Plumas Bancorp 10-Q for FY2021 Q1
Plumas Bancorp (PLBC)
About this 10-Q
Plumas Bancorp filed this 10-Q on May 5, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).
Headline figures
Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $540K
- down 23.4% from $705K a year earlier
- Net income
- $4.44M
- up 33.9% from net income of $3.32M a year earlier
- Diluted EPS
- $0.85
- up 34.9% from $0.63 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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| | QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED |
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| | TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO ___________ |
COMMISSION FILE NUMBER:
PLUMAS BANCORP
(Exact Name of Registrant as Specified in Its Charter)
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| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
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| (Address of Principal Executive Offices) | (Zip Code) |
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| Registrant’s Telephone Number, Including Area Code ( | |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act:
Large Accelerated Filer ☐ Accelerated Filer ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class: | Trading Symbol | Name of Each Exchange on which Registered: |
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Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of May 3, 2021.
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PLUMAS BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
| March 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investment securities available for sale | ||||||||
| Loans, less allowance for loan losses of at March 31, 2021 and at December 31, 2020 | ||||||||
| Real estate acquired through foreclosure | ||||||||
| Premises and equipment, net | ||||||||
| Bank owned life insurance | ||||||||
| Accrued interest receivable and other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Deposits: | ||||||||
| Non-interest bearing | $ | $ | ||||||
| Interest bearing | ||||||||
| Total deposits | ||||||||
| Repurchase agreements | ||||||||
| Accrued interest payable and other liabilities | ||||||||
| Federal Home Loan Bank advances | ||||||||
| Junior subordinated deferrable interest debentures | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 5) | ||||||||
| Shareholders’ equity: | ||||||||
| Common stock, par value; shares authorized; issued and outstanding – shares at March 31, 2021 and at December 31, 2020 | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive income, net | ||||||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements.
PLUMAS BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2021 | 2020 | |||||||
| Interest Income: | ||||||||
| Interest and fees on loans | $ | $ | ||||||
| Interest on investment securities | ||||||||
| Other | ||||||||
| Total interest income | ||||||||
| Interest Expense: | ||||||||
| Interest on deposits | ||||||||
| Interest on junior subordinated deferrable interest debentures | ||||||||
| Other | ||||||||
| Total interest expense | ||||||||
| Net interest income before provision for loan losses | ||||||||
| Provision for Loan Losses | ||||||||
| Net interest income after provision for loan losses | ||||||||
| Non-Interest Income: | ||||||||
| Service charges | ||||||||
| Interchange revenue | ||||||||
| Gain on sale of loans | ||||||||
| Other | ||||||||
| Total non-interest income | ||||||||
| Non-Interest Expenses: | ||||||||
| Salaries and employee benefits | ||||||||
| Occupancy and equipment | ||||||||
| Other | ||||||||
| Total non-interest expenses | ||||||||
| Income before provision for income taxes | ||||||||
| Provision for Income Taxes | ||||||||
| Net income | $ | $ | ||||||
| Basic earnings per share | $ | $ | ||||||
| Diluted earnings per share | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements.
PLUMAS BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2021 | 2020 | |||||||
| Net income | $ | $ | ||||||
| Other comprehensive income: | ||||||||
| Change in net unrealized gain on securities | ( | ) | ||||||
| Change in unrealized gain on cash flow hedge | ||||||||
| Net unrealized holding (loss) gain | ( | ) | ||||||
| Related tax effect: | ||||||||
| Change in net unrealized gain | ( | ) | ||||||
| Change in unrealized gain on cash flow hedge | ( | ) | ||||||
| Income tax effect | ( | ) | ||||||
| Other comprehensive (loss) income | ( | ) | ||||||
| Total comprehensive income | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements.
PLUMAS BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands, except shares)
| Common Stock | Retained | Accumulated Other Comprehensive Income | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | Earnings | (Net of Taxes) | Equity | ||||||||||||||||
| Balance, December 31, 2019 | $ | $ | $ | $ | ||||||||||||||||
| Net Income | ||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||
| Exercise of stock options and tax effect | ||||||||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||
| Balance, March 31, 2020 | $ | $ | $ | $ | ||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | ||||||||||||||||
| Net Income | ||||||||||||||||||||
| Other comprehensive loss | ( | ) | ( | ) | ||||||||||||||||
| Cash dividends on common stock | ( | ) | ( | ) | ||||||||||||||||
| Exercise of stock options and tax effect | ||||||||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||
| Balance, March 31, 2021 | $ | $ | $ | $ | ||||||||||||||||
| See notes to unaudited condensed consolidated financial statements. |
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PLUMAS BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Provision for loan losses | ||||||||
| Change in deferred loan origination costs/fees, net | ( | ) | ||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation expense | ||||||||
| Amortization of investment security premiums | ||||||||
| Loss on sale of other vehicles | ||||||||
| Gain on sale of loans held for sale | ( | ) | ( | ) | ||||
| Loans originated for sale | ( | ) | ( | ) | ||||
| Proceeds from loan sales | ||||||||
| Earnings on bank-owned life insurance | ( | ) | ( | ) | ||||
| Decrease (increase) in accrued interest receivable and other assets | ( | ) | ||||||
| Decrease in accrued interest payable and other liabilities | ||||||||
| Net cash provided by operating activities | ||||||||
| Cash Flows from Investing Activities: | ||||||||
| Proceeds from principal repayments from available-for-sale government-sponsored mortgage-backed securities | ||||||||
| Proceeds from matured and called available-for-sale securities | ||||||||
| Purchases of available-for-sale securities | ( | ) | ( | ) | ||||
| Purchase of FRB stock | ( | ) | ||||||
| Net increase in loans | ( | ) | ( | ) | ||||
| Proceeds from sale of other vehicles | ||||||||
| Purchase of premises and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
Continued on next page.
PLUMAS BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
(Continued)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash Flows from Financing Activities: | ||||||||
| Net increase in demand, interest bearing and savings deposits | $ | $ | ||||||
| Net increase (decrease) in time deposits | ( | ) | ||||||
| Net decrease in securities sold under agreements to repurchase | ( | ) | ( | ) | ||||
| Cash dividends paid on common stock | ( | ) | ||||||
| Proceeds from exercise of stock options | ||||||||
| Net cash provided by financing activities | ||||||||
| Increase in cash and cash equivalents | ||||||||
| Cash and Cash Equivalents at Beginning of Year | ||||||||
| Cash and Cash Equivalents at End of Period | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest expense | $ | $ | ||||||
| Non-Cash Investing Activities: | ||||||||
| Real estate and vehicles acquired through foreclosure | $ | $ | ||||||
| Non-Cash Financing Activities: | ||||||||
| Common stock retired in connection with the exercise of stock options | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements.
PLUMAS BANCORP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. THE BUSINESS OF PLUMAS BANCORP
During 2002, Plumas Bancorp (the "Company") was incorporated as a bank holding company for the purpose of acquiring Plumas Bank (the "Bank") in a one bank holding company reorganization. This corporate structure gives the Company and the Bank greater flexibility in terms of operation, expansion and diversification. The Company formed Plumas Statutory Trust I ("Trust I") for the sole purpose of issuing trust preferred securities on September 26, 2002. The Company formed Plumas Statutory Trust II ("Trust II") for the sole purpose of issuing trust preferred securities on September 28, 2005.
The Bank operates 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 and in 2018 the Bank purchased a branch located in Carson City, Nevada. The Bank’s administrative headquarters is in Quincy, California. In addition, the Bank operates a lending office specializing in government-guaranteed lending in Auburn, California, 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 subsidiary, Plumas Bank. All significant intercompany balances and transactions have been eliminated.
Plumas Statutory Trust I and Trust II are not consolidated into the Company's consolidated financial statements and, accordingly, are accounted for under the equity method. The Company's investment in Trust I of $
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. In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company’s financial position at March 31, 2021 and the results of its operations and its cash flows for the three- month period ended March 31, 2021 and 2020. Our condensed consolidated balance sheet at December 31, 2020 is derived from audited financial statements.
The unaudited condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting on Form 10-Q. Accordingly, certain disclosures normally presented in the notes to the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted. The Company believes that the disclosures are adequate to make the information not misleading. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 2020 Annual Report to Shareholders on Form 10-K. The results of operations for the three-month period ended March 31, 2021 may not necessarily be indicative of future operating results. In preparing such financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the periods reported. Actual results could differ significantly from those estimates.
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.
Revenue from Contracts with Customers
The Company records revenue from contracts with customers in accordance with Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“Topic 606”). Under Topic 606, the Company must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) the Company satisfies a performance obligation. Significant revenue has not been recognized in the current reporting period that results from performance obligations satisfied in previous periods.
Most of the Company’s revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as the Company’s loans and investment securities. The Company has evaluated the nature of its contracts with customers and determined that further disaggregation of revenue from contracts with customers into more granular categories beyond what is presented in the Condensed Consolidated Statements of Income was not necessary. The Company generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers.
Pending Accounting Pronouncements
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. On October 16, 2019, the FASB approved a proposal to change the effective date of ASU No. 2016-13 for smaller reporting companies, as defined by the SEC, and other non-SEC reporting entities delaying the effective date to fiscal years beginning after December 31, 2022, including interim periods within those fiscal periods. As the Company is a smaller reporting company and has not adopted provisions of the standard early, the delay is applicable to the Company. 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. We have purchased software to support the CECL calculation of the allowance for loan losses under ASU No 2016-13 and have engaged the software vendor to assist in the transition to the CECL model. 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.
3. INVESTMENT SECURITIES AVAILABLE FOR SALE
The amortized cost and estimated fair value of investment securities at March 31, 2021 and December 31, 2020 consisted of the following, in thousands:
| Available-for-Sale | March 31, 2021 | |||||||||||||||
| Gross | Gross | |||||||||||||||
| Amortized | Unrealized | Unrealized | Fair | |||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
| Debt securities: | ||||||||||||||||
| U.S. Government-sponsored agencies collateralized by mortgage obligations- residential | $ | $ | $ | ( | ) | $ | ||||||||||
| U.S. Government-agencies collateralized by mortgage obligations-commercial | ( | ) | ||||||||||||||
| Obligations of states and political subdivisions | ( | ) | ||||||||||||||
| $ | $ | $ | ( | ) | $ | |||||||||||
Unrealized gains on available-for-sale investment securities totaling $
| Available-for-Sale | December 31, 2020 | |||||||||||||||
| Gross | Gross | |||||||||||||||
| Amortized | Unrealized | Unrealized | Fair | |||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
| Debt securities: | ||||||||||||||||
| U.S. Government-sponsored agencies collateralized by mortgage obligations- residential | $ | $ | $ | ( | ) | $ | ||||||||||
| U.S. Government-agencies collateralized by mortgage obligations-commercial | $ | |||||||||||||||
| Obligations of states and political subdivisions | ( | ) | ||||||||||||||
| $ | $ | $ | ( | ) | $ | |||||||||||
Unrealized gains on available-for-sale investment securities totaling $
There were no transfers of available-for-sale investment securities during the three months ended March 31, 2021 and twelve months ended December 31, 2020. There were
Investment securities with unrealized losses at March 31, 2021 and December 31, 2020 are summarized and classified according to the duration of the loss period as follows, in thousands:
| March 31, 2021 | Less than 12 Months | 12 Months or More | Total | |||||||||||||||||||||
| Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
| Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
| Debt securities: | ||||||||||||||||||||||||
| U.S. Government-sponsored agencies collateralized by mortgage obligations-residential | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| U.S. Government-agencies collateralized by mortgage obligations-commercial | ||||||||||||||||||||||||
| Obligations of states and political subdivisions | ||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
| December 31, 2020 | Less than 12 Months | 12 Months or More | Total | |||||||||||||||||||||
| Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
| Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
| Debt securities: | ||||||||||||||||||||||||
| U.S. Government-sponsored agencies collateralized by mortgage obligations-residential | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| U.S. Government-agencies collateralized by mortgage obligations-commercial | ||||||||||||||||||||||||
| Obligations of states and political subdivisions | ||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
At March 31, 2021, the Company held
The amortized cost and estimated fair value of investment securities at March 31, 2021 by contractual maturity are shown below, in thousands.
| Amortized Cost | Estimated Fair Value | |||||||
| Within one year | $ | $ | ||||||
| After one year through five years | ||||||||
| After five years through ten years | ||||||||
| After ten years | ||||||||
| Investment securities not due at a single maturity date: | ||||||||
| Government- agencies commercial mortgage-backed securities | ||||||||
| Government-sponsored agencies residential mortage-backed securities | ||||||||
| $ | $ | |||||||
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.
Investment securities with amortized costs totaling $
4. LOANS AND THE ALLOWANCE FOR LOAN LOSSES
Outstanding loans are summarized below, in thousands:
| March 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Commercial | $ | $ | ||||||
| Agricultural | ||||||||
| Real estate – residential | ||||||||
| Real estate – commercial | ||||||||
| Real estate – construction and land development | ||||||||
| Equity lines of credit | ||||||||
| Auto | ||||||||
| Other | ||||||||
| Total loans | ||||||||
| Deferred loan (fees) costs, net | ( | ) | ||||||
| Allowance for loan losses | ( | ) | ( | ) | ||||
| Total net loans | $ | $ | ||||||
Changes in the allowance for loan losses, in thousands, were as follows:
| March 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Balance, beginning of period | $ | $ | ||||||
| Provision charged to operations | ||||||||
| Losses charged to allowance | ( | ) | ( | ) | ||||
| Recoveries | ||||||||
| Balance, end of period | $ | $ | ||||||
The recorded investment in impaired loans totaled $
Included in impaired loans are troubled debt restructurings. Section 4013 of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) provides that a qualifying loan modification or extension is exempt by law from classification as a Troubled Debt Restructuring ("TDR") pursuant to FASB ASC 340-10. Under Section 541 of the Consolidated Appropriations Act, 2021, Congress extended the Troubled Debt Restructurings relief for financial institutions through January 1, 2022. In addition, FIL-36-2020 issued by the FDIC on April 7, 2020 provides more limited circumstances in which a loan modification or extension is not subject to classification as a TDR pursuant to FASB ASC 340-10.
The Company evaluates loan extensions or modifications not qualified under Section 4013 of the CARES Act or under FIL-36-2020 in accordance with FASB ASC 340-10 with respect to the classification of the loan as a TDR. Under ASC 340-10, if the Company grants a loan extension or modification to a borrower experiencing financial difficulties for other than an insignificant period of time that includes a below–market interest rate, principal forgiveness, payment forbearance or other concession intended to minimize the economic loss to the Company, the loan extension or loan modification is classified as a TDR. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal then due and payable, management measures any impairment on the restructured loan in the same manner as for impaired loans as noted above. 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 value of troubled debt restructurings at March 31, 2021 and December 31, 2020 was $
There were
There were
At March 31, 2021 and December 31, 2020, nonaccrual loans totaled $
Salaries and employee benefits totaling $
The Company assigns a risk rating to all loans and periodically, but not less than annually, performs detailed reviews of all criticized and classified loans over $100,000 to identify credit risks and to assess the overall collectability of the portfolio. These risk ratings are also subject to examination by independent specialists engaged by the Company and the Company’s regulators. During these internal reviews, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which borrowers operate and the fair values of collateral securing these loans. These credit quality indicators are used to assign a risk rating to each individual loan.
The risk ratings can be grouped into three major categories, defined as follows:
Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
Substandard – A substandard loan is not adequately protected by the current sound worth and paying capacity of the borrower or the value of the collateral pledged, if any. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Well defined weaknesses include a project's lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time or the project's failure to fulfill economic expectations. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Doubtful – Loans classified doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable.
Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.
The following table shows the loan portfolio allocated by management's internal risk ratings at the dates indicated, in thousands:
| March 31, 2021 | Commercial Credit Exposure | |||||||||||||||||||||||||||
| Credit Risk Profile by Internally Assigned Grade | ||||||||||||||||||||||||||||
| Grade: | Commercial | Agricultural | Real Estate-Residential | Real Estate-Commercial | Real Estate-Construction | Equity LOC | Total | |||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| December 31, 2020 | Commercial Credit Exposure | |||||||||||||||||||||||||||
| Credit Risk Profile by Internally Assigned Grade | ||||||||||||||||||||||||||||
| Grade: | Commercial | Agricultural | Real Estate-Residential | Real Estate-Commercial | Real Estate-Construction | Equity LOC | Total | |||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Consumer Credit Exposure | Consumer Credit Exposure | |||||||||||||||||||||||
| Credit Risk Profile Based on Payment Activity | Credit Risk Profile Based on Payment Activity | |||||||||||||||||||||||
| March 31, 2021 | December 31, 2020 | |||||||||||||||||||||||
| Auto | Other | Total | Auto | Other | Total | |||||||||||||||||||
| Grade: | ||||||||||||||||||||||||
| Performing | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Non-performing | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The following tables show the allocation of the allowance for loan losses at the dates indicated, in thousands:
| Three Months Ended March 31, 2021: | Commercial | Agricultural | Real Estate-Residential | Real Estate-Commercial | Real Estate-Construction | Equity LOC | Auto | Other | Total | |||||||||||||||||||||||||||
| Allowance for Loan Losses | ||||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||||||||||
| Provision | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Three Months Ended March 31, 2020: | ||||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||||||||||
| Provision | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| March 31, 2021: | ||||||||||||||||||||||||||||||||||||
| Allowance for Loan Losses | ||||||||||||||||||||||||||||||||||||
| Ending balance: individually evaluated for impairment | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Ending balance: collectively evaluated for impairment | ||||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Loans | ||||||||||||||||||||||||||||||||||||
| Ending balance: individually evaluated for impairment | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Ending balance: collectively evaluated for impairment | ||||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| December 31, 2020: | Commercial | Agricultural | Real Estate-Residential | Real Estate-Commercial | Real Estate-Construction | Equity LOC | Auto | Other | Total | |||||||||||||||||||||||||||
| Allowance for Loan Losses | ||||||||||||||||||||||||||||||||||||
| Ending balance: individually evaluated for impairment | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Ending balance: collectively evaluated for impairment | ||||||||||||||||||||||||||||||||||||
| Ending Balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Loans | ||||||||||||||||||||||||||||||||||||
| Ending balance: individually evaluated for impairment | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Ending balance: collectively evaluated for impairment | ||||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
The following table shows an aging analysis of the loan portfolio by the time past due, in thousands:
| Total | ||||||||||||||||||||||||
| March 31, 2021 | 90 Days | Past Due | ||||||||||||||||||||||
| 30-89 Days | and Still | and | ||||||||||||||||||||||
| Past Due | Accruing | Nonaccrual | Nonaccrual | Current | Total | |||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Agricultural | ||||||||||||||||||||||||
| Real estate – residential | ||||||||||||||||||||||||
| Real estate – commercial | ||||||||||||||||||||||||
| Real estate - construction & land | ||||||||||||||||||||||||
| Equity Lines of Credit | ||||||||||||||||||||||||
| Auto | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Total | ||||||||||||||||||||||||
| December 31, 2020 | 90 Days | Past Due | ||||||||||||||||||||||
| 30-89 Days | and Still | and | ||||||||||||||||||||||
| Past Due | Accruing | Nonaccrual | Nonaccrual | Current | Total | |||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Agricultural | ||||||||||||||||||||||||
| Real estate – residential | ||||||||||||||||||||||||
| Real estate - commercial | ||||||||||||||||||||||||
| Real estate - construction & land | ||||||||||||||||||||||||
| Equity Lines of Credit | ||||||||||||||||||||||||
| Auto | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The following tables show information related to impaired loans at March 31, 2021, in thousands:
| Unpaid | Average | Interest | ||||||||||||||||||
| Recorded | Principal | Related | Recorded | Income | ||||||||||||||||
| As of March 31, 2021: | Investment | Balance | Allowance | Investment | Recognized | |||||||||||||||
| With no related allowance recorded: | ||||||||||||||||||||
| Commercial | $ | $ | $ | - | $ | $ | ||||||||||||||
| Agricultural | - | |||||||||||||||||||
| Real estate – residential | - | |||||||||||||||||||
| Real estate – commercial | - | |||||||||||||||||||
| Real estate – construction & land | - | |||||||||||||||||||
| Equity Lines of Credit | - | |||||||||||||||||||
| Auto | - | |||||||||||||||||||
| Other | - | |||||||||||||||||||
| With an allowance recorded: | ||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | |||||||||||||||
| Agricultural | ||||||||||||||||||||
| Real estate – residential | ||||||||||||||||||||
| Real estate – commercial | ||||||||||||||||||||
| Real estate – construction & land | ||||||||||||||||||||
| Equity Lines of Credit | ||||||||||||||||||||
| Auto | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Total: | ||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | |||||||||||||||
| Agricultural | ||||||||||||||||||||
| Real estate – residential | ||||||||||||||||||||
| Real estate – commercial | ||||||||||||||||||||
| Real estate – construction & land | ||||||||||||||||||||
| Equity Lines of Credit | ||||||||||||||||||||
| Auto | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
The following tables show information related to impaired loans at December 31, 2020, in thousands:
| Unpaid | Average | Interest | ||||||||||||||||||
| Recorded | Principal | Related | Recorded | Income | ||||||||||||||||
| As of December 31, 2020: | Investment | Balance | Allowance | Investment | Recognized | |||||||||||||||
| With no related allowance recorded: | ||||||||||||||||||||
| Commercial | $ | $ | $ | - | $ | $ | ||||||||||||||
| Agricultural | - | |||||||||||||||||||
| Real estate – residential | - | |||||||||||||||||||
| Real estate – commercial | - | |||||||||||||||||||
| Real estate – construction & land | - | |||||||||||||||||||
| Equity Lines of Credit | - | |||||||||||||||||||
| Auto | - | |||||||||||||||||||
| Other | - | |||||||||||||||||||
| With an allowance recorded: | ||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | |||||||||||||||
| Agricultural | ||||||||||||||||||||
| Real estate – residential | ||||||||||||||||||||
| Real estate – commercial | ||||||||||||||||||||
| Real estate – construction & land | ||||||||||||||||||||
| Equity Lines of Credit | ||||||||||||||||||||
| Auto | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Total: | ||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | |||||||||||||||
| Agricultural | ||||||||||||||||||||
| Real estate – residential | ||||||||||||||||||||
| Real estate – commercial | ||||||||||||||||||||
| Real estate – construction & land | ||||||||||||||||||||
| Equity Lines of Credit | ||||||||||||||||||||
| Auto | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
5. COMMITMENTS AND CONTINGENCIES
The Company is party to claims and legal proceedings arising in the ordinary course of business. In the opinion of the Company’s management, the amount of ultimate liability with respect to such proceedings will not have a material adverse effect on the financial condition or result of operations of the Company taken as a whole.
In the normal course of business, there are various outstanding commitments to extend credit, which are not reflected in the financial statements, including loan commitments of $
Of the loan commitments outstanding at March 31, 2021, $
Stand-by letters of credit are conditional commitments written to guarantee the performance of a customer to a third party. These guarantees are primarily related to the purchases of inventory by commercial customers and are typically short-term in nature. Credit risk is similar to that involved in extending loan commitments to customers and accordingly, evaluation and collateral requirements similar to those for loan commitments are used. The deferred liability related to the Company’s stand-by letters of credit was not significant at March 31, 2021 or December 31, 2020.
6. 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 Three Months Ended | ||||||||
| March 31, | ||||||||
| (In thousands, except per share data) | 2021 | 2020 | ||||||
| Net Income: | ||||||||
| Net income | $ | $ | ||||||
| Earnings Per Share: | ||||||||
| Basic earnings per share | $ | $ | ||||||
| Diluted earnings per share | $ | $ | ||||||
| Weighted Average Number of Shares Outstanding: | ||||||||
| Basic shares | ||||||||
| Diluted shares | ||||||||
Shares of common stock issuable under stock options for which the exercise prices were greater than the average market prices were not included in the computation of diluted earnings per share due to their antidilutive effect. Stock options not included in the computation of diluted earnings per share, due to shares not being in-the-money and having an antidilutive effect, were approximately
7. STOCK-BASED COMPENSATION
In May 2013, the Company established the 2013 Stock Option Plan for which
The fair value of each option was estimated on the date of grant using the following assumptions.
| 2020 | ||||
| Expected life of stock options (in years) | ||||
| Risk free interest rate | % | |||
| Daily Volatility | % | |||
| Dividend yields | % | |||
| Weighted-average fair value of options granted during the three months ended March 31, 2021 | $ | |||
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.
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, 2021 | $ | |||||||||||||||
| Options cancelled | ( | ) | ||||||||||||||
| Options exercised | ( | ) | ||||||||||||||
| Options outstanding at March 31, 2021 | $ | $ | ||||||||||||||
| Options exercisable at March 31, 2021 | $ | $ | ||||||||||||||
| Expected to vest after March 31, 2021 | $ | $ | ||||||||||||||
As of March 31, 2021, there was $
The total fair value of options vested during the three months ended March 31, 2021 and 2020 was $
Compensation cost related to stock options recognized in operating results under the stock option plans was $
Cash received from option exercises under the plan for the three months ended March 31, 2021 and 2020 were $
8. INCOME TAXES
The Company files its income taxes on a consolidated basis with its subsidiary. Income tax expense is the total of current year income tax due or refundable and the change in deferred tax assets and liabilities.
Deferred tax assets and liabilities are recognized for the tax consequences of temporary differences between the reported amount of assets and liabilities and their tax bases. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. A valuation allowance is recognized if, based on the weight of available evidence management believes it is more likely than not that some portion or all of the deferred tax assets will not be realized. On the consolidated balance sheet, net deferred tax assets are included in accrued interest receivable and other assets.
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 statements of income. There have been no significant changes to unrecognized tax benefits or accrued interest and penalties for the three months ended March 31, 2021.
9. FAIR VALUE MEASUREMENT
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.
Management monitors the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period.
Management evaluates the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total assets, total liabilities or total earnings.
Fair Value of Financial Instruments
The carrying amounts and estimated fair values of financial instruments, at March 31, 2021 follows, in thousands:
| Fair Value Measurements at March 31, 2021, Using: | ||||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | Total Fair Value | ||||||||||||||||
| Financial assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | - | $ | - | $ | |||||||||||||
| Investment securities | - | - | ||||||||||||||||||
| Interest rate swaps | - | |||||||||||||||||||
| Loans, net | - | - | ||||||||||||||||||
| FHLB stock | - | - | - | N/A | ||||||||||||||||
| FRB Stock | - | - | - | N/A | ||||||||||||||||
| Accrued interest receivable | ||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||
| Deposits | - | |||||||||||||||||||
| Repurchase agreements | - | - | ||||||||||||||||||
| FHLB advances | - | - | ||||||||||||||||||
| Junior subordinated deferrable interest debentures | - | - | ||||||||||||||||||
| Accrued interest payable | ||||||||||||||||||||
The carrying amounts and estimated fair values of financial instruments, at December 31, 2020 follows, in thousands:
| Fair Value Measurements at December 31, 2020 Using: | ||||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | Total Fair Value | ||||||||||||||||
| Financial assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | - | $ | - | $ | |||||||||||||
| Investment securities | - | - | ||||||||||||||||||
| Interest rate swaps | ||||||||||||||||||||
| Loans, net | - | - | ||||||||||||||||||
| FHLB stock | - | - | - | N/A | ||||||||||||||||
| FRB Stock | - | - | - | N/A | ||||||||||||||||
| Accrued interest receivable | ||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||
| Deposits | - | |||||||||||||||||||
| Repurchase agreements | - | - | ||||||||||||||||||
| FHLB advances | ||||||||||||||||||||
| Junior subordinated deferrable interest debentures | - | - | ||||||||||||||||||
| Accrued interest payable | ||||||||||||||||||||
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.
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 March 31, 2021 and December 31, 2020, 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 March 31, 2021 are summarized below, in thousands:
| Fair Value Measurements at | ||||||||||||||||
| March 31, 2021 Using | ||||||||||||||||
| Quoted | ||||||||||||||||
| Prices in | ||||||||||||||||
| Active | Significant | |||||||||||||||
| Markets for | Other | Significant | ||||||||||||||
| Identical | Observable | Unobservable | ||||||||||||||
| Assets | Inputs | Inputs | ||||||||||||||
| Total Fair Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| U.S. Government-sponsored agencies collateralized by mortgage obligations- residential | $ | $ | - | $ | $ | - | ||||||||||
| U.S. Government-agencies collateralized by mortgage obligations-commercial | - | - | ||||||||||||||
| Obligations of states and political subdivisions | ||||||||||||||||
| Interest rate swaps | ||||||||||||||||
| $ | $ | - | $ | $ | - | |||||||||||
Assets and liabilities measured at fair value on a recurring basis at December 31, 2020 are summarized below, in thousands:
| Fair Value Measurements at | ||||||||||||||||
| December 31, 2020 Using | ||||||||||||||||
| Quoted | ||||||||||||||||
| Prices in | ||||||||||||||||
| Active | Significant | |||||||||||||||
| Markets for | Other | Significant | ||||||||||||||
| Identical | Observable | Unobservable | ||||||||||||||
| Assets | Inputs | Inputs | ||||||||||||||
| Total Fair Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| U.S. Government-sponsored agencies collateralized by mortgage obligations-residential | $ | $ | - | $ | $ | - | ||||||||||
| U.S. Government agencies collateralized by mortgage obligations-commercial | - | - | ||||||||||||||
| Obligations of states and political subdivisions | ||||||||||||||||
| Interest rate swaps | ||||||||||||||||
| $ | $ | - | $ | $ | - | |||||||||||
The fair value of securities available-for-sale equals quoted market price, if available. If quoted market prices are not available, fair value is determined using quoted market prices for similar securities or matrix pricing. The fair value of the interest rate swap agreements was derived from discounted cash flow analysis based on the terms of the contract and the forward interest rate curve adjusted for our credit risk. There were no changes in the valuation techniques used during 2021 or 2020. 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.
Assets and liabilities measured at fair value on a non-recurring basis at March 31, 2021 are summarized below, in thousands:
| Fair Value Measurements at | ||||||||||||||||||||
| March 31, 2021 Using | ||||||||||||||||||||
| Quoted | ||||||||||||||||||||
| Prices in | Total | |||||||||||||||||||
| Active | Significant | Losses | ||||||||||||||||||
| Markets for | Other | Significant | Three Months | |||||||||||||||||
| Identical | Observable | Unobservable | Ended | |||||||||||||||||
| Assets | Inputs | Inputs | March 31, | |||||||||||||||||
| Total Fair Value | (Level 1) | (Level 2) | (Level 3) | 2021 | ||||||||||||||||
| Assets: | ||||||||||||||||||||
| Other real estate: | ||||||||||||||||||||
| Real estate – commercial | $ | $ | $ | $ | $ | |||||||||||||||
| Real estate – residential | ||||||||||||||||||||
| Total other real estate | $ | $ | $ | $ | $ | |||||||||||||||
Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2020 are summarized below, in thousands:
| Fair Value Measurements at | ||||||||||||||||||||
| December 31, 2020 Using | ||||||||||||||||||||
| Quoted | ||||||||||||||||||||
| Prices in | Total | |||||||||||||||||||
| Active | Significant | Losses | ||||||||||||||||||
| Markets for | Other | Significant | Three Months | |||||||||||||||||
| Identical | Observable | Unobservable | Ended | |||||||||||||||||
| Assets | Inputs | Inputs | March 31, | |||||||||||||||||
| Total Fair Value | (Level 1) | (Level 2) | (Level 3) | 2020 | ||||||||||||||||
| Assets: | ||||||||||||||||||||
| Impaired loans: | ||||||||||||||||||||
| Real estate – commercial | $ | $ | $ | $ | $ | |||||||||||||||
| Other real estate: | ||||||||||||||||||||
| Real estate – commercial | ||||||||||||||||||||
| Real estate - residential | ||||||||||||||||||||
| Total other real estate | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
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). No impairment charges were recognized during the three months ended March 31, 2021 and 2020 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 March 31, 2021 and December 31, 2020 (dollars in thousands):
| Range | Range | |||||||||||||||||||||||||||||||
| Fair Value | Fair Value | Valuation | (Weighted Average) | (Weighted Average) | ||||||||||||||||||||||||||||
| Description | 3/31/2021 | 12/31/2020 | Technique | Significant Unobservable Input | 3/31/2021 | 12/31/2020 | ||||||||||||||||||||||||||
| Impaired Loans: | ||||||||||||||||||||||||||||||||
| RE – Commercial | $ | Third Party appraisals | Management Adjustments to Reflect Current Conditions and Selling Costs | % | ( | )% | ||||||||||||||||||||||||||
| Other Real Estate: | ||||||||||||||||||||||||||||||||
| RE – Commercial | $ | $ | Third Party appraisals | Management Adjustments to Reflect Current Conditions and Selling Costs | % | ( | )% | % | ( | )% | ||||||||||||||||||||||
| RE – Residential | $ | $ | Third Party appraisals | Management Adjustments to Reflect Current Conditions and Selling Costs | % | ( | )% | % | ( | )% | ||||||||||||||||||||||
PART I – FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain matters discussed in this Quarterly Report are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Such risks and uncertainties include, among others, (1) significant increases in competitive pressures in the financial services industry; (2) changes in the interest rate environment resulting in reduced margins; (3) general economic conditions, either nationally or regionally, maybe less favorable than expected, resulting in, among other things, a deterioration in credit quality; (4) changes in regulatory environment; (5) loss of key personnel; (6) fluctuations in the real estate market; (7) changes in business conditions and inflation; (8) operational risks including data processing systems failures or fraud; and (9) changes in securities markets. Therefore, the information set forth herein should be carefully considered when evaluating the business prospects of Plumas Bancorp (the “Company”).
When the Company uses in this Quarterly Report the words “anticipate”, “estimate”, “expect”, “project”, “intend”, “commit”, “believe” and similar expressions, the Company intends to identify forward-looking statements. Such statements are not guarantees of performance and are subject to certain risks, uncertainties and assumptions, including those described in this Quarterly Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected, projected, intended, committed or believed. The future results and stockholder values of the Company may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results and values are beyond the Company’s ability to control or predict. For those statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
INTRODUCTION
The following discussion and analysis sets forth certain statistical information relating to the Company as of March 31, 2021 and December 31, 2020 and for the three- month period ended March 31, 2021 and 2020. This discussion should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto included in Plumas Bancorp’s Annual Report filed on Form 10-K for the year ended December 31, 2020.
Plumas Bancorp trades on The NASDAQ Capital Market under the ticker symbol “PLBC”.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There have been no changes to the Company’s critical accounting policies from those disclosed in the Company’s 2020 Annual Report to Shareholders on Form 10-K.
COVID-19
On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a global pandemic, which continues to spread throughout the United States and around the world. The declaration of a global pandemic indicates that almost all public commerce and related business activities must be, to varying degrees, curtailed with the goal of decreasing the rate of new infections. The outbreak of COVID-19 could adversely impact a broad range of industries in which the Company’s customers operate and impair their ability to fulfill their financial obligations to the Company. On March 3, 2020, the Federal Open Market Committee reduced the target federal funds rate by 50 basis points to 1.00% to 1.25%. This rate was further reduced to a target range of 0% to 0.25% on March 16, 2020. These reductions in interest rates and other effects of the COVID-19 outbreak may adversely affect the Company’s financial condition and results of operations. As a result of the spread of the COVID-19 coronavirus, economic uncertainties have arisen which are likely to negatively impact net interest income, the provision for loan losses and non-interest income. Other financial impact could occur though such potential impact is unknown at this time.
COVID-19 Loan Forbearance Programs
Section 4013 of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) provides that a qualified loan modification is exempt by law from classification as a Troubled Debt Restructuring pursuant to U.S. Generally Accepted Accounting Principles (GAAP). Under Section 541 of the Consolidated Appropriations Act, 2021, Congress extended the Troubled Debt Restructurings relief for financial institutions through January 1, 2022. In addition, FIL -36-2020 issued by the FDIC on April 7, 2020 encourages financial institutions to work constructively with borrowers affected by COVID-19; states that the FDIC will not criticize institutions for prudent loan modifications; and views prudent loan modification programs to financial institution customers affected by COVID-19 as positive actions that can effectively manage or mitigate adverse impacts on borrowers due to COVID-19, and lead to improved loan performance and reduced credit risk. Pursuant to this new guidance, we have instituted loan forbearance programs to assist borrowers with managing cash flows disrupted due to COVID-19. As of March 31, 2021, there were 80 loan forbearance agreements outstanding which allow for the deferral of up to 6 months in payments representing approximately $20.4 million in loan balances. The following table presents loans under forbearance programs by loan type as of March 31, 2021 with the expected month that payments are to resume, dollars in thousands.
|
|
Month Payments Resume |
||||
| Loan Type |
April |
May |
June |
Other |
Total |
| Agricultural |
$ 21 |
$ - |
$ - |
$ - |
$ 21 |
| Commercial |
253 |
- |
37 |
349 |
639 |
| Real Estate - Residential |
2,274 |
- |
- |
- |
2,274 |
| Real Estate - Commercial |
14,852 |
352 |
366 |
- |
15,570 |
| Equity Lines of Credit |
198 |
- |
- |
- |
198 |
| Automobile |
600 |
241 |
227 |
588 |
1,656 |
| Other |
19 |
- |
51 |
6 |
76 |
| Total |
$ 18,217 |
$ 593 |
$ 681 |
$ 943 |
$ 20,434 |
U.S. Small Business Administration Paycheck Protection Program
The CARES Act also provided for the Paycheck Protection Program (PPP) and additional legislation has extended this program into 2021; we are actively participating in the PPP program. As of March 31, 2021 we funded 1,998 PPP loans totaling $187 million. The remaining principal balance of these loans at March 31, 2021 was $95.8 million. During the three months ended March 31, 2021 we funded 775 PPP loans totaling over $67 million. Since inception of the PPP program our borrowers have received over $90 million in loan forgiveness.
Merger Agreement with Feather River Bancorp, Inc.
On March 10, 2021 Plumas Bancorp entered into an Agreement and Plan of Reorganization and Merger with Feather River Bancorp, Inc. (Feather River), a Delaware corporation, pursuant to which Feather River will merge with and into the Company, with the Company as the surviving corporation (the “Merger”). The Merger Agreement contemplates that immediately after the Merger, Feather River’s wholly-owned subsidiary, Bank of Feather River, a California state-chartered bank, will merge with and into Plumas Bank, a California state-chartered bank and wholly-owned subsidiary of the Company, with Plumas Bank as the surviving bank. Subject to the terms and conditions of the Merger Agreement, the aggregate consideration payable to holders of Feather River upon completion of the Merger will consist of $4,735,184 in cash and 598,129 shares of Plumas common stock.
RESULTS OF OPERATIONS FOR THE three MONTHS ENDED March 31, 2021
Net Income. The Company recorded net income of $4.4 million for the three months ended March 31, 2021 up $1.1 million from net income of $3.3 million for the three months ended March 31, 2020. Increases of $1.3 million in net interest income and $125 thousand in non-interest income and a decline of $375 thousand in the provision for loan losses were partially offset by an increase in non-interest expense of $156 thousand and an increase in the provision for income taxes of $477 thousand. The annualized return on average assets was 1.55% for the three months ended March 31, 2021 up from 1.53% for the three months ended March 31, 2020. The annualized return on average equity increased from 15.2% during the first quarter of 2020 to 17.7% during the current quarter.
The following is a detail discussion of each component of the change in net income.
Net interest income before provision for loan losses. Net interest income was $10.5 million for the three months ended March 31, 2020, an increase of $1.3 million from the same period in 2020. Net interest margin for the three months ended March 31, 2021 decreased 71 basis points to 3.86%, down from 4.57% for the same period in 2020.
The increase in net interest income includes an increase of $1.1 million in interest income and a reduction of $123 thousand in interest expense. Interest and fees on loans increased by $1.2 million as an increase in average loan balances of $99 million was partially offset by a decline of 2 basis points in yield from 5.55% during the third quarter of 2020 to 5.53% during the current quarter. The reduction in loan yield includes the effect of a reduction in market rates, including a decline in the average prime rate of 1.17% mostly offset by the amortization of loan fees net of loan costs on PPP loans totaling $1.6 million. This includes normal amortization on our PPP portfolio and the effect of $42 million in PPP loan forgiveness. Interest on investment securities declined by $51 thousand as an increase in average balance of $30 million was offset by a decline in yield of 48 basis points to 1.94%. Interest on cash balances declined by $55 thousand related to a decline in the rate paid on these balances from 1.23% during the first quarter of 2020 to 0.11% during the current quarter partially offset by an increase in average balance of $160 million to $195 million.
Interest expense on deposits decreased by $85 thousand to $174 thousand for the three months ended March 31, 2021, down from $259 thousand during the 2020 quarter. The largest components of this decrease were $30 thousand in interest on money market accounts, $26 thousand in interest on NOW deposits and $20 thousand in interest on time deposits. The decline in money market and time is primarily related to a decline in market rates in our service areas. The decline in NOW interest expense is related to the elimination of our NOW deposit product in November 2020.
Interest expense on other interest-bearing liabilities decreased by $38 thousand from $119 thousand during the three months ended March 31, 2020 to $81 thousand during the current quarter related to a decrease in rate paid on junior subordinated debentures from 4.53% during the first quarter of 2020 to 3.11% during the current quarter. Interest on the debentures declined by $37 thousand from $116 thousand during the three months ended March 31, 2020 to $79 thousand during the current quarter. During the first quarter of 2020 interest on the debentures fluctuated with changes in the 3-month LIBOR rate. However On May 26, 2020 we entered into two separate interest rate swap agreements, effectively converting the $10 million in Subordinated Debentures to fixed obligations effective with the quarterly payments due in September, 2020. The swaps have a 10 year maturity and fix the LIBOR rate on the Subordinated Debentures at approximately 75 basis points.
The following table presents for the three-month periods indicated the distribution of consolidated average assets, liabilities and shareholders' equity. It also presents the amounts of interest income from interest earning assets and the resultant annualized yields expressed in both dollars and annualized yield percentages, as well as the amounts of interest expense on interest bearing liabilities and the resultant cost expressed in both dollars and annualized rate percentages. Average balances are based on daily averages. Nonaccrual loans are included in the calculation of average loans while nonaccrued interest thereon is excluded from the computation of yields earned:
| For the Three Months Ended |
For the Three Months Ended |
|||||||||||||||||||||||
| March 31, 2021 |
March 31, 2020 |
|||||||||||||||||||||||
| Average |
Average |
|||||||||||||||||||||||
| Balance |
Interest |
Yield/ |
Balance |
Interest |
Yield/ |
|||||||||||||||||||
| (in thousands) |
(in thousands) |
Rate |
(in thousands) |
(in thousands) |
Rate |
|||||||||||||||||||
| Interest-earning assets: |
||||||||||||||||||||||||
| Loans (1) (2) (3) |
$ | 717,670 | $ | 9,781 | 5.53 | % | $ | 618,961 | $ | 8,540 | 5.55 | % | ||||||||||||
| Investment securities (1) |
188,542 | 901 | 1.94 | % | 158,112 | 952 | 2.42 | % | ||||||||||||||||
| Interest-bearing deposits |
194,837 | 52 | 0.11 | % | 34,984 | 107 | 1.23 | % | ||||||||||||||||
| Total interest-earning assets |
1,101,049 | 10,734 | 3.95 | % | 812,057 | 9,599 | 4.75 | % | ||||||||||||||||
| Cash and due from banks |
27,481 | 22,007 | ||||||||||||||||||||||
| Other assets |
36,594 | 39,234 | ||||||||||||||||||||||
| Total assets |
$ | 1,165,124 | $ | 873,298 | ||||||||||||||||||||
| Interest-bearing liabilities: |
||||||||||||||||||||||||
| NOW deposits |
$ | - | - | - | % | $ | 107,667 | 26 | 0.10 | % | ||||||||||||||
| Money market deposits |
188,616 | 69 | 0.15 | % | 93,436 | 99 | 0.43 | % | ||||||||||||||||
| Savings deposits |
256,013 | 67 | 0.11 | % | 186,084 | 76 | 0.16 | % | ||||||||||||||||
| Time deposits |
40,590 | 38 | 0.38 | % | 37,698 | 58 | 0.62 | % | ||||||||||||||||
| Total deposits |
485,219 | 174 | 0.15 | % | 424,885 | 259 | 0.25 | % | ||||||||||||||||
| Junior subordinated debentures |
10,310 | 79 | 3.11 | % | 10,310 | 116 | 4.53 | % | ||||||||||||||||
| Other interest-bearing liabilities |
12,878 | 2 | 0.06 | % | 12,596 | 3 | 0.10 | % | ||||||||||||||||
| Total interest-bearing liabilities |
508,407 | 255 | 0.20 | % | 447,791 | 378 | 0.34 | % | ||||||||||||||||
| Non-interest-bearing deposits |
541,253 | 330,588 | ||||||||||||||||||||||
| Other liabilities |
13,564 | 7,186 | ||||||||||||||||||||||
| Shareholders' equity |
101,900 | 87,733 | ||||||||||||||||||||||
| Total liabilities & equity |
$ | 1,165,124 | $ | 873,298 | ||||||||||||||||||||
| Cost of funding interest-earning assets (4) |
0.09 | % | 0.18 | % | ||||||||||||||||||||
| Net interest income and margin (5) |
$ | 10,479 | 3.86 | % | $ | 9,221 | 4.57 | % | ||||||||||||||||
| (1) |
Not computed on a tax-equivalent basis. |
| (2) |
Average nonaccrual loan balances of $2.3 million for 2021 and $2.1 million for 2020 are included in average loan balances for computational purposes. |
| (3) |
Net fees (costs) included in loan interest income for the three-month periods ended March 31, 2021 and 2020 were $1,458,000 and ($248,000), respectively. |
| (4) |
Total annualized interest expense divided by the average balance of total earning assets. |
| (5) |
Annualized net interest income divided by the average balance of total earning assets. |
The following table sets forth changes in interest income and interest expense for the three-month periods indicated and the amount of change attributable to variances in volume, rates and the combination of volume and rates based on the relative changes of volume and rates:
| 2021 over 2020 change in net interest income |
||||||||||||||||
| for the three months ended March 31, |
||||||||||||||||
| (in thousands) |
||||||||||||||||
| Volume (1) |
Rate (2) |
Mix (3) |
Total |
|||||||||||||
| Interest-earning assets: |
||||||||||||||||
| Loans |
$ | 1,351 | $ | (34 | ) | $ | (76 | ) | $ | 1,241 | ||||||
| Investment securities |
182 | (189 | ) | (44 | ) | (51 | ) | |||||||||
| Interest bearing deposits |
485 | (97 | ) | (443 | ) | (55 | ) | |||||||||
| Total interest income |
2,018 | (320 | ) | (563 | ) | 1,135 | ||||||||||
| Interest-bearing liabilities: |
||||||||||||||||
| NOW deposits |
(25 | ) | 0 | - | (25 | ) | ||||||||||
| Money market deposits |
100 | (64 | ) | (66 | ) | (30 | ) | |||||||||
| Savings deposits |
29 | (27 | ) | (11 | ) | (9 | ) | |||||||||
| Time deposits |
4 | (22 | ) | (2 | ) | (20 | ) | |||||||||
| Junior subordinated debentures |
- | (37 | ) | - | (37 | ) | ||||||||||
| Other |
- | (1 | ) | - | (1 | ) | ||||||||||
| Total interest expense |
108 | (151 | ) | (79 | ) | (122 | ) | |||||||||
| Net interest income |
$ | 1,910 | $ | (169 | ) | $ | (484 | ) | $ | 1,257 | ||||||
| (1) |
The volume change in net interest income represents the change in average balance divided by the previous year’s rate. |
| (2) |
The rate change in net interest income represents the change in rate divided by the previous year’s average balance. |
| (3) |
The mix change in net interest income represents the change in average balance multiplied by the change in rate. |
Provision for loan losses. During the three months ended March 31, 2021 and 2020 we recorded a provision for loan losses of $375 thousand and $750 thousand, respectively. See “Analysis of Asset Quality and Allowance for Loan Losses” for a discussion of loan quality trends and the provision for loan losses.
Non-interest income. During the three months ended March 31, 2021, non-interest income totaled $2.3 million, an increase of $125 thousand from the three months ended March 31, 2020. A reduction in service charge fees of $165 thousand related to a reduction in NSF fees and a reduction in other non-interest income of $70 thousand were offset by increases in other items the largest of which were increases of $176 thousand in interchange fees and $127 thousand in gains on sale of SBA loans. The decrease in NSF fees and increase in interchange income is a pattern we have observed since the onset of the Pandemic.
The following table describes the components of non-interest income for the three-month periods ended March 31, 2021 and 2020, dollars in thousands:
| For the Three Months Ended |
||||||||||||||||
| March 31, |
||||||||||||||||
| 2021 |
2020 |
Dollar Change |
Percentage Change |
|||||||||||||
| Interchange income |
715 | 539 | 176 | 32.7 | % | |||||||||||
| Gain on sale of loans, net |
591 | 464 | $ | 127 | 27.4 | % | ||||||||||
| Service charges on deposit accounts |
540 | 705 | (165 | ) | -23.4 | % | ||||||||||
| Loan servicing fees |
227 | 169 | 58 | 34.3 | % | |||||||||||
| Earnings on life insurance policies |
90 | 91 | (1 | ) | -1.1 | % | ||||||||||
| Other |
187 | 257 | (70 | ) | -27.2 | % | ||||||||||
| Total non-interest income |
$ | 2,350 | $ | 2,225 | $ | 125 | 5.6 | % | ||||||||
Non-interest expense. During the three months ended March 31, 2021, total non-interest expense increased by $156 thousand to $6.3 million. The largest components of this increase were a $262 thousand increase in accrued bonus expense consistent with the increase in pretax income and $191 thousand in legal and investment banking expenses related to our pending acquisition of Feather River. The largest decrease in expense was an increase in the deferral of loan origination fees of $211 thousand; $155 thousand of which relates to origination of PPP loans. In the table below bonus expense and deferred loan origination fees are included in salary and benefit expense and legal and investment banking expenses are included in profession fees. Advertising costs decreased by $50 thousand in the comparison quarters as advertising expense during the 2020 quarter was higher than normal related to a digital and traditional advertising campaign focused on the Northern Nevada marketplace.
The following table describes the components of non-interest expense for the three-month periods ended March 31, 2021 and 2020, dollars in thousands:
| For the Three Months Ended |
||||||||||||||||
| March 31, |
||||||||||||||||
| 2021 |
2020 |
Dollar Change |
Percentage Change |
|||||||||||||
| Salaries and employee benefits |
$ | 3,524 | $ | 3,529 | $ | (5 | ) | -0.1 | % | |||||||
| Occupancy and equipment |
890 | 865 | 25 | 2.9 | % | |||||||||||
| Outside service fees |
742 | 724 | 18 | 2.5 | % | |||||||||||
| Professional fees |
342 | 117 | 225 | 192.3 | % | |||||||||||
| Telephone and data communication |
155 | 143 | 12 | 8.4 | % | |||||||||||
| Armored car and courier |
108 | 99 | 9 | 9.1 | % | |||||||||||
| Director compensation and expense |
91 | 119 | (28 | ) | -23.5 | % | ||||||||||
| Deposit insurance |
74 | 58 | 16 | 27.6 | % | |||||||||||
| Advertising and shareholder relations |
68 | 118 | (50 | ) | -42.4 | % | ||||||||||
| Business development |
66 | 100 | (34 | ) | -34.0 | % | ||||||||||
| Loan collection expenses |
49 | 60 | (11 | ) | -18.3 | % | ||||||||||
| Amortization of Core Deposit Intangible |
42 | 51 | (9 | ) | -17.6 | % | ||||||||||
| Stationery and supplies |
26 | 27 | (1 | ) | -3.7 | % | ||||||||||
| Other |
115 | 126 | (11 | ) | -8.7 | % | ||||||||||
| Total non-interest expense |
$ | 6,292 | $ | 6,136 | $ | 156 | 2.5 | % | ||||||||
Provision for income taxes. The Company recorded an income tax provision of $1.7 million, or 27.9% of pre-tax income for the three months ended March 31, 2021. This compares to an income tax provision of $1.2 million, or 27.3% of pre-tax income for the three months ended March 31, 2020. The percentages for 2021 and 2020 differ from statutory rates as tax exempt items of income such as earnings on Bank owned life insurance and municipal loan and securities interest decrease taxable income. The increase in the effective tax rate in the current quarter is primarily related to nondeductible merger expenses.
FINANCIAL CONDITION
Total assets at March 31, 2021 were $1.2 billion, an increase of $95.9 million from December 31, 2020. Net loans increased by $21.6 million from $700.8 million at December 31, 2020 to $722.4 million at March 31, 2021. Investment securities increased by $25.0 million from $179.6 million at December 31, 2020 to $204.6 million at March 31, 2021. Cash and cash equivalents totaled $233.6 million at March 31, 2021 up $48.7 million from $184.9 million at December 31, 2020.
Deposits totaled $1.1 billion at March 31, 2021, an increase of $95.2 million from $974.0 million at December 31, 2020. Shareholders’ equity increased by $1.8 million from $100.2 million at December 31, 2020 to $102.0 million at March 31, 2021.
Loan Portfolio. Gross loans increased by $23 million, or 3%, from $710 million at December 31, 2020 to $733 million at March 31, 2021. The largest areas of growth in the Company’s loan portfolio were $23 million in commercial loans and $5 million in commercial real estate loans. The largest decreases were $4 million in agricultural loans, and $1 million in residential real estate loans. The increase in commercial loans relates to PPP loans. As of March 31, 2021 we funded 1,998 PPP loans totaling $187 million. The remaining principal balance of these loans at March 31, 2021 was $95.8 million. During the three months ended March 31, 2021 we funded 775 PPP loans totaling over $67 million. Since inception of the PPP program our borrowers have received over $90 million in loan forgiveness. We expect a decline in PPP loans from current levels as borrowers continue to apply for and are granted forgiveness. The Company continues to manage the mix of its loan portfolio consistent with its identity as a community bank serving the financing needs of all sectors of the area it serves. Although the Company offers a broad array of financing options, it continues to concentrate its focus on small to medium sized commercial businesses. These loans offer diversification as to industries and types of businesses, thus limiting material exposure in any industry concentrations. The Company offers both fixed and floating rate loans and obtains collateral in the form of real property, business assets and deposit accounts, but looks to business and personal cash flows as its primary source of repayment.
As shown in the following table the Company's largest lending categories are commercial real estate loans, commercial loans, auto loans and agricultural loans.
| Percent of |
Percent of |
|||||||||||||||
| Loans in Each |
Loans in Each |
|||||||||||||||
| Balance at End |
Category to |
Balance at End |
Category to |
|||||||||||||
| (dollars in thousands) |
of Period |
Total Loans |
of Period |
Total Loans |
||||||||||||
| 03/31/2021 |
03/31/2021 |
12/31/2020 |
12/31/2020 |
|||||||||||||
| Commercial |
$ | 141,284 | 19.3 | % | $ | 117,360 | 16.5 | % | ||||||||
| Agricultural |
68,953 | 9.4 | % | 72,911 | 10.3 | % | ||||||||||
| Real estate – residential |
10,385 | 1.4 | % | 11,399 | 1.6 | % | ||||||||||
| Real estate – commercial |
353,010 | 48.2 | % | 352,552 | 49.7 | % | ||||||||||
| Real estate – construction & land |
30,694 | 4.2 | % | 25,306 | 3.6 | % | ||||||||||
| Equity Lines of Credit |
34,068 | 4.6 | % | 34,744 | 4.9 | % | ||||||||||
| Auto |
90,418 | 12.3 | % | 91,080 | 12.8 | % | ||||||||||
| Other |
4,303 | 0.6 | % | 4,587 | 0.6 | % | ||||||||||
| Total Gross Loans |
$ | 733,115 | 100 | % | $ | 709,939 | 100 | % | ||||||||
The Company’s real estate related loans, including real estate mortgage loans, real estate construction and land development loans, consumer equity lines of credit, and agricultural loans secured by real estate comprised 65% of the total loan portfolio at March 31, 2021. Moreover, the business activities of the Company currently are focused in the California counties of Plumas, Nevada, Placer, Lassen, Modoc, Shasta, and Sierra and in Washoe and Carson City Counties in Northern Nevada. Consequently, the results of operations and financial condition of the Company are dependent upon the general trends in these economies and, in particular, the residential and commercial real estate markets. In addition, the concentration of the Company's operations in these areas of Northeastern California and Northwestern Nevada exposes it to greater risk than other banking companies with a wider geographic base in the event of catastrophes, such as earthquakes, fires and floods in these regions.
The rates of interest charged on variable rate loans are set at specific increments in relation to the Company's lending rate or other indexes such as the published prime interest rate or U.S. Treasury rates and vary with changes in these indexes. The frequency in which variable rate loans reprice can vary from one day to several years. At March 31, 2021 and December 31, 2020, approximately 66% and 68%, respectively of the Company's loan portfolio was comprised of variable rate loans. Loans indexed to the prime interest rate or an equivalent rate totaled approximately 17% of the Company’s loan portfolio; these loans reprice within one day to three months of a change in the prime rate. At March 31, 2021 and December 31, 2020, 45% and 43%, respectively of the variable loans were at their respective floor rate. While real estate mortgage, commercial and consumer lending remain the foundation of the Company's historical loan mix, some changes in the mix have occurred due to the changing economic environment and the resulting change in demand for certain loan types. The most significant change was loans generated through the PPP program which totaled 13% of the Bank's loan portfolio at March 31, 2021.
Analysis of Asset Quality and Allowance for Loan Losses. The Company attempts to minimize credit risk through its underwriting and credit review policies. The Company’s credit review process includes internally prepared credit reviews as well as contracting with an outside firm to conduct periodic credit reviews. The Company’s management and lending officers evaluate the loss exposure of classified and impaired loans on a quarterly basis, or more frequently as loan conditions change. The Management Asset Resolution Committee (MARC) reviews the asset quality of criticized and past due loans monthly and reports the findings to the full Board of Directors. In management's opinion, this loan review system helps facilitate the early identification of potential criticized loans. MARC also provides guidance for the maintenance and timely disposition of OREO properties including developing financing and marketing programs to incent individuals to purchase OREO. MARC consists of the Bank’s Chief Executive Officer, Chief Financial Officer and Chief Credit Officer, and the activities are governed by a formal written charter. The MARC meets monthly and reports to the Board of Directors.
The allowance for loan losses is established through charges to earnings in the form of the provision for loan losses. Loan losses are charged to and recoveries are credited to the allowance for loan losses. The allowance for loan losses is maintained at a level deemed appropriate by management to provide for known and inherent risks in the loan portfolio. The adequacy of the allowance for loan losses is based upon management's continuing assessment of various factors affecting the collectability of loans including current economic conditions, maturity of the portfolio, size of the portfolio, industry concentrations, borrower credit history, collateral, the existing allowance for loan losses, independent credit reviews, current charges and recoveries to the allowance for loan losses and the overall quality of the portfolio as determined by management, regulatory agencies, and independent credit review consultants retained by the Company. There is no precise method of predicting specific losses or amounts which may ultimately be charged off on particular segments of the loan portfolio. The collectability of a loan is subjective to some degree, but must relate to the borrower’s financial condition, cash flow, quality of the borrower’s management expertise, collateral and guarantees, and state of the local economy.
Formula allocations are calculated by applying loss factors to outstanding loans with similar characteristics. Loss factors are based on the Company’s historical loss experience as adjusted for changes in the business cycle and may be adjusted for significant factors that, in management's judgment, affect the collectability of the portfolio as of the evaluation date. Historical loss data from the beginning of the latest business cycle are incorporated in the loss factors.
The discretionary allocation is based upon management’s evaluation of various loan segment conditions that are not directly measured in the determination of the formula and specific allowances. The conditions may include, but are not limited to, general economic and business conditions affecting the key lending areas of the Company, credit quality trends, collateral values, loan volumes and concentrations, and other business conditions. We have added a new specific pandemic qualitative factor to our allowance for loan loss calculation and have increased the qualitative factor related to economic conditions. These changes resulted in the need for additional loan loss provision during 2020.
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. We have purchased software to support the CECL calculation of the allowance for loan losses under ASU No 2016-13 and have engaged the software vendor to assist in the transition to the CECL model. 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. On October 16, 2019, the FASB approved a proposal to change the effective date of ASU No. 2016-13 for smaller reporting companies, as defined by the SEC, and other non-SEC reporting entities delaying the effective date to fiscal years beginning after December 31, 2022, including interim periods within those fiscal periods. As the Company is a smaller reporting company and has not adopted provisions of the standard early, the delay is applicable to the Company.
The following table provides certain information for the dates indicated with respect to the Company's allowance for loan losses as well as charge-off and recovery activity.
| For the Three Months Ended |
For the Year Ended |
|||||||||||||||||||
| (dollars in thousands) |
March 31, |
December 31, |
||||||||||||||||||
| 2021 |
2020 |
2020 |
2019 |
2018 |
||||||||||||||||
| Balance at beginning of period |
$ | 9,902 | $ | 7,243 | $ | 7,243 | $ | 6,958 | $ | 6,669 | ||||||||||
| Charge-offs: |
||||||||||||||||||||
| Commercial and agricultural |
154 | 131 | 131 | 587 | 325 | |||||||||||||||
| Real estate mortgage |
- | - | - | 0 | 25 | |||||||||||||||
| Real estate construction & land |
- | - | - | - | - | |||||||||||||||
| Consumer (includes equity LOC & Auto) |
238 | 137 | 656 | 934 | 841 | |||||||||||||||
| Total charge-offs |
392 | 268 | 787 | 1,521 | 1,191 | |||||||||||||||
| Recoveries: |
||||||||||||||||||||
| Commercial and agricultural |
42 | 2 | 34 | 26 | 83 | |||||||||||||||
| Real estate mortgage |
4 | 2 | 23 | 7 | 114 | |||||||||||||||
| Real estate construction & land |
- | - | - | - | 3 | |||||||||||||||
| Consumer (includes equity LOC & Auto) |
31 | 75 | 214 | 273 | 280 | |||||||||||||||
| Total recoveries |
77 | 79 | 271 | 306 | 480 | |||||||||||||||
| Net charge-offs |
315 | 189 | 516 | 1,215 | 711 | |||||||||||||||
| Provision for loan losses |
375 | 750 | 3,175 | 1,500 | 1,000 | |||||||||||||||
| Balance at end of period |
$ | 9,962 | $ | 7,804 | $ | 9,902 | $ | 7,243 | $ | 6,958 | ||||||||||
| Net charge-offs during the period to average loans (annualized for the three-month periods) |
0.18 | % | 0.12 | % | 0.07 | % | 0.21 | % | 0.14 | % | ||||||||||
| Allowance for loan losses to total loans |
1.36 | % | 1.25 | % | 1.39 | % | 1.17 | % | 1.23 | % | ||||||||||
During the three months ended March 31, 2021 and 2020 we recorded a provision for loan losses of $375 thousand and $750 thousand, respectively. Net charge-offs totaled $315 thousand during the three months ended March 31, 2021, an increase of $126 thousand from $189 thousand during the three months ended March 31, 2020. This increase primarily resulted from an increase in charge-offs on automobile loans. We expect some future recoveries on the automobile charge-offs once the vehicles are located, repossessed and sold.
The following table provides a breakdown of the allowance for loan losses at March 31, 2021 and December 31, 2020:
| Percent of |
Percent of |
|||||||||||||||
| Loans in Each |
Loans in Each |
|||||||||||||||
| Balance at End |
Category to |
Balance at End |
Category to |
|||||||||||||
| (dollars in thousands) |
of Period |
Total Loans |
of Period |
Total Loans |
||||||||||||
| 2021 |
2021 |
2020 |
2020 |
|||||||||||||
| Commercial and agricultural |
$ | 1,475 | 28.7 | % | $ | 1,707 | 26.8 | % | ||||||||
| Real estate mortgage |
5,301 | 49.6 | % | 5,253 | 51.3 | % | ||||||||||
| Real estate construction & land |
657 | 4.2 | % | 554 | 3.6 | % | ||||||||||
| Consumer (includes equity LOC & Auto) |
2,529 | 17.6 | % | 2,388 | 18.3 | % | ||||||||||
| Total |
$ | 9,962 | 100.0 | % | $ | 9,902 | 100.0 | % | ||||||||
The allowance for loan losses totaled $10.0 million at March 31, 2021 and $9.9 million at December 31, 2020. At least quarterly, the Company evaluates each specific reserve and if it determines that the loss represented by the specific reserve is uncollectable it records a charge-off for the uncollectable portion. General reserves were $9.9 million at March 31, 2021 and $9.7 million at December 31, 2020. The allowance for loan losses as a percentage of total loans was 1.36% at March 31, 2021 and 1.39% at December 31, 2020. The percentage of general reserves to unimpaired loans totaled 1.36% at March 31, 2021 and 1.37% at December 31, 2020. Excluding PPP loans the allowance for loan losses as a percentage of total loans was 1.56% at March 31, 2021 and 1.55% at December 31, 2020 and the percentage of general reserves to unimpaired loans was 1.57% at March 31, 2021 and 1.53% at December 31, 2020
The Company places loans 90 days or more past due on nonaccrual status unless the loan is well secured and in the process of collection. A loan is considered to be in the process of collection if, based on a probable specific event, it is expected that the loan will be repaid or brought current. Generally, this collection period would not exceed 90 days. When a loan is placed on nonaccrual status the Company's general policy is to reverse and charge against current income previously accrued but unpaid interest. Interest income on such loans is subsequently recognized only to the extent that cash is received, and future collection of principal is deemed by management to be probable. Where the collectability of the principal or interest on a loan is considered to be doubtful by management, it is placed on nonaccrual status prior to becoming 90 days delinquent.
Impaired loans are measured based on the present value of the expected future cash flows discounted at the loan's effective interest rate or the fair value of the collateral if the loan is collateral dependent. The amount of impaired loans is not directly comparable to the amount of nonperforming loans disclosed later in this section. The primary difference between impaired loans and nonperforming loans is that impaired loan recognition considers not only loans 90 days or more past due, restructured loans and nonaccrual loans but also may include identified problem loans other than delinquent loans where it is considered probable that we will not collect all amounts due to us (including both principal and interest) in accordance with the contractual terms of the loan agreement.
A restructuring of a debt constitutes 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.
Loans restructured (TDRs) and not included in nonperforming loans in the following table totaled $0.9 million, $0.9 million, $0.9 million, $1.0 million and $1.1 million at March 31, 2021 and December 31, 2020, 2019, 2018, and 2017, respectively. For additional information related to restructured loans see Note 4 to the condensed consolidated financial statements contained within this Form 10-Q.
The following table sets forth the amount of the Company's nonperforming assets as of the dates indicated.
| At |
||||||||||||||||||||
| March 31, |
At December 31, |
|||||||||||||||||||
| 2021 |
2020 |
2019 |
2018 |
2017 |
||||||||||||||||
| (dollars in thousands) |
||||||||||||||||||||
| Nonaccrual loans |
$ | 3,804 | $ | 2,536 | $ | 2,050 | $ | 1,117 | $ | 1,226 | ||||||||||
| Loans past due 90 days or more and still accruing |
- | - | - | - | 1,796 | |||||||||||||||
| Total nonperforming loans |
3,804 | 2,536 | 2,050 | 1,117 | 3,022 | |||||||||||||||
| Other real estate owned | 580 | 403 | 707 | 1,170 | 1,344 | |||||||||||||||
| Other vehicles owned |
17 | 31 | 56 | 53 | 35 | |||||||||||||||
| Total nonperforming assets |
$ | 4,401 | $ | 2,970 | $ | 2,813 | $ | 2,340 | $ | 4,401 | ||||||||||
| Interest income forgone on nonaccrual loans | $ | 75 | $ | 119 | $ | 158 | $ | 46 | $ | 50 | ||||||||||
| Interest income recorded on a cash basis on nonaccrual loans |
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Nonperforming loans to total loans |
0.52 | % | 0.36 | % | 0.33 | % | 0.20 | % | 0.62 | % | ||||||||||
| Nonperforming assets to total assets |
0.36 | % | 0.27 | % | 0.33 | % | 0.28 | % | 0.59 | % | ||||||||||
Nonperforming loans at March 31, 2021 were $3.8 million, an increase of $1.3 million from the $2.5 million balance at December 31, 2020. This increase relates to a $1.9 million loan that was on Covid related deferral at March 31, 2021. This loan is adequately secured. There were no specific reserves on nonaccrual at March 31, 2021. Specific reserves on nonaccrual loans totaled $143 thousand at December 31, 2020. Performing loans past due thirty to eighty-nine days were $749 thousand at March 31, 2021 down from $1.2 million at December 31, 2020.
A substandard loan is not adequately protected by the current sound worth and paying capacity of the borrower or the value of the collateral pledged, if any. Total substandard loans increased by $5.2 million from $1.8 million at December 31, 2020 to $7.0 million at March 31, 2021. Loans classified as special mention increased by $9.6 million from $3.1 million at December 31, 2020 to $12.7 million at March 31, 2021. The increase in substandard and special mention loans mostly relates to loans that on March 31, 2021 were on Covid related deferral and had been on deferral for an extended period of time.
At March 31, 2021 and December 31, 2020, the Company's recorded investment in impaired loans totaled $3.6 million and $2.2 million, respectively. The specific allowance for loan losses related to impaired loans totaled $30 thousand and $174 thousand at March 31, 2021 and December 31, 2020.
It is the policy of management to make additions to the allowance for loan losses so that it remains appropriate to absorb the inherent risk of loss in the portfolio. Management believes that the allowance at March 31, 2021 is appropriate. However, the determination of the amount of the allowance is judgmental and subject to economic conditions which cannot be predicted with certainty. Accordingly, the Company cannot predict whether charge-offs of loans in excess of the allowance may occur in future periods.
OREO represents real property acquired by the Bank either through foreclosure or through a deed in lieu thereof from the borrower. Repossessed assets include vehicles and other commercial assets acquired under agreements with delinquent borrowers. OREO holdings represented four properties totaling $0.6 million at March 31, 2021 and three properties totaling $0.4 million at December 31, 2020. Nonperforming assets as a percentage of total assets were 0.36% at March 31, 2021 and 0.27% at December 31, 2020.
The following table provides a summary of the change in the number and balance of OREO properties for the three months ended March 31, 2021 and 2020 (dollars in thousands):
| Three Months Ended March 31, |
||||||||||||||||
| # |
2021 |
# |
2020 |
|||||||||||||
| Beginning Balance |
3 | $ | 403 | 3 | $ | 707 | ||||||||||
| Additions |
1 | 177 | - | - | ||||||||||||
| Dispositions |
- | - | - | - | ||||||||||||
| Ending Balance |
4 | $ | 580 | 3 | $ | 707 | ||||||||||
Investment Portfolio and Federal Funds Sold. Total investment securities were $204.7 million as of March 31, 2021 and $179.6 million as of December 31, 2020. Unrealized gains on available-for-sale investment securities totaling $3,011,000 were recorded, net of $890,000 in tax expense, as accumulated other comprehensive income within shareholders' equity at March 31, 2021. Unrealized gains on available-for-sale investment securities totaling $6,595,000 were recorded, net of $1,950,000 in tax expense, as accumulated other comprehensive income within shareholders' equity at December 31, 2020. No securities were sold during the three months ended March 31, 2021 and 2020.
The investment portfolio at March 31, 2021 consisted of $120.4 million in securities of U.S. Government-sponsored agencies, $19.9 million in securities of U.S. Government-agencies and 146 municipal securities totaling $64.4 million. The investment portfolio at December 31, 2020 consisted of $110.7 million in securities of U.S. Government-sponsored agencies, $10.5 million in securities of U.S. Government-agencies and 135 municipal securities totaling $58.4 million.
There were no Federal funds sold at March 31, 2021 and December 31, 2020; however, the Bank maintained interest earning balances at the Federal Reserve Bank totaling $195.8 million at March 31, 2021 and $143.7 million at December 31, 2020. The balance, at March 31, 2021, earns interest at the rate of 0.10%.
The Company classifies its investment securities as available-for-sale or held-to-maturity. Currently all securities are classified as available-for-sale. Securities classified as available-for-sale may be sold to implement the Company's asset/liability management strategies and in response to changes in interest rates, prepayment rates and similar factors.
Deposits. Total deposits increased by $95 million from $974 million at December 31, 2020 to $1.1 billion at March 31, 2021. We attribute much of this increase to retention of proceeds from PPP loans, a more cautious consumer, and continued growth in our customer base. The increase in deposits includes increases of $48 million in demand deposits, $27 million in savings accounts and $21 million in money market accounts.
During November 2020 we eliminated our interest-bearing demand deposit products transferring these accounts to either money market accounts or non-interest bearing demand accounts based on product type. We made this change to simplify our product offerings in light of the changes to Federal Reserve Board Regulation D which no longer limits the number of transfers or withdrawals from Money Market or Savings accounts.
The following table shows the distribution of deposits by type at March 31, 2021 and December 31, 2020.
| Percent of |
Percent of |
|||||||||||||||
| Deposits in Each |
Deposits in Each |
|||||||||||||||
| Balance at End |
Category to |
Balance at End |
Category to |
|||||||||||||
| (dollars in thousands) |
of Period |
Total Deposits |
of Period |
Total Deposits |
||||||||||||
| 03/31/2021 |
03/31/2021 |
12/31/2020 |
12/31/2020 |
|||||||||||||
| Non-interest bearing |
$ | 564,337 | 52.8 | % | $ | 516,682 | 53.0 | % | ||||||||
| Money Market |
194,304 | 18.2 | % | 173,557 | 17.8 | % | ||||||||||
| Savings |
270,192 | 25.3 | % | 243,419 | 25.0 | % | ||||||||||
| Time |
40,385 | 3.8 | % | 40,316 | 4.2 | % | ||||||||||
| Total Deposits |
$ | 1,069,218 | 100 | % | $ | 973,974 | 100 | % | ||||||||
Deposits represent the Bank's primary source of funds. Deposits are primarily core deposits in that they are demand, savings and time deposits generated from local businesses and individuals. These sources are considered to be relatively stable, long-term relationships thereby enhancing steady growth of the deposit base without major fluctuations in overall deposit balances. The Company experiences, to a small degree, some seasonality with the slower growth period between November through April, and the higher growth period from May through October. To assist in meeting any funding demands, the Company maintains a secured borrowing arrangement with the FHLB. There were no brokered deposits at March 31, 2021 or December 31, 2020.
Short-term Borrowing Arrangements. The Company is a member of the FHLB and can borrow up to $150 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $312 million. The Company is required to hold FHLB stock as a condition of membership. At March 31, 2021 the Company held $3.7 million of FHLB stock which is recorded as a component of other assets. Based on this level of stock holdings the Company can borrow up to $135.8 million. To borrow the $150 million in available credit the Company would need to purchase $377 thousand 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 $50 million, $20 million and $10 million. There were $5 million in outstanding borrowings to the FHLB at March 31, 2021 and December 31, 2020. The $5 million matures on May 7, 2021. The borrowing is at a zero interest rate. There were no outstanding borrowings to the correspondent banks at March 31, 2021 and December 31, 2020.
Note Payable. The Company maintains a $15 million line of credit facility with one of its correspondent banks (the "Note"). Interest on the Note is payable at the "Prime Rate". There were no borrowings on the Note during the three months ended March 31, 2021 or the year ended December 31, 2020. The Note is secured by 100 shares of Plumas Bank stock representing the Company's 100% ownership interest in Plumas Bank. Under the Note, the Bank is subject 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 Bank was in compliance with all such covenants related to the Note at March 31, 2021 and December 31, 2020. The Note matures on March 2, 2022.
Repurchase Agreements. The Bank offers a repurchase agreement product for its larger customers which use securities sold under agreements to repurchase as an alternative to interest-bearing deposits. Securities sold under agreements to repurchase totaling $11.5 million and $13.9 million at March 31, 2021 and December 31, 2020, respectively are secured by U.S. Government agency securities with a carrying amount of $17.4 million and $19.8 million at March 31, 2021 and December 31, 2020, respectively. Interest paid on this product is similar to that which is paid on the Bank’s premium interest-bearing transaction accounts; however, these are not deposits and are not FDIC insured.
Junior Subordinated Deferrable Interest Debentures. Plumas Statutory Trust I and II are business trust subsidiaries formed by the Company with capital at March 31, 2021 of $359,000 and $182,000, respectively, for the sole purpose of issuing trust preferred securities fully and unconditionally guaranteed by the Company.
During 2002, Trust I issued 6,000 Floating Rate Capital Trust Pass-Through Securities ("Trust Preferred Securities"), with a liquidation value of $1,000 per security, for gross proceeds of $6,000,000. During 2005, 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 an effective interest rate of 4.15%, with payments due quarterly. Trust II’s Subordinated Debentures mature on September 28, 2035, bear an effective interest rate of 2.23%, with payments due quarterly. The effective interest rate includes the effect of interest rate swaps that are associated with these borrowings. See Interest Rate Swaps below. 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.
Interest expense recognized by the Company for the three months ended March 31, 2021 and 2020 related to the subordinated debentures was $79 thousand and $116 thousand, respectively.
Interest Rate Swaps
From time to time, we may use interest rate swaps or other instruments to manage our interest rate exposure and reduce the impact of future interest rate changes. These financial instruments are not used for trading or speculative purposes. On May 26, 2020 we entered into two separate interest rate swap agreements, effectively converting the $10 million in Subordinated Debentures to fixed obligations. The swaps have a 10 year maturity and fix the LIBOR rate on the Subordinated Debentures at approximately 75 basis points. These agreements have been designated and qualify as cash flow hedging instruments and, as such changes in the fair value are recorded in accumulated other comprehensive income/loss to the extent the agreements are effective hedges. At March 31, 2021 and December 31, 2020 the carrying value of the swaps, which was included in other assets, was an unrealized gain of $809 thousand and $141 thousand, respectively.
Capital Resources
Shareholders’ equity increased by $1.8 million from $100.2 million at December 31, 2020 to $102.0 million at March 31, 2021. The $1.8 million increase was related to earnings during the first three months of 2021 of $4.4 million and $0.2 million representing stock option activity partially offset by a decrease in accumulated other comprehensive income, net of tax of $2.1 million and a quarterly cash dividend of $0.7 million.
It is the policy of the Company to periodically distribute excess retained earnings to the shareholders through the payment of cash dividends. Such dividends help promote shareholder value and capital adequacy by enhancing the marketability of the Company’s stock. All authority to provide a return to the shareholders in the form of a cash or stock dividend or split rests with the Board of Directors. The Board will periodically, but on no regular schedule, review the appropriateness of a cash dividend payment. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. The Company is subject to various restrictions on the payment of dividends. Quarterly cash dividends of $0.14, $0.12, $0.12 and $0.12 per shares were paid on February 15, 2021, November 16, 2020, August 14, 2020 and May 15, 2020, respectively.
Capital Standards. The Company uses a variety of measures to evaluate its capital adequacy. Management reviews these capital measurements on a monthly basis and takes appropriate action to ensure that they are within established internal and external guidelines. The FDIC has promulgated risk-based capital guidelines for all state non-member banks such as the Bank. These guidelines establish a risk-adjusted ratio relating capital to different categories of assets and off-balance sheet exposures.
In July, 2013, the federal bank regulatory agencies adopted rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. depository organizations, sometimes called “Basel III,” that increased the minimum regulatory capital requirements for bank holding companies and depository institutions and implemented strict eligibility criteria for regulatory capital instruments. The Basel III capital rules include a minimum common equity Tier 1 ratio of 4.5%, a Tier 1 capital ratio of 6.0%, a total risk-based capital ratio of 8.0%, and a minimum leverage ratio of 4.0% (calculated as Tier 1 capital to average consolidated assets). The minimum capital levels required to be considered “well capitalized” include a common equity Tier 1 ratio of 6.5%, a Tier 1 risk-based capital ratio of 8.0%, a total risk-based capital ratio of 10.0% and a leverage ratio of 5.0%. In addition, the Basel III capital rules require that banking organizations maintain a capital conservation buffer of 2.5% above the minimum capital requirements in order to avoid restrictions on their ability to pay dividends, repurchase stock or pay discretionary bonuses. Including the capital conservation buffer of 2.5%, the Basel III capital rules require the following minimum ratios for a bank holding company or bank to be considered well capitalized: a common equity Tier 1 capital ratio of 7.0%; a Tier 1 capital ratio of 8.5%, and a total capital ratio of 10.5%. At March 31, 2021 and December 31, 2020, the Bank’s capital ratios exceed the thresholds necessary to be considered “well capitalized” under the Basel III framework.
Under the FRB’s Small Bank Holding Company and Savings and Loan Holding company Policy Statement (the “Policy Statement”), qualifying bank holding companies with less than $3 billion in consolidated assets are exempt from the Basel III consolidated capital rules. The Company qualifies for treatment under the Policy Statement and is not currently subject to the Basel III consolidated capital rules at the bank holding company level. The Basel III capital rules continue to apply to the Bank.
In 2019, the federal bank regulators issued a rule establishing a “community bank leverage ratio” (the ratio of a bank’s tier 1 capital to average total consolidated assets) that qualifying institutions with less than $10 billion in assets may elect to use in lieu of the generally applicable leverage and risk-based capital requirements under Basel III. A qualifying banking organization that elects to use new ratio will be considered to have met all applicable federal regulatory capital and leverage requirements, including the minimum capital levels required to be considered “well capitalized, ” if it maintains community bank leverage ratio capital exceeding 9%. The new rule became effective on January 1, 2020. Plumas Bank has chosen not to opt into the community bank leverage ratio at this time.
The following table sets forth the Bank's actual capital amounts and ratios (dollar amounts in thousands):
| Minimum Amount of Capital Required |
||||||||||||||||||||||||
| To be Well-Capitalized |
||||||||||||||||||||||||
| For Capital |
Under Prompt |
|||||||||||||||||||||||
| Actual |
Adequacy Purposes (1) |
Corrective Provisions |
||||||||||||||||||||||
| Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
|||||||||||||||||||
| March 31, 2021 |
||||||||||||||||||||||||
| Common Equity Tier 1 Ratio |
$ | 107,263 | 14.7 | % | $ | 32,766 | 4.5 | % | $ | 47,328 | 6.5 | % | ||||||||||||
| Tier 1 Leverage Ratio |
107,263 | 9.3 | % | 46,302 | 4.0 | % | 57,878 | 5.0 | % | |||||||||||||||
| Tier 1 Risk-Based Capital Ratio |
107,263 | 14.7 | % | 43,687 | 6.0 | % | 58,250 | 8.0 | % | |||||||||||||||
| Total Risk-Based Capital Ratio |
116,378 | 16.0 | % | 58,250 | 8.0 | % | 72,812 | 10.0 | % | |||||||||||||||
| December 31, 2020 |
||||||||||||||||||||||||
| Common Equity Tier 1 Ratio |
$ | 103,361 | 14.2 | % | $ | 32,802 | 4.5 | % | $ | 47,381 | 6.5 | % | ||||||||||||
| Tier 1 Leverage Ratio |
103,361 | 9.2 | % | 45,017 | 4.0 | % | 56,271 | 5.0 | % | |||||||||||||||
| Tier 1 Risk-Based Capital Ratio |
103,361 | 14.2 | % | 43,736 | 6.0 | % | 58,315 | 8.0 | % | |||||||||||||||
| Total Risk-Based Capital Ratio |
112,485 | 15.4 | % | 58,315 | 8.0 | % | 72,894 | 10.0 | % | |||||||||||||||
(1) Does not include amounts required to maintain the capital conservation buffer under the new capital rules
Management believes that Plumas Bank currently meets all its capital adequacy requirements.
The current and projected capital positions of the Bank and the impact of capital plans and long-term strategies are reviewed regularly by management. The Company policy is to maintain the Bank’s ratios above the prescribed well-capitalized ratios at all times.
Off-Balance Sheet Arrangements
Loan Commitments. In the normal course of business, there are various commitments outstanding to extend credits that are not reflected in the financial statements. Commitments to extend credit and letters of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Annual review of commercial credit lines, letters of credit and ongoing monitoring of outstanding balances reduces the risk of loss associated with these commitments. As of March 31, 2021, the Company had $150.7 million in unfunded loan commitments and $226 thousand in letters of credit. This compares to $144.4 million in unfunded loan commitments and $531 thousand in letters of credit at December 31, 2020. Of the $150.7 million in unfunded loan commitments, $101.7 million and $49.0 million represented commitments to commercial and consumer customers, respectively. Of the total unfunded commitments at March 31, 2021, $89.8 million were secured by real estate, of which $50.6 million was secured by commercial real estate and $39.2 million was secured by residential real estate in the form of equity lines of credit. The commercial loan commitments not secured by real estate primarily represent business lines of credit, while the consumer loan commitments not secured by real estate primarily represent revolving credit card lines and overdraft protection lines. Since some of the commitments are expected to expire without being drawn upon the total commitment amounts do not necessarily represent future cash requirements.
Leases. The Company leases two depository branches, three lending offices, two administrative offices and two non-branch automated teller machine locations. Including variable lease expense, total rent expense under all leases was $95 thousand and $130 thousand during the three months ended March 31, 2021 and 2020, respectively. The expiration dates of the leases vary, with the first such lease expiring during 2021 and the last such lease expiring during 2026.
Liquidity
The Company manages its liquidity to provide the ability to generate funds to support asset growth, meet deposit withdrawals (both anticipated and unanticipated), fund customers' borrowing needs, satisfy maturity of short-term borrowings and maintain reserve requirements. The Company’s liquidity needs are managed using assets or liabilities, or both. On the asset side, in addition to cash and due from banks, the Company maintains an investment portfolio which includes unpledged U.S. Government-sponsored agency securities that are classified as available-for-sale. On the liability side, liquidity needs are managed by charging competitive offering rates on deposit products and the use of established lines of credit.
The Company is a member of the FHLB and can borrow up to $150 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $312 million. See “Short-term Borrowing Arrangements” for additional information on our FHLB borrowing capacity. 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 $50 million, $20 million and $10 million. There were no outstanding borrowings under the FHLB or the correspondent bank borrowing lines at March 31, 2021 or December 31, 2020.
Customer deposits are the Company’s primary source of funds. Total deposits were $1.1 billion at March 31, 2021 and $974 million at December 31, 2020. Deposits are held in various forms with varying maturities. The Company’s securities portfolio, Federal funds sold, FHLB advances, and cash and due from banks serve as the primary sources of liquidity, providing adequate funding for loans during periods of high loan demand. During periods of decreased lending, funds obtained from the maturing or sale of investments, loan payments, and new deposits are invested in short-term earning assets, such as cash held at the FRB, Federal funds sold and investment securities, to serve as a source of funding for future loan growth. Management believes that the Company’s available sources of funds, including borrowings, will provide adequate liquidity for its operations in the foreseeable future.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2021. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2021.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2021 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company and/or its subsidiary are a party to claims and legal proceedings arising in the ordinary course of business. In the opinion of the Company's management, the amount of ultimate liability with respect to such proceedings will not have a material adverse effect on the financial condition or results of operations of the Company taken as a whole.
Item 1A RISK FACTORS
In addition to the other information set forth in this Form 10-Q you should carefully consider the risk factors that appeared under Item 1A, “Risk Factors” in the Company’s 2020 Annual Report. There are no material changes from the risk factors included within the Company’s 2020 Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) None.
(b) None.
(c) None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following documents are included or incorporated by reference in this Quarterly Report on Form 10Q:
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| 4.1 | Description of Securities of Plumas Bancorp Registered Under Section 12 of the Exchange Act, is included as exhibit 4.1 to the Registrant's 10-K for December 31, 2019, which is incorporated by this reference herein. |
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| 101.INS* | Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
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Inline XBRL Taxonomy Extension Schema Document |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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Filed herewith |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| PLUMAS BANCORP |
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| (Registrant) |
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| Date: May 5, 2021 |
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/s/ Richard L. Belstock |
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Richard L. Belstock |
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Chief Financial Officer |
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/s/ Andrew J. Ryback |
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Andrew J. Ryback |
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Director, President and Chief Executive Officer |
Exhibit 10.14
IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT THIS NOTE MAY REQUIRE A “BALLOON” PAYMENT OF ALL UNPAID PRINCIPAL AND ACCRUED BUT UNPAID INTEREST ON THE MATURITY DATE. THE UNPAID PRINCIPAL INDEBTEDNESS EVIDENCED BY THIS NOTE IS PAYABLE IN FULL AT MATURITY. MAKER MUST REPAY THE ENTIRE UNPAID PRINCIPAL BALANCE OF THIS NOTE AND ACCRUED BUT UNPAID INTEREST THEN DUE. PAYEE IS UNDER NO OBLIGATION TO REFINANCE THIS NOTE AT THAT TIME.
TIB THE INDEPENDENT BANKERSBANK, N.A.
PROMISSORY NOTE
(Revolving)
| $15,000,000.00 | March 2, 2021 |
FOR VALUE RECEIVED, the undersigned, PLUMAS BANCORP ("Maker"), promises to pay to the order of TIB THE INDEPENDENT BANKERSBANK, N.A. ("Payee") the maximum principal sum of Fifteen Million and No/100 Dollars ($15,000,000.00), or so much thereof as shall be advanced hereunder, on demand, or if not sooner demanded, then at or before the maturity of this Note, with interest on the unpaid balance outstanding from time to time at the rate or rates specified below, both principal and interest payable as provided below in lawful money of the United States of America at the address of Payee set forth below or at such other place as from time to time may be designated by the holder of this Note.
I. Interest Rates and Payments
Prior to default or maturity, the unpaid principal of this Note from time to time outstanding shall bear interest at the rate ("Rate") of interest per annum equal to the rate reported in the Credit Markets section (or similar section) of The Wall Street Journal as the U.S. “Prime Rate” on the date hereof (the “Index”); provided, however, in no event shall the Rate exceed the maximum interest rate permitted under applicable law (“Maximum Rate”). If applicable law provides for a ceiling, that ceiling shall be the indicated rate ceiling. All interest accruing under this Note shall be calculated on the basis of a 360-day year applied to the actual number of days elapsed.
Quarterly payments of interest on the unpaid principal balance of this Note shall be due and payable on June 2, 2021, September 2, 2021, December 2, 2021 and March 2, 2022 (“Maturity Date”), on which date all unpaid principal of and accrued interest on this Note shall be due and payable, which will be a balloon payment. Any payment received later than ten (10) days from the due date thereof must be accompanied by a late fee payment in the amount of five percent (5%) of the amount of such payment. Any partial prepayments of principal shall be applied to installments thereof in the inverse order of maturity.
All principal and interest which is matured or otherwise past due under this Note shall bear interest at the Maximum Rate, or, if no such rate is designated under applicable law, at the rate of eighteen percent (18%) per annum.
Maker shall have the right to prepay, without penalty, at any time and from time to time prior to maturity, all or any part of the unpaid principal balance of this Note and all or any part of the unpaid interest accrued to the date of such prepayment, provided that any such principal thus paid is accompanied by accrued interest on such principal. Maker may borrow, repay, and reborrow up to the principal face amount of this Note; provided, however, that (1) such borrowings or reborrowings be in accordance with the requirements in the Loan Agreement between Maker and Payee of even date herewith, and (2) at no time shall the total outstanding principal amount hereunder exceed the face value of this Note. It is contemplated that by reason of prepayments hereon there may be times when no indebtedness is owing hereunder; but, notwithstanding such occurrences, this Note shall remain valid and shall be in full force and effect subsequent to each such occurrence until the Maturity Date.
| PROMISSORY NOTE - PLUMAS BANCORP - Loan No. 95405 | Page 1 |
II. Security
This Note is secured by, Inter alia, a Pledge Agreement (the "Pledge Agreement") and an Assignment of Life Insurance Policies as Collateral (“Assignment”) of even date herewith from Maker to Payee, to which Pledge Agreement reference is made for a description of the property covered thereby and the nature and extent of the rights and powers of the holder of this Note in respect of such property.
III. Right to Accelerate Upon Default
In addition to the demand feature herein, the holder of this Note shall have the option of declaring the principal balance hereof and the interest accrued hereon to be immediately due and payable upon the occurrence of an Event of Default under the Loan Agreement (“Loan Agreement”) of even date herewith, between Maker and Payee (this Note, the Pledge Agreement, the Assignment, the Loan Agreement, and any such other documents are called the "Loan Documents" below), and the continuance of such default for a relevant grace or notice period provided therein, if any.
IV. Waiver of Conditions and Defenses to Liability
Maker and any other party who is or becomes liable to pay all or any part of this Note, or who grants any lien or security interest to secure all or any part of this Note (each called an "other liable party" below), including but not limited to any drawer, acceptor, endorser, guarantor, surety or accommodation party, severally waive presentment for payment, demand, notice of demand and of dishonor and nonpayment of this Note, notice of intention to accelerate the maturity of this Note, protest and notice of protest, diligence in collecting, and the bringing of suit against any other party.
Further, Maker and any other liable party severally waive any notice of or defense based upon any agreement or consent of the holder of this Note made or given from time to time, before or after maturity, to any of the following: the acceleration, renewal or extension of this Note; a change in the time or manner of payments required by this Note; a change in the rates of interest specified in this Note; acceptance or surrender of security; a substitution of security or subordination, amendment or release of security; an addition or release of any other liable party; changes of any sort whatever in the terms of payment of this Note or in the manner of doing business with Maker; and any settlement or compromise with Maker or any other liable party on such terms as the holder of this Note may deem appropriate in its sole and absolute discretion.
The holder of this Note may apply all moneys received from Maker or others, or from any security (whether held under a security instrument or not), in such manner upon the indebtedness evidenced or secured by any Loan Documents (whether then due or not) as such holder may determine to be in its best interest, without in any way being required to marshal assets or to apply all or any part of such moneys upon any particular part of such indebtedness. The holder of this Note is not required to retain, hold, protect, exercise due care with respect to, perfect security interests in or otherwise assure or safeguard any security for this Note, and no failure by the holder of this Note to do any of the foregoing and no exercise or failure to exercise by such holder of any other right or remedy shall in any way affect any of Maker's or any other liable party's obligations hereunder or under other Loan Documents or affect any security or give Maker or any other liable party any recourse against the holder of this Note.
| PROMISSORY NOTE - PLUMAS BANCORP - Loan No. 95405 | Page 2 |
V. Usury Savings Provision
It is the intent of Maker and Payee in the execution of this Note and all other Loan Documents to contract in strict compliance with applicable usury law. In furtherance thereof, Maker and Payee stipulate and agree that none of the terms and provisions contained in this Note, or in any other instrument executed in connection herewith, shall ever be construed to create a contract to pay for the use, forbearance or detention of money, interest at a rate in excess of the Maximum Rate. Neither Maker nor any guarantors, endorsers or other parties now or hereafter becoming liable for payment of this Note shall ever be obligated or required to pay interest on this Note at a rate in excess of the Maximum Rate, and the provisions of this paragraph shall control over all other provisions of this Note and any other Loan Documents now or hereafter executed which may be in apparent conflict herewith. Payee expressly disavows any intention to charge or collect excessive unearned interest or finance charges in the event the maturity of this Note is accelerated. If the maturity of this Note shall be accelerated for any reason or if the principal of this Note is paid prior to the end of the term of this Note, and as a result thereof the interest received for the actual period of existence of the loan evidenced by this Note exceeds the applicable maximum lawful rate, the holder of this Note shall credit the amount of such excess against the principal balance of this Note then outstanding and thereby shall render inapplicable any and all penalties of any kind provided by applicable law as a result of such excess interest; provided, however, that if the principal hereof has been paid in full, such excess shall be refunded to Maker. If the holder of this Note shall receive money (or anything else) which is determined to constitute interest and which would increase the effective interest rate on this Note or the other indebtedness secured by the Loan Documents to a rate in excess of that permitted by applicable law, the amount determined to constitute interest in excess of the lawful rate shall be credited against the principal balance of this Note then outstanding or, if the principal balance has been paid in full, refunded to Maker, in which event any and all penalties of any kind under applicable law as a result of such excess interest shall be inapplicable. If the holder of this Note shall not actually receive, but shall contract for, request or demand, a payment of money (or anything else) which is determined to constitute interest and which would increase the effective interest rate contracted for or charged on this Note or the other indebtedness evidenced or secured by the Loan Documents to a rate in excess of that permitted by applicable law, the holder of this Note shall be entitled, following such determination, to waive or rescind the contractual claim, request or demand for the amount determined to constitute interest in excess of the lawful rate, in which event any and all penalties of any kind under applicable law as a result of such excess interest shall be inapplicable. By execution of this Note Maker acknowledges that Maker believes the loan evidenced by this Note to be non-usurious and agrees that if, at any time, Maker should have reason to believe that such loan is in fact usurious, Maker will give the holder of this Note notice of such condition and Maker agrees that the holder shall have sixty (60) days in which to make appropriate refund or other adjustment in order to correct such condition if in fact such exists. Additionally, if, from any circumstance whatsoever, fulfillment of any provision hereof or any other Loan Documents shall, at the time fulfillment of such provision be due, involve transcending the Maximum Rate then, ipso facto, the obligation to be fulfilled shall be reduced to the Maximum Rate. The term "applicable law" as used in this Note shall mean the laws of the State of Texas or the laws of the United States, whichever laws allow the greater rate of interest, as such laws now exist or may be changed or amended or come into effect in the future.
VI. Miscellaneous
Should the indebtedness represented by this Note or any part thereof be collected at law or in equity or through any bankruptcy, receivership, probate or other court proceedings or if this Note is placed in the hands of attorneys for collection after default, Maker and all endorsers, guarantors and sureties of this Note jointly and severally agree to pay to the holder of this Note in addition to the principal and interest due and payable hereon all the costs and expenses of the holder in enforcing this Note including, without limitation, reasonable attorneys' fees and legal expenses.
This Note and the rights, duties and liabilities of the parties hereunder or arising from or relating in any way to the indebtedness evidenced by this Note or the transaction of which such indebtedness is a part shall be governed by and construed in accordance with the law of the State of Texas and the law of the United States applicable to transactions within such State.
No amendment of this Note shall be binding unless expressed in a writing executed by Maker and the holder of this Note.
Maker certifies, represents, and warrants to Payee that the proceeds hereof are to be used for a commercial purpose and not for personal, family, household, or agricultural purposes.
THE PARTIES HERETO VOLUNTARILY AND KNOWINGLY WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY ON ANY MATTER WHATSOEVER ARISING OUT OF, IN CONNECTION WITH, OR RELATED TO ANY OF THE LOAN DOCUMENTS.
| PROMISSORY NOTE - PLUMAS BANCORP - Loan No. 95405 | Page 3 |
THIS NOTE AND ALL OTHER DOCUMENTS AND INSTRUMENTS EXECUTED PURSUANT HERETO OR IN CONNECTION HEREWITH AND THE TRANSACTIONS CONTEMPLATED HEREBY ARE MADE AND PERFORMABLE IN DALLAS COUNTY, TEXAS AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. MAKER IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY TEXAS OR FEDERAL COURT SITTING IN DALLAS COUNTY, TEXAS OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, AND MAKER HEREBY AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY TEXAS OR FEDERAL COURT SITTING IN DALLAS COUNTY, TEXAS (OR SUCH OTHER COUNTY IN TEXAS) MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO MAKER AT THE ADDRESS INDICATED BELOW, AND SERVICE SO MADE SHALL BE COMPLETE FIVE DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.
| MAKER: | |
| Maker's Address: | |
| 5525 Kietzke Lane, Suite 100 | PLUMAS BANCORP |
| Reno,Nevada89511 | |
| By: | |
| Andrew J. Ryback, President and CEO | |
| Payee's Address: | |
| TIB THE INDEPENDENT BANKERSBANK, N.A. | |
| 11701 Luna Road | |
| Farmers Branch, Texas 75234 |
| PROMISSORY NOTE - PLUMAS BANCORP - Loan No. 95405 | Page 4 |
LOAN AGREEMENT
The undersigned, PLUMAS BANCORP, a California corporation (the “Borrower”), with its mailing address located at the address set forth on the signature pages hereof, has requested that TIB The Independent BankersBank, N.A. (the “Lender”) extend a loan (the “Loan”) to Borrower to be evidenced by Borrower’s promissory note dated of even date herewith, in the maximum stated principal sum of $15,000,000.00, payable to the order of Lender as therein specified (together with all renewals, extensions and rearrangements thereof, the “Note”). In consideration of Lender making the Loan, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Borrower agrees with Lender as follows:
1. Definitions. Capitalized terms as used in this Loan Agreement (the “Agreement”) and not otherwise defined herein shall have the meanings as contained on the attached Schedule A.
2. Repayment of Loan. Borrower shall repay the Loan, plus accrued interest thereon, as provided in the Note.
3. Collateral. To secure full and complete payment and performance of the Obligations, Borrower shall execute and deliver or cause to be executed and delivered the documents described below covering the collateral described in this Section (which, together with any other property and collateral which may now or hereafter secure the Obligations or any part thereof, is sometimes herein called the “Collateral”):
(a) Borrower shall grant to Lender a first priority security interest in all of the capital stock of the Bank, including common and preferred stock, now owned or hereafter acquired by Borrower, and all products and proceeds thereof (the “Pledged Stock”), pursuant to the Pledge Agreement. Lender shall be delivered and retain possession of the original certificate or certificates representing the Pledged Stock, together with stock powers duly executed in blank by Borrower.
(b) Borrower consents to the filing of any Uniform Commercial Code financing statements Lender deems necessary or desirable to evidence and perfect its liens and security interests in the Collateral.
4. A. Conditions Precedent. The obligation of Lender to make the Loan (or initial advance thereof, if applicable) is subject to the condition precedent that Lender shall have received all of the following, each dated (unless otherwise indicated) the date hereof, in form and substance satisfactory to Lender:
(a) Note. The Note executed by Borrower.
(b) Pledge Agreement. The Pledge Agreement executed by Borrower and Grantor.
(c) Pledged Stock. The original certificates representing the Pledged Stock, accompanied by stock powers duly executed in blank by Borrower and Grantor.
(d) Additional Information. Such additional documents, instruments, and information as Lender or its legal counsel may reasonably request, including any information listed in any Schedules attached hereto.
4. B. Conditions Precedent to All Advances. To the extent the Loan includes advances which may be made after the Closing Date, the obligation of the Lender to thereafter make any advance under the Loan is subject to the following additional conditions precedent:
(a) Advance Request Form. Lender shall have received an advance request form in a form satisfactory to Lender, dated the date of such requested advance, executed by an authorized officer of the Borrower;
(b) No Default. No Event of Default, and no event which with the giving of notice or lapse of time or both would be an Event of Default, shall have occurred and be continuing, or would result from such advance;
| LOAN AGREEMENT (Loan No. 95405) | Page 1 |
(c) Representations and Warranties. All of the representations and warranties contained in the Loan Documents shall be true and correct on and as of the date of such advance with the same force and effect as if such representations and warranties had been made on and as of such date;
(d) No Material Adverse Change. No material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower or any of its Subsidiaries shall have occurred since the date of the most recent financial statements of Borrower and Bank delivered to Lender;
(e) Additional Documentation. Lender shall have received such additional approvals or documents as the Lender or its legal counsel may reasonably request;
(f) Uses. Lender shall have reviewed and approved the terms and conditions of the use of proceeds of the advance to be made; and
(g) Timeline. No advances shall be made after any Conversion Date defined in the Note, if applicable.
5. Representations and Warranties.To induce Lender to enter into this Agreement, Borrower represents and warrants to Lender that:
(a) Borrower (i) is a corporation duly organized, validly existing, and in good standing under the laws of California; (ii) has all requisite corporate power to own assets and carry on its business as now being or as proposed to be conducted; and (iii) is qualified to do business in all jurisdictions in which the nature of its business makes such qualifications necessary and where failure to so qualify would have a material adverse effect on its business, financial condition, or operations. The Bank is a state banking association duly organized, validly existing and in good standing under the applicable laws of the United States and the State of California.
(b) The execution, delivery and performance by Borrower of this Agreement, the Note and other Loan Documents have been duly authorized by all necessary action of Borrower and are not in contravention of any law, rule or regulation or of the terms of any agreement or instrument to which Borrower is a party or by which it may be bound or of Borrower’s certificate of formation/articles of incorporation or bylaws.
(c) This Agreement, the Note and the other Loan Documents, when delivered, shall constitute the legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with their respective terms, except as limited by bankruptcy, insolvency, or other laws of general application relating to the enforcement of creditors’ rights.
(d) No litigation or governmental proceeding is pending, or to the knowledge of Borrower, threatened against or affecting Borrower or Bank, which may result in any material adverse change in Borrower’s or Bank’s business, properties or operations.
(e) Unless described on Schedule B attached hereto, (1) Borrower has no Debt except Debt to Lender and (2) none of Borrower’s or Bank’s assets are subject to any Lien except Liens to Lender.
(f) Borrower has the unrestricted right to pledge the Collateral as contemplated by the Loan Documents. There are no existing subscriptions, options, warrants, calls, or rights (including preemptive rights) to acquire, and no existing Debt, securities or other instruments convertible into or exchangeable for capital stock of the Bank.
(g) No certificate or statement (including without limitation financial statements) herewith or heretofore delivered by Borrower to Lender in connection therewith, or in connection with any transaction contemplated hereby, contains any untrue statement of a material fact or fails to state any material fact necessary to keep the statements contained therein from being misleading and there has been no material adverse change in Borrower’s or Bank’s financial condition and operations subsequent to the date of the most recent financial statements of Borrower and Bank delivered to Lender.
| LOAN AGREEMENT (Loan No. 95405) | Page 2 |
6. Affirmative Covenants. Borrower covenants and agrees that, as long as the Obligations or any part thereof are outstanding or Lender has any commitment hereunder, Borrower will observe and perform the following affirmative covenants, unless Lender shall otherwise consent in writing:
(a) Borrower will furnish to Lender as soon as available, and in any event within ninety (90) days after the end of each fiscal year of Borrower, a copy of the annual audit report of Borrower and Bank for such fiscal year containing, on a consolidated and unconsolidated basis, balance sheets, statements of income, statements of changes in financial position and cash flows as at the end of such fiscal year and for the 12-month period then ended, in each case setting forth in comparative form the figures for the preceding fiscal year, all in reasonable detail and audited and certified by independent certified public accountants of recognized standing reasonably acceptable to Lender, to the effect that such report has been prepared in accordance with GAAP.
(b) To the extent that Lender is unable to readily obtain online, within ten (10) days of Lender’s written request, Borrower will deliver to Lender copies of financial reports of Borrower for such period, prepared in conformity with GAAP, and which fairly and accurately states Borrower’s financial condition at such time (including all assets, liabilities, contingent liabilities, and cash flow); such financial reports shall include without limitation a copy of Borrower’s most recent Federal Reserve Form Y-9SP or Form Y-9LP, Federal Reserve Form Y-6, as well as any Federal Reserve Form Y-10 if applicable. In addition, to the extent that Lender is unable to readily obtain online, within ten (10) days of Lender’s written request, Borrower will deliver to Lender copies of all Call Reports as filed with the Federal Financial Institutions Examination Council as well as copies of the Uniform Bank Performance Report for Bank prepared by the Federal Financial Institutions Examination Council or any successor entity.
(c) As soon as available, and in any event within thirty (30) days after the end of each calendar quarter, Borrower shall furnish to Lender a Watch List or other report identifying the Classified Assets and Criticized Assets of Bank.
(d) As soon as available, and in any event within thirty (30) days after the end of each calendar quarter, Borrower shall deliver or cause to be delivered to Lender the directors’ report from any meetings during such quarter.
(e) Promptly, and in any event, prior to January 31st of each and every year during the term of the Loan (including renewals, modifications, and/or extensions thereof), Borrower shall and shall cause Bank to create and deliver to Lender a comprehensive and detailed fiscal budget for the forthcoming year, such budget to include projected cash flow information and a pro forma balance sheet.
(f) Borrower will cause Bank to maintain at all times a liquidity position determined by the ratio of total deposits to total loans which is in accordance with the guidelines recommended by applicable federal bank regulatory authorities and is deemed satisfactory at each regulatory examination of Bank.
(g) Borrower will preserve and maintain its present existence and good standing in jurisdictions where Borrower is organized and operates. Borrower will continue its business or activities as presently conducted by obtaining licenses, permits and bonds where needed. Borrower will obtain Lender’s prior written consent before ceasing business or engaging in any line of business that is materially different from its present business.
(h) Borrower will promptly inform Lender of any litigation against Borrower or Bank or affecting any of Borrower’s or Bank’s property, if such litigation or potential litigation that would reasonably be expected to, in the event of an unfavorable outcome, have a material adverse effect on Borrower’s or Bank’s financial condition or that would reasonably be expected to cause an Event of Default.
(i) Borrower will notify Lender within ten (10) days of the occurrence of an Event of Default or event which with the giving of notice or lapse of time or both would constitute an Event of Default.
(j) If, at any time Lender in its sole but reasonable discretion believes that it is advisable that the loan portfolio of Bank should be reviewed during any year during the term of the Loan, Borrower will provide or cause to be provided to Lender a third party loan review of Bank’s loan portfolio conducted by an independent third party acceptable to Lender, such review to begin within ninety (90) days after Lender’s written request therefor. Borrower shall provide such reviews annually if Bank is the subject of any regulatory action.
| LOAN AGREEMENT (Loan No. 95405) | Page 3 |
(k) Borrower will promptly furnish to Lender written notice of (i) the issuance of any notice of charges, cease and desist order (temporary or otherwise) or order to take affirmative action by any governmental or regulatory authority against Borrower or Bank or any director, officer, employee, agent, or other person participating in the conduct of the affairs of Borrower or Bank, (ii) the service of any notice of intention to remove from office or notice of intention to suspend from office by any governmental or regulatory authority upon any director or officer of Borrower or Bank, (iii) the issuance of a notice of termination of the status of Bank as an insured bank under the Federal Deposit Insurance Corporation Act, as amended, or (iv) the commencement of any action, issuance of any order, or the occurrence of any other event between any governmental or regulatory authority the result of which would prohibit, limit or otherwise in any manner restrict the payment of dividends or flow of monies or benefits from Bank; provided however, Borrower shall not be required to furnish written notice of the foregoing actions if such notification would violate the confidentiality rights associated with such action.
(l) Borrower shall maintain, and cause Bank to maintain, insurance of the kinds, covering the risks and in the relative proportionate amounts carried by Bank consistent with past practices, and at Lender’s request, deliver to Lender evidence of the maintenance of such insurance.
(m) Borrower will promptly furnish to Lender, at Lender’s request and within Lender’s sole discretion, such additional financial or other information concerning the assets, liabilities, operations and transactions of Borrower, and/or Bank as Lender may from time to time request.
7. Negative Covenants. Borrower covenants and agrees that, as long as the Obligations or any part thereof are outstanding or Lender has any commitment hereunder, Borrower will perform and observe the following negative covenants as noted applicable to this transaction unless Lender shall otherwise consent in writing:
(a) Borrower will not permit:
|
(a) |
Borrower will not permit: |
(1) ☑ Bank’s Classified Assets to at any time exceed forty percent (40%) of the Tier 1 Capital plus allowance for loan and lease losses of Bank;
(2) ☑ Bank’s Leverage Ratio to at any time be less than eight percent (8%);
(3) ☐ Bank’s Common Equity Tier 1 Ratio to at any time be less than N/A N/A percent ( N/A %);
(4) ☐ Bank’s Tier 1 Capital Ratio to at any time be less than N/A percent ( N/A %);
(5) ☐ Bank’s Total Capital Ratio to at any time be less than N/A percent ( N/A %);
(6) ☐ Bank’s Tier 1 Capital to at any time be less than $ N/A ;
(7) ☑ Bank’s Return on Average Assets to be less than one-half percent (0.50%) at any fiscal quarter end;
(8) ☐ Its Debt Service Coverage Ratio to be less than N/A times, measured N/A upon receipt of and based upon financial information delivered in accordance with Section 6;
(9) ☑ The ratio of Bank’s Total Loans to Total Assets to at any time be greater than eighty-two percent (82%);
(10) ☐ The ratio of Bank’s Total Loans to Total Deposits to at any time be greater than N/A percent ( N/A %)
| LOAN AGREEMENT (Loan No. 95405) | Page 4 |
(11) ☐ Bank’s Total Reported Loans for Construction, Land Development, and other Land Loans to exceed N/A % of Bank’s Total Risk Based Capital;
(12) ☐ Bank’s Total Reported Commercial Real Estate Loans to at any time exceed N/A % of Bank’s Total Risk Based Capital;
(13) ☑ Bank’s aggregate capital expenditures to exceed $3,000,000.00 during any calendar year during the term hereof;
(14) ☐ Bank’s Texas Ratio to at any time be greater than N/A percent ( N/A %).
(15) ☐ New Debt of Borrower exceeding $ N/A other than the Obligations.
(b) Borrower will not permit any change in Control of Borrower to occur (for purposes hereof, “Control” shall mean the power to vote at least ten percent (10%) of any voting stock of Borrower, respectively).
(c) Borrower will not and will not permit Bank to sell, lease, or otherwise dispose of any of its assets used or useful in its business, except in the regular course of business for reasonably equivalent cash consideration.
(d) Borrower will not incur, create, assume, or permit to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except Liens in favor of Lender (provided, however, that the foregoing shall not apply to Liens for taxes which are not delinquent or which are being contested in good faith [with bond or other security reasonably acceptable to Lender if Lender so requires], mechanic’s and materialmen’s Liens with respect to obligations which are not overdue or which are being contested in good faith, and Liens resulting from deposits to secure the payments of workers’ compensation or other social security or to secure the performance of bids or contracts in the ordinary course of business).
(e) During the existence of an Event of Default, or if doing so would cause an Event of Default (or an event which, with the giving of notice, or passage of time, or both, would be an Event of Default), Borrower will not declare or pay any dividends or make any other payment or distribution (in cash, property, or obligations) on account of its capital stock, or redeem, purchase, retire or otherwise acquire any of its capital stock, or set apart any money for a sinking or other analogous fund for any dividend or other distribution on its capital stock or for any redemption, purchase, retirement, or other acquisition of any of its capital stock, or grant or issue any capital stock or any warrant, right or option pertaining to its capital stock, or issue any security convertible into capital stock, or permit any of its Subsidiaries to grant or issue any capital stock or any warrant, right or operation pertaining to its capital stock or purchase any capital stock of Borrower or another Subsidiary.
(f) Borrower will not incur, create, assume or permit to exist Debt of Borrower aggregating over $1,000,000.00 outstanding at any time, except Debt to Lender and as shown on Schedule B.
8. Event of Default. Without in any way impairing the demand nature of the Note, each of the following shall be deemed an “Event of Default”:
(a) Borrower shall fail to pay when due any monetary Obligations.
(b) A cease and desist order shall be issued or shall be drafted or recommended against the Bank by any regulatory authority.
(c) Borrower, Bank, or any Obligated Party shall commence a voluntary proceeding seeking liquidation, reorganization, or other relief with respect to itself or its debts under any bankruptcy, insolvency, receivership, conservatorship, or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian, conservator, or other similar official of it or a substantial part of its property or shall consent to any such relief or to the appointment of or taking possession by any such official in such a proceeding commenced against it or shall make a general assignment for the benefit of creditors or shall generally fail to pay its debts as they become due or shall take any corporate action to authorize any of the foregoing or shall be subject to any proceeding to accomplish a comparable arrangement.
| LOAN AGREEMENT (Loan No. 95405) | Page 5 |
(d) An involuntary proceeding shall be commenced against the Borrower, Bank, or any Obligated Party seeking liquidation, reorganization, or other relief with respect to it or its debts under any bankruptcy, insolvency, receivership, conservatorship, or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian, conservator, or other similar official for it or a substantial part of its property, and such involuntary proceeding shall remain undismissed and unstayed for a period of thirty (30) days.
(e) Borrower, Bank or any Obligated Party shall fail to pay when due any principal or interest on any Debt (other than the Obligations), or the maturity of any such Debt shall have been accelerated, or any such Debt shall have been required to be prepaid prior to the state maturity thereof, or any event shall have occurred and be continuing that, with the giving of notice or lapse of time or both, would permit any holder or holders of such Debt or any Person acting on behalf of such holder or holders to accelerate the maturity thereof or require any such prepayment.
(f) This Agreement or any other Loan Document shall cease to be in full force and effect or shall be declared null and void or the validity or enforceability thereof shall be contested or challenged by Borrower or any of Borrower’s shareholders, or Borrower shall deny that it has any further liability or obligation under any of the Loan Documents.
(g) Borrower shall fail, at any time, to own and have pledged to Lender at least 100% of the issued and outstanding shares of capital stock of Bank, or such security interest in favor of Lender shall at any time fail to be a first priority perfected lien and security interest.
(h) Any representation or warranty made or deemed made by the Borrower, Bank or any Obligated Party in any Loan Document or in any certificate, report, notice or financial statement furnished at any time in connection with this Agreement shall be false, misleading, or erroneous in any material respect when made or deemed to have been made.
(i) Borrower, Bank or any Obligated Party shall fail to perform, observe, or comply with any other covenant, agreement or term contained in this Agreement or any other Loan Document and such failure continues for fifteen (15) days after written notice of such failure to Borrower.
9. Rights of Lender. Upon the occurrence of an Event of Default, Lender may without notice terminate its commitment to lend hereunder and declare the Obligations or any part thereof to be immediately due and payable, and the same shall thereupon become immediately due and payable, without demand, presentment, notice of dishonor, notice of acceleration, notice of intent to accelerate, notice of intent to demand, or protest, all of which are hereby expressly waived; provided, however, that upon the occurrence of an Event of Default under Section 8(c) or Section 8(d), the commitment of Lender to lend hereunder shall automatically terminate, and the Obligations shall become immediately due and payable without notice, demand, presentment, notice of dishonor, notice of acceleration, notice of intent to accelerate, notice of intent to demand, or protest, all of which are hereby expressly waived. Upon the occurrence of any Event of Default, Lender may exercise all rights and remedies available to it in law, or in equity, under the Loan Documents, or otherwise.
10. Applicable Law. This Agreement and all other documents and instruments executed pursuant hereto or in connection herewith and the transactions contemplated hereby are made and performable in Dallas County, Texas and shall be governed by and construed in accordance with the laws of the State of Texas and the applicable laws of the United States of America.
11. Severability. The unenforceability of any provision of this Agreement shall not affect the enforceability or validity of any other provision hereof.
12. Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument. Delivery of an executed counterpart by fax or pdf shall be effective as delivery of an original signature.
| LOAN AGREEMENT (Loan No. 95405) | Page 6 |
13. Miscellaneous. No modification, consent, amendment or waiver of any provision of this Agreement, nor consent to any departure by Borrower therefrom, shall be effective unless the same shall be in writing and signed by an officer of Lender, and then shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in similar or other circumstances. No delay or omission by Lender in exercising any power or right hereunder shall impair any such right or power or be construed as a waiver thereof or any acquiescence therein, nor shall any single or partial exercise of any such power preclude other or further exercise thereof, or the exercise of any other right or power hereunder. All rights and remedies of Lender hereunder are cumulative of each other and of every other right or remedy which Lender may otherwise have at law or in equity or under any other contract or document, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise or other rights or remedies. All accounting terms not specifically defined herein shall be construed in accordance with GAAP on the basis used by Borrower in prior years. This Agreement is binding upon Borrower, its successors and assigns, and inures to the benefit of Lender, its successors and assigns; provided, however, that Borrower may not assign its rights or obligations hereunder without Lender’s prior written consent.
14. Expenses of Lender. Borrower agrees to pay, on demand, all reasonable costs and expenses incurred by Lender in connection with the preparation, negotiation, execution and administration of this Agreement and the other Loan Documents and the transactions contemplated hereby, including reasonable costs and expenses incurred by Lender in connection with any and all amendments, modifications, supplements to, and ongoing administration of this Agreement and the other Loan Documents, including without limitation the reasonable costs and fees of Lender’s legal counsel, and all costs and expenses incurred by Lender in connection with the enforcement or preservation of any rights under this Agreement or any other Loan Document.
15. Fees. Borrower agrees to pay to Lender a non-usage fee (“Fee”) of $15,000.00 on the Maturity Date (as defined in the Note), which Borrower authorizes Lender to fund itself under the Note; provided, however, Lender will waive the Fee if interest on the Note paid to Lender equals or exceeds the Fee.
16. INDEMNIFICATION. EXCEPT FOR LENDER’S GROSS NEGLIGENCE OR WILFUL MISCONDUCT, BORROWER HEREBY INDEMNIFIES LENDER AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, AND AGENTS FROM, AND HOLDS EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS’ FEES) TO WHICH ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (i) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (ii) ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS, (iii) ANY BREACH BY BORROWER OF ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT CONTAINED IN ANY OF THE LOAN DOCUMENTS, OR (iv) ANY INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION, OR OTHER PROCEEDING RELATING TO ANY OF THE FOREGOING. Without limiting any provision of this Agreement or of any other Loan Document, it is the express intention of the parties hereto that each person to be indemnified under this Section shall be indemnified from and held harmless against any and all losses, liabilities, claims, damages, penalties, judgments, costs, and expenses (including attorneys’ fees) arising out of or resulting from the sole or contributory negligence of the person to be indemnified.
17. Limitation of Liability. Neither Lender nor any affiliate, officer, director, employee, attorney, or agent of Lender shall have any liability with respect to, and Borrower hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by Borrower in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the other Loan Documents. Borrower hereby waives, releases, and agrees not to sue Lender or any of Lender’s affiliates, officers, directors, employees, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the other Loan Documents.
| LOAN AGREEMENT (Loan No. 95405) | Page 7 |
18. Participations. Lender shall have the right at any time and from time to time to grant participations in the Note and any other Loan Documents. Each participant shall be entitled to receive all information received by Lender regarding the creditworthiness of Borrower, including without limitation, information required to be disclosed to a participant to Banking Circular 181 (Rev. August 2, 1984), issued by the Comptroller of the Currency (whether the participant is subject to the circular or not).
19. Notices. All notices and other communications provided for in this Agreement and the other Loan Documents to which Borrower is a party shall be given or made in writing and mailed by certified mail return receipt requested, or delivered by hand or nationally recognized overnight delivery service to the intended recipient at the “Address for Notices” specified below its name on the signature pages hereof; or, as to any party at such other address as shall be designated by such party in a notice to the other party given in accordance with this Section. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when personally delivered or, in the case of a notice transmitted by mail or overnight delivery service, when duly deposited in the mails or the day following delivery to such service, in each case given or addressed as aforesaid.
20. Entire Agreement. THIS AGREEMENT, THE NOTE, AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. The provisions of this Agreement and the other Loan Documents to which Borrower is a party may be amended or waived only by an instrument in writing signed by the parties hereto. The terms of this Agreement shall control to the extent of any direct conflict with the terms of the other Loan Documents; however, the parties acknowledge and agree that the other Loan Documents contain terms supplemental to the terms of this Agreement.
21. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF LENDER IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
22. USA Patriot Act Notice. Lender hereby notifies Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub.L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies Borrower, which information includes the name and address of Borrower and other information that will allow such Lender to identify Borrower in accordance with the Act.
23. Special Provisions. The following schedules, if checked and attached hereto, are hereby incorporated herein for all purposes:
|
(a) |
☑ Schedule 1: Key Man Life Insurance; |
|
|
(b) |
☐ Schedule 2: Guarantor(s); |
|
|
(c) |
☐ Schedule 3: Hybrid Liquidity Ratio; |
|
| (d) | ☐ Schedule 4: Other: |
Executed to be effective as of March 2, 2021.
[Balance of Page Intentionally Left Blank]
| LOAN AGREEMENT (Loan No. 95405) | Page 8 |
| Very truly yours, | |
| PLUMAS BANCO | |
| By: Andrew J. Ryback | |
| Address for Notices: | |
| 5525 Kietzke Lane, Suite 100 | |
| Reno, NV 89511 | |
| Telephone: (530) 283-7305 | |
| Attention: Andrew J. Ryback | |
| Accepted and Agreed to: | |
| TlB THE INDEPENDENT BANKERSBANK, N.A. | |
| By: | |
| Gale L. Fossatti, Senior Vice President | |
| Address for Notices: | |
| 11701 Luna Road | |
| Fanners Branch, TX 75234 | |
| Telephone: 972-444-3653 | |
| Attention: Katie Lawton |
| LOAN AGREEMENT (Loan No. 95405) | Page 9 |
SCHEDULE A
DEFINITIONS
The terms defined herein shall have the following meanings for the purpose of this Agreement, and the singular shall include the plural, and vice versa, unless otherwise specifically required by the context:
“Average Assets” means a year-to-date average of the average assets reported in the Report of Condition Schedule RC-
K. Thus for the ?rst quarter of the year the average assets from Call Schedule RC-K quarter will appear, while at the end-of-year, assets for all four quarters would beaveraged.
“Bank” means Plumas Bank, a state banking association.
“Book Value” means, at any time for any share of common stock of Bank, Bank’s Equity Capital divided by the total number of shares of common stock of Bank outstanding at such time.
“Business Day” means any day on which commercial banks are not authorized or required to close in Farmers Branch, Dallas County, Texas.
“Call Report” means Reports of Condition and Reports of Income of Bank as filed with the Federal Financial Institutions Examination Council.
“Cash Flow” means, the summation of all net income after taxes, defined as the consolidated net income of the bank holding company and all of its subsidiaries, plus interest expense of only the holding company, less Preferred Stock Dividends, less 35% tax distribution on all Sub-S banks or income tax benefit on all C-Corp banks on an annualized basis.
“Classified Assets” means, at any particular time, all assets of Bank classified as “Loss,” “Doubtful,” or “Substandard” or in any equivalent category by Bank or any governmental or regulatory authority.
“Closing Date” means March 2, 2021.
“Collateral” has the meaning specified in Section 3.
“Common Equity Tier 1 Capital Ratio” means, at any particular time, the ratio of Common Equity Tier 1 Capital to Risk-Weighted Assets of the Bank determined in accordance with the Call Report Instructions.
“Criticized Assets” means, at any particular time, all assets of the Bank classified as “Loss,” “Doubtful,” “Substandard,” or “other Assets Especially Mentioned,” or in any equivalent category by the Bank or any governmental or regulatory authority.
“Current Maturities of Long-Term Debt” means interest expense and principal payments (if applicable) on Borrower’s debt with Lender, plus any principal and interest payments on Guarantor’s personal financial statement and/or credit bureau report (or the long-term debt of any entities for which Guarantor is advancing such payments), with respect to the indicated time period.
“Debt” means as to any Person at any time (without duplication): ( i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, notes, debentures, or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable of such Person arising in the ordinary course of business which are not past due by more than ninety (90) days unless such trade accounts payable are being contested in good faith by appropriate proceedings, (iv) all obligations of such Person under any lease which, in conformity with GAAP, is required to be capitalized for balance sheet purposes, (v) all obligations of such Person under guaranties, endorsements (other than for collection or deposit in the ordinary course of business), assumptions or other contingent obligations, in respect of, or to purchase or otherwise acquire, any obligation or indebtedness of any other Person, or any other obligation, contingent or otherwise, of such Person directly or indirectly protecting the holder of any obligation or indebtedness of any other Person against loss (whether by partnership arrangements, agreements to keep well, to purchase assets, goods, securities, or services, to take or pay or otherwise), (vi) all obligations secured by a Lien existing on property owned by such Person, whether or not the obligations secured thereby have been assumed by such Person or are non-recourse to the credit of such Person, (vii) reimbursement obligations of such Person (whether contingent or otherwise) in respect of letters of credit, bankers’ acceptances, surety or other bonds and similar instruments, (viii) all liabilities of such Person in respect of unfunded vested benefits under any employee benefit plan of Borrower or any Subsidiary and (ix) all obligations under interest rate swap and similar hedging agreements.
| LOAN AGREEMENT (Loan No. 95405) | Page 10 |
“Debt Service Coverage Ratio” means, the Net Income of Bank less Borrower’s expenses and dividends, plus Borrower’s interest expense divided by annual debt service on the Note and any other Debt payments during such time period including, without limitation, any payments on the debt listed on Schedule B attached hereto.
“Equity Capital” means, at any particular time, the total equity capital of the Bank determined in accordance with the Instructions (the “Call Report Instructions”) to the Call Reports as most recently promulgated by the Federal Financial Institutions Examination Council.
“Event of Default” has the meaning specified in Section 8.
“GAAP” means generally accepted accounting principles, applied on a consistent basis, as set forth in Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and/or in statements of the Financial Accounting Standards Board and/or their respective successors and which are applicable in the circumstances as of the date in question. Accounting principles are applied on a “consistent basis” when the accounting principles observed in a current period are comparable in all material respects to those accounting principles applied in a preceding period.
“Grantor” means (if not completed, Grantor shall mean Borrower). “Guarantors” means the Persons identified on Schedule 2 as guarantying the Loan, if any.
“Key Man Policy” means the key man life insurance policy(ies) described on Schedule 1, if applicable.
“Leverage Ratio” means, at any particular time, the ratio of Tier 1 Capital to Average Assets of the Bank determined in accordance with the Call Report Instructions
“Lien” means any lien, mortgage, security interest, tax lien, financing statement, pledge, charge, hypothecation, assignment, preference, priority, or other encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or title retention agreement), whether arising by contract, operation of law, or otherwise.
“Loan Documents” means this Agreement and all promissory notes, security agreements, pledge agreements, guaranties, and other instruments, documents, and agreements now or hereafter executed and delivered pursuant to or in connection with this Agreement and any future renewals, extensions, and amendments hereto or thereto.
“Maximum Rate” means the maximum rate of nonusurious interest permitted from day to day by applicable law, including as to Chapter 303, Texas Finance Code, as amended from time to time (and as the same may be incorporated by reference in other Texas statutes), but otherwise without limitation, that rate based upon the “weekly rate ceiling” and calculated after taking into account any and all relevant fees, payments, and other charges in respect of the Loan Documents which are deemed to be interest under applicable law.
“Net Income” means net income (loss) attributable to Bank, in accordance with the Call Report Instructions.
“Non-Performing Assets” means loans on nonaccrual, loans on which the interest rate has been reduced as troubled debt restructurings, loans which have been past due for ninety (90) days or more, and other real estate and other assets which are owned due to foreclosure or as a result of the exercise of legal remedies where such real estate or other assets were mortgaged or taken as security for loans.
| LOAN AGREEMENT (Loan No. 95405) | Page 11 |
“Obligated Party” means Grantor, any Guarantor or other Person who is or becomes party to any agreement that guarantees or secures payment and performance of the Obligations or any part thereof.
“Obligations” means all obligations, indebtedness, and liabilities of Borrower to Lender, now existing or hereafter arising, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, including, without limitation, the obligations, indebtedness, and liabilities of Borrower under this Agreement, the Note, and the other Loan Documents, and all interest accruing thereon and all attorneys’ fees and other expenses incurred in the enforcement or collection thereof.
“Person” means any individual, corporation, business trust, association, company, partnership, joint venture, or other entity.
“Pledge Agreement” means the Commercial Pledge Agreement(s) of Borrower and/or Grantor in favor of Lender of even date herewith, as the same may be amended, supplemented, ormodified.
“Pledged Stock” has the meaning specified in Section 3(a).
“Return on Average Assets” means, for the applicable reporting period, the ratio, expressed as a percentage, of Bank’s Net Income year-to-date annualized to Bank’s Average Assets determined at the end of the applicable period being analyzed.
“Subsidiary” means any corporation or bank of which more than fifty percent (50%) of the issued and outstanding securities having ordinary voting power for the election of a majority of directors is owned or controlled, directly or indirectly, by Borrower, by Borrower and one or more other Subsidiaries, or by one or more other Subsidiaries.
“Tangible Equity Capital” means Equity Capital less Goodwill and Other Intangible Assets of the Bank determined in accordance with the Call Report Instructions.
“Texas Ratio” means, at any particular time, the ratio of Bank’s Non-Performing Assets to Tangible Equity Capital (plus loan loss reserve if not included therein).
“Tier 1 Capital” means, at any particular time, the Tier 1 Capital of the Bank determined in accordance with the Call Report Instructions.
“Tier 1 Capital Ratio” means, at any particular time, the ratio of Tier 1 Capital to Risk-Weighted Assets of the Bank determined in accordance with the Call Report Instructions
“Total Assets” means, at any particular time, all amounts which, in conformity with GAAP, would be included as assets on a balance sheet of Bank determined in accordance with the Call Report Instructions.
“Total Capital Ratio” means, at any particular time, the ratio of combined Tier 1 Capital and Tier 2 Capital to Risk-Weighted Assets of the Bank determined in accordance with the Call Report Instructions.
“Total Debt Service” means, at any particular time, the summation of the contractually obligated amounts due based on the outstanding balance plus any requested advances on revolving lines of credit, advancing lines of credit and term notes at TIB plus other annual debt service from Trust Preferred subordinated debt, subordinated debts and all other miscellaneous debt service (to include all lines of credit and term debt with other financial institutions) on an annualized basis.
Defined terms (i.e., terms delineated with capital letters) not otherwise defined herein shall be given the meanings commonly ascribed to them by the FFIEC, FDIC, state banking authorities or other authority, as reasonably determined by Lender.
| LOAN AGREEMENT (Loan No. 95405) | Page 12 |
SCHEDULE B
EXISTING DEBT and LIENS
| LOAN AGREEMENT (Loan No. 95405) | Page 13 |
SCHEDULE 1
SPECIAL PROVISIONS
☑ Borrower shall assign or cause to be assigned to Lender as security for the Obligations a Key Man Policy on the life of ANDREW J. RYBACK issued by an insurance company(ies) in the minimum amount of $3,500,000.00, which shall be assigned to Lender as security for the Obligations and maintained in good standing, by punctual payment of the premiums due thereon. In the event of the death of the insured, Borrower will give prompt notice thereof to Lender and Lender will have the right, but not the obligation, to collect and apply all or a portion of the proceeds of the Key Man Policy to the prepayment of the Obligations, together with accrued interest thereon.
| LOAN AGREEMENT (Loan No. 95405) | Page 14 |
Exhibit 31.1
CERTIFICATION UNDER SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, Richard L. Belstock, Chief Financial Officer, certify that:
|
1. |
I have reviewed this report on Form 10-Q of Plumas Bancorp; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c. |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
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5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
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a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
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Date: May 5, 2021 |
/s/ Richard L. Belstock |
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Richard L. Belstock, Chief Financial Officer |
Exhibit 31.2
CERTIFICATION UNDER SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, Andrew J. Ryback, Chief Executive Officer, certify that:
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1. |
I have reviewed this report on Form 10-Q of Plumas Bancorp; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c. |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
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5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
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Date: May 5, 2021 |
/s/ Andrew J. Ryback |
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|
Andrew J. Ryback, Chief Executive Officer |
Exhibit 32.1
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Plumas Bancorp (the “Company”) hereby certifies, to such officer’s knowledge, that:
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(i) |
the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2021 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
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(ii) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: May 5, 2021 | /s/ Richard L. Belstock |
| Richard L. Belstock, Chief Financial Officer |
Exhibit 32.2
Certification of Chief Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Plumas Bancorp (the “Company”) hereby certifies, to such officer’s knowledge, that:
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(i) |
the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2021 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
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(ii) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: May 5, 2021 | /s/ Andrew J. Ryback |
| Andrew J. Ryback, Chief Executive Officer |