PSB Holdings, Inc. 2022 Annual Report Impact in Agility SIXTY YEARS AGO, PEOPLES STATE BANK OPENED ITS DOORS AS A BANK DESIGNED TO HELP PEOPLE WITH THEIR FINANCIAL NEEDS. IT’S WHY WE’RE NAMED PEOPLES STATE BANK. Our goal has always been to help our customers pursue their financial dreams. For six decades, Peoples State Bank has provided financial solutions to business owners, consumers, and home buyers. Putting people first in their financial pursuits keeps staff focused on providing excellent customer service. And as technology and customer needs change, Peoples is changing, too, providing multiple service channels no matter how customers choose to bank with us. 60 Years of Growth $1,647,919 - value of bank assets when Peoples opened $1,337,689,000 - value of bank assets at 60 years 6 - # of employees when Peoples opened with one location (Charles Anderson, Glenn Resheske, Harold Telschow, Gladys Beese, Joyce Lazewski, Lucille Ward - Gordon Connor was first president but was not an employee) 206 - # of employees at 60 years with 12 locations 1 - # of Wisconsin counties with loans when Peoples opened 53 - # of Wisconsin counties (out of 72) with loans at 60 years 2022 ANNUAL REPORT 1 The President’s Letter Despite adversity in the 2022 financial markets, Peoples recurring SBA PPP loan origination fees are excluded, employees provided impact for our customers and 2022 net interest margin was 3.25% compared to 3.01% shareholders by being agile in our solutions. in 2021. Also supporting net income was continued Scott M. Cattanach President & CEO 2022 GROWTH AND RETURN HIGHLIGHTS Our loan growth was strong during 2022, up $85.5 million, or 9.8%, and we achieved record PSB Holdings, Inc. & Peoples State Bank earnings of $3.07 per share on net income of $13.5 million. On December 31, 2022, total assets reached $1.34 billion, and total deposits closed at a new milestone of $1.15 billion. strong credit quality, which required no provision for loan losses during 2022 after expensing $1 million in 2021. Rising interest rates also reduced the value of our existing fixed-rate investment securities, with those unrealized securities losses recorded as a reduction to stockholders’ equity as part of comprehensive income, reducing net book value per share. However, unrealized security losses do not reduce net income unless they are sold prior to maturity and changes in Impact in Agility: a concerted effort to provide value to our customers in the face of changing markets. Opening our doors on Wausau’s west side in August 1962, was the first step in what has become a rich history of community banking. Sixty years later, most experiences in banking have changed, except our commitment to providing customers with excellent personal service. The nation’s economic growth stumbled a bit during value do not impact earnings per share. 2022 as the Federal Reserve increased interest rates to contain rising inflation. These higher rates decreased home purchase and refinance activity, and our mortgage banking revenue declined $1.9 million, or 60.5% in 2022. In addition, the Small Business Administration’s pandemic-related Paycheck Protection Program (PPP) concluded in 2022, during which we recognized $360,000 of PPP origination fees, down significantly from $3.4 million recorded in 2021. Return on shareholder equity grew to 13.47% during 2022 compared to 11.63% during 2021. Strong results permitted the company to again increase cash dividends declared to shareholders during 2022, which increased 8.6% to $0.50 per share. The cash dividend rate per share has increased 56% over the past five years. TECHNOLOGICALLY SPEAKING We are committed to expanding our traditional customer However, net interest income increased $1.4 million delivery channels to include more digital banking options. despite the reduction in PPP fee income. If these non- Our recent customer research shows that more than 2 ANNUAL REPORT 2022 65% of our customers prefer to bank with Peoples using and public support to local organizations, there are many our digital banking tools. While many of our customers other ways we support our neighbors. value traditional face-to-face interaction, digital options are increasingly important, particularly in our more metro Milwaukee area markets. In 2022, we added the following: In 2022, we added the Peoples Balance Banking account to our retail checking account lineup. Peoples Balance Banking offers those without a • Zelle® allows you to send money using your mobile banking relationship a low-cost account that prevents phone to a friend or family member in minutes overdrafts, providing them with a safe and secure with high security. way to manage and grow their finances. The Cities for • Our digital “OpenNow” permits retail customers to open a deposit account via mobile phone or online in minutes, including funding the new account. • Allpoint ATM Network provides 55,000 fee-free ATMs worldwide, including 560 in Wisconsin. • Autobooks for businesses provides a convenient mobile phone app to bill and collect customer payments on-site, with lower interchange costs, improving the speed of business cash flow. Demand for ACH and Positive Pay commercial deposit treasury management fraud protection tools continues to grow, allowing us to protect customer deposits from fraudulent payments and transfers. During 2022, these tools were used to protect customers from over $587,000 in deposit losses from fraud attempts. COMMITMENT TO COMMUNITY It’s always been essential for us to give back to the Financial Empowerment Fund approved our Peoples Balance Banking product under the BankOn National Account Standards designed to help provide financial stability to those who need assistance. We’ve also created a series of essential financial information blogs, which we’ve dubbed our Money 101 series. We want our customers to understand money, bank accounts, and how their financial decisions can impact their futures. These new initiatives are in addition to the myriad of community involvement activities you’ve come to expect from Peoples and our employees, which you can learn more about on pages 6 and 7. We earned three significant honors in this year’s Wausau Daily Herald “Best of Marathon County” contest, finishing as the Best Bank, Best Mortgage Company, and Best Financial Planning Company by the newspaper’s readers. It’s the 11th year in a row their readers have voted us as the Best Bank in Marathon County, and the fourth straight communities we serve. Besides our monetary donation year we’ve been named Best Mortgage Company. 2022 ANNUAL REPORT 3 In addition, American Banker Magazine industries not currently served by Peoples while named PSB Holdings, Inc. one of the Top 200 still managing credit risk. Community Banks for the 13th year in a row, recognizing the above-average return on equity results over a three-year period for our shareholders. American Banker Magazine also honored Peoples as one of the Best Banks to Work For in 2022. It’s the fourth year in a row for that honor, which is awarded to banks that create exceptional work environments based on an anonymous survey of our staff. LOOKING AHEAD Our Stevens Point loan production office, started in 2017, now has $55 million in loans. We will expand this office to a full-service branch in 2023. The new site is being designed to include new technology to expand our customer service channels. Our new residential mortgage origination system brought us several benefits, including improved customer regulatory disclosures, increased customer self-service options, and staff efficiencies from fewer manual inputs and processes. Continued process efficiencies are essential for us to continue favorable expense and efficiency ratios to deliver competitive loan and deposit pricing. In 2023, we are updating our commercial loan origination system to provide faster approvals, fewer customer steps, and fewer manual processes for small to medium-sized commercial loan requests. SHAREHOLDER LIQUIDITY During 2022, we took actions to increase our stock trading liquidity and introduced new options to In addition to our Stevens Point expansion, buy and sell shares. Through our transfer agent, a we look to add to our strong SBA 504 lending new dividend reinvestment plan and direct stock program, under which we are already a leading purchase plan are now available for shareholders. Wisconsin lender. Our commercial banking team is building the foundation and procedures to also offer SBA 7(a) guaranteed loans to businesses. The SBA 7(a) loans provide financing for customers with start-up businesses, those with a collateral shortfall, or operating in a challenging industry not well served with traditional bank financing. This product expands our growth opportunities with new business leaders and We have a lot to be thankful for in looking back at 2022. Peoples celebrated 60 years of banking with another outstanding year for our shareholders, customers, and employees. Thank you for your trust and ongoing support. Scott M. Cattanach President & Chief Executive Officer PSB Holdings Inc. & Peoples State Bank . 4 ANNUAL REPORT 2022 The Board of Directors Our board members ensure Peoples State Bank’s financial security and dedication to our customer's and shareholders' best interests. William J. Fish Peter W. Knitt Chairman of PSB Holdings, Inc. & Peoples State Bank Retired President BILCO, Inc. Retired President & CEO PSB Holdings, Inc. & Peoples State Bank Scott M. Cattanach President & CEO PSB Holdings, Inc. & Peoples State Bank Kevin J. Kraft Managing Director Wisconsin River Partners, LLC Lee A. Guenther Retired CEO T.A. Solberg Co., Inc. Karla M. Kieffer Co-owner & VP Sales SUN Printing Corey B. Vanderpoel Managing Director & Owner Taureau Group, LLC Patricia M. Hanz Retired Briggs & Stratton U.S. Consumer Product Safety Commission Robert F. Eastman, Jr. Retired CEO Sunset Bank & Savings Front row – Karla Kieffer, Peter Knitt, Corey Vanderpoel Back row – Lee Guenther, Scott Cattanach, Kevin Kraft, William Fish, Patricia Hanz Not pictured: Robert Eastman, Jr. A special "thank you" to Bob Eastman on his retirement from the PSB Holdings, Inc. board of directors in 2023. Without Bob's support, the bank's acquisition of Sunset Bank & Savings in 2021, and transition to Peoples State Bank - Waukesha could not have happened. Eastman spent many years in Milwaukee area residential mortgage banking and other financial services, and formed Sunset Bank & Savings in 1999. EASTMAN R E T I R E M E N T S Community banking is a people business, and we recognize colleagues who retired in 2022. Thank you, and we wish you all the best! Cindy Wright VP Retail Team Leader Northern Market 17 years of service Patty Duberstein Commercial Loan Post Closer 4 years of service Heidi Fleurant VP Senior Private Banker 43 years of service Kevin Smith Retail Loan Underwriting Specialist 6 years of service Angela Vinnedge Customer Service Representative 1 year of service Left to Right – Tim Dively, Jeff Saxton, Jessica Brown, Pat Heier, Robert McPherson, Erik Rajek, Scott Cattanach, Tina Seidl The Executive Management Team Working together on a common goal, Peoples’ Executive Management Team is responsible for ensuring the board’s directives are WRIGHT FLEURANT achieved, providing success for our customers, employees, and shareholders. 2022 ANNUAL REPORT 5 Scott Cattanach Robert McPherson President Chief Executive Officer Vice President Risk Management Jessica Brown Jeffrey Saxton Senior Vice President Chief Financial Officer Vice President Retail Sales & Service Tim Dively Tina Seidl Senior Vice President Chief Technology & Operating Officer Pat Heier Senior Vice President Commercial Banking Vice President Human Resources Erik Rajek Vice President Chief Credit Officer 6 ANNUAL REPORT 2022 Giving back & supporting our community WE SUPPORT THE COMMUNITIES AND PEOPLE WE SERVE. Our employees routinely volunteer their time and talent to help others in the community. In 2022, our employees donated more than 5,400 hours to non-profit organizations, community service clubs, athletic clubs, schools, and church organizations in the communities where they live. For Peoples, it’s the definition of being a community bank! A Shining Star Peoples received a Shining Star award from the United Way of Marathon County for our support of the United Way Annual Campaign. Peoples was honored for our campaign growth, participation growth, per capita gift amount, leadership giving, corporate gift, and volunteerism. Financial Assistance Peoples State Bank contributes more than $250,000 every year in donations and sponsorships of events and organizations that impact their communities. Some of our West Allis leadership presented a $1,500 check to Junior Achievement of Wisconsin in 2022. The money was used to provide financial education to young students in West Allis area schools. 2022 ANNUAL REPORT 7 Raising Money Peoples employees pride themselves on helping to raise money for non-profits and community organizations. Our Rhinelander team coordinates three fundraisers each year, this one to raise money for the Humane Society of Oneida County. Investing in the Future In 2022, Peoples provided $1 million to support affordable housing development through Cinnaire’s 2022 Community Fund, a low-income housing tax credit equity fund. The investments reinforce Peoples’ commitment to expanding access to high- quality affordable housing—a key driver of economic mobility and family stability. Peoples’ investment helped build 40 new apartments in Lac du Flambeau, a community in need of affordable housing. 8 ANNUAL REPORT 2022 SUMMARY STATEMENTS OF INCOME Years ended December 31 (dollars in thousands, except per share data) Net interest income Provision for loan losses 2022 2021 2020 2019 2018 $40,003 $38,601 $31,879 $31,283 $28,828 - 1,000 5,575 850 130 Net interest income after loan loss provision Noninterest income Operating expenses Net income before income taxes Provision for income taxes 40,003 7,444 29,516 17,931 4,294 37,601 9,418 30,110 16,909 4,092 26,304 11,413 23,744 13,973 3,284 30,433 7,661 23,296 14,798 3,551 28,698 6,476 21,713 13,461 3,149 NET INCOME $13,637 $12,817 $10,689 $11,247 $10,312 Preferred stock dividends declared $81 - - - - Net income available to common shareholders $13,556 $12,817 $10,689 $11,247 $10,312 Diluted earnings per share Cash dividends per share Return on average assets Return on average equity $3.07 $0.50 1.05% 13.47% $2.88 $0.46 1.03% 11.63% $2.40 $0.42 1.01% 10.83% $2.51 $0.40 1.22% 12.77% $2.29 $0.36 1.19% 13.41% 2022 ANNUAL REPORT 9 SUMMARY BALANCE SHEETS Years ended December 31 (dollars in thousands, except per share data) ASSETS Cash and cash equivalents Securities and certificates of deposit Loans receivable, net Premises and equipment Other assets 2022 $29,409 282,045 961,865 13,164 51,206 2021 $53,543 310,690 876,337 12,695 45,446 2020 $38,528 229,527 820,956 10,920 32,024 2019 $49,028 179,431 707,651 10,457 28,326 2018 $43,978 175,108 658,481 10,209 28,222 TOTAL ASSETS $1,337,689 $1,298,711 $1,131,955 $974,893 $915,998 LIABILITIES Deposits Federal Home Loan Bank advances Other borrowings Senior subordinated notes Junior subordinated debentures Other liabilities Stockholders’ equity TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY 2022 2021 2020 2019 2018 $1,148,755 $1,105,240 $932,137 $781,790 $725,826 43,000 12,985 5,549 12,819 12,639 47,000 6,677 2,500 12,717 13,315 101,942 111,262 62,000 12,239 2,500 7,732 10,920 104,427 73,496 81,071 6,131 2,500 7,732 10,553 92,691 8,379 2,500 7,732 9,650 80,840 $1,337,689 $1,298,711 $1,131,955 $974,893 $915,998 Common shares outstanding at year end 4,297,279 4,440,329 4,452,287 4,467,217 4,487,895 Tangible net book value per share $21.37 $24.36 $23.43 $20.72 $17.98 PSBQ 888.929.9902 psbholdingsinc.com | bankpeoples.com