10q10k10q10k.net

What changed in PLUMAS BANCORP's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of PLUMAS BANCORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+353 added−346 removedSource: 10-K (2024-03-20) vs 10-K (2023-03-16)

Top changes in PLUMAS BANCORP's 2023 10-K

353 paragraphs added · 346 removed · 211 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

48 edited+12 added−8 removed93 unchanged
Biggest changeThe FDIC insures the Bank’s deposits, up to prescribed statutory limits, through the Deposit Insurance Fund, currently $250,000 per depositor per institution. The Deposit Insurance Fund is funded primarily by FDIC assessments paid by the insured depository institution.
Biggest changeBanking regulators expect banks with concentrations of commercial real estate loans to maintain appropriate underwriting discipline, risk-management and capital commensurate with the level and nature of their commercial real estate risks. Federal Deposit Insurance . The FDIC insures the Bank’s deposits, up to prescribed statutory limits, through the Deposit Insurance Fund, currently $250,000 per depositor per institution.
We have established loan concentration guidelines as a percentage of capital and evaluate loan concentration levels within a single industry or group of related industries on quarterly basis, or more frequently as loan conditions change. There has been no material effect upon our capital expenditures, earnings, or competitive position as a result of federal, state, or local environmental regulation.
We have established loan concentration guidelines as a percentage of capital and evaluate loan concentration levels within a single industry or group of related industries on a quarterly basis, or more frequently as loan conditions change. There has been no material effect upon our capital expenditures, earnings, or competitive position as a result of federal, state, or local environmental regulation.
The CFPB has examination and primary enforcement authority with respect to depository institutions with $10 billion or more in assets. Smaller institutions, including the Bank, are generally subject to rules promulgated by the CFPB but continue to be examined and supervised by their primary federal banking regulators for consumer compliance purposes. Anti-Money Laundering Laws.
The CFPB has examination and primary enforcement authority with respect to depository institutions with $10 billion or more in assets. Smaller institutions, including the Bank, are generally subject to rules promulgated by the CFPB but continue to be examined and supervised by their primary federal banking regulators for consumer compliance purposes. 9 Anti-Money Laundering Laws.
The Bank’s principal retail lending services include consumer, automobile, and home equity loans. The Bank provides land development and construction loans on a limited basis. 2 Table of Contents The Bank provides Small Business Administration (SBA) loans to qualified borrowers throughout Northern California, and Northern Nevada through its government-guaranteed lending center headquartered in Auburn, California.
The Bank’s principal retail lending services include consumer and home equity loans. The Bank provides land development and construction loans on a limited basis. 2 Table of Contents The Bank provides Small Business Administration (SBA) loans to qualified borrowers throughout Northern California and Northern Nevada through its government-guaranteed lending center headquartered in Auburn, California.
The Company is a California corporation incorporated in 2002 for the purpose of becoming the holding company for the Bank, which we acquired the same year. The Company's only other subsidiaries are Plumas Statutory Trust I and Plumas Statutory Trust II, which were formed in 2002 and 2005 solely to facilitate the issuance of trust preferred securities.
The Company is a California corporation incorporated in 2002 for the purpose of becoming the holding company for the Bank, which we acquired the same year. The Company's only other subsidiaries were Plumas Statutory Trust I and Plumas Statutory Trust II, which were formed in 2002 and 2005 solely to facilitate the issuance of trust preferred securities.
On a full-time equivalent basis, we employed 180 persons. While we expect to hire additional employees as we grow or as a result of attrition, we believe our human capital resources are adequate to support our current business. None of our employees are represented by a labor union, and management considers its relations with employees to be good.
On a full-time equivalent basis, we employed 175 persons. While we expect to hire additional employees as we grow or as a result of attrition, we believe our human capital resources are adequate to support our current business. None of our employees are represented by a labor union, and management considers its relations with employees to be good.
Under the US PATRIOT Act of 2001, financial institutions are subject to prohibitions against specified financial transactions and account relationships, requirements regarding the Customer Identification Program, as well as enhanced due diligence and “know your customer” standards in their dealings with high risk customers, foreign financial institutions, and foreign individuals and entities.
Under the US PATRIOT Act of 2001 (the “Patriot Act”), financial institutions are subject to prohibitions against specified financial transactions and account relationships, requirements regarding the Customer Identification Program, as well as enhanced due diligence and “know your customer” standards in their dealings with high-risk customers, foreign financial institutions, and foreign individuals and entities.
The California General Corporation Law permits a California corporation such as the Company to make a distribution to its shareholders if its retained earnings equal at least the amount of the proposed distribution or if after giving effect to the distribution, the value of the corporation’s assets exceed the amount of its liabilities plus the amount of shareholders preferences, if any, and certain other conditions are met.
The California General Corporation Law permits a California corporation such as the Company to make a distribution to its shareholders if its retained earnings equal at least the amount of the proposed distribution or if after giving effect to the distribution, the value of the corporation’s assets exceeds the amount of its liabilities plus the amount of shareholders preferences, if any, and certain other conditions are met.
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.
Under the FRB’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement, qualifying bank holding companies with less than $3 billion in consolidated assets are exempt from the Basel III consolidated capital rules.
The Company qualifies for treatment under 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. For additional information, see “Item 7.
The Company qualifies for treatment under this policy and is not currently subject to the Basel III consolidated capital rules at the bank holding company level. The Basel III capital rules continue to apply to the Bank. For additional information, see “Item 7.
However, at December 31, 2022 approximately 77% of the Bank's total loan portfolio consisted of real estate-secured loans, including real estate mortgage loans, real estate construction loans, consumer equity lines of credit, and agricultural loans secured by real estate.
However, at December 31, 2023, approximately 77% of the Bank's total loan portfolio consisted of real estate-secured loans, including real estate mortgage loans, real estate construction loans, consumer equity lines of credit, and agricultural loans secured by real estate.
Also, RESPA prohibits certain abusive practices, such as kickbacks, and places limitations on the amount of escrow accounts. 8 Table of Contents Penalties for noncompliance or violations under the above laws may include enforcement actions, fines, customer reimbursement and other penalties. Violations of consumer laws may also adversely affect the Bank’s CRA rating.
Also, RESPA prohibits certain abusive practices, such as kickbacks, and places limitations on the amount of escrow accounts. Penalties for noncompliance or violations under the above laws may include enforcement actions, fines, customer reimbursement and other penalties. Violations of consumer laws may also adversely affect the Bank’s CRA rating.
The DFPI and the FRB regularly examine the Bank and may prohibit the Bank from engaging in what they believe constitute unsafe or unsound banking practices or violations of law.
The DFPI and the FRB regularly examine the Bank and may prohibit the Bank from engaging in what they believe constitutes unsafe or unsound banking practices or violations of law.
To meet the needs of customers who prefer to bank electronically, we offer telephone banking, mobile banking, remote deposit, mobile deposit, and internet banking with bill payment capabilities. This high tech and high touch approach allows customers to tailor their access to our services based on their particular preferences. Employees. At December 31, 2022, we employed 193 persons.
To meet the needs of customers who prefer to bank electronically, we offer telephone banking, mobile banking, remote deposit, mobile deposit, and internet banking with bill payment capabilities. This high tech and high touch approach allows customers to tailor their access to our services based on their particular preferences. Employees. At December 31, 2023, we employed 189 persons.
At December 31, 2022, the Bank had $1.4 million in stock of the Federal Reserve Bank of San Francisco in compliance with this requirement. Capital Adequacy.
At December 31, 2023, the Bank had $1.4 million in stock of the Federal Reserve Bank of San Francisco in compliance with this requirement. Capital Adequacy.
Under California law, the termination of the Bank’s deposit insurance would result in a termination of the Bank’s charter. Consumer Protection Laws and Regulations. The bank regulatory agencies continue to focus greater attention on compliance with consumer protection laws and their implementing regulations.
Under California law, the termination of the Bank’s deposit insurance would result in a termination of the Bank’s charter. 8 Table of Contents Consumer Protection Laws and Regulations. The bank regulatory agencies continue to focus greater attention on compliance with consumer protection laws and their implementing regulations.
At December 31, 2022, the Company’s and the Bank’s capital ratios exceed the thresholds necessary to be considered “well capitalized” under the Basel III framework.
At December 31, 2023, the Company’s and the Bank’s capital ratios exceed the thresholds necessary to be considered “well capitalized” under the Basel III framework.
As of December 31, 2022, the maximum amount available for dividend distribution under this restriction was approximately $49.1 million. In addition, the Bank is subject to the Basel III capital rules and the capital conservation buffer discussed above. The foregoing restrictions and limitations on dividends similarly restrict the Company’s ability to repurchase shares of its common stock. Loans-to-One Borrower.
As of December 31, 2023, the maximum amount available for dividend distribution under this restriction was approximately $58 million. In addition, the Bank is subject to the Basel III capital rules and the capital conservation buffer discussed above. The foregoing restrictions and limitations on dividends similarly restrict the Company’s ability to repurchase shares of its common stock. Loans-to-One Borrower.
As of December 31, 2022, the principal areas to which we have directed our lending activities, and the percentage of our total loan portfolio comprised by each, were as follows: (i) commercial real estate – 56.6%; (ii) consumer loans (including residential equity lines of credit and automobile loans) – 15.0%, (iii) agricultural loans (including agricultural real estate loans) – 13.5%, (iv); commercial and industrial loans – 8.4%; (v) construction and land development – 4.8%; and (vi) residential real estate – 1.7% .
As of December 31, 2023, the principal areas to which we have directed our lending activities, and the percentage of our total loan portfolio comprised by each, were as follows: (i) commercial real estate – 56.8%; (ii) consumer loans (including residential equity lines of credit and automobile loans) – 14.7%, (iii) agricultural loans (including agricultural real estate loans) – 13.5%, (iv); commercial and industrial loans – 7.8%; (v) construction and land development – 6.0%; and (vi) residential real estate – 1.2% .
In addition, competitive conditions have intensified as banks have increasingly affiliated with securities firms, insurance companies, and other financial companies. 4 Table of Contents As of June 30, 2022, within towns in which the Bank has a branch as of this same date there were 133 banking branch offices of competing institutions (excluding credit unions, but including savings banks), including 108 branches of 16 banks having assets more than $10 billion.
In addition, competitive conditions have intensified as banks have increasingly affiliated with securities firms, insurance companies, and other financial companies. 4 Table of Contents As of June 30, 2023, within towns in which the Bank has a branch as of this same date there were 157 banking branch offices of competing institutions (excluding credit unions, but including savings banks), including 111 branches of 16 banks having assets more than $10 billion.
It is the policy of the Company to periodically distribute excess retained earnings to the shareholders through the payment of cash dividends, subject to the approval of the Board of Directors. During 2022 the Company paid quarterly cash dividends of $0.16 per share on each of November 15, 2022, August 15, 2022, May 16, 2022 and February 15, 2022.
It is the policy of the Company to periodically distribute excess retained earnings to the shareholders through the payment of cash dividends, subject to the approval of the Board of Directors. During 2023 the Company paid quarterly cash dividends of $0.25 per share on each of November 15, 2023, August 15, 2023, May 15, 2023 and February 15, 2023.
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%.
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%.
Recent Accounting Pronouncements See Note 2 – “Summary of Significant Accounting Policies – Adoption of New Accounting Standards” of the Company’s Consolidated Financial Statements in Item 8 – Financial Statements and Supplementary Data of this Annual Report on Form 10K for information related to recent accounting pronouncements. 9 Table of Contents
Recent Accounting Pronouncements See Note 2 – “Summary of Significant Accounting Policies – Adoption of New Accounting Standards” of the Company’s Consolidated Financial Statements in Item 8 – Financial Statements and Supplementary Data of this Annual Report on Form 10-K for information related to recent accounting pronouncements. 10 Table of Contents
These changes include, prohibiting certain payments to a mortgage broker or loan officer based on the transaction’s terms or conditions, prohibiting dual compensation and prohibiting a mortgage broker or loan officer from ‘‘steering’’ consumers to transactions not in their interest to increase mortgage broker or loan officer compensation. ● The Fair Housing Act (“FH Act”) regulates many practices, including making it unlawful for any lender to discriminate in its housing-related lending activities against any person because of race, color, religion, national origin, sex, handicap or familial status.
These changes include underwriting standards, mandated disclosures, fee limitations, prohibiting certain payments to a mortgage broker or loan officer based on the transaction’s terms or conditions other than its principal amount and prohibiting dual compensation and prohibiting a mortgage broker or loan officer from ‘‘steering’’ consumers to transactions not in their interest to increase mortgage broker or loan officer compensation. ● The Fair Housing Act (“FH Act”) regulates many practices, including making it unlawful for any lender to discriminate in its housing-related lending activities against any person because of race, color, religion, national origin, sex, handicap or familial status.
Interest bearing deposits include higher yielding sweep accounts designed for our commercial customers and for public entities such as municipalities. As of December 31, 2022, the Bank ha d 39,338 d eposit accounts with balances totaling approximately $1.5 billion, compared to 38,602 deposit accounts with balances totaling approximately $1.4 billion at December 31, 2021.
Interest bearing deposits include higher yielding sweep accounts designed for our commercial customers and for public entities such as municipalities. As of December 31, 2023, the Bank ha d 39,619 d eposit accounts with balances totaling approximately $1.3 billion, compared to 39,338 deposit accounts with balances totaling approximately $1.5 billion at December 31, 2022.
This mix of deposit customers resulted in a relatively modest average deposit balance of approxi mately $37 thou sand at December 31, 2022.
This mix of deposit customers resulted in a relatively modest average deposit balance of approxi mately $34 thou sand at December 31, 2023.
An institution that fails to meet these standards must develop a plan acceptable to the agency, specifying the steps that it will take to meet the standards. Failure to submit or implement such a plan may subject the institution to regulatory enforcement actions, including civil money penalties. Federal Deposit Insurance .
An institution that fails to meet these standards must develop a plan acceptable to the agency, specifying the steps that it will take to meet the standards. Failure to submit or implement such a plan may subject the institution to regulatory enforcement actions, including civil money penalties. Concentrations in Commercial Real Estate Lending .
We file annual, quarterly, and other reports required under the Securities Exchange Act of 1934 with Securities and Exchange Commission (the “SEC”). These reports are available at no cost on our website, www.plumasbank.com , as soon as reasonably practicable after filing with the SEC. These reports are also available through the SEC’s website at www.sec.gov .
In March 2023 the Trusts were dissolved. We file annual, quarterly, and other reports required under the Securities Exchange Act of 1934 with Securities and Exchange Commission (the “SEC”). These reports are available at no cost on our website, www.plumasbank.com , as soon as reasonably practicable after filing with the SEC.
The amount of FDIC assessments paid by a depository institution is based on its relative risk of default as measured by regulatory capital ratios and other supervisory factors. The Bank’s FDIC insurance expense totaled $528 thousand for 2022.
The Deposit Insurance Fund is funded primarily by FDIC assessments paid by the insured depository institution. The amount of FDIC assessments paid by a depository institution is based on its relative risk of default as measured by regulatory capital ratios and other supervisory factors. The Bank’s FDIC insurance expense totaled $737 thousand for 2023.
Under California law, the Bank’s ability to make aggregate secured and unsecured loans-to-one-borrower is limited to 25% and 15%, respectively, of unimpaired capital and surplus. At December 31, 2022, the Bank’s limit on aggregate secured loans-to-one-borrower was $34.3 million a nd unsecured loans-to-one borrower was $20.6 million.
Under California law, the Bank’s ability to make aggregate secured and unsecured loans-to-one-borrower is limited to 25% and 15%, respectively, of unimpaired capital and surplus. At December 31, 2023, the Bank’s limit on aggregate secured loans-to-one-borrower was $48 million and unsecured loans-to-one borrower was $29 million.
The GLBA generally prohibits disclosure of consumer information to non-affiliated third parties unless the consumer has been given the opportunity to object and has not objected to such disclosure. Financial institutions are further required to disclose their privacy policies to consumers annually.
The Gramm-Leach Bliley Act of 1999 (“GLBA”) imposes requirements on financial institutions with respect to consumer privacy. The GLBA generally prohibits disclosure of consumer information to non-affiliated third parties unless the consumer has been given the opportunity to object and has not objected to such disclosure. Financial institutions are further required to disclose their privacy policies to consumers annually.
The Bank maintains eighteen automated teller machines (“ATMs”) tied in with major statewide and national networks. In addition to its branch network, the Bank operates a lending office specializing in government-guaranteed lending in Auburn, California and commercial/agricultural lending offices located in Chico, California and Klamath Falls, Oregon. The Bank’s primary business is servicing the banking needs of these communities.
In addition to its branch network, the Bank operates a lending office specializing in government-guaranteed lending in Auburn, California and commercial/agricultural lending offices located in Chico, California and Klamath Falls, Oregon. The Bank’s primary business is servicing the banking needs of these communities.
Enhanced and streamlined incoming wire notifications and developed electronic tracking and monitoring for ACH origination and Remote Deposit Capture services and implemented the ability for our commercial online banking clients to originate one-time ACH payments.
In 2022 Plumas Bank upgraded and replaced our fleet of ATM machines, enhanced incoming wire notifications and developed electronic tracking and monitoring for ACH origination and Remote Deposit Capture services and implemented the ability for our commercial online banking clients to originate one-time ACH payments.
As of June 30, 2022, the FDIC estimated the Bank’s market share of insured deposits within the communities it serves to be as follows: Greenville and Portola 100%, Quincy 83%, Alturas 67%, Chester 64%, Susanville 57%, Kings Beach 42%, Fall River Mills 38%, Tahoe City 32%, Truckee 17%, Yuba City 5%, Carson City 4%, Redding 2% and Reno less than 1%.
As of June 30, 2023, the FDIC estimated the Bank’s market share of insured deposits within the communities it serves to be as follows: Greenville and Portola 100%, Quincy 85%, Alturas 69%, Chester 60%, Susanville 59%, Kings Beach 42%, Fall River Mills 39%, Tahoe City 30%, Truckee 18%, Yuba City 4%, Carson City 3%, Redding 2% and Reno and Chico less than 1%.
During 2021 the Company paid quarterly cash dividends of $0.14 per share on each of November 15, 2021, August 16, 2021, May 17, 2021 and February 15, 2021. During 2020 the Company paid three quarterly $0.12 per share dividends one each on May 15, 2020, August 14, 2020 and November 16, 2020. Trust Preferred Securities.
During 2022 the Company paid quarterly cash dividends of $0.16 per share on each of November 15, 2022, August 15, 2022, May 16, 2022 and February 15, 2022. During 2021 the Company paid quarterly cash dividends of $0.14 per share on each of November 15, 2021, August 16, 2021, May 17, 2021 and February 15, 2021. Interest Rate Swaps.
In 2007 the Bank was granted nationwide Preferred Lender status with the U.S. Small Business Administration and we expect government-guaranteed lending to continue to be an important part of our overall lending operation. During 2022 proceeds from the sale of government-guaranteed loans totaled $55.4 million and we generated a gain on sale of $2.7 million.
In 2007 the Bank was granted nationwide Preferred Lender status with the U.S. Small Business Administration, and we expect government-guaranteed lending to continue to be an important part of our overall lending operation.
Moreover, our business activities are currently focused in the California counties of Plumas, Nevada, Placer, Lassen, Modoc, Shasta, Sutter and Sierra and Washoe and Carson City Counties in Nevada. Consequently, our results of operations and financial condition are dependent upon the general trends in these economies and, in particular, the residential and commercial real estate markets.
Consequently, our results of operations and financial condition are dependent upon the general trends in these economies and, in particular, the residential and commercial real estate markets.
The Bank’s primary service area covers the Northeastern portion of California, with Lake Tahoe to the south and the Oregon border to the north, and the Northwestern portion of Nevada.
It is currently the largest bank headquartered in Plumas County, California. The Bank’s operations are conducted through its administrative office in Quincy, California. The Bank’s primary service area covers the Northeastern portion of California, with Lake Tahoe to the south and the Oregon border to the north, and the Northwestern portion of Nevada.
The Company depends on the performance of the Bank for funds which may be received as dividends from the Bank for use in the operation of the Company and the ability of the Company to pay dividends to shareholders. Future cash dividends by the Bank will also depend upon management’s assessment of future capital requirements, contractual restrictions, and other factors.
Future cash dividends by the Bank will also depend upon management’s assessment of future capital requirements, contractual restrictions, and other factors.
The address of our headquarters is 5525 Kietzke Lane, Suite 100, Reno, Nevada, 89511. The Bank. The Bank is a California state-chartered bank that was incorporated and commenced business in 1980.. The Bank’s deposit accounts are insured by the Federal Deposit Insurance Corporation (the “FDIC”) up to applicable legal limits. The Bank is a member of the Federal Reserve System.
The Bank’s deposit accounts are insured by the Federal Deposit Insurance Corporation (the “FDIC”) up to applicable legal limits. The Bank is a member of the Federal Reserve System.
Additionally, we created a streamlined login process for our consumer clients in order to instantly access their accounts once enrolled in online banking. In 2022 Plumas Bank upgraded and replaced our fleet of ATM machines.
During 2021 we increased our online banking product offerings for commercial clients including enhanced security controls. Additionally, we created a streamlined login process for our consumer clients to instantly access their accounts once enrolled in online banking.
The branches are located in the California communities of Quincy, Portola, Greenville, Truckee, Fall River Mills, Alturas, Susanville, Chester, Tahoe City, Kings Beach, Redding and Yuba City and in Reno and Carson City, Nevada. On July 1, 2021 we acquired our Yuba City branch with the acquisition of the Bank of Feather River. See "Recent Expansion Activities".
The Bank operates thirteen branches in California, including branches in Alturas, Chester, Chico, Fall River Mills, Greenville, Kings Beach, Portola, Quincy, Redding, Susanville, Tahoe City, Truckee and Yuba City. The Bank's newest branch was opened in April 2023 and is located in Chico, California.
The Bank, through its fourteen-b ran ch network, serves Washoe and Carson City counties in Nevada and the eight contiguous California counties of Plumas, Nevada, Sierra, Placer, Lassen, Modoc, Sutter and Shasta.
Moreover, the business activities of the Company currently are focused in the California counties of Butte, Lassen, Modoc, Nevada, Placer, Plumas, Shasta and Sutter and in Washoe and Carson City Counties in Northern Nevada.
As a result of the Dodd-Frank Act, Regulation Z promulgated under the TILA includes new limits on loan originator compensation for all closed-end mortgages.
As a result of the Dodd-Frank Act, Regulation Z promulgated under the TILA includes numerous requirements regarding consumer mortgage origination and services.
At December 31, 2022, the Company had consolidated assets of $1.6 billion, deposits of $1.5 billion, other liabilities of $44 million and shareholders’ equity of $119 million. The Company’s other liabilities include $10.3 million in junior subordinated deferrable interest debentures and $18.6 million in repurchase agreements. These items are described in detail later in this Form 10-K.
At December 31, 2023, the Company had consolidated assets of $1.6 billion, deposits of $1.3 billion, other liabilities of $129 million and shareholders’ equity of $147 million.
In addition, the Company’s ability to pay dividends is subject to certain covenants contained in the indentures relating to the trust preferred securities issued by the Company’s business trust subsidiaries. The Bank is a legal entity that is separate and distinct from its holding company.
The Bank is a legal entity that is separate and distinct from its holding company. The Company depends on the performance of the Bank for funds which may be received as dividends from the Bank for use in the operation of the Company and the ability of the Company to pay dividends to shareholders.
These rules also mandate a variety of record keeping, reporting and employee training requirements. Privacy and Data Security. The Gramm-Leach Bliley Act of 1999 (“GLBA”) imposes requirements on financial institutions with respect to consumer privacy.
These rules also mandate a variety of record keeping, reporting and employee training requirements. The Patriot Act also requires federal bank regulators to evaluate the effectiveness of an applicant in combating money laundering when determining whether to approve a proposed bank acquisition or merger. Privacy and Data Security.
At December 31, 2022 the Bank had approximately $1.6 billion in assets, $906 million in net loans and $1.5 billion in deposits (including deposits of $1.0 million from the Company). It is currently the largest bank headquartered in Plumas County, California. The Bank’s operations are conducted through its administrative office in Quincy, California.
At December 31, 2023, the Bank had approximately $1.6 billion in assets, $949 million in net loans and $1.3 billion in deposits (including deposits of $3.6 million from the Company), other liabilities of $119 million and shareholders’ equity of $154 million. The Bank’s other liabilities include $80 million in borrowings under the BTFP and $23.1 million in repurchase agreements.
Removed
SBA loans available for sale at December 31, 2022 totaled $2.3 million, a decrease of $29.0 million from $31.3 million at December 31, 2021.
Added
The Company’s other liabilities include a $10 million borrowing from one of the Company's correspondent banks, $80 million in borrowings under the Federal Reserve's Bank Term Funding Program (BTFP) and $23.1 million in repurchase agreements. These items are described in detail later in this Form 10-K.
Removed
During 2015 we enhanced our mobile banking services and began offering mobile deposit services, and in 2018 we began offering the ability for our customers to send money to others from their mobile devices through a linked debit card (“P2P” transfers).
Added
These reports are also available through the SEC’s website at www.sec.gov . The address of our headquarters is 5525 Kietzke Lane, Suite 100, Reno, Nevada, 89511. The Bank. The Bank is a California state-chartered bank that was incorporated and commenced business in 1980.
Removed
During 2020 we added the ability for customers to make loan payments via our website regardless of whether they have a deposit relationship with us. During 2021 we increased our online banking product offerings for commercial clients including enhanced security controls.
Added
In December 2015 the Bank opened a branch in Reno, Nevada, its first branch outside of California, and in 2018 the Bank purchased a branch located in Carson City, Nevada. The Bank maintains nineteen automated teller machines (“ATMs”) tied in with major statewide and national networks.
Removed
In addition to the Bank, the Company has two unconsolidated statutory trust subsidiaries, Plumas Statutory Trust I and Plumas Statutory Trust II. We organized both trust subsidiaries for the purpose of issuing an aggregate of $10.0 million of trust preferred securities to increase our regulatory capital levels.
Added
During the fourth quarter of 2022 and continuing into 2023 we experienced a significant decline in premiums received on the sale of SBA loans; in response we chose to portfolio SBA 7(a) loans which do not meet a minimum premium on sale.
Removed
The trust preferred securities mature in 2032 and 2035 or upon earlier redemption as provided in the applicable indentures. Neither Trust I nor Trust II are consolidated into the Company’s consolidated financial statements and, accordingly, both entities are accounted for under the equity method and their junior subordinated debentures are reflected as debt on our consolidated balance sheet.
Added
During 2023 we chose not to sell $4.1 million in salable guaranteed portions of SBA 7(a) loans as they did not meet our minimum premium on sale.
Removed
The business trusts and the trust preferred securities are described in more detail in Note 10 to the Company’s consolidated financial statements in Item 8 of this Form 10-K.
Added
Additionally, the SBA 7(a) loan product that is salable in the open market is variable rate tied to prime and we have seen a significant decline in interest in this product given the recent increases in the prime rate.
Removed
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) trust preferred securities issued after May 19, 2010 are excluded from Tier 1 capital unless the issuing company is a bank holding company with less than $500 million in total assets.
Added
While we continue to produce SBA 7(a) loans for sale at a greatly reduced rate, we have had success in funding fixed rate SBA 7(a) loans which we portfolio. At December 31, 2023 fixed rate SBA 7(a) loans totaled $23 million.
Removed
Trust preferred securities issued prior to that date continue to count as Tier 1 capital for bank holding companies with less than $15 billion in total assets, such as the Company. Interest Rate Swaps.
Added
During the fourth quarter of 2023 we elected to discontinue our auto loan program.
Added
In 2023 we provided enhanced security features and monitoring to detect and rapidly notify clients of potential fraudulent debit card transactions and created the ability for clients to dispute debit card transactions utilizing an online interface.
Added
The federal banking regulators have issued guidance to identify institutions that may be exposed to potential significant commercial real estate lending risks and may therefore warrant greater supervisory scrutiny.
Added
The guidance includes the following numerical tests: ● total reported loans for construction, land development and other land represent 100% or more of the institution’s total risk-based capital, or ● total commercial real estate loans represent 300% or more of the institution’s total risk-based capital, and the outstanding balance of the institution’s commercial real estate loan portfolio has increased by 50% or more during the previous 36 months.
Added
The guidance does not limit a bank’s levels of commercial real estate lending activities, but rather guides institutions in developing risk management practices and levels of capital that are commensurate with the level and nature of their commercial real estate concentrations.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

41 edited+37 added−26 removed53 unchanged
Biggest changeAlthough we maintain a rigorous process for managing the impact of possible interest rate fluctuations on earnings, there is a risk that despite our efforts, our earnings could be significantly and adversely impacted by changes in interest rates. 11 Table of Contents Our earnings depend largely upon net interest income, which is the difference between the total interest income earned on interest earning assets (primarily loans and investment securities) and the total interest expense incurred on interest bearing liabilities (primarily deposits and borrowed funds).
Biggest changeAlthough we maintain a rigorous process for managing the impact of possible interest rate fluctuations on earnings, there is a risk that despite our efforts, our earnings could be significantly and adversely impacted by changes in interest rates.
A significant decline in the trading price of our common stock price could result in substantial losses for individual shareholders and could lead to costly and disruptive securities litigation. The trading volume of our common stock is limited. Although our common stock is traded on the Nasdaq Stock Market, trading volume to date has been relatively modest.
A significant decline in the trading price of our common stock price could result in substantial losses for individual shareholders and could lead to costly and disruptive securities litigation. 17 The trading volume of our common stock is limited. Although our common stock is traded on the Nasdaq Stock Market, trading volume to date has been relatively modest.
Among the factors that could affect the trading price of our common stock are: • actual or anticipated quarterly fluctuations in our operating results and financial condition; • research reports and recommendations by financial analysts; • failure to meet analysts’ revenue or earnings estimates; • speculation in the press or investment community; 16 Table of Contents • our actions or those of our competitors, such as acquisitions or restructurings; • actions by institutional shareholders; • fluctuations in the stock prices and operating results of other financial institutions; • general market conditions and, in particular, developments related to market conditions for the financial services industry; • proposed or adopted regulatory changes or developments; • anticipated or pending investigations, proceedings or litigation that involve or affect us; • domestic and international economic factors unrelated to our performance.
Among the factors that could affect the trading price of our common stock are: • actual or anticipated quarterly fluctuations in our operating results and financial condition; • research reports and recommendations by financial analysts; • failure to meet analysts’ revenue or earnings estimates; • speculation in the press or investment community; • our actions or those of our competitors, such as acquisitions or restructurings; • actions by institutional shareholders; • fluctuations in the stock prices and operating results of other financial institutions; • general market conditions and, in particular, developments related to market conditions for the financial services industry; • proposed or adopted regulatory changes or developments; • anticipated or pending investigations, proceedings or litigation that involve or affect us; • domestic and international economic factors unrelated to our performance.
Damage to our reputation among existing and potential customers, investors and employees could cause significant harm to our business and prospects and may arise from numerous sources, including litigation or regulatory actions, failing to deliver minimum standards of service and quality, lending practices, inadequate protection of customer information, sales and marketing efforts, compliance failures, unethical behavior and the misconduct of employees.
Damage to our reputation among existing and potential customers, investors and employees could cause significant harm to our business and prospects and may arise from numerous sources, including litigation or regulatory actions, failing to deliver minimum standards of service and quality, lending practices, inadequate protection of customer information, sales and marketing efforts, compliance failures, cybersecurity breaches, unethical behavior and the misconduct of employees.
If our allowance for loan losses is not sufficient to absorb actual loan losses, our profitability could be reduced. The risk of loan losses is inherent in the lending business.
If our allowance for credit losses is not sufficient to absorb actual loan losses, our profitability could be reduced. The risk of loan losses is inherent in the lending business.
Although we maintain a rigorous process for determining the allowance for loan losses, we cannot be certain that it will be sufficient to cover future loan losses.
Although we maintain a rigorous process for determining the allowance for credit losses, we cannot be certain that it will be sufficient to cover future loan losses.
If our allowance for loan losses is not adequate to absorb future losses, or if bank regulatory agencies require us to increase our allowance for loan losses, our earnings could be significantly and adversely impacted. A deterioration in the real estate market could have a material adverse effect on our business, financial condition and results of operations.
If our allowance for credit losses is not adequate to absorb future losses, or if bank regulatory agencies require us to increase our allowance for credit losses, our earnings could be significantly and adversely impacted. A deterioration in the real estate market could have a material adverse effect on our business, financial condition and results of operations.
See Management’s Discussion and Analysis of Financial Condition and Results of Operations – “Analysis of Asset Quality and Allowance for Loan Losses”. A deterioration of national or local economic conditions could reduce our profitability. Our lending operations and customers are primarily located in the eastern region of Northern California and Northern Nevada.
See Management’s Discussion and Analysis of Financial Condition and Results of Operations – “Analysis of Asset Quality and Allowance for Credit Losses”. A deterioration of national or local economic conditions could reduce our profitability. Our lending operations and customers are primarily located in the eastern region of Northern California and Northern Nevada.
We maintain an allowance for loan losses based upon our actual losses over a relevant time period and management’s assessment of all relevant qualitative factors that may cause future loss experience to differ from our historical loss experience.
We maintain an allowance for credit losses based upon our actual losses over a relevant time period and management’s assessment of all relevant qualitative factors that may cause future loss experience to differ from our historical loss experience.
We may also incur substantial increases in costs in an effort to minimize or mitigate cyber security risks and to respond to cyber incidents. The potential for operational risk exposure exists throughout our business.
We may also incur substantial increases in costs in an effort to minimize or mitigate cybersecurity risks and to respond to cyber incidents. The potential for operational risk exposure exists throughout our business.
Therefore, a major earthquake, fire, flood or other natural disaster in California or Nevada could have a material adverse effect on our business, financial condition, results of operations and cash flows. 12 Table of Contents Over the past decade, California has experienced a severe drought, though drought conditions have lessened in the past few years.
Therefore, a major earthquake, fire, flood or other natural disaster in California or Nevada could have a material adverse effect on our business, financial condition, results of operations and cash flows. Over the past decade, California has experienced a severe drought, though drought conditions have lessened in the past few years.
As a result, if future events or regulatory views concerning such analysis differ significantly form the judgments, assumptions and estimates in our critical accounting polices, those events or assumptions could have a material impact on our consolidated financial statements and related disclosures, in each case resulting in our need to revise or restate prior period financial statements, cause damage to our reputation and the price of our common stock and adversely affect our business, financial condition and results of operations.
As a result, if future events or regulatory views concerning such analysis differ significantly from the judgments, assumptions and estimates in our critical accounting policies, those events or assumptions could have a material impact on our consolidated financial statements and related disclosures, in each case resulting in our need to revise or restate prior period financial statements, cause damage to our reputation and the price of our common stock and adversely affect our business, financial condition and results of operations.
Security breaches and technological disruptions could damage our reputation and profitability. Our electronic banking activities expose us to possible liability and harm to our reputation should an unauthorized party gain access to confidential customer information.
Cybersecurity breaches and technological disruptions could damage our reputation and profitability. Our electronic banking activities expose us to possible liability and harm to our reputation should an unauthorized party gain access to confidential customer information.
The loss of these vendor relationships could disrupt the services we provide to customers and cause us to incur significant expense in connection with replacing these services. 14 Table of Contents The Company depends primarily on the operations of the Bank to pay dividends, repurchase shares, repay its indebtedness and fund its operations.
The loss of these vendor relationships could disrupt the services we provide to customers and cause us to incur significant expense in connection with replacing these services. The Company depends primarily on the operations of the Bank to pay dividends, repurchase shares, repay its indebtedness and fund its operations.
As a result, a significant majority of the loans in our loan portfolios as of December 31, 2022 were secured by properties and collateral located within these regions. As of such date, approximately 90% of the loans in our loan portfolio were made to borrowers who primarily conduct business or live in Northern California or Northern Nevada.
As a result, a significant majority of the loans in our loan portfolios as of December 31, 2023, were secured by properties and collateral located within these regions. As of such date, approximately 92% of the loans in our loan portfolio were made to borrowers who primarily conduct business or live in Northern California or Northern Nevada.
The Bank’s ability to pay dividends to the Company depends on the success of the Bank’s operations. The Company is a separate and distinct legal entity from its subsidiary, the Bank, and it receives substantially all of its revenue from dividends paid by the Bank.
The Bank ’ s ability to pay dividends to the Company depends on the success of the Bank ’ s operations. The Company is a separate and distinct legal entity from its subsidiary, the Bank, and it receives substantially all of its revenue from dividends paid by the Bank.
In particular, our success has been and continues to be highly dependent upon the abilities and relationships of key executives and certain other employees. Climate change may materially adversely affect the Company's business and results of operations.
In particular, our success has been and continues to be highly dependent upon the abilities and relationships of key executives and certain other employees. Climate change may materially adversely affect the Company ’ s business and results of operations.
A significant portion of our borrowers are involved in or are dependent on the agricultural industry in California, which requires water. As of December 31, 2022, approximatel y 13% of our loans were categorized as agricultural loans. As a result of the drought, there have been governmental proposals concerning the distribution or rationing of water.
A significant portion of our borrowers are involved in or are dependent on the agricultural industry in California, which requires water. As of December 31, 2023, approximately 13% of our loans were categorized as agricultural loans. As a result of the drought, there have been governmental proposals concerning the distribution or rationing of water.
Our critical accounting policies, which are included in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," describe those significant accounting polices and methods used in the preparation of our consolidated financial statements that we consider critical because they require judgments, assumptions and estimates that materially affect our consolidated financial statements and related disclosures.
Management’s Discussion and Analysis of Financial Condition and Results of Operations,” describe those significant accounting policies and methods used in the preparation of our consolidated financial statements that we consider critical because they require judgments, assumptions and estimates that materially affect our consolidated financial statements and related disclosures.
Our efforts to take these risks into account in making lending and other decisions, including by increasing our business with climate-friendly companies, may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior.
Our efforts to take these risks into account in making lending and other decisions, including by increasing our business with climate-friendly companies, may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior. 18 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable.
The markets in which we operate are subject to the risks of drought, fires, earthquakes and other natural disasters. The occurrence of catastrophic weather events or pandemics could adversely affect our financial condition or results of operations. Most of our offices are located in California, as are most of the real and personal properties securing our loans.
The occurrence of catastrophic weather events or pandemics could adversely affect our financial condition or results of operations. Most of our offices are located in California, as are most of the real and personal properties securing our loans. The areas in which we operate and lend in California and Nevada are prone to earthquakes, fires, flooding and other natural disasters.
As of December 31, 2022, approximate ly 77% of our t otal loan portfolio is secured by real estate, the majority of which is commercial real estate. The market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in the area in which the real estate is located.
As of December 31, 2023, approximately 77% of our total loan portfolio is secured by real estate, the majority of which is commercial real estate. The market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in the area in which the real estate is located.
If we pursue our growth strategy too aggressively or fail to attract qualified personnel, control costs or maintain asset quality, or if factors beyond management’s control divert attention away from our business operations, our pursuit of growth could have a material adverse impact on our business.
If we pursue our growth strategy too aggressively or fail to attract qualified personnel, control costs or maintain asset quality, or if factors beyond management’s control divert attention away from our business operations, our pursuit of growth could have a material adverse impact on our business. Our accounting estimates and risk management processes rely on analytical and forecasting models.
General Risk Factors The trading price of our common stock may be volatile or may decline. The trading price of our common stock may fluctuate as a result of a number of factors, many of which are outside our control.
The trading price of our common stock may fluctuate as a result of a number of factors, many of which are outside our control.
The accuracy of our financial statements and related disclosures could be affected if the judgments, assumptions or estimates used in our critical accounting policies are inaccurate. The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes.
The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. Our critical accounting policies, which are included in “Item 7.
If our investment securities decline in market value and other than temporary impairments of these assets results, we would be required to recognize a loss which could have a material adverse effect on our net income and capital levels. Damage to our reputation could significantly harm our business and prospects. Our reputation is an important asset.
If our investment securities decline in market value and impairments of these assets results, we could be required to recognize a loss which could have a material adverse effect on our net income and capital levels.
In addition, if we were the owner or former owner of a contaminated site, we could be subject to common law claims by third parties seeking damages for environmental contamination emanating from the site.
In addition, if we were the owner or former owner of a contaminated site, we could be subject to common law claims by third parties seeking damages for environmental contamination emanating from the site. If we were to become subject to significant environmental liabilities or costs, our business, financial condition, results of operations and prospects could be adversely affected.
Historically, our liabilities have shorter contractual maturities than our assets. This creates a potential imbalance as interest rates change over time, which can create significant earnings volatility.
Historically, our liabilities have shorter contractual maturities than our assets. This creates a potential imbalance as interest rates change over time, which can create significant earnings volatility. Such an occurrence would have a material adverse effect on our net interest income and our results of operations.
We may engage in additional acquisition activity and open additional offices in the future to expand our markets and further our growth strategy. Acquiring other banks or branches involves various other risks commonly associated with acquisitions including difficulty in estimating the value of the business to be acquired, integrating the operations, and retaining key employees and customers.
Acquiring other banks or branches involves various other risks commonly associated with acquisitions including difficulty in estimating the value of the business to be acquired, integrating the operations, and retaining key employees and customers. We cannot assure that future acquisitions or new offices will be successful.
This creates reinvestment risk, which is the risk that we may not be able to reinvest the funds from faster prepayments at rates that are comparable to the rates earned on the prepaid loans.
A reduction in interest rates causes increased prepayments of loans as borrowers tend to refinance their debt to reduce their borrowing costs. This creates reinvestment risk, which is the risk that we may not be able to reinvest the funds from faster prepayments at rates that are comparable to the rates earned on the prepaid loans.
Ultimately, competition can reduce our profitability, as well as make it more difficult to increase the size of our loan portfolio and deposit base. Our growth strategy involves risks.
Ultimately, competition can reduce our profitability, as well as make it more difficult to increase the size of our loan portfolio and deposit base. Our growth strategy involves risks. In July 2021 we completed the acquisition of Bank of Feather River and in 2023 we opened a new branch in Chico California.
For these reasons, the amount and frequency of dividends that we pay to shareholders may vary from time to time. A reduction in the value, or impairment of our investment securities, can impact our earnings and common shareholders' equity. Generally Accepted Accounting Principles (“GAAP”) requires that we carry our available-for-sale investment securities at fair value on our balance sheet.
All of these factors could have a material adverse impact on our liquidity, business, financial condition and results of operations. A reduction in the value, or impairment of our investment securities, can impact our earnings and common shareholders ’ equity. Generally Accepted Accounting Principles (“GAAP”) requires that we carry our available-for-sale investment securities at fair value on our balance sheet.
Collateral may have to be sold for less than the outstanding balance of the loan, which could result in losses on such loans. Declines in real estate market values or increases in commercial and consumer delinquency levels could require increased net charge-offs which could adversely affect our financial condition, results of operations and cash flows.
Declines in real estate market values or increases in commercial and consumer delinquency levels could require increased net charge-offs which could adversely affect our financial condition, results of operations and cash flows. 11 Inflationary pressures and rising prices may affect our results of operations and financial condition.
At the same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting from higher interest rates. Changes in interest rates can also affect the average life of our loans. A reduction in interest rates causes increased prepayments of loans as borrowers tend to refinance their debt to reduce their borrowing costs.
Interest rate increases often result in larger payment requirements for our borrowers, increasing the potential for default. At the same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting from higher interest rates. Changes in interest rates can also affect the average life of our loans.
We cannot assure that future acquisitions or new offices will be successful. Further, growth may strain our administrative, managerial, financial and operational resources and increase demands on our systems and controls.
Further, growth may strain our administrative, managerial, financial and operational resources and increase demands on our systems and controls.
If we were to become subject to significant environmental liabilities or costs, our business, financial condition, results of operations and prospects could be adversely affected. 15 Table of Contents Risks Related to Regulation of the Company and the Bank We are subject to extensive regulation and may face regulatory enforcement actions, incur fines, penalties and other negative consequences from regulatory violations.
Risks Related to Regulation of the Company and the Bank We are subject to extensive regulation and may face regulatory enforcement actions, incur fines, penalties and other negative consequences from regulatory violations.
Accordingly, we cannot assure that we will be able to raise additional capital if needed or on terms acceptable to us. If we fail to maintain capital to meet regulatory requirements, our financial condition, liquidity and results of operations would be materially and adversely affected.
Accordingly, we cannot assure that we will be able to raise additional capital if needed or on terms acceptable to us.
Over the past seven years, we have completed the acquisition of Bank of Feather River, two branch purchase and assumption transactions, the establishment of a new branch office in Reno, Nevada and a loan production office in Klamath Falls, Oregon.
Previously, during the last ten years we completed two branch purchase and assumption transactions, the establishment of a new branch office in Reno, Nevada and a loan production office in Klamath Falls, Oregon. We may engage in additional acquisition activity and open additional offices in the future to expand our markets and further our growth strategy.
Any one or a combination of the factors identified above could negatively impact our business, financial condition and results of operations and prospects. The majority of our assets are loans, which are subject to credit risks and potential losses.
ITEM 1A. RISK FACTORS Risks Relating to our Business and Industry The majority of our assets are loans, which are subject to credit risks and potential losses.
In addition, in a prolonged low interest rate environment, the difference between the total interest income earned on interest earning assets and the total interest expense incurred on interest bearing liabilities may compress, reducing our net interest income and adversely affecting our operating results.
Our earnings depend largely upon net interest income, which is the difference between the total interest income earned on interest earning assets (primarily loans and investment securities) and the total interest expense incurred on interest bearing liabilities (primarily deposits and borrowed funds).
Any financial liability, regulatory enforcement, litigation costs or reputational damage stemming from our participation in the PPP and any related litigation could have a material adverse impact on our business, financial condition and results of operations.
Any such failure in our analytical or forecasting models could have a material adverse effect on our business, financial condition and results of operations. 14 The accuracy of our financial statements and related disclosures could be affected if the judgments, assumptions or estimates used in our critical accounting policies are inaccurate.
Removed
ITEM 1A. RISK FACTORS Risk s Relating to our Business and Industry T he ongoing COVID-19 pandemic and resulting adverse economic conditions have adversely impacted, and could continue to adversely impact, our business and results of operations . Our business is dependent on the willingness and ability of our customers to conduct banking and other financial transactions.
Added
Collateral may have to be sold for less than the outstanding balance of the loan, which could result in losses on such loans.
Removed
The ongoing COVID-19 pandemic has caused significant disruption in the United States and international economies and financial markets. Given the ongoing and dynamic nature of the circumstances and uncertainty regarding the duration of the pandemic, it is difficult to predict the full, continuing impact of the pandemic on our business.
Added
Inflation began to rise sharply at the end of 2021 and has remained at an elevated level through 2023. Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses.
Removed
We could, however, be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: ● demand for our products and services may decline, making it difficult to sustain and grow asset and income levels; ● if the economy worsens, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; ● collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; ● our allowance for loan losses may have to be increased due to a deterioration in the credit quality of borrowers or the inability of borrowers or guarantors to satisfy their obligations to us (and any related forbearances or restructurings that may be implemented), which will adversely affect our net income; ● higher operating costs, increased cybersecurity risks and potential loss of productivity due to employees working remotely, at least part of the time; ● the value of securities in our investment portfolio may decline if, for example, the general economy deteriorates, inflation rates increase, credit ratings decline, the issuers’ financial condition deteriorates or the liquidity for debt securities declines; 10 Table of Contents ● material decreases in net income or a net loss over several quarters could result in a decrease in the rate or discontinuation of our quarterly cash dividend; ● we rely on third party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us; and ● FDIC premiums may increase if the agency experiences additional resolution costs.
Added
Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition.
Removed
Changes in interest rates could reduce our business and profitability.
Added
Furthermore, a prolonged period of inflation could cause wages and other costs to the Company to increase, which could adversely affect our results of operations and financial condition. Changes in interest rates could reduce our business and profitability.
Removed
If short-term interest rates remain at their historically low levels for a prolonged period, and assuming longer term interest rates fall further, we could experience net interest margin compression as our interest earning assets would continue to re-price downward while our interest-bearing liability rates could fail to decline in tandem.
Added
Changes in interest rates also affect the value of our interest-earning assets, particularly our investment securities portfolio. Generally, the value of fixed-rate securities fluctuates inversely with changes in interest rates, so the market value of our investment securities may fall as interest rates rise.
Removed
Such an occurrence would have a material adverse effect on our net interest income and our results of operations. Interest rate increases often result in larger payment requirements for our borrowers, increasing the potential for default.
Added
Unrealized gains and losses on securities available for sale are reported as a separate component of equity, net of tax. Stockholders’ equity, specifically accumulated other comprehensive income (loss) (“AOCI”), is increased or decreased by the amount of change in the estimated fair value of our securities available for sale, net of deferred income taxes.
Removed
The areas in which we operate and lend in California and Nevada are prone to earthquakes, fires, flooding and other natural disasters.
Added
Decreases in the fair value of securities available for sale resulting from increases in interest rates could have an adverse effect on shareholders’ equity. 12 A lack of liquidity could adversely affect our operations and jeopardize our business, financial condition and results of operations. Liquidity is essential to our business.
Removed
Our implementation of the current Expected Credit Loss (CECL) model will significantly change how we recognize credit losses, could require that we increase our allowance for loan losses and may materially impact our results of operations, financial condition or liquidity.
Added
We rely on our ability to generate deposits and effectively manage the repayment and maturity schedules of our loans and investment securities, respectively, to ensure that we have adequate liquidity to fund our operations.
Removed
Beginning January 1, 2023, we are subject to new accounting standard ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments.
Added
An inability to raise funds through deposits, borrowings, securities sales, Federal Reserve Bank advances, the sale of loans and other sources could have a substantial negative effect on our liquidity. Our most important source of funding consists of deposits.
Removed
The new standard significantly changes how entities measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. 13 Table of Contents The new standard replaces the earlier “incurred loss” approach with an “expected loss” model.
Added
Deposit balances may decrease if customers seek higher investment returns or choose to move deposits to other banks or investments that are perceived as having lower risks.
Removed
The new model, referred to as the current expected credit loss (“CECL”) model, applies 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.
Added
If customers move money out of bank deposits and into other investments, then we would lose a relatively low-cost source of funds, increasing our funding costs and reducing our net interest income and net income.
Removed
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.
Added
Other primary sources of funds consist of cash flows from operations, investment maturities and sales, loan repayments, and proceeds from the issuance and sale of any equity and debt securities to investors.
Removed
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.
Added
Additional liquidity is provided by the ability to borrow from the Federal Reserve Bank of San Francisco and the Federal Home Loan Bank and our ability to raise brokered deposits. We also may borrow funds from third-party lenders, such as other financial institutions.
Removed
Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach).
Added
Our access to funding sources in amounts adequate to finance or capitalize our activities, or on terms that are acceptable to us, could be impaired by factors that affect us directly or the bank or non-bank financial services industries or the economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the bank or non-bank financial services industries.
Removed
To implement the CECL model, we established an implementation t eam chaired by our Chief Lending Officer and composed of members of our credit administration and accounting departments, invested in technology to support the CECL calculation of the allowance for loan losses and engaged a consultant to review our CECL model and to assist us in documenting aspects of the CECL model.
Added
Based on experience, we believe that our deposit accounts are relatively stable sources of funds. If we increase interest rates paid to retain deposits, our earnings may be adversely affected, which could have an adverse effect on our business, financial condition and results of operations.
Removed
Based on the loan portfolio composition, characteristics and quality of the loan portfolio as of December 31, 2022, and the current economic environment, management estimates that the total allowance for loan losses will increase by between $500,000 and $800,000 . The estimated decline in equity, net of tax, will range from $350,000 to $550,000.
Added
Significant declines in available funding could adversely affect our ability to originate loans, invest in securities, pay our expenses, distribute dividends to our shareholders, and fulfill our debt obligations or deposit withdrawal demands. In addition, a lack of liquidity could result in the sale of securities in an unrealized loss position.
Removed
The economic conditions, forecasts and assumptions used in the model could be significantly different in future periods. The impact of the change in the allowance on our results of operations in a provision for credit losses will depend on the current period net charge-offs, level of loan originations, and change in mix of the loan portfolio.
Added
Adverse developments affecting the banking industry have eroded customer confidence in the banking system and could have a material effect on our operations and/or stock price. The recent high-profile failures of several depository institutions may have negatively impacted customer confidence in the safety and soundness of some regional and community banks.
Removed
The ranges noted above exclude any impact to the Company's reserve for unfunded commitments, which is expected to increase by between $250,000 and $350,000. The estimated decline in equity, net of tax, will range from $175,000 to $250,000.
Added
As a result, we face that risk that customers may prefer to maintain deposits with larger financial institutions or invest in short-term fixed income securities instead of deposits with the Bank, either of which could materially adversely impact our liquidity, cost of funding, capital, and results of operations.
Removed
As time progresses and the results of economic conditions require model assumption inputs to change, further refinements to the estimation process may also be identified.
Added
In response to the failures of other depository institutions, we may face increased regulation and supervisory oversight, higher capital or liquidity requirements or a heightened risk of regulatory enforcement activities, any of which could have a material impact on our business.
Removed
The federal banking regulators, including the Federal Reserve and the FDIC, have adopted a rule that gives a banking organization the option to phase in over a three-year period the day-one adverse effects of CECL on its regulatory capital.

… 24 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

8 edited+0 added−1 removed1 unchanged
Biggest change(5) Future home to our Chico, California branch. This branch is expected to open for business early second quarter 2023. Including variable lease expense, total rent expense for the years ended December 31, 2022, 2021 and 2020 were $611,000, $507,000 and $407,000, respectively.
Biggest change(5) These properties were sold and leased backed during the first quarter of 2024. Including variable lease expense, total rent expense for the years ended December 31, 2023, 2022 and 2021 were $635,000, $611,000 and $507,000, respectively. The expiration dates of the leases vary, with the first such lease expiring during 2024 and the last such lease expiring during 2044.
Lake Boulevard 336 West Main Street 120 North Pine Street Tahoe City, California Quincy, California Portola, California 43163 Highway 299 E 121 Crescent Street 255 Main Street Fall River Mills, California Greenville, California Chester, California 510 North Main Street 3000 Riverside Drive 8475 North Lake Boulevard Alturas, California Susanville, California Kings Beach, California 11638 Donner Pass Road 5050 Meadowood Mall Circle 1280 Bridge St.
Lake Boulevard 336 West Main Street 120 North Pine Street Tahoe City, California Quincy, California (5) Portola, California (5) 43163 Highway 299 E 121 Crescent Street 255 Main Street Fall River Mills, California (5) Greenville, California (5) Chester, California (5) 510 North Main Street 3000 Riverside Drive 8475 North Lake Boulevard Alturas, California (5) Susanville, California (5) Kings Beach, California 11638 Donner Pass Road 5050 Meadowood Mall Circle 1280 Bridge St.
Generally, investments in real property are either for the Company and Bank use or are in real property and real property interests in the ordinary course of the Bank’s business. 18 Table of Contents
Generally, investments in real property are either for the Company and Bank use or are in real property and real property interests in the ordinary course of the Bank’s business. 20 Table of Contents
Carson St. 107 S. 7 th St. 5525 Kietzke Lane, Suite 100 Carson City, Nevada Klamath Falls, OR (3) Reno, Nevada (1) 424 N. Mill Creek 495 Idaho Street #102 Quincy, California (1) Elko, Nevada (1) (1) Non-branch administrative or credit administrative offices. (2) SBA lending office. (3) Commercial lending office. (4) Branch subject to long term land lease.
Carson St. 107 S. 7 th St. 5525 Kietzke Lane, Suite 100 Carson City, Nevada Klamath Falls, Oregon (3) Reno, Nevada (1) 424 N. Mill Creek Quincy, California (1) (1) Non-branch administrative or credit administrative offices. (2) SBA lending office. (3) Commercial lending office. (4) Branch subject to long term land lease.
Future minimum lease payments for operating leases having initial or remaining noncancelable lease terms in excess of one year are as follows: Year Ending December 31, 2023 $ 539,000 2024 481,000 2025 385,000 2026 263,000 2027 232,000 Thereafter 2,830,000 $ 4,730,000 The Company maintains insurance coverage on its premises, leaseholds and equipment, including business interruption and record reconstruction coverage.
Future minimum lease payments at December 31, 2023 for operating leases having initial or remaining noncancelable lease terms in excess of one year are as follows: Year Ending December 31, 2024 $ 481,000 2025 385,000 2026 263,000 2027 232,000 2028 146,000 Thereafter 2,684,000 $ 4,191,000 The Company maintains insurance coverage on its premises, leaseholds and equipment, including business interruption and record reconstruction coverage.
ITEM 2. PROPERTIES Of the Company’s fourteen depository branches, twelve are owned and two are leased. Our Yuba City branch is classified as owned; however, it is subject to a long term land lease. The Company also leases three lending offices and three administrative offices and owns three administrative facilities.
ITEM 2. PROPERTIES Of the Company’s fifteen depository branches, thirteen are owned and two are leased. Our Yuba City branch is classified as owned; however, it is subject to a long-term land lease. The Company also leases two lending offices and three administrative offices and owns three administrative facilities. Owned Properties 35 South Lindan Avenue 32 Central Avenue 80 W.
Truckee, California Reno, Nevada Yuba City, California (4) 900 Mangrove Avenue Chico, California (5) Leased Properties 100 Amber Grove Dr. Suite 105 1335 Hilltop Drive 11641 Blocker Dr. Suite 140 Chico, CA (3) Redding, California Auburn, California (2) 1101 N.
Truckee, California (5) Reno, Nevada (5) Yuba City, California (4) 900 Mangrove Avenue 315 Birch St. Chico, California Westwood, California (1) (5) Leased Properties 495 Idaho Street #102 1335 Hilltop Drive 11641 Blocker Dr. Suite 140 Elko, Nevada (1) Redding, California Auburn, California (2) 1101 N.
Owned Properties 35 South Lindan Avenue 32 Central Avenue 80 W. Main St. Quincy, California (1) Quincy, California (1) Quincy, California (1) 215 N.
Main St. Quincy, California (1) (5) Quincy, California (1) (5) Quincy, California (1) 215 N.
Removed
The expiration dates of the leases vary, with the first such lease expiring during 2024 and the last such lease expiring during 2044.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+0 added−1 removed0 unchanged
Biggest changeAt or for the year ended December 31, 2022 2021 2020 2019 2018 (dollars in thousands except per share information) Statement of Income Interest income $ 59,758 $ 48,070 $ 39,624 $ 39,302 $ 34,322 Interest expense 1,249 1,136 1,228 1,747 1,236 Net interest income 58,509 46,934 38,396 37,555 33,086 Provision for loan losses 1,300 1,125 3,175 1,500 1,000 Non-interest income 11,050 8,716 8,463 8,135 8,881 Non-interest expense 32,590 26,038 23,732 22,810 21,841 Net income before income taxes 35,669 28,487 19,952 21,380 19,126 Provision for income taxes 9,225 7,478 5,477 5,868 5,134 Net income $ 26,444 $ 21,009 $ 14,475 $ 15,512 $ 13,992 Total assets $ 1,621,044 $ 1,614,074 $ 1,111,576 $ 865,191 $ 824,398 Total gross loans $ 911,949 $ 838,587 $ 709,246 $ 617,561 $ 564,898 Loans held for sale $ 2,301 $ 31,277 $ 693 $ 2,123 $ 1,301 Allowance for loan losses $ 10,717 $ 10,352 $ 9,902 $ 7,243 $ 6,958 Total deposits $ 1,457,809 $ 1,438,999 $ 973,974 $ 747,324 $ 726,565 Total shareholders’ equity $ 119,004 $ 134,082 $ 100,154 $ 84,505 $ 66,932 Balance sheet (period average) Total assets $ 1,642,895 $ 1,386,028 $ 1,015,297 $ 852,664 $ 764,326 Total gross loans $ 856,728 $ 785,527 $ 695,024 $ 586,672 $ 513,689 Loans held for sale $ 8,771 $ 15,258 $ 4,231 $ 2,186 $ 4,937 Total deposits $ 1,487,346 $ 1,231,618 $ 886,515 $ 747,196 $ 677,829 Total shareholders’ equity $ 120,868 $ 117,967 $ 93,152 $ 76,737 $ 60,080 Asset quality ratios Nonperforming loans/total loans 0.13 % 0.58 % 0.36 % 0.33 % 0.20 % Nonperforming assets/total assets 0.07 % 0.33 % 0.27 % 0.33 % 0.28 % Allowance for loan losses/total loans 1.18 % 1.23 % 1.40 % 1.17 % 1.23 % Net loan charge-offs $ 935 $ 675 $ 516 $ 1,215 $ 711 Performance ratios Return on average assets 1.61 % 1.52 % 1.43 % 1.82 % 1.83 % Return on average equity 21.9 % 17.8 % 15.5 % 20.2 % 23.3 % Net interest margin 3.82 % 3.63 % 4.02 % 4.75 % 4.70 % Loans to deposits 62.6 % 58.3 % 72.9 % 82.6 % 77.7 % Efficiency ratio (1) 46.9 % 46.8 % 50.6 % 49.9 % 52.0 % Per share information Basic earnings $ 4.53 $ 3.82 $ 2.80 $ 3.01 $ 2.74 Diluted earnings $ 4.47 $ 3.76 $ 2.77 $ 2.97 $ 2.68 Common cash dividends $ 0.64 $ 0.56 $ 0.36 $ 0.46 $ 0.36 Book value per common share $ 20.34 $ 23.05 $ 19.33 $ 16.36 $ 13.03 Common shares outstanding at period end 5,850,216 5,816,991 5,182,232 5,165,760 5,137,476 Capital ratios – Plumas Bank Leverage ratio 9.2 % 8.4 % 9.2 % 10.4 % 9.3 % Tier 1 risk-based capital 14.7 % 14.4 % 14.2 % 13.1 % 11.8 % Total risk-based capital 15.7 % 15.5 % 15.4 % 14.2 % 13.0 % (1) The efficiency ratio is defined as non-interest expense divided by total revenue (net interest income and non-interest income)
Biggest changeAt or for the year ended December 31, 2023 2022 2021 2020 2019 (dollars in thousands except per share information) Statement of Income Interest income $ 74,592 $ 59,758 $ 48,070 $ 39,624 $ 39,302 Interest expense 4,798 1,249 1,136 1,228 1,747 Net interest income 69,794 58,509 46,934 38,396 37,555 Provision for credit losses 2,775 1,300 1,125 3,175 1,500 Non-interest income 10,722 11,050 8,716 8,463 8,135 Non-interest expense 37,530 32,590 26,038 23,732 22,810 Net income before income taxes 40,211 35,669 28,487 19,952 21,380 Provision for income taxes 10,435 9,225 7,478 5,477 5,868 Net income $ 29,776 $ 26,444 $ 21,009 $ 14,475 $ 15,512 Total assets $ 1,610,416 $ 1,621,044 $ 1,614,074 $ 1,111,576 $ 865,191 Total gross loans $ 958,564 $ 911,949 $ 838,587 $ 709,246 $ 617,561 Loans held for sale $ - $ 2,301 $ 31,277 $ 693 $ 2,123 Allowance for credit losses $ 12,867 $ 10,717 $ 10,352 $ 9,902 $ 7,243 Total deposits $ 1,333,655 $ 1,457,809 $ 1,438,999 $ 973,974 $ 747,324 Total shareholders’ equity $ 147,617 $ 119,004 $ 134,082 $ 100,154 $ 84,505 Balance sheet (period average) Total assets $ 1,587,149 $ 1,642,895 $ 1,386,028 $ 1,015,297 $ 852,664 Total gross loans $ 933,464 $ 856,728 $ 785,527 $ 695,024 $ 586,672 Loans held for sale $ 533 $ 8,771 $ 15,258 $ 4,231 $ 2,186 Total deposits $ 1,403,957 $ 1,487,346 $ 1,231,618 $ 886,515 $ 747,196 Total shareholders’ equity $ 126,984 $ 120,868 $ 117,967 $ 93,152 $ 76,737 Asset quality ratios Nonperforming loans/total loans 0.50 % 0.13 % 0.58 % 0.36 % 0.33 % Nonperforming assets/total assets 0.33 % 0.07 % 0.33 % 0.27 % 0.33 % Allowance for credit losses/total loans 1.34 % 1.18 % 1.23 % 1.40 % 1.17 % Net loan charge-offs $ 954 $ 935 $ 675 $ 516 $ 1,215 Performance ratios Return on average assets 1.88 % 1.61 % 1.52 % 1.43 % 1.82 % Return on average equity 23.4 % 21.9 % 17.8 % 15.5 % 20.2 % Net interest margin 4.71 % 3.82 % 3.63 % 4.02 % 4.75 % Loans to deposits 71.9 % 62.6 % 58.3 % 72.9 % 82.6 % Efficiency ratio (1) 46.6 % 46.9 % 46.8 % 50.6 % 49.9 % Per share information Basic earnings $ 5.08 $ 4.53 $ 3.82 $ 2.80 $ 3.01 Diluted earnings $ 5.02 $ 4.47 $ 3.76 $ 2.77 $ 2.97 Common cash dividends $ 1.00 $ 0.64 $ 0.56 $ 0.36 $ 0.46 Book value per common share $ 25.09 $ 20.34 $ 23.05 $ 19.33 $ 16.36 Common shares outstanding at period end 5,871,523 5,850,216 5,816,991 5,182,232 5,165,760 Capital ratios – Plumas Bank Leverage ratio 10.8 % 9.2 % 8.4 % 9.2 % 10.4 % Tier 1 risk-based capital 15.7 % 14.7 % 14.4 % 14.2 % 13.1 % Total risk-based capital 16.9 % 15.7 % 15.5 % 15.4 % 14.2 % (1) The efficiency ratio is defined as non-interest expense divided by total revenue (net interest income and non-interest income)
We did not repurchase any shares of our common stock during the quarterly period ended December 31, 2022. 20 Table of Contents The following table presents a summary of selected financial data and should be read in conjunction with the Company’s consolidated financial statements and notes thereto included under Item 8 – Financial Statements and Supplementary Data.
We did not repurchase any shares of our common stock during the quarterly period ended December 31, 2023. 22 Table of Contents The following table presents a summary of selected financial data and should be read in conjunction with the Company’s consolidated financial statements and notes thereto included under Item 8 – Financial Statements and Supplementary Data.
It is the policy of the Company to periodically distribute excess retained earnings to the shareholders through the payment of cash dividends. Our Board of Directors believes that dividends help promote shareholder value and capital adequacy by enhancing the marketability of the Company’s stock.
It is the policy of the Company to periodically distribute excess retained earnings to the shareholders through the payment of cash dividends. Our Board of Directors believes that dividends help promote shareholder value and capital adequacy by enhancing the marketability of the Company’s stock. The Company is subject to various restrictions on the payment of dividends.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCK HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. The Company’s common stock is traded on the NASDAQ Capital Market under the ticker symbol "PLBC". As of December 31, 2022, there wer e 5,850,216 shares of the Company’s common stock outstanding held by approximatel y 2,250 shareholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCK HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. The Company’s common stock is traded on the NASDAQ Capital Market under the ticker symbol "PLBC". As of December 31, 2023, there wer e 5,871,523 shares of the Company’s common stock outstanding held by approximatel y 2,500 shareholders of record.
The Board generally considers the payment of dividends each quarter based on a number of factors, including our results of operations, general business conditions, growth, financial condition, anticipated capital needs and other factors deemed relevant by the Board. Further, the Company is subject to various restrictions on the payment of dividends.
The payment of future dividends is at the discretion of the Board. The Board generally considers the payment of dividends each quarter based on a number of factors, including our results of operations, general business conditions, growth, financial condition, anticipated capital needs and other factors deemed relevant by the Board.
During 2022 the Company paid quarterly cash dividends of $0.16 per share on each of November 15, 2022, August 15, 2022, May 16, 2022 and February 15, 2022. During 2021 the Company paid quarterly cash dividends of $0.14 per share on each of November 15, 2021, August 16, 2021, May 17, 2021 and February 15, 2021.
The Company paid a quarterly cash dividend of $0.25 per share on November 15, 2023, August 15, 2023, May 15, 2023 and February 15, 2023 and a quarterly cash dividend of $0.16 per share on February 15, 2022, May 16, 2022, August 15, 2022, and November 15, 2022, and a quarterly cash dividend of $0.14 per share on February 15, 2021, May 17, 2021, August 16, 2021, and November 15, 2021.
See Note 13 “Shareholders’ Equity – Dividend Restrictions” of the Company’s Consolidated Financial Statements in Item 8 – Financial Statements and Supplementary Data of this report. Issuer Purchases of Equity Securities.
Further, the Company is subject to various restrictions on the payment of dividends. See Note 13 “Shareholders’ Equity – Dividend Restrictions” of the Company’s Consolidated Financial Statements in Item 8 – Financial Statements and Supplementary Data of this report. Issuer Purchases of Equity Securities.
Removed
During 2020 the Company paid three quarterly $0.12 per share dividends, one each on May 15, 2020, August 14, 2020 and November 16, 2020. The payment of future dividends is at the discretion of the Board.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

107 edited+93 added−99 removed49 unchanged
Biggest changeYear ended December 31, 2022 2021 2020 Interest Rates Interest Rates Interest Rates Average income/ earned/ Average income/ earned/ Average income/ earned/ balance expense paid balance expense paid balance expense paid (dollars in thousands) Assets Interest-bearing cash and due from banks and deposits in banks $ 305,095 $ 4,923 1.61 % $ 253,023 $ 345 0.14 % $ 95,591 $ 210 0.22 % Taxable investment securities 258,732 6,409 2.48 % 164,199 2,746 1.67 % 119,968 2,451 2.04 % Non-taxable investment securities (1) 103,366 2,722 2.63 % 75,673 1,666 2.20 % 39,576 983 2.48 % Loans held for sale 8,771 510 5.81 % 15,258 826 5.41 % 4,231 254 6.00 % Total loans (2)(3) 856,728 45,194 5.28 % 785,527 42,487 5.41 % 695,024 35,726 5.14 % Total earning assets 1,532,692 59,758 3.90 % 1,293,680 48,070 3.72 % 954,390 39,624 4.15 % Cash and due from banks 40,520 44,396 23,654 Other assets 69,683 47,952 37,253 Total assets $ 1,642,895 $ 1,386,028 $ 1,015,297 Liabilities and shareholders’ equity Interest bearing demand deposits $ - $ - 0.00 % $ - $ - 0.00 % $ 97,395 $ 77 0.08 % Money market deposits 254,723 284 0.11 % 224,776 307 0.14 % 115,203 278 0.24 % Savings deposits 400,314 376 0.09 % 306,911 280 0.09 % 212,470 278 0.13 % Time deposits 59,016 163 0.28 % 53,976 193 0.36 % 38,003 199 0.52 % Junior subordinated debentures 10,310 359 3.48 % 10,310 348 3.38 % 10,310 385 3.73 % Repurchase agreements and other 12,327 67 0.54 % 13,419 8 0.06 % 11,899 11 0.09 % Total interest-bearing liabilities 736,690 1,249 0.17 % 609,392 1,136 0.19 % 485,280 1,228 0.25 % Noninterest bearing demand deposits 773,293 645,955 423,444 Other liabilities 12,044 12,714 13,421 Shareholders’ equity 120,868 117,967 93,152 Total liabilities and shareholders’ equity $ 1,642,895 $ 1,386,028 $ 1,015,297 Net interest income $ 58,509 $ 46,934 $ 38,396 Net interest spread (4) 3.73 % 3.53 % 3.90 % Net interest margin (5) 3.82 % 3.63 % 4.02 % (1) Interest income is reflected on an actual basis and is not computed on a tax-equivalent basis.
Biggest changeYear ended December 31, 2023 2022 2021 Interest Rates Interest Rates Interest Rates Average income/ earned/ Average income/ earned/ Average income/ earned/ balance expense paid balance expense paid balance expense paid (dollars in thousands) Assets Interest-bearing cash and due from banks and deposits in banks $ 86,897 $ 4,387 5.05 % $ 305,095 $ 4,923 1.61 % $ 253,023 $ 345 0.14 % Taxable investment securities 338,941 11,525 3.40 % 258,732 6,409 2.48 % 164,199 2,746 1.67 % Non-taxable investment securities (1) 123,002 3,681 2.99 % 103,366 2,722 2.63 % 75,673 1,666 2.20 % Loans held for sale 533 49 9.19 % 8,771 510 5.81 % 15,258 826 5.41 % Total loans (2)(3) 933,464 54,950 5.89 % 856,728 45,194 5.28 % 785,527 42,487 5.41 % Total earning assets 1,482,837 74,592 5.03 % 1,532,692 59,758 3.90 % 1,293,680 48,070 3.72 % Cash and due from banks 26,100 40,520 44,396 Other assets 78,212 69,683 47,952 Total assets $ 1,587,149 $ 1,642,895 $ 1,386,028 Liabilities and shareholders’ equity Money market deposits $ 227,819 $ 1,367 0.60 % 254,723 $ 284 0.11 % $ 224,776 $ 307 0.14 % Savings deposits 375,377 795 0.21 % 400,314 376 0.09 % 306,911 280 0.09 % Time deposits 74,570 1,568 2.10 % 59,016 163 0.28 % 53,976 193 0.36 % Other borrowings 17,945 896 4.99 % - - 0.00 % - - 0.00 % Junior subordinated debentures 2,268 141 6.22 % 10,310 359 3.48 % 10,310 348 3.38 % Repurchase agreements and other 18,576 31 0.17 % 12,327 67 0.54 % 13,419 8 0.06 % Total interest-bearing liabilities 716,555 4,798 0.67 % 736,690 1,249 0.17 % 609,392 1,136 0.19 % Noninterest bearing demand deposits 726,191 773,293 645,955 Other liabilities 17,419 12,044 12,714 Shareholders’ equity 126,984 120,868 117,967 Total liabilities and shareholders’ equity $ 1,587,149 $ 1,642,895 $ 1,386,028 Net interest income $ 69,794 $ 58,509 $ 46,934 Net interest spread (4) 4.36 % 3.73 % 3.53 % Net interest margin (5) 4.71 % 3.82 % 3.63 % (1) Interest income is reflected on an actual basis and is not computed on a tax-equivalent basis.
On May 26, 2020 we entered into two separate interest rate swap agreements with notional amounts totaling $10 million, effectively converting the $10 million in Subordinated Debentures to fixed obligations. The swaps have a 10 year maturity and fix the labor rate on the Subordinated Debentures at approximately 75 basis points.
Interest Rate Swaps . On May 26, 2020 we entered into two separate interest rate swap agreements with notional amounts totaling $10 million, effectively converting the $10 million in Subordinated Debentures to fixed obligations. The swaps have a 10 year maturity and fix the labor rate on the Subordinated Debentures at approximately 75 basis points.
A qualifying banking organization that elects to use the new ratio will be considered to have met all applicable federal regulatory capital and leverage requirements, including the minimum capital levels required to be considered “well capitalized, ” if it maintains community bank leverage ratio capital exceeding 9%. The new rule became effective on January 1, 2020.
A qualifying banking organization that elects to use the new ratio will be considered to have met all applicable federal regulatory capital and leverage requirements, including the minimum capital levels required to be considered “well capitalized, ” if it maintains a community bank leverage ratio capital exceeding 9%. The new rule became effective on January 1, 2020.
Net interest margin for the year ended December 31, 2022 increased 19 basis points to 3.82%, up from 3.63% during 2021. 25 Table of Contents The $2.4 million increase in interest and fees on loans and loans held for sale resulted from an increase in average balance of $65 million partially offset by a decrease in yield of 13 basis points to 5.28%.
Net interest margin for the year ended December 31, 2022, increased 19 basis points to 3.82%, up from 3.63% during 2021. 28 Table of Contents The $2.4 million increase in interest and fees on loans and loans held for sale resulted from an increase in average balance of $65 million partially offset by a decrease in yield of 13 basis points to 5.28%.
We cannot provide you with any assurance that economic difficulties or other circumstances which would adversely affect our borrowers and their ability to repay outstanding loans will not occur which would be reflected in increased losses in our loan portfolio, which could result in actual losses that exceed reserves previously established. 22 Table of Contents The following discussion is designed to provide a better understanding of significant trends related to the Company's financial condition, results of operations, liquidity and capital.
We cannot provide you with any assurance that economic difficulties or other circumstances which would adversely affect our borrowers and their ability to repay outstanding loans will not occur which would be reflected in increased losses in our loan portfolio and which could result in actual losses that exceed reserves previously established. 24 Table of Contents The following discussion is designed to provide a better understanding of significant trends related to the Company's financial condition, results of operations, liquidity and capital.
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.
Loan losses are charged to, and recoveries are credited to, the allowance for credit losses. The allowance for credit losses is maintained at a level deemed appropriate by management to provide for known and inherent risks in the loan portfolio.
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.
The Company’s management and lending officers evaluate the loss exposure of classified and nonaccrual loans on a quarterly basis, or more frequently as loan conditions change. The Management Asset Resolution Committee (MARC) reviews the asset quality of criticized and past due loans monthly and reports the findings to the full Board of Directors.
Based upon the analysis of available evidence, management has determined that it is "more likely than not" that all deferred income tax assets as of December 31, 2022 and 2021 will be fully realized and therefore no valuation allowance was recorded.
Based upon the analysis of available evidence, management has determined that it is "more likely than not" that all deferred income tax assets as of December 31, 2023 and 2022 will be fully realized and therefore no valuation allowance was recorded.
The increase in bonus expense includes the affect of the increase in pretax pre-bonus income during the comparison period as well as an increase in performance compared to peers. The increase in occupancy and equipment expense includes $293 thousand related to a full year of operations of our Yuba City branch.
The increase in bonus expense includes the effect of the increase in pretax pre-bonus income during the comparison period as well as an increase in performance compared to peers. The increase in occupancy and equipment expense includes $293 thousand related to a full year of operations of our Yuba City branch.
While real estate mortgage, agricultural, commercial and consumer lending remain the foundation of the Company's historical loan mix, some changes in the mix have occurred due to the changing economic environment and the resulting change in demand for certain loan types. 31 Table of Contents The following table sets forth the maturity of gross loan categories as of December 31, 2022.
While real estate mortgage, agricultural, commercial and consumer lending remain the foundation of the Company's historical loan mix, some changes in the mix have occurred due to the changing economic environment and the resulting change in demand for certain loan types. 33 Table of Contents The following table sets forth the maturity of gross loan categories as of December 31, 2023.
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.
During 2002, Plumas Statutory Trust I issued 6,000 Floating Rate Capital Trust Pass-Through Securities ("Trust Preferred Securities"), with a liquidation value of $1,000 per security, for gross proceeds of $6,000,000. During 2005, Plumas Statutory Trust II issued 4,000 Trust Preferred Securities with a liquidation value of $1,000 per security, for gross proceeds of $4,000,000.
At December 31, 2021, the Company’s and the Bank’s capital ratios exceeded the thresholds necessary to be considered “well capitalized” under the Basel III framework. 39 Table of Contents 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.
At December 31, 2023, the Company’s and the Bank’s capital ratios exceeded the thresholds necessary to be considered “well capitalized” under the Basel III framework. 41 Table of Contents 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.
Moreover, the business activities of the Company currently are focused in the California counties of Plumas, Nevada, Placer, Lassen, Modoc, Shasta, Sierra, and Sutter and in Washoe and Carson City Counties in Northern Nevada.
Moreover, the business activities of the Company currently are focused in the California counties of Butte, Lassen, Modoc, Nevada, Placer, Plumas, Shasta and Sutter and in Washoe and Carson City Counties in Northern Nevada.
It pertains to the Company's financial condition, changes in financial condition and results of operations as of December 31, 2022 and 2021 and for each of the three years in the period ended December 31, 2022.
It pertains to the Company's financial condition, changes in financial condition and results of operations as of December 31, 2023 and 2022 and for each of the three years in the period ended December 31, 2023.
The increase in the federal funds rate had a much smaller affect on the Company's interest expense which increased by $113 thousand to $1.2 million.
The increase in the federal funds rate had a much smaller effect on the Company's interest expense which increased by $113 thousand to $1.2 million.
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. 36 Table of Contents The following table summarizes the maturities of the Company's securities at their carrying value, which represents fair value, and their weighted average tax equivalent yields at December 31, 2022.
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. 38 Table of Contents The following table summarizes the maturities of the Company's securities at their carrying value, which represents fair value, and their weighted average tax equivalent yields at December 31, 2023.
(2) Average nonaccrual loan balances of $2.8 million for 2022, $4.4 million for 2021 and $2.3 million for 2020 are included in average loan balances for computational purposes. (3) Loan origination fees and costs are included in interest income as adjustments of the loan yields over the life of the loan using the interest method.
(2) Average nonaccrual loan balances of $3.0 million for 2023, $2.8 million for 2022 and $4.4 million for 2021 are included in average loan balances for computational purposes. (3) Loan origination fees and costs are included in interest income as adjustments of the loan yields over the life of the loan using the interest method.
However, no assurance can be given that the Company may not sustain charge-offs which are in excess of the allowance in any given period. 27 Table of Contents Non-Interest Income The following table sets forth the components of non-interest income for the years ended December 31, 2022, 2021 and 2020.
However, no assurance can be given that the Company may not sustain charge-offs which are in excess of the allowance in any given period. 29 Table of Contents Non-Interest Income The following table sets forth the components of non-interest income for the years ended December 31, 2023, 2022 and 2021.
Interest paid on this product is similar to that which is paid on the Bank’s money market accounts; however, these are not deposits and are not FDIC insured. Junior Subordinated Deferrable Interest Debentures.
Interest paid on this product is similar to, but less than, that which is paid on the Bank’s money market accounts; however, these are not deposits and are not FDIC insured. Junior Subordinated Deferrable Interest Debentures.
Loan interest income includes net loan fees of $234 thousand, $5.7 million and $1.4 million for 2022, 2021 and 2020, respectively. (4) Net interest spread represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.
Loan interest income includes net (costs)/ loan fees of ($1.3 million), $234 thousand and $5.7 million for 2023, 2022 and 2021, respectively. (4) Net interest spread represents the average yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities.
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.
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.
Return on average equity increased to 21.9% for the twelve months ended December 31, 2022, up from 17.8% during 2021. 23 Table of Contents Results of Operations Net Interest Income The following table presents, for the years indicated, the distribution of consolidated average assets, liabilities and shareholders' equity. Average balances are based on average daily balances.
Return on average equity increased to 23.4% for the twelve months ended December 31, 2023, up from 21.9% during 2022. 25 Table of Contents Results of Operations Net Interest Income The following table presents, for the years indicated, the distribution of consolidated average assets, liabilities and shareholders' equity. Average balances are based on average daily balances.
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.
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.
In addition to its FHLB borrowing line, the Company has unsecured short-term borrowing agreements with two of its correspondent banks in the amounts of $50 million and $20 million. There were no outstanding borrowings to the FHLB or the correspondent banks at December 31, 2022 and December 31, 2021. Note Payable.
In addition to its FHLB borrowing line and the BTFP, the Company has unsecured short-term borrowing agreements with two of its correspondent banks in the amounts of $50 million and $20 million. There were no outstanding borrowings to the FHLB, or the correspondent banks at December 31, 2023, and December 31, 2022.
The remaining principal balance of PPP loans at December 31, 2022 was $300 thousand and the remaining balance of deferred fees related to these loans totaled $18 thousand at December 31, 2022. For the years ending December 31, 2022 and 2021 we recognized PPP fees, net of costs, totaling $1.3 million and $6.1 million, respectively.
The remaining principal balance of PPP loans at December 31, 2023 was $125 thousand and the remaining balance of deferred fees related to these loans totaled $7 thousand at December 31, 2023. For the years ending December 31, 2023, 2022, and 2021 we recognized PPP fees, net of costs, totaling $10 thousand, $1.3 million and $6.1 million, respectively.
At December 31, 2022 and December 31, 2021, approximately 80% and 76%, respectively of the Company's loan portfolio was comprised of variable rate loans. Loans indexed to the prime interest rate were approximately 23% of the Company’s loan portfolio; these loans reprice within one day to three months of a change in the prime rate.
At December 31, 2023 and December 31, 2022, approximately 78% and 80% respectively, of the Company's loan portfolio was comprised of variable rate loans. Loans indexed to the prime interest rate were approximately 20% of the Company’s loan portfolio; these loans reprice within one day to three months of a change in the prime rate.
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. There was no OREO holdings at December 31, 2022. OREO holdings represented three properties totaling $487 thousand at December 31, 2021.
OREO represents real property acquired by the Bank either through foreclosure or through a deed in lieu thereof from the borrower. Repossessed assets include vehicles and other commercial assets acquired under agreements with delinquent borrowers. OREO holdings represented one property totaling $357 thousand at December 31, 2023. There were no OREO holdings at December 31, 2022.
During 2022, non-interest expense increased by $6.6 million. The largest components of this increase were $4.7 million in salary and benefit expense, $627 thousand in occupancy and equipment costs, $304 thousand in outside service fees, $242 thousand in advertising and shareholder relations and $163 thousand in business development expense.
The largest components of this increase were $4.7 million in salary and benefit expense, $627 thousand in occupancy and equipment costs, $304 thousand in outside service fees, $242 thousand in advertising and shareholder relations and $163 thousand in business development expense.
The Company can receive a premium in excess of the adjusted carrying value of the loan at the time of sale. As of December 31, 2022 and December 31, 2021 the Company had $2.3 million and $31.3 million, respectively in SBA government guaranteed loans held for sale.
The Company can receive a premium in excess of the adjusted carrying value of the loan at the time of sale. As of December 31, 2023, there were no loans held for sale. At December 31, 2022, the Company had $2.3 million in SBA government guaranteed loans held for sale.
Securities sold under agreements to repurchase totaling $18.6 million and $17.3 million at December 31, 2022 and December 31, 2021, respectively, are secured by U.S. Government agency securities with a carrying amount of $29.6 million and $23.0 million at December 31, 2022 and December 31, 2021, respectively.
Securities sold under agreements to repurchase totaling $23.1 million and $18.6 million at December 31, 2023, and December 31, 2022, respectively are secured by U.S. Government agency securities with a carrying amount of $34.1 million and $29.6 million at December 31, 2023, and December 31, 2022, respectively.
See page 36 for additional information related to Loans Held for Sale. 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.
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.
(2) The rate change in net interest income represents the change in rate multiplied by the previous year’s average balance. (3) The mix change in net interest income represents the change in average balance multiplied by the change in rate. 2022 compared to 2021. Net interest income is the difference between interest income and interest expense.
(2) The rate change in net interest income represents the change in rate multiplied by the previous year’s average balance. (3) The mix change in net interest income represents the change in average balance multiplied by the change in rate. 27 Table of Contents 2023 compared to 2022. Net interest income is the difference between interest income and interest expense.
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.
The Company experiences, to a small degree, some seasonality with the slower growth period between November through April, and the higher growth period from May through October. To assist in meeting any funding demands, the Company maintains several borrowing agreements as described below.
After One Through After Five Through (dollars in thousands) Within One Year Five Years Ten Years After Ten Years Total Available-for-sale (Fair Value) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield U.S. Treasury securities $ 2,951 2.57 % $ 6,756 2.90 % $ - - % $ - - % $ 9,707 2.80 % U.S.
After One Through After Five Through (dollars in thousands) Within One Year Five Years Ten Years After Ten Years Total Available-for-sale (Fair Value) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield U.S. Treasury securities $ 6,880 2.90 % $ - - % $ - - % $ - - % $ 6,880 2.90 % U.S.
Annual review of commercial credit lines, letters of credit and ongoing monitoring of outstanding balances reduces the risk of loss associated with these commitments. As of December 31, 2022, the Company had $178.7 million in unfunded loan commitments and no letters of credit.
Annual review of commercial credit lines, letters of credit and ongoing monitoring of outstanding balances reduces the risk of loss associated with these commitments. As of December 31, 2023, the Company had $174.6 million in unfunded loan commitments and $108 thousand in letters of credit.
The Company is a member of the FHLB and can borrow up to $233 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $504 million. The Company is required to hold FHLB stock as a condition of membership.
The Company is a member of the Federal Home Loan Bank of San Francisco (FHLB) and can borrow up to $215 million from the FHLB secured by commercial and residential mortgage loans with carrying values totaling $396 million. The Company is required to hold FHLB stock as a condition of membership.
Overview The Company recorded net income of $26.4 million for the year ended December 31, 2022, an increase of $5.4 million or 26% from net income of $21.0 million during the year ended December 31, 2021. Pretax income increased by $7.2 million, or 25%, to $35.7 million in 2022 from $28.5 million during the year ended December 31, 2021.
Overview The Company recorded net income of $29.8 million for the year ended December 31, 2023, an increase of $3.4 million or 13% from net income of $26.4 million during the year ended December 31, 2022. Pretax income increased by $4.5 million, or 13%, to $40.2 million in 2023 from $35.7 million during the year ended December 31, 2022.
The following table provides a summary of the change in the number and balance of OREO properties for the years ended December 31, 2022 and 2021, dollars in thousands: Year Ended December 31, Number 2022 Number 2021 Beginning Balance 3 $ 487 3 $ 403 Additions - - 1 177 Dispositions (3 ) (487 ) (1 ) (56 ) Provision from change in OREO valuation - - - (37 ) Ending Balance - $ - 3 $ 487 Investment Portfolio and Federal Reserve Balances.
The following table provides a summary of the change in the number and balance of OREO properties for the years ended December 31, 2023 and 2022, dollars in thousands: Year Ended December 31, Number 2023 Number 2022 Beginning Balance - $ - 3 $ 487 Additions 2 440 - - Dispositions (1 ) (83 ) (3 ) (487 ) Ending Balance 1 $ 357 - $ - Investment Portfolio and Federal Reserve Balances.
The percentage of general reserves to unimpaired loans totaled 1.17% at December 31, 2022 and 1.24% at December 31, 2021. 34 Table of Contents The following table provides a breakdown of the allowance for loan losses: Percent of Percent of Loans in Loans in Balance at Each Balance at Each End of Category to End of Category to (dollars in thousands) Period Total Loans Period Total Loans 12/31/2022 12/31/2022 12/31/2021 12/31/2021 Commercial $ 892 8.4 % $ 1,074 11.9 % Agricultural 1,086 13.5 % 791 15.1 % Real estate – residential 138 1.7 % 168 1.9 % Real estate – commercial 4,980 56.6 % 4,549 49.9 % Real estate – construction & land development 1,500 4.8 % 1,325 6.1 % Equity Lines of Credit 687 3.9 % 426 3.9 % Auto 1,289 10.6 % 1,911 10.6 % Other 145 0.5 % 108 0.6 % Total $ 10,717 100 % $ 10,352 100 % 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.
The allowance for credit losses as a percentage of total loans was 1.34% on December 31, 2023 and 1.18% on December 31, 2022. 36 Table of Contents The following table provides a breakdown of the allowance for credit losses: Percent of Percent of Loans in Loans in Balance at Each Balance at Each End of Category to End of Category to (dollars in thousands) Period Total Loans Period Total Loans 12/31/2023 12/31/2023 12/31/2022 12/31/2022 Commercial $ 1,134 7.8 % $ 892 8.4 % Agricultural 1,738 13.5 % 1,086 13.5 % Real estate – residential 137 1.2 % 138 1.7 % Real estate – commercial 6,678 56.8 % 4,980 56.6 % Real estate – construction & land development 797 6.0 % 1,500 4.8 % Equity Lines of Credit 439 4.0 % 687 3.9 % Auto 1,865 10.2 % 1,289 10.6 % Other 79 0.5 % 145 0.5 % Total $ 12,867 100 % $ 10,717 100 % 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.
Increases in loans included $97 million in commercial real estate loans, $8 million in automobile loans and $3 million in equity lines of credit; these items were partially offset by decreases of $23 million in commercial loans, $8 million in construction loans and $4 million in agricultural loans.
Increases in loans included $28 million in commercial real estate loans, $14 million in construction loans, $7 million in agricultural loans, $2 million in equity lines of credit, and $1 million in automobile loans; these items were partially offset by decreases of $3 million in residential real estate loans and $2 million in commercial loans.
Increases in loans included $97 million in commercial real estate loans, $8 million in automobile loans and $3 million in equity lines of credit; these items were partially offset by decreases of $23 million in commercial loans, $8 million in construction loans and $4 million in agricultural loans.
Increases in loans included $28 million in commercial real estate loans, $14 million in construction loans, $7 million in agricultural loans, $2 million in equity lines of credit, and $1 million in automobile loans; these items were partially offset by decreases of $3 million in residential real estate loans and $2 million in commercial loans.
Therefore, the aggregate fair value of the swaps is recorded in other assets with changes in fair value recorded in other comprehensive income. The amount included in accumulated other comprehensive income would be reclassified to current earnings should the hedges no longer be considered effective.
Therefore, the aggregate fair value of the swaps is recorded in other assets with changes in fair value recorded in other comprehensive income. The amount included in accumulated other comprehensive income would be reclassified to current earnings should the hedges no longer be considered effective. In January, 2023 we terminated the swap agreements receiving $1.7 million in proceeds on termination.
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.
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. The following table sets forth the amount of the Company's nonperforming assets as of the dates indicated.
Total investment securities were $445 million as of December 31, 2022 and $306 million as of December 31, 2021. Net unrealized losses on available-for-sale investment securities totaling $54.2 million were recorded, net of $16.0 million in tax benefit, as accumulated other comprehensive loss within shareholders' equity at December 31, 2022.
Total investment securities were $489.2 million as of December 31, 2023 and $444.7 million as of December 31, 2022. Net unrealized losses on available-for-sale investment securities totaling $46.1 million were recorded, net of $13.6 million in tax benefit, as accumulated other comprehensive loss within shareholders' equity at December 31, 2023.
Of the total unfunded commitments at December 31, 2022, $108.4 million were secured by real estate, of which $54.9 million was secured by commercial real estate and $53.5 million was secured by residential real estate mostly in the form of equity lines of credit.
Of the total unfunded commitments at December 31, 2023, $114.3 million were secured by real estate, of which $60.2 million was secured by commercial real estate and $54.1 million was secured by residential real estate mostly in the form of equity lines of credit.
Percent of Percent of Loans in Loans in Balance at Each Balance at Each End of Category to End of Category to (dollars in thousands) Period Total Loans Period Total Loans 12/31/2022 12/31/2022 12/31/2021 12/31/2021 Commercial $ 76,680 8.4 % $ 99,804 11.9 % Agricultural 122,873 13.5 % 126,456 15.1 % Real estate – residential 15,324 1.7 % 15,837 1.9 % Real estate – commercial 516,107 56.6 % 418,609 49.9 % Real estate – construction & land development 43,420 4.8 % 51,526 6.1 % Equity Lines of Credit 35,891 3.9 % 32,793 3.9 % Auto 96,750 10.6 % 89,046 10.6 % Other 4,904 0.5 % 4,516 0.6 % Total $ 911,949 100 % $ 838,587 100 % 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 77% of the total loan portfolio at December 31, 2022.
Percent of Percent of Loans in Loans in Balance at Each Balance at Each End of Category to End of Category to (dollars in thousands) Period Total Loans Period Total Loans 12/31/2023 12/31/2023 12/31/2022 12/31/2022 Commercial $ 74,271 7.8 % $ 76,680 8.4 % Agricultural 129,389 13.5 % 122,873 13.5 % Real estate – residential 11,914 1.2 % 15,324 1.7 % Real estate – commercial 544,339 56.8 % 516,107 56.6 % Real estate – construction & land development 57,717 6.0 % 43,420 4.8 % Equity Lines of Credit 37,871 4.0 % 35,891 3.9 % Auto 98,132 10.2 % 96,750 10.6 % Other 4,931 0.5 % 4,904 0.5 % Total $ 958,564 100 % $ 911,949 100 % 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 77% of the total loan portfolio at December 31, 2023.
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.
Of this amount, $85 million represents deposits that are collateralized such as deposits of states, municipalities and tribal accounts. 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.
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.
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.
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.
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.
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.
Management believes that the Bank met all its capital adequacy requirements as of December 31, 2023. 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.
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 asset side, in addition to cash and due from banks, the Company maintains an investment portfolio which includes unpledged U.S. Government-sponsored agency securities that are classified as available-for-sale. On the liability side, liquidity needs are managed by offering competitive rates on deposit products and the use of established lines of credit.
This compares to $162.5 million in unfunded loan commitments and $12 thousand in letters of credit at December 31, 2021. Of the $178.7 million in unfunded loan commitments, $115.6 million and $63.1 million represented commitments to commercial and consumer customers, respectively.
This compares to $178.7 million in unfunded loan commitments and no letters of credit at December 31, 2022. Of the $174.6 million in unfunded loan commitments, $111.2 million and $63.4 million represented commitments to commercial and consumer customers, respectively.
Net interest expense recognized by the Company for the years ended December 31, 2022, 2021 and 2020 related to the subordinated debentures was $359,000, $348,000 and $385,000, respectively. Interest expense is recorded net of the interest paid/received on our interest rate swaps. See the following paragraph for a description of the swaps. Interest Rate Swaps .
Funding for the redemption was provided from borrowings on our Term Note as described above. Interest expense, net of the effect of interest rate swaps, recognized by the Company for the years ended December 31, 2023, 2022 and 2021 related to the subordinated debentures was $141,000, $359,000 and $348,000, respectively. See the following paragraph for a description of the swaps.
The following table sets forth the Bank's actual capital amounts and ratios (dollar amounts in thousands): Minimum Amount of Capital Required To be Well-Capitalized For Capital Under Prompt Actual Adequacy Purposes (1) Corrective Provisions Amount Ratio Amount Ratio Amount Ratio December 31, 2022 Common Equity Tier 1 Ratio $ 157,361 14.7 % $ 48,218 4.5 % $ 69,648 6.5 % Tier 1 Leverage Ratio 157,361 9.2 % 68,078 4.0 % 85,098 5.0 % Tier 1 Risk-Based Capital Ratio 157,361 14.7 % 64,291 6.0 % 85,721 8.0 % Total Risk-Based Capital Ratio 168,419 15.7 % 85,721 8.0 % 107,151 10.0 % December 31, 2021 Common Equity Tier 1 Ratio $ 134,015 14.4 % $ 42,024 4.5 % $ 60,701 6.5 % Tier 1 Leverage Ratio 134,015 8.4 % 64,066 4.0 % 80,083 5.0 % Tier 1 Risk-Based Capital Ratio 134,015 14.4 % 56,032 6.0 % 74,709 8.0 % Total Risk-Based Capital Ratio 144,708 15.5 % 74,709 8.0 % 93,387 10.0 % (1) Does not include amounts required to maintain the capital conservation buffer under the new capital rules Management believes that the Bank met all its capital adequacy requirements as of December 31, 2022.
The following table sets forth the Bank's actual capital amounts and ratios (dollar amounts in thousands): Minimum Amount of Capital Required To be Well-Capitalized For Capital Under Prompt Actual Adequacy Purposes (1) Corrective Provisions Amount Ratio Amount Ratio Amount Ratio December 31, 2023 Common Equity Tier 1 Ratio $ 179,194 15.7 % $ 51,294 4.5 % $ 74,092 6.5 % Tier 1 Leverage Ratio 179,194 10.8 % 66,348 4.0 % 82,935 5.0 % Tier 1 Risk-Based Capital Ratio 179,194 15.7 % 68,392 6.0 % 91,190 8.0 % Total Risk-Based Capital Ratio 192,860 16.9 % 91,190 8.0 % 113,987 10.0 % December 31, 2022 Common Equity Tier 1 Ratio $ 157,361 14.7 % $ 48,218 4.5 % $ 69,648 6.5 % Tier 1 Leverage Ratio 157,361 9.2 % 68,078 4.0 % 85,098 5.0 % Tier 1 Risk-Based Capital Ratio 157,361 14.7 % 64,291 6.0 % 85,721 8.0 % Total Risk-Based Capital Ratio 168,419 15.7 % 85,721 8.0 % 107,151 10.0 % (1) Does not include amounts required to maintain the capital conservation buffer under the new capital rules.
At December 31, 2022, 53% of the Company’s deposits were in the form of non-interest bearing demand deposits.
At December 31, 2023, 52% of the Company’s deposits were in the form of non-interest-bearing demand deposits. The Company has no brokered deposits.
Net charge-offs as a percentage of average loans increased from 0.09% during 2021 to 0.11% during the year ended December 31, 2022. 33 Table of Contents The following table provides selected credit ratios as of December 31, 2022, 2021 and 2020: (dollars in thousands) As of and for the Year Ended December 31, 2022 2021 2020 Allowance for loan losses to total loans outstanding 1.18 % 1.23 % 1.40 % Allowance for loan losses $ 10,717 $ 10,352 $ 9,902 Total loans outstanding $ 911,949 $ 838,587 $ 709,246 Nonaccrual loans to total loans outstanding 0.13 % 0.58 % 0.36 % Nonaccrual loans $ 1,172 $ 4,863 $ 2,536 Total loans outstanding $ 911,949 $ 838,587 $ 709,246 Allowance for loan losses to nonaccrual loans 914.42 % 212.87 % 390.46 % Allowance for loan losses $ 10,717 $ 10,352 $ 9,902 Nonaccrual loans $ 1,172 $ 4,863 $ 2,536 Net charge-offs during the period to average loans outstanding: Commercial 0.21 % 0.09 % 0.08 % Net charge-off during the period $ 180 $ 116 $ 97 Average amount outstanding $ 85,460 $ 133,433 $ 119,840 Agricultural 0.00 % 0.00 % 0.00 % Net charge-off during the period $ - $ - $ - Average amount outstanding $ 124,389 $ 99,598 $ 75,469 Real estate - residential (0.02 %) (0.03 %) (0.11 %) Net charge-off during the period $ (3 ) $ (3 ) $ (15 ) Average amount outstanding $ 15,680 $ 11,236 $ 13,265 Real estate - commercial 0.00 % 0.00 % 0.00 % Net charge-off during the period $ 17 $ (8 ) $ (8 ) Average amount outstanding $ 445,348 $ 376,048 $ 328,602 Real estate - construction & land development 0.00 % 0.00 % 0.00 % Net charge-off during the period $ - $ - $ - Average amount outstanding $ 57,367 $ 36,446 $ 26,212 Equity lines of credit (0.00 %) (0.01 %) (0.01 %) Net charge-off during the period $ - $ (4 ) $ (4 ) Average amount outstanding $ 34,458 $ 33,662 $ 35,205 Auto 0.80 % 0.63 % 0.41 % Net charge-off during the period $ 713 $ 567 $ 374 Average amount outstanding $ 89,442 $ 90,651 $ 92,041 Other 0.61 % 0.16 % 1.64 % Net charge-off during the period $ 28 $ 7 $ 72 Average amount outstanding $ 4,584 $ 4,453 $ 4,390 Total Loans 0.11 % 0.09 % 0.07 % Net charge-off during the period $ 935 $ 675 $ 516 Average amount outstanding $ 856,728 $ 785,527 $ 695,024 The allowance for loan losses totaled $10.7 million at December 31, 2022 and $10.4 million at December 31, 2021.
Under CECL the ACL on unfunded loan commitments remains in Other Liabilities while the related provision expense is included in the provision for credit loss expense. 35 Table of Contents The following table provides selected credit ratios as of December 31, 2023, 2022 and 2021: (dollars in thousands) As of and for the Year Ended December 31, 2023 2022 2021 Allowance for credit losses to total loans outstanding 1.34 % 1.18 % 1.23 % Allowance for credit losses $ 12,867 $ 10,717 $ 10,352 Total loans outstanding $ 961,471 $ 911,949 $ 838,587 Nonaccrual loans to total loans outstanding 0.50 % 0.13 % 0.58 % Nonaccrual loans $ 4,820 $ 1,172 $ 4,863 Total loans outstanding $ 961,471 $ 911,949 $ 838,587 Allowance for credit losses to nonaccrual loans 266.95 % 914.42 % 212.87 % Allowance for credit losses $ 12,867 $ 10,717 $ 10,352 Nonaccrual loans $ 4,820 $ 1,172 $ 4,863 Net charge-offs during the period to average loans outstanding: Commercial 0.10 % 0.21 % 0.09 % Net charge-off during the period $ 79 $ 180 $ 116 Average amount outstanding $ 75,760 $ 85,460 $ 133,433 Agricultural 0.00 % 0.00 % 0.00 % Net charge-off during the period $ - $ - $ - Average amount outstanding $ 124,798 $ 124,389 $ 99,598 Real estate - residential (0.02 %) (0.02 %) (0.03 %) Net charge-off during the period $ (3 ) $ (3 ) $ (3 ) Average amount outstanding $ 14,223 $ 15,680 $ 11,236 Real estate - commercial 0.00 % 0.00 % 0.00 % Net charge-off during the period $ (1 ) $ 17 $ (8 ) Average amount outstanding $ 520,498 $ 445,348 $ 376,048 Real estate - construction & land development 0.00 % 0.00 % 0.00 % Net charge-off during the period $ - $ - $ - Average amount outstanding $ 55,034 $ 57,367 $ 36,446 Equity lines of credit (0.00 %) (0.00 %) (0.01 %) Net charge-off during the period $ - $ - $ (4 ) Average amount outstanding $ 36,371 $ 34,458 $ 33,662 Auto 0.79 % 0.80 % 0.63 % Net charge-off during the period $ 804 $ 713 $ 567 Average amount outstanding $ 101,800 $ 89,442 $ 90,651 Other 1.36 % 0.61 % 0.16 % Net charge-off during the period $ 75 $ 28 $ 7 Average amount outstanding $ 5,513 $ 4,584 $ 4,453 Total Loans 0.10 % 0.11 % 0.09 % Net charge-off during the period $ 954 $ 935 $ 675 Average amount outstanding $ 933,997 $ 856,728 $ 785,527 The allowance for credit losses totaled $12.9 million at December 31, 2023, and $10.7 million at December 31, 2022.
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 $10.7 million at December 31, 2022 and $10.3 million at December 31, 2021.
At least quarterly, the Company evaluates each specific reserve and if it determines that the loss represented by the specific reserve is uncollectable it records a charge-off for the uncollectable portion. Specific reserves related to collateral dependent loans totaled $28,000 on December 31, 2023. There were no specific reserves related to collateral dependent loans on December 31, 2022.
The allowance is established through a provision for loan losses which is charged to expense. Additions to the allowance are expected to maintain the adequacy of the total allowance after credit losses and loan growth. Credit exposures determined to be uncollectible are charged against the allowance.
Additions to the allowance are expected to maintain the adequacy of the total allowance after credit losses and loan growth. Credit exposures determined to be uncollectible are charged against the allowance. Cash received on previously charged off amounts is recorded as a recovery to the allowance.
Since some of the commitments are expected to expire without being drawn upon the total commitment amounts do not necessarily represent future cash requirements. 40 Table of Contents Operating Leases.
Since some of the commitments are expected to expire without being drawn upon the total commitment amounts do not necessarily represent future cash requirements. 42 Table of Contents Operating Leases. The Company leases two lending offices, two branch offices, the land under our Yuba City branch, three administrative offices and two standalone ATM locations.
Quarterly cash dividends of $0.16 were paid on November 15, 2022, August 15, 2022, May 16, 2022 and February 15, 2022 and quarterly cash dividends of $0.14 per share were paid on November 15, 2021, August 16, 2021, May 17, 2021 and February 15, 2021. Capital Standards. The Company uses a variety of measures to evaluate its capital adequacy.
The Company paid a quarterly cash dividend of $0.25 per share on November 15, 2023, August 15, 2023, May 15, 2023 and February 15, 2023 and a quarterly cash dividend of $0.16 per share on February 15, 2022, May 16, 2022, August 15, 2022, and November 15, 2022, and a quarterly cash dividend of 14 cents per share on February 15, 2021, May 17, 2021, August 16, 2021, and November 15, 2021.
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. 30 Table of Contents As shown in the following table the Company's largest lending categories are commercial real estate loans, auto loans, agricultural loans and commercial loans.
The Company offers both fixed and floating rate loans and obtains collateral in the form of real property, business assets and deposit accounts, but looks to business and personal cash flows as its primary source of repayment. In the fourth quarter of 2023 we terminated our indirect auto loan program.
(5) Net interest margin is computed by dividing net interest income by total average earning assets. 24 Table of Contents The following table sets forth changes in interest income and interest expense, for the years indicated and the amount of change attributable to variances in volume, rates and the combination of volume and rates based on the relative changes of volume and rates: 2022 compared to 2021 2021 compared to 2020 Increase (decrease) due to change in: Increase (decrease) due to change in: Average Average Average Average Volume(1) Rate(2) Mix(3) Total Volume(1) Rate(2) Mix(3) Total (dollars in thousands) Interest-earning assets: Interest-bearing cash and due from banks and deposits in banks $ 71 $ 3,738 $ 769 $ 4,578 $ 346 $ (80 ) $ (131 ) $ 135 Taxable investment securities 1,581 1,321 761 3,663 904 (445 ) (164 ) 295 Non-taxable investment securities 610 327 119 1,056 897 (112 ) (102 ) 683 Loans held for sale (351 ) 61 (26 ) (316 ) 662 (25 ) (65 ) 572 Loans 3,851 (1,049 ) (95 ) 2,707 4,652 1,866 243 6,761 Total interest income 5,762 4,398 1,528 11,688 7,461 1,204 (219 ) 8,446 Interest-bearing liabilities: Interest bearing demand deposits - - - - (77 ) - - (77 ) Money market deposits 41 (56 ) (8 ) (23 ) 265 (121 ) (115 ) 29 Savings deposits 85 8 3 96 123 (84 ) (37 ) 2 Time deposits 18 (44 ) (4 ) (30 ) 84 (63 ) (27 ) (6 ) Junior subordinated debentures - 11 - 11 - (37 ) - (37 ) Repurchase agreements and other (1 ) 65 (5 ) 59 1 (4 ) - (3 ) Total interest expense 143 (16 ) (14 ) 113 396 (309 ) (179 ) (92 ) Net interest income $ 5,619 $ 4,414 $ 1,542 $ 11,575 $ 7,065 $ 1,513 $ (40 ) $ 8,538 (1) The volume change in net interest income represents the change in average balance multiplied by the previous year’s rate.
(5) Net interest margin is computed by dividing net interest income by total average earning assets. 26 Table of Contents The following table sets forth changes in interest income and interest expense, for the years indicated and the amount of change attributable to variances in volume, rates and the combination of volume and rates based on the relative changes of volume and rates: 2023 compared to 2022 2022 compared to 2021 Increase (decrease) due to change in: Increase (decrease) due to change in: Average Average Average Average Volume(1) Rate(2) Mix(3) Total Volume(1) Rate(2) Mix(3) Total (dollars in thousands) Interest-earning assets: Interest-bearing cash and due from banks and deposits in banks $ (3,521 ) $ 10,480 $ (7,495 ) $ (536 ) $ 71 $ 3,738 $ 769 $ 4,578 Taxable investment securities 1,987 2,389 740 5,116 1,581 1,321 761 3,663 Non-taxable investment securities 517 371 71 959 610 327 119 1,056 Loans held for sale (479 ) 296 (278 ) (461 ) (351 ) 61 (26 ) (316 ) Loans 4,048 5,239 469 9,756 3,851 (1,049 ) (95 ) 2,707 Total interest income 2,552 18,775 (6,493 ) 14,834 5,762 4,398 1,528 11,688 Interest-bearing liabilities: Money market deposits (30 ) 1,244 (131 ) 1,083 41 (56 ) (8 ) (23 ) Savings deposits (24 ) 472 (29 ) 419 85 8 3 96 Time deposits 43 1,078 284 1,405 18 (44 ) (4 ) (30 ) Other borrowings - - 896 896 - - - - Junior subordinated debentures (280 ) 282 (220 ) (218 ) - 11 - 11 Repurchase agreements and other 34 (46 ) (24 ) (36 ) (1 ) 65 (5 ) 59 Total interest expense (257 ) 3,030 776 3,549 143 (16 ) (14 ) 113 Net interest income $ 2,809 $ 15,745 $ (7,269 ) $ 11,285 $ 5,619 $ 4,414 $ 1,542 $ 11,575 (1) The volume change in net interest income represents the change in average balance multiplied by the previous year’s rate.
Years Ended December 31, Change during Year 2022 2021 2020 2022 2021 (dollars in thousands) Interchange revenue $ 3,401 $ 3,279 $ 2,568 $ 122 $ 711 Gain on sale of loans, net 2,696 1,008 1,344 1,688 (336 ) Service charges on deposit accounts 2,464 2,349 2,323 115 26 Loan servicing fees 893 852 841 41 11 Earnings on bank owned life insurance policies 391 380 342 11 38 Gain on sale of building - - 218 - (218 ) Loss on sale of investments - (209 ) - 209 (209 ) Other income 1,205 1,057 827 148 230 Total non-interest income $ 11,050 $ 8,716 $ 8,463 $ 2,334 $ 253 2022 compared to 2021.
Years Ended December 31, Change during Year 2023 2022 2021 2023 2022 (dollars in thousands) Interchange revenue $ 3,419 $ 3,401 $ 3,279 $ 18 $ 122 Service charges on deposit accounts 2,789 2,464 2,349 325 115 Gain on termination of swaps 1,707 - - 1,707 - Loan servicing fees 900 893 852 7 41 FHLB Dividends 418 293 233 125 60 Earnings on bank owned life insurance policies 417 391 380 26 11 Gain on sale of loans, net 234 2,696 1,008 (2,462 ) 1,688 Loss on sale of investments - - (209 ) - 209 Other income 838 912 824 (74 ) 88 Total non-interest income $ 10,722 $ 11,050 $ 8,716 $ (328 ) $ 2,334 2023 compared to 2022.
The Company was in compliance with all covenants related to the Term Note at December 31, 2022 and has not borrowed on the Term Note. 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.
There were no borrowings on the Term Note during 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.
During the year ended December 31, 2022 , non-interest income totaled $11.0 million, an increase of $2.3 million from the $8.7 million earned during 2021. Non-interest expense increased by $6.6 million from $26.0 million during 2021 to $32.6 million during the twelve months ending December 31, 2022.
The provision for credit losses increased from $1.3 million during the twelve months ended December 31, 2022 to $2.8 million during 2023. During the year ended December 31, 2023, non-interest income totaled $10.7 million, a decrease of $0.3 million from the $11.0 million earned during 2022.
Our most complex accounting policies require management’s judgment to ascertain the valuation of assets, liabilities, commitments and contingencies. We have established detailed policies and internal control procedures that are intended to ensure valuation methods are applied in an environment that is designed and operating effectively and applied consistently from period to period.
We have established detailed policies and internal control procedures that are intended to ensure valuation methods are applied in an environment that is designed and operating effectively and applied consistently from period to period. The following is a brief description of our current accounting policies involving significant management valuation judgments. Allowance for Credit Losses.
The average rate paid on interest bearing deposits decreased slightly from 0.13% during 2021 to 0.12% during 2022, while average interest bearing deposits increased by $128 million to $714 million. In recent months, market rates for deposits have increased significantly and we would expect in 2023 an increase in our cost of interest bearing deposits.
The average rate paid on interest bearing deposits decreased slightly from 0.13% during 2021 to 0.12% during 2022, while average interest-bearing deposits increased by $128 million to $714 million.
Interest expense on junior subordinated debentures increased by $11 thousand from $348 thousand during 2021 to $359 thousand during 2022 and interest on other interest bearing liabilities increased by $59 thousand to $67 thousand. Net interest margin is net interest income expressed as a percentage of average interest-earning assets.
Interest expense on junior subordinated debentures increased by $11 thousand from $348 thousand during 2021 to $359 thousand during 2022 and interest on other interest-bearing liabilities increased by $59 thousand to $67 thousand. As a result of the changes noted above, the net interest margin for 2022 increased by 19 basis points to 3.82% Provision for credit losses.
Net unrealized gains on available-for-sale investment securities totaling $1.7 million were recorded, net of $493 thousand in tax expense, as accumulated other comprehensive income within shareholders' equity at December 31, 2021. No securities were sold during the year ended December 31, 2022.
Net unrealized losses on available-for-sale investment securities totaling $54.2 million were recorded, net of $16.0 million in tax benefit, as accumulated other comprehensive income within shareholders' equity at December 31, 2022. No securities were sold during the twelve months ended December 31, 2023 and 2022. The investment portfolio at December 31, 2023 consisted of $6.9 million in U.S.
Years Ended December 31, Change during Year 2022 2021 2020 2022 2021 (dollars in thousands) Salaries and employee benefits $ 17,451 $ 12,792 $ 13,282 $ 4,659 $ (490 ) Occupancy and equipment 4,610 3,983 3,362 627 621 Outside service fees 4,057 3,753 2,871 304 882 Professional fees 1,282 1,311 688 (29 ) 623 Telephone and data communications 770 746 600 24 146 Armored car and courier 675 498 426 177 72 Advertising and promotion 673 431 519 242 (88 ) Director compensation, education and retirement 606 498 456 108 42 Deposit insurance 528 455 252 73 203 Business development 506 343 280 163 63 Amortization of Core Deposit Intangible 284 246 198 38 48 Loan collection costs 274 284 230 (10 ) 54 Stationery and supplies 109 122 112 (13 ) 10 Provision from change in OREO valuation - 37 - (37 ) 37 Loss (gain) on sale of OREO 37 2 (9 ) 35 11 Other operating expense 728 537 465 191 72 Total non-interest expense $ 32,590 $ 26,038 $ 23,732 $ 6,552 $ 2,306 2022 compared to 2021.
Years Ended December 31, Change during Year 2023 2022 2021 2023 2022 (dollars in thousands) Salaries and employee benefits $ 20,320 $ 17,451 $ 12,792 $ 2,869 $ 4,659 Occupancy and equipment 5,302 4,610 3,983 692 627 Outside service fees 4,496 4,057 3,753 439 304 Professional fees 1,258 1,282 1,311 (24 ) (29 ) Advertising and promotion 941 673 431 268 242 Telephone and data communications 806 770 746 36 24 Armored car and courier 767 675 498 92 177 Director compensation, education and retirement 763 606 498 157 108 Deposit insurance 737 528 455 209 73 Business development 615 506 343 109 163 Loan collection costs 423 274 284 149 (10 ) Amortization of Core Deposit Intangible 237 284 246 (47 ) 38 Other operating expense 865 874 698 (9 ) 176 Total non-interest expense $ 37,530 $ 32,590 $ 26,038 $ 4,940 $ 6,552 2023 compared to 2022.
Treasury securities, $214.4 million in securities of U.S. Government-sponsored agencies residential mortgage back securities, $99.6 million in securities of U.S. Government-agencies commercial mortgage-backed securites and 239 municipal securities totaling $121.0 million. The investment portfolio at December 31, 2021 consisted of $151.0 million in securities of U.S. Government-sponsored agencies residential mortgage back securities, $57.2 million in securities of U.S.
Treasury securities, $235.9 million in securities of U.S. Government-sponsored agencies, $116.0 million in securities of U.S. Government-agencies and 244 municipal securities totaling $130.4 million. The investment portfolio at December 31, 2022 consisted of $9.7 million in U.S. Treasury securities, $214.4 million in securities of U.S. Government-sponsored agencies, $99.6 million in securities of U.S.
The provision for income taxes increased by $1.7 million from $7.5 million in 2021 to $9.2 million during the year ended December 31, 2022. Total assets at December 31, 2022 were $1.6 billion, an increase of $7 million from December 31, 2021.
The provision for income taxes increased by $1.2 million from $9.2 million in 2022 to $10.4 million during the year ended December 31, 2023. Total assets at December 31, 2023 were $1.6 billion, a decrease of $11 million from December 31, 2022. The largest component of this decrease was a decline in cash and due from banks of $98 million.
The percentages for 2022 and 2021 differ from statutory rates as tax exempt items of income such as earnings on Bank owned life insurance and municipal securities interest decrease taxable income. The effect of these items during 2021 was somewhat offset by nondeductible merger expenses.
This compares to an income tax provision of $9.2 million, or 25.9% of pre-tax income during 2022. The percentages for 2023 and 2022 differ from statutory rates as tax exempt items of income such as earnings on Bank owned life insurance and municipal securities interest decrease taxable income.
At December 31, (dollars in thousands) 2022 2021 2020 Nonaccrual loans $ 1,172 $ 4,863 $ 2,536 Loans past due 90 days or more and still accruing - - - Total nonperforming loans 1,172 4,863 2,536 Other real estate owned - 487 403 Other vehicles owned 18 47 31 Total nonperforming assets $ 1,190 $ 5,397 $ 2,970 Interest income forgone on nonaccrual loans $ 121 $ 381 $ 119 Interest income recorded on a cash basis on nonaccrual loans $ - $ - $ - Nonperforming loans to total loans 0.13 % 0.58 % 0.36 % Nonperforming assets to total assets 0.07 % 0.33 % 0.27 % Nonperforming loans at December 31, 2022 were $1.2 million, a decrease of $3.7 million from the $4.9 million balance at December 31, 2021.
At December 31, (dollars in thousands) 2023 2022 2021 Nonaccrual loans $ 4,820 $ 1,172 $ 4,863 Loans past due 90 days or more and still accruing - - - Total nonperforming loans 4,820 1,172 4,863 Other real estate owned 357 0 487 Other vehicles owned 138 18 47 Total nonperforming assets $ 5,315 $ 1,190 $ 5,397 Interest income forgone on nonaccrual loans $ 257 $ 121 $ 381 Interest income recorded on a cash basis on nonaccrual loans $ - $ - $ - Nonperforming loans to total loans 0.50 % 0.13 % 0.58 % Nonperforming assets to total assets 0.33 % 0.07 % 0.33 % 37 Table of Contents 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.
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.
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 following is a brief description of our current accounting policies involving significant management valuation judgments. Allowance for Loan Losses. The allowance for loan losses is an estimate of credit losses inherent in the Company's loan portfolio that have been incurred as of the balance-sheet date.
The allowance for credit losses is an estimate of credit losses inherent in the Company's loan portfolio that have been incurred as of the balance-sheet date. The allowance is established through a provision for credit losses which is charged to expense.
The following tables show the distribution of deposits by type at December 31, 2022 and 2021 and the average balance and rates paid on deposits for the three years ending December 31, 2020: Percent of Percent of Deposits in Deposits in Each Category Each Category Balance at End to Total Balance at End to Total of Period Deposits of Period Deposits (dollars in thousands) 12/31/2022 12/31/2022 12/31/2021 12/31/2021 Non-interest bearing $ 766,549 52.6 % $ 736,582 51.2 % Money Market 237,924 16.3 % 261,005 18.1 % Savings 404,150 27.7 % 377,050 26.2 % Time 49,186 3.4 % 64,362 4.5 % Total Deposits $ 1,457,809 100 % $ 1,438,999 100 % Average Balance Yields/Rates Average Balance Yields/Rates Average Balance Yields/Rates (dollars in thousands) 12/31/2022 12/31/2022 12/31/2021 12/31/2021 12/31/2020 12/31/2020 Non-interest bearing $ 773,293 $ 645,955 $ 423,444 NOW $ - 0.0 % $ - 0.0 % $ 97,395 0.08 % Money Market 254,723 0.11 % 224,776 0.14 % 115,203 0.24 % Savings 400,314 0.09 % 306,911 0.09 % 212,470 0.13 % Time 59,016 0.28 % 53,976 0.36 % 38,003 0.52 % Total interest bearing $ 714,053 0.12 % $ 585,663 0.13 % $ 463,071 0.18 % 37 Table of Contents The following table shows the Company's time deposits in excess of the FDIC insurance limit and time deposits otherwise uninsured at December 31, 2022 (dollars in thousands): Amount Portion of time deposits in excess of insurance limit $ 3,811 Time deposits otherwise uninsured $ - Time deposits of $250,000 or more are generally from the Company's local business and individual customer base.
The following tables show the distribution of deposits by type at December 31, 2023 and 2022 and the average balance and rates paid on deposits for the three years ending December 31, 2023: Percent of Percent of Deposits in Deposits in Each Category Each Category Balance at End to Total Balance at End to Total of Period Deposits of Period Deposits (dollars in thousands) 12/31/2023 12/31/2023 12/31/2022 12/31/2022 Non-interest bearing $ 692,768 51.9 % $ 766,549 52.6 % Money Market 214,185 16.1 % 237,924 16.3 % Savings 335,050 25.1 % 404,150 27.7 % Time 91,652 6.9 % 49,186 3.4 % Total Deposits $ 1,333,655 100 % $ 1,457,809 100 % Average Balance Yields/Rates Average Balance Yields/Rates Average Balance Yields/Rates (dollars in thousands) 12/31/2023 12/31/2023 12/31/2022 12/31/2022 12/31/2021 12/31/2021 Non-interest bearing $ 726,191 $ 773,293 $ 645,955 Money Market 227,819 0.60 % 254,723 0.11 % 224,776 0.14 % Savings 375,377 0.21 % 400,314 0.09 % 306,911 0.09 % Time 74,570 2.10 % 59,016 0.28 % 53,976 0.36 % Total interest bearing $ 677,766 0.55 % $ 714,053 0.12 % $ 585,663 0.13 % 39 Table of Contents Deposits represent the Bank's primary source of funds.
The proceeds of this lending facility shall be used by the Company for general corporation purposes, and to provide capital injections into the Bank. The Term Note bears interest at a fixed rate of 3.85% for the first 5 years and then at a floating interest rate linked to WSJ Prime Rate for the remaining eight year term.
The Term Note bears interest at a fixed rate of 3.85% for the first 5 years and then at a floating interest rate linked to WSJ Prime Rate for the remaining eight year term. The Loan Agreement provides for a $187,500 loan fee. The Note is secured by the common stock of the Bank.
These estimates are reviewed periodically and, as adjustments become necessary, they are reported in earnings in the periods in which they become known. Based on information currently available, management believes that the allowance for loan losses is appropriate to absorb potential risks in the portfolio.
Based on information currently available, management believes that the allowance for credit losses is appropriate to absorb potential risks in the portfolio.
This increase in net interest income resulted from an increase in interest income of $11.7 million partially offset by an increase in interest expense of $113 thousand. Interest and fees on loans, including loans held for sale, increased by $2.4 million, interest on investment securities increased by $4.7 million and interest on other interest earning assets increased by $4.6 million.
Interest and fees on loans, including loans held for sale, increased by $9.3 million; interest on investment securities increased by $6.0 million. These components of the increase in interest income were partially offset by a decline in interest on other interest earning assets of $0.5 million.

… 219 more changes not shown on this page.

Other PLBC 10-K year-over-year comparisons