimen form of certificate for Plumas Bancorp included as exhibit 4 to the
Registrants Form S-4, File No. 333-84534, which is incorporated by reference
herein.4.1
    
    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, 2008.10.2
    
    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.10.5
    
    Employment Agreement of Douglas N. Biddle dated February 18, 2009 is included as
Exhibit 10.05 to the Registrants
8-K filed on February 19, 2009, 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.
  54




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##### Table of Contents



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
    
    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.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.
  55




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##### Table of Contents



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, is included as Exhibit 10.41 to the Registrants 10-QSB for
June 30, 2002, 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.10.51
    
    First Amendment to Split Dollar Agreement of Andrew J. Ryback.10.52
    
    Executive Salary Continuation Agreement of Douglas N. Biddle dated December 17, 2008.10.53
    
    Second Amendment to Executive Salary Continuation Agreement of Douglas N. Biddle dated June 2,
1994 and Amended February 16, 2000.10.54
    
    First Amendment to Addendum A of Split Dollar Agreements of Douglas N. Biddle dated
January 24, 2002.10.55
    
    First Amendment to Addendum B of Split Dollar Agreements of Douglas N. Biddle dated
January 24, 2002.10.56
    
    Second Amendment to Executive Salary Continuation Agreement of Robert T. Herr dated
June 4, 2002 and Amended September 15, 200410.57
    
    First Amendment to Split Dollar Agreements of Robert T. Herr dated September 15, 2004.10.58
    
    Executive Salary Continuation Agreement of Robert T. Herr dated December 17, 2008.10.64
    
    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.
  56




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##### Table of Contents



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-K under Item 8 Financial
Statements Plumas Bancorp and Subsidiary Notes to Consolidated Financial Statements as
Footnote 11  Shareholders Equity.21.01
    
    Plumas Bank  California.21.02
    
    Plumas Statutory Trust I  Connecticut.21.03
    
    Plumas Statutory Trust II  Connecticut.23
    
    Independent Auditors Consent letter dated March 18, 2009.31.1
    
    Rule 13a-14(a) [Section 302] Certification of Principal Financial Officer dated March 18, 2009.31.2
    
    Rule 13a-14(a) [Section 302] Certification of Principal Executive Officer dated March 18, 2009.32.1
    
    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 March 18, 2009.32.2
    
    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 March 18, 2009.
  57




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##### Table of Contents



SIGNATURES
  PLUMAS BANCORP
(Registrant) 
Date: March 18, 2009/s/ D. N. BIDDLEDouglas N. BiddlePresident/Chief Executive Officer/s/ ANDREW RYBACKAndrew J. RybackExecutive Vice President/Chief Financial Officer  58




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##### Table of Contents



/s/ DANIEL E. WEST

Daniel E. West, Director and Chairman of the Board
    
    Dated: March 18, 2009/s/ TERRANCE J. REESON

Terrance J. Reeson, Director and Vice Chairman of
the Board
    
    Dated: March 18, 2009/s/ D. N. BIDDLE

Douglas N. Biddle, Director
    
    Dated: March 18, 2009/s/ ALVIN G. BLICKENSTAFF

Alvin G. Blickenstaff, Director
    
    Dated: March 18, 2009/s/ W. E. ELLIOTT

William E. Elliott, Director
    
    Dated: March 18, 2009/s/ GERALD W. FLETCHER

Gerald W. Fletcher, Director
    
    Dated: March 18, 2009/s/ JOHN FLOURNOY

John Flournoy, Director
    
    Dated: March 18, 2009/s/ ARTHUR C. GROHS

Arthur C. Grohs, Director
    
    Dated: March 18, 2009/s/ ROBERT J. MCCLINTOCK

Robert J. McClintock, Director
    
    Dated:
March 18, 2009
  59




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    
    
    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, 2009.3.3
    
    
    Amendment of the Articles of Incorporation of Registrant dated November 1, 2002, is
included as exhibit 3.3 to the Registrants 10-Q for September 30, 2005, which is
incorporated by this reference herein.3.4
    
    
    Amendment of the Articles of Incorporation of Registrant dated August 17, 2005, is
included as exhibit 3.4 to the Registrants 10-Q for September 30, 2005, which is
incorporated by this reference herein.4
    
    
    Specimen form of certificate for Plumas Bancorp included as exhibit 4 to the
Registrants Form S-4, File No. 333-84534, which is incorporated by reference
herein.4.1
    
    
    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, 2008.10.2
    
    
    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.10.5
    
    
    Employment Agreement of Douglas N. Biddle dated February 18, 2009 is included as
Exhibit 10.05 to the Registrants 8-K filed on February 19, 2009, 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
    
    
    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.




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##### Table of Contents



ExhibitNumber
    
    Description10.20
    
    
    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.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.10.40
    
    
    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, is included as Exhibit 10.41 to the Registrants 10-QSB for
June 30, 2002, 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.




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##### Table of Contents



ExhibitNumber
    
    Description10.47
    
    
    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.10.51
    
    
    First Amendment to Split Dollar Agreement of Andrew J. Ryback.10.52
    
    
    Executive Salary Continuation Agreement of Douglas N. Biddle dated December 17, 2008.10.53
    
    
    Second Amendment to Executive Salary Continuation Agreement of Douglas N. Biddle dated June 2,
1994 and Amended February 16, 2000.10.54
    
    
    First Amendment to Addendum A of Split Dollar Agreements of Douglas N. Biddle dated
January 24, 2002.10.55
    
    
    First Amendment to Addendum B of Split Dollar Agreements of Douglas N. Biddle dated
January 24, 2002.10.56
    
    
    Second Amendment to Executive Salary Continuation Agreement of Robert T. Herr dated
June 4, 2002 and Amended September 15, 200410.57
    
    
    First Amendment to Split Dollar Agreements of Robert T. Herr dated September 15, 2004.10.58
    
    
    Executive Salary Continuation Agreement of Robert T. Herr dated December 17, 2008.10.64
    
    
    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-K under Item 8 Financial
Statements Plumas Bancorp and Subsidiary Notes to Consolidated Financial Statements as
Footnote 11  Shareholders Equity.




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##### Table of Contents



ExhibitNumber
    
    Description21.01
    
    
    Plumas Bank  California.21.02
    
    
    Plumas Statutory Trust I  Connecticut.21.03
    
    
    Plumas Statutory Trust II  Connecticut.23
    
    
    Independent Auditors Consent letter dated March 18, 2009.31.1
    
    
    Rule 13a-14(a) [Section 302] Certification of Principal Financial Officer dated March 18, 2009.31.2
    
    
    Rule 13a-14(a) [Section 302] Certification of Principal Executive Officer dated March 18, 2009.32.1
    
    
    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 March 18, 2009.32.2
    
    
    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 March 18, 2009.