EDGAR 10-K Filing

Company CIK: 1168455
Filing Year: 2025
Filename: 1168455_10-K_2025_0001437749-25-008351.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
References in this report to the “Company,” “we,” “us” and “our” refer to Plumas Bancorp and its consolidated subsidiary, unless the context indicates otherwise. References to the “Bank” refer to Company’s wholly-owned subsidiary, Plumas Bank. References to “Management” refer to the members of the Company’s management and references to the “Board of Directors” or the “Board” refer to the Company’s Board of Directors.
General
The Company. Plumas Bancorp is a bank holding company headquartered in Reno, Nevada. Substantially all of the Company's operations are conducted through its subsidiary, Plumas Bank.
The Company’s principal source of income is dividends from the Bank, but the Company may explore supplemental sources of income in the future. The cash outlays of the Company, including but not limited to the payment of dividends to shareholders, if and when declared by the Board of Directors, costs of repurchasing Company common stock and the cost of servicing debt, will generally be paid from dividends paid to the Company by the Bank.
At December 31, 2024, the Company had consolidated assets of $1.6 billion, deposits of $1.4 billion, other liabilities of $74 million and shareholders’ equity of $178 million. The Company’s other liabilities include a $15 million borrowing from one of the Company's correspondent banks, $24.8 million in lease liabilities and $22.1 million in repurchase agreements. These items are described in detail later in this Form 10-K.
The Company is a California corporation incorporated in 2002 for the purpose of becoming the holding company for the Bank, which we acquired the same year.
We file annual, quarterly, and other reports required under the Securities Exchange Act of 1934 with Securities and Exchange Commission (the “SEC”). These reports are available at no cost on our website, www.plumasbank.com, as soon as reasonably practicable after filing with the SEC. These reports are also available through the SEC’s website at www.sec.gov. The address of our headquarters is 5525 Kietzke Lane, Suite 100, Reno, Nevada, 89511.
The Bank. The Bank is a California state-chartered bank that was incorporated and commenced business in 1980. The Bank’s deposit accounts are insured by the Federal Deposit Insurance Corporation (the “FDIC”) up to applicable legal limits. The Bank is a member of the Federal Reserve System. At December 31, 2024, the Bank had approximately $1.6 billion in assets, $1.0 billion in net loans and $1.4 billion in deposits (including deposits of $12.3 million from the Company), other liabilities of $59 million and shareholders’ equity of $181 million. The Bank’s other liabilities include $24.5 million in lease liabilities and $22.1 million in repurchase agreements. It is currently the largest bank headquartered in Plumas County, California. The Bank’s operations are conducted through its administrative office in Quincy, California.
The Bank’s primary service area covers the Northeastern portion of California, with Lake Tahoe to the south and the Oregon border to the north, and the Northwestern portion of Nevada. The Bank operates thirteen branches in California, including branches in Alturas, Chester, Chico, Fall River Mills, Greenville, Kings Beach, Portola, Quincy, Redding, Susanville, Tahoe City, Truckee and Yuba City. The Bank's newest branch was opened in April 2023 and is located in Chico, California. In December 2015 the Bank opened a branch in Reno, Nevada, its first branch outside of California, and in 2018 the Bank purchased a branch located in Carson City, Nevada.
The Bank maintains nineteen automated teller machines (“ATMs”) tied in with major statewide and national networks. In addition to its branch network, the Bank operates a lending office specializing in government-guaranteed lending in Auburn, California with additional lenders in Utah and Southern California and commercial/agricultural lending offices located in Chico, California and Klamath Falls, Oregon. The Bank’s primary business is servicing the banking needs of these communities. Its marketing strategy emphasizes its local ownership and commitment to serve the banking needs of individuals living and working in the Bank’s primary service areas.
The Bank primarily generates revenue from loans and investment securities in its portfolio and, to a lesser extent, service fees. With a predominant focus on personal service, the Bank positions itself as a multi-community independent bank serving the financial needs of individuals and businesses within the Bank’s geographic footprint. The Bank’s principal commercial lending services include term real estate, commercial and industrial term loans. In addition, the Bank provides government-guaranteed and agricultural loans as well as credit lines. The Bank’s principal retail lending services include consumer and home equity loans. The Bank provides land development and construction loans on a limited basis.
The Bank provides Small Business Administration (SBA) loans to qualified borrowers mostly in Northern California, through its government-guaranteed lending center headquartered in Auburn, California. In addition to its Auburn location the Bank has an SBA lender based in San Diego, California and an SBA lender based in South Jordan, Utah. In 2007 the Bank was granted nationwide Preferred Lender status with the U.S. Small Business Administration, and we expect government-guaranteed lending to continue to be an important part of our overall lending operation. The SBA 7(a) loan product in which the guaranteed portion is salable in the secondary market is variable rate tied to prime and we have seen a significant decline in interest in this product during the last two years. However, we have successfully pivoted to producing fixed rate SBA 7(a) loans. We portfolio the entire fixed rate SBA 7(a) loan. At December 31, 2024 fixed rate SBA 7(a) loans totaling $70 million with guaranteed portions totaling $52 million were included in our commercial and commercial real estate loan portfolio. The weighted rate of these loans was 8.3%. Once demand for variable rate SBA 7(a) loans returns to an acceptable level, we will likely move most of our production efforts back to this product.
The Agricultural Credit Centers located in Alturas, Chico, and Yuba City, California and Klamath Falls, Oregon provide an array of credit services supporting the agricultural activities that are key to the continued economic development of these communities. “Ag lending” clients include a full range of individual farming customers, small to medium-sized business farming organizations and corporate farming units.
As of December 31, 2024, the principal areas to which we have directed our lending activities, and the percentage of our total loan portfolio comprised by each, were as follows: (i) commercial real estate - 63.7%; agricultural loans (including agricultural real estate loans) - 11.7%, (iii) consumer loans (including residential equity lines of credit and automobile loans) - 10.6%, (iv); commercial and industrial loans - 7.6%; (v) construction and land development - 5.3%; and (vi) residential real estate - 1.1% . During the fourth quarter of 2023 we elected to discontinue our auto loan program.
In addition to our lending activities, we offer a wide range of deposit products for the commercial and retail banking markets including checking, money market checking, business sweep, public funds sweep, savings, time deposit and retirement accounts, as well as remote deposit, telephone and mobile banking, including mobile deposit and internet banking with bill-pay options. Interest bearing deposits include higher yielding sweep accounts designed for our commercial customers and for public entities such as municipalities. As of December 31, 2024, the Bank had 38,188 deposit accounts with balances totaling approximately $1.4 billion, compared to 39,619 deposit accounts with balances totaling approximately $1.3 billion at December 31, 2023. We attract deposits through our customer-oriented product mix, competitive pricing, convenient locations, mobile and internet banking and remote deposit operations, all provided with a high level of customer service.
Most of the Bank’s deposits are attracted from individuals, business-related sources, and smaller municipal entities. This mix of deposit customers resulted in a relatively modest average deposit balance of approximately $36 thousand at December 31, 2024. However, we believe this broad deposit base makes us less vulnerable to adverse effects from the loss of depositors who may be seeking higher yields in other markets or who may otherwise draw down balances for cash needs.
We also offer a variety of other products and services complementing our lending and deposit services. These include cashier’s checks, bank-by-mail, ATMs, night depository, safe deposit boxes, direct deposit, electronic funds transfers, FedNow®-receive Service and other customary banking services. We offer a Remote Deposit product that allows our business customers to make non-cash deposits remotely from their physical location. This product enables us to extend our service area because we can now meet the deposit needs of customers who may not be located within a convenient distance of one of our branch offices.
The Bank has devoted a substantial amount of time and capital to the improvement of existing bank services. During 2022 Plumas Bank upgraded and replaced our fleet of ATM machines, enhanced incoming wire notifications and developed electronic tracking and monitoring for ACH origination and Remote Deposit Capture services and implemented the ability for our commercial online banking clients to originate one-time ACH payments. In 2023 we provided enhanced security features and monitoring to detect and rapidly notify clients of potential fraudulent debit card transactions and created the ability for clients to dispute debit card transactions utilizing an online interface. In 2024, we upgraded our branch deposit acceptance system, entered real-time payments by implementing FedNow®-receive, optimized our outgoing wire transfer capabilities, and launched Payee Match for Positive Pay to aid in combatting the rising trend of check fraud. Additionally, beginning in 2024 we began accepting through our website applications for our Business Exxpress product.
The officers and employees of the Bank are continually engaged in marketing activities, including the evaluation and development of new products and services, to enable the Bank to retain and improve its competitive position in its service area.
We hold no patents or licenses (other than licenses required by appropriate bank regulatory agencies or local governments), franchises, or concessions. Our business has a modest seasonal component due to the heavy agricultural and tourism orientation of some of the communities we serve. We are not dependent on a single customer or group of related customers for a material portion of our deposits. We have established loan concentration guidelines as a percentage of capital and evaluate loan concentration levels within a single industry or group of related industries on a quarterly basis, or more frequently as loan conditions change. There has been no material effect upon our capital expenditures, earnings, or competitive position as a result of federal, state, or local environmental regulation.
Commitment to our Communities. The Board of Directors and management believe that the Company plays an important role in the economic well-being of the communities we serve. Our Bank has a continuing responsibility to provide a wide range of lending and deposit services to both individuals and businesses. We strive to tailor these services to meet the needs of the communities served by the Company and the Bank.
We offer various loan products which encourage job growth and support community economic development. Types of loans offered range from personal and commercial loans to real estate, construction, agricultural, and government-guaranteed loans. Many banking decisions are made locally with the goal of maintaining customer satisfaction through the timely delivery of high-quality products and services.
Recent Expansion Activities. As part of our business strategy, we may regularly review opportunities to enhance the value of our franchise, including through acquisitions. On July 1, 2021, we completed the acquisition of Feather River Bancorp and its subsidiary, Bank of Feather River, which merged with and into the Bank the same day. The estimated fair value of assets acquired at July 1, 2021 was $205.0 million consisting of $28.4 million in cash, $160.4 million in net loans, $1.0 million in core deposit intangible, $5.5 million in goodwill and $9.7 million in other assets. The estimated fair value of deposits assumed totaled $176.7 million consisting of $89.5 million in non-interest bearing transaction accounts, $9.3 million in savings accounts, $45.6 million in money market accounts and $32.3 million in time deposits.
Dividends. It is the policy of the Company to periodically distribute excess retained earnings to the shareholders through the payment of cash dividends, subject to the approval of the Board of Directors. The Company paid a quarterly cash dividend of $0.27 per share on November 15, 2024, August 15, 2024, May 15, 2024, and February 15, 2024, and a quarterly cash dividend of $0.25 per share on November 15, 2023, August 15, 2023, May 15, 2023, and February 15, 2023.
Business Concentrations. No individual or single group of related customer accounts is considered material in relation to the Bank's assets or deposits, or in relation to our overall business. However, at December 31, 2024, approximately 77% of the Bank's total loan portfolio consisted of real estate-secured loans, including real estate mortgage loans, real estate construction loans, consumer equity lines of credit, and agricultural loans secured by real estate. Moreover, the business activities of the Company currently are focused in the California counties of Butte, Lassen, Modoc, Nevada, Placer, Plumas, Shasta and Sutter and in Washoe and Carson City Counties in Northern Nevada. Consequently, our results of operations and financial condition are dependent upon the general trends in these economies and, in particular, the residential and commercial real estate markets. In addition, the concentration of our operations in these areas of California and Nevada exposes us to greater risk than other banking companies with a wider geographic base in the event of catastrophes, such as earthquakes, fires, drought and floods in these regions in California and Nevada.
Competition. The banking business is highly competitive. The business is largely dominated by a relatively small number of major banks with many offices operating over a wide geographical area. These banks have, among other advantages, a greater ability to invest in technology, to finance wide-ranging marketing campaigns and to allocate their resources to regions of highest yield and demand. Many of the major banks operating in the area offer certain services that we do not offer directly but may offer indirectly through correspondent institutions. By virtue of their greater total capitalization, such banks also have substantially higher lending limits than we do. For customers whose loan demands exceed our legal lending limit, we attempt to arrange for such loans on a participation basis with correspondent or other banks.
In addition to other banks, our competitors include savings institutions, credit unions, and numerous non-banking institutions such as finance companies, leasing companies, insurance companies, brokerage firms, Internet-based fintech lenders and investment banking firms. In recent years, increased competition has also developed from specialized finance and non-finance companies that offer wholesale finance, credit card, and other consumer finance services, including on-line banking services and personal financial software. Strong competition for deposit and loan products affects the rates of those products as well as the terms on which they are offered to customers. Mergers between financial institutions have placed additional competitive pressure on banks within the industry to streamline their operations, reduce expenses, and increase revenues. In addition, competitive conditions have intensified as banks have increasingly affiliated with securities firms, insurance companies, and other financial companies.
As of June 30, 2024, within towns in which the Bank had a branch as of this same date there were 137 banking branch offices of competing institutions (excluding credit unions, but including savings banks), including 105 branches of 15 banks having assets more than $10 billion. As of June 30, 2024, the FDIC estimated the Bank’s market share of deposits within the communities it serves to be as follows: Greenville and Portola 100%, Quincy 78%, Alturas 67%, Susanville 57%, Kings Beach 51%, Chester 49%, Fall River Mills 37%, Tahoe City 30%, Truckee 18%, Yuba City 3%, Carson City 3%, Redding 2% and Reno and Chico less than 1%.
Technological innovations have also resulted in increased competition in financial services markets. Such innovation has, for example, made it possible for non-depository institutions to offer customers loans or automated transfer payment services that previously were considered traditional banking products. In addition, many customers now expect a choice of delivery systems and channels, including home computer, mobile, remote deposit, telephone, ATMs, mail, full-service branches and/or in-store branches. The sources of competition in such products include traditional banks as well as savings associations, credit unions, brokerage firms, money market and other mutual funds, asset management groups, finance and insurance companies, fintechs and mortgage banking firms.
Our strategy is to counter rising competition by providing our own style of community-oriented, personalized service. We rely on local promotional activity, personal contacts by our officers, directors, employees, and shareholders, automated 24-hour banking, and the individualized service that we can provide through our flexible policies. This approach appears to be well-received by our customers who appreciate a more personal and customer-oriented environment in which to conduct their financial transactions. To meet the needs of customers who prefer to bank electronically, we offer telephone banking, mobile banking, remote deposit, mobile deposit, and internet banking with bill payment capabilities. This high tech and high touch approach allows customers to tailor their access to our services based on their particular preferences.
Employees. At December 31, 2024, we employed 197 persons. On a full-time equivalent basis, we employed 183 persons. While we expect to hire additional employees as we grow or as a result of attrition, we believe our human capital resources are adequate to support our current business. None of our employees are represented by a labor union, and management considers its relations with employees to be good.
Code of Ethics. Our Board of Directors has adopted a code of business conduct and ethics for directors, officers (including the Company’s principal executive officer and principal financial officer) and financial personnel, known as the Corporate Governance Code of Ethics. This policy is available on our website at www.plumasbank.com. Shareholders may request a free copy of this policy from Plumas Bancorp, Ms. Jamie Huynh, Assistant Corporate Secretary, 5525 Kietzke Lane, Suite 100, Reno, Nevada, 89511.
Supervision and Regulation
General.
As a banking organization, we are extensively regulated under federal and state law. These laws and regulations are generally intended to protect our customers and the financial system and not our shareholders. Our operations may be affected by legislative changes and by the policies of various regulatory authorities. Any change in applicable laws or regulations may have a material effect on our business and prospects. We cannot accurately predict the nature or the extent of the effects on our business and earnings that fiscal or monetary policies, or new federal or state legislation may have in the future. The following summaries of statutes and regulations are qualified in their entirety by reference to the particular statute or regulation.
Holding Company Regulation. The Company is a registered bank holding company under the Bank Holding Company Act of 1956, as amended, and is subject to supervision and regulation by the Board of Governors of the Federal Reserve System (the “FRB”). We are required to file reports with the FRB and the FRB periodically examines the Company. A bank holding company is required to serve as a source of financial and managerial strength to its subsidiary bank and, under appropriate circumstances, to commit resources to support its subsidiary bank. FRB regulations and policies require the Company to meet or exceed certain capital requirements and regulate provisions of certain bank holding company debt. The Company is also a bank holding company for purposes of the California Financial Code, so the Company and its subsidiaries are also subject to supervision and examination by the California Department of Financial Protection and Innovation (“DFPI”).
The activities of bank holding companies are generally limited to the business of banking, managing or controlling banks, and other activities that the FRB has determined to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Bank holding companies that qualify and register as “financial holding companies” are also able to engage in certain additional financial activities, such as merchant banking and securities and insurance underwriting, subject to limitations set forth in federal law. The Company has not elected to become a financial holding company. As a bank holding company, the Company must obtain prior approval of the FRB before taking any action that causes a bank to become a controlled subsidiary of the bank holding company, acquiring direct or indirect ownership of 5% of the outstanding shares of any class of voting securities of another bank or bank holding company, acquiring all or substantially all the assets of a bank or merging or consolidating with another bank holding company.
Federal and State Bank Regulation. As a California-chartered commercial bank that is a member of the Federal Reserve System, the Bank is subject to the supervision and regulation of the DFPI and the FRB, as well as certain of the regulations of the FDIC and the Consumer Financial Protection Bureau (“CFPB”). The DFPI and the FRB regularly examine the Bank and may prohibit the Bank from engaging in what they believe constitutes unsafe or unsound banking practices or violations of law.
As a member of the Federal Reserve System, the Bank is required to purchase and maintain stock in the Federal Reserve Bank of San Francisco in an amount equal to 3.00% of the paid-up capital stock and surplus of the Bank and have available another 3.00% in reserves. At December 31, 2024, the Bank had $1.4 million in stock of the Federal Reserve Bank of San Francisco in compliance with this requirement.
Capital Adequacy. The federal banking agencies have adopted risk-based capital adequacy guidelines intended to measure capital relative to the degree of risk associated with a banking organization’s operations for both transactions reported on the balance sheet as assets, and transactions, such as letters of credit and recourse arrangements, which are reported as off-balance-sheet items. Under these guidelines, nominal dollar amounts of assets and credit equivalent amounts of off-balance-sheet items are multiplied by one of several risk adjustment percentages, which range from 0% for assets with low credit risk, such as certain U.S. government securities, to 100% for assets with relatively higher credit risk, such as business loans.
A banking organization’s risk-based capital ratios are calculated by dividing its qualifying capital by its total risk-adjusted assets and off-balance-sheet items. The regulators measure risk-adjusted assets and off-balance-sheet items against common equity Tier 1 capital, Tier 1 capital and total qualifying capital (the sum of Tier 1 capital and limited amounts of Tier 2 capital). Common equity Tier 1 capital generally consists of common stock and retained earnings. Tier 1 capital consists of common stock, retained earnings, noncumulative perpetual preferred stock and minority interests in certain subsidiaries, less most other intangible assets. Tier 2 capital may consist of a limited amount of the allowance for credit losses and certain other instruments with some characteristics of equity. The inclusion of elements of Tier 2 capital is subject to certain other requirements and limitations of the federal banking agencies.
If a bank does not maintain the required capital levels, federal banking regulators, as well as the DFPI, may issue a capital directive or take other enforcement measures to ensure the maintenance of required capital levels. Federal law requires, among other things, that federal bank regulators take “prompt corrective action” with respect to banks that do not meet minimum capital requirements. For this purpose, the law establishes five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. At each successive lower capital category, a bank is subject to more restrictions and prohibitions, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on payment of dividends, and restrictions on the acceptance of brokered deposits. Furthermore, if an insured depository institution is classified in one of the undercapitalized categories, it is required to submit a capital restoration plan to the appropriate federal banking agency, and the holding company and any other company deemed to control the bank must guarantee the performance of that plan.
The federal bank regulatory agencies’ risk-based capital adequacy guidelines, sometimes called “Basel III,” establish minimum regulatory capital requirements for bank holding companies and depository institutions. The Basel III capital rules include a minimum common equity Tier 1 ratio of 4.5%, a Tier 1 capital ratio of 6.0%, a total risk-based capital ratio of 8.0%, and a minimum leverage ratio of 4.0% (calculated as Tier 1 capital to average consolidated assets). The minimum capital levels required to be considered “well capitalized” include a common equity Tier 1 ratio of 6.5%, a Tier 1 risk-based capital ratio of 8.0%, a total risk-based capital ratio of 10.0% and a leverage ratio of 5.0%. In addition, the Basel III capital rules require that banking organizations maintain a capital conservation buffer of 2.5% above the minimum capital requirements in order to avoid restrictions on their ability to pay dividends, repurchase stock or pay discretionary bonuses. Including the capital conservation buffer of 2.5%, the Basel III capital rules require the following minimum ratios for a bank holding company or bank to be considered “well capitalized”: a common equity Tier 1 capital ratio of 7.0%; a Tier 1 capital ratio of 8.5%, and a total capital ratio of 10.5%. At December 31, 2024, the Company’s and the Bank’s capital ratios exceed the thresholds necessary to be considered “well capitalized” under the Basel III framework.
Under the FRB’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement, qualifying bank holding companies with less than $3 billion in consolidated assets are exempt from the Basel III consolidated capital rules. The Company qualifies for treatment under this policy and is not currently subject to the Basel III consolidated capital rules at the bank holding company level. The Basel III capital rules continue to apply to the Bank.
For additional information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Capital Standards.”
Dividends and Stock Repurchases. The Company’s ability to pay cash dividends is limited by California law and is dependent on dividends it may receive from the Bank. The California General Corporation Law permits a California corporation such as the Company to make a distribution to its shareholders if its retained earnings equal at least the amount of the proposed distribution or if after giving effect to the distribution, the value of the corporation’s assets exceeds the amount of its liabilities plus the amount of shareholders preferences, if any, and certain other conditions are met.
It is the FRB’s policy that bank holding companies should generally pay dividends on common stock only out of current income and only if prospective earnings support the organization’s expected future needs and financial condition. Further, it is the FRB’s policy that bank holding companies should not maintain dividend levels that undermine their ability to be a source of strength to their banking subsidiaries. The FRB also discourages dividend payment ratios that are at maximum allowable levels unless both asset quality and capital are very strong.
The Bank is a legal entity that is separate and distinct from its holding company. The Company depends on the performance of the Bank for funds which may be received as dividends from the Bank for use in the operation of the Company and the ability of the Company to pay dividends to shareholders. Future cash dividends by the Bank will also depend upon management’s assessment of future capital requirements, contractual restrictions, and other factors.
The California Financial Code restricts the dividends that the Bank may pay to the Company to the lesser of the Bank’s retained earnings or the Bank’s net income for the latest three fiscal years, less dividends previously declared during that period, or, with the approval of the DFPI, to the greater of the retained earnings of the Bank, the net income of the Bank for its last fiscal year, or the net income of the Bank for its current fiscal year. As of December 31, 2024, the maximum amount available for dividend distribution under this restriction was approximately $58 million. In addition, the Bank is subject to the Basel III capital rules and the capital conservation buffer discussed above.
The foregoing restrictions and limitations on dividends similarly restrict the Company’s ability to repurchase shares of its common stock.
Loans-to-One Borrower. Under California law, the Bank’s ability to make aggregate secured and unsecured loans-to-one-borrower is limited to 25% and 15%, respectively, of unimpaired capital and surplus. At December 31, 2024, the Bank’s limit on aggregate secured loans-to-one-borrower was $48 million and unsecured loans-to-one borrower was $29 million. The Bank has established internal loan limits that are lower than its legal lending limits.
The Community Reinvestment Act. The Community Reinvestment Act (“CRA”) requires the federal banking regulators to evaluate the record of depository institutions in meeting the credit needs of their local communities, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of those institutions. Federal banking regulators consider the Bank’s CRA performance in evaluating applications for mergers, acquisitions and to establish new branches. A less than “Satisfactory” rating would likely result in the suspension of any growth of the Bank through acquisitions or opening de novo branches until the rating is improved. The Bank’s most recent CRA rating was “Satisfactory.”
Transactions with Affiliates. The Bank is subject to certain restrictions imposed by the Federal Reserve Act on extensions of credit to executive officers, directors, principal shareholders (including the Company) or any related interest of such persons. Extensions of credit must be made on substantially the same terms, including interest rates and collateral, as, and follow credit underwriting procedures that are not less stringent than, those prevailing at the time for comparable transactions with persons not affiliated with the Bank, and must not involve more than the normal risk of repayment or present other unfavorable features. Banks are also subject to certain lending limits and restrictions on overdrafts to such persons. A violation of these restrictions may result in the assessment of substantial civil monetary penalties on the affected bank or any officer, director, employee, agent or other person participating in the conduct of the affairs of that bank, the imposition of a cease and desist order, and other regulatory sanctions.
The Federal Reserve Act and the FRB’s Regulation W limit the amount of certain loan and investment transactions between the Bank and its affiliates, require certain levels of collateral for such loans, and limit the amount of advances to third parties that may be collateralized by the securities of the Company or its subsidiaries. Regulation W requires that certain transactions between the Bank and its affiliates be on terms substantially the same, or at least as favorable to the Bank, as those prevailing at the time for comparable transactions with or involving nonaffiliated companies or, in the absence of comparable transactions, on terms and under circumstances, including credit standards, that in good faith would be offered to or would apply to nonaffiliated companies.
Safety and Soundness Standards. The federal banking regulators have adopted non-capital safety and soundness standards for institutions. These standards cover internal controls, information and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, and standards for asset quality, earnings and stock valuation. An institution that fails to meet these standards must develop a plan acceptable to the agency, specifying the steps that it will take to meet the standards. Failure to submit or implement such a plan may subject the institution to regulatory enforcement actions, including civil money penalties.
Concentrations in Commercial Real Estate Lending. The federal banking regulators have issued guidance to identify institutions that may be exposed to potential significant commercial real estate lending risks and may therefore warrant greater supervisory scrutiny. The guidance includes the following numerical tests:
● total reported loans for construction, land development and other land represent 100% or more of the institution’s total risk-based capital, or
● total commercial real estate loans represent 300% or more of the institution’s total risk-based capital, and the outstanding balance of the institution’s commercial real estate loan portfolio has increased by 50% or more during the previous 36 months.
The guidance does not limit a bank’s levels of commercial real estate lending activities, but rather guides institutions in developing risk management practices and levels of capital that are commensurate with the level and nature of their commercial real estate concentrations. Banking regulators expect banks with concentrations of commercial real estate loans to maintain appropriate underwriting discipline, risk-management and capital commensurate with the level and nature of their commercial real estate risks.
Federal Deposit Insurance. The FDIC insures the Bank’s deposits, up to prescribed statutory limits, through the Deposit Insurance Fund, currently $250,000 per depositor per institution. The Deposit Insurance Fund is funded primarily by FDIC assessments paid by the insured depository institution. The amount of FDIC assessments paid by a depository institution is based on its relative risk of default as measured by regulatory capital ratios and other supervisory factors. The Bank’s FDIC insurance expense totaled $750 thousand for 2024.
While the FRB is the Bank’s primary federal regulator, as a federally insured depository institution, the Bank is also subject to certain regulations of and supervision by the FDIC. The FDIC may terminate a depository institution’s deposit insurance upon a finding that the institution’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices that pose a risk to the Deposit Insurance Fund or that may prejudice the interest of the institution’s depositors. Under California law, the termination of the Bank’s deposit insurance would result in a termination of the Bank’s charter.
Consumer Protection Laws and Regulations. The bank regulatory agencies continue to focus greater attention on compliance with consumer protection laws and their implementing regulations. Examination and enforcement have become more intense in nature, and insured institutions have been advised to carefully monitor compliance with such laws and regulations. The Company is subject to many federal and state consumer protection and privacy statutes and regulations, including but not limited to the following:
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The Equal Credit Opportunity Act generally prohibits discrimination in any credit transaction, whether for consumer or business purposes, on the basis of race, color, religion, national origin, sex, marital status, age (except in limited circumstances), receipt of income from public assistance programs, or good faith exercise of any rights under the Consumer Credit Protection Act.
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The Truth in Lending Act (“TILA”) is designed to ensure that credit terms are disclosed in a meaningful way so that consumers may compare credit terms more readily and knowledgeably. As a result of the TILA, all creditors must use the same credit terminology to express rates and payments, including the annual percentage rate, the finance charge, the amount financed, the total of payments and the payment schedule, among other things. As a result of the Dodd-Frank Act, Regulation Z promulgated under the TILA includes numerous requirements regarding consumer mortgage origination and services. These changes include underwriting standards, mandated disclosures, fee limitations, prohibiting certain payments to a mortgage broker or loan officer based on the transaction’s terms or conditions other than its principal amount and prohibiting dual compensation and prohibiting a mortgage broker or loan officer from ‘‘steering’’ consumers to transactions not in their interest to increase mortgage broker or loan officer compensation.
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The Fair Housing Act (“FH Act”) regulates many practices, including making it unlawful for any lender to discriminate in its housing-related lending activities against any person because of race, color, religion, national origin, sex, handicap or familial status. A number of lending practices have been found by the courts to be, or may be considered, illegal under the FH Act, including some that are not specifically mentioned in the FH Act itself.
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The Home Mortgage Disclosure Act (“HMDA”), in response to public concern over credit shortages in certain urban neighborhoods, requires public disclosure of information that shows whether financial institutions are serving the housing credit needs of the neighborhoods and communities in which they are located. The HMDA also includes a “fair lending” aspect that requires the collection and disclosure of data about applicant and borrower characteristics as a way of identifying possible discriminatory lending patterns and enforcing anti-discrimination statutes.
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The Right to Financial Privacy Act imposes a new requirement for financial institutions to provide new privacy protections to consumers. Financial institutions must provide disclosures to consumers of its privacy policy and state the rights of consumers to direct their financial institution not to share their nonpublic personal information with third parties.
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The Real Estate Settlement Procedures Act (“RESPA”) requires lenders to provide noncommercial borrowers with disclosures regarding the nature and cost of real estate settlements. Also, RESPA prohibits certain abusive practices, such as kickbacks, and places limitations on the amount of escrow accounts.
Penalties for noncompliance or violations under the above laws may include enforcement actions, fines, customer reimbursement and other penalties. Violations of consumer laws may also adversely affect the Bank’s CRA rating. Due to heightened regulatory expectations related to compliance generally, the Company may incur additional compliance costs.
The Dodd-Frank Act created the CFPB as an independent federal agency with broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws. The CFPB has examination and primary enforcement authority with respect to depository institutions with $10 billion or more in assets. Smaller institutions, including the Bank, are generally subject to rules promulgated by the CFPB but continue to be examined and supervised by their primary federal banking regulators for consumer compliance purposes.
Anti-Money Laundering Laws. A series of banking laws and regulations beginning with the Bank Secrecy Act require banks to prevent, detect, and report illicit or illegal financial activities to the federal government to prevent money laundering, international drug trafficking, and terrorism. Under the US PATRIOT Act of 2001 (the “Patriot Act”), financial institutions are subject to prohibitions against specified financial transactions and account relationships, requirements regarding the Customer Identification Program, as well as enhanced due diligence and “know your customer” standards in their dealings with high-risk customers, foreign financial institutions, and foreign individuals and entities. These rules also mandate a variety of record keeping, reporting and employee training requirements. The Patriot Act also requires federal bank regulators to evaluate the effectiveness of an applicant in combating money laundering when determining whether to approve a proposed bank acquisition or merger.
Privacy and Data Security. The Gramm-Leach Bliley Act of 1999 (“GLBA”) imposes requirements on financial institutions with respect to consumer privacy. The GLBA generally prohibits disclosure of consumer information to non-affiliated third parties unless the consumer has been given the opportunity to object and has not objected to such disclosure. Financial institutions are further required to disclose their privacy policies to consumers annually. The Bank is required to have an information security program to safeguard the confidentiality and security of customer information and to ensure proper disposal of information that is no longer needed. Customers must be notified when unauthorized disclosure involves sensitive customer information that may be misused.
Potential Enforcement Actions; Supervisory Agreements. Under federal law, the Company, the Bank and their institution-affiliated parties may be the subject of potential enforcement actions by the federal banking regulators for unsafe and unsound practices in conducting their businesses, or for violations of any law, rule or regulation or provision, any consent order with any agency, any condition imposed in writing by the agency or any written agreement with the agency. Enforcement actions may include the imposition of a conservator or receiver, cease-and-desist orders and written agreements, the termination of insurance of deposits, the imposition of civil money penalties, the payment of restitution and removal and prohibition orders against institution-affiliated parties. The DFPI also has authority to bring similar enforcement actions against the Bank.
Legislation and Proposed Changes. From time to time, legislation is enacted which has the effect of increasing the cost of doing business, limiting or expanding permissible activities or affecting the competitive balance between banks and other financial institutions. Proposals to change the laws and regulations governing the operations and taxation of banks, bank holding companies and other financial institutions are frequently made in Congress, in the California legislature and before various bank regulatory agencies. Typically, the intent of this type of legislation is to strengthen the banking industry, even if it may on occasion prove to be a burden on management’s plans. No prediction can be made as to the likelihood of any major changes or the impact that new laws or regulations might have on us.
Effects of Government Monetary Policy. Our earnings and growth are affected not only by general economic conditions, but also by the fiscal and monetary policies of the federal government, particularly the FRB. The FRB implements national monetary policy for such purposes as curbing inflation and combating recession, through its open market operations in U.S. Government securities, control of the discount rate applicable to borrowings from the FRB, and establishment of reserve requirements against certain deposits. These activities influence growth of bank loans, investments and deposits, and also affect interest rates charged on loans or paid on deposits. The Company’s profitability, like most financial institutions, is primarily dependent on interest rate spreads. In general, the difference between the interest rates paid by the Bank on interest-bearing liabilities, such as deposits and other borrowings, and the interest rates received by the Bank on interest-earning assets, such as loans extended to customers and securities held in the investment portfolio, will comprise the major portion of the Company’s earnings. These rates are highly sensitive to many factors that are beyond our control, such as inflation, recession and unemployment, the monetary and fiscal policies of the federal government and the policies of regulatory agencies, particularly the FRB, and the impact which future changes in domestic and foreign economic conditions might have on us cannot be predicted. The nature and impact of future changes in monetary policies and their impact on us cannot be predicted with certainty.
Recent Accounting Pronouncements
See Note 2 - “Summary of Significant Accounting Policies - Adoption of New Accounting Standards” of the Company’s Consolidated Financial Statements in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K for information related to recent accounting pronouncements.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
Risks Relating to our Business and Industry
The majority of our assets are loans, which are subject to credit risks and potential losses.
The Bank, like other lenders, is subject to credit risk, which is the risk of losing principal or interest due to borrowers’ failure to perform their obligations in accordance with the terms of their credit agreements. Underwriting and documentation controls cannot mitigate all credit risk. Accordingly, our results of operations will be directly affected by the volume and timing of loan losses, which for several reasons can vary from period to period. The risks of loan losses may be exacerbated by a downturn in the economy or the real estate market in our market areas or a rapid increase in interest rates, which could have a negative effect on collateral values and borrowers’ ability to repay. To the extent borrowers do not timely pay our loans, the loans are placed on non-accrual status, thereby reducing interest income. Further, under these circumstances, we may be required to make an additional provision for loan and lease losses or unfunded commitments, which could reduce our income and capital. See Management’s Discussion and Analysis of Financial Condition and Results of Operations - “Analysis of Asset Quality and Allowance for Credit Losses”.
A deterioration of national or local economic conditions could reduce our profitability.
Our lending operations and customers are primarily located in the eastern region of Northern California and Northern Nevada. As a result, a significant majority of the loans in our loan portfolios as of December 31, 2024, were secured by properties and collateral located within these regions. As of such date, approximately 92% of the loans in our loan portfolio were made to borrowers who primarily conduct business or live in Northern California or Northern Nevada. This geographic concentration imposes risks from lack of geographic diversification, as adverse economic developments in Northern California or Northern Nevada, among other things, could affect the volume of loan originations, increase the level of nonperforming assets, increase the rate of foreclosure losses on loans and reduce the value of our loans and the underlying collateral. Any regional or local economic downturn affecting Northern California or Northern Nevada or existing or prospective borrowers or property values in such areas may affect us and our profitability more significantly and more adversely than depository organizations whose operations are less geographically concentrated. A significant downturn in the national economy or the local economy due to the real estate market, public policy decisions, agricultural commodity prices, natural disaster, fires, drought or other factors could result in a decline in the local economy in general, which could in turn negatively impact our business, financial condition, results of operations and prospects.
If our allowance for credit losses is not sufficient to absorb actual loan losses, our profitability could be reduced.
The risk of loan losses is inherent in the lending business. We maintain an allowance for credit losses based upon our actual losses over a relevant time period and management’s assessment of all relevant qualitative factors that may cause future loss experience to differ from our historical loss experience. Although we maintain a rigorous process for determining the allowance for credit losses, we cannot be certain that it will be sufficient to cover future loan losses. If our allowance for credit losses is not adequate to absorb future losses, or if bank regulatory agencies require us to increase our allowance for credit losses, our earnings could be significantly and adversely impacted.
A deterioration in the real estate market could have a material adverse effect on our business, financial condition and results of operations.
As of December 31, 2024, approximately 77% of our total loan portfolio is secured by real estate, the majority of which is commercial real estate. The market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in the area in which the real estate is located. Adverse changes affecting real estate values and the liquidity of real estate in our markets could increase the credit risk associated with our loan portfolio and could result in losses that would adversely affect credit quality, financial condition, and results of operation. Negative changes in the economy affecting real estate values and liquidity in our market areas could significantly impair the value of property pledged as collateral on loans and affect our ability to sell the collateral upon foreclosure without a loss or additional losses. Collateral may have to be sold for less than the outstanding balance of the loan, which could result in losses on such loans. Declines in real estate market values or increases in commercial and consumer delinquency levels could require increased net charge-offs which could adversely affect our financial condition, results of operations and cash flows.
Inflationary pressures and rising prices may affect our results of operations and financial condition.
Inflation began to rise sharply at the end of 2021 and has remained at an elevated level through 2024. Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses. Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition. Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which could adversely affect our results of operations and financial condition.
Changes in interest rates could reduce our business and profitability.
Although we maintain a rigorous process for managing the impact of possible interest rate fluctuations on earnings, there is a risk that despite our efforts, our earnings could be significantly and adversely impacted by changes in interest rates.
Our earnings depend largely upon net interest income, which is the difference between the total interest income earned on interest earning assets (primarily loans and investment securities) and the total interest expense incurred on interest bearing liabilities (primarily deposits and borrowed funds). The rate of interest that we earn on assets and pay on liabilities is affected principally by direct competition, and general economic conditions at the state and national level and other factors beyond our control such as actions of the FRB, the general supply of money in the economy, legislative tax policies, governmental budgetary matters, and other state and federal economic policies.
In a period of rising interest rates, the interest income we earn on our assets may not increase as rapidly as the interest expense we incur on our liabilities. Likewise, in a period of falling interest rates, the interest expense we incur on our liabilities may not decrease as rapidly as the interest income we earn on our assets. Historically, our liabilities have shorter contractual maturities than our assets. This creates a potential imbalance as interest rates change over time, which can create significant earnings volatility. Such an occurrence would have a material adverse effect on our net interest income and our results of operations.
Interest rate increases often result in larger payment requirements for our borrowers, increasing the potential for default. At the same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting from higher interest rates.
Changes in interest rates can also affect the average life of our loans. A reduction in interest rates causes increased prepayments of loans as borrowers tend to refinance their debt to reduce their borrowing costs. This creates reinvestment risk, which is the risk that we may not be able to reinvest the funds from faster prepayments at rates that are comparable to the rates earned on the prepaid loans.
Changes in interest rates also affect the value of our interest-earning assets, particularly our investment securities portfolio. Generally, the value of fixed-rate securities fluctuates inversely with changes in interest rates, so the market value of our investment securities may fall as interest rates rise. Unrealized gains and losses on securities available for sale are reported as a separate component of equity, net of tax. Stockholders’ equity, specifically accumulated other comprehensive income (loss) (“AOCI”), is increased or decreased by the amount of change in the estimated fair value of our securities available for sale, net of deferred income taxes. Decreases in the fair value of securities available for sale resulting from increases in interest rates could have an adverse effect on shareholders’ equity.
A lack of liquidity could adversely affect our operations and jeopardize our business, financial condition and results of operations.
Liquidity is essential to our business. We rely on our ability to generate deposits and effectively manage the repayment and maturity schedules of our loans and investment securities, respectively, to ensure that we have adequate liquidity to fund our operations. An inability to raise funds through deposits, borrowings, securities sales, Federal Reserve Bank advances, the sale of loans and other sources could have a substantial negative effect on our liquidity. Our most important source of funding consists of deposits. Deposit balances may decrease if customers seek higher investment returns or choose to move deposits to other banks or investments that are perceived as having lower risks. If customers move money out of bank deposits and into other investments, then we would lose a relatively low-cost source of funds, increasing our funding costs and reducing our net interest income and net income.
Other primary sources of funds consist of cash flows from operations, investment maturities and sales, loan repayments, and proceeds from the issuance and sale of any equity and debt securities to investors. Additional liquidity is provided by the ability to borrow from the Federal Reserve Bank of San Francisco and the Federal Home Loan Bank and our ability to raise brokered deposits. We also may borrow funds from third-party lenders, such as other financial institutions. Our access to funding sources in amounts adequate to finance or capitalize our activities, or on terms that are acceptable to us, could be impaired by factors that affect us directly or the bank or non-bank financial services industries or the economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the bank or non-bank financial services industries.
Based on experience, we believe that our deposit accounts are relatively stable sources of funds. If we increase interest rates paid to retain deposits, our earnings may be adversely affected, which could have an adverse effect on our business, financial condition and results of operations.
Significant declines in available funding could adversely affect our ability to originate loans, invest in securities, pay our expenses, distribute dividends to our shareholders, and fulfill our debt obligations or deposit withdrawal demands. In addition, a lack of liquidity could result in the sale of securities in an unrealized loss position. All of these factors could have a material adverse impact on our liquidity, business, financial condition and results of operations.
A reduction in the value, or impairment of our investment securities, can impact our earnings and common shareholders’ equity.
Generally Accepted Accounting Principles (“GAAP”) requires that we carry our available-for-sale investment securities at fair value on our balance sheet. Unrealized gains or losses on these securities, reflecting the difference between the fair market value and the amortized cost, net of its tax effect, are reported as a component of shareholders’ equity. In certain instances, GAAP requires recognition through earnings of declines in the fair value of securities that are deemed to be other than temporarily impaired. Changes in the fair value of these securities may result from a number of circumstances that are beyond our control, such as changes in interest rates, the financial condition of municipalities, government sponsored enterprises or insurers of municipal bonds, changes in demand for these securities as a result of economic conditions, or reduced market liquidity. If our investment securities decline in market value and impairments of these assets results, we could be required to recognize a loss which could have a material adverse effect on our net income and capital levels.
Adverse developments affecting the banking industry have eroded customer confidence in the banking system and could have a material effect on our operations and/or stock price.
The recent high-profile failures of several depository institutions may have negatively impacted customer confidence in the safety and soundness of some regional and community banks. As a result, we face that risk that customers may prefer to maintain deposits with larger financial institutions or invest in short-term fixed income securities instead of deposits with the Bank, either of which could materially adversely impact our liquidity, cost of funding, capital, and results of operations. In response to the failures of other depository institutions, we may face increased regulation and supervisory oversight, higher capital or liquidity requirements or a heightened risk of regulatory enforcement activities, any of which could have a material impact on our business. Further, our costs of deposit insurance may increase as a result of these bank failures and the resulting losses to the FDIC’s Deposit Insurance Fund. In addition, concerns about the banking industry’s operating environment and the public trading prices of bank holding companies are often correlated, particularly during times of financial stress, which could adversely impact the trading price of our common stock.
We could be required to raise additional capital in the future, but that capital may not be available when it is needed or may not be available on terms that are favorable to us or our existing shareholders.
As a depository organization, we must meet significant regulatory capital requirements and maintain sufficient liquidity. We may need to raise additional capital in the future to provide us with sufficient capital resources and liquidity to meet our commitments and business needs. Our ability to raise additional capital depends on conditions in the capital markets, economic conditions, and a number of other factors, including investor perceptions regarding the banking industry, market conditions and governmental activities, and on our financial condition and performance. Accordingly, we cannot assure that we will be able to raise additional capital if needed or on terms acceptable to us. If we fail to maintain capital to meet regulatory requirements, our financial condition, liquidity and results of operations would be materially and adversely affected.
The markets in which we operate are subject to the risks of drought, fires, earthquakes and other natural disasters.
The occurrence of catastrophic weather events or pandemics could adversely affect our financial condition or results of operations. Most of our offices are located in California, as are most of the real and personal properties securing our loans. The areas in which we operate and lend in California and Nevada are prone to earthquakes, fires, flooding and other natural disasters. In addition to possibly sustaining damage to its own properties, if there is a major earthquake, fire, flood or other natural disaster, we face the risk that many of our borrowers may experience uninsured property losses, or sustained job interruption and/or loss which may materially impair their ability to meet the terms of their loan obligations. Therefore, a major earthquake, fire, flood or other natural disaster in California or Nevada could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Over the past decade, California has experienced a severe drought, though drought conditions have lessened in the past few years. A significant portion of our borrowers are involved in or are dependent on the agricultural industry in California, which requires water. As of December 31, 2024, approximately 13% of our loans were categorized as agricultural loans. As a result of the drought, there have been governmental proposals concerning the distribution or rationing of water. If the amount of water available to agriculture becomes scarcer due to drought or rationing, growers may not be able to continue to produce agricultural products profitably, which could force some out of business. Although many of our customers are not directly involved in agriculture, they could be impacted by difficulties in the agricultural industry because many jobs and businesses in our market areas are related to the production of agricultural products. Therefore, a drought could adversely impact our loan portfolio, business, financial condition and results of operations.
We face substantial competition from larger banks and other financial institutions.
We face substantial competition for deposits and loans. Competition for deposits primarily comes from other commercial banks, savings institutions, thrift and loan associations, credit unions, money market and mutual funds and other investment alternatives. Competition for loans comes primarily from other commercial banks, savings institutions, credit unions, mortgage banking firms, thrift and loan associations and increasingly “fintech” lending platforms. Larger competitors with larger capital resources have substantially greater resources to invest in technology and marketing and higher lending limits than us. In addition, with greater financial resources, they may be able to offer longer maturities or lower rates. Our competitors may also provide certain products and services for their customers, such as technological solutions, trust services and international banking, that we are unable to offer or may only be able to offer indirectly through correspondent relationships. Ultimately, competition can reduce our profitability, as well as make it more difficult to increase the size of our loan portfolio and deposit base.
Our growth strategy involves risks.
In January 2025, we announced our proposed merger with Cornerstone Community Bancorp. In July 2021 we completed the acquisition of Bank of Feather River and in 2023 we opened a new branch in Chico California. Previously, during the last ten years we completed two branch purchase and assumption transactions, the establishment of a new branch office in Reno, Nevada and a loan production office in Klamath Falls, Oregon. We may engage in additional acquisition activity and open additional offices in the future to expand our markets and further our growth strategy. Acquiring other banks or branches involves various other risks commonly associated with acquisitions including difficulty in estimating the value of the business to be acquired, integrating the operations, and retaining key employees and customers. We cannot assure that future acquisitions or new offices will be successful. Further, growth may strain our administrative, managerial, financial and operational resources and increase demands on our systems and controls. If we pursue our growth strategy too aggressively or fail to attract qualified personnel, control costs or maintain asset quality, or if factors beyond management’s control divert attention away from our business operations, our pursuit of growth could have a material adverse impact on our business. See “Risks Related to Our Proposed Acquisition of Cornerstone Community Bancorp.”
Our accounting estimates and risk management processes rely on analytical and forecasting models.
The processes we use to estimate expected credit losses on loans and investment securities, and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates and other market measures on our financial condition and results of operations, depends upon the use of analytical and forecasting models. These models reflect assumptions that may not be accurate, particularly in times of market volatility or other unforeseen circumstances. Even if these assumptions are adequate, the models may prove to be inadequate or inaccurate because of other flaws in their design or their implementation. If the models we use for interest rate risk and asset-liability management are inadequate, we may incur increased or unexpected losses upon changes in market interest rates or other market factors. If the models we use for determining our expected credit losses on loans and investment securities are inadequate, the allowance for credit losses may not be sufficient to support future charge-offs. If the models we use to measure the fair value of financial instruments are inadequate, the fair value of such financial instruments may fluctuate unexpectedly or may not accurately reflect what we could realize upon sale or settlement of such financial instruments. Any such failure in our analytical or forecasting models could have a material adverse effect on our business, financial condition and results of operations.
The accuracy of our financial statements and related disclosures could be affected if the judgments, assumptions or estimates used in our critical accounting policies are inaccurate.
The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. Our critical accounting policies, which are included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” describe those significant accounting policies and methods used in the preparation of our consolidated financial statements that we consider critical because they require judgments, assumptions and estimates that materially affect our consolidated financial statements and related disclosures. As a result, if future events or regulatory views concerning such analysis differ significantly from the judgments, assumptions and estimates in our critical accounting policies, those events or assumptions could have a material impact on our consolidated financial statements and related disclosures, in each case resulting in our need to revise or restate prior period financial statements, cause damage to our reputation and the price of our common stock and adversely affect our business, financial condition and results of operations.
Cybersecurity breaches and technological disruptions could damage our reputation and profitability.
Our electronic banking activities expose us to possible liability and harm to our reputation should an unauthorized party gain access to confidential customer information. Despite our considerable efforts and investment to provide the security and authentication necessary to effect secure transmission of data, we cannot guarantee that these precautions will protect our systems from security compromises or breaches. Although we have developed systems and processes that are designed to recognize and assist in preventing security breaches (and periodically test our security), a failure to protect against or mitigate breaches of security could adversely affect our ability to offer and grow our online services, constitute a breach of privacy or other laws, result in costly litigation and loss of customer relationships, negatively impact our reputation, and could have an adverse effect on our business, results of operations and financial condition. We may also incur substantial increases in costs in an effort to minimize or mitigate cybersecurity risks and to respond to cyber incidents.
The potential for operational risk exposure exists throughout our business. Integral to our performance is the continued efficacy of our technology and information systems, operational infrastructure and relationships with third parties and colleagues in day-to-day and ongoing operations. A failure by any or all of these resources subjects us to risks that may vary in size, scale and scope. This includes, but is not limited to, operational or systems failures, disruption of client operations and activities, ineffectiveness or exposure due to interruption in third party support as well as the loss of key colleagues or failure on the part of key colleagues to perform properly. The continued evolution and increased use of artificial intelligence technologies may further increase these risks.
Technology is changing rapidly and may put us at a competitive disadvantage.
The banking industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. Effective use of technology increases efficiency and enables banks to better serve customers. Our future success depends, in part, on our ability and the ability of our third-party partners to effectively implement new technology. The widespread adoption of new technologies, including mobile banking services, artificial intelligence, cryptocurrencies and payment systems, could require us in the future to make substantial expenditures to modify or adapt our existing products and services as we grow and develop new products to satisfy our customers’ expectations and comply with regulatory guidance. Many of our larger competitors have substantially greater resources than we do to invest in technological improvements. As a result, they may be able to offer, or more quickly offer, additional or superior products that could put us at a competitive disadvantage.
The use of artificial intelligence in our marketplace may result in reputational harm or liability, or could otherwise adversely affect our business.
Artificial intelligence, including generative artificial intelligence, is or may be enabled by or integrated into our products and services or those developed by our third-party partners. As with many developing technologies, artificial intelligence presents risks and challenges that could affect its further development, adoption, and use, and therefore our business. Artificial intelligence algorithms may be flawed, for example datasets may contain biased information or otherwise be insufficient; and inappropriate or controversial data practices could impair the acceptance of artificial intelligence solutions and result in burdensome new regulations. If the analyses that products incorporating artificial intelligence assist in producing for us or our third-party partners are deficient, biased or inaccurate, we could be subject to competitive harm, potential legal liability and brand or reputational harm. The use of artificial intelligence may also present ethical issues. If we or our third-party partners offer artificial intelligence enabled products that are controversial because of their purported or real impact on human rights, privacy, or other issues, we may experience competitive harm, potential legal liability and brand or reputational harm. In addition, we expect that governments will continue to assess and implement new laws and regulations concerning the use of artificial intelligence, which may affect or impair the usability or efficiency of our products and services and those developed by our third-party partners.
We face risks relating to our reliance on third party vendors.
We outsource a large portion of our data processing to third parties who may encounter technological or other difficulties that could in turn significantly limit or affect our ability to process and account for customer transactions. These vendors provide services that support our operations, including the storage and processing of sensitive consumer and business customer data, as well as our sales efforts. A cyber security breach of a vendor’s system may result in theft of our data or disruption of business processes. In most cases, we would be primarily liable to our customers for losses arising from a breach of a vendor’s data security system.
We also rely on our outsourced service providers to implement and maintain prudent cyber security controls. The loss of these vendor relationships could disrupt the services we provide to customers and cause us to incur significant expense in connection with replacing these services.
The Company depends primarily on the operations of the Bank to pay dividends, repurchase shares, repay its indebtedness and fund its operations. The Bank’s ability to pay dividends to the Company depends on the success of the Bank’s operations.
The Company is a separate and distinct legal entity from its subsidiary, the Bank, and it receives substantially all of its revenue from dividends paid by the Bank. There are legal limitations on the extent to which the Bank may extend credit, pay dividends or otherwise supply funds to, or engage in transactions with, the Company. The Company’s inability to receive dividends from the Bank could adversely affect its business, financial condition, results of operations and prospects. Even if applicable laws and regulations would permit the Bank to pay dividends to the Company and would permit the Company to pay dividends to our shareholders, our Board of Directors could determine that it is not in the best interest of the Company’s shareholders to do so in order to preserve or redeploy our capital resources, for example. For these reasons, the amount and frequency of dividends that we pay to shareholders may vary from time to time.
Damage to our reputation could significantly harm our business and prospects.
Our reputation is an important asset. Our relationship with many of our customers is predicated upon our reputation as a high-quality provider of financial services that adheres to the highest standards of ethics, service quality and regulatory compliance. Our ability to attract and retain customers, investors and employees depends upon external perceptions. Damage to our reputation among existing and potential customers, investors and employees could cause significant harm to our business and prospects and may arise from numerous sources, including litigation or regulatory actions, failing to deliver minimum standards of service and quality, lending practices, inadequate protection of customer information, sales and marketing efforts, compliance failures, cybersecurity breaches, unethical behavior and the misconduct of employees. Adverse developments in the banking industry may also, by association, negatively impact our reputation or result in greater regulatory or legislative scrutiny or litigation against us. We have policies and procedures in place intended to protect our reputation and promote ethical conduct, but these policies and procedures may not be fully effective. Negative publicity regarding our business, employees, or customers, with or without merit, may result in the loss of customers, investors, and employees, costly litigation, a decline in revenues and increased governmental regulation.
We are exposed to risk of environmental liabilities with respect to real properties that we may acquire.
If our borrowers are unable to meet their loan repayment obligations, we will initiate foreclosure proceedings with respect to and may take actions to acquire title to the personal and real property that collateralized their loans. As an owner of such properties, we could become subject to environmental liabilities and incur substantial costs for any property damage, personal injury, investigation and clean-up that may be required due to any environmental contamination that may be found to exist at any of those properties, even though we did not engage in the activities that led to such contamination. In addition, if we were the owner or former owner of a contaminated site, we could be subject to common law claims by third parties seeking damages for environmental contamination emanating from the site. If we were to become subject to significant environmental liabilities or costs, our business, financial condition, results of operations and prospects could be adversely affected.
Risks Related to Our Proposed Acquisition of Cornerstone Community Bancorp
Our failure to manage our proposed acquisition of Cornerstone Community Bancorp may have a material adverse effect on our financial condition and results of operations.
In January 2025, we entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Cornerstone Community Bancorp (“Cornerstone”), which is the holding company for Cornerstone Community Bank based in Red Bluff, California. The Merger Agreement provides that, subject to the terms and conditions in the agreement, Cornerstone will merge with and into the Company, with the Company as the surviving corporation (the “Merger”). Acquiring other banks involves risks commonly associated with acquisitions generally, including, among other things, the risk that acquisition activity may divert our management’s attention from other aspects of our business, the difficulty in estimating the value of a target company, and the risk that an acquired business may not perform in accordance with our expectations. Our future results of operations will depend in large part on our ability to successfully integrate Cornerstone’s operations with our own and retain Cornerstone’s customers. If we are unable to successfully manage the risks related to the Merger and the integration of the separate business, customers, employees and operating systems of Cornerstone with our own, our financial condition and results of operations may be adversely affected.
We may fail to realize the anticipated benefits of the proposed merger with Cornerstone.
The success of the Merger will depend on, among other things, our ability to combine and integrate the business of Cornerstone into our business. If we are unable to successfully achieve this objective, the anticipated benefits of the Merger may not be realized fully, or at all, or may take longer to realize than expected.
The Company and Cornerstone operate independently and will continue to do so until the Merger is completed. It is possible that the integration process or other factors could result in the loss or departure of key employees, the disruption of the ongoing business of the Company or Cornerstone or inconsistencies in standards, controls, procedures and policies. It is also possible that clients, customers, depositors and counterparties of Cornerstone could choose to discontinue their relationships with the Company after the Merger, which would adversely affect the future anticipated performance of the Company. It is also possible that we may not realize all or some of the anticipated cost savings of the Merger, or that the realization of cost savings may be delayed. These risks could have an adverse effect on the Company, its financial condition, prospects and results of operations following the consummation of the Merger.
We will incur substantial costs related to the Merger.
We have incurred and expect to incur a number of significant non-recurring costs associated with the Merger. These costs include legal, financial advisory, accounting, consulting, and other advisory fees, severance/employee benefit-related costs and other related costs. Some of these costs are payable regardless of whether the Merger is completed. We may incur additional costs to maintain employee morale and retain key employees during the pendency of the Merger. There can be no assurances that the expected benefits and efficiencies related to the integration of the businesses will be realized to offset these transaction costs over time.
Risks Related to Regulation of the Company and the Bank
We are subject to extensive regulation and may face regulatory enforcement actions, incur fines, penalties and other negative consequences from regulatory violations.
Our operations are subject to extensive regulation by federal, state and local governmental authorities and are subject to various laws and judicial and administrative decisions imposing requirements and restrictions on our operations. Over time, our business has been increasingly affected by the growing breadth of these regulations, and this trend is likely to continue. Federal and state banking regulators have significant discretion and authority to prevent or remedy unsafe or unsound practices or violations of laws or regulations by bank holding companies and banks in the performance of their supervisory and enforcement duties. If banking regulators determine that we have violated laws or engaged in unsafe or unsound practices, we could face enforcement actions, incur fines, penalties, and other negative consequences. While we maintain systems and procedures designed to ensure that we comply with applicable laws and regulations, we cannot be certain that these will be effective. We may also suffer other negative consequences resulting from findings of noncompliance with laws and regulations which may also damage our reputation, and this in turn might materially affect our business and results of operations. Further, some legal/regulatory frameworks provide for the imposition of fines, restitution, or penalties for noncompliance even though the noncompliance was inadvertent or unintentional and even though there were in place at the time systems and procedures designed to ensure compliance.
Regulatory policies regarding loans secured by commercial real estate could limit our ability to leverage our capital and adversely affect our growth and profitability.
The federal banking agencies have issued guidance regarding concentrations in commercial real estate (“CRE”) lending for banks that are deemed to have particularly high concentrations of CRE loans within their lending portfolios. Under this guidance, a bank that has (i) total reported loans for construction, land development, and other land which represent 100% or more of the bank’s total risk-based capital; or (ii) total CRE representing 300% or more of the bank’s total risk-based capital, where the outstanding balance of the bank’s CRE loan portfolio has increased 50% or more during the prior 36 months, is identified as having potential CRE concentration risk. While the agencies’ guidance does not limit the levels of a bank’s CRE lending, banks with higher levels of CRE loans are generally expected to implement enhanced underwriting, internal controls, risk management policies and portfolio stress testing, as well as higher levels of allowances for credit losses and capital levels as a result of CRE lending growth and exposures.
As of December 31, 2024, our CRE loans for purposes of this guidance represented 242% of our total risk-based capital. As of December 31, 2024, total loans secured by CRE under construction and land development represented 54% of our total risk-based capital. As a result, the FRB, which is the Bank’s federal banking regulator, could view the Bank as having a high concentration of CRE loans under this guidance.
Although we actively work to manage our CRE concentration and believe that our underwriting policies, management information systems, independent credit administration process, and monitoring of real estate loan concentrations are appropriate to address our CRE concentration, we face heightened regulatory scrutiny as a result of our CRE loan concentrations. Federal regulators could become concerned about our CRE loan concentrations, and we could be required to reduce our levels of CRE lending, increase our capital, allocate greater resources to the management of CRE risks, or any combination of these actions. The FRB could limit our ability to grow by, among other things, restricting their approvals for the establishment or acquisition of branches, or approvals of mergers or other acquisition opportunities. Further, we cannot guarantee that any risk management practices we implement will be effective to prevent losses relating to our CRE portfolio.
Any of these risks could have an adverse effect on our business, consolidated financial condition and consolidated results of operations.
General Risk Factors
The trading price of our common stock may be volatile or may decline.
The trading price of our common stock may fluctuate as a result of a number of factors, many of which are outside our control. Among the factors that could affect the trading price of our common stock are:
•
actual or anticipated quarterly fluctuations in our operating results and financial condition;
•
research reports and recommendations by financial analysts;
•
failure to meet analysts’ revenue or earnings estimates;
•
speculation in the press or investment community;
•
our actions or those of our competitors, such as acquisitions or restructurings;
•
actions by institutional shareholders;
•
fluctuations in the stock prices and operating results of other financial institutions;
•
general market conditions and, in particular, developments related to market conditions for the financial services industry;
•
proposed or adopted regulatory changes or developments;
•
anticipated or pending investigations, proceedings or litigation that involve or affect us;
•
domestic and international economic factors unrelated to our performance.
A significant decline in the trading price of our common stock price could result in substantial losses for individual shareholders and could lead to costly and disruptive securities litigation.
The trading volume of our common stock is limited.
Although our common stock is traded on the Nasdaq Stock Market, trading volume to date has been relatively modest. The limited trading market for our common stock may lead to exaggerated fluctuations in market prices and possible market inefficiencies compared to more actively traded securities. It may also make it more difficult for investors to sell our common stock at desired prices, especially for holders seeking to dispose of a large number of shares of stock.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
We have designed and implemented controls and procedures to provide reasonable assurance that the information we are required to disclose in the reports that we file with the SEC under the Exchange Act is accurately accumulated and communicated to our management, and recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. However, no disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide absolute assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, that alternative reasoned judgments can be drawn, or that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control systems, misstatements due to error or fraud may occur and not be detected, which could result in a material weakness in our internal controls over financial reporting and the correction or restatement of previously disclosed financial statements or information.
We rely on key executives and personnel and the loss of any of them could have a material adverse impact on our prospects.
Competition for qualified employees and personnel in the banking industry is intense and there are a limited number of qualified persons with knowledge of, and experience in, the California and Nevada community banking industry. The process of recruiting personnel with the combination of skills and attributes required to carry out the Company’s strategies is often lengthy. Our success depends to a significant degree upon our ability to attract and retain qualified management, loan origination, finance, administrative, marketing, compliance, and technical personnel and upon the continued contributions of our management and personnel. In particular, our success has been and continues to be highly dependent upon the abilities and relationships of key executives and certain other employees.
Climate change may materially adversely affect the Company’s business and results of operations.
Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts. Consumers and businesses also may change their behavior on their own as a result of these concerns. We and our clients will need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns. We and our clients may face cost increases, asset value reductions and operating process changes. The impact on our clients will likely vary depending on their specific attributes, including reliance on or role in carbon intensive activities. Among the impacts to us could be a drop in demand for our products and services, particularly in certain industry sectors. In addition, we could face reductions in creditworthiness on the part of some clients or in the value of assets securing loans. Our efforts to take these risks into account in making lending and other decisions, including by increasing our business with climate-friendly companies, may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
Of the Company’s fifteen depository branches, four are owned and eleven are leased. Our Yuba City branch is classified as owned; however, it is subject to a long-term land lease. The Company also leases two lending offices and four administrative offices and owns three administrative facilities.
Owned Properties
35 South Lindan Avenue
32 Central Avenue
80 W. Main Street
Quincy, California (1)
Quincy, California (1)
Quincy, California (1)
215 North Lake Boulevard 900 Mangrove Avenue 315 Birch Street
Tahoe City, California Chico, California Westwood, California (1)
1280 Bridge Street 8475 North Lake Boulevard
Yuba City, California (4)
Kings Beach, California
Leased Properties
495 Idaho Street #102 1335 Hilltop Drive
11641 Blocker Drive. Suite 140
Elko, Nevada (1) Redding, California
Auburn, California (2)
1101 N. Carson St.
107 S. 7th Street
5525 Kietzke Lane, Suite 100
Carson City, Nevada
Klamath Falls, Oregon (3)
Reno, Nevada (1)
5050 Meadowood Mall Circle
336 West Main Street
120 North Pine Street
Reno, Nevada
Quincy, California Portola, California
11638 Donner Pass Road 43163 Highway 299 E 121 Crescent Street
Truckee, California Fall River Mills, California Greenville, California
255 Main Street 510 North Main Street 3000 Riverside Drive
Chester, California Alturas, California Susanville, California
(1) Non-branch administrative or credit administrative offices.
(2) SBA lending office.
(3) Commercial lending office.
(4) Branch subject to long term land lease.
Including variable lease expense, total rent expense for the years ended December 31, 2024, 2023 and 2022 were $3,064,000, $635,000 and $611,000, respectively. The expiration dates of the leases vary, with the first such lease expiring during 2025 and the last such lease expiring during 2044.
Future minimum lease payments at December 31, 2024 for operating leases having initial or remaining noncancelable lease terms in excess of one year are as follows:
Year Ending December 31,
$ 2,910,000
2,838,000
2,764,000
2,710,000
2,765,000
Thereafter
29,076,000
$ 43,063,000
The Company maintains insurance coverage on its premises, leaseholds and equipment, including business interruption and record reconstruction coverage. The branch properties and non-branch offices are adequate, suitable, in good condition and have adequate parking facilities for customers and employees. The Company and Bank are limited in their investments in real property under Federal and state banking laws. Generally, investments in real property are either for the Company and Bank use or are in real property and real property interests in the ordinary course of the Bank’s business.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company and/or its subsidiary are a party to claims and legal proceedings arising in the ordinary course of business. In the opinion of the Company's management, the amount of ultimate liability with respect to such proceedings will not have a material adverse effect on the financial condition or results of operations of the Company taken as a whole.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
The Company’s common stock is traded on the NASDAQ Capital Market under the ticker symbol "PLBC". As of December 31, 2024, there were 5,903,368 shares of the Company’s common stock outstanding held by approximately 1,800 shareholders of record.
It is the policy of the Company to periodically distribute excess retained earnings to the shareholders through the payment of cash dividends. Our Board of Directors believes that dividends help promote shareholder value and capital adequacy by enhancing the marketability of the Company’s stock. The Company is subject to various restrictions on the payment of dividends. The Company paid a quarterly cash dividend of $0.27 per share on November 15, August 15, 2024, May 15, 2024 and February 15, 2024, and a quarterly cash dividend of $0.25 per share on November 15, 2023, August 15, 2023, May 15, 2023, and February 15, 2023.
The payment of future dividends is at the discretion of the Board. The Board generally considers the payment of dividends each quarter based on a number of factors, including our results of operations, general business conditions, growth, financial condition, anticipated capital needs and other factors deemed relevant by the Board.
Further, the Company is subject to various restrictions on the payment of dividends. See Note 13 “Shareholders’ Equity - Dividend Restrictions” of the Company’s Consolidated Financial Statements in Item 8 - Financial Statements and Supplementary Data of this report.
Issuer Purchases of Equity Securities. We did not repurchase any shares of our common stock during the quarterly period ended December 31, 2024.
The following table presents a summary of selected financial data and should be read in conjunction with the Company’s consolidated financial statements and notes thereto included under Item 8 - Financial Statements and Supplementary Data.
At or for the year ended December 31,
(dollars in thousands except per share information)
Statement of Income
Interest income
$ 84,325
$ 74,592
$ 59,758
$ 48,070
$ 39,624
Interest expense
10,634
4,798
1,249
1,136
1,228
Net interest income
73,691
69,794
58,509
46,934
38,396
Provision for credit losses
1,196
2,775
1,300
1,125
3,175
Non-interest income
8,780
10,722
11,050
8,716
8,463
Non-interest expense
42,274
37,530
32,590
26,038
23,732
Net income before income taxes
39,001
40,211
35,669
28,487
19,952
Provision for income taxes
10,382
10,435
9,225
7,478
5,477
Net income
$ 28,619
$ 29,776
$ 26,444
$ 21,009
$ 14,475
Total assets
$ 1,623,326
$ 1,610,416
$ 1,621,044
$ 1,614,074
$ 1,111,576
Total gross loans
$ 1,015,424
$ 958,564
$ 911,949
$ 838,587
$ 709,246
Loans held for sale
$ -
$ -
$ 2,301
$ 31,277
$
Allowance for credit losses
$ 13,196
$ 12,867
$ 10,717
$ 10,352
$ 9,902
Total deposits
$ 1,371,101
$ 1,333,655
$ 1,457,809
$ 1,438,999
$ 973,974
Total shareholders’ equity
$ 177,899
$ 147,317
$ 119,004
$ 134,082
$ 100,154
Balance sheet (period average)
Total assets
$ 1,649,341
$ 1,587,149
$ 1,642,895
$ 1,386,028
$ 1,015,297
Total gross loans
$ 989,313
$ 933,997
$ 865,499
$ 800,785
$ 699,255
Total deposits
$ 1,331,412
$ 1,403,957
$ 1,487,346
$ 1,231,618
$ 886,515
Total shareholders’ equity
$ 166,255
$ 126,984
$ 120,868
$ 117,967
$ 93,152
Asset quality ratios
Nonperforming loans/total loans
0.40 %
0.50 %
0.13 %
0.58 %
0.36 %
Nonperforming assets/total assets
0.27 %
0.33 %
0.07 %
0.33 %
0.27 %
Allowance for credit losses/total loans
1.30 %
1.34 %
1.18 %
1.23 %
1.40 %
Net loan charge-offs
$ 1,046
$
$
$
$
Performance ratios
Return on average assets
1.74 %
1.88 %
1.61 %
1.52 %
1.43 %
Return on average equity
17.2 %
23.4 %
21.9 %
17.8 %
15.5 %
Net interest margin
4.79 %
4.71 %
3.82 %
3.63 %
4.02 %
Loans to deposits
74.1 %
71.9 %
62.6 %
58.3 %
72.9 %
Efficiency ratio (1)
51.3 %
46.6 %
46.9 %
46.8 %
50.6 %
Per share information
Basic earnings
$ 4.85
$ 5.08
$ 4.53
$ 3.82
$ 2.80
Diluted earnings
$ 4.80
$ 5.02
$ 4.47
$ 3.76
$ 2.77
Common cash dividends
$ 1.08
$ 1.00
$ 0.64
$ 0.56
$ 0.36
Book value per common share
$ 30.14
$ 25.09
$ 20.34
$ 23.05
$ 19.33
Common shares outstanding at period end
5,903,368
5,871,523
5,850,216
5,816,991
5,182,232
Capital ratios - Plumas Bank
Leverage ratio
11.9 %
10.8 %
9.2 %
8.4 %
9.2 %
Tier 1 risk-based capital
17.3 %
15.7 %
14.7 %
14.4 %
14.2 %
Total risk-based capital
18.5 %
16.9 %
15.7 %
15.5 %
15.4 %
(1) The efficiency ratio is defined as non-interest expense divided by total revenue (net interest income and non-interest income).

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [RESERVED]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Plumas Bancorp is a bank holding company for Plumas Bank, a California state-chartered commercial bank. We derive our income primarily from interest received on real estate related, commercial, automobile and consumer loans and, to a lesser extent, interest on investment securities and cash balances and fees received in connection with servicing deposit and loan customers. Our major operating expenses are the interest we pay on deposits and borrowings and general operating expenses. We rely on locally-generated deposits to provide us with funds for making loans.
We are subject to competition from other financial institutions and our operating results, like those of other financial institutions operating in California and Northern Nevada, are significantly influenced by economic conditions in California and Northern Nevada, including the strength of the real estate market. In addition, both the fiscal and regulatory policies of the federal and state government and regulatory authorities that govern financial institutions and market interest rates also impact the Bank’s financial condition, results of operations and cash flows.
SALES/LEASEBACK AND iNVESTMENT RESTRUCTURING
On January 19, 2024, Plumas Bank entered into two agreements for the purchase and sale of real property (the “Sale Agreements”). One Sale Agreement provided for the sale to MountainSeed of nine properties owned and operated by Plumas Bank as branches for an aggregate cash purchase price of approximately $25.7 million. The branch portion of the sale was completed on February 14, 2024 resulting in a net gain on sale of $19.9 million, recording of right-of-use assets totaling $22.3 million and recording a lease liability of $22.3 million. The second Sale Agreement provided for the sale to MountainSeed of up to three properties operated as non-branch administrative offices (the “Non-Branch Offices”). This agreement was terminated in August 2024. We continue to review opportunities for the sale of the Non- Branch Offices.
Concurrently with the closing of the sale of the branch properties, we entered into triple net lease agreements (the “Lease Agreements”) pursuant to which Plumas Bank leased back each of the properties sold. Each Lease Agreement has an initial term of fifteen years with one 15-year renewal option. The Lease Agreements provide for an annual rent of approximately $2.4 million in the aggregate for the nine properties increased by two percent (2%) per annum for each year during the initial Term. During the renewal term, the initial rent will be the basic rent during the last year of the initial term, increased by two percent (2%) per annum for each year during the renewal term.
The gain on sales of the branches was offset by losses on the sale of approximately $115 million in investment securities. We sold $115 million in investment securities having a weighted average tax equivalent yield of 2.24% recording a $19.8 million loss on the sales. As part of the restructuring, beginning in December 2023 and ending on March 27, 2024, we purchased $120 million in investment securities having a weighted average tax equivalent yield of 5.25%.
Critical Accounting Policies
Our accounting policies are integral to understanding the financial results reported. Our most complex accounting policies require management’s judgment to ascertain the valuation of assets, liabilities, commitments and contingencies. We have established detailed policies and internal control procedures that are intended to ensure valuation methods are applied in an environment that is designed and operating effectively and applied consistently from period to period. The following is a brief description of our current accounting policies involving significant management valuation judgments.
Allowance for Credit Losses. The allowance for credit losses is an estimate of credit losses inherent in the Company's loan portfolio that have been incurred as of the balance-sheet date. The allowance is established through a provision for credit 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. Credit exposures determined to be uncollectible are charged against the allowance. Cash received on previously charged off amounts is recorded as a recovery to the allowance.
To estimate expected losses the Company generally utilizes historical loss trends and the remaining contractual lives of the loan portfolios to determine estimated credit losses through a reasonable and supportable forecast period. Individual loan credit quality indicators including loan grade and borrower repayment performance have been statistically correlated with historical credit losses and various economic metrics, including California unemployment rates, California housing prices, and California gross domestic product. Model forecasts may be adjusted for inherent limitations or biases that have been identified through independent validation and back-testing of model performance to actual realized results. At both January 1, 2023, the adoption and implementation date of ASC Topic 326, and December 31, 2024, the Company utilized a reasonable and supportable forecast period of approximately four quarters and obtained the forecast data from publicly available sources. The Company also considered the impact of portfolio concentrations, changes in underwriting practices, and other risk factors that might influence its loss estimation process. Management believes that the allowance for credit losses at December 31, 2024, appropriately reflected expected credit losses inherent in the loan portfolio at that date.
In determining the allowance for credit losses, accruing loans with similar risk characteristics are generally evaluated collectively. The Company's policy is that loans designated as nonaccrual no longer share risk characteristics similar to other loans evaluated collectively and as such, all nonaccrual loans, in excess of $100,000, are individually evaluated for reserves. As of December 31, 2024 the Bank's nonaccrual loans comprised the entire population of loans individually evaluated. The Company's policy is that nonaccrual loans in excess of $100,000, also represent the subset of loans where borrowers are experiencing financial difficulty where an evaluation of the source of repayment is required to determine if the nonaccrual loans should be categorized as collateral dependent.
We cannot provide you with any assurance that economic difficulties or other circumstances which would adversely affect our borrowers and their ability to repay outstanding loans will not occur which would be reflected in increased losses in our loan portfolio and which could result in actual losses that exceed reserves previously established.
The following discussion is designed to provide a better understanding of significant trends related to the Company's financial condition, results of operations, liquidity and capital. It pertains to the Company's financial condition, changes in financial condition and results of operations as of December 31, 2024 and 2023 and for each of the three years in the period ended December 31, 2024. The discussion should be read in conjunction with the Company's audited consolidated financial statements and notes thereto and the other financial information appearing elsewhere herein.
Overview
The Company recorded net income of $28.6 million for the year ended December 31, 2024, a decrease of $1.2 million or 4% from net income of $29.8 million during the year ended December 31, 2023. Pretax income decreased by $1.2 million, or 3%, to $39.0 million in 2024 from $40.2 million during the year ended December 31, 2023. Net interest income increased by $3.9 million to $73.7 million during 2024 from $69.8 million for the year ended December 31, 2023. This increase in net interest income resulted from an increase in interest income of $9.7 million partially offset by an increase in interest expense of $5.8 million. Interest and fees on loans increased by $6.4 million; interest on investment securities increased by $2.7 million and interest on other interest earning assets increased by $0.6 million. The provision for credit losses decreased from $2.8 million during the twelve months ended December 31, 2023 to $1.2 million during 2024.
During the year ended December 31, 2024, non-interest income totaled $8.8 million, a decrease of $1.9 million from the $10.7 million earned during 2023. Non-interest income in 2023 included a nonrecurring gain of $1.7 million on termination of our interest rate swaps during the first quarter of 2023. Non-interest expense increased by $4.8 million from $37.5 million during 2023 to $42.3 million during the twelve months ending December 31, 2024. The provision for income taxes totaled $10.4 million a decrease of $53 thousand from 2023.
Total assets at December 31, 2024 were $1.6 billion, an increase of $13 million from December 31, 2023. The largest component of this increase was an increase in net loans of $56.8 million. This was mostly offset by a decrease of $51 million in investment securities.
Gross loans increased by approximately $57 million, or 6%, from $959 million at December 31, 2023, to $1.0 billion at December 31, 2024. Increases in loans included $102 million in commercial real estate loans and $3 million in commercial loans. These items were partially offset by decreases of $33 million in auto loans, $11 million in agricultural loans and $4 million in construction loans. In the fourth quarter of 2023 we terminated our indirect automobile loan program. Ending this program, which was our lowest yielding loan segment, also improved our loan loss risk profile since this program had historically higher charge-off rates. Terminating this program also improved our consumer compliance risk profile.
Total deposits increased by approximately $37 million from $1.3 billion at December 31, 2023 to $1.4 billion at December 31, 2024. The increase in deposits includes increases of $7 million in demand deposits, $53 million in money market accounts and $2 million in time deposits. Partially offsetting these increases was a $25 million decrease in savings deposits.
Borrowings decreased from $90 million at December 31, 2023 to $15 million at December 31, 2024. Borrowings at December 31, 2023 consisted of $80 million under the Bank Term Funding Program (BTFP) and $10 million under our $15 million Bancorp line of credit with a correspondent bank. At December 31, 2024, the Company had paid its BTFP borrowings in full and outstanding borrowings consisted of $15 million under the Bancorp line of credit.
Shareholders’ equity increased by $30.6 million from $147.3 million at December 31, 2023 to $177.9 million at December 31, 2024. The $30.6 million increase was related to net income during 2024, of $28.6 million, a decline in accumulated other comprehensive loss of $7.3 million and stock option and restricted stock activity of $1.0 million partially offset by shareholder dividends of $6.3 million.
The return on average assets was 1.74% for the twelve months ended December 31, 2024, down from 1.88% for the twelve months ended December 31, 2023. The return on average equity decreased from 23.4% during 2023 to 17.2% during 2024.
Results of Operations
Net Interest Income
The following table presents, for the years indicated, the distribution of consolidated average assets, liabilities and shareholders' equity. Average balances are based on average daily balances. It also presents the amounts of interest income from interest-earning assets and the resultant yields expressed in both dollars and yield percentages, as well as the amounts of interest expense on interest-bearing liabilities and the resultant cost expressed in both dollars and rate percentages. Nonaccrual loans are included in the calculation of average loans while nonaccrued interest thereon is excluded from the computation of yields earned.
Year ended December 31,
Interest
Rates
Interest
Rates
Interest
Rates
Average
income/
earned/
Average
income/
earned/
Average
income/
earned/
balance
expense
paid
balance
expense
paid
balance
expense
paid
(dollars in thousands)
Assets
Interest-bearing cash and due from banks and deposits in banks
$ 93,122
$ 4,993
5.36 %
$ 86,897
$ 4,387
5.05 %
$ 305,095
$ 4,923
1.61 %
Taxable investment securities
370,228
15,308
4.13 %
338,941
11,525
3.40 %
258,732
6,409
2.48 %
Non-taxable investment securities (1)
84,369
2,574
3.05 %
123,002
3,681
2.99 %
103,366
2,722
2.63 %
Total loans (2)(3)
989,313
61,450
6.21 %
933,997
54,999
5.89 %
865,499
45,704
5.28 %
Total earning assets
1,537,032
84,325
5.49 %
1,482,837
74,592
5.03 %
1,532,692
59,758
3.90 %
Cash and due from banks
27,077
26,100
40,520
Other assets
85,232
78,212
69,683
Total assets
$ 1,649,341
$ 1,587,149
$ 1,642,895
Liabilities and shareholders’ equity
Money market deposits
$ 226,372
$ 2,472
1.09 %
$ 227,819
$ 1,367
0.60 %
254,723
$
0.11 %
Savings deposits
324,000
0.22 %
375,377
0.21 %
400,314
0.09 %
Time deposits
96,131
2,739
2.85 %
74,570
1,568
2.10 %
59,016
0.28 %
Other borrowings
97,691
4,676
4.79 %
17,945
4.99 %
-
-
0.00 %
Junior subordinated debentures
-
-
0.00 %
2,268
6.22 %
10,310
3.48 %
Repurchase agreements and other
19,119
0.22 %
18,576
0.17 %
12,327
0.54 %
Total interest-bearing liabilities
763,313
10,634
1.39 %
716,555
4,798
0.67 %
736,690
1,249
0.17 %
Noninterest bearing demand deposits
684,909
726,191
773,293
Other liabilities
34,864
17,419
12,044
Shareholders’ equity
166,255
126,984
120,868
Total liabilities and shareholders’ equity
$ 1,649,341
$ 1,587,149
$ 1,642,895
Net interest income
$ 73,691
$ 69,794
$ 58,509
Net interest spread (4)
4.09 %
4.36 %
3.73 %
Net interest margin (5)
4.79 %
4.71 %
3.82 %
(1)
Interest income is reflected on an actual basis and is not computed on a tax-equivalent basis.
(2)
Average nonaccrual loan balances of $4.4 million for 2024, $3.0 million for 2023 and $2.8 million for 2022 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 (costs)/ loan fees of ($1.4 million), ($1.3 million) and $234 thousand for 2024, 2023 and 2022, respectively.
(4)
Net interest spread represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.
(5)
Net interest margin is computed by dividing net interest income by total average earning assets.
The following table sets forth changes in interest income and interest expense, for the years indicated and the amount of change attributable to variances in volume, rates and the combination of volume and rates based on the relative changes of volume and rates:
2024 compared to 2023
2023 compared to 2022
Increase (decrease) due to change in:
Increase (decrease) due to change in:
Average
Average
Average
Average
Volume(1)
Rate(2)
Mix(3)
Total
Volume(1)
Rate(2)
Mix(3)
Total
(dollars in thousands)
Interest-earning assets:
Interest-bearing cash and due from banks and deposits in banks
$
$
$
$
$ (3,521 )
$ 10,480
$ (7,495 )
$ (536 )
Taxable investment securities
1,064
2,489
3,783
1,987
2,389
5,116
Non-taxable investment securities
(1,156 )
(23 )
(1,107 )
Loans
3,257
3,015
6,451
3,569
5,535
9,295
Total interest income
3,479
5,848
9,733
2,552
18,775
(6,493 )
14,834
Interest-bearing liabilities:
Money market deposits
(9 )
1,121
(7 )
1,105
(30 )
1,244
(131 )
1,083
Savings deposits
(109 )
(3 )
(90 )
(24 )
(29 )
Time deposits
1,171
1,078
1,405
Other borrowings
3,981
(37 )
(164 )
3,780
-
-
Junior subordinated debentures
(141 )
-
-
(141 )
(280 )
(220 )
(218 )
Repurchase agreements and other
-
(46 )
(24 )
(36 )
Total interest expense
4,177
1,672
(13 )
5,836
(257 )
3,030
3,549
Net interest income
$ (698 )
$ 4,176
$
$ 3,897
$ 2,809
$ 15,745
$ (7,269 )
$ 11,285
(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.
2024 compared to 2023. Net interest income is the difference between interest income and interest expense. Net interest income for the twelve months ended December 31, 2024 was $73.7 million, an increase of $3.9 million from the $69.8 million earned during 2023. The increase in net interest income includes an increase of $9.7 million in interest income partially offset by an increase of $5.8 million in interest expense.
Interest and fees on loans increased by $6.5 million related to an increase in average balance and yield. The average balance of loans during the twelve months ended December 31, 2024 was $989 million, an increase of $55 million from $934 million during 2023. The average yield on loans increased by 32 basis points from 5.89% during 2023 to 6.21% during 2024.
Interest on investment securities increased by $2.7 million related to an increase in yield of 64 basis points to 3.93%. The increase in investment yields is consistent with the increase in market rates and the partial restructuring of the investment portfolio. Average investment securities declined from $462 million during the twelve months ended December 31, 2023 to $455 million during the current period. Interest on cash balances increased by $606 thousand related to an increase in yield of 31 basis points and an increase in average balance of $6.2 million from $86.9 million during 2023 to $93.1 million during 2024.
Interest expense increased from $4.8 million during 2023 to $10.6 million during the current period related mostly to an increase in rate paid on interest bearing liabilities and an increase in average borrowings. The average rate paid on interest bearing liabilities increased from 0.67% during the 2023 period to 1.39% in 2024 related to an increase in borrowings and an increase in market interest rates. Interest incurred on borrowings, including junior subordinated debentures in 2023, totaled $4.7 million and $1.0 million during 2024 and 2023, respectively. The average balance of borrowings increased by $78 million from $20 million during 2023 to $98 million during 2024.
Interest paid on deposits increased by $2.2 million; this increase is broken down by product type as follows: money market accounts - $1.1 million and time deposits - $1.2 million. Related to a decline in average balance of $51 million, interest on savings deposits declined by $90 thousand. The average rate paid on interest-bearing deposits increased from 0.55% during 2023 to 0.92% during the current period. Rates paid on money market accounts and time deposits increased by 49 basis points and 75 basis points, respectively. This is consistent with market conditions and an increase in higher rate public entity money market accounts.
Net interest margin for the year ended December 31, 2024 increased 8 basis points to 4.79%, up from 4.71% during 2023.
2023 compared to 2022. Net interest income for the year ended December 31, 2023 was $69.8 million, an increase of $11.3 million from the $58.5 million earned during 2022. The increase in net interest income includes an increase of $14.8 million in interest income partially offset by an increase of $3.5 million in interest expense. Interest and fees on loans, including loans held for sale, increased by $9.3 million related to growth in the loan portfolio and an increase in yield on the portfolio. Net loan fees/costs declined from net fees of $234,000 during 2022 to net costs of $1.3 million during 2023. This decline is mostly related to a decline in fees earned on PPP loans. The average yield on loans, including loans held for sale, increased by 61 basis points from 5.28% during 2022 to 5.89% during 2023. The average prime rate increased from 4.86% in 2022 to 8.20% in 2023.
Interest on investment securities increased by $6.1 million from 2022, related to an increase in average investment securities of $100 million to $462 million and an increase in yield on the investment portfolio from 2.52% during 2022 to 3.29% during 2023. Interest on interest-earning cash balances decreased by $0.5 million related to a decrease in average interest-earning cash balances partially offset by an increase in the rate earned on these balances. The rate paid on interest-earning cash balances increased from 1.61% during 2022 to 5.05% during 2023 mostly related to an increase in the rate paid on balances held at the Federal Reserve Bank. The average rate paid on Federal Reserve balances was 1.76% during 2022 and 5.1% during 2023. Average interest-earning cash balances declined from $305 million during 2022 to $87 million during 2023 related to a decline in average deposits and increases in average loans and investment securities.
Average interest earning assets during 2023 totaled $1.5 billion, a decrease of $50 million from 2022. This decrease in average interest earning assets resulted from a decline in average interest-earning cash balances of $218 million, mostly offset by increases of $68 million in average loan balances and $100 million in average investment securities. The average yield on interest earning assets increased by 113 basis points to 5.03%, related to increases in market rates.
Interest expense increased from $1.2 million during 2022 to $4.8 million during 2023 related to an increase in rate paid on interest bearing liabilities. The average rate paid on interest bearing liabilities increased from 0.17% during 2022 to 0.67% in 2023 related mainly to an increase in market interest rates and the effect of a 4% time deposit promotion. Beginning in April 2023 we began offering a time deposit promotion offering for a limited time 7-month and 11-month time deposits at an interest rate of 4%. We discontinued this promotion, which generated $46 million in deposits, on June 30, 2023. However, during the fourth quarter we allowed those customers who had promotional time deposits to renew those deposits at similar terms. Interest paid on deposit accounts increased for all products mostly related to market conditions. In total interest paid on deposits increased by $2.9 million broken down by product type as follows: Money market accounts - $1.1 million, Savings accounts - $0.4 million and Time deposits - $1.4 million.
During March 2023 we redeemed our junior subordinated debentures with funding provided by a $10 million borrowing on Plumas Bancorp's line of credit/term loan facility. Interest expense incurred during the twelve months ended December 31, 2023, on the junior subordinated debentures totaled $141,000, down from $359,000 during 2022. Interest and fees incurred on the line of credit borrowing totaled $369,000 during the current period. During the fourth quarter of 2023 we borrowed $80 million under the BTFP. Interest incurred on this borrowing totaled $527,000 during 2023.
Net interest margin is net interest income expressed as a percentage of average interest-earning assets. Net interest margin for the twelve months ended December 31, 2023, increased by 89 basis points to 4.71%, up from 3.82% in 2022.
Provision for credit losses. During 2024 we recorded a provision for credit losses of $1.2 million consisting of a provision for credit losses on loans of $1.4 million and a decrease in the reserve for unfunded commitments of $179 thousand. On January 1, 2023, the Company adopted ASU 2016-03 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology, referred to as the current expected credit loss (CECL) methodology. Upon adoption of CECL we recorded an increase in the allowance for credit losses of $529,000 and an increase in the reserve for unfunded commitments of $258,000. During 2023 we recorded a provision for credit losses of $2,775,000 an increase of $1,475,000 from $1,300,000 during 2022. As time progresses the results of economic conditions will require CECL model assumption inputs to change and further refinements to the estimation process may also be identified. See “Analysis of Asset Quality and Allowance for Credit Losses” for a discussion of loan quality trends and the provision for credit losses.
The following tables present the activity in the allowance for credit losses and the reserve for unfunded commitments during the twelve months ended December 31, 2024, and 2023 (in thousands).
Allowance for Credit Losses
December 31, 2024
December 31, 2023
Balance, beginning of period
$
12,867
$
10,717
Impact of CECL adoption
-
Provision charged to operations
1.375
2,575
Losses charged to allowance
(2,039
)
(1,802
)
Recoveries
Balance, end of period
$
13,196
$
12,867
Reserve for Unfunded Commitments
December 31, 2024
December 31, 2023
Balance, beginning of period
$
$
Impact of CECL adoption
-
Provision charged to operations
(179
)
Balance, end of period
$
$
These estimates are reviewed periodically and, as adjustments become necessary, they are reported in earnings in the periods in which they become known. Based on information currently available, management believes that the allowance for credit losses is appropriate to absorb potential risks in the portfolio. However, no assurance can be given that the Company may not sustain charge-offs which are in excess of the allowance in any given period.
Non-Interest Income
The following table sets forth the components of non-interest income for the years ended December 31, 2024, 2023 and 2022.
Years Ended December 31,
Change during Year
(dollars in thousands)
Gain on sale of buildings
$ 19,854
$ -
$ -
$ 19,854
$ -
Interchange revenue
3,130
3,419
3,401
(289 )
Service charges on deposit accounts
2,988
2,789
2,464
Loan servicing fees
(116 )
(21 )
FHLB Dividends
Earnings on bank owned life insurance policies, net
(8 )
Gain on sale of loans
2,696
(197 )
(2,462 )
Gain on termination of swaps
-
1,707
-
(1,707 )
1,707
Loss on sale of investments
(19,817 )
-
-
(19,817 )
-
Other income
(46 )
Total non-interest income
$ 8,780
$ 10,722
$ 11,050
$ (1,942 )
$ (328 )
2024 compared to 2023. During the year ended December 31, 2024, non-interest income totaled $8.8 million, a decrease of $1.9 million from the year ended December 31, 2023. The largest component of this decrease was a $1.7 million gain on termination of our interest rate swaps during 2023. Related to the sale/leaseback transaction and the partial restructuring of our investment portfolio, a $19.9 million gain on sale of buildings was offset by a $19.8 million loss on investment securities. Other changes in non-interest income include a decline in interchange income of $289 thousand and an increase in service charges on deposit accounts of $199 thousand.
2023 compared to 2022. During 2023, non-interest income totaled $10.7 million, a decrease of $328,000 from $11.0 million during the twelve months ended December 31, 2022. The largest component of this decrease was a decline in gain on sale of SBA 7(a) loans of $2.5 million from $2.7 million during the twelve months ended December 31, 2022, to $234,000 during the current period. We did not sell SBA 7(a) loans during the second and third quarters of 2021 resulting in an inventory of loans held for sale of $31.3 million at December 31, 2021. During 2022 we sold $50.5 million in guaranteed portions of SBA 7(a) loans. This compares to $5.3 million in sales during the current period. Partially offsetting the decline in SBA gains was a gain of $1.7 million on termination of our interest rate swaps during the first quarter of 2023. In addition, service charges on deposit accounts increased by $325,000. This was mostly related to our Yuba City, California branch acquired in the acquisition of Feather River Bancorp in 2021. During most of 2022 we waived service charges on deposit accounts at the Yuba City Branch.
During the fourth quarter of 2022 and continuing into 2023 we experienced a significant decline in premiums received on the sale of SBA loans; in response we chose to portfolio SBA 7(a) loans which do not meet a minimum premium on sale. During 2023 we chose not to sell $4.1 million in salable guaranteed portions of SBA 7(a) loans as they did not meet our minimum premium on sale. Additionally, the SBA 7(a) loan product that is salable in the open market is variable rate tied to prime and we have seen a significant decline in interest in this product given the recent increases in the prime rate. While we continue to produce SBA 7(a) loans for sale at a greatly reduced rate, we have had success in funding fixed rate SBA 7(a) loans which we portfolio. At December 31, 2023, fixed rate SBA 7(a) loans totaled $23 million.
Non-Interest Expense
The following table sets forth the components of other non-interest expense for the years ended December 31, 2024, 2023 and 2022.
Years Ended December 31,
Change during Year
(dollars in thousands)
Salaries and employee benefits
$ 21,744
$ 20,320
$ 17,451
$ 1,424
$ 2,869
Occupancy and equipment
7,606
5,302
4,610
2,304
Outside service fees
4,576
4,496
4,057
Professional fees
1,407
1,258
1,282
(24 )
Advertising and promotion
1,030
Armored car and courier
Telephone and data communications
(26 )
Deposit insurance
Director compensation, education and retirement
(35 )
Business development
Loan collection costs
(35 )
Amortization of Core Deposit Intangible
(36 )
(47 )
Other operating expense
1,508
(9 )
Total non-interest expense
$ 42,274
$ 37,530
$ 32,590
$ 4,744
$ 4,940
2024 compared to 2023. During 2024 non-interest expense increased by $4.7 million to $42.3 million. The largest components of this increase were a $1.4 million increase in salary and benefit expenses, a $2.3 million increase in occupancy and equipment expenses and a $643 thousand increase in other non-interest expenses. The largest increases in salary and benefit expense were $695 thousand in salary expense and $401 thousand in commission expense. The increase in salary expense relates to both an increase in FTE and merit and promotional increases, while the increase in commission is related to increased SBA loan production. These were partially offset by an increase in the deferral of loan origination costs of $414 thousand related to an increase in SBA loan production. The increase in occupancy and equipment costs relates to a $2.4 million increase in rent expense related to the sales/leaseback transaction. The increase in other non-interest expense includes $277 thousand related to a recently concluded litigation.
2023 compared to 2022. During 2023, non-interest expense increased by $4.9 million to $37.5 million. The largest components of this increase were $2.9 million in salary and benefit expense, $692,000 in occupancy and equipment costs, $439,000 in outside service fees and $268,000 in advertising and shareholder relations. The largest single components of the increase in salary and benefit expense were a $1.5 million increase in salary expense and a $1.2 million reduction in the deferral of loan origination expense. We attribute much of the increase in salary expense to two factors. Merit and promotional salary increases and employee termination costs which included $115,000 related to the termination of our automobile loan program. We have seen a reduction in loan demand given the current economic environment, especially in SBA 7(a) loans tied to the prime interest rate resulting in the reduction in the deferral of loan origination costs. Occupancy and equipment costs increased by $692,000, a considerable portion of which relates to snow removal and other costs attributable to an unusually harsh winter in our service area and to our new Chico, California branch. The increase in outside service fees was spread among several different categories, none of which exceeded $100,000. The increase in advertising costs reflects an increase in our budgeted advertising program, with an emphasis on Northern Nevada growth opportunities.
Provision for Income Taxes. The Company recorded an income tax provision of $10.4 million, or 26.6% of pre-tax income for the year ended December 31, 2024. This compares to an income tax provision of $10.4 million, or 26.0% of pre-tax income during 2023. The percentages for 2024 and 2023 differ from statutory rates as tax exempt items of income such as earnings on Bank owned life insurance and municipal securities interest decrease taxable income.
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 basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The determination of the amount of deferred income tax assets which are more likely than not to be realized is primarily dependent on projections of future earnings, which are subject to uncertainty and estimates that may change given economic conditions and other factors. The realization of deferred income tax assets is assessed, and a valuation allowance is recorded if it is "more likely than not" that all or a portion of the deferred tax asset will not be realized. "More likely than not" is defined as greater than a 50% chance. All available evidence, both positive and negative, is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed. Based upon the analysis of available evidence, management has determined that it is "more likely than not" that all deferred income tax assets as of December 31, 2024 and 2023 will be fully realized and therefore no valuation allowance was recorded.
Financial Condition
Total assets at December 31, 2024 were $1.6 billion, an increase of $13 million from December 31, 2023. The largest component of this increase was an increase in net loans of $57 million. This was mostly offset by a decrease of $51 million in investment securities. Cash and cash equivalents decreased by $4 million to $82 million on December 31, 2024. Related to the sales/leaseback transaction right-of use assets increased by $21 million. These increases were offset by declines of $51 million in investment securities, $6 million in property and equipment and $4 million in all other assets. Deposits totaled $1.4 billion at December 31, 2024, an increase of $37 million from December 31, 2023. Lease liabilities increased by $22 million to $25 million. Partially offsetting these increases in liabilities were decreases in borrowings, interest payable and other liabilities and repurchase agreements. Borrowings decreased by $75 million from $90 million on December 31, 2023, to $15 million on December 31, 2024. Interest payable and other liabilities and repurchase agreements each decreased by $1 million. Shareholders’ equity increased by $30.6 million from $147.3 million at December 31, 2023 to $177.9 million at December 31, 2024. A detailed discussion of each of these changes follows.
Loan Portfolio. Gross loans increased by approximately $57 million, or 6%, from $959 million at December 31, 2023, to $1.0 billion at December 31, 2024. Increases in loans included $102 million in commercial real estate loans and $3 million in commercial loans. These items were partially offset by decreases of $33 million in auto loans, $11 million in agricultural loans and $4 million in construction loans. Although the Company offers a broad array of financing options, it continues to concentrate its focus on small to medium sized commercial businesses. These loans offer diversification as to industries and types of businesses, thus limiting material exposure in any industry concentrations. The Company offers both fixed and floating rate loans and obtains collateral in the form of real property, business assets and deposit accounts, but looks to business and personal cash flows as its primary source of repayment. In the fourth quarter of 2023 we terminated our indirect automobile loan program. Ending this program, which was our lowest yielding loan segment, also improved our loan loss risk profile since this program had historically higher charge-off rates. Terminating this program also improved our consumer compliance risk profile.
As shown in the following table the Company's largest lending categories are commercial real estate loans, auto loans, agricultural loans and commercial loans.
Percent of
Percent of
Loans in
Loans in
Balance at
Each
Balance at
Each
End of
Category to
End of
Category to
(dollars in thousands)
Period
Total Loans
Period
Total Loans
12/31/2024
12/31/2024
12/31/2023
12/31/2023
Commercial
$ 77,444
7.6 %
$ 74,271
7.8 %
Agricultural
118,866
11.7 %
129,389
13.5 %
Real estate - residential
11,539
1.1 %
11,914
1.2 %
Real estate - commercial
646,378
63.7 %
544,339
56.8 %
Real estate - construction & land development
53,503
5.3 %
57,717
6.0 %
Equity Lines of Credit
37,888
3.7 %
37,871
4.0 %
Auto
64,734
6.4 %
98,132
10.2 %
Other
5,072
0.5 %
4,931
0.5 %
Total
$ 1,015,424
%
$ 958,564
%
The Company’s real estate related loans, including real estate mortgage loans, real estate construction and land development loans, consumer equity lines of credit, and agricultural loans secured by real estate, comprised 82% of the total loan portfolio at December 31, 2024. Moreover, the business activities of the Company currently are focused in the California counties of Butte, Lassen, Modoc, Nevada, Placer, Plumas, Shasta and Sutter and in Washoe and Carson City Counties in Northern Nevada. Consequently, the results of operations and financial condition of the Company are dependent upon the general trends in these economies and, in particular, the commercial real estate markets. In addition, the concentration of the Company's operations in these areas of Northeastern California and Northwestern Nevada exposes it to greater risk than other banking companies with a wider geographic base in the event of catastrophes, such as earthquakes, fires and floods in these regions.
Commercial real estate loans (“CRE”), which comprised 64% of the lending portfolio at December 31, 2024, included 27% investor-owned, 28% owner-occupied, and 9% multi-family. Concentrations by real estate type within the CRE portfolio included 15% multi-family, 12% retail, 11% mixed commercial real estate, 11% office, 7% hospitality, 7% special purpose, 6% industrial, 6% gas stations and 5% mini storage facilities, with all remaining concentrations below 5%. There were no rent-controlled properties within the multi-family category. Office facilities are typically small and located in more rural areas. 28% of CRE loans were located in northern Nevada and 48% were located in northern California. Of the $4.1 million in non-accrual balances at December 31, 2024, approximately 38% were CRE. Of the $19.8 million in substandard balances at December 31, 2024 9% were CRE.
CRE loans consist of term loans secured by a mortgage lien on real property and include both owner occupied CRE loans as well as investor-owned loans. Investor- owned CRE loans consist of mortgage loans to finance investments in real property that may include, but are not limited to, multi-family, industrial, office, retail and other specific use properties. The primary risk characteristics in the investor-owned portfolio include impacts of overall leasing rates, absorption timelines, levels of vacancy rates and operating expenses. The Company requires collateral values in excess of the loan amounts, cash flows in excess of expected debt service requirements and equity investment in the project. The expected cash flows from all significant new or renewed income producing property commitments are stress tested to reflect the risks in varying interest rates, vacancy rates and rental rates. Inherent lending risks are monitored on a continuous basis through quarterly monitoring and the Bank’s annual underwriting process, incorporating an analysis of cash flow, collateral, market conditions and guarantor liquidity, if applicable. CRE loan policies are specific to individual product types and underwriting parameters vary depending on the risk profile of each asset class. CRE loan policies are reviewed no less than annually by management and approved by the Company’s Board of Directors to ensure they align with current market conditions and the Company’s moderate risk appetite. CRE concentration limits have been established by product type and are monitored quarterly by the Company’s Board of Directors.
The rates of interest charged on variable rate loans are set at specific increments in relation to the Company's lending rate or other indexes such as the published prime interest rate or U.S. Treasury rates and vary with changes in these indexes. The frequency in which variable rate loans reprice can vary from one day to several years. At December 31, 2024 and December 31, 2023, approximately 77% and 78%, respectively, of the Company's loan portfolio was comprised of variable rate loans. Loans indexed to the prime interest rate were approximately 21% of the Company’s variable rate loan portfolio on December 31, 2024; these loans reprice within one day to three months of a change in the prime rate. The remainder of the Company's variable rate loans mostly consist of commercial real estate loans tied to U.S. Treasury rates and reprice every five years. Approximately 76% of the variable rate loans are indexed to the five-year T-Bill rate and reprice every five years. While real estate mortgage, agricultural, commercial and consumer lending remain the foundation of the Company's historical loan mix, some changes in the mix have occurred due to the changing economic environment and the resulting change in demand for certain loan types.
The following table sets forth the maturity of gross loan categories as of December 31, 2024. Also provided with respect to such loans are the amounts due after one year, classified according to sensitivity to changes in interest rates:
After One
After 5
Within
Through 5
Through 15
Due After 15
One Year
Years
Years
Years
Total
( in thousands)
Commercial
$ 27,810
$ 42,426
$ 7,206
$
$ 77,444
Agricultural
68,620
41,235
8,256
118,866
Real estate - residential
2,645
6,547
2,329
11,539
Real estate - commercial
56,470
186,263
295,919
107,726
646,378
Real estate - construction & land development
9,678
5,315
6,681
31,829
53,503
Equity Lines of Credit
3,989
12,187
15,362
6,350
37,888
Auto
27,456
37,278
-
-
64,734
Other
2,277
2,739
5,072
Total
$ 198,945
$ 333,990
$ 335,803
$ 146,686
$ 1,015,424
Amount due after one year at fixed interest rates:
(in thousands)
Commercial
$ 34,918
Agricultural
1,972
Real estate - residential
3,233
Real estate - commercial
79,098
Real estate - construction & land development
2,548
Equity Lines of Credit
1,654
Auto
37,278
Other
2,587
Total
$ 163,288
Amount due after one year at variable interest rates:
(in thousands)
Commercial
$ 14,716
Agricultural
48,275
Real estate - residential
5,661
Real estate - commercial
510,810
Real estate - construction & land development
41,277
Equity Lines of Credit
32,244
Auto
-
Other
Total
$ 653,191
Analysis of Asset Quality and Allowance for Credit Losses. The Company attempts to minimize credit risk through its underwriting and credit review policies. The Company’s credit review process includes internally prepared credit reviews as well as contracting with an outside firm to conduct periodic credit reviews. The Company’s management and lending officers evaluate the loss exposure of classified and nonaccrual loans on a quarterly basis, or more frequently as loan conditions change. The Management Asset Resolution Committee (MARC) reviews the asset quality of criticized and past due loans monthly and reports the findings to the full Board of Directors. In management's opinion, this loan review system helps facilitate the early identification of potential criticized loans. MARC also provides guidance for the maintenance and timely disposition of OREO properties including developing financing and marketing programs to incent individuals to purchase OREO. MARC consists of the Bank’s Chief Executive Officer, Chief Financial Officer and Chief Credit Officer, and the activities are governed by a formal written charter. The MARC meets monthly and reports to the Board of Directors.
The allowance for credit losses is established through charges to earnings in the form of the provision for credit losses. Loan losses are charged to, and recoveries are credited to, the allowance for credit losses. The allowance for credit losses is maintained at a level deemed appropriate by management to provide for known and inherent risks in the loan portfolio.
To estimate expected losses the Company generally utilizes historical loss trends and the remaining contractual lives of the loan portfolios to determine estimated credit losses through a reasonable and supportable forecast period. Individual loan credit quality indicators including loan grade and borrower repayment performance have been statistically correlated with historical credit losses and various economic metrics including California unemployment rates, California Housing Prices and California gross domestic product. Model forecasts may be adjusted for inherent limitations or biases that have been identified through independent validation and back-testing of model performance to actual realized results. At both December 31, 2024, and December 31, 2023, the Company utilized a reasonable and supportable forecast period of approximately four quarters and obtained the forecast data from publicly available sources. The Company also considered the impact of portfolio concentrations, changes in underwriting practices and other risk factors that might influence its loss estimation process. Management believes that the allowance for credit losses at December 31, 2024, appropriately reflected expected credit losses inherent in the loan portfolio at that date.
In determining the allowance for credit losses, accruing loans with similar risk characteristics are generally evaluated collectively. The Company's policy is that loans designated as nonaccrual no longer share risk characteristics similar to other loans evaluated collectively and as such, all nonaccrual loans are individually evaluated for reserves. As of December 31, 2024, the Bank's nonaccrual loans in excess of $100,000 comprised the entire population of loans individually evaluated. The Company's policy is that nonaccrual loans also represent the subset of loans in which borrowers are experiencing financial difficulty such that an evaluation of the source of repayment is required to determine if the nonaccrual loans should be categorized as collateral dependent.
The following table provides selected credit ratios as of December 31, 2024, 2023 and 2022:
(dollars in thousands)
As of and for the Year Ended December 31,
Allowance for credit losses to total loans outstanding
1.30 %
1.34 %
1.18 %
Allowance for credit losses
$ 13,196
$ 12,867
$ 10,717
Total loans outstanding
$ 1,015,424
$ 958,564
$ 911,949
Nonaccrual loans to total loans outstanding
0.40 %
0.50 %
0.13 %
Nonaccrual loans
$ 4,105
$ 4,820
$ 1,172
Total loans outstanding
$ 1,015,424
$ 958,564
$ 911,949
Allowance for credit losses to nonaccrual loans
321.46 %
266.95 %
914.42 %
Allowance for credit losses
$ 13,196
$ 12,867
$ 10,717
Nonaccrual loans
$ 4,105
$ 4,820
$ 1,172
Net charge-offs during the period to average loans outstanding:
Commercial
0.35 %
0.10 %
0.21 %
Net charge-off during the period
$
$
$
Average amount outstanding
$ 78,279
$ 75,760
$ 85,460
Agricultural
0.00 %
0.00 %
0.00 %
Net charge-off during the period
$ -
$ -
$ -
Average amount outstanding
$ 122,871
$ 124,798
$ 124,389
Real estate - residential
(0.03 %)
(0.02 %)
(0.02 %)
Net charge-off during the period
$ (4 )
$ (3 )
$ (3 )
Average amount outstanding
$ 11,692
$ 14,223
$ 15,680
Real estate - commercial
0.00 %
0.00 %
0.00 %
Net charge-off during the period
$ (1 )
$ (1 )
$
Average amount outstanding
$ 589,551
$ 520,498
$ 445,348
Real estate - construction & land development
0.00 %
0.00 %
0.00 %
Net charge-off during the period
$ -
$ -
$ -
Average amount outstanding
$ 63,399
$ 55,034
$ 57,367
Equity lines of credit
(0.00 %)
(0.00 %)
(0.00 %)
Net charge-off during the period
$ -
$ -
$ -
Average amount outstanding
$ 37,620
$ 36,371
$ 34,458
Auto
0.88 %
0.79 %
0.80 %
Net charge-off during the period
$
$
$
Average amount outstanding
$ 80,828
$ 101,800
$ 89,442
Other
1.16 %
1.36 %
0.61 %
Net charge-off during the period
$
$
$
Average amount outstanding
$ 5,073
$ 5,513
$ 4,584
Total Loans
0.11 %
0.10 %
0.11 %
Net charge-off during the period
$ 1,046
$
$
Average amount outstanding
$ 989,313
$ 933,997
$ 856,728
The allowance for credit losses totaled $13.2 million at December 31, 2024, and $12.9 million at December 31, 2023. At least quarterly, the Company evaluates each specific reserve and if it determines that the loss represented by the specific reserve is uncollectable it records a charge-off for the uncollectable portion. Specific reserves related to collateral dependent loans totaled $29,000 and $28,000 at December 31, 2024, and December 31, 2023, respectively. The allowance for credit losses as a percentage of total loans was 1.30% on December 31, 2024, and 1.34% on December 31, 2023.
The following table provides a breakdown of the allowance for credit losses:
Percent of
Percent of
Loans in
Loans in
Balance at
Each
Balance at
Each
End of
Category to
End of
Category to
(dollars in thousands)
Period
Total Loans
Period
Total Loans
12/31/2024
12/31/2024
12/31/2023
12/31/2023
Commercial
$ 1,265
7.6 %
$ 1,134
7.8 %
Agricultural
1,802
11.7 %
1,738
13.5 %
Real estate - residential
1.1 %
1.2 %
Real estate - commercial
7,459
63.7 %
6,678
56.8 %
Real estate - construction & land development
5.3 %
6.0 %
Equity Lines of Credit
3.7 %
4.0 %
Auto
1,215
6.4 %
1,865
10.2 %
Other
0.5 %
0.5 %
Total
$ 13,196
%
$ 12,867
%
The Company places loans 90 days or more past due on nonaccrual status unless the loan is well secured and in the process of collection. A loan is considered to be in the process of collection if, based on a probable specific event, it is expected that the loan will be repaid or brought current. Generally, this collection period would not exceed 90 days. When a loan is placed on nonaccrual status the Company's general policy is to reverse and charge against current income previously accrued but unpaid interest. Interest income on such loans is subsequently recognized only to the extent that cash is received and future collection of principal is deemed by management to be probable. Where the collectability of the principal or interest on a loan is considered to be doubtful by management, it is placed on nonaccrual status prior to becoming 90 days delinquent.
Nonperforming loans at December 31, 2024 were $4.1 million, a decrease of $0.7 million from $4.8 million at December 31, 2023.
The following table sets forth the amount of the Company's nonperforming assets as of the dates indicated.
At December 31,
(dollars in thousands)
Nonaccrual loans
$ 4,105
$ 4,820
$ 1,172
Loans past due 90 days or more and still accruing
-
-
-
Total nonperforming loans
4,105
4,820
1,172
Other real estate owned
Other vehicles owned
Total nonperforming assets
$ 4,307
$ 5,315
$ 1,190
Interest income forgone on nonaccrual loans
$
$
$
Interest income recorded on a cash basis on nonaccrual loans
$ -
$ -
$ -
Nonperforming loans to total loans
0.40 %
0.50 %
0.13 %
Nonperforming assets to total assets
0.27 %
0.33 %
0.07 %
A substandard loan is not adequately protected by the current sound worth and paying capacity of the borrower or the value of the collateral pledged, if any. Total substandard loans increased by $1.3 million from $21.7 million on December 31, 2023, to $23.0 million on December 31, 2024. Loans classified as special mention increased by $2.7 million from $9.3 million on December 31, 2023, to $12.0 million on December 31, 2024.
It is the policy of management to make additions to the allowance for credit losses so that it remains appropriate to absorb the inherent risk of loss in the portfolio. Management believes that the allowance on December 31, 2024, is appropriate. However, the determination of the amount of the allowance is judgmental and subject to economic conditions which cannot be predicted with certainty. Accordingly, the Company cannot predict whether charge-offs of loans in excess of the allowance may occur in future periods.
OREO represent real property acquired by the Bank either through foreclosure or through a deed in lieu thereof from the borrower. Repossessed assets include vehicles and other commercial assets acquired under agreements with delinquent borrowers. OREO holdings represented one property totaling $91,000 on December 31, 2024, and one property totaling $357,000 at December 31, 2023.
Nonperforming assets as a percentage of total assets were 0.27% at December 31, 2024 and 0.33% at December 31, 2023.
The following table provides a summary of the change in the number and balance of OREO properties for the years ended December 31, 2024 and 2023, dollars in thousands:
Year Ended December 31,
Number
Number
Beginning Balance
$
-
$ -
Additions
Dispositions
(1 )
(357 )
(1 )
(83 )
Provision from change in OREO valuation
-
(50 )
-
-
Ending Balance
$
$
$
Investment Portfolio and Federal Reserve Balances. Total investment securities were $437.7 million as of December 31, 2024, and $489.2 million at December 31, 2023. Unrealized losses on available-for-sale investment securities totaling $35.7 million were recorded, net of $10.6 million in tax benefits, as accumulated other comprehensive loss within shareholders' equity at December 31, 2024. During the first quarter of 2024 we sold $116 million in investment securities having a weighted average tax equivalent yield of 2.24% recording a $19.8 million loss on sale. Beginning in December 2023 and ending on March 27, 2024 we purchased $120 million in investment securities having a weighted average tax equivalent yield of 5.25%. These sales and purchases were made as part of the investment restructure described earlier. No securities were sold during 2023.
The investment portfolio at December 31, 2024, consisted of $350.2 million in securities of U.S. Government-sponsored agencies and U.S. Government agencies, and 170 municipal securities totaling $87.5 million. The investment portfolio at December 31, 2023 consisted of $6.9 million in U.S. Treasury securities, $351.9 million in securities of U.S. Government-sponsored agencies and U.S. Government agencies and 244 municipal securities totaling $130.4 million.
There were no Federal funds sold at December 31, 2024, and December 31, 2023; however, the Bank maintained interest earning balances at the Federal Reserve Bank totaling $47.2 million at December 31, 2024 and $52.9 million at December 31, 2023. The balance, on December 31, 2024, earns interest at the rate of 4.40%.
The Company classifies its investment securities as available-for-sale or held-to-maturity. Currently all securities are classified as available-for-sale. Securities classified as available-for-sale may be sold to implement the Company's asset/liability management strategies and in response to changes in interest rates, prepayment rates and similar factors.
The following table summarizes the maturities of the Company's securities at their carrying value, which represents fair value, and their weighted average tax equivalent yields at December 31, 2024. Mortgage-backed securities are included in maturity categories based on their stated maturity date. Expected maturities may differ from contractual maturities because the issuers may have the right to call or prepay obligations.
After One Through
After Five Through
(dollars in thousands)
Within One Year
Five Years
Ten Years
After Ten Years
Total
Available-for-sale (Fair Value)
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
U.S. Government-sponsored agency mortgage-backed securities - residential
3,615
3.46 %
94,517
3.95 %
130,259
4.06 %
-
- %
228,391
4.00 %
U.S. Government agency mortgage-backed securities - commercial
5,825
4.20 %
27,037
4.47 %
89,008
3.63 %
-
- %
121,870
3.84 %
Municipal obligations
3.47 %
6,874
3.78 %
17,186
4.56 %
62,596
3.28 %
87,474
3.57 %
Total
$ 10,258
3.88 %
$ 128,428
4.05 %
$ 236,453
3.93 %
$ 62,596
3.28 %
$ 437,735
3.87 %
Deposits. Deposits totaled $1.4 billion on December 31, 2024, an increase of $37 million from December 31, 2023. The increase in deposits includes increases of $7 million in demand deposits, $53 million in money market accounts and $2 million in time deposits. Partially offsetting these increases was a $25 million decrease in savings deposits. At December 31, 2024, 51% of the Company’s deposits were in the form of non-interest-bearing demand deposits. The Company has no brokered deposits.
The following tables show the distribution of deposits by type at December 31, 2024 and 2023 and the average balance and rates paid on deposits for the three years ending December 31, 2024:
Percent of
Percent of
Deposits in
Deposits in
Each Category
Each Category
Balance at End
to Total
Balance at End
to Total
of Period
Deposits
of Period
Deposits
(dollars in thousands)
12/31/2024
12/31/2024
12/31/2023
12/31/2023
Non-interest bearing
$ 699,401
51.0 %
$ 692,768
51.9 %
Money Market
267,582
19.5 %
214,185
16.1 %
Savings
309,929
22.6 %
335,050
25.1 %
Time
94,189
6.9 %
91,652
6.9 %
Total Deposits
$ 1,371,101
%
$ 1,333,655
%
Average Balance
Yields/Rates
Average Balance
Yields/Rates
Average Balance
Yields/Rates
(dollars in thousands)
12/31/2024
12/31/2024
12/31/2023
12/31/2023
12/31/2022
12/31/2022
Non-interest bearing
$ 684,909
$ 726,191
$ 773,293
Money Market
226,372
1.09 %
227,819
0.60 %
254,723
0.11 %
Savings
324,000
0.22 %
375,377
0.21 %
400,314
0.09 %
Time
96,131
2.85 %
74,570
2.10 %
59,016
0.28 %
Total interest bearing
$ 646,503
0.92 %
$ 677,766
0.55 %
$ 714,053
0.12 %
Deposits represent the Bank's primary source of funds. Deposits are primarily core deposits in that they are demand, savings and time deposits generated from local businesses and individuals. These sources are considered to be relatively stable, long-term relationships thereby enhancing steady growth of the deposit base without major fluctuations in overall deposit balances. The Company experiences, to a small degree, some seasonality with the slower growth period between November through April, and the higher growth period from May through October. To assist in meeting any funding demands, the Company maintains several borrowing agreements as described below.
The Company estimates that it has approximately $496 million in uninsured deposits which includes uninsured deposits of Plumas Bancorp. Of this amount, $128 million represents deposits that are collateralized such as deposits of states, municipalities and tribal accounts. Uninsured amounts are estimated based on the portion of the account balances in excess of FDIC insurance limits.
The following table presents the maturity distribution of the portion of time deposits in excess of the FDIC insurance limit.
Maturity Distribution of Estimated Uninsured Time Deposits
December 31,
December 31,
(dollars in thousands)
Remaining maturity:
Three months or less
$
11,697
6,044
After three through six months
6,712
10,097
After six through twelve months
4,452
5,428
After twelve months
Total
$
22,922
$
22,326
Short-term Borrowing Arrangements. The Company is a member of the Federal Home Loan Bank of San Francisco (FHLB) and can borrow up to $248 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $433 million. The Company is required to hold FHLB stock as a condition of membership. At December 31, 2024, the Company held $6.2 million of FHLB stock which is recorded as a component of other assets. The Company is also eligible to borrow at the FRB Discount Window. At December 31, 2024 the Company could borrow up to $116 million at the Discount Window secured by investment securities with a fair value of $120 million. In addition to its FHLB borrowing line and the Discount Window, the Company has unsecured short-term borrowing agreements with two of its correspondent banks in the amounts of $50 million and $20 million. There were no outstanding borrowings to the FHLB, FRB Discount Window or the correspondent banks at December 31, 2024, and December 31, 2023.
The Federal Reserve Board, on March 12, 2023, announced the creation of the Bank Term Funding Program (BTFP). The BTFP offered loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets where valued at par. At December 31, 2023, the Company had outstanding borrowings under the Bank Term Funding Program (BTFP) totaling $80 million. In January 2024, the Company borrowed an additional $25 million under the BTFP. During September 2024 we made a $45 million payment resulting in a balance of $60 million and in November 2024 we paid off the $60 million balance. Interest expense recognized on the BTFP borrowings for the twelve months ended December 31, 2024, and 2023 totaled $4.0 million and $527,000, respectively.
Note Payable. On January 25, 2022 the Company replaced its $15 million line of credit facility with a $15 million Loan Agreement (the “Loan Agreement”) and Promissory Note (the “Term Note”). The Term Note matures on January 25, 2035 and can be prepaid at any time. During the initial three years of the Loan Agreement the Term Note functions as an interest only revolving line of credit. Beginning on year four the Term Note converts into a term loan requiring semi-annual principal and interest payments and no further advances can be made. The proceeds of this lending facility shall be used by the Company for general corporation purposes, and to provide capital injections into the Bank. The Term Note bears interest at a fixed rate of 3.85% for the first 5 years and then at a floating interest rate linked to WSJ Prime Rate for the remaining eight year term. The Loan Agreement provides for a $187,500 loan fee. The Note is secured by the common stock of the Bank. The Loan Agreement contains certain financial and non-financial covenants, which include, but are not limited to, a minimum leverage ratio at the Bank, a minimum total risk-based capital ratio at the Bank, a maximum Texas Ratio at the Bank, a minimum level of Tier 1 capital at the Bank and a return on average assets needed to generate a 1.25X debt service coverage ratio. The Loan Agreement also contains customary events of default, including, but not limited to, failure to pay principal or interest, the commencement of certain bankruptcy proceedings, and certain adverse regulatory events affecting the Company or the Bank. Upon the occurrence of an event of default under the Loan Agreement, the Company’s obligations under the Loan Agreement may be accelerated. In March 2023 the Company borrowed $10 million on this note and used the proceeds to redeem its Trust Preferred securities as described below. During January of 2024 the Company borrowed an additional $5 million under this note for general corporate purposes. The Company was in compliance with all covenants related to the Term Note at December 31, 2024. Interest expense recognized on the Term Note for the twelve months ended December 31, 2024 and 2023 totaled $641 thousand and $369 thousand, respectively.
Repurchase Agreements. The Bank offers a repurchase agreement product for its larger customers which use securities sold under agreements to repurchase as an alternative to interest-bearing deposits. Securities sold under agreements to repurchase totaling $22.1 million and $23.1 million at December 31, 2024 and December 31, 2023, respectively, are secured by U.S. Government agency securities with a carrying amount of $38.5 million and $34.1 million at December 31, 2024 and December 31, 2023, respectively. Interest paid on this product is similar to, but less than, that which is paid on the Bank’s money market accounts; however, these are not deposits and are not FDIC insured.
Junior Subordinated Deferrable Interest Debentures. During 2002, Plumas Statutory Trust I issued 6,000 Floating Rate Capital Trust Pass-Through Securities ("Trust Preferred Securities"), with a liquidation value of $1,000 per security, for gross proceeds of $6,000,000. During 2005, Plumas Statutory Trust II issued 4,000 Trust Preferred Securities with a liquidation value of $1,000 per security, 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 represented the sole assets of Trusts I and II.
On February 9, 2023, Plumas Bancorp submitted redemption notices to redeem $6,000,000 of trust preferred securities of Plumas Statutory Trust I (“Trust I”) and $4,000,000 of trust preferred securities of Plumas Statutory Trust II (“Trust II”). The trust preferred securities were redeemed, along with an aggregate of $310,000 in common securities issued by the trusts and held by the Company and 100% of the Company’s junior subordinated debentures due 2032 held by Trust I and 100% of the Company’s junior subordinated debentures due 2035 held by Trust II underlying the trust preferred securities.
The trust preferred securities of Plumas Statutory Trust II were redeemed on March 15, 2023 and the trust preferred securities of Plumas Statutory Trust I were redeemed on March 27, 2023. The redemption prices for the junior subordinated debentures were equal to 100% of the respective principal amounts, which total $10,000,000, plus accrued interest up to the redemption date. The proceeds from the redemption of the junior subordinated debentures were simultaneously applied to redeem all of the outstanding common securities and the outstanding trust preferred securities at a price of 100% of the aggregate principal amount of the trust preferred securities plus accumulated but unpaid distributions up to the redemption date. Funding for the redemption was provided from borrowings on our Term Note as described above.
Interest expense, net of the effect of interest rate swaps, recognized by the Company for the years ended December 31, 2023 and 2022 related to the subordinated debentures was $141,000 and $359,000, respectively.
Interest Rate Swaps. On May 26, 2020 we entered into two separate interest rate swap agreements with notional amounts totaling $10 million, effectively converting the $10 million in Subordinated Debentures to fixed obligations. The swaps had a 10-year maturity and fix the libor rate on the Subordinated Debentures at approximately 75 basis points. These agreements had been designated and qualify as cash flow hedging instruments and, as such, changes in the fair value are recorded in accumulated other comprehensive income/loss to the extent the agreements are effective hedges. The swaps were determined to be fully effective during all periods presented. As such, no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the swaps is recorded in other assets with changes in fair value recorded in other comprehensive income. The amount included in accumulated other comprehensive income would be reclassified to current earnings should the hedges no longer be considered effective. In January 2023 we terminated the swap agreements receiving $1.7 million in proceeds on termination.
Interest income recorded on these swap transactions totaled $25,000 for the year ended December 31, 2023, and $104,000 for the year ended December 31, 2022, and is reported as a component of interest expense on the Subordinated Debentures.
Capital Resources
Shareholders’ equity increased by $30.6 million from $147.3 million at December 31, 2023 to $177.9 million at December 31, 2024. The $30.6 million increase was related to net income during 2024 of $28.6 million, a decline in accumulated other comprehensive loss of $7.3 million and stock option and restricted stock activity of $1.0 million partially offset by shareholder dividends of $6.3 million.
It is the policy of the Company to periodically distribute excess retained earnings to the shareholders through the payment of cash dividends. Such dividends help promote shareholder value and capital adequacy by enhancing the marketability of the Company’s stock. All authority to provide a return to the shareholders in the form of a cash or stock dividend or split rests with the Board of Directors. The Board will periodically, but on no regular schedule, review the appropriateness of a cash dividend payment. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. The Company paid a quarterly cash dividend of $0.27 per share on November 15, 2024, August 15, 2024, May 15, 2024 and February 15, 2024, and a quarterly cash dividend of $0.25 per share on November 15, 2023, August 15, 2023, May 15, 2023, and February 15, 2023.
Capital Standards. The Company uses a variety of measures to evaluate its capital adequacy. Management reviews these capital measurements on a monthly basis and takes appropriate action to ensure that they are within established internal and external guidelines. The FDIC has promulgated risk-based capital guidelines for all state non-member banks such as the Bank. These guidelines establish a risk-adjusted ratio relating capital to different categories of assets and off-balance sheet exposures.
In July, 2013, the federal bank regulatory agencies adopted rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. depository organizations, sometimes called “Basel III,” that increased the minimum regulatory capital requirements for bank holding companies and depository institutions and implemented strict eligibility criteria for regulatory capital instruments. The Basel III capital rules include a minimum common equity Tier 1 ratio of 4.5%, a Tier 1 capital ratio of 6.0%, a total risk-based capital ratio of 8.0%, and a minimum leverage ratio of 4.0% (calculated as Tier 1 capital to average consolidated assets). The minimum capital levels required to be considered “well capitalized” include a common equity Tier 1 ratio of 6.5%, a Tier 1 risk-based capital ratio of 8.0%, a total risk-based capital ratio of 10.0% and a leverage ratio of 5.0%. In addition, the Basel III capital rules require that banking organizations maintain a capital conservation buffer of 2.5% above the minimum capital requirements in order to avoid restrictions on their ability to pay dividends, repurchase stock or pay discretionary bonuses. Including the capital conservation buffer of 2.5%, the Basel III capital rules require the following minimum ratios for a bank holding company or bank to be considered well capitalized: a common equity Tier 1 capital ratio of 7.0%, a Tier 1 capital ratio of 8.5%, and a total capital ratio of 10.5%. At December 31, 2024, the Company’s and the Bank’s capital ratios exceeded the thresholds necessary to be considered “well capitalized” under the Basel III framework.
Under the FRB’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement (the “Policy Statement”), qualifying bank holding companies with less than $3 billion in consolidated assets are exempt from the Basel III consolidated capital rules. The Company qualifies for treatment under the Policy Statement and is not currently subject to the Basel III consolidated capital rules at the bank holding company level. The Basel III capital rules continue to apply to the Bank.
In 2019, the federal bank regulators issued a rule establishing a “community bank leverage ratio” (the ratio of a bank’s tier 1 capital to average total consolidated assets) that qualifying institutions with less than $10 billion in assets may elect to use in lieu of the generally applicable leverage and risk-based capital requirements under Basel III. A qualifying banking organization that elects to use the new ratio will be considered to have met all applicable federal regulatory capital and leverage requirements, including the minimum capital levels required to be considered “well capitalized,” if it maintains a community bank leverage ratio capital exceeding 9%. The new rule became effective on January 1, 2020. Plumas Bank has chosen not to opt into the community bank leverage ratio at this time.
The following table sets forth the Bank's actual capital amounts and ratios (dollar amounts in thousands):
Minimum Amount of Capital Required
To be Well-Capitalized
For Capital
Under Prompt
Actual
Adequacy Purposes (1)
Corrective Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
December 31, 2024
Common Equity Tier 1 Ratio
$ 199,308
17.3 %
$ 51,981
4.5 %
$ 75,084
6.5 %
Tier 1 Leverage Ratio
199,308
11.9 %
66,856
4.0 %
83,570
5.0 %
Tier 1 Risk-Based Capital Ratio
199,308
17.3 %
69,308
6.0 %
92,411
8.0 %
Total Risk-Based Capital Ratio
213,124
18.5 %
92,411
8.0 %
115,514
10.0 %
December 31, 2023
Common Equity Tier 1 Ratio
$ 179,194
15.7 %
$ 51,294
4.5 %
$ 74,092
6.5 %
Tier 1 Leverage Ratio
179,194
10.8 %
66,348
4.0 %
82,935
5.0 %
Tier 1 Risk-Based Capital Ratio
179,194
15.7 %
68,392
6.0 %
91,190
8.0 %
Total Risk-Based Capital Ratio
192,860
16.9 %
91,190
8.0 %
113,987
10.0 %
(1) Does not include amounts required to maintain the capital conservation buffer under the new capital rules.
Management believes that the Bank met all its capital adequacy requirements as of December 31, 2024.
The current and projected capital positions of the Bank and the impact of capital plans and long-term strategies are reviewed regularly by management. The Company policy is to maintain the Bank’s ratios above the prescribed well-capitalized ratios at all times.
Off-Balance Sheet Arrangements
Loan Commitments. In the normal course of business, there are various commitments outstanding to extend credits that are not reflected in the financial statements. Commitments to extend credit and letters of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Annual review of commercial credit lines, letters of credit and ongoing monitoring of outstanding balances reduces the risk of loss associated with these commitments. As of December 31, 2024, the Company had $155.4 million in unfunded loan commitments and no letters of credit. This compares to $174.6 million in unfunded loan commitments and $108,000 in letters of credit at December 31, 2023. Of the $155.4 million in unfunded loan commitments, $92.7 million and $62.7 million represent commitments to commercial and consumer customers, respectively. Of the total unfunded commitments at December 31, 2024, $91.7 million were secured by real estate, of which $37.8 million was secured by commercial real estate and $53.9 million was secured by residential real estate mostly in the form of equity lines of credit. The commercial loan commitments not secured by real estate primarily represent business lines of credit, while the consumer loan commitments not secured by real estate primarily represent revolving credit card lines and overdraft protection lines. Since some of the commitments are expected to expire without being drawn upon the total commitment amounts do not necessarily represent future cash requirements.
Operating Leases. The Company’s leases eleven branches. Our Yuba City branch is classified as owned; however, it is subject to a long-term land lease. The Company also leases two lending offices and four administrative offices and owns three administrative facilities. The expiration dates of the leases vary, with the first such lease expiring during 2025 and the last such lease expiring during 2044. Including variable lease expense, total rent expense for the years ended December 31, 2024, 2023 and 2022 was $3.1 million, $635 thousand and $611 thousand, respectively.
Liquidity
The Company manages its liquidity to provide the ability to generate funds to support asset growth, meet deposit withdrawals (both anticipated and unanticipated), fund customers' borrowing needs and satisfy maturity of short-term borrowings. The Company’s liquidity needs are managed using assets or liabilities, or both. On the asset side, in addition to cash and due from banks, the Company maintains an investment portfolio which includes unpledged U.S. Government-sponsored agency securities that are classified as available-for-sale. On the liability side, liquidity needs are managed by offering competitive rates on deposit products and the use of established lines of credit.
The Company is a member of the Federal Home Loan Bank of San Francisco (FHLB) and can borrow up to $248 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $433 million. The Company is also eligible to borrow at the FRB Discount Window. At December 31, 2024 the Company could borrow up to $116 million at the Discount Window secured by investment securities with a fair value of $120 million. In addition to its FHLB borrowing line and the Discount Window, the Company has unsecured short-term borrowing agreements with two of its correspondent banks in the amounts of $50 million and $20 million. There were no outstanding borrowings to the FHLB, FRB Discount Window or the correspondent banks at December 31, 2024, and December 31, 2023.
Customer deposits are the Company’s primary source of funds. Total deposits increased by $37 million from $1.3 billion at December 31, 2023 to $1.4 billion at December 31, 2024. Deposits are held in various forms with varying maturities. The Company estimates that it has approximately $496 million in uninsured deposits which includes uninsured deposits of Plumas Bancorp. Of this amount, $128 million represents deposits that are collateralized such as deposits of states, municipalities and tribal accounts.
The Company’s securities portfolio, Discount Window advances, FHLB advances, and cash and due from banks serve as the primary sources of liquidity, providing adequate funding for loans during periods of high loan demand. During periods of decreased lending, funds obtained from the maturing or sale of investments, loan payments, and new deposits are invested in short-term earning assets, such as cash held at the FRB and investment securities, to serve as a source of funding for future loan growth. Management believes that the Company’s available sources of funds, including borrowings, will provide adequate liquidity for its operations in the foreseeable future.
Subsequent Event
On January 28, 2025, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Cornerstone Community Bancorp (“Cornerstone”), pursuant to which Cornerstone will merge with and into the Company, with the Company as the surviving corporation (the “Merger”). The Merger Agreement contemplates that immediately after the Merger, Cornerstone’s wholly-owned subsidiary, Cornerstone Community Bank, a California state-chartered bank, will merge with and into Plumas Bank, a California state-chartered bank and wholly-owned subsidiary of the Company, with Plumas Bank as the surviving bank.
Merger Consideration
At the effective time of the Merger (the “Effective Time”), each outstanding share of Cornerstone common stock, excluding certain specified shares, will be converted into the right to receive 0.6608 shares of Plumas common stock, plus up to $9.75 in cash consideration, as may be reduced in accordance with the terms of the Merger Agreement (the “Cash Consideration”) If Cornerstone’s Adjusted Tangible Common Equity (as determined in accordance with the Merger Agreement) as of the month end prior to the Effective Time, as adjusted to reflect certain merger-related costs, is less than $42,586,066, then the Cash Consideration will be reduced by such difference on a pro rata basis based on the number of shares of Cornerstone common stock outstanding immediately prior to the Effective Time. In addition, if Cornerstone’s merger-related costs (as determined in accordance with the Merger Agreement and giving credit for any recoveries on a specific Cornerstone Bank loan) exceed $7,000,000, then the Cash Consideration will be reduced by such excess on a pro rata basis based on the number of shares of Cornerstone common stock outstanding immediately prior to the Effective Time.
The transaction is valued at approximately $64.6 million based on the closing price of $47.76 for Plumas shares on January 28, 2025. On a pro forma consolidated basis, the combined company would have approximately $2.3 billion in assets, $2.0 billion in deposits, $1.5 billion in loans, and operate 19 branches throughout Northern California and Western Nevada.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company we are not required to provide the information required by this item.
On January 28, 2025, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Cornerstone Community Bancorp (“Cornerstone”), pursuant to which Cornerstone will merge with and into the Company, with the Company as the surviving corporation (the “Merger”). The Merger Agreement contemplates that immediately after the Merger, Cornerstone’s wholly-owned subsidiary, Cornerstone Community Bank, a California state-chartered bank, will merge with and into Plumas Bank, a California state-chartered bank and wholly-owned subsidiary of the Company, with Plumas Bank as the surviving bank.
Merger Consideration
At the effective time of the Merger (the “Effective Time”), each outstanding share of Cornerstone common stock, excluding certain specified shares, will be converted into the right to receive 0.6608 shares of Plumas common stock, plus up to $9.75 in cash consideration, as may be reduced in accordance with the terms of the Merger Agreement (the “Cash Consideration”) If Cornerstone’s Adjusted Tangible Common Equity (as determined in accordance with the Merger Agreement) as of the month end prior to the Effective Time, as adjusted to reflect certain merger-related costs, is less than $42,586,066, then the Cash Consideration will be reduced by such difference on a pro rata basis based on the number of shares of Cornerstone common stock outstanding immediately prior to the Effective Time. In addition, if Cornerstone’s merger-related costs (as determined in accordance with the Merger Agreement and giving credit for any recoveries on a specific Cornerstone Bank loan) exceed $7,000,000, then the Cash Consideration will be reduced by such excess on a pro rata basis based on the number of shares of Cornerstone common stock outstanding immediately prior to the Effective Time.
The transaction is valued at approximately $64.6 million based on the closing price of $47.76 for Plumas shares on January 28, 2025. On a pro forma consolidated basis, the combined company would have approximately $2.3 billion in assets, $2.0 billion in deposits, $1.5 billion in loans, and operate 19 branches throughout Northern California and Western Nevada.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of Plumas Bancorp and subsidiary, and report of the independent registered public accounting firm, are included in the Annual Report of Plumas Bancorp to its shareholders for the years ended December 31, 2024, 2023 and 2022.
Page
Management’s Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm (Elliott Davis, LLC, Greenville, South Carolina, PCAOB ID 149)
Report of Independent Registered Public Accounting Firm (Eide Bailly, LLP, San Ramon, California, PCAOB ID 286)
Consolidated Balance Sheets as of December 31, 2024 and 2023
Consolidated Statements of Income for the years ended December 31, 2024, 2023 and 2022
Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023 and 2022
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2024, 2023 and 2022
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022
Notes to Consolidated Financial Statements
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Plumas Bancorp and subsidiary (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.
As of December 31, 2024, management assessed the effectiveness of the Company’s internal control over financial reporting based on the framework established in the 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2024, is effective.
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Plumas Bancorp and Subsidiary
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Plumas Bancorp and Subsidiary (the Company) as of December 31, 2024, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for the year then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involvedour especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
elliottdavis.com
Allowance for Credit Losses - Collectively Evaluated Loans
As described in Note 5 to the Company’s financial statements, the Company has a gross loan portfolio of approximately $1.0 billion and related allowance for credit losses of $13.2 million as of December 31, 2024. As described by the Company in Note 2 to the Company’s financial statements, the Company uses discounted cash flow method to estimate expected credit losses. In addition to its own loss experience, the Company also includes peer bank historical loss experience in its assessment of expected credit losses to determine the allowance for credit losses. The Company utilized call report data to measure its and its peers' historical credit losses experience with similar risk characteristics within the segments over an economic cycle. Also considered were further adjustments to historical loss information to appropriately adjust for the impact of portfolio concentrations, changes in underwriting practices, imprecision in its economic forecasts, and other risk factors that might influence its loss estimation process.
We identified the Company’s estimate of the allowance for credit losses for collectively evaluated loans as a critical audit matter. The principal considerations for our determination of the allowance for credit losses as a critical audit matter related to the high degree of subjectivity in the Company’s determination of significant model assumptions, including the determination of qualitative factor adjustments and macroeconomic data in the reasonable and supportable forecasts. Auditing these complex judgments and assumptions by the Company involves especially challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these matters, including the extent of specialized skill or knowledge needed.
The primary procedures we performed to address this critical audit matter included the following:
●
We obtained an understanding of the Company’s methodology and process for establishing the allowance for credit losses, including the selection and application of forecasts and the basis for development and related adjustments of the qualitative factor component of the allowance for credit losses.
●
We tested the completeness and accuracy of the significant inputs into the model including the underlying data used to develop the qualitative factors and forecasts.
●
We tested the computational accuracy of the model utilized to determine the allowance for credit losses by recalculating the model outputs.
●
We evaluated the relevance and the reasonableness of assumptions related to the determination of qualitative factor adjustments and the forecasting component of the ACL by comparing the data used in the model to internally developed, third-party sources, and other audit evidence gathered.
/s/ Elliott Davis, LLC
We have served as the Company's auditor since 2024.
Greenville, South Carolina
March 19, 2025
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
Plumas Bancorp and Subsidiary
Reno, Nevada
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Plumas Bancorp and Subsidiary (the “Company”) as of December 31, 2023, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows, for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risk of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Change in Accounting Principle
As discussed in Note 2 to the financial statements, the Company adopted the provisions of FASB Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as of January 1, 2023, using the modified retrospective approach with an adjustment at the beginning of the adoption period. Our opinion is not modified with respect to this matter.
/s/ Eide Bailly LLP
We served as the Company’s auditor from 2013 to 2023. Such date incorporates the acquisition of certain assets of Vavrinek, Trine, Day & Co., LLP, by Eide Bailly LLP in 2019.
San Ramon, California
March 20, 2024
PLUMAS BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 2024 and 2023
ASSETS
Cash and cash equivalents
$ 82,018,000 $ 85,655,000
Investment securities available for sale, net of allowance for credit losses of $0 at December 31, 2024 and 2023
437,735,000 489,181,000
Loans, less allowance for credit losses of $13,196,000 at December 31, 2024 and $12,867,000 at 2023
1,005,375,000 948,604,000
Right-of-use assets
24,334,000 2,926,000
Other real estate owned
91,000 357,000
Premises and equipment, net
12,495,000 18,948,000
Bank owned life insurance
16,519,000 16,110,000
Goodwill
5,502,000 5,502,000
Accrued interest receivable and other assets
39,257,000 43,133,000
Total assets
$ 1,623,326,000 $ 1,610,416,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing
$ 699,401,000 $ 692,768,000
Interest bearing
671,700,000 640,887,000
Total deposits
1,371,101,000 1,333,655,000
Repurchase agreements
22,073,000 23,054,000
Accrued interest payable and other liabilities
12,493,000 13,389,000
Borrowings
15,000,000 90,000,000
Lease liabilities
24,759,000 3,001,000
Total liabilities
1,445,426,000 1,463,099,000
Commitments and contingencies (Note 12)
Shareholders' equity:
Serial preferred stock - no par value; 10,000,000 shares authorized; none outstanding
- -
Common stock - no par value; 22,500,000 shares authorized; issued and outstanding - 5,903,368 at December 31, 2024 and 5,871,523 at December 31, 2023
29,043,000 28,033,000
Retained earnings
174,002,000 151,748,000
Accumulated other comprehensive loss, net of taxes
(25,145,000 ) (32,464,000 )
Total shareholders' equity
177,900,000 147,317,000
Total liabilities and shareholders' equity
$ 1,623,326,000 $ 1,610,416,000
The accompanying notes are an integral part of these consolidated financial statements.
PLUMAS BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2024, 2023 and 2022
Interest income:
Interest and fees on loans
$ 61,450,000 $ 54,999,000 $ 45,704,000
Interest on investment securities:
Taxable
15,308,000 11,525,000 6,409,000
Exempt from Federal income taxes
2,574,000 3,681,000 2,722,000
Other
4,993,000 4,387,000 4,923,000
Total interest income
84,325,000 74,592,000 59,758,000
Interest expense:
Interest on deposits
5,916,000 3,730,000 823,000
Interest on junior subordinated deferrable interest debentures
- 141,000 359,000
Interest on borrowings
4,676,000 896,000 -
Other
42,000 31,000 67,000
Total interest expense
10,634,000 4,798,000 1,249,000
Net interest income before provision for credit losses
73,691,000 69,794,000 58,509,000
Provision for credit losses
1,196,000 2,775,000 1,300,000
Net interest income after provision for credit losses
72,495,000 67,019,000 57,209,000
Non-interest income:
Gain on sale of buildings
19,854,000 - -
Interchange revenue
3,130,000 3,419,000 3,401,000
Service charges
2,988,000 2,789,000 2,464,000
Loan servicing fees
756,000 872,000 893,000
Federal Home Loan Bank dividends
546,000 418,000 293,000
Earnings on bank owned life insurance policies, net
409,000 417,000 391,000
Gain on sale of loans held for sale
37,000 234,000 2,696,000
Gain on termination of swaps
- 1,707,000 -
Loss on sale of investment securities
(19,817,000 ) - -
Other
877,000 866,000 912,000
Total non-interest income
8,780,000 10,722,000 11,050,000
(Continued)
PLUMAS BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Continued)
For the Years Ended December 31, 2024, 2023 and 2022
Non-interest expenses:
Salaries and employee benefits
$ 21,744,000 $ 20,320,000 $ 17,451,000
Occupancy and equipment
7,606,000 5,302,000 4,610,000
Other
12,924,000 11,908,000 10,529,000
Total non-interest expenses
42,274,000 37,530,000 32,590,000
Income before income taxes
39,001,000 40,211,000 35,669,000
Provision for income taxes
10,382,000 10,435,000 9,225,000
Net income
$ 28,619,000 $ 29,776,000 $ 26,444,000
Basic earnings per common share
$ 4.85 $ 5.08 $ 4.53
Diluted earnings per common share
$ 4.80 $ 5.02 $ 4.47
Common dividends per share
$ 1.08 $ 1.00 $ 0.64
The accompanying notes are an integral part of these consolidated financial statements.
PLUMAS BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended December 31, 2024, 2023 and 2022
Net Income
$ 28,619,000
$ 29,776,000
$ 26,444,000
Other comprehensive income (loss):
Change in available for sale securities
(9,427,000 )
8,095,000
(55,849,000 )
Change in cash flow hedge
-
(295,000 )
1,395,000
Reclassification adjustments for net loss (gain) included in net income
19,817,000
(1,707,000 )
-
Net unrealized holding gain (loss)
10,390,000
6,093,000
(54,454,000 )
Related tax effect:
Change in available for sale securities
2,787,000
(2,393,000 )
16,510,000
Change in cash flow hedge
-
87,000
(412,000 )
Reclassification of (loss) gain included in net income
(5,858,000 )
505,000
-
Income tax effect
(3,071,000 )
(1,801,000 )
16,098,000
Other comprehensive income (loss)
7,319,000
4,292,000
(38,356,000 )
Total comprehensive income (loss)
$ 35,938,000
$ 34,068,000
$ (11,912,000 )
The accompanying notes are an integral part of these consolidated financial statements.
PLUMAS BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended December 31, 2024, 2023 and 2022
Accumulated
Other
Comprehensive
Total
Common Stock
Retained
Income (loss)
Shareholders’
Shares
Amount
Earnings
(Net of Taxes)
Equity
Balance, January 1, 2022
5,816,991 $ 26,801,000 $ 105,681,000 $ 1,600,000 $ 134,082,000
Net Income
- - 26,444,000 - 26,444,000
Other comprehensive loss
- - - (38,356,000 ) (38,356,000 )
Grants of restricted stock
1,650 - - -
Exercise of stock options
31,575 309,000 - - 309,000
Cash dividends on common stock ($0.64 per share)
- - (3,737,000 ) - (3,737,000 )
Stock-based compensation expense
- 262,000 - - 262,000
Balance, December 31, 2022
5,850,216 27,372,000 128,388,000 (36,756,000 ) 119,004,000
Cumulative change from adoption of ASU 2016-13
- - (554,000 ) - (554,000 )
Net Income
- - 29,776,000 - 29,776,000
Other comprehensive income
- - - 4,292,000 4,292,000
Exercise of stock options
22,132 339,000 - - 339,000
Termination of restricted stock
(825 ) - - - -
Cash dividends on common stock ($1.00 per share)
- - (5,862,000 ) - (5,862,000 )
Stock-based compensation expense
- 322,000 - - 322,000
Balance, December 31, 2023
5,871,523 28,033,000 151,748,000 (32,464,000 ) 147,317,000
Net Income
- - 28,619,000 - 28,619,000
Other comprehensive income
7,319,000 7,319,000
Grants of restricted stock
435 - - -
Exercise of stock options
31,410 508,000 - - 508,000
Cash dividends on common stock ($1.08 per share)
- - (6,365,000 ) - (6,365,000 )
Stock-based compensation expense
- 502,000 - - 502,000
Balance, December 31, 2024
5,903,368 $ 29,043,000 $ 174,002,000 $ (25,145,000 ) $ 177,900,000
The accompanying notes are an integral part of these consolidated financial statements.
PLUMAS BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2024, 2023 and 2022
Cash flows from operating activities:
Net income
$ 28,619,000 $ 29,776,000 $ 26,444,000
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses
1,196,000 2,775,000 1,300,000
Provision from change in OREO valuation
50,000 - -
Change in deferred loan origination costs/fees, net
(250,000 ) (318,000 ) (2,363,000 )
Stock-based compensation expense
502,000 322,000 262,000
Depreciation and amortization
1,496,000 1,667,000 1,899,000
Amortization of investment security premiums
831,000 1,268,000 1,185,000
Accretion of discounts on investments
(1,195,000 ) (761,000 ) (331,000 )
Net loss on sale of investment securities
19,817,000 - -
Gain on sale of loans held for sale
(37,000 ) (234,000 ) (2,696,000 )
Loans originated for sale
(1,230,000 ) (1,736,000 ) (25,707,000 )
Proceeds from loan sales
757,000 5,739,000 55,356,000
Net (gain) loss on sale of OREO
(5,000 ) (39,000 ) 37,000
Net loss on sale of other vehicles owned
131,000 28,000 54,000
Earnings on bank owned life insurance policies
(409,000 ) (417,000 ) (391,000 )
Gain on sale of buildings
(19,854,000 ) - -
Deferred income tax
(54,000 ) (702,000 ) 1,033,000
Decrease (increase) in accrued interest receivable and other assets
1,690,000 335,000 (1,094,000 )
(Decrease) increase in accrued interest payable and other liabilities
(1,546,000 ) 635,000 1,897,000
Net cash provided by operating activities
30,509,000 38,338,000 56,885,000
(Continued)
PLUMAS BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
For the Years Ended December 31, 2024, 2023 and 2022
Cash flows from investing activities:
Proceeds from matured and called available-for-sale investment securities
$ 8,950,000
$ 4,565,000
$ 830,000
Proceeds from sale of available-for-sale securities
116,285,000
-
-
Purchases of available-for-sale investment securities
(120,812,000 )
(73,111,000 )
(227,070,000 )
Proceeds from principal repayments from available-for-sale government-guaranteed mortgage-backed securities
37,959,000
31,656,000
30,748,000
Net increase in loans
(58,264,000 )
(49,764,000 )
(72,883,000 )
Proceeds from sale of vehicles
763,000
484,000
450,000
Proceeds from sale of other real estate
362,000
122,000
487,000
Purchases of Federal Home Loan Bank stock
-
(2,540,000 )
(514,000 )
Purchase of Federal Reserve Bank stock
(9,000 )
(8,000 )
(6,000 )
Proceeds from bank owned life insurance
-
322,000
215,000
Proceeds from sale of buildings
25,690,000
-
-
Purchases of premises and equipment
(678,000 )
(2,278,000 )
(3,023,000 )
Net cash provided by (used in) investing activities
10,246,000
(90,552,000 )
(270,766,000 )
Cash flows from financing activities:
Net increase (decrease) in demand, interest-bearing and savings deposits
34,909,000
(166,620,000 )
33,986,000
Net increase (decrease) in time deposits
2,537,000
42,466,000
(15,176,000 )
Net (decrease) increase in securities sold under agreements to repurchase
(981,000 )
4,430,000
1,341,000
Cash dividends paid on common stock
(6,365,000 )
(5,862,000 )
(3,737,000 )
Decrease in other borrowings
(185,000,000 )
-
-
Redemption of Trust Preferred Securities
-
(10,310,000 )
-
Increase in other borrowings
110,000,000
90,000,000
-
Proceeds from exercise of stock options
508,000
339,000
309,000
Net cash (used in) provided by financing activities
(44,392,000 )
(45,557,000 )
16,723,000
Decrease in cash and cash equivalents
(3,637,000 )
(97,771,000 )
(197,158,000 )
Cash and cash equivalents at beginning of year
85,655,000
183,426,000
380,584,000
Cash and cash equivalents at end of year
$ 82,018,000
$ 85,655,000
$ 183,426,000
(Continued)
PLUMAS BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
For the Years Ended December 31, 2024, 2023 and 2022
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest expense
$ 8,574,000
$ 3,628,000
$ 1,246,000
Income taxes
$ 9,655,000
$ 12,261,000
$ 6,900,000
Supplemental noncash disclosures:
Real estate and vehicles acquired through foreclosure/repossession
$ 867,000
$ 1,072,000
$ 512,000
Lease liabilities arising from obtaining right-of-use assets
$ 22,588,000
$ 382,000
$ -
Common stock retired in connection with the exercise of stock options
$ 78,000
$ 154,000
$ 84,000
The accompanying notes are an integral part of these consolidated financial statements.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
THE BUSINESS OF PLUMAS BANCORP
During 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. In March 2023 the Trusts were dissolved. Plumas Bancorp's Principal Executive Office is located in Reno, Nevada.
The Bank operates thirteen branches in California, including branches in Alturas, Chester, Chico, Fall River Mills, Greenville, Kings Beach, Portola, Quincy, Redding, Susanville, Tahoe City, Truckee and Yuba City. The Bank's newest branch was opened in April 2023 and is located in Chico, California. The Bank’s administrative headquarters are in Quincy, California. In December 2015 the Bank opened a branch in Reno, Nevada, its first branch outside of California, and in 2018 the Bank purchased a branch located in Carson City, Nevada. In addition, the Bank operates a lending office specializing in government-guaranteed lending in Auburn, California, and a commercial/agricultural lending office in Klamath Falls, Oregon. 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 POLICIES
Consolidation and Basis of Presentation
The 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.
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.
Reclassifications
Certain reclassifications have been made to prior years’ balances to conform to the classifications used in 2024. These reclassifications had no impact on the Company’s consolidated financial position, results of operations or net change in cash and cash equivalents.
Segment Information
An operating segment is generally defined as a component of business for which discrete financial information is available and whose operating results are regularly reviewed by the chief operating decision maker. As a community-oriented financial institution, substantially all of the Company’s operations involve the delivery of loan and deposit products to customers.
The chief operating decision maker makes operating decisions and assesses performance based on an ongoing review of the Company’s community banking activities, which constitutes the Company’s only operating segment for financial reporting purposes. The Company’s single reportable segment is determined by the Chief Financial Officer, who is the designated chief operating decision maker, based upon information provided about the Company’s products and services offered, primarily banking operations. The segment is also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business such as branches and departments, which are then aggregated if operating performance, products/services, and customers are similar. The chief operating decision maker will evaluate the financial performance of the Company’s business components such as by evaluating revenue streams, significant expenses, and budget to actual results in assessing the Company’s segment and in the determination of allocating resources. The chief operating decision maker uses revenue streams to evaluate product pricing and significant expenses to assess performance and evaluate return on assets. The chief operating decision maker uses consolidated net income to benchmark the Company against its competitors. The benchmarking analysis coupled with monitoring of budget to actual results are used in assessment performance and in establishing compensation. Loans, investments, and deposits provide the revenues in the banking operation. Interest expense, provisions for credit losses, and payroll provide the significant expenses in the banking operation. The consolidated expense information is the same as is reported on the income statement as consolidated net income. The measure of segment assets is reported on the balance sheet as total consolidated assets. All operations are domestic
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates
To prepare financial statements in conformity with accounting principles generally accepted in the United States of America management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The allowance for credit losses, loan servicing rights, deferred tax assets, and fair values of financial instruments are particularly subject to change.
Cash and Cash Equivalents
For 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, 2024 was $6.7 million. Net cash flows are reported for customer loans and deposit transactions and repurchase agreements.
Investment Securities
Investments 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. As of December 31, 2024 and 2023 the Company did not have any investment securities classified as held-to-maturity.
●
Trading securities are bought and held principally for the purpose of selling in the near term and changes in the value of these securities are recorded through earnings. As of December 31, 2024 and 2023 the Company did not have any investment securities classified as trading.
Management determines the appropriate classification of its investments at the time of purchase and may only change the classification in certain limited circumstances.
Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Premiums on callable debt securities are amortized to their earliest call date. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.
The Company evaluates available for sale debt securities in an unrealized loss position to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an allowance for credit losses on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings. Both the allowance for credit losses and the adjustment to net income may be reversed if conditions change. However, if the Company intends to sell an impaired available for sale debt security or more likely than not will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount is recognized in earnings with a corresponding adjustment to the security's amortized cost basis. In evaluating available for sale debt securities in unrealized loss positions for impairment and the criteria regarding its intent or requirement to sell such securities, the Company considers the extent to which fair value is less than amortized cost, whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuers' financial condition, among other factors. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the ACL when management believes the uncollectability of an available for sale debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met. No security credit losses were recognized during the years ended December 31, 2024, 2023 or 2022.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Federal Home Loan Bank Stock
As a member of the Federal Home Loan Bank (FHLB) System, the Bank is required to maintain an investment in the capital stock of the FHLB. The investment is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income. At December 31, 2024 and December 31, 2023, the Company held $6,234,000 of FHLB stock. On the consolidated balance sheet, FHLB stock is included in accrued interest receivable and other assets.
Federal Reserve Bank Stock
The Bank is a member of its regional Federal Reserve Bank (FRB). FRB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income. At December 31, 2024 and December 31, 2023, the Company held $1,380,000 and $1,371,000, respectively of FRB stock. On the consolidated balance sheet, FRB stock is included in accrued interest receivable and other assets.
Loans Held for Sale, Loan Sales and Servicing
Included in the loan 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). In some cases, 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.
There were no loans held for sale on December 31, 2024 and 2023. Loans held for sale are recorded at the lower of cost or fair value and therefore may be reported at fair value on a non-recurring basis. The fair values for loans held for sale are based on either observable transactions of similar instruments or formally committed loan sale prices.
SBA Government guaranteed loans with unpaid balances of $95,332,000 and $113,176,000 were being serviced for others at December 31, 2024 and 2023, respectively.
The Company accounts for the transfer and servicing of financial assets based on the fair value of financial and servicing assets it controls and liabilities it has assumed, 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 fair value and are subsequently amortized in proportion to and over the period of the related net servicing income or expense. Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If the Company later determines that all or a portion of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income. Changes in valuation allowances are reported with non-interest income on the statement of income. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses.
The Company's investment in the loan is allocated between the retained portion of the loan and the sold portion of the loan based on their 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.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of purchase premiums or discounts, deferred loan fees and costs, and an allowance for credit losses. Loans, if any, that are transferred from loans held for sale 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, the future collectability 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. A loan is moved to non-accrual status in accordance with the Company’s policy, typically after 90 days of non-payment unless well secured and in the process of collection. Past due status is based on the contractual terms of the loan. Subsequent payments on these loans, or payments received on nonaccrual loans for which the ultimate collectability of principal is not in doubt, are applied first to earned but unpaid interest and then to principal. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
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.
Allowance for Credit Losses
To estimate the Allowance for Credit Loss (ACL), the Company elected to use the Discounted Cash Flow (DCF) methodology. This method uses loan level repayment terms to determine expected cash flows which are then discounted by various assumptions such as prepayment or curtailment rates, Probability of Default and Loss Given Default rates.
The ACL is measured on the loan’s amortized cost over the remaining contractual lives of the loan portfolios, adjusted for industry average prepayment and curtailment rates. The Company established a 12-month term for forecasting economic conditions followed by a 24-month straight line reversion to historical average conditions as its basis for the probability of loan default. The probability of default rate is determined by reviewing loans with similar risk characteristics that are combined to form loan pools which are statistically correlated with historical credit losses, defaults and various economic metrics, including California Unemployment rates, California Housing Prices and California Gross Domestic Product. Pool balances that are determined to have probable default are then adjusted for expected loss given default. The Company selected the Frye Jacobs Index as its basis for Loss Given Default. Model forecasts may be adjusted for inherent limitations or biases that have been identified through independent validation and annual back-testing of model performance to actual realized results.
At January 1, 2023, the adoption and implementation date of ASC Topic 326, December 31, 2024, and December 31, 2023, the Company utilized a reasonable and supportable forecast period of approximately four quarters and obtained the forecast data from publicly available sources. The Company also considered the impact of portfolio concentrations, changes in underwriting practices, and other risk factors that might influence its loss estimation process. Management believes that the allowance for credit losses at December 31, 2024, appropriately reflected expected credit losses inherent in the loan portfolio at that date.
In determining the allowance for credit losses, accruing loans with similar risk characteristics are generally evaluated collectively. The Company's policy is that loans designated as nonaccrual no longer share risk characteristics similar to other loans evaluated collectively and as such, all nonaccrual loans, in excess of $100,000, are individually evaluated for reserves. As of December 31, 2024, and 2023, the Bank's nonaccrual loans comprised the entire population of loans individually evaluated. The Company's policy is that nonaccrual loans, in excess of $100,000, also represent the subset of loans where borrowers are experiencing financial difficulty where an evaluation of the source of repayment is required to determine if the nonaccrual loans should be categorized as collateral dependent. Nonaccrual loans with a balance less than or equal to $100,000 are evaluated collectively and consist primarily of automobile loans.
The implementation of CECL on January 1, 2023, also impacted the Company's ACL on unfunded loan commitments, as the ACL now represents expected credit losses over the contractual life of commitments not identified as unconditionally cancellable by the Company. The Reserve for Unfunded Commitments is estimated using the same reserve or coverage rates calculated on collectively evaluated loans following the application of a funding rate to the amount of the unfunded commitment. The funding rate represents management's estimate of the amount of the current unfunded commitment that will be funded over the remaining contractual life of the commitment and is based on historical data. Under CECL the ACL on unfunded loan commitments remains in Other Liabilities while any related provision expense is included in the provision for credit loss expense.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Allowance for Credit Losses (continued)
The Company assigns a risk rating to all loans and periodically, but not less than annually, performs detailed reviews of all criticized and classified loans over $100,000 to identify credit risks and to assess the overall collectability of the portfolio. These risk ratings are also subject to examination by independent specialists engaged by the Company and the Company’s regulators. During these internal reviews, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which borrowers operate and the fair values of collateral securing these loans. These credit quality indicators are used to assign a risk rating to each individual loan.
The risk ratings can be grouped into three major categories, defined as follows:
Special Mention - Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
Substandard - A substandard loan is not adequately protected by the current sound worth and paying capacity of the borrower or the value of the collateral pledged, if any. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Well defined weaknesses include a project's lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time or the project's failure to fulfill economic expectations. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Doubtful - Loans classified doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.
Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass-rated loans.
For other loans, which are primarily consumer loans and automobile loans the Company evaluates credit quality based on the aging status of the loan and by payment activity.
The Company has identified the following portfolio segments to evaluate and measure the allowance for credit loss:
Commercial - Commercial loans are generally underwritten to existing cash flows of operating businesses. Debt coverage is provided by business cash flows and economic trends influenced by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans.
Agricultural - Loans secured by crop production and livestock are especially vulnerable to two risk factors that are largely outside the control of Company and borrowers: commodity prices and weather conditions.
Real Estate - Residential and Home Equity Lines of Credit - The degree of risk in residential real estate lending depends primarily on the loan amount in relation to collateral value, the interest rate and the borrower's ability to repay in an orderly fashion. These loans generally possess a lower inherent risk of loss than other real estate portfolio segments. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate that the borrowers' capacity to repay their obligations may be deteriorating.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Allowance for Credit Losses (continued)
Real Estate - Commercial - Commercial real estate mortgage loans generally possess a higher inherent risk of loss than other real estate portfolio segments, except land and construction loans. Adverse economic developments or an overbuilt market impact commercial real estate projects and may result in troubled loans. Trends in vacancy rates of commercial properties impact the credit quality of these loans. High vacancy rates reduce operating revenues and the ability for properties to produce sufficient cash flow to service debt obligations.
Real Estate - Construction and Land Development - Construction and land development loans generally possess a higher inherent risk of loss than other real estate portfolio segments. A major risk arises from the necessity to complete projects within specified cost and timelines. Trends in the construction industry significantly impact the credit quality of these loans, as demand drives construction activity. In addition, trends in real estate values significantly impact the credit quality of these loans, as property values determine the economic viability of construction projects.
Automobile - An automobile loan portfolio is usually comprised of a large number of smaller loans scheduled to be amortized over a specific period. Most automobile loans are made directly for consumer purchases, but business vehicles may also be included. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate that the borrowers' capacity to repay their obligations may be deteriorating.
Other - Other loans primarily consist of consumer loans and are similar in nature to automobile loans.
Although management believes the allowance to be adequate, ultimate losses may vary from its estimates. At least quarterly, the Board of Directors and management review the adequacy of the allowance, including consideration of the relative risks in the portfolio, current economic conditions and other factors. If the Board of Directors and management determine that changes are warranted based on those reviews, the allowance is adjusted. In addition, the Company's primary regulators, the Federal Reserve (FRB) and the Department of Financial Protection and Innovation (DFPI), as an integral part of their examination process, review the adequacy of the allowance. These regulatory agencies may require additions to the allowance based on their judgment about information available at the time of their examinations.
Purchased Credit Deteriorated (PCD) Loans
PCD loans are loans acquired at a discount that is due, in part, to credit quality deterioration since origination which may be determined through observation of missed payments, downgrade in risk rating, deterioration of a borrower's financial trends or other observable factors including subjectivity utilized by management. PCD loans are initially recorded at fair value, by taking the sum of the present value of expected future cash flows and an allowance for credit losses, at acquisition. The allowance for credit losses for PCD loans is recorded through a gross-up of reserves on the consolidated balance sheets, while the allowance for acquired non-PCD loans, such as loans, is recorded through the provision for credit losses on the consolidated statements of income, consistent with originated loans. Subsequent to acquisition, the allowance for credit losses for PCD loans will generally follow the same forward-looking estimation, provision, and charge-off process as non-PCD acquired and originated loans.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Other Real Estate Owned
Other real estate owned relates to real estate acquired in full or partial settlement of loan obligations. On December 31, 2024 and 2023, other real estate owned totaled $91,000 and $357,000 consisting of one residential real estate property. There was one commercial loan with a balance of $53,000 secured by a residential real estate property for which formal foreclosure proceedings were in process at December 31, 2024 and one consumer mortgage loan with a balance of $122,000 secured by a residential real estate property for which formal foreclosure proceedings were in process at December 31, 2023. Proceeds from sales of other real estate owned totaled $362,000, $122,000 and $487,000 for the years ended December 31, 2024, 2023 and 2022, respectively. For the years ended December 31, 2024, 2023 and 2022 the Company recorded gains (losses) on sale of other real estate owned of $5,000, $39,000 and ($37,000), respectively. Other real estate owned is initially recorded at fair value less cost to sell when acquired. Any excess of the Bank's recorded investment in the loan balance and accrued interest income over the estimated fair value of the property less costs to sell is charged against the allowance for credit 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 also recorded in other expenses as incurred.
The following table provides a summary of the change in the OREO balance for the years ended December 31, 2024 and 2023:
Year Ended December 31,
Beginning balance
$ 357,000 $ -
Additions
141,000 440,000
Dispositions
(357,000 ) (83,000 )
Provision from change in OREO valuation
(50,000 ) -
Ending balance
$ 91,000 $ 357,000
Goodwill and Intangible Assets
Intangible assets consist of core deposit intangibles related to the acquisition of Feather River Bancorp and branch acquisitions and are amortized on an accelerated basis 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. There were no such events or circumstances during the periods presented.
Aggregate amortization expense was $201,000, $237,000, and $284,000 for 2024, 2023 and 2022.
The gross carrying amount of intangible assets and accumulated amortization was:
Gross Carrying
Accumulated
Gross Carrying
Accumulated
Amount
Amortization
Amount
Amortization
Core deposit intangibles
$ 2,263,000 $ 1,472,000 $ 2,263,000 $ 1,271,000
Estimated amortization expense for each of the next five years is $172,000, $153,000, $138,000, $120,000 and $87,000.
Goodwill totaling $5,502,000 was recorded on July 1, 2021, related to the acquisition of Feather River Bancorp. Goodwill is not amortized but is evaluated for impairment at least annually including during the fourth quarter of 2024. The Company did not recognize impairment during the years ended December 31, 2024, 2023 and 2022.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Premises and Equipment
Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. 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.
Bank Owned Life Insurance
The Company has purchased life insurance policies on certain key executives. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.
Revenue from Contracts with Customers
The Company records revenue from contracts with customers in accordance with Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“Topic 606”). Under Topic 606, the Company must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) the Company satisfies a performance obligation. Significant revenue has not been recognized in the current reporting period that results from performance obligations satisfied in previous periods.
Most of our revenue-generating transactions are not subject to Topic 606, including revenue generated from financial instruments, such as our loans and investment securities. The Company has evaluated the nature of its contracts with customers and determined that further disaggregation of revenue from contracts with customers into more granular categories beyond what is presented in the Consolidated Statements of Income was not necessary. The Company generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed, charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers.
The following are descriptions of significant revenues within the scope of ASC 606.
Deposit service charges
The Company earns fees from its deposit customers for account maintenance, transaction-based and overdraft services. Account maintenance fees consist primarily of account fees and analyzed account fees charged on deposit accounts on a monthly basis. The performance obligation is satisfied, and the fees are recognized on a monthly basis as the service period is completed. Transaction-based fees on deposit accounts are charged to deposit customers for specific services provided to the customer, such as non-sufficient funds fees, overdraft fees, and wire fees. The performance obligation is completed as the transaction occurs and the fees are recognized at the time each specific service is provided to the customer.
Debit and ATM interchange fees
Debit and ATM interchange income represent fees earned when a debit card issued by the Company is used. The Company earns interchange fees from debit cardholder transactions through the Visa payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the cardholders’ debit card. Certain expenses directly associated with the credit and debit card are recorded on a net basis with the interchange income.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Low Income Housing Tax Credits
The Company accounts for low-income housing tax credits and the related qualified affordable housing projects using the proportional amortization method. Under the proportional amortization method, the Company amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). Upon entering into a qualified affordable housing project, the Company records, in other liabilities, the entire amount that it has agreed to invest in the project, and an equal amount, in other assets, representing its investment in the project. As the Company disburses cash to satisfy its investment obligation, other liabilities are reduced. Over time, as the tax credits and other tax benefits of the project are realized by the Company, the investment recorded in other assets is reduced using the proportional amortization method.
Income Taxes
The Company files its income taxes on a consolidated basis with its subsidiary. Income tax expense is the total of current year income tax due or refundable and the change in deferred tax assets and liabilities.
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. A valuation allowance is recognized if, based on the weight of available evidence management believes it is more likely than not that some portion or all of the deferred tax assets will not be realized. On the consolidated balance sheet, net deferred tax assets are included in accrued interest receivable and other assets.
Accounting for Uncertainty in Income Taxes
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 income statement. There have been no significant changes to unrecognized tax benefits or accrued interest and penalties for the years ended December 31, 2024 and 2023.
Earnings Per Share
Basic earnings per share (EPS), which excludes dilution, is computed by dividing income available to common stockholders (net income plus discount on redemption of preferred stock less preferred dividends and accretion) 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.
Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale and unrealized gains on cash flow hedges which are also recognized as separate components of equity. The amount reclassified out of other accumulated comprehensive income relating to realized losses on securities available for sale was $19,817,000, $0 and $0 for 2024, 2023 and 2022, with the related tax benefit of $5,858,000, $0 and $0, respectively. During 2023 the amount reclassified out of other accumulated comprehensive income relating to realized gains on our cash flow hedges was $1,707,000 with the related tax expense of $505,000.
Dividend Restrictions
Banking regulations require maintaining certain capital levels and may limit the dividend paid by the bank to the holding company or by the holding company to shareholders.
Fair Value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock-Based Compensation
Compensation expense related to the Company’s Stock based compensation plans, net of related tax benefit, recorded in 2024, 2023 and 2022 totaled $450,000, $300,000 and $224,000 or $0.08, $0.05 and $0.04 per diluted share, respectively. Compensation expense is recognized over the vesting period on a straight-line accounting basis.
The Company determines the fair value of options on the date of grant using a Black-Scholes-Merton option pricing model that uses assumptions based on expected option life, expected stock volatility and the risk-free interest rate. The expected volatility assumptions used by the Company are based on the historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected life of the Company’s stock options. The Company bases its expected life assumption on its historical experience and on the terms and conditions of the stock options it grants to employees. The risk-free rate is based on the U.S. Treasury yield curve for the periods within the contractual life of the options in effect at the time of the grant.
During the twelve months ended December 31, 2024, and 2022 the Company granted options to purchase 107,200 and 117,200 shares, respectively of common stock. The fair value of each option was estimated on the date of grant using the following assumptions.
Expected life of stock options (in years)
6.2 6.1
Risk free interest rate
3.98 % 2.96 %
Annualized Volatility
32.3 % 31.8 %
Dividend yields
3.17 % 2.06 %
Weighted-average fair value of options granted during the year
$ 9.25 $ 8.85
During 2024 the Company granted 435 shares of restricted stock with a fair value of $46.04 per share and which fully vested on December 31, 2024, resulting in compensation costs during 2024 of $20,000. During 2024, the Company granted 3,033 restricted stock units with a fair value of $34.07 per share and a one-year vesting period. Compensation costs related to these units during 2024 was $89,000. During 2022 the Company granted 1,650 shares of restricted stock with a fair value of $31 per share and a one-year vesting period. Compensation costs related to these shares during 2023 and 2022 totaled $4,000 and $21,000, respectively. Of the 1,650 restricted stock shares issued, 825 are fully vested and 825 were terminated in 2023.
No options, restricted stock units or restricted stock were granted in 2023.
Pending Accounting Pronouncements
Accounting Standards Update 2023-09 “Income Taxes (Topic 740) - Improvements to Income Tax Disclosures” (“ASU 2023-09”): In December 2023, the FASB amended the Income Taxes topic in the Accounting Standards Codification to improve the transparency of income tax disclosures. The amendments are effective for annual periods beginning after December 15, 2024, Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company does not expect these amendments to have a material effect on its financial statements
Accounting Standards Update 2024-02 “Codification Improvements” (“ASU 2024-02): In March 2024, the FASB issued amendments to the Codification that remove references to various FASB Concepts Statements. The amendments are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company does not expect these amendments to have a material effect on its financial statements.
Accounting Standards Update 2024-03 “Income Statement Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): In November 2024, the FASB amended the Income Statement-Reporting Comprehensive Income topic in the Accounting Standards Codification to require public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to financial statements. The amendments are effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.
Impact of Recently Issued Accounting Pronouncements
In November 2023, FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which amends the disclosure requirements related to segment reporting primarily through enhanced disclosure about significant segment expenses and by requiring disclosure of segment information on an annual and interim basis. ASU 2023-07 was effective January 1, 2024 and did not have a significant impact on the Company’s financial statements.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3.
FAIR VALUE MEASUREMENTS
The Company measures fair value under the fair value hierarchy described below.
Level 1: Quoted prices for identical instruments traded in active exchange markets.
Level 2: Quoted prices (unadjusted) for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable or can be corroborated by observable market data.
Level 3: Model based techniques that use one significant assumption not observable in the market. These unobservable assumptions reflect the Company’s estimates of assumptions that market participants would use on pricing the asset or liability. Valuation techniques include management's judgment and estimation which may be significant.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls, has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Management monitors the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period.
Management evaluates the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total assets, total liabilities or total earnings.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3.
FAIR VALUE MEASUREMENTS (Continued)
Fair Value of Financial Instruments
The carrying amounts and estimated fair values of financial instruments, at December 31, 2024 are as follows:
Fair Value Measurements at December 31, 2024 Using:
Total Fair
Carrying Value
Level 1
Level 2
Level 3
Value
Financial assets:
Cash and cash equivalents
$ 82,018,000 $ 82,018,000 $ - $ - $ 82,018,000
Investment securities
437,735,000 - 437,735,000 - 437,735,000
Loans, net
1,005,375,000 - - 981,114,000 981,114,000
FHLB stock
6,234,000 - - - N/A
FRB Stock
1,380,000 - - - N/A
Financial liabilities:
Deposits
1,371,101,000 1,276,912,000 - 94,161,000 1,371,073,000
Repurchase agreements
22,073,000 - 22,073,000 - 22,073,000
Borrowings
15,000,000 - - 13,967,000 13,967,000
The carrying amounts and estimated fair values of financial instruments, at December 31, 2023 are as follows:
Fair Value Measurements at December 31, 2023 Using:
Total Fair
Carrying Value
Level 1
Level 2
Level 3
Value
Financial assets:
Cash and cash equivalents
$ 85,655,000 $ 85,655,000 $ - $ - $ 85,655,000
Investment securities
489,181,000 - 489,181,000 - 489,181,000
Loans, net
948,604,000 - - 923,500,000 923,500,000
FHLB stock
6,234,000 - - - N/A
FRB Stock
1,371,000 - - - N/A
Financial liabilities:
Deposits
1,333,655,000 1,242,003,000 92,311,000 1,334,314,000
Repurchase agreements
23,054,000 - 23,054,000 - 23,054,000
Borrowings
90,000,000 - - 86,100,000 86,100,000
The methods and assumptions used to estimate the fair value of each class of financial instruments not measured at fair value are as follows:
Loans - Loans are generally valued by discounting expected cash flows using market inputs with adjustments based on cohort level assumptions for certain loan types as well as internally developed estimates at a business segment level. Due to the significance of the unobservable market inputs and assumptions, as well as the absence of a liquid secondary market for most loans, these loans are classified as Level 3. Nonaccrual loans are written down and reported at their estimated recovery value which approximates their fair value and classified as Level 3.
Deposits - The estimated fair value of deposits with no stated maturity, such as demand deposit accounts, money market accounts, and savings accounts was the amount payable on demand at the reporting date. The fair value of time deposits was estimated based on a discounted cash flow technique using Level 3 inputs appropriate to the contractual maturity.
Repurchase agreements - The fair value of the repurchase agreement is based on Level 2 inputs. The primary inputs used in the valuation include the market interest rate and the credit quality of the underlying securities.
Borrowings - The cash flows were calculated using the contractual features of the borrowing and then discounted using observable market.
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. Those estimates that are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision are included in Level 3. Changes in assumptions could significantly affect the fair values presented.
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.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3.
FAIR VALUE MEASUREMENTS (Continued)
Fair Value of Financial Instruments (continued)
The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of December 31, 2024 and December 31, 2023, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:
Assets and liabilities measured at fair value on a recurring basis at December 31, 2024 are summarized below:
Fair Value Measurements at
December 31, 2024 Using
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Total Fair
Assets
Inputs
Inputs
Value
(Level 1)
(Level 2)
(Level 3)
Assets:
U.S. Government-sponsored agencies collateralized by mortgage obligations-residential
228,391,000 - 228,391,000 -
U.S. Government agencies collateralized by mortgage obligations-commercial
121,870,000 - 121,870,000 -
Obligations of states and political subdivisions
87,474,000 - 87,474,000 -
$ 437,735,000 $ - $ 437,735,000 $ -
Assets and liabilities measured at fair value on a recurring basis at December 31, 2023 are summarized below:
Fair Value Measurements at
December 31, 2023 Using
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Total Fair
Assets
Inputs
Inputs
Value
(Level 1)
(Level 2)
(Level 3)
Assets:
U.S. Treasury securities
$ 6,880,000 $ - $ 6,880,000 $ -
U.S. Government-sponsored agencies collateralized by mortgage obligations-residential
235,931,000 - 235,931,000 -
U.S. Government agencies collateralized by mortgage obligations-commercial
115,952,000 - 115,952,000 -
Obligations of states and political subdivisions
130,418,000 - 130,418,000 -
$ 489,181,000 $ - $ 489,181,000 $ -
The fair value of securities available-for-sale equals quoted market price, if available. If quoted market prices are not available, fair value is determined using quoted market prices for similar securities or matrix pricing. There were no changes in the valuation techniques used during 2024 or 2023. Transfers between hierarchy measurement levels are recognized by the Company as of the beginning of the reporting period. Changes in fair market value are recorded in other comprehensive income (loss).
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3.
FAIR VALUE MEASUREMENTS (Continued)
Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2024, are summarized below:
Fair Value Measurements at December 31, 2024 Using:
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Total
Assets
Inputs
Inputs
Total
Fair Value
(Level 1)
(Level 2)
(Level 3)
Losses
Assets:
Collateral-dependent loans
Commercial
$ 24 $ - $ - $ 24 $ 1
Other Real Estate:
RE - Residential
$ 91 $ - $ - $ 91 $ 50
Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2023, are summarized below:
Fair Value Measurements at December 31, 2023 Using:
Quoted
Prices in
Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Total
Assets
Inputs
Inputs
Total
Fair Value
(Level 1)
(Level 2)
(Level 3)
Losses
Assets:
Collateral-dependent loans
Commercial
$ 27 $ - $ - $ 27 $ 28
Other Real Estate:
RE - Residential
$ 357 $ - $ - $ 357 $ -
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3.
FAIR VALUE MEASUREMENTS (Continued)
The Company has no liabilities which are reported at fair value.
The following methods were used to estimate fair value.
Collateral-Dependent Loans: The Bank does not record loans at fair value on a recurring basis. However, from time to time, fair value adjustments are recorded on these loans to reflect partial write-downs, through charge-offs or specific reserve allowances, that are based on fair value estimates of the underlying collateral. The fair value estimates for collateral-dependent loans are generally based on recent real estate appraisals or broker opinions, obtained from independent third parties, which are frequently adjusted by management to reflect current conditions and estimated selling costs (Level 3). Impairment charges of $1,000 were recognized during the twelve months ended December 31, 2024, related to the above collateral dependent loan. Impairment charges of $28,000 were recognized during the twelve months ended December 31, 2023, related to the above collateral dependent loan. The collateral-dependent loans at December 31, 2024 and December 31, 2023 consist solely of one loan which had been allocated a specific credit reserve.
Other Real Estate: Nonrecurring adjustments to certain real estate properties classified as other real estate owned are measured at the lower of carrying amount or fair value, less costs to sell. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized. Fair values are generally based on third party appraisals of the property which are commonly adjusted by management to reflect current conditions and selling costs (Level 3).
Appraisals for both collateral-dependent loans and other real estate are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the Loan Administration Department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. On a quarterly basis, the Company compares the actual selling price of similar collateral that has been liquidated to the most recent appraised value for unsold properties to determine what additional adjustment, if any, should be made to the appraisal value to arrive at fair value. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available.
The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2024 and 2023 (dollars in thousands):
Range
Range
Fair Value
Fair Value
Valuation
(Weighted Average)
(Weighted Average)
Description
12/31/2024
12/31/2023
Technique
Significant Unobservable Input
12/31/2024
12/31/2023
Collateral-dependent loans
Commercial
$ 24 $ 27 Third Party appraisals
Management Adjustments to Reflect Current Conditions and Selling Costs
45% 48%
Other Real Estate:
RE - Residential
$ 91 $ 357 Third Party appraisals
Management Adjustments to Reflect Current Conditions and Selling Costs
60% 11%
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4.
INVESTMENT SECURITIES
The amortized cost and estimated fair value of investment securities at December 31, 2024 and 2023 consisted of the following:
Available-for-Sale
Gross
Gross
Estimated
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
Debt securities:
U.S. Government-sponsored agencies collateralized by mortgage obligations-residential
$ 243,709,000 $ 138,000 $ (15,456,000 ) $ 228,391,000
U.S. Government agencies collateralized by mortgage obligations-commercial
133,749,000 77,000 (11,956,000 ) 121,870,000
Obligations of states and political subdivisions
95,975,000 315,000 (8,816,000 ) 87,474,000
$ 473,433,000 $ 530,000 $ (36,228,000 ) $ 437,735,000
Unrealized losses on available-for-sale investment securities totaling $35,698,000 were recorded, net of $10,552,000 in tax benefits, as accumulated other comprehensive loss within shareholders' equity at December 31, 2024. During the twelve months ended December 31, 2024, the Company sold 157 available-for-sale investment securities for proceeds of $116,285,000 recording a $19,817,000 net loss on sale. The Company realized a gain on sale from ten of these securities totaling $115,000 and a loss on sale of 147 securities totaling $19,932,000.
Available-for-Sale
Gross
Gross
Estimated
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
Debt securities:
U.S. Treasury securities
$ 6,978,000 $ - $ (98,000 ) $ 6,880,000
U.S. Government-sponsored agencies collateralized by mortgage obligations-residential
256,694,000 351,000 (21,114,000 ) 235,931,000
U.S. Government agencies collateralized by mortgage obligations-commercial
129,321,000 465,000 (13,834,000 ) 115,952,000
Obligations of states and political subdivisions
142,276,000 1,067,000 (12,925,000 ) 130,418,000
$ 535,269,000 $ 1,883,000 $ (47,971,000 ) $ 489,181,000
Unrealized losses on available-for-sale investment securities totaling $46,088,000 were recorded, net of $13,624,000 in tax benefits, as accumulated other comprehensive loss within shareholders' equity at December 31, 2023. No investment securities were sold during the year ended December 31, 2023.
Unrealized losses on available-for-sale investment securities totaling $54,183,000 were recorded, net of $16,017,000 in tax benefits, as accumulated other comprehensive loss within shareholders' equity at December 31, 2022. No investment securities were sold during the year ended December 31, 2022.
Investment securities with unrealized losses at December 31, 2024 are summarized and classified according to the duration of the loss period as follows:
December 31, 2024
Less than 12 Months
12 Months or More
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Value
Losses
Value
Losses
Value
Losses
Debt securities:
U.S. Government-sponsored agencies collateralized by mortgage obligations-residential
$ 107,328,000 $ 1,917,000 $ 94,506,000 $ 13,539,000 $ 201,834,000 $ 15,456,000
U.S. Government agencies collateralized by mortgage obligations-commercial
55,921,000 926,000 57,735,000 11,030,000 113,656,000 11,956,000
Obligations of states and political subdivisions
18,938,000 250,000 48,460,000 8,566,000 67,398,000 8,816,000
$ 182,187,000 $ 3,093,000 $ 200,701,000 $ 33,135,000 $ 382,888,000 $ 36,228,000
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4.
INVESTMENT SECURITIES (Continued)
Investment securities with unrealized losses at December 31, 2023 are summarized and classified according to the duration of the loss period as follows:
December 31, 2023
Less than 12 Months
12 Months or More
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Value
Losses
Value
Losses
Value
Losses
Debt securities:
U.S. Treasury securities
$ - $ - $ 6,880,000 $ 98,000 $ 6,880,000 $ 98,000
U.S. Government-sponsored agencies collateralized by mortgage obligations-residential
43,924,000 279,000 160,383,000 20,835,000 204,307,000 21,114,000
U.S. Government agencies collateralized by mortgage obligations-commercial
16,533,000 295,000 71,782,000 13,539,000 88,315,000 13,834,000
Obligations of states and political subdivisions
9,306,000 151,000 82,764,000 12,774,000 92,070,000 12,925,000
$ 69,763,000 $ 725,000 $ 321,809,000 $ 47,246,000 $ 391,572,000 $ 47,971,000
At December 31, 2024, the Company held 310 securities of which 73 were in a loss position for less than twelve months and 178 were in a loss position for twelve months or more. Of the 251 securities in a loss position 87 are U.S. Government-sponsored agencies collateralized by residential mortgage obligations, 43 are U.S. Government agencies collateralized by commercial mortgage obligations and 121 are obligations of states and political subdivisions.
Unrealized losses on investments in obligations of U.S. government agencies and U.S. government sponsored agencies are caused by interest rate increases.
Obligations of states and political subdivisions: Management reviewed the collectability of the obligations of the states and political subdivisions taking into consideration such factors as the financial condition of the issuers, credit ratings, and other information. Management believes the unrealized losses on the obligations of states and political subdivisions are attributable to changes in the investment spreads and interest rates and not changes in the credit quality of the issuers.
The amortized cost and estimated fair value of investment securities at December 31, 2024 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.
Amortized
Estimated Fair
Cost
Value
Under one year
$ 820,000 $ 818,000
After one year through five years
6,978,000 6,874,000
After five years through ten years
17,505,000 17,186,000
After ten years
70,672,000 62,596,000
Investment securities not due at a single maturity date:
U.S. Government-sponsored agencies collateralized by mortgage obligations-residential
243,709,000 228,391,000
U.S. Government agencies collateralized by mortgage obligations-commercial
133,749,000 121,870,000
$ 473,433,000 $ 437,735,000
Investment securities with amortized costs totaling $225,313,000 and $316,733,000 and estimated fair values totaling $212,001,000 and $285,534,000 at December 31, 2024 and 2023, respectively, were pledged to secure deposits, repurchase agreements and on December 31, 2023 borrowings under the Bank Term Funding Program (BTFP). In addition, on December 31, 2024, investment securities with amortized costs totaling $131,876,000 and estimated fair values totaling $120,060,000 were pledged at the Federal Reserve Bank Discount Window. No borrowings were outstanding on December 31, 2024 and 2023, at the Discount Window.
There were no transfers of available-for-sale investment securities during the years ended December 31, 2024, 2023 or 2022. There were no securities classified as held-to-maturity at December 31, 2024 or December 31, 2023.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5.
LOANS AND THE ALLOWANCE FOR CREDIT LOSSES
Outstanding loans are summarized below:
December 31,
Commercial
$ 77,444,000 $ 74,271,000
Agricultural
118,866,000 129,389,000
Real estate - residential
11,539,000 11,914,000
Real estate - commercial
646,378,000 544,339,000
Real estate - construction & land development
53,503,000 57,717,000
Equity lines of credit (Equity LOC)
37,888,000 37,871,000
Auto
64,734,000 98,132,000
Other
5,072,000 4,931,000
Subtotal
1,015,424,000 958,564,000
Deferred loan costs, net
3,147,000 2,907,000
Loans, amortized cost basis
1,018,571,000 961,471,000
Allowance for credit losses
(13,196,000 ) (12,867,000 )
Loans, net
$ 1,005,375,000 $ 948,604,000
Salaries and employee benefits totaling $2,697,000, $2,283,000 and $3,445,000 have been deferred as loan origination costs during the years ended December 31, 2024, 2023 and 2022, respectively.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5.
LOANS AND THE ALLOWANCE FOR CREDIT LOSSES (Continued)
The following table shows the loan portfolio allocated by management's internal risk ratings or payment activity at December 31, 2024:
Term Loans - Amortized Cost Basis by Origination Year and Risk Grades - As of December 31, 2024
(in thousands)
Prior
Revolving Loans Book Amortized Cost Basis
Revolving Loans Converted to Term Amortized Cost Basis
Total - Amortized Cost Basis
Commercial
Pass
$ 19,885 $ 12,642 $ 12,042 $ 8,405 $ 1,658 $ 6,886 $ 13,232 $ - $ 74,750
Special Mention
- - 157 444 - 36 513 - 1,150
Substandard
61 244 1,050 365 469 30 75 - 2,294
Total Commercial loans
$ 19,946 $ 12,886 $ 13,249 $ 9,214 $ 2,127 $ 6,952 $ 13,820 $ - $ 78,194
Current period gross charge-offs
$ - $ 86 $ 43 $ - $ - $ 22 $ 151 $ - $ 302
Agricultural
Pass
$ 6,421 $ 9,331 $ 14,290 $ 11,389 $ 14,252 $ 28,075 $ 13,356 $ - $ 97,114
Special Mention
518 53 1,159 358 1,307 1,639 534 - 5,568
Substandard
- 2,710 4,606 3,252 78 1,281 4,501 - 16,428
Total Agricultural
$ 6,939 $ 12,094 $ 20,055 $ 14,999 $ 15,637 $ 30,995 $ 18,391 $ - $ 119,110
Current period gross charge-offs
$ - $ - $ - $ - $ - $ - $ - $ - $ -
Real Estate - Residential
Pass
$ 632 $ 1,105 $ - $ 2,064 $ 2,355 $ 4,639 $ 520 $ - $ 11,315
Substandard
- - - - - 253 - - 253
Total Real Estate - Residential
$ 632 $ 1,105 $ - $ 2,064 $ 2,355 $ 4,892 $ 520 $ - $ 11,568
Current period gross charge-offs
$ - $ - $ - $ - $ - $ - $ - $ - $ -
Real Estate -Commercial
Pass
$ 90,579 $ 92,735 $ 137,607 $ 82,627 $ 73,405 $ 154,466 $ 7,142 $ - $ 638,561
Special Mention
- - 171 - - 4,460 450 - 5,081
Substandard
- - 628 - 921 1,760 - - 3,309
Total Real Estate -Commercial
$ 90,579 $ 92,735 $ 138,406 $ 82,627 $ 74,326 $ 160,686 $ 7,592 $ - $ 646,951
Current period gross charge-offs
$ - $ - $ - $ - $ - $ - $ - $ - $ -
Real Estate -Construction
Pass
$ 21,110 $ 15,244 $ 11,054 $ 3,767 $ 947 $ 843 $ - $ - $ 52,965
Special Mention
- - 210 - - - - - 210
Substandard
110 - - - - - - - 110
Total Real Estate -Construction
$ 21,220 $ 15,244 $ 11,264 $ 3,767 $ 947 $ 843 $ - $ - $ 53,285
Current period gross charge-offs
$ - $ - $ - $ - $ - $ - $ - $ - $ -
Equity LOC
Pass
$ - $ - $ - $ - $ - $ 34,622 $ 3,483 $ 38,105
Substandard
- - - - - 371 279 650
Total Equity LOC
$ - $ - $ - $ - $ - $ - $ 34,993 $ 3,762 $ 38,755
Current period gross charge-offs
$ - $ - $ - $ - $ - $ - $ - $ - $ -
Total
Pass
$ 138,627 $ 131,057 $ 174,993 $ 108,252 $ 92,617 $ 194,909 $ 68,872 $ 3,483 $ 912,810
Special Mention
518 53 1,697 802 1,307 6,135 1,497 - 12,009
Substandard
171 2,954 6,284 3,617 1,468 3,324 4,947 279 23,044
Total
$ 139,316 $ 134,064 $ 182,974 $ 112,671 $ 95,392 $ 204,368 $ 75,316 $ 3,762 $ 947,863
Current period gross charge-offs
$ - $ 86 $ 43 $ - $ - $ 22 $ 151 $ - $ 302
Auto
Performing
$ - $ 23,163 $ 22,361 $ 10,426 $ 4,779 $ 4,063 $ - $ - $ 64,792
Non-performing
- 147 241 187 129 88 - - 792
Total Auto
$ - $ 23,310 $ 22,602 $ 10,613 $ 4,908 $ 4,151 $ - $ - $ 65,584
Current period gross charge-offs
$ - $ 389 $ 598 $ 262 $ 171 $ 223 $ - $ - $ 1,643
Other
Performing
$ 2,433 $ 1,245 $ 799 $ 318 $ 88 $ 5 $ 157 $ - $ 5,045
Non-performing
- 48 24 3 2 - 2 - 79
Total Other
$ 2,433 $ 1,293 $ 823 $ 321 $ 90 $ 5 $ 159 $ - $ 5,124
Current period gross charge-offs
$ - $ 9 $ 35 $ 31 $ 6 $ 12 $ 1 $ - $ 94
Total
Performing
$ 2,433 $ 24,408 $ 23,160 $ 10,744 $ 4,867 $ 4,068 $ 157 $ - $ 69,837
Non-performing
- 195 265 190 131 88 2 - 871
Total
$ 2,433 $ 24,603 $ 23,425 $ 10,934 $ 4,998 $ 4,156 $ 159 $ - $ 70,708
Total Loans
$ 141,749 $ 158,667 $ 206,399 $ 123,605 $ 100,390 $ 208,524 $ 75,475 $ 3,762 $ 1,018,571
Total gross charge-offs
$ - $ 484 $ 676 $ 293 $ 177 $ 257 $ 152 $ - $ 2,039
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5.
LOANS AND THE ALLOWANCE FOR CREDIT LOSSES (Continued)
Term Loans - Amortized Cost Basis by Origination Year and Risk Grades - as of December 31, 2023
(in thousands)
Prior
Revolving Loans Book Amortized Cost Basis
Revolving Loans Converted to Term Amortized Cost Basis
Total - Amortized Cost Basis
Commercial
Pass
$ 15,549 $ 18,995 $ 11,603 $ 3,472 $ 4,291 $ 5,165 $ 13,079 $ - $ 72,154
Special Mention
- - 302 - 31 68 170 - 571
Substandard
- 1,532 289 340 - 24 23 - 2,208
Total Commercial loans
$ 15,549 $ 20,527 $ 12,194 $ 3,812 $ 4,322 $ 5,257 $ 13,272 $ - $ 74,933
Current period gross charge-offs
$ - $ 34 $ 40 $ 14 $ - $ 10 $ 25 $ - $ 123
Agricultural
Pass
$ 12,028 $ 17,382 $ 13,182 $ 15,550 $ 11,495 $ 20,704 $ 18,925 $ - $ 109,266
Special Mention
1,852 813 97 1,017 16 817 621 - 5,233
Substandard
6,226 6,878 1,075 - 752 248 - - 15,179
Total Agricultural
$ 20,106 $ 25,073 $ 14,354 $ 16,567 $ 12,263 $ 21,769 $ 19,546 $ - $ 129,678
Current period gross charge-offs
$ - $ - $ - $ - $ - $ - $ - $ - $ -
Real Estate - Residential
Pass
$ 1,127 $ - $ 2,143 $ 2,447 $ 524 $ 4,676 $ 201 $ - $ 11,118
Substandard
- - - - 59 765 - - 824
Total Real Estate - Residential
$ 1,127 $ - $ 2,143 $ 2,447 $ 583 $ 5,441 $ 201 $ - $ 11,942
Current period gross charge-offs
$ - $ - $ - $ - $ - $ - $ - $ - $ -
Real Estate -Commercial
Pass
$ 74,595 $ 115,890 $ 90,436 $ 76,401 $ 40,256 $ 133,958 $ 6,246 $ - $ 537,782
Special Mention
- - - 199 - 3,316 - - 3,515
Substandard
- 12 - 281 353 2,271 - - 2,917
Total Real Estate -Commercial
$ 74,595 $ 115,902 $ 90,436 $ 76,881 $ 40,609 $ 139,545 $ 6,246 $ - $ 544,214
Current period gross charge-offs
$ - $ - $ - $ - $ - $ - $ - $ - $ -
Real Estate -Construction
Pass
$ 18,878 $ 30,825 $ 3,717 $ 1,672 $ 619 $ 281 $ 1,368 $ - $ 57,360
Total Real Estate -Construction
$ 18,878 $ 30,825 $ 3,717 $ 1,672 $ 619 $ 281 $ 1,368 $ - $ 57,360
Current period gross charge-offs
$ - $ - $ - $ - $ - $ - $ - $ - $ -
Equity LOC
Pass
$ - $ - $ - $ - $ - $ - $ 35,122 $ 3,018 $ 38,140
Substandard
- - - - - - 319 254 573
Total Equity LOC
$ - $ - $ - $ - $ - $ - $ 35,441 $ 3,272 $ 38,713
Current period gross charge-offs
$ - $ - $ - $ - $ - $ - $ - $ - $ -
Total
Pass
$ 122,177 $ 183,092 $ 121,081 $ 99,542 $ 57,185 $ 164,784 $ 74,941 $ 3,018 $ 825,820
Special Mention
1,852 813 399 1,216 47 4,201 791 - 9,319
Substandard
6,226 8,422 1,364 621 1,164 3,308 342 254 21,701
Total
$ 130,255 $ 192,327 $ 122,844 $ 101,379 $ 58,396 $ 172,293 $ 76,074 $ 3,272 $ 856,840
Current period gross charge-offs
$ - $ 34 $ 40 $ 14 $ - $ 10 $ 25 $ - $ 123
Auto
Performing
$ 31,880 $ 31,913 $ 16,246 $ 8,554 $ 6,329 $ 3,689 $ - $ - $ 98,611
Non-performing
167 228 179 210 228 37 - - 1,049
Total Auto
$ 32,047 $ 32,141 $ 16,425 $ 8,764 $ 6,557 $ 3,726 $ - $ - $ 99,660
Current period gross charge-offs
$ - $ 367 $ 569 $ 237 $ 255 $ 122 $ - $ - $ 1,550
Other
Performing
$ 2,411 $ 1,354 $ 719 $ 252 $ 57 $ 15 $ 159 $ - $ 4,967
Non-performing
- 4 - - - - - - 4
Total Other
$ 2,411 $ 1,358 $ 719 $ 252 $ 57 $ 15 $ 159 $ - $ 4,971
Current period gross charge-offs
$ - $ 70 $ 33 $ 9 $ 12 $ 3 $ 2 $ - $ 129
Total
Performing
$ 34,291 $ 33,267 $ 16,965 $ 8,806 $ 6,386 $ 3,704 $ 159 $ - $ 103,578
Non-performing
167 232 179 210 228 37 - - 1,053
Total
$ 34,458 $ 33,499 $ 17,144 $ 9,016 $ 6,614 $ 3,741 $ 159 $ - $ 104,631
Total Loans
$ 164,713 $ 225,826 $ 139,988 $ 110,395 $ 65,010 $ 176,034 $ 76,233 $ 3,272 $ 961,471
Total gross charge-offs
$ - $ 471 $ 642 $ 260 $ 267 $ 135 $ 27 $ - $ 1,802
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5.
LOANS AND THE ALLOWANCE FOR CREDIT LOSSES (Continued)
The following table shows the ending balance of nonaccrual loans by loan category as of the date indicated:
Non Performing Loans
December 31, 2024
December 31, 2023
(in thousands)
Nonaccrual with no allowance for credit losses
Total nonaccrual
Past due 90 days or more and still accruing
Nonaccrual with no allowance for credit losses
Total nonaccrual
Past due 90 days or more and still accruing
Commercial
$ 302 $ 355 $ - $ 75 $ 132 $ -
Agricultural
567 567 - 2,066 2,066 -
Real estate - residential
83 83 - 223 223 -
Real estate - commercial
1,579 1,579 - 774 774 -
Real estate - construction & land development
- - - - - -
Equity lines of credit
650 650 - 572 572 -
Auto
792 792 - 1,049 1,049 -
Other
77 79 - 4 4 -
Total Gross Loans
$ 4,050 $ 4,105 $ - $ 4,763 $ 4,820 $ -
The Company places loans 90 days or more past due on nonaccrual status unless the loan is well secured and in the process of collection. A loan is considered to be in the process of collection if, based on a probable specific event, it is expected that the loan will be repaid or brought current. Generally, this collection period would not exceed 90 days. When a loan is placed on nonaccrual status the Company's general policy is to reverse and charge against current income previously accrued but unpaid interest. Interest income on such loans is subsequently recognized only to the extent that cash is received, and future collection of principal is deemed by management to be probable. Where the collectability of the principal or interest on a loan is considered to be doubtful by management, it is placed on nonaccrual status prior to becoming 90 days delinquent.
At December 31, 2024, there was one nonaccrual commercial loan with an amortized cost of $55,000 that had allowance for credit losses totaling $29,000. At December 31, 2023, this same loan had an amortized cost of $57,000 and an allowance for credit losses totaling $28,000. No income was recognized on nonaccrual loans accounted on a cash basis during the twelve months ended December 31, 2024, or the year ended December 31, 2023.
The following tables show interest reversed against interest income for loans placed on nonaccrual status during the twelve months ended December 31, 2024, 2023 and 2022.
December 31, 2024 December 31, 2023 December 31, 2022
Commercial $ 15,000 $ 7,000 $ 6,000
Agricultural 29,000 153,000 -
Real estate - residential 9,000 - 4,000
Real estate - commercial 52,000 38,000 1,000
Equity Lines of Credit 14,000 6,000 -
Auto 26,000 40,000 32,000
Other 2,000 2,000 1,000
Total $ 147,000 $ 246,000 $ 44,000
The following tables present the amortized cost basis of collateral dependent loans by class of loans at December 31, 2024, in thousands:
Commercial -1st
SFR-1st
SFR-2nd
SFR-3rd
Equipment
Crops
Deed
Deed
Deed
Deed
Total
Commercial
$ 245 $ - $ - $ - $ - $ - $ 245
Agricultural
- 535 - - - - 535
Real estate - residential
- - - - - - -
Real estate - commercial
- - 739 53 652 50 1,494
Real estate - construction & land
- - - - - - -
Equity Lines of Credit
- - - 173 - 173
Total
$ 245 $ 535 $ 739 $ 53 $ 825 $ 50 $ 2,447
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5.
LOANS AND THE ALLOWANCE FOR CREDIT LOSSES (Continued)
The following tables present the amortized cost basis of collateral dependent loans by class of loans at December 31, 2023, in thousands:
Commercial -1st
SFR-1st
SFR-2nd
SFR-3rd
Equipment
Crops
Deed
Deed
Deed
Deed
Total
Commercial
$ 55 $ - $ - $ - $ - $ 55
Agricultural
- 2,066 - - - - 2,066
Real estate - residential
- - - 122 - - 122
Real estate - commercial
- - 634 - 28 - 662
Real estate - construction & land
- - - - - - -
Equity Lines of Credit
- - - 105 190 - 295
Total
$ 55 $ 2,066 $ 634 $ 227 $ 218 $ - $ 3,200
The following table presents the amortized cost basis of loans on December 31, 2024, that were both experiencing financial difficulty and modified during the twelve months ended December 31, 2024, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financial receivable is also presented below.
Term Extension
(in thousands)
Amortized Cost Basis
Total Class of Financing Receivable
Commercial
$ 982 1.26 %
Agricultural
10,017 8.41 %
Total
$ 10,999 1.08 %
The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty as of December 31, 2024:
Weighted-Average Term Extension (in months)
Commercial
58.3
Agricultural
6.1
Total
10.7
The following table presents the amortized cost basis of loans on December 31, 2023, that were both experiencing financial difficulty and modified during the twelve months ended December 31, 2023 by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financial receivable is also presented below.
Term Extension
(in thousands)
Amortized Cost Basis
Total Class of Financing Receivable
Commercial
$ 1,531 2.04 %
Agricultural
5,715 4.41 %
Total
$ 7,246 0.75 %
The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty as of December 31, 2023:
Weighted-Average Term Extension (in months)
Commercial
Agricultural
Total
8.4
Loans with payment defaults by borrowers experiencing financial difficulty during the twelve months ended December 31, 2024, which had material modifications in rate, term or principal forgiveness during the twelve months prior to default totaled $4.3 million in agricultural loans which were not past due at December 31, 2024, and one commercial loan totaling $30,000 which was 70 days past due at December 31, 2024. There were no loans payment defaults by borrowers experiencing financial difficulty during the twelve months ended December 31, 2023, which had material modifications in rate, term or principal forgiveness during the twelve months prior to default.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5.
LOANS AND THE ALLOWANCE FOR CREDIT LOSSES (Continued)
The following tables show an aging analysis of the loan portfolio by the time past due, in thousands:
Total
December 31, 2024
90 Days
Past Due
30-59 Days
60-89 Days
and Still
and
Past Due
Past Due
Accruing
Nonaccrual
Nonaccrual
Current
Total
Commercial
$ 1,074 $ 533 $ - $ 355 $ 1,962 $ 76,232 $ 78,194
Agricultural
273 - - 567 840 118,270 119,110
Real estate - residential
348 319 - 83 750 10,818 11,568
Real estate - commercial
1,954 82 - 1,579 3,615 643,336 646,951
Real estate - construction & land
2,133 - - - 2,133 51,152 53,285
Equity Lines of Credit
1,416 189 - 650 2,255 36,500 38,755
Auto
1,251 242 - 792 2,285 63,299 65,584
Other
72 7 - 79 158 4,966 5,124
Total
$ 8,521 $ 1,372 $ - $ 4,105 $ 13,998 $ 1,004,573 $ 1,018,571
Total
December 31, 2023
90 Days
Past Due
30-89 Days
60-89 Days
and Still
and
Past Due
Past Due
Accruing
Nonaccrual
Nonaccrual
Current
Total
Commercial
$ 21 $ 254 $ - $ 132 $ 407 $ 74,526 $ 74,933
Agricultural
82 - - 2,066 2,148 127,530 129,678
Real estate - residential
348 423 - 223 994 10,948 11,942
Real estate - commercial
587 - - 774 1,361 542,853 544,214
Real estate - construction & land
- - - - 0 57,360 57,360
Equity Lines of Credit
473 53 - 572 1,098 37,615 38,713
Auto
1,729 405 - 1,049 3,183 96,477 99,660
Other
19 3 - 4 26 4,945 4,971
Total
$ 3,259 $ 1,138 $ - $ 4,820 $ 9,217 $ 952,254 $ 961,471
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5.
LOANS AND THE ALLOWANCE FOR CREDIT LOSSES (Continued)
The following tables show the allocation of the allowance for credit losses at the dates indicated, in thousands:
Commercial Agricultural Real Estate Residential Real Estate Commercial Real Estate Construction Equity LOC Auto Other Total
Year ended 12/31/24:
Allowance for credit losses
Beginning balance
$ 1,134 $ 1,738 $ 137 $ 6,678 $ 797 $ 439 $ 1,865 $ 79 $ 12,867
Charge-offs
(302 ) - - - - - (1,643 ) (94 ) (2,039 )
Recoveries
25 - 4 1 - - 928 35 993
Provision
408 64 (39 ) 780 18 21 65 58 1,375
Ending balance
$ 1,265 $ 1,802 $ 102 $ 7,459 $ 815 $ 460 $ 1,215 $ 78 $ 13,196
Year ended 12/31/23:
Allowance for credit losses
Beginning balance
$ 892 $ 1,086 $ 138 $ 4,980 $ 1,500 $ 687 $ 1,289 $ 145 $ 10,717
Impact of CECL Adoption
$ 354 $ 148 $ 2 $ 1,488 $ (951 ) $ (421 ) $ 9 $ (100 ) $ 529
Charge-offs
(123 ) - - - - - (1,550 ) (129 ) (1,802 )
Recoveries
44 - 3 1 - - 746 54 848
Provision
(33 ) 504 (6 ) 209 248 173 1,371 109 2,575
Ending balance
$ 1,134 $ 1,738 $ 137 $ 6,678 $ 797 $ 439 $ 1,865 $ 79 $ 12,867
Year ended 12/31/22:
Allowance for credit losses
Beginning balance
$ 1,074 $ 791 $ 168 $ 4,549 $ 1,325 $ 426 $ 1,911 $ 108 $ 10,352
Charge-offs
(207 ) - - (19 ) - - (1,195 ) (40 ) (1,461 )
Recoveries
27 - 3 2 - - 482 12 526
Provision
(2 ) 295 (33 ) 448 175 261 91 65 1,300
Ending balance
$ 892 $ 1,086 $ 138 $ 4,980 $ 1,500 $ 687 $ 1,289 $ 145 $ 10,717
The following tables summarize the activity in the reserve for unfunded commitments which is recorded on the balance sheet within other liabilities for the twelve months ended December 31, 2024, and 2023.
Twelve months ended:
December 31, 2024
December 31,2023
Beginning balance
$
$
Impact of CECL adoption - 258
Recovery of provision for credit losses
(179 ) -
Provision for credit losses - 200
Ending balance
$ 620 $ 799
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6.
PREMISES AND EQUIPMENT
Premises and equipment consisted of the following:
December 31,
Land
$ 2,447,000 $ 4,570,000
Premises
12,909,000 23,359,000
Furniture, equipment and leasehold improvements
7,693,000 7,630,000
Total
23,049,000 35,559,000
Less accumulated depreciation and amortization
(10,554,000 ) (16,611,000 )
Premises and equipment, net
$ 12,495,000 $ 18,948,000
Depreciation and amortization included in occupancy and equipment expense totaled $1,295,000, $1,430,000 and $1,347,000 for the years ended December 31, 2024, 2023 and 2022, respectively.
7.
DEPOSITS
Interest-bearing deposits consisted of the following:
December 31,
Money market
$ 267,582,000 $ 214,185,000
Savings
309,929,000 335,050,000
Time, $250,000 or more
40,672,000 37,607,000
Other Time
53,517,000 54,045,000
Interest-bearing deposits
$ 671,700,000 $ 640,887,000
At December 31, 2024, the scheduled maturities of time deposits were as follows:
Year Ending December 31,
$ 88,173,000
3,478,000
1,386,000
877,000
235,000
thereafter
40,000
$ 94,189,000
Deposit overdrafts reclassified as loan balances were $524,000 and $309,000 at December 31, 2024 and 2023, respectively.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
8.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase totaling $22,073,000 and $23,054,000 at December 31, 2024 and 2023, respectively, are secured by U.S. Government agency securities with a carrying amount of $38,461,000 and $34,100,000 at December 31, 2024 and 2023, respectively.
Securities sold under agreements to repurchase are financing arrangements that mature within two years. At maturity, the securities underlying the agreements are returned to the Company. Information concerning securities sold under agreements to repurchase during 2024 and 2023 is summarized as follows:
Average daily balance during the year
$ 19,001,000 $ 18,572,000
Average interest rate during the year
0.19 % 0.15 %
Maximum month-end balance during the year
$ 22,073,000 $ 23,054,000
Weighted average interest rate at year-end
0.19 % 0.20 %
9.
BORROWING ARRANGEMENTS
The Company is a member of the Federal Home Loan Bank of San Francisco (FHLB) and can borrow up to $248 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $433 million. The Company is required to hold FHLB stock as a condition of membership. At December 31, 2024, the Company held $6.2 million of FHLB stock which is recorded as a component of other assets. At December 31, 2024 the Company could borrow up to $116 million at the Federal Reserve Bank (FRB) Discount Window secured by investment securities with amortized costs totaling $131,876,000 and estimated fair values totaling $120,060,000. No borrowings were outstanding on December 31, 2024 and 2023, at the Discount Window.
The Company was also eligible to participate in the Bank Term Lending Program. The Federal Reserve Board, on March 12, 2023, announced the creation of a new Bank Term Funding Program (BTFP). The BTFP offered loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. The FRB ceased making new loans under the BTFP on March 11, 2024. At December 31, 2024 the Company had no borrowings under the BTFP. At December 31, 2023, the Company had outstanding borrowings under the BTFP totaling $80 million, secured by $107 million in par value of securities pledged as collateral under the BTFP. Interest expense recognized on the BTFP for the twelve months ended December 31, 2024, totaled $4.0 million and $527,000, respectively.
In addition to its FHLB borrowing line and collateralized borrowings at the FRB Discount Window, the Company has unsecured short-term borrowing agreements with two of its correspondent banks in the amounts of $50 million and $20 million. There were no outstanding borrowings to the FHLB, FRB or the correspondent banks at December 31, 2024, and December 31, 2023.
On January 25, 2022 the Company replaced its $15 million line of credit facility with a $15 million Loan Agreement (the “Loan Agreement”) and Promissory Note (the “Term Note”). The Term Note matures on January 25, 2035 and can be prepaid at any time. During the initial three years of the Loan Agreement the Term Note functions as an interest only revolving line of credit. Beginning on year four the Term Note converts into a term loan requiring semi-annual principal and interest payments and no further advances can be made. The proceeds of this lending facility shall be used by the Company for general corporation purposes, and to provide capital injections into the Bank. The Term Note bears interest at a fixed rate of 3.85% for the first 5 years and then at a floating interest rate linked to WSJ Prime Rate for the remaining eight year term. The Loan Agreement provides for a $187,500 loan fee. The Note is secured by the common stock of the Bank. The Loan Agreement contains certain financial and non-financial covenants, which include, but are not limited to, a minimum leverage ratio at the Bank, a minimum total risk-based capital ratio at the Bank, a maximum Texas Ratio at the Bank, a minimum level of Tier 1 capital at the Bank and a return on average assets needed to generate a 1.25X debt service coverage ratio. The Loan Agreement also contains customary events of default, including, but not limited to, failure to pay principal or interest, the commencement of certain bankruptcy proceedings, and certain adverse regulatory events affecting the Company or the Bank. Upon the occurrence of an event of default under the Loan Agreement, the Company’s obligations under the Loan Agreement may be accelerated. In March 2023 the Company borrowed $10 million on this note and used the proceeds to redeem its Trust Preferred securities as described below. During January of 2024 the Company borrowed an additional $5 million under this note for general corporate purposes, resulting in an ending balance at December 31, 2024, of $15 million. The Company was in compliance with all covenants related to the Term Note at December 31, 2024. Interest expense recognized on the Term Note for the twelve months ended December 31, 2024, and 2023 totaled $641,000 and $369,000, respectively.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10.
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
During 2002, Plumas Statutory Trust I issued 6,000 Floating Rate Capital Trust Pass-Through Securities ("Trust Preferred Securities"), with a liquidation value of $1,000 per security, for gross proceeds of $6,000,000. During 2005, Plumas Statutory Trust II issued 4,000 Trust Preferred Securities with a liquidation value of $1,000 per security, 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.
On February 9, 2023, Plumas Bancorp submitted redemption notices to redeem $6,000,000 of trust preferred securities of Plumas Statutory Trust I (“Trust I”) and $4,000,000 of trust preferred securities of Plumas Statutory Trust II (“Trust II”). The trust preferred securities were redeemed, along with an aggregate of $310,000 in common securities issued by the trusts and held by the Company and 100% of the Company’s junior subordinated debentures due 2032 held by Trust I and 100% of the Company’s junior subordinated debentures due 2035 held by Trust II underlying the trust preferred securities.
The trust preferred securities of Plumas Statutory Trust II were redeemed on March 15, 2023 and the trust preferred securities of Plumas Statutory Trust I were redeemed on March 27, 2023. The redemption prices for the junior subordinated debentures were equal to 100% of the respective principal amounts, which total $10,000,000, plus accrued interest up to the redemption date. The proceeds from the redemption of the junior subordinated debentures were simultaneously applied to redeem all of the outstanding common securities and the outstanding trust preferred securities at a price of 100% of the aggregate principal amount of the trust preferred securities plus accumulated but unpaid distributions up to the redemption date. Funding for the redemption was provided from borrowings on our Term Note as described above.
Interest expense, net of the effect of interest rate swaps, recognized by the Company for the years ended December 31, 2024, 2023 and 2022 related to the subordinated debentures was $0, $141,000 and $359,000, respectively.
11.
DERIVATIVES
Interest Rate Swaps Designated as Cash Flow Hedges: On May 26, 2020 we entered into two separate interest rate swap agreements with notional amounts totaling $10 million, effectively converting the $10 million in Subordinated Debentures to fixed obligations. The swaps had a 10-year maturity and fix the labor rate on the Subordinated Debentures at approximately 75 basis points. These agreements had been designated and qualify as cash flow hedging instruments and, as such, changes in the fair value are recorded in accumulated other comprehensive income/loss to the extent the agreements are effective hedges. The swaps were determined to be fully effective during all periods presented. As such, no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the swaps is recorded in other assets with changes in fair value recorded in other comprehensive income. The amount included in accumulated other comprehensive income would be reclassified to current earnings should the hedges no longer be considered effective. In January 2023 we terminated the swap agreements receiving $1.7 million in proceeds on termination.
Interest income recorded on these swap transactions totaled $25,000 for the year ended December 31, 2023, and $104,000 for the year ended December 31, 2022, and is reported as a component of interest expense on the Subordinated Debentures.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12.
COMMITMENTS AND CONTINGENCIES
Leases
On January 19, 2024, Plumas Bank entered into an agreement for the purchase and sale of real property (the “Sale Agreement”). The Sale Agreement provided for the sale to MountainSeed of nine properties owned and operated by Plumas Bank as branches for an aggregate cash purchase price of approximately $25.7 million. The sale was completed on February 14, 2024 resulting in a net gain on sale of $19.9 million, recording of right-of-use assets totaling $22.3 million and recording a lease liability of $22.3 million.
Concurrently with the closing of the sale of the branch properties, we entered into triple net lease agreements (the “Lease Agreements”) pursuant to which Plumas Bank leased back each of the properties sold. Each Lease Agreement has an initial term of fifteen years with one 15-year renewal option. The Lease Agreements provide for an annual rent of approximately $2.4 million in the aggregate for the nine properties increased by two percent (2%) per annum for each year during the initial Term. During the renewal term, the initial rent will be the basic rent during the last year of the initial term, increased by two percent (2%) per annum for each year during the renewal term.
The Company leases two lending offices, eleven branch offices including the nine branches sold and leased back in 2024, the land under our Yuba City branch, two administrative offices and three standalone ATM locations. The branch office leases and the land lease have options to renew. The exercise of lease renewal options is at our sole discretion; therefore, they are not included in our Right of Use (ROU) assets and lease liabilities as they are not reasonably certain of exercise. We regularly evaluate the renewal options and when they are reasonably certain of exercise, we include the renewal period in our lease term. We have elected the practical expedient to exclude short-term leases from our ROU assets and lease liabilities. The branch leases, two administrative office leases, the land lease and one of the lending office leases are classified as operating leases while the remaining leases are all short-term leases. Right of use assets totaling $24,334,000 and $2,926,000 at December 31, 2024 and 2023, respectively were included on the consolidated balance sheets. Lease liabilities totaling $24,759,000 and $3,001,000 at December 31, 2024 and 2023, respectively were included on the consolidated balance sheets.
As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. The Company’s weighted average incremental borrowing rate used in the calculation of the right-of-use assets and lease liabilities was estimated at 8.3%.
The following table presents a maturity analysis of the operating lease liability at December 31, 2024:
Maturities of
Lease Liabilities
Year ended December 31, 2025
$ 2,910,000
Year ended December 31, 2026
2,838,000
Year ended December 31, 2027
2,764,000
Year ended December 31, 2028
2,710,000
Year ended December 31, 2029
2,765,000
Thereafter
29,076,000
43,063,000
Less: Present value discount
(18,304,000 )
Lease Liability December 31, 2024
$ 24,759,000
The weighted-average remaining lease term is 14.3 years.
Total lease costs for the year ended December 31, 2024 were $3,064,000 consisting of $3,004,004 related to operating leases, $29,000 related to short-term leases and variable lease expense of $31,000. Total lease costs for the year ended December 31, 2023 were $635,000 consisting of $564,000 related to operating leases, $35,000 related to short-term leases and variable lease expense of $36,000. Total lease costs for the year ended December 31, 2022 were $611,000 consisting of $535,000 related to operating leases, $50,000 related to short-term leases and variable lease expense of $26,000. Cash paid on operating leases was $2,655,000 and $539,000 for the years ended December 31, 2024 and 2023, respectively.
Rental expense included in occupancy and equipment expense totaled $3,033,000, $599,000 and $585,000 for the years ended December 31, 2024, 2023 and 2022, respectively.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12.
COMMITMENTS AND CONTINGENCIES (Continued)
Financial Instruments With Off-Balance-Sheet Risk
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business in order to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized on the consolidated balance sheet.
The Company's exposure to credit loss in the event of nonperformance by the other party for commitments to extend credit and letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and letters of credit as it does for loans included on the consolidated balance sheet.
The following financial instruments represent off-balance-sheet credit risk, in thousands:
December 31,
Commitments to extend credit
$ 155,391 $ 174,621
Letters of credit
$ - $ 108
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the borrower. Collateral held varies, but may include accounts receivable, crops, inventory, equipment, income-producing commercial properties, farmland and residential properties.
Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The fair value of the liability related to these letters of credit, which represents the fees received for issuing the guarantees, was not significant at December 31, 2024 and 2023. The Company recognizes these fees as revenues over the term of the commitment or when the commitment is used.
At December 31, 2024, consumer loan commitments represent approximately 6% of total commitments and are generally unsecured. Commercial and agricultural loan commitments represent approximately 38% of total commitments and are generally secured by various assets of the borrower. Real estate loan commitments, including consumer home equity lines of credit, represent the remaining 56% of total commitments and are generally secured by property with a loan-to-value ratio not to exceed 80%. In addition, the majority of the Company’s commitments have variable interest rates.
Concentrations of Credit Risk
The Company grants real estate mortgage, real estate construction, commercial, agricultural and consumer loans to customers throughout Plumas, Nevada, Placer, Lassen, Sierra, Shasta, Sutter and Modoc counties in California and Washoe and Carson City counties in Northern Nevada. Although the Company has a diversified loan portfolio, a substantial portion of its portfolio is secured by commercial and residential real estate. A continued substantial decline in the economy in general, or a continued decline in real estate values in the Company’s primary market areas in particular, could have an adverse impact on the collectability of these loans. However, personal and business income represents the primary source of repayment for a majority of these loans.
Contingencies
The Company is subject to legal proceedings and claims which arise in the ordinary course of business. In the opinion of management, the amount of ultimate liability with respect to such actions will not materially affect the financial position or results of operations of the Company.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
13.
SHAREHOLDERS' EQUITY
Dividend Restrictions
The Company's ability to pay cash dividends is dependent on dividends paid to it by the Bank and limited by California corporation law. Under California law, the holders of common stock of the Company are entitled to receive dividends when and as declared by the Board of Directors, out of funds legally available, subject to certain restrictions. The California General Corporation Law permits a California corporation such as the Company to make a distribution to its shareholders if its retained earnings equal at least the amount of the proposed distribution or if after giving effect to the distribution, the value of the corporation’s assets exceed the amount of its liabilities plus the amount of shareholders preferences, if any, and certain other conditions are met.
Dividends from the Bank to the Company are restricted under California law to the lesser of the Bank's retained earnings or the Bank's net income for the latest three fiscal years, less dividends previously declared during that period, or, with the approval of the DFPI to the greater of the retained earnings of the Bank, the net income of the Bank for its last fiscal year, or the net income of the Bank for its current fiscal year. As of December 31, 2024, the maximum amount available for dividend distribution under this restriction was $58,197,000. The Company paid a quarterly cash dividend of $0.27 per share on November 15, 2024, August 15, 2024, May 15, 2024 and February 15, 2024, and a quarterly cash dividend of $0.25 per share on November 15, 2023, August 15, 2023, May 15, 2023, and February 15, 2023.
Earnings Per Share
Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share 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 earnings per share.
For the Year Ended December 31,
(In thousands, except per share data)
Net Income:
Net income
$ 28,619 $ 29,776 $ 26,444
Earnings Per Share:
Basic earnings per share
$ 4.85 $ 5.08 $ 4.53
Diluted earnings per share
$ 4.80 $ 5.02 $ 4.47
Weighted Average Number of Shares Outstanding:
Basic shares
5,895 5,863 5,840
Effect of dilutive of stock options and restricted stock
73 71 72
Diluted shares
5,968 5,934 5,912
Shares of common stock issuable under stock options for which the exercise prices were greater than the average market prices were not included in the computation of diluted earnings per share due to their antidilutive effect. Stock options not included in the computation of diluted earnings per share, due to shares not being in the-money and having an antidilutive effect, were 5,860, 101,994 and 118,850 for the years ended December 31, 2024, 2023 and 2022, respectively.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
13.
SHAREHOLDERS' EQUITY (Continued)
Stock Options
In May 2022, the Company’s shareholders approved the 2022 Equity Incentive Plan (the “2022 Plan”), which provides for the grant of up to 576,550 shares of common stock, including 126,550 shares that remained available for grant under the 2013 Stock Option Plan when the 2022 Plan was adopted. The 2022 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. The frequency, amount and terms of stock-based awards may be determined by the Board of Directors or its compensation committee, consistent with the terms and purposes of the 2022 plan.
In May 2013, the Company established the 2013 Stock Option Plan for which 131,847 shares of common stock are reserved. With the establishment of the Company’s 2022 Equity Incentive Plan, no further options may be issued under the 2013 Stock Option Plan, though options previously granted continue to be outstanding and governed by the plan.
During the years ended December 31, 2024, and December 31, 2022, 107,200 and 117,200 options, respectively were granted under the 2022 plan. There were no options granted during the year ended December 31, 2023, under the 2022 plan. There were no options granted during the years ended December 31, 2024, 2023, and 2022 under the 2013 plan.
A summary of the activity within the 2013 Plan follows:
Weighted
Average
Weighted
Remaining
Average
Contractual
Exercise
Term in
Intrinsic
Shares
Price
Years
Value
Options outstanding at January 1, 2022
223,617 $ 19.71
Options exercised
(33,700 ) $ 11.66
Options outstanding at December 31, 2022
189,917 $ 21.14
Options exercised
(24,400 ) $ 18.59
Options outstanding at December 31, 2023
165,517 $ 21.52
Options cancelled
(1,600 ) $ 24.40
Options exercised
(32,070 ) $ 17.03
Options outstanding at December 31, 2024
131,847 $ 22.58 2.3 $ 3,254,383
Options exercisable at December 31, 2024
131,847 $ 22.58 2.3 $ 3,254,383
A summary of the activity within the 2022 Plan follows:
Shares
Weighted Average Exercise Price Weighted Average Remaining Contractual Term in Years Intrinsic Value
Options outstanding at January 1, 2022
- -
Options granted
117,200 $ 31.00
Options outstanding at December 31, 2022
117,200 $ 31.00
Options cancelled
(10,400 ) $ 31.00
Options exercised
(1,300 ) $ 31.00
Options outstanding at December 31, 2023
105,500 $ 31.00
Options granted
107,200 $ 34.07
Options cancelled
(1,200 ) $ 34.07
Options exercised
(1,300 ) $ 31.00
Options outstanding at December 31, 2024
210,200 $ 32.55 9.0 $ 3,092,042
Options exercisable at December 31, 2024
43,600 $ 31.00 8.8 $ 708,936
Expected to vest after December 31, 2024
155,388 $ 32.95 9.1 $ 2,223,602
Information related to the stock options plans during the twelve months ended December 31, 2024, and 2023.
Fair value of options vested
$
199,000
$
349,000
Intrinsic value of options exercised
$
700,000 $
484,000
Cash received from option exercises
$
508,000 $
339,000
Tax benefit from option exercises
$
83,000 $
75,000
Compensation cost
$
393,000 $
318,000
Tax benefit associated with compensation cost
$
51,000
$
22,000
As of December 31, 2024, there was $1.3 million of total unrecognized compensation cost related to non-vested, share-based compensation under the 2022 plan. That cost is expected to be recognized over a weighted average period of 3.5 years. As of December 31, 2024, there was no unrecognized compensation cost related to non-vested, share-based compensation under the 2013 plan.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
13.
SHAREHOLDERS' EQUITY (Continued)
Restricted Stock and Restricted Stock Units
During the twelve months ended December 31, 2024, the Company granted 3,033 restricted stock units with a fair value of $34.07 per share and a one-year vesting period. Compensation costs related to these units during the twelve months ended December 31, 2024, was $89,000. As of December 31, 2024, there was $14,000 of total unrecognized compensation cost related to restricted stock units. That cost is expected to be recognized over a weighted average period of 1.7 months.
During 2024 the Company granted 435 shares of restricted stock with a fair value of $46.04 per share and which fully vested on December 31, 2024, resulting in compensation costs during 2024 of $20,000. During 2022 the Company granted 1,650 shares of restricted stock with a fair value of $31 per share and a one-year vesting period. 825 of these shares were terminated during 2023 and 825 were fully vested on December 31, 2023. Compensation costs related to these shares during the twelve months ended December 2024, 2023, and 2022 totaled $0, $4,000 and $21,000, respectively. On December 31, 2024, and 2023, there was no unrecognized compensation cost related to restricted stock.
Regulatory Capital
The Bank is subject to certain regulatory capital requirements administered by the FDIC. Failure to meet these minimum capital requirements can initiate certain mandatory and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company's consolidated financial statements. Under capital adequacy guidelines, the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. These quantitative measures are established by regulation and require that minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets be maintained. Capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
The Bank is also subject to additional capital guidelines under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the below table, and cannot be subject to a written agreement, order or capital directive issued by the FRB.
In July 2013, the federal bank regulatory agencies adopted rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks, sometimes called “Basel III,” that increased the minimum regulatory capital requirements for bank holding companies and banks and implemented strict eligibility criteria for regulatory capital instruments. The Basel III capital rules include a minimum common equity Tier 1 ratio of 4.5%, a Tier 1 capital ratio of 6.0%, a total risk-based capital ratio of 8.0%, and a minimum leverage ratio of 4.0% (calculated as Tier 1 capital to average consolidated assets). The minimum capital levels required to be considered “well capitalized” include a common equity Tier 1 ratio of 6.5%, a Tier 1 risk-based capital ratio of 8.0%, a total risk-based capital ratio of 10.0% and a leverage ratio of 5.0%. In addition, the Basel III capital rules require that banking organizations maintain “a capital conservation buffer” of 2.5% above the minimum capital requirements in order to avoid restrictions on their ability to pay dividends, repurchase stock or pay discretionary bonuses. Including the capital conservation buffer of 2.5%, the Basel III capital rules require the following minimum ratios for a bank holding company or bank to be considered well capitalized: a common equity Tier 1 capital ratio of 7.0%; a Tier 1 capital ratio of 8.5%, and a total capital ratio of 10.5%. At December 31, 2024, the Company’s and the Bank’s capital ratios exceed the thresholds necessary to be considered “well capitalized” under the Basel III framework.
Under the FRB’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement (the “Policy Statement”), qualifying bank holding companies with less than $3 billion in consolidated assets are exempt from the consolidated capital rules. The Company qualifies for treatment under the Policy Statement and is not currently subject to the Basel III consolidated capital rules at the bank holding company level. The new capital rules continue to apply to the Bank.
In 2019, the federal banking agencies issued a rule establishing a “community bank leverage ratio” (the ratio of a bank’s tier 1 capital to average total consolidated assets) that qualifying institutions with less than $10 billion in assets may elect to use in lieu of the generally applicable leverage and risk-based capital requirements under Basel III. A qualifying banking organization that elects to use the new ratio will be considered to have met all applicable federal regulatory capital and leverage requirements, including the minimum capital levels required to be considered “well capitalized,” if it maintains a community bank leverage ratio capital exceeding 9%. The new rule became effective on January 1, 2020. Plumas Bank has chosen not to opt into the community bank leverage ratio at this time.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
13.
SHAREHOLDERS' EQUITY (Continued)
The following table sets forth the Bank's actual capital amounts and ratios (dollar amounts in thousands):
Minimum Amount of Capital Required
To be Well-Capitalized
For Capital
Under Prompt
Actual
Adequacy Purposes (1)
Corrective Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
December 31, 2024
Common Equity Tier 1 Ratio
$ 199,308 17.3 % $ 51,981 4.5 % $ 75,084 6.5 %
Tier 1 Leverage Ratio
199,308 11.9 % 66,856 4.0 % 83,570 5.0 %
Tier 1 Risk-Based Capital Ratio
199,308 17.3 % 69,308 6.0 % 92,411 8.0 %
Total Risk-Based Capital Ratio
213,124 18.5 % 92,411 8.0 % 115,514 10.0 %
December 31, 2023
Common Equity Tier 1 Ratio
$ 179,194 15.7 % $ 51,294 4.5 % $ 74,092 6.5 %
Tier 1 Leverage Ratio
179,194 10.8 % 66,348 4.0 % 82,935 5.0 %
Tier 1 Risk-Based Capital Ratio
179,194 15.7 % 68,392 6.0 % 91,190 8.0 %
Total Risk-Based Capital Ratio
192,860 16.9 % 91,190 8.0 % 113,987 10.0 %
(1) Does not include amounts required under the capital conservation buffer discussed above.
The current and projected capital positions of the Company and the Bank and the impact of capital plans and long-term strategies are reviewed regularly by management. The Company policy is to maintain the Bank’s ratios above the prescribed well-capitalized ratios at all times. Management believes that the Bank currently meets all its capital adequacy requirements.
14.
OTHER EXPENSES
Other expenses consisted of the following:
Year Ended December 31,
Outside service fees
$ 4,576,000 $ 4,496,000 $ 4,057,000
Professional fees
1,407,000 1,258,000 1,282,000
Advertising and promotion
1,030,000 941,000 673,000
Armored car and courier
876,000 767,000 675,000
Telephone and data communications
780,000 806,000 770,000
Deposit insurance
750,000 737,000 528,000
Director compensation, education and retirement
728,000 763,000 606,000
Business development
680,000 615,000 506,000
Loan collection costs
388,000 423,000 274,000
Amortization of Core Deposit Intangible
201,000 237,000 284,000
Other operating expense
1,508,000 865,000 874,000
Other non-interest expense
$ 12,924,000 $ 11,908,000 $ 10,529,000
15.
INCOME TAXES
The provision for income taxes for the years ended December 31, 2024, 2023 and 2022 consisted of the following:
Federal
State
Total
Current
$ 6,896,000 $ 3,540,000 $ 10,436,000
Deferred
75,000 (129,000 ) (54,000 )
Provision for income taxes
$ 6,971,000 $ 3,411,000 $ 10,382,000
Federal
State
Total
Current
$ 7,310,000 $ 3,827,000 $ 11,137,000
Deferred
(582,000 ) (120,000 ) (702,000 )
Provision for income taxes
$ 6,728,000 $ 3,707,000 $ 10,435,000
Federal
State
Total
Current
$ 5,398,000 $ 2,794,000 $ 8,192,000
Deferred
686,000 347,000 1,033,000
Provision for income taxes
$ 6,084,000 $ 3,141,000 $ 9,225,000
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
15.
INCOME TAXES (Continued)
Deferred tax assets (liabilities) consisted of the following:
December 31,
Deferred tax assets:
Allowance for credit losses
$ 3,714,000 $ 3,449,000
Deferred compensation
1,166,000 1,127,000
State taxes
734,000 804,000
Premises and equipment
190,000 619,000
Unrealized loss on available-for-sale investment securities
10,552,000 13,625,000
Lease Liability
6,968,000 860,000
Other
1,144,000 815,000
Total deferred tax assets
24,468,000 21,299,000
Deferred tax liabilities:
Deferred loan costs
(1,397,000 ) (1,259,000 )
Purchase accounting adjustments
(249,000 ) (306,000 )
Right-of-use assets
(6,849,000 ) (840,000 )
Other
(241,000 ) (143,000 )
Total deferred tax liabilities
(8,736,000 ) (2,548,000 )
Net deferred tax assets
$ 15,732,000 $ 18,751,000
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 measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The determination of the amount of deferred income tax assets which are more likely than not to be realized is primarily dependent on projections of future earnings, which are subject to uncertainty and estimates that may change given economic conditions and other factors. The realization of deferred income tax assets is assessed and a valuation allowance is recorded if it is "more likely than not" that all or a portion of the deferred tax asset will not be realized. "More likely than not" is defined as greater than a 50% chance. All available evidence, both positive and negative is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed.
At December 31, 2024 total deferred tax assets were approximately $24,468,000 and total deferred tax liabilities were approximately $8,736,000 for a net deferred tax asset of $15,732,000. The Company’s deferred tax assets primarily relate to timing differences in the tax deductibility of unrealized losses on investment securities, deprecation on premises and equipment, the provision for credit losses and deferred compensation. Based upon our analysis of available evidence, management of the Company determined that it is "more likely than not" that all of our deferred income tax assets as of December 31, 2024 and 2023 will be fully realized and therefore no valuation allowance was recorded. On the consolidated balance sheet, net deferred tax assets are included in accrued interest receivable and other assets.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
15.
INCOME TAXES (Continued)
The Company recognized, as components of tax expense, tax credits and other tax benefits, and amortization expense relating to our investment in Qualified Affordable House Projects as follows:
December 31, 2024 December 31, 2023 December 31, 2022
Tax credits and other tax benefits - decrease in tax expense $ 305,928 $ 142,691 $ 33,305
Amortization - increase in tax expense $ 237,753 $ 93,012 $ 19,474
The carrying value of Low-Income Housing Tax Credit Funds was $2,150,000 and $2,388,000 as of December 31, 2024 and 2023, respectively. As of December 31, 2024, the Company has committed to make additional capital contributions to the Low-Income Housing Tax Credit Funds in the amount of $1,277,000, and these contributions are expected to be made over the next several years.
The provision for income taxes differs from amounts computed by applying the statutory Federal income tax rate to operating income before income taxes. The significant items comprising these differences consisted of the following:
Federal income tax, at statutory rate
21.0 % 21.0 % 21.0 %
State franchise tax, net of Federal tax effect
7.0 7.0 7.0
Interest on obligations of states and political subdivisions
(1.2 ) (1.8 ) (1.6 )
Net increase in cash surrender value of bank owned life insurance
(0.2 ) (0.2 ) (0.2 )
Other
- - (0.3 )
Effective tax rate
26.6 % 26.0 % 25.9 %
The Company and its subsidiary file income tax returns in the U.S. federal and applicable state jurisdictions. The Company conducts all of its business activities in the states of California, Nevada, Oregon and Utah. 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, 2021, and by state and local taxing authorities for years ended before December 31, 2020.
The unrecognized tax benefits and changes therein and the interest and penalties accrued by the Company as of or during the years ended December 31, 2024 and 2023 were not significant. The Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months.
16.
RELATED PARTY TRANSACTIONS
During the normal course of business, the Company enters into transactions with related parties, including executive officers and directors. The following is a summary of the aggregate activity involving related party borrowers during 2024:
Balance, January 1, 2024
$ 4,526,000
Effect of change in composition of related parties
22,640,000
Disbursements
7,000
Amounts repaid
(4,374,000 )
Balance, December 31, 2024
$ 22,799,000
Undisbursed commitments to related parties, December 31, 2024
$ 165,000
Deposits from executive officers, directors and their affiliates at year-end 2024 and 2023 were $10.7 million and $8.3 million.
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
17.
EMPLOYEE BENEFIT PLANS
Profit Sharing Plan
The Plumas Bank Profit Sharing Plan commenced April 1, 1988 and is available to employees meeting certain service requirements. Under the Plan, employees are able to defer a selected percentage of their annual compensation. Included under the Plan's investment options is the option to invest in Company stock. The Company’s contribution, which is recorded net of forfeitures, consisted of a matching amount of 30% of the employee’s contribution up to a total of 3% of the employee’s compensation totaling $397,000, $351,000 and $305,000 for the years ended December 31, 2024, 2023 and 2022, respectively.
Salary Continuation and Retirement Agreements
Salary continuation and retirement agreements are in place for the Company’s president, its current executive vice presidents, six members of the Board of Directors as well as five former executives and four former directors. Under these agreements, the directors and executives will receive monthly payments for periods ranging from ten to fifteen years, after retirement. The estimated present value of these future benefits is accrued over the period from the effective dates of the agreements until the participants' expected retirement dates. The expense recognized under these plans for the years ended December 31, 2024, 2023 and 2022 totaled $483,000, $595,000 and $471,000, respectively. Accrued compensation payable under these plans totaled $4,143,000 and $4,013,000 at December 31, 2024 and 2023, respectively and is included in accrued interest payable and other liabilities on the consolidated balance sheet.
In connection with some of these agreements, the Bank purchased single premium life insurance policies with cash surrender values totaling $16,519,000 and $16,110,000 at December 31, 2024 and 2023, respectively. Income earned on these policies, net of expenses, totaled $409,000, $417,000 and $391,000 for the years ended December 31, 2024, 2023 and 2022, respectively.
18.
COMPREHENSIVE INCOME
The changes in the accumulated balances for each component of other comprehensive loss, net of tax for the twelve months ended December 31, 2024 and 2023 were as follows, in thousands:
Other Accumulated
Unrealized (Losses)
Unrealized Gain
Comprehensive
on AFS Securities
Cash Flow Hedge
Income (Loss), net of tax
Beginning Balance, January 1, 2023
$ (54,183 ) $ 2,002 $ (36,756 )
Current year-to-date other comprehensive income (loss)
8,095 (2,002 ) 4,292
Ending balance, December 31, 2023
$ (46,088 ) $ - $ (32,464 )
Current year-to-date other comprehensive income
10,390 - 7,319
Ending balance, December 31, 2024
$ (35,698 ) $ - $ (25,145 )
The changes in the accumulated balances for each component of other comprehensive loss, net of tax for the twelve months ended December 31, 2024 and 2023 were as follows:
Amounts Reclassified from Accumulated Other Comprehensive Loss
Details about Accumulated Other Comprehensive (Loss) Components
Year Ended December 31, 2024
Year Ended December 31, 2023
Affected Line Item on the Statement of Income
Cash flow hedge
Termination of cash flow hedge
$ - $ 1,707 Non-Interest Income
Tax effect
- (505 ) Provision for income taxes
Investment securities
Loss on sale of investment securities
$ 19,817 $ - Non-Interest Income
Tax effect
(5,858 ) - Provision for income taxes
Total reclassifications for the period
$ 13,959 $ 1,202 Net Income
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
19.
PARENT ONLY CONDENSED FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS
December 31, 2024 and 2023
ASSETS
Cash and cash equivalents
$ 12,261,000 $ 3,608,000
Investment in bank subsidiary
180,744,000 153,636,000
Other assets
369,000 256,000
Total assets
$ 193,374,000 $ 157,500,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Other liabilities
$ 474,000 $ 183,000
Borrowings
15,000,000 10,000,000
Junior subordinated deferrable interest debentures
- -
Total liabilities
15,474,000 10,183,000
Shareholders' equity:
Common stock
29,043,000 28,033,000
Retained earnings
174,002,000 151,748,000
Accumulated other comprehensive loss, net of taxes
(25,145,000 ) (32,464,000 )
Total shareholders' equity
177,900,000 147,317,000
Total liabilities and shareholders' equity
$ 193,374,000 $ 157,500,000
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Years Ended December 31, 2024, 2023 and 2022
Income:
Dividends declared by bank subsidiary
$ 10,000,000 $ 7,500,000 $ 4,000,000
Gain on termination of swaps
- 1,707,000 -
Earnings from investment in Plumas Statutory Trust I and II
- 5,000 14,000
Total income
10,000,000 9,212,000 4,014,000
Expenses:
Interest on junior subordinated deferrable interest debentures
- 141,000 359,000
Interest on borrowings
641,000 369,000 -
Other expenses
622,000 523,000 556,000
Total expenses
1,263,000 1,033,000 915,000
Income before equity in undistributed income of bank subsidiary
8,737,000 8,179,000 3,099,000
Equity in undistributed income of bank subsidiary
19,462,000 21,746,000 23,039,000
Income before income taxes
28,199,000 29,925,000 26,138,000
Income tax (expense) benefit
420,000 (149,000 ) 306,000
Net income
$ 28,619,000 $ 29,776,000 $ 26,444,000
Total comprehensive income (loss)
$ 35,938,000 $ 34,068,000 $ (11,912,000 )
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
19.
PARENT ONLY CONDENSED FINANCIAL STATEMENTS (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2024, 2023 and 2022
Cash flows from operating activities:
Net income
$ 28,619,000 $ 29,776,000 $ 26,444,000
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed income of bank subsidiary
(19,462,000 ) (21,746,000 ) (23,039,000 )
Stock-based compensation expense
174,000 78,000 78,000
Decrease (increase) in other assets
94,000 554,000 (88,000 )
Increase (decrease) in other liabilities
85,000 (185,000 ) (65,000 )
Net cash provided by operating activities
9,510,000 8,477,000 3,330,000
Cash flows from financing activities:
Cash dividends paid on common stock
(6,365,000 ) (5,862,000 ) (3,737,000 )
Redemption of Trust Preferred Securities
- (10,310,000 ) -
Increase in other borrowings
5,000,000 10,000,000 -
Proceeds from exercise of stock options
508,000 339,000 309,000
Net cash used in financing activities
(857,000 ) (5,833,000 ) (3,428,000 )
Increase (decrease) in cash and cash equivalents
8,653,000 2,644,000 (98,000 )
Cash and cash equivalents at beginning of year
3,608,000 964,000 1,062,000
Cash and cash equivalents at end of year
$ 12,261,000 $ 3,608,000 $ 964,000
F-
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
20.
SUBSEQUENT EVENTS
On January 28, 2025, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Cornerstone Community Bancorp (“Cornerstone”), pursuant to which Cornerstone will merge with and into the Company, with the Company as the surviving corporation (the “Merger”). The Merger Agreement contemplates that immediately after the Merger, Cornerstone’s wholly-owned subsidiary, Cornerstone Community Bank, a California state-chartered bank, will merge with and into Plumas Bank, a California state-chartered bank and wholly-owned subsidiary of the Company, with Plumas Bank as the surviving bank.
Merger Consideration
At the effective time of the Merger (the “Effective Time”), each outstanding share of Cornerstone common stock, excluding certain specified shares, will be converted into the right to receive 0.6608 shares of Plumas common stock, plus up to $9.75 in cash consideration, as may be reduced in accordance with the terms of the Merger Agreement (the “Cash Consideration”) If Cornerstone’s Adjusted Tangible Common Equity (as determined in accordance with the Merger Agreement) as of the month end prior to the Effective Time, as adjusted to reflect certain merger-related costs, is less than $42,586,066, then the Cash Consideration will be reduced by such difference on a pro rata basis based on the number of shares of Cornerstone common stock outstanding immediately prior to the Effective Time. In addition, if Cornerstone’s merger-related costs (as determined in accordance with the Merger Agreement and giving credit for any recoveries on a specific Cornerstone Bank loan) exceed $7,000,000, then the Cash Consideration will be reduced by such excess on a pro rata basis based on the number of shares of Cornerstone common stock outstanding immediately prior to the Effective Time.
The transaction is valued at approximately $64.6 million based on the closing price of $47.76 for Plumas shares on January 28, 2025. On a pro forma consolidated basis, the combined company would have approximately $2.3 billion in assets, $2.0 billion in deposits, $1.5 billion in loans, and operate 19 branches throughout Northern California and Western Nevada.
The Merger is currently pending regulatory approval, and we anticipate closing to take place during the second half of 2025.
F-

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures.
The Company’s management, including the Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting.
During the fourth quarter of 2024, no change in the Company’s internal control over financial reporting was identified in connection with this evaluation that has materially affected or is reasonably likely to materially affect internal control over financial reporting.
Management's Report on Internal Control over Financial Reporting and Attestation Report of Registered Public Accounting Firm
Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm are set forth in our consolidated financial statements and the reports thereon set forth in Item 8 of this report.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
Not applicable.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Principal Occupation of Directors
The following table sets forth the names of, and certain information concerning, the directors of the Company. Each director of the Company is also a director of the Bank.
Name and Title Other than Director
Age
Year First
Appointed
Director
Principal Occupation During the Past Five Years
Daniel E. West
Chairman of the Board
President, Graeagle Land & Water Co., a land management company. President, Graeagle Water Co., a private water utility, Graeagle, CA. Member, Graeagle Timber Co.
Robert J. McClintock
Vice Chairman of the Board
Certified Public Accountant, former co-owner of McClintock Accountancy Corporation, Tahoe City, CA. Co-owner 305 West Lake Blvd, LLC.
Michonne R. Ascuaga
Secretary of the Board
Retired
Steven M. Coldani
President, Owner/Broker, Coldani Realty Inc. and co-owner of Graeagle Associates Realtors; a managing member of Coldani Farming, LLC, a diversified farming company, and Coldani Olive Ranch, LLC, Lodi, CA.
Heidi S. O’Gara
Former Nevada state senator. Former Executive Director of External Relations at University of Nevada, Reno.
Richard F. Kenny
Retired
Sushil A. Patel
Owner, Laxmi Hotels, LLC, Mountain West Builders, LLC, Sharlands Hospitality, LLC, Corporate Pointe Hospitality, LLC, SLT Hospitality OZ Fund, LLC, SP OZ Fund, LLC, Laxmi Holdings, LLC, and Laxmi Reno, LLC.
Kevin Foster
Retired Managing Director, Ernst & Young 2017-2023
Andrew J. Ryback
President and CEO of Plumas Bancorp and Plumas Bank
Experience & Qualifications
The following provides a brief description of the business experience of each of the Company's directors and the experience and qualifications that the Corporate Governance & Compensation Committee considered in nominating them to serve as directors. Unless otherwise specified, each nominee has held his or her current position of employment or has been retired for at least five years.
None of the directors were selected pursuant to any arrangement or understanding other than with the directors and executive officers of the Company acting within their capacities as such. There are no family relationships among any of the directors or executive officers of the Company. No director of the Company serves as a director of any company that has a class of securities registered under, or which is subject to the periodic reporting requirements of, the Securities Exchange Act of 1934, or of any company registered as an investment company under the Investment Company Act of 1940.
Daniel E. West
Chairman of the Board
Director since 1997
Daniel E. West has lived in Graeagle, California since 1958. He is president of Graeagle Land and Water Company, a land management company, and Graeagle Water Company, a private water utility. Mr. West is a managing member of Graeagle Timber Company, LLC. He also serves as a director on the boards of Graeagle Fire Protection District and California Water Association. Mr. West graduated from the University of the Pacific, Stockton, California where he received a Bachelor of Science degree in Business Administration. Mr. West’s valuable business acumen, his extensive experience on various and diverse boards, and his deep ties to his community highly qualify him for service as a member of the Board and Chairman.
Robert J. McClintock
Vice Chairman of the Board
Director since 2008
Robert J. McClintock resides in Reno, Nevada. He is a retired Certified Public Accountant. As a retired CPA, Mr. McClintock brings strong accounting and financial skills important to the oversight of the Company’s financial reporting, enterprise and operational risk management, and he qualifies as an audit committee financial expert for the Board’s Audit & Risk Committee. He is a board member and Treasurer of the Kiwanis Club of North Lake Tahoe and served previously as its President. He is a member of the advisory board for the Tahoe Truckee Excellence in Education Foundation and served previously as its Treasurer. Mr. McClintock attended Michigan Tech University where he received his Bachelor of Science degree in Business Administration.
Michonne R. Ascuaga
Secretary of the Board
Director since 2019
Michonne R. Ascuaga is a native northern Nevadan and has 30 years of experience working at John Ascuaga’s Nugget, a hotel-casino, serving as its CEO for the 16 years preceding its sale in 2013. From 2015 to 2016 Ms. Ascuaga served as Commissioner for the Nevada State Gaming Commission. Having served on numerous boards over the years, Ms. Ascuaga currently sits on the board of the Nevada Western Heritage Alliance. She received her Bachelor of Science degree in Mathematics from Santa Clara University and her Master of Business Administration from Stanford University. Ms. Ascuaga’s extensive management experience, leadership skills and her knowledge of and involvement in the communities the Company serves well qualifies her for service as a director of the Company.
Steven M. Coldani
Director
Director since 2013
Steven M. Coldani was born and raised in Lodi, California. He is a licensed real estate broker and the president and owner of Coldani Realty Inc. in Lodi, California; he is also co-owner of Graeagle Associates Realtors in Graeagle, California since 1992. In addition, Mr. Coldani is a managing member of Coldani Farming, LLC, a diversified farming company producing various row crops, tree and nut crops, olives, grapes, hay, and livestock. He is also a past director of the California Association of Realtors. Mr. Coldani graduated from the University of the Pacific, Stockton, California where he received a Bachelor of Science degree in Business and Public Administration. Mr. Coldani’s relevant experience qualifying him for service as a member of the Board includes his familiarity with the real estate markets in which we operate, a broad range of management and community service experience including his prior service on the board of Community Business Bank, and his membership in the Lodi District Chamber of Commerce, the Lodi Association of Realtors, the Plumas Association of Realtors and the Tahoe-Sierra Board of Realtors.
Kevin Foster
Director
Director since 2025
Kevin Foster is a fourth generation Californian who resides in both Lake Tahoe and Lafayette, California. A seasoned banking professional, he brings over 40 years of experience in lending, technology, cybersecurity, data, consulting, and sales, with a proven track record of driving transformation, efficiency, and compliance. Kevin retired in 2023 following a distinguished career, most recently serving as a Managing Director at Ernst & Young, one of the world’s largest professional services firms. Past employers included Teradata Corporation and Bank of America. An active community leader, Kevin has previously served on the board of Junior Achievement and is a regular volunteer at Glide Memorial in San Francisco. In Lake Tahoe, he contributes his leadership to multiple boards, including the Chambers Landing Recreation Association, Chamberland Beach & Mountain Club, and the Chambers Pier Association. He also spearheaded efforts to earn Firewise USA recognition for his community. Kevin holds a Bachelor of Science degree in Finance from San Jose State University.
Richard F. Kenny
Director
Director since 2017
Richard F. Kenny resides in Reno, Nevada and has over 40 years of leadership experience in Operations, Information Systems, Strategic Planning and Credit Risk Management. Before retiring in 2010, he was the founding President and CEO of Charles Schwab Bank, a subsidiary of the Charles Schwab Corporation. Prior to that, he served in a variety of management roles with Citibank, both domestic and international. He is actively involved with KNPB public television in Reno and Capital Public Radio in Sacramento. He graduated from Northwestern University in Evanston, Illinois with a Bachelor of Science degree in Business Administration and Marketing and received his MBA in Finance from the University of Chicago. Mr. Kenny’s relevant experience qualifying him for service as a member of the Board includes his extensive leadership experience, knowledge of the financial industry and community involvement.
Heidi S. O’Gara
Director
Director since 2019
Heidi Seevers O’Gara resides in Reno and has over 30 years of management experience. Ms. O’Gara served in Nevada’s part-time legislature as a state senator from 2016 to 2024 and served in the state assembly from 2004 to 2010. She was elected the floor minority leader for each legislative body. She also previously served as Chief of Staff to Nevada Governor Brian Sandoval from January 2011 to September 2012. Her time in the executive and legislative branches of state government included roles related to business, education, economic development, workforce training, and energy. Upon her departure from Governor Sandoval’s Office, Ms. O’Gara served as the Executive Director of External Relations at the University of Nevada, Reno. While at the University of Nevada, Reno, Ms. O’Gara led the University’s economic development efforts and served on behalf of the University on the boards of the Economic Development Authority of Western Nevada (EDAWN) and Downtown Reno Partnership. Ms. O’Gara holds a bachelor of science degree in engineering from Santa Clara University and holds an MBA from the University of Nevada, Reno. Ms. O’Gara’s experience with economic development, knowledge of and involvement in the northern Nevada region and extensive leadership experience qualify her for service as a member of the Board.
Sushil A. Patel
Director
Director since 2024
Sushil Patel is originally from South Lake Tahoe, California, and is a successful business leader in the hospitality, lodging and real estate industries. He is the owner of Laxmi Hotels and operates five hotel properties in Lake Tahoe and Reno. For more than 20 years, Mr. Patel has developed real estate projects in both Nevada and California. He is a managing partner for Mountain West Builders, which is one of the largest multifamily contractors in Northern Nevada. Mr. Patel lives in Reno with his wife and four children and is an active member of the community serving on the Renown Health Foundation board. He earned his bachelor’s degree in business administration and public relations from California State University, Sacramento. Mr. Patel’s extensive management experience, familiarity with the real estate markets in which we operate, and involvement in the communities the Company serves, well qualifies him for service as a director of the Company.
Andrew J. Ryback
Director, President and CEO
Director since 2016
Andrew J. Ryback has been the President and Chief Executive Officer of the Company and the Bank since 2011. He previously served as interim President and Chief Executive Officer from March 2010 to November 2011 and, prior thereto, as Executive Vice President and Chief Financial Officer from 2005 to 2011. He joined the Bank in July 2001. Mr. Ryback received his Bachelor of Science degree in Business Administration from California State University, Northridge. He is a Certified Public Accountant and a graduate of Pacific Coast Banking School. Mr. Ryback actively serves in a variety of national, regional and local organizations: Mr. Ryback is the California Delegate to the Federal Delegate Board of the Independent Community Bankers of America (ICBA), he serves on ICBA’s Legislative Issues Committee and is the past Chair of the board of the California Community Banking Network. He previously served on the Federal Reserve Board of Governors’ Community Depository Institutions Advisory Council (CDIAC) and as chairman of the Federal Reserve Bank of San Francisco’s CDIAC. Furthermore, Mr. Ryback is past president of the Rotary Club of Quincy and served as an assistant governor for Rotary District 5190. Locally, he serves on the Board of Directors of Plumas District Hospital and as Commissioner and Treasurer for the Quincy Fire Protection District where he previously served as a volunteer firefighter. Mr. Ryback’s qualifications for serving as a director include his extensive banking, finance and leadership experience. In addition, as the Company’s President and Chief Executive Officer, Mr. Ryback brings the Board a deep familiarity with the Company and its operations.
Executive Officers
Name
Age
Position and Business Experience During the Past Five Years
Andrew J. Ryback
President and Chief Executive Officer of the Company and the Bank since 2011
Richard L. Belstock
Executive Vice President and Chief Financial Officer of the Company and the Bank since 2012
Aaron M. Boigon
Executive Vice President and Chief Information Officer of the Bank since April 1, 2018 and of the Company since April 21, 2021.
BJ North
Executive Vice President and Chief Banking Officer of the Bank since 2018. Previously Executive Vice President of Retail Banking, Marketing and Commercial Lending of the Bank since 2011.
Jeffrey T. Moore
Executive Vice President and Chief Credit Officer of the Bank since February 21, 2019.
Senior Vice President, Credit Administrator of the Bank from January 2018 to February 21, 2019.
Code of Ethics
The Board of Directors has adopted a code of business conduct and ethics for directors, officers (including the Company’s principal executive officer and principal financial officer) and financial personnel, known as the Corporate Governance Code of Ethics, or Code of Ethics. Shareholders may request a free copy of the Code of Ethics from Plumas Bancorp, Ms. Jamie Huynh, Investor Relations, 5525 Kietzke Lane, Suite 100, Reno, Nevada 89511. Additionally, a copy of the Code of Ethics can be accessed at www.plumasbank.com.
Audit & Risk Committee
The Company has an Audit & Risk Committee composed of Mr. McClintock (Chairman), Ms. Ascuaga, Ms. O’Gara and Mr. Patel. The Board has determined that each member of the Audit & Risk Committee meets the independence requirements of NASDAQ’s listing standards and the SEC rules applicable to audit committee members and has the ability to read and understand fundamental financial statements. The Board has also determined that Mr. McClintock is qualified as an audit committee financial expert and that he has accounting or related financial management expertise, in each case in accordance with the rules of the SEC and NASDAQ’s listing standards. The Audit & Risk Committee met nine times in 2024.
The Audit & Risk Committee selects and reviews the performance of our independent auditors and approves, in advance, all engagements. The Audit & Risk Committee reviews all internal and external audits, reports any significant findings of audits to the Board, and ensures that the Company’s internal audit plans are met, programs are carried out, and deficiencies and weaknesses are addressed. The Audit & Risk Committee meets regularly to discuss and review the overall audit plan. The Audit & Risk Committee’s policy is to pre-approve all recurring audit and non-audit services provided by the independent auditors using engagement letters. These services may include audit services, audit-related services, tax services, and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Audit & Risk Committee regarding all services provided by the independent auditors and fees associated with those services performed to date. The fees paid to the independent auditors in 2024 and 2023 were approved per the Audit & Risk Committee’s pre-approval policies.
The Audit & Risk Committee also oversees the Company’s enterprise risk management function.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and certain executive officers and persons who own more than ten percent (10%) of a registered class of the Company’s equity securities (collectively, the “Reporting Persons”), to file reports of ownership and changes in ownership with the SEC. The Reporting Persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto and the Reporting Persons’ written representations furnished to the Company during and with respect to its 2024 fiscal year, the following Reporting Persons failed to file, on a timely basis, reports required during or with respect to 2024 by Section 16(a) of the Securities Exchange Act of 1934, as amended, as follows. Each of the current directors and executives who held their respective positions during 2024 inadvertently failed to timely file one report each on Form 4 with respect to the grant of options or restricted stock units. And Ms. O’Gara failed a Form 5 reporting related to six acquisitions of a total of 103 shares pursuant to dividend reinvestments made during 2023 which she was unaware of.
Insider Trading Policy; Anti-Hedging
The Board of Directors has adopted an insider trading policy governing the purchase, sale and other dispositions of the Company’s securities by directors, officers and employees, that are reasonably designed to promote compliance with insider trading laws, rules and regulations and NASDAQ listing standards. Among other things, the Company’s insider trading policy prohibits the Company’s directors, officers, and employees from engaging in short sales of the Company’s common stock or other transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Company’s securities they own. A copy of the insider trading policy is included as Exhibit 19 to this report.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation
The following table sets forth information concerning the compensation earned by the Company’s President and Chief Executive Officer and the two other most highly compensated executive officers during 2023 and 2024 (collectively, the “named executive officers.”)
Summary Compensation Table
Name and
Principal Position
Year
Salary
Bonus
Stock
Awards
Option
Awards
(1)
Non-Equity
Incentive Plan
Compensation
Nonqualified
Deferred
Compensation Earnings
All Other
Compensation
(2)
Total
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Andrew J. Ryback, President and CEO of the Company and Plumas Bank
$522,500
$0
$0
$44,400
$284,963
$0
$15,468
$867,331
$450,000
$0
$0
$0
$276,755
$0
$13,519
$740,274
Richard L. Belstock, EVP and CFO of the Company and Plumas Bank
$307,500
$0
$0
$31,450
$122,444
$0
$14,944
$476,338
$277,500
$0
$0
$0
$118,418
$0
$15,357
$411,275
BJ North, EVP and Chief Banking Officer of Plumas Bank
$293,000
$0
$0
$31,450
$115,573
$0
$9,624
$450,021
$268,500
$0
$0
$0
$110,922
$0
$11,874
$391,296
(1)
The amounts reported in this column represent the aggregate grant date fair value of stock option awards in accordance with Financial Accounting Standards Board Accounting Standard Codification No. 718-10. These values have been determined under the principles used to calculate the grant date fair value of equity awards for purposes of the Company’s financial statements. For additional information regarding this valuation methodology and the assumptions used to arrive at the estimates, please refer to Note 2, to the Company’s consolidated financial statements included in the Company’s Annual Report to Shareholders for the year ended December 31, 2024. On February 21, 2024 the CEO was granted 4,800 options with a strike price of $34.07 per share. Each of the NEO’s was granted 3,400 options also with a strike price of $34.07 per share on the same date.
(2)
The amounts in column (i) include premiums paid and accrued on life insurance policies (Mr. Ryback), personal use of a Company automobile (Mr. Ryback and Ms. North), tax gross ups, Company-provided gasoline (Mr. Ryback and Mr. Belstock), Company 401(k) matching contributions, and cell phone allowance.
Non-Equity Incentive Plan
On December 20, 2023, the Board approved the Company’s cash non-equity incentive plan for 2024 (the “20234 NEI” or the “Plan”). Eligible employees under the 2024 NEI include all employees of the Company’s subsidiary, Plumas Bank, who are regularly scheduled to work at least 20 hours per week. The aggregate bonus pool was comprised of two pools, one for officers of the Company and one for all other employees. The officers’ portion represented 90.9% of the combined pools. Incentives were payable under the 2024 NEI once the Bank exceeded the 50th percentile of return on assets (“ROA”) with ROA calculated as of September 30, 2024 as follows: annualized year to date pretax income1 divided by average year to date assets. The percentile is calculated based on a peer group composed of commercial banks with total assets as of September 30, 2024 of between $1 billion and $3 billion. The higher the percentile, the higher the bonus pool. The maximum total bonus pool available for distribution was 8.8% of pretax pre-bonus income as of December 31, 2024. At an 80.8 percentile the total bonus pool available for distribution would be 5.5% of pretax, pre-bonus income with the officer’s pool totaling 5.0% of pretax, pre-bonus income and the other employees sharing in the remaining pool dollars. Up to 12% of the officers’ pool could be allocated to the Company’s Chief Executive Officer (“CEO”) and President. Executive Vice Presidents (“EVPs”) each can earn up to 4.65% of the officers’ bonus pool.
Under the 2024 NEI, the cash incentive payment to the Company’s CEO and President was based 50% on the ROA percentile, 16.7% upon the attainment of performance goals, and 16.6% upon various performance metrics with the remaining 16.7% based on the CEO’s performance during 2024, as evaluated by the Company’s Corporate Governance & Compensation Committee. Cash incentive payments for the Company’s EVPs were based 60.2% on the ROA percentile, 17.2% upon the attainment of performance goals, and 8.6% upon various performance metrics with the remaining 14.0% based on the CEO’s evaluation of each EVP’s performance during 2024.
For 2024, goals for the CEO included targeted increases in loans and deposits, exceeding an asset quality benchmark, and achieving selected strategic initiatives. Metrics included exceeding a targeted percentile of return on equity (calculated on a pre-tax basis) compared with a select group of peer institutions and exceeding budgeted net income. The Board has the ability to terminate or modify the Plan and all payouts under the Plan are subject to approval by the Company’s Corporate Governance & Compensation Committee. The Plan does not give any employee the right to or guarantee of continued employment. A total of one hundred seventy-five employees received incentive payments under the 2024 NEI, which were paid during the first quarter of 2025.
1 Income may be adjusted by unusual or nonrecurring items of revenue/expense at the discretion of the Company’s Corporate Governance and Compensation Committee. No adjustments were made to the 2024 calculation.
Incentives earned by the named executive officers under the 2024 Incentive Plan were as follows:
Incentive Earned Based On:
Executive
ROA Percentile
Goals
Metrics
Performance
Total
Andrew J. Ryback
$178,101
$17,811
$29,684
$59,367
$284,963
Richard L. Belstock
$83,114
$7,125
$5,937
$26,269
$122,444
BJ North
$83,114
$7,125
$5,937
$19,397
$115,573
Equity Compensation
The Board considers equity compensation in the form of stock options, restricted stock awards, and restricted stock units that vest over time to be an important component of its compensation program because it helps align the interests of the Company’s executives to those of its shareholders and provides a significant retention incentive. In 2022 the Company’s shareholders approved the Plumas Bancorp 2022 Equity Incentive Plan (the “2022 Plan”), which allows for the grant of stock option awards, restricted stock, and restricted stock units to directors, executives and employees. The 2022 Plan has a term of 10 years. Up to 576,550 shares of common stock may be issued pursuant to awards under the 2022 Plan, of which 362,882 remained available for future grants as of December 31, 2024. The Corporate Governance & Compensation Committee approves and recommends to the Board for its approval all equity compensation awards. The Company only grants stock options having an exercise price equal to fair market value of the Company’s common stock at the time of grant. The exercise price of stock options is set at the closing stock price on the date of grant. All option grants to employees have a maximum vesting period of five years and expire no more than 10 years from the date of grant. The 3,033 restricted stock units issued to directors in 2024 had a one-year vesting period. The 435 restricted stock issued to Mr. Reeson in 2024 vested at December 31, 2024.
While the Company does not have formal policy or obligation that requires it to grant or award equity-based compensation on a specific date, the Corporate Governance & Compensation Committee and the Board have a historical practice of not granting stock options or other equity awards to executive officers during closed quarterly trading windows as determined under the Company’s insider trading policy. Consequently, the Company has not granted, and does not expect to grant, any equity awards to any named executive officers within four business days preceding or one business day following the filing with the SEC of any report on Forms 10-K, 10-Q or 8-K that discloses material non-public information. The Corporate Governance & Compensation Committee and the Board do not take material non-public information into account when determining the timing of equity awards and do not time the disclosure of material non-public information in order to impact the value of executive compensation.
The Company considers the officer’s position level in the determination of the total value of the equity-based compensation to be included in the officer’s total compensation. Generally, the higher the officer’s level, the greater the equity compensation. Additional options and/or restricted stock may be granted to an individual based on outstanding achievement. This is consistent with the Company’s philosophy of rewarding those officers who have the most impact on our performance.
Employment Agreements, Post-Employments Benefits & Potential Payments Upon Termination or Change of Control
CEO Employment Agreement. On December 16, 2021, the Company and its subsidiary, Plumas Bank, entered into an Employment Agreement (the “Employment Agreement”) with Andrew J. Ryback, who is the President and Chief Executive Officer of the Company and the Bank. The Employment Agreement has a term of three years and after three years will automatically renew each year unless either party elects to terminate it prior to renewal.
The Employment Agreement provides that Mr. Ryback will continue to serve as the President and Chief Executive Officer of the Company and the Bank and will receive an annual base salary of $382,000, subject to annual review for increase but not decrease. Mr. Ryback’s annual base salary was increased to $552,500 as of January 1, 2024. He has the opportunity to earn an annual bonus and will participate in any annual incentive compensation program established by the Board, the Company’s equity incentive plans and such other benefit programs of the Company and the Bank available to executive employees generally. He receives an automobile allowance or use of a car owned by the Company.
If Mr. Ryback’s employment is terminated without “Cause” or if he terminates his employment for “Good Reason” (in each case, as defined in the Employment Agreement), then he will be entitled to receive payments equal to one and a half (1.5) times his annual base salary and reimbursement of COBRA expenses for up to 18 months. If Mr. Ryback’s employment is terminated for Cause or for his death, disability or resignation without Good Reason, he will not be entitled to any severance compensation.
If Mr. Ryback’s employment is terminated without Cause or if he terminates his employment for Good Reason, in either case within six months before or 24 months after a “Change in Control” (as defined in the Employment Agreement), he will be entitled to receive the following severance compensation in lieu of other severance benefits under the Employment Agreement: (1) two and a half (2.5) times his annual base salary, (2) his bonus for the year prior to his termination if not previously paid, (3) a prorated portion of his target bonus for the year in which his termination occurs, based on the number of months elapsed prior to his termination, and (4) reimbursement of up to 18 months of COBRA premiums.
Receipt of the severance benefits is conditioned on Mr. Ryback releasing the Company and its affiliates from all legal claims. In addition, Mr. Ryback agrees to protect the Company’s trade secrets and confidential information and, for a period of 18 months following his termination, that he will not induce employees to leave the Company’s employment or use confidential information to solicit the Company’s customers.
The Employment Agreement provides that if Mr. Ryback becomes entitled to any payments, benefits, or distributions from the Company or the Bank that would be subject to Section 280G of the Internal Revenue Code or any corresponding provisions of state or local excise tax law, then such payments, benefits, or distributions will be reduced to the extent the reduction would place Mr. Ryback in a better after-tax position.
In addition, any incentive compensation paid to Mr. Ryback is subject to potential clawback as required by any applicable law, government regulation, stock exchange listing requirement or the Company’s policies adopted pursuant to such laws or requirements.
The Company has not entered into employment or change in control/severance agreements with any of the executive officers other than Mr. Ryback.
Salary Continuation Agreements. The Board considers providing significant post-employment benefits in the form of salary continuation benefits to our executives as an important long-term component of their total executive compensation to reward them for their service and loyalty to the Company. These post-employment benefits also help the Company retain executives because the benefits are subject to vesting over a period of years.
In 2005, the Company entered into a salary continuation agreement with Mr. Ryback, which was subsequently amended, most recently on February 1, 2023. The purpose of the salary continuation agreement is to provide a special incentive to the experienced executive officer to continue employment with the Company on a long-term basis. The agreement provides Mr. Ryback with annual post-retirement salary continuation benefits of up to $140,000 for 15 years after retirement at age 65. If Mr. Ryback terminates employment with the Company for a reason other than death or disability prior to the retirement age of 65, he or his beneficiary will be entitled to salary continuation benefits at a reduced amount depending on the length of service with the Company. The vesting of salary continuation benefits for Mr. Ryback occurs at a rate that provides for a 90% vesting at age 60 and 2% per year for the next five years of service. In the event of disability wherein Mr. Ryback does not continue employment with the Company, he is entitled to salary continuation benefits, at a reduced amount depending on the length of service with the Company, beginning at age 65 or on the date on which he is no longer entitled to disability benefits under the Company’s group disability insurance, whichever is earlier.
If Mr. Ryback’s employment terminates within a period of 24 months after a change in control of the Company, the unvested portion of his salary continuation benefits would vest and the payment of the salary continuation benefits would begin the month following the month of termination, subject to the reduction of benefits if the benefits result in a limitation of deductibility of such benefits for the Company under Section 280G of the Internal Revenue Code.
The salary continuation benefits are informally funded by single premium life insurance policies with Mr. Ryback as the insured party and the Company as the beneficiary of the policies. The Company has entered into a split dollar agreement with Mr. Ryback in which the Company agrees to divide the net death proceeds of life insurance policies on Mr. Ryback’s life with Mr. Ryback’s beneficiary. However, Mr. Ryback’s rights or interests in the split dollar policies no longer exist once he ceases to be employed by the Company for any reason whatsoever prior to normal retirement age, provided that he has received or had the opportunity to receive any benefit under his executive salary continuation agreement. The Company has agreed to pay the taxes on the imputed income on the life insurance benefit provided to Mr. Ryback under the split dollar agreement.
In 2016, the Company entered into salary continuation agreements with Mr. Belstock and Ms. North which were subsequently amended, most recently on February 1, 2023. As amended, the agreements provide Mr. Belstock with annual post-retirement salary continuation benefits of up to $88,500 for 10 years and Ms. North with annual post-retirement salary continuation benefits of up to $82,500 for 10 years, in each case subject to his or her continuous employment through March 31, 2026. If Mr. Belstock or Ms. North terminates employment with the Company for a reason other than a change in control prior to the retirement date of March 31, 2026, he/she will be entitled to salary continuation benefits at a reduced amount depending on their length of service with the Company. In the event that Mr. Belstock or Ms. North terminates their employment with the Company or its successor within a period of 24 months after a change in control, he/she is entitled to the full vesting of their salary continuation payments and the payment of the salary continuation benefits beginning with the month following the month of termination, subject to the reduction of benefits if the benefits result in a limitation of deductibility of such benefits for the Company under Section 280G of the Internal Revenue Code.
Perquisites
The Company offers a qualified 401(k) plan in which the named executive officers participate on the same terms as all other employees. During 2024 and 2023 the Company contributed a matching amount of 30% of the employee’s contribution up to a total of 3% of the employee’s compensation. The Company also offers its executives medical, dental, and vision plans under the same terms available to all employees. Other perquisites and benefits, which do not represent a significant portion of the named executive’s total compensation, include for Mr. Ryback and Ms. North a Company-provided automobile and maintenance and, for Mr. Ryback, the payment of his portion of the split dollar insurance premium. The Company provides each of the named executive officers a monthly allowance to cover the business portion of their cellular phone use, gasoline for business use in their automobiles and a tax gross up on selected perquisites. These plans and the contributions provide an additional benefit to attract and retain executive officers of the Company.
Outstanding Equity Awards as of December 31, 2024
The following table shows all outstanding option awards held by the named executive officers as of December 31, 2024.
Option Awards
Name
Number of Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of Securities
Underlying
Unexercised
Options (#)
Unexercisable
Equity Incentive Plan Awards:
Number of Securities Underlying
Unexercised
Unearned Options (#)
Option
Exercise
Price ($)
Option
Expiration
Date
(a)
(b)
(c)
(d)
(e)
(f)
Andrew J. Ryback
5,000 (1)
0 (1)
N/A
$21.45
10/21/2027
4,800 (2)
7,200 (2)
N/A
$31.00
08/16/2032
0 (3)
4,800 (3)
N/A
$34.07
02/21/2034
Richard L. Belstock
6,100 (1)
0 (1)
N/A
$21.45
10/21/2027
3,400 (2)
5,100 (2)
N/A
$31.00
08/16/2032
0 (3)
3,400 (3)
N/A
$34.07
02/21/2034
BJ North
2,400 (1)
0 (1)
N/A
$21.45
10/21/2027
3,400 (2)
5,100 (2)
N/A
$31.00
08/16/2032
0 (3)
3,400 (3)
N/A
$34.07
02/21/2034
(1)
Options were granted 10/21/2019, have an eight-year life and vest 25% per year beginning 10/21/2020.
(2)
Options were granted 08/16/2022, have a ten-year life and vest 20% per year beginning 08/16/2023.
(3)
Options were granted 02/21/2024, have a ten-year life and vest 20% per year beginning 02/21/2025.
There were no other outstanding stock awards held by any of the NEOs as of December 31, 2024.
Director Compensation
The table below summarizes the compensation paid by the Company to non-employee directors for the year ended December 31, 2024.
Director Compensation Table
Name
Fees Earned
or Paid in Cash (1)
Stock
Awards
Option
Awards
(2)
Non-Equity
Incentive Plan
Compensation
Nonqualified
Deferred
Compensation
Earnings
All Other
Compensation (3)
Total
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Michonne R. Ascuaga
$48,000
$0
$31,444.44
N/A
N/A
$480
$79,924.44
Steven M. Coldani
$53,400
$0
$31,444.44
N/A
N/A
$480
$85,324.44
Richard F. Kenny
$48,000
$34,444.77
$0
N/A
N/A
$480
$82,924.77
Robert J. McClintock
$53,400
$34,444.77
$0
N/A
N/A
$480
$88,324.77
Kevin Foster (4)
N/A
N/A N/A
N/A N/A N/A
N/A
Heidi S. O’Gara
$48,000
$0
$31,444.44
N/A
N/A
$480
$79,924.44
Sushil A. Patel (5)
$44,000
$34,444.77
$0
N/A
N/A
$440
$78,884.77
Terrance J. Reeson (6)
$48,000
$20,027.40
$0
N/A
N/A
$480
$68,507.40
Daniel E. West
$58,500
$0
$31,444.44
N/A
N/A
$480
$90,424.44
(1)
During 2024, non-employee directors received a monthly fee of $4,000. The Audit & Risk Committee and Loan Committee chairs each received $4,450 per month. The Board Chair received $4,875 per month.
(2)
As of December 31, 2024, the non-employee directors held exercisable options to purchase shares of common stock in the following amounts: Ms. Ascuaga, 4,800 shares; Mr. Coldani, 7,300; Mr. Foster, 0 shares; Mr. Kenny, 4,567 shares; Mr. McClintock, 7,300 shares; Ms. O’Gara, 4,800 shares; Mr. Patel, 0 shares; Mr. Reeson, 5,700 shares; and Mr. West, 7,300 shares. On February 21, 2024 the Company granted 3,400 options having a strike price of $34.07 per share to each of four of its Directors. In addition, three of its Directors were issued 1,011 restricted stock units at $34.07 per share which vested in full on February 21, 2025. One Director was issued 435 restricted stock at $46.04 per share on December 18, 2024.
(3)
Each director is provided a $40 per month allowance for purchase of an electronic device to access board materials.
(4)
Mr. Foster joined the Board of Directors in 2025 and therefore received no compensation in 2024.
(5)
Mr. Patel joined the Board of Directors in February 2024.
(6)
Mr. Reeson retired from the Board of Directors on December 31, 2024.
Director Retirement Agreements
The Company has entered into Director Retirement (fee continuation) Agreements with its non-employee directors other than Messrs. Patel and Foster. The fee continuation agreements provide a retirement benefit to the directors as an incentive to continue informal service with the Company. The agreements provide for fee continuation benefits of up to $15,000 per year with a term of 12 years after retirement for Mr. West and a term of 15 years after retirement for Mmes. Ascuaga and O’Gara and Messrs. Coldani, Kenny and McClintock. In the event of death prior to retirement, Mr. West’s beneficiaries would receive full fee continuation benefits, Messrs. Coldani’s and McClintock’s beneficiaries would be entitled to receive a lump sum payment of $30,000, and Mmes. Ascuaga’s and O’Gara’s and Mr. Kenny’s beneficiaries would receive a lump sum equal to the accrual balance. In the event of disability wherein the director does not continue service with the Company, the director is entitled to fee continuation benefits, at a reduced amount depending on the length of service with the Company, beginning the month following termination of service. Mr. West’s agreement allows for a hardship distribution under specified circumstances. Hardship distributions are limited to the amount the Company had accrued under the terms of the agreement as of the day the director petitioned the Board to receive a hardship distribution. Upon a change in control, the director is eligible to receive the full fee continuation benefits upon the director’s termination of service. Mr. West’s benefits are informally funded by single premium life insurance policies. The director is the insured party and the Company is the beneficiary of the policy.
Post-Retirement Consulting Agreements
The Company has entered into Post-Retirement Consulting Agreements with Mr. West and certain former directors upon their retirement from the Board, including Terrance J. Reeson, who retired from the Board on December 31, 2024 upon reaching the mandatory retirement age. The purpose of the Agreements is to provide consideration to the Board members in exchange for consulting services after their retirement from the Board. The Agreement provides for consulting fees of $15,000 per year for three years after retirement. In the event of death prior to completion of the consulting services, the beneficiary will receive death benefits equal to $30,000 less any payments already received. In the event of disability wherein the retired director is unable to continue consulting services with the Company, the Company may terminate the director’s post-retirement consulting services. If the retired director voluntarily terminates his consulting services for other than good reason or if the Company terminates the director’s post-retirement consulting services for cause, the Post-Retirement Consulting Agreement will terminate.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Beneficial Ownership Table
The following table sets forth, as of March 18, 2025, the number and percentage of shares of the Company’s outstanding common stock beneficially owned, directly or indirectly, (1) by shareholders known by the Company to beneficially own 5% or more of the outstanding shares of the Company’s common stock, (2) by each of the Company’s directors and the executive officers named in the Summary Compensation Table in this proxy statement and (3) by all of the Company’s directors and executive officers as a group.
“Beneficial ownership” is determined under the Securities and Exchange Commission (“SEC”) rules and does not necessarily indicate ownership for any other purpose. In general, beneficial ownership includes shares over which a person has sole or shared voting or investment power and shares as to which such person has the right to acquire beneficial ownership within 60 days of March 18, 2025. Unless otherwise indicated, the persons listed below have sole voting and investment powers of the shares beneficially owned or acquirable by exercise of stock options and any shared voting power reflects power shared with his or her spouse. Management is not aware of any arrangements that may result in a change of control of the Company.
Beneficial Owner
Amount and Nature of
Beneficial Ownership (1)
Percent of Class (1)
Principal Shareholders that own 5% or more
Fidelity Management & Research LLC
527,733 (2)
8.9
BlackRock, Inc.
322,890 (3)
5.5
The Vanguard Group
304,321 (4)
5.2
Directors and Named Executive Officers:
Andrew J. Ryback, President, CEO and Director
97,328 (5)
1.6
Richard L. Belstock, EVP and CFO
71,015 (6)
1.2
BJ North, EVP and Chief Banking Officer (CBO) of Plumas Bank
6,480 (7)
*
Daniel E. West, Director and Chairman of the Board
73,730 (8)
1.2
Robert J. McClintock, Director and Vice Chairman of the Board
112,683 (9)
1.9
Michonne R. Ascuaga, Director and Secretary of the Board
10,987 (10)
*
Steven M. Coldani, Director
28,782 (11)
*
Heidi S. O’Gara, Director
10,715 (12)
*
Richard F. Kenny, Director
15,085 (13)
*
Sushil A. Patel, Director
2,385
*
Kevin Foster, Director
1,000 (14)
*
All 13 Directors and Executive Officers as a Group
463,150
7.7
*
Less than one percent
(1)
Includes 85,517 shares subject to options held by the directors and executive officers that were exercisable within 60 days of March 18, 2025. In accordance with SEC rules, shares a director or executive officer has the right to acquire upon exercise of a stock option within 60 days of March 18, 2025 are treated as issued and outstanding for the purpose of computing his or her own percentage ownership and the percentage ownership of directors and executive officers as a group, but not for the purpose of computing the percentage of class owned by any other person, including principal shareholders.
(2)
Based solely on information provided by the beneficial owners in a Schedule 13G filed with the SEC on February 8, 2024 by FMR LLC, FMR LLC directly holds 527,733 shares of common stock of the Company. The address of FMR LLC is 245 Summer Street, Boston, Massachusetts 02210.
(3)
Based solely on information provided by the beneficial owners in a Schedule 13G filed with the SEC on February 2, 2024 by BlackRock, Inc., BlackRock, Inc. directly holds 322,890 shares of common stock of the Company. The address of BlackRock, Inc. is 50 Hudson Yards, New York, New York 10001.
(4)
Based solely on information provided by the beneficial owners in a Schedule 13G filed with the SEC on January 31, 2025 by The Vanguard Group, The Vanguard Group holds 304,321 shares of common stock of the Company. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.
(5)
Mr. Ryback has shared voting and investment powers as to 55,300 of these shares. Includes 8,260 shares that Mr. Ryback has the right to acquire upon the exercise of stock options within 60 days of March 18, 2025.
(6)
Includes 8,180 shares that Mr. Belstock has the right to acquire upon the exercise of stock options within 60 days of March 18, 2025.
(7)
Includes 6,480 shares that Ms. North has the right to acquire upon the exercise of stock options within 60 days of March 18, 2025.
(8)
Mr. West has shared voting and investment powers as to 40,174 of these shares and sole voting powers but shared investment powers as to 16,794 of these shares. Includes 7,980 shares that he has the right to acquire upon the exercise of stock options within 60 days of March 18, 2025.
(9)
Mr. McClintock has shared voting and investment powers as to 55,749 of these shares. Includes 7,300 shares that he has the right to acquire upon the exercise of stock options within 60 days of March 18, 2025.
(10)
Includes 5,480 shares that Ms. Ascuaga has the right to acquire upon the exercise of stock options within 60 days of March 18, 2025.
(11)
Mr. Coldani has shared voting and investment powers as to 14,139 of these shares. Mr. Coldani has no voting powers as to 1,780 of these shares. Includes 7,980 shares that he has the right to acquire upon the exercise of stock options within 60 days of March 18, 2025.
(12)
Includes 5,480 shares that Ms. O’Gara has the right to acquire upon the exercise of stock options within 60 days of March 18, 2025.
(13)
Mr. Kenny has shared voting and investment powers as to 10,257 of these shares. Includes 3,817 shares that he has the right to acquire upon the exercise of stock options within 60 days of March 18, 2025.
(14)
Under the Company’s stock ownership guidelines, Mr. Foster, as a newly appointed Director, is required to acquire $150,000 of Plumas Bancorp stock within three years of his appointment.
Securities Authorized for Issuance under Equity Compensation Plans
Equity Compensation Plan Information
The following table provides information as of December 31, 2024, with respect to options and restricted stock units outstanding and shares available for future awards under the Company's active equity incentive plans.
Number of securities to be issued upon exercise of outstanding options
Weighted-average exercise price of outstanding options
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Plan Category
(a)
(b)
(c)
Equity compensation plans approved by security holders
271,017
$ 25.21
468,925
Equity compensation plans not approved by security holders
None
Not Applicable
None
Total
271,017
$ 25.21
468,925

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain Transactions
Some of the directors and executive officers of the Company and their immediate families, as well as the companies with which they are associated, are customers of, or have had banking transactions with, the Company in the ordinary course of the Company’s business, and the Company expects to have banking transactions with such persons in the future. In management’s opinion, all loans and commitments to lend in such transactions were made in the ordinary course of business, in compliance with applicable laws and on substantially the same terms, including interest rates and collateral, as those prevailing for comparable transactions with other non-affiliated persons of similar creditworthiness and, in the opinion of management, did not involve more than a normal risk of collectability or present other unfavorable features.
Director Independence
The Board has determined that each of the following non-employee directors are “independent” within the meaning of NASDAQ’s listing standards.
Michonne R. Ascuaga
Steven M. Coldani
Kevin Foster
Richard F. Kenny
Robert J. McClintock
Heidi S. O’Gara
Sushil A. Patel
Daniel E. West
Mr. Ryback is not independent because he is an employee of the Company.
Director tenure ranges from less than one to twenty-eight years, providing Board refreshment as well as continuity and depth of institutional knowledge.
Audit & Risk Committee
The Company has an Audit & Risk Committee composed of Mr. McClintock (Chairman), Ms. Ascuaga, Ms. O’Gara and Mr. Patel. The Board has determined that each member of the Audit & Risk Committee meets the independence requirements of NASDAQ’s listing standards and the SEC rules applicable to audit committee members and has the ability to read and understand fundamental financial statements. The Board has also determined that Mr. McClintock is qualified as an audit committee financial expert and that he has accounting or related financial management expertise, in each case in accordance with the rules of the SEC and NASDAQ’s listing standards. The Audit & Risk Committee met nine times in 2024.
The Audit & Risk Committee selects and reviews the performance of our independent auditors and approves, in advance, all engagements. The Audit & Risk Committee reviews all internal and external audits, reports any significant findings of audits to the Board, and ensures that the Company’s internal audit plans are met, programs are carried out, and deficiencies and weaknesses are addressed. The Audit & Risk Committee meets regularly to discuss and review the overall audit plan. The Audit & Risk Committee’s policy is to pre-approve all recurring audit and non-audit services provided by the independent auditors using engagement letters. These services may include audit services, audit-related services, tax services, and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Audit & Risk Committee regarding all services provided by the independent auditors and fees associated with those services performed to date. The fees paid to the independent auditors in 2024 and 2023 were approved per the Audit & Risk Committee’s pre-approval policies.
The Audit & Risk Committee also oversees the Company’s enterprise risk management function.
Corporate Governance & Compensation Committee
The Company has a Corporate Governance & Compensation Committee which met six times during 2024. The Corporate Governance & Compensation Committee consists of Ms. O’Gara, Chair, Messrs. Coldani, Patel, and West. The Board has determined that each member of the Corporate Governance & Compensation Committee is “independent” within the meaning of the listing standards and rules of NASDAQ, including those applicable to compensation committee members. The Corporate Governance & Compensation Committee, which functions as the Board’s nominating and compensation committees, identifies qualified individuals as prospective Board members, recommends to the Board the director nominees for election at the annual meeting of shareholders, nominates the Chairperson and Vice-Chairperson of the Board, and develops and recommends corporate governance guidelines to the Board of Directors.
The Corporate Governance & Compensation Committee at least annually reviews, adjusts (as appropriate) and approves the Company’s directors’ compensation, including cash, equity, or other compensation for service on the Board, any committee of the Board, and as Chairperson of the Board or any committee of the Board. The Corporate Governance & Compensation Committee at least annually reviews, adjusts (as appropriate) and approves the Chief Executive Officer’s compensation, provides advice and consents to the Chief Executive Officer in the review and adjustment of executive officer compensation (other than the Chief Executive Officer), approves the compensation strategy for the Company’s employees, reviews and recommends for approval by the Board all equity-based compensation, including stock options and stock grants, and approves other personnel matters which are in excess of management’s authority.
The Corporate Governance & Compensation Committee does not have any written specific minimum qualifications or skills that the committee believes must be met by either a committee-recommended or a shareholder-recommended candidate to serve on the Board. The Corporate Governance & Compensation Committee identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to the Company’s business and who are willing to continue in service are considered for re-nomination, balancing the value of continuity of service by existing members of the Board with that of obtaining a new perspective, skills, or experience. While no specific diversity policy exists, in practice, when identifying and evaluating new directors, the Corporate Governance & Compensation Committee considers the diversity and mix of the existing members of the Board, including, but not limited to, such factors as: the age of the current directors, their geographic location (being a community bank, there is a strong preference for local directors), background, skills, and employment experience. Among other things, when examining a specific candidate’s qualifications, the Corporate Governance & Compensation Committee considers the candidate’s ability to represent the best interest of the Company; existing relationships with the Company; interest in the affairs of the Company and its purpose; ability to fulfill director responsibilities; leadership skills; reputation within the Company’s community; community service; integrity; business judgment; ability to develop business for the Company; and ability to work as a member of a team. The Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. The Committee does not discriminate against prospective nominees on the basis of race, religion, national origin, gender, sexual orientation, disability or any other basis proscribed by law. All nominees to be considered for election as directors at the Meeting were recommended by the Corporate Governance & Compensation Committee.
The Corporate Governance & Compensation Committee will consider nominees to the Board proposed by shareholders. The Board has no formal policy with regard to shareholder nominees but considers all nominees on their merits as described above. Any shareholder nominations must comply with the nomination procedures set forth in the Company’s Bylaws. See “Shareholder Proposals and Nominations.” Suggestions for nominees and shareholder nomination should be addressed to:
Board Secretary Plumas Bancorp
5525 Kietzke Lane, Suite 100
Reno, Nevada 89511

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Principal Accountant Fees & Services
Eide Bailly LLP (“Eide Bailly”) served as the independent registered public accounting firm for the audit of the Company’s consolidated financial statements as of and for the year ended December 31, 2023.
On November 17, 2023, Eide Bailly notified the Company that it would exit the financial institution portion of its SEC audit practice, and therefore would decline to stand for reappointment as the Company’s independent registered public accounting firm for the year ending December 31, 2024.
The report of Eide Bailly regarding the Company’s financial statements for the year ended December 31, 2023 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the year ended December 31, 2023, (i) there were no disagreements with Eide Bailly on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Eide Bailly, would have caused it to make reference to such disagreement in its report and (ii) there were no reportable events that would require disclosure under Item 304(a)(1)(v) of Regulation S-K and the related instructions. The Company provided Eide Bailly with a copy of the preceding statements and requested Eide Bailly to furnish it with a letter addressed to the SEC stating whether or not it agrees with the statements. A copy of Eide Bailly’s letter was included as an exhibit to the Company’s Form 8-K filed with the SEC on November 20, 2023.
On November 29, 2023, following the notification of resignation of Eide Bailly, the Company engaged Elliott Davis to serve as its independent registered public accounting firm for the year ending December 31, 2024. The decision to engage Elliott Davis was approved by the Company’s Audit & Risk Committee prior to the engagement. Prior to engaging Elliott Davis, the Company did not consult with Elliott Davis regarding the application of accounting principles to a specific completed or proposed transaction or regarding the type of audit opinion that might be rendered by Elliott Davis on the Company’s financial statements or any matters that were either the subject of a disagreement (as that term is used in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event (as described in Item 304(a)(1) (v) of Regulation S-K). Prior to the Company’s engagement of Elliott Davis, Elliott Davis did not provide any written or oral advice that was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue.
Eide Bailly served as the independent registered public accounting firm for the audit of the Company’s consolidated financial statements as of and for the year ended December 31, 2023. Aggregate fees billed by Elliott Davis for the year ended 2024 and by Eide Bailly for the years ended 2024 and 2023 to the Company and the Bank and the percentage of those fees that were pre-approved by the Company’s Audit & Risk Committee are as follows:
Fee Description
Percentage
Pre-Approved
Percentage
Pre-Approved
Elliott Davis
Eide Bailly
Elliott Davis
Eide Bailly
Audit fees
$398,579
$0
100%
$386,000
100%
Audit-related fees
$0
$25,500
100%
$23,100
100%
Tax fees
$0
$34,750
100%
$23,100
100%
Other fees
$0
$0
N/A
$0
N/A
Total fees
$398,579 $60,250
100%
$432,200
100%
For 2024 and 2023, audit-related fees included the audits of the Company’s 401(k) plan and tax fees included work related to the preparation of the Company’s tax returns such as tax compliance, tax advice, and tax planning services. For 2024, Eide Bailly performed the audits of the Company’s 401(k) plan at a pre-approved fee of $25,500.
The Audit & Risk Committee has considered the provision of non-audit services provided by Eide Bailly to be compatible with maintaining their independence.
The Audit & Risk Committee will establish general guidelines for the permissible scope and nature of any permitted non-audit services to be provided by the independent registered public accounting firm in connection with the Committee’s annual review of its charter. Pre-approval may be granted by action of the full Audit & Risk Committee or by delegated authority to one or more members of the Audit & Risk Committee. If this authority is delegated, all approved non-audit services will be presented to the Audit & Risk Committee at its next meeting. In considering non-audit services, the Audit & Risk Committee or its delegate will consider various factors, including but not limited to, whether it would be beneficial to have the service provided by the independent registered public accounting firm and whether the service could compromise the independence of the independent registered public accounting firm. For the year ended December 31, 2024 the Audit & Risk Committee approved all of the services provided by Elliott Davis and Eide Bailly that were designated as audit-related fees, tax fees and all other fees as set forth in the table above.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following documents are included or incorporated by reference in this Annual Report on Form 10K:
2.1
Agreement and Plan of Reorganization and Merger dated as of January 28, 2025, by and between Plumas Bancorp and Cornerstone Community Bancorp, included as exhibit 2.1 to the Registrant’s 8-K filed on January 29, 2025, which is incorporated by this reference herein.
3.1
Articles of Incorporation as amended of Registrant included as exhibit 3.1 to the Registrant’s Form S-4, File No. 333-84534, which is incorporated by reference herein.
3.2
Bylaws of Registrant as amended on August 16, 2023 included as exhibit 3.1 to the Registrant’s Form 8-K filed on August 16, 2023, which is incorporated by this reference herein.
3.3
Amendment of the Articles of Incorporation of Registrant dated November 1, 2002, is included as exhibit 3.3 to the Registrant’s 10-Q for September 30, 2005, which is incorporated by this reference herein.
3.4
Amendment of the Articles of Incorporation of Registrant dated August 17, 2005, is included as exhibit 3.4 to the Registrant’s 10-Q for September 30, 2005, which is incorporated by this reference herein.
Specimen form of certificate for Plumas Bancorp included as exhibit 4 to the Registrant’s Form S-4, File No. 333-84534, which is incorporated by reference herein.
4.1
Description of Securities of Plumas Bancorp Registered Under Section 12 of the Exchange Act, dated December 31, 2023, which is incorporated by reference herein.
10.1
Executive Salary Continuation Agreement of Andrew J. Ryback dated August 23, 2005, is included as exhibit 10.01 to the Registrant's 8-K filed on October 17, 2005, which is incorporated by this reference herein.
10.2
Amendment to Executive Salary Continuation Agreement of Andrew J. Ryback dated December 17, 2008, is included as exhibit 10.1 to the Registrant’s 10-K for December 31, 2008, which is incorporated by this reference herein.
10.3
Split Dollar Agreement of Andrew J. Ryback dated August 23, 2005, is included as Exhibit 10.02 to the Registrant’s 8-K filed on October 17, 2005, which is incorporated by this reference herein.
10.4
Amendment to Salary Continuation Agreement of Andrew J. Ryback dated February 1, 2022 is included as Exhibit 10.1 to the Registrant’s 8-K filed on February 1, 2022, which is incorporated by this reference herein.
10.5
First Amendment to Split Dollar Agreement of Andrew J. Ryback, is included as exhibit 10.51 to the Registrant’s 10-K for December 31, 2008, which is incorporated by this reference herein.
10.6
Employment Agreement by and among Andrew Ryback, Plumas Bancorp and Plumas Bank dated as of December 16, 2021, is included as exhibit 10.1 to the Registrant's 8-K filed on December 17, 2021, which is incorporated by this reference herein.
10.7
Amendment to Salary Continuation Agreement of Richard Belstock dated February 1, 2022 is included as Exhibit 10.2 to the Registrant’s 8-K filed on February 1, 2022 ,which is incorporated by this reference herein.
10.8
Amendment to Salary Continuation Agreement of BJ North dated February 1, 2022 is included as Exhibit 10.3 to the Registrant’s 8-K filed on February 1, 2022 ,which is incorporated by this reference herein.
10.9
Amendment to Salary Continuation Agreement of Jeffery Moore dated February 1, 2022 is included as Exhibit 10.4 to the Registrant’s 8-K filed on February 1, 2022, which is incorporated by this reference herein.
10.10
Amendment to Salary Continuation Agreement of Aaron Boigon dated February 1, 2022 is included as Exhibit 10.5 to the Registrant’s 8-K filed on February 1, 2022, which is incorporated by this reference herein.
10.11
Salary Continuation Agreement of Richard L. Belstock dated April 1, 2016, is included as Exhibit 10.2 to the Registrant’s 8-K filed on April 4, 2016, which is incorporated by this reference herein.
10.12
Salary Continuation Agreement of BJ North dated April 1, 2016, is included as Exhibit 10.4 to the Registrant’s 8-K filed on April 4, 2016, which is incorporated by this reference herein.
10.13
Salary Continuation Agreement of Jeff Moore dated April 1, 2020, is included as Exhibit 10.14 to the Registrant’s 10-K filed on March 3, 2021, which is incorporated by this reference herein.
10.14
Salary Continuation Agreement of Aaron Boigon dated April 1, 2019, is included as Exhibit 10.4 to the Registrant’s 8-K filed on April 2, 2019, which is incorporated by this reference herein.
10.17
Loan Agreement dated January 25, 2022 is included as Exhibit 10.1 to the Registrant's 8-K filed on January 26, 2022, which is incorporated by this reference herein.
10.18
Promissory Note dated January 25, 2022 is included as Exhibit 10.2 to the Registrant's 8-K filed on January 26, 2022, which is incorporated by this reference herein.
10.19
Director Retirement Agreement of Steven M. Coldani dated December 21, 2016, is included as Exhibit 10.13 to the Registrant’s 10-K filed on March 17, 2017, which is incorporated by this reference herein.
10.20
Amendment to the Plumas Bank Amended and Restated Director Retirement Agreement for Steven M. Coldani adopted on May 17, 2023, is included as Exhibit 10.1 to the Registrant's 10-Q filed on August 9, 2023, which is incorporated by this reference herein.
10.21
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.
10.22
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.
10.23
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.
10.24
Amendment to the Plumas Bank Amended and Restated Director Retirement Agreement for Terrance J. Reeson adopted on May 17, 2023, is included as Exhibit 10.3 to the Registrant's 10-Q filed on August 9, 2023, which is incorporated by this reference herein.
10.25
Director Retirement Agreement of Robert McClintock, is included as Exhibit 10.66 to the Registrant’s 10-K filed on March 23, 2012, which is incorporated by this reference herein.
10.26
Amendment to the Plumas Bank Amended and Restated Director Retirement Agreement for Robert J. McClintock adopted on May 17, 2023, is included as Exhibit 10.2 to the Registrant's 10-Q filed on August 9, 2023, which is incorporated by this reference herein.
10.29
Director Retirement Agreement of Michonne R. Ascuaga adopted on May 17, 2023, is included as Exhibit 10.5 to the Registrant's 10-Q filed on August 9, 2023, which is incorporated by this reference herein.
10.30
Director Retirement Agreement of Heidi S. Gansert adopted on May 17, 2023, is included as Exhibit 10.6 to the Registrant's 10-Q filed on August 9, 2023, which is incorporated by this reference herein.
10.31
Director Retirement Agreement of Richard F. Kenny adopted on May 17, 2023, is included as Exhibit 10.7 to the Registrant's 10-Q filed on August 9, 2023, which is incorporated by this reference herein.
10.32
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.
10.33
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.
10.34
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.
10.35
Amendment to the Plumas Bank Amended and Restated Director Retirement Agreement for Daniel E. West adopted on May 17, 2023, is included as Exhibit 10.4 to the Registrant's 10-Q filed on August 9, 2023, which is incorporated by this reference herein.
10.41
Form of Indemnification Agreement (Plumas Bancorp) is included as Exhibit 10.1 to the Registrant’s 8-K filed on August 20,2020 which is incorporated by this reference herein.
10.42
Form of Indemnification Agreement (Plumas Bank) is included as Exhibit 10.2 to the Registrant’s 8-K filed on August 20,2020 which is incorporated by this reference herein.
10.43*
Amendment to the Plumas Bank Amended and Restated Director Consulting Agreement for Daniel E. West adopted on December 18, 2024.
10.44*
Amendment to the Plumas Bank Amended and Restated Director Consulting Agreement for Terrance J. Reeson adopted on December 18, 2024.
10.47
2013 Stock Option Plan is included as exhibit 99.1 of the Form S-8 filed September 12, 2013, which is incorporated by this reference herein.
10.48
Specimen Form of Incentive Stock Option Agreement under the 2013 Stock Option Plan is included as exhibit 99.2 of the Form S-8 filed September 12, 2013, which is incorporated by this reference herein.
10.49
Specimen Form of Nonqualified Stock Option Agreement under the 2013 Stock Option Plan is included as exhibit 99.3 of the Form S-8 filed September 12, 2013, which is incorporated by this reference herein.
10.50
Agreement for Purchase and Sale of Real Property by and between Plumas Bank and Mountainseed Real Estate Services, LLC (Branches) is included as Exhibit 10.1 to the Registrant's 8-K filed on January 23, 2024 which is incorporated by this reference herein.
10.51
Agreement for Purchase and Sale of Real Property by and between Plumas Bank and Mountainseed Real Estate Services, LLC (Non-Branch Offices) is included as Exhibit 10.2 to the Registrant's 8-K filed on January 23, 2024 which is incorporated by this reference herein.
10.52
Form of Lease Agreement by and between Plumas Bank and Mountainseed Real Estate Services, LLC is included as Exhibit 10.3 to the Registrant's 8-K filed on January 23, 2024 which is incorporated by this reference herein.
10.53
First Amendment to Agreement for Purchase and Sale of Property is included as Exhibit 10.3 to the Registrant's 8-K filed on March 15, 2024 which is incorporated by this reference herein.
10.54
Termination Agreement 2024 by and between Plumas Bank and Mountainseed Real Estate Services, LLC is included as Exhibit 10.3 to the Registrant’s 8-K filed on August 15, 2024, which is incorporated by this reference herein.
10.71
Form of Stock Option Agreement Under Plumas Bancorp 2022 Equity Incentive Plan, is included as Exhibit 10.1 to the Registrant's 8-K filed on June 16, 2022, which is incorporated by this reference herein.
10.72
Form of Stock Option Agreement Under Plumas Bancorp 2022 Equity Incentive Plan with Post-Retirement Exercisability is included as Exhibit 10.2 to the Registrant's 8-K filed on June 16, 2022, which is incorporated by this reference herein.
10.73
Form of Restricted Stock Award Agreement Under Plumas Bancorp 2022 Equity Incentive Plan is included as Exhibit 10.3 to the Registrant's 8-K filed on June 16, 2022, which is incorporated by this reference herein
10.74
Form of Restricted Stock Unit Agreement Under Plumas Bancorp 2022 Equity Incentive Plan is included as Exhibit 10.1 to the Registrant’s 8-K/A filed on April 15, 2024, which is incorporated by this reference herein.
10.75
Plumas Bancorp 2022 Equity Incentive Plan (incorporated by reference to Appendix A to Plumas Bancorp’s Definitive Proxy Statement filed on March 28, 2022)
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 13 - Shareholders’ Equity.
16.1
Letter from Registrant’s Certifying Accountant is included as Exhibit 16.1 to the Registrant’s 8-K filed on November 20, 2024, which is incorporated by this reference herein.
19.1*
Insider Trading Policy
21.01
Plumas Bank - California.
23.01*
Independent Registered Public Accountant’s Consent dated March 19, 2025.
23.02*
Independent Registered Public Accountant’s Consent dated March 19, 2025.
31.1*
Rule 13a-14(a) [Section 302] Certification of Principal Financial Officer dated March 19, 2025.
31.2*
Rule 13a-14(a) [Section 302] Certification of Principal Executive Officer dated March 19, 2025.
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 19, 2025.
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 19, 2025.
97.1
Compensation Clawback Policy dated October 18, 2023 is included as Exhibit 97.1 to the Registrant's 10-K filed on March 20, 2024, which is incorporated by this reference herein.
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Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
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Inline XBRL Taxonomy Extension Schema Document.
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Inline XBRL Taxonomy Extension Calculation Linkbase Document.
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Inline XBRL Taxonomy Extension Definition Linkbase Document.
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Inline XBRL Taxonomy Extension Label Linkbase Document.
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Inline XBRL Taxonomy Extension Presentation Linkbase Document.
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*
Filed herewith