Not Applicable

Not Applicable

Not Applicable

The Plumas Bank 401(k) Profit Sharing Plan, (the “Plan”) is subject to the requirements of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Furnished herewith are the financial statements and schedules of the Plan for the fiscal year ended December 31, 2007, prepared in accordance with the financial reporting requirements of ERISA.

 

Financial Statements:

 

 

 

 

Supplemental Schedule:

 

 

 

 

Investments (Notes 3, 4 and 5):

Participant-directed investments at fair value

Participant loans

 

 

Total investments

 

 

Net assets available for benefits at fair value

 

Adjustment from fair value to contract value for guaranteed investment contract — Stable Value Fund

 

 

Net assets available for benefits

 

 

 

Investment income (Notes 3, 4 and 5):

Net appreciation (depreciation) in fair value of investments

Interest and dividends

 

 

Total investment income

 

 

Contributions:

Participant

Employer

 

 

Total contributions

 

 

Total additions

 

 

 

Benefits paid to participants

 

 

Net increase (decrease)

 

Net assets available for benefits:

Beginning of year

 

 

End of year

 

The following description of the Plumas Bank (the “Bank”) 401(k) Profit Sharing Plan (the “Plan”) provides only general information. Participants should refer to the Summary Plan Description or the Plan Document for a more complete description of the Plan’s provisions.

Plumas Bank, the Plan Sponsor, established the Plan effective on April 1, 1988, to provide all Bank employees, not otherwise excluded, who have completed 90 days of service and are eighteen years of age with the opportunity to defer a portion of their eligible compensation on a pre-tax basis. All investments in the Plan are participant directed. Prudential Trust Company is the Trustee of the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).

Each year, participants may make salary deferral contributions in any percentage of their pretax annual compensation, as defined in the Plan, subject to certain Internal Revenue Code (IRC) limitations. All participant contributions and earnings thereon are 100% vested.

The Bank provides a 100% match on each participant’s elective deferral up to 3% of the participant’s eligible compensation. At the discretion of the Bank, the Bank may also make a non-elective contribution to the Plan. Bank contributions are subject to certain IRC limitations. During 2007 and 2006 the Bank did not make any discretionary contributions. Both the matching contribution and any non-elective contribution vest over a five-year period as follows:

 

2 years but less than 3 years

3 years but less than 4 years

4 years but less than 5 years

5 years or more

DESCRIPTION OF PLAN (Continued)

Participants direct all of their voluntary contributions and their portion of the employer matching contributions among any or all of the investment options offered by Prudential Insurance Company of America. The investment options include a range of funds that are invested in shares of thirteen registered investment companies (mutual funds) that invest mainly in common stocks and bonds.

In addition, participants have the option of investing in Plumas Bancorp common stock, up to 50% of the participant’s total elective deferrals. These investments are also maintained by the Plan’s Trustee.

Participants may change their investment options without restriction.

Participants may borrow from their accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. Loan transactions are treated as a transfer (from) to the investment fund (to) from the Participant Loans fund. Loan terms range from one to five years, or longer if used to purchase the primary residence of the participant. The loans are secured by the balance in the participant’s account and bear interest at prevailing market rates at the time of borrowing. Principal and interest is paid ratably through semi-monthly payroll deductions.

Upon termination of employment or other reasons specified by the Plan, a participant with a vested account balance that exceeds $5,000 may elect to receive: (1) a lump sum payment, (2) a part lump sum payment and part installment payments as described in (3), or (3) installment payments (annually, quarterly or monthly) over a specified period of time, not exceeding the participant’s life expectancy or the joint life expectancy of the participant or participant’s beneficiary. For a participant with a vested account balance of $5,000 or less, a lump sum payment is distributed to the participant. Distributions between $1,000 and $5,000 may be made automatically to a participant without requiring the participant’s consent. If the participant does not elect to have such distribution paid directly to an “eligible retirement plan” in a direct rollover or to receive the distribution directly, then the Plan’s Sponsor automatically pays the distribution through a direct rollover to an individual retirement plan designated by the Plan’s Sponsor. As of December 31, 2007 and 2006, there were no benefits payable to participants that have elected to withdraw from the Plan but have not yet been paid.

DESCRIPTION OF PLAN (Continued)

Forfeitures from the nonvested portion of terminated employees’ account balances can be used to reduce employer contributions in the following plan year. Forfeitures totaling $16,231 and $5,844 were used to reduce employer contributions for the years ending December 31, 2007 and 2006, respectively.

The Bank pays the administrative costs of the Plan. Investment management fees are paid by the Plan.

Although it has not expressed any intent to do so, the Bank has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event that the Plan is terminated, participants would become 100% vested in their accounts.

The accompanying financial statements of the Plan have been prepared in accordance with accounting principles generally accepted in the United States of America.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Plan’s management to make estimates and assumptions that affect certain reported amounts of net assets available for benefits and changes therein and disclosure of contingent assets and liabilities. Actual results may differ from those estimates.

The Plan’s investments are stated at fair value, except for the guaranteed investment contract which is stated at contract value. Quoted market prices as of the last business day of the Plan year are used to value investments in registered investment companies (mutual funds) as well as in Plumas Bancorp’s common stock. Participant loans receivable are valued at the outstanding loan balances.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Investment Valuation and Income Recognition (Continued)

As described in Financial Accounting Standards Board Staff Position, FSP AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans (the “FSP”), investment contracts held by a defined contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the plan. As required by the FSP, the Statement of Net Assets Available for Benefits presents the fair value of the investment contracts as well as the adjustment of the fully benefit-responsive investment contracts from fair value to contract value at December 31, 2007. At December 31, 2006, the investment contract’s contract value approximated its fair value, so no adjustment from fair value to contract value is presented.

Purchases and sales of securities are recorded on a trade date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation (depreciation) in fair value of investments includes net unrealized market appreciation and (depreciation) of investments and net realized gains and losses on the sale of investments during the period.

The Plan utilizes various investment instruments, including mutual funds, the common stock of the Plan Sponsor, and a guaranteed investment contract. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements.

Benefits are recorded when paid.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 does not require new fair value measurements, but provides guidance on how to measure fair value by establishing a fair value hierarchy used to classify the source of the information. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Plan adopted SFAS 157 on January 1, 2008 and its adoption did not have a material impact on the Plan’s financial position or results of operations.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115 (“SFAS 159”). This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the FASB’s long-term measurement objectives for accounting for financial instruments. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Plan adopted SFAS 159 on January 1, 2008 and the Plan’s management did not elect the fair value option for any of its financial instruments.

The following table presents the fair value of the investments in the Plan. Investments representing more than 5% of the Plan’s net assets as of December 31, 2007 and 2006 are separately identified.

 

Investments at quoted market prices:

Davis NY Venture Fund

Euro Pacific Growth Fund

Plumas Bancorp Common Stock

Stable Value Fund

Jennison Growth Fund

Van Kampen Equity Income Fund

Goldman Sachs Mid Cap Fund

Franklin Small-Mid Cap Fund

PIMCO Total Return Fund

Other investments

 

 

 

 

Other investments:

Loans to participants

 

 

Total investments

 

At December 31, 2007 and 2006, the Plan held investments in Plumas Bancorp common stock, representing approximately 15% and 19% of net assets available for benefits, respectively. A significant decline in the performance of Plumas Bancorp common stock could have a materially adverse impact on the Plan’s net assets available for benefits.

Certain Plan investments are shares of mutual funds managed by Prudential Insurance Company of America. Prudential Trust Company is the Trustee as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions. Fees paid by the Plan for investment management services were included as a reduction of the return earned on each fund.

RELATED-PARTY TRANSACTIONS (Continued)

At December 31, 2007 and 2006, the Plan’s investments in Plumas Bancorp common stock (a party-in-interest) are as follows:

 

Number of shares

Fair value, based on quoted market values

The Internal Revenue Service has determined, and informed the Bank by a letter dated November 20, 1992, that the Plan and related trust are designed in accordance with applicable regulations of the Internal Revenue Code (IRC). The Plan has been amended since receiving the determination letter. However, the Plan Administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC and the Plan continues to be tax exempt. Therefore, no provision for income taxes has been included in the financial statements.

 

 

 

 

 

 

 

**

 

 

 

 

 

 

 

 

 

**

 

 

 

 

 

 

 

 

 

**

 

**

 

 

 

 

 

 

Information regarding the cost of investments at December 31, 2007 is not required as investments are participant directed.

Party-in-interest to the Plan.

 

 

 

 

Date: June 26, 2008

 

 

 

23.1