Plumas Bancorp reports record earnings for 2023

Plumas Bancorp, the parent company of Plumas Bank, today announced record earnings for the year ended Dec. 31, 2023.

For the 12 months ended Dec. 31, 2023, the company reported net income of $29.8 million or $5.08 per share, an increase of $3.3 million, or 13 percent from $26.4 million or $4.53 per share earned during 2022. Earnings per diluted share increased to $5.02 during the 12 months ended Dec. 31, 2023, up $0.55 from $4.47 during 2022.

Earnings during the fourth quarter of 2023 totaled $7.5 million or $1.28 per share, a decrease of $297,000, or 4 percent from $7.8 million or $1.34 per share during the fourth quarter of 2022. Diluted earnings per share decreased to $1.27 per share during the three months ended Dec. 31, 2023, down from $1.32 per share during the quarter ended Dec. 31, 2022.

Return on average assets was 1.88 percent during the 12 months ended Dec.  31, 2023, up from 1.61 percent during 2022. Return on average equity increased to 23.4 percent for the 12 months ended Dec. 31, 2023, up from 21. percent during 2022. Return on average assets was 1.87 percent  during the three months ended Dec. 31, 2023 and 1.88 percent during the three months ended Dec. 31, 2022. Return on average equity decreased to 23.9 percent for the three months ended Dec. 31, 2023, down from 27.9 percent during the fourth quarter of 2022.

Balance Sheet Highlights — Dec. 31, 2023 compared to Dec. 31, 2022

  • Cash and due from banks declined by $98 million to $86 million.
  • Gross loans, excluding loans held for sale, increased by $47 million, or 5 peercent, to $959 million.
  • Investment securities increased by $44 million, or 10 percent, to $489 million.
  • Deposits declined by $124 million, or 9 percent to $1.3 billion.
  • Total borrowings increased by $80 million to $90 million.
  • tShareholders’ equity increased by $28 million, or 24 percent, to $147 million.

Update:
Plumas Bancorp, the parent company of Plumas Bank, today announced that the Board of Directors declared a regular quarterly cash dividend on Plumas Bancorp common stock of $0.27 per share, payable Feb. 15, 2024, to stockholders of record as of Feb. 1, 2024.

President’s comments
Andrew J. Ryback, director, president and chief executive officer of Plumas Bancorp and Plumas Bank, said, “As you know, the last year and a half has been a period of rapidly rising rates. This rising rate environment, coupled with another Fed policy, that of quantitative tightening, has resulted in reductions to the money supply and the impairment of banks to generate new deposits and fund new loans. In response, we have invested in retooling our lending system and processes for enhanced efficiency and decision making. This change will position us well for future loan growth. As for deposits, we remain disciplined in protecting our lower cost of funds but have offered Time deposit specials so that we can compete for new deposits.

“Rapidly rising rates have also put pressure on variable-rate borrowers, creating some elevated loan loss risk in the banking industry. At Plumas, however, we do not expect significant losses because criticized assets are being proactively addressed with advanced preparation of solutions and collaborative monitoring for potential challenges. Additionally, non-performing loans are well-collateralized. In the fourth quarter we terminated our indirect auto loan program. Ending this program, which was our lowest yielding loan segment, also improved our loan loss risk profile since this program had historically higher charge-off rates. Terminating this program also improved our consumer compliance risk profile.

“Another current industry challenge is that of margin compression. Fortunately, at Plumas, our extremely low cost of funds coupled with higher yielding loans has resulted in margin expansion rather than the more typical margin compression experienced by most banks.

“The higher rate environment presented some opportunities that we took advantage of during 2023. One of those opportunities involved harvesting a significant gain from an interest rate swap while locking in a lower cost borrowing. We also developed a sale leaseback strategy which we expect to implement in the first quarter of 2024 and which will provide an opportunity to restructure our investment portfolio by divesting lower yielding securities and replacing them with higher yielding securities. This possible restructuring of our investment portfolio has the potential to enhance the bank’s interest income streams for years to come.

“Looking forward, the Fed is signaling some rate decreases in the coming year which we anticipate will result in improved demand for loans. We also anticipate stabilization of deposit balances as clients may be less likely to self-fund with savings and more likely to borrow with rates declining. As the banking environment for community banks improves, we expect to continue to out-perform the industry and will explore avenues for strategic opportunities that align with our long-term growth objectives.

“We would like to thank our clients, communities, employees, and investors for their continued support which empowers Plumas Bank to be Here. FOR GOOD.”

Loans, deposits, investments and cash gross loans, excluding loans held for sale, increased by $47 million, or 5 percent, from $912 million at Dec. 31, 2022, to $959 million at Dec. 31, 2023. 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.

On   Dec. 31, 2023, approximately 78 percent of the company’s loan portfolio was comprised of variable rate loans. The rates of interest charged on variable rate loans are set at specific increments in relation to the company’s lending rate or other indexes such as the published prime interest rate or U.S. Treasury rates and vary with changes in these indexes. The frequency at which variable rate loans reprice can vary from one day to several years. The largest portion of variable rate loans are variable rate commercial real estate loans which predominantly reprice every five years and are indexed to the 5-year Treasury.

Loans indexed to the prime interest rate were approximately 20 peercent of the company’s loan portfolio;these loans reprice within one day to three months of a change in the prime rate.

Total deposits decreased by $124 million to $1.3 billion at Dec. 31, 2023. The decrease in deposits includes decreases of $74 million in demand deposits, $69 million in savings and $24 million in money market accounts deposits. P

Partially offsetting these decreases was an increase in time deposit of $43 million. We attribute much of the decrease to the current interest rate environment as we have seen some deposits leave for higher rates and some customers reluctant to borrow to fund operating expense and instead have drawn down their excess deposit balances.

Beginning in April 2023 we began offering a time deposit promotion offering 7-month and 11-month time deposits at an interest rate of 4 percent. Effective June 30, 2023 we discontinued this promotion which generated $46 million in deposits. However, during the fourth quarter we allowed those customers who had promotional time deposits to renew those deposits at similar terms. At Dec. 31, 2023, 52 percent of the company’s deposits were in the form of non-interest bearing demand deposits. The company has no brokered deposits.

Total investment securities increased by $44 million from $445 million at Dec. 31, 2022, to $489 million at Dec. 31, 2023. The bank’s investment security portfolio consists of debt securities issued by the US Government, US Government agencies, US Government sponsored agencies and municipalities. Cash and due from banks decreased by $98 million to $86 million at Dec. 31, 2023.

Asset Quality and CEC
Nonperforming assets (which are comprised of nonperforming loans, other real estate owned (“OREO”) and repossessed vehicle holdings) at Dec. 31, 2023 were $5.3 million, up from $1.2 million at Dec. 31, 2022. Nonperforming assets as a percentage of total assets increased to 0.33 percent at Dec. 31, 2023 up from 0.07 percent at Dec. 31, 2022.

OREO increased to $357,000 at Dec. 31, 2023 and represented one loan. There was no OREO outstanding at Dec. 31, 2022. Nonperforming loans were $4.8 million at Dec. 31, 2023, and $1.2 million at Dec. 31, 2022. The largest increase in nonperforming loans was related to agricultural loans to one borrower totaling $2.1 million. These loans are well secured. Nonperforming loans as a percentage of total loans increased to 0.50 percent at Dec. 31, 2023, up from 0.13 percent at Dec. 31, 2022.

On Jan. 1, 2023, the company adopted ASU 2016-03 Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology. This is referred to as the current expected credit loss (CECL) methodology. Upon adoption we recorded an increase in the allowance for credit losses of $529,000 and an increase in the reserve for unfunded commitments of $258,000. The decline in equity, net of tax, related to these two adjustments totaled $554,000. During the year ended Dec. 31, 2023, we recorded a provision for credit losses of $2,775,000 consisting of a provision for loan losses of $2,575,000 and an increase in the reserve for unfunded commitments of $200,000. As time progresses the results of economic conditions will require CECL model assumption inputs to change and further refinements to the estimation process may also be identified.

Net charge-offs totaled $954,000 and $935,000 during the years ended Dec. 31, 2023 and 2022, respectively. The allowance for credit losses totaled $12.9 million at Dec. 31, 2023 and $10.7 million at Dec. 31, 2022. The allowance for credit losses as a percentage of total loans increased from 1.18 percent at Dec. 31, 2022 to 1.34 percent at Dec. 31, 2023.