Add
PLBC to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| PLBC > SEC Filings for PLBC > Form 10-Q on 9-Aug-2012 | All Recent SEC Filings |
9-Aug-2012
Quarterly Report
Certain matters discussed in this Quarterly Report are forward-looking
statements that are subject to risks and uncertainties that could cause actual
results to differ materially from those projected in the forward-looking
statements. Such risks and uncertainties include, among others, (1) significant
increases in competitive pressures in the financial services industry;
(2) changes in the interest rate environment resulting in reduced margins;
(3) general economic conditions, either nationally or regionally, maybe less
favorable than expected, resulting in, among other things, a deterioration in
credit quality; (4) changes in regulatory environment; (5) loss of key
personnel; (6) fluctuations in the real estate market; (7) changes in business
conditions and inflation; (8) operational risks including data processing
systems failures or fraud; and (9) changes in securities markets. Therefore, the
information set forth herein should be carefully considered when evaluating the
business prospects of Plumas Bancorp (the "Company").
When the Company uses in this Quarterly Report the words "anticipate", "estimate", "expect", "project", "intend", "commit", "believe" and similar expressions, the Company intends to identify forward-looking statements. Such statements are not guarantees of performance and are subject to certain risks, uncertainties and assumptions, including those described in this Quarterly Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected, projected, intended, committed or believed. The future results and stockholder values of the Company may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results and values are beyond the Company's ability to control or predict. For those statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
INTRODUCTION
The following discussion and analysis sets forth certain statistical information relating to the Company as of June 30, 2012 and December 31, 2011 and for the six and three month periods ended June 30, 2012 and 2011. 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, 2011.
Plumas Bancorp trades on The NASDAQ Capital Market under the ticker symbol "PLBC".
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There have been no changes to the Company's critical accounting policies from those disclosed in the Company's 2011 Annual Report to Shareholders on Form 10-K.
This discussion should be read in conjunction with our unaudited condensed consolidated financial statements, including the notes thereto, appearing elsewhere in this report.
The Company recorded net income of $857 thousand for the six months ended June 30, 2012, up $532 thousand from net income of $325 thousand during the six months ended June 30, 2011. The largest component of this increase was a $1.4 million reduction in the provision for loan losses. Additionally, net interest income increased by $22 thousand and non-interest expense declined by $616 thousand. The effect of these items was partially offset by a decline in non-interest income of $999 thousand and an increase in the provision for income taxes of $507 thousand. The decline in non-interest income was related to a reduction in gains on sale of government guaranteed loans of $665 thousand and a reduction in gain on sale of investment securities of $401 thousand.
Interest income in the six month periods declined by $376 thousand related to a decline in interest on loans and investment securities. Related to a decrease in average loan balances mostly offset by an increase in yield, interest on loans declined by $70 thousand. Interest on investment securities declined by $310 thousand mostly related to a decline in yield. These declines in interest income were offset by a decline in interest expense of $398 thousand primarily related to a decline in interest on time deposits of $392 thousand related to a decrease in the rate paid and average balance. Non-interest expense benefited from a $310 thousand decline in salary and benefit expense, a $301 thousand decrease in FDIC insurance expense, a $168 thousand decrease in Other Real Estate Owned (OREO) expense and a $667 thousand reduction in loss on sale of OREO partially offset by a $629 thousand increase in the provision for changes in valuation of OREO. Pre-tax earnings increased by $1 million from $337 thousand during the six months ended June 30, 2011 to $1.4 million during the current six month period. The provision for income taxes increased from $12 thousand during the 2011 period to $519 thousand during the current six month period.
Net income (loss) allocable to common shareholders increased from a loss of $17
thousand or $0.00 per share during the six months ended June 30, 2011 to income
of $515 thousand or $0.11 per share during the current six month period. Income
(loss) allocable to common shareholders is calculated by subtracting dividends
and discount amortized on preferred stock from net income.
Total assets at June 30, 2012 were $456 million, an increase of $465 thousand from $455 million at December 31, 2011. A decline in cash and cash equivalents of $28 million was used to fund an increase in investment securities of $16.6 million and loans of $13.6 million. Net loan balances increased from $287.4 million at December 31, 2011 to $301.0 million at June 30, 2012 and investment securities increased from $57.9 million at December 31, 2011 to $74.5 million at June 30, 2012. OREO and Other Vehicles Owned (OVO) declined by $0.9 million and all other assets declined by $0.8 million.
Deposits increased by $3.7 million from $391 million at December 31, 2011 to $395 million at June 30, 2012. Non-interest bearing demand deposits increased by $1.9 million and savings and money market accounts increased by $7.4 million. Interest bearing transaction accounts (NOW) accounts decreased by $1.9 million and time deposits declined by $3.7 million. Offsetting this increase in deposits was a decline of $4.5 million in repurchase agreements. Shareholders' equity increased by $1.0 million from $39.6 million at December 31, 2011 to $40.6 million at June 30, 2012.
The annualized return on average assets was 0.38% for the six months ended June 30, 2012 up from 0.14% for the six months ended June 30, 2011. The annualized return (loss) on average common equity was 3.6% for the six months ended June 30, 2012 up from (0.1%) for the six months ended June 30, 2011.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2012
Net interest income before provision for loan losses. Net interest income, on a nontax-equivalent basis, for the six months ended June 30, 2012 was $8.39 million, an increase of $22 thousand from the $8.37 million earned during the same period in 2011. The largest components of the increase in net interest income were a decline in the average balance and rate paid on time deposits and an increase in yield on the Company's loan portfolio. These items were mostly offset by a decline in yield and average balance in investment securities and a decline in average balance in loans. Net interest margin for the six months ended June 30, 2012 increased 13 basis points, or 3%, to 4.19%, up from 4.06% for the same period in 2011.
Interest expense on deposits decreased by $436 thousand, or 48%, to $465 thousand for the six months ended June 30, 2012, down from $901 thousand for the same period in 2011. This decrease primarily relates to decreases in the average balance and rate paid on time deposits, a decline in average balance of NOW deposits and declines in the rate paid on NOW and money market accounts.
Interest on time deposits declined by $392 thousand. Average time deposits declined by $30.1 million from $108.6 million during the first six months of 2011 to $78.4 million during the six months ended June 30, 2012. The decrease in time deposits is substantially related to a promotional time deposit product we began offering in June, 2009 and continued to offer until April 30, 2010. These promotional time deposits, which totaled $18 million at June 30, 2011, had all matured prior to January 1, 2012. In addition, the Bank has held down the rate paid on time deposits in 2012 as it has significant excess liquidity and does not need to overpay for deposits. The average rate paid on promotional deposits during the six months ended June 30, 2011 was 2%. The average rate paid on time deposits decreased from 1.27% during the first half of 2011 to 0.75% during the current six month period. This decrease primarily relates to a decline in market rates in the Company's service area and the maturity of the higher rate promotional deposits.
Interest expense on NOW accounts declined by $44 thousand. Rates paid on NOW accounts declined by 7 basis points from 0.21% during the first six months of 2011 to 0.14% during the same period in 2012, mostly related to a decline in higher rate public sweep accounts. Public sweep accounts declined from $24.2 million at June 30, 2011 to $16.7 million at June 30, 2012 and are the primary reason for the decline in average balance in NOW deposits from $97.7 million during the six months ended June 30, 2011 to $85.1 million during the current six month period.
Interest expense on money market accounts decreased by $15 thousand related to a decrease in rate paid on these accounts of 8 basis points from 0.31% during the six months ended June 30, 2011 to 0.23% during the current six month period. This was primarily related to our money market sweep product which paid rates in excess of those offered on our other money market products. We no longer offer the money market sweep account having replaced it with a product that utilizes repurchase agreements during the third quarter of 2011. Interest expense on savings accounts increased by $15 thousand related to an increase in average balance from $56.4 million during the six months ended June 30, 2011 to $66.9 million during the current period.
Interest expense on repurchase agreements totaled $9 thousand during the six months ended June 30, 2012 and the average rate paid was 0.30%. This compares to interest of $1 thousand and an average rate of 0.32% during the six months ended June 30, 2011. Interest expense on junior subordinated debentures, which totaled $171 thousand reflecting an increase of $19 thousand from the first half of 2011, fluctuates with changes in the 3-month London Interbank Offered Rate (LIBOR) rate. In addition, as a result of deferring our interest payments under the debentures we are required to pay interest on the deferred interest payments. This has the effect of increasing the effective yield on the debentures.
For the Six Months Ended June 30, 2012 For the Six Months Ended June 30, 2011
Average Balance Interest Yield/ Average Balance Interest Yield/
(in thousands) (in thousands) Rate (in thousands) (in thousands) Rate
Interest-earning assets:
Loans (1) (2) (3) $ 296,938 $ 8,614 5.83 % $ 306,908 $ 8,684 5.71 %
Investment securities (1) 61,221 396 1.30 % 67,143 706 2.12 %
Interest-bearing deposits 44,388 56 0.25 % 42,126 52 0.25 %
Total interest-earning assets 402,547 9,066 4.53 % 416,177 9,442 4.58 %
Cash and due from banks 13,047 12,881
Other assets 40,815 42,679
Total assets $ 456,409 $ 471,737
Interest-bearing liabilities:
NOW deposits $ 85,117 59 0.14 % $ 97,707 103 0.21 %
Money market deposits 41,530 48 0.23 % 40,609 63 0.31 %
Savings deposits 66,886 64 0.19 % 56,427 49 0.18 %
Time deposits 78,438 294 0.75 % 108,562 686 1.27 %
Total deposits 271,971 465 0.34 % 303,305 901 0.60 %
Repurchase agreements 6,023 9 0.30 % 628 1 0.32 %
Other interest-bearing liabilities 1,089 29 5.36 % 572 18 6.35 %
Junior subordinated debentures 10,310 171 3.34 % 10,310 152 2.97 %
Total interest-bearing liabilities 289,393 674 0.47 % 314,815 1,072 0.69 %
Non-interest bearing deposits 121,736 111,256
Other liabilities 4,893 6,837
Shareholders' equity 40,387 38,829
Total liabilities & equity $ 456,409 $ 471,737
Cost of funding interest-earning
assets (4) 0.34 % 0.52 %
Net interest income and margin (5) $ 8,392 4.19 % $ 8,370 4.06 %
|
(1) Not computed on a tax-equivalent basis.
(2) Average nonaccrual loan balances of $15.6 million for 2012 and $23.6 million for 2011 are included in average loan balances for computational purposes.
(3) Net loan fees included in loan interest income for the six-month periods ended June 30, 2012 and 2011 were $2,000 and $41,000, respectively.
(4) Total annualized interest expense divided by the average balance of total earning assets.
(5) Annualized net interest income divided by the average balance of total earning assets.
2012 over 2011 change in net interest income
for the six months ended June 30
(in thousands)
Volume (1) Rate (2) Mix (3) Total
Interest-earning assets:
Loans $ (283 ) $ 195 $ 18 $ (70 )
Investment securities (62 ) (274 ) 26 (310 )
Interest bearing deposits 3 1 - 4
Total interest income (342 ) (78 ) 44 (376 )
Interest-bearing liabilities:
NOW deposits (13 ) (36 ) 5 (44 )
Money market deposits 1 (16 ) - (15 )
Savings deposits 9 5 1 15
Time deposits (191 ) (281 ) 80 (392 )
Repurchase agreements 9 - (1 ) 8
Other 16 (3 ) (2 ) 11
Junior subordinated debentures - 19 - 19
Total interest expense (169 ) (312 ) 83 (398 )
Net interest income $ (173 ) $ 234 $ (39 ) $ 22
|
(1) The volume change in net interest income represents the change in average balance multiplied by the previous year's rate.
(2) The rate change in net interest income represents the change in rate multiplied by the previous year's average balance.
(3) The mix change in net interest income represents the change in average balance multiplied by the change in rate.
Provision for loan losses. During the six months ended June 30, 2012 we recorded a provision for loan losses of $0.9 million down $1.4 million from the $2.3 million provision recorded during the first half of 2011. A large portion of the $2.3 million provision in the 2011 period was related to a specific reserve required on one significant land development loan relationship. See "Analysis of Asset Quality and Allowance for Loan Losses" for further discussion of loan quality trends and the provision for loan losses.
The allowance for loan losses is maintained at a level that management believes will be appropriate to absorb inherent losses on existing loans based on an evaluation of the collectability of the loans and prior loan loss experience. The evaluations take into consideration such factors as changes in the nature and volume of the portfolio, overall portfolio quality, review of specific problem loans, and current economic conditions that may affect the borrower's ability to repay their loan. The allowance for loan losses is based on estimates, and ultimate losses may vary from the current estimates. These estimates are reviewed not less than quarterly and, as adjustments become necessary, they are reported in earnings in the periods in which they become known.
Based on information currently available, management believes that the allowance for loan losses is appropriate to absorb potential risks in the portfolio. However, no assurance can be given that the Company may not sustain charge-offs which are in excess of the allowance in any given period.
Non-interest income. During the six months ended June 30, 2012 non-interest income decreased by $999 thousand to $3.0 million from $4.0 million during the first half of 2011. The largest component of this decrease was due to a decrease of $665 thousand in gains on the sale of government guaranteed loans from $1.1 million during the first half of 2011 to $473 thousand during the current six month period. Beginning in the first quarter of 2011, related to a change in SBA requirements guaranteed portions of SBA loans were no longer required to be sold with a 90 day premium recourse
Service charges on deposit accounts increased by $85 thousand primarily related to an increase in use of overdraft protection services. During the fourth quarter of 2011 we introduced a new overdraft draft protection (ODP) program which we made available to a larger portion of our customer base than the prior program, resulting in an increase in service fee income. This new program has enabled us to increase income while strengthening our regulatory compliance over the ODP function.
The following table describes the components of non-interest income for the six-month periods ending June 30, 2012 and 2011, dollars in thousands:
For the Six Months
Ended June 30 Dollar Percentage
2012 2011 Change Change
Service charges on deposit accounts $ 1,786 $ 1,701 $ 85 5.0 %
Gain on sale of loans 473 1,138 (665 ) -58.4 %
Gain on sale of securities 211 612 (401 ) -65.5 %
Earnings on life insurance policies 172 177 (5 ) -2.8 %
Loan servicing income 92 107 (15 ) -14.0 %
Customer service fees 69 69 - - %
Other 212 210 2 1.0 %
Total non-interest income $ 3,015 $ 4,014 $ (999 ) -24.9 %
|
Non-interest expense. We continue to achieve savings in many categories of non-interest expense resulting in a reduction in non-interest expense of $616 thousand from $9.7 million during the six months ended June 30, 2011 to $9.1 million during the current six month period. Significant reductions in salary and benefits expense, FDIC insurance, OREO expense and loss on sale of OREO and OVO were partially offset by an increase in the provision for changes in valuation of OREO of $629 thousand, an increase in outside service fees of $65 thousand and an increase in insurance expense of $60 thousand.
Salaries and employee benefits decreased by $310 thousand primarily related to a decline in officer salary continuation costs, a decline in commission expense and an increase in deferred loan origination costs. Salary continuation expense was abnormally high during the first six months of 2011 as we were required to record a one-time adjustment to reflect the early retirement of the Company's Chief Credit Officer, this along no longer having a need for an ongoing accrual for this individual were the primary reasons for a decline in officer salary continuation expense of $90 thousand. Commission expense, which relates to government-guaranteed lending personnel, decreased by $146 thousand consistent with the decline in government-guaranteed loan sales during the comparison periods. Related to an increase in lending activity, the deferral of loan origination costs increased by $165 thousand. Partially offsetting these reductions in salary and benefit expense was an increase in stock compensation expense of $141 thousand from a credit of $69 thousand during the first half of 2011 to expense of $72 thousand during the current period. The credit in stock compensation expense during the 2011 period was related to a revision in the estimated forfeiture rate compared to the current periods adjustment to estimated forfeiture rate which resulted in an increase in compensation expense. Salary expense, excluding commissions, increased by $2 thousand.
A decline of $301 thousand in FDIC insurance expense relates to a decline in the rate charged Plumas Bank by the FDIC. This decline in rate includes a change in the assessment base and assessment rate under new rules enacted pursuant to the
OREO expense declined by $168 thousand from $215 thousand during the six months . . .
|
|