Plumas Bancorp has a market cap of $14.8 million; its shares were traded at around $3.1 with and P/S ratio of 0.5.
Highlight of Business Operations:The Company recorded net income of $710 thousand or $0.08 per share for the six months ended June 30, 2010, up from a net loss of $4.5 million or ($1.00) per share for the six months ended June 30, 2009. This increase in earnings resulted from a decline in the provision for loan losses of $6.35 million, an increase in non-interest income of $2.2 million and a decrease in non-interest expense of $1.1 million. These items were partially offset by a decline in net interest income of $875 thousand and an increase in the provision for income taxes of $3.6 million.
Total assets at March 31, 2010 were $506 million, a decrease of $22 million from the $528 million at December 31, 2009. Cash and due from banks increased by $3.0 million from $59.5 million at December 31, 2009 to $62.5 million at June 30, 2010. Funding was provided by an $18 million decline in investment securities from $87.9 million at December 31, 2009 to $70.2 million at June 30, 2010. Included in the decline in investment securities were sales totaling $14.6 million with a gain on sale of $580 thousand. Net loans decreased by $5.1 million which included net charge-offs of $5.8 million during the six months ended June 30, 2010. Short-term borrowings, which totaled $20 million at December 31, 2009, matured in January of 2010. Deposits decreased by $8.3 million from $433.2 million at December 31, 2009 to $424.9 million at June 30, 2010. The decline in borrowings and deposits was slightly offset by a $5.2 million increase in other liabilities. Included in other liabilities is a $4.9 million secured borrowing which represents SBA loans sold but subject to a 90-day premium recourse provision. Under ASC Topic 860, Accounting for Transfers of Financial Assets, we are required to maintain this liability and the related loans on balance sheet until the premium recourse period has passed. Once the 90 days has passed and no premium recourse remains we will remove the sold loans from assets, derecognize the secured borrowing and record the gain on sale.
Interest income decreased $878 thousand or 8%, to $10.6 million for the six months ended June 30, 2010 primarily as a result of a decline in the average balance of loans. Interest and fees on loans decreased $964 thousand to $9.5 million for the six months ended June 30, 2009 as compared to $10.5 million during the first half of 2009. The Companys average loan balances were $327 million for the six months ended June 30, 2010, down $35.7 million, or 10%, from $363 million for the same period in 2009. The decline in loan balances includes net charge-offs which totaled $11.9 million from July 1, 2009 to June 30, 2010 as well as loans transferred to OREO. The average rate earned on the Companys loan balances increased 4 basis points to 5.86% during the first six months of 2010 compared to 5.82% during the first six months of 2009. The increase in loan yield reflects a decline in nonperforming loan balances. Nonperforming loans totaled $17.6 million at June 30, 2010 down from $31.3 million at June 30, 2009. Interest income on investment securities increased by $67 thousand as an increase in average balances of $23.0 million, from $51.8 million for the six months ended June 30, 2009 to $74.8 million during the current period, was partially offset by a decline in yield of 100 basis points. Much of the decline in yield is related to the increase in investment balance as additions to the investment portfolio had a lower yield than investments purchased prior to June 30, 2009. Interest income on other interest-earning assets, which totaled $19 thousand in 2010 and zero in 2009, relates to interest on balances held at the Federal Reserve.
Interest expense on long-term borrowings, which at June 30, 2010 consisted of two $10 million FHLB advances, totaled $129 thousand. The first advance was scheduled to mature on November 23, 2011 and bore interest at 1.00%. The second advance was scheduled to mature on November 23, 2012 and bore interest at 1.60%. We chose to prepay both of these borrowings during July 2010 as we had significant excess liquidity and no longer projected a need for these long-term borrowings. We incurred a $226 thousand prepayment penalty on these advances which we anticipate will be more than offset by future savings in interest expense. There were no long-term borrowings outstanding during the 2009 period. Interest on short-term borrowings decreased by $30 thousand to $5 thousand related to a decline in average balance of $25.6 million from $27.6 million during the first six months of 2009 to $2.0 million during the current period. Interest expense paid on junior subordinated debentures, which fluctuates with changes in the 3-month London Interbank Offered Rate (LIBOR), decreased by $58 thousand as a result of a decrease in LIBOR.
Net charge-offs as an annualized percentage of average loans increased from 3.39% during the six months ended June 30, 2009 to 3.59% during the current period; however, we experienced a significant decline in nonperforming loans from $31.3 million at June 30, 2009 to $17.6 million at June 30, 2010. While we incurred significant charge-offs during the 2010 period, $2.6 million of the charge-offs had been incorporated in the allowance for loan losses at December 31, 2009 as specific reserves on impaired loans. The allowance for loan losses totaled $6.1 million at June 30, 2010 and $9.9 million at June 30, 2009. The decrease in the allowance for loan losses from June 30, 2009 is attributable to a $3.6 million decrease in specific reserves related to impaired loans from $4.8 million at June 30, 2009 to $1.2 million at June 30, 2010. General reserves decreased by $118 thousand to $5.0 million at June 30, 2010. The allowance for loan losses as a percentage of total loans decreased from 2.72% at June 30, 2009 to 1.90% at June 30, 2010.
Non-interest income. During the six months ended June 30, 2010 non-interest income increased by $2.2 million to $4.7 million, from $2.5 million during the six months ended June 30, 2009. This increase was primarily related to three items, the largest of which was a $1.4 million gain on the sale of our merchant processing portfolio. During June 2010 we entered into an alliance with a world-wide merchant processing leader. In conjunction with this alliance we sold our merchant processing business, recording a one-time gain of $1.4 million. The Company believes that this alliance will provide our customers with a superior merchant processing solution. Additionally we sold $14.6 million in securities recording a gain on sale of $580 thousand. We chose to sell substantially all of our municipal securities portfolio as part of our overall asset/liability management strategy and related to the favorable market price for these securities. In addition, we sold $4 million in U.S. government agency securities to lock in significant gains that were available on these securities. Finally, we recorded a gain on sale of SBA loans of $240 thousand representing the sale of $3.4 million in loans. Additional SBA loans totaling $4.9 million were sold in May and June; however, the gain on sale generated will not be recorded until the 90-day premium recourse period on SBA loan sales has expired. During the third quarter, assuming no premiums are refunded, the Company will recognize a gain on sale of approximately $350 thousand; however, it will also incur commission expense of approximately $100 thousand.
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