PBCO Financial : Audited Financial Statements (Opens in a new Window)

REPORT OF INDEPENDENT AUDITORS AND

FINANCIAL STATEMENTS

PBCO FINANCIAL CORPORATION

December 31, 2022 and 2021

Table of Contents

	PAGE
Report of Independent Auditors	1-2
Consolidated Financial Statements
Consolidated balance sheets	3
Consolidated statements of income	4
Consolidated statements of comprehensive income (loss)	5
Consolidated statements of changes in stockholders' equity	6
Consolidated statements of cash flows	7-8
Notes to consolidated financial statements	9-43

Note: These financial statements have not been reviewed or confirmed for accuracy or relevance by the Federal Deposit Insurance Corporation.

Report of Independent Auditors

The Board of Directors and Stockholders

PBCO Financial Corporation

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of PBCO Financial Corporation, which comprise the balance sheets as of December 31, 2022 and 2021, 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 PBCO Financial Corporation as of December 31, 2022 and 2021, 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 audits 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 PBCO Financial Corporation and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. 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 PBCO Financial Corporation's ability to continue as a going concern within one year after the date that the financial statements are available to be 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 PBCO Financial Corporation'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 PBCO Financial Corporation'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 10, 2023

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PBCO Financial Corporation

Balance Sheets

		December 31,
		2022			2021
ASSETS
Cash and cash equivalents	$	15,886,562	$	81,345,358
Time deposits with other institutions		496,000			1,492,000
Investment securities
available-for-sale, at fair value		236,283,195			241,637,890
Federal Home Loan Bank (FHLB) stock		1,231,700			1,010,100
Loans held-for-sale		627,542			1,407,525
Factored accounts receivable, net of allowance		16,714,999			27,199,768
Loans, net of allowance for loan losses, and
unearned income		469,834,264			452,848,631
Premises, equipment, and leasehold improvements,
net of accumulated depreciation and amortization		23,176,477			23,048,156
Right-of-use asset, net		4,756,769			4,256,256
Other real estate owned		286,072			542,310
Bank-owned life insurance (BOLI)		14,178,661			13,759,082
Goodwill		3,335,384			3,335,384
Investment in real estate joint venture		2,262,615			2,311,732
Deferred tax assets, net		10,235,190			1,345,120
Accrued interest receivable and other assets		4,944,835			4,057,969
Total assets	$	804,250,265	$	859,597,281
LIABILITIES
Noninterest-bearing demand deposits	$	322,808,505	$	350,423,974
Interest-bearing demand and money market accounts		291,743,977			322,951,065
Savings deposits		61,509,636			66,466,635
Time deposits		16,733,087			24,387,655
Total deposits		692,795,205			764,229,329
FHLB Advances		5,000,000			3,000,000
Subordinated notes, net		24,470,504			-
Accrued interest payable and other liabilities		8,595,572			8,865,507
Lease liability		4,978,187			4,436,997
Total liabilities		735,839,468			780,531,833
COMMITMENTS AND CONTINGENCIES (Notes 9, 11, and 12)
STOCKHOLDERS' EQUITY
Common stock, $5 par value, 10,000,000 shares authorized;
5,325,035 and 5,057,211 shares issued and outstanding
at December 31, 2022 and 2021, respectively		83,710,599			25,297,545
Surplus		2,609,462			36,042,613
Retained earnings		4,812,490			19,465,705
Accumulated other comprehensive income (loss)		(22,721,754)			(1,740,415)
Total stockholders' equity		68,410,797			79,065,448
Total liabilities and stockholders' equity	$	804,250,265		$	859,597,281

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