PLUMAS BANCORP (Form: 10-Q, Received: 05/09/2007 15:23:34)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED March 31, 2007


o		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

Indicated 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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule12b-2 of the Exchange Act (check one):

Large Accelerated Filer o Accelerated Filer þ Non-Accelerated Filer o

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of May 7, 2007; 4,994,596 shares

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II — OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 1A RISK FACTORS
	ITEM 2. UNREGISTERD SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS
	SIGNATURES
EXHIBIT 10.8
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PLUMAS BANCORP
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands, except share data)


	March 31,			December 31,
	2007			2006
Assets
Cash and due from banks	$	12,457		$	11,293
Federal funds sold		—			—

Cash and cash equivalents		12,457			11,293
Investment securities (fair value of $66,904 at March 31, 2007 and $74,841 at December 31, 2006)		66,849			74,795
Loans, less allowance for loan losses of $4,150 at March 31, 2007 and $3,917 at December 31, 2006 (Notes 3 and 4)		357,485			351,977
Premises and equipment, net		15,153			15,190
Intangible assets, net		1,262			1,337
Bank owned life insurance		9,531			9,449
Accrued interest receivable and other assets		9,441			9,198

Total assets	$	472,178		$	473,239


Liabilities and Shareholders’ Equity

Deposits:
Non-interest bearing	$	113,284		$	121,464
Interest bearing		292,076			280,712

Total deposits		405,360			402,176
Short-term borrowings		14,800			20,000
Accrued interest payable and other liabilities		5,179			4,901
Junior subordinated deferrable interest debentures		10,310			10,310

Total liabilities		435,649			437,387


Commitments and contingencies (Note 4)		—			—

Shareholders’ equity (Notes 5, 7 and 10):
Serial preferred stock, no par value; 10,000,000 shares authorized, none issued		—			—
Common stock, no par value; 22,500,000 shares authorized; issued and outstanding – 4,999,596 shares at March 31, 2007 and 5,023,205 shares at December 31, 2006		4,871			4,828
Retained earnings		32,201			31,716
Accumulated other comprehensive loss (Note 6)		(543	)		(692	)

Total shareholders’ equity		36,529			35,852

Total liabilities and shareholders’ equity	$	472,178		$	473,239

See notes to unaudited condensed consolidated financial statements.

PLUMAS BANCORP
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)


	Unaudited
	For the Three Months
	Ended March 31,
	2007		2006
Interest Income:
Interest and fees on loans	$	6,905	$	6,004
Interest on investment securities:
Taxable		519		687
Exempt from Federal income taxes		134		131
Interest on Federal funds sold		2		117

Total interest income		7,560		6,939

Interest Expense:
Interest on deposits		1,675		1,361
Interest on short-term borrowings		186		—
Interest on junior subordinated deferrable interest debentures		206		183
Other		6		4

Total interest expense		2,073		1,548

Net interest income before provision for loan losses		5,487		5,391
Provision for Loan Losses		250		300

Net interest income after provision for loan losses		5,237		5,091
Non-Interest Income:
Service charges		855		859
Gain (loss) on sale of loans		27		(4	)
Earnings on Bank owned life insurance policies		102		94
Other		287		261

Total non-interest income		1,271		1,210

Non-Interest Expenses:
Salaries and employee benefits		2,828		2,537
Occupancy and equipment		910		750
Other		1,270		1,121

Total non-interest expenses		5,008		4,408


Income before provision for income taxes		1,500		1,893
Provision for Income Taxes		552		718

Net income	$	948	$	1,175


Basic earnings per share (Note 5)	$	0.19	$	0.24

Diluted earnings per share (Note 5)	$	0.19	$	0.23

See notes to unaudited condensed consolidated financial statements.

PLUMAS BANCORP
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)


	For the Three Months
	Ended March 31,
	2007			2006
Cash Flows from Operating Activities:
Net income	$	948		$	1,175
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		250			300
Change in deferred loan origination costs/fees, net		69			(246	)
Depreciation and amortization		564			482
Stock-based compensation expense		53			43
Amortization of investment security premiums		59			122
Accretion of investment security discounts		(16	)		(22	)
Net loss on disposal/sale of premises and equipment		27			1
Net gain on sale of other vehicles owned		(20	)		—
Earnings on Bank owned life insurance policies		(102	)		(94	)
Expenses on Bank owned life insurance policies		20			17
Increase in accrued interest receivable and other assets		(419	)		(120	)
Increase in accrued interest payable and other liabilities		278			33

Net cash provided by operating activities		1,711			1,691


Cash Flows from Investing Activities:
Proceeds from matured and called available-for-sale investment securities		7,375			7,346
Proceeds from matured and called held-to-maturity investment securities		26			—
Purchases of held-to-maturity investment securities		—			(155	)
Proceeds from principal repayments from available-for-sale government-guaranteed mortgage-backed securities		755			837
Proceeds from principal repayments from held-to-maturity government-guaranteed mortgage-backed securities		—			19
Net increase in loans		(5,921	)		(1,209	)
Proceeds from sale of other real estate and vehicles		89			54
Purchase of premises and equipment		(382	)		(2,001	)

Net cash provided by investing activities		1,942			4,891

Continued on next page.

PLUMAS BANCORP
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
(Continued)


	For the Three Months
	Ended March 31,
	2007			2006
Cash Flows from Financing Activities:
Net (decrease) increase in demand, interest bearing and savings deposits	$	(11,813	)	$	3,028
Net increase (decrease) in time deposits		14,997			(5,911	)
Net decrease in short-term borrowings		(5,200	)		—
Net proceeds from exercise of stock options		17			61
Repurchase and retirement of common stock		(490	)		—

Net cash used in financing activities		(2,489	)		(2,822	)

Increase in cash and cash equivalents		1,164			3,760
Cash and Cash Equivalents at Beginning of Year		11,293			24,596

Cash and Cash Equivalents at End of Period	$	12,457		$	28,356


Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest expense	$	1,809		$	1,468
Income taxes	$	75		$	—

Non-Cash Investing Activities:
Real estate and vehicles acquired through foreclosure	$	94		$	60
Net change in unrealized loss on available-for-sale securities	$	149		$	(99	)

Non-Cash Financing Activities:
Common stock retired in connection with the exercise of stock options	$	49		$	312

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 is a California state-chartered bank that was incorporated in July 1980 and opened for business in December 1980. The Bank operates twelve branches in California, including branches in Alturas, Chester, Fall River Mills, Greenville, Kings Beach, Loyalton, Portola, Quincy, Susanville, Tahoe City, Truckee and Westwood. The bank also has a commercial lending office in Reno, Nevada. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (FDIC) up to applicable legal limits. 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 March 31, 2007 and December 31, 2006 and its results of operations and cash flows for the three-month periods ended March 31, 2007 and 2006. Certain reclassifications have been made to prior period’s balances to conform to classifications used in 2007.

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 consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America 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 2006 Annual Report to Shareholders on Form 10-K. The results of operations for the three-month periods ended March 31, 2007 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. LOANS

Outstanding loans are summarized below, in thousands:


	March 31,			December 31,
	2007			2006
Commercial	$	35,148		$	36,182
Agricultural		36,831			35,577
Real estate – mortgage		122,987			116,329
Real estate – construction and land development		76,305			75,930
Consumer		89,251			90,694

		360,522			354,712
Deferred loan costs, net		1,113			1,182
Allowance for loan losses		(4,150	)		(3,917	)

	$	357,485		$	351,977

4. COMMITMENTS AND CONTINGENCIES

The Company is party to claims and legal proceedings arising in the ordinary course of business. In the opinion of the Company’s management, the amount of ultimate liability with respect to such proceedings will not have a material adverse effect on the financial condition or result of operations of the Company taken as a whole.

In the normal course of business, there are various outstanding commitments to extend credit, which are not reflected, in the financial statements, including loan commitments of $100,391,000 and $101,759,000 and stand-by letters of credit of $508,000 and $564,000 at March 31, 2007 and December 31, 2006, respectively.

Of the loan commitments outstanding at March 31, 2007, $27,810,000 are real estate construction loan commitments that are expected to fund within the next twelve months. The remaining commitments primarily relate to revolving lines of credit or other commercial loans, and many of these are expected to expire without being drawn upon. Therefore, the total commitments do not necessarily represent future cash requirements. Each loan commitment and the amount and type of collateral obtained, if any, are evaluated on an individual basis. Collateral held varies, but may include real property, bank deposits, debt or equity securities or business assets.

Stand-by letters of credit are conditional commitments written to guarantee the performance of a customer to a third party. These guarantees are primarily related to the purchases of inventory by commercial customers and are typically short-term in nature. Credit risk is similar to that involved in extending loan commitments to customers and accordingly, evaluation and collateral requirements similar to those for loan commitments are used. The deferred liability related to the Company’s stand-by letters of credit was not significant at March 31, 2007 or December 31, 2006.

5. EARNINGS PER SHARE

Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options, result in the issuance of common stock which shares in the earnings of the Company. The treasury stock method has been applied to determine the dilutive effect of stock options in computing diluted earnings per share.


	For the Three Months
	Ended March 31,
	2007		2006
Earnings Per Share:
Basic earnings per share	$	0.19	$	0.24
Diluted earnings per share	$	0.19	$	0.23
Weighted Average Number of Shares Outstanding: (in thousands)
Basic shares		5,012		4,988
Diluted shares		5,071		5,091

There were 170,700 stock options during the three-month period ended March 31, 2007, considered to be antidilutive and therefore omitted from the above calculation of diluted earnings per share. There were no stock options in the three-month period ended March 31, 2006 considered to be antidilutive.

6. COMPREHENSIVE INCOME

Total comprehensive income for the three months ended March 31, 2007 and 2006 totaled $1,097,000 and $1,076,000, respectively. Comprehensive income is comprised of unrealized gains (losses), net of taxes, on available-for-sale investment securities, which were $149,000 and $(99,000) for the three months ended March 31, 2007 and 2006, respectively, together with net income.

At March 31, 2007 and December 31, 2006, accumulated other comprehensive loss totaled $543,000 and $692,000, respectively, and is reflected, net of taxes, as a component of shareholders’ equity.

7. STOCK-BASED COMPENSATION

In 2001 and 1991, the Company established Stock Option Plans for which 897,110 shares of common stock remain reserved for issuance to employees and directors and 459,337 shares are available for future grants under incentive and nonstatutory agreements as of March 31, 2007. The Company granted 155,700 and 2,500 options in the quarters ended March 31, 2007 and 2006 respectively. The weighted average grant date fair value of options granted for the three month periods ended March 31, 2007 and 2006 was $4.53 and $4.60 respectively. Compensation cost related to stock options recognized in operating results under SFAS No. 123R was $53,000 and $43,000 in the three months ended March 31, 2007 and 2006, respectively. The associated future income tax benefit recognized was $6,000 and $5,000 in the three months ended March 31, 2007 and 2006, respectively.

The following table summarizes information about stock option activity for the three months ended March 31, 2007:


						Weighted
				Weighted		Average
				Average		Remaining
				Exercise		Contractual		Intrinsic Value
	Shares			Price		Term		(in thousands)
Options outstanding at December 31, 2006		290,914		$	11.62
Options granted		155,700			16.37
Options exercised		(8,841	)		7.43
Options cancelled		—			—

Options outstanding at March 31, 2007		437,773		$	13.40		6.8	$	1,138

Options exercisable at March 31, 2007		182,309		$	10.70		5.7	$	966

Expected to vest after March 31, 2007		255,464		$	15.33		7.6	$	172

The total intrinsic value of options (which is the amount by which the stock price exceeded the exercise price of the options on the date of exercise) exercised during the three months ended March 31, 2007 was $80,000. During the three months ended March 31, 2007, the amount of cash received from the exercise of stock options was $17,000.

At March 31, 2007, there was $886,000 of total unrecognized compensation cost related to non-vested stock option awards which is expected to be recognized over a weighted-average period of 3.4 years. The total fair value of options vested during the three months ended March 31, 2007 was $6,000.

8. INCOME TAXES

In July 2006, the Financial Accounting Standards Board (FASB) issued Financial Accounting Standards Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes—an Interpretation of FASB statement No. 109 . FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes . FIN 48 also prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions. The Company has adopted FIN 48 as of January 1, 2007.

The Company previously recognized income tax positions based on management’s estimate of whether it is reasonably possible that a liability has been incurred for unrecognized income tax benefits by applying FASB Statement No. 5, Accounting for Contingencies .

The provisions of FIN 48 have been applied to all tax positions of the Company as of January 1, 2007. There was no cumulative effect of applying the provisions of FIN 48 and there was no material effect on the Company’s provision for income taxes for the three months ended March 31, 2007. The Company recognizes interest accrued related to unrecognized tax benefits and accruals for penalties in income tax expense.

9. RECENT ACCOUNTING DEVELOPMENTS

Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued Statement No. 159 (SFAS 159), The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115 . This standard permits an entity to choose to measure many financial instruments and certain other items at fair value at specified election dates. The entity will report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The fair value option: (a) may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method; (b) is irrevocable (unless a new election date occurs); and (c) is applied only to entire instruments and not to portions of instruments. The provisions of SFAS 159 are effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Management did not elect to early adopt SFAS 159 and has not yet completed its evaluation of the impact that SFAS 159 will have.

10. SUBSEQUENT EVENTS

On April 18, 2007, the Company declared a common stock cash dividend of $0.15 per share. The dividend will be payable on May 15, 2007 to its shareholders of record on April 30, 2007.

PART I – FINANCIAL INFORMATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

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 March 31, 2007 and December 31, 2006 and for the three month periods ended March 31, 2007 and 2006. 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, 2006.

Plumas Bancorp trades on The NASDAQ Capital Market under the ticker symbol “PLBC”.

CASH DIVIDEND

On April 18, 2007, the Company declared a semi-annual common stock cash dividend of $0.15 per share. . This represents a 15% increase in the semi-annual cash dividend per share from 13 cents paid on May 15, 2006. The dividend will be payable on May 14, 2007 to its shareholders of record on April 30, 2007.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no changes to the Company’s critical accounting policies from those disclosed in the Company’s 2006 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.

OVERVIEW

The Company’s net income decreased $227 thousand, or 19%, to $948 thousand for the three months ended March 31, 2007 from $1,175 thousand for the same period in 2006. An increase of $96 thousand in net interest income, a $61 thousand increase in non-interest income and decreases of $50 thousand in the provision for loan losses and $166 thousand in the provision for income taxes were offset by an increase of $600 thousand in non-interest expenses, primarily in salaries and benefits and occupancy and equipment.

Total assets at March 31, 2007 were $472 million, a slight decrease of $1 million from the $473 million at December 31, 2006. A decrease in investment securities of $7.9 million, primarily related to anticipated maturities during the first quarter of 2007, was available to fund an increase of $5.5 million in net loans. Deposits increased by $3.2 million, or less than 1%, to $405 million at March 31, 2007 from $402 million at December 31, 2006. An increase of $15 million in time deposits offset decreases in other categories of deposits. As a result of the increase in deposits and maturities of the investment securities, the Company was also able to reduce its short-term borrowings by $5.2 million from $20 million at December 31, 2006 to $14.8 million at March 31, 2007.

The annualized return on average assets was 0.82% for the three months ended March 31, 2007 down from 1.02% for the same period in 2006. The annualized return on average equity was 10.5% for the three months ended March 31, 2007 down from 14.8% for the same period in 2006.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2007

Net interest income before provision for loan losses. Net interest income, on a nontax-equivalent basis, was $5.5 million for the three months ended March 31, 2007, an increase of $96 thousand, or 2%, from $5.4 million for the same period in 2006. The increase in net interest income can be primarily attributed to increases in the Company’s average loan balances and average loan yield, mostly offset by decreases in average investment securities and average federal funds sold and the change in mix of and increase in the cost of average interest bearing liabilities. Net interest margin for the three months ended March 31, 2007 increased 10 basis points, or 2%, to 5.24%, up from 5.14% for the same period in 2006.

Interest income increased $621 thousand or 9%, to $7.6 million for the three months ended March 31, 2007 primarily as a result of the volume and rate increases in loan balances. Interest and fees on loans increased $901 thousand to $6.9 million for the three months ended March 31, 2007 as compared to $6.0 million during the first quarter of 2006. The Company’s average loan balances were $354 million for the three months ended March 31, 2007, up $32.5 million, or 10%, from the $321 million for the same period in 2006. The average rate earned on the Company’s loan balances increased 34 basis points to 7.92% during the first three months of 2007 compared to 7.58% during the first three months of 2006. The Company experienced a decline of $165 thousand in interest on investment securities and $115 thousand in interest on federal funds sold primarily related to a decline in the average balance of these assets.

Primarily related to an increase in the cost of interest-bearing liabilities, interest expense increased $525 thousand, or 34%, to $2.1 million for the three months ended March 31, 2007, up from $1.6 million for the same period in 2006. Consistent with market conditions in the Company’s service area, the Company has experienced a change in the mix of its deposit accounts from the first quarter of 2006, with growth in higher rate time and Money Fund Plu$ accounts and decreases in accounts offering lower rates such as the Company’s money market and savings accounts and non-interest bearing demand deposits. Money Fund Plu$ is a high interest bearing checking account designed to pay rates comparable to those available on a typical brokerage account.

This change in mix and an increase in the average rate paid on time deposits has resulted in an increase in the average rate paid on the Company’s interest bearing deposits of 52 basis points from 1.85% for the quarter ended March 31, 2006 to 2.37% for the first current quarter of 2007 and an increase in interest expense on deposits of $314 thousand. The average rate paid on time deposits increased from 3.26% during the three months ended March 31, 2006 to 4.16% during the first quarter of 2007. This increase includes an increase in market rates in the Company’s service area and the effect of a promotional 5-month certificate of deposit introduced during the fourth quarter of 2006. The average rate paid on this promotional certificate of deposit during the quarter ended March 31, 2007 was 5.11% and the average balance was $22.5 million.

The remaining increase in interest expense relates to an increase in short-term borrowings and rates paid on trust preferred securities. The Company had average short-term borrowings of $14.1 million with an average cost of 5.37% during the first quarter of 2007. There were no short-term borrowings outstanding during the first quarter of 2006. The average rate paid on the Company’s trust preferred securities (junior subordinated debentures) increased 90 basis points to 8.1% for the three months ended March 31, 2007 from 7.2% during the first quarter of 2006. The rate on the trust preferred securities is tied to the LIBOR rate and will increase/decrease with increases/decreases in LIBOR.

The following table presents for the three-month periods indicated the distribution of consolidated average assets, liabilities and shareholders’ equity. It also presents the amounts of interest income from interest-earning assets and the resultant annualized yields expressed in both dollars and annualized yield percentages, as well as the amounts of interest expense on interest-bearing liabilities and the resultant cost expressed in both dollars and annualized rate percentages. Average balances are based on daily averages. Nonaccrual loans are included in the calculation of average loans while nonaccrued interest thereon is excluded from the computation of yields earned:


	For the Three Months Ended March 31, 2007							For the Three Months Ended March 31, 2006
	Average Balance		Interest		Yield/			Average Balance		Interest		Yield/
	(in thousands)		(in thousands)		Rate			(in thousands)		(in thousands)		Rate
Interest-earning assets:
Loans (1) (2)	$	353,640	$	6,905		7.92	%	$	321,136	$	6,004		7.58	%
Investment securities (1)		70,700		653		3.75	%		93,366		818		3.55	%
Federal funds sold		175		2		4.63	%		10,745		117		4.42	%

Total interest-earning assets		424,515		7,560		7.22	%		425,247		6,939		6.62	%

Cash and due from banks		12,597							14,042
Other assets		32,616							29,721


Total assets	$	469,728						$	469,010


Interest-bearing liabilities:
NOW deposits	$	79,600		369		1.88	%	$	72,658		263		1.47	%
Money market deposits		44,566		106		0.96	%		64,731		201		1.26	%
Savings deposits		53,487		77		0.58	%		63,945		116		0.74	%
Time deposits		109,566		1,123		4.16	%		97,227		781		3.26	%
Short-term borrowings		14,053		186		5.37	%		—		—		—	%
Other interest-bearing liabilities		300		6		8.11	%		273		4		5.94	%
Junior subordinated debentures		10,310		206		8.10	%		10,310		183		7.20	%


Total interest-bearing liabilities		311,882		2,073		2.70	%		309,144		1,548		2.03	%


Non-interest bearing deposits		116,284							123,102
Other liabilities		4,982							4,642
Shareholders’ equity		36,580							32,122


Total liabilities & equity	$	469,728						$	469,010


Cost of funding interest-earning assets (3)						1.98	%						1.48	%
Net interest income and margin (4)			$	5,487		5.24	%			$	5,391		5.14	%


(1)		Not computed on a tax-equivalent basis.

(2)		Net loan costs included in loan interest income for the three-month periods ended March 31, 2007 and 2006 were $177,000 and $84,000, respectively.

(3)		Total annualized interest expense divided by the average balance of total earning assets.

(4)		Annualized net interest income divided by the average balance of total earning assets.

The following table sets forth changes in interest income and interest expense for the three-month periods indicated and the amount of change attributable to variances in volume, rates and the combination of volume and rates based on the relative changes of volume and rates:


	2007 over 2006 change in net interest income
	for the three months ended March 31
	(in thousands)
	Volume (1)			Rate (2)			Mix (3)			Total
Interest-earning assets:
Loans	$	608		$	266		$	27		$	901
Investment securities		(198	)		44			(11	)		(165	)
Federal funds sold		(115	)		6			(6	)		(115	)


Total interest income		295			316			10			621


Interest-bearing liabilities:
NOW deposits		25			74			7			106
Money market deposits		(63	)		(47	)		15			(95	)
Savings deposits		(19	)		(24	)		4			(39	)
Time deposits		99			216			27			342
Short-term borrowings		—			—			186			186
Other interest-bearing liabilities		1			1			—			2
Junior subordinated debentures		—			23			—			23


Total interest expense		43			243			239			525


Net interest income	$	252		$	73		$	(229	)	$	96


(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. The Company recorded $250,000 in provision for loan losses for the quarter ended March 31, 2007 and $300,000 for the three month periods ended March 31, 2006. Management assesses its loan quality monthly to maintain an adequate allowance for loan losses. Based on information currently available, management believes that the allowance for loan losses is adequate to absorb probable losses 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. The Company’s loan portfolio composition and non-performing assets are further discussed under the financial condition section below.

Non-interest income. During the three months ended March 31, 2007 non-interest income increased by $61 thousand to $1.3 million, from $1.2 million during the quarter ended March 31, 2006. The Company had increases in gains on sale of loans of $31 thousand, investment services income increased by $30 thousand and the Company recorded gains on the sale of repossessed vehicles of $20 thousand. Partially offsetting these increases was a decrease of $32 thousand in miscellaneous other income.

The following table describes the components of non-interest income for the three-month periods ending March 31, 2007 and 2006 in thousands:


	For the Three
	Months
	Ended March 31						Dollar			Percentage
	2007			2006			Change			Change
Service charges on deposit accounts	$	855		$	859		$	(4	)		-0.5	%
Earnings on life insurance policies		102			94			8			8.5	%
Merchant processing income		60			61			(1	)		-1.6	%
Investment services income		52			22			30			136.4	%
Official check fees		41			35			6			17.1	%
Federal Home Loan Bank dividends		31			23			8			34.8	%
Customer service fees		30			28			2			7.1	%
Gain (loss) on sale of loans		27			(4	)		31			775.0	%
Mortgage loan commission and servicing fees		25			30			(5	)		-16.7	%
Gain on sale of real estate and vehicles		20			—			20			—	%
Safe deposit box and night depository income		18			20			(2	)		-10.0	%
Printed check fee income		15			11			4			36.4	%
Other deposit account fees		11			15			(4	)		-26.7	%
Other		(16	)		16			(32	)		-200.0	%

Total non-interest income	$	1,271		$	1,210		$	61			5.0	%

Non-interest expense. During the three months ended March 31, 2007, total non-interest expense increased $600 thousand, or 14%, to $5.0 million, up from $4.4 million for the comparable period in 2006. The increase in non-interest expense was primarily the result of increases in salaries and employee benefits, occupancy and equipment costs and professional fees.

Salaries and other employee benefits increased $291 thousand, or 11%, over the same three-month period last year. Salaries costs increased by $227 thousand which included annual merit increases as well as additional employees primarily related to the Company’s Reno, Nevada loan production office, its expanded Truckee, California branch and administration staffing including additions to the accounting and human resource departments. During the fourth quarter of 2006 the Company completed construction and opened a new Bank owned branch in Truckee, California. This replaced a much smaller leased facility. Also in the fourth quarter of 2006 we opened a commercial real estate loan office in Reno, Nevada. The other significant component of the increase in salaries and employee benefits was a $52 thousand reduction in the deferral of loan origination costs primarily related to a reduction in the volume of consumer loans.

The increase in occupancy and equipment includes $78 thousand related to the new Truckee branch and $14 thousand related to the Reno loan production office. The increase in professional fees primarily relates to an outside evaluation of our core banking software requirements. The Company is reaching the capacity of its current software and is evaluating alternatives; however it is not anticipated than any changes will be made during the current year.

The following table describes the components of non-interest expense for the three-month periods ending March 31, 2007 and 2006, in thousands:


	For the Three
	Months
	Ended March 31				Dollar			Percentage
	2007		2006		Change			Change
Salaries and employee benefits	$	2,828	$	2,537	$	291			11.5	%
Occupancy and equipment		910		750		160			21.3	%
Professional fees		207		164		43			26.2	%
Outside service fees		156		142		14			9.9	%
Advertising and shareholder relations		139		99		40			40.4	%
Business development		125		133		(8	)		-6.0	%
Telephone and data communication		103		86		17			19.8	%
Director compensation		93		88		5			5.7	%
Stationery and supplies		77		74		3			4.1	%
Deposit premium amortization		75		75		—			—	%
Armored car and courier		66		65		1			1.5	%
Postage		60		63		(3	)		-4.8	%
Loan and collection expenses		44		27		17			63.0	%
Insurance		37		42		(5	)		-11.9	%
Other		88		63		25			39.7	%

Total non-interest expense	$	5,008	$	4,408	$	600			13.6	%

Provision for income taxes. The provision for income taxes was $552 thousand, or 36.8% of pre-tax income for the three months ended March 31, 2007. This compares to $718 thousand or 37.9% of pre-tax income during the first three months of 2006. The decrease of 1.1% includes the effect of an increase, during the 2007 quarter, in the percentage of tax-exempt income as a percentage of pre-tax income.

FINANCIAL CONDITION

Loan portfolio composition. The Company continues to manage the mix of its loan portfolio consistent with its identity as a community bank serving the financing needs of all sectors of the area it serves. Although the Company offers a broad array of financing options, it continues to concentrate its focus on small- to medium-sized commercial businesses. These commercial loans are diversified as to the industries and types of businesses, thus limiting material exposure from any one industry concentration. The Company offers both fixed and floating rate loans and obtains collateral in the form of real property, business assets and deposit accounts, but looks to business and personal cash flows as its primary source of repayment. The composition of the Company’s loan portfolio has remained relatively unchanged from December 31, 2006. Real estate mortgage loans increased to 34% of total gross loans at March 31, 2007 from 33% at December 31, 2006. Consumer loans declined to 25% of total gross loans from 26% at December 31, 2006. Commercial, agricultural and real estate construction loans were 10%, 10% and 21%, respectively of total gross loans at March 31, 2007 and December 31, 2006.

The Company expects the level of consumer loans to continue to decline in the future. Over the past three years, to fully utilize available deposits and build our consumer loan portfolio, the Company had been aggressive in seeking out dealer auto loans. Beginning in late 2006 and continuing into 2007 we began to deemphasize our auto lending activities. Recently, the head of the Company’s auto lending department resigned. The Company does not expect to replace this position. It is our expectation that the payoffs from our auto loan portfolio can be replaced by other, higher yielding, loans.

Nonperforming assets. Nonperforming loans at March 31, 2007 were $1,072 thousand, an increase of $59 thousand over the $1,013 thousand balance at December 31, 2006. Nonperforming assets (which is comprised of nonperforming loans plus repossessed vehicle holdings) at March 31, 2007 were $1,144 thousand, an increase of $84 thousand over the $1,060 thousand balance at December 31, 2006.

Nonperforming loans as a percentage of total loans increased slightly to 0.30% at March 31, 2007 up from 0.29% at December 31, 2006. In addition, nonperforming assets as a percentage of total assets also increased to 0.24% at March 31, 2007 up from 0.22% at December 31, 2006.

Analysis of allowance for loan losses. Net charge-offs during the three months ended March 31, 2007 totaled $17 thousand, or less than 0.01% of average loans, compared to $120 thousand, or 0.04% of average loans, for the comparable period in 2006. Net charge-offs during the first three months of 2007 were comprised of $134 thousand of charge-offs offset by $117 thousand in recoveries, compared to $175 thousand of charge-offs offset by $55 thousand in recoveries for the same period in 2006. The allowance for loan losses was 1.15% of total loans as of March 31, 2007 up from 1.10% as of December 31, 2006. Based on an evaluation of the credit quality of the loan portfolio and delinquency trends and charge-offs, management believes the allowance for loan losses to be adequate. However, no prediction of the ultimate level of loans charged off in future years can be made with any certainty.

The following table provides certain information for the three-month period indicated with respect to the Company’s allowance for loan losses as well as charge-off and recovery activity, in thousands:


	For the Three Months
	Ended March 31,
	2007			2006
Balance at January 1,	$	3,917		$	3,256


Charge-offs:
Commercial and agricultural					(77	)
Real estate mortgage		—			—
Real estate construction		—			—
Consumer		(134	)		(98	)


Total charge-offs		(134	)		(175	)


Recoveries:
Commercial and agricultural		46			19
Real estate mortgage		—			—
Real estate construction		—			—
Consumer		71			36


Total recoveries		117			55


Net charge-offs		(17	)		(120	)


Provision for loan losses		250			300


Balance at March 31,	$	4,150		$	3,436

Net charge-offs during the three-month period to average loans		0.00	%		0.04	%
Allowance for loan losses to total loans		1.15	%		1.06	%

Investment securities. Investment securities decreased $8 million to $67 million at March 31, 2007, down from $75 million at December 31, 2006. The investment portfolio balances in U.S. Treasuries, U.S. Government agencies, corporate debt securities and municipal obligations comprised 8%, 61%, 10% and 21%, respectively, of the Company’s investment portfolio at March 31, 2007 versus 7%, 64%, 10%, and 19% at December 31, 2006. The decrease in the overall investment portfolio resulted from maturities, calls and pay downs that were used to provide funding for loan growth and liquidity.

Premises and equipment. Premises and equipment decreased by $37 thousand from $15.19 million at December 31, 2006 to $15.15 million at March 31, 2007.

Deposits. Total deposits were $405 million as of March 31, 2007, a slight increase of $3.2 million, or 0.8%, from the December 31, 2006 balance of $402 million. Declines in non-interest bearing demand deposits, interest bearing transaction accounts, money market and savings deposits were offset by an increase in time deposits. The increase in time deposits primarily relates to a promotional 5 month certificate of deposit. At March 31, 2007 we had $33 million in this promotional certificate of deposit with an average rate paid, during the quarter ended March 31, 2007, of 5.11%.

The Company continues to manage the mix of its deposits consistent with its identity as a community bank serving the financial needs of its customers. Time deposits increased to 29% of total deposits as of March 31, 2007 up from 25% as of December 31, 2006. Non-interest bearing demand deposits decreased to 28% of total deposits at March 31, 2007 down from 30% at December 31, 2006. Interest bearing transaction accounts decreased to 19% of total deposits at March 31, 2007, down from 20% at December 31, 2006. Money market and savings deposits decreased slightly to 24% of total deposits at March 31, 2007 from 25% at December 31, 2006.

Short-term borrowings. Short-term borrowings at March 31, 2007 consisted of $14,800,000 in one day Federal Home Loan Bank (“FHLB”) advances, a decline of $5,200,000 from the $20,000,000 balance in FHLB advances outstanding at December 31, 2006. The rate paid on short-term borrowings at March 31, 2007 was 5.59%.

CAPITAL RESOURCES

Shareholders’ equity as of March 31, 2007 increased $677 thousand, or 1.9%, to $36.5 million up from $35.9 million as of December 31, 2006. This increase was the result of earnings during the first quarter of 2007 of $948 thousand million and a decrease in accumulated other comprehensive loss of $149 thousand, partially offset by the repurchase of stock under the Company’s stock buy back plan.

On January 22, 2007 the Company announced that its Board of Directors authorized a common stock repurchase plan. The plan calls for the repurchase of up to 250,000 shares, or approximately 5%, of the Company’s shares outstanding as of January 22, 2007. During the first quarter of 2007 the Company repurchased 29,500 shares at an average cost, including commission, of $16.60 per share for a total cost of $490 thousand.

The Company and the Bank are subject to certain regulatory capital requirements administered by the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (FDIC). Failure to meet these minimum capital requirements can initiate certain mandatory and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets. Each of these components is defined in the regulations. Management believes that the Company met all its capital adequacy requirements and that the Bank met the requirements to be considered well capitalized under the regulatory framework for prompt corrective action as of March 31, 2007.

The following table presents the Company’s and the Bank’s capital ratios as of March 31, 2007 and December 31, 2006, in thousands:


	March 31, 2007					December 31,2006
	Amount		Ratio			Amount		Ratio
Tier 1 Leverage Ratio

Plumas Bancorp and Subsidiary	$	45,810		9.8	%	$	45,206		9.5	%
Minimum regulatory requirement		18,739		4.0	%		18,955		4.0	%
Plumas Bank		44,184		9.4	%		44,094		9.3	%
Minimum requirement for “Well-Capitalized” institution		23,397		5.0	%		23,669		5.0	%
Minimum regulatory requirement		18,718		4.0	%		18,935		4.0	%

Tier 1 Risk-Based Capital Ratio

Plumas Bancorp and Subsidiary		45,810		11.1	%		45,206		10.9	%
Minimum regulatory requirement		16,572		4.0	%		16,610		4.0	%
Plumas Bank		44,184		10.7	%		44,094		10.6	%
Minimum requirement for “Well-Capitalized” institution		24,826		6.0	%		24,885		6.0	%
Minimum regulatory requirement		16,550		4.0	%		16,590		4.0	%

Total Risk-Based Capital Ratio

Plumas Bancorp and Subsidiary		49,960		12.1	%		49,123		11.8	%
Minimum regulatory requirement		33,144		8.0	%		33,221		8.0	%
Plumas Bank		48,334		11.7	%		48,011		11.6	%
Minimum requirement for “Well-Capitalized” institution		41,376		10.0	%		41,475		10.0	%
Minimum regulatory requirement		33,101		8.0	%		33,180		8.0	%

LIQUIDITY

The Company manages its liquidity to provide the ability to generate funds to support asset growth, meet deposit withdrawals (both anticipated and unanticipated), fund customers’ borrowing needs, satisfy maturity of short-term borrowings and maintain reserve requirements. The Company’s liquidity needs are managed using assets or liabilities, or both. On the asset side the Company maintains cash and due from banks along with an investment portfolio containing U.S. government securities, agency securities and corporate bonds that are not classified as held-to-maturity. On the liability side, liquidity needs are managed by charging competitive offering rates on deposit products and the use of established lines of credit from correspondent financial institutions and the Federal Home Loan Bank.

The Company has unsecured short-term borrowing agreements with two of its correspondent banks in the amounts of $10 million and $5 million. In addition, the Company can borrow up to $93 million from the Federal Home Loan Bank secured by commercial and residential mortgage loans. At March 31, 2007 the Company had outstanding borrowings from the Federal Home Loan Bank of $14.8 million and no outstanding borrowings from its correspondent banks.

Customer deposits are the Company’s primary source of funds. Those funds are held in various types of accounts with varying maturities. The Company currently does not accept brokered deposits. During the first quarter of 2007, deposits increased $3.2 million, or 0.8%, from the December 31, 2006 balance of $402 million. The Company has historically experienced a seasonal trend in regards to deposits; whereas the majority of the Company’s annual deposit growth has historically occurred in the late spring, summer and fall months.

The Company’s investment securities not classified as held-to-maturity, cash and due from banks and short-term borrowings from correspondent banks and the Federal Home Loan Bank serve as primary sources of liquidity, providing adequate funding for loans during periods of high loan demand. During periods of decreased lending activity, proceeds from the maturity or sale of investment securities, loan payments, and new deposits are invested in short-term earning assets, such as Federal funds sold and investment securities, to serve as a source of funding for future loan growth. Management believes that the Company’s available sources of funds, including short-term borrowings, will provide adequate liquidity for its operations in the foreseeable future.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates and prices such as interest rates, commodity prices and equity prices. As a financial institution, the Company’s market risk arises primarily from interest rate risk exposure. Fluctuation in interest rates will ultimately impact both the level of income and expense recorded on a large portion of the Company’s assets and liabilities, and the market value of all interest earning assets and interest bearing liabilities, other than those which possess a short term to maturity. Based upon the nature of its operations, the Company is not subject to foreign currency exchange or commodity price risk. However, the Bank’s real estate loan portfolio, concentrated primarily within northeastern California, is subject to risks associated with the local economies.

The fundamental objective of the Company’s management of its assets and liabilities is to maximize the economic value of the Company while maintaining adequate liquidity and an exposure to interest rate risk deemed by management to be acceptable. Management believes an acceptable degree of exposure to interest rate risk results from the management of assets and liabilities through using floating rate loans and deposits, maturities, pricing and mix to attempt to neutralize the potential impact of changes in market interest rates. The Company’s profitability is dependent to a large extent upon its net interest income which is the difference between its interest income on interest-earning assets, such as loans and securities, and its interest expense on interest-bearing liabilities, such as deposits, trust preferred securities and other borrowings. The Company, like other financial institutions, is subject to interest rate risk to the degree that its interest-earning assets reprice differently than its interest-bearing liabilities. The Company manages its mix of assets and liabilities with the goals of limiting its exposure to interest rate risk, ensuring adequate liquidity, and coordinating its sources and uses of funds.

The Company seeks to control its interest rate risk exposure in a manner that will allow for adequate levels of earnings and capital over a range of possible interest rate environments. The Company has adopted formal policies and practices to monitor and manage interest rate risk exposure. As part of this effort, the Company measures interest rate risk utilizing both an internal asset liability management system as well as employing independent third party reviews to confirm the reasonableness of the assumptions used to measure and report the Company’s interest rate risk, enabling management to make any adjustments necessary.

Interest rate risk is managed by the Company’s Asset Liability Committee (“ALCO”), which includes members of senior management. The ALCO monitors interest rate risk by analyzing the potential impact on net interest income from potential changes in interest rates and considers the impact of alternative strategies or changes in balance sheet structure. The ALCO manages the Company’s balance sheet in part to maintain the potential impact on net interest income within acceptable ranges despite changes in interest rates. The Company’s exposure to interest rate risk is reviewed on at least a quarterly basis by ALCO.

In management’s opinion there has not been a material change in the Company’s market risk or interest rate risk profile for the three months ended March 31, 2007 compared to December 31, 2006 as discussed in the Company’s 2006 annual report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

The Company’s Chief Executive Officer and Chief Financial Officer, based on their evaluation of the Company’s disclosure controls and procedures as of the end of the Company’s fiscal quarter ended March 31, 2007 (as defined in Exchange Act Rule 13a—15(e), have concluded that the Company’s disclosure controls and procedures are adequate and effective for purposes of Rule 13a—15(e) in timely alerting them to material information relating to the Company required to be included in the Company’s filings with the SEC under the Securities Exchange Act of 1934.

There were no significant changes in the Company’s internal control over financial reporting or in other factors that could significantly affect internal controls that occurred during the Company’s fiscal quarter ended March 31, 2007.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Company and/or its subsidiaries are a party to claims and legal proceedings arising in the ordinary course of business. In the opinion of the Company’s management, the amount of ultimate liability with respect to such proceedings will not have a material adverse effect on the financial condition or results of operations of the Company taken as a whole.

ITEM 1A RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2006, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.”

ITEM 2. UNREGISTERD SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) None.

(b) None.


					Total Number of
					Shares
					Purchased as
					Part of		Maximum
	Total		Average		Publicly		Number of Shares
	Number of		Price Paid		Announced		That May Yet Be
	Shares		per Share		Plans or		Purchased Under the
Period	Purchased (1)		(2)		Programs (3)		Plans or Programs (3)
January 1, 2007 to January 31, 2007		0	$	0.00		0		250,000
February 1, 2007 to February 28, 2007		24,650	$	16.56		22,500		227,500
March 1, 2007 to March 31, 2007		7,800	$	16.68		7,000		220,500


Total		32,450	$	16.59		29,500


(1)		The difference between total number of shares purchased and the total number of shares purchased as part of publicly announced programs is due to repurchases of common stock from certain employees in connection with their exercise of stock options.

(2)		Includes commissions.

(3)		On January 22, 2007 the Company announced that its Board of Directors authorized a common stock repurchase plan. The plan calls for the repurchase of up to 250,000 shares, or approximately 5%, of the Company’s shares outstanding as of January 22, 2007.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following documents are included or incorporated by reference in this Quarterly Report on Form 10Q:

3.1		Articles of Incorporation as amended of Registrant included as exhibit 3.1 to the Registrant’s Form S-4, File No. 333-84534, which is incorporated by reference herein.

3.2		Bylaws of Registrant included as exhibit 3.2 to the Registrant’s Form S-4, File No. 333-84534, which is incorporated by reference herein.

3.3		Amendment of the Articles of Incorporation of Registrant dated November 1, 2002, is included as Exhibit 3.3 to the Registrant’s 10-Q for September 30, 2005, which is incorporated by this reference herein.

3.4		Amendment of the Articles of Incorporation of Registrant dated August 17, 2005, is included as Exhibit 3.4 to the Registrant’s 10-Q for September 30, 2005, which is incorporated by this reference herein.

4		Specimen form of certificate for Plumas Bancorp included as exhibit 4 to the Registrant’s Form S-4, File No. 333-84534, which is incorporated by reference herein.

10.1		Executive Salary Continuation Agreement of Andrew J. Ryback dated August 23, 2005, is included as Exhibit 10.1 to the Registrant’s 8-K filed on October 17, 2005, which is incorporated by this reference herein.

10.2		Split Dollar Agreement of Andrew J. Ryback dated August 23, 2005, is included as Exhibit 10.2 to the Registrant’s 8-K filed on October 17, 2005, which is incorporated by this reference herein.

10.5		Employment Agreement of Douglas N. Biddle dated January 1, 2006 is included as Exhibit 10.5 to the Registrant’s 8-K filed on March 15, 2006, which is incorporated by this reference herein.

10.6		Executive Salary Continuation Agreement as amended of Douglas N. Biddle dated June 2, 1994, is included as Exhibit 10.6 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.7		Split Dollar Agreements of Douglas N. Biddle dated January 24, 2002, is included as Exhibit 10.7 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.8		Director Retirement Agreement of John Flournoy dated March 21, 2007.

10.9		Executive Salary Continuation Agreement as amended of Dennis C. Irvine dated June 2, 1994, is included as Exhibit 10.9 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.10		Split Dollar Agreements of Dennis C. Irvine dated January 24, 2002, is included as Exhibit 10.10 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.11		First Amendment to Executive Salary Continuation Agreement of Robert T. Herr dated September 15, 2004, is included as Exhibit 10.11 to the Registrant’s 8-K filed on September 17, 2004, which is incorporated by this reference herein.

10.13		Deferred Fee Agreement as amended of Jerry V. Kehr dated August 19, 1998, is included as Exhibit 10.13 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.14		Amended and Restated Director Retirement Agreement of Jerry V. Kehr dated April 28, 2000, is included as Exhibit 10.14 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.15		Consulting Agreement of Jerry V. Kehr dated May 10, 2000, is included as Exhibit 10.15 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.16		Deferred Fee Agreement of Jerry V. Kehr dated December 21, 2005 is included as Exhibit 10.16 to the Registrant’s 8-K filed on March 15, 2006, which is incorporated by this reference herein.

10.18		Amended and Restated Director Retirement Agreement of Daniel E. West dated May 10, 2000, is included as Exhibit 10.18 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.19		Consulting Agreement of Daniel E. West dated May 10, 2000, is included as Exhibit 10.19 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.20		Split Dollar Agreements of Robert T. Herr dated September 15, 2004, is included as Exhibit 10.20 to the Registrant’s 8-K filed on September 17, 2004, which is incorporated by this reference herein.

10.21		Amended and Restated Director Retirement Agreement of Alvin G. Blickenstaff dated April 19, 2000, is included as Exhibit 10.21 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.22		Consulting Agreement of Alvin G. Blickenstaff dated May 8, 2000, is included as Exhibit 10.22 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.24		Amended and Restated Director Retirement Agreement of Gerald W. Fletcher dated May 10, 2000, is included as Exhibit 10.24 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.25		Consulting Agreement of Gerald W. Fletcher dated May 10, 2000, is included as Exhibit 10.25 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.27		Amended and Restated Director Retirement Agreement of Arthur C. Grohs dated May 9, 2000, is included as Exhibit 10.27 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.28		Consulting Agreement of Arthur C. Grohs dated May 9, 2000, is included as Exhibit 10.28 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.30		Amended and Restated Director Retirement Agreement of Christine McArthur dated May 12, 2000, is included as Exhibit 10.30 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.31		Consulting Agreement of Christine McArthur dated May 12, 2000, is included as Exhibit 10.31 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.33		Amended and Restated Director Retirement Agreement of Terrance J. Reeson dated April 19, 2000, is included as Exhibit 10.33 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.34		Consulting Agreement of Terrance J. Reeson dated May 10, 2000, is included as Exhibit 10.34 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.39		Deferred Fee Agreement of Thomas Watson dated March 3, 2001, is included as Exhibit 10.39 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.40		Form of Indemnification Agreement, is included as Exhibit 10.41 to the Registrant’s 10-QSB for June 30, 2002, which is incorporated by this reference herein.

10.41		2001 Stock Option Plan as amended is included as exhibit 99.1 of the Form S-8 filed July 23, 2002, File No. 333-96957.

10.43		Plumas Bank 401(k) Profit Sharing Plan as amended is included as exhibit 99.1 of the Form S-8 filed February 14, 2003, File No. 333-103229.

10.44		Executive Salary Continuation Agreement of Robert T. Herr dated June 4, 2002, is included as Exhibit 10.44 to the Registrant’s 10-Q for March 31, 2003, which is incorporated by this reference herein.

10.46		1991 Stock Option Plan as amended is included as Exhibit 10.46 to the Registrant’s 10-Q for September 30, 2004, which is incorporated by this reference herein.

10.47		Specimen form of Incentive Stock Option Agreement under the 1991 Stock Option Plan is included as Exhibit 10.47 to the Registrant’s 10-Q for September 30, 2004, which is incorporated by this reference herein.

10.48		Specimen form of Non-Qualified Stock Option Agreement under the 1991 Stock Option Plan is included as Exhibit 10.48 to the Registrant’s 10-Q for September 30, 2004, which is incorporated by this reference herein.

10.49		Amended and Restated Plumes Bancorp Stock Option Plan is included as Exhibit 10.49 to the Registrant’s 10-Q for September 30, 2006, which is incorporated by this reference herein.

10.59		Director Retirement Agreement of Thomas Watson dated May 1, 2003, is included as Exhibit 10.59 to the Registrant’s 10-Q for June 30, 2003, which is incorporated by this reference herein.

10.60		Consulting Agreement of Thomas Watson dated May 1, 2003, is included as Exhibit 10.60 to the Registrant’s 10-Q for June 30, 2003, which is incorporated by this reference herein.

10.62		Deferred Fee Agreement of Thomas Watson dated December 23, 2004, is included as Exhibit 10.62 to the Registrant’s 8-K filed on January 6, 2005, which is incorporated by this reference herein.

10.63		Deferred Fee Agreement of Jerry V. Kehr dated December 24, 2004, is included as Exhibit 10.63 to the Registrant’s 8-K filed on January 6, 2005, which is incorporated by this reference herein.

11		Computation of per share earnings appears in the attached 10-Q under Plumas Bancorp and Subsidiary Notes to Consolidated Financial Statements as Footnote 5 – Earnings Per Share Computation.

31.1		Rule 13a-14(a) [Section 302] Certification of Principal Financial Officer dated May 9, 2007.

31.2		Rule 13a-14(a) [Section 302] Certification of Principal Executive Officer dated May 9, 2007.

32.1		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated May 9, 2007.

32.2		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated May 9, 2007.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PLUMAS BANCORP

(Registrant)

Date: May 9, 2007


		/s/ Andrew J. Ryback

		Andrew J. Ryback
		Executive Vice President Chief Financial Officer

		/s/ Douglas N. Biddle

		Douglas N. Biddle
		President and Chief Executive Officer

Exhibit 10.8

PLUMAS BANK
DIRECTOR RETIREMENT AGREEMENT

THIS DIRECTOR RETIREMENT AGREEMENT (the “Agreement”) is adopted this 21st day of March, 2007, by and between PLUMAS BANK, a California corporation located in Quincy, California (the “Company”) and JOHN FLOURNOY (the “Director”).

The purpose of this Agreement is to provide specified benefits to the Director who contributes to the continued growth, development, and future business success of the Company.

Article 1
Definitions

Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1		“ Accrual Balance ” means the liability that should be accrued by the Company, under Generally Accepted Accounting Principles (“GAAP”), for the Company’s obligation to the Director under this Agreement, by applying Accounting Principles Board Opinion Number 12 (“APB 12”) as amended by Statement of Financial Accounting Standards Number 106 (“FAS 106”) and the Discount Rate. Any one of a variety of amortization methods may be used to determine the Accrual Balance. However, once chosen, the method must be consistently applied. The Accrual Balance shall be reported annually by the Company to the Director.

1.2		“ Beneficiary ” means each designated person, or the estate of the deceased Director, entitled to benefits, if any, upon the death of the Director determined pursuant to Article 4.

1.3		“ Beneficiary Designation Form ” means the form established from time to time by the Plan Administrator that the Director completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries.

1.4		“ Board ” means the Board of Directors of the Company as from time to time constituted.

1.5		“ Change in Control ” means a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, as such change is defined in Section 409A of the Code and regulations thereunder.

1.6		“ Code ” means the Internal Revenue Code of 1986, as amended.

1.7		“ Disability ” means Director: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering directors of the Company. Medical determination of Disability may be made by either the Social Security Administration or by the provider of an accident or health plan covering directors of the Company. Upon the request of the Plan Administrator, the Director must submit proof to the Plan Administrator of the Social Security Administration’s or the provider’s determination.

1.8		“ Discount Rate ” means the rate used by the Plan Administrator for determining the Accrual Balance. The initial Discount Rate is six percent (6%). However, the Plan Administrator, in its discretion, may adjust the Discount Rate to maintain the rate within reasonable standards according to GAAP and/or applicable bank regulatory guidance.

1.9		“ Effective Date ” means May 17, 2006.

1.10		“ Normal Retirement Age ” means the earlier of (i) Director attaining age sixty-five (65) and completing fifteen (15) Years of Service; or (ii) the date the Director is required to retire pursuant to the Company’s mandatory retirement policy for Directors.

1.11		“ Normal Retirement Date ” means the later of Normal Retirement Age or Separation from Service.

1.12		“ Plan Administrator ” means the plan administrator described in Article 6.

1.13		“ Plan Year ” means each twelve-month period commencing on October 1st and ending on September 30 ^th of each year. The initial Plan Year shall commence on the Effective Date of this Agreement and end on the following September 30, 2006.

1.14		“ Separation from Service ” means the termination of the Director’s service as a director of the Company for reasons other than death.

1.15		“ Termination for Cause ” means Separation from Service for:

	(a)		Gross negligence or gross neglect of duties to the Company; or

	(b)		Conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Director’s service with the Company; or

	(c)		Fraud, disloyalty, dishonesty or willful violation of any law or significant Company policy committed in connection with the Director’s service and resulting in a material adverse effect on the Company.

1.16

“ Years of Service ” means the twelve consecutive month period beginning on the date the Director’s service on the Board commences and any twelve (12) month anniversary thereof, during the entirety of which time the Director is a director of the Company. Service with a subsidiary or other entity controlled by the Company before the time such entity became a subsidiary or under such control shall not be considered “credited service” unless the Plan Administrator specifically agrees to credit such service. In addition and solely for the purpose of determining the amount of benefits to be distributed hereunder the Plan Administrator in its discretion may also grant additional Years of Service in such circumstances where it deems such additional service appropriate.

Article 2
Distributions During Lifetime

2.1

Normal Retirement Benefit . Upon the Normal Retirement Date, the Company shall distribute to the Director the benefit described in this Section 2.1 in lieu of any other benefit under this Article.

	2.1.1		Amount of Benefit . The annual benefit under this Section 2.1 is Ten Thousand Dollars ($10,000).

	2.1.2		Distribution of Benefit . The Company shall distribute the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following Separation from Service. The annual benefit shall be distributed to the Director for fifteen (15) years.

2.2

Disability Benefit . If the Director experiences a Disability which results in a Separation from Service prior to Normal Retirement Age, the Company shall distribute to the Director the benefit described in this Section 2.2 in lieu of any other benefit under this Article.

2.2.1

Amount of Benefit . The annual benefit under this Section 2.3 is Ten Thousand Dollars ($10,000) multiplied by the applicable percentage in the vesting schedule set forth below.


Years of Service
Completed at Separation
from Service		Vesting Percentage
1		6.67%
2		13.33%
3		20.00%
4		26.67%
5		33.33%
6		40.00%


Years of Service
Completed at Separation
from Service		Vesting Percentage
7		46.67%
8		53.33%
9		60.00%
10		66.67%
11		73.33%
12		80.00%
13		86.67%
14		93.33%
15		100.00%

2.2.2

Distribution of Benefit . The Company shall distribute the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following Separation from Service. The annual benefit shall be distributed to the Director for fifteen (15) years.

2.3

Change in Control Benefit . Upon a Change in Control, followed by a Separation from Service, the Company shall distribute to the Director the benefit described in this Section 2.3 in lieu of any other benefit under this Article.

	2.3.1		Amount of Benefit . The benefit under this Section 2.3 is one hundred percent (100%) of the Normal Retirement Benefit amount described in Section 2.1.1.

	2.3.2		Distribution of Benefit . The Company shall distribute the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following Separation from Service. The annual benefit shall be distributed to the Director for fifteen (15) years.

	2.3.3		Excess Parachute Payments . Notwithstanding any provision of this Agreement to the contrary, and to the extent allowed by Code Section 409A, if any distribution(s) made under this Section 2.3 would be treated as an “excess parachute payment” under Code Section 280G, the Company shall reduce such distribution(s) to the extent necessary to avoid treating the distribution(s) as an excess parachute payment.

2.5

Distributions Upon Income Inclusion Under Section 409A of the Code . Upon the inclusion of any amount into the Director’s income as a result of the failure of this non-qualified deferred compensation plan to comply with the requirements of Section 409A of the Code, to the extent such tax liability can be covered by the Director’s vested Accrual Balance without further to comply with the requirements of Section 409a of the Code, a distribution shall be made as soon as is administratively practicable following the discovery of the plan failure.

2.6

Change in Form or Timing of Distributions . For distribution of benefits under this Article 2, the Director and the Company may, subject to the terms of Section 8.1, amend the Agreement to delay the timing or change the form of distributions. Any such amendment:

	(a)		may not accelerate the time or schedule of any distribution, except as provided in Section 409A of the Code and the regulations there under;

	(b)		must, for benefits distributable under Sections 2.1, 2.2 and 2.3, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and

	(c)		must take effect not less than twelve (12) months after the amendment is made.

Article 3
Distribution at Death

3.1		Death During Active Service . If the Director dies while in the active service of the Company, the Company shall distribute to the Beneficiary the death benefit in a lump sum of $30,000 within 30 days of the Director’s death.

3.2		Death During Distribution of a Benefit . If the Director dies after any benefit distributions have commenced under this Agreement but before receiving all such distributions, the Company shall distribute to the Beneficiary a death benefit in a lump sum equal to the amount of $30,000 less the aggregate amount of benefits previously paid pursuant to this Agreement within 30 days of the Director’s death.

3.3		Death After Separation from Service But Before Benefit Distributions Commence . If the Director is entitled to benefit distributions under this Agreement, but dies prior to the commencement of said benefit distributions, the Company shall distribute to the Beneficiary the death benefit in a lump sum of $30,000 within 30 days of the Director’s death.

Article 4
Beneficiaries

4.1

Beneficiary . The Director shall have the right, at any time, to designate a Beneficiary to receive any benefit distributions under this Agreement upon the death of the Director. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designated under any other plan of the Company in which the Director participates.

4.2		Beneficiary Designation: Change; Spousal Consent . The Director shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent. If the Director names someone other than his or her spouse as a Beneficiary, a spousal consent, in the form designated by the Plan Administrator, must be signed by the Director’s spouse and returned to the Plan Administrator. The Director’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Director or if the Director names a spouse as Beneficiary and the marriage is subsequently dissolved. The Director shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Director and accepted by the Plan Administrator prior to the Director’s death.

4.3		Acknowledgment . No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.

4.4		No Beneficiary Designation . If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director’s spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be made to the personal representative of the Director’s estate.

4.5		Facility of Distribution . If the Plan Administrator determines in its discretion that a benefit is to be distributed to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any distribution of a benefit shall be a distribution for the account of the Director and the Director’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such distribution amount.

Article 5
General Limitations

5.1

Termination for Cause . Notwithstanding any provision of this Agreement to the contrary, the Company shall not distribute any benefit under this Agreement if the Director’s service with the Company is terminated due to a Termination for Cause.

5.2		Suicide or Misstatement . No benefits shall be distributed if the Director commits suicide within two years after the Effective Date of this Agreement, or if an insurance company which issued a life insurance policy covering the Director and owned by the Company denies coverage (i) for material misstatements of fact made by the Director on an application for such life insurance, or (ii) for any other reason.

5.3		Removal . Notwithstanding any provision of this Agreement to the contrary, the Company shall not distribute any benefit under this Agreement if the Director is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act.

Article 6
Administration of Agreement

6.1		Plan Administrator Duties . This Agreement shall be administered by a Plan Administrator which shall consist of the Board, or such committee or person(s) as the Board shall appoint. The Plan Administrator shall administer this Agreement according to its express terms and shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions including interpretations of this Agreement, as may arise in connection with the Agreement to the extent the exercise of such discretion and authority does not conflict with Section 409A of the Code and regulations thereunder.

6.2		Agents . In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Company.

6.3		Binding Effect of Decisions . The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement.

6.4		Indemnity of Plan Administrator . The Company shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members.

6.5		Company Information . To enable the Plan Administrator to perform its functions, the Company shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Separation from Service of the Director, and such other pertinent information as the Plan Administrator may reasonably require.

6.6

Annual Statement . The Plan Administrator shall provide to the Director, within one hundred twenty (120) days after the end of each Plan Year, a statement setting forth the benefits to be distributed under this Agreement.

Article 7
Claims And Review Procedures

7.1

Claims Procedure . A Director or Beneficiary (“claimant”) who has not received benefits under the Agreement that he or she believes should be distributed shall make a claim for such benefits as follows:

	7.1.1		Initiation – Written Claim . The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the claimant, the claim must be made within sixty (60) days after such notice was received by the claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the claimant.

	7.1.2		Timing of Plan Administrator Response . The Plan Administrator shall respond to such claimant within 90 days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

	7.1.3		Notice of Decision . If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

	(a)		The specific reasons for the denial;

	(b)		A reference to the specific provisions of the Agreement on which the denial is based;

	(c)		A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed; and

	(d)		An explanation of the Agreement’s review procedures and the time limits applicable to such procedures.

7.2

Review Procedure . If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:

	7.2.1		Initiation – Written Request . To initiate the review, the claimant, within 60 days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.

	7.2.2		Additional Submissions – Information Access . The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant’s claim for benefits.

	7.2.3		Considerations on Review . In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

	7.2.4		Timing of Plan Administrator Response . The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

	7.2.5		Notice of Decision . The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

	(a)		The specific reasons for the denial;

	(b)		A reference to the specific provisions of the Agreement on which the denial is based;

	(c)		A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant’s claim for benefits; and

	(d)		A statement of the claimant’s right to bring a civil action.

Article 8
Amendments and Termination

8.1		Amendments . This Agreement may be amended only by a written agreement signed by the Company and the Director. However, the Company may unilaterally amend this Agreement to conform with written directives to the Company from its auditors or banking regulators or to comply with legislative or tax law, including without limitation Section 409A of the Code and any and all regulations and guidance promulgated thereunder.

8.2		Plan Termination Generally . This Agreement may be terminated only by a written agreement signed by the Company and Director. However, the Company may unilaterally terminate this Agreement to conform with written directives to the Company from its auditors or banking regulators or to comply with legislative or tax law, including without limitation Section 409A of the Code and any and all regulations and guidance promulgated there under. In the event the Company unilaterally terminates this Agreement, the Director shall be entitled to receive from the Company an amount equal to the Accrual Balance as of the date the Agreement is terminated. Except as provided in Section 8.3, the termination of this Agreement shall not cause any early distribution of benefits under this Agreement. Rather, upon such termination, benefit distributions will be made in accordance with the distribution schedules set forth under Article 2 or Article 3, as applicable.

8.3		Plan Terminations Under Section 409A . Notwithstanding anything to the contrary in Section 8.2, if the Company terminates this Agreement in the following circumstances:

	(a)		Within thirty (30) days before, or twelve (12) months after a Change in Control, provided that all distributions are made no later than twelve (12) months following such termination of the Agreement and further provided that all the Company’s arrangements which are substantially similar to the Agreement are terminated so the Director and all participants in the similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the termination of the arrangements;

	(b)		Upon the Company’s dissolution or with the approval of a bankruptcy court provided that the amounts deferred under the Agreement are included in the Director’s gross income in the latest of (i) the calendar year in which the Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practical; or

(c)

Upon the Company’s termination of this and all other non-account balance plans (as referenced in Section 409A of the Code or the regulations thereunder), provided that all distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and the Company does not adopt any new non-account balance plans for a minimum of five (5) years following the date of such termination;

The Company shall distribute the Accrual Balance, determined as of the date of the termination of the Agreement, to the Director in a lump sum subject to the above terms.

Article 9
Miscellaneous

9.1		Binding Effect . This Agreement shall bind the Director and the Company, and their beneficiaries, survivors, executors, administrators and transferees.

9.2		No Guarantee of Service . This Agreement is not a contract for service. It does not give the Director the right to remain as a director of the Company, nor does it interfere with the Company’s right to discharge the Director. It also does not require the Director to remain a director nor interfere with the Director’s right to terminate service at any time.

9.3		Non-Transferability . Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

9.4		Tax Withholding and Reporting . The Company shall withhold any taxes that are required to be withheld, including but not limited to taxes owed under Section 409A of the Code and regulations thereunder, from the benefits provided under this Agreement. The Director acknowledges that the Company’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies). Further, the Company shall satisfy all applicable reporting requirements, including those under Section 409A of the Code and regulations thereunder.

9.5		Applicable Law . The Agreement and all rights hereunder shall be governed by the laws of the State of California, except to the extent preempted by the laws of the United States of America.

9.6		Unfunded Arrangement . The Director and the Beneficiary are general unsecured creditors of the Company for the distribution of benefits under this Agreement. The benefits represent the mere promise by the Company to distribute such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Director’s life or other informal funding asset is a general asset of the Company to which the Director and Beneficiary have no preferred or secured claim.

9.7		Reorganization . The Company shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Company under this Agreement. Upon the occurrence of such event, the term “Company” as used in this Agreement shall be deemed to refer to the successor or survivor bank.

9.8		Entire Agreement . This Agreement constitutes the entire agreement between the Company and the Director as to the subject matter hereof. No rights are granted to the Director by virtue of this Agreement other than those specifically set forth herein.

9.9		Interpretation . Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

9.10		Alternative Action . In the event it shall become impossible for the Company or the Plan Administrator to perform any act required by this Agreement, the Company or Plan Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Company, provided that such alternative acts do not violate Section 409A of the Code.

9.11		Headings . Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.

9.12		Validity . In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision has never been inserted herein.

9.13		Notice . Any notice or filing required or permitted to be given to the Company or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

Plumas Bank
35 South Lindan Avenue
Quincy, CA 95971

		Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

		Any notice or filing required or permitted to be given to the Director under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Director.

9.14

Compliance with Section 409A . This Agreement shall at all times be administered and the provisions of this Agreement shall be interpreted consistent with the requirements of Section 409A of the Code and any and all regulations thereunder, including such regulations as may be promulgated after the Effective Date of this Agreement.

IN WITNESS WHEREOF, the Director and a duly authorized representative of the Company have signed this Agreement.


DIRECTOR:	COMPANY:
	PLUMAS BANK

/s/ John Flournoy	By	Daniel West

John Flournoy
	Title Chairman

PLUMAS BANK
Director Retirement Agreement
BENEFICIARY DESIGNATION FORM

{ } New Designation
{ } Change in Designation

I, JOHN FLOURNOY, designate the following as Beneficiary under the Agreement:


Primary:
			%

			%

Contingent:
			%

			%

Notes:

	•		Please PRINT CLEARLY or TYPE the names of the beneficiaries.

	•		To name a trust as Beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement.

	•		To name your estate as Beneficiary, please write “Estate of [your name] ”.

	•		Be aware that none of the contingent beneficiaries will receive anything unless ALL of the primary beneficiaries predecease you.

I understand that I may change these beneficiary designations by delivering a new written designation to the Plan Administrator, which shall be effective only upon receipt and acknowledgment by the Plan Administrator prior to my death. I further understand that the designations will be automatically revoked if the Beneficiary predeceases me, or, if I have named my spouse as Beneficiary and our marriage is subsequently dissolved.

SPOUSAL CONSENT (Required if someone other than Spouse named beneficiary):

I consent to the beneficiary designation above, and acknowledge that if I am named Beneficiary and our marriage is subsequently dissolved, the designation will be automatically revoked.

Received by the Plan Administrator this day of , 2


By:

Title:

Exhibit 31.1

CERTIFICATION UNDER SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

I, Andrew J. Ryback, Chief Financial Officer, certify that:

	1.		I have reviewed this report on Form 10-Q of Plumas Bancorp;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b.		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a.		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b.		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: May 9, 2007	/s/ Andrew Ryback
	Andrew J. Ryback, Chief Financial Officer

Exhibit 31.2

CERTIFICATION UNDER SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

I, Douglas N. Biddle, Chief Executive Officer, certify that:

	1.		I have reviewed this report on Form 10-Q of Plumas Bancorp;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b.		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	a.		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b.		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: May 9, 2007	/s/ D. N. Biddle
	Douglas N. Biddle, Chief Executive Officer

Exhibit 32.1

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying Quarterly Report on Form 10-Q of the Company for the three months ended March 31, 2007, I, Andrew J. Ryback, Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

	1)		such Quarterly Report on Form 10-Q of the Company for the three months ended March 31, 2007, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	2)		the information contained in such Quarterly Report on Form 10-Q of the Company for the three months ended March 31, 2007, fairly presents, in all material respects, the financial condition and results of operations of Plumas Bancorp.



Date: May 9, 2007	/s/ Andrew Ryback
	Andrew J. Ryback, Chief Financial Officer

Exhibit 32.2

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying Quarterly Report on Form 10-Q of the Company for the three months ended March 31, 2007, I, Douglas N. Biddle, Chief Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

	1)		such Quarterly Report on Form 10-Q of the Company for the three months ended March 31, 2007, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	2)		the information contained in such Quarterly Report on Form 10-Q of the Company for the three months ended March 31, 2007, fairly presents, in all material respects, the financial condition and results of operations of Plumas Bancorp.



Date: May 9, 2007	/s/ D. N. Biddle
	Douglas N. Biddle, Chief Executive Officer

Signature: