PLBC 10-K & 10-Q changes, risk factors and insider trading
Plumas Bancorp · Nasdaq · Short-Term Business Credit Institutions · CIK 1168455 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We are subject to market, operational, accounting, credit and other related risks associated with our interest rate hedging strategies.”
New heading “We rely upon independent appraisals to determine the value of the real estate that secures a substantial portion of our loans, and the values indicated by such appraisals may not be realizable if we are forced to foreclose upon such loans.”
Removed heading “Risks Related to Our Proposed Acquisition of Cornerstone Community Bancorp”
Removed heading “Our failure to manage our proposed acquisition of Cornerstone Community Bancorp may have a material adverse effect on our financial condition and results of operations.”
Removed heading “We may fail to realize the anticipated benefits of the proposed merger with Cornerstone.”
Removed heading “We will incur substantial costs related to the Merger.”
Largest changes
“We are subject to market, operational, accounting, credit and other related risks associated with our interest rate hedging strategies.”see in full comparison
“A substantial portion of our loan portfolio consists of loans secured by real estate. We generally rely upon appraisers at the time of origination to estimate the value of such real estate. Appraisals are only estimates of value, and the soundness of those estimates may be affected by volatility in the real estate market or other changes in market conditions. In addition, the appraisers may make mistakes of fact or judgment, which adversely affect the reliability of their appraisals. …”see in full comparison
“We rely upon independent appraisals to determine the value of the real estate that secures a substantial portion of our loans, and the values indicated by such appraisals may not be realizable if we are forced to foreclose upon such loans.”see in full comparison
“Our failure to manage our proposed acquisition of Cornerstone Community Bancorp may have a material adverse effect on our financial condition and results of operations.”see in full comparison
“We may fail to realize the anticipated benefits of the proposed merger with Cornerstone.”see in full comparison
“Risks Related to Our Proposed Acquisition of Cornerstone Community Bancorp”see in full comparison
Full comparison: every changed paragraph (34)
Our lending operations and customers are primarily located in the eastern region of Northern California and in Northern Nevada. As a result, a significant majority of the loans in our loan portfolios as of December 31, 2024,2025, 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. This geographic concentration imposes risks from lack of geographic diversification, as adverse economic developments in Northern California or Northern Nevada, among other things, could affect the volume of loan originations, increase the level of nonperforming assets, increase the rate of foreclosure losses on loans and reduce the value of our loans and the underlying collateral. Any regional or local economic downturn affecting Northern California or Northern Nevada or existing or prospective borrowers or property values in such areas may affect us and our profitability more significantly and more adversely than depository organizations whose operations are less geographically concentrated. A significant downturn in the national economy or the local economy due to the real estate market, monetary or public policy decisions, tariffs and internal trading tension, agricultural commodity prices, natural disaster, fires, drought or other factors could result in a decline in the local economy in general, which could in turn negatively impact our business, financial condition, results of operations and prospects.
The risk of loan losses is inherent in the lending business. 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. 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. Determining the appropriate levels of the allowances for credit losses inherently involves a high degree of subjectivity and judgment and requires us to make estimates of current credit risks and future trends, all of which may undergo material changes. 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.
Inflation began to rise sharply at the end of 2021 and has remained at an elevated level through 2024. While some broad inflation rates began to moderate in 2025, inflation rates in some sectors remained elevated relative to historical levels. 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. 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. 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.
Our earnings could be significantly and adversely impacted by changes in interest rates. While we maintain processes for managing the impact of interest rate fluctuations on earnings, there is a risk that these processes may not fully mitigate the impact of interest rate fluctuations on our business and profitability.
Although 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.
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). The rate of interest that we earn on assets and pay on liabilities is affected principally by direct competition,competition and general economic conditions at the state and national level and other factors beyond our control such as actions of the FRB, the general supply of money in the economy, legislative tax policies, governmental budgetary matters, and other state and federal economic policies.
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. 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. 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. 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.
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.
Generally Accepted Accounting Principles (“GAAP”) requires that we carry our available-for-sale investment securities at fair value on our balance sheet. Unrealized gains or losses on these securities, reflecting the difference between the fair market value and the amortized cost, net of its tax effect, are reported as a component of shareholders’ equity. In certain instances, GAAP requires recognition through earnings of declines in the fair value of securities that are deemed to be impaired. Any impairment that is not credit related is recognized in other thancomprehensive temporarilyincome, impaired.net of applicable taxes. Credit-related impairment is recognized as an allowance for credit losses on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings. Changes in the fair value of these securities may result from a number of circumstances that are beyond our control, such as changes in interest rates, the financial condition of municipalities, government sponsored enterprises or insurers of municipal bonds, changes in demand for these securities as a result of economic conditions, or reduced market liquidity. 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.
Adverse developments affecting the banking industry havemay erodederode 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. Future failures of or publicized financial difficulties at other depository institutions similarly erode customer confidence. 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. 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. Further, our costs of deposit insurance may increase as a result of these bank failures and the resulting losses to the FDIC’s Deposit Insurance Fund. In addition, concerns about the banking industry’s operating environment and the public trading prices of bank holding companies are often correlated, particularly during times of financial stress, which could adversely impact the trading price of our common stock.
As a depository organization, we must meet significant regulatory capital requirements and maintain sufficient liquidity. We may need to raise additional capital in the future to provide us with sufficient capital resources and liquidity to meet our commitments and business needs. Our ability to raise additional capital depends on conditions in the capital markets, economic conditions, and a number of other factors, including investor perceptions regarding the banking industry, market conditions and governmental activities, and on our financial condition and performance. Accordingly, we cannot assure that we will be able to raise additional capital if needed orneeded, on terms acceptable to us.us or on terms that would not adversely affect our existing shareholders. If we fail to maintain capital to meet regulatory requirements, our financial condition, liquidity and results of operations would be materially and adversely affected.
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. In addition to possibly sustaining damage to itsour own properties, if there is a major earthquake, fire, flood or other natural disaster, we face the risk that many of our borrowers may experience uninsured property losses, or sustained job interruption and/or loss which may materially impair their ability to meet the terms of their loan obligations. 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 aperiods of severe drought, though drought conditions have lessened in the past few years.drought. 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, 2024,2025, approximately 13%10% 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. If the amount of water available to agriculture becomes scarcer due to drought or rationing, growers may not be able to continue to produce agricultural products profitably, which could force some out of business. Although many of our customers are not directly involved in agriculture, they could be impacted by difficulties in the agricultural industry because many jobs and businesses in our market areas are related to the production of agricultural products. Therefore, a drought could adversely impact our loan portfolio, business, financial condition and results of operations.
We are subject to market, operational, accounting, credit and other related risks associated with our interest rate hedging strategies.
We may seek to mitigate our interest rate risk by entering into interest rate swaps and other interest rate derivative contracts from time to time. No hedging strategy can completely protect us and the derivative financial instruments we elect may not be effective in reducing our interest rate risk. Our hedging strategies rely on assumptions and projections regarding interest rates, asset levels and general market factors and subject us to counterparty risks, such as the risks of insolvency or other inability of the counterparty to a particular transaction to perform its obligations thereunder, including providing sufficient collateral. Hedging strategies that prove to be ineffective, inaccurate assumptions or projections or the failure of a counterparty to fulfill its contractual obligations could increase our risks and losses.
To the extent a derivative contract does not meet the requirements for applying hedge accounting in accordance with GAAP, our earnings may be adversely affected. In particular, to be eligible for hedge accounting under GAAP, derivatives must be highly effective in offsetting changes in the value or cash flows of the hedged items and appropriately designated or documented as such. If it is determined that a derivative is not highly effective at hedging the designated exposure, hedge accounting is discontinued and the changes in fair value of the instrument are included in our reported net income.
In addition, hedging strategies involve transaction and other costs. Therefore, our hedging strategies and the derivatives that we use may not adequately offset the risks of interest rate volatility and could result in or magnify losses, which could have an adverse effect on our financial condition and result of operations.
In July 2025, we completed our acquisition of Cornerstone Community Bancorp. In 2021 we acquired Bank of Feather River and in 2023 we opened a new branch in Chico California. 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. As a result, the size and complexity of our business has increased. Our future success will depend, in part, upon our ability to manage this expanded business, which may pose challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity.
In January 2025, we announced our proposed merger with Cornerstone Community Bancorp. In July 2021 we completed the acquisition of Bank of Feather River and in 2023 we opened a new branch in Chico California. 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. 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 our acquisition of Cornerstone Community Bancorp or any future acquisitions or new offices will be successful.successful or achieve the anticipated benefits. Further, growth may strain our administrative, managerial, financial and operational resources and increase demands on our systems and controls. 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. See “Risks Related to Our Proposed Acquisition of Cornerstone Community Bancorp.”
We rely upon independent appraisals to determine the value of the real estate that secures a substantial portion of our loans, and the values indicated by such appraisals may not be realizable if we are forced to foreclose upon such loans.
A substantial portion of our loan portfolio consists of loans secured by real estate. We generally rely upon appraisers at the time of origination to estimate the value of such real estate. Appraisals are only estimates of value, and the soundness of those estimates may be affected by volatility in the real estate market or other changes in market conditions. In addition, the appraisers may make mistakes of fact or judgment, which adversely affect the reliability of their appraisals. In addition, events occurring after the initial appraisal may cause the value of the real estate to increase or decrease. For example, since 2020 and in light of the prevalence of hybrid work arrangements and associated lower occupancy rates, in many cases the value of commercial real estate secured by office properties has declined. As a result of these factors, the real estate securing some of our loans may be less valuable than anticipated at the time the loans were made. If a default occurs on a loan secured by real estate that is less valuable than originally estimated, then we may not be able to recover the outstanding balance of the loan and will suffer a loss.
ThePlumas CompanyBancorp depends primarily on the operations of thePlumas Bank to pay dividends, repurchase shares, repay its indebtedness and fund its operations. The Bank’s ability to pay dividends to thePlumas CompanyBancorp depends on the success of the Bank’s operations.
ThePlumas CompanyBancorp 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. There are legal limitations on the extent to which the Bank may extend credit, pay dividends or otherwise supply funds to, or engage in transactions with, thePlumas Company.Bancorp. ThePlumas Company’sBancorp’s inability to receive dividends from the Bank could adversely affect its business, financial condition, results of operations and prospects. Even if applicable laws and regulations would permit the Bank to pay dividends to thePlumas CompanyBancorp and would permit thePlumas CompanyBancorp to pay dividends to our shareholders, our Board of Directors could determine that it is not in the best interest of the Company’sour shareholders to do so in order to preserve or redeploy our capital resources, for example. For these reasons, the amount and frequency of dividends that we pay to shareholders may vary from time to time.
Risks Related to Our Proposed Acquisition of Cornerstone Community Bancorp
Our failure to manage our proposed acquisition of Cornerstone Community Bancorp may have a material adverse effect on our financial condition and results of operations.
In January 2025, we entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Cornerstone Community Bancorp (“Cornerstone”), which is the holding company for Cornerstone Community Bank based in Red Bluff, California. The Merger Agreement provides that, subject to the terms and conditions in the agreement, Cornerstone will merge with and into the Company, with the Company as the surviving corporation (the “Merger”). Acquiring other banks involves risks commonly associated with acquisitions generally, including, among other things, the risk that acquisition activity may divert our management’s attention from other aspects of our business, the difficulty in estimating the value of a target company, and the risk that an acquired business may not perform in accordance with our expectations. Our future results of operations will depend in large part on our ability to successfully integrate Cornerstone’s operations with our own and retain Cornerstone’s customers. If we are unable to successfully manage the risks related to the Merger and the integration of the separate business, customers, employees and operating systems of Cornerstone with our own, our financial condition and results of operations may be adversely affected.
We may fail to realize the anticipated benefits of the proposed merger with Cornerstone.
The success of the Merger will depend on, among other things, our ability to combine and integrate the business of Cornerstone into our business. If we are unable to successfully achieve this objective, the anticipated benefits of the Merger may not be realized fully, or at all, or may take longer to realize than expected.
The Company and Cornerstone operate independently and will continue to do so until the Merger is completed. It is possible that the integration process or other factors could result in the loss or departure of key employees, the disruption of the ongoing business of the Company or Cornerstone or inconsistencies in standards, controls, procedures and policies. It is also possible that clients, customers, depositors and counterparties of Cornerstone could choose to discontinue their relationships with the Company after the Merger, which would adversely affect the future anticipated performance of the Company. It is also possible that we may not realize all or some of the anticipated cost savings of the Merger, or that the realization of cost savings may be delayed. These risks could have an adverse effect on the Company, its financial condition, prospects and results of operations following the consummation of the Merger.
We will incur substantial costs related to the Merger.
We have incurred and expect to incur a number of significant non-recurring costs associated with the Merger. These costs include legal, financial advisory, accounting, consulting, and other advisory fees, severance/employee benefit-related costs and other related costs. Some of these costs are payable regardless of whether the Merger is completed. We may incur additional costs to maintain employee morale and retain key employees during the pendency of the Merger. There can be no assurances that the expected benefits and efficiencies related to the integration of the businesses will be realized to offset these transaction costs over time.
As of December 31, 2024,2025, our CRE loans for purposes of this guidanceguidance, represented 242%389% of our total risk-based capital. As of December 31, 2024,2025, total loans secured by CRE under construction and land development represented 54%15% of our total risk-based capital. As a result, the FRB, which is the Bank’s federal banking regulator, could view the Bank as having a high concentration of CRE loans under this guidance.
Climate change may materially adversely affect the Company’sour business and results of operations.
Management's Discussion & Analysis (MD&A)
New heading “BUSINESS COMBINATION - Acquisition OF Cornerstone COMMUNITY Bancorp”
New heading “NON-GAAP FINANCIAL MEASURES”
Removed heading “Subsequent Event”
Removed heading “Merger Consideration”
Largest changes
“The ACL is measured on the loan’s amortized cost over the remaining contractual lives of the loan portfolios, adjusted for industry average prepayment and curtailment rates. The Company established a 12-month term for forecasting economic conditions followed by a 24-month straight line reversion to historical average conditions as its basis for the probability of loan default. …”see in full comparison
“2024 compared to 2023. During the year ended December 31, 2024, non-interest income totaled $8.8 million, a decrease of $1.9 million from the year ended December 31, 2023. The largest component of this decrease was a $1.7 million gain on termination of our interest rate swaps during 2023 which is included in other income in the above table. Related to the sale/leaseback transaction and the partial restructuring of our investment portfolio, a $19.9 million gain on sale of buildings was offset by a $19.8 million loss on investment securities. …”see in full comparison
“To estimate the Allowance for Credit Loss (ACL), the Company elected to use the Discounted Cash Flow (DCF) methodology. This method uses loan level repayment terms to determine expected cash flows which are then discounted by various assumptions such as prepayment or curtailment rates, Probability of Default and Loss Given Default rates.”see in full comparison
“BUSINESS COMBINATION - Acquisition OF Cornerstone COMMUNITY Bancorp”see in full comparison
“Provision for credit losses. During 2024 we recorded a provision for credit losses of $1.2 million consisting of a provision for credit losses on loans of $1.4 million and a decrease in the reserve for unfunded commitments of $179 thousand. On January 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, referred to as the current expected credit loss (CECL) methodology. …”see in full comparison
see in full comparison20242025 compared to2023.2024. During the year ended December 31,2024,2025, non-interest income totaled$8.8$10.5 million,aandecreaseincrease of$1.9$1.7 million from the year ended December 31,2023.2024. The largestcomponentcomponents of thisdecreaseincreasewaswere a$1.7legal settlement totaling $1.1 million related to the Dixie Fire in August of 2021 and an increase in earnings on BOLI of $332 thousand. A $14.3 million reduction in gain onterminationsale of buildings related to ourinterest2024ratesales/leaseswapsbackduringtransaction2023.wasRelatedmostly offset by a $14.0 million reduction in loss on sale of investment securities related to thesale/leaseback transaction and the2024 partial restructuring of our investmentportfolio,portfolio.a $19.9 million gainLoss on sale ofbuildingsinvestmentwassecuritiesoffsetduringby2025 consisted of the December 2025 partial restructuring of the investment portfolio discussed earlier, and a$19.8$628millionthousand loss generated on the disposition of Cornerstone’s investmentsecurities.portfolioOtherduringchangestheinthirdnon-interest income include a decline in interchange incomequarter of$289 thousand and an increase in service charges on deposit accounts of $199 thousand.2025.
Full comparison: every changed paragraph (107)
2025 Sale/Leaseback
On JanuaryMarch 19,28, 2024,2025, Plumas Bank entered into twoan agreementsagreement for the purchase and sale of real property (the “SalePurchase AgreementsAgreement”). OneThe SalePurchase Agreement as amended provided for the sale to MountainSeedBBS ofBranch nineIII, propertiesLLC, owneda andDelaware operatedlimited byliability Plumascompany, Banktwo asadministrative branchesbuildings located in Quincy California for an aggregate cash purchase price of approximately $25.7$5.5 million. The branch portion of the sale was completed on FebruaryNovember 14,19, 20242025, resulting in a net gain on sale of $19.9$5.5 million, recording of right-of-use assets totaling $22.3$5.3 million and recording a lease liability of $22.3$4.7 million. The second Sale Agreement provided for the sale to MountainSeed of up to three properties operated as non-branch administrative offices (the “Non-Branch Offices”). This agreement was terminated in August 2024. We continue to review opportunities for the sale of the Non- Branch Offices.
Concurrent with the closing of the sale, Plumas Bank and Plumas Investor, LLC, a Delaware limited liability company and Plumas Quincy, LLC, a Delaware limited liability company entered into triple net lease agreements (the “Lease Agreements”) pursuant to which the Bank leased back the Properties sold. The Lease Agreements have an initial term of 15 years with three five-year renewal options. The Lease Agreements provide for annual rent of approximately $463,000 in the aggregate for both Properties, increasing by three percent per annum each year.
The gain on sales of the branches was mostly offset by a $5.4 million loss on the sale of approximately $47 million in investment securities. We sold $47 million in investment securities having a weighted average tax equivalent yield of 2.43% recording a $5.4 million loss on the sales. As part of the restructuring, beginning in November 2025 and ending on January 13, 2026, we purchased $42 million in investment securities having a weighted average tax equivalent yield of 4.88%.
2024 Sale/Leaseback
On January 19, 2024, Plumas Bank entered into two agreements for the purchase and sale of real property (the “Sale Agreements”). One Sale Agreement provided for the sale to MountainSeed of nine properties owned and operated by Plumas Bank as branches for an aggregate cash purchase price of approximately $25.7 million. The branch portion of the sale was completed on February 14, 2024 resulting in a net gain on sale of $19.9 million, recording of right-of-use assets totaling $22.3 million and recording a lease liability of $22.3 million. The second Sale Agreement provided for the sale to MountainSeed of up to three properties operated as non-branch administrative offices (the “Non-Branch Offices”). This agreement was terminated in August 2024.
BUSINESS COMBINATION - Acquisition OF Cornerstone COMMUNITY Bancorp
On July 1, 2025 (the “Closing Date”), Plumas Bancorp (the “Company”) completed its previously announced acquisition of Cornerstone Community Bancorp (“Cornerstone”) pursuant to an Agreement and Plan of Merger and Reorganization, dated as of January 28, 2025, by and between the Company and Cornerstone (the “Merger Agreement”). Total book value of assets acquired from Cornerstone, excluding fair value adjustments, were $658 million, gross loans totaled $478 million, and deposits totaled $580 million. Goodwill associated with the acquisition of Cornerstone was $18.7 million; the core deposit intangible (CDI) was $11.6 million. In addition, the Company recorded a discount on the acquired loans totaling $15.5 million. With the completion of the merger, Plumas Bank adds four branches in Anderson, Red Bluff and Redding (two branches), California.
Pursuant to the Merger Agreement, on the Closing Date, Cornerstone merged with and into the Company (the “Merger”) with the Company continuing as the surviving corporation. Immediately following the Merger, Cornerstone’s subsidiary, Cornerstone Community Bank (CCB) merged with and into the Company’s subsidiary, Plumas Bank with Plumas Bank as the surviving bank. Pursuant to the terms of the Merger Agreement, upon the completion of the Merger, each share of Cornerstone common stock outstanding immediately prior was converted into the right to receive 0.6608 shares of common stock of the Company and $9.75 cash, with cash paid in lieu of fractional shares. The total aggregate consideration delivered to holders of Cornerstone common stock in the Merger was 1,003,718 shares of Company common stock and $14.8 million cash. In addition, in accordance with the Merger Agreement, the Company paid approximately $1.3 million to holders of options to purchase Cornerstone common stock that were terminated in connection with the Merger. The Company also assumed options to purchase 35,000 shares of Cornerstone common stock representing, on an as-converted basis, options to purchase 30,803 shares of the Company’s common stock.
As a result of and upon the completion of the Merger, the Company assumed Cornerstone’s obligations with respect to an aggregate principal amount of $12 million of subordinated notes, comprised of (a) $2 million in aggregate principal amount of 4.75% Fixed to Floating Rate Subordinated Notes due November 30, 2035 (the “2035 Notes”) and (b) $10 million in aggregate principal amount of 4.75% Fixed-to-Floating Rate Subordinated Notes due November 30, 2030 (the “2030 Notes”). The 2035 Notes, which were issued in 2020, have a fixed interest rate of 4.75% for the first ten years and thereafter a quarterly variable interest rate equal to the then current three-month term Secured Overnight Financing Rate (“SOFR”) plus 4.14%. The 2030 Notes, which were issued in 2020, have a fixed interest rate of 4.75% for the first five years and thereafter a quarterly variable interest rate equal to the then current three-month term SOFR plus 4.52%. The 2030 notes were called for redemption on December 30, 2025. Of the $10 million originally outstanding on the 2030 notes, principal payments were made on $5.8 million while $4.2 million remain outstanding at December 31, 2025. The remaining $4.2 million will be paid once the notes are surrendered for cancelation by the debenture holders as required under the 2030 Notes. In accordance with the terms of the 2030 Notes interest has ceased to accrue on the remaining $4.2 million. Interest expense recognized on the subordinated notes for the twelve months ended December 31, 2025, was $426 thousand.
Our financial statements are prepared in conformity with accounting principles generally accepted in the United States (U.S. GAAP). In connection with the acquisition, the Company incurred a variety of non-recurring expenses related to the Merger which are summarized on the following page under the heading “Reconciliation of Non-GAAP Disclosure”. The non-recurring expenses for the twelve months ended December 31, 2025 were $7.3 million. Excluding these expenses, non-GAAP net income for the twelve months ended December 31, 2025 would have been $35.0 million, resulting in diluted earnings per share of $5.37 and return on average assets of 1.80%.
In addition, during the second half of 2025, the Company recorded additional expense and income related to the amortization and accretion, respectively related to the amortization/accretion of various Fair Value (FV) marks required under GAAP. The following table presents the effect on pretax earnings of the amortization/accretion of the FV marks recorded during the six months ended December 31, 2025 and the projected effect for the twelve months ended December 31, 2026. Positive numbers would increase pretax income and negative are a decrease in pretax income.
The projected accretion of the discount on acquired loans is based on the acquired loans contractual payment schedules and may differ significantly from the actual accretion during the projected periods. The accretion of the premium on time deposits of $655 thousand was accelerated with the payoff of $38.5 million in brokered deposits during the three months ended September 30, 2025. This resulted in a $160 thousand discount going forward which will be amortized as an increase in interest expense over the remaining life of the time deposits acquired.
NON-GAAP FINANCIAL MEASURES
In addition to results presented in accordance with generally accepted accounting principles in the GAAP, Management has presented these non-GAAP financial measures because it believes that they provide useful and comparative information to assess trends in the Company's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers. However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP.
The Company recorded net income of $28.6$29.6 million for the year ended December 31, 2024,2025, aan decreaseincrease of $1.2$1.0 million or 4% from net income of $29.8$28.6 million during the year ended December 31, 2023.2024. Pretax income decreasedincreased by $1.2$591 million,thousand, or 3%,2%, to $39.0$39.6 million in 20242025 from $40.2$39.0 million during the year ended December 31, 2023.2024. Net interest income increased by $3.9$14.1 million to $73.7$87.8 million during 20242025 from $69.8$73.7 million for the year ended December 31, 2023.2024. This increase in net interest income resulted from an increase in interest income of $9.7$17.3 million partially offset by an increase in interest expense of $5.8$3.2 million. InterestIncreases of $17.4 million in interest and fees on loans increasedand by $6.4$1.6 million; in interest on investment securities increasedwere partially offset by $2.7decreases million andin interest on other interest earning assets increasedtotaling by $0.6$1.7 million. TheMostly related to the acquisition of Cornerstone the provision for credit losses decreasedincreased from $2.8$1.2 million during the twelve months ended December 31, 20232024 to $1.2$6.8 million during 2024.2025.
During the year ended
December 31, 2024,2025, non-interest income totaled $8.8$10.5 million, aan decreaseincrease of $1.9$1.7 million from the $10.7$8.8 million earned during
2023. Non-interest income in 2023 included a nonrecurring gain of $1.7 million on termination of our interest rate swaps during the first quarter of 2023.2024. Non-interest expense increased by $4.8$9.6 million from $37.5$42.3 million during
20232024 to $42.3$51.9 million during the twelve months ending
December 31, 2024.2025. The provision for income taxes totaled $10.4$10.0 millionmillion, a decrease of $53$407 thousand from 2023.2024.
Total assets at December 31, 20242025 were $1.6$2.2 billion, an increase of $13$615 million from December 31, 2023.2024. The largest component of this increase was an increase in net loans of $56.8$490 million. This wasmillion mostly offsetrelated byto athe decreaseacquisition of $51 million in investment securities.Cornerstone.
Gross loans increased by approximately $57$497 million, or 6%,49%, from $959 million at December 31, 2023, to $1.0 billion at December 31, 2024.2024, to $1.5 billion at December 31, 2025. Increases in loans included $102$356 million in commercial real estate loansloans, and $3$90 million in commercial loans, $39 million in agricultural loans, $22 million in residential real estate loans, $16 million in equity lines and $12 million in consumer and other loans. These itemsincreases were partially offset by decreases of $33$25 million in auto loans, $11 million in agriculturalautomobile loans and $4$13 million in construction loans. In the fourth quarter of 2023 we terminated our indirect automobile loan program. Ending this program, which was our lowest yielding loan segment, also improved our loan loss risk profile since this program had historically higher charge-off rates. Terminating this program also improved our consumer compliance risk profile.
TotalRelated mostly to the acquisition of Cornerstone, total deposits increased by approximately $37$439 million from $1.3 billion at December 31, 2023 to $1.4 billion at December 31, 2024.2024, to $1.8 billion at December 31, 2025. The increase in deposits includes increases of $7$150 million in demand deposits, $53$173 million in money market accounts and $2$117 million in time deposits. Partially offsetting these increases was a $25decline of $1 million decrease in savings deposits.
Borrowings decreasedincreased from $90 million at December 31, 2023 to $15 million at December 31, 2024.2024 to $21 million at December 31, 2025. Borrowings at December 31, 20232025 consisted of $80$6 million underin thesubordinated Bank Term Funding Program (BTFP)debentures and $10a $15 million underBancorp ourterm loan with a correspondent bank. Borrowings at December 31, 2024 consisted of a $15 million Bancorp line of credit with a correspondent bank. At December 31, 2024, the Company had paid its BTFP borrowings in full and outstanding borrowings consisted of $15 million under the BancorpThis line of credit.credit converted to a term loan on February 1, 2025.
Shareholders’ equity increased by $30.6$83 million from $147.3$178 million at December 31, 20232024 to $177.9$261 million at December 31, 2024.2025. The $30.6$83 million increase wasincludes related to net incomeearnings during 2024,the twelve-month period of $28.6$29.6 million, common stock and stock options issued in the acquisition of Cornerstone totaling $45.2 million, a declinedecrease in accumulated other comprehensive loss of $7.3$14.7 million and restricted stock and stock option and restricted stock activity oftotaling $1.0$1.4 millionmillion. These items were partially offset by shareholderthe payment of cash dividends oftotaling $6.3$7.7 million.
20242025 compared to 2023.2024. Net interest income iswas the$87.8 difference between interest income and interest expense. Net interest incomemillion for the twelve monthsyear ended December 31, 2024 was $73.7 million,2025, an increase of $3.9$14.1 million from the $69.8same millionperiod earnedin during 2023.2024. The increase in net interest income includes an increase of $9.7$17.3 million in interest income partially offset by an increase of $5.8$3.2 million in interest expense.
Interest and fees on loans increased by $17.4 million, mostly related to an increase in average balance. The average balance of loans during the year ended December 31, 2025, was $1.3 billion, an increase of $263 million from $989 million during the same period in 2024. The average yield on loans increased by 9 basis points from 6.21% during 2024 to 6.30% during 2025.
Interest on investment securities increased by $1.6 million related to an increase in yield of 29 basis points to 4.22%. The increase in investment yields is consistent with market rate trends, the partial restructuring of the investment portfolio in February of 2024 and again in December 2025 and an increase in accretion of discount. Most of the increase in the accretion of discount was related to an investment security that prepaid during the fourth quarter of 2025. This repayment resulted in the recognition of $635 thousand in unamortized discount. Average investment securities increased from $455 million during the year ended December 31, 2024, to $462 million during the current period.
Interest on cash balances declined by $1.7 million, related to both a decline in balance and a decline in yield. The rate earned on cash balances declined by 100 basis points to 4.36% and the average balance declined from $93.1 million during 2024 to $75.1 million during 2025. The decline in rate is consistent with the decline in rate earned on FRB balances. The average rate earned on FRB balances declined from 5.21% during 2024 to 4.27% during 2025.
Related to an increase in interest bearing deposits, an increase in the cost of these deposits and the acquisition of Cornerstone partially offset by a $4.0 million decline in interest on Bank Term Funding Program (BTFP) borrowings, interest expense increased by $3.2 million to $13.9 during the year ended December 31, 2025. During 2024 Plumas Bank had borrowings under the BTFP which averaged $83 million for the twelve months ended December 31, 2024. All BTFP borrowings were paid off during 2024.
Interest paid on deposits increased by $6.1 million and is broken down by product type as follows: money market accounts - $4.6 million, savings deposits - $302 thousand and time deposits - $1.2 million. The average rate paid on interest-bearing deposits increased from 0.92% during 2024, to 1.43% during 2025. Average interest-bearing deposits totaled $840 million during the year ended December 31, 2025, an increase of $194 million from $646 million during the year ended December 31, 2024.
The average rate paid on interest bearing liabilities increased from 1.39% during 2024 to 1.52% during 2025.
Net interest margin for the year ended December 31, 2025, increased 12 basis points to 4.91%, up from 4.79% for the same period in 2024.
2024 compared to 2023. Net interest income for the twelve months ended December 31, 2024 was $73.7 million, an increase of $3.9 million from the $69.8 million earned during 2023. The increase in net interest income includes an increase of $9.7 million in interest income partially offset by an increase of $5.8 million in interest expense.
Interest on investment securities increased by $2.7 million related to an increase in yield of 64 basis points to 3.93%. The increase in investment yieldsyield is consistent with the increase in market rates and the partial restructuring of the investment portfolio. Average investment securities declined from $462 million during the twelve months ended December 31, 2023 to $455 million during the current period. Interest on cash balances increased by $606 thousand related to an increase in yield of 31 basis points and an increase in average balance of $6.2 million from $86.9 million during 2023 to $93.1 million during 2024.
Interest paid on deposits increased by $2.2 million;; this increase is broken down by product type as follows: money market accounts - $1.1 million and time deposits - $1.2-$1.2 million. Related to a decline in average balance of $51 million, interest on savings deposits declined by $90 thousand. The average rate paid on interest-bearing deposits increased from 0.55% during 2023 to 0.92% during the current period. Rates paid on money market accounts and time deposits increased by 49 basis points and 75 basis points, respectively. This is consistent with market conditions and an increase in higher rate public entity money market accounts.
Provision for credit losses. During 2025 we recorded a provision for credit losses of $6.8 million, consisting of a provision for credit losses on loans of $6.9 million and a decrease in the reserve for unfunded commitments of $40 thousand. The provision includes the Current Expected Credit Losses (CECL) day 1 provision on non-Purchased Credit Deteriorated (non-PCD) loans acquired from CCB and a reserve for unfunded commitments on loans acquired from CCB. This compares to a provision for credit losses of $1.2 million consisting of a provision for credit losses on loans of $1.4 million and a decrease in the reserve for unfunded commitments of $179 thousand during 2024. See “Analysis of Asset Quality and Allowance for Credit Losses” for a discussion of loan quality trends and the provision for credit losses.
2023 compared to 2022. Net interest income for the year ended December 31, 2023 was $69.8 million, an increase of $11.3 million from the $58.5 million earned during 2022. The increase in net interest income includes an increase of $14.8 million in interest income partially offset by an increase of $3.5 million in interest expense. Interest and fees on loans, including loans held for sale, increased by $9.3 million related to growth in the loan portfolio and an increase in yield on the portfolio. Net loan fees/costs declined from net fees of $234,000 during 2022 to net costs of $1.3 million during 2023. This decline is mostly related to a decline in fees earned on PPP loans. The average yield on loans, including loans held for sale, increased by 61 basis points from 5.28% during 2022 to 5.89% during 2023. The average prime rate increased from 4.86% in 2022 to 8.20% in 2023.
Interest on investment securities increased by $6.1 million from 2022, related to an increase in average investment securities of $100 million to $462 million and an increase in yield on the investment portfolio from 2.52% during 2022 to 3.29% during 2023. Interest on interest-earning cash balances decreased by $0.5 million related to a decrease in average interest-earning cash balances partially offset by an increase in the rate earned on these balances. The rate paid on interest-earning cash balances increased from 1.61% during 2022 to 5.05% during 2023 mostly related to an increase in the rate paid on balances held at the Federal Reserve Bank. The average rate paid on Federal Reserve balances was 1.76% during 2022 and 5.1% during 2023. Average interest-earning cash balances declined from $305 million during 2022 to $87 million during 2023 related to a decline in average deposits and increases in average loans and investment securities.
Average interest earning assets during 2023 totaled $1.5 billion, a decrease of $50 million from 2022. This decrease in average interest earning assets resulted from a decline in average interest-earning cash balances of $218 million, mostly offset by increases of $68 million in average loan balances and $100 million in average investment securities. The average yield on interest earning assets increased by 113 basis points to 5.03%, related to increases in market rates.
Interest expense increased from $1.2 million during 2022 to $4.8 million during 2023 related to an increase in rate paid on interest bearing liabilities. The average rate paid on interest bearing liabilities increased from 0.17% during 2022 to 0.67% in 2023 related mainly to an increase in market interest rates and the effect of a 4% time deposit promotion. Beginning in April 2023 we began offering a time deposit promotion offering for a limited time 7-month and 11-month time deposits at an interest rate of 4%. We discontinued this promotion, which generated $46 million in deposits, on June 30, 2023. However, during the fourth quarter we allowed those customers who had promotional time deposits to renew those deposits at similar terms. Interest paid on deposit accounts increased for all products mostly related to market conditions. In total interest paid on deposits increased by $2.9 million broken down by product type as follows: Money market accounts - $1.1 million, Savings accounts - $0.4 million and Time deposits - $1.4 million.
During March 2023 we redeemed our junior subordinated debentures with funding provided by a $10 million borrowing on Plumas Bancorp's line of credit/term loan facility. Interest expense incurred during the twelve months ended December 31, 2023, on the junior subordinated debentures totaled $141,000, down from $359,000 during 2022. Interest and fees incurred on the line of credit borrowing totaled $369,000 during the current period. During the fourth quarter of 2023 we borrowed $80 million under the BTFP. Interest incurred on this borrowing totaled $527,000 during 2023.
Net interest margin is net interest income expressed as a percentage of average interest-earning assets. Net interest margin for the twelve months ended December 31, 2023, increased by 89 basis points to 4.71%, up from 3.82% in 2022.
Provision for credit losses. During 2024 we recorded a provision for credit losses of $1.2 million consisting of a provision for credit losses on loans of $1.4 million and a decrease in the reserve for unfunded commitments of $179 thousand. On January 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, referred to as the current expected credit loss (CECL) methodology. Upon adoption of CECL 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. During 2023 we recorded a provision for credit losses of $2,775,000 an increase of $1,475,000 from $1,300,000 during 2022. As time progresses the results of economic conditions will require CECL model assumption inputs to change and further refinements to the estimation process may also be identified. See “Analysis of Asset Quality and Allowance for Credit Losses” for a discussion of loan quality trends and the provision for credit losses.
20242025 compared to 2023.2024. During the year ended December 31, 2024,2025, non-interest income totaled $8.8$10.5 million, aan decreaseincrease of $1.9$1.7 million from the year ended December 31, 2023.2024. The largest componentcomponents of this decreaseincrease waswere a $1.7legal settlement totaling $1.1 million related to the Dixie Fire in August of 2021 and an increase in earnings on BOLI of $332 thousand. A $14.3 million reduction in gain on terminationsale of buildings related to our interest2024 ratesales/lease swapsback duringtransaction 2023.was Relatedmostly offset by a $14.0 million reduction in loss on sale of investment securities related to the sale/leaseback transaction and the2024 partial restructuring of our investment portfolio,portfolio. a $19.9 million gainLoss on sale of buildingsinvestment wassecurities offsetduring by2025 consisted of the December 2025 partial restructuring of the investment portfolio discussed earlier, and a $19.8$628 millionthousand loss generated on the disposition of Cornerstone’s investment securities.portfolio Otherduring changesthe inthird non-interest income include a decline in interchange incomequarter of $289 thousand and an increase in service charges on deposit accounts of $199 thousand.2025.
2024 compared to 2023. During the year ended December 31, 2024, non-interest income totaled $8.8 million, a decrease of $1.9 million from the year ended December 31, 2023. The largest component of this decrease was a $1.7 million gain on termination of our interest rate swaps during 2023 which is included in other income in the above table. Related to the sale/leaseback transaction and the partial restructuring of our investment portfolio, a $19.9 million gain on sale of buildings was offset by a $19.8 million loss on investment securities. Other changes in non-interest income include a decline in interchange income of $289 thousand and an increase in service charges on deposit accounts of $199 thousand.
2023 compared to 2022. During 2023, non-interest income totaled $10.7 million, a decrease of $328,000 from $11.0 million during the twelve months ended December 31, 2022. The largest component of this decrease was a decline in gain on sale of SBA 7(a) loans of $2.5 million from $2.7 million during the twelve months ended December 31, 2022, to $234,000 during the current period. We did not sell SBA 7(a) loans during the second and third quarters of 2021 resulting in an inventory of loans held for sale of $31.3 million at December 31, 2021. During 2022 we sold $50.5 million in guaranteed portions of SBA 7(a) loans. This compares to $5.3 million in sales during the current period. Partially offsetting the decline in SBA gains was a gain of $1.7 million on termination of our interest rate swaps during the first quarter of 2023. In addition, service charges on deposit accounts increased by $325,000. This was mostly related to our Yuba City, California branch acquired in the acquisition of Feather River Bancorp in 2021. During most of 2022 we waived service charges on deposit accounts at the Yuba City Branch.
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. 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. 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. 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.
The following table sets forth the components of other non-interest expense for the years ended December 31, 2024,2025, 2024 and 2023 and(in 2022.thousands).
2025 compared to 2024. During the year ended December 31, 2025, total non-interest expense increased by $9.6 million from $42.3 million during the year ended December 31, 2024, to $51.9 million during the current period. The largest components of this increase were salary and benefit expenses of $4.3 million, merger related expenses of $2.0 million, occupancy and equipment expenses of $1.5 million, amortization of Core Deposit Intangible of $1.1 million and an increase in outside service fees of $1.0 million. The increase in salary and benefit expense included an increase in salary expense of $3.0 million primarily related to the acquisition of Cornerstone and to a lesser extent merit and promotional salary increases. Other significant increases in salary and benefit expense were $934 thousand in bonus expense, $256 thousand in health insurance costs and $269 thousand in payroll taxes. The increase in occupancy and equipment expenses and outside service fees mostly relates to the acquisition of Cornerstone.
2023 compared to 2022. During 2023, non-interest expense increased by $4.9 million to $37.5 million. The largest components of this increase were $2.9 million in salary and benefit expense, $692,000 in occupancy and equipment costs, $439,000 in outside service fees and $268,000 in advertising and shareholder relations. The largest single components of the increase in salary and benefit expense were a $1.5 million increase in salary expense and a $1.2 million reduction in the deferral of loan origination expense. We attribute much of the increase in salary expense to two factors. Merit and promotional salary increases and employee termination costs which included $115,000 related to the termination of our automobile loan program. We have seen a reduction in loan demand given the current economic environment, especially in SBA 7(a) loans tied to the prime interest rate resulting in the reduction in the deferral of loan origination costs. Occupancy and equipment costs increased by $692,000, a considerable portion of which relates to snow removal and other costs attributable to an unusually harsh winter in our service area and to our new Chico, California branch. The increase in outside service fees was spread among several different categories, none of which exceeded $100,000. The increase in advertising costs reflects an increase in our budgeted advertising program, with an emphasis on Northern Nevada growth opportunities.
Provision for Income Taxes. The Company recorded an income tax provision of $10.0 million, or 25.2% of pre-tax income for the year ended December 31, 2025. This compares to an income tax provision of $10.4 million, or 26.6% of pre-tax income for the year ended December 31,during 2024. This compares to an income tax provision of $10.4 million, or 26.0% of pre-tax income during 2023. The percentages for 20242025 and 20232024 differ from statutory rates as tax exempt items of incomeincome, such as earnings on Bank owned life insurance and municipal securities interestinterest, decrease taxable income while non-deductible merger transaction costs incurred during the current period increase taxable income. In addition, during the fourth quarter of 2025, we purchased green energy tax credits at a discount resulting in a $700 thousand reduction in the provision for income taxes.
Mostly related to the acquisition of Cornerstone, total assets increased by $615 million from $1.6 billion on December 31, 2024, to $2.2 billion on December 31, 2025. The largest components of this increase were increases in gross loans of $497 million, investment securities of $39 million, accrued interest receivable and other assets of $25 million, Goodwill of $19 million, BOLI of $17 million, premises and equipment of $12 million and CDI of $10 million. Increases in liabilities include $439 million in deposits, $76 million in repurchase agreements, $6 million in borrowings and $7 million in accrued interest payable and other liabilities and $4 million in lease liabilities. Total shareholders' equity increased by $83 million. The following discussion provides detail on the major components of assets, liabilities and equity and the changes during 2025.
Total assets at December 31, 2024 were $1.6 billion, an increase of $13 million from December 31, 2023. The largest component of this increase was an increase in net loans of $57 million. This was mostly offset by a decrease of $51 million in investment securities. Cash and cash equivalents decreased by $4 million to $82 million on December 31, 2024. Related to the sales/leaseback transaction right-of use assets increased by $21 million. These increases were offset by declines of $51 million in investment securities, $6 million in property and equipment and $4 million in all other assets. Deposits totaled $1.4 billion at December 31, 2024, an increase of $37 million from December 31, 2023. Lease liabilities increased by $22 million to $25 million. Partially offsetting these increases in liabilities were decreases in borrowings, interest payable and other liabilities and repurchase agreements. Borrowings decreased by $75 million from $90 million on December 31, 2023, to $15 million on December 31, 2024. Interest payable and other liabilities and repurchase agreements each decreased by $1 million. Shareholders’ equity increased by $30.6 million from $147.3 million at December 31, 2023 to $177.9 million at December 31, 2024. A detailed discussion of each of these changes follows.
Loan Portfolio. GrossMostly related to the acquisition of CCB, gross loans increased by approximately $57$497 million, or 6%,49%, from $959 million at December 31, 2023, to $1.0 billion at December 31, 2024.2024, to $1.5 billion at December 31, 2025. Increases in loans included $102$356 million in commercial real estate loansloans, and $3$90 million in commercial loans, $39 million in agricultural loans, $22 million in residential real estate loans, $16 million in equity lines and $12 million in consumer and other loans. These itemsincreases were partially offset by decreases of $33$25 million in auto loans, $11 million in agriculturalautomobile loans and $4$13 million in construction loans. Although the Company offers a broad array of financing options, it continues to concentrate its focus on small to medium sized commercial businesses. These loans offer diversification as to industries and types of businesses, thus limiting material exposure in any industry concentrations. The Company offers both fixed and floating rate loans and obtains collateral in the form of real property, business assets and deposit accounts, but looks to business and personal cash flows as its primary source of repayment. In the fourth quarter of 2023 we terminated our indirect automobile loan program. Ending this program, which was our lowest yielding loan segment, also improved our loan loss risk profile since this program had historically higher charge-off rates. Terminating this program also improved our consumer compliance risk profile.
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’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 82% of the total loan portfolio at December 31, 2024.2025. Moreover, the business activities of the Company currently are focused in the California counties of Butte, Lassen, Modoc, Nevada, Placer, Plumas, ShastaShasta, Sutter and SutterTehama and in Washoe and Carson City Counties in Northern Nevada. Consequently, the results of operations and financial condition of the Company are dependent upon the general trends in these economies and, in particular, the commercial real estate markets. In addition, the concentration of the Company's operations in these areas of Northeastern California and Northwestern Nevada exposes it to greater risk than other banking companies with a wider geographic base in the event of catastrophes, such as earthquakes, fires and floods in these regions.
Commercial real estate loans (“CRE”), which comprised 64%67% of the lending portfolio at December 31, 2024,2025. includedCRE 27%loans were 43% investor-owned, 28%43% owner-occupied, and 9%14% multi-family. Concentrations by real estate type within the CRE portfolioportfolio, included 15%excluding multi-family, 12%were retail,14% 11%Mixed mixedCommercial commercialReal realEstate, estate,13% 11%Office, office,13% 7%Retail, hospitality,10% 7%Hospitality, special10% purpose,Industrial, 6%8% industrial,Gas 6% gas stations andStations, 5% miniMedical storagebuildings, facilities,5% Special Purpose, 5% Mini Storage Facilities and, 5% Residential, with all remaining concentrations below 5%. There were no rent-controlled properties within the multi-family category. Office facilities are typically small and located in more rural areas. 28%21% of CRE loans were located in northern Nevada and 48%57% were located in northern California. Of the $4.1$15.1 million in non-accrual balances at December 31, 2024,2025, approximately 38%13% were CRE. Of the $19.8$34.2 million in substandard balances at December 31, 20242025 9%approximately 28% were CRE.
The rates of interest charged on variable rate loans are set at specific increments in relation to the Company's lending rate or other indexes such as the published prime interest rate or U.S. Treasury rates and vary with changes in these indexes. The frequency in which variable rate loans reprice can vary from one day to several years. At December 31, 20242025, and December 31, 2023,2024, approximately 77%80% and 78%,77%, respectively, of the Company's loan portfolio was comprised of variable rate loans. Loans indexed to the prime interest rate were approximately 21% of the Company’s variable rate loan portfolio on December 31, 2024;2025; these loans reprice within one day to three months of a change in the prime rate. The remainder of the Company's variable rate loans mostly consist of commercial real estate loans tied to U.S. Treasury rates and reprice every five years. Approximately 76%75% of the variable rate loans are indexed to the five-year T-Bill rate and reprice every five years. While real estate mortgage, agricultural, commercial and consumer lending remain the foundation of the Company's historical loan mix, some changes in the mix have occurred due to the changing economic environment and the resulting change in demand for certain loan types.
A substandard loan is not adequately protected by the current sound worth and paying capacity of the borrower or the value of the collateral pledged, if any. Total substandard loans increased by $11.2 million from $23.0 million on December 31, 2024, to $34.2 million on December 31, 2025. Loans classified as special mention increased by $8.1 million from $12.0 million on December 31, 2024, to $20.1 million on December 31, 2025.
Analysis of Asset Quality and Allowance for Credit Losses. The Company attempts to minimize credit risk through its underwriting and credit review policies. The Company’s credit review process includes internally prepared credit reviews as well as contracting with an outside firm to conduct periodic credit reviews. The Company’s management and lending officers evaluate the loss exposure of classified and 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. In management's opinion, this loan review system helps facilitate the early identification of potential criticized loans. MARC also provides guidance for the maintenance and timely disposition of OREO properties including developing financing and marketing programs to incent individuals to purchase OREO. MARC consists of the Bank’s Chief Executive Officer, Chief Financial OfficerOfficer, Chief Banking Officer, Regional President 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.
To estimate the Allowance for Credit Loss (ACL), the Company elected to use the Discounted Cash Flow (DCF) methodology. This method uses loan level repayment terms to determine expected cash flows which are then discounted by various assumptions such as prepayment or curtailment rates, Probability of Default and Loss Given Default rates.
The ACL is measured on the loan’s amortized cost over the remaining contractual lives of the loan portfolios, adjusted for industry average prepayment and curtailment rates. The Company established a 12-month term for forecasting economic conditions followed by a 24-month straight line reversion to historical average conditions as its basis for the probability of loan default. The probability of default rate is determined by reviewing loans with similar risk characteristics that are combined to form loan pools which are statistically correlated with historical credit losses, defaults and various economic metrics, including California Unemployment rates, California Housing Prices and California Gross Domestic Product. Pool balances that are determined to have probable default are then adjusted for expected Loss Given Default. The Company selected the Frye Jacobs Index as its basis for Loss Given Default. Model forecasts may be adjusted for inherent limitations or biases that have been identified through independent validation and annual back-testing of model performance to actual realized results.
What changed in the latest 10-Q
Risk Factors
In addition to the other information set forth in this Form 10-Q you should carefully consider the risk factors that appeared under Item 1A, “Risk Factors” in the Company’s 2025 Annual Report. There are no material changes from the risk factors included within the Company’s 2025 Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) None.
(b) None.
(c)
On February 2, 2026 the Company’s announced a share repurchase program permitting the repurchase of up to $25.0 million of the Company’s outstanding common stock through the fourth quarter of 2026. During the three months ended June 30, 2026, the Company repurchased 15 thousand shares of its common stock for an aggregate purchase price of approximately $756,000, inclusive of commissions, at an average price of $50.39 per share. All repurchases were executed in open‑market transactions and were funded using available cash on hand.
As of June 30, 2026, approximately $22.2 million remained available for future repurchases under the existing authorization. The Company is not obligated to repurchase any specific number of shares and expects that any future repurchases will depend on market conditions, capital availability, and other corporate considerations.
Issuer Purchases of Equity Securities
(1) Excludes commissions, no shares were purchased during June 2026.
Largest changes
On February 2, 2026 the Company’s announced a share repurchase program permitting the repurchase of up to $25.0 million of the Company’s outstanding common stock through the fourth quarter of 2026. During the three months endedsee in full comparisonMarchJune31,30, 2026, the Company repurchased4115 thousand shares of its common stock for an aggregate purchase price of approximately$2.0 million,$756,000, inclusive of commissions, at an average price of$48.17$50.39 per share. All repurchases were executed in open‑market transactions and were funded using available cash on hand.
“(1) Excludes commissions, no shares were purchased during June 2026.”see in full comparison
Full comparison: every changed paragraph (3)
On February 2, 2026 the Company’s announced a share repurchase program permitting the repurchase of up to $25.0 million of the Company’s outstanding common stock through the fourth quarter of 2026. During the three months ended MarchJune 31,30, 2026, the Company repurchased 4115 thousand shares of its common stock for an aggregate purchase price of approximately $2.0 million,$756,000, inclusive of commissions, at an average price of $48.17$50.39 per share. All repurchases were executed in open‑market transactions and were funded using available cash on hand.
As of MarchJune 31,30, 2026, approximately $23$22.2 million remained available for future repurchases under the existing authorization. The Company is not obligated to repurchase any specific number of shares and expects that any future repurchases will depend on market conditions, capital availability, and other corporate considerations.
(1) Excludes commissions, no shares were purchased during June 2026.
Management's Discussion & Analysis (MD&A)
New heading “RESULTS OF OPERATIONS FOR THE six MONTHS ENDED June 30, 2026”
Largest changes
“The ACL is measured on the loan’s amortized cost over the remaining contractual lives of the loan portfolios, adjusted for industry average prepayment and curtailment rates. The Company established a 12-month term for forecasting economic conditions followed by a 24-month straight line reversion to historical average conditions as its basis for the probability of loan default. …”see in full comparison
“The Allowance for Credit Loss (ACL) is established as management’s estimate of expected credit losses inherent in the Company’s lending activities; it is increased by the provision for credit losses and decreased by net charge-offs. The ACL is evaluated quarterly by management based on periodic reviews of the collectability of the Company's loans and current economic conditions. …”see in full comparison
“The PD is determined by reviewing loans with similar risk characteristics that are combined into loan pools and statistically correlated with historical credit losses, defaults, and various economic metrics, including California unemployment rates, California housing prices, and California gross domestic product. Pool balances identified as having a probability of default are then adjusted for expected loss given default. The Company utilizes the Frye Jacobs Index as a basis for LGD. …”see in full comparison
“To estimate the Allowance for Credit Loss (ACL), the Company elected to use the Discounted Cash Flow (DCF) methodology. This method uses loan level repayment terms to determine expected cash flows which are then discounted by various assumptions such as prepayment or curtailment rates, Probability of Default and Loss Given Default rates.”see in full comparison
“During the second quarter of 2026, the Company completed its annual review of the allowance for credit losses methodology and refined certain assumptions and model inputs used in estimating expected credit losses within its existing CECL framework. The refinements included updates to the reasonable and supportable forecast period, which was extended from four quarters to eight quarters, and certain model inputs. …”see in full comparison
Full comparison: every changed paragraph (93)
The following discussion and analysis sets forth certain statistical information relating to the Company as of MarchJune 31,30, 2026 and December 31, 2025 and for the six and three-month periods ended MarchJune 31,30, 2026 and 2025. This discussion should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto included in Plumas Bancorp’s Annual Report filed on Form 10-K for the year ended December 31, 2025.
See the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 for a complete discussion of the Company’s significant accounting policies and critical accounting estimates.
Allowance for Credit Losses
During the second quarter of 2026, the Company completed its annual review of the allowance for credit losses methodology and refined certain assumptions and model inputs used in estimating expected credit losses within its existing CECL framework. The refinements included updates to the reasonable and supportable forecast period, which was extended from four quarters to eight quarters, and certain model inputs. These refinements were implemented through the Company's regular model governance and review process and reflect management's current assessment of portfolio dynamics and the period over which forecast information is considered sufficiently reliable for estimating expected credit losses.
There have been no changes to the Company’s critical accounting policies from those disclosed in the Company’s 2025 Annual Report to Shareholders on Form 10-K.
BISINESSBUSINESS COMBINATIONS - ACQUISTIONACQUISITION OF CONERSTONECORNERSTONE COMMUNITY BANCORP
In connection with the acquisition of Cornerstone, the Company assumed $12 million of subordinated debentures, including $2 million of 4.75% Fixed‑to‑Floating Rate Subordinated Notes due November 30, 2035 (the “2035 Notes”). The 2035 Notes, which were issued in 2020, have a fixed interest rate of 4.75% for the first ten years and thereafter a quarterly variable interest rate equal to the then current three-month term Secured Overnight Financing Rate (“SOFR”) plus 4.14%. The remaining subordinated notes were called in 2025 and are no longer outstanding. Interest expense recognized on the subordinated notes for the three-monthssix months ended MarchJune 31,30, 2026, was $61$97 thousand.
RESULTS OF OPERATIONS FOR THE threeTHREE MONTHS ENDED MarchJune 31,30, 2026
Net Income. The Company recorded net income of $9.9 million or $1.43 per share during the current quarter, an increase of $3.6 million from $6.3 million or $1.07 per share during the second quarter of 2025. Diluted earnings per share increased to $1.41 per share during the three months ended June 30, 2026 up from $1.05 per share during the quarter ended June 30, 2025. Return on average assets was 1.79% during the current quarter, up from 1.56% during the second quarter of 2025. Return on average equity increased to 15.0% for the three months ended June 30, 2026, up from 13.4% during the second quarter of 2025.
Net Income. The Company recorded net income of $9.8 million for the three months ended March 31, 2026, up from net income of $7.2 million for the three months ended March 31, 2025. An increase of $6.6 million in net interest income and a decline of $580 thousand in the provision for credit losses was partially offset by increases of $3.8 million in non-interest expense and $560 thousand in the provision for income taxes and a decline of $217 thousand in non-interest income. The annualized return on average assets was 1.78% for the three months ended March 31, 2026, down slightly from 1.79% for the three months ended March 31, 2025. The annualized return on average equity decreased from 16.0% during the first quarter of 2025 to 14.9% during the current quarter.
Net interest income increased by $7.8 million from $18.5$18.2 million during the three months ended MarchJune 31,30, 2025, to $25.1$26 million during the current quarter. The provision for credit losses decreased from $250$860 thousand during the firstsecond quarter of 20262025 to a recovery of $330$600 thousand during the current quarter. Non-interest income decreasedincreased by $390 thousand from $3.2$2.4 million during the three months ended MarchJune 31,30, 2025,2025 to $3.0$2.8 million during the second quarter of 2026. Non-interest expense increased by $3.5 million from $11.0 million during the second quarter of 2025 to $14.5 million during the current quarter. The provision for income taxes increased by $1.3 million from $2.4 million, during the three months ended MarchJune 31, 2026. Non-interest expense increased by $3.8 million from $11.5 million during the first quarter of30, 2025 to $15.3$3.7 million during the current quarter. The average effective tax rate was 27.1% in both periods.
The provision for income taxes increased by $560 thousand from $2.9 million, or 28.5% of pre-tax income, during the three months ended March 31, 2025 to $3.4 million, or 25.9% of pre-tax income, during the current quarter.
Net interest income before provision for credit losses. Driven primarily by growth in the loan portfolio mostly related to the acquisition of Cornerstone, net interest income increased by $6.6$7.8 million from $18.5$18.2 million during the three months ended MarchJune 31,30, 2025, to $25.1$26.0 million for the three months ended MarchJune 31,30, 2026. The increase in net interest income includes an increase of $8.8$9.7 million in interest income partially offset by an increase of $2.2$1.9 million in interest expense.
Interest and fees on loans increased by $8.6$9.2 million to $24.8 million related both to an increase in average balance and an increase in yield. Average loan balances increased by $495$484 million, while the average yield on these loans increased by 2847 basis points from 6.17%6.14% during the firstsecond quarter of 2025 to 6.45%6.61% during the current quarter. We attribute theThe increase in yield relates to several factors including the amortizationaccretion of discount on purchased loans, the repricing of a portion of our commercial real estate loans most of which reprice every five years from the date of originationorigination, the reversal of $344 thousand in accrued interest on a large loan relationship during the second quarter of 2025 and growth in fixed rate SBA loans which totaled $119$123 million at MarchJune 31,30, 2026, and $74$75 million at MarchJune 31,30, 2025. The weighted average rate earned on this portfolio at MarchJune 31,30, 2026, was 8.1%.
The accretion of discounts on loans acquired from Cornerstone totaled $1.3 million during the quarter an increase of $800 thousand from $500 thousand during the first quarter of 2026. The increase in accretion during the current quarter relates to an increase in prepayments on this portfolio. Partially offsetting the discount accretion was the reversal of approximately $375 thousand in interest on loans placed on nonaccrual during the current quarter. The average prime interest rate decreased from 7.5% during the second quarter of 2025 to 6.75% during the current quarter. Approximately 15% of the Company's loans are tied to the prime interest rate and most of these reprice within one to three months of a change in prime.
Interest earned on investment securities increased by $489$484 thousand related to an increase in yield on investment securities of 1521 basis points to 4.27%4.29% and an increase in average balance.balance of $24 million. The increase in investment yields is consistent with the partial restructuring of the investment portfolio during the fourth quarter of 2025 and market conditions. Average investment securities increased from $444$442 million during the three months ended MarchJune 31,30, 2025 to $475$466 million during the current period.
Interest earned on cash balances decreasedincreased by $273$78 thousand related to aan declineincrease in average balance of $18$17 million andpartially offset by a decrease in average rate paid on cash balances of 7173 basis points from 4.52%4.47% during the firstsecond quarter of 2025 to 3.81%3.74% during the current quarter. This decline in yield was mostly related to a decline in rate paid on balances held at the Federal Reserve Bank of San Francisco (FRB). The average rate earned on FRB balances decreased from 4.40% during the firstsecond quarter of 2025 to 3.65% during the current quarter.
Interest paidexpense on deposits increased by $1.7$1.6 million and is broken down by product type as follows: money market accounts - $730$844 thousand, savings deposits - $71$29 thousand and time deposits - $889$747 thousand. The increase in interest paidexpense primarily relates to the growth in money market and time deposits related to the acquisition of Cornerstone. The average rate paid on interest-bearing deposits increased from 1.11%1.30% during the firstsecond quarter of 2025 to 1.52%1.59% during the current quarter and primarily relates to an increase in the percentage of average money market and time deposits to average interest-bearinginterest bearing deposits from 13%58% during the firstsecond quarter of 2025 to 22%68% during the current quarter.quarter as well as an increase in the average rate paid on these deposits.
The average rate paid on interest bearing liabilities increased from 1.14%1.33% during the 2025 quarter to 1.60%1.62% in 2026 related mainly to the increase in the cost of interest-bearing deposits and repurchase agreements. The average rate paid on repurchase agreements increased from 0.46% during the second quarter of 2025 to 1.48% during the current quarter. This increase is related to higher rate repurchase agreements acquired in the acquisition of Cornerstone.
Net interest margin for the three months ended MarchJune 31,30, 2026, increased 830 basis points to 5.03%,5.13%, up from 4.95%4.83% for the same period in 2025.
The following table sets forth changes in interest income and interest expense for the three-months ended MarchJune 31,30, 2026, 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:
Provision for credit losses. During the firstthree quartermonths ofended 2026June we30, recorded2026, a recovery ofthe provision for credit losses oftotaled $330$600 thousand consisting of a recovery of provision for credit losses on loans of $401$601 thousand partiallyand offseta by an increasedecrease in the reserve for unfunded commitments of $71$1 thousand. This compares to a provision for credit losses of $250$1.1 million consisting of a provision for credit losses on loans of $1.1 million and a decrease in the reserve for unfunded commitments of $40 thousand during the firstsix quartermonths ofended June 30, 2025. See “Analysis of Asset Quality and Allowance for Loan Losses” for a discussion of loan quality trends and the provision for credit losses.
Non-interest income. During the three months ended MarchJune 31,30, 2026, non-interest income totaled $3.0$2.8 million, aan decreaseincrease of $217$390 thousand from the three months ended MarchJune 31, 2025. The largest component of this decrease was a $1.1 million settlement related to the Dixie Fire during the first quarter of30, 2025. Significant increases in non-interest income during the current quarter were $309 thousand in FHLB dividends, $159$168 thousand in earnings on Bank Owned Life Insurance (BOLI) and $140$97 thousand in interchange income. Each of these items benefited from the acquisition of Cornerstone. Additionally, the FHLB paid a regular dividend of $194 thousand and special dividend of $252 thousand during the firstcurrent quarterperiod non-interest income included a gain of 2026.$104 thousand on sale of an OREO property.
The following table describes the components of non-interest income for the three-month periods ended MarchJune 31,30, 2026 and 2025, dollars in thousands2025:
Non-interest expense. During the three months ended MarchJune 31,30, 2026, total non-interest expense increased by $3.8$3.5 million from $11.5$11.0 million during the firstsecond quarter of 2025 to $15.3$14.5 million during the current quarter. Much of this increase was driven by the acquisition of Cornerstone. Salary and benefit expense increased by $1.9$2.0 million which includes an increase in salary expense of $1.1$1.2 million primarily related to an increase in Full-Time Equivalent (FTE) employees of 4856 to 232238 FTE at MarchJune 31,30, 2026 and to a much lesser extent merit and promotional increases. RelatedPrimarily primarilyrelated to an increase in pre-tax income, bonus expense increased by $281$315 thousand. Payroll taxes increased by $207 thousand.
Occupancy and equipment expensesexpense increased by $660$598 thousand from $2.0 million during the firstsecond quarter of 2025 to $2.7$2.6 million during the current quarter, Primarilyprimarily related to the acquisition of Cornerstone and to a much lesser extent the sales/leaseback completed during the fourth quarter of 2025. Amortization of Core Deposit Intangible increased by $537$522 thousand related to the acquisition of Cornerstone. Other expenses increased by $719 thousand related to a $726 thousand loss associated with two fraudulent wire transfers. The largest reduction in non-interest expense was $569$481 thousand in merger expenses incurred during the firstsecond quarter of 2025.
The following table describes the components of non-interest expense for the three-month periods ended MarchJune 31,30, 2026 and 2025, dollars in thousands2025:
Provision for income taxes. The provision for income taxes increased by $560$1.3 thousandmillion from $2.9$2.4 million, or 28.5% of pre-tax income, during the three months ended MarchJune 31,30, 2025 to $3.4$3.7 million, or 25.9% of pre-tax income,million during the current quarter. The average effective tax rate was 27.1% in both periods. The percentages for 2026 and 2025 differ from statutory rates as tax exempt items of income such as earnings on Bank owned life insuranceBOLI and municipal securities interest decrease taxable income while non-deductible merger transaction costs incurred during the 2025 quarter effectively increase taxable income.
RESULTS OF OPERATIONS FOR THE six MONTHS ENDED June 30, 2026
Net Income. The Company recorded net income of $19.7 million or $2.83 per share during the current six-month period, an increase of $6.2 million from $13.5 million or $2.28 per share earned during the six months ended June 30, 2025. Earnings per diluted share increased to $2.79 during the six months ended June 30, 2026, up $0.54 from $2.25 during the first six months of 2025. Return on average assets was 1.79% during the six months ended June 30, 2026, up from 1.67% during the first half of 2025. Return on average equity increased to 14.9% for the six months ended June 30, 2026, up from 14.7% during the first half of 2025.
Net interest income increased by $14.4 million from $36.7 million during the six months ended June 30, 2025, to $51.1 million during the current period. The provision for credit losses decreased from $1.1 million during the first half of 2025 to $270 thousand during the current period. Non-interest income increased by $174 thousand from $5.6 million during the six months ended June 30, 2025 to $5.7 million during the first half of 2026. Non-interest expense increased by $7.3 million from $22.5 million during the first half of 2025 to $29.8 million during the current period. The provision for income taxes increased by $1.9 million from $5.2 million, or 27.8% of pre-tax income, during the six months ended June 30, 2025 to $7.1 million, or 26.5% of pre-tax income, during the current period.
The following is a detailed discussion of each component of the change in net income.
Net interest income before provision for credit losses. Net interest income for the six months ended June 30, 2026 was $51.1 million, an increase of $14.4 million from the $36.7 million earned during the same period in 2025. The increase in net interest income includes an increase of $18.5 million in interest income partially offset by an increase of $4.1 million in interest expense.
Interest and fees on loans increased by $17.7 million related to increases in average balance and yield. The average balance of loans during the six months ended June 30, 2026 was $1.5 billion, an increase of $490 million from $1.0 billion during the same period in 2025. The average yield on loans increased by 38 basis points from 6.15% during the first six months of 2025 to 6.53% during the current period. Included in interest and fees on loans for the six months ended June 30, 2026 was $1.8 million of discount accretion related to loans acquired in the Cornerstone acquisition. As the acquisition closed on July 1, 2025, no comparable accretion income was recognized during the first six months of 2025.
Interest on investment securities increased by $973 thousand related to an increase in yield of 18 basis points to 4.28% and an increase in average balance of $27 million to $470 million. The increase in investment yield is consistent with the partial restructuring of the investment portfolio during the fourth quarter of 2025 and market conditions.
Interest on cash balances declined by $195 thousand related to a decline in yield. The rate earned on cash balances declined by 73 basis points to 3.77%. The average balance in interest bearing cash remained unchanged at $53.8 million.
Primarily related to an increase in balance and rate paid on deposits and repurchase agreements, interest expense increased from $4.5 million during the six months ended June 30, 2025 to $8.6 million during the current period. The average rate paid on interest bearing liabilities increased from 1.24% during the 2025 period to 1.61% in 2026.
Interest expense on deposits increased by $3.3 million and is broken down by product type as follows: money market accounts - $1.6 million, savings deposits - $100 thousand and time deposits - $1.6 million. The average rate paid on interest-bearing deposits increased from 1.21% during the six months ended June 30, 2025 to 1.55% during the current period. Average interest-bearing deposits totaled $972 million during the first half of 2026, an increase of $274 million from $698 million during the first half of 2025.
Interest expense on repurchase agreements increased by $683 thousand related to an increase in average balance of $67.7 million and an increase in rate paid of 1.33%.
Net interest margin for the six months ending June 30, 2026 increased 19 basis points to 5.08%, up from 4.89% for the same period in 2025.
The following table presents for the six-month periods indicated the distribution of consolidated average assets, liabilities and shareholders' equity. It also presents the amounts of interest income from interest earning assets and the resultant annualized yields expressed in both dollars and annualized yield percentages, as well as the amounts of interest expense on interest bearing liabilities and the resultant cost expressed in both dollars and annualized rate percentages. Average balances are based on daily averages. Nonaccrual loans are included in the calculation of average loans while nonaccrued interest thereon is excluded from the computation of yields earned:
The following table sets forth changes in interest income and interest expense for the six-months ended June 30, 2026, 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:
Provision for credit losses. During the first half of 2026 the provision for credit losses totaled $270 thousand consisting of a provision for credit losses on loans of $200 thousand and an increase in the reserve for unfunded commitments of $70 thousand. This compares to a provision for credit losses of $1.1 million consisting of a provision for credit losses on loans of $1.1 million and a decrease in the reserve for unfunded commitments of $40 thousand during the six months ended June 30, 2025. See “Analysis of Asset Quality and Allowance for Loan Losses” for a discussion of loan quality trends and the provision for credit losses.
Non-interest income. During the six months ended June 30, 2026, non-interest income totaled $5.7 million, an increase of $174 thousand from the six months ended June 30, 2025. Significant increases in non-interest income during the current period were $278 thousand in FHLB dividends, $327 thousand in earnings on BOLI and $238 thousand in interchange income. Each of these items benefited from the acquisition of Cornerstone. Additionally, the FHLB paid a special dividend of $252 thousand during the first quarter of 2026. These increases were mostly offset by a $1.1 million settlement related to the Dixie Fire during the first quarter of 2025.
The following table describes the components of non-interest income for the six-month periods ended June 30, 2026 and 2025:
Non-interest expense. Primarily driven by the acquisition of Cornerstone, non-interest expense increased by $7.3 million from $22.5 million during the first half of 2025 to $29.8 million during the current period. The four largest increases were $3.8 million in salary and benefit expense, $1.3 million in occupancy and equipment expense, $1.1 million in amortization of core deposit intangible and $637 thousand in other.
Salary and benefit expense totaled $15.3 million during the current six month period and $11.4 million during the six months ended June 30, 2025. Salary expense increased by $2.1 million, mostly related to an increase in FTE. Related to an increase in pre-tax income, bonus expense increased by $595 thousand. Other significant increases in salary and benefit expense include $316 thousand in payroll taxes and $226 thousand in insurance expense.
Primarily related to the acquisition of Cornerstone and to a lesser extent the sales/leaseback completed during the fourth quarter of 2025, occupancy and equipment expenses increased by $1.2 million from $4.1 million during the first six months of 2025 to $5.3 million during the current period. Amortization of Core Deposit Intangible increased by $1.1 million related to the acquisition of Cornerstone. Other expense increased by $637 thousand related to a $726 thousand loss associated with two fraudulent wire transfers during the first quarter of 2026. The largest reduction in non-interest expense was $1.1 million in merger expenses incurred during the first half of 2025.
The following table describes the components of non-interest expense for the six-month periods ended June 30, 2026 and 2025:
Provision for income taxes. The provision for income taxes increased by $1.9 million from $5.2 million, or 27.8% of pre-tax income, during the six months ended June 30, 2025 to $7.1 million, or 26.5% of pre-tax income, during the current period. The percentages for 2026 and 2025 differ from statutory rates as tax exempt items of income such as earnings on BOLI and municipal securities interest decrease taxable income while non-deductible merger transaction costs incurred during the 2025 period effectively increase taxable income.
Total assets were $2.2$2.3 billion on MarchJune 31,30, 2026, aan decreaseincrease of $39 million from December 31, 2025. The largest componentscomponent of this decreaseincrease werewas declines$55 million in cash and cash equivalentsequivalents. ofThe $18largest million,decline netwas loans$11 ofmillion $9 million,in investment securities of $7 million and accrued interest receivable and other assets of $3 million.securities. Total liabilities declinedincreased by $43$28 million primarily related to an increase of $76 million in deposits partially offset by a decline of $35$39 million in deposits.repurchase agreements and $7 million in all other liabilities. Total shareholders' equity increased by $4$11 million.
Loan Portfolio. Gross loans decreased by approximately $11 million, or 7%, and totaled $1.5 billion on MarchJune 31,30, 2026, and December 31, 2025. Increases of $11$23 million in commercial real estate loans, $1$9 million equityin linesconstruction of creditloans and $1 million in constructionequity loanslines of credit were offset by declines of $12$15 million in agricultural loansloans, $10 million in commercialautomobile loans, $5$6 million in commercial loans, $5 million in automobile loans, $1 million in residential real estate loans and $1$2 million in other loans. Although the Company offers a broad array of financing options, it continues to concentrate its focus on small to medium sized commercial businesses. These loans offer diversification as to industries and types of businesses, thus limiting material exposure in any industry concentrations. The Company offers both fixed and floating rate loans and obtains collateral in the form of real property, business assets and deposit accounts, but looks to business and personal cash flows as its primary source of repayment. In the fourth quarter of 2023 we terminated our indirect automobile loan program. Ending this program, which was our lowest yielding loan segment, also improved our loan loss risk profile since this program had historically higher charge-off rates. Terminating this program also improved our consumer compliance risk profile.
As shown in the following tabletable, the Company's largest lending categories are commercial real estate loans, commercial loans, agricultural loans, and equity lines of credits.
The Company’s real estate related loans, including real estate mortgage loans, real estate construction and land development loans, consumer equity lines of credit, and agricultural loans secured by real estate, comprised 83%84% of the total loan portfolio onat MarchJune 31,30, 2026. TheMoreover, the business activities of the Company conductscurrently businessare primarilyfocused in the California counties of Butte, Lassen, Modoc, Nevada, Placer, Plumas, Shasta, Sutter and Tehama and in Washoe and Carson City Counties in Northern Nevada. Consequently, the results of operations and financial condition of the Company are dependent upon the general trends in these economies and, in particular, the commercial real estate markets. In addition, the concentration of the Company's operations in these areas of Northeastern California and Northwestern Nevada exposes it to greater risk than other banking companies with a wider geographic base in the event of catastrophes, such as earthquakes, fires and floods in these regions.
Commercial real estate loans (“CRE”) comprised 68% of the lending portfolio at MarchJune 31,30, 2026. CRE loans were 43%44% owner-occupied, 42%43% investor-owned, and 15%13% multi-family. Concentrations by real estate type within the CRE portfolio, excluding multi-family, were 14% Office, 13% Mixed Commercial Real Estate, 14% Office, 13% Retail, 10%11% Hospitality, 10%9% Industrial, 8% Gas Stations, 6% Residential, 5% Special Purpose, 5% Residential,and 5% Medical Buildings, and 5% Mini Storage Facilities, with all remaining concentrations below 5%. There were no rent-controlled properties within the multi-family category. Office facilities are typically small and located in more rural areas. 21%22% of CRE loans were located in northern Nevada and 56%54% were located in northern California. OfNon-accrual theloans $14.1milliontotaled in$21.9 non-accrual balancesmillion at MarchJune 31,30, 2026, approximatelyof 11% were CRE. Of the $37.3 million in substandard balances at March 31, 2026which approximately 32% were CRE. Substandard loans totaled $42.8 million at June 30, 2026, of which approximately 32% were CRE.
The rates of interest charged on variable rate loans are set at specific increments in relation to the Company's lending rate or other indexes such as the published prime interest rate or U.S. Treasury rates and vary with changes in these indexes. The frequency in which variable rate loans reprice can vary from one day to several years. On MarchJune 31,30, 2026, and December 31, 2024,2025, approximately 80%79% 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 variable rate loan portfolio on MarchJune 31,30, 2026; these loans reprice within one day to three months of a change in the prime rate. The remainder of the Company's variable rate loans mostly consist of commercial real estate loans tied to U.S. Treasury rates and reprice every five years. Approximately 77% of the variable rate loans are indexed to the five-year T-Bill rate and reprice every five years. While real estate mortgage, agricultural, commercial and consumer lending remain the foundation of the Company's historical loan mix, some changes in the mix have occurred due to the changing economic environment and the resulting change in demand for certain loan types Analysis of Asset Quality and Allowance for Credit Losses. The Company attempts to minimize credit risk through its underwriting and credit review policies. The Company’s credit review process includes internally prepared credit reviews as well as contracting with an outside firm to conduct periodic credit reviews. The Company’s management and lending officers evaluate the loss exposure of classified and 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. In management's opinion, this loan review system helps facilitate the early identification of potential criticized loans. MARC also provides guidance for the maintenance and timely disposition of OREO properties including developing financing and marketing programs to incent individuals to purchase OREO. MARC consists of the Bank’s Chief Executive Officer, Chief Financial Officer, Chief Banking Officer, Regional President 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 Credit Loss (ACL) is established as management’s estimate of expected credit losses inherent in the Company’s lending activities; it is increased by the provision for credit losses and decreased by net charge-offs. The ACL is evaluated quarterly by management based on periodic reviews of the collectability of the Company's loans and current economic conditions. The ACL represents the portion of a loan’s amortized cost basis that the Company does not expect to collect due to anticipated credit losses over the loan’s remaining contractual life, adjusted for expected prepayments and curtailments. To estimate the collective ACL, the Company utilizes the Discounted Cash Flow (DCF) methodology. This method uses loan level repayment terms to determine expected cash flows which are then discounted by various assumptions such as prepayment or curtailment rates, Probability of Default (PD) and Loss Given Default (LGD) rates.
The Company incorporates forward-looking information using macroeconomic forecast data obtained from publicly available sources, including variables considered key drivers of changes in credit losses. The Company applies a reasonable and supportable forecast period, followed by a reversion to historical loss information.
The allowance for credit losses is established through charges to earnings in the form of the provision for credit losses. 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.
To estimate the Allowance for Credit Loss (ACL), the Company elected to use the Discounted Cash Flow (DCF) methodology. This method uses loan level repayment terms to determine expected cash flows which are then discounted by various assumptions such as prepayment or curtailment rates, Probability of Default and Loss Given Default rates.
PLBC insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 2 Form 4 filings (2 insiders, 2 trade dates, 510 shares, about $26.1K) and open-market sales in 1 filing (1 insider, 1 trade date, 1,200 shares, about $73.8K). Net open-market shares: -690 (purchases minus sales); net value about -$47.7K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-17 | Boigon Aaron M. |
Option exercise | 1,600 | $21.45 | $34.3K |
| 2026-08-26 | Kaiser Kevin Craig |
Open-market sale | 1,200 | $61.50 | $73.8K |
| 2026-07-13 | Kaiser Kevin Craig |
Option exercise | 1,400 | $21.45 | $30.0K |
| 2026-05-15 | Moseley Matthew Brock |
Open-market purchase | 40 | $51.18 | $2.0K |
| 2026-05-11 | Foster Michael Kevin |
Open-market purchase | 470 | $51.25 | $24.1K |
| 2026-04-30 | Moseley Matthew Brock |
Option exercise | 483 | $31.09 | $15.0K |
| 2026-04-30 | Boigon Aaron M. |
Option exercise | 2,500 | $21.45 | $53.6K |
Well-known investors holding PLBC (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Two Sigma Investments | 2026-06-30 | 106,659 | $6.2M | 0.0% | Added 918% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 47,908 | $2.8M | 0.0% | Added 126% |
| Renaissance Technologies | 2026-06-30 | 31,100 | $1.8M | 0.0% | Added 368% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 28,030 | $1.6M | 0.0% | Added 138% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 3,593 | $210.0K | 0.0% | New position |