Plumas Bancorp has a market cap of $11.1 million; its shares were traded at around $2.3 with and P/S ratio of 0.4.
Highlight of Business Operations:The Company recorded net income of $906 thousand or $0.08 per share for the nine months ended September 30, 2010, up from a net loss of $5.6 million or ($1.28) per share for the nine months ended September 30, 2009. This increase in earnings resulted from a decline in the provision for loan losses of $7.6 million, an increase in non-interest income of $2.5 million and a decrease in non-interest expense of $2.2 million. These items were partially offset by a decline in net interest income of $1.2 million and an increase in the provision for income taxes of $4.6 million.
Total assets at September 30, 2010 were $491 million, a decrease of $37 million from the $528 million at December 31, 2009. Cash and due from banks increased by $3.7 million from $59.5 million at December 31, 2009 to $63.2 million at September 30, 2010. Investment securities declined by $24 million from $87.9 million at December 31, 2009 to $63.5 million at September 30, 2010. Included in the decline in investment securities were sales totaling $21.2 million with a gain on sale of $780 thousand. Net loans decreased by $9.9 million which included net charge-offs of $6.6 million during the nine months ended September 30, 2010. Short-term borrowings, which totaled $20 million at December 31, 2009, matured in January of 2010. Long-term borrowings, which also totaled $20 million at December 31, 2009, were paid off during July, 2010. Deposits decreased by $1.2 million from $433.3 million at December 31, 2009 to $432.1 million at September 30, 2010. The decline in borrowings and deposits was slightly offset by a $3.2 million increase in other liabilities. Included in other liabilities is a $2.9 million secured borrowing which represents SBA loans sold but subject to a 90-day premium recourse provision. We are required to maintain this liability and the related loans on the 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 $1.4 million or 8%, to $15.7 million for the nine months ended September 30, 2010 primarily as a result of a $34.9 million decline in the average balance of loans. Interest and fees on loans decreased $1.3 million to $14.3 million for the nine months ended September 30, 2010 as compared to $15.6 million during the first nine months of 2009. The Companys average loan balances were $326 million for the nine months ended September 30, 2010, down from $360 million for the same period in 2009. The decline in loan balances includes net charge-offs which totaled $8.7 million from October 1, 2009 to September 30, 2010. The average rate earned on the Companys loan balances increased 9 basis points to 5.86% during the first nine months of 2010 compared to 5.77% during the first nine months of 2009. The increase in loan yield reflects a decline in average nonaccrual loan balances. Average nonaccrual loans totaled $28.3 million during the nine months ended September 30, 2009 and $16.7 million during the current nine month period. Interest income on investment securities decreased by $103 thousand related to a decline in yield of 90 basis points. The decline in yield is primarily related to the replacement of matured and sold investment securities with new investments with market yields below those which they replaced. Interest income on other interest-earning assets, which totaled $27 thousand in 2010 and zero in 2009, relates to interest on balances held at the Federal Reserve.
Interest expense on long-term borrowings totaled $129 thousand during the nine months ended September 30, 2010. We chose to prepay 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 $51 thousand to $5 thousand related to a decline in average balance of $23.7 million from $25.0 million during the first nine months of 2009 to $1.3 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 $59 thousand as a result of a decrease in LIBOR.
Net charge-offs totaled $6.6 million during the nine months ended September 30, 2010 and $10.2 million during the same period in 2009. Net charge-offs as an annualized percentage of average loans decreased from 3.77% during the nine months ended September 30, 2009 to 2.73% during the current period. While we incurred significant charge-offs during the 2010 period, $3.1 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 $6.6 million at September 30, 2010 and $8.4 million at September 30, 2009. The decrease in the allowance for loan losses from September 30, 2009 is attributable to a $1.3 million decrease in specific reserves related to impaired loans from $2.5 million at September 30, 2009 to $1.2 million at September 30, 2010 and a decrease of $35 million in average loan balances. General reserves decreased by $381 thousand to $5.5 million at September 30, 2010 primarily related to a decline in loan balances. Related to the decrease in specific reserves on impaired loans, the allowance for loan losses as a percentage of total loans decreased from 2.43% at September 30, 2009 to 2.07% at September 30, 2010.
Non-interest income. During the nine months ended September 30, 2010 non-interest income increased by $2.5 million to $6.5 million, from $4.0 million during the nine months ended September 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 provides our customers with a superior merchant processing solution. Additionally we sold $21.2 million in securities recording a gain on sale of $780 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 $10.4 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 $600 thousand representing the sale of $8.3 million in loans. Additional SBA loans totaling $2.9 million were sold during the third quarter; 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 fourth quarter, assuming no premiums are refunded, the Company will recognize a gain on sale of approximately $221 thousand; however, it will also incur commission expense of approximately $76 thousand.
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