PEOPLES B : PBCO Financial Statement 2021

REPORT OF INDEPENDENT AUDITORS AND

FINANCIAL STATEMENTS

PEOPLE'S BANK OF COMMERCE

(AN OREGON BANKING CORPORATION)

December 31, 2021 and 2020

Table of Contents

		PAGE
Report of Independent Auditors	1-2
Financial Statements
Balance sheets	3
Statements of income	4
Statements of comprehensive income	5
Statements of changes in stockholders' equity	6
Statements of cash flows	7-8
Notes to financial statements	9-45
Note:	These financial statements have not been reviewed or confirmed for accuracy or relevance by

the Federal Deposit Insurance Corporation.

Report of Independent Auditors

To the Board of Directors and Stockholders

People's Bank of Commerce

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of People's Bank of Commerce, which comprise the balance sheets as of December 31, 2021 and 2020, and the related statements of income, comprehensive income, changes in stockholders' equity, and cash flows for the years then ended, and the related notes to the financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of People's Bank of Commerce as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of People's Bank of Commerce and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about People's Bank of Commerce's ability to continue as a going concern within one year after the date that the financial statements are issued.

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Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of People's Bank of Commerce's internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about People's Bank of Commerce's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

Portland, Oregon

March 11, 2022

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People's Bank of Commerce

Balance Sheets

		December 31,
		2021			2020
ASSETS
Cash and cash equivalents	$	81,345,358	$	92,182,758
Time deposits with other institutions		1,492,000			1,740,000
Investment securities
available-for-sale, at fair value		241,637,890			25,893,747
Federal Home Loan Bank (FHLB) stock		1,010,100			564,300
Loans held-for-sale		1,407,525			3,407,443
Factored accounts receivable, net of allowance		27,199,768			17,762,644
Loans, net of allowance for loan losses, and
unearned income		452,848,631			341,744,684
Premises, equipment, and leasehold improvements,
net of accumulated depreciation and amortization		23,048,156			17,796,522
Right-of-use asset, net		4,256,256			3,826,981
Other real estate owned		542,310			1,028,151
Bank-owned life insurance (BOLI)		13,759,082			7,475,619
Goodwill		3,335,384			3,335,384
Investment in real estate joint venture		2,311,732			2,360,850
Accrued interest receivable and other assets		5,403,089			4,211,549
Total assets	$	859,597,281	$	523,330,632
LIABILITIES
Noninterest-bearing demand deposits	$	350,423,974	$	231,095,318
Interest-bearing demand and money market accounts		322,951,065			165,556,742
Savings deposits		66,466,635			36,730,181
Time deposits		24,387,655			22,365,573
Total deposits		764,229,329			455,747,814
FHLB Advances		3,000,000			3,000,000
Accrued interest payable and other liabilities		8,865,508			7,822,875
Lease liability		4,436,997			3,924,444
Total liabilities		780,531,833			470,495,133
COMMITMENTS AND CONTINGENCIES (Notes 9, 11, and 12)
STOCKHOLDERS' EQUITY
Common stock, $5 par value, 10,000,000 shares authorized;
5,057,211 and 3,558,581 shares issued and outstanding
at December 31, 2021 and 2020, respectively		25,297,545			17,804,396
Surplus		36,042,613			22,574,481
Retained earnings		19,465,705			11,774,851
Accumulated other comprehensive income (loss)		(1,740,415)			681,771
Total stockholders' equity		79,065,448			52,835,499
Total liabilities and stockholders' equity	$	859,597,281	$	523,330,632

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