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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, 2007
 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 þ
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
  o þ




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TABLE OF CONTENTS
 PagePART IItem 1.
    
    Business
    
    
    5Item 1A
    
    Risk Factors
    
    
    20Item 1B
    
    Unresolved Staff Comments
    
    
    20Item 2.
    
    Properties
    
    
    21Item 3.
    
    Legal Proceedings
    
    
    22Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    22PART IIItem 5.
    
    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    23Item 6.
    
    Selected Financial Data
    
    
    25Item 7.
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    
    26Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    48Item 8.
    
    Financial Statements and Supplementary Data
    
    
    48Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    49Item 9A.
    
    Controls and Procedures
    
    
    49Item 9B
    
    Other Information
    
    
    51PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    51Item 11.
    
    Executive Compensation
    
    
    51Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    51Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    52Item 14.
    
    Principal Accountant Fees and Services
    
    
    52PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    52Signatures
    
    
    56EXHIBIT 23EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  3




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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.
 4




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ITEM 1. BUSINESS
 General
 The Company Bank Holding Company Act
   www.plumasbank.com www.sec.gov
 The Bank.
  5




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6




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Commitment to our Communities.
  Recent Developments.
 Trust Preferred Securities.
 7




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Business Concentrations.
 Competition
 8




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Employees.
 Supervision and Regulation
 The Company.
 9




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The Bank.
  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
    %
    
    
    9.9
    %
    
    
    10.0
    %Tier 1 risk-based capital ratio
    
    
    4.0
    %
    
    
    6.0
    %
    
    
    11.5
    %
    
    
    11.6
    %Total risk-based capital ratio
    
    
    8.0
    %
    
    
    10.0
    %
    
    
    12.5
    %
    
    
    12.7
    %
 Prompt Corrective Action.
  11




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Premiums for Deposit Insurance.
  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.
 12




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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.
  Consumer Protection Laws and Regulations.
 Community Reinvestment Act .
 Equal Credit Opportunity Act
 Truth in Lending Act
 Fair Housing Act
 13




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Home Mortgage Disclosure Act
 Right to Financial Privacy Act
 Real Estate Settlement Procedures Act
  Recent Legislation and Other Changes.
   14




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
    
    Identify relevant patterns, practices, and specific forms of activity that are
red flags signaling possible identity theft and incorporate those red flags into
the Program;
    
    Detect red flags that have been incorporated into the Program;
    
    Respond appropriately to any red flags that are detected to prevent and
mitigate identity theft; and
    
    Ensure the Program is updated periodically to reflect changes in risks from
identity theft.
    16




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
    
    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.
  18




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Recent Accounting Pronouncements
 Fair Value Measurements
  Fair Value Option for Financial Assets and Financial Liabilities
  19




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Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar
Life Insurance Arrangements
  Accounting for Business Combinations
  
 ITEM 1A. RISK FACTORS
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  20




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ITEM 2. PROPERTIES
  Owned Properties35 South Lindan Avenue
    
    32 Central Avenue
    
    80 W. Main St.Quincy, California (1)
    
    Quincy, California (1)
    
    Quincy, California (1)424 N. Mill Creek
    
    336 West Main Street
    
    120 North Pine StreetQuincy, California (4)
    
    Quincy, California
    
    Portola, California43163 Highway 299E
    
    121 Crescent Street
    
    315 Birch StreetFall River Mills, California
    
    Greenville, California
    
    Westwood, California (2)255 Main Street
    
    510 North Main Street
    
    3000 Riverside DriveChester, California
    
    Alturas, California
    
    Susanville, California8475 North Lake Boulevard
    
    11638 Donner Pass RoadKings Beach, California
    
    Truckee, California
 Leased Properties243 North Lake Boulevard
    
    604 Main Street
    
    470 Nevada St., Suite 108Tahoe City, California
    
    Loyalton, California
    
    Auburn, California (3)1895 Plumas Ste 2
    
    1320 Yuba St. #104
    
    2175 Civic Center DriveReno, Nevada (3)
    
    Redding, CA (5)
    
    Redding, CA (6)
 
 (1)
    
    Non-branch administrative or credit administrative offices.(2)
    
    The Westwood branch is a mortgaged property with an outstanding balance of $53,000 at
December 31, 2007.(3)
    
    Commercial lending offices.(4)
    
    Future location of Companys data processing facilities.(5)
    
    Temporary home of Companys Redding Branch.(6)
    
    Future home of Companys Redding Branch.  Year Ending December 31,2008
    
    $
    285,0002009
    
    
    312,0002010
    
    
    286,0002011
    
    
    262,0002012
    
    
    262,000Thereafter
    
    
    914,000$
    2,321,000
 21




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ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  22




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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 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
    
    
    $
    14.504th Quarter 2006
    
    $
    0.13
    
    
    $
    17.45
    
    
    $
    14.503rd Quarter 2006
    
    
    
    
    
    $
    19.00
    
    
    $
    15.772nd Quarter 2006
    
    $
    0.13
    
    
    $
    19.89
    
    
    $
    15.501st Quarter 2006
    
    
    
    
    
    $
    23.00
    
    
    $
    17.00
     23




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Securities Authorized for Issuance under Equity Compensation Plans.
 Number ofsecuritiesremaining availableNumber of
    
    
    
    
    
    for future issuancesecurities to be
    
    
    
    
    
    under equityissued upon
    
    Weighted-average
    
    compensation plansexercise of
    
    exercise price of
    
    (excluding securitiesoutstanding options
    
    outstanding options
    
    reflected in column (a))Plan Category
    
    (a)
    
    (b)
    
    (c)Equity compensation
plans approved by
security holders
    
    
    395,772
    
    
    $
    13.37
    
    
    
    490,889Equity compensation
plans not approved
by security holders
    
    None
    
    Not Applicable
    
    NoneTotal
    
    
    395,772
    
    
    $
    13.37
    
    
    
    490,889
  Issuer Purchases of Equity Securities.
 Total Number
    
    Maximum NumberTotal
    
    
    
    
    
    of Shares
    
    of SharesNumber of
    
    Average
    
    Purchased as Part of
    
    That May Yet BeShares
    
    Price Paid
    
    Publicly Announced
    
    Purchased Under thePeriod
    
    Purchased
    
    per Share (1)
    
    Plans or Programs (2)
    
    Plans or Programs (3)October 1, 2007 to October 31, 2007
    
    
    7,500
    
    
    $
    13.33
    
    
    
    7,500
    
    
    
    144,770November 1, 2007 to November 30, 2007
    
    
    38,813
    
    
    $
    13.15
    
    
    
    37,133
    
    
    
    107,637December 1, 2007 to December 31, 2007
    
    
    26,374
    
    
    $
    13.66
    
    
    
    26,374
    
    
    
    0
    (4)Total
    
    
    72,687
    
    
    $
    13.35
    
    
    
    71,007
 
 (1)
    
    Includes commissions.(2)
    
    The difference between total number of shares purchased and the total
number of shares purchased as part of publicly announced programs is
due to repurchases of common stock from employees in connection with
their exercise of stock options.(3)
    
    On January 22, 2007 the Company announced that its Board of Directors
authorized a common stock repurchase plan. The plan called for the
repurchase of up to 250,000 shares, or approximately 5%, of the
Companys shares outstanding as of January 22, 2007. The shares
included in this column represent shares available under this plan
which expired on December 31, 2007(4)
    
    The 2007 stock repurchase plan terminated on December 31, 2007. 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. 24




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ITEM 6. SELECTED FINANCIAL DATA
  At or for the year ended December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(dollars in thousands except per share information)Statement of IncomeInterest income
    
    $
    30,284
    
    
    $
    29,483
    
    
    $
    25,497
    
    
    $
    20,110
    
    
    $
    18,549Interest expense
    
    
    8,536
    
    
    
    6,954
    
    
    
    4,793
    
    
    
    2,914
    
    
    
    3,013Net interest income
    
    
    21,748
    
    
    
    22,529
    
    
    
    20,704
    
    
    
    17,196
    
    
    
    15,536Provision for loan losses
    
    
    800
    
    
    
    1,000
    
    
    
    1,100
    
    
    
    750
    
    
    
    750Noninterest income
    
    
    5,448
    
    
    
    5,159
    
    
    
    5,073
    
    
    
    5,099
    
    
    
    3,639Noninterest expense
    
    
    19,671
    
    
    
    18,290
    
    
    
    17,549
    
    
    
    15,898
    
    
    
    13,126Provision for income taxes
    
    
    2,502
    
    
    
    3,196
    
    
    
    2,600
    
    
    
    2,001
    
    
    
    2,018Net income
    
    $
    4,223
    
    
    $
    5,202
    
    
    $
    4,528
    
    
    $
    3,646
    
    
    $
    3,281Balance sheet (end of period)Total assets
    
    $
    453,115
    
    
    $
    473,239
    
    
    $
    472,803
    
    
    $
    417,346
    
    
    $
    390,262Total loans
    
    $
    352,949
    
    
    $
    354,712
    
    
    $
    321,646
    
    
    $
    266,913
    
    
    $
    217,957Allowance for loan losses
    
    $
    4,211
    
    
    $
    3,917
    
    
    $
    3,256
    
    
    $
    2,722
    
    
    $
    2,524Total deposits
    
    $
    391,940
    
    
    $
    402,176
    
    
    $
    426,560
    
    
    $
    378,567
    
    
    $
    355,842Total shareholders equity
    
    $
    37,139
    
    
    $
    35,852
    
    
    $
    31,137
    
    
    $
    27,891
    
    
    $
    25,749Balance sheet (period average)Total assets
    
    $
    464,974
    
    
    $
    468,988
    
    
    $
    452,225
    
    
    $
    409,335
    
    
    $
    339,160Total loans
    
    $
    353,384
    
    
    $
    335,226
    
    
    $
    302,596
    
    
    $
    233,759
    
    
    $
    214,736Total deposits
    
    $
    403,772
    
    
    $
    415,700
    
    
    $
    403,818
    
    
    $
    373,267
    
    
    $
    304,840Total shareholders equity
    
    $
    37,041
    
    
    $
    33,682
    
    
    $
    29,548
    
    
    $
    26,829
    
    
    $
    24,558Capital ratiosLeverage ratio
    
    
    10.0
    %
    
    
    9.5
    %
    
    
    8.5
    %
    
    
    7.6
    %
    
    
    8.4
    %Tier 1 risk-based capital
    
    
    11.6
    %
    
    
    10.9
    %
    
    
    10.3
    %
    
    
    10.1
    %
    
    
    10.4
    %Total risk-based capital
    
    
    12.7
    %
    
    
    11.8
    %
    
    
    11.1
    %
    
    
    10.9
    %
    
    
    11.3
    %Asset quality ratiosNonperforming loans/total loans
    
    
    0.75
    %
    
    
    0.29
    %
    
    
    0.52
    %
    
    
    0.45
    %
    
    
    0.40
    %Nonperforming assets/total assets
    
    
    0.70
    %
    
    
    0.22
    %
    
    
    0.36
    %
    
    
    0.30
    %
    
    
    0.22
    %Allowance for loan losses/total loans
    
    
    1.19
    %
    
    
    1.10
    %
    
    
    1.01
    %
    
    
    1.02
    %
    
    
    1.16
    %Net loan charge-offs
    
    $
    506
    
    
    $
    339
    
    
    $
    566
    
    
    $
    552
    
    
    $
    657Performance ratiosReturn on average assets
    
    
    0.91
    %
    
    
    1.11
    %
    
    
    1.00
    %
    
    
    0.89
    %
    
    
    0.97
    %Return on average equity
    
    
    11.4
    %
    
    
    15.4
    %
    
    
    15.2
    %
    
    
    13.5
    %
    
    
    13.3
    %Net interest margin
    
    
    5.18
    %
    
    
    5.32
    %
    
    
    5.06
    %
    
    
    4.77
    %
    
    
    5.20
    %Loans to Deposits
    
    
    90.1
    %
    
    
    88.2
    %
    
    
    75.4
    %
    
    
    70.5
    %
    
    
    61.3
    %Efficiency ratio
    
    
    72.3
    %
    
    
    66.1
    %
    
    
    68.1
    %
    
    
    71.3
    %
    
    
    68.5
    %Per share informationBasic earnings
    
    $
    0.85
    
    
    $
    1.04
    
    
    $
    0.92
    
    
    $
    0.75
    
    
    $
    0.68Diluted earnings
    
    $
    0.84
    
    
    $
    1.02
    
    
    $
    0.89
    
    
    $
    0.73
    
    
    $
    0.66Cash dividends
    
    $
    0.30
    
    
    $
    0.26
    
    
    $
    0.22
    
    
    $
    0.19
    
    
    $
    0.16Dividend payout ratio
    
    
    35.3
    %
    
    
    25.0
    %
    
    
    23.9
    %
    
    
    25.1
    %
    
    
    23.7
    %Book value
    
    $
    7.63
    
    
    $
    7.14
    
    
    $
    6.26
    
    
    $
    5.69
    
    
    $
    5.29Common shares outstanding at period end
    
    
    4,869,130
    
    
    
    5,023,205
    
    
    
    4,976,654
    
    
    
    4,901,197
    
    
    
    4,863,040
 25




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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.
 26




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Income Taxes.
  Accounting for
Uncertainty in Income Taxes
 Impairment of Core Deposit Intangible.
 Stock-Based Compensation Share-Based Payment Accounting for Stock-Based
Compensation
  27




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Overview
     28




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Results of Operations
 Net Interest Income
  Year ended December 31,2007
    
    
    2006
    
    
    2005Interest
    
    
    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
    
    $
    3,517
    
    
    $
    171
    
    
    
    4.86
    %
    
    $
    3,616
    
    
    $
    164
    
    
    
    4.54
    %
    
    $
    5,930
    
    
    $
    218
    
    
    
    3.68
    %Investment securities(1)
    
    
    62,690
    
    
    
    2,404
    
    
    
    3.83
    
    
    
    84,794
    
    
    
    3,047
    
    
    
    3.59
    
    
    
    100,633
    
    
    
    3,324
    
    
    
    3.30Total loans (2)(3)
    
    
    353,384
    
    
    
    27,709
    
    
    
    7.84
    
    
    
    335,226
    
    
    
    26,272
    
    
    
    7.84
    
    
    
    302,596
    
    
    
    21,955
    
    
    
    7.26Total earning assets
    
    
    419,591
    
    
    
    30,284
    
    
    
    7.22
    %
    
    
    423,636
    
    
    
    29,483
    
    
    
    6.96
    %
    
    
    409,159
    
    
    
    25,497
    
    
    
    6.23
    %Cash and due from banks
    
    
    12,850
    
    
    
    
    
    
    
    
    
    
    
    13,547
    
    
    
    
    
    
    
    
    
    
    
    15,953Other assets
    
    
    32,533
    
    
    
    
    
    
    
    
    
    
    
    31,805
    
    
    
    
    
    
    
    
    
    
    
    27,357Total assets
    
    $
    464,974
    
    
    
    
    
    
    
    
    
    
    $
    468,988
    
    
    
    
    
    
    
    
    
    
    $
    452,469Liabilities and shareholders
equityInterest bearing demand deposits
    
    $
    77,254
    
    
    
    1,335
    
    
    
    1.73
    %
    
    $
    80,685
    
    
    
    1,489
    
    
    
    1.85
    %
    
    $
    48,577
    
    
    
    196
    
    
    
    0.40
    %Money market deposits
    
    
    39,431
    
    
    
    327
    
    
    
    0.83
    
    
    
    56,496
    
    
    
    661
    
    
    
    1.17
    
    
    
    64,025
    
    
    
    747
    
    
    
    1.17Savings deposits
    
    
    50,448
    
    
    
    245
    
    
    
    0.49
    
    
    
    59,802
    
    
    
    423
    
    
    
    0.71
    
    
    
    67,702
    
    
    
    445
    
    
    
    0.66Time deposits
    
    
    121,808
    
    
    
    5,304
    
    
    
    4.35
    
    
    
    93,515
    
    
    
    3,314
    
    
    
    3.54
    
    
    
    98,946
    
    
    
    2,704
    
    
    
    2.73Short-term borrowings
    
    
    8,735
    
    
    
    467
    
    
    
    5.35
    
    
    
    4,446
    
    
    
    237
    
    
    
    5.33
    
    
    
    6,921
    
    
    
    210
    
    
    
    3.03Junior subordinated debentures
    
    
    10,310
    
    
    
    835
    
    
    
    8.10
    
    
    
    10,310
    
    
    
    810
    
    
    
    7.86
    
    
    
    7,259
    
    
    
    479
    
    
    
    6.60Other
    
    
    303
    
    
    
    23
    
    
    
    7.59
    
    
    
    285
    
    
    
    20
    
    
    
    7.02
    
    
    
    245
    
    
    
    12
    
    
    
    4.90Total interest bearing liabilities
    
    
    308,289
    
    
    
    8,536
    
    
    
    2.77
    %
    
    
    305,539
    
    
    
    6,954
    
    
    
    2.28
    %
    
    
    293,675
    
    
    
    4,793
    
    
    
    1.63
    %Noninterest bearing demand deposits
    
    
    114,831
    
    
    
    
    
    
    
    
    
    
    
    125,202
    
    
    
    
    
    
    
    
    
    
    
    124,568Other liabilities
    
    
    4,813
    
    
    
    
    
    
    
    
    
    
    
    4,565
    
    
    
    
    
    
    
    
    
    
    
    4,434Shareholders equity
    
    
    37,041
    
    
    
    
    
    
    
    
    
    
    
    33,682
    
    
    
    
    
    
    
    
    
    
    
    29,792Total liabilities and
shareholders equity
    
    $
    464,974
    
    
    
    
    
    
    
    
    
    
    $
    468,988
    
    
    
    
    
    
    
    
    
    
    $
    452,469Net interest income
    
    
    
    
    
    $
    21,748
    
    
    
    
    
    
    
    
    
    
    $
    22,529
    
    
    
    
    
    
    
    
    
    
    $
    20,704Net interest spread(4)
    
    
    
    
    
    
    
    
    
    
    4.45
    %
    
    
    
    
    
    
    
    
    
    
    4.68
    %
    
    
    
    
    
    
    
    
    
    
    4.60
    %Net interest margin(5)
    
    
    
    
    
    
    
    
    
    
    5.18
    %
    
    
    
    
    
    
    
    
    
    
    5.32
    %
    
    
    
    
    
    
    
    
    
    
    5.06
    %
 
 (1)
    
    Interest income is reflected on an actual basis and is not computed on a tax-equivalent
basis.(2)
    
    Average nonaccrual loan balances of $1.7 million for 2007, $1.2 million for 2006 and $1.3
million for 2005 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 $360,000 and $407,000 for 2007 and 2006, respectively and net loan fees of
$94,000 for 2005.(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. 29




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##### Table of Contents



2007 compared to 2006
    
    2006 compared to 2005Increase (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
    
    $
    (4
    )
    
    $
    12
    
    
    $
    (1
    )
    
    $
    7
    
    
    $
    (85
    )
    
    $
    51
    
    
    $
    (20
    )
    
    $
    (54
    )Investment securities
    
    
    (794
    )
    
    
    205
    
    
    
    (54
    )
    
    
    (643
    )
    
    
    (523
    )
    
    
    292
    
    
    
    (46
    )
    
    
    (277
    )Loans
    
    
    1,423
    
    
    
    13
    
    
    
    1
    
    
    
    1,437
    
    
    
    2,367
    
    
    
    1,760
    
    
    
    190
    
    
    
    4,317Total interest income
    
    
    625
    
    
    
    230
    
    
    
    (54
    )
    
    
    801
    
    
    
    1,759
    
    
    
    2,103
    
    
    
    124
    
    
    
    3,986Interest-bearing
liabilities:Interest bearing demand
deposits
    
    
    (63
    )
    
    
    (95
    )
    
    
    4
    
    
    
    (154
    )
    
    
    130
    
    
    
    700
    
    
    
    463
    
    
    
    1,293Money market deposits
    
    
    (200
    )
    
    
    (192
    )
    
    
    58
    
    
    
    (334
    )
    
    
    (88
    )
    
    
    2
    
    
    
    
    
    
    
    (86
    )Savings deposits
    
    
    (66
    )
    
    
    (133
    )
    
    
    21
    
    
    
    (178
    )
    
    
    (52
    )
    
    
    34
    
    
    
    (4
    )
    
    
    (22
    )Time deposits
    
    
    1,003
    
    
    
    758
    
    
    
    229
    
    
    
    1,990
    
    
    
    (148
    )
    
    
    802
    
    
    
    (44
    )
    
    
    610Short-term borrowings
    
    
    228
    
    
    
    1
    
    
    
    1
    
    
    
    230
    
    
    
    (75
    )
    
    
    159
    
    
    
    (57
    )
    
    
    27Junior subordinated debentures:
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    25
    
    
    
    201
    
    
    
    91
    
    
    
    39
    
    
    
    331Other borrowings
    
    
    1
    
    
    
    2
    
    
    
    
    
    
    
    3
    
    
    
    2
    
    
    
    5
    
    
    
    1
    
    
    
    8Total interest expense
    
    
    903
    
    
    
    366
    
    
    
    313
    
    
    
    1,582
    
    
    
    (30
    )
    
    
    1,793
    
    
    
    398
    
    
    
    2,161Net interest income
    
    $
    (278
    )
    
    $
    (136
    )
    
    $
    (367
    )
    
    $
    (781
    )
    
    $
    1,789
    
    
    $
    310
    
    
    $
    (274
    )
    
    $
    1,825
 
 (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. 2007 compared to 2006.
    30




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##### Table of Contents



2006 compared to 2005.
      31




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##### Table of Contents



Provision for Loan Losses
   32




---



##### Table of Contents



Non-Interest Income
  Years Ended December 31,
    
    Change during Year2007
    
    2006
    
    2005
    
    2007
    
    2006(dollars in thousands)Service charges on deposit
accounts
    
    $
    3,806
    
    
    $
    3,676
    
    
    $
    3,458
    
    
    $
    130
    
    
    $
    218Earnings on bank owned life
insurance policies
    
    
    415
    
    
    
    393
    
    
    
    355
    
    
    
    22
    
    
    
    38Merchant processing
    
    
    282
    
    
    
    318
    
    
    
    338
    
    
    
    (36
    )
    
    
    (20
    )Investment services
    
    
    162
    
    
    
    104
    
    
    
    189
    
    
    
    58
    
    
    
    (85
    )Official check fees
    
    
    157
    
    
    
    170
    
    
    
    118
    
    
    
    (13
    )
    
    
    52Loan commission and
servicing fees
    
    
    140
    
    
    
    14
    
    
    
    171
    
    
    
    126
    
    
    
    (157
    )Customer service fees
    
    
    119
    
    
    
    113
    
    
    
    111
    
    
    
    6
    
    
    
    2Federal Home Loan Bank Dividends
    
    
    109
    
    
    
    104
    
    
    
    82
    
    
    
    5
    
    
    
    22Safe deposit box and night
depository income
    
    
    67
    
    
    
    69
    
    
    
    69
    
    
    
    (2
    )
    
    
    Gain on sale of loans, net
    
    
    47
    
    
    
    42
    
    
    
    45
    
    
    
    5
    
    
    
    (3
    )Other income
    
    
    144
    
    
    
    156
    
    
    
    137
    
    
    
    (12
    )
    
    
    19Total non-interest income
    
    $
    5,448
    
    
    $
    5,159
    
    
    $
    5,073
    
    
    $
    289
    
    
    $
    86
 2007 compared to 2006.
  2006 compared to 2005.
  33




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##### Table of Contents



Non-Interest Expense
  Years Ended December 31,
    
    Change during Year2007
    
    2006
    
    2005
    
    2007
    
    2006(dollars in thousands)Salaries and employee benefits
    
    $
    11,200
    
    
    $
    10,043
    
    
    $
    9,514
    
    
    $
    1,157
    
    
    $
    529Occupancy and equipment
    
    
    3,552
    
    
    
    3,323
    
    
    
    3,070
    
    
    
    229
    
    
    
    253Professional fees
    
    
    738
    
    
    
    780
    
    
    
    865
    
    
    
    (42
    )
    
    
    (85
    )Outside service fees
    
    
    671
    
    
    
    591
    
    
    
    700
    
    
    
    80
    
    
    
    (109
    )Business development
    
    
    530
    
    
    
    555
    
    
    
    494
    
    
    
    (25
    )
    
    
    61Advertising and promotion
    
    
    520
    
    
    
    552
    
    
    
    467
    
    
    
    (32
    )
    
    
    85Telephone and data
communications
    
    
    362
    
    
    
    374
    
    
    
    366
    
    
    
    (12
    )
    
    
    8Director compensation and
retirement
    
    
    349
    
    
    
    370
    
    
    
    288
    
    
    
    (21
    )
    
    
    82Core deposit intangible
Amortization
    
    
    301
    
    
    
    301
    
    
    
    301
    
    
    
    
    
    
    
    Armored car and courier
    
    
    279
    
    
    
    270
    
    
    
    337
    
    
    
    9
    
    
    
    (67
    )Stationery and supplies
    
    
    278
    
    
    
    282
    
    
    
    336
    
    
    
    (4
    )
    
    
    (54
    )Postage
    
    
    242
    
    
    
    249
    
    
    
    258
    
    
    
    (7
    )
    
    
    (9
    )Loan expenses
    
    
    192
    
    
    
    139
    
    
    
    114
    
    
    
    53
    
    
    
    25Insurance
    
    
    177
    
    
    
    173
    
    
    
    206
    
    
    
    4
    
    
    
    (33
    )Other operating expense
    
    
    280
    
    
    
    288
    
    
    
    233
    
    
    
    (8
    )
    
    
    55Total non-interest expense
    
    $
    19,671
    
    
    $
    18,290
    
    
    $
    17,549
    
    
    $
    1,381
    
    
    $
    741
 2007 compared to 2006.
    34




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##### Table of Contents



2006 compared to 2005.
  Share Based Payment
 Accounting for Stock Issued to Employees
 35




---



##### Table of Contents



Provision for income taxes.
 Financial Condition
 Loan Portfolio.
  36




---



##### Table of Contents



At December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(dollars in thousands)Real estate  mortgage
    
    $
    128,357
    
    
    $
    116,329
    
    
    $
    110,686
    
    
    $
    102,125
    
    
    $
    67,532Real estate  construction
    
    
    76,478
    
    
    
    75,930
    
    
    
    56,370
    
    
    
    31,964
    
    
    
    26,194Commercial
    
    
    39,584
    
    
    
    36,182
    
    
    
    42,252
    
    
    
    42,689
    
    
    
    51,073Consumer
    
    
    72,768
    
    
    
    90,694
    
    
    
    81,320
    
    
    
    59,068
    
    
    
    46,621Agriculture
    
    
    35,762
    
    
    
    35,577
    
    
    
    31,018
    
    
    
    31,067
    
    
    
    26,537Total loans
    
    
    352,949
    
    
    
    354,712
    
    
    
    321,646
    
    
    
    266,913
    
    
    
    217,957Less:Deferred (costs) fees
    
    
    (564
    )
    
    
    (1,182
    )
    
    
    (766
    )
    
    
    260
    
    
    
    530Allowance for loan losses
    
    
    4,211
    
    
    
    3,917
    
    
    
    3,256
    
    
    
    2,722
    
    
    
    2,524Net loans
    
    $
    349,302
    
    
    $
    351,977
    
    
    $
    319,156
    
    
    $
    263,931
    
    
    $
    214,903
  Within
    
    After One
    
    AfterOne Year
    
    Through Five Years
    
    Five Years
    
    Total(dollars in thousands)Real estate  mortgage
    
    $
    12,285
    
    
    $
    31,097
    
    
    $
    84,975
    
    
    $
    128,357Real estate  construction
    
    
    47,319
    
    
    
    17,990
    
    
    
    11,169
    
    
    
    76,478Commercial
    
    
    12,696
    
    
    
    13,982
    
    
    
    12,906
    
    
    
    39,584Consumer
    
    
    13,678
    
    
    
    36,388
    
    
    
    22,702
    
    
    
    72,768Agriculture
    
    
    17,351
    
    
    
    12,176
    
    
    
    6,235
    
    
    
    35,762Total
    
    $
    103,329
    
    
    $
    111,633
    
    
    $
    137,987
    
    
    $
    352,949Loans maturing after one year with:Fixed interest rates
    
    
    
    
    
    $
    58,277
    
    
    $
    47,081
    
    
    $
    105,358Variable interest rates
    
    
    
    
    
    
    53,356
    
    
    
    90,906
    
    
    
    144,262Total
    
    
    
    
    
    $
    111,633
    
    
    $
    137,987
    
    
    $
    249,620
 Analysis of Asset Quality and Allowance for Loan Losses.
 37




---



##### Table of Contents



38




---



##### 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.
    39




---



##### Table of Contents



At December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(dollars in thousands)Balance at beginning of period
    
    $
    3,917
    
    
    $
    3,256
    
    
    $
    2,722
    
    
    $
    2,524
    
    
    $
    2,431Charge-offs:Commercial and agricultural
    
    
    83
    
    
    
    126
    
    
    
    297
    
    
    
    103
    
    
    
    295Real estate mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26Real estate construction
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6Consumer
    
    
    657
    
    
    
    519
    
    
    
    442
    
    
    
    600
    
    
    
    520Total charge-offs
    
    
    786
    
    
    
    645
    
    
    
    739
    
    
    
    703
    
    
    
    847Recoveries:Commercial and agricultural
    
    
    53
    
    
    
    46
    
    
    
    21
    
    
    
    15
    
    
    
    45Real estate mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    227
    
    
    
    260
    
    
    
    152
    
    
    
    136
    
    
    
    145Total recoveries
    
    
    280
    
    
    
    306
    
    
    
    173
    
    
    
    151
    
    
    
    190Net charge-offs
    
    
    506
    
    
    
    339
    
    
    
    566
    
    
    
    552
    
    
    
    657Provision for loan losses
    
    
    800
    
    
    
    1,000
    
    
    
    1,100
    
    
    
    750
    
    
    
    750Balance at end of period
    
    $
    4,211
    
    
    $
    3,917
    
    
    $
    3,256
    
    
    $
    2,722
    
    
    $
    2,524Net charge-offs during the period
to average loans
    
    
    0.14
    %
    
    
    0.10
    %
    
    
    0.19
    %
    
    
    0.24
    %
    
    
    0.31
    %Allowance for loan losses to total loans
    
    
    1.19
    %
    
    
    1.10
    %
    
    
    1.01
    %
    
    
    1.02
    %
    
    
    1.16
    %
   40




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##### Table of Contents



At December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003(dollars in thousands)Nonaccrual loans
    
    $
    2,618
    
    
    $
    972
    
    
    $
    1,661
    
    
    $
    1,171
    
    
    $
    847Loans past due 90 days or
more and still accruing
    
    
    14
    
    
    
    41
    
    
    
    
    
    
    
    36
    
    
    
    29Total nonperforming loans
    
    
    2,632
    
    
    
    1,013
    
    
    
    1,661
    
    
    
    1,207
    
    
    
    876Other real estate owned
    
    
    402
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other vehicles owned
    
    
    135
    
    
    
    47
    
    
    
    40
    
    
    
    33
    
    
    
    Total nonperforming assets
    
    $
    3,169
    
    
    $
    1,060
    
    
    $
    1,701
    
    
    $
    1,240
    
    
    $
    876Interest income forgone on
nonaccrual loans
    
    $
    161
    
    
    $
    53
    
    
    $
    39
    
    
    $
    25
    
    
    $
    51Interest income recorded on a
cash basis on nonaccrual loans
    
    $
    118
    
    
    $
    116
    
    
    $
    16
    
    
    $
    63
    
    
    $
    143Nonperforming loans to total
loans
    
    
    0.75
    %
    
    
    0.29
    %
    
    
    0.52
    %
    
    
    0.45
    %
    
    
    0.40
    %Nonperforming assets to total
assets
    
    
    0.70
    %
    
    
    0.22
    %
    
    
    0.36
    %
    
    
    0.30
    %
    
    
    0.22
    %Allowance for loan losses to nonperforming
loans
    
    
    160
    %
    
    
    387
    %
    
    
    196
    %
    
    
    226
    %
    
    
    288
    %
   Investment Portfolio and Federal Funds Sold.
  41




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##### Table of Contents



December 31,Available-for-sale (fair value)
    
    2007
    
    2006
    
    2005(dollars in thousands)U.S. Treasuries
    
    $
    3,481
    
    
    $
    5,344
    
    
    $
    9,823U.S. Government agencies
    
    
    19,662
    
    
    
    30,063
    
    
    
    43,756Corporate debt securities
    
    
    3,923
    
    
    
    7,868
    
    
    
    9,231U.S. Government agency mortgage-backed
Securities
    
    
    14,738
    
    
    
    17,440
    
    
    
    20,951Total
    
    $
    41,804
    
    
    $
    60,715
    
    
    $
    83,761
 December 31,Held-to-maturity (amortized cost)
    
    2007
    
    2006
    
    2005(dollars in thousands)U.S. Government agencies
    
    
    
    
    
    
    
    
    
    $
    6Municipal obligations
    
    $
    13,488
    
    
    $
    14,080
    
    
    
    14,077Total
    
    $
    13,488
    
    
    $
    14,080
    
    
    $
    14,083
 42




---



##### Table of Contents



After One Through
    
    After Five Through(dollars in thousands)
    
    One Year or Less
    
    Five Years
    
    Ten Years
    
    After Ten Years
    
    TotalAvailable-for-sale (Fair Value)
    
    Amount
    
    Yield
    
    Amount
    
    Yield
    
    Amount
    
    Yield
    
    Amount
    
    Yield
    
    Amount
    
    YieldU.S. Treasuries
    
    $
    1,993
    
    
    
    2.94
    %
    
    $
    1,488
    
    
    
    3.13
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    3,481
    
    
    
    3.02
    %U.S. Government agencies
    
    
    8,469
    
    
    
    2.87
    %
    
    
    11,193
    
    
    
    5.16
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    19,662
    
    
    
    4.16
    %Corporate debt securities
    
    
    1,954
    
    
    
    3.47
    %
    
    
    1,969
    
    
    
    3.68
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    3,923
    
    
    
    3.57
    %U.S. Government agency
mortgage-backed securities
    
    
    
    
    
    
    
    %
    
    
    4,909
    
    
    
    3.67
    %
    
    
    3,462
    
    
    
    3.85
    %
    
    
    6,367
    
    
    
    4.78
    %
    
    
    14,738
    
    
    
    4.19
    %Total
    
    $
    12,416
    
    
    
    2.98
    %
    
    $
    19,559
    
    
    
    4.47
    %
    
    $
    3,462
    
    
    
    3.85
    %
    
    $
    6,367
    
    
    
    4.78
    %
    
    $
    41,804
    
    
    
    4.02
    %Held-to-maturity
(Amortized Cost)Municipal obligations
    
    $
    923
    
    
    
    6.07
    %
    
    $
    813
    
    
    
    4.64
    %
    
    $
    10,183
    
    
    
    5.65
    %
    
    $
    1,569
    
    
    
    6.51
    %
    
    $
    13,488
    
    
    
    5.72
    %
 43




---



##### Table of Contents



Deposits.
    2007
    
    
    2006
    
    
    2005Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Rate %
    
    
    Balance
    
    
    Rate %
    
    
    Balance
    
    
    Rate %(dollars in thousands)Non-interest-bearing deposits
    
    $
    114,831
    
    
    
    
    
    
    $
    125,202
    
    
    
    
    
    
    $
    124,568Interest-bearing deposits:Interest bearing demand deposits
    
    
    77,254
    
    
    
    1.73
    %
    
    
    80,685
    
    
    
    1.85
    %
    
    
    48,577
    
    
    
    0.40
    %Money market accounts
    
    
    39,431
    
    
    
    0.83
    %
    
    
    56,496
    
    
    
    1.17
    %
    
    
    64,025
    
    
    
    1.17
    %Savings
    
    
    50,448
    
    
    
    0.49
    %
    
    
    59,802
    
    
    
    0.71
    %
    
    
    67,702
    
    
    
    0.66
    %Time deposits
    
    
    121,808
    
    
    
    4.35
    %
    
    
    93,515
    
    
    
    3.54
    %
    
    
    93,946
    
    
    
    2.73
    %Total interest bearing deposits
    
    
    288,941
    
    
    
    2.50
    %
    
    
    290,498
    
    
    
    2.03
    %
    
    
    274,250
    
    
    
    1.49
    %Total deposits
    
    $
    403,772
    
    
    
    1.79
    %
    
    $
    415,700
    
    
    
    1.42
    %
    
    $
    398,818
    
    
    
    1.03
    %
 
 Amount(dollars in thousands)Remaining Maturity:Three months or less
    
    $
    29,369Over three months to six months
    
    
    12,001Over six months to 12 months
    
    
    7,206Over 12 months
    
    
    3,012Total
    
    $
    51,588
 44




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##### Table of Contents



Capital Resources
 Shareholders Equity.
   Capital Standards.
   45




---



##### Table of Contents



December 31, 2007
    
    December 31, 2006Amount
    
    Ratio
    
    Amount
    
    RatioTier 1 Leverage RatioPlumas Bancorp and Subsidiary
    
    $
    46,209
    
    
    
    10.0
    %
    
    $
    45,206
    
    
    
    9.5
    %Minimum regulatory requirement
    
    
    18,439
    
    
    
    4.0
    %
    
    
    18,955
    
    
    
    4.0
    %Plumas Bank
    
    
    45,415
    
    
    
    9.9
    %
    
    
    44,094
    
    
    
    9.3
    %Minimum requirement for
Well-Capitalized institution
    
    
    23,024
    
    
    
    5.0
    %
    
    
    23,669
    
    
    
    5.0
    %Minimum regulatory requirement
    
    
    18,419
    
    
    
    4.0
    %
    
    
    18,935
    
    
    
    4.0
    %Tier 1 Risk-Based Capital RatioPlumas Bancorp and Subsidiary
    
    
    46,209
    
    
    
    11.6
    %
    
    
    45,206
    
    
    
    10.9
    %Minimum regulatory requirement
    
    
    15,881
    
    
    
    4.0
    %
    
    
    16,610
    
    
    
    4.0
    %Plumas Bank
    
    
    45,415
    
    
    
    11.5
    %
    
    
    44,094
    
    
    
    10.6
    %Minimum requirement for
Well-Capitalized institution
    
    
    23,790
    
    
    
    6.0
    %
    
    
    24,885
    
    
    
    6.0
    %Minimum regulatory requirement
    
    
    15,860
    
    
    
    4.0
    %
    
    
    16,590
    
    
    
    4.0
    %Total Risk-Based Capital RatioPlumas Bancorp and Subsidiary
    
    
    50,475
    
    
    
    12.7
    %
    
    
    49,123
    
    
    
    11.8
    %Minimum regulatory requirement
    
    
    31,763
    
    
    
    8.0
    %
    
    
    33,221
    
    
    
    8.0
    %Plumas Bank
    
    
    49,681
    
    
    
    12.5
    %
    
    
    48,011
    
    
    
    11.6
    %Minimum requirement for
Well-Capitalized institution
    
    
    39,651
    
    
    
    10.0
    %
    
    
    41,475
    
    
    
    10.0
    %Minimum regulatory requirement
    
    
    31,720
    
    
    
    8.0
    %
    
    
    33,180
    
    
    
    8.0
    %
  Off-Balance Sheet Arrangements
 Loan Commitments.
 46




---



##### Table of Contents



Operating Leases.
  Liquidity
    47




---



##### Table of Contents



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, 2007 and 2006
    
    
    F-2Consolidated Statement of Income for the years ended December 31,
2007, 2006 and 2005
    
    
    F-3Consolidated Statement of Changes in Shareholders Equity for the
years ended December 31, 2007, 2006 and 2005
    
    
    F-5Consolidated Statement of Cash Flows for the years ended December 31,
2007, 2006 and 2005
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-10
 48




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal Control-Integrated
Framework
 
 
 F-1




---



##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 
 CONSOLIDATED BALANCE SHEET
 December 31, 2007 and 2006
 2007
    
    
    2006ASSETSCash and due from banks
    
    $
    13,207,000
    
    
    $
    11,293,000Federal funds sold
    
    
    
    
    
    
    Cash and cash equivalents
    
    
    13,207,000
    
    
    
    11,293,000Investment securities (Note 3)
    
    
    55,292,000
    
    
    
    74,795,000Loans, less allowance for loan losses of $4,211,000
in 2007 and $3,917,000 in 2006 (Notes 4, 7, 9 and 13)
    
    
    349,302,000
    
    
    
    351,977,000Premises and equipment, net (Note 5)
    
    
    14,666,000
    
    
    
    15,190,000Intangible assets, net (Note 17)
    
    
    1,037,000
    
    
    
    1,337,000Bank owned life insurance (Note 14)
    
    
    9,428,000
    
    
    
    9,449,000Accrued interest receivable and other assets (Note 12)
    
    
    10,183,000
    
    
    
    9,198,000Total assets
    
    $
    453,115,000
    
    
    $
    473,239,000LIABILITIES ANDSHAREHOLDERS EQUITYDeposits:Non-interest bearing
    
    $
    111,240,000
    
    
    $
    121,464,000Interest bearing (Note 6)
    
    
    280,700,000
    
    
    
    280,712,000Total deposits
    
    
    391,940,000
    
    
    
    402,176,000Short-term borrowings (Note 7)
    
    
    7,500,000
    
    
    
    20,000,000Accrued interest payable and other liabilities
    
    
    6,226,000
    
    
    
    4,901,000Junior subordinated deferrable interest debentures
(Note 8)
    
    
    10,310,000
    
    
    
    10,310,000Total liabilities
    
    
    415,976,000
    
    
    
    437,387,000Commitments and contingencies (Note 9)Shareholders equity (Note 10):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  4,869,130
shares in 2007 and 5,023,205 shares in 2006
    
    
    5,042,000
    
    
    
    4,828,000Retained earnings
    
    
    32,204,000
    
    
    
    31,716,000Accumulated other comprehensive loss
(Notes 3 and 15)
    
    
    (107,000
    )
    
    
    (692,000
    )Total shareholders equity
    
    
    37,139,000
    
    
    
    35,852,000Total liabilities and shareholders equity
    
    $
    453,115,000
    
    
    $
    473,239,000
 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, 2007, 2006 and 2005
 2007
    
    
    2006
    
    
    2005Interest income:Interest and fees on loans
    
    $
    27,709,000
    
    
    $
    26,272,000
    
    
    $
    21,955,000Interest on investment securities:Taxable
    
    
    1,900,000
    
    
    
    2,516,000
    
    
    
    2,787,000Exempt from Federal income taxes
    
    
    504,000
    
    
    
    531,000
    
    
    
    537,000Interest on Federal funds sold
    
    
    171,000
    
    
    
    164,000
    
    
    
    218,000Total interest income
    
    
    30,284,000
    
    
    
    29,483,000
    
    
    
    25,497,000Interest expense:Interest on deposits
    
    
    7,211,000
    
    
    
    5,887,000
    
    
    
    4,092,000Interest on short-term borrowings
(Note 7)
    
    
    490,000
    
    
    
    257,000
    
    
    
    222,000Interest on junior subordinated
deferrable interest debentures
(Note 8)
    
    
    835,000
    
    
    
    810,000
    
    
    
    479,000Total interest expense
    
    
    8,536,000
    
    
    
    6,954,000
    
    
    
    4,793,000Net interest income before
provision for loan losses
    
    
    21,748,000
    
    
    
    22,529,000
    
    
    
    20,704,000Provision for loan losses (Note 4)
    
    
    800,000
    
    
    
    1,000,000
    
    
    
    1,100,000Net interest income after
provision for loan losses
    
    
    20,948,000
    
    
    
    21,529,000
    
    
    
    19,604,000Non-interest income:Service charges
    
    
    3,806,000
    
    
    
    3,676,000
    
    
    
    3,458,000Gain on sale of loans
    
    
    47,000
    
    
    
    42,000
    
    
    
    45,000Loss on sale of available-for-
sale investment securities, net
(Notes 3 and 15)
    
    
    
    
    
    
    
    
    
    
    (8,000
    )Earnings on Bank owned life
insurance policies (Note 14)
    
    
    415,000
    
    
    
    393,000
    
    
    
    355,000Other
    
    
    1,180,000
    
    
    
    1,048,000
    
    
    
    1,223,000Total non-interest income
    
    
    5,448,000
    
    
    
    5,159,000
    
    
    
    5,073,000
  F-3




---



##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 CONSOLIDATED STATEMENT OF INCOME   For the Years Ended December 31, 2007, 2006 and 2005
 2007
    
    
    2006
    
    
    2005Non-interest expenses:Salaries and employee benefits
(Notes 4 and 14)
    
    $
    11,200,000
    
    
    $
    10,043,000
    
    
    $
    9,514,000Occupancy and equipment
(Notes 5 and 9)
    
    
    3,552,000
    
    
    
    3,323,000
    
    
    
    3,070,000Other (Note 11)
    
    
    4,919,000
    
    
    
    4,924,000
    
    
    
    4,965,000Total non-interest expenses
    
    
    19,671,000
    
    
    
    18,290,000
    
    
    
    17,549,000Income before provision for
income taxes
    
    
    6,725,000
    
    
    
    8,398,000
    
    
    
    7,128,000Provision for income taxes (Note 12)
    
    
    2,502,000
    
    
    
    3,196,000
    
    
    
    2,600,000Net income
    
    $
    4,223,000
    
    
    $
    5,202,000
    
    
    $
    4,528,000Basic earnings per share (Note 10)
    
    $
    0.85
    
    
    $
    1.04
    
    
    $
    0.92Diluted earnings per share (Note 10)
    
    $
    0.84
    
    
    $
    1.02
    
    
    $
    0.89Cash dividends per share (Note 10)
    
    $
    0.30
    
    
    $
    0.26
    
    
    $
    0.22
 The accompanying notes are an integral
part of these consolidated financial statements.
 F-4




---



##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
 For the Years Ended December 31, 2007, 2006 and 2005
 AccumulatedOtherComprehensive
    
    
    Total
    
    
    TotalCommon Stock
    
    
    Retained
    
    
    (Loss) Income
    
    
    Shareholders'
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Earnings
    
    
    (Net of Taxes)
    
    
    Equity
    
    
    IncomeBalance, January 1, 2005
    
    
    4,901,197
    
    
    
    4,013,000
    
    
    
    24,370,000
    
    
    
    (492,000
    )
    
    
    27,891,000Comprehensive income (Note 15):Net income
    
    
    
    
    
    
    
    
    
    
    4,528,000
    
    
    
    
    
    
    
    4,528,000
    
    
    $
    4,528,000Other
comprehensive loss, net of tax:Net change in unrealized losses
on available-for-sale investment
securities (Note 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (599,000
    )
    
    
    (599,000
    )
    
    
    (599,000
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,929,000Cash dividends  $0.22 per share
    
    
    
    
    
    
    
    
    
    
    (1,082,000
    )
    
    
    
    
    
    
    (1,082,000
    )Retirement of common stock in connection
with the exercise of stock options
(Note 10)
    
    
    (6,904
    )
    
    
    (105,000
    )
    
    
    
    
    
    
    
    
    
    
    (105,000
    )Stock options exercised and related
tax benefit (Note 10)
    
    
    82,608
    
    
    
    512,000
    
    
    
    
    
    
    
    
    
    
    
    512,000Fractional shares repurchased as a result
of three-for-two stock split
    
    
    (247
    )
    
    
    (8,000
    )
    
    
    
    
    
    
    
    
    
    
    (8,000
    )Balance, December 31, 2005
    
    
    4,976,654
    
    
    
    4,412,000
    
    
    
    27,816,000
    
    
    
    (1,091,000
    )
    
    
    31,137,000Comprehensive income (Note 15):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 (Note 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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 10)
    
    
    (21,255
    )
    
    
    (417,000
    )
    
    
    
    
    
    
    
    
    
    
    (417,000
    )Stock options exercised and related
tax benefit (Note 10)
    
    
    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
    )
    
    
    35,852,000
  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, 2007, 2006 and 2005
 AccumulatedOtherComprehensive
    
    
    Total
    
    
    TotalCommon Stock
    
    
    Retained
    
    
    (Loss) Income
    
    
    Shareholders'
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Earnings
    
    
    (Net of Taxes)
    
    
    Equity
    
    
    IncomeBalance, December 31, 2006
    
    
    5,023,205
    
    
    
    4,828,000
    
    
    
    31,716,000
    
    
    
    (692,000
    )
    
    
    35,852,000Comprehensive income (Note 15):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 (Note 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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 10)
    
    
    (4,630
    )
    
    
    (70,000
    )
    
    
    
    
    
    
    
    
    
    
    (70,000
    )Stock options exercised and related
tax benefit (Note 10)
    
    
    19,292
    
    
    
    152,000
    
    
    
    
    
    
    
    
    
    
    
    152,000Stock-based compensation expense
    
    
    
    
    
    
    288,000
    
    
    
    
    
    
    
    
    
    
    
    288,000Repurchase and retirement of common stock
    
    
    (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
 2007
    
    
    2006
    
    
    2005Disclosure of reclassification amount, net of taxes (Note 15):Unrealized holding gain (losses) arising during the year
    
    $
    585,000
    
    
    $
    399,000
    
    
    $
    (604,000
    )Reclassification adjustment for (losses) gains included in net income
    
    
    
    
    
    
    
    
    
    
    (5,000
    )Net unrealized gain (losses) on available-for-sale investment securities
    
    $
    585,000
    
    
    $
    399,000
    
    
    $
    (599,000
    )
 The accompanying notes are an integral
part of these consolidated financial statements.
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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 
 CONSOLIDATED STATEMENT OF CASH FLOWS
 For the Years Ended December 31, 2007, 2006 and 2005
 2007
    
    
    2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    4,223,000
    
    
    $
    5,202,000
    
    
    $
    4,528,000Adjustments to reconcile net income to net
cash provided by operating activities:Provision for loan losses
    
    
    800,000
    
    
    
    1,000,000
    
    
    
    1,100,000Change in deferred loan origination
costs/fees, net
    
    
    618,000
    
    
    
    (416,000
    )
    
    
    (1,026,000
    )Stock-based compensation expense
    
    
    288,000
    
    
    
    174,000Excess tax benefits from stock-based
compensation
    
    
    (9,000
    )
    
    
    (61,000
    )Depreciation and amortization
    
    
    2,197,000
    
    
    
    2,171,000
    
    
    
    2,076,000Net loss on sale of available-for-sale
investment securities
    
    
    
    
    
    
    
    
    
    
    8,000Amortization of investment security
premiums
    
    
    149,000
    
    
    
    387,000
    
    
    
    633,000Accretion of investment security discounts
    
    
    (63,000
    )
    
    
    (89,000
    )
    
    
    (72,000
    )Net loss on sale of premises and
equipment
    
    
    39,000
    
    
    
    
    
    
    
    2,000Net loss on sale of other real estate
    
    
    
    
    
    
    
    
    
    
    15,000Net (gain) loss on sale of other vehicles owned
    
    
    (17,000
    )
    
    
    (23,000
    )
    
    
    28,000Gain on life insurance death benefit
    
    
    (63,000
    )Earnings on bank owned life insurance
policies
    
    
    (415,000
    )
    
    
    (393,000
    )
    
    
    (355,000
    )Expenses on bank owned life insurance
policies
    
    
    80,000
    
    
    
    74,000
    
    
    
    68,000Increase in accrued interest receivable and
other assets
    
    
    (426,000
    )
    
    
    (41,000
    )
    
    
    (215,000
    )Increase in accrued interest payable and
other liabilities
    
    
    1,325,000
    
    
    
    166,000
    
    
    
    1,021,000Provision for deferred income taxes
    
    
    (787,000
    )
    
    
    (456,000
    )
    
    
    34,000Net cash provided by operating
activities
    
    
    7,939,000
    
    
    
    7,695,000
    
    
    
    7,845,000
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PLUMAS BANCORP AND SUBSIDIARY
 CONSOLIDATED STATEMENT OF CASH FLOWS   For the Years Ended December 31, 2007, 2006 and 2005
 2007
    
    
    2006
    
    
    2005Cash flows from investing activities:Proceeds from matured and called available-
for-sale investment securities
    
    $
    27,876,000
    
    
    $
    19,931,000
    
    
    $
    16,000,000Proceeds from matured and called held-to-
maturity investment securities
    
    
    585,000
    
    
    
    
    
    
    
    1,801,000Proceeds from sale of available-for-sale
investment securities
    
    
    
    
    
    
    
    
    
    
    1,992,000Purchases of available-for-sale investment
securities
    
    
    (11,009,000
    )
    
    
    
    
    
    
    (9,688,000
    )Purchases of held-to-maturity investment
securities
    
    
    
    
    
    
    (155,000
    )Proceeds from principal repayments from
available-for-sale government-guaranteed
mortgage-backed securities
    
    
    2,961,000
    
    
    
    3,521,000
    
    
    
    3,572,000Proceeds from principal repayments from
held-to-maturity government-guaranteed
mortgage-backed securities
    
    
    
    
    
    
    134,000
    
    
    
    143,000Net decrease (increase) in loans
    
    
    355,000
    
    
    
    (33,831,000
    )
    
    
    (55,527,000
    )Proceeds from sale of other real estate and
vehicles
    
    
    429,000
    
    
    
    211,000
    
    
    
    284,000Proceeds from the sale of premises and
equipment
    
    
    20,000
    
    
    
    8,000
    
    
    
    6,000Purchases of premises and equipment
    
    
    (1,116,000
    )
    
    
    (5,173,000
    )
    
    
    (3,394,000
    )Proceeds from bank owned life insurance
    
    
    419,000Purchase of bank owned life insurance
    
    
    
    
    
    
    (200,000
    )
    
    
    (281,000
    )Net cash provided by (used in)
investing activities
    
    
    20,520,000
    
    
    
    (15,554,000
    )
    
    
    (45,092,000
    )Cash flows from financing activities:Net (decrease) increase in demand,
interest-bearing and savings deposits
    
    
    (37,881,000
    )
    
    
    (26,025,000
    )
    
    
    43,443,000Net increase in time deposits
    
    
    27,645,000
    
    
    
    1,641,000
    
    
    
    4,550,000Net (decrease) increase in
short-term borrowings
    
    
    (12,500,000
    )
    
    
    20,000,000
    
    
    
    (1,035,000
    )Proceeds from exercise of stock options
    
    
    73,000
    
    
    
    181,000
    
    
    
    407,000Cash paid for fractional shares
    
    
    
    
    
    
    
    
    
    
    (8,000
    )Excess tax benefits from stock-based
compensation
    
    
    9,000
    
    
    
    61,000Proceeds from the issuance of junior
subordinated deferrable interest debentures
    
    
    
    
    
    
    
    
    
    
    4,124,000Repurchase and retirement of common stock
    
    
    (2,400,000
    )Payment of cash dividends
    
    
    (1,491,000
    )
    
    
    (1,302,000
    )
    
    
    (1,082,000
    )Net cash (used in) provided by financing
activities
    
    
    (26,545,000
    )
    
    
    (5,444,000
    )
    
    
    50,399,000Increase (decrease) in cash and cash
equivalents
    
    
    1,914,000
    
    
    
    (13,303,000
    )
    
    
    13,152,000Cash and cash equivalents at beginning of year
    
    
    11,293,000
    
    
    
    24,596,000
    
    
    
    11,444,000Cash and cash equivalents at end of year
    
    $
    13,207,000
    
    
    $
    11,293,000
    
    
    $
    24,596,000
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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 CONSOLIDATED STATEMENT OF CASH FLOWS   For the Years Ended December 31, 2007, 2006 and 2005
 2007
    
    2006
    
    2005Supplemental disclosure of cash flow information:Cash paid during the year for:Interest expense
    
    $
    8,184,000
    
    
    $
    6,882,000
    
    
    $
    4,581,000Income taxes
    
    $
    3,495,000
    
    
    $
    3,370,000
    
    
    $
    2,805,000Non-cash investing activities:Real estate acquired through foreclosure
    
    $
    402,000Vehicles acquired through repossession
    
    $
    500,000
    
    
    $
    196,000
    
    
    $
    228,000Reclassification of loans to other assets
    
    $
    
    
    
    $
    230,000Net change in unrealized loss on
available-for-sale investment securities
    
    $
    585,000
    
    
    $
    399,000
    
    
    $
    (599,000
    )Non-cash financing activities:Common stock retired in connection
with the exercise of stock options
    
    $
    70,000
    
    
    $
    417,000
    
    
    $
    105,000Tax benefit from stock options exercised
    
    $
    9,000
    
    
    $
    61,000
 The accompanying notes are an integral
part of these consolidated financial statements.
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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    THE BUSINESS OF PLUMAS BANCORPDuring 2002, Plumas Bancorp (the Company) was incorporated as a bank holding company for
the purpose of acquiring Plumas Bank (the Bank) in a one bank holding company
reorganization. This corporate structure gives the Company and the Bank greater flexibility
in terms of operation expansion and diversification. The Company formed Plumas Statutory
Trust I (Trust I) for the sole purpose of issuing trust preferred securities on September
26, 2002. The Company formed Plumas Statutory Trust II (Trust II) for the sole purpose of
issuing trust preferred securities on September 28, 2005.The Bank operates thirteen branches in California, including branches in Alturas, Chester,
Fall River Mills, Greenville, Kings Beach, Loyalton, Portola, Quincy, Redding, Susanville,
Tahoe City, Truckee and Westwood. In addition to its branch network, the Bank operates a
commercial lending office in Reno, Nevada and a lending office specializing in
government-guaranteed lending in Auburn, California. The Banks deposits are insured by the
Federal Deposit Insurance Corporation (FDIC) up to applicable legal limits. The Banks
primary source of revenue is generated from providing loans to customers who are
predominately small and middle market businesses and individuals residing in the surrounding
areas.2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESConsolidation and Basis of PresentationThe consolidated financial statements include the accounts of the Company and the
consolidated accounts of its wholly-owned subsidiary, Plumas Bank. All significant
intercompany balances and transactions have been eliminated.Plumas Statutory Trust I and Trust II are not consolidated into the Companys consolidated
financial statements and, accordingly, are accounted for under the equity method. The
Companys investment in Trust I of $247,000 and Trust II of $140,000 are included in accrued
interest receivable and other assets on the consolidated balance sheet. The junior
subordinated deferrable interest debentures issued and guaranteed by the Company and held by
Trust I and Trust II are reflected as debt on the consolidated balance sheet.The accounting and reporting policies of Plumas Bancorp and subsidiary conform with
accounting principles generally accepted in the United States of America and prevailing
practices within the banking industry.ReclassificationsCertain reclassifications have been made to prior years balances to conform to
classifications used in 2007.
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PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)Segment InformationManagement has determined that since all of the banking products and services offered by the
Company are available in each branch of the Bank, all branches are located within the same
economic environment and management does not allocate resources based on the performance of
different lending or transaction activities, it is appropriate to aggregate the Bank
branches and report them as a single operating segment. No customer accounts for more than
10 percent of revenues for the Company or the Bank.Stock SplitOn August 17, 2005 the Companys Board of Director approved a three-for-two stock split for
shareholders of record at the close of business on September 2, 2005 and effective on
September 16, 2005. All share and per share data in the consolidated financial statements
have been retroactively adjusted to give effect to the stock split.Use of EstimatesThe preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions. These estimates and
assumptions affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.Cash and Cash EquivalentsFor the purpose of the statement of cash flows, cash and due from banks and Federal funds
sold are considered to be cash equivalents. Generally, Federal funds are sold for one day
periods. Cash held with other federally insured institutions in excess of FDIC limits as of
December 31, 2007 was $49,000.Investment SecuritiesInvestments are classified into one of the following categories:
 
    
    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.
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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 (Continued)Gains or losses on the sale of securities are computed on the specific identification
method. Interest earned on investment securities is reported in interest income, net of
applicable adjustments for accretion of discounts and amortization of premiums.Investment securities are evaluated for impairment on at least a quarterly basis and more
frequently when economic or market conditions warrant such an evaluation to determine
whether a decline in their value is other than temporary. Management utilizes criteria such
as the magnitude and duration of the decline and the intent and ability of the Company to
retain its investment in the securities for a period of time sufficient to allow for an
anticipated recovery in fair value, in addition to the reasons underlying the decline, to
determine whether the loss in value is other than temporary. The term other than
temporary is not intended to indicate that the decline is permanent, but indicates that the
prospects for a near-term recovery of value is not necessarily favorable, or that there is a
lack of evidence to support a realizable value equal to or greater than the carrying value
of the investment. Once a decline in value is determined to be other than temporary, the
value of the security is reduced and a corresponding charge to earnings is recognized.Investment in Federal Home Loan Bank StockAs a member of the Federal Home Loan Bank System, the Bank is required to maintain an
investment in the capital stock of the Federal Home Loan Bank. The investment is carried at
cost. At December 31, 2007 and 2006, Federal Home Loan Bank stock totaled $2,045,000 and
$2,103,000, respectively. On the consolidated balance sheet, Federal Home Loan Bank stock
is included in accrued interest receivable and other assets.Loans Held for Sale, Loan Sales and ServicingThe Company accounts for the transfer and servicing of financial assets based on the
financial and servicing assets it controls and liabilities it has incurred, derecognizes
financial assets when control has been surrendered, and derecognizes liabilities when
extinguished.Servicing rights acquired through 1) a purchase or 2) the origination of loans which are
sold or securitized with servicing rights retained are recognized as separate assets or
liabilities. Servicing assets or liabilities are recorded at the difference between the
contractual servicing fees and adequate compensation for performing the servicing, and are
subsequently amortized in proportion to and over the period of the related net servicing
income or expense. Servicing assets are periodically evaluated for impairment. Fair values
are estimated using discounted cash flows based on current market interest rates. For
purposes of measuring impairment, servicing assets are stratified based on note rate and
term. The amount of impairment recognized, if any is the amount by which the servicing
assets for a stratum exceed their fair value.
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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 (Continued)Government Guaranteed LoansIncluded in the portfolio are loans which are 75% to 90% guaranteed by the Small Business
Administration (SBA), US Department of Agriculture Rural Business Cooperative Service (RBS)
and Farm Services Agency (FSA). The guaranteed portion of these loans may be sold to a
third party, with the Bank retaining the unguaranteed portion. The Company can receive a
premium in excess of the adjusted carrying value of the loan at the time of sale. The
Company may be required to refund a portion of the sales premium if the borrower defaults or
prepays within ninety days of the settlement date. At December 31, 2007, the premiums and
guaranteed portion of these sold loans subject to these recourse provisions was not
significant. During 2007, 2006 and 2005 the Company was not required to refund any
significant amounts of sales premiums related to the loans sold.The Companys investment in the loan is allocated between the retained portion of the loan,
the servicing asset, the interest-only (IO) strip, and the sold portion of the loan based on
their relative fair values on the date the loan is sold. The gain on the sold portion of
the loan is recognized as income at the time of sale. The carrying value of the retained
portion of the loan is discounted based on the estimated value of a comparable
non-guaranteed loan. The servicing asset is recognized and amortized over the estimated
life of the related loan (see Note 4). Assets (accounted for as interest-only (IO) strips)
are recorded at the fair value of the difference between note rates and rates paid to
purchasers (the interest spread) and contractual servicing fees, if applicable. IO strips
are carried at fair value with gains or losses recorded as a component of shareholders
equity, similar to available-for-sale investment securities. Significant future prepayments
of these loans will result in the recognition of additional amortization of related
servicing assets and an adjustment to the carrying value of related IO strips.Mortgage LoansThe Company originates mortgage loans that are either held in the Companys loan portfolio
or sold in the secondary market. Loans held-for-sale are carried at the lower of cost or
market value. Market value is determined by the specific identification method as of the
balance sheet date or the date which the purchasers have committed to purchase the loans.
At the time the loan is sold, the related right to service the loan is either retained, with
the Bank earning future servicing income, or released in exchange for a one-time
servicing-released premium. Loans subsequently transferred to the loan portfolio are
transferred at the lower of cost or market value at the date of transfer. Any difference
between the carrying amount of the loan and its outstanding principal balance is recognized
as an adjustment to yield by the interest method. The Company did not have any loans held
for sale at December 31, 2007 or 2006.The Company may be required to refund a portion of the premiums and repurchase a portion of
the loans that are sold if the borrower defaults within one hundred and eighty days of the
settlement date. At December 31, 2007, there were no premiums on sold loans subject to
these recourse provisions. During 2007, 2006 and 2005 the Company was not required to
refund any significant amounts of sales premiums related to the loans sold.
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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 (Continued)Mortgage Loans(Continued)The Company serviced loans for the Federal National Mortgage Association (FNMA) totaling
$5,073,000 and $6,388,000 as of December 31, 2007 and 2006, respectively.LoansLoans are stated at principal balances outstanding, except for loans transferred from loans
held for sale which are carried at the lower of principal balance or market value at the
date of transfer, adjusted for accretion of discounts. Interest is accrued daily based upon
outstanding loan balances. However, when, in the opinion of management, loans are
considered to be impaired and the future collectibility of interest and principal is in
serious doubt, loans are placed on nonaccrual status and the accrual of interest income is
suspended. Any interest accrued but unpaid is charged against income. Payments received
are applied to reduce principal to the extent necessary to ensure collection. Subsequent
payments on these loans, or payments received on nonaccrual loans for which the ultimate
collectibility of principal is not in doubt, are applied first to earned but unpaid interest
and then to principal.An impaired loan is measured based on the present value of expected future cash flows
discounted at the loans effective interest rate or, as a practical matter, at the loans
observable market price or the fair value of collateral if the loan is collateral dependent.
A loan is considered impaired when, based on current information and events, it is probable
that the Bank will be unable to collect all amounts due (including both principal and
interest) in accordance with the contractual terms of the loan agreement.Loan origination fees, commitment fees, direct loan origination costs and purchased premiums
and discounts on loans are deferred and recognized as an adjustment of yield, to be
amortized to interest income over the contractual term of the loan. The unamortized balance
of deferred fees and costs is reported as a component of net loans.The Company may acquire loans through a business combination or a purchase for which
differences may exist between the contractual cash flows and the cash flows expected to be
collected due, at least in part, to credit quality. When the Company acquires such loans,
the yield that may be accreted (accretable yield) is limited to the excess of the Companys
estimate of undiscounted cash flows expected to be collected over the Companys initial
investment in the loan. The excess of contractual cash flows over cash flows expected to be
collected may not be recognized as an adjustment to yield, loss, or a valuation allowance.
Subsequent increases in cash flows expected to be collected generally should be recognized
prospectively through adjustment of the loans yield over its remaining life. Decreases in
cash flows expected to be collected should be recognized as an impairment.
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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)Loans (Continued)The Company may not carry over or create a valuation allowance in the initial accounting
for loans acquired under these circumstances. At December 31, 2007 and 2006, there were no
such loans being accounted for under this policy.Allowance for Loan LossesThe allowance for loan losses is maintained to provide for losses related to impaired loans
and other losses that can be expected to occur in the normal course of business. The
determination of the allowance is based on estimates made by management, to include
consideration of the character of the loan portfolio, specifically identified problem loans,
potential losses inherent in the portfolio taken as a whole and economic conditions in the
Companys service area.Classified loans and loans determined to be impaired are evaluated by management for
specific risk of loss. In addition, reserve factors are assigned to currently performing
loans based on managements assessment of the following for each identified loan type: (1)
inherent credit risk, (2) historical losses and, (3) where the Company has not experienced
losses, the loss experience of peer banks. These estimates are particularly susceptible to
changes in the economic environment and market conditions.The Banks Loan Committee reviews the adequacy of the allowance for loan losses at least
quarterly, to include consideration of the relative risks in the portfolio and current
economic conditions. The allowance is adjusted based on that review if, in managements
judgment, changes are warranted.The allowance is established through a provision for loan losses which is charged to
expense. Additions to the allowance are expected to maintain the adequacy of the total
allowance after credit losses and loan growth. The allowance for loan losses at December
31, 2007 and 2006, respectively, reflects managements estimate of probable losses in the
portfolio.Allowance for Losses Related to Undisbursed CommitmentsThe Company maintains a separate allowance for losses related to undisbursed loan
commitments. Management estimates the amount of probable losses by applying a loss reserve
factor to the unused portion of undisbursed lines of credit. The allowance totaled $55,000
at December 31, 2007 and 2006, and is included in accrued interest payable and other
liabilities in the consolidated balance sheet.Other Real EstateThe Companys investment in other real estate holdings, all of which were related to real
estate acquired in full or partial settlement of loan obligations, totaled $402,000 at
December 31, 2007. The Company had no other real estate holdings and no investment in real
estate acquired in full or partial settlement of loan obligations at December 31, 2006.
When property is acquired, any excess of the Banks recorded investment in the
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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)Other Real Estate (Continued)loan balance and accrued interest income over the estimated fair market value of the
property less costs to sell is charged against the allowance for loan losses. A valuation
allowance for losses on other real estate is maintained to provide for temporary declines in
value. The allowance is established through a provision for losses on other real estate
which is included in other expenses. Subsequent gains or losses on sales or write-downs
resulting from permanent impairment are recorded in other income or expenses as incurred.Premises and EquipmentPremises and equipment are carried at cost. Depreciation is determined using the
straight-line method over the estimated useful lives of the related assets. The useful
lives of premises are estimated to be twenty to thirty years. The useful lives of
furniture, fixtures and equipment are estimated to be two to ten years. Leasehold
improvements are amortized over the life of the asset or the life of the related lease,
whichever is shorter. When assets are sold or otherwise disposed of, the cost and related
accumulated depreciation or amortization are removed from the accounts, and any resulting
gain or loss is recognized in income for the period. The cost of maintenance and repairs is
charged to expense as incurred. The Company evaluates premises and equipment for financial
impairment as events or changes in circumstances indicate that the carrying amount of such
assets may not be fully recoverable.Intangible AssetsIntangible assets consist of core deposit intangibles related to branch acquisitions and are
amortized using the straight-line method over ten years. The Company evaluates the
recoverability and remaining useful life annually to determine whether events or
circumstances warrant a revision to the intangible asset or the remaining period of
amortization.Income TaxesThe Company files its income taxes on a consolidated basis with its subsidiary. The
allocation of income tax expense (benefit) represents each entitys proportionate share of
the consolidated provision for income taxes.Deferred tax assets and liabilities are recognized for the tax consequences of temporary
differences between the reported amount of assets and liabilities and their tax bases.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment. On the consolidated balance sheet, net deferred tax assets
are included in accrued interest receivable and other assets.
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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 TaxesOn January 1, 2007, the Company adopted Financial Accounting Standards Board (FASB)
Interpretation No. 48, Accounting for Uncertainty in Income Taxes(FIN 48). FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an enterprises
financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes.
FIN 48 prescribes a recognition threshold and measurement standard for the financial
statement recognition and measurement of an income tax position taken or expected to be
taken in a tax return. In addition, FIN 48 provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods, disclosure and
transition.The provisions of FIN 48 have been applied to all tax positions of the Company as of January
1, 2007. Only tax positions that met the more-likely-than-not recognition threshold on
January 1, 2007 were recognized or continue to be recognized upon adoption. The Company
previously recognized income tax positions based on managements estimate of whether it was
reasonably possible that a liability had been incurred for unrecognized income tax benefits
by applying FASB Statement No. 5, Accounting for Contingencies. The adoption of FIN 48 did
not have a material impact on the Companys financial position, results of operations or
cash flows.When tax returns are filed, it is highly certain that some positions taken would be
sustained upon examination by the taxing authorities, while others are subject to
uncertainty about the merits of the position taken or the amount of the position that would
be ultimately sustained. The benefit of a tax position is recognized in the financial
statements in the period during which, based on all available evidence, management believes
it is more likely than not that the position will be sustained upon examination, including
the resolution of appeals or litigation processes, if any. Tax positions taken are not
offset or aggregated with other positions. Tax positions that meet the more-likely-than-not
recognition threshold are measured as the largest amount of tax benefit that is more than 50
percent likely of being realized upon settlement with the applicable taxing authority. The
portion of the benefits associated with tax positions taken that exceeds the amount measured
as described above is reflected as a liability for unrecognized tax benefits in the
accompanying balance sheet along with any associated interest and penalties that would be
payable to the taxing authorities upon examination.Interest expense and penalties associated with unrecognized tax benefits, if any, are
classified as income tax expense in the consolidated statement of income.Earnings Per ShareBasic earnings per share (EPS), which excludes dilution, is computed by dividing income
available to common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if securities
or other contracts to issue common stock, such as stock options, result in the issuance of
common stock which shares in the earnings of the Company. The treasury stock method has
been applied to determine the dilutive effect of stock options in computing diluted EPS.
 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 CompensationAt December 31, 2007, the Company had two shareholder approved stock-based compensation
plans, the Plumas Bank 2001 and 1991 Stock Option Plans (the Plans) which are described
more fully in Note 10. On January 1, 2006, the Company adopted Statement of Financial
Accounting Standards No. 123 (R), Share-Based Payment(SFAS 123 (R)), using the modified
prospective application transition method, which requires recognition of expense for options
granted prior to the adoption date equal to the fair value of the unvested amounts over
their remaining vesting period based on the grant date fair value estimated in accordance
with the original provisions of SFAS No. 123 Accounting for Stock Based Compensationand
compensation cost for all share based payments granted subsequent to January 1, 2006 based
on the grant date fair values estimated in accordance with the provisions of SFAS 123 (R).
The Company applied the alternative transition method in calculating its pool of excess tax
benefits available to absorb future tax deficiencies as provided by FSP FAS 123(R)-3,
Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards.
Results for prior periods have not been restated. Prior to January 1, 2006, the Company
accounted for the Plans under the recognition and measurement principles of APB Opinion No.
25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based
compensation cost was recorded prior to January 1, 2006, as all options granted under these
Plans had an exercise price equal to the market value of the underlying common stock on the
date of the grant.Compensation expense, net of related tax benefits, recorded in 2007 and 2006 as a result of
applying this accounting standard totaled $262,000 and $154,000, or $.05 and $.03 per
diluted share, respectively. Compensation expense is recognized over the vesting period on
a straight line accounting basis.In accordance with SFAS 123 (R), beginning in 2006 the Company has presented excess tax
benefits from the exercise of stock-based compensation awards as a financing activity in the
consolidated statement of cash flows.
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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 (Continued)The following table illustrates the pro forma SFAS 123 adjustment on consolidated net income
and earnings per share had the Company recorded compensation expense in accordance with SFAS
123 for the year ended December 31, 2005:
 Net income, as reported
    
    $
    4,528,000Deduct: Total stock-based compensation expense
determined under the fair value based method for
all awards, net of related tax effects
    
    
    177,000Pro forma net income
    
    $
    4,351,000Basic earnings per share  as reported
    
    $
    .92Basic earnings per share  pro forma
    
    $
    .88Diluted earnings per share  as reported
    
    $
    .89Diluted earnings per share  pro forma
    
    $
    .86
   2007
    
    2006
    
    2005Expected life of stock options
    
    6.6 years
    
    5.0 years
    
    5.0 yearsInterest ratestock options
    
    
    4.71
    %
    
    
    4.67
    %
    
    
    4.14
    %Volatilitystock options
    
    
    26.8
    %
    
    
    21.4
    %
    
    
    30.5
    %Dividend yields
    
    
    1.72
    %
    
    
    1.40
    %
    
    
    1.48
    %Weighted-average fair value
of options granted during the
year
    
    $
    4.53
    
    
    $
    4.56
    
    
    $
    4.77
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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 StandardsFair Value MeasurementsIn September 2006, the FASB issued Statement No. 157 (SFAS 157), Fair Value Measurements.
SFAS 157 defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS 157 applies whenever other standards require
(or permit) assets or liabilities to be measured at fair value but does not expand the use
of fair value in any new circumstances. In this standard, the FASB clarifies the principle
that fair value should be based on the assumptions market participants would use when
pricing the asset or liability. In support of this principle, SFAS 157 establishes a fair
value hierarchy that prioritizes the information used to develop those assumptions. The
provisions of SFAS 157 are effective for financial statements issued for fiscal years
beginning after November 15, 2007 and interim periods within those fiscal years. The
provisions should be applied prospectively, except for certain specifically identified
financial instruments. The Company adopted SFAS 157 on January 1, 2008 and management does
not believe its adoption will have a material impact on the Companys financial position,
results of operations or cash flows.Fair Value Option for Financial Assets and Financial LiabilitiesIn February 2007, the FASB issued Statement No. 159 (SFAS 159), The Fair Value Option for
Financial Assets and Financial Liabilities  Including an Amendment of FASB Statement No.
115. This standard permits an entity to choose to measure many financial instruments and
certain other items at fair value at specified election dates. The entity will report
unrealized gains and losses on items for which the fair value option has been elected in
earnings at each subsequent reporting date. The fair value option: (a) may be applied
instrument by instrument, with a few exceptions, such as investments otherwise accounted for
by the equity method; (b) is irrevocable (unless a new election date occurs); and (c) is
applied only to entire instruments and not to portions of instruments. The provisions of
SFAS 159 are effective as of the beginning of an entitys first fiscal year that begins
after November 15, 2007. The Company adopted SFAS 159 on January 1, 2008 and management did
not elect the fair value option for any of its financial instruments.Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement
Split-Dollar Life Insurance ArrangementsIn September 2006, the FASB ratified the consensuses reached by the Task Force on Issue No.
06-4 (EITF 06-4), Accounting for Deferred Compensation and Postretirement Benefit Aspects
of Endorsement Split-Dollar Life Insurance Arrangements. A question arose when an employer
enters into an endorsement split-dollar life insurance arrangement related to whether the
employer should recognize a liability for the future benefits or premiums to be provided to
the employee. EITF 06-4 indicates that an employer should recognize a liability for future
benefits and that a liability for the benefit
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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Impact of New Financial Accounting Standards (Continued)obligation has not been settled through the purchase of an endorsement type policy. An
entity should apply the provisions of EITF 06-4 either through a
change in accounting principle through a cumulative-effect adjustment to retained earnings as of the beginning of
the year of adoption or a change in accounting principle through retrospective application
to all prior periods. The provisions of EITF 06-4 are effective for fiscal years beginning
after December 15, 2007. The Company adopted EITF 06-04 on January 1, 2008 and management
determined that a liability of $420,000 will be recorded as of January 1, 2008, with a
corresponding reduction as a cumulative-effect adjustment to retained earnings.Accounting for Business CombinationsIn December 2007, the FASB issued Statement of Financial Accounting Standards No. 141
(revised 2007), Business CombinationsSFAS No. 141(R)). SFAS No. 141(R), among other
things, establishes principles and requirements for how the acquirer in a business
combination (i) recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the acquired business,
(ii) recognizes and measures the goodwill acquired in the business combination or a gain
from a bargain purchase, and (iii) determines what information to disclose to enable users
of the financial statements to evaluate the nature and financial effects of the business
combination. The Company is required to adopt SFAS No. 141(R) for all business combinations
for which the acquisition date is on or after January 1, 2009. Earlier adoption is
prohibited. This standard will change the accounting treatment for business combinations on
a prospective basis.
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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    INVESTMENT SECURITIESThe amortized cost and estimated fair value of investment securities at December 31, 2007
and 2006 consisted of the following: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
  2006Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDebt securities:U.S. Treasury securities
    
    $
    5,481,000
    
    
    $
    
    
    
    $
    (137,000
    )
    
    $
    5,344,000U.S. Government agencies
    
    
    30,435,000
    
    
    
    
    
    
    
    (372,000
    )
    
    
    30,063,000U.S. Government agencies
collateralized by mortgage
obligations
    
    
    17,959,000
    
    
    
    
    
    
    
    (519,000
    )
    
    
    17,440,000Corporate debt securities
    
    
    8,018,000
    
    
    
    
    
    
    
    (150,000
    )
    
    
    7,868,000$
    61,893,000
    
    
    $
    
    
    
    $
    (1,178,000
    )
    
    $
    60,715,000
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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    INVESTMENT SECURITIES(Continued)Available-for-Sale: (Continued)Net unrealized losses on available-for-sale investment securities totaling $1,178,000 were
recorded, net of $486,000 in tax benefits, as accumulated other comprehensive loss within
shareholders equity at December 31, 2006. There were no sales of available-for-sale
investment securities during the year ended December 31, 2006. Proceeds and gross realized
losses from the sale of available-for-sale investment securities for the year ended December
31, 2005 totaled $1,992,000 and $8,000, respectively.Held-to-Maturity
 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
 2006Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDebt securities:Obligations of states and
political subdivisions
    
    $
    14,080,000
    
    
    $
    90,000
    
    
    $
    (44,000
    )
    
    $
    14,126,000
  F-23




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    INVESTMENT SECURITIES(Continued)Investment securities with unrealized losses at December 31, 2007 are summarized and
classified according to the duration of the loss period as follows:
 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 subdi-
visions
    
    
    421,000
    
    
    
    1,000
    
    
    
    3,873,000
    
    
    
    19,000
    
    
    
    4,294,000
    
    
    
    20,000U.S. Government
agencies collateral-
ized 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
  Less than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    LossesDebt securities:U.S. Treasury securities
    
    
    
    
    
    
    
    
    
    $
    5,344,000
    
    
    $
    137,000
    
    
    $
    5,344,000
    
    
    $
    137,000U.S. Government
agencies
    
    
    
    
    
    
    
    
    
    
    30,063,000
    
    
    
    372,000
    
    
    
    30,063,000
    
    
    
    372,000Obligations of states
and political subdi-
visions
    
    
    
    
    
    
    
    
    
    
    5,738,000
    
    
    
    44,000
    
    
    
    5,738,000
    
    
    
    44,000U.S. Government
agencies collateral-
ized by mortgage
obligations
    
    $
    2,816,000
    
    
    $
    15,000
    
    
    
    14,553,000
    
    
    
    504,000
    
    
    
    17,369,000
    
    
    
    519,000Corporate debt securities
    
    
    
    
    
    
    
    
    
    
    7,868,000
    
    
    
    150,000
    
    
    
    7,868,000
    
    
    
    150,000$
    2,816,000
    
    
    $
    15,000
    
    
    $
    63,566,000
    
    
    $
    1,207,000
    
    
    $
    66,382,000
    
    
    $
    1,222,000
 U.S. Treasury and U.S. Government Agencies
  F-24




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    INVESTMENT SECURITIES(Continued)
 Obligations of States and Political Subdivision
  U.S. Government Agencies Collateralized by Mortgage Obligations
  Corporate Debt Securities
 
 F-25




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    INVESTMENT SECURITIES(Continued)
  Available-for-Sale
    
    
    Held-to-MaturityEstimated
    
    
    
    
    
    
    EstimatedAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    ValueWithin one year
    
    $
    12,487,000
    
    
    $
    12,416,000
    
    
    $
    923,000
    
    
    $
    931,000After one year through
five years
    
    
    14,499,000
    
    
    
    14,650,000
    
    
    
    813,000
    
    
    
    810,000After five years through
ten years
    
    
    
    
    
    
    
    
    
    
    10,183,000
    
    
    
    10,230,000After ten years through
fifteen years
    
    
    
    
    
    
    
    
    
    
    1,569,000
    
    
    
    1,592,00026,986,000
    
    
    
    27,066,000
    
    
    
    13,488,000
    
    
    
    13,563,000Investment securities
not due at a single
maturity date:Government-guar-
anteed mortgage-
backed securities
    
    
    15,001,000
    
    
    
    14,738,000$
    41,987,000
    
    
    $
    41,804,000
    
    
    $
    13,488,000
    
    
    $
    13,563,000
  F-26




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 4.
    
    LOANS AND THE ALLOWANCE FOR LOAN LOSSES
  December 31,2007
    
    
    2006Commercial
    
    $
    39,584,000
    
    
    $
    36,182,000Agricultural
    
    
    35,762,000
    
    
    
    35,577,000Real estate  mortgage
    
    
    128,357,000
    
    
    
    116,329,000Real estate  construction and land
development
    
    
    76,478,000
    
    
    
    75,930,000Installment
    
    
    72,768,000
    
    
    
    90,694,000352,949,000
    
    
    
    354,712,000Deferred loan costs, net
    
    
    564,000
    
    
    
    1,182,000Allowance for loan losses
    
    
    (4,211,000
    )
    
    
    (3,917,000
    )$
    349,302,000
    
    
    $
    351,977,000
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Balance, beginning of year
    
    $
    3,917,000
    
    
    $
    3,256,000
    
    
    $
    2,722,000Provision charged to operations
    
    
    800,000
    
    
    
    1,000,000
    
    
    
    1,100,000Losses charged to allowance
    
    
    (786,000
    )
    
    
    (645,000
    )
    
    
    (739,000
    )Recoveries
    
    
    280,000
    
    
    
    306,000
    
    
    
    173,000Balance, end of year
    
    $
    4,211,000
    
    
    $
    3,917,000
    
    
    $
    3,256,000
  F-27




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 4.
    
    LOANS AND THE ALLOWANCE FOR LOAN LOSSES(Continued)
   Servicing Assets and Interest-Only Strips Receivable
   Year Ended December 31,Servicing Assets:
    
    2007
    
    
    2006
    
    
    2005Balance at beginning of year
    
    $
    69,000
    
    
    $
    97,000
    
    
    $
    106,000Increase from loan sales
    
    
    24,000
    
    
    
    15,000
    
    
    
    3,000Amortization charged to income
    
    
    (17,000
    )
    
    
    (43,000
    )
    
    
    (12,000
    )Balance at end of year
    
    $
    76,000
    
    
    $
    69,000
    
    
    $
    97,000
 Interest-Only Strips Receivable:
    
    2007
    
    
    2006
    
    
    2005Balance at beginning of year
    
    $
    238,000
    
    
    $
    326,000
    
    
    $
    356,000Increase from loan sales
    
    
    68,000
    
    
    
    67,000
    
    
    
    10,000Amortization charged to income
    
    
    (59,000
    )
    
    
    (155,000
    )
    
    
    (40,000
    )Balance at end of year
    
    $
    247,000
    
    
    $
    238,000
    
    
    $
    326,000
  F-28




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 5.
    
    PREMISES AND EQUIPMENT
  December 31,2007
    
    
    2006Land
    
    $
    2,397,000
    
    
    $
    2,372,000Premises
    
    
    12,621,000
    
    
    
    12,142,000Furniture, equipment and leasehold improvements
    
    
    8,723,000
    
    
    
    8,799,000Construction in progress
    
    
    309,000
    
    
    
    247,00024,050,000
    
    
    
    23,560,000Less accumulated depreciation
and amortization
    
    
    (9,384,000
    )
    
    
    (8,370,000
    )$
    14,666,000
    
    
    $
    15,190,000
  6.
    
    DEPOSITS
  December 31,2007
    
    
    2006Interest-bearing demand deposits
    
    $
    74,811,000
    
    
    $
    81,011,000Money market
    
    
    32,149,000
    
    
    
    44,082,000Savings
    
    
    45,343,000
    
    
    
    54,866,000Time, $100,000 or more
    
    
    51,588,000
    
    
    
    38,863,000Other time
    
    
    76,809,000
    
    
    
    61,890,000$
    280,700,000
    
    
    $
    280,712,000
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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 6.
    
    DEPOSITS(Continued)
  Year EndingDecember 31,2008
    
    $
    118,055,0002009
    
    
    6,382,0002010
    
    
    2,574,0002011
    
    
    947,0002012
    
    
    296,000Thereafter
    
    
    143,000$
    128,397,000
   7.
    
    SHORT-TERM BORROWING ARRANGEMENTS
  8.
    
    JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
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PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 8.
    
    JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES(Continued)for gross proceeds of $4,000,000. The entire proceeds were invested by Trust I in the
amount of $6,186,000 and Trust II in the amount of $4,124,000 in Floating Rate Junior
Subordinated Deferrable Interest Debentures (the Subordinated Debentures) issued by the
Company, with identical maturity, repricing and payment terms as the Trust Preferred
Securities. The Subordinated Debentures represent the sole assets of Trusts I and II.Trust Is Subordinated Debentures mature on September 26, 2032, bear a current interest rate
of 8.26% (based on 3-month LIBOR plus 3.40%), with repricing and payments due quarterly.
Trust IIs Subordinated Debentures mature on September 28, 2035, bear a current interest
rate of 6.47% (based on 3-month LIBOR plus 1.48%), with repricing and payments due
quarterly. The Subordinated Debentures are redeemable by the Company, subject to receipt by
the Company of prior approval from the Federal Reserve Board of Governors, on any quarterly
anniversary date on or after the 5-year anniversary date of the issuance. The redemption
price is par plus accrued and unpaid interest, except in the case of redemption under a
special event which is defined in the debenture. The Trust Preferred Securities are subject
to mandatory redemption to the extent of any early redemption of the Subordinated Debentures
and upon maturity of the Subordinated Debentures on September 26, 2032 for Trust I and
September 28, 2035 for Trust II.Holders of the Trust Preferred Securities are entitled to a cumulative cash distribution on
the liquidation amount of $1,000 per security. The interest rate of the Trust Preferred
Securities issued by Trust I adjust on each quarterly anniversary date to equal the 3-month
LIBOR plus 3.40% provided, however, that prior to September 26, 2007, such annual rate does
not exceed 11.90%. The Trust Preferred Securities issued by Trust II adjust on each
quarterly anniversary date to equal the 3-month LIBOR plus 1.48%. Both Trusts I and II have
the option to defer payment of the distributions for a period of up to five years, as long
as the Company is not in default on the payment of interest on the Subordinated Debentures.
The Trust Preferred Securities were sold and issued in private transactions pursuant to an
exemption from registration under the Securities Act of 1933, as amended. The Company has
guaranteed, on a subordinated basis, distributions and other payments due on the Trust
Preferred Securities.Interest expense recognized by the Company for the years ended December 31, 2007, 2006 and
2005 related to the subordinated debentures was $835,000, $810,000 and $479,000,
respectively. The amount of deferred costs at December 31, 2007 and 2006 was $149,000 and
$155,000, respectively. The amortization of the deferred costs was $6,000 for each of the
years ended December 31, 2007, 2006 and 2005.
 F-31




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 9.
    
    COMMITMENTS AND CONTINGENCIES
 Leases
  Year EndingDecember 31,2008
    
    $
    285,0002009
    
    
    312,0002010
    
    
    286,0002011
    
    
    262,0002012
    
    
    262,000Thereafter
    
    
    914,000$
    2,321,000
  Financial Instruments With Off-Balance-Sheet Risk
    December 31,2007
    
    2006Commitments to extend credit
    
    $
    96,867,000
    
    
    $
    101,759,000Letters of credit
    
    $
    655,000
    
    
    $
    564,000
  F-32




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 9.
    
    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
 10.
    
    SHAREHOLDERS EQUITY
 Dividend Restrictions
   F-34




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10.
    
    SHAREHOLDERS EQUITY(Continued)
 Earnings Per Share
  WeightedAverageNumber ofNet
    
    
    Shares
    
    
    Per ShareFor the Year Ended
    
    Income
    
    
    Outstanding
    
    
    AmountDecember 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
    
    
    $
    1.02December 31, 2005Basic earnings per share
    
    $
    4,528,000
    
    
    
    4,946,026
    
    
    $
    0.92Effect of dilutive stock options
    
    
    
    
    
    
    150,700Diluted earnings per share
    
    $
    4,528,000
    
    
    
    5,096,726
    
    
    $
    0.89
  F-35




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10.
    
    SHAREHOLDERS EQUITY(Continued)
 Stock Options
  WeightedWeighted
    
    AverageAverage
    
    Remaining
    
    IntrinsicExercise
    
    Contractual
    
    ValueShares
    
    Price
    
    Term
    
    (in thousands)Options outstanding at January 1, 2005
    
    
    460,069
    
    
    $
    10.06Options granted
    
    
    7,500
    
    
    
    18.97Options exercised
    
    
    (82,608
    )
    
    
    6.11Options cancelled
    
    
    (28,985
    )
    
    
    13.26Options outstanding at December 31, 2005
    
    
    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
    
    
    $
    13.37
    
    
    
    6.1
    
    
    $
    607Options exercisable at December 31, 2007
    
    
    207,558
    
    
    $
    11.10
    
    
    
    5.3
    
    
    $
    592Expected to vest after December 31, 2007
    
    
    188,214
    
    
    $
    15.87
    
    
    
    7.1
    
    
    $
    15
 F-36




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10.
    
    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
 10.
    
    SHAREHOLDERS EQUITY(Continued)
 Regulatory Capital
 December 31,2007
    
    2006Amount
    
    Ratio
    
    Amount
    
    RatioLeverage RatioPlumas Bancorp and Subsidiary
    
    $
    46,209,000
    
    
    
    10.0
    %
    
    $
    45,206,000
    
    
    
    9.5
    %Minimum regulatory requirement
    
    $
    18,439,000
    
    
    
    4.0
    %
    
    $
    18,955,000
    
    
    
    4.0
    %Plumas Bank
    
    $
    45,415,000
    
    
    
    9.9
    %
    
    $
    44,094,000
    
    
    
    9.3
    %Minimum requirement for Well-
Capitalized institution
    
    $
    23,024,000
    
    
    
    5.0
    %
    
    $
    23,669,000
    
    
    
    5.0
    %Minimum regulatory requirement
    
    $
    18,419,000
    
    
    
    4.0
    %
    
    $
    18,935,000
    
    
    
    4.0
    %Tier 1 Risk-Based Capital RatioPlumas Bancorp and Subsidiary
    
    $
    46,209,000
    
    
    
    11.6
    %
    
    $
    45,206,000
    
    
    
    10.9
    %Minimum regulatory requirement
    
    $
    15,881,000
    
    
    
    4.0
    %
    
    $
    16,610,000
    
    
    
    4.0
    %Plumas Bank
    
    $
    45,415,000
    
    
    
    11.5
    %
    
    $
    44,094,000
    
    
    
    10.6
    %Minimum requirement for Well-
Capitalized institution
    
    $
    23,790,000
    
    
    
    6.0
    %
    
    $
    24,885,000
    
    
    
    6.0
    %Minimum regulatory requirement
    
    $
    15,860,000
    
    
    
    4.0
    %
    
    $
    16,590,000
    
    
    
    4.0
    %Total Risk-Based Capital RatioPlumas Bancorp and Subsidiary
    
    $
    50,475,000
    
    
    
    12.7
    %
    
    $
    49,123,000
    
    
    
    11.8
    %Minimum regulatory requirement
    
    $
    31,763,000
    
    
    
    8.0
    %
    
    $
    33,221,000
    
    
    
    8.0
    %Plumas Bank
    
    $
    49,681,000
    
    
    
    12.5
    %
    
    $
    48,011,000
    
    
    
    11.6
    %Minimum requirement for Well-
Capitalized institution
    
    $
    39,651,000
    
    
    
    10.0
    %
    
    $
    41,475,000
    
    
    
    10.0
    %Minimum regulatory requirement
    
    $
    31,720,000
    
    
    
    8.0
    %
    
    $
    33,180,000
    
    
    
    8.0
    %
 Share Repurchase Plan
   F-38




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11.
    
    OTHER EXPENSESOther expenses consisted of the following:
 Year Ended December 31,2007
    
    
    2006
    
    
    2005Professional fees
    
    $
    738,000
    
    
    $
    780,000
    
    
    $
    865,000Outside service fees
    
    
    671,000
    
    
    
    591,000
    
    
    
    700,000Business development
    
    
    530,000
    
    
    
    555,000
    
    
    
    494,000Advertising and promotion
    
    
    520,000
    
    
    
    552,000
    
    
    
    467,000Telephone and data communications
    
    
    362,000
    
    
    
    374,000
    
    
    
    366,000Director compensation and retirement
    
    
    349,000
    
    
    
    370,000
    
    
    
    288,000Core deposit intangible amortization
    
    
    301,000
    
    
    
    301,000
    
    
    
    301,000Armored car and courier
    
    
    279,000
    
    
    
    270,000
    
    
    
    337,000Stationery and supplies
    
    
    278,000
    
    
    
    282,000
    
    
    
    336,000Postage
    
    
    242,000
    
    
    
    249,000
    
    
    
    258,000Loan expenses
    
    
    192,000
    
    
    
    139,000
    
    
    
    114,000Insurance
    
    
    177,000
    
    
    
    173,000
    
    
    
    206,000Other operating expenses
    
    
    280,000
    
    
    
    288,000
    
    
    
    233,000$
    4,919,000
    
    
    $
    4,924,000
    
    
    $
    4,965,000
 12.
    
    INCOME TAXESThe provision for income taxes for the years ended December 31, 2007, 2006 and 2005
consisted of the following:
 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
    
    
    $
    3,196,0002005Current
    
    $
    1,809,000
    
    
    $
    757,000
    
    
    $
    2,566,000Deferred
    
    
    44,000
    
    
    
    (10,000
    )
    
    
    34,000Provision for income taxes
    
    $
    1,853,000
    
    
    $
    747,000
    
    
    $
    2,600,000
 F-39




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 12.
    
    INCOME TAXES(Continued)Deferred tax assets (liabilities) consisted of the following:
 December 31,2007
    
    
    2006Deferred tax assets:Allowance for loan losses
    
    $
    1,586,000
    
    
    $
    1,431,000Future benefit of state income tax deduction
    
    
    160,000
    
    
    
    246,000Deferred compensation
    
    
    1,668,000
    
    
    
    1,441,000Core deposit premium
    
    
    297,000
    
    
    
    254,000Unrealized loss on available-for-sale
investment securities
    
    
    75,000
    
    
    
    486,000Other
    
    
    71,000
    
    
    
    46,000Total deferred tax assets
    
    
    3,857,000
    
    
    
    3,904,000
 December 31,2007
    
    
    2006Deferred tax liabilities:Prepaid costs
    
    $
    (139,000
    )
    
    $
    (80,000
    )Deferred loan costs
    
    
    (1,085,000
    )
    
    
    (1,421,000
    )Premises and equipment
    
    
    (353,000
    )
    
    
    (535,000
    )Other
    
    
    (161,000
    )
    
    
    (123,000
    )Total deferred tax liabilities
    
    
    (1,738,000
    )
    
    
    (2,159,000
    )Net deferred tax assets
    
    $
    2,119,000
    
    
    $
    1,745,000
   2007
    
    2006
    
    2005Federal income tax, at statutory rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %State franchise tax, net of Federal tax effect
    
    
    7.0
    %
    
    
    7.0
    %
    
    
    6.9
    %Interest on obligations of states and political
subdivisions
    
    
    (3.2
    )%
    
    
    (2.3
    )%
    
    
    (2.8
    )%Net increase in cash surrender value of bank
owned life insurance
    
    
    (1.7
    )%
    
    
    (1.3
    )%
    
    
    (1.4
    )%Other
    
    
    1.1
    %
    
    
    0.7
    %
    
    
    (0.2
    )%Effective tax rate
    
    
    37.2
    %
    
    
    38.1
    %
    
    
    36.5
    %
 F-40




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 12.
    
    INCOME TAXES(Continued)The Company and its subsidiary file income tax returns in the U.S. federal and California
jurisdictions. The Company conducts all of its business activities in the States of
California and Nevada. There are currently no pending U.S. federal, state, and local income
tax or non-U.S. income tax examinations by tax authorities.With few exceptions, the Company is no longer subject to tax examinations by U.S. Federal
taxing authorities for years ended before December 31, 2004, and by state and local taxing
authorities for years ended before December 31, 2003.The unrecognized tax benefits and the interest and penalties accrued by the Company as of
December 31, 2007 were not significant.
 13.
    
    RELATED PARTY TRANSACTIONSDuring the normal course of business, the Company enters into transactions with related
parties, including executive officers and directors. These transactions include borrowings
with substantially the same terms, including rates and collateral, as loans to unrelated
parties. The following is a summary of the aggregate activity involving related party
borrowers during 2007:
 Balance, January 1, 2007
    
    $
    2,728,000Disbursements
    
    
    334,000Amounts repaid
    
    
    (199,000
    )Other
    
    
    (2,113,000
    )Balance, December 31, 2007
    
    $
    750,000Undisbursed commitments to related
parties, December 31, 2007
    
    $
    1,843,000
  14.
    
    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.
 F-41




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14.
    
    EMPLOYEE BENEFIT PLANS(Continued)
 Profit Sharing Plan
  Salary Continuation and Retirement Agreements
   15.
    
    COMPREHENSIVE INCOMEComprehensive income is reported in addition to net income for all periods presented.
Comprehensive income is a more inclusive financial reporting methodology that includes
disclosure of other comprehensive income (loss) that historically has not been recognized in
the calculation of net income. The unrealized gains and losses on the Companys
available-for-sale investment securities are included in other comprehensive income (loss).
Total comprehensive income and the components of accumulated other comprehensive income
(loss) are presented in the consolidated statement of changes in shareholders equity.
 F-42




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 15.
    
    COMPREHENSIVE INCOME(Continued)At December 31, 2007, 2006 and 2005, the Company held securities classified as
available-for-sale which had unrealized (losses) gains as follows:
 TaxBefore
    
    
    Benefit
    
    
    AfterTax
    
    
    (Expense)
    
    
    TaxFor 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
    )
    
    $
    399,000For the Year Ended December 31, 2005Other comprehensive loss:Unrealized holding losses
    
    $
    (1,027,000
    )
    
    $
    423,000
    
    
    $
    (604,000
    )Reclassification adjustment for losses
included in net income
    
    
    (8,000
    )
    
    
    3,000
    
    
    
    (5,000
    )Total other comprehensive
loss
    
    $
    (1,019,000
    )
    
    $
    420,000
    
    
    $
    (599,000
    )
 16.
    
    DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTSEstimated fair values are disclosed for financial instruments for which it is practicable to
estimate fair value. These estimates are made at a specific point in time based on relevant
market data and information about the financial instruments. These estimates do not reflect
any premium or discount that could result from offering the Companys entire holdings of a
particular financial instrument for sale at one time, nor do they attempt to estimate the
value of anticipated future business related to the instruments. In addition, the tax
ramifications related to the realization of unrealized gains and losses can have a
significant effect on fair value estimates and have not been considered in any of these
estimates.Because no market exists for a significant portion of the Companys financial instruments,
fair value estimates are based on judgments regarding current economic conditions, risk
characteristics of various financial instruments and other factors. These estimates are
subjective in nature and involve uncertainties and matters of significant
 F-43




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 16.
    
    DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS(Continued)judgment and therefore cannot be determined with precision. Changes in assumptions could
significantly affect the fair values presented.The following methods and assumptions were used by management to estimate the fair value of
its financial instruments at December 31, 2007 and 2006:Cash and cash equivalents: For cash and cash equivalents, the carrying amount is
estimated to be fair value.Investment securities: For investment securities, fair values are based on quoted
market prices, where available. If quoted market prices are not available, fair values are
estimated using quoted market prices for similar securities and indications of value
provided by brokers.Loans: For variable-rate loans that reprice frequently with no significant change
in credit risk, fair values are based on carrying values. Fair values of loans held for
sale, if any, are estimated using quoted market prices for similar loans. The fair values
for other loans are estimated using discounted cash flow analyses, using interest rates
currently being offered at each reporting date for loans with similar terms to borrowers of
comparable creditworthiness. The fair value of loans is adjusted for the allowance for loan
losses. The carrying amount of accrued interest receivable approximates its fair value.Bank owned life insurance: The fair values of bank owned life insurance policies
are based on current cash surrender values at each reporting date provided by the insurers.Deposits: The fair values for demand deposits are, by definition, equal to the
amount payable on demand at the reporting date represented by their carrying amount. Fair
values for fixed-rate certificates of deposit are estimated using a discounted cash flow
analysis using interest rates offered at each reporting date by the Bank for certificates
with similar remaining maturities. The carrying amount of accrued interest payable
approximates its fair value.Short-term borrowings: The carrying amount of the short-term borrowings
approximates its fair value.Junior subordinated deferrable interest debentures: The fair value of junior
subordinated deferrable interest debentures was determined based on the current market value
for like kind instruments of a similar maturity and structure.Commitments to extend credit and letters of credit: The fair value of commitments
are estimated using the fees currently charged to enter into similar agreements.
Commitments to extend credit are primarily for variable rate loans and letters of credit.
For these commitments, there is no significant difference between the committed amounts and
their fair values and therefore, is not included in the table below.
 F-44




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 16.
    
    DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS(Continued)The estimated fair values of the Companys financial instruments are as follows:
 December 31, 2007
    
    December 31, 2006Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    13,207,000
    
    
    $
    13,207,000
    
    
    $
    11,293,000
    
    
    $
    11,293,000Investment securities
    
    
    55,292,000
    
    
    
    55,367,000
    
    
    
    74,795,000
    
    
    
    74,841,000Loans
    
    
    349,302,000
    
    
    
    348,672,000
    
    
    
    351,977,000
    
    
    
    350,721,000Cash surrender value of life
insurance policies
    
    
    9,428,000
    
    
    
    9,428,000
    
    
    
    9,449,000
    
    
    
    9,449,000Accrued interest receivable
    
    
    2,619,000
    
    
    
    2,619,000
    
    
    
    2,784,000
    
    
    
    2,784,000Financial liabilities:Deposits
    
    $
    391,940,000
    
    
    $
    391,975,000
    
    
    $
    402,176,000
    
    
    $
    402,326,000Short-term borrowings
    
    
    7,500,000
    
    
    
    7,500,000
    
    
    
    20,000,000
    
    
    
    20,000,000Junior subordinated deferrable
interest debentures
    
    
    10,310,000
    
    
    
    9,314,000
    
    
    
    10,310,000
    
    
    
    10,392,000Accrued interest payable
    
    
    927,000
    
    
    
    927,000
    
    
    
    556,000
    
    
    
    556,000
 17.
    
    INTANGIBLE ASSETSDuring 2003, the Company acquired certain assets and liabilities of five branches from
another bank. Upon acquisition, premises and equipment were valued at fair value and a core
deposit premium was recorded as an intangible asset. This core deposit premium, along with
core deposit premiums from previous acquisitions, is amortized using the straight-line
method over ten years. Annually, the intangible asset is analyzed for impairment. At
December 31, 2007, 2006 and 2005, no impairment of the intangible asset has been recognized
in the consolidated financial statements. Amortization expense totaled $301,000 for each of
the years ended December 31, 2007, 2006 and 2005.The gross carrying amount of intangible assets and accumulated amortization was:
 December 31, 2007
    
    December 31, 2006Gross Carrying
    
    Accumulated
    
    Gross Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Amount
    
    AmortizationCore Deposit Intangibles
    
    $
    2,983,000
    
    
    $
    1,946,000
    
    
    $
    2,983,000
    
    
    $
    1,646,000
  Year EndingDecember 31,2008
    
    $
    216,0002009
    
    
    173,0002010
    
    
    173,0002011
    
    
    173,0002012
    
    
    173,0002013
    
    
    129,000$
    1,037,000
 F-45




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 18. PARENT ONLY CONDENSED FINANCIAL STATEMENTS
 CONDENSED BALANCE SHEET
 December 31, 2007 and 2006
 2007
    
    
    2006ASSETSCash and cash equivalents
    
    $
    698,000
    
    
    $
    857,000Investment in bank subsidiary
    
    
    46,345,000
    
    
    
    44,740,000Other assets
    
    
    541,000
    
    
    
    650,000Total assets
    
    $
    47,584,000
    
    
    $
    46,247,000LIABILITIES AND SHAREHOLDERS EQUITYOther liabilities
    
    $
    135,000
    
    
    $
    85,000Junior subordinated deferrable interest debentures
    
    
    10,310,000
    
    
    
    10,310,000Total liabilities
    
    
    10,445,000
    
    
    
    10,395,000Shareholders equity:Common stock
    
    
    5,042,000
    
    
    
    4,828,000Retained earnings
    
    
    32,204,000
    
    
    
    31,716,000Accumulated other comprehensive loss
    
    
    (107,000
    )
    
    
    (692,000
    )Total shareholders equity
    
    
    37,139,000
    
    
    
    35,852,000Total liabilities and shareholders equity
    
    $
    47,584,000
    
    
    $
    46,247,000
 CONDENSED STATEMENT OF INCOME
 For the Years Ended December 31, 2007, 2006 and 2005
 2007
    
    
    2006
    
    
    2005Income:Dividends declared by bank subsidiary
    
    $
    4,300,000
    
    
    
    
    
    
    $
    840,000Earnings from investment in Plumas
Statutory Trusts I and II
    
    
    18,000
    
    
    $
    24,000
    
    
    
    14,000Total income
    
    
    4,318,000
    
    
    
    24,000
    
    
    
    854,000Expenses:Interest on junior subordinated
deferrable interest debentures
    
    
    835,000
    
    
    
    810,000
    
    
    
    479,000Other expenses
    
    
    765,000
    
    
    
    793,000
    
    
    
    611,000Total expenses
    
    
    1,600,000
    
    
    
    1,603,000
    
    
    
    1,090,000Income (loss) before equity in
undistributed income of subsidiary
    
    
    2,718,000
    
    
    
    (1,579,000
    )
    
    
    (236,000
    )Equity in undistributed income of
subsidiary
    
    
    896,000
    
    
    
    6,183,000
    
    
    
    4,328,000Income before income taxes
    
    
    3,614,000
    
    
    
    4,604,000
    
    
    
    4,092,000Income tax benefit
    
    
    609,000
    
    
    
    598,000
    
    
    
    436,000Net income
    
    $
    4,223,000
    
    
    $
    5,202,000
    
    
    $
    4,528,000
 F -46




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##### Table of Contents



PLUMAS BANCORP AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 18. PARENT ONLY CONDENSED FINANCIAL STATEMENTS
 CONDENSED STATEMENT OF CASH FLOWS
 For the Years Ended December 31, 2007, 2006 and 2005
 2007
    
    
    2006
    
    
    2005Cash flows from operating activities:Net income
    
    $
    4,223,000
    
    
    $
    5,202,000
    
    
    $
    4,528,000Adjustments to reconcile net income to
net cash provided by operating activities:Undistributed net income of subsidiary
    
    
    (896,000
    )
    
    
    (6,183,000
    )
    
    
    (4,328,000
    )Excess tax benefits from stock-based
compensation
    
    
    (9,000
    )
    
    
    (61,000
    )Stock-based compensation expense
    
    
    164,000
    
    
    
    174,000Decrease (increase) in other assets
    
    
    118,000
    
    
    
    185,000
    
    
    
    (127,000
    )Increase in other liabilities
    
    
    50,000
    
    
    
    69,000
    
    
    
    11,000Net cash provided by (used in)
operating activities
    
    
    3,650,000
    
    
    
    (492,000
    )
    
    
    84,000Cash flows from investing activities:Investment in bank subsidiary
    
    
    
    
    
    
    
    
    
    
    (1,000,000
    )Investment in Plumas Statutory Trust II
    
    
    
    
    
    
    
    
    
    
    (124,000
    )Net cash used in investing activities
    
    
    
    
    
    
    
    
    
    
    (1,124,000
    )Cash flows from financing activities:Proceeds from the issuance of junior sub-
ordinated deferrable interest debentures
    
    
    
    
    
    
    
    
    
    
    4,124,000Payment of cash dividends
    
    
    (1,491,000
    )
    
    
    (1,302,000
    )
    
    
    (1,082,000
    )Proceeds from the exercise of stock
options
    
    
    73,000
    
    
    
    181,000
    
    
    
    407,000Excess tax benefits from stock-based
compensation
    
    
    9,000
    
    
    
    61,000Repurchase and retirement of common stock
    
    
    (2,400,000
    )Cash paid for fractional shares
    
    
    
    
    
    
    
    
    
    
    (8,000
    )Net cash (used in) provided by
financing activities
    
    
    (3,809,000
    )
    
    
    (1,060,000
    )
    
    
    3,441,000(Decrease) increase in cash and cash
equivalents
    
    
    (159,000
    )
    
    
    (1,552,000
    )
    
    
    2,401,000Cash and cash equivalents at beginning
of year
    
    
    857,000
    
    
    
    2,409,000
    
    
    
    8,000Cash and cash equivalents at end of year
    
    $
    698,000
    
    
    $
    857,000
    
    
    $
    2,409,000Non-cash investing activities:Net change in unrealized gain (loss) on
investment securities available-for-sale
    
    $
    585,000
    
    
    $
    399,000
    
    
    $
    (599,000
    )Non-cash financing activities:Common stock retired in connection
with the exercise of stock options
    
    $
    70,000
    
    
    $
    417,000
    
    
    $
    105,000Tax benefit from stock options exercised
    
    $
    9,000
    
    
    $
    61,000
 F -47




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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. BIDDLEMr. Douglas N. BiddlePresident and Chief Executive Officer/s/ ANDREW RYBACKMr. Andrew J. RybackExecutive Vice President and Chief Financial Officer  49




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal ControlIntegrated Framework
    50




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     
 
 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
  51




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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)
    
    ExhibitsThe following documents are included or incorporated by reference in this Annual Report on
Form 10K.
 3.1
    
    Articles of Incorporation as amended of Registrant included as exhibit 3.1 to the Registrants
Form S-4, File No. 333-84534, which is incorporated by reference herein.3.2
    
    Bylaws of Registrant included as exhibit 3.2 to the Registrants Form S-4, File No. 333-84534,
which is incorporated by reference herein.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.10.1
    
    Executive Salary Continuation Agreement of Andrew J. Ryback dated August 23, 2005, is included
as Exhibit 10.1 to the Registrants 8-K filed on October 17, 2005, which is incorporated by
this reference herein.10.2
    
    Split Dollar Agreement of Andrew J. Ryback dated August 23, 2005, is included as Exhibit 10.2
to the Registrants 8-K filed on October 17, 2005, which is incorporated by this reference
herein.10.5
    
    Employment Agreement of Douglas N. Biddle dated January 1, 2006 is included as Exhibit 10.5 to
the Registrants 8-K filed on March 15, 2006, 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.
 52




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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.10.9
    
    Executive Salary Continuation Agreement as amended of Dennis C. Irvine dated June 2, 1994, is
included as Exhibit 10.9 to the Registrants 10-QSB for June 30, 2002, which is incorporated
by this reference herein.10.10
    
    Split Dollar Agreements of Dennis C. Irvine dated January 24, 2002, is included as Exhibit
10.10 to the Registrants 10-QSB for June 30, 2002, which is incorporated by this reference
herein.10.11
    
    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.10.13
    
    Deferred Fee Agreement as amended of Jerry V. Kehr dated August 19,
1998, is included as Exhibit 10.13 to the Registrants 10-QSB for
June 30, 2002, which is incorporated by this reference herein.10.14
    
    Amended and Restated Director Retirement Agreement of Jerry V. Kehr
dated April 28, 2000, is included as Exhibit 10.14 to the
Registrants 10-QSB for June 30, 2002, which is incorporated by this
reference herein.10.15
    
    Consulting Agreement of Jerry V. Kehr dated May 10, 2000, is
included as Exhibit 10.15 to the Registrants 10-QSB for June 30,
2002, which is incorporated by this reference herein.10.16
    
    Deferred Fee Agreement of Jerry V. Kehr dated December 21, 2005 is
included as Exhibit 10.16 to the Registrants 8-K filed on March 15,
2006, 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.
 53




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##### Table of Contents



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.10.39
    
    Deferred Fee Agreement of Thomas Watson dated March 3, 2001, is
included as Exhibit 10.39 to the Registrants 10-QSB for June 30,
2002, which is incorporated by this reference herein.10.40
    
    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.10.59
    
    Director Retirement Agreement of
Thomas Watson dated May 1, 2003,
is included as Exhibit 10.59 to
the Registrants 10-Q for June
30, 2003, which is incorporated
by this reference herein.10.60
    
    Consulting Agreement of Thomas
Watson dated May 1, 2003, is
included as Exhibit 10.60 to the
Registrants 10-Q for June 30,
2003, which is incorporated by
this reference herein.10.62
    
    Deferred Fee Agreement of Thomas
Watson dated December 23, 2004,
is included as Exhibit 10.62 to
the Registrants 8-K filed on
January 6, 2005, which is
incorporated by this reference
herein.10.63
    
    Deferred Fee Agreement of Jerry
V. Kehr dated December 24, 2004,
is included as Exhibit 10.63 to
the Registrants 8-K filed on
January 6, 2005, which is
incorporated by this reference
herein.
 54




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##### Table of Contents



10.64
    
    First Amendment to the Plumas
Bank Amended and Restated
Director Retirement Agreement for
Alvin Blickenstaff adopted on
September 19, 2007, is included
as Exhibit 10.64 to the
Registrants 8-K filed on
September 25, 2007, which is
incorporated by this reference
herein.10.65
    
    First Amendment to the Plumas
Bank Amended and Restated
Director Retirement Agreement for
Arthur C. Grohs adopted on
September 19, 2007, is included
as Exhibit 10.65 to the
Registrants 8-K filed on
September 25, 2007, which is
incorporated by this reference
herein.10.66
    
    First Amendment to the Plumas
Bank Amended and Restated
Director Retirement Agreement for
Jerry V. Kehr adopted on
September 19, 2007, is included
as Exhibit 10.66 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.10.68
    
    First Amendment to the Plumas
Bank Amended and Restated
Director Retirement Agreement for
Thomas Watson adopted on
September 19, 2007, is included
as Exhibit 10.68 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 10  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 14, 2008.31.1
    
    Rule 13a-14(a) [Section 302] Certification of Principal Financial
Officer dated March 14, 2008.31.2
    
    Rule 13a-14(a) [Section 302] Certification of Principal Executive
Officer dated March 14, 2008.32.1
    
    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 14, 2008.32.2
    
    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 14, 2008.
 55




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SIGNATURES
  PLUMAS BANCORP
  /s/ D. N. BIDDLEDouglas N. BiddlePresident/Chief Executive Officer/s/ ANDREW RYBACKAndrew J. RybackExecutive Vice President/Chief Financial Officer 56




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##### Table of Contents



/s/ DANIEL E. WEST
    
    Dated: March 14, 2008Daniel E. West, Director and Chairman of the Board/s/ TERRANCE J. REESON
    
    Dated: March 14 , 2008Terrance J. Reeson, Director and Vice Chairman of
the Board/s/ D. N. BIDDLE
    
    Dated: March 14, 2008Douglas N. Biddle, Director/s/ ALVIN G. BLICKENSTAFF
    
    Dated: March 14, 2008Alvin G. Blickenstaff, Director/s/ W. E. ELLIOTT
    
    Dated: March 14 , 2008William E. Elliott, Director/s/ GERALD W. FLETCHER
    
    Dated: March 14, 2008Gerald W. Fletcher, Director/s/ JOHN FLOURNOY
    
    Dated: March 14, 2008John Flournoy, Director/s/ ARTHUR C. GROHS
    
    Dated: March 14, 2008Arthur C. Grohs, Director/s/ JERRY V. KEHR
    
    Dated: March 14, 2008Jerry V. Kehr, Director/s/ THOMAS WATSON
    
    Dated: March 14, 2008Thomas Watson, Director
 57