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 reorganizati
on. This corporate structure gives the Company and the Bank greater flexibility in terms of operation, expansion and diversification. The Company formed Plumas Statutory Trust I ("Trust I") for the sole purpose of issuing trust preferred securities on September 26, 2002. The Company formed Plumas Statutory Trust II ("Trust II") for the sole purpose of issuing trust preferred securities on September 28, 2005.
The Bank operates eleven branches in California, including branches in Alturas, Chester, Fall River Mills, Greenville, Kings Beach, Portola, Quincy, Redding, Susanville, Tahoe City, and Truckee. In December, 2015 the Bank opened a
branch in Reno, Nevada; its first branch outside of California. The Bank’s administrative headquarters is in Quincy, California. In addition, the Bank operates lending offices specializing in government-guaranteed lending in Auburn, California, Phoenix, Arizona and Seattle, Washington and commercial/agricultural lending offices in Chico, California and 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 subsi
diary, Plumas Bank. All significant intercompany balances and transactions have been eliminated.
Plumas Statutory Trust I and Trust II are not consolidated into the Company's consolidated financial statements and, accordingly, are accounted for under the
equity method. The Company's investment in Trust I of $319,000 and Trust II of $166,000 are included in accrued interest receivable and other assets on the consolidated balance sheet. The junior subordinated deferrable interest debentures issued and guaranteed by the Company and held by Trust I and Trust II are reflected as debt on the consolidated balance sheet.
The accounting and reporting policies of Plumas Bancorp and subsidiary conform with accounting principles generally accepted in the United
States of America and prevailing practices within the banking industry.
Reclassifications
Certain reclassifications have been made to prior years
’ balances to conform to the classifications used in 2016. These reclassifications had no impact on the Company’s consolidated financial position, results of operations or net change in cash and cash equivalents.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
Segment Information
Management has determined that since all of the banking products and services offered by the Company are available in each branch of the Bank, all branches are located within the same economic environment and management
does not allocate resources based on the performance of different lending or transaction activities, it is appropriate to aggregate the Bank branches and report them as a single operating segment. No customer accounts for more than 10 percent of revenues for the Company or the Bank.
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 e
stimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The allowance for loan 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, 2016 was $9.9 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, 201
6 and 2015 the Company did not have any investment securities classified as held-to-maturity.
|
Management determines the appropriate classification of its investments at the time of purchase and may only change the classification in certain limited circum
stances.
As of December 31, 201
6 and 2015 the Company did not have any investment securities classified as trading and gains or losses on the sale of securities are computed on the specific identification method. Interest earned on investment securities is reported in interest income, net of applicable adjustments for accretion of discounts and amortization of premiums accounted for by the level yield method with no pre-payment anticipated.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
Investment Securities
(continued)
An investment security is impaired when its carrying value is greater than its fair value. Investment securities that are im
paired are evaluated on at least a quarterly basis and more frequently when economic or market conditions warrant such an evaluation to determine whether such a decline in their fair value is other than temporary. Management utilizes criteria such as the magnitude and duration of the decline and the intent and ability of the Company to retain its investment in the securities for a period of time sufficient to allow for an anticipated recovery in fair value, in addition to the reasons underlying the decline, to determine whether the loss in value is other than temporary. The term "other than temporary" is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value is not necessarily favorable, or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of the investment. Once a decline in value is determined to be other than temporary, and management does not intend to sell the security or it is more likely than not that the Company will not be required to sell the security before recovery, only the portion of the impairment loss representing credit exposure is recognized as a charge to earnings, with the balance recognized as a charge to other comprehensive income. If management intends to sell the security or it is more likely than not that the Company will be required to sell the security before recovering its forecasted cost, the entire impairment loss is recognized as a charge to earnings.
Inv
estment in 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. At December 31, 2016 and December 31, 2015, the Company held $2,438,000 and $2,380,000, respectively of FHLB stock
. On the consolidated balance sheet, FHLB 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 85% guaranteed by the Small Business Administration (SBA), US Department of Agriculture Rural Busines
s Cooperative Service (RBS) and Farm Services Agency (FSA). The guaranteed portion of these loans may be sold to a third party, with the Bank retaining the unguaranteed portion. The Company can receive a premium in excess of the adjusted carrying value of the loan at the time of sale.
As of December 31, 201
6 and 2015 the Company had $2.5 million and $2.1 million, respectively in government guaranteed loans held for sale. 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.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
Loans Held for Sale, Loan Sales and Servicing
(continued)
Government guaranteed loans with unpaid balances of $
96,592,000 and $86,589,000 were being serviced for others at December 31, 2016 and 2015, respectively.
The Company accounts for the transf
er 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.
Se
rvicing 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.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
|
SUMMARY OF SIGNIFICA
NT ACCOUNTING POLICIES (Continued)
|
Loans
Loans that management has the intent and ability to hold for 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 loan 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, loans are considered to be impaired and 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 c
ontractual term of the loan. The unamortized balance of deferred fees and costs is reported as a component of net loans.
The Company may acquire loans through a business combination or a purchase for which differences may exist between the contractual c
ash flows and the cash flows expected to be collected due, at least in part, to credit quality.
When the Company acquires such loans, the yield that may be accreted (accretable yield) is limited to the excess of the Company's estimate of undiscounted cas
h flows expected to be collected over the Company's initial investment in the loan. The excess of contractual cash flows over cash flows expected to be collected may not be recognized as an adjustment to yield, loss, or a valuation allowance.
Subsequent
increases in cash flows expected to be collected generally should be recognized prospectively through adjustment of the loan's yield over its remaining life. Decreases in cash flows expected to be collected should be recognized as an impairment.
The Co
mpany may not "carry over" or create a valuation allowance in the initial accounting for loans acquired under these circumstances. At December 31, 2016 and 2015, there were no such loans being accounted for under this policy.
PLUMAS BANCORP AND
SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
Allowance for Loan Losses
The allowance for loan losses is an estimate of probable incurred 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 loan losses which is charged to expense. Additions to the allowance are expected to maintain the adequacy of the total allowance after credit losses and loan growth. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The overall allowance consists of two primary components, specific reserves related to impaired loans and general reserves for inherent losses related to loans that are not impaired but collectively evaluated for impairment.
A loan is considered impaired when, based on current info
rmation and events, it is probable that the Company will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the original agreement. Loans determined to be impaired are individually evaluated for impairment. When a loan is impaired, the Company measures impairment based on the present value of expected future cash flows discounted at the loan's effective interest rate, except that as a practical expedient, it may measure impairment based on a loan's observable market price, or the fair value of the collateral if the loan is collateral dependent. A loan is collateral dependent if the repayment of the loan is expected to be provided solely by the underlying collateral.
A restructuring of a debt consti
tutes a troubled debt restructuring (TDR) if the Company, for economic or legal reasons related to the debtor's financial difficulties, grants a concession to the debtor that it would not otherwise consider. Restructured workout loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms. Loans that are reported as TDRs are considered impaired and measured for impairment as described above.
The determination of the general r
eserve for loans that are not impaired is based on estimates made by management, to include, but not limited to, consideration of historical losses by portfolio segment from January 1, 2008 (the beginning of the latest business cycle as determined by management) to the most current balance sheet date, internal asset classifications, and qualitative factors to include economic trends in the Company’s service areas, industry experience and trends, geographic concentrations, estimated collateral values, the Company’s underwriting policies, the character of the loan portfolio, and probable incurred losses inherent in the portfolio taken as a whole.
The Company maintains a separate allowance for each portfolio segment (loan type). These portfolio segments incl
ude commercial, agricultural, real estate construction (including land and development loans), commercial real estate mortgage, residential mortgage, home equity loans, automobile loans and other loans primarily consisting of consumer installment loans and credit card receivables. The allowance for loan losses attributable to each portfolio segment, which includes both impaired loans and loans that are not impaired, is combined to determine the Company’s overall allowance, and is included as a component of loans on the consolidated balance sheet.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
Allowance for Loan Losses
(continued)
The Company assigns a risk rating to all loans, with the exception of automobile and other loans and periodically, but not less than annually, performs detailed reviews of all such loans over $100,000 to identify credit risks and to assess the overall col
lectability 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 in
to five major categories, defined as follows:
Pass
– A pass loan is a strong credit with no existing or known potential weaknesses deserving of management's close attention.
Watch
– A Watch loan has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Company’s credit position at some future date. Watch loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.
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.
Loss
– Loans classified as loss are considered uncollectible and charged off immediately.
The general reserve component of the allowance for loan losses associated with loans collectively evaluated for impairment also consi
sts of reserve factors that are based on management's assessment of the following for each portfolio segment: (1) historical losses and (2) other qualitative factors, including inherent credit risk. These reserve factors are inherently subjective and are driven by the repayment risk associated with each portfolio segment described on the next page.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
Allowance for Loan Losses
(continued)
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.
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 time lines. 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 and credit card 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 a
nd 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 FDIC and DBO, 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.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
Allowance for
Loan Losses
(continued)
The Company also maintains a separate allowance for off-balance-sheet commitments. Management estimates anticipated losses using historical data and utilization assumptions. The allowance for these commitments totaled $200,000 at
December 31, 2016 and 2015 and is included in accrued interest payable and other liabilities in the consolidated balance sheet.
Other Real Estate
Other real estate owned relates to real estate acquired in full or partial settlement of loan obligation
s, which was $735,000 ($2
,005,000 less a valuation allowance of $1,270,000) at December 31, 2016 and $1,756,000 ($3,106,000 less a valuation allowance of $1,350,000) at December 31, 2015. Of these amounts $84,000 at December 31, 2016 and 2015 represent foreclosed residential real estate property. There were four consumer mortgage loans with a balance of $335 thousand secured by residential real estate properties for which formal foreclosure proceedings are in process at December 31, 2016. There was one consumer mortgage loans with a balance of $23 thousand secured by residential real estate properties for which formal foreclosure proceedings are in process at December 31, 2015. Proceeds from sales of other real estate owned totaled $2,245,000, $2,281,000 and $3,399,000 for the years ended December 31, 2016, 2015 and 2014, respectively. For the years ended December 31, 2016, 2015 and 2014 the Company recorded gains on sale of other real estate owned of $60,000, $198,000 and $1
01,000, 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 loan losses. A valuation allowance for losses on other real estate is maintained to provide for temporary declines in value. The allowance is established through a provision for losses on other real estate which is included in other expenses. Subsequent gains or losses on sales or write-downs resulting from permanent impairment are 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,
2016 and 2015:
|
|
Year Ended December 31,
|
|
|
|
201
6
|
|
|
201
5
|
|
Beginning balance
|
|
$
|
1,756,000
|
|
|
$
|
3,590,000
|
|
Additions
|
|
|
1,200,000
|
|
|
|
328,000
|
|
Dispositions
|
|
|
(2,184,000
|
)
|
|
|
(2,083,000
|
)
|
Write-downs
|
|
|
(37,000
|
)
|
|
|
(79,000
|
)
|
Ending
balance
|
|
$
|
735,000
|
|
|
$
|
1,756,000
|
|
Intangible Assets
Intangible assets consist of core deposit intangibles related to branch acquisitions and are amortized using the straight-line method over a period not to exceed fifteen 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. At December 31, 2016 and 2015, intangible assets totaled $87,000 and $94,000, respectively.
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.
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 de
ferred 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, 2016 and 2015.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Continued)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
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
Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available for sale which are also recognized as separate components of equity. The amount reclassif
ied out of other accumulated comprehensive income relating to realized (losses) gains on securities available for sale was $(32,000)
, $21,000 and $128,000 for 2016, 2015 and 2014, with the related tax effect of $(13,000), $9,000 and $53,000, respectively.
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.
Stock-Based Compensation
Compensation expense related to the Com
pany’s Stock Option Plans, net of related tax benefit, recorded in 2016, 2015 and 2014 totaled $103,000, $70,000 and $75,000 or $0.02, $0.01 and $0.02 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. The Company also makes assumptions regarding estimated forfeitures that will impact the total compensation expenses recognized under the Plans.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
Stock-Based Compensation
(continued)
During
2016 and 2014 the Company granted options to purchase 108,000 and 110,400 shares of common stock, respectively. The fair value of each option was estimated on the date of grant using the following assumptions.
|
|
201
6
|
|
|
2014
|
|
Expected life of stock options (in years)
|
|
|
5.1
|
|
|
|
5.2
|
|
Risk free interest rate
|
|
|
1.52%
|
|
|
|
1.64%
|
|
Volatility
|
|
|
53.6%
|
|
|
|
63.8%
|
|
Dividend
yields
|
|
|
2.00%
|
|
|
|
2.00%
|
|
Weighted-average fair value of options granted during the year
|
|
|
$3.55
|
|
|
|
$3.02
|
|
No options were granted during the year ended December 31, 2015.
Pending Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09
Revenue from Contracts with Customers. This update to the ASC is the culmination of efforts by the FASB and the International Accounting Standards Board (IASB) to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards (IFRS). ASU 2014-09 supersedes Topic 605 – Revenue Recognition and most industry-specific guidance. The core principal of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance in ASU 2014-09 describes a 5-step process entities can apply to achieve the core principle of revenue recognition and requires disclosures sufficient to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers and the significant judgments used in determining that information.
This update was originally effective for annual reporting periods beginning on or after December 15, 2016 and interim periods therein and requires expanded disclosures. In July 2015 the FASB issued a deferral of ASU 2014-09 of one year making it effecti
ve for annual reporting periods beginning on or after December 15, 2017 while also providing for early adoption but not before the original effective date.
Since the guidance does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other GAAP, the Company does not expect the new guidance to
have a material impact on revenue most closely associated with financial instruments, including interest income. The Company is currently performing an overall assessment of revenue streams potentially affected by the ASU including deposit related fees and interchange fees to determine the potential impact the new guidance is expected to have on the Company's Consolidated Financial Statements. The Company plans to adopt ASU No. 2014-09 on January 1, 2018 utilizing the modified retrospective approach.
On January 5, 2016, the FASB issued Accounting Standards Update 2016-01, Financial Instruments
–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. Changes made to the current measurement model primarily affect the accounting for equity securities with readily determinable fair values, where changes in fair value will impact earnings instead of other comprehensive income. The accounting for other financial instruments, such as loans, investments in debt securities, and financial liabilities is largely unchanged. The Update also changes the presentation and disclosure requirements for financial instruments including a requirement that public business entities use exit price when measuring the fair value of financial instruments measured at amortized cost for disclosure purposes. This Update is generally effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years
.
The Company has performed a preliminary evaluation of the provisions of ASU No. 2016-01. Based on this evaluation, the Company has determined that ASU No. 2016-01 is not expected to have a material
impact on the Company's Consolidated Financial Statements; however, the Company will continue to closely monitor developments and additional guidance.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
Pending
Accounting Pronouncements
(continued)
On February 25, 2016, the FASB issued ASU 2016-02, Leases.
The most significant change for lessees is the requirement under the new guidance to recognize right-of-use assets and lease liabilities for all leases not considered short-term leases, which is generally defined as a lease term of less than 12 months. This change will result in lessees recognizing right-of-use assets and lease liabilities for most leases currently accounted for as operating leases under current lease accounting guidance. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018.
The Company has several lease agreements, including two branch locations, which are currently considered operating leases, and therefore, not recognized on the Company'
s consolidated statements of condition. The Company expects the new guidance will require some of these lease agreements to now be recognized on the consolidated statements of condition as a right-of-use asset and a corresponding lease liability. Therefore, the Company's preliminary evaluation indicates the provisions of ASU No. 2016-02 are expected to impact the Company's consolidated statements of condition. However, the Company continues to evaluate the extent of potential impact the new guidance will have on the Company's Consolidated Financial Statements.
On March 30, 2016, the F
ASB issued ASU 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for interim and annual periods beginning after December 15, 2016. Early application is permitted.
The Company adopted ASU No. 2016-09 on January 1, 2017 and elected to recognize forfeitures as they occur. The cumulative effect adjustment from the modified retrospective transition of the forfeitures and the classification of awards
did not have a material effect on the Company's financial statements or disclosures. The Company expects adoption of ASU No. 2016-09 could result in increased volatility to reported income tax expense related to excess tax benefits and tax.
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments
.
ASU No. 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees. The CECL model does not apply to available-for-sale (“AFS”) debt securities. For AFS debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU No. 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. ASU No. 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach).
The Company has begun its implementation efforts by establishing an implementation team chaired by the Company'
s Chief Lending Officer and composed of members of the Company's credit administration and accounting departments. The Company's preliminary evaluation indicates the provisions of ASU No. 2016-13 are expected to impact the Company's Consolidated Financial Statements, in particular the level of the reserve for credit losses. However, the Company continues to evaluate the extent of the potential impact.
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 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.
Mana
gement 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.
Fair Value of Financial Instruments
The carrying amounts and estimated fair values of financial instruments, at December 31, 2016 are as follows:
|
|
|
|
|
|
Fair Value
Measurements at December 31, 2016 Using:
|
|
|
|
Carrying Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Fair Value
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
62,646,000
|
|
|
$
|
62,646,000
|
|
|
|
|
|
|
|
|
|
|
$
|
62,646,000
|
|
Investment securities
|
|
|
101,595,000
|
|
|
|
|
|
|
$
|
101,595,000
|
|
|
|
|
|
|
|
101,595,000
|
|
Loans, net
|
|
|
456,580,000
|
|
|
|
|
|
|
|
|
|
|
$
|
459,618,000
|
|
|
|
459,618,000
|
|
FHLB stock
|
|
|
2,438,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
Accrued interest receivable
|
|
|
2,312,000
|
|
|
|
7,000
|
|
|
|
398,000
|
|
|
|
1,907,000
|
|
|
|
2,312,000
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
582,353,000
|
|
|
|
532,750,000
|
|
|
|
49,586,000
|
|
|
|
|
|
|
|
582,336,000
|
|
Repurchase agreements
|
|
|
7,547,000
|
|
|
|
|
|
|
|
7,547,000
|
|
|
|
|
|
|
|
7,547,000
|
|
Note payable
|
|
|
2,375,000
|
|
|
|
|
|
|
|
|
|
|
|
2,375,000
|
|
|
|
2,375,000
|
|
Junior subordinated deferrable interest debentures
|
|
|
10,310,000
|
|
|
|
|
|
|
|
|
|
|
|
7,762,000
|
|
|
|
7,762,000
|
|
Accrued interest payable
|
|
|
59,000
|
|
|
|
9,000
|
|
|
|
36,000
|
|
|
|
14,000
|
|
|
|
59,000
|
|
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3.
|
FAIR VALUE MEASUREMENTS
(Continued)
|
Fair Value of Financial Instruments
(continued)
The carrying amounts and estimated fair values of
financial instruments, at December 31, 2015 are as follows:
|
|
|
|
|
|
Fair Value
Measurements at December 31, 2015 Using:
|
|
|
|
Carrying Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Fair Value
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
68,195,000
|
|
|
$
|
68,195,000
|
|
|
|
|
|
|
|
|
|
|
$
|
68,195,000
|
|
Investment securities
|
|
|
96,704,000
|
|
|
|
|
|
|
$
|
96,704,000
|
|
|
|
|
|
|
|
96,704,000
|
|
Loans, net
|
|
|
396,833,000
|
|
|
|
|
|
|
|
|
|
|
$
|
395,338,000
|
|
|
|
395,338,000
|
|
FHLB stock
|
|
|
2,380,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
Accrued interest receivable
|
|
|
2,048,000
|
|
|
|
26,000
|
|
|
|
328,000
|
|
|
|
1,694,000
|
|
|
|
2,048,000
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
527,276,000
|
|
|
|
475,013,000
|
|
|
|
52,287,000
|
|
|
|
|
|
|
|
527,300,000
|
|
Repurchase agreements
|
|
|
7,671,000
|
|
|
|
|
|
|
|
7,671,000
|
|
|
|
|
|
|
|
7,671,000
|
|
Note payable
|
|
|
4,875,000
|
|
|
|
|
|
|
|
|
|
|
|
4,875,000
|
|
|
|
4,875,000
|
|
Junior subordinated deferrable interest debentures
|
|
|
10,310,000
|
|
|
|
|
|
|
|
|
|
|
|
6,662,000
|
|
|
|
6,662,000
|
|
Accrued interest payable
|
|
|
58,000
|
|
|
|
8,000
|
|
|
|
38,000
|
|
|
|
12,000
|
|
|
|
58,000
|
|
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 anticipat
ed 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.
The
following methods and assumptions were used by management to estimate the fair value of its financial instruments:
Cash and cash equivalents:
The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1.
Investment securities:
Fair values for securities available for sale are generally determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2).
Loans:
Fair values of loans, excluding loans held for sale, are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3.
|
FAIR VALUE MEASUREMENTS
(Continued)
|
Fair Value of Financial Instruments
(continued)
FHLB stock:
It was not practicable to determine the fair value of the FHLB stock due to restrictions placed on its transferability.
Deposits:
The fair values disclosed for demand deposits, including interest and non-interest demand accounts, savings, and certain types of money market accounts are, by definition, equal to the carrying amount at the reporting date resulting in a Level 1 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.
Repurchase agreements:
The fair value of securities sold under repurchase agreements is estimated based on bid quotations received from brokers using observable inputs and are included as Level 2.
Note payable:
The fair value of the Company’s Note Payable is estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.
Junior subordinated deferrable interest debentures:
The fair values of the Company’s Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.
Accrued interest and payable:
The carrying amounts of accrued interest approximate fair value and are considered to be linked in classification to the asset or liability for which they relate.
Commitments to extend credit and letters of credit:
The fair value of commitments are estimated using the fees currently charged to enter into similar agreements and are not significant and, therefore, not presented. Commitments to extend credit are primarily for variable rate loans and letters of credit.
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.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3.
|
FAIR VALUE MEASUREMENTS (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, 2016 and December 31, 2015, and indicates 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, 201
6 are summarized below:
|
|
|
|
|
|
Fair Value Measurements at
December 31, 201
6 Using
|
|
|
|
Total Fair
Value
|
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government-sponsored agencies collateralized
by mortgage obligations- residential
|
|
$
|
74,911,000
|
|
|
|
|
|
|
$
|
74,911,000
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
|
26,684,000
|
|
|
|
|
|
|
|
26,684,000
|
|
|
|
|
|
|
|
$
|
101,595,000
|
|
|
$
|
-
|
|
|
$
|
101,595,000
|
|
|
$
|
-
|
|
Assets and liabilities measured at fair value on a recurring basis at December 31, 2015 are summarized below:
|
|
|
|
|
|
Fair Value Measurements at
December 31, 2015 Using
|
|
|
|
Total Fair
Value
|
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government-sponsored agencies
|
|
$
|
1,977,000
|
|
|
|
|
|
|
$
|
1,977,000
|
|
|
|
|
|
U.S. Government-sponsored agencies collateralized by mortgage obligations- residential
|
|
|
72,370,000
|
|
|
|
|
|
|
|
72,370,000
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
|
22,357,000
|
|
|
|
|
|
|
|
22,357,000
|
|
|
|
|
|
|
|
$
|
96,704,000
|
|
|
$
|
-
|
|
|
$
|
96,704,000
|
|
|
$
|
-
|
|
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 simil
ar securities or matrix pricing. There were no changes in the valuation techniques used during 2016 or 2015. 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.
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, 2016 are summarized below:
|
|
|
|
|
|
Fair Value Measurements at December 31, 201
6 Using
|
|
|
|
Total
Fair
Value
|
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
Gains
(Losses)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
– commercial
|
|
$
|
453,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
453,000
|
|
|
$
|
(81,000
|
)
|
Equity lines of credit
|
|
|
83,000
|
|
|
|
|
|
|
|
|
|
|
|
83,000
|
|
|
|
6,000
|
|
Total impaired loans
|
|
|
536,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
536,000
|
|
|
|
(75,000
|
)
|
Other real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
– residential
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
-
|
|
Real estate
– commercial
|
|
|
84,000
|
|
|
|
|
|
|
|
|
|
|
|
84,000
|
|
|
|
(37,000
|
)
|
Real estate
– construction and land development
|
|
|
641,000
|
|
|
|
|
|
|
|
|
|
|
|
641,000
|
|
|
|
-
|
|
Total other real estate
|
|
|
735,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
735,000
|
|
|
|
(37,000
|
)
|
|
|
$
|
1,271,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,271,000
|
|
|
$
|
(112,000
|
)
|
Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2015 are summarized
below:
|
|
|
|
|
|
Fair Value Measurements at December 31, 2015 Using
|
|
|
|
Total
Fair
Value
|
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
|
Total
Gains
(Losses)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
– commercial
|
|
$
|
1,214,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,214,000
|
|
|
$
|
-
|
|
Real estate
– construction and land development
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
(53,000
|
)
|
Equity lines of credit
|
|
|
83,000
|
|
|
|
|
|
|
|
|
|
|
|
83,000
|
|
|
|
6,000
|
|
Total impaired loans
|
|
|
1,327,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,327,000
|
|
|
|
(47,000
|
)
|
Other real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
– commercial
|
|
|
156,000
|
|
|
|
|
|
|
|
|
|
|
|
156,000
|
|
|
|
(127,000
|
)
|
Real estate
– construction and land development
|
|
|
1,516,000
|
|
|
|
|
|
|
|
|
|
|
|
1,516,000
|
|
|
|
75,000
|
|
Equity lines of credit
|
|
|
84,000
|
|
|
|
|
|
|
|
|
|
|
|
84,000
|
|
|
|
(27,000
|
)
|
Total other real estate
|
|
|
1,756,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,756,000
|
|
|
|
(79,000
|
)
|
|
|
$
|
3,083,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,083,000
|
|
|
$
|
(126,000
|
)
|
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 Impaired 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 impaired 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). Total losses of $75,000 and $47,000 represent impairment charges recognized during the years ended December 31, 2016 and 2015, respectively, related to the above impaired loans.
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 impaired 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, 2016 and 2015 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
Range
|
Range
|
|
Description
|
|
Fair Value
12/31/201
6
|
|
Fair Value
12/31/2015
|
|
Valuation
Technique
|
Significant Unobservable Input
|
|
(Weighted Average)
12/31/201
6
|
(Weighted Average)
12/31/2015
|
|
Impaired Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RE
– Commercial
|
|
$
|
453
|
|
$
|
1,214
|
|
Third Party
appraisals
|
Management Adjustments to Reflect Current Conditions and Selling Costs
|
|
12% (12
%)
|
9% - 12% (10%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and
Construction
|
|
$
|
-
|
|
$
|
30
|
|
Third Party
appraisals
|
Management Adjustments to Reflect Current Conditions and Selling Costs
|
|
|
8% (8%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity L
ines of Credit
|
|
$
|
83
|
|
$
|
83
|
|
Third Party
appraisals
|
Management Adjustments to Reflect Current Conditions and Selling Costs
|
|
8% (8%)
|
8% (8%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RE
– Residential
|
|
$
|
10
|
|
$
|
-
|
|
Third Party
appraisals
|
Management Adjustments to Reflect Current Conditions and Selling Costs
|
|
48% (48%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and Construction
|
|
$
|
641
|
|
$
|
1,516
|
|
Third Party
appraisals
|
Management Adjustments to Reflect Current Conditions and Selling Costs
|
|
10% - 36% (33%)
|
10% (10%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RE
– Commercial
|
|
$
|
84
|
|
$
|
156
|
|
Third Party
appraisals
|
Management Adjustments to Reflect Current Conditions and Selling Costs
|
|
4
0%
(4
0%)
|
10% (10%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Lines of Credit
|
|
$
|
-
|
|
$
|
84
|
|
Third Party
appraisals
|
Management Adjustments to Reflect Current Conditions and Selling Costs
|
|
|
10% (10%)
|
|
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The amortized cost and estimated fair value of investment securities at December
31, 2016 and 2015 consisted of the following:
Available-for-Sale
|
|
201
6
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government-sponsored
agencies collateralized by mortgage obligations-residential
|
|
$
|
76,207,000
|
|
|
$
|
11,000
|
|
|
$
|
(1,307,000
|
)
|
|
$
|
74,911,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
|
27,042,000
|
|
|
|
89,000
|
|
|
|
(447,000
|
)
|
|
|
26,684,000
|
|
|
|
$
|
103,249,000
|
|
|
$
|
100,000
|
|
|
$
|
(1,754,000
|
)
|
|
$
|
101,595,000
|
|
U
nrealized loss on available-for-sale investment securities totaling $1,654,000 were recorded, net of $682,000 in tax benefits, as accumulated other comprehensive loss within shareholders' equity at December 31, 2016.
During the year ended December 31, 2016 the Company sold fourteen available-for-sale investment securities for total proceeds of $14,589,000 recording a $32,000 loss on sale. The Company realized a gain on sale from eight of these securities totaling $48,000 and a loss on sale on six securities of $80,000.
Available-for-Sale
|
|
2015
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government-sponsored agencies
|
|
$
|
1,994,000
|
|
|
$
|
-
|
|
|
$
|
(17,000
|
)
|
|
$
|
1,977,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government-sponsored agencies collateralized by mortgage obligations-residential
|
|
|
72,965,000
|
|
|
|
56,000
|
|
|
|
(651,000
|
)
|
|
|
72,370,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
|
21,817,000
|
|
|
|
548,000
|
|
|
|
(8,000
|
)
|
|
|
22,357,000
|
|
|
|
$
|
96,776,000
|
|
|
$
|
604,000
|
|
|
$
|
(676,000
|
)
|
|
$
|
96,704,000
|
|
U
nrealized loss on available-for-sale investment securities totaling $72,000 were recorded, net of $30,000 in tax benefits, as accumulated other comprehensive loss within shareholders' equity at December 31, 2015. During the year ended December 31, 2015 the Company sold fifteen available-for-sale investment securities for total proceeds of $12,260,000 recording a $21,000 net gain on sale. The Company realized a gain on sale from eight of these securities totaling $62,000 and a loss on sale on seven of these securities of $41,000.
Net unrealized loss on available-for-sale investment securities totaling $102,000 were recorded, net of $42,000 in tax benefits, as accumulated other comprehensive
loss within shareholders' equity at December 31, 2014. During the year ended December 31, 2014 the Company sold fourteen available-for-sale investment securities for total proceeds of $16,325,000 recording a $128,000 gain on sale. The Company realized a gain on sale from thirteen of these securities totaling $134,000 and a loss on sale on one security of $6,000.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4.
|
INVESTMENT SECURITIES (Continued)
|
There were no transfers of available-for-sale investment securities during the
years ended December 31, 2016, 2015 or 2014. There were no securities classified as held-to-maturity at December 31, 2016 or December 31, 2015
.
Investment securities with unrealized losses at December 31, 201
6 and 2015 are summarized and classified according to the duration of the loss period as follows:
December 31, 201
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies collateralized by mortgage obligations-residential
|
|
$
|
68,338,000
|
|
|
$
|
1,237,000
|
|
|
$
|
2,043,000
|
|
|
$
|
70,000
|
|
|
$
|
70,381,000
|
|
|
$
|
1,307,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ob
ligations of states and political subdivisions
|
|
|
18,052,000
|
|
|
|
447,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,052,000
|
|
|
|
447,000
|
|
|
|
$
|
86,390,000
|
|
|
$
|
1,684,000
|
|
|
$
|
2,043,000
|
|
|
$
|
70,000
|
|
|
$
|
88,433,000
|
|
|
$
|
1,754,000
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.
S. Government- sponsored agencies
|
|
$
|
1,977,000
|
|
|
$
|
17,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,977,000
|
|
|
$
|
17,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies collateralized by mortgage obligations-residential
|
|
|
45,398,000
|
|
|
|
327,000
|
|
|
|
11,880,000
|
|
|
|
324,000
|
|
|
|
57,278,000
|
|
|
|
651,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
|
1,037,000
|
|
|
|
7,000
|
|
|
|
160,000
|
|
|
|
1,000
|
|
|
|
1,197,000
|
|
|
|
8,000
|
|
|
|
$
|
48,412,000
|
|
|
$
|
351,000
|
|
|
$
|
12,040,000
|
|
|
$
|
325,000
|
|
|
$
|
60,452,000
|
|
|
$
|
676,000
|
|
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4.
|
INVESTMENT SECURITIES (
Continued)
|
At December 31, 201
6, the Company held 166 securities of which 127 were in a loss position. Of the securities in a loss position, 123 were in a loss position for less than twelve months. Of the 127 securities 61 are U.S. Government-sponsored agencies collateralized by residential mortgage obligations and 66 were obligations of states and political subdivisions. The unrealized losses relate principally to market rate conditions. All of the securities continue to pay as scheduled. When analyzing an issuer’s financial condition, management considers the length of time and extent to which the market value has been less than cost; the historical and implied volatility of the security; the financial condition of the issuer of the security; and the Company’s intent and ability to hold the security to recovery. As of December 31, 2016, management does not have the intent to sell these securities nor does it believe it is more likely than not that it will be required to sell these securities before the recovery of its amortized cost basis. Based on the Company’s evaluation of the above and other relevant factors, the Company does not believe the securities that are in an unrealized loss position as of December 31, 2016 are other than temporarily impaired.
The amortized cost and estimated fair value of investment securities at December
31, 2016 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
Cost
|
|
|
Estimated Fair
Value
|
|
After one year through five years
|
|
$
|
898,000
|
|
|
$
|
893,000
|
|
After five years through ten years
|
|
|
16,052,000
|
|
|
|
15,978,000
|
|
After ten years
|
|
|
10,092,000
|
|
|
|
9,813,000
|
|
Investment securities not due at a single maturity date:
|
|
|
|
|
|
|
|
|
Government-sponsored mortgage-backed securities
|
|
|
76,207,000
|
|
|
|
74,911,000
|
|
|
|
$
|
103,249,000
|
|
|
$
|
101,595,000
|
|
Investment securities with amortized costs totaling $
73,331,000 and $62,914,000 and estimated fair values totaling $72,112,000 and $62,483,000 at December 31, 2016 and 2015, respectively, were pledged to secure deposits and repurchase agreements.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5.
|
LOANS AND THE ALLOWANCE FOR LOAN LOSSES
|
Outstanding loans are summarized
below:
|
|
December 31,
|
|
|
|
201
6
|
|
|
2015
|
|
Commercial
|
|
$
|
41,293,000
|
|
|
$
|
37,084,000
|
|
Agricultural
|
|
|
51,103,000
|
|
|
|
39,856,000
|
|
Real estate
– residential
|
|
|
21,283,000
|
|
|
|
25,474,000
|
|
Real estate
– commercial
|
|
|
226,136,000
|
|
|
|
192,095,000
|
|
Real estate
– construction & land development
|
|
|
21,904,000
|
|
|
|
16,188,000
|
|
Equity lines of credit
|
|
|
42,338,000
|
|
|
|
38,327,000
|
|
Auto
|
|
|
53,553,000
|
|
|
|
48,365,000
|
|
Other
|
|
|
3,513,000
|
|
|
|
3,582,000
|
|
|
|
|
461,123,000
|
|
|
|
400,971,000
|
|
Deferred loan costs, net
|
|
|
2,006,000
|
|
|
|
1,940,000
|
|
Allowance for loan losses
|
|
|
(6,549,000
|
)
|
|
|
(6,078,000
|
)
|
Loans, net
|
|
$
|
456,580,000
|
|
|
$
|
396,833,000
|
|
Changes in the allowance for loan losses were as follows:
|
|
Year Ended
December 31,
|
|
|
|
201
6
|
|
|
201
5
|
|
|
201
4
|
|
Balance, beginning of year
|
|
$
|
6,078,000
|
|
|
$
|
5,451,000
|
|
|
$
|
5,517,000
|
|
Provision charged to operations
|
|
|
800,000
|
|
|
|
1,100,000
|
|
|
|
1,100,000
|
|
Losses charged to allowance
|
|
|
(979,000
|
)
|
|
|
(827,000
|
)
|
|
|
(1,913,000
|
)
|
Recoveries
|
|
|
650,000
|
|
|
|
354,000
|
|
|
|
747,000
|
|
Balance, end of year
|
|
$
|
6,549,000
|
|
|
$
|
6,078,000
|
|
|
$
|
5,451,000
|
|
The recorded investment
in impaired loans totaled $5,442,000 and $6,461,000 at December 31, 2016 and 2015, respectively. The Company had specific allowances for loan losses of $366,000 on impaired loans of $1,534,000 at December 31, 2016 as compared to specific allowances for loan losses of $751,000 on impaired loans of $2,346,000 at December 31, 2015. The balance of impaired loans in which no specific reserves were required totaled $3,908,000 and $4,115,000 at December 31, 2016 and 2015, respectively. The average recorded investment in impaired loans for the years ended December 31, 2016, 2015 and 2014 was $5,077,000, $6,528,000 and $8,070,000, respectively. The Company recognized $149,000, $119,000 and $152,000 in interest income on impaired loans during the years ended December 31, 2016, 2015 and 2014, respectively. Of these amounts $29,000, $0 and $31,000 were recognized on the cash basis, respectively.
Included in impaired loans are troubled debt restructurings. A troubled debt re
structuring is a formal restructure of a loan where the Company for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower. The concessions may be granted in various forms to include one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5.
|
LOANS AND THE ALLOWANCE FOR LOAN LOSSES (Continued)
|
In order to determine whether a borrower is experiencing financial difficulty, an
evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.
The carrying val
ue of troubled debt restructurings at December 31, 2016 and December 31, 2015 was $4,616
,000 and $4,661,000, respectively. The Company has allocated $342,000 and $311,000 of specific reserves on loans to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2016 and December 31, 2015, respectively. The Company has not committed to lend additional amounts on loans classified as troubled debt restructurings at December 31, 2016 and December 31, 2015.
There were no
troubled debt restructurings during the twelve months ending December 31, 2016 and 2015
.
There were no troubled debt restructurings for which there was a payment default within twelve months following the modification during the twelve months ended Dece
mber 31, 2016 and 2015
.
At December 31, 201
6 and 2015
, nonaccrual loans totaled $2,724,000 and $4,546,000, respectively. Interest foregone on nonaccrual loans totaled $164,000, $303,000 and $345,000 for the twelve months ended December 31, 2016, 2015 and 2014, respectively. The Company recognized $29,000
, $0 and $31,000 in interest income on nonaccrual loans during the years ended December 31, 2016, 2015 and 2014, respectively. There were no loans past due 90 days or more and on accrual status at December 31, 2016 and 2015.
Salaries and e
mployee benefits totaling $1,882,000, $1,337,000 and $1,441,000 have been deferred as loan origination costs during the years ended December 31, 2016, 2015 and 2014, respectively.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5.
|
LOANS AND THE ALLOWANCE FOR LOAN LOSSES (Continued)
|
The following tables show the loan portfolio allocated by management's internal risk ratings at the dates indicated, in thousands:
December 31, 201
6
|
|
Commercial Credit Exposure
|
|
|
|
Credit Risk Profile by Internally Assigned Grade
|
|
|
|
Commercial
|
|
|
Agricultural
|
|
|
Real
Estate-Residential
|
|
|
Real
Estate-Commercial
|
|
|
Real
Estate-Construction
|
|
|
Equity LOC
|
|
|
Total
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
40,459
|
|
|
$
|
50,790
|
|
|
$
|
21,125
|
|
|
$
|
223,854
|
|
|
$
|
21,201
|
|
|
$
|
41,983
|
|
|
$
|
399,412
|
|
Watch
|
|
|
565
|
|
|
|
280
|
|
|
|
-
|
|
|
|
400
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,245
|
|
Substandard
|
|
|
269
|
|
|
|
33
|
|
|
|
158
|
|
|
|
1,882
|
|
|
|
703
|
|
|
|
355
|
|
|
|
3,400
|
|
Doubtful
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
41,293
|
|
|
$
|
51,103
|
|
|
$
|
21,283
|
|
|
$
|
226,136
|
|
|
$
|
21,904
|
|
|
$
|
42,338
|
|
|
$
|
404,057
|
|
December 31, 201
5
|
|
Commercial Credit Exposure
|
|
|
|
Credit Risk Profile by Internally Assigned Grade
|
|
|
|
Commercial
|
|
|
Agricultural
|
|
|
Real
Estate-Residential
|
|
|
Real
Estate-Commercial
|
|
|
Real
Estate-Construction
|
|
|
Equity LOC
|
|
|
Total
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
35,508
|
|
|
$
|
39,426
|
|
|
$
|
25,220
|
|
|
$
|
185,739
|
|
|
$
|
15,048
|
|
|
$
|
37,983
|
|
|
$
|
338,924
|
|
Watch
|
|
|
883
|
|
|
|
387
|
|
|
|
149
|
|
|
|
2,442
|
|
|
|
247
|
|
|
|
-
|
|
|
|
4,108
|
|
Substandard
|
|
|
693
|
|
|
|
43
|
|
|
|
105
|
|
|
|
3,914
|
|
|
|
893
|
|
|
|
344
|
|
|
|
5,992
|
|
Doubtful
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
37,084
|
|
|
$
|
39,856
|
|
|
$
|
25,474
|
|
|
$
|
192,095
|
|
|
$
|
16,188
|
|
|
$
|
38,327
|
|
|
$
|
349,024
|
|
|
|
Consumer Credit Exposure
|
|
|
Consumer Credit Exposure
|
|
|
|
Credit Risk Profile
Based on Payment Activity
|
|
|
Credit Risk Profile
Based on Payment Activity
|
|
|
|
December 31, 201
6
|
|
|
December 31, 201
5
|
|
|
|
Auto
|
|
|
Other
|
|
|
Total
|
|
|
Auto
|
|
|
Other
|
|
|
Total
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
|
$
|
53,474
|
|
|
$
|
3,511
|
|
|
$
|
56,985
|
|
|
$
|
48,300
|
|
|
$
|
3,582
|
|
|
$
|
51,882
|
|
Non-performing
|
|
|
79
|
|
|
|
2
|
|
|
|
81
|
|
|
|
65
|
|
|
|
-
|
|
|
|
65
|
|
Total
|
|
$
|
53,553
|
|
|
$
|
3,513
|
|
|
$
|
57,066
|
|
|
$
|
48,365
|
|
|
$
|
3,582
|
|
|
$
|
51,947
|
|
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CO
NSOLIDATED FINANCIAL STATEMENTS
(Continued)
5.
|
LOANS AND THE ALLOWANCE FOR LOAN LOSSES (Continued)
|
The following tables show the allocation of the allowance for loan losses at the dates indicated, in thousands:
|
|
|
|
|
|
|
|
|
|
Real
Estate-
|
|
|
Real Estate-
|
|
|
Real Estate-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Agricultural
|
|
|
Residential
|
|
|
Commercial
|
|
|
Construction
|
|
|
Equity LOC
|
|
|
Auto
|
|
|
Other
|
|
|
Total
|
|
Year ended
12/31/1
6
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
639
|
|
|
$
|
294
|
|
|
$
|
341
|
|
|
$
|
2,525
|
|
|
$
|
874
|
|
|
$
|
528
|
|
|
$
|
784
|
|
|
$
|
93
|
|
|
$
|
6,078
|
|
Charge-offs
|
|
|
(268
|
)
|
|
|
-
|
|
|
|
(39
|
)
|
|
|
(253
|
)
|
|
|
(5
|
)
|
|
|
(23
|
)
|
|
|
(319
|
)
|
|
|
(72
|
)
|
|
|
(979
|
)
|
Recoveries
|
|
|
53
|
|
|
|
-
|
|
|
|
42
|
|
|
|
3
|
|
|
|
389
|
|
|
|
2
|
|
|
|
131
|
|
|
|
30
|
|
|
|
650
|
|
Provision
|
|
|
231
|
|
|
|
172
|
|
|
|
(64
|
)
|
|
|
465
|
|
|
|
(331
|
)
|
|
|
68
|
|
|
|
219
|
|
|
|
40
|
|
|
|
800
|
|
Ending balance
|
|
$
|
655
|
|
|
$
|
466
|
|
|
$
|
280
|
|
|
$
|
2,740
|
|
|
$
|
927
|
|
|
$
|
575
|
|
|
$
|
815
|
|
|
$
|
91
|
|
|
$
|
6,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 12/31/1
5
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
574
|
|
|
$
|
225
|
|
|
$
|
379
|
|
|
$
|
1,701
|
|
|
$
|
1,227
|
|
|
$
|
691
|
|
|
$
|
581
|
|
|
$
|
73
|
|
|
$
|
5,451
|
|
Charge-offs
|
|
|
(88
|
)
|
|
|
(3
|
)
|
|
|
(132
|
)
|
|
|
-
|
|
|
|
(55
|
)
|
|
|
(98
|
)
|
|
|
(414
|
)
|
|
|
(37
|
)
|
|
|
(827
|
)
|
Recoveries
|
|
|
167
|
|
|
|
6
|
|
|
|
8
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
|
|
124
|
|
|
|
43
|
|
|
|
354
|
|
Provision
|
|
|
(14
|
)
|
|
|
66
|
|
|
|
86
|
|
|
|
824
|
|
|
|
(298
|
)
|
|
|
(71
|
)
|
|
|
493
|
|
|
|
14
|
|
|
|
1,100
|
|
Ending balance
|
|
$
|
639
|
|
|
$
|
294
|
|
|
$
|
341
|
|
|
$
|
2,525
|
|
|
$
|
874
|
|
|
$
|
528
|
|
|
$
|
784
|
|
|
$
|
93
|
|
|
$
|
6,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 12/31/1
4
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
785
|
|
|
$
|
164
|
|
|
$
|
638
|
|
|
$
|
1,774
|
|
|
$
|
944
|
|
|
$
|
613
|
|
|
$
|
449
|
|
|
$
|
150
|
|
|
$
|
5,517
|
|
Charge-offs
|
|
|
(191
|
)
|
|
|
-
|
|
|
|
(127
|
)
|
|
|
(888
|
)
|
|
|
(106
|
)
|
|
|
(205
|
)
|
|
|
(282
|
)
|
|
|
(114
|
)
|
|
|
(1,913
|
)
|
Recoveries
|
|
|
89
|
|
|
|
-
|
|
|
|
13
|
|
|
|
6
|
|
|
|
491
|
|
|
|
5
|
|
|
|
73
|
|
|
|
70
|
|
|
|
747
|
|
Provision
|
|
|
(109
|
)
|
|
|
61
|
|
|
|
(145
|
)
|
|
|
809
|
|
|
|
(102
|
)
|
|
|
278
|
|
|
|
341
|
|
|
|
(33
|
)
|
|
|
1,100
|
|
Ending balance
|
|
$
|
574
|
|
|
$
|
225
|
|
|
$
|
379
|
|
|
$
|
1,701
|
|
|
$
|
1,227
|
|
|
$
|
691
|
|
|
$
|
581
|
|
|
$
|
73
|
|
|
$
|
5,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 201
6
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
2
|
|
|
$
|
-
|
|
|
|
53
|
|
|
$
|
81
|
|
|
$
|
206
|
|
|
$
|
24
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
366
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
653
|
|
|
$
|
466
|
|
|
$
|
227
|
|
|
$
|
2,659
|
|
|
$
|
721
|
|
|
$
|
551
|
|
|
$
|
815
|
|
|
$
|
91
|
|
|
$
|
6,183
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
41,293
|
|
|
$
|
51,103
|
|
|
$
|
21,283
|
|
|
$
|
226,136
|
|
|
$
|
21,904
|
|
|
$
|
42,338
|
|
|
$
|
53,553
|
|
|
$
|
3,513
|
|
|
$
|
461,123
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
16
|
|
|
$
|
258
|
|
|
$
|
1,615
|
|
|
$
|
2,323
|
|
|
$
|
833
|
|
|
$
|
326
|
|
|
$
|
69
|
|
|
$
|
2
|
|
|
$
|
5,442
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
41,277
|
|
|
$
|
50,845
|
|
|
$
|
19,668
|
|
|
$
|
223,813
|
|
|
$
|
21,071
|
|
|
$
|
42,012
|
|
|
$
|
53,484
|
|
|
$
|
3,511
|
|
|
$
|
455,681
|
|
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5.
|
LOANS AND THE ALLOWANCE FOR LOAN LOSSES (Continued)
|
The following table shows
the allocation of the allowance for loan losses at the date indicated, in thousands:
|
|
|
|
|
|
|
|
|
|
Real Estate-
|
|
|
Real
Estate-
|
|
|
Real
Estate-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Agricultural
|
|
|
Residential
|
|
|
Commercial
|
|
|
Construction
|
|
|
Equity LOC
|
|
|
Auto
|
|
|
Other
|
|
|
Total
|
|
December 31, 201
5
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
26
|
|
|
$
|
-
|
|
|
|
54
|
|
|
$
|
371
|
|
|
$
|
269
|
|
|
$
|
31
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
751
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
613
|
|
|
$
|
294
|
|
|
$
|
287
|
|
|
$
|
2,154
|
|
|
$
|
605
|
|
|
$
|
497
|
|
|
$
|
784
|
|
|
$
|
93
|
|
|
$
|
5,327
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
37,084
|
|
|
$
|
39,856
|
|
|
$
|
25,474
|
|
|
$
|
192,095
|
|
|
$
|
16,188
|
|
|
$
|
38,327
|
|
|
$
|
48,365
|
|
|
$
|
3,582
|
|
|
$
|
400,971
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
73
|
|
|
$
|
260
|
|
|
$
|
1,593
|
|
|
$
|
3,129
|
|
|
$
|
1,029
|
|
|
$
|
311
|
|
|
$
|
66
|
|
|
$
|
-
|
|
|
$
|
6,461
|
|
Ending balance: collectively evaluated for impairment
|
|
$
|
37,011
|
|
|
$
|
39,596
|
|
|
$
|
23,881
|
|
|
$
|
188,966
|
|
|
$
|
15,159
|
|
|
$
|
38,016
|
|
|
$
|
48,299
|
|
|
$
|
3,582
|
|
|
$
|
394,510
|
|
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5.
|
LOANS AND THE ALLOWANCE FOR LOAN LOSSES (Continued)
|
The following tables show an aging analysis of the
loan portfolio by the time past due, in thousands:
December 31, 201
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 Days
Past Due
|
|
|
90 Days
and
Still
Accruing
|
|
|
Nonaccrual
|
|
|
Total Past
Due
and
Nonaccrual
|
|
|
Current
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
77
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
77
|
|
|
$
|
41,216
|
|
|
$
|
41,293
|
|
Agricultural
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
51,103
|
|
|
|
51,103
|
|
Real estate - residential
|
|
|
179
|
|
|
|
-
|
|
|
|
145
|
|
|
|
324
|
|
|
|
20,959
|
|
|
|
21,283
|
|
Real estate - commercial
|
|
|
519
|
|
|
|
-
|
|
|
|
1,479
|
|
|
|
1,998
|
|
|
|
224,138
|
|
|
|
226,136
|
|
Real estate
– construction & land
|
|
|
10
|
|
|
|
-
|
|
|
|
703
|
|
|
|
713
|
|
|
|
21,191
|
|
|
|
21,904
|
|
Equity Lines of Credit
|
|
|
276
|
|
|
|
-
|
|
|
|
326
|
|
|
|
602
|
|
|
|
41,736
|
|
|
|
42,338
|
|
Auto
|
|
|
919
|
|
|
|
-
|
|
|
|
69
|
|
|
|
988
|
|
|
|
52,565
|
|
|
|
53,553
|
|
Other
|
|
|
23
|
|
|
|
-
|
|
|
|
2
|
|
|
|
25
|
|
|
|
3,488
|
|
|
|
3,513
|
|
Total
|
|
$
|
2,003
|
|
|
$
|
-
|
|
|
$
|
2,724
|
|
|
$
|
4,727
|
|
|
$
|
456,396
|
|
|
$
|
461,123
|
|
December 31, 201
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 Days
Past Due
|
|
|
90 Days
and
Still
Accruing
|
|
|
Nonaccrual
|
|
|
Total Past
Due
and
Nonaccrual
|
|
|
Current
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
457
|
|
|
$
|
-
|
|
|
$
|
56
|
|
|
$
|
513
|
|
|
$
|
36,571
|
|
|
$
|
37,084
|
|
Agricultural
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39,856
|
|
|
|
39,856
|
|
Real estate - residential
|
|
|
472
|
|
|
|
-
|
|
|
|
90
|
|
|
|
562
|
|
|
|
24,912
|
|
|
|
25,474
|
|
Real estate - commercial
|
|
|
-
|
|
|
|
-
|
|
|
|
3,130
|
|
|
|
3,130
|
|
|
|
188,965
|
|
|
|
192,095
|
|
Real estate
– construction & land
|
|
|
9
|
|
|
|
-
|
|
|
|
893
|
|
|
|
902
|
|
|
|
15,286
|
|
|
|
16,188
|
|
Equity Lines of Credit
|
|
|
8
|
|
|
|
-
|
|
|
|
312
|
|
|
|
320
|
|
|
|
38,007
|
|
|
|
38,327
|
|
Auto
|
|
|
586
|
|
|
|
-
|
|
|
|
65
|
|
|
|
651
|
|
|
|
47,714
|
|
|
|
48,365
|
|
Other
|
|
|
15
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15
|
|
|
|
3,567
|
|
|
|
3,582
|
|
Total
|
|
$
|
1,547
|
|
|
$
|
-
|
|
|
$
|
4,546
|
|
|
$
|
6,093
|
|
|
$
|
394,878
|
|
|
$
|
400,971
|
|
PLUMAS BANCORP AND
SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5.
|
LOANS AND THE ALLOWANCE FOR LOAN LOSSES (Continued)
|
The following tables show information related to impaired loans at the dates indicated, in thousands:
As of December 31, 201
6
:
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Agricultural
|
|
|
258
|
|
|
|
258
|
|
|
|
|
|
|
|
259
|
|
|
|
19
|
|
Real estate
– residential
|
|
|
1,373
|
|
|
|
1,385
|
|
|
|
|
|
|
|
1,291
|
|
|
|
77
|
|
Real estate
– commercial
|
|
|
1,789
|
|
|
|
2,227
|
|
|
|
|
|
|
|
1,589
|
|
|
|
33
|
|
Real estate
– construction & land
|
|
|
198
|
|
|
|
198
|
|
|
|
|
|
|
|
210
|
|
|
|
-
|
|
Equity Lines of Credit
|
|
|
219
|
|
|
|
219
|
|
|
|
|
|
|
|
121
|
|
|
|
-
|
|
Auto
|
|
|
69
|
|
|
|
69
|
|
|
|
|
|
|
|
46
|
|
|
|
-
|
|
Other
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
16
|
|
|
$
|
16
|
|
|
$
|
2
|
|
|
$
|
16
|
|
|
$
|
1
|
|
Agricultural
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Real estate
– residential
|
|
|
242
|
|
|
|
242
|
|
|
|
53
|
|
|
|
243
|
|
|
|
11
|
|
Re
al estate – commercial
|
|
|
534
|
|
|
|
742
|
|
|
|
81
|
|
|
|
534
|
|
|
|
-
|
|
Re
al estate – construction & land
|
|
|
635
|
|
|
|
635
|
|
|
|
206
|
|
|
|
658
|
|
|
|
8
|
|
Eq
uity Lines of Credit
|
|
|
107
|
|
|
|
107
|
|
|
|
24
|
|
|
|
110
|
|
|
|
-
|
|
Au
to
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ot
her
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
To
tal:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
16
|
|
|
$
|
16
|
|
|
$
|
2
|
|
|
$
|
16
|
|
|
$
|
1
|
|
Agricultural
|
|
|
258
|
|
|
|
258
|
|
|
|
-
|
|
|
|
259
|
|
|
|
19
|
|
Real estate
– residential
|
|
|
1,615
|
|
|
|
1,627
|
|
|
|
53
|
|
|
|
1,534
|
|
|
|
88
|
|
Re
al estate – commercial
|
|
|
2,323
|
|
|
|
2,969
|
|
|
|
81
|
|
|
|
2,123
|
|
|
|
33
|
|
Re
al estate – construction & land
|
|
|
833
|
|
|
|
833
|
|
|
|
206
|
|
|
|
868
|
|
|
|
8
|
|
Eq
uity Lines of Credit
|
|
|
326
|
|
|
|
326
|
|
|
|
24
|
|
|
|
231
|
|
|
|
-
|
|
Au
to
|
|
|
69
|
|
|
|
69
|
|
|
|
-
|
|
|
|
46
|
|
|
|
-
|
|
Ot
her
|
|
|
2
|
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
5,442
|
|
|
$
|
6,100
|
|
|
$
|
366
|
|
|
$
|
5,077
|
|
|
$
|
149
|
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
Recorded
|
|
|
Income
|
|
As of December 31,
201
5
:
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
Investment
|
|
|
Recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
47
|
|
|
$
|
47
|
|
|
|
|
|
|
$
|
39
|
|
|
$
|
1
|
|
Agricultural
|
|
|
260
|
|
|
|
260
|
|
|
|
|
|
|
|
262
|
|
|
|
20
|
|
Real estate
– residential
|
|
|
1,347
|
|
|
|
1,359
|
|
|
|
|
|
|
|
1,346
|
|
|
|
79
|
|
Real estate
– commercial
|
|
|
1,976
|
|
|
|
2,622
|
|
|
|
|
|
|
|
2,057
|
|
|
|
-
|
|
Real estate
– construction & land
|
|
|
221
|
|
|
|
221
|
|
|
|
|
|
|
|
232
|
|
|
|
-
|
|
Equity Lines of Credit
|
|
|
199
|
|
|
|
199
|
|
|
|
|
|
|
|
156
|
|
|
|
-
|
|
Auto
|
|
|
65
|
|
|
|
65
|
|
|
|
|
|
|
|
21
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
26
|
|
|
$
|
26
|
|
|
$
|
26
|
|
|
$
|
29
|
|
|
$
|
-
|
|
Ag
ricultural
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Re
al estate – residential
|
|
|
245
|
|
|
|
245
|
|
|
|
54
|
|
|
|
246
|
|
|
|
11
|
|
Re
al estate – commercial
|
|
|
1,154
|
|
|
|
1,154
|
|
|
|
371
|
|
|
|
1,203
|
|
|
|
-
|
|
Re
al estate – construction & land
|
|
|
808
|
|
|
|
808
|
|
|
|
269
|
|
|
|
822
|
|
|
|
8
|
|
Eq
uity Lines of Credit
|
|
|
113
|
|
|
|
113
|
|
|
|
31
|
|
|
|
115
|
|
|
|
-
|
|
Au
to
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
To
tal:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
73
|
|
|
$
|
73
|
|
|
$
|
26
|
|
|
$
|
68
|
|
|
$
|
1
|
|
Ag
ricultural
|
|
|
260
|
|
|
|
260
|
|
|
|
-
|
|
|
|
262
|
|
|
|
20
|
|
Re
al estate – residential
|
|
|
1,592
|
|
|
|
1,604
|
|
|
|
54
|
|
|
|
1,592
|
|
|
|
90
|
|
Re
al estate – commercial
|
|
|
3,130
|
|
|
|
3,776
|
|
|
|
371
|
|
|
|
3,260
|
|
|
|
-
|
|
Re
al estate – construction & land
|
|
|
1,029
|
|
|
|
1,029
|
|
|
|
269
|
|
|
|
1,054
|
|
|
|
8
|
|
Eq
uity Lines of Credit
|
|
|
312
|
|
|
|
312
|
|
|
|
31
|
|
|
|
271
|
|
|
|
-
|
|
Au
to
|
|
|
65
|
|
|
|
65
|
|
|
|
-
|
|
|
|
21
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
6,461
|
|
|
$
|
7,119
|
|
|
$
|
751
|
|
|
$
|
6,528
|
|
|
$
|
119
|
|
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5.
|
LOANS AND THE ALLOWANCE FOR LOAN LOSSES (Continued)
|
The following table shows information related to impaired loans at the date indicated, in thousands:
As of December 31, 201
4
:
|
|
Recorded
Investment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
55
|
|
|
$
|
55
|
|
|
|
|
|
|
$
|
61
|
|
|
$
|
1
|
|
Agricultural
|
|
|
605
|
|
|
|
605
|
|
|
|
|
|
|
|
605
|
|
|
|
51
|
|
Real estate
– residential
|
|
|
1,422
|
|
|
|
1,433
|
|
|
|
|
|
|
|
1,443
|
|
|
|
80
|
|
Real estate
– commercial
|
|
|
3,389
|
|
|
|
4,036
|
|
|
|
|
|
|
|
2,460
|
|
|
|
-
|
|
Real estate
– construction & land
|
|
|
495
|
|
|
|
495
|
|
|
|
|
|
|
|
512
|
|
|
|
9
|
|
Equity Lines of Credit
|
|
|
121
|
|
|
|
121
|
|
|
|
|
|
|
|
130
|
|
|
|
-
|
|
Auto
|
|
|
93
|
|
|
|
93
|
|
|
|
|
|
|
|
81
|
|
|
|
-
|
|
Other
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Agricultural
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Real estate
– residential
|
|
|
1,096
|
|
|
|
1,102
|
|
|
|
51
|
|
|
|
1,112
|
|
|
|
11
|
|
Real estate
– commercial
|
|
|
254
|
|
|
|
254
|
|
|
|
65
|
|
|
|
589
|
|
|
|
-
|
|
Real estate
– construction & land
|
|
|
757
|
|
|
|
757
|
|
|
|
274
|
|
|
|
778
|
|
|
|
-
|
|
Equity Lines of Credit
|
|
|
294
|
|
|
|
294
|
|
|
|
174
|
|
|
|
299
|
|
|
|
-
|
|
Auto
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
55
|
|
|
$
|
55
|
|
|
$
|
-
|
|
|
$
|
61
|
|
|
$
|
1
|
|
Agricultural
|
|
|
605
|
|
|
|
605
|
|
|
|
-
|
|
|
|
605
|
|
|
|
51
|
|
Real estate
– residential
|
|
|
2,518
|
|
|
|
2,535
|
|
|
|
51
|
|
|
|
2,555
|
|
|
|
91
|
|
Real estate
– commercial
|
|
|
3,643
|
|
|
|
4,290
|
|
|
|
65
|
|
|
|
3,049
|
|
|
|
-
|
|
Real estate
– construction & land
|
|
|
1,252
|
|
|
|
1,252
|
|
|
|
274
|
|
|
|
1,290
|
|
|
|
9
|
|
Equity Lines of Credit
|
|
|
415
|
|
|
|
415
|
|
|
|
174
|
|
|
|
429
|
|
|
|
-
|
|
Auto
|
|
|
93
|
|
|
|
93
|
|
|
|
-
|
|
|
|
81
|
|
|
|
-
|
|
Other
|
|
|
1
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
8,582
|
|
|
$
|
9,246
|
|
|
$
|
564
|
|
|
$
|
8,070
|
|
|
$
|
152
|
|
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6.
|
PREMISES
AND EQUIPMENT
|
Premises and equipment consisted of the following:
|
|
December 31,
|
|
|
|
201
6
|
|
|
201
5
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
2,863,000
|
|
|
$
|
2,863,000
|
|
Premises
|
|
|
16,028,000
|
|
|
|
15,833,000
|
|
Furniture, equipment and leasehold improvements
|
|
|
7,505,000
|
|
|
|
7,491,000
|
|
|
|
|
26,396,000
|
|
|
|
26,187,000
|
|
Less accumulated depreciation and amortization
|
|
|
(14,628,000
|
)
|
|
|
(13,953,000
|
)
|
Premises and equipment, net
|
|
$
|
11,768,000
|
|
|
$
|
12,234,000
|
|
Depreciation and amortization included in occupancy and equipment expense totaled $1,0
24,000, $1,055,000 and $1,147,000 for the years ended December 31, 2016, 2015 and 2014, respectively.
Interest-bearing deposits
consisted of the following:
|
|
December 31,
|
|
|
|
201
6
|
|
|
201
5
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing demand deposits
|
|
$
|
91,289,000
|
|
|
$
|
91,225,000
|
|
Money market
|
|
|
57,208,000
|
|
|
|
48,848,000
|
|
Savings
|
|
|
147,474,000
|
|
|
|
125,896,000
|
|
Time, $250,000 or more
|
|
|
4,055,000
|
|
|
|
3,079,000
|
|
Other time
|
|
|
45,548,000
|
|
|
|
49,184,000
|
|
Interest-bearing deposits
|
|
$
|
345,574,000
|
|
|
$
|
318,232,000
|
|
At December 31, 201
6, the scheduled maturities of time deposits were as follows:
Year
Ending December 31,
|
|
|
|
|
|
|
|
|
|
201
7
|
|
$
|
38,579,000
|
|
201
8
|
|
|
6,788,000
|
|
2019
|
|
|
2,422,000
|
|
20
20
|
|
|
1,476,000
|
|
202
1
|
|
|
338,000
|
|
thereafter
|
|
|
-
|
|
|
|
$
|
49,603,000
|
|
Deposit overdrafts reclassified as loan balances were
$252,000 and $364,000 at December 31, 2016 and 2015, respectively.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
8.
|
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
|
Securities sold under agreements to
repurchase totaling $7,547,000 and $7,671,000 at December 31, 2016, and 2015, respectively are secured by U.S. Government agency securities with a carrying amount of $15,113,000 and $13,171,000 at December 31, 2016 and 2015, respectively.
Securities sol
d 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 2016 and 2015 is summarized as follows:
|
|
201
6
|
|
|
201
5
|
|
Average daily balance during the year
|
|
$
|
6,411,000
|
|
|
$
|
6,529,000
|
|
Average interest rate during the year
|
|
|
0.08
|
%
|
|
|
0.08
|
%
|
Maximum month-end balance during the year
|
|
$
|
9,069,000
|
|
|
$
|
8,708,000
|
|
Weighted average interest rate at year-end
|
|
|
0.08
|
%
|
|
|
0.08
|
%
|
9.
|
BORROWING ARRANGEMENTS
|
The Company is a member of the FHLB and can borrow up to $1
72,000,000 from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $270,000,000. The Company is required to hold FHLB stock as a condition of membership. At December 31, 2016 and December 31, 2015, the Company held $2,438,000 and $2,380,000, respectively of FHLB stock which is recorded as a component of other assets. Based on this level of stock holdings at December 31, 2016, the Company can borrow up to $90,281,000. To borrow the $172,000,000 in available credit the Company would need to purchase $2,195,000 in additional FHLB stock. In addition to its FHLB borrowing line, the Company has unsecured short-term borrowing agreements with three of its correspondent banks in the amounts of $20 million, $11 million and $10 million. There were no outstanding borrowings to the FHLB or the correspondent banks under these agreements at December 31, 2016 and 2015
.
On October 24, 2013 the Company issued a $3.0 million promissory note (the “
Note”) payable to an unrelated commercial bank. As originally issued, the Note provided for an interest rate of U.S. “Prime Rate” plus three-quarters percent per annum, 4.00% at December 31, 2014 and 2013, had a term of 18 months and subjected the Bank to several negative and affirmative covenants including, but not limited to providing timely financial information, maintaining specified levels of capital, restrictions on additional borrowings, and meeting or exceeding certain capital and asset quality ratios. The Note is secured by 100 shares of the Bank’s stock representing the 100% of the Company's ownership interest in the Bank.
On July 28, 2014, the Company and the borrower modified the Note to (1) extend the maturity date to October 24, 2015, (2) increase the maximum principal amount to $7.5 million and (3) permit the Company to borrow, repay and reborrow up to t
he maximum principal amount of the Note, among other things.
On October 1, 2015, the Company and the borrower further modified the Note to (1) extend the maturity date to October 1, 2016, (2) reduce the maximum principal amount to $2.5 million and (3) c
hange the interest rate to U.S. "Prime Rate" plus one-half percent per annum. This note was renewed on October 1, 2016 with the following changes in terms:
|
1.)
|
The maturity date was extended to October 1, 2017
|
|
2.)
|
The maximum amount outstanding at any one time on this note and the term loan described below
cannot exceed $5 million.
|
Concurrently, with entering into the second modification of the note on October 1, 2015, the Company entered into a $5.0 million ter
m loan (the “Term Loan”), which matures on October 1, 2018. The Term Loan requires quarterly principal payments of $125,000 plus accrued interest. Both the Term Loan and the Note bear interest at a rate of the U.S. "Prime Rate" plus one-half percent per annum and are secured by 100 shares of Plumas Bank stock representing the Company's 100% ownership interest in Plumas Bank.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
9.
|
BORROWING ARRANGEMENTS
(Continued)
|
Under the Term Loan and the Note, the Bank is subject to several negative and affirmative covenants similar to the covenants under the original Note but in several cases less restrictive. Additional covenant modifications were made on renewal of the Note
on October 1, 2016. The Bank was in compliance with all such covenants related to the Note and the Term Loan at December 31, 2016 and December 31, 2015. Interest expense related to the Note and the Term Loan for the years ended December 31, 2016, 2015 and 2014 totaled $133 thousand, $155 thousand and $111 thousand, respectively. The ending balance of the Note at December 31, 2014 was $1,000,000. There was no balance outstanding on the Note at December 31, 2015 or December 31, 2016. On April 21, 2016 Plumas Bancorp made a $2 million payment on the Term Loan. The payment was funded through a $3 million dividend from Plumas Bank. The balance of the Term Loan was $2,375,000 and $4,875,000 at December 30, 2016 and December 31, 2015, respectively.
On April 15, 20
13 the Company issued a $7.5 million subordinated debenture (“subordinated debt”). The subordinated debt was issued to an unrelated third-party (“Lender”) pursuant to a subordinated debenture purchase agreement, subordinated debenture note, and stock purchase warrant. On April 16, 2015 the Bancorp paid off the subordinated debt. Interest expense related to the subordinated debt for the years ended December 31, 2015 and 2014 totaled $219,000 and $756,000, respectively.
The subordinated debt had an interest
rate of 7.5% per annum and a term of 8 years with no prepayment allowed during the first two years and was made in conjunction with an eight-year warrant (the “Warrant”) to purchase up to 300,000 shares of the Company’s common stock, no par value at an exercise price, subject to anti-dilution adjustments, of $5.25 per share. Under capital guidelines in effect through December 31, 2014 the subordinated debt qualified as Tier 2 capital. However, under the provisions of Basel III, which became effective for the Company on January 1, 2015, the subordinated debt no longer qualified as capital.
The Company allocated the proceeds received on April 15, 2013 between the subordinated debt and the Warrant based on the estimated relative fair value of each. The fair value of the Warrant was estimated based on a Black-Scholes-Merton model and totaled $
318,000. The discount recorded on the subordinated noted was amortized by the level-yield method over 2 years. In May of 2016 the Company repurchased a portion of the warrant, representing the right to purchase 150,000 shares of the registrant’s common stock at a cost of $862,000. The remaining warrant represents the right to purchase 150,000 shares of Plumas Bancorp common stock at an exercise price of $5.25 per share. The warrant expires on April 15, 2021.
Proceeds from the Note and the subordinated de
bt were used to partially fund the repurchase of preferred stock. (See Note 12 - Shareholders’ Equity for additional information related to the repurchase, during 2013, of the Bancorp’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”).
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10.
|
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
|
Plumas Statutory Trust I and II are business trusts formed by the Company with
capital of $319,000 and $166,000, respectively, for the sole purpose of issuing trust preferred securities fully and unconditionally guaranteed by the Company.
During 2002, Plumas Statutory Trust I issued 6,000 Floating Rate Capital Trust Pass-Through S
ecurities ("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.
Trust I
’s Subordinated Debentures mature on September 26, 2032, bear a current interest rate of 4.40% (based on 3-month LIBOR plus 3.40%), with repricing and payments due quarterly. Trust II’s Subordinated Debentures mature on September 28, 2035, bear a current interest rate of 2.44% (based on 3-month LIBOR plus 1.48%), with repricing and payments due quarterly. The Subordinated Debentures are redeemable by the Company, subject to receipt by the Company of prior approval from the Federal Reserve Board of Governors, on any quarterly anniversary date on or after the 5-year anniversary date of the issuance. The redemption price is par plus accrued and unpaid interest, except in the case of redemption under a special event which is defined in the debenture. The Trust Preferred Securities are subject to mandatory redemption to the extent of any early redemption of the Subordinated Debentures and upon maturity of the Subordinated Debentures on September 26, 2032 for Trust I and September 28, 2035 for Trust II.
Holders of the Trust Preferred Securities are entitled to a cumulative cash distr
ibution on the liquidation amount of $1,000 per security. The interest rate of the Trust Preferred Securities issued by Trust I adjust on each quarterly anniversary date to equal the 3-month LIBOR plus 3.40%. The Trust Preferred Securities issued by Trust II adjust on each quarterly anniversary date to equal the 3-month LIBOR plus 1.48%. Both Trusts I and II have the option to defer payment of the distributions for a period of up to five years, as long as the Company is not in default on the payment of interest on the Subordinated Debentures.
The Trust Preferred Securities were sold and issued in private transactions pursuant to an exemption from registration under the Securities Act of 1933, as amended. The Company has guaranteed, on a subordinated basis
, distributions and other payments due on the Trust Preferred Securities.
Interest expense recognized by the Company for the years ended December 31, 201
6, 2015 and 2014 related to the subordinated debentures was $348,000, $306,000 and $3
03,000, respectively.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
11.
|
COMMITMENTS AND CONTINGENCIES
|
Leases
The Company has commitments for leasing premises under the terms of noncancelable operating leases
expiring from 2017 to 2021. Future minimum lease payments are as follows:
Year Ending December 31,
|
|
2017
|
|
$
|
275,000
|
|
2018
|
|
|
219,000
|
|
2019
|
|
|
206,000
|
|
2020
|
|
|
209,000
|
|
2021
|
|
|
187,000
|
|
|
|
$
|
1,096,000
|
|
Rental expense included in
occupancy and equipment expense totaled $276,000, $233,000 and $192,000 for the years ended December 31, 2016, 2015 and 2014, respectively.
Financial Instruments With Off-Balance-Sheet Risk
The Company is a party to financial instruments with off-balan
ce-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:
|
|
December 31,
|
|
|
|
201
6
|
|
|
201
5
|
|
Commitments to extend credit
|
|
$
|
93,699,000
|
|
|
$
|
82,995,000
|
|
Letters of credit
|
|
$
|
625,000
|
|
|
$
|
265,000
|
|
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 fe
e. 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, farm land 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, 2016 and 2015. The Company recognizes these fees as revenues over the term of the commitment or when the commitment is used.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
11.
|
COMMITMENTS AND CONTINGENCIES (Continued)
|
At December 31, 201
6
, consumer loan commitments represent approximately 11% of total commitments and are generally unsecured. Commercial and agricultural loan commitments represent approximately 37% 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 52% 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, Sha
sta and Modoc counties in California and Washoe county 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 ac
tions will not materially affect the financial position or results of operations of the Company.
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 th
e 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 DBO, 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, 2016, the maximum amount available for dividend distribution under this restriction was approximately $9
,900,000. In addition the Company’s ability to pay dividends is subject to certain covenants contained in the indentures relating to the Trust Preferred Securities issued by the business trusts (see Note 10 for additional information related to the Trust Preferred Securities).
On October 20, 2016 the Co
mpany announced that its Board of Directors approved the reinstatement of a semi-annual cash dividend. The dividend, in the amount of $0.10 per share, was paid on November 21, 2016 to shareholders of record at the close of business day on November 7, 2016.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12.
|
SHAREHOLDERS' EQUITY (Continued)
|
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)
|
|
201
6
|
|
|
201
5
|
|
|
201
4
|
|
Net Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
7,474
|
|
|
$
|
5,818
|
|
|
$
|
4,738
|
|
Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
1.54
|
|
|
$
|
1.21
|
|
|
$
|
0.99
|
|
Diluted earnings per
share
|
|
$
|
1.47
|
|
|
$
|
1.15
|
|
|
$
|
0.95
|
|
Weighted Average Number of Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares
|
|
|
4,864
|
|
|
|
4,817
|
|
|
|
4,793
|
|
Diluted shares
|
|
|
5,098
|
|
|
|
5,058
|
|
|
|
4,977
|
|
Shares of common stock issuable under stock options and warrants 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 a
nd warrants not included in the computation of diluted earnings per share, due to shares not being in the-money and having an antidilutive effect, were 63,000, 53,000 and 238,000 for the years ended December 31, 2016, 2015 and 2014, respectively. At December 31, 2016 one stock warrant was outstanding to purchase up to 150,000 shares of the Bancorp’s common stock at an exercise price, subject to anti-dilution adjustments, of $5.25 per share. At December 31, 2015 and 2014 one stock warrant was outstanding to purchase up to 300,000 shares of the Bancorp’s common stock at an exercise price, subject to anti-dilution adjustments, of $5.25 per share.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12.
|
SHAREHOLDERS' EQUI
TY (Continued)
|
Stock Options
In 2001, the Company established a Sto
ck Option Plan for which 81,893 shares of common stock remain reserved for issuance to employees and directors and no shares are available for future grants as of December 31, 2016
.
As of December 31, 201
6, all remaining shares in this plan have vested and no compensation cost remains unrecognized.
The total fair value of options vested was
$0 and $49,000 for the years ended December 31, 2016 and 2015. The total intrinsic value of options at time of exercise was $427,000 and $240,000 for the years ended December 31, 2016 and 2015, respectively.
A summary of the activity within the 2001 Plan follows:
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Term in Years
|
|
|
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at January 1, 2014
|
|
|
365,059
|
|
|
$
|
8.53
|
|
|
|
|
|
|
|
|
|
Options forfeited
|
|
|
(47,266
|
)
|
|
|
13.64
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(11,400
|
)
|
|
|
2.95
|
|
|
|
|
|
|
|
|
|
Options
outstanding at December 31, 2014
|
|
|
306,393
|
|
|
|
7.95
|
|
|
|
|
|
|
|
|
|
Options forfeited
|
|
|
(74,600
|
)
|
|
|
16.26
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(38,900
|
)
|
|
|
2.95
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 31, 201
5
|
|
|
192,893
|
|
|
|
5.75
|
|
|
|
|
|
|
|
|
|
Options forfeited
|
|
|
(55,800
|
)
|
|
|
12.61
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(55,200
|
)
|
|
|
2.95
|
|
|
|
|
|
|
|
|
|
Option
s outstanding at December 31, 2016
|
|
|
81,893
|
|
|
$
|
2.95
|
|
|
|
2.2
|
|
|
$
|
1,314,000
|
|
Options exercisable at December 31, 201
6
|
|
|
81,893
|
|
|
$
|
2.95
|
|
|
|
2.2
|
|
|
$
|
1,314,000
|
|
Expected to vest after December 31, 201
6
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In May 2013, the Company established the 2013 Stock Option Plan for which
489,443 shares of common stock are reserved and 298,400 shares are available for future grants as of December 31, 2016. The 2013 Plan requires that the option price may not be less than the fair market value of the stock at the date the option is granted, and that the stock must be paid in full at the time the option is exercised. Payment in full for the option price must be made in cash, with Company common stock previously acquired by the optionee and held by the optionee for a period of at least six months, in options of the Optionee that are fully vested and exercisable or in any combination of the foregoing. The options expire on dates determined by the Board of Directors, but not later than ten years from the date of grant. During the years ended December 31, 2016 and 2014 108,000 and 110,400 options were granted, respectively. No options were granted during the year ended December 31, 2015
.
As of December 31, 201
6, there was $282,000 of total unrecognized compensation cost related to non-vested, share-based compensation arrangements granted under the 2013 Plan. That cost is expected to be recognized over a weighted average period of 2.5 years.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12.
|
SHAREHOLDERS' EQUITY (Continued)
|
Stock Options
(continued)
A summary of the activity within the 2013 Plan follows:
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Term in
Years
|
|
|
Intrinsic
Value
|
|
Options outstanding at January 1, 2014
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
110,400
|
|
|
$
|
6.32
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 31, 2014
|
|
|
110,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options cancelled
|
|
|
(7,200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(800
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 31, 2015
|
|
|
102,400
|
|
|
|
6.32
|
|
|
|
|
|
|
|
|
|
Option
granted
|
|
|
108,000
|
|
|
|
8.75
|
|
|
|
|
|
|
|
|
|
Options cancelled
|
|
|
(9,600
|
)
|
|
|
7.94
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(8,000
|
)
|
|
|
6.32
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 31, 2016
|
|
|
192,800
|
|
|
$
|
7.60
|
|
|
|
6.3
|
|
|
$
|
2,198,000
|
|
Options exercisable at December 31, 2016
|
|
|
44,000
|
|
|
$
|
6.32
|
|
|
|
5.3
|
|
|
$
|
558,000
|
|
Expected to vest after December 31, 2016
|
|
|
129,798
|
|
|
$
|
7.98
|
|
|
|
6.6
|
|
|
$
|
1,430,000
|
|
Compensation cost related to stock options recognized in operating results under the two stock option plans was
$116,000, $70,000 and $81,000 for the years ended December 31, 2016, 2015 and 2014, respectively. The associated future income tax benefit recognized was $13,000
, $7,000
, $6,000 for the years ended December 31, 2016, 2015 and 2014, respectively
.
Cash received from option exercises for the years ended December 31, 201
6, 2015 and 2014 was $200
,000, $88,000 and $34,000, respectively. The tax benefit realized for the tax deductions from option exercise totaled $12,000, $13,000 and $13,000 for the years ended December 31, 2016, 2015 and 2014, respectively
.
Regulatory Capital
Th
e 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 involved 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 framewo
rk 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 table on the following page and cannot be subject to a written agreement, order or capital directive issued by the FDIC.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12.
|
SHAREHOLDERS' EQUITY (Continued)
|
Regulatory Capital
(continued)
In July, 2013, the federal bank regulatory
agencies approved the final rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks, sometimes called “Basel III”. The phase-in period for the final rules began in 2015, with certain of the rules’ requirements phased in over a multi-year schedule. Under the final rules minimum requirements increased for both the quantity and quality of capital held by the Company and the Bank. The new capital rules include a new minimum “common equity Tier 1” ratio of 4.5%, a Tier 1 capital ratio of 6.0% (increased from 4.0%), 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 effective date of these requirements was January 1, 2015. In addition, the new capital rules include a capital conservation buffer of 2.5% above each of these levels (to be phased in over three years which beginning at 0.625% on January 1, 2016 and increasing by that amount on each subsequent January 1, until reaching 2.5% on January 1, 2019) will be required for banking institutions to avoid restrictions on their ability to pay dividends, repurchase stock or pay discretionary bonuses. Including the capital conservation buffer of 2.5%, the New Capital Rules would result in the following minimum ratios to be considered well capitalized: (i) a Tier 1 capital ratio of 8.5%, (ii) a common equity Tier 1 capital ratio of 7.0%, and (iii) a total capital ratio of 10.5%. The final rules also implement strict eligibility criteria for regulatory capital instruments.
The Board of Governors of the Federal Reserve System has adopted final amendments to the Small Bank Holding Company Policy Statement (Regulation Y, Appendix C) ( the “
Policy Statement”) that, among other things, raised from $500 million to $1 billion the asset threshold to qualify for the Policy Statement. Plumas Bancorp qualifies for treatment under the Policy Statement and is no longer subject to consolidated capital rules at the bank holding company level.
T
he following table sets forth the Bank's actual capital amounts and ratios (dollar amounts in thousands):
|
|
|
|
|
|
|
|
|
|
Amount of Capital Required
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To be Well-Capitalized
|
|
|
|
|
|
|
|
|
|
|
|
For Capital
|
|
|
Under Prompt
|
|
|
|
Actual
|
|
|
Adequacy Purposes
|
|
|
Corrective Provisions
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Equity Tier 1 Ratio
|
|
$
|
60,521
|
|
|
|
12.1
|
%
|
|
$
|
22,597
|
|
|
|
4.5
|
%
|
|
$
|
32,641
|
|
|
|
6.5
|
%
|
Tier 1 Leverage Ratio
|
|
|
60,521
|
|
|
|
9.2
|
%
|
|
|
26,353
|
|
|
|
4.0
|
%
|
|
|
32,941
|
|
|
|
5.0
|
%
|
Tier 1 Risk-Based Capital Ratio
|
|
|
60,521
|
|
|
|
12.1
|
%
|
|
|
30,130
|
|
|
|
6.0
|
%
|
|
|
40,173
|
|
|
|
8.0
|
%
|
Total Risk-Based Capital Ratio
|
|
|
66,804
|
|
|
|
13.3
|
%
|
|
|
40,173
|
|
|
|
8.0
|
%
|
|
|
50,217
|
|
|
|
10.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Equity Tier 1 Ratio
|
|
$
|
56,300
|
|
|
|
12.7
|
%
|
|
$
|
19,908
|
|
|
|
4.5
|
%
|
|
$
|
28,756
|
|
|
|
6.5
|
%
|
Tier 1 Leverage Ratio
|
|
|
56,300
|
|
|
|
9.4
|
%
|
|
|
23,999
|
|
|
|
4.0
|
%
|
|
|
29,999
|
|
|
|
5.0
|
%
|
Tier 1 Risk-Based Capital Ratio
|
|
|
56,300
|
|
|
|
12.7
|
%
|
|
|
26,544
|
|
|
|
6.0
|
%
|
|
|
35,392
|
|
|
|
8.0
|
%
|
Total Risk-Based Capital Ratio
|
|
|
61,839
|
|
|
|
14.0
|
%
|
|
|
35,392
|
|
|
|
8.0
|
%
|
|
|
44,240
|
|
|
|
10.0
|
%
|
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.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Other expenses consisted of the following:
|
|
Year Ended December 31,
|
|
|
|
201
6
|
|
|
201
5
|
|
|
201
4
|
|
Outside se
rvice fees
|
|
$
|
2,105,000
|
|
|
$
|
2,003,000
|
|
|
$
|
2,042,000
|
|
Professional fees
|
|
|
608,000
|
|
|
|
707,000
|
|
|
|
583,000
|
|
Telephone and data communications
|
|
|
450,000
|
|
|
|
376,000
|
|
|
|
351,000
|
|
Advertising and promotion
|
|
|
366,000
|
|
|
|
305,000
|
|
|
|
282,000
|
|
Director compensation and retirement
|
|
|
348,000
|
|
|
|
300,000
|
|
|
|
298,000
|
|
Business development
|
|
|
344,000
|
|
|
|
332,000
|
|
|
|
279,000
|
|
Deposit insurance
|
|
|
285,000
|
|
|
|
362,000
|
|
|
|
387,000
|
|
Armored car and courier
|
|
|
248,000
|
|
|
|
234,000
|
|
|
|
224,000
|
|
Loan collection expenses
|
|
|
166,000
|
|
|
|
200,000
|
|
|
|
182,000
|
|
Stationery and supplies
|
|
|
119,000
|
|
|
|
105,000
|
|
|
|
122,000
|
|
Insurance
|
|
|
78,000
|
|
|
|
95,000
|
|
|
|
(9,000
|
)
|
Postage
|
|
|
40,000
|
|
|
|
41,000
|
|
|
|
45,000
|
|
Provision from change in OREO valuation
|
|
|
37,000
|
|
|
|
79,000
|
|
|
|
240,000
|
|
OREO expenses
|
|
|
(34,000
|
)
|
|
|
182,000
|
|
|
|
362,000
|
|
Gain on sale of other real estate
|
|
|
(60,000
|
)
|
|
|
(198,000
|
)
|
|
|
(101,000
|
)
|
Other operating expenses
|
|
|
309,000
|
|
|
|
309,000
|
|
|
|
182,000
|
|
Other non-interest expense
|
|
$
|
5,409,000
|
|
|
$
|
5,432,000
|
|
|
$
|
5,469,000
|
|
The provision for income taxes for the years ended December 31, 201
6, 2015 and 2014 consisted of the following:
2016
|
|
Federal
|
|
|
State
|
|
|
Total
|
|
Current
|
|
$
|
4,156,000
|
|
|
$
|
1,263,000
|
|
|
$
|
5,419,000
|
|
Deferred
|
|
|
(575,000
|
)
|
|
|
(85,000
|
)
|
|
|
(660,000
|
)
|
Provision for income taxes
|
|
$
|
3,581,000
|
|
|
$
|
1,178,000
|
|
|
$
|
4,759,000
|
|
2015
|
|
Federal
|
|
|
State
|
|
|
Total
|
|
Current
|
|
$
|
3,625,000
|
|
|
$
|
631,000
|
|
|
$
|
4,256,000
|
|
Deferred
|
|
|
(848,000
|
)
|
|
|
309,000
|
|
|
|
(539,000
|
)
|
Provision for income taxes
|
|
$
|
2,777,000
|
|
|
$
|
940,000
|
|
|
$
|
3,717,000
|
|
2014
|
|
Federal
|
|
|
State
|
|
|
Total
|
|
Current
|
|
$
|
1,863,000
|
|
|
$
|
58,000
|
|
|
$
|
1,921,000
|
|
Deferred
|
|
|
401,000
|
|
|
|
764,000
|
|
|
|
1,165,000
|
|
Provision for income taxes
|
|
$
|
2,264,000
|
|
|
$
|
822,000
|
|
|
$
|
3,086,000
|
|
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
14.
|
INCOME TAXES (Continued)
|
Deferred tax assets (liabilities) consisted of the following:
|
|
December 31,
|
|
|
|
201
6
|
|
|
201
5
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
1,741,000
|
|
|
$
|
903,000
|
|
Deferred compensation
|
|
|
1,574,000
|
|
|
|
1,774,000
|
|
OREO valuation allowance
|
|
|
519,000
|
|
|
|
556,000
|
|
Premises and equipment
|
|
|
515,000
|
|
|
|
619,000
|
|
Unrealized loss on available-for-sale investment securities
|
|
|
682,000
|
|
|
|
30,000
|
|
Other
|
|
|
1,070,000
|
|
|
|
721,000
|
|
Total deferred tax assets
|
|
|
6,101,000
|
|
|
|
4,603,000
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred loan costs
|
|
|
(1,628,000
|
)
|
|
|
(1,436,000
|
)
|
Other
|
|
|
(238,000
|
)
|
|
|
(244,000
|
)
|
Total deferred tax liabilities
|
|
|
(1,866,000
|
)
|
|
|
(1,680,000
|
)
|
Net deferred tax assets
|
|
$
|
4,235,000
|
|
|
$
|
2,923,000
|
|
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 expect
ed 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, 201
6 total deferred tax assets were approximately $6,101,000 and total deferred tax liabilities were approximately $1,866,000 for a net deferred tax asset of $4,235,000. The Company’s deferred tax assets primarily relate timing differences in the tax deductibility of impairment charges on other real estate owned, deprecation on premises and equipment, the provision for loan 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, 2016 and 2015 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.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
14.
|
INCOME TAXES (Continued)
|
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:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Fed
eral income tax, at statutory rate
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
State franchise tax, net of Federal tax effect
|
|
|
6.9
|
%
|
|
|
6.9
|
%
|
|
|
6.9
|
%
|
Interest on obligations of states and political subdivisions
|
|
|
(1.5
|
)%
|
|
|
(1.3
|
)%
|
|
|
(0.7
|
)%
|
Net
increase in cash surrender value of bank owned life insurance
|
|
|
(0.9
|
)%
|
|
|
(1.2
|
)%
|
|
|
(1.5
|
)%
|
Other
|
|
|
0.4
|
%
|
|
|
0.6
|
%
|
|
|
0.7
|
%
|
Effective tax rate
|
|
|
38.9
|
%
|
|
|
39.0
|
%
|
|
|
39.4
|
%
|
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 Arizona, California, Nevada and Oregon. 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, 20
13, and by state and local taxing authorities for years ended before December 31, 2012.
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, 2016 and 2015 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.
15.
|
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 2016:
Balance, January 1, 201
6
|
|
$
|
3,249,000
|
|
Disbursements
|
|
|
2,498,000
|
|
Amounts repaid
|
|
|
(3,511,000
|
)
|
Balance, December 31, 201
6
|
|
$
|
2,236,000
|
|
Undisbursed commitments to related parties, December 31, 201
6
|
|
$
|
2,442,000
|
|
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
16.
|
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. During 2016 and 2015, the Company’s contribution consisted of a matching amount of 25% of the employee’s contribution up to a total of 2% of the employee’s compensation totaling $114,000 and $111,000, respectively. No contribution was made for the year ended December 31, 2014.
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, 2016, 2015 and 2014 totaled $269,000, $258,000 and $289,000, respectively. Accrued compensation payable under these plans totaled $3,889,000 and $3,973,000 at December 31, 2016 and 2015, respectively.
In connection with
some of these agreements, the Bank purchased single premium life insurance policies with cash surrender values totaling $12,528,000 and $12,187,000 at December 31, 2016 and 2015, respectively. Income earned on these policies, net of expenses, totaled $341,000, $342,000 and $341,000 for the years ended December 31, 2016, 2015 and 2014, respectively.
PLUMAS BANCORP AND SUBSID
IARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
17.
|
PARENT ONLY CONDENSED FINANCIAL STATEMENTS
|
CONDENSED BALANCE SHEETS
December 31, 201
6
and 201
5
|
|
201
6
|
|
|
201
5
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
281,000
|
|
|
$
|
849,000
|
|
Investment in bank subsidiary
|
|
|
59,840,000
|
|
|
|
56,295,000
|
|
Other assets
|
|
|
571,000
|
|
|
|
552,000
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
60,692,000
|
|
|
$
|
57,696,000
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
$
|
13,000
|
|
|
$
|
15,000
|
|
Note payable
|
|
|
2,375,000
|
|
|
|
4,875,000
|
|
Junior subordinated deferrable interest debentures
|
|
|
10,310,000
|
|
|
|
10,310,000
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
12,698,000
|
|
|
|
15,200,000
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity:
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
5,918,000
|
|
|
|
6,475,000
|
|
Retained earnings
|
|
|
43,048,000
|
|
|
|
36,063,000
|
|
Accumulated other comprehensive loss
|
|
|
(972,000
|
)
|
|
|
(42,000
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity
|
|
|
47,994,000
|
|
|
|
42,496,000
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
|
$
|
60,692,000
|
|
|
$
|
57,696,000
|
|
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Years Ended
December 31, 201
6
, 201
5
and 201
4
|
|
201
6
|
|
|
201
5
|
|
|
201
4
|
|
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared by bank subsidiary
|
|
$
|
3,500,000
|
|
|
$
|
4,000,000
|
|
|
$
|
2,500,000
|
|
Earnings from investment in Plumas
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory
Trusts I and II
|
|
|
10,000
|
|
|
|
9,000
|
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income
|
|
|
3,510,000
|
|
|
|
4,009,000
|
|
|
|
2,509,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on note payable
|
|
|
133,000
|
|
|
|
155,000
|
|
|
|
111,000
|
|
Interest on subordinated debenture
|
|
|
-
|
|
|
|
219,000
|
|
|
|
756,000
|
|
Interest on junior subordinated deferrable interest
debentures
|
|
|
348,000
|
|
|
|
306,000
|
|
|
|
303,000
|
|
Other expenses
|
|
|
235,000
|
|
|
|
206,000
|
|
|
|
211,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
716,000
|
|
|
|
886,000
|
|
|
|
1,381,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before equity in undistributed income of subsidiary
|
|
|
2,794,000
|
|
|
|
3,123,000
|
|
|
|
1,128,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in undistributed income of subsidiary
|
|
|
4,390,000
|
|
|
|
2,353,000
|
|
|
|
3,111,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
7,184,000
|
|
|
|
5,476,000
|
|
|
|
4,239,000
|
|
Income tax benefit
|
|
|
290,000
|
|
|
|
342,000
|
|
|
|
499,000
|
|
Net income
|
|
$
|
7,474,000
|
|
|
$
|
5,818,000
|
|
|
$
|
4,738,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
6,544,000
|
|
|
$
|
5,836,000
|
|
|
$
|
5,841,000
|
|
PLU
MAS BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
17.
|
PARENT ONLY CONDENSED FINANCIAL STATEMENTS (Continued)
|
CONDENSED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 201
6
, 201
5
and 201
4
|
|
201
6
|
|
|
201
5
|
|
|
201
4
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
7,474,000
|
|
|
$
|
5,818,000
|
|
|
$
|
4,738,000
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Undistributed
income of subsidiary
|
|
|
(4,390,000
|
)
|
|
|
(2,353,000
|
)
|
|
|
(3,111,000
|
)
|
Amortization of discount on debentures
|
|
|
-
|
|
|
|
45,000
|
|
|
|
159,000
|
|
Stock-based compensation expense
|
|
|
32,000
|
|
|
|
17,000
|
|
|
|
14,000
|
|
(
Decrease) increase in other assets
|
|
|
(31,000
|
)
|
|
|
238,000
|
|
|
|
207,000
|
|
Decrease in other liabilities
|
|
|
(2,000
|
)
|
|
|
(7,000
|
)
|
|
|
(11,000
|
)
|
Net cash provided by operating activities
|
|
|
3,083,000
|
|
|
|
3,758,000
|
|
|
|
1,996,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid on common stock
|
|
|
(489,000
|
)
|
|
|
-
|
|
|
|
-
|
|
Redemption of subordinated debt
|
|
|
-
|
|
|
|
(7,500,000
|
)
|
|
|
-
|
|
Repurchase of common stock warrant
|
|
|
(862,000
|
)
|
|
|
-
|
|
|
|
-
|
|
Increase in note payable
|
|
|
-
|
|
|
|
4,000,000
|
|
|
|
-
|
|
Payment on note payable
|
|
|
(2,500,000
|
)
|
|
|
(125,000
|
)
|
|
|
(2,000,000
|
)
|
Proceeds from exercise of stock options
|
|
|
200,000
|
|
|
|
88,000
|
|
|
|
34,000
|
|
Net cash used in financing activities
|
|
|
(3,651,000
|
)
|
|
|
(3,537,000
|
)
|
|
|
(1,966,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) i
ncrease in cash and cash equivalents
|
|
|
(568,000
|
)
|
|
|
221,000
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year
|
|
|
849,000
|
|
|
|
628,000
|
|
|
|
598,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
281,000
|
|
|
$
|
849,000
|
|
|
$
|
628,000
|
|