Update on Plumas Bancorp (NASDAQ: PLBC)
This post is an update on Plumas Bancorp’s Q2 2024.
Plumas Bancorp (NASDAQ: PLBC) is a community bank with $1+ billion in deposits headquartered in Reno, Nevada.
My original writeup on the business can be found here: https://possiblevalue.substack.com/p/plumas-bancorp-ticker-plbc
My plan is to provide more consistent updates on businesses going forward and this post along with my previous one on Revolve, Yeti, and Deckers Outdoor Corporation serve as my first steps on to that path.
Plumas issued an earnings release for Q2 2024 along with a corresponding investor presentation. An additional 8-K was released this morning declaring a common dividend of $0.27 per share payable on August 15, 2024. Links to all three filings can be found here:
Business Update
All of the financial information below was taken from the earnings release and investor presentation linked above.
Net income – Q2 2024 earnings increased $126,000 to $6.8 million or $1.15 per share, from $6.7 million or $1.14 per share in Q2 2023.For the six months ended 6/30/2024, net income was $13 million or $2.21 per share versus which was down $1.2 million from $14.3 million or $2.44 per share during the first six months of 2023. Earnings per diluted share decreased to $2.19 during the six months ended June 30, 2024, down $0.22 from $2.41 during the first six months of 2023.
ROE and ROAA - Return on average assets was 1.67% during the current quarter, down slightly from 1.70% during the second quarter of 2023. Return on average assets was 1.61% during the six months ended June 30, 2024, down from 1.81% during the first half of 2023.
Return on average equity decreased to 17.1% for the three months ended June 30, 2024, down from 20.5% during the second quarter of 2023. Return on average equity decreased to 16.7% for the six months ended June 30, 2024, down from 22.7% during the first half of 2023.
Loans – Gross loans increased by $62 million or 7% to $997 million from $935 million at June 30, 2023. 75% of Pumas’ loan portfolio was comprised of variable rate loans as of June 30, 2024.
Deposits – Total deposits decreased $91 million to $1.3 billion at June 30, 2024 due to higher interest rates causing some customers to withdraw their funds in search of higher rates elsewhere and business customers being reluctant to borrow to fund their operating expenses. As of June 30, 2024, 51% of Plumas’ deposits were non-interest bearing which you absolutely love to see.
Investments - Total investment securities decreased by $24 million from $469 million at June 30, 2023, to $445 million at June 30, 2024. The Bank’s investment security portfolio consists of debt securities issued by US Government agencies, US Government sponsored agencies and municipalities. Cash and due from banks increased by $18 million from $92 million at June 30, 2023, to $110 million at June 30, 2024.
Asset Quality – Plumas’ asset quality remains solid as shown in the screencap below which was taken from p. 15 of the earnings release linked above.
Management did note that, “Included in nonperforming loans at June 30, 2024 were agricultural loans from one borrower totaling $6.2 million which were over 90 days past due but not nonaccrual. We received payments on these loans totaling $1.6 million in July and concurrently with these payments we extended the maturity of the loans to August 15, 2024 which allows time for the borrower to sell the crops securing the remaining balance of principal and interest on the loans.”
Shareholder’s equity – Increased $36.6 million or 28.4% to $165.2 million at June, 30, 2024 from $128.6 million at June 30, 2023.
Debt – Plumas did take on some debt since Q2 of 2023. Per the earnings release, The Federal Reserve Board, on June 12, 2023, announced the creation of a new Bank Term Funding Program (BTFP). The BTFP offered loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage backed securities, and other qualifying assets as collateral. These assets will be valued at par. At December 31, 2023, the Company had outstanding borrowings under the BTFP totaling $80 million. In January 2024 the Company borrowed an additional $25 million under the BTFP for a total of $105 million outstanding at June 30, 2024. This borrowing bears interest at the rate of 4.85% and is payable on January 17, 2025. Borrowings under the BTFP can be prepaid without penalty. There were no borrowings under the BTFP at June 30, 2023. Interest expense recognized on the BTFP borrowings for the six months ended June 30, 2024, totaled $2.5 million.”
Net-interest income and margin - Net interest income was $18.4 million for the three months ended June 30, 2024, an increase of $1.2 million from the same period in 2023. The increase in net interest income includes an increase of $2.9 million in interest income partially offset by an increase of $1.8 million in interest expense. Interest and fees on loans increased by $2.0 million related to growth in the loan portfolio and an increase in yield on the portfolio. Interest expense increased from $984 thousand during the three months ended June 30, 2023 to $2.8 million during the current period related to an increase in rate paid on interest bearing liabilities and an increase in borrowings. The average rate paid on interest bearing liabilities increased from 0.56% during the 2023 quarter to 1.44% in 2024 related mainly to an increase in market interest rates, an increase in borrowings and the effect of a 4% time deposit promotion. Net interest margin for the three months ended June 30, 2024 increased 20 basis points to 4.89%, up from 4.69% for the same period in 2023.
Net interest income for the six months ended June 30, 2024 was $35.9 million, an increase of $1.5 million from the $34.4 million earned during the same period in 2023. The increase in net interest income includes an increase of $5.2 million in interest income partially offset by an increase of $3.7 million in interest expense. Interest expense increased from $1.6 million during the six months ended June 30, 2023 to $5.3 million during the current period related to an increase in rate paid on interest bearing liabilities and an increase in borrowings. The average rate paid on interest bearing liabilities increased from 0.46% during the 2023 period to 1.39% in 2024 related mainly to an increase in market interest rates, an increase in borrowings and the effect of a 4% time deposit promotion. Net interest margin for the six months ended June 30, 2024 increased 10 basis points to 4.76%, up from 4.66% for the same period in 2023.
Non-interest income and expense - Non-interest income increased by $59 thousand to $2.2 million during Q2 2024. During the three months ended June 30, 2024, total non-interest expense increased by $1.3 million from $9.1 million during the second quarter of 2023 to $10.4 million during the current quarter. The largest components of this increase were an increase in salary and benefit expense of $417 thousand and an increase in occupancy and equipment costs of $696 thousand.
During the six months ended June 30, 2024, non-interest income totaled $4.3 million, a decrease of $1.7 million from the six months ended June 30, 2023. The largest component of this decrease was a $1.7 million gain on termination of our interest rate swaps during the 2023 quarter. During the six months ended June 30, 2024 non-interest expense increased by $2.5 million to $20.8 million. The largest components of this increase were a $716 thousand increase in salary and benefit expenses and a $1.0 million increase in occupancy and equipment expense.
Screencaps of Plumas’ selected financial data and loan portfolio are shown below. They were taken from p. 20 of the earnings release linked above.
Not exactly thrilled with Plumas’ decrease in earnings, but they can’t go up every quarter/year. I do like the dividend increase. Its performance ratios have managed to remain exceptional even when measured against results from the previous quarter and year. The only nitpick would be the increase in its efficiency ratio, but even that is still great at just north of 51%. Its credit quality ratios look solid too. No complaints in that department. Shareholder equity and book value keep increasing in its Capital and Other Data section. Gross loans to deposits look good at 76.4%. Its regulatory capital ratios remain healthy too.
Plumas’ loan portfolio is shown in the screencap below and was taken from p. 20 of the earnings release linked above.
Plumas’ loan portfolio remains anchored to its Commercial Real Estate loans which have increased to 59% of total loans at June 30, 2024 from 55.3% of total loans at June 30, 2023. A breakdown of its CRE portfolio is shown in screencap below and was taken from slide 18 of the Q2 2024 Investor Presentation linked above.
Commercial real estate has been a tough racket lately with businesses getting out of their office leases, but Plumas’ total exposure seems to be around ~$70 million based on the investor-owned and owner-occupied office figures provided in the slide above. Zeroing out those loans in a worst-case scenario wouldn’t seem to put the bank in a precarious position.
Other Highlights
Per the CEO, Plumas has been included again in the Russell 2000 index.
Per the CEO, Plumas Bank recently received several awards including:
Raymond James Bankers Cup
Independent Community Bankers of America Top-Performing Bank
Keefe, Bruyette & Woods Bank Honor Roll
American Banker Top-Performing Community Banks
D.A. Davidson Bison Select
Findley Reports Super Premier Performing Bank
CB-Resource Top Ten
A more complete list of awards is shown in the screencap below and can be found on slide 28 of the investor presentation linked above.
Sale/Leaseback Update – The screencap below, taken from p. 6 of the earnings release linked above, gives a detailed description of Plumas’ sale/leaseback transaction from Q1 2024.
This sale/leaseback transaction does make me question management’s capital allocation. I understand that they were in a tough spot and didn’t want to take a huge loss on the sale of the investment securities, but the bank’s investment portfolio shouldn’t have been in that position in the first place.
Disclosure: I am long Plumas Bancorp.