Plumas Bancorp(PLBC) - 2024 Q2 - Quarterly Results

Earnings and Performance Overview Plumas Bancorp's Q2 and YTD 2024 earnings show mixed results, with strategic transactions impacting profitability and operational highlights Second Quarter 2024 Earnings Highlights Net income slightly increased in Q2 2024 to $6.8 million, while six-month net income decreased, and key profitability ratios declined Net Income and Diluted EPS | Metric | Q2 2024 | Q2 2023 | Change | Six Months 2024 | Six Months 2023 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Income | $6.8M | $6.7M | +$0.1M | $13.0M | $14.3M | -$1.3M | | Diluted EPS | $1.14 | $1.12 | +$0.02 | $2.19 | $2.41 | -$0.22 | Performance Ratios | Performance Ratio | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Return on Average Assets (ROA) | 1.67% | 1.70% | 1.61% | 1.81% | | Return on Average Equity (ROE) | 17.1% | 20.5% | 16.7% | 22.7% | President's Comments The President highlighted deposit stabilization, strong SBA loan growth, benefits from securities restructuring, and Russell 2000 index inclusion - Key operational and strategic points mentioned by the CEO include: - Deposits stabilized during the second quarter[5] - Continued loan growth with strong SBA production, currently focused on fixed-rate 7(a) loans[6] - The restructured securities portfolio's increased yield is offsetting higher rent expenses from the sale-leaseback transaction[7] - The company was included again in the Russell 2000 index, which is expected to improve stock liquidity[8] - Plumas Bank received several industry awards, recognizing its strong performance across various metrics compared to peer institutions[9][12] Key Transactions: Sales/Leaseback and Investment Restructuring The company executed a sale-leaseback of nine properties for a $19.9 million gain, offsetting a $19.8 million loss from selling lower-yielding securities to reinvest at higher yields - The company sold nine branch properties for approximately $25.7 million, resulting in a net gain of $19.9 million[9][10] - Concurrently, it entered into a 15-year lease agreement for these properties with an initial annual rent of about $2.4 million[10] - To offset the gain, the company sold $115 million in investment securities with a 2.24% yield, realizing a $19.8 million loss[11] - It then purchased $120 million in new securities with a much higher weighted average tax equivalent yield of 5.25%[11] Financial Condition Analysis This section analyzes the company's balance sheet, asset quality, liquidity, and capital resources as of June 30, 2024 Balance Sheet Analysis Total assets grew 4.4% to $1.64 billion, driven by loan growth, while deposits declined and total equity increased significantly by 28% Balance Sheet Item Overview | Balance Sheet Item | June 30, 2024 | June 30, 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Gross Loans | $997 million | $935 million | +$62 million | +7% | | Total Deposits | $1.3 billion | $1.4 billion | -$91 million | -6.5% | | Total Equity | $165 million | $128.6 million | +$36.6 million | +28% | | Book Value Per Share | $28.01 | $21.92 | +$6.09 | +28% | Loans, Deposits, Investments and Cash Gross loans increased by $62 million, primarily in commercial real estate, while total deposits decreased by $91 million due to rate-seeking customers - Gross loans increased by 7% YoY, driven by growth in commercial real estate (+$71M) and construction loans (+$12M), partially offset by a decrease in automobile loans (-$22M)[13] - Total deposits fell by $91 million, with decreases in demand deposits (-$46M) and savings deposits (-$51M)[15] - The company attributes this deposit decline to the interest rate environment, with non-interest-bearing deposits constituting 51% of total deposits[15] - Total investment securities decreased by $24 million to $445 million, while cash and due from banks increased by $18 million to $110 million[16] Asset Quality Asset quality improved with nonperforming assets decreasing to 0.56% of total assets, and the allowance for credit losses increased to $14.1 million Asset Quality Metrics | Asset Quality Metric | June 30, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Nonperforming Assets | $9.1 million | $9.6 million | | Nonperforming Assets / Total Assets | 0.56% | 0.61% | | Nonperforming Loans / Total Loans | 0.90% | 1.02% | - The provision for credit losses for the first half of 2024 was $1.7 million, down from $2.9 million in the first half of 2023[18] Allowance for Credit Losses (in thousands) | Allowance for Credit Losses (in thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Beginning Balance | $12,867 | $10,717 | | Provision | $1,825 | $2,550 | | Net Charge-offs | ($610) | ($411) | | Ending Balance | $14,082 | $13,385 | Shareholders' Equity Total shareholders' equity significantly increased by $36.6 million to $165.2 million, driven by net earnings and a positive change in comprehensive loss - The $36.6 million increase in shareholders' equity over the twelve-month period was composed of: - +$28.5 million from earnings[23] - +$13.3 million from a decrease in accumulated other comprehensive loss[23] - +$0.9 million from stock activity[23] - -$6.1 million from cash dividends[23] Liquidity and Capital Resources The company manages liquidity through BTFP borrowings and substantial unused credit lines, maintaining adequate resources for future operations - The company utilized the Bank Term Funding Program (BTFP), borrowing an additional $25 million in January 2024 to bring the total outstanding to $105 million at a rate of 4.85%, maturing in January 2025[24] - The company has significant available borrowing capacity, including $235 million from the FHLB and $70 million from correspondent banks, with no outstanding balances on these lines as of June 30, 2024[26] - Uninsured deposits are estimated at $423 million, of which $100 million are collateralized public funds[27] Results of Operations This section details the company's net interest income, net interest margin, and non-interest income and expense for Q2 and the first half of 2024 Net Interest Income and Net Interest Margin Net interest income increased for both periods, driven by higher loan and investment yields, leading to an expanded net interest margin of 4.89% in Q2 2024 Net Interest Income and Margin | Metric | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $18.4M | $17.2M | $35.9M | $34.4M | | Net Interest Margin | 4.89% | 4.69% | 4.76% | 4.66% | Three Months Ended June 30, 2024 Q2 2024 net interest income rose by $1.2 million to $18.4 million, with higher loan and investment yields offsetting increased interest expense - Interest income on loans increased by $2.0 million due to a $61 million increase in average balances and a 48 bps rise in average yield to 6.32%[29][30] - Interest income on investment securities increased by $669 thousand, with the average yield rising 86 bps to 4.11%, reflecting the portfolio restructuring[31] - Total interest expense increased by $1.8 million, driven by higher market rates, a time deposit promotion, and $1.4 million in interest on BTFP borrowings[33][35] Six Months Ended June 30, 2024 For the first half of 2024, net interest income grew by $1.5 million to $35.9 million, supported by higher loan yields despite increased interest expense - Interest income on loans for the six-month period increased by $3.9 million, as average loan balances grew by $55 million and the average yield increased by 48 bps to 6.21%[38] - Interest expense for the six-month period increased by $3.7 million, with the average rate on interest-bearing liabilities rising from 0.46% to 1.39%[40] - Interest on borrowings, primarily BTFP, accounted for $2.8 million of this expense[43] Non-Interest Income and Expense Q2 2024 non-interest income was stable, while non-interest expense rose due to salaries and occupancy costs, with a YTD decrease in non-interest income due to a prior-year gain Three Months Ended June 30, 2024 Non-interest income remained stable at $2.2 million, while non-interest expense increased by $1.3 million, mainly due to higher salaries and occupancy costs - Non-interest income was stable at $2.2 million, with minor fluctuations across categories[44] - Non-interest expense rose by $1.3 million, with the largest drivers being a $417k increase in salaries/benefits and a $696k increase in occupancy/equipment costs[45] Six Months Ended June 30, 2024 Non-interest income decreased by $1.7 million due to a non-recurring prior-year gain, while non-interest expense increased by $2.5 million from salaries and occupancy - The $1.7 million decrease in non-interest income was primarily due to a $1.7 million gain on termination of interest rate swaps in the prior-year period that did not recur[46] - Non-interest expense increased by $2.5 million, led by a $716k rise in salary/benefits and a $1.0M increase in occupancy/equipment costs from the sale-leaseback[47] Financial Statements and Supplementary Data This section provides detailed unaudited consolidated financial statements and supplementary data for Plumas Bancorp as of and for periods ended June 30, 2024 Condensed Consolidated Balance Sheets Presents the company's assets, liabilities, and shareholders' equity, showing total assets increased 4.4% to $1.64 billion as of June 30, 2024 Condensed Consolidated Balance Sheets (in thousands) | (In thousands) | June 30, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Total Assets | $1,642,097 | $1,572,985 | | Gross Loans | $997,334 | $935,214 | | Total Deposits | $1,304,587 | $1,395,160 | | Borrowings | $120,000 | $10,000 | | Total Liabilities | $1,476,942 | $1,444,427 | | Shareholders' Equity | $165,155 | $128,558 | Condensed Consolidated Statements of Income Details the company's revenues and expenses, reporting net income of $6.8 million for Q2 2024 and $13.0 million for the first six months Condensed Consolidated Statements of Income (Three Months Ended June 30, in thousands) | For the Three Months Ended June 30, (In thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net interest income | $18,405 | $17,239 | | Provision for credit losses | $925 | $1,350 | | Non-interest income | $2,202 | $2,143 | | Non-interest expense | $10,396 | $9,098 | | Net income | $6,786 | $6,660 | Condensed Consolidated Statements of Income (Six Months Ended June 30, in thousands) | For the Six Months Ended June 30, (In thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net interest income | $35,862 | $34,388 | | Provision for credit losses | $1,746 | $2,875 | | Non-interest income | $4,342 | $6,068 | | Non-interest expense | $20,793 | $18,323 | | Net income | $13,040 | $14,285 | Selected Financial Information Provides key performance ratios, credit quality data, capital ratios, and detailed components of income and expense for deeper financial insight Selected Ratios | Selected Ratios | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Return on average assets | 1.67% | 1.70% | | Net interest margin | 4.89% | 4.69% | | Efficiency ratio | 50.4% | 46.9% | | Nonperforming assets to total assets | 0.56% | 0.61% | | Tier 1 Leverage Ratio (Plumas Bank) | 11.3% | 10.3% | Loan and Deposit Composition Details the loan portfolio, with commercial real estate at 59.0%, and deposit base, where non-interest-bearing deposits represent 51.4% of total Loan Type (June 30, 2024) | Loan Type (June 30, 2024) | Balance (in thousands) | % of Total | | :--- | :--- | :--- | | Real estate – commercial | $588,332 | 59.0% | | Agricultural | $123,661 | 12.4% | | Auto | $80,751 | 8.1% | | Commercial | $81,170 | 8.1% | | Total Gross Loans | $997,334 | 100% | Deposit Type (June 30, 2024) | Deposit Type (June 30, 2024) | Balance (in thousands) | % of Total | | :--- | :--- | :--- | | Non-interest bearing | $670,652 | 51.4% | | Savings | $322,081 | 24.7% | | Money Market | $214,063 | 16.4% | | Time | $97,791 | 7.5% | | Total Deposits | $1,304,587 | 100% |