Stonegate Capital Partners Updates Coverage On Plumas Bancorp (Nasdaq: PLBC) 2023 Q1

DALLAS, TX -- April 27th, 2023 -- Plumas Bancorp (Nasdaq: PLBC): Stonegate Capital Partners updates coverage on Plumas Bancorp (Nasdaq: PLBC). The full report can be accessed by clicking on the following link: Plumas Bancorp 2023 Q1 Report

Company Summary

• Continued growth: Assets decreased slightly to $1.58B at 1Q23 end, down from $1.62B at 1Q22. Deposits also decreased to $1.41B in 1Q23 from $1.47B in 1Q22. Non-performing assets decreased by $1.1M Y/Y to $4.2M at 1Q23, a decrease of 21%. Additionally, investment securities have grown by $168M Y/Y to $484M.
• Community banks on strong footing: In the wake of the recent SVB failure there has been increased scrutiny on the banking sector. When compared to larger regional banks, we believe that local banks like PLBC are better suited to weather this bank sector turmoil. This is in large part due to community banks having less than 10% of their accounts uninsured by the FDIC as compared to SVB’s 95% of accounts being uninsured. It is also notable that SVB had a much lower NIM, at 2.0% in 4Q22, as compared to PLBC at 4.64% in 1Q23. Additionally, assets at PLBC have shorter durations compared to peers and they are not invested in held-to-maturity securities.
• Strong core deposits: Plumas has a strong history of increasing its demand, savings, and money market deposits from local businesses and individuals. However, deposits fell by $61M Y/Y to $1.47B on March 31, 2023. This decline is attributed to the increasing rate environment and is being mitigated by an introduction of limited time 7- and 11-month time deposits offered at a rate of 4%. Despite this headwind, the Company has grown deposits at a ~17% CAGR since 2018.
• Diversified loan portfolio: PLBC provides a range of lending services with the breadth of loan diversification helping Plumas to avoid becoming overly concentrated in a single industry. As of 1Q23 80% of the loan portfolio was comprised of variable rate loans. The Company saw gross loans increase by 9% from $839M in 1Q22 to $916M in 1Q23.
• Non-interest earnings income growth: In addition to the Company’s primary source of revenue, interest income, in 1Q23 Plumas also derived ~$3.93M of its revenue from a variety of noninterest income items including loan servicing fees, service charges on deposit accounts, interchange revenue and gains on sales of SBA 7a loans. Non-interest income increased by $0.3M as compared to 1Q22.
• Successful growth strategy: The Company continued to expand its branch operations into targeted growth markets of Northern California and Northwestern Nevada over the years with great success including the purchase of Mutual of Omaha Bank’s Carson City Branch in October 2018 and the acquisition of Feather River Bancorp in 2021. Most recently the company announced the opening of its Chico, California branch that will open in 2Q23.
• Valuation: We use a comp analysis on P/E and P/BV to help frame valuation. Using a P/E range of 7.0x to 8.0x with a mid-point of 7.5x on our FY24 EPS estimate results in a valuation range of $39.2 to $44.8 with a mid-point of $42.00. Using a P/BV multiple range of 1.7x to 2.1x, we arrive at a valuation range of $37.33 to $46.12 with a mid-point of $41.72. Additional details can be found on page 9.