PBCO Financial : People's Bank Annual Report 2022 Newsletter (Opens in a new Window)

2022

Year In Review

Dear Shareholder,

The Board of Directors of PBCO Financial Corporation, the holding company for People's Bank of Commerce, is pleased to report our 2022 annual results and accomplishments.

This will be my last message to shareholders as the CEO of the company, as I will retire on July 1st. It has been a tremendous opportunity and pleasure for me to watch the bank grow from infancy to maturity over the last 25 years. I will continue on as a board member and will provide assistance to the management team as needed.

Julia Beattie will become the company's third CEO when she takes the helm in July. My	en Trautman
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retirement is a continuation of our succession plan that was developed many years ago and

included the retirement of three other executives over the last three years. I have worked very closely with Julia to ensure a smooth leadership transition. She not only has the talent and experience, but also the leadership traits and quality of character that fit well within our organization.

Financially, the company had a solid year in 2022, with an ROA of 1.14%, an ROE of 14.04% and an efficiency ratio of 62.67%. Loan growth was modest at 5.4%, primarily due to our passing on loans priced unreasonably low by competitors thinking inflation was transitory. Deposits decreased, as expected, as rate sensitive customers moved money for higher rates. We did not feel compelled to significantly raise our deposit rates with over 30% liquidity on our balance sheet. Credit quality continues to remain high with non-performing loans to total loans of 0.56%. Our goal of looking for quality loans instead of loan growth will pay dividends as we enter the uncertain times in 2023 and beyond.

2022 was a year of adjustments - the extremely low interest rate environment that we have been operating in for many years came to a sudden end. The Fed Funds rate began increasing in March, first thought to be transitory, but soon proved to be more lasting. Our excess liquidity, gained during the pandemic, allowed us to remain conservative with our deposit rates, and positioned us well for the future. The rapid increase in rates impacted our mortgage department the most, erasing the positive gains obtained the first part of the year. The mortgage industry will stabilize as soon as home prices adjust to the new rates and buyers gain more comfort with the new norm.

People's Bank opened its tenth branch in Jacksonville, after Umpqua and US Bank closed their branches, and we hired a commercial lending team in Eugene, led by Mark Rodewald, as Market President. We also say goodbye to director, Lindsay Berryman, who has faithfully and diligently served the bank for the last nine years.

We are prepared for what 2023 will bring and are thankful to our shareholders, employees and customers, who we strive to honor and serve. We proudly believe in our locally owned community bank and are committed to the long- term value of its stock (PBCO); follow it at www.peoplesbank.bank.

Please don't hesitate to contact me directly at 541-774-7654, if you have questions or comments.

Sincerely,

Ken Trautman

Chief Executive Officer

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:

This release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as People's Bank or its management "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar import. Similarly, statements herein that describe People's Bank's business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in forward-looking statements.

President Report

Ken's letter to shareholders provides a very informative recap of 2022, not only in terms of our company's performance, but also in speaking to the rising rate environment and our strategic response. As the incoming CEO, I want to share my vision on how we will go forward from 2022 and continue to build on the company's success. There are three primary efforts I feel would be of interest to you, our shareholders.

First, we will be revisiting our strategic plan this year with an upcoming session that will include our board and our senior management team. Our last strategic planning session was in June 2021, and we feel current times call for a review of that plan. Second, we have been actively meeting with community stakeholders across a variety of industries to get their 'pulse' on the economy and how changing dynamics might impact their industries and consequently our communities. We have also used these meetings to get their thoughts on what more we can be doing, what we can be doing better, and what financial products and services are needed to help businesses in our communities thrive.

And third, we will focus on improving our core operating performance, looking for ways to make us more efficient without compromising the quality of our delivery. Improvement in our core operating performance will strengthen our position in the industry and continue to build the company's resiliency.

J	tie	There continues to be market disruption in our footprint, with the merger of regional banks
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	a Beat	and associated branch closures and with banks opting to discontinue or temporarily suspend

certain product offerings. We feel we are well positioned to take advantage of this disruption with our recent expansion into the Eugene marketplace and our investment in our Mortgage production team.

I am very excited to be the company's incoming CEO and to lead this organization forward, capitalizing on the incredible foundation Ken and others have built over the past 25 years. With this strong foundation and our terrific team of bankers, we are well positioned for continued growth and success.

Jeri Reno Retirement

The closing of 2022 brought a significant change amongst our management team with the retirement of Jeri Reno, EVP, Chief Administrative Officer. Jeri joined People's Bank in 1998. She has been instrumental in the company's

growth, now serving ten Oregon communities with eleven branch locations. When asked what
stood out to Jeri about the impact on the communities that People's Bank serves, she
responded, "People's Bank's consistent delivery of loan and deposit services and its
long-standing commitment to providing financial contributions to civic and charitable
organizations continue to play an important role in the success of the local economy
and the betterment of people's personal lives. These actions define the principles of
community banking and have remained as the bank's core mission since it began in
1998." When asked what it was about banking that drove her professional career she	eri Reno
responded, "I enjoyed creating a better banking experience for every customer, whether it
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was in providing customer service or by supporting the bank's staff, systems and operations. This is

what I liked most about banking." We are so grateful to Jeri for her service to People's Bank and her dedication to the Oregon banking industry. Congratulations on a well deserved retirement.

Supporting Our Communities

Siskiyou County Fair Auction

Northwest Seasonal Farm Workers Association

People's Bank places a high priority on serving the needs of our communities. In 2019, People's Bank started its own Foundation in order to better partner with non-profitorganizations in our footprint. Very soon after the formation of the Foundation, devastating wildfires spread throughout our beautiful state, destroying businesses and homes in its path. Our Foundation stepped in to support those that lost their homes and continues to support efforts to rebuild our communities.

We look forward to building our Foundation, raising funds to help our communities grow through good and bad times. Over the next few years, as our Foundation develops, we look forward to it being a vibrant and active part of all the communities we serve.

Supporting Our Communities

Major Contributions

from the People's Bank Foundation

Donations range from 2020-2022

$260,708	Immediate Fire Relief - Hotels*
$250,000	Fire Relief Temporary Housing - City of Talent
$150,000	Rogue Retreat
$38,500	City of Talent Gateway Transitional Shelter
$30,000	Asante Forward Campaign**
$16,592	Siskiyou County Fair Auction - 4-H & FFA Projects
$12,000	Rogue Community College Foundation**
$10,000	Kentucky Bankers Hurricane Relief Donation
$6,440	Other Donations
$774,240	TOTAL

City of Talent Gateway Transitional Shelter - Gateway Project

Gateway Project Ribbon Cutting Celebration

• Funded by employee donations, local businesses, and individual donations from community members.
• Multi-YearCommitment

Asante Forward Campaign $100,000 over 10 years

Rogue Community College Foundation $20,000 over 5 years