plbc20160818

plbc20160818_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
☒		QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2016

☐		TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO ___________

COMMISSION FILE NUMBER: 000-49883

PLUMAS BANCORP

(Exact Name of Registrant as Specified in Its Charter)

California		75-2987096
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)


35 S. Lindan Avenue, Quincy, California		95971
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code (530) 283-7305

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐	Accelerated Filer ☐
Non-Accelerated Filer ☐	Smaller Reporting Company ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of November 1, 2016. 4,888,475 shares.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PLUMAS BANCORP

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share data)

	September 30, 2016		December 31, 2015

Assets
Cash and cash equivalents	$	77,048	$	68,195
Investment securities available for sale		100,618		96,704
Loans, less allowance for loan losses of $6,477 at September 30, 2016 and $6,078 at December 31, 2015		442,399		396,833
Real estate acquired through foreclosure		2,517		1,756
Premises and equipment, net		11,921		12,234
Bank owned life insurance		12,443		12,187
Accrued interest receivable and other assets		10,173		11,377
Total assets	$	657,119	$	599,286

Liabilities and Shareholders’ Equity

Deposits:
Non-interest bearing	$	238,312	$	209,044
Interest bearing		343,109		318,232
Total deposits		581,421		527,276
Repurchase agreements		8,166		7,671
Note payable		2,500		4,875
Accrued interest payable and other liabilities		6,416		6,658
Junior subordinated deferrable interest debentures		10,310		10,310
Total liabilities		608,813		556,790
Commitments and contingencies (Note 5)

Shareholders’ equity:
Common stock, no par value; 22,500,000 shares authorized; issued and outstanding – 4,874,475 shares at September 30, 2016 and 4,835,432 at December 31, 2015		5,818		6,475
Retained earnings		41,429		36,063
Accumulated other comprehensive income (loss), net		1,059		(42	)
Total shareholders’ equity		48,306		42,496
Total liabilities and shareholders’ equity	$	657,119	$	599,286

See notes to unaudited condensed consolidated financial statements.

PLUMAS BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)

	For the Three Months					For the Nine Months
	Ended September 30,					Ended September 30,
	2016		2015			2016			2015
Interest Income:
Interest and fees on loans	$	5,850	$	5,325		$	16,859		$	15,415
Interest on investment securities		462		418			1,407			1,235
Other		68		50			191			114
Total interest income		6,380		5,793			18,457			16,764
Interest Expense:
Interest on deposits		135		134			397			383
Interest on note payable		31		51			108			106
Interest on subordinated debenture		-		-			-			219
Interest on junior subordinated deferrable interest debentures		87		77			255			227
Other		1		1			3			4
Total interest expense		254		263			763			939
Net interest income before provision for loan losses		6,126		5,530			17,694			15,825
Provision for Loan Losses		200		300			600			900
Net interest income after provision for loan losses		5,926		5,230			17,094			14,925
Non-Interest Income:
Service charges		1,027		1,013			2,992			2,958
Gain on sale of loans		505		617			1,397			1,591
(Loss) gain on sale of investments		-		(9	)		(32	)		21
Other		461		425			1,344			1,343
Total non-interest income		1,993		2,046			5,701			5,913
Non-Interest Expenses:
Salaries and employee benefits		2,547		2,584			7,713			7,728
Occupancy and equipment		779		702			2,163			2,082
Other		1,383		1,372			4,147			4,184
Total non-interest expenses		4,709		4,658			14,023			13,994
Income before provision for income taxes		3,210		2,618			8,772			6,844
Provision for Income Taxes		1,253		1,018			3,405			2,674
Net income	$	1,957	$	1,600		$	5,367		$	4,170

Basic earnings per share	$	0.40	$	0.33		$	1.11		$	0.87
Diluted earnings per share	$	0.39	$	0.32		$	1.06		$	0.82

See notes to unaudited condensed consolidated financial statements.

PLUMAS BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2016			2015			2016			2015

Net income	$	1,957		$	1,600		$	5,367		$	4,170
Other comprehensive income (loss) :
Change in net unrealized gain		(229	)		934			1,843			755
Less: reclassification adjustments for net losses (gains) included in net income		-			9			32			(21	)
Net unrealized holding gains (losses)		(229	)		943			1,875			734
Related tax effect:
Change in net unrealized gain		95			(386	)		(761	)		(312	)
Reclassification of net (losses) gains included in net income		-			(3	)		(13	)		9
Income tax effect		95			(389	)		(774	)		(303	)
Other comprehensive (loss) income		(134	)		554			1,101			431
Total comprehensive income	$	1,823		$	2,154		$	6,468		$	4,601

See notes to unaudited condensed consolidated financial statements.

PLUMAS BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	For the Nine Months
	Ended September 30,
	2016			2015
Cash Flows from Operating Activities:
Net income	$	5,367		$	4,170
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		600			900
Change in deferred loan origination costs/fees, net		(326	)		(317	)
Depreciation and amortization		808			895
Stock-based compensation expense		86			56
Loss (gain) on sale of investments		32			(21	)
Amortization of investment security premiums		487			373
Gain on sale of OREO and other vehicles		(21	)		(141	)
Gain on sale of loans held for sale		(1,397	)		(1,591	)
Loans originated for sale		(22,173	)		(20,816	)
Proceeds from loan sales		23,722			23,735
Provision from change in OREO valuation		9			79
Earnings on bank-owned life insurance		(256	)		(256	)
Decrease (increase) in accrued interest receivable and other assets		764			(675	)
(Decrease) increase in accrued interest payable and other liabilities		(243	)		145
Net cash provided by operating activities		7,459			6,536

Cash Flows from Investing Activities:
Proceeds from principal repayments from available-for-sale government-sponsored mortgage-backed securities		9,842			8,996
Proceeds from matured and called available-for-sale investment securities		2,000			2,500
Purchases of available-for-sale securities		(28,986	)		(22,441	)
Proceeds from sale of available-for-sale securities		14,589			12,260
Net increase in loans		(47,764	)		(22,951	)
Proceeds from sale of OREO		392			1,648
Proceeds from sale of other vehicles		249			303
Purchase of premises and equipment		(461	)		(1,611	)
Net cash used in investing activities		(50,139	)		(21,296	)

Continued on next page.

PLUMAS BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

(Continued)

	For the Nine Months
	Ended September 30,
	2016			2015
Cash Flows from Financing Activities:
Net increase in demand, interest bearing and savings deposits	$	56,818		$	72,058
Net decrease in time deposits		(2,673	)		(1,195	)
Redemption of subordinated debenture		-			(7,500	)
Borrowing on note payable		-			4,000
Principal payment on note payable		(2,375	)		-
Net increase (decrease) in securities sold under agreements to repurchase		495			(4,271	)
Repurchase of common stock warrant		(862	)		-
Proceeds from exercise of stock options		130			58
Net cash provided by financing activities		51,533			63,150
Increase in cash and cash equivalents		8,853			48,390
Cash and Cash Equivalents at Beginning of Year		68,195			45,574
Cash and Cash Equivalents at End of Period	$	77,048		$	93,964

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest expense	$	764		$	871
Income taxes	$	3,638		$	3,295

Non-Cash Investing Activities:
Real estate and vehicles acquired through foreclosure	$	1,383		$	604
Loans provided for sales real estate owned				$	345

Non-Cash Financing Activities:
Common stock retired in connection with the exercise of stock options	$	15		$	32

See notes to unaudited condensed consolidated financial statements.

PLUMAS BANCORP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. GENERAL

During 2002, Plumas Bancorp (the "Company") was incorporated as a bank holding company for the purpose of acquiring Plumas Bank (the "Bank") in one bank holding company reorganization. This corporate structure gives the Company and the Bank greater flexibility in terms of operation, expansion and diversification. The Company formed Plumas Statutory Trust I ("Trust I") for the sole purpose of issuing trust preferred securities on September 26, 2002. The Company formed Plumas Statutory Trust II ("Trust II") for the sole purpose of issuing trust preferred securities on September 28, 2005.

The Bank operates eleven branches in California, including branches in Alturas, Chester, Fall River Mills, Greenville, Kings Beach, Portola, Quincy, Redding, Susanville, Tahoe City, and Truckee. In December, 2015 the Bank opened a Branch in Reno, Nevada; it’s first Branch outside of California. The Bank’s administrative headquarters is in Quincy, California. In addition, the Bank operates lending offices specializing in government-guaranteed lending in Auburn, California, Phoenix, Arizona and Seattle, Washington and commercial/agricultural lending offices in Chico, California and Klamath Falls, Oregon. The Bank's primary source of revenue is generated from providing loans to customers who are predominately small and middle market businesses and individuals residing in the surrounding areas.

2. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The condensed consolidated financial statements include the accounts of the Company and the accounts of its wholly-owned subsidiary, Plumas Bank. Plumas Statutory Trust I and Plumas Statutory Trust II are not consolidated into the Company’s consolidated financial statements and, accordingly, are accounted for under the equity method. In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company’s financial position at September 30, 2016 and the results of its operations and its cash flows for the three-month and nine-month periods ended September 30, 2016 and 2015. Our condensed consolidated balance sheet at December 31, 2015 is derived from audited financial statements. Certain reclassifications have been made to prior period’s balances to conform to classifications used in 2016.

The unaudited condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting on Form 10-Q. Accordingly, certain disclosures normally presented in the notes to the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted. The Company believes that the disclosures are adequate to make the information not misleading.

These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 2015 Annual Report to Shareholders on Form 10-K. The results of operations for the three-month and nine-month periods ended September 30, 2016 may not necessarily be indicative of future operating results. In preparing such financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the periods reported. Actual results could differ significantly from those estimates.

Management has determined that because all of the commercial banking products and services offered by the Company are available in each branch of the Bank, all branches are located within the same economic environment and management does not allocate resources based on the performance of different lending or transaction activities, it is appropriate to aggregate the Bank branches and report them as a single operating segment. No single customer accounts for more than 10% of the revenues of the Company or the Bank.

3. INVESTMENT SECURITIES AVAILABLE FOR SALE

The amortized cost and estimated fair value of investment securities at September 30, 2016 and December 31, 2015 consisted of the following, in thousands:

Available-for-Sale	September 30, 2016
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Debt securities:
U.S. Government-sponsored agencies	$	1,997	$	3	$	-		$	2,000
U.S. Government-sponsored agencies collateralized by mortgage obligations- residential		72,432		896		(28	)		73,300
Obligations of states and political subdivisions		24,386		933		(1	)		25,318
	$	98,815	$	1,832	$	(29	)	$	100,618

Net unrealized gain on available-for-sale investment securities totaling $1,803,000 were recorded, net of $744,000 in tax expense, as accumulated other comprehensive income within shareholders' equity September 30, 2016. During the nine months ended September 30, 2016 the Company sold fourteen available-for-sale investment securities for total proceeds of $14,589,000 recording a $32,000 loss on sale. The Company realized a gain on sale from eight of these securities totaling $48,000 and a loss on sale on six securities of $80,000. No securities were sold during the three months ended September 30, 2016.

Available-for-Sale	December 31, 2015
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Debt securities:
U.S. Government-sponsored agencies	$	1,994	$	-	$	(17	)	$	1,977
U.S. Government-sponsored agencies collateralized by mortgage obligations- residential		72,965		56		(651	)		72,370
Obligations of states and political subdivisions		21,817		548		(8	)		22,357
	$	96,776	$	604	$	(676	)	$	96,704

Net unrealized loss on available-for-sale investment securities totaling $72,000 were recorded, net of $30,000 in tax benefits, as accumulated other comprehensive income within shareholders' equity at December 31, 2015. During the nine months ended September 30, 2015 the Company sold fifteen available-for-sale investment securities for total proceeds of $12,260,000 recording a $21,000 net gain on sale. The Company realized a gain on sale from eight of these securities totaling $62,000 and a loss on sale on seven securities of $41,000. During the three months ended September 30, 2015 the Company sold seven available-for-sale investment securities for total proceeds of $5,592,000 recording a $9,000 net loss on sale. The Company realized a gain on sale from three of these securities totaling $25,000 and a loss on sale on four securities of $34,000.

There were no transfers of available-for-sale investment securities during the nine months ended September 30, 2016 and twelve months ended December 31, 2015. There were no securities classified as held-to-maturity at September 30, 2016 or December 31, 2015.

Investment securities with unrealized losses at September 30, 2016 and December 31, 2015 are summarized and classified according to the duration of the loss period as follows, in thousands:

September 30, 2016	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Debt securities:
U.S. Government-sponsored agencies	$	-	$	-	$	-	$	-	$	-	$	-
U.S. Government agencies collateralized by mortgage obligations-residential		2,662		3		2,212		25		4,874		28
Obligations of states and political subdivisions		264		1		-		-		264		1
	$	2,926	$	4	$	2,212	$	25	$	5,138	$	29

December 31, 2015	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Debt securities:
U.S. Government-sponsored agencies	$	1,977	$	17	$	-	$	-	$	1,977	$	17
U.S. Government agencies collateralized by mortgage obligations-residential		45,398		327		11,880		324		57,278		651
Obligations of states and political subdivisions		1,037		7		160		1		1,197		8
	$	48,412	$	351	$	12,040	$	325	$	60,452	$	676

At September 30, 2016, the Company held 158 securities of which 7 were in a loss position. Of the 158 securities 2 are U.S. Government-sponsored agencies 63 are U.S. Government-sponsored agencies collateralized by residential mortgage obligations and 93 were obligations of states and political subdivisions. The unrealized losses relate principally to market rate conditions. All of the securities continue to pay as scheduled. When analyzing an issuer’s financial condition, management considers the length of time and extent to which the market value has been less than cost; the historical and implied volatility of the security; the financial condition of the issuer of the security; and the Company’s intent and ability to hold the security to recovery. As of September 30, 2016, management does not have the intent to sell these securities nor does it believe it is more likely than not that it will be required to sell these securities before the recovery of its amortized cost basis. Based on the Company’s evaluation of the above and other relevant factors, the Company does not believe the securities that are in an unrealized loss position as of September 30, 2016 are other than temporarily impaired.

The amortized cost and estimated fair value of investment securities at September 30, 2016 by contractual maturity are shown below, in thousands.

	Amortized Cost		Estimated Fair Value
Within one year	$	-	$	-
After one year through five years		1,602		1,616
After five years through ten years		16,855		17,515
After ten years		7,926		8,187
Investment securities not due at a single maturity date:
Government-sponsored mortgage-backed securities		72,432		73,300
	$	98,815	$	100,618

Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

Investment securities with amortized costs totaling $63,734,000 and $62,914,000 and estimated fair values totaling $64,569,000 and $62,483,000 September 30, 2016 and December 31, 2015, respectively, were pledged to secure deposits and repurchase agreements.

4. LOANS AND THE ALLOWANCE FOR LOAN LOSSES

Outstanding loans are summarized below, in thousands:

	September 30,			December 31,
	2016			2015

Commercial	$	41,942		$	37,084
Agricultural		49,046			39,856
Real estate – residential		22,987			25,474
Real estate – commercial		215,166			192,095
Real estate – construction and land development		18,952			16,188
Equity lines of credit		41,743			38,327
Auto		53,464			48,365
Other		3,613			3,582
		446,913			400,971
Deferred loan costs, net		1,963			1,940
Allowance for loan losses		(6,477	)		(6,078	)
	$	442,399		$	396,833

Changes in the allowance for loan losses, in thousands, were as follows:

	September 30,			December 31,
	2016			2015

Balance, beginning of year	$	6,078		$	5,451
Provision charged to operations		600			1,100
Losses charged to allowance		(757	)		(827	)
Recoveries		556			354
Balance, end of year	$	6,477		$	6,078

The recorded investment in impaired loans totaled $5,832,000 and $6,461,000 at September 30, 2016 and December 31, 2015, respectively. The Company had specific allowances for loan losses of $480,000 on impaired loans of $1,678,000 at September 30, 2016 as compared to specific allowances for loan losses of $751,000 on impaired loans of $2,346,000 at December 31, 2015. The balance of impaired loans in which no specific reserves were required totaled $4,153,000 and $4,115,000 at September 30, 2016 and December 31, 2015, respectively. The average recorded investment in impaired loans for the nine months ended September 30, 2016 and September 30, 2015 was $5,398,000 and $6,892,000, respectively. The Company recognized $105,000 and $89,000 in interest income for impaired loans during the nine months ended September 30, 2016 and 2015, respectively. No interest was recognized on nonaccrual loans accounted for on a cash basis during the nine months ended September 30, 2016 and 2015.

Included in impaired loans are troubled debt restructurings. A troubled debt restructuring is a formal restructure of a loan where the Company for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower. The concessions may be granted in various forms to include one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

The carrying value of troubled debt restructurings at September 30, 2016 and December 31, 2015 was $4,739,000 and $4,661,000, respectively. The Company has allocated $386,000 and $311,000 of specific reserves on loans to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2016 and December 31, 2015, respectively. The Company has not committed to lend additional amounts on loans classified as troubled debt restructurings at September 30, 2016 and December 31, 2015. There were no troubled debt restructurings that occurred during the nine months ending September 30, 2016 or September 30, 2015. There were no troubled debt restructurings for which there was a payment default within twelve months following the modification during the nine months ended September 30, 2016 and 2015, respectively.

At September 30, 2016 and December 31, 2015, nonaccrual loans totaled $3,100,000 and $4,546,000, respectively. Interest foregone on nonaccrual loans totaled $157,000 and $270,000 for the nine months ended September 30, 2016 and 2015, respectively. Interest foregone on nonaccrual loans totaled $51,000 and $66,000 for the three months ended September 30, 2016 and 2015, respectively. There were no loans past due 90 days or more and on accrual status at September 30, 2016 and December 31, 2015.

Salaries and employee benefits totaling $1,437,000 and $1,035,000 have been deferred as loan origination costs during the nine months ended September 30, 2016 and 2015, respectively. Salaries and employee benefits totaling $495,000 and $319,000 have been deferred as loan origination costs during the three months ended September 30, 2016 and 2015, respectively.

The Company assigns a risk rating to all loans, with the exception of automobile and other loans and periodically, but not less than annually, performs detailed reviews of all such loans over $100,000 to identify credit risks and to assess the overall collectability of the portfolio. These risk ratings are also subject to examination by independent specialists engaged by the Company and the Company’s regulators. During these internal reviews, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which borrowers operate and the fair values of collateral securing these loans. These credit quality indicators are used to assign a risk rating to each individual loan.

The balance of other real estate includes $0 and $84 thousand of foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property as of September 30, 2016 and December 31, 2015, respectively. The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds are in process was $243 thousand and $23 thousand as of September 30, 2016 and December 31, 2015, respectively.

The risk ratings can be grouped into five major categories, defined as follows:

Pass – A pass loan is a strong credit with no existing or known potential weaknesses deserving of management's close attention.

Watch – A Watch loan has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Company’s credit position at some future date. Watch loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Substandard – A substandard loan is not adequately protected by the current sound worth and paying capacity of the borrower or the value of the collateral pledged, if any. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Well defined weaknesses include a project's lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time or the project's failure to fulfill economic expectations. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable.

Loss – Loans classified as loss are considered uncollectible and charged off immediately.

The following table shows the loan portfolio allocated by management's internal risk ratings at the dates indicated, in thousands:

September 30, 2016	Commercial Credit Exposure
	Credit Risk Profile by Internally Assigned Grade
Grade:	Commercial		Agricultural		Real Estate- Residential		Real Estate- Commercial		Real Estate- Construction		Equity LOC		Total
Pass	$	41,074	$	48,715	$	22,819	$	211,813	$	18,171	$	41,408	$	384,000
Watch		491		289		-		1,271		-		-		2,051
Substandard		377		42		168		2,082		781		335		3,785
Doubtful		-		-		-		-		-		-		-
Total	$	41,942	$	49,046	$	22,987	$	215,166	$	18,952	$	41,743	$	389,836

December 31, 2015	Commercial Credit Exposure
	Credit Risk Profile by Internally Assigned Grade
Grade:	Commercial		Agricultural		Real Estate- Residential		Real Estate- Commercial		Real Estate- Construction		Equity LOC		Total
Pass	$	35,508	$	39,426	$	25,220	$	185,739	$	15,048	$	37,983	$	338,924
Watch		883		387		149		2,442		247		-		4,108
Substandard		693		43		105		3,914		893		344		5,992
Doubtful		-		-		-		-		-		-		-
Total	$	37,084	$	39,856	$	25,474	$	192,095	$	16,188	$	38,327	$	349,024

	Consumer Credit Exposure						Consumer Credit Exposure
	Credit Risk Profile Based on Payment Activity						Credit Risk Profile Based on Payment Activity
	September 30, 2016						December 31, 2015
	Auto		Other		Total		Auto		Other		Total
Grade:
Performing	$	53,343	$	3,613	$	56,956	$	48,300	$	3,582	$	51,882
Non-performing		121		-		121		65		-		65
Total	$	53,464	$	3,613	$	57,077	$	48,365	$	3,582	$	51,947

The following tables show the allocation of the allowance for loan losses at the dates indicated, in thousands:

Nine months ended 9/30/16:	Commercial			Agricultural			Real Estate- Residential			Real Estate- Commercial			Real Estate- Construction			Equity LOC			Auto			Other			Total
Allowance for Loan Losses
Beginning balance	$	639		$	294		$	341		$	2,525		$	874		$	528		$	784		$	93		$	6,078
Charge-offs		(200	)		-			-			(252	)		(5	)		(23	)		(222	)		(55	)		(757	)
Recoveries		23			-			39			3			359			2			106			24			556
Provision		225			177			(82	)		341			(333	)		70			171			31			600
Ending balance	$	687		$	471		$	298		$	2,617		$	895		$	577		$	839		$	93		$	6,477
Three months ended 9/30/16:
Allowance for Loan Losses
Beginning balance	$	835		$	416		$	322		$	2,465		$	883		$	573		$	841			95		$	6,430
Charge-offs		(127	)		-			-			-			(5	)		-			(64	)		(31	)		(227	)
Recoveries		6			-			3			1			30			1			24			9			74
Provision		(27	)		55			(27	)		151			(13	)		3			38			20			200
Ending balance	$	687		$	471		$	298		$	2,617		$	895		$	577		$	839		$	93		$	6,477
Nine months ended 9/30/15:
Allowance for Loan Losses
Beginning balance	$	574		$	225		$	379		$	1,701		$	1,227		$	691		$	581		$	73		$	5,451
Charge-offs		(88	)		(3	)		(132	)		-			(54	)		(59	)		(309	)		(27	)		(672	)
Recoveries		102			6			6			-			-			4			84			36			238
Provision		(30	)		33			80			758			(231	)		(97	)		397			(10	)		900
Ending balance	$	558		$	261		$	333		$	2,459		$	942		$	539		$	753		$	72		$	5,917
Three months ended 9/30/15:
Allowance for Loan Losses
Beginning balance	$	628		$	242		$	399		$	2,140		$	1,031		$	534		$	717		$	89		$	5,780
Charge-offs		(34	)		-			(79	)		-			1			-			(105	)		(5	)		(222	)
Recoveries		12			6			2			-			-			1			29			9			59
Provision		(48	)		13			11			319			(90	)		4			112			(21	)		300
Ending balance	$	558		$	261		$	333		$	2,459		$	942		$	539		$	753		$	72		$	5,917
September 30, 2016:
Allowance for Loan Losses
Ending balance: individually evaluated for impairment	$	2		$	-		$	53		$	152		$	248		$	25		$	-		$	-		$	480
Ending balance: collectively evaluated for impairment	$	685		$	471		$	245		$	2,465		$	647		$	552		$	839		$	93		$	5,997
Loans
Ending balance	$	41,942		$	49,046		$	22,987		$	215,166		$	18,952		$	41,743		$	53,464		$	3,613		$	446,913
Ending balance: individually evaluated for impairment	$	16		$	257		$	1,632		$	2,588		$	913		$	305		$	121		$	-		$	5,832
Ending balance: collectively evaluated for impairment	$	41,926		$	48,789		$	21,355		$	212,578		$	18,039		$	41,438		$	53,343		$	3,613		$	441,081
December 31, 2015:
Allowance for Loan Losses
Ending balance: individually evaluated for impairment	$	26		$	-		$	54		$	371		$	269		$	31		$	-		$	-		$	751
Ending balance: collectively evaluated for impairment	$	613		$	294		$	287		$	2,154		$	605		$	497		$	784		$	93		$	5,327
Loans
Ending balance	$	37,084		$	39,856		$	25,474		$	192,095		$	16,188		$	38,327		$	48,365		$	3,582		$	400,971
Ending balance: individually evaluated for impairment	$	73		$	260		$	1,593		$	3,129		$	1,029		$	311		$	66		$	-		$	6,461
Ending balance: collectively evaluated for impairment	$	37,011		$	39,596		$	23,881		$	188,966		$	15,159		$	38,016		$	48,299		$	3,582		$	394,510

The following table shows an aging analysis of the loan portfolio by the time past due, in thousands:

September 30, 2016

30-89 Days