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, 2017
☐	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 File (Do not check if a smaller reporting company)	☐	Smaller Reporting Company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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 3, 2017. 5,062,772 shares

1

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PLUMAS BANCORP

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share data)

	September 30, 2017			December 31, 2016
Assets
Cash and cash equivalents	$	101,531		$	62,646
Investment securities available for sale		116,522			101,595
Loans, less allowance for loan losses of $6,822 at September 30, 2017 and $6,549 at December 31, 2016		474,717			456,580
Real estate acquired through foreclosure		828			735
Premises and equipment, net		11,270			11,768
Bank owned life insurance		12,781			12,528
Accrued interest receivable and other assets		13,399			12,123
Total assets	$	731,048		$	657,975
Liabilities and Shareholders’ Equity
Deposits:
Non-interest bearing	$	275,353		$	236,779
Interest bearing		374,497			345,574
Total deposits		649,850			582,353
Repurchase agreements		8,719			7,547
Note payable		-			2,375
Accrued interest payable and other liabilities		6,613			7,396
Junior subordinated deferrable interest debentures		10,310			10,310
Total liabilities		675,492			609,981
Commitments and contingencies (Note 5)
Shareholders’ equity:
Common stock, no par value; 22,500,000 shares authorized; issued and outstanding – 5,053,172 shares at September 30, 2017 and 4,896,875 at December 31, 2016		6,350			5,918
Retained earnings		49,332			43,048
Accumulated other comprehensive loss, net		(126	)		(972	)
Total shareholders’ equity		55,556			47,994
Total liabilities and shareholders’ equity	$	731,048		$	657,975

See notes to unaudited condensed consolidated financial statements.

2

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,
	2017		2016		2017			2016
Interest Income:
Interest and fees on loans	$	6,560	$	5,850	$	19,101		$	16,859
Interest on investment securities		618		462		1,782			1,407
Other		223		68		402			191
Total interest income		7,401		6,380		21,285			18,457
Interest Expense:
Interest on deposits		149		135		429			397
Interest on note payable		-		31		28			108
Interest on junior subordinated deferrable interest debentures		103		87		295			255
Other		1		1		4			3
Total interest expense		253		254		756			763
Net interest income before provision for loan losses		7,148		6,126		20,529			17,694
Provision for Loan Losses		200		200		600			600
Net interest income after provision for loan losses		6,948		5,926		19,929			17,094
Non-Interest Income:
Service charges		1,138		1,027		3,311			2,992
Gain on sale of loans		557		505		1,870			1,397
Loss on sale of investments		-		-		(17	)		(32	)
Other		488		461		1,449			1,344
Total non-interest income		2,183		1,993		6,613			5,701
Non-Interest Expenses:
Salaries and employee benefits		2,822		2,547		8,613			7,713
Occupancy and equipment		713		779		2,136			2,163
Other		1,597		1,383		4,357			4,147
Total non-interest expenses		5,132		4,709		15,106			14,023
Income before provision for income taxes		3,999		3,210		11,436			8,772
Provision for Income Taxes		1,551		1,253		4,383			3,405
Net income	$	2,448	$	1,957	$	7,053		$	5,367
Basic earnings per share	$	0.48	$	0.40	$	1.41		$	1.11
Diluted earnings per share	$	0.47	$	0.39	$	1.36		$	1.06

See notes to unaudited condensed consolidated financial statements.

3

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,
	2017			2016			2017			2016
Net income	$	2,448		$	1,957		$	7,053		$	5,367
Other comprehensive income:
Change in net unrealized gain/loss		139			(229	)		1,422			1,843
Less: reclassification adjustments for net losses included in net income		-			-			17			32
Net unrealized holding gains/losses		139			(229	)		1,439			1,875
Related tax effect:
Change in net unrealized gain/loss		(57	)		95			(586	)		(761	)
Reclassification of net losses included in net income		-			-			(7	)		(13	)
Income tax effect		(57	)		95			(593	)		(774	)
Other comprehensive income (loss)		82			(134	)		846			1,101
Total comprehensive income	$	2,530		$	1,823		$	7,899		$	6,468

See notes to unaudited condensed consolidated financial statements.

4

PLUMAS BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	For the Nine Months
	Ended September 30,
	2017			2016
Cash Flows from Operating Activities:
Net income	$	7,053		$	5,367
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		600			600
Change in deferred loan origination costs/fees, net		(636	)		(326	)
Depreciation and amortization		775			808
Stock-based compensation expense		122			86
Loss on sale of investments		17			32
Amortization of investment security premiums		451			487
Gain on sale of OREO and other vehicles		(15	)		(21	)
Gain on sale of loans held for sale		(1,870	)		(1,397	)
Loans originated for sale		(27,236	)		(22,173	)
Proceeds from loan sales		31,435			23,722
Provision from change in OREO valuation		106			9
Earnings on bank-owned life insurance		(253	)		(256	)
(Increase) decrease in accrued interest receivable and other assets		(1,081	)		764
Decrease in accrued interest payable and other liabilities		(783	)		(243	)
Net cash provided by operating activities		8,685			7,459
Cash Flows from Investing Activities:
Proceeds from principal repayments from available-for-sale government-sponsored mortgage-backed securities		9,387			9,842
Proceeds from matured and called available-for-sale investment securities		-			2,000
Purchases of available-for-sale securities		(27,811	)		(28,986	)
Proceeds from sale of available-for-sale securities		4,221			14,589
Net increase in loans		(21,454	)		(47,764	)
Proceeds from sale of OREO		83			392
Proceeds from sale of other vehicles		171			249
Purchase of premises and equipment		(226	)		(461	)
Net cash used in investing activities		(35,629	)		(50,139	)

Continued on next page.

5

PLUMAS BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

(Continued)

	For the Nine Months
	Ended September 30,
	2017			2016
Cash Flows from Financing Activities:
Net increase in demand, interest bearing and savings deposits	$	70,314		$	56,818
Net decrease in time deposits		(2,817	)		(2,673	)
Principal payment on note payable		(2,375	)		(2,375	)
Net increase in securities sold under agreements to repurchase		1,172			495
Repurchase of common stock warrant		-			(862	)
Cash dividends paid on common stock		(691	)		-
Proceeds from exercise of stock options		226			130
Net cash provided by financing activities		65,829			51,533
Increase in cash and cash equivalents		38,885			8,853
Cash and Cash Equivalents at Beginning of Year		62,646			68,195
Cash and Cash Equivalents at End of Period	$	101,531		$	77,048
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest expense	$	757		$	764
Income taxes	$	5,220		$	3,638
Non-Cash Investing Activities:
Real estate and vehicles acquired through foreclosure	$	475		$	1,383
Non-Cash Financing Activities:
Common stock retired in connection with the exercise of stock options	$	10		$	15
Common stock issued in connection with the cashless exercise of stock warrant	$	787		$	-

See notes to unaudited condensed consolidated financial statements.  

6

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 a 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; its 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, and Phoenix, Arizona 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, 2017 and the results of its operations and its cash flows for the three-month and nine-month periods ended September 30, 2017 and 2016. Our condensed consolidated balance sheet at December 31, 2016 is derived from audited financial statements. Certain reclassifications have been made to prior period’s balances to conform to classifications used in 2017.

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 2016 Annual Report to Shareholders on Form 10-K. The results of operations for the three-month and nine-month periods ended September 30, 2017 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.

7

3.   INVESTMENT SECURITIES AVAILABLE FOR SALE

The amortized cost and estimated fair value of investment securities at September 30, 2017 and December 31, 2016 consisted of the following, in thousands:

Available-for-Sale	September 30, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Debt securities:
U.S. Government-sponsored agencies collateralized by mortgage obligations- residential	$	84,810	$	111	$	(729	)	$	84,192
Obligations of states and political subdivisions		31,927		518		(115	)		32,330
	$	116,737	$	629	$	(844	)	$	116,522

Net unrealized loss on available-for-sale investment securities totaling $215,000 were recorded, net of $89,000 in tax benefit, as accumulated other comprehensive loss within shareholders' equity at September 30, 2017. During the nine months ended September 30, 2017 the Company sold seven available-for-sale investment securities for total proceeds of $4,221,000 recording a $17,000 loss on sale. The Company realized a gain on sale from four of these securities totaling $4,000 and a loss on sale on three securities of $21,000. No securities were sold during the three months ended September 30, 2017.

Available-for-Sale	December 31, 2016
			Gross		Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Debt securities:
U.S. Government-sponsored agencies collateralized by mortgage obligations- residential	$	76,207	$	11	$	(1,307	)	$	74,911
Obligations of states and political subdivisions		27,042		89		(447	)		26,684
	$	103,249	$	100	$	(1,754	)	$	101,595

Net unrealized loss on available-for-sale investment securities totaling $1,654,000 were recorded, net of $682,000 in tax benefits, as accumulated other comprehensive loss within shareholders' equity at December 31, 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.

There were no transfers of available-for-sale investment securities during the nine months ended September 30, 2017 and twelve months ended December 31, 2016. There were no securities classified as held-to-maturity at September 30, 2017 or December 31, 2016.

8

Investment securities with unrealized losses at September 30, 2017 and December 31, 2016 are summarized and classified according to the duration of the loss period as follows, in thousands:

September 30, 2017	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 agencies collateralized by mortgage obligations-residential	$	56,380	$	582	$	4,066	$	147	$	60,446	$	729
Obligations of states and political subdivisions		6,046		103		254		12		6,300		115
	$	62,426	$	685	$	4,320	$	159	$	66,746	$	844

December 31, 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 agencies collateralized by mortgage obligations-residential	$	68,338	$	1,237	$	2,043	$	70	$	70,381	$	1,307
Obligations of states and political subdivisions		18,052		447		-		-		18,052		447
	$	86,390	$	1,684	$	2,043	$	70	$	88,433	$	1,754

At September 30, 2017, the Company held 184 securities of which 75 were in a loss position. Of the 184 securities 72 are U.S. Government-sponsored agencies collateralized by residential mortgage obligations and 112 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, 2017, 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, 2017 are other than temporarily impaired.

The amortized cost and estimated fair value of investment securities at September 30, 2017 by contractual maturity are shown below, in thousands.

	Amortized Cost		Estimated Fair Value
Within one year	$	-	$	-
After one year through five years		3,859		3,923
After five years through ten years		16,406		16,684
After ten years		11,662		11,723
Investment securities not due at a single maturity date:
Government-sponsored mortgage-backed securities		84,810		84,192
	$	116,737	$	116,522

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 $71,985,000 and $73,331,000 and estimated fair values totaling $71,422,000 and $72,112,000 at September 30, 2017 and December 31, 2016, respectively, were pledged to secure deposits and repurchase agreements.

9

4. LOANS AND THE ALLOWANCE FOR LOAN LOSSES

Outstanding loans are summarized below, in thousands:

	September 30,			December 31,
	2017			2016
Commercial	$	40,211		$	41,293
Agricultural		58,105			51,103
Real estate – residential		17,810			21,283
Real estate – commercial		236,913			226,136
Real estate – construction and land development		23,175			21,904
Equity lines of credit		41,926			42,338
Auto		57,446			53,553
Other		3,697			3,513
		479,283			461,123
Deferred loan costs, net		2,256			2,006
Allowance for loan losses		(6,822	)		(6,549	)
Loans, net	$	474,717		$	456,580

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

	September 30,			December 31,
	2017			2016
Balance, beginning of year	$	6,549		$	6,078
Provision charged to operations		600			800
Losses charged to allowance		(514	)		(979	)
Recoveries		187			650
Balance, end of period	$	6,822		$	6,549

The recorded investment in impaired loans totaled $5,677,000 and $5,442,000 at September 30, 2017 and December 31, 2016, respectively. The Company had specific allowances for loan losses of $463,000 on impaired loans of $1,769,000 at September 30, 2017 as compared to specific allowances for loan losses of $366,000 on impaired loans of $1,534,000 at December 31, 2016. The balance of impaired loans in which no specific reserves were required totaled $3,908,000 at September 30, 2017 and December 31, 2016. The average recorded investment in impaired loans for the nine months ended September 30, 2017 and September 30, 2016 was $4,982,000 and $5,398,000, respectively. The Company recognized $100,000 and $105,000 in interest income for impaired loans during the nine months ended September 30, 2017 and 2016, respectively. No interest was recognized on nonaccrual loans accounted for on a cash basis during the nine months ended September 30, 2017 and 2016.

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, 2017 and December 31, 2016 was $4,078,000 and $4,616,000, respectively. The Company has allocated $323,000 and $342,000 of specific reserves on loans to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2017 and December 31, 2016, respectively. The Company has not committed to lend additional amounts on loans classified as troubled debt restructurings at September 30, 2017 and December 31, 2016. There were no troubled debt restructurings that occurred during the nine months ending September 30, 2017 or September 30, 2016. 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, 2017 and 2016, respectively.

10

At September 30, 2017 and December 31, 2016, nonaccrual loans totaled $3,798,000 and $2,724,000, respectively. Interest foregone on nonaccrual loans totaled $141,000 and $157,000 for the nine months ended September 30, 2017 and 2016, respectively. Interest foregone on nonaccrual loans totaled $52,000 and $51,000 for the three months ended September 30, 2017 and 2016, respectively. There were no loans past due 90 days or more and on accrual status at September 30, 2017 and December 31, 2016.

Salaries and employee benefits totaling $1,393,000 and $1,437,000 have been deferred as loan origination costs during the nine months ended September 30, 2017 and 2016, respectively. Salaries and employee benefits totaling $457,000 and $495,000 have been deferred as loan origination costs during the three months ended September 30, 2017 and 2016, 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 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.

11

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

September 30, 2017	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	$	39,240	$	54,718	$	16,974	$	235,101	$	22,512	$	41,366	$	409,911
Watch		420		3,387		126		302		-		-		4,235
Substandard		551		-		710		1,510		663		560		3,994
Doubtful		-		-		-		-		-		-		-
Total	$	40,211	$	58,105	$	17,810	$	236,913	$	23,175	$	41,926	$	418,140

December 31, 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	$	40,459	$	50,790	$	21,125	$	223,854	$	21,201	$	41,983	$	399,412
Watch		565		280		-		400		-		-		1,245
Substandard		269		33		158		1,882		703		355		3,400
Doubtful		-		-		-		-		-		-		-
Total	$	41,293	$	51,103	$	21,283	$	226,136	$	21,904	$	42,338	$	404,057

	Consumer Credit Exposure						Consumer Credit Exposure
	Credit Risk Profile Based on Payment Activity						Credit Risk Profile Based on Payment Activity
	September 30, 2017						December 31, 2016
	Auto		Other		Total		Auto		Other		Total
Grade:
Performing	$	57,162	$	3,681	$	60,843	$	53,474	$	3,511	$	56,985
Non-performing		284		16		300		79		2		81
Total	$	57,446	$	3,697	$	61,143	$	53,553	$	3,513	$	57,066

12

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

Nine months ended 9/30/17:	Commercial			Agricultural		Real Estate- Residential			Real Estate- Commercial			Real Estate- Construction			Equity LOC			Auto			Other			Total
Allowance for Loan Losses
Beginning balance	$	655		$	466	$	280		$	2,740		$	927		$	575		$	815		$	91		$	6,549
Charge-offs		(179	)		-		-			-			-			(5	)		(295	)		(35	)		(514	)
Recoveries		46			-		3			4			-			3			123			8			187
Provision		108			95		(47	)		39			64			77			233			31			600
Ending balance	$	630		$	561	$	236		$	2,783		$	991		$	650		$	876		$	95		$	6,822
Three months ended 9/30/17:
Allowance for Loan Losses
Beginning balance	$	705		$	514	$	252		$	2,812		$	1,071		$	561		$	845		$	95		$	6,855
Charge-offs		(112	)		-		-			-			-			(5	)		(205	)		(17	)		(339	)
Recoveries		27			-		1			1			-			1			73			3			106
Provision		10			47		(17	)		(30	)		(80	)		93			163			14			200
Ending balance	$	630		$	561	$	236		$	2,783		$	991		$	650		$	876		$	95		$	6,822
Nine months ended 9/30/16:
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
September 30, 2017:
Allowance for Loan Losses
Ending balance: individually evaluated for impairment	$	2		$	-	$	50		$	74		$	219		$	118		$	-		$	-		$	463
Ending balance: collectively evaluated for impairment	$	628		$	561	$	186		$	2,709		$	772		$	532		$	876		$	95		$	6,359
Loans
Ending balance	$	40,211		$	58,105	$	17,810		$	236,913		$	23,175		$	41,926		$	57,446		$	3,697		$	479,283
Ending balance: individually evaluated for impairment	$	71		$	255	$	1,367		$	2,336		$	788		$	560		$	284		$	16		$	5,677
Ending balance: collectively evaluated for impairment	$	40,140		$	57,850	$	16,443		$	234,577		$	22,387		$	41,366		$	57,162		$	3,681		$	473,606
December 31, 2016:
Allowance for Loan Losses
Ending balance: individually evaluated for impairment	$	2		$	-		53			81		$	206		$	24		$	-		$	-		$	366
Ending balance: collectively evaluated for impairment	$	653		$	466	$	227			2,659		$	721		$	551		$	815		$	91		$	6,183
Loans
Ending balance	$	41,293		$	51,103	$	21,283			226,136		$	21,904		$	42,338		$	53,553		$	3,513		$	461,123
Ending balance: individually evaluated for impairment	$	16		$	258	$	1,615			2,323		$	833		$	326		$	69		$	2		$	5,442
Ending balance: collectively evaluated for impairment	$	41,277		$	50,845	$	19,668			223,813		$	21,071		$	42,012		$	53,484		$	3,511		$	455,681

13

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

September 30, 2017	30-89 Days		90 Days and Still				Total Past Due and
	Past Due		Accruing		Nonaccrual		Nonaccrual		Current		Total
Commercial	$	407	$	-	$	56	$	463	$	39,748	$	40,211
Agricultural		932		-		-		932		57,173		58,105
Real estate – residential		-		-		710		710		17,100		17,810
Real estate – commercial		766		-		1,510		2,276		234,637		236,913
Real estate – construction & land		-		-		663		663		22,512		23,175
Equity Lines of Credit		176		-		559		735		41,191		41,926
Auto		750		-		284		1,034		56,412		57,446
Other		22		-		16		38		3,659		3,697
Total	$	3,053	$	-	$	3,798	$	6,851	$	472,432	$	479,283

December 31, 2016	30-89 Days		90 Days and Still				Total Past Due and
	Past Due		Accruing		Nonaccrual		Nonaccrual		Current		Total
Commercial	$	77	$	-	$	-	$	77	$	41,216	$	41,293
Agricultural		-		-		-		-		51,103		51,103
Real estate – residential		179		-		145		324		20,959		21,283
Real estate – commercial		519		-		1,479		1,998		224,138		226,136
Real estate – construction & land		10		-		703		713		21,191		21,904
Equity Lines of Credit		276		-		326		602		41,736		42,338
Auto		919		-		69		988		52,565		53,553
Other		23		-		2		25		3,488		3,513
Total	$	2,003	$	-	$	2,724	$	4,727	$	456,396	$	461,123

14

The following tables show information related to impaired loans at the dates indicated, in thousands:

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
As of September 30, 2017:	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
Commercial	$	56	$	56			$	6	$	-
Agricultural		255		255				256		14
Real estate – residential		1,129		1,139				1,072		30
Real estate – commercial		1,811		2,250				1,667		44
Real estate – construction & land		148		148				164		-
Equity Lines of Credit		209		209				212		-
Auto		284		284				95		-
Other		16		16				1		-
With an allowance recorded:
Commercial	$	15	$	15	$	2	$	15	$	1
Agricultural		-		-		-		-		-
Real estate – residential		238		238		50		240		5
Real estate – commercial		525		733		74		529		-
Real estate – construction & land		640		640		219		658		6
Equity Lines of Credit		351		351		118		67		-
Auto		-		-		-		-		-
Other		-		-		-		-		-
Total:
Commercial	$	71	$	71	$	2	$	21	$	1
Agricultural		255		255		-		256		14
Real estate – residential		1,367		1,377		50		1,312		35
Real estate – commercial		2,336		2,983		74		2,196		44
Real estate – construction & land		788		788		219		822		6
Equity Lines of Credit		560		560		118		279		-
Auto		284		284		-		95		-
Other		16		16		-		1		-
Total	$	5,677	$	6,334	$	463	$	4,982	$	100

			Unpaid			Average		Interest
	Recorded		Principal		Related	Recorded		Income
As of December 31, 2016:	Investment		Balance		Allowance	Investment		Recognized
With no related allowance recorded:
Commercial	$	-	$	-		$	-	$	-
Agricultural		258		258			259		19
Real estate – residential		1,373		1,385			1,291		77
Real estate – commercial		1,789		2,227			1,589		33
Real estate – construction & land		198		198			210		-
Equity Lines of Credit		219		219			121		-
Auto		69		69			46		-
Other		2		2