PLUMAS BANCORP
For the period ended Mar 31, 2025. Filed May 7, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 7, 2025
PLBC$62.46-0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-06.
0001437749-24-033515
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-07.
0001437749-25-014933
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 102 previous paragraphs and 89 current paragraphs.
36 unchanged; 37 reworded; 14 added; 22 removed; 7 previous and 2 current paragraphs rearranged.
Tables are not compared: 22 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
Net-interest income increased by $1.1 million from $17.4 million during the three months ending March 31, 2024, to $18.5 million during the current quarter. The provision for credit losses decreased from $821 thousand during the first quarter of 2024 to $250 thousand during the current quarter.
Current report
Non-interest income increased by $1.1 million from $2.1 million during the three months ended March 31, 2024 to $3.2 million during the first quarter of 2025 related to a legal settlement totaling $1.1 million. This settlement related to the Dixie Fire in August of 2021 which swept through the town of Greenville, California. The fire caused severe damage to the Greenville area, including the telecommunications infrastructure which adversely affected our ability to service our customers in this area during the last few years.
Current report
Non-interest expense increased by $1.1 million from $10.4 million during the first quarter of 2024 to $11.5 million during the current quarter. Of this amount $569 thousand relates to costs associated with our pending acquisition of Cornerstone Community Bancorp. We signed a definitive agreement to acquire Cornerstone Community Bancorp on January 28, 2025. Merger transaction costs that facilitate the merger are not deductible for income tax purposes. Of the $569 thousand in merger related costs, $562 thousand is estimated to be not deductible for state and federal income tax.
Current report
The provision for income taxes increased by $731 thousand from $2.1 million, or 25.4% of pre-tax income, during the three months ended March 31, 2024 to $2.9 million, or 28.5% of pre-tax income, during the current quarter.
Current report
Interest and fees on loans increased by $804 thousand related both to an increase in average balance and an increase in yield. Average loan balances increased by $48 million, while the average yield on loans increased by 8 basis points from 6.09% during the first quarter of 2024 to 6.17% during the current quarter. The average prime interest rate decreased from 8.5% during the first quarter of 2024 to 7.5% during the current quarter. Approximately 16% of the Company's loans are tied to the prime interest rate and most of these reprice within one to three months with a change in prime. The negative effect of the decrease in prime was offset by an increase in average yield on the bank’s fixed rate portfolio which includes growth in fixed rate SBA loans which totaled $74 million at March 31, 2025, and $42 million at March 31, 2024. The weighted average rate earned on this portfolio at March 31, 2025, was 8.3%.
Current report
Interest on investment securities increased by $114 thousand related to an increase in yield on investment securities of 44 basis points to 4.12%. The increase in investment yields is consistent with the partial restructuring of the investment portfolio during the first quarter of 2024. The effect of this increase in yield was mostly offset by a decline of $36 million in average investment securities.
Current report
Interest on cash balances decreased by $354 thousand related to a decline in average balance of $14 million and a decrease in average rate paid on cash balances of 105 basis points from 5.57% during the first quarter of 2024 to 4.52% during the current quarter. This decline in yield was mostly related to a decline in rate paid on balances held at the Federal Reserve Bank (FRB). The average rate earned on FRB balances decreased from 5.40% during the first quarter of 2024 to 4.40% during the current quarter.
Current report
Interest expense decreased by $518 thousand, mostly related to the repayment of the BTFP borrowings. See “Short-term Borrowing Arrangements” for a discussion additional discussion related to the BTFP. The average rate paid on interest bearing liabilities decreased from 1.33% during the 2024 quarter to 1.14% in 2025 related mainly to the decrease in these borrowings.
Current report
Interest paid on deposits increased by $710 thousand and is broken down by product type as follows: money market accounts - $770 thousand and savings deposits - $26 thousand. The increase in interest paid on money market accounts mostly relates to an increase in public entity balances. Interest on time deposits declined by $86 thousand related to a decline in average balance of $3 million and a decline in rate paid of 27 basis points. During the second half of 2024 and continuing into 2025, we have offered a premium rate on large balances of public entities in our service area, matching the rate they could earn from the California local agency investment fund. This has led to a significant increase in these balances and an increase in the overall rate paid on money market accounts. The average rate paid on interest-bearing deposits increased from 0.75% during the first quarter of 2024 to 1.11% during the current quarter.
Current report
**Non-interest income.**During the three months ended March 31, 2025, non-interest income totaled $3.2 million, an increase of $1.1 million from the three months ended March 31, 2024. The largest component of this increase was the $1.1 million settlement related to the Dixie Fire as discussed earlier. This settlement is included in Other in the following table.
Current report
**Non-interest expense.**Non-interest expense increased by $1.1 million from $10.4 million during the first quarter of 2024 to $11.5 million during the current quarter. Of this amount $569,000 relates to costs associated with our pending acquisition of Cornerstone Community Bancorp. We signed a definitive agreement to acquire Cornerstone Community Bancorp on January 28, 2025. Merger transaction costs that facilitate the merger are not deductible for income tax purposes. Of the $569,000 in merger related costs, $562,000 is estimated to be not deductible for state and federal income tax. Salary and benefit expense increased by $514,000 which includes an increase in salary expense of $269,000 related primarily to merit and promotional salary increases. Related mostly to an increase in pre-tax income, bonus expense increased by $216,000. A decrease in deferred loan origination fees of $97,000 was offset by a decline in commission expense of $137,000. Both items mostly relate to a decline in SBA loan production during the comparison quarters. Occupancy and equipment expense increased by $324,000 from $1.7 million during the first quarter of 2024 to $2.0 million during the current quarter related to an increase of $338,000 in rent expense related to the February 2024 sales/leaseback transaction.
Current report
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.
Current report
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.
Current report
**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 two 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 three months ended March 31, 2025, and 2024 was $852,000 and $514,000, respectively.
Removed paragraphs (22)
Previous report
**Net Income.**The Company recorded net income of $20.9 million for the nine months ended September 30, 2024, down from net income of $22.3 million for the nine months ended September 30, 2023. An increase of $2.6 million in net interest income and declines of $1.3 million in the provision for credit losses and $336,000 in the provision for income taxes were offset by a decline of $1.8 million in non-interest income and an increase of $3.9 million in non-interest expense. The annualized return on average assets was 1.69% for the nine months ended September 30, 2024, down from 1.88% for the nine months ended September 30, 2023. The annualized return on average equity decreased from 23.3% during the first nine months of 2023 to 17.2% during the current period.
Previous report
Interest and fees on loans increased by $5.3 million related to an increase in average balance and yield. The average balance of loans during the nine months ended September 30, 2024 was $982 million, an increase of $56 million from $926 million during the same period in 2023. The average yield on loans increased by 38 basis points from 5.83% during the first nine months of 2023 to 6.21% during the current period.
Previous report
Interest on investment securities increased by $2.0 million related to an increase in yield of 67 basis points to 3.92%. The increase in investment yields is consistent with an increase in market rates and the restructuring of the investment portfolio during the first quarter of 2024. Average investment securities declined from $469 million during the nine months ended September 30, 2023 to $457 million during the current period. Interest on cash balances increased by $712 thousand related to an increase in yield of 54 basis points and an increase in average balance of $8.4 million from $88.8 million during the first nine months of 2023 to $97.2 million in the current period. Cash balances primarily relate to cash held at the Federal Reserve Bank of San Francisco (FRB). The average rate earned on FRB balances was 5.38% during the nine months ended September 30, 2024 and 4.99% during the nine months ended September 30, 2023.
Previous report
Interest expense increased from $2.9 million during the nine months ended September 30, 2023 to $8.3 million during the current period related to an increase in rate paid on interest bearing liabilities and an increase in borrowings. The average rate paid on interest bearing liabilities increased from 0.55% during the 2023 period to 1.43% in 2024 related to an increase in borrowings and an increase in market interest rates. The average balance of borrowings increased by $107 million from $10 million during the nine months ended September 30, 2023 to $117 million during the current period. Interest incurred on borrowings totaled $4.2 million and $396 thousand during the nine months ended September 30, 2024 and 2023, respectively.
Previous report
Interest paid on deposits increased by $1.6 million and is broken down by product type as follows: money market accounts - $556 thousand, and time deposits - $1.1 million. Related to a decline in average balance of $57 million, interest on savings deposits declined by $75 thousand. The average rate paid on interest-bearing deposits increased from 0.49% during the nine months ended September 30, 2023 to 0.85% during the current period.
Previous report
**Provision for credit losses.**During the first nine months of 2024 we recorded a provision for credit losses of $1,346,000 consisting of a provision for credit losses on loans of $1,475,000 and a decrease in the reserve for unfunded commitments of $129,000. This compares to a provision for credit losses of $2,675,000 consisting of a provision for credit losses on loans of $2,425,000 and an increase in the reserve for unfunded commitments of $250,000 during the nine months ended September 30, 2023. 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.
Previous report
The following tables present the activity in the allowance for credit losses and the reserve for unfunded commitments during the nine months ended September 30, 2024 and 2023 (in thousands).
Previous report
**Non-interest income.**During the nine months ended September 30, 2024, non-interest income totaled $6.6 million, a decrease of $1.8 million from the nine months ended September 30, 2023. The largest component of this decrease was a $1.7 million gain on termination of our interest rate swaps during 2023. As discussed earlier, during the first quarter of 2024, a $19.9 million gain on the sale of buildings was offset by a $19.8 million loss on sale of investment securities.
Previous report
The following table describes the components of non-interest income for the nine-month periods ended September 30, 2024 and 2023, dollars in thousands:
Previous report
**Non-interest expense.**During the nine months ended September 30, 2024 non-interest expense increased by $3.9 million to $31.6 million. The largest components of this increase were a $1.1 million increase in salary and benefit expenses and a $1.7 million increase in occupancy and equipment expenses. The largest increases in salary and benefit expense were $524 thousand in salary expense and $404 thousand in commission expense. These were partially offset by an increase in the deferral of loan origination costs of $297 thousand related to an increase in SBA production. The increase in occupancy and equipment costs relates to a $1.7 million increase in rent expense associated with the sales/leaseback transaction. The increase in other non-interest expense includes a $300 thousand accrual related to a litigation matter. In addition, professional fees include $265 thousand related to this matter, mostly legal fees. While portions of this matter are still being litigated these amounts represent our best estimate of potential costs to Plumas Bank related to this matter.
Previous report
The following table describes the components of non-interest expense for the nine-month periods ended September 30, 2024 and 2023, dollars in thousands:
Previous report
**Net interest income before provision for credit losses.**Net interest income was $18.9 million for the three months ended September 30, 2024, an increase of $1.1 million from the same period in 2023. The increase in net interest income includes an increase of $2.8 million in interest income partially offset by an increase of $1.7 million in interest expense.
Previous report
Interest and fees on loans increased by $1.4 million related to growth in the loan portfolio and an increase in yield on the portfolio. Average loan balances increased by $58 million, while the average yield on these loans increased by 21 basis points from 6.00% during the third quarter of 2023 to 6.21% during the current quarter. The increase in loan yield includes an increase in SBA fixed rate loans which currently yield approximately 8.1% and the repricing of loans that are priced off the 5 year Treasury. These loans are primarily commercial real estate loans and are repriced every five years.
Previous report
Interest on investment securities increased by $670 thousand related to an increase in yield of 71 basis points to 3.99%. The increase in investment yields is consistent with the increase in market rates and the restructuring of the investment portfolio during the first quarter of 2024. Average investment securities declined from $462 million during the three months ended September 30, 2023 to $447 million during the current quarter. Interest on cash balances increased by $791 thousand related to an increase in average balance of $57 million and an increase in rate earned on these balances of 7 basis points from 5.37% during the three months ended September 30, 2023 to 5.44% during the current quarter. Cash balances primarily relate to cash held at the FRB. The average rate earned on FRB balances was 5.33% during both the third quarter of 2024 and 2023.
Previous report
Interest expense increased by $1.7 million from $1.3 million during the three months ended September 30, 2023 to $3.0 million during the current period related to an increase in rate paid on interest bearing liabilities and an increase in borrowings. The average rate paid on interest bearing liabilities increased from 0.73% during the 2023 quarter to 1.52% in 2024 related mainly to an increase in market interest rates, and an increase in borrowings.
Previous report
Interest paid on deposits increased by $391 thousand and is broken down by product type as follows: money market accounts - $266 thousand, and time deposits - $146 thousand. Related to a decline in average balance of $43 million, interest on savings deposits declined by $21 thousand. The average rate paid on interest-bearing deposits increased from 0.69% during the third quarter of 2023 to 0.97% during the current quarter.
Previous report
Mostly related to an increase in average borrowings outstanding from $10 million during the three months ended September 30, 2023 to $117 million during the current quarter, interest incurred on borrowings increased by $1.3 million from $114 thousand during the three months ended September 30, 2023 to $1.4 million during the three months ended September 30, 2024.
Previous report
Net interest margin for the three months ended September 30, 2024 was 4.76%, down slightly from 4.77% for the same period in 2023.
Previous report
**Non-interest income.**Non-interest income decreased by $76 thousand to $2.2 million during the current quarter. Increases of $29 thousand in service charge income, $21 thousand in Federal Home Loan Bank dividends and $6 thousand in other non-interest income were offset by declines in interchange income of $101 thousand, loan servicing fees of $27 thousand and earnings on insurance policies of $4 thousand. Interchange income can fluctuate period to period mostly based on the volume of debit card transactions.
Previous report
**Non-interest expense.**During the three months ended September 30, 2024, total non-interest expense increased by $1.4 million from $9.4 million during the third quarter of 2023 to $10.8 million during the current quarter. The largest components of this increase were an increase in salary and benefit expense of $367 thousand, an increase in occupancy and equipment costs of $636 thousand, an increase in professional fees of $117 thousand and an increase in other non-interest expense of $262 thousand. The increase in salary and benefit expense primarily relates to an increase in salary expense and a decrease in the deferral of loan origination costs. Salary expenses increased by $138 thousand, which we attribute primarily to merit and promotional salary increases and an increase in employees. Our full time equivalent employee count has increased from 180 at September 30, 2023 to 189 at September 30, 2024. Deferred loan origination cost declined by $95 thousand from $694 thousand during the three months ended September 30, 2023 to $599 thousand during the current period. The amount of loan origination costs deferred is primarily related to loan volume, both new originations and renewals, during the period. Occupancy and equipment costs increased by $636 thousand related to an increase in rent expense of $705 thousand mostly related to the sales/leaseback transaction completed during the first quarter of 2024. This increase in rent expense was offset by additional income resulting from the restructuring of our investment portfolio which also took place during the first quarter of 2024. The increase in other non-interest expense includes a $300 thousand accrual related to a litigation matter. In addition, professional fees include $76 thousand related to this matter, mostly legal fees. While portions of this matter are still being litigated these amounts represent our best estimate of potential costs to Plumas Bank related to this matter.
Previous report
Total assets on September 30, 2024, were $1.6 billion, an increase of $54 million from December 31, 2023. Net loans increased by $44 million from $949 million on December 31, 2023, to $993 million at September 30, 2024. Cash and cash equivalents increased by $32 million to $118 million on September 30, 2024. Related to the sales/leaseback transaction right-of use assets increased by $22 million. These increases were offset by declines of $32 million in investment securities, $6 million in property and equipment and $6 million in all other assets.
Previous report
Capital Resources
Reworded paragraphs (37)
Previous wording
The following discussion and analysis sets forth certain statistical information relating to the Company as of September 30, 2024 and December 31, 2023 and for the three and nine-month periods ended September 30, 2024 and 2023. This discussion should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto included in Plumas Bancorp’s Annual Report filed on Form 10-K for the year ended December 31, 2023.
Current wording
The following discussion and analysis sets forth certain statistical information relating to the Company as of March 31, 2025 and December 31, 2024 and for the three-month periods ended March 31, 2025 and 2024. This discussion should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto included in Plumas Bancorp’s Annual Report filed on Form 10-K for the year ended December 31, 2024.
Previous wording
SALES/LEASEBACK AND INVESTMENT RESTRUCTURING
Current wording
SALES/LEASEBACK AND INVESTMENT RESTRUCTURING - March 31, 2024
Previous wording
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 (the “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.
Current wording
On January 19, 2024, Plumas Bank entered into a 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 (the “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.
Previous wording
The gain on sales of the branches was offset by losses on the sale of approximately $115 million in investment securities. During the nine months ended September 30, 2024 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%.
Current wording
The gain on sales of the branches was offset by losses on the sale of approximately $115 million in investment securities. During the three months ended March 31, 2024, we sold $115 million in investment securities having a weighted average tax equivalent yield of 2.24% recording a $19.8 million net 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%.
Previous wording
**Net Income.**The Company recorded net income of $7.8 million for the three months ended September 30, 2024, down from net income of $8.0 million for the three months ended September 30, 2023. An increase of $1.1 million in net interest income and a decline of $200,000 in the provision for credit losses were offset by increases of $1.4 million in non-interest expense and a decline of $76,000 in non-interest income. Included in non-interest expense were nonrecurring costs related to a litigation matter totaling $376,000. The annualized return on average assets was 1.84% for the three months ended September 30, 2024, down from 2.00% for the three months ended September 30, 2023. The annualized return on average equity decreased from 24.4% during the third quarter of 2023 to 18.1% during the current quarter.
Current wording
**Net Income.**The Company recorded net income of $7.2 million for the three months ended March 31, 2025, up from net income of $6.3 million for the three months ended March 31, 2024. Increases of $1.1 million in net interest income and $1.1 million in non-interest income and a decline of $571,000 in the provision for credit losses were partially offset by increases of $1.1 million in non-interest expense and $731,000 in the provision for income tax expense. The annualized return on average assets was 1.79% for the three months ended March 31, 2025, up from 1.55% for the three months ended March 31, 2024. The annualized return on average equity decreased from 16.4% during the first quarter of 2024 to 16.0% during the current quarter.
Previous wording
**Net interest income before provision for credit losses.**Driven by an increase in market rates, growth in the loan portfolio, growth in cash balances and the restructuring of a portion of our investment portfolio partially offset by an increase in interest expense, net interest income increased by $2.6 million from $52.1 million during the nine months ended September 30, 2023, to $54.7 million for the nine months ended September 30, 2024. The increase in net interest income includes an increase of $8.0 million in interest income partially offset by an increase of $5.4 million in interest expense.
Current wording
Net interest income before provision for credit losses. Driven mostly by growth in the loan portfolio and the repayment of the Bank Term Funding Program (BTFP) borrowings, net interest income increased by $1.1 million from $17.4 million during the three months ended March 31, 2024, to $18.5 million for the three months ended March 31, 2025. The increase in net interest income includes an increase of $564 thousand in interest income and a decline of $518 thousand in interest expense.
Previous wording
Net interest margin for the nine months ended September 30, 2024 increased 6 basis points to 4.76%, up from 4.70% for the same period in 2023.
Current wording
Net interest margin for the three months ended March 31, 2025, increased 33 basis points to 4.95%, up from 4.62% for the same period in 2024.
Previous wording
The following table sets forth changes in interest income and interest expense for the three-month periods indicated and the amount of change attributable to variances in volume, rates and the combination of volume and rates based on the relative changes of volume and rates:
Current wording
The following table sets forth changes in interest income and interest expense for the three-months ended March 31, 2025, 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:
Previous wording
**Provision for credit losses.**During the third quarter of 2024 we recorded a provision for credit losses of ($400,000) consisting of a provision for credit losses on loans of ($350,000) and a decrease in the reserve for unfunded commitments of $50,000. This compares to a provision for credit losses of ($200,000) during the 2023 quarter consisting of a provision for credit losses on loans of ($125,000) and a decrease in the reserve for unfunded commitments of $75,000. 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.
Current wording
**Provision for credit losses.**During the first quarter of 2025 we recorded a provision for credit losses of $250,000 consisting of a provision for credit losses on loans of $250,000. This compares to a provision for credit losses of $821,000 consisting of a provision for credit losses on loans of $900,000 and a decrease in the reserve for unfunded commitments of $79,000 during the first quarter of 2024. See “Analysis of Asset Quality and Allowance for Loan Losses” for a discussion of loan quality trends and the provision for credit losses.
Previous wording
Provision for income taxes. The Company recorded an income tax provision of $2.9 million, or 26.7% of pre-tax income, for the three months ended September 30, 2024. This compares to an income tax provision of $2.8 million, or 26.3% of pre-tax income, for the three months ended September 30, 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.
Current wording
**Provision for income taxes.**The Company recorded an income tax provision of $2.9 million, or 28.5% of pre-tax income, for the three months ended March 31, 2025. This compares to an income tax provision of $2.1 million, or 25.4% of pre-tax income, for the three months ended March 31, 2024. The percentages for 2025 and 2024 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. While non-deductible merger transaction costs incurred during the current quarter effectively increase taxable income.
Previous wording
Deposits totaled $1.4 billion at September 30, 2024, an increase of $17 million from December 31, 2023. Lease liabilities increased by $22 million and other liabilities increased by $1 million. Partially offsetting these increases in liabilities were decreases in borrowings and repurchase agreements. Borrowings decreased by $15 million from $90 million on December 31, 2023, to $75 million on September 30, 2024. Repurchase agreements decreased by $6 million to $17 million. Shareholders’ equity increased by $35 million from $147 million on December 31, 2023, to $182 million on September 30, 2024. A detailed discussion of each of these changes follows.
Current wording
Total assets on March 31, 2025, were $1.6 billion, an increase of $10 million from December 31, 2024. The largest components of this increase were increases in investment securities of $9.6 million and $5.3 million in cash equivalents. These increases were partially offset by a decrease of $4.7 million in net loans. Deposits increased by $2.0 million and totaled $1.4 billion at March 31, 2025. Accrued interest payable and other liabilities increased by $1.9 million to $14.4 million. The largest decline in liabilities was a decrease in repurchase agreements of $3.3 million. Total liabilities were $1.4 billion on March 31, 2025, and December 31, 2024. Shareholders’ equity increased by $9.7 million from $177.9 million on December 31, 2024, to $187.6 million on March 31, 2025. A detailed discussion of each of these changes follows.
Previous wording
**Loan Portfolio.**Gross loans increased by $45 million, or 4%, from $959 million at December 31, 2023, to $1 billion at September 30, 2024. Increases in loans included $74 million in commercial real estate loans and $8 million in commercial loans. These items were offset by declines of $26 million in automobile loans, $8 million in agricultural loans and $3 million in all other categories. 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 auto 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.
Current wording
**Loan Portfolio.**Gross loans decreased by approximately $4.7 million, or 0.5%, and totaled $1.0 billion on March 31, 2025, and December 31, 2024. The largest increases in loans were $14.5 million in commercial real estate loans and $746,000 in equity lines of credit. These were offset by declines of $6.8 million in agricultural loans, $6.8 million in construction and land development loans and $6.4 million in auto 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.
Previous wording
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 80% of the total loan portfolio at September 30, 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.
Current wording
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 83% of the total loan portfolio at March 31, 2025. 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.
Previous wording
Commercial real estate loans (“CRE”), which comprised 61% of the lending portfolio at September 30, 2024, included 26% investor-owned, 26% owner-occupied, and 9% multi-family. Concentrations by real estate type within the CRE portfolio included 15% multi-family, 11% retail, 11% office, 10% mixed commercial real estate, 8% hospitality, 6% industrial, 6% special purpose, 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 47% were located in northern California, including the Sacramento area. Of the $4.5 million in non-accrual balances at September 30, 2024, approximately 39% were CRE. Of the $22.4 million in substandard balances at September 30, 2024, 17% were CRE.
Current wording
Commercial real estate loans (“CRE”), which comprised 65% of the lending portfolio at March 31, 2025, included 27% investor-owned, 29% owner-occupied, and 9% multi-family. Concentrations by real estate type within the CRE portfolio, excluding multi-family, were 13% Mixed Commercial Real Estate, 13% Retail, 12% Office, 8% Hospitality, 8% Gas Stations, 8% Special Purpose, 7% Industrial, 6% Mini Storage Facilities, 6% Residential, and 5% Mixed Commercial and Residential, 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 $3.7 million in non-accrual balances at March 31, 2025, approximately 29% were CRE. Of the $21.5 million in substandard balances at March 31, 2025 approximately 23% were CRE.
Previous wording
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 September 30, 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 22% of the Company’s variable rate loan portfolio on September 30, 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 75% 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.
Current wording
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 March 31, 2025, and December 31, 2024, approximately 77% of the Company's loan portfolio was comprised of variable rate loans. Loans indexed to the prime interest rate were approximately 20% of the Company’s variable rate loan portfolio on March 31, 2025; 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 77% 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
Previous wording
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, 2023 and September 30, 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, imprecision in its economic forecasts, and other risk factors that might influence its loss estimation process. Management believes that the allowance for credit losses at September 30, 2024, appropriately reflected expected credit losses inherent in the loan portfolio at that date.
Current wording
At January 1, 2023, the adoption and implementation date of ASC Topic 326, March 31, 2025, 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 March 31, 2025, appropriately reflected expected credit losses inherent in the loan portfolio at that date.
Previous wording
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 September 30, 2024, the Bank's nonaccrual loans 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.
Current wording
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 March 31, 2025 and 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. Nonaccrual loans with a balance less than or equal to $100,000 are evaluated collectively and consist primarily of automobile loans.
Previous wording
The allowance for credit losses totaled $13.6 million at September 30, 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 $26,000 and $28,000 at September 30, 2024, and December 31, 2023, respectively. The allowance for credit losses as a percentage of total loans was 1.35% on September 30, 2024, and 1.34% on December 31, 2023.
Current wording
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 at March 31, 2025, and December 31, 2024. The allowance for credit losses as a percentage of total loans was 1.32% on March 31, 2025, and 1.30% on December 31, 2024.
Previous wording
Nonperforming loans at September 30, 2024 were $4.5 million, a decrease of $0.3 million from $4.8 million at December 31, 2023.
Current wording
Nonperforming loans at March 31, 2025, were $3.7 million, a decrease of $0.4 million from $4.1 million at December 31, 2024.
Previous wording
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 $0.7 million from $21.7 million on December 31, 2023, to $22.4 million on September 30, 2024. Loans classified as special mention increased by $4.8 million from $9.3 million on December 31, 2023, to $14.1 million on September 30, 2024.
Current wording
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 decreased by $1.5 million from $23.0 million on December 31, 2024, to $21.5 million on March 31, 2025. Loans classified as special mention increased by $12.2 million from $12.0 million on December 31, 2024, to $24.2 million at March 31, 2025. The increase relates to several agricultural loans that migrated to the special mention category.
Previous wording
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 $141,000 on September 30, 2024, and one property totaling $357,000 at December 31, 2023.
Current wording
OREO represents 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 March 31, 2025, and December 31, 2024.
Previous wording
Nonperforming assets as a percentage of total assets were 0.29% at September 30, 2024 and 0.33% at December 31, 2023.
Current wording
Nonperforming assets as a percentage of total assets were 0.23% at March 31, 2025 and 0.27% at December 31, 2024.
Previous wording
The following table provides a summary of the change in the number and balance of OREO properties for the nine months ended September 30, 2024 and 2023 (dollars in thousands):
Current wording
The following table provides a summary of the change in the number and balance of OREO properties for the three months ended March 31, 2025 and 2024 (dollars in thousands):
Previous wording
Investment Portfolio and Federal Funds Sold. Total investment securities were $456.7 million as of September 30, 2024, and $489.2 million at December 31, 2023. Unrealized losses on available-for-sale investment securities totaling $20.9 million were recorded, net of $6.2 million in tax benefit, as accumulated other comprehensive loss within shareholders' equity at September 30, 2024. Net unrealized losses on available-for-sale investment securities totaling $46.1 million were recorded, net of $13.6 million in tax benefit, as accumulated other comprehensive loss within shareholders' equity at December 31, 2023. 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 the nine months ended September 30, 2023.
Current wording
**Investment Portfolio and Federal Reserve Balances.**Total investment securities were $447.3 million as of March 31, 2025, and $437.7 million at December 31, 2024. Unrealized losses on available-for-sale investment securities totaling $30.2 million were recorded, net of $8.9 million in tax benefits, as accumulated other comprehensive loss within shareholders' equity at March 31, 2025. 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 the three months ended March 31, 2025.
Previous wording
The investment portfolio at September 30, 2024, consisted of $4.0 million in U.S. Treasury securities, $363.1 million in securities of U.S. Government-sponsored agencies and U.S. Government agencies, and 170 municipal securities totaling $89.6 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.
Current wording
The investment portfolio at March 31, 2025, consisted of $360.3 million in securities of U.S. Government-sponsored agencies and U.S. Government agencies, and 170 municipal securities totaling $87.0 million. 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.
Previous wording
There were no Federal funds sold at September 30, 2024, and December 31, 2023; however, the Bank maintained interest earning balances at the Federal Reserve Bank totaling $82.3 million at September 30, 2024 and $52.9 million at December 31, 2023. The balance, on September 30, 2024, earns interest at the rate of 4.90%.
Current wording
There were no Federal funds sold at March 31 2025, and December 31, 2024; however, the Bank maintained interest earning balances at the Federal Reserve Bank totaling $53.2 million at March 31, 2025, and $47.2 million at December 31, 2024. The balance, on March 31, 2025, earns interest at the rate of 4.40%.
Previous wording
Deposits totaled $1.4 billion September 30, 2024, an increase of $17 million from December 31, 2023. The increase in deposits includes increases of $15 million in money market accounts, $11 million in time deposits and $10 million in demand deposits. Partially offsetting these increases was a decrease in savings deposits of $19 million. At September 30, 2024, 52% of the Company’s deposits were in the form of non-interest-bearing demand deposits. The Company has no brokered deposits.
Current wording
**Deposits.**Deposits totaled $1.4 billion on March 31, 2025, an increase of $2 million from December 31, 2024. The increase in deposits includes increases of $ $22.5 million in money market accounts and $13.6 million in savings deposits. Partially offsetting these increases were declines of $22.9 million in demand deposits, and $11.2 million in time deposits. At March 31, 2025, 49% of the Company’s deposits were in the form of non-interest-bearing demand deposits. The Company has no brokered deposits.
Previous wording
The Federal Reserve Board, on March 12, 2023, announced the creation of the Bank Term Funding Program (BTFP). The BTFP offers 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 will be 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 and during September 2024 we made a $45 million payment resulting in a balance of $60 million outstanding at September 30, 2024. This borrowing bears interest at the rate of 4.85% and is payable on January 17, 2025. Borrowings under the BTFP can be prepaid without penalty. There were no borrowings under the BTFP during the nine months ended September 30, 2023. Interest expense recognized on the BTFP borrowings for the nine months ended September 30, 2024 totaled $3.7 million. In addition to its FHLB borrowing line and the BTFP, 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 from the FHLB or the correspondent banks at September 30, 2024, and December 31, 2023.
Current wording
The Federal Reserve Board, on March 12, 2023, announced the creation of the BTFP. At March 31, 2024, the Company had outstanding borrowings under the BTFP totaling $105 million. All BTFP borrowings were paid off during 2024. Interest expense recognized on the BTFP borrowings for the three months ended March 31, 2024, was $1.2 million.
Previous wording
**Note Payable.**On January 25, 2022 the Company replaced its existing $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. 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 September 30, 2024. Interest expense recognized on the Term Note for the nine months ended September 30, 2024 and 2023 totaled $477,000 and $255,000, respectively.
Current wording
Note Payable. The Company's borrowing at March 31, 2025, and December 31, 2024, consist of a Term Note entered into on January 25, 2022, which matures on January 25, 2035, and can be prepaid at any time. 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 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. The Company was in compliance with all covenants related to the Term Note at March 31, 2025. Interest expense recognized on the Term Note for the three months ended March 31, 2025 and 2024 totaled $145,000 and $151,000, respectively.
Previous wording
**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 $17.0 million and $23.1 million at September 30, 2024 and December 31, 2023, respectively, are secured by U.S. Government agency securities with a carrying amount of $30.4 million and $34.1 million at September 30, 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.
Current wording
**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 $18.7 million and $22.1 million at March 31, 2025, and December 31, 2024, respectively, are secured by U.S. Government agency securities with a carrying amount of $38.8 million and $38.5 million at March 31, 2025, and December 31, 2024, 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. Interest expense recognized on repurchase agreements for the three months ended March 31, 2025 and 2024 totaled $10,000 during both periods.
Previous wording
Shareholders’ equity increased by $34.6 million from $147.3 million at December 31, 2023 to $181.9 million at September 30, 2024. The $34.6 million increase was related to net income during the nine months ended September 30, 2024, of $20.9 million, stock option activity of $780,000 and a decrease of other comprehensive loss of $17.7 million related to the investment portfolio restructuring and a decline in market interest rates. These items were partially offset by shareholder dividends of $4.8 million.
Current wording
Shareholders’ Equity. Shareholders’ equity increased by $9.7 million from $177.9 million at December 31, 2024 to $187.6 million at March 31, 2025. The $9.7 million increase was related to net income during the current quarter of $7.2 million, a decline in accumulated other comprehensive loss of $3.9 million and stock option and restricted stock activity of $411,000 partially offset by shareholder dividends of $1.8 million.
Previous wording
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 is subject to various restrictions on the payment of dividends. The Company paid a quarterly cash dividend of $0.27 per share on 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.
Current wording
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 $0.30 per share on February 17, 2025 and a quarterly cash dividend of $0.27 per share on February 15, 2024, May 15, 2024, August 15, 2024, and November 15, 2024.
Previous wording
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 September 30, 2024 and December 31, 2023, the Bank’s capital ratios exceeded the thresholds necessary to be considered “well capitalized” under the Basel III framework.
Current wording
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 March 31, 2025, the Company’s and the Bank’s capital ratios exceeded the thresholds necessary to be considered “well capitalized” under the Basel III framework.
Previous wording
**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 September 30, 2024, the Company had $158.7 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 $158.7 million in unfunded loan commitments, $95.7 million and $63.0 million represent commitments to commercial and consumer customers, respectively. Of the total unfunded commitments at September 30, 2024, $94.4 million were secured by real estate, of which $40.4 million was secured by commercial real estate and $54.0 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.
Current wording
**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 March 31, 2025, the Company had $157.9 million in unfunded loan commitments and no letters of credit. This compares to $155.4 million in unfunded loan commitments at December 31, 2024. Of the $157.9 million in unfunded loan commitments, $94.1 million and $63.8 million represent commitments to commercial and consumer customers, respectively. Of the total unfunded commitments at March 31, 2025, $87.9 million were secured by real estate, of which $32.9 million was secured by commercial real estate and $55.0 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.
Previous wording
The Company is a member of the FHLB and can borrow up to $240 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $426 million. In addition to its FHLB borrowing line, 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, or the correspondent banks at September 30, 2024, and December 31, 2023.
Current wording
The Company is a member of the FHLB and can borrow up to $251 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $441 million. The Company is also eligible to borrow at the FRB Discount Window. At March 31, 2025 the Company could borrow up to $115 million at the Discount Window secured by investment securities with a fair value of $119 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 March 31, 2025, and December 31, 2024.
Previous wording
Customer deposits are the Company’s primary source of funds. Deposits totaled $1.4 billion September 30, 2024, an increase of $17 million from December 31, 2023. Deposits are held in various forms with varying maturities. The Company estimates that it has approximately $456 million in uninsured deposits. Of this amount, $104 million represents deposits that are collateralized such as deposits of states, municipalities and tribal accounts.
Current wording
Customer deposits are the Company’s primary source of funds. Deposits totaled $1.4 billion on March 31, 2025, an increase of $2 million from December 31, 2024. Deposits are held in various forms with varying maturities. The Company estimates that it has approximately $510 million in uninsured deposits which includes uninsured deposits of Plumas Bancorp. Of this amount, $190 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.
Previous wording
The Company’s securities portfolio, Federal funds sold, 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, Federal funds sold and investment securities, to serve as a source of funding for future loan growth. Management believes that the Company’s available sources of funds, including borrowings, will provide adequate liquidity for its operations in the foreseeable future.
Current wording
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.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
The Company estimates that it has approximately $510 million in uninsured deposits which includes uninsured deposits of Plumas Bancorp. Of this amount, $190 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.
Current report — wording carried from elsewhere
**Short-term Borrowing Arrangements.**The Company is a member of the Federal Home Loan Bank of San Francisco (FHLB) and can borrow up to $251 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $441 million. The Company is also eligible to borrow at the FRB Discount Window. At March 31, 2025 the Company could borrow up to $115 million at the Discount Window secured by investment securities with a fair value of $119 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 March 31, 2025, and December 31, 2024.
Rearranged previous paragraphs (7)
Previous report — wording carried elsewhere
RESULTS OF OPERATIONS FOR THE Nine MONTHS ENDED September 30, 2024
Previous report — wording carried elsewhere
The following table presents for the nine-month periods indicated the distribution of consolidated average assets, liabilities and shareholders' equity. It also presents the amounts of interest income from interest earning assets and the resultant annualized yields expressed in both dollars and annualized yield percentages, as well as the amounts of interest expense on interest bearing liabilities and the resultant cost expressed in both dollars and annualized rate percentages. Average balances are based on daily averages. Nonaccrual loans are included in the calculation of average loans while nonaccrued interest thereon is excluded from the computation of yields earned.
Previous report — wording carried elsewhere
The following table sets forth changes in interest income and interest expense for the nine-month periods indicated and the amount of change attributable to variances in volume, rates and the combination of volume and rates based on the relative changes of volume and rates:
Previous report — wording carried elsewhere
Provision for income taxes. The Company recorded an income tax provision of $7.5 million, or 26.4% of pre-tax income, for the nine months ended September 30, 2024. This compares to an income tax provision of $7.8 million, or 26.0% of pre-tax income, for the nine months ended September 30, 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.
Previous report — wording carried elsewhere
The following is a detailed discussion of each component of the change in net income.
Previous report — wording carried elsewhere
Estimated uninsured deposits totaled $456 million and $416 million at September 30, 2024, and December 31, 2023, respectively. Uninsured amounts are estimated based on the portion of the account balances in excess of FDIC insurance limits.
Previous report — wording carried elsewhere
**Short-term Borrowing Arrangements.**The Company is a member of the Federal Home Loan Bank of San Francisco (FHLB) and can borrow up to $240 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $426 million. The Company is required to hold FHLB stock as a condition of membership. At September 30, 2024, the Company held $6.2 million of FHLB stock which is recorded as a component of other assets.