10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-37416

PEOPLE’S UTAH BANCORP

(Exact name of registrant as specified in its charter)

UTAH	87-0622021
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)
1 East Main Street, American Fork, Utah	84003
(Address of principal executive offices)	(Zip Code)

(801) 642-3998

Registrant’s telephone number, including area code

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒  Yes    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   ☒  Yes    No  ☐

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐		Accelerated filer	☒
Non-accelerated filer	☐	(Do not check if a smaller reporting company)	Smaller reporting company	☐
			Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period forcomplying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   ☐  Yes    No  ☒

The number of shares of Registrant’s common stock outstanding on July 31, 2017 was 17,958,487. No preferred shares are issued or outstanding.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1 – Financial Statements
Unaudited Consolidated Balance Sheets	3
Unaudited Consolidated Statements of Income	4
Unaudited Consolidated Statements of Comprehensive Income	5
Unaudited Consolidated Statements of Changes in Shareholders’ Equity	6
Unaudited Consolidated Statements of Cash Flows	7
Notes to Unaudited Consolidated Financial Statements	8
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3 – Quantitative and Qualitative Disclosures about Market Risk	37
Item 4 – Controls and Procedures	38
PART II. OTHER INFORMATION
Item 1 – Legal Proceedings	38
Item 1A – Risk Factors	38
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3 – Defaults upon Senior Securities	38
Item 4 – Mine Safety Disclosures	38
Item 5 – Other Information	38
Item 6 – Exhibits	39
Signatures	40

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
(Dollars in thousands, except share data)	2017			2016
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	28,315		$	26,524
Interest bearing deposits		26,027			37,958
Federal funds sold		3,093			3,456
Total cash and cash equivalents		57,435			67,938
Investment securities:
Available-for-sale, at fair value		325,172			335,609
Held-to-maturity, at historical cost		77,394			73,512
Total investment securities		402,566			409,121
Non-marketable equity securities		1,959			1,827
Loans held for sale		7,655			20,826
Loans:
Loans held for investment		1,201,391			1,119,877
Less allowance for loan losses		(17,271	)		(16,715	)
Total loans held for investment, net		1,184,120			1,103,162
Premises and equipment, net		23,551			21,926
Bank-owned life insurance		19,970			19,714
Deferred income tax assets		9,845			9,799
Accrued interest receivable		5,616			5,557
Other real estate owned		468			245
Other assets		5,190			5,866
Total assets	$	1,718,375		$	1,665,981
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Non-interest bearing deposits	$	465,988		$	443,100
Interest bearing deposits		995,064			981,974
Total deposits		1,461,052			1,425,074
Short-term borrowings		3,302			3,199
Accrued interest payable		269			305
Other liabilities		13,850			8,886
Total liabilities		1,478,473			1,437,464
Commitments and contingencies
Shareholders’ equity:
Preferred shares, $0.01 par value: 3,000,000 shares authorized, no shares issued		—			—
Common shares, $0.01 par value: 30,000,000 shares authorized; 17,948,347
and 17,819,538 shares issued and outstanding as of June 30, 2017
and December 31, 2016, respectively		179			178
Additional paid-in capital		69,623			68,657
Retained earnings		170,840			160,692
Accumulated other comprehensive loss		(740	)		(1,010	)
Total shareholders’ equity		239,902			228,517
Total liabilities and shareholders’ equity	$	1,718,375		$	1,665,981

See accompanying notes to the unaudited consolidated financial statements.

3

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands, except share and per share data)	2017		2016		2017		2016
Interest income
Interest and fees on loans	$	17,928	$	16,420	$	34,781	$	32,271
Interest and dividends on investments		1,802		1,489		3,507		3,092
Total interest income		19,730		17,909		38,288		35,363
Interest expense		749		698		1,515		1,452
Net interest income		18,981		17,211		36,773		33,911
Provision for loan losses		900		225		1,100		425
Net interest income after provision for loan losses		18,081		16,986		35,673		33,486
Non-interest income
Mortgage banking		1,960		2,277		3,939		4,025
Card processing		1,208		1,136		2,332		2,167
Service charges on deposit accounts		578		531		1,114		1,044
Other operating		602		454		1,088		925
Total non-interest income		4,348		4,398		8,473		8,161
Non-interest expense
Salaries and employee benefits		7,762		7,959		15,729		15,843
Occupancy, equipment and depreciation		1,088		1,076		2,205		2,064
Data processing		661		740		1,336		1,447
Card processing		516		549		1,045		1,139
Marketing and advertising		349		290		611		459
FDIC premiums		130		188		256		383
Other		1,845		1,598		3,625		3,200
Total non-interest expense		12,351		12,400		24,807		24,535
Income before income tax expense		10,078		8,984		19,339		17,112
Income tax expense		3,584		3,407		6,324		6,292
Net income	$	6,494	$	5,577	$	13,015	$	10,820
Earnings per common share:
Basic	$	0.37	$	0.31	$	0.73	$	0.61
Diluted	$	0.35	$	0.31	$	0.71	$	0.60
Weighted average common shares outstanding:
Basic		17,937,926		17,738,182		17,911,125		17,685,235
Diluted		18,351,531		18,173,034		18,334,028		18,148,713

See accompanying notes to the unaudited consolidated financial statements.

4

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2017			2016			2017			2016
Net income	$	6,494		$	5,577		$	13,015		$	10,820
Other comprehensive income
Unrealized holding gains on securities available-for-sale		375			675			438			2,904
Tax effect		(143	)		(258	)		(168	)		(1,110	)
Unrealized holding gains on securities available-for-sale,
net of tax		232			417			270			1,794
Total comprehensive income	$	6,726		$	5,994		$	13,285		$	12,614

See accompanying notes to the unaudited consolidated financial statements.

5

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

										Accumulated
					Additional					Other
	Common				Paid-in		Retained			Comprehensive
(Dollars in thousands, except share data)	Shares		Amount		Capital		Earnings			Income (Loss)			Total
Balance as of January 1, 2016		17,567,154	$	176	$	67,338	$	142,223		$	(329	)	$	209,408
Comprehensive income		—		—		—		10,820			1,794			12,614
Cash dividends ($0.14 per share)		—		—		—		(2,475	)		—			(2,475	)
Share-based compensation		—		—		252		—			—			252
Exercise of stock options		185,666		2		646		—			—			648
Balance as of June 30, 2016		17,752,820	$	178	$	68,236	$	150,568		$	1,465		$	220,447
Balance as of January 1, 2017		17,819,538	$	178	$	68,657	$	160,692		$	(1,010	)	$	228,517
Comprehensive income		—		—		—		13,015			270			13,285
Cash dividends ($0.16 per share)		—		—		—		(2,867	)		—			(2,867	)
Share-based compensation		—		—		218		—			—			218
Exercise of stock options		128,809		1		748		—			—			749
Balance as of June 30, 2017		17,948,347	$	179	$	69,623	$	170,840		$	(740	)	$	239,902

See accompanying notes to the unaudited consolidated financial statements.

6

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended
	June 30,
(Dollars in thousands)	2017			2016
Cash flows from operating activities:
Net income	$	13,015		$	10,820
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		1,100			425
Depreciation and amortization		1,267			1,290
Deferred income taxes		(214	)		—
Net amortization of securities discounts and premiums		1,501			1,512
Increase in cash surrender value of bank owned life insurance		(256	)		(278	)
Share based compensation		218			252
Other		(159	)		26
Gain on sale of loans held for sale		(2,838	)		(3,033	)
Originations of loans held for sale		(115,621	)		(123,895	)
Proceeds from sale of loans held for sale		131,630			132,960
Net changes in:
Accrued interest receivable		(59	)		181
Other assets		676			554
Accrued interest payable		(36	)		(11	)
Other liabilities		4,964			3,177
Net cash provided by operating activities		35,188			23,980
Cash flows from investing activities:
Net change in loans held for investment		(82,558	)		(47,920	)
Purchase of available-for-sale securities		(24,599	)		(12,997	)
Purchase of held-to-maturity securities		(12,198	)		—
Proceeds from maturities/sales of available-for-sale securities		34,350			66,721
Proceeds from maturities of held-to-maturity securities		7,939			4,143
Purchase of premises and equipment		(2,758	)		(1,302	)
Proceeds from sale of other real estate owned, net of improvements		302			133
Purchase of non-marketable equity securities		(2,368	)		(2,663	)
Proceeds from sale of non-marketable equity securities		2,236			3,080
Net cash (used in) provided by investing activities		(79,654	)		9,195
Cash flows from financing activities:
Net increase in non-interest bearing deposits		22,888			21,487
Net increase in interest bearing deposits		13,090			15,691
Proceeds related to exercise of stock options		749			648
Net change in short-term borrowings		103			(24,349	)
Cash dividends paid		(2,867	)		(2,475	)
Net cash provided by financing activities		33,963			11,002
Net change in cash and cash equivalents		(10,503	)		44,177
Cash and cash equivalents, beginning of period		67,938			42,349
Cash and cash equivalents, end of period	$	57,435		$	86,526
Supplemental disclosures of cash flow information:
Cash paid for interest	$	1,551		$	1,285
Income taxes paid	$	6,217		$	5,610
Supplemental disclosures of non-cash transactions:
Reclassifications from loans to other real estate owned	$	468		$	237
Unrealized gains on securities available-for-sale	$	438		$	2,904

See accompanying notes to the unaudited consolidated financial statements.

7

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Basis of Presentation

People’s Utah Bancorp, Inc. (“PUB” or the “Company”) is a Utah corporation headquartered in American Fork, Utah. The Company’s subsidiary is People’s Intermountain Bank (“PIB” or the “Bank”), which includes two banking divisions doing business as (“dba”) Bank of American Fork (“BAF”) and Lewiston State Bank (“LSB”), an equipment leasing division dba GrowthFunding Equipment Finance and a mortgage division dba People’s Intermountain Bank Mortgage.  BAF and LSB have over 100 years of history and continue to do business as registered names of PIB.

The interim consolidated financial statements include the accounts of the Company together with its subsidiary Bank. All intercompany transactions and balances have been eliminated.

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial information. In the opinion of management, the interim statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows of the Company on a consolidated basis and all such adjustments are of a normal recurring nature. These financial statements and the accompanying notes should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2016, which are included in the Company’s 2016 Form 10-K.  Operating results for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017, or any other period.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of real estate acquired through foreclosure, deferred tax assets, and share-based compensation.

Earnings per share — Basic earnings per common share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares include shares that may be issued by the Company for outstanding stock options determined using the treasury stock method and for all outstanding restricted stock units (“RSU”).

Earnings per common share have been computed based on the following:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands, except share and per share data)	2017		2016		2017		2016
Numerator
Net income	$	6,494	$	5,577	$	13,015	$	10,820
Denominator
Weighted-average number of common shares outstanding		17,937,926		17,738,182		17,911,125		17,685,235
Incremental shares assumed for stock options and RSUs		413,605		434,852		422,903		463,478
Weighted-average number of dilutive shares outstanding		18,351,531		18,173,034		18,334,028		18,148,713
Basic earnings per common share	$	0.37	$	0.31	$	0.73	$	0.61
Diluted earnings per common share	$	0.35	$	0.31	$	0.71	$	0.60

8

Note 1 — Basis of Presentation – Continued

Reclassifications —Certain amounts in the prior period’s financial statements have been reclassified to conform to the current period’s presentation.

Impact of Recent Authoritative Accounting Guidance —The Accounting Standards Codification™ (“ASC”) is the Financial Accounting Standards Board’s (“FASB”) officially recognized source of authoritative GAAP applicable to all public and non-public non-governmental entities. Rules and interpretive releases of the SEC under the authority of the federal securities laws are also sources of authoritative GAAP for us as an SEC registrant. All other accounting literature is non-authoritative.

In June 2016, FASB amended FASB ASC Topic 326, Financial Instruments - Credit Losses. The amendments in this Update replace the current incurred loss model with a methodology that reflects expected credit losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. The amendments are effective for public business entities for the first interim and annual reporting periods beginning after December 15, 2019. The Company is currently evaluating the impact of these amendments to the Company’s financial position and results of operations and currently does not know or cannot reasonably quantify the impact of the adoption of the amendments as a result of the complexity and extensive changes from the amendments. The ALLL is a material estimate of the Company and given the change from an incurred loss model to a methodology that considers the credit loss over the life of the loan, there is the potential for an increase in the ALLL at adoption date. The Company is anticipating a significant change in the processes and procedures to calculate the ALLL, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model. The Company will also develop new procedures for determining an allowance for credit losses relating to held-to-maturity investment securities. In addition, the current accounting policy and procedures for other-than-temporary impairment on available-for-sale investment securities will be replaced with an allowance approach. The Company is expecting to begin developing and implementing processes and procedures during the next two years to ensure it is fully compliant with the amendments at adoption date. For additional information on the ALLL see Note 3

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (“ASU 2016-09”) which addresses certain aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification of awards on the statement of cash flows. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016 and for interim periods within such periods. Early application is permitted.  The Company implemented ASU 2016-09 during the annual reporting period of 2016.

Note 2 — Investment Securities

Amortized cost and estimated fair value of investment securities available-for-sale are summarized as follows:

					Gross Unrealized Losses
					Less			12
			Gross		Than			Months
	Amortized		Unrealized		12			or			Fair
(Dollars in thousands)	Cost		Gains		Months			Longer			Value
As of June 30, 2017
U.S. Government-sponsored securities	$	117,202	$	151	$	(544	)	$	(35	)	$	116,774
Municipal securities		18,117		385		(27	)		—			18,475
Mortgage-backed securities		181,051		767		(1,096	)		(604	)		180,118
Corporate securities		10,000		55		—			(250	)		9,805
	$	326,370	$	1,358	$	(1,667	)	$	(889	)	$	325,172
As of December 31, 2016
U.S. Government-sponsored securities	$	119,202	$	71	$	(669	)	$	(1	)	$	118,603
Municipal securities		25,176		401		(58	)		—			25,519
Mortgage-backed securities		182,867		679		(1,111	)		(614	)		181,821
Corporate securities		10,000		28		(32	)		(330	)		9,666
	$	337,245	$	1,179	$	(1,870	)	$	(945	)	$	335,609

9

Note 2 — Investment Securities – continued

Amortized cost and estimated fair value of investment securities held-to-maturity are as follows:

					Gross Unrealized Losses
					Less			12
			Gross		Than			Months
	Amortized		Unrealized		12			or			Fair
(Dollars in thousands)	Cost		Gains		Months			Longer			Value
As of June 30, 2017
Municipal securities	$	77,394	$	505	$	(177	)	$	(13	)	$	77,709
As of December 31, 2016
Municipal securities	$	73,512	$	105	$	(579	)	$	(38	)	$	73,000

The amortized cost and estimated fair value of investment securities that are available-for-sale and held-to-maturity at June 30, 2017, by contractual maturity, are as follows:

	Available-for-sale				Held-to-maturity
	Amortized		Fair		Amortized		Fair
(Dollars in thousands)	Cost		Value		Cost		Value
Securities maturing in:
One year or less	$	26,252	$	26,265	$	7,774	$	7,774
After one year through five years		102,578		102,260		45,458		45,636
After five years through ten years		89,162		88,789		17,132		17,246
After ten years		108,378		107,858		7,030		7,053
	$	326,370	$	325,172	$	77,394	$	77,709

Actual  maturities may differ from contractual maturities because issuers may have the right to call obligations with or without penalties and other securities may experience pre-payments.

As of June 30, 2017 and December 31, 2016, the Company held 254 and 302 investment securities, respectively, with fair value less than amortized cost. Management evaluated these investment securities and determined that the decline in value is temporary and related to the change in market interest rates since purchase. The decline in value is not related to any company or industry specific event. The Company anticipates full recovery of the amortized cost with respect to these securities at maturity, or sooner in the event of a more favorable market interest rate environment.

10

Note 3 — Loans and Allowance for Loan Losses

Loans are summarized as follows:

	June 30,			December 31,
(Dollars in thousands)	2017			2016
Loans held for investment:
Commercial real estate loans:
Real estate term	$	643,756		$	582,029
Construction and land development		251,741			240,120
Total commercial real estate loans		895,497			822,149
Commercial and industrial loans		221,901			213,260
Consumer loans:
Residential and home equity		73,791			72,959
Consumer and other		14,936			15,678
Total consumer loans		88,727			88,637
Total gross loans		1,206,125			1,124,046
Less:
Net deferred loan fees		(4,734	)		(4,169	)
Total loans held for investment		1,201,391			1,119,877
Less: allowance for loan losses		(17,271	)		(16,715	)
Total loans held for investment, net	$	1,184,120		$	1,103,162

Changes in the allowance for loan losses (“ALLL”) are as follows:

	Three Months Ended June 30, 2017
	Real			Construction		Commercial			Residential			Consumer
	Estate			and Land		and			and			and
(Dollars in thousands)	Term			Development		Industrial			Home Equity			Other			Total
Balance at beginning of period	$	7,149		$	4,683	$	4,222		$	529		$	61		$	16,644
Additions: Provisions for loan losses		181			394		342			(28	)		11			900
Deductions:
Gross loan charge-offs		(350	)		—		(114	)		—			(48	)		(512	)
Recoveries		177			—		39			2			21			239
Net loan charge-offs		(173	)		—		(75	)		2			(27	)		(273	)
Balance at end of period	$	7,157		$	5,077	$	4,489		$	503		$	45		$	17,271

	Three Months Ended June 30, 2016
	Real		Construction		Commercial			Residential			Consumer
	Estate		and Land		and			and			and
(Dollars in thousands)	Term		Development		Industrial			Home Equity			Other			Total
Balance at beginning of period	$	6,692	$	4,344	$	3,921		$	595		$	171		$	15,723
Additions: Provisions for loan losses		172		351		(224	)		(44	)		(30	)		225
Deductions:
Gross loan charge-offs		—		—		—			—			(56	)		(56	)
Recoveries		5		30		71			77			77			260
Net loan charge-offs		5		30		71			77			21			204
Balance at end of period	$	6,869	$	4,725	$	3,768		$	628		$	162		$	16,152

11

Note 3 — Loans and Allowance for Loan Losses – Continued

	Six Months Ended June 30, 2017
	Real			Construction			Commercial			Residential			Consumer
	Estate			and Land			and			and			and
(Dollars in thousands)	Term			Development			Industrial			Home Equity			Other			Total
Balance at beginning of period	$	6,770		$	5,449		$	3,718		$	617		$	161		$	16,715
Additions: Provisions for loan losses		556			(451	)		966			84			(55	)		1,100
Deductions:
Gross loan charge-offs		(350	)		—			(272	)		(338	)		(113	)		(1,073	)
Recoveries		181			79			77			140			52			529
Net loan charge-offs		(169	)		79			(195	)		(198	)		(61	)		(544	)
Balance at end of period	$	7,157		$	5,077		$	4,489		$	503		$	45		$	17,271

	Six Months Ended June 30, 2016
	Real		Construction		Commercial			Residential			Consumer
	Estate		and Land		and			and			and
(Dollars in thousands)	Term		Development		Industrial			Home Equity			Other			Total
Balance at beginning of period	$	6,783	$	3,984	$	3,941		$	603		$	246		$	15,557
Additions: Provisions for loan losses		77		695		(209	)		(56	)		(82	)		425
Deductions:
Gross loan charge-offs		—		—		(72	)		—			(120	)		(192	)
Recoveries		9		46		108			81			118			362
Net loan charge-offs		9		46		36			81			(2	)		170
Balance at end of period	$	6,869	$	4,725	$	3,768		$	628		$	162		$	16,152

Non-accrual loans are summarized as follows:

	June 30,		December 31,
(Dollars in thousands)	2017		2016
Non-accrual loans, not troubled debt restructured:
Real estate term	$	4,089	$	2,386
Construction and land development		826		378
Commercial and industrial		1,513		1,211
Residential and home equity		116		142
Consumer and other		—		14
Total non-accrual loans, not troubled debt restructured		6,544		4,131
Troubled debt restructured loans, non-accrual:
Real estate term		663		808
Construction and land development		383		396
Commercial and industrial		—		—
Residential and home equity		—		—
Consumer and other		—		—
Total troubled debt restructured loans, non-accrual		1,046		1,204
Total non-accrual loans	$	7,590	$	5,335

12

Note 3 — Loans and Allowance for Loan Losses – Continued

Troubled debt restructured loans are summarized as follows:

	June 30,		December 31,
(Dollars in thousands)	2017		2016
Accruing troubled debt restructured loans	$	4,162	$	5,572
Non-accrual troubled debt restructured loans		1,046		1,204
Total troubled debt restructured loans	$	5,208	$	6,776

A restructured loan is considered a troubled debt restructured loan (“TDR”), if the Company, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession in terms or a below-market interest rate to the debtor that it would not otherwise consider. Each TDR loan is separately negotiated with the borrower and includes terms and conditions that reflect the borrower’s prospective ability to service the debt as modified.

Current and past due loans held for investment (accruing and non-accruing) are summarized as follows:

	June 30, 2017
			30-89 Days		90+ Days				Total		Total
(Dollars in thousands)	Current		Past Due		Past Due		Non-accrual		Past Due		Loans
Commercial real estate:
Real estate term	$	639,004	$	-	$	—	$	4,752	$	4,752	$	643,756
Construction and land development		249,428		1,104		—		1,209		2,313		251,741
Total commercial real estate		888,432		1,104		—		5,961		7,065		895,497
Commercial and industrial		220,047		341		—		1,513		1,854		221,901
Consumer:
Residential and home equity		73,602		73		—		116		189		73,791
Consumer and other		14,567		348		21		-		369		14,936
Total consumer		88,169		421		21		116		558		88,727
Total gross loans	$	1,196,648	$	1,866	$	21	$	7,590	$	9,477	$	1,206,125

	December 31, 2016
			30-89 Days		90+ Days				Total		Total
(Dollars in thousands)	Current		Past Due		Past Due		Non-accrual		Past Due		Loans
Commercial real estate:
Real estate term	$	577,134	$	1,701	$	—	$	3,194	$	4,895	$	582,029
Construction and land development		237,433		1,913		—		774		2,687		240,120
Total commercial real estate		814,567		3,614		—		3,968		7,582		822,149
Commercial and industrial		211,143		906		—		1,211		2,117		213,260
Consumer:
Residential and home equity		71,719		1,098		—		142		1,240		72,959
Consumer and other		15,168		474		22		14		510		15,678
Total consumer		86,887		1,572		22		156		1,750		88,637
Total gross loans	$	1,112,597	$	6,092	$	22	$	5,335	$	11,449	$	1,124,046

Credit Quality Indicators:

In addition to past due and non-accrual criteria, the Company also analyzes loans using a loan grading system. Performance-based grading follows the Company’s definitions of Pass, Special Mention, Substandard and Doubtful, which are consistent with published definitions of regulatory risk classifications.

13

Note 3 — Loans and Allowance for Loan Losses – Continued

Definitions of Pass, Special Mention, Substandard and Doubtful are summarized as follows:

Pass: A Pass asset is higher quality and does not fit any of the other categories described below. The likelihood of loss is considered remote.

Special Mention: A Special Mention asset has potential weaknesses that may be temporary or, if left uncorrected, may result in a loss. While concerns exist, the Company is currently protected and loss is considered unlikely and not imminent.

Substandard: A Substandard asset is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have well defined weaknesses and are characterized by the distinct possibility that the Company may sustain some loss if deficiencies are not corrected.

Doubtful: A Doubtful asset has all the weaknesses inherent in a Substandard asset with the added characteristics that the weaknesses make collection or liquidation in full highly questionable.

For Consumer loans, the Company generally assigns internal risk grades similar to those described above based on payment performance.

Outstanding loan balances (accruing and non-accruing) categorized by these credit quality indicators are summarized as follows:

	June 30, 2017
			Special		Substandard		Total		Total
(Dollars in thousands)	Pass		Mention		and Doubtful		Loans		Allowance
Commercial real estate:
Real estate term	$	622,611	$	13,871	$	7,274	$	643,756	$	7,157
Construction and land development		247,157		2,081		2,503		251,741		5,077
Total commercial real estate		869,768		15,952		9,777		895,497		12,234
Commercial and industrial		212,211		4,938		4,752		221,901		4,489
Consumer loans:
Residential and home equity		71,041		1,717		1,033		73,791		503
Consumer and other		14,822		—		114		14,936		45
Total consumer		85,863		1,717		1,147		88,727		548
Total	$	1,167,842	$	22,607	$	15,676	$	1,206,125	$	17,271

	December 31, 2016
			Special		Substandard		Total		Total
(Dollars in thousands)	Pass		Mention		and Doubtful		Loans		Allowance
Commercial real estate:
Real estate term	$	565,550	$	10,609	$	5,870	$	582,029	$	6,770
Construction and land development		234,359		2,222		3,539		240,120		5,449
Total commercial real estate		799,909		12,831		9,409		822,149		12,219
Commercial and industrial		205,933		2,266		5,061		213,260		3,718
Consumer loans:
Residential and home equity		69,287		1,869		1,803		72,959		617
Consumer and other		15,542		—		136		15,678		161
Total consumer		84,829		1,869		1,939		88,637		778
Total	$	1,090,671	$	16,966	$	16,409	$	1,124,046	$	16,715

14

Note 3 — Loans and Allowance for Loan Losses – Continued

The ALLL and outstanding loan balances reviewed according to the Company’s impairment method are summarized as follows:

	June 30, 2017
	Real		Construction		Commercial		Residential		Consumer
	Estate		and Land		and		and		and
(Dollars in thousands)	Term		Development		Industrial		Home Equity		Other		Total
Allowance for loan losses:
Individually evaluated for impairment	$	61	$	67	$	528	$	72	$	—	$	728
Collectively evaluated for impairment		7,096		5,010		3,961		431		45		16,543
Total	$	7,157	$	5,077	$	4,489	$	503	$	45	$	17,271
Outstanding loan balances:
Individually evaluated for impairment	$	4,854	$	2,327	$	2,684	$	634	$	—	$	10,499
Collectively evaluated for impairment		638,902		249,414		219,217		73,157		14,936		1,195,626
Total gross loans	$	643,756	$	251,741	$	221,901	$	73,791	$	14,936	$	1,206,125

	December 31, 2016
	Real		Construction		Commercial		Residential		Consumer
	Estate		and Land		and		and		and
(Dollars in thousands)	Term		Development		Industrial		Home Equity		Other		Total
Allowance for loan losses:
Individually evaluated for impairment	$	189	$	67	$	323	$	75	$	—	$	654
Collectively evaluated for impairment		6,581		5,382		3,395		542		161		16,061
Total	$	6,770	$	5,449	$	3,718	$	617	$	161	$	16,715
Outstanding loan balances:
Individually evaluated for impairment	$	5,778	$	2,995	$	6,045	$	1,476	$	—	$	16,294
Collectively evaluated for impairment		576,251		237,125		207,215		71,483		15,678		1,107,752
Total gross loans	$	582,029	$	240,120	$	213,260	$	72,959	$	15,678	$	1,124,046

Information on impaired loans is summarized as follows:

	June 30, 2017
			Recorded Investment
	Unpaid						Total
	Principal		With No		With		Recorded		Related
(Dollars in thousands)	Balance		Allowance		Allowance		Investment		Allowance
Commercial real estate:
Real estate term	$	4,940	$	3,291	$	1,563	$	4,854	$	61
Construction and land development		3,280		2,123		204		2,327		67
Total commercial real estate		8,220		5,414		1,767		7,181		128
Commercial and industrial		3,477		940		1,744		2,684		528
Consumer loans:
Residential and home equity		634		232		402		634		72
Consumer and other		—		—		—		—		—
Total consumer		634		232		402		634		72
Total	$	12,331	$	6,586	$	3,913	$	10,499	$	728

15

Note 3 — Loans and Allowance for Loan Losses – Continued

	December 31, 2016
			Recorded Investment
	Unpaid						Total
	Principal		With No		With		Recorded		Related
(Dollars in thousands)	Balance		Allowance		Allowance		Investment		Allowance
Commercial real estate:
Real estate term	$	5,864	$	2,979	$	2,799	$	5,778	$	189
Construction and land development		3,949		2,790		205		2,995		67
Total commercial real estate		9,813		5,769		3,004		8,773		256
Commercial and industrial		6,937		4,458		1,587		6,045		323
Consumer loans:
Residential and home equity		1,476		1,071		405		1,476		75
Consumer and other		—		—		—		—		—
Total consumer		1,476		1,071		405		1,476		75
Total	$	18,226	$	11,298	$	4,996	$	16,294	$	654

The interest income recognized on impaired loans was as follows:  

	Three Months Ended
	June 30, 2017				June 30, 2016
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
(Dollars in thousands)	Investment		Recognition		Investment		Recognition
Commercial real estate:
Real estate term	$	4,734	$	6	$	8,416	$	74
Construction and land development		2,872		32		3,767		47
Total commercial real estate		7,606		38		12,183		121
Commercial and industrial		4,280		36		7,934		97
Consumer loans:
Residential and home equity		850		10		1,794		12
Consumer and other		—		—		15		—
Total consumer		850		10		1,809		12
Total	$	12,736	$	84	$	21,926	$	230

	Six Months Ended
	June 30, 2017				June 30, 2016
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
(Dollars in thousands)	Investment		Recognition		Investment		Recognition
Commercial real estate:
Real estate term	$	5,316	$	36	$	9,106	$	153
Construction and land development		2,660		63		3,865		102
Total commercial real estate		7,976		99		12,971		255
Commercial and industrial		4,365		90		7,243		185
Consumer loans:
Residential and home equity		1,055		23		1,980		34
Consumer and other		—		—		15		—
Total consumer		1,055		23		1,995		34
Total	$	13,396	$	212	$	22,209	$	474

16

Note 3 — Loans and Allowance for Loan Losses – Concluded

Loans and Deposits to affiliates— The Company has entered into loan transactions with certain directors, affiliated companies and executive committee members (“affiliates”). Such transactions were made in the ordinary course of business on substantially the same terms and conditions, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other customers, and did not, in the opinion of management, involve more than normal credit risk or present other unfavorable features. Total outstanding loans with affiliates were approximately $3,327,000 and $330,000 as of June 30, 2017 and December 31, 2016, respectively.  Available lines of credit for loans and credit cards to affiliates were approximately $509,000 as of June 30, 2017.  Deposits from affiliates were $7.6 million and $7.8 million as of June 30, 2017 and December 31, 2016, respectively.

Note 4 — Commitments and Contingencies

Litigation contingencies— The Company is involved in various claims, legal actions and complaints which arise in the ordinary course of business. In the Company’s opinion, all such matters are adequately covered by insurance, are without merit or are of such kind, or involve such amounts, that unfavorable disposition would not have a material adverse effect on the financial condition or results of operations of the Company.

Commitments to extend credit — In the normal course of business, the Company has outstanding commitments and contingent liabilities, such as commitments to extend credit and unused credit card lines, which are not included in the accompanying consolidated financial statements. The Company’s exposure to credit loss in the event of non-performance by other parties to the financial instruments for commitments to extend credit and unused credit card lines is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheets.

Contractual amounts of off-balance sheet financial instruments were as follows:

	June 30,		December 31,
(Dollars in thousands)	2017		2016
Commitments to extend credit, including unsecured    commitments of $12,185 and $11,230 as of    June 30, 2017 and December 31, 2016,    respectively	$	516,291	$	445,645
Stand-by letters of credit and bond commitments,    including unsecured commitments of $566 and    $660 as of June 30, 2017 and December 31,    2016, respectively		29,233		29,332
Unused credit card lines, all unsecured		25,337		25,803

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments to extend credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer.

Unused credit card lines are commitments for possible future extensions of credit to existing customers. These lines of credit are uncollateralized and usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed.

17

Note 5 — Fair Value

Fair value measurements — Fair value represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, GAAP has established a hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows:

Level 1	Quoted prices in active markets for identical assets or liabilities.
Level 2	Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data.
Level 3	Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

The following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation methodology:

Investment securities, available-for-sale — Where quoted prices are available in an active market, securities are classified within Level 1 of the hierarchy. Level 1 includes securities that have quoted prices in an active market for identical assets. If quoted market prices are not available, then fair values are estimated using pricing models, quoted prices of securities with similar characteristics or discounted cash flows, and accordingly, are classified as Level 2 or 3. The Company has categorized its available-for-sale investment securities as Level 1 or 2.

Impaired loans and other real estate owned — Fair value applies to loans and other real estate owned measured for impairment. Impaired loans are measured at the fair value of the loan’s collateral (if collateral dependent) or net present value of future cash flows (if not collateral dependent). Fair value of the loan’s collateral is determined by appraisals or independent valuation which is then adjusted for the cost related to liquidation of the collateral. The Company has categorized its impaired loans and other real estate owned as Level 2.    

Assets measured at fair value are summarized as follows:

(Dollars in thousands)	Level 1		Level 2		Level 3		Total
As of June 30, 2017
Fair valued on a recurring basis:
Investment securities available-for-sale	$	1,002	$	324,170	$	—	$	325,172
Fair valued on a non-recurring basis:
Impaired loans		—		3,185		—		3,185
As of December 31, 2016
Fair valued on a recurring basis:
Investment securities available-for-sale	$	1,008	$	334,601	$	—	$	335,609
Fair valued on a non-recurring basis:
Impaired loans		—		4,342		—		4,342

18

Note 5 — Fair Value - Continued

Fair value of financial instruments — The following table summarizes carrying amounts, estimated fair values and assumptions used to estimate fair values of financial instruments:

	Carrying		Estimated
(Dollars in thousands)	Value		Fair Value
As of June 30, 2017
Financial Assets:
Net loans held for investment	$	1,184,120	$	1,184,297
Financial Liabilities:
Interest bearing deposits		995,064		995,098
As of December 31, 2016
Financial Assets:
Net loans held for investment	$	1,103,162	$	1,101,890
Financial Liabilities:
Interest bearing deposits		981,974		982,380

The above summary excludes financial assets and liabilities for which carrying value approximates fair value. For financial assets, these include cash and cash equivalents, held-to-maturity securities (see Note 2), loans held for sale, bank-owned life insurance, accrued interest receivable, and FHLB stock. For financial liabilities, these include non-interest bearing deposits, short-term borrowings, and accrued interest payable. Also excluded from the summary are financial instruments recorded at fair value on a recurring basis, as previously described.

Fair values of off-balance sheet commitments such as lending commitments, standby letters of credit and guarantees are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of the fees as of June 30, 2017 and December 31, 2016 were insignificant.

The following methods and assumptions were used to estimate the fair value of financial instruments:

Net loans held for investment — The fair value is estimated by discounting the future cash flows and estimated prepayments using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining term. Some loan types were valued at carrying value because of their floating rate or expected maturity characteristics.

Interest bearing deposits — The fair value of interest bearing deposits is estimated by discounting the estimated future cash flows using the rates currently offered for deposits with similar remaining maturities.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in the above methodologies and assumptions could significantly affect the estimates. Further, certain financial instruments and all non-financial instruments are excluded from the applicable disclosure requirements. Therefore, the fair value amounts shown in the table do not, by themselves, represent the underlying value of the Company as a whole.

Note 6 — Income Taxes

Income tax expense was $3.6 million and $3.4 million for the three months ended June 30, 2017 and 2016, respectively. The Company’s effective tax rate for the second quarter of 2017 was 35.6% compared with 37.9% in the second quarter of 2016. The tax rate in the second quarter of 2017 is lower than the same quarter in 2016 due primarily to adjustments in the expected recoverability of certain tax credits.

Income tax expense was $6.3 million and $6.3 million for the six months ended June 30, 2017 and 2016, respectively. The Company’s effective tax rate was 32.7% and 36.8% for the six months ended June 30, 2017 and 2016, respectively.  The tax rate in 2017 is lower than 2016 due primarily to tax-deductible stock compensation expense and the reversal of a liability related to an unrecognized tax benefit totaling, approximately $600,000 in taxable benefits.

19

Note 7 — Regulatory Capital Matters

The consolidated Tier 1 Leverage ratio increased from 13.71% at December 31, 2016 to 14.15% as of June 30, 2017. Federal Reserve Board Regulations require maintenance of certain minimum reserve balances based on certain average deposits which as of June 30, 2017 and December 31, 2016 were $9.9 million and $9.1 million, respectively. The Company’s Board of Directors may declare a cash or stock dividend out of retained earnings provided the regulatory minimum capital ratios are met. The Company plans to maintain capital ratios that meet the well-capitalized standards per the regulations and, therefore, plans to limit dividends to amounts that are appropriate to maintain those well-capitalized regulatory capital ratios.

Note 8 — Incentive Share-Based Plan and Other Employee Benefits  

In June 2014, the Board of Directors (“Board”) and shareholders of the Company approved a share-based incentive plan (“the Plan”). The Plan provides for various share-based incentive awards including incentive share-based options, non-qualified share-based options, restricted shares, and stock appreciation rights to be granted to officers, directors and other key employees. The maximum aggregate number of shares that may be issued under the Plan is 800,000 common shares. The share-based awards are granted to participants under the Plan at a price not less than the fair value on the date of grant and for terms of up to ten years. The Plan also allows for granting of share-based awards to directors and consultants who are not employees of the Company.

During the six months ended June 30, 2017, the Company granted options for the purchase of 769 common shares, which have a weighted average exercise price of $26.26 per share and a weighted average fair value as of the date of grant of $4.867 per share.  Additionally, the Company granted 104 restricted stock units (“RSU”) at a weighted-average fair value of $25.00 per unit.  The options and RSU’s generally vest over periods from one to three years. The Company recorded share-based compensation expense of $218,000 and $252,000 for the six months ended June 30, 2017 and 2016, respectively.

Note 9 — Announced Transactions

Town & Country Bank:

On May 31, 2017, the Company entered into a definitive agreement to acquire Town & Country Bank Inc. (“Town & Country Bank”), a community based bank in St. George Utah, whereby Town & Country Bank will be merged with and into PIB, a wholly owned subsidiary of PUB.  Under the terms of the agreement, each outstanding share will receive $4.28 in cash and 0.2978 PUB common shares.  Based on the closing price of $25.55 for PUB shares on May 30, 2017, the transaction would result in an aggregate value of $20.9 million or $11.89 per fully diluted Town & Country Bank common share. $1.5 million of the cash to be paid to shareholders will be held in escrow for eighteen months after closing pending the resolution of certain contingencies.  Town & Country Bank shareholders may also receive additional cash consideration at closing subject to certain closing conditions.  

The transaction was unanimously approved by the boards of directors of both companies. The transaction is expected to close in the fourth quarter of 2017 subject to Town & Country Bank’s shareholder approval, required regulatory approval and the satisfaction of other customary closing conditions.  The Company’s primary reasons for the transaction are to solidify its market share in the St. George, Utah market, expand its customer base to enhance total revenues and leverage operating costs through economies of scale.  

Town & Country Bank currently operates one branch in St. George and one loan production office in Sandy, UT.  The Town & Country Bank office and PIB’s Bank of American Fork branch in St. George are expected to be consolidated in January 2018. Upon consolidation, the combined division will operate under the name “People’s Town & Country Bank.” Bank of American Fork branches in other areas will not be affected by this St. George-area name change. Town & Country Bank’s Sandy loan production office is expected to be consolidated with the current Bank of American Fork Sandy branch and will operate under the name Bank of American Fork. This merger is part of a larger bank-wide strategy to establish a community-banking network with local names throughout Utah and potentially in adjoining states.  As of March 31, 2017, Town & Country Bank had total assets of $135.1 million, gross loans of $97.3 million and total deposits of $119.7 million.

20

Banner Bank Utah Branches:

On July 27, 2017, the Company signed a purchase and assumption agreement to acquire approximately $266 million in loans and seven Utah branch locations with approximately $159 million in deposits from Banner Corporation’s banking subsidiary, Banner Bank.  PIB will operate the branches under the name of Bank of American Fork, a division of PIB.  The seven branches are located in Salt Lake City, Provo, South Jordan, Woods Cross, Orem, Salem, and Springville.  The Woods Cross and Orem branches will be consolidated into the existing Bank of American Fork Bountiful and Orem branches, respectively.  The transaction is expected to close in the fourth quarter of 2017 and is subject to certain closing conditions, including receipt of regulatory approval.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is intended to provide a more comprehensive review of People’s Utah Bancorp’s operating results and financial condition than can be obtained from reading the Unaudited Consolidated Financial Statements alone. The discussion should be read in conjunction with the Unaudited Consolidated Financial Statements and the notes thereto included in “Part I. Item 1. Financial Statements.”

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10–Q may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views and are not historical facts.  These statements can generally be identified by use of phrases such as “believe,” “expect,” “will,” “seek,” “should,” “anticipate,” “estimate,” “intend,” “plan,” “target,” “project,” “commit” or other words of similar import. Similarly, statements that describe our future financial condition, results of operations, objectives, strategies, plans, goals or future performance and business are also forward-looking statements. These forward-looking statements include but are not limited to, (i) the expected closing dates of the acquisitions of Town & Country Bank and the seven Utah branches of Banner bank, and (ii) the impact on our business of these acquisitions, including, without limitation, the impact on the average equity, average assets and liquidity ratios after the closing of the acquisitions.  Statements that project future financial conditions, results of operations and shareholder value are not guarantees of performance and many of the factors that will determine these results and values are beyond our ability to control or predict. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. These are forward-looking statements and involve known and unknown risks, uncertainties and other factors, including, but not limited to, those described in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in this report and our Annual Report on Form 10-K for the year ended December 31, 2016 (“Form 10-K”), and other parts of this report that could cause our actual results to differ materially from those anticipated in these forward-looking statements. The following is a non-exclusive list of factors which could cause our actual results to differ materially from our forward-looking statements in this prospectus:

• changes in general economic conditions, either nationally or in our local market;

• inflation, interest rates, securities market volatility and monetary fluctuations;

• increases in competitive pressures among financial institutions and businesses offering similar products and services;

• higher defaults on our loan portfolio than we expect;

• changes in management’s estimate of the adequacy of the allowance for loan losses;

• risks associated with our growth and expansion strategy and related costs;

• failure to successfully integrate acquisitions and mergers that are pending

• increased lending risks associated with our high concentration of real estate loans;

• ability to successfully grow our business in Utah and neighboring states;

• legislative or regulatory changes or changes in accounting principles, policies or guidelines;

• technological changes;

• regulatory or judicial proceedings; and

• other factors and risks including those described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report and our Annual Report on Form 10-K for the year ended December 31, 2016.

21

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected, projected, intended, committed or believed.

Please take into account that forward-looking statements speak only as of the date of this Form 10-Q. We do not undertake any obligation to release publicly our revisions to such forward-looking statements to reflect events or circumstances after the date of this Form 10-Q.

Overview

We are a bank holding company, formed in 1998 and headquartered in American Fork, Utah, which is located on the I-15 corridor between the cities of Salt Lake City and Provo. We have four divisions in our wholly-owned subsidiary, People’s Intermountain Bank (“PIB” or the “Bank”). We have 20 banking locations operating through two banking divisions, dba, BAF and LSB, which began offering banking services in 1913 and 1905, respectively.  Our third division is GrowthFunding Equipment Finance, an equipment leasing operation which originates direct equipment leasing products to businesses nationwide and to our banking customers.  Our fourth division is People’s Intermountain Bank Mortgage, a mortgage operation which originates mortgages.  We provide full-service retail banking in many of the leading population centers in the state of Utah, including a wide range of banking and related services to locally-owned businesses, professional firms, real estate developers, residential home builders, high net-worth individuals, investors and other customers. Our primary customers are small and medium-sized businesses that require highly personalized commercial banking products and services.

We believe our growth is a result of our ability to attract and retain high-quality associates, add branches in attractive markets and provide good customer service, as well as due to the expansion of our construction, land acquisition and development and commercial and industrial lending. The primary source of funding for our asset growth has been the generation of core deposits, which we accomplish through a combination of competitive pricing for local deposits coupled with expansion of our branch system. We have opened new branches during the year in Preston, Idaho, and Bountiful, Utah.

Our results of operations are largely dependent on net interest income. Net interest income is the difference between interest income we earn on interest earning assets, which are comprised of loans, investment securities and short-term investments and the interest we pay on our interest-bearing liabilities, which are primarily deposits, and, to a lesser extent, other borrowings. Deposits are our primary source of funding. Management strives to match the re-pricing characteristics of the interest earning assets and interest bearing liabilities to protect net interest income from changes in market interest rates and changes in the shape of the yield curve.

We measure our performance by calculating our net interest margin, return on average assets, and return on average equity. Net interest margin is calculated by dividing net interest income, which is the difference between interest income on interest earning assets and interest expense on interest bearing liabilities, by average interest earning assets. Net interest income is our largest source of revenue. Interest rate fluctuations, as well as changes in the amount and type of earning assets and liabilities, combine to affect net interest income. We also measure our performance by our efficiency ratio, which is calculated by dividing non-interest expense less merger-related costs, if applicable, by the sum of net interest income and non-interest income.

Announced Transactions

Town & Country Bank:

On May 31, 2017, the Company entered into a definitive agreement to acquire Town & Country Bank, Inc. (“Town & Country Bank”), a community based bank in St. George Utah, whereby Town & Country Bank will be merged with and into PIB, a wholly owned subsidiary of PUB.  Under the terms of the agreement, each outstanding share will receive $4.28 in cash and 0.2978 PUB common shares.  Based on the closing price of $25.55 for PUB shares on May 30, 2017, the transaction would result in an aggregate value of $20.9 million or $11.89 per fully diluted Town & Country Bank common share. $1.5 million of the cash to be paid to shareholders will be held in escrow for eighteen months after closing pending the resolution of certain contingencies.  Town & Country Bank shareholders may also receive additional cash consideration at closing subject to certain closing conditions.  

The transaction was unanimously approved by the boards of directors of both companies. The transaction is expected to close in the fourth quarter of 2017 subject to Town & Country Bank’s shareholder approval, required regulatory approval and the satisfaction of other customary closing conditions. The Company’s primary reasons for the transaction are to solidify its market share in the St. George, Utah market, expand its customer base to enhance total revenues and leverage operating costs through economies of scale.  

22

Town & Country Bank currently operates one branch in St. George and one loan production office in Sandy, UT.  The Town & Country Bank office and PIB’s Bank of American Fork branch in St. George are expected to be consolidated in January 2018. Upon consolidation, the combined division will operate under the name “People’s Town & Country Bank”. Bank of American Fork branches in other areas will not be affected by this St. George-area name change. Town & Country Bank’s Sandy loan production office is expected to be consolidated with the current Bank of American Fork Sandy branch and will operate under the name Bank of American Fork. This is part of a larger bank-wide strategy to establish a community-banking network with local names throughout Utah and potentially in adjoining states.  As of March 31, 2017, Town & Country Bank had total assets of $135.1 million, gross loans of $97.3 million and total deposits of $119.7 million.

Banner Bank Utah Branches:

On July 27, 2017, the Company signed a purchase and assumption agreement to acquire approximately $266 million in loans and seven Utah branch locations with approximately $159 million in deposits from Banner Corporation’s banking subsidiary, Banner Bank.  PIB will operate the branches under the name of Bank of American Fork, a division of PIB.  The seven branches are located in Salt Lake City, Provo, South Jordan, Woods Cross, Orem, Salem, and Springville.  The Woods Cross and Orem branches are planned to be consolidated into the existing Bank of American Fork Bountiful and Orem branches, respectively.  The transaction is expected to close in the fourth quarter of 2017 and is subject to certain closing conditions, including receipt of regulatory approval.

A copy of the purchase and assumption agreement is attached as Exhibit 2.1 and incorporated herein by reference. The foregoing description does not purport to be complete and is qualified in its entirety by reference to the full text of the purchase and assumption agreement attached as Exhibit 2.1.

23

Key Factors in Evaluating Our Financial Condition and Results of Operations

As a bank holding company, we focus on a number of key factors in evaluating our financial condition and results of operations including:

• Return on average equity;

• Return on average assets;

• Asset quality;

• Asset growth;

• Capital and liquidity;

• Net interest margin; and

• Operating efficiency.

The chart below shows these key financial measures:

	Six Months Ended
	June 30,			June 30,
(Dollars in thousands except per share amounts)	2017			2016
Net income	$	13,015		$	10,820
Basic earnings per share		0.73			0.61
Diluted earnings per share		0.71			0.60
Total assets		1,718,375			1,583,016
Total loans held for investment, net		1,184,120			1,079,676
Total deposits		1,461,052			1,346,363
Net interest margin		4.63	%		4.63	%
Efficiency ratio		54.44	%		58.32	%
Return on average assets		1.56	%		1.40	%
Return on average equity		11.14	%		10.07	%
Average equity to average assets		14.00	%		13.89	%
Non-performing assets to total assets		0.47	%		0.38	%
Liquidity ratio (1)		28.77	%		28.81	%
Dividend Payout Ratio (2)		22.03	%		22.87	%

(1) The liquidity ratio is the sum of cash equivalents and investment securities, less investment securities pledged as collateral against short-term borrowings, all divided by total liabilities. Pledged investment securities were $34.6 million and $36.1 million at June 30, 2017 and 2016, respectively.

(2) The dividend payout ratio is dividends paid divided by net income for the period.

Return on Average Equity. We measure the return to our shareholders through a return on average equity, or ROE, calculation. Our net income for the six months ended June 30, 2017 increased 20.3% to $13.0 million from $10.8 million for the comparable period in 2016. Net income for the six months ended June 30, 2017 increased primarily due to an increase in interest income due to loan growth, an increase in non-interest income offset by an increase in non-interest expenses.  Basic earnings per share, or EPS, was $0.73 for the six months ended June 30, 2017 compared to $0.61 for the comparable period in 2016. Diluted EPS was $0.71 per share for the six months ended June 30, 2017 compared to $0.60 per share for the comparable period in 2016. ROE increased to 11.14% for the six months ended June 30, 2017 compared to 10.07% for the comparable period in 2016, primarily from the 20.3% increase in net income.

Return on Average Assets. We measure asset utilization through a return on average assets, or ROA, calculation. For the six months ended June 30, 2017 our ROA increased to 1.56% compared to 1.40% for the six months ended June 30, 2016. The increase in ROA is a result of improved operating results as discussed throughout this Management’s Discussion & Analysis.  

Asset Quality. Since the majority of our performing assets are loans, we measure asset quality in terms of non-performing assets as a percentage of total assets. This measurement is used in determining asset quality and its potential effect on future earnings. Non-performing assets as a percentage of total assets were 0.47% as of June 30, 2017 compared to 0.38% as of June 30, 2016. Non-performing assets are loans that are 90 days or more past due or have been placed on nonaccrual status, or are other real estate owned, or OREO.

24

Asset Growth. Revenue growth and EPS are directly related to earning assets growth. In descending order, our earning assets are loans, investments (including federal funds) and interest earning deposit balances. As of June 30, 2017, compared to June 30, 2016, total assets grew 8.6%, total net loans increased by 9.2%, and investment securities increased by 17.7%.  Loan growth in 2017 came primarily from the increased level of real estate, construction, acquisition and land development lending activities.

Capital and Liquidity. Maintaining appropriate capital and liquidity levels is imperative for us to continue our strong growth levels. We have been successful in maintaining capital levels well above the minimum regulatory requirements, which we believe has enabled our growth strategy. In 2015, we raised approximately $34.9 million in new capital from our IPO. We plan to utilize the additional capital for expansion purposes, both organic and through acquisition, and for general corporate purposes.  We have two pending acquisitions: 1) Town & Country Bank, Inc. in St, George, Utah, and 2) approximately $260 million in loans with approximately $180 million in low-cost deposits of Banner Bank’s seven Utah-based bank branches and an operations center.  Both transactions are subject to customary closing conditions and regulatory approval.  Our average equity to average assets ratio as of June 30, 2017 was 14.00% compared to 13.89% as of June 30, 2016. The average equity, average assets and liquidity ratios will likely decline after closing the pending acquisitions. We monitor liquidity levels to ensure we have adequate sources available to fund our loan growth and to accommodate daily operations. The key measure we use to monitor liquidity is our liquidity ratio which is calculated as cash and cash equivalents plus unpledged investment securities divided by total liabilities. Our liquidity ratio was 28.77% as of June 30, 2017, compared to 28.81% as of June 30, 2016.

Net Interest Margin. Net interest margin is a metric that allows us to gauge our loan pricing and funding cost relationship. For the six months ended June 30, 2017 and 2016, our net interest margin was 4.63% for both periods.

Operating Efficiency. Operating efficiency is the measure of how much it costs us to generate each dollar of revenue. A lower percentage indicates a better operating efficiency. Our efficiency ratio is calculated as the sum of non-interest expense less merger and acquisition related expenses, if applicable, divided by the sum of net interest income and non-interest income and was 54.44% for the six months ended June 30, 2017 as compared to 58.32% for the six months ended June 30, 2016.  The improvement in the efficiency ratio is the result of operating efficiencies as discussed throughout this Managements’ Discussion & Analysis.

Results of Operations

Factors that determine the level of net income include the volume of earning assets and interest bearing liabilities, yields earned and rates paid, fee income, non-interest expense, the level of non-performing loans and other non-earning assets, and the amount of non-interest bearing liabilities supporting earning assets. Non-interest income primarily includes service charges and other fees on deposits, and mortgage banking income. Non-interest expense consists primarily of employee compensation and benefits, occupancy, equipment and depreciation expense, and other operating expenses.

Average Balance and Yields. The following tables set forth a summary of average balances with corresponding interest income and interest expense as well as average yield, cost and net interest margin information for the periods presented. Average balances are derived from daily balances. Average non-accrual loans are derived from quarterly balances and are included as non-interest earning assets for purposes of these tables.

25

	Three Months Ended
	June 30, 2017								June 30, 2016
				Interest		Average						Interest		Average
	Average			Income/		Yield/			Average			Income/		Yield/
(Dollars in thousands, except footnotes)	Balance			Expense		Rate			Balance			Expense		Rate
ASSETS
Interest earning deposits in other banks and federal funds sold	$	21,593		$	56		1.04	%	$	20,952		$	20		0.38	%
Securities: (1)
Taxable securities		319,877			1,309		1.64	%		271,850			1,047		1.55	%
Non-taxable securities (2)		93,688			432		1.85	%		90,428			420		1.87	%
Loans (3) (4)		1,177,403			17,928		6.11	%		1,096,584			16,420		6.02	%
Non-marketable equity securities		2,306			5		0.87	%		2,065			2		0.39	%
Total interest earning assets		1,614,867			19,730		4.90	%		1,481,879			17,909		4.86	%
Allowance for loan losses		(16,658	)							(15,873	)
Non-interest earning assets		100,457								97,503
Total average assets	$	1,698,666							$	1,563,509
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest bearing deposits:
Demand and savings accounts	$	660,563		$	416		0.25	%	$	591,976		$	415		0.28	%
Money market accounts		168,022			95		0.23	%		144,747			83		0.23	%
Certificates of deposit, under $100,000		89,010			136		0.61	%		96,545			76		0.32	%
Certificates of deposit, $100,000 and over		62,967			74		0.47	%		75,228			123		0.66	%
Total interest bearing deposits		980,562			721		0.29	%		908,496			697		0.31	%
Short-term borrowings		12,428			28		0.90	%		9,651			1		0.04	%
Total interest bearing liabilities		992,990			749		0.30	%		918,147			698		0.31	%
Non-interest bearing deposits		454,235								414,040
Total funding		1,447,225			749		0.21	%		1,332,187			698		0.21	%
Other non-interest bearing liabilities		12,676								12,617
Shareholders’ equity		238,765								218,705
Total average liabilities and shareholders’ equity	$	1,698,666							$	1,563,509
Net interest income				$	18,981							$	17,211
Interest rate spread (5)							4.60	%							4.55	%
Net interest margin (6)							4.71	%							4.67	%

⁽¹⁾ Excludes average unrealized gains (losses) of ($786,000) and $1.5 million for the three months ended June 30, 2017 and 2016, respectively, which are included in non-interest earning assets.

⁽²⁾ The average yield does not include the federal tax benefits relating to income earned on municipal securities totaling $233,000 and $226,000 for the three months ended June 30, 2017 and 2016, respectively.  

⁽³⁾ Loan interest income includes loan fees of $1.6 million and $1.4 million for the three months ended June 30, 2017 and 2016, respectively.  

⁽⁴⁾ Average loans do not include average non-accrual loans of $6.6 million and $5.3 million for the three months ended June 30, 2017 and 2016, respectively, which are included in non-interest earning assets.

⁽⁵⁾ Interest rate spread is the difference between the yield on interest-earning assets minus the rate on interest-bearing liabilities.

⁽⁶⁾ Net interest margin is computed by dividing net interest income by average interest earning assets.

26

	Six Months Ended
	June 30, 2017								June 30, 2016
				Interest		Average						Interest		Average
	Average			Income/		Yield/			Average			Income/		Yield/
(Dollars in thousands, except footnotes)	Balance			Expense		Rate			Balance			Expense		Rate
ASSETS
Interest earning deposits in other banks and federal funds sold	$	31,168		$	135		0.87	%	$	18,400		$	38		0.42	%
Securities: (1)
Taxable securities		317,342			2,510		1.59	%		281,738			2,186		1.56	%
Non-taxable securities (2)		92,930			854		1.85	%		92,923			863		1.87	%
Loans (3) (4)		1,156,661			34,781		6.06	%		1,078,687			32,272		6.02	%
Non-marketable equity securities		2,070			8		0.78	%		2,401			4		0.34	%
Total interest earning assets		1,600,171			38,288		4.83	%		1,474,149			35,363		4.82	%
Allowance for loan losses		(16,713	)							(15,733	)
Non-interest earning assets		99,498								96,811
Total average assets	$	1,682,956							$	1,555,227
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest bearing deposits:
Demand and savings accounts	$	660,026		$	854		0.26	%	$	586,911		$	818		0.28	%
Money market accounts		171,221			200		0.24	%		146,018			177		0.24	%
Certificates of deposit, under $100,000		89,685			272		0.61	%		97,183			161		0.33	%
Certificates of deposit, $100,000 and over		64,447			160		0.50	%		75,545			258		0.69	%
Total interest bearing deposits		985,379			1,486		0.30	%		905,657			1,414		0.31	%
Short-term borrowings		7,856			29		0.74	%		20,507			38		0.37	%
Total interest bearing liabilities		993,235			1,515		0.31	%		926,164			1,452		0.32	%
Non-interest bearing deposits		442,861								401,580
Total funding		1,436,096			1,515		0.21	%		1,327,744			1,452		0.22	%
Other non-interest bearing liabilities		11,325								11,409
Shareholders’ equity		235,535								216,074
Total average liabilities and shareholders’ equity	$	1,682,956							$	1,555,227
Net interest income				$	36,773							$	33,911
Interest rate spread (5)							4.52	%							4.50	%
Net interest margin (6)							4.63	%							4.63	%

⁽¹⁾ Excludes average unrealized gains (losses) of ($1.2) million and $1.1 million for the six months ended June 30, 2017 and 2016, respectively, which are included in non-interest earning assets.

⁽²⁾ The average yield does not include the federal tax benefits relating to income earned on municipal securities totaling $460,000 and $464,000 for the six months ended June 30, 2017 and 2016, respectively.  

⁽³⁾ Loan interest income includes loan fees of $3.0 million and $2.8 million for the six months ended June 30, 2017 and 2016, respectively.  

⁽⁴⁾ Average loans do not include average non-accrual loans of $6.1 million and $5.8 million for the six months ended June 30, 2017 and 2016, respectively, which are included in non-interest earning assets.

⁽⁵⁾ Interest rate spread is the difference between the yield on interest-earning assets minus the rate on interest-bearing liabilities.

⁽⁶⁾ Net interest margin is computed by dividing net interest income by average interest earning assets.

27

Rate/Volume Analysis. The following table shows the change in interest income and interest expense and the amount of change attributable to variances in volume, rates and the combination of volume and rates based on the relative changes of volume and rates. For purposes of this table, the change in interest due to both volume and rate has been allocated to change due to volume and rate in proportion to the relationship of absolute dollar amounts of change in each.

	Three Months Ended June 30,									Six Months Ended June 30,
	2017 vs. 2016									2017 vs. 2016
	Increase (Decrease) Due to:									Increase (Decrease) Due to:
(Dollars in thousands)	Volume			Rate			Net			Volume			Rate			Net
Interest income:
Interest earning deposits in other banks and federal funds sold	$	1		$	35		$	36		$	38		$	59		$	97
Taxable securities		194			68			262			281			43			324
Non-taxable securities		15			(3	)		12			—			(9	)		(9	)
Loans		1,227			281			1,508			2,344			165			2,509
Federal Home Loan Bank stock		—			3			3			(1	)		5			4
Total interest income		1,437			384			1,821			2,662			263			2,925
Interest expense:
Demand and savings accounts		45			(44	)		1			97			(61	)		36
Money market accounts		13			(1	)		12			30			(7	)		23
Certificates of deposit, under $100,000		(6	)		66			60			(13	)		124			111
Certificates of deposit, $100,000 and over		(18	)		(31	)		(49	)		(34	)		(64	)		(98	)
Short-term borrowings		—			27			27			(32	)		23			(9	)
Total interest expense		34			17			51			48			15			63
Net interest income	$	1,403		$	367		$	1,770		$	2,614		$	248		$	2,862

Net interest income increased $1.8 million for the three months ended June 30, 2017 compared to the same period in 2016. The increase in interest income was primarily driven by increased organic loan volumes, slightly higher loan yields and increases in investment securities. Additionally, interest expense also increased for the three months ended June 30, 2017 compared to the same period in 2016 due principally to increases in deposits offset by slightly lower deposit interest rates.

Net interest income increased $2.9 million for the six months ended June 30, 2017 compared to the same period in 2016. The increase in interest income was primarily driven by increased organic loan volumes, slightly higher loan yields, and increases in investment securities. Additionally, interest expense also increased for the six months ended June 30, 2017 compared to the same period in 2016 due principally to increases in deposits offset by slightly lower deposit interest rates.

28

Financial Overview for the Three Months Ended June 30, 2017 and 2016

	Three Months Ended
	June 30,		June 30,
(Dollars in thousands)	2017		2016		$ Change			% Change
Interest income	$	19,730	$	17,909	$	1,821			10.2	%
Interest expense		749		698		51			7.3	%
Net interest income		18,981		17,211		1,770			10.3	%
Provision for loan losses		900		225		675			300.0	%
Net interest income after provision for loan losses		18,081		16,986		1,095			6.4	%
Non-interest income		4,348		4,398		(50	)		-1.1	%
Non-interest expense		12,351		12,400		(49	)		-0.4	%
Income before income tax expense		10,078		8,984		1,094			12.2	%
Income tax expense		3,584		3,407		177			5.2	%
Net income	$	6,494	$	5,577	$	917			16.4	%

Net Income. Our net income grew by $917,000 or 16.4% to $6.5 million for the quarter ended June 30, 2017 as compared to $5.6 million for the same quarter in 2016. This was attributable principally to an increase in net interest income of $1.8 million, and offset by an increase of $675,000 in loan loss provision and $177,000 of higher income tax expenses.

Net Interest Income and Net Interest Margin. The increase in net interest income for the quarter ended June 30, 2017 compared to the same quarter in 2016 was primarily driven by interest earned on a higher average loan volume attributable to organic growth. Interest expense in the quarter ended June 30, 2017 increased from the same period in 2016 due to higher volume in average deposits.  Construction and land development loans (“C & D loans”) are our highest yielding assets within our earning asset mix and represents 20.9% of gross loans as of June 30, 2017.  If C & D loan activity declines as a percentage of earning asset mix in future quarters, the net interest margin could decline from current levels.

The yield on our average interest earning assets was 4.90% for the quarter ended June 30, 2017 compared to 4.86% for the comparable quarter in 2016.  The cost of funding our earning assets declined in the quarter ended June 30, 2017 to 0.30% from 0.31% in the comparable quarter in 2016 because of lower rates paid on deposits and accretion of fair value adjustments to certificates of deposit.

Provision for Loan Losses. The provision for loan losses in each period is a charge against earnings in that period. The provision is that amount required to maintain the allowance for loan losses at a level that, in management’s judgment, is adequate to absorb loan losses inherent in the loan portfolio.

The provision for loan losses for each of the quarters ended June 30, 2017 and 2016 was $900,000 and $225,000, respectively. We have experienced net charge-offs of $273,000 in the current quarter compared to net recoveries of ($204,000) in the comparable quarter in 2016. The provision for loan losses in both periods were primarily due to the impact of the charge-offs and relative increases in loan balances.

Non-interest Income. The following table presents, for the periods indicated, the major categories of non-interest income:

	Three Months Ended
	June 30,		June 30,
(Dollars in thousands)	2017		2016		$ Change			% Change
Mortgage banking		1,960		2,277		(317	)		-13.9	%
Card processing		1,208		1,136		72			6.3	%
Service charges on deposit accounts	$	578	$	531	$	47			8.9	%
Other operating		602		454		148			32.6	%
Total non-interest income	$	4,348	$	4,398	$	(50	)		-1.1	%

The decrease in total non-interest income during the quarter ended June 30, 2017 compared to the same quarter in 2016 was primarily influenced by lower mortgage banking income from lower mortgage volumes and offset by higher card processing income and various other operating income which includes a gain of approximately $134,000 relating to the sale of land held by the Bank.  

29

Non-interest Expense. The following table presents, for the periods indicated, the major categories of non-interest expense:

	Three Months Ended
	June 30,		June 30,
(Dollars in thousands)	2017		2016		$ Change			% Change
Salaries and employee benefits	$	7,762	$	7,959	$	(197	)		-2.5	%
Occupancy, equipment and depreciation		1,088		1,076		12			1.1	%
Data processing		661		740		(79	)		-10.7	%
Card processing		516		549		(33	)		-6.0	%
Marketing and advertising		349		290		59			20.3	%
FDIC premiums		130		188		(58	)		-30.9	%
Other		1,845		1,598		247			15.5	%
Total non-interest expense	$	12,351	$	12,400	$	(49	)		-0.4	%

Non-interest expense for the second quarter of 2017 was relatively flat, only decreasing by $49,000, as compared to the same period in 2016, primarily due to an increase in various other expenses of $247,000 and offset by lower salaries and employee benefits, lower data processing costs and lower rates on FDIC premiums. Our personnel costs have increased in 2017 due to annual salary increases, higher variable compensation costs, higher payroll tax and medical benefits to support our balance sheet and income growth, offset by approximately $500,000 refund on medical benefit premiums received in the second quarter of 2017 contributing to the decrease in salaries and benefits.  We expect non-interest expenses to increase in future quarters due to the recent opening of two new branches and future merger and acquisition costs related to the pending acquisitions.

  Income Tax Expense. We recorded an income tax expense of $3.6 million for the three months ended June 30, 2017 compared to $3.4 million for the same period in 2016. The effective tax rate for the three months of 2017 was 35.6% compared to 37.9% in the corresponding three months of 2016. The tax rate in the second quarter of 2017 is lower than the same quarter in 2016 due primarily to adjustments in the expected recoverability of certain tax credits.  

Financial Overview for the Six Months Ended June 30, 2017 and 2016

	Six Months Ended
	June 30,		June 30,
(Dollars in thousands)	2017		2016		$ Change		% Change
Interest income	$	38,288	$	35,363	$	2,925		8.3	%
Interest expense		1,515		1,452		63		4.3	%
Net interest income		36,773		33,911		2,862		8.4	%
Provision for loan losses		1,100		425		675		158.8	%
Net interest income after provision for loan losses		35,673		33,486		2,187		6.5	%
Non-interest income		8,473		8,161		312		3.8	%
Non-interest expense		24,807		24,535		272		1.1	%
Income before income tax expense		19,339		17,112		2,227		13.0	%
Income tax expense		6,324		6,292		32		0.5	%
Net income	$	13,015	$	10,820	$	2,195		20.3	%

Net Income. Our net income grew by $2.2 million or 20.3% to $13.0 million for the six months ended June 30, 2017 as compared to $10.8 million for the same period in 2016. This was attributable principally to an increase in net interest income of $2.9 million, and offset primarily by an increase of $675,000 in loan loss provision.

Net Interest Income and Net Interest Margin. The increase in net interest income for the six months ended June 30, 2017 compared to the same period in 2016 was primarily driven by interest earned on a higher average loan volume attributable to organic growth. Interest expense in the six months ended June 30, 2017 increased from the same period in 2016 due to higher volume in average deposits.  As stated previously, C & D loans are our highest yielding assets within our earning asset mix and represents 20.9% of gross loans as of June 30, 2017.  If C & D loan activity declines as a percentage of earning asset mix in future quarters, the net interest margin could decline from current levels.

30

The yield on our average interest earning assets was 4.83% for the six months ended June 30, 2017 compared to 4.82% for the same period in 2016.  The cost of funding our earning assets declined in the six months ended June 30, 2017 to 0.31% from 0.32% in the comparable period in 2016 because of lower rates paid on deposits and accretion of fair value adjustments to certificates of deposit.

Provision for Loan Losses. The provision for loan losses in each period is a charge against earnings in that period. The provision is that amount required to maintain the allowance for loan losses at a level that, in management’s judgment, is adequate to absorb loan losses inherent in the loan portfolio.

The provision for loan losses for each of the six months ended June 30, 2017 and 2016 was $1.1 million and $425,000, respectively. We have experienced net charge-offs of $544,000 in the six months ended June 30, 2017, compared to net recoveries of ($170,000) in the comparable period in 2016. The provision for loan losses in both periods were primarily due to the impact of the charge-offs and relative increases in loan balances.

Non-interest Income. The following table presents, for the periods indicated, the major categories of non-interest income:

	Six Months Ended
	June 30,		June 30,
(Dollars in thousands)	2017		2016		$ Change			% Change
Mortgage banking		3,939		4,025		(86	)		-2.1	%
Card processing		2,332		2,167		165			7.6	%
Service charges on deposit accounts	$	1,114	$	1,044	$	70			6.7	%
Other operating		1,088		925		163			17.6	%
Total non-interest income	$	8,473	$	8,161	$	312			3.8	%

The increase in total non-interest income during the six months ended June 30, 2017 compared to the same period in 2016 was primarily influenced by higher card processing income and various other operating income which includes approximately $134,000 gain relating to the sale of land held by the Bank, and offset by lower mortgage banking income from lower mortgage volumes.  

Non-interest Expense. The following table presents, for the periods indicated, the major categories of non-interest expense:

	Six Months Ended
	June 30,		June 30,
(Dollars in thousands)	2017		2016		$ Change			% Change
Salaries and employee benefits	$	15,729	$	15,843	$	(114	)		-0.7	%
Occupancy, equipment and depreciation		2,205		2,064		141			6.8	%
Data processing		1,336		1,447		(111	)		-7.7	%
Card processing		1,045		1,139		(94	)		-8.3	%
Marketing and advertising		611		459		152			33.1	%
FDIC premiums		256		383		(127	)		-33.2	%
Other		3,625		3,200		425			13.3	%
Total non-interest expense	$	24,807	$	24,535	$	272			1.1	%

Non-interest expense for the first six months of 2017 increased by $272,000, compared to the same period in 2016, primarily due to an increase in various other expenses of $425,000 and offset by lower salaries and employee benefits, lower data processing costs and lower rates on FDIC premiums. Our personnel costs have increased in 2017 due to annual salary increases, higher variable compensation costs, higher payroll tax and medical benefits to support our balance sheet and income growth, offset by a $500,000 refund on medical benefit premiums received in the second quarter of 2017 contributing to the decrease in salaries and benefits.

  Income Tax Expense. We recorded an income tax expense of $6.3 million for the six months ended June 30, 2017 compared to $6.3 million for the same period in 2016. The effective tax rate for the first six months of 2017 was 32.7% compared to 36.8% in the corresponding six months of 2016. The tax rate in 2017 is lower than 2016 due primarily to tax-deductible stock compensation expense and the reversal of a liability related to an unrecognized tax benefit, totaling approximately $600,000 in taxable benefits.

31

Financial Condition

Our total assets as of June 30, 2017 were $1.72 billion, a 3.1% increase compared to December 31, 2016. Our total loans held for investment as of June 30, 2017 were $1.20 billion, an increase of 7.3% from December 31, 2016. Total deposits as of June 30, 2017 were $1.46 billion, an increase of 2.5% compared to December 31, 2016.

Loans

The following table sets forth information regarding the composition of the loan portfolio at the end of each of the periods presented.

	June 30,			December 31,
(Dollars in thousands)	2017			2016
Loans held for sale	$	7,655		$	20,826
Loans held for investment:
Commercial real estate loans:
Real estate term		643,756			582,029
Construction and land development		251,741			240,120
Total commercial real estate loans		895,497			822,149
Commercial and industrial loans		221,901			213,260
Consumer loans:
Residential and home equity		73,791			72,959
Consumer and other		14,936			15,678
Total consumer loans		88,727			88,637
Total gross loans		1,206,125			1,124,046
Net deferred loan fees		(4,734	)		(4,169	)
Allowance for loan losses		(17,271	)		(16,715	)
Loans held for investment, net	$	1,184,120		$	1,103,162

	June 30,			December 31,
(Percentage of total loans held for investment)	2017			2016
Loans held for investment:
Commercial real estate loans:
Real estate term		53.4	%		51.7	%
Construction and land development		20.9	%		21.4	%
Total commercial real estate loans		74.3	%		73.1	%
Commercial and industrial loans		18.4	%		19.0	%
Consumer loans:
Residential and home equity		6.1	%		6.5	%
Consumer and other		1.2	%		1.4	%
Total consumer loans		7.3	%		7.9	%
Total loans held for investment		100.0	%		100.0	%

We originate certain residential mortgage loans for sale to investors that are carried at cost. Due to the short period held, generally less than 90 days, we consider these loans held for sale to be carried at fair value.

The following table shows the amounts of outstanding loans, which, based on remaining scheduled repayments of principal, were due in one year or less, more than one year through five years, and more than five years. Lines of credit or other loans having no stated maturity and no stated schedule of repayments are reported as due in one year or less. In the table below, loans are classified as real estate related if they are collateralized by real estate. The tables also present, for loans with maturities over one year, an analysis with respect to fixed interest rate loans and adjustable interest rate loans.

32

Contractual maturities as of June 30, 2017 are as follows:

										Rate Structure for
										Loans Maturing Over
	Maturity									One Year
				One
	One			through		After
	Year			Five		Five						Adjustable
(Dollars in thousands)	or Less			Years		Years		Total		Fixed Rate		Rate
Loans held for investment:
Commercial real estate loans:
Real estate term	$	77,976		$	219,635	$	346,145	$	643,756	$	113,508	$	452,272
Construction and land development		204,349			44,080		3,312		251,741		20,540		26,852
Total commercial real estate loans		282,325			263,715		349,457		895,497		134,048		479,124
Commercial and industrial loans		86,216			104,763		30,922		221,901		88,294		47,391
Consumer loans:
Residential and home equity		12,517			16,778		44,496		73,791		10,278		50,996
Consumer and other		6,414			6,886		1,636		14,936		7,979		543
Total consumer loans		18,931			23,664		46,132		88,727		18,257		51,539
Total gross loans held for investment	$	387,472	(1)	$	392,142	$	426,511	$	1,206,125	$	240,599	$	578,054	(1)

⁽¹⁾ The sum of adjustable rate loans maturing after one year and total loans maturing within one year is $966 million or 80.1% of total loans at June 30, 2017.

Concentrations. As of June 30, 2017, in management’s judgment, a concentration of loans existed in real estate related loans. At that date, real estate related loans comprised 80.4% of total loans held for investment, of which commercial real estate represents 53.4%, 20.9% are construction and land development loans, and 6.1% are residential and home equity loans. We require collateral on real estate lending arrangements and typically maintain loan-to-value ratios of up to 80%, except for some residential construction loans of up to 95% loan-to-value provided the loan includes pre-approved long-term financing.  Our concentration in commercial and industrial loans has slightly decreased to 18.4% as of June 30, 2017 from 19.0% as of December 31, 2016.  We have focused on diversifying our loan portfolio mix since 2011 resulting in an increase in our concentration of commercial and industrial loans from 15.5% as of December 31, 2011, to 18.4% as of June 30, 2017.

Non-Performing Assets. Loans are placed on non-accrual status when they become 90 days or more past due or at such earlier time as management determines timely recognition of interest to be in doubt. Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions, collection efforts, and the borrower’s financial condition, that the borrower will be unable to make payments as they become due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received, or payment is considered certain. Loans may be returned to accrual status when all delinquent interest and principal amounts contractually due are brought current and future payments are reasonably assured.

33

The following table summarizes the loans for which the accrual of interest has been discontinued and loans more than 90 days past due and still accruing interest, including those non-accrual loans that are troubled-debt restructured loans, and OREO:

	June 30,			December 31,
(Dollars in thousands)	2017			2016
Non-accrual loans, not troubled-debt restructured
Real estate term	$	4,089		$	2,386
Construction and land development		826			378
Commercial and industrial		1,513			1,211
Residential and home equity		116			142
Consumer and other		—			14
Total non-accrual, not troubled-debt restructured loans		6,544			4,131
Troubled-debt restructured loans non-accrual
Real estate term		663			808
Construction and land development		383			396
Commercial and industrial		—			—
Residential and home equity		—			—
Consumer and other		—			—
Total troubled-debt restructured, non-accrual loans		1,046			1,204
Total non-accrual loans (1)		7,590			5,335
Accruing loans past due 90 days or more		21			22
Total non-performing loans (NPL)		7,611			5,357
OREO		468			245
Total non-performing assets (NPA) (2)	$	8,079		$	5,602
Accruing troubled debt restructured loans	$	4,162		$	5,572
Non-accrual troubled debt restructured loans		1,046			1,204
Total troubled debt restructured loans	$	5,208		$	6,776
Selected ratios:
NPL to total loans		0.64	%		0.49	%
NPA to total assets		0.47	%		0.34	%

⁽¹⁾ We estimate that approximately $189,000 and $298,000 of interest income would have been recognized on loans accounted for on a non-accrual basis for the six months ended June 30, 2017 and the year ended December 31, 2016, respectively, had such loans performed pursuant to contractual terms.

⁽²⁾ Non-performing assets as of December 31, 2016 have not been reduced by U.S. government guarantees of $16,000.  There were no U.S. Government guarantees on non-performing assets as of June 30, 2017.  

Impaired Loans. Impaired loans are loans for which it is probable that we will be unable to collect all principal and interest payments due according to the contractual terms of the loan agreement. We measure impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral, if the loan is collateral-dependent.

In determining whether or not a loan is impaired, we consider payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. We determine the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all the circumstances surrounding the loan and borrower, including the length of delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Loans for which an insignificant shortfall in amount of payments is anticipated, but where we expect to collect all amounts due, are not considered impaired.

Troubled-debt Restructured Loans. A restructured loan is considered a troubled debt restructured loan, or TDR, if we, for economic or legal reasons related to the debtor’s financial difficulties, grant a concession in terms or a below-market interest rate to the debtor that we would not otherwise consider. We had TDR loans of $5.2 million and $6.8 million as of June 30, 2017 and December 31, 2016, respectively. Our TDR loans are considered impaired loans of which $1.05 million and $1.20 million as of June 30, 2017 and December 31, 2016, respectively, are designated as non-accrual.

34

Each restructured debt is separately negotiated with the borrower and includes terms and conditions that reflect the borrower’s prospective ability to service the debt as modified.

OREO Properties. OREO represents real property taken either through foreclosure or through a deed in lieu thereof from the borrower. All OREO properties are recorded by us at amounts equal to or less than the fair market value of the properties based on current independent appraisals reduced by estimated selling costs. The following table provides a summary of the changes in the OREO balance:

	Six Months Ended
	June 30,			June 30,
(Dollars in thousands)	2017			2016
Balance, beginning of period	$	245		$	568
Additions		468			237
Write-downs		—			(53	)
Sales		(245	)		(108	)
Balance, end of period	$	468		$	644

Allowance for Loan Losses

We maintain an adequate allowance for loan losses, or ALLL, based on a comprehensive methodology that assesses the losses inherent in the loan portfolio. Our ALLL is based on a continuing review of loans which includes consideration of actual loss experience, changes in the size and character of the portfolio, identification of individual problem situations which may affect the borrower’s ability to repay, evaluations of the prevailing and anticipated economic conditions, and other qualitative factors. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.

Our ALLL is increased by charges to income and decreased by charge-offs (net of recoveries). While we use available information to recognize losses on loans, changes in economic conditions may necessitate revision of the estimate in future years.

The ALLL consists of specific and general components. The specific component relates to loans determined to be impaired that are individually evaluated for impairment. For impaired loans individually evaluated, an allowance is established when the discounted cash flows, or the fair value of the collateral if the loans are collateral-dependent, of the impaired loan are lower than the carrying value of the loan. The general component covers all loans not individually evaluated for impairment and is based on historical loss experience adjusted for qualitative factors. Various qualitative factors are considered including changes to underwriting policies, loan concentrations, volume and mix of loans, size and complexity of individual credits, locations of credits and new market areas, changes in local and national economic conditions, and trends in past due, non-accrual and classified loan balances.

35

The following table sets forth the activity in our allowance for loan losses for the periods indicated:

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
(Dollars in thousands)	2017			2016			2017			2016
Allowance for loan losses:
Beginning balance	$	16,644		$	15,723		$	16,715		$	15,557
Loans charged off:
Real estate term		(350	)		—			(350	)		—
Construction and land development		—			—			—			—
Commercial and industrial		(114	)		—			(272	)		(72	)
Residential and home equity		—			—			(338	)		—
Consumer and other		(48	)		(56	)		(113	)		(120	)
Total		(512	)		(56	)		(1,073	)		(192	)
Recoveries:
Real estate term		177			5			181			9
Construction and land development		—			30			79			46
Commercial and industrial		39			71			77			108
Residential and home equity		2			77			140			81
Consumer and other		21			77			52			118
Total		239			260			529			362
Net loan (charge-offs) recoveries		(273	)		204			(544	)		170
Provision for loan losses		900			225			1,100			425
Ending balance	$	17,271		$	16,152		$	17,271		$	16,152
Loans held for investment	$	1,201,391		$	1,095,828		$	1,201,391		$	1,095,828
Average loans held for investment		1,168,996			1,082,491			1,147,263			1,065,172
Non-performing loans		7,611			5,383			7,611			5,383
Selected ratios:
Net loan charge-offs (recoveries) to average loans		0.09	%		-0.07	%		0.09	%		-0.03	%
Provision for loan losses to average loans		0.31	%		0.08	%		0.19	%		0.08	%
Allowance for loan losses to loans held for investment		1.43	%		1.47	%		1.43	%		1.47	%

The decrease in ALLL as a percentage of total loans from 2016 to 2017 is attributable to overall improvement in the credit quality of the underlying loan portfolio, changes to our historical loss rates, and adjustments to qualitative ALLL factors due to changes in current conditions.

Our construction and land development portfolio reflects some borrower concentration risk, and also carries the enhanced risks encountered with construction loans generally. We also finance contractors on a speculative basis. Construction and land development loans are generally more risky than permanent mortgage loans because they are dependent upon the borrower’s ability to generate cash to service the loan, and the value of the collateral depends on project completion when market conditions may have changed.  Our commercial real estate loans are a mixture of new and seasoned properties, retail, office, warehouse, and some industrial properties. Loans on properties are usually underwritten at a loan to value ratio of up to 75% with a minimum debt coverage ratio of 1.25 times.  Our loan portfolio does not include any significant concentrations in oil and gas related businesses.  

We allocate our allowance for loan losses by assigning general percentages to our major loan categories (construction and land development, commercial real estate term, residential real estate, C&I and consumer), assigning specific percentages to each category of loans graded in accordance with the guidelines established by our regulatory agencies, and making specific allocations to impaired loans when factors are present requiring a greater reserve than would be required using the assigned risk rating allocation, which is typically based on a review of appraisals or other collateral analysis.

36

The following table indicates management’s allocation of the ALLL and the percent of loans in each category to total loans as of each of the following dates:

	June 30,		December 31,
(Dollars in thousands)	2017		2016
Commercial real estate loans:
Real estate term	$	7,157	$	6,770
Construction and land development		5,077		5,449
Total commercial real estate loans		12,234		12,219
Commercial and industrial loans		4,489		3,718
Consumer loans:
Residential and home equity		503		617
Consumer and other		45		161
Total consumer loans		548		778
Total	$	17,271	$	16,715

	June 30,			December 31,
(Percentage of total loans held for investment)	2017			2016
Commercial real estate loans:
Real estate term		53.4	%		51.7	%
Construction and land development		20.9	%		21.4	%
Total commercial real estate loans		74.3	%		73.1	%
Commercial and industrial loans		18.4	%		19.0	%
Consumer loans:
Residential and home equity		6.1	%		6.5	%
Consumer and other		1.2	%		1.4	%
Total consumer loans		7.3	%		7.9	%
Total		100.0	%		100.0	%

Investments

The carrying value of our investment securities totaled $402.6 million as of June 30, 2017 and $409.1 million as of December 31, 2016. Our portfolio of investment securities is comprised of both available-for-sale securities and securities that we intend to hold to maturity. As of June 30, 2017, we held no investment securities from any issuer which totaled over 10% of our shareholders’ equity.

The carrying value of our portfolio of investment securities was as follows:

	June 30,		December 31,
(Dollars in thousands)	2017		2016
Available-for-sale securities: (Fair Value)
U.S. Government agencies	$	116,774	$	118,603
Municipal securities		18,475		25,519
Mortgage-backed securities		180,118		181,821
Corporate securities		9,805		9,666
Total		325,172		335,609
Held-to-maturity securities: (Amortized Cost)
Municipal securities		77,394		73,512
Total investment securities	$	402,566	$	409,121

37

The following table shows the amortized cost for maturities of investment securities and the weighted average yields of such securities, including the benefit of tax-exempt securities:

Investment securities maturities as of June 30, 2017:

						After One but					After Five but
	Within One Year					within Five Years					within Ten Years					After Ten Years					Total
(Dollars in thousands)	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Available-for-sale securities:
U.S. Government agencies	$	20,271		1.03	%	$	87,082		1.18	%	$	9,849		2.37	%	$	—		0.00	%	$	117,202		1.25	%
Municipal securities		5,975		2.63	%		7,005		3.17	%		4,534		2.16	%		603		2.35	%		18,117		2.71	%
Mortgage-backed securities		6		4.98	%		5,491		1.23	%		70,779		1.63	%		104,775		2.05	%		181,051		1.86	%
Other securities		—		0.00	%		3,000		2.16	%		4,000		2.21	%		3,000		4.00	%		10,000		2.73	%
Total		26,252		1.40	%		102,578		1.35	%		89,162		1.76	%		108,378		2.11	%		326,370		1.72	%
Held-to-maturity securities:
Municipal securities		7,774		1.23	%		45,458		1.60	%		17,132		1.96	%		7,030		2.29	%		77,394		1.71	%
Total investment securities	$	34,026		1.36	%	$	148,036		1.42	%	$	106,294		1.80	%	$	115,408		2.12	%	$	403,764		1.72	%

Actual maturities may differ from contractual maturities because issuers may have the right to call obligations with or without penalties.

We evaluate securities for other-than-temporary impairment at least on an annual basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Deposits

Total deposits were $1.46 billion as of June 30, 2017 and $1.43 billion as of December 31, 2016. The increase in total deposits is attributed primarily to our growth in existing markets and entering into new markets. Non-interest bearing demand deposits were $466.0 million, or 31.9% of total deposits as of June 30, 2017 compared to 31.1% as of December 31, 2016. Interest bearing deposits are comprised of interest bearing DDA accounts, money market accounts, regular savings accounts, certificates of deposit of under $100,000, and certificates of deposit of $100,000 or more.

The following table shows the average amount and average rate paid on the categories of deposits for each of the periods presented:

	Year to Date					Year Ended
	June 30, 2017					December 31, 2016
	Average		Average			Average		Average
(Dollars in thousands)	Balance		Rate			Balance		Rate
Non-interest bearing deposits	$	442,861		0.00	%	$	426,487		0.00	%
Interest bearing deposits:
Interest bearing demand and savings		660,026		0.26	%		607,714		0.28	%
Money market		171,221		0.24	%		150,028		0.24	%
Certificates of deposit under $100,000		89,685		0.61	%		94,689		0.32	%
Certificates of deposit $100,000 and over		64,447		0.50	%		73,860		0.66	%
Total interest bearing deposits		985,379		0.30	%		926,291		0.31	%
Total	$	1,428,240		0.21	%	$	1,352,778		0.21	%

38

Additionally, the following table shows the maturities of CDs of $100,000 or more:

	June 30,
(Dollars in thousands)	2017
Due in three months or less	$	9,487
Due in over three months through six months		12,449
Due in over six months through twelve months		14,868
Due in over twelve months		33,017
Total	$	69,821

Deposits are gathered from individuals, partnerships and corporations in our market areas. The interest rates paid are competitively priced for each particular deposit product and structured to meet our funding requirements. We will continue to manage interest expense through deposit pricing.  Although our cost of funds have declined slightly, short-term interest rates have increased since the fourth quarter of 2016, and we would expect that cost of funds on deposits will increase in future quarters.

Shareholders’ Equity

As of June 30, 2017, our shareholders’ equity totaled $239.9 million, an increase of $11.4 million or 5.0% since December 31, 2016. The increase in shareholders’ equity for the six-month period ended June 30, 2017 was primarily due to an increase of $1.0 million in additional paid in capital from exercises of stock options and net income of $13.0 million for the period less dividends paid of $2.9 million.

Dividends of  $0.16 per share were declared during the six months ended June 30, 2017 representing 22.0% of the net income for the same period. We increased our quarterly dividend to $0.09 per share in July 2017 payable in August 2017.  Future cash dividends will depend on a variety of factors, including net income, capital, asset quality, general economic conditions, and regulatory considerations.

Capital Resources

We are subject to risk-based capital adequacy guidelines related to the adoption of U.S. Basel III Capital Rules. Specifically, the rules impose, among other requirements, new minimum capital requirements including a Tier 1 leverage capital ratio of 4.0%, a common equity Tier 1 risk-based capital ratio of 4.5%, a Tier 1 risk-based capital ratio of 6% and a total risk-based capital ratio of 8%.

The following table sets forth our capital ratios.

	Basel III
	Regulatory
	Requirements -
	Well Capitalized			PUB
	(Greater than or			Actual as of			Actual as of			Actual as of
	Equal to Stated			June 30,			December 31,			June 30,
	Percentage)			2017			2016			2016
Common equity tier 1 capital		6.50	%		18.55	%		18.93	%		18.51	%
Tier 1 risk-based capital		8.00	%		18.55	%		18.93	%		18.51	%
Total risk-based capital		10.00	%		19.82	%		20.19	%		19.77	%
Tier 1 leverage capital ratio		5.00	%		14.15	%		13.71	%		14.00	%

PUB and the Bank were well-capitalized as of June 30, 2017, December 31, 2016 and June 30, 2016 for federal regulatory purposes.

39

Off-Balance Sheet Arrangements

The following table sets forth our off-balance sheet lending commitments as of June 30, 2017:

			Payments Due by Period
	Total				One to		Three to		After
	Amounts		Less than		Three		Five		Five
Other Commitments (Dollars in thousands)	Committed		One Year		Years		Years		Years
Commitments to extend credit	$	516,291	$	346,743	$	106,385	$	5,841	$	57,322
Standby letters of credit		29,233		29,233		—		—		—
Credit cards		25,337		25,337		—		—		—
Total	$	570,861	$	401,313	$	106,385	$	5,841	$	57,322

Contractual Obligations

The following table sets forth our significant contractual obligations as of June 30, 2017:

			Payments Due by Period
					One to		Three to		After
			Less than		Three		Five		Five
Contractual Obligations (Dollars in thousands)	Total		One Year		Years		Years		Years
Time certificates of deposit	$	149,540	$	85,368	$	42,010	$	14,414	$	7,748
Deposits without stated maturity		1,311,512		1,311,512		—		—		—
Short-term borrowings		3,302		3,302		—		—		—
Total	$	1,464,354	$	1,400,182	$	42,010	$	14,414	$	7,748

Liquidity

The ability to have readily available funds sufficient to repay fully maturing liabilities is of primary importance to depositors, creditors and regulators. Our liquidity, represented by cash borrowing lines, federal funds and available-for-sale securities, is a result of our operating, investing and financing activities and related cash flows. In order to ensure funds are available at all times, we devote resources to projecting on a monthly basis the amount of funds that will be required and we maintain relationships with a diversified customer base so funds are accessible. Liquidity requirements can also be met through short-term borrowings or the disposition of short-term assets. We have borrowing lines at a correspondent bank totaling $25.0 million. We also have a current borrowing line with the FHLB, totaling $326.9 million as of June 30, 2017, which are secured by various real estate loans pledged as collateral totaling $493.1 million.  Additionally, we have a borrowing line with the Federal Reserve Bank of $21.1 million which is secured by $21.7 million of investment securities.

We believe our liquid assets are adequate to meet our cash flow needs for loan funding and deposit cash withdrawal for the next 60 to 90 days. As of June 30, 2017, we had approximately $355.7 million in net liquid assets comprised of $57.4 million in cash and cash equivalents, including interest bearing deposits of $26.0 million and federal funds sold of $3.1 million, $325.2 million in available-for-sale securities and $7.7 million in loans held for sale, less $34.6 million of available-for-sale securities pledged as collateral for short-term borrowings. We monitor liquidity measured by a liquidity ratio defined as cash and cash equivalents plus unpledged investment securities divided by total liabilities. Our liquidity ratio was 28.77% as of June 30, 2017 compared to 30.58% as of December 31, 2016.  Our future liquidity ratio will likely decline as a result of the pending acquisitions of Town & Country Bank and the seven Utah branches of Banner Bank.  

On a long-term basis, our liquidity will be met by changing the relative distribution of our asset portfolios by reducing our investment or loan volumes, or selling or encumbering assets. Further, we will increase liquidity by soliciting higher levels of deposit accounts through promotional activities and/or borrowing from our correspondent banks as well as the FHLB. At the current time, our long-term liquidity needs primarily relate to funds required to support loan originations and commitments, deposit withdrawals and pending acquisitions. All of these needs can currently be met by cash flows from investment payments and maturities, and investment sales if the need arises.

Our liquidity is comprised of three primary classifications: cash flows from or used in operating activities; cash flows from or used in investing activities; and cash flows from or used in financing activities.

Net cash provided by or used in operating activities has consisted primarily of net income adjusted for certain non-cash income and expense items such as the loan loss provision, investment and other amortization and depreciation.

40

Our primary investing activities are the origination of real estate, commercial and consumer loans and purchases and sales of investment securities. As of June 30, 2017, we had outstanding loan commitments of $516.3 million, credit card commitments of $25.3 million and outstanding letters of credit of $29.2 million. We anticipate that we will have sufficient funds available to meet current loan commitments.

Net cash provided from financing activities for the six months ended June 30, 2017 was $34.0 million, principally from increases in deposit balances offset by dividends paid to shareholders during the period.  

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company’s assessment of market risk as of June 30, 2017 indicates there have been no material changes in the quantitative and qualitative disclosures from those in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as required by Exchange Act Rules 240.13a-15(b) and 15d-14(a)) as of June 30, 2017. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s current disclosure controls and procedures are effective and timely, providing them with material information relating to the Company required to be disclosed in the reports the Company files or submits under the Exchange Act.

Changes in Internal Controls

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the six months of 2017, to which this report relates that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved in various claims, legal actions and complaints which arise in the ordinary course of business. In the Company’s opinion, all such matters are adequately covered by insurance, are without merit or are of such kind, or involve such amounts, that unfavorable disposition would not have a material adverse effect on the financial condition or results of operations of the Company.

Item 1A. Risk Factors

There have been no material changes in our assessment of our risk factors from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Use of Proceeds from Initial Public Offering –On June 16, 2015, the Company completed it’s initial public offering of 2,657,000 common shares. Additionally, 218,000 common shares were sold by certain selling shareholders. The Company received net proceeds of $34.9 million from the offering, after deducting the underwriting discounts and offering expenses. The Company did not receive any proceeds from the sale of shares by the selling shareholders.

41

We plan to utilize a major portion of the offering proceeds in connection with the pending acquisitions of Town & Country Bank, Inc. and Banner Bank’s Utah branches.

Item 3. Defaults upon Senior Securities

Not Applicable

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

None

42

Item 6. Exhibits

Exhibit Number	Description
2.1*	Purchase and Assumption Agreement dated July 26, 2017
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes - Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes - Oxley Act of 2002
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002
101	The following financial information from People’s Utah Bancorp Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 is formatted in XBRL: (i) the Unaudited Condensed Consolidated Statements of Financial Condition, (ii) the Unaudited Condensed Consolidated Statements of Operations, (iii) the Unaudited Condensed Consolidated Statements of Stockholders’ Equity and Comprehensive Income, (iv) the Unaudited Condensed Consolidated Statements of Cash Flows, and (v) the Notes to Unaudited Condensed Consolidated Financial Statements

* Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K.  The Company agrees to furnish supplementally a copy of any such omitted schedule or exhibit to the SEC upon request.

43

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on August 8, 2017

PEOPLE’S UTAH BANCORP

/s/ Richard T. Beard

Richard T. Beard

President and Chief Executive Officer

(Principal Executive Officer)

/s/ Wolfgang T.N. Muelleck

Wolfgang T.N. Muelleck

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

44

EX-2.1

Execution Copy

Exhibit 2.1

Purchase And Assumption Agreement

by and between

Banner Bank

(the “Seller”)

and

People’s Intermountain Bank

(the “Purchaser”)

dated as of

July 26, 2017

4832-5501-9850v.12 0058243-000353

TABLE OF CONTENTS

ARTICLE I. DEFINITIONS1

Section 1.1Defined Terms1

Section 1.2Accounting Terms10

ARTICLE II. PURCHASE AND SALE OF PURCHASED ASSETS AND ASSIGNMENT AND ASSUMPTION OF ASSUMED LIABILITIES10

Section 2.1Purchase and Sale of Assets10

Section 2.2Excluded Assets12

Section 2.3Assumed Liabilities12

Section 2.4Excluded Liabilities13

ARTICLE III. PURCHASE PRICE; PAYMENT; SETTLEMENT; TAX ALLOCATION13

Section 3.1Purchase Price13

Section 3.2Payment at Closing14

Section 3.3Adjustment of Estimated Payment Amount14

Section 3.4Allocation of Purchase Price15

Section 3.5Proration; Other Closing Date Adjustments15

ARTICLE IV. TAXES16

Section 4.1Sales, Transfer and Use Taxes16

Section 4.2Information Reports16

ARTICLE V. CLOSING16

Section 5.1Closing Date16

Section 5.2Seller’s Deliveries17

Section 5.3Purchaser’s Deliveries18

ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF SELLER19

Section 6.1Organization19

Section 6.2Authority19

Section 6.3Non-Contravention19

Section 6.4Compliance with Law20

Section 6.5Legal Proceedings20

Section 6.6Consents and Other Regulatory Matters20

Section 6.7Purchased Assets21

Section 6.8Loans21

Section 6.9Absence of Defaults Under Contracts22

Section 6.10Absence of Material Adverse Change22

i

4832-5501-9850v.12 0058243-000353

Section 6.11Real Property22

Section 6.12Environmental Matters22

Section 6.13Real Property Leases23

Section 6.14Fixed Assets24

Section 6.15Deposit Agreements24

Section 6.16Conduct of Business25

Section 6.17Tax Matters25

Section 6.18Certain Employment Matters25

Section 6.19ERISA Matters26

Section 6.20Books, Records, Documentation, Etc.26

Section 6.21Custodial Duties26

Section 6.22Insurance26

Section 6.23Service Agreements27

Section 6.24No Broker27

Section 6.25Effect of Representations and Warranties Limitation27

Section 6.26Swap Agreements28

ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF PURCHASER28

Section 7.1Organization28

Section 7.2Authority28

Section 7.3Non-Contravention28

Section 7.4Legal Proceedings29

Section 7.5Consents and Other Regulatory Matters29

Section 7.6No Broker29

Section 7.7Community Reinvestment Act30

Section 7.8Capital Available30

Section 7.9Effect of Representations and Warranties Limitation30

ARTICLE VIII. COVENANTS OF SELLER31

Section 8.1Conduct of Seller’s Business31

Section 8.2Regulatory Approvals32

Section 8.3Non-Solicitation of Customers32

Section 8.4Insurance33

Section 8.5Landlord Consents33

Section 8.6No Solicitation of Other Bids.34

Section 8.7COBRA34

ii

4832-5501-9850v.12 0058243-000353

ARTICLE IX. COVENANTS OF PURCHASER34

Section 9.1Conduct of Purchaser’s Business34

Section 9.2Regulatory Approvals and Standards35

Section 9.3Solicitation of Customers36

Section 9.4Recording of Instruments of Assignment36

Section 9.5Transferred Employees36

Section 9.6Landlord Consents38

ARTICLE X. ACCESS; EMPLOYEE AND CUSTOMER COMMUNICATIONS38

Section 10.1Access by Purchaser38

Section 10.2Communications to Employees; Training39

Section 10.3Communications with Customers39

ARTICLE XI. CERTAIN MUTUAL COVENANTS40

Section 11.1Non-Solicitation of Employees40

Section 11.2Letters of Credit40

Section 11.3Real Property40

Section 11.4Participation Loans41

Section 11.5Counterparty Swap Agreements41

ARTICLE XII. TRANSITIONAL MATTERS41

Section 12.1Notification to Branch Office Customers41

Section 12.2Payment of Instruments42

Section 12.3Statements43

Section 12.4Uncollected Items43

Section 12.5ACH and Wire Transfers43

Section 12.6Loans and Deposits44

Section 12.7Maintenance of Records44

Section 12.8Information Reporting44

Section 12.9Transition44

Section 12.10Actions With Respect to IRA Deposit Liabilities45

Section 12.11Overdrafts46

Section 12.12New Telephone Numbers46

Section 12.13New ATM/Debit Cards46

Section 12.14Installation of Equipment by Purchaser46

Section 12.15Deactivation of ATMs and ATM/Debit Cards46

Section 12.16Deposit Histories46

iii

4832-5501-9850v.12 0058243-000353

Section 12.17Form W-2s46

Section 12.18Solicitation Letter47

ARTICLE XIII. CONDITIONS TO CLOSING47

Section 13.1Conditions to Obligations of Seller47

Section 13.2Conditions to Obligations of Purchaser47

ARTICLE XIV. INDEMNITY48

Section 14.1Seller’s Indemnity48

Section 14.2Purchaser’s Indemnity49

Section 14.3Indemnification Procedures49

Section 14.4Limitations on Liability50

Section 14.5Exclusive Remedy for Monetary Damages51

Section 14.6Period of Indemnity51

ARTICLE XV. POST- CLOSING MATTERS51

Section 15.1Further Assurances51

Section 15.2Access to and Retention of Books and Records51

ARTICLE XVI. MISCELLANEOUS52

Section 16.1Expenses52

Section 16.2Trade Names and Trademarks52

Section 16.3Termination; Extension of Closing Date52

Section 16.4Modification and Waiver53

Section 16.5Binding Effect; Assignment53

Section 16.6Confidentiality53

Section 16.7Entire Agreement; Governing Law54

Section 16.8Consent to Jurisdiction; Waiver of Jury Trial54

Section 16.9Severability55

Section 16.10Counterparts55

Section 16.11Notices55

Section 16.12Interpretation56

Section 16.13Specific Performance56

Section 16.14No Third Party Beneficiaries57

iv

4832-5501-9850v.12 0058243-000353

PURCHASE AND ASSUMPTION AGREEMENT

This Purchase and Assumption Agreement (the “Agreement”) dated as of July 26, 2017, is by and between Banner Bank, a Washington state chartered commercial bank (the “Seller”), and People’s Intermountain Bank, a Utah state chartered commercial bank (the “Purchaser”).  Seller and Purchaser are from time to time referred to collectively as the “parties,” or each individually as a “party.”

WHEREAS, Seller desires to sell certain depository accounts and other liabilities and certain loans and other assets attributable to certain of its branch banking offices located in the State of Utah in accordance with the terms and provisions of this Agreement; and

WHEREAS, Purchaser is willing to acquire such loans and other assets and to assume such deposits and other liabilities in accordance with the terms and provisions of this Agreement.

NOW, THEREFORE, in consideration of the agreements, representations, warranties, and the mutual promises and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

ARTICLE I.
DEFINITIONS

Defined Terms

.  As used in this Agreement, the following terms shall have the following meanings:

“Accrued Liabilities” means any obligations of Seller described in Section 9.5 that are paid by Purchaser.

“Accrued Interest” shall mean, as of any date, (a) with respect to the Deposit Liabilities, the interest and other amounts that are owed to the customer that have been accrued but not paid on or credited or charged to the Deposit Liabilities each as reflected on Seller’s system of record, and (b) with respect to the Loans, the Advance Lines, the Negative Deposits, and the other Purchased Assets, any interest, fees, premiums, consignment fees, costs and other charges that have accrued on or been charged to the Loans, the Advance Lines, the Negative Deposits or the other Purchased Assets but have not been paid by the applicable borrower, guarantor, surety or other obligor, or otherwise collected by offset, recourse to collateral or otherwise, as reflected on Seller’s  system of record.

“ACH” shall have the meaning specified in Section 12.5.

“Acquisition Proposal” shall have the meaning specified in Section 8.6(b).

“Administrative Employees” shall have the meaning set forth on Schedule 1.1(a)(1).

“Adjusted Payment Amount” shall mean the difference between (x) the Final Payment Amount, and (y) the Estimated Payment Amount.

1

4832-5501-9850v.12 0058243-000353

“Advance Lines” means the overdraft lines of credit to owners of the Deposit Liabilities as of the Closing Date, plus any and all Accrued Interest on such lines of credit, but without duplication of amounts included in the Loans.

“Affiliate” shall mean, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person, or a director, officer, partner, joint venture or member of such Person and any successor to such Person.

“Agreement” shall have the meaning specified in the preamble and shall include all Schedules and Exhibits to, and statements or other deliveries required by this Agreement.

“Assignment and Assumption of Lease” shall have the meaning specified in Section 5.2(b).

“Assumption Certificate” shall mean an agreement substantially in the form of Exhibit D hereto.

“Assumed Liabilities” shall have the meaning specified in Section 2.3.

“ATMs” shall mean the on-premises automated teller machines located at the Branches.

“Branch Employees” shall mean the employees of Seller listed on Schedule 1.1(a)(2) hereto, but excluding such employees who shall leave Seller’s employ between the date hereof and the close of business on the Closing Date, but including any new employees who may be hired in the ordinary course of business between the date hereof and the Closing Date and including any Person who fills a vacant position between the date hereof and the Closing Date to provide Branch-related services to Customers.

“Branches” shall mean the branch offices of the Seller listed on Schedule 1.1(b) hereto.

“Business Day” shall mean any day that is not a Saturday, a Sunday or a day on which banks are required or authorized by law to be closed in the State of Utah.

“Cash” shall mean all petty cash, vault cash, teller cash, and cash located at the Branches (including foreign currency), in each case as of the close of business at the respective Branch on the Closing Date.

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.

“Clearing Account” shall have the meaning specified in Section 12.4.

“Closing” shall have the meaning specified in Section 5.1(a).

“Closing Date” shall have the meaning specified in Section 5.1(a).

2

4832-5501-9850v.12 0058243-000353

“Closing Statement” shall have the meaning specified in Section 5.2(g).

“COBRA Regulations” shall have the meaning specified in Section 8.7.

“Code” shall mean the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

“Consolidated Branches” shall have the meaning specified in Section 10.3(c).

“CRA” shall mean the Community Reinvestment Act, as amended (12 U.S.C. §§2901 et seq.).

“Credit Card Loans” means outstanding loans at the Branches listed on Schedule 1.1(c) that were made to customers of Seller through any credit card issued by Seller.

“Customers” shall mean, individually and collectively, (a) the Persons named as the owners of the deposit accounts relating to the Deposit Liabilities, (b) the obligors and guarantors under the Loans, and (c) the parties (other than Seller and its Affiliates) to the Safe Deposit Agreements.

“Customer Notices” shall have the meaning specified in Section 10.3(a).

“Damages” shall have the meaning specified in Section 14.1.

“Deposit Agreements” shall mean all applicable deposit contracts, including, without limitation, those relating to overdraft lines, online or electronic banking services and instruments governing or applicable to the Deposit Liabilities.

“Deposit Liabilities” shall mean all of the Seller’s obligations and liabilities relating to Seller’s deposit accounts at the Branches that are either (a) listed on Schedule 1.1(d), excluding any such accounts that are closed between the date of this Agreement and the close of business on the Closing Date, or (b) opened at and booked to any Branch between the date of this Agreement and the close of business on the Closing Date, which Seller shall add to Schedule 1.1(d) at or prior to the Closing, together with (in the case of both (a) and (b)) Accrued Interest on such deposit accounts, all as exists at the close of business on the Closing Date; provided, however, the Deposit Liabilities do not include the Excluded Deposits or the Excluded IRA Deposits.  The deposit accounts listed (or to be listed) on Schedule 1.1(d) shall include, without limitation, with respect to each Branch, all passbook accounts, statement savings accounts, checking, money market and NOW accounts, time deposits, IRA accounts and CDARS accounts (which CDARS accounts shall be disclosed separately from the other Deposit Liabilities on Schedule 1.1(d)) (each of the foregoing deposit accounts are defined as such accounts used for the purposes of preparing and filing the Seller’s call reports).  

“Employee Benefit Plan” shall mean “employee benefit plan” as defined in Section 3(3) of ERISA and any other bonus, incentive compensation, deferred compensation, profit sharing, stock option, stock appreciation right, stock bonus, stock purchase, employee stock ownership, savings, severance, change in control, supplemental unemployment, layoff, salary continuation, retirement, severance, pension, health, life insurance, disability, accident, group insurance,

3

4832-5501-9850v.12 0058243-000353

vacation, holiday, sick leave, fringe benefit, or welfare plan, and any other employment, consulting, employee compensation, or benefit plan, agreement, policy, practice, commitment, contract, or understanding (whether qualified or nonqualified, currently effective or terminated, written or unwritten) related to such employee benefit plan (a) that is or was maintained or contributed to by Seller or any of its ERISA Affiliates, (b) with respect to which Seller or any of its ERISA Affiliates has or may have any liability or liabilities, and/or (c) that provides benefits or describes policies or procedures applicable to any current or former employee, officer, director, consultant, service provider, or contractor of Seller or an ERISA Affiliate, regardless of how (or whether) liabilities for the provision of benefits are accrued or assets are acquired or dedicated with respect to the funding of such benefits.

“End Date” shall mean November 30, 2017.

“Environmental Laws” shall mean all applicable laws, ordinances, rules, regulations, permits, guidelines, and orders: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water, groundwater and the subsurface); or (b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Substances. The term “Environmental Law” includes, without limitation, the following (including their implementing regulations and any state analogs):  CERCLA; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.; and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended (11 U.S.C. §§ 1101 et seq.).

“ERISA Affiliate” means any entity or trade or business (whether or not incorporated) that together with Seller is treated as a single employer under any of Sections 414(b), (c), (m), or (o) of the Code or Section 4001(a)(14) of ERISA.

“Estimated Payment Amount” shall mean (x) the estimate of the Liabilities as of the close of business on the last Business Day preceding the Closing Date, minus (y) the estimate of the Purchase Price as set forth on the Closing Statement as reasonably agreed upon prior to Closing between Seller and Purchaser.  For avoidance of doubt, the Estimated Payment Amount may be a negative amount.

“Excluded Assets” shall have the meaning set forth in Section 2.2.

“Excluded Deposits” shall mean all Deposit Liabilities (a) owned by employees of Seller or any of its Affiliates (other than Transferred Employees), (b) securing, guaranteeing or

4

4832-5501-9850v.12 0058243-000353

otherwise relating to any loan that is not acquired by Purchaser, (c) except as otherwise agreed to by Purchaser and Seller, that are the deposits of customers set forth on Schedule 1.1(e) hereto who have, or whose related businesses have, significant business relationships with other offices of Seller not included in the Branches, (d) over which Seller or its Affiliates will continue to have investment authority or discretion following the Closing Date, (e) subject to a legal impediment to transfer or subject to pending or threatened litigation, and (f) that are cashier checks, money orders, travelers checks and expense checks issued before the Closing Date and cash items paid by Seller but not cleared before the Closing Date.

“Excluded Employee” shall have the meaning specified in Section 9.5(a).

“Excluded Fixed Assets” shall mean (a) supplies, signs, marketing aids, trade fixtures or equipment specifically identifying or relating to Seller or any of its Affiliates located at the Branches, (b) software, source and object code, user manuals and related documents and all updates, upgrades or other revisions thereto and all copies or duplicates thereof located at the Branches, (c) electronic teller station hardware and other hardware related to teller stations and platforms located at the Branches, (d) any equipment and other assets, specifically excluding ATMs, that Purchaser determines cannot continue to be utilized by Purchaser after the Closing Date or does not or will not comply with laws, rules or regulations applicable to Purchaser on or after the Closing Date, provided that Purchaser must provide written notice of all such assets to Seller no later than ten (10) Business Days before Closing, (e) all electronic mail records, (f) any databases not associated with Customers, Branch Employees or the Branches, and (g) all computers, servers, network equipment, telephone systems, and copier machines, less any such items consumed or disposed of, plus new similar items acquired or obtained, in the ordinary course of the operation of the Branches through the close of business on the Closing Date.

“Excluded IRA Deposits” shall have the meaning specified in Section 12.10(a).

“Excluded Liabilities” shall have the meaning specified in Section 2.4.

“Excluded Taxes” shall mean all liabilities and obligations of Seller or any of its Affiliates for (i) any Taxes of any kind of, or relating to, the Purchased Assets, the Assumed Liabilities or the operation of the Branches for, or attributable to, the period prior to the Closing Date and (ii) any Taxes of any kind that will arise as a result of the sale of the Purchased Assets pursuant to this Agreement.

“FDIA” shall mean the Federal Deposit Insurance Act, as amended (12 U.S.C. §§ 1811 et seq.).

“FDIC” shall mean the Federal Deposit Insurance Corporation.

“Final” shall mean, as applied to any governmental order or action, that such order or action has not been stayed, vacated or otherwise rendered ineffective, that all applicable waiting periods have expired, and that either (a) the time period for taking an appeal therefrom shall have passed without an appeal therefrom having been taken, or (b) if any such appeal shall have been dismissed or resolved, all applicable periods for further appeal of such order or action shall have passed.

5

4832-5501-9850v.12 0058243-000353

“Final Payment Amount” shall mean (x) the Liabilities as of the close of business on the Closing Date, minus (y) the Purchase Price as set forth on the Final Statement.  For avoidance of doubt, the Final Payment Amount may be a negative amount.

“Final Statement” shall have the meaning specified in Section 3.3(a).

“FIRPTA Affidavits” shall mean affidavits pursuant to Section 1445 of the Code certifying to the non-foreign entity status of the Seller.

“Fixed Assets” shall mean all of the ATMs, furniture, fixtures, safe deposit boxes, supplies equipment, vaults, safes, signage (not included in Excluded Fixed Assets), digital signage, security devices and systems, leasehold improvements and other assets owned by Seller and located in the Branches as of the Closing Date (and all combinations, manuals, keys and security codes related to any of the foregoing), less any items consumed or disposed of, plus new items acquired or obtained, in the ordinary course of the operation of the Branches through the close of business on the Closing Date, but excluding the Excluded Fixed Assets.

“GAAP” shall have the meaning specified in Section 1.2.

“Governmental Authority” shall mean any federal, state, or local court, governmental body, regulatory agency, authority, commission, tribunal, or securities exchange.

“Hazardous Substance” has the meaning set forth in Section 9601 of CERCLA and also includes any substance regulated by or subject to any Environmental Law and any other pollutant, contaminant, or waste, including, without limitation, petroleum (and all derivatives thereof), asbestos, radon, and polychlorinated biphenyls.

“Indemnified Party” shall mean any of the Persons entitled to indemnification pursuant to Section 14.1 or Section 14.2, as applicable.

“Indemnifying Party” shall mean, in the case of indemnity obligations pursuant to Section 14.1, the Seller, and, in the case of indemnity obligations pursuant to Section 14.2, the Purchaser.

“IRA” shall mean an individual retirement account as specified in Sections 408 and 408A of the Code.

“IRA Deposit Liability” shall mean a Deposit Liability in a deposit account that is an IRA.

“IRS” shall mean the Internal Revenue Service of the United States.

“ISDA Agreements” shall mean those certain International Swaps and Derivatives Association, Inc. Master Agreements.  

“Knowledge” of a fact shall mean: (a) with respect to Seller, the actual knowledge, after due inquiry, of any of the President, Chief Financial Officer, or any officer with the title of senior vice president or above who has responsibility with respect to the operations of the Branches or

6

4832-5501-9850v.12 0058243-000353

the Loans; and (b) with respect to Purchaser, the actual knowledge, after due inquiry, of any of the President, Chief Financial Officer, the Executive Vice President in charge of operations or any officer with the title of senior vice president or above and who has responsibility for the operations of Purchaser.

“Landlord Consents” means the consents required pursuant to the terms of the Leases prior to the assignment of the Leases by Seller to Purchaser on the Closing Date.

“Leased Real Property” shall mean the leased premises under the Leases, all as more fully described on Schedule 1.1(g) hereto

“Leases” shall mean those certain lease agreements for which Seller is a tenant as described on Schedule 1.1(h).

“Liabilities” shall mean the aggregate balance of the Deposit Liabilities, the unearned revenue applicable to the Safe Deposit Agreements, the Accrued Liabilities and all escrow amounts related to the Loans.

“Lien” shall mean any lien, pledge, charge, encumbrance, security interest, mortgage, deed of trust, lease, option or other adverse claim of any kind or description.

“Loans” shall mean:

(a) (i) all loans listed on Schedule 1.1(i), subject to any repayments or prepayments, in whole or in part, and advances or other credits affecting the balance of any such loans as of the date hereof through the close of business on the Closing Date, and (ii) all loans identified by Purchaser on a supplement to Schedule 1.1(i) and delivered to Seller not later than ten (10) days prior to the Closing Date, subject to any repayments or prepayments, in whole or in part, and advances or other credits affecting the balance of any such loans as of such date through the close of business on the Closing Date and, in each case, including all Loan Agreements, loan files, and other loan records; Seller’s rights in and to any and all collateral held as security therefor or in which a security interest, lien or mortgage has been granted, and all rights in relation thereto; together with Accrued Interest thereon, all as of the close of business on the Closing Date.  “Loans” do not include Credit Card Loans.  In furtherance of (ii), fifteen (15) days prior to the Closing Date, Seller shall provide to Purchaser a list of all loans made from the Branches between the date hereof and up to (but not including) the date which is fifteen (15) days prior to the Closing Date and provide Purchaser with access to all Seller’s Loan Agreements, loan files and records relating to such loans; and

(b) the SBA Loans.

“Loan Agreement” shall mean all applicable loan contracts, documents, disclosures, and instruments applicable to the Loans, including without limitation all applicable promissory notes, security agreements or instruments, deeds of trust, or guarantees.

“Loan Participation Amount” shall mean the amount of the Participation Loans purchased by Seller from Purchaser, which amount shall not exceed $15,000,000.

7

4832-5501-9850v.12 0058243-000353

“Material Adverse Effect” shall mean: with respect to Seller, any circumstance, change in or effect that is materially adverse to the business, operations, results of operations, or the financial condition of the Branches, or the Purchased Assets or Assumed Liabilities, taken as a whole; provided, however, that “Material Adverse Effect” shall not include any circumstance, change in or effect on the Branches directly or indirectly arising out of or attributable to (i) changes in general economic, legal, regulatory or political conditions, (ii) changes in prevailing interest rates, or (iii) any actions taken or omitted to be taken pursuant to the terms of this Agreement; provided, however, that any event, occurrence, fact, condition or change referred to in clauses (i) through (ii) immediately above shall be taken into account in determining whether a Material Adverse Effect has occurred or could reasonably be expected to occur to the extent that such event, occurrence, fact, condition or change has a disproportionate effect on the Seller compared to other participants in the industries in which the Seller operates.

“Merchant Services Accounts” shall mean those merchant services account agreements at the Branches listed on Schedule 1.1(j).

“Negative Deposits” means overdrafts in Deposit Accounts which are not covered by Advance Lines, and any and all Accrued Interest on such Deposit Accounts, all as reflected on Seller’s general ledger as of the Closing Date.

“Orem Branch” shall have the meaning specified in Section 10.3(c).

“Other Assigned Contracts” shall mean those agreements listed on Schedule 1.1(k).

“Participation Loans” shall mean the portion of the loans listed on Schedule 1.1(p) that are sold from Purchaser to Seller for the Loan Participation Amount.

“Permitted Liens” shall mean (a) Liens for taxes, assessments, governmental charges or levies not yet due and payable, (b) Liens imposed by law, such as carriers’, warehousemen’s, and mechanics’ Liens and other similar Liens arising in the ordinary course of business which secure payment of obligations that are not past due, (c) easements, covenants and restrictions of record that do not materially and adversely affect the value and/or use of the applicable parcel of Real Property as a bank branch, (d) zoning, entitlement, building, planning, land use, and other requirements or restrictions imposed by law, rule, or regulation, (e) Liens or other matters consented to by Purchaser pursuant to the terms and conditions of this Agreement, and (f) matters disclosed on any Title Commitment.

“Person” shall mean any individual, partnership, joint venture, corporation, trust, limited liability company, unincorporated organization, government, or other entity.

“Prepaid Expenses” shall mean those expenses set forth on Schedule 1.1(l) hereto.

“Purchase Price” shall have the meaning specified in Section 3.1.

“Purchased Assets” shall have the meaning specified in Section 2.1(a).

“Purchaser” shall have the meaning specified in the preamble.

8

4832-5501-9850v.12 0058243-000353

“Real Property” shall mean the parcels of real property owned in fee by the Seller on which certain of the Branches are located or parcels owned by the Seller adjacent or proximate thereto, and all improvements thereon, all as more fully described on Schedule 1.1(m) hereto.

“Real Property Deeds” shall have the meaning specified in Section 5.2(a).

“Real Property Purchase Price” shall mean $3,864,008.69, which amount represents the aggregate book value of all Real Property (except that the property located at 59 West 900 North, Springville, Utah shall be valued at the listed price of $1,055,000), as detailed by each parcel of Real Property on Schedule 1.1(n) hereto.

“Regulatory Approvals” shall mean any consent, approval, authorization or other order of, action or non-objection by, filing or registration with or notification to any Governmental Authority necessary to consummate the transactions contemplated by this Agreement.

“Safe Deposit Agreements” shall mean the agreements between Seller and a Customer or Customers relating to safe deposit boxes located in the Branches.

“SBA” shall mean the United States Small Business Administration.

“SBA Consents” shall mean all consents necessary to transfer to Purchaser the SBA Loans.

“SBA Loans” shall mean, collectively, the loans listed on Schedule 1.1(o) hereto and all obligations of Seller to make additional extensions of credit in connection with such loans, as such loans may be increased, decreased, amended, renewed, or extended in the ordinary course of business between the date of this Agreement and the close of business on the Closing Date; provided, however, that SBA Loans shall not include any loan described above if such loan, as of the Closing Date, is (i) subject to a current legal proceeding related to a Customer’s inability or refusal to pay such loan or (ii) not current and with respect to which proceedings are pending against the obligor or obligors of such loan under Title 11 of the United States Code; and provided, further, that with respect to any such loan, to the extent that as of the Closing, Purchaser shall not have received a SBA Consent, such loan shall no longer be deemed a “SBA Loan” hereunder.  Each SBA Loan shall include all documents executed or delivered in connection with such loan to the extent such documents are in the loan file relating to such loan; Seller’s rights in and to any and all collateral held as security therefor or in which a security interest, Lien or mortgage has been granted; and all guarantees therefor; together with Accrued Interest thereon, all as exists at the close of business on the Closing Date.

“Seller” shall have the meaning specified in the preamble.

“Seller’s Disclosure Statement” shall have the meaning specified at the beginning of ARTICLE VI.

“Seller’s Severance Pay Plan” shall mean the Banner Corporation Amended and Restated Severance Pay Plan (restated effective October 1, 2016), a copy of which has been provided to Purchaser.

9

4832-5501-9850v.12 0058243-000353

“Service Agreements” shall have the meaning specified in Section 2.1(a).

“Swap Agreements” shall mean the ISDA Agreements entered into between Seller and certain other counterparties to offset the ISDA Agreements listed on Schedule 1.1(k).

“Taxes” shall mean all taxes, charges, fees, levies or other like assessments, including income, gross receipts, excise, real and personal and intangible property, sales, use, transfer (including transfer gains taxes), withholding, license, payroll, recording, ad valorem and franchise taxes, whether computed on a separate or consolidated, unitary or combined basis or in any other manner, whether disputed or not and including any obligation to indemnify or otherwise assume or succeed to the tax liability of another person, imposed by the United States, or any state, local or foreign government or subdivision or agency thereof and such term shall include any interest, penalties or additions to tax attributable to such assessments.

“Third Party Claim” means any legal proceeding by a Person not a party to this Agreement and not an Affiliate of one of the parties to this Agreement.

“Title Commitment” shall have the meaning specified in Section 11.3.

“Title Company” shall have the meaning specified in Section 11.3.

“Transfer Date” shall mean the first day following the Closing Date.

“Transferred Employees” shall mean the Branch Employees and Administrative Employees who accept offers of employment from Purchaser as contemplated by Section 9.5.

“UDFI” shall mean the Utah Department of Financial Institutions.

“WARN Act” means the Worker Adjustment and Retraining Notification Act as amended (29 U.S.C. § 2101 et seq.).

“Woods Cross Branch” shall have the meaning specified in Section 10.3(c).

Accounting Terms

.  All accounting terms not otherwise defined herein shall have the respective meanings assigned to them in accordance with generally accepted accounting principles consistently applied as are in effect from time to time in the United States of America (“GAAP”).

ARTICLE II.
PURCHASE AND SALE OF PURCHASED ASSETS AND ASSIGNMENT AND ASSUMPTION OF ASSUMED LIABILITIES

Purchase and Sale of Assets

.  

(a)Subject to the terms and conditions hereof, including without limitation the assumption by Purchaser of the Assumed Liabilities, on the Closing Date, Seller shall sell, convey, assign, transfer, and deliver to Purchaser, and Purchaser shall purchase and accept from

10

4832-5501-9850v.12 0058243-000353

Seller, all of Seller’s right, title, and interest in, and to, and under certain assets of the Seller as described below (collectively, the “Purchased Assets”):

(i) the Fixed Assets;

(ii) the Loans outstanding as of the Closing Date;

(iii) the Real Property;

(iv) the Leases;

(v) the Safe Deposit Agreements and all keys for the safe deposit boxes located in the Branches and all of Seller’s records related to such safe deposit boxes held by Seller at the Branches;

(vi) the Negative Deposits;

(vii) all rights of Seller under any building maintenance, service, or similar contracts in effect as of the Closing Date relating solely to the operations of the Branches to the extent such contracts are assignable and do not relate to Excluded Assets, as listed on Schedule 2.1(a) (the “Service Agreements”);

(viii) the Cash;

(ix) all Prepaid Expenses;

(x) all physical books, records, files, reports, and other information in Seller’s possession or under Seller’s control relating to the Branches, and the Customers of the Branches, the Loans, the Deposit Liabilities, the Purchased Assets, and the Assumed Liabilities, including information related to authorized signers or payable on death beneficiaries related to any Deposit Liability;

(xi) electronic records in Seller’s possession as can be extracted by Seller, using commercially reasonable efforts, from Seller’s core electronic banking system for transmittal and delivery to Purchaser relating to the Loans, the Deposit Liabilities and the Customers (including life-to-date loan and certificate of deposit transaction histories, other deposit account transaction histories as available (typically more recent 90 to 180 days depending on account type), safe deposit billing history, as available, and related available Customer record information), including information related to authorized signers or payable on death beneficiaries related to any Deposit Liability if available;

(xii) the Deposit Agreements and all of Seller’s rights with respect to the contracts and instruments arising from or relating to the

11

4832-5501-9850v.12 0058243-000353

Deposit Liabilities, including, without limitation, signature cards, deposit account, online banking and cash management agreements;

(xiii) all inventories and supplies on hand at the Branches (other than Excluded Fixed Assets);

(xiv) all rights of Seller under express or implied warranties or indemnities given or made in connection with the Purchased Assets, if any, and all claims, counterclaims and causes of action with respect to the Purchased Assets, and the Assumed Liabilities; and

(xv) to the extent assignable, all of Seller’s rights under the Other Assigned Contracts.

(b)Purchaser and Seller understand and agree that Purchaser is purchasing only the Purchased Assets (and assuming only the Assumed Liabilities) specified in this Agreement.

Excluded Assets

.  Purchaser shall not be deemed to have purchased, and Seller shall not be deemed to have sold, assigned or transferred, any assets of Seller other than the Purchased Assets (the “Excluded Assets”).  Without limitation, the Excluded Assets shall specifically include the Excluded Fixed Assets and the Credit Card Loans.

Assumed Liabilities

.  Subject to the terms and conditions of this Agreement, including without limitation the transfer of the Purchased Assets to Purchaser, on the Closing Date, Purchaser shall assume, and thereafter honor and fully and timely, pay, perform, and discharge when due, only the following liabilities of Seller (whether accrued, contingent, known or unknown, or otherwise) and shall perform all duties, responsibilities, and obligations of Seller under the following from and after the Closing Date (collectively, the “Assumed Liabilities”):

(a)the Deposit Liabilities;

(b)Seller’s liabilities and obligations with respect to the Purchased Assets but only to the extent that such liabilities or obligations arise or accrue after the Closing Date;

(c)the Safe Deposit Agreements;

(d)the Leases, subject to the terms and conditions of that certain Assignment and Assumption of Leases (as defined in Section 5.2(b) below);

(e)all obligations that accrue after the Closing Date under the Service Agreements;

(f)any and all liabilities and obligations relating to the Branches, the Leased Real Property or the Real Property under Environmental Laws that occur after the Closing Date, including, without limitation, the presence of any Hazardous Substance, if and to the extent that

12

4832-5501-9850v.12 0058243-000353

the action, omission, or event giving rise to the liability or obligation occurs after the Closing Date;

(g)all escrow amounts relating to the Loans;

(h)the Loan Agreements;

(i)except as set forth in Section 9.5(c), all liabilities arising out of the employment of the Transferred Employees and their dependents and beneficiaries that accrue as of and after the Closing Date;

(j)the Other Assigned Contracts; and

(k)except as set forth in Section 4.1, any liability for Taxes of, or relating to, the Purchased Assets, the Assumed Liabilities or the business or operation of the Branches, other than Excluded Taxes.

Excluded Liabilities

.  Other than the Assumed Liabilities, Purchaser shall not assume or be bound by any duties, obligations or liabilities of Seller of any kind or nature (the “Excluded Liabilities”).  Without limitation, the Excluded Liabilities specifically include the Excluded Deposits, the Excluded IRA Deposits and the Excluded Taxes.

ARTICLE III.
PURCHASE PRICE; PAYMENT; SETTLEMENT; TAX ALLOCATION

Purchase Price

.  The purchase price for the Purchased Assets shall be an amount computed as follows (the “Purchase Price”):

(a)An amount equal to 8.50% of the average daily closing balances of the Deposit Liabilities, associated with the Branches for the 30-day period ending two (2) Business Days prior to the Closing Date, provided that, for purposes of calculating this premium, any Deposit Liability with a negative balance shall be treated as having a zero balance for each day during the 30-day calculation period that the balance is negative; PLUS

(b)The Real Property Purchase Price; PLUS  

(c)An amount equal to 100.00% of the aggregate outstanding principal amounts of the Loans as of the close of business on the Closing Date; PLUS

(d)An amount equal to the aggregate Accrued Interest on the Loans as of the close of business on the Closing Date; PLUS

(e)The aggregate unpaid principal balance of and Accrued Interest on the Negative Deposits (to the extent such unpaid principal balance or Accrued Interest shall be outstanding and unpaid for thirty (30) days or less prior to the Closing Date) as reflected on the system of record  of Seller as of the Closing Date less any charge-offs, write-downs and specific reserves with respect to Negative Deposits; PLUS

13

4832-5501-9850v.12 0058243-000353

(f)The aggregate amount of Cash as of the close of business on the Closing Date; PLUS

(g)The aggregate amount of the Prepaid Expenses as of the close of business on the Closing Date; PLUS

(h)Any proration amounts payable by Purchaser as determined in this Agreement; PLUS

(i)An amount equal to the Seller’s net book value with respect to the Fixed Assets as shown on the Seller’s system of record, as of the month-end immediately preceding the Closing Date; LESS.

(j)An amount equal to the Loan Participation Amount.

Payment at Closing

.  At least two (2) Business Days prior to the Closing Date, Seller shall deliver to Purchaser the Closing Statement, which shall include a calculation of the Estimated Payment Amount.  At Closing, if the Estimated Payment Amount set forth on the Closing Statement is (i) a positive amount, Seller shall pay to Purchaser an amount in dollars equal to such positive amount, or (ii) a negative amount, Purchaser shall pay to Seller an amount in dollars equal to the absolute value of such negative amount.  All payments to be made hereunder by one party to the other shall be made by wire transfer of immediately available funds (in all cases to an account specified in writing by Seller or Purchaser, as the case may be, to the other and so specified not later than the third (3^rd) Business Day prior to the Closing Date) on the Closing Date.

Adjustment of Estimated Payment Amount

.  

(a)On or before 12:00 noon on the tenth (10th) day following the Closing Date, Seller shall deliver to Purchaser a statement substantially in the form attached as Exhibit F hereto (the “Final Statement”) setting forth (i) the Purchase Price (including all adjustments and prorations thereto as set forth in Section 3.5), and (ii) the Liabilities and each component thereof, in each case as of the close of business on the Closing Date, and shall make available to Purchaser such work papers, schedules, and other supporting data as may be reasonably requested by Purchaser to enable Purchaser to verify such determinations.  Such Final Statement shall also set forth the Adjusted Payment Amount.  The Final Statement shall become final and binding on Purchaser and Seller on the earlier of (i) the date it is approved by Purchaser by written notice to Seller or (ii) at 5:00 p.m. Eastern Time on the tenth (10th) Business Day after it is delivered by Seller to Purchaser unless, within such ten (10) Business Day period, Purchaser gives written notice to Seller of its actual or potential disagreement with respect to any item included in such Final Statement. Seller and Purchaser shall use their commercially reasonable efforts to resolve any disagreement during the ten (10) Business Day period following receipt by Seller of such notice. If the disagreement is not resolved during such ten (10) Business Day period, the dispute shall be referred to an independent accounting firm mutually acceptable to Seller and Purchaser, and such Final Statement shall be modified, if required, by the independent accounting firm and thereupon such Final Statement shall become final and binding. Purchaser and Seller shall share equally the cost of any independent accounting firm.

14

4832-5501-9850v.12 0058243-000353

(b)On or before 12:00 noon on the fifth (5th) day after the Final Statement becomes final and binding pursuant to Section 3.3(a), if the Adjusted Payment Amount set forth on the Final Statement is (i) a positive amount, Seller shall pay to Purchaser an amount in dollars equal to such positive amount, or (ii) a negative amount, Purchaser shall pay to Seller an amount in dollars equal to the absolute value of such negative amount.  All payments to be made hereunder by one party to the other shall be made by wire transfer of immediately available funds (in all cases to an account specified in writing by Seller or Purchaser, as the case may be, to the other and so specified not later than the third (3^rd) Business Day prior to the Closing Date) on the Closing Date.

Allocation of Purchase Price

.  

(a)Upon final determination of the Purchase Price, Purchaser will prepare an allocation of the Purchase Price (and all other capitalized costs) in accordance with Section 1060 of the Code and the Treasury regulations thereunder (and any similar provision of state, local or foreign law, as appropriate).  Seller will review such allocation and may object to any parts of the allocation that are unreasonable, whereupon the parties will work to resolve any objections.  The allocation described herein shall be binding upon the parties.  The parties shall prepare a draft of such allocation prior to the Closing Date.

(b)Purchaser and Seller and their Affiliates shall report, act, and file all Tax returns (including IRS Form 8594 and any amendments thereto) in all respects and for all purposes consistent with such allocation prepared by the parties.  Purchaser and Seller shall cooperate in timely and properly preparing, executing, filing and delivering all such documents, forms and other information as may reasonably be required to prepare such allocation.  Neither Purchaser nor Seller shall take any position (whether in audits, returns or otherwise) that is inconsistent with such allocation unless required to do so by applicable law.

Proration; Other Closing Date Adjustments

.  

(a)Except as otherwise specifically provided in this Agreement, it is the intention of the parties that Seller will operate the Branches for their own account and own the Loans and other Purchased Assets until the close of business on the Closing Date, and that Purchaser shall operate the Branches, own the Loans and other Purchased Assets and assume the Deposit Liabilities and other Assumed Liabilities for its own account from and after the close of business on the Closing Date. Thus, except as otherwise specifically provided in this Agreement, items of income and expense shall be prorated as of the close of business on the Closing Date, and shall be settled between Seller and Purchaser on the Closing Date, whether or not such adjustment would normally be made as of such time.  Items of proration will be handled as an adjustment to the Purchase Price.

(b)For purposes of this Agreement, items of proration and other adjustments shall include, without limitation:  (i) rent and other amounts payable under the Leases, sales, personal property, real estate, and use taxes (other than such sales, real estate, and use taxes that arise as a result of the transactions contemplated by this Agreement which shall be paid by Seller in accordance with Section 4.1 hereof); (ii) insurance premiums paid or payable to the FDIC attributable to insurance coverage for the Deposit Liabilities for the assessment period from and

15

4832-5501-9850v.12 0058243-000353

after the Closing Date; (iii) fees for customary annual or periodic licenses or permits to the extent assignable; (iv) water, sewer, fuel, and utility charges; (v) other prepaid items, in each case as of the close of business on the Closing Date, and (vi) the cost of any severance claims for which Purchaser is responsible (in accordance with Section 9.5(c) hereof) which are paid on Purchaser’s behalf by Seller.  Real estate taxes shall be prorated according to local practice for determining whether they are assumed to be paid in advance, in arrears or on a calendar year basis; provided that if the parties cannot agree on the local practice for any particular real estate taxes, such taxes shall be prorated on a calendar year basis.  Notwithstanding the foregoing, if accurate and appropriate arrangements cannot be made as of the Closing Date for any items of proration, the parties shall apportion the charges for any such items of proration on the basis of the bill for such item for the most recent billing period prior to the Closing Date or as otherwise agreed to by the parties.

ARTICLE IV.
TAXES

Sales, Transfer and Use Taxes

.  Except as otherwise provided in this Agreement, any sales, personal property transfer, use or similar Taxes, including but not limited to all transfer Taxes required in connection with the transfer of the Leases and Real Property or Purchased Assets to Purchaser, which are payable or arise as a result of this Agreement or the consummation of the transactions contemplated hereby, shall be paid by Seller.  Purchaser and Seller shall cooperate in timely making all filings, returns, reports and forms as may be required to comply with such Tax laws.

Information Reports

.  Purchaser and Seller shall each file with the IRS and furnish to any required recipients on a timely basis and otherwise as required by law Forms 1099INT, 1099R, W-2P, 5498 and any other required forms and reports with respect to each Deposit Liability concerning interest paid on, or contributions to and distributions from, the Deposit Liability accounts, as appropriate, for the periods during which Purchaser and Seller, respectively, administered such accounts, including without limitation, any information required by the IRS pursuant to any request for back-up withholding and taxpayer identification number certification records and documents.  Seller shall make such reports for interest paid or credited to Customers on or before the Closing Date and Purchaser shall make such reports after the Closing Date.

ARTICLE V.
CLOSING

Closing Date

.  

(a)Closing Date.  Upon the terms and subject to the conditions of this Agreement, the purchase and sale of the Purchased Assets and the assumption of the Assumed Liabilities contemplated by this Agreement shall take place at a closing (the “Closing”) to be held at the offices of Davis Wright Tremaine LLP, 1201 Third Avenue, Suite 2200, Seattle, WA 98101, at 10:00 a.m. (which Closing shall be effective as of the close of business on the seventh (7th) Business Day following the satisfaction or waiver of all conditions to the obligations of the parties set forth in ARTICLE XIII hereof (other than obligations to be performed at the Closing);

16

4832-5501-9850v.12 0058243-000353

provided, however, that either party shall be permitted to extend the Closing Date to such date, which shall be no later than thirty (30) days, in such party’s sole discretion, if such extension is necessary for such party to be prepared to convert account information as to the Deposit Liabilities and the Loans or at such other place or at such other time or on such other date as Seller and Purchaser may mutually agree in writing (the day on which the Closing takes place being the “Closing Date”). Except as otherwise agreed, the Closing shall be held on a Friday in order to facilitate the operational transition from Seller to Purchaser.

(b)Closing Procedure.  The parties may agree to conduct the Closing in person or by exchange of closing documents by overnight delivery service or by facsimile or electronic transmission.  Seller shall deliver to Purchaser physical possession of the Purchased Assets as of the close of business on the Closing Date.

Seller’s Deliveries

.  On or before the Closing Date, the Seller shall deliver to the Purchaser:

(a)Duly executed deeds for the Real Property subject to Permitted Liens, pursuant to which the Real Property shall be transferred to Purchaser substantially in the form(s) attached as Exhibit B hereto (the “Real Property Deeds”), such Real Property Deeds to be in the form of deed by which the Seller (or Seller’s predecessor in interest) initially acquired such Real Property;

(b)An Assignment and Assumption of Lease for each of the Leases, pursuant to which the Leases shall be transferred to Purchaser, substantially in the form attached as Exhibit B-1 hereto (the “Assignment and Assumption of Lease”), including the Landlord Consents;

(c)A Bill of Sale and Assignment for the Purchased Assets, pursuant to which the Purchased Assets (other than the Real Property and the Leases) shall be transferred to Purchaser, substantially in the form attached as Exhibit C hereto;

(d)Possession of the Safe Deposit Agreements and books, records and documentation regarding the Deposit Liabilities and other Purchased Assets and Assumed Liabilities (which may be facsimiles or other electronic records of the same in lieu of originals) in the possession or control of and reasonably available to Seller;

(e)Physical possession of Purchased Assets capable of physical delivery and in the possession of and reasonably available to Seller, provided, however, that the delivery of Purchased Assets shall not convey to Purchaser any right of ownership or use to any proprietary information or trade name, trademark or service mark, logo or corporate name that may be contained within or relating to any such Purchased Assets that cannot be readily removed;

(f)Possession of Loan files (including all related credit files), data and other books, records and documentation regarding the Loans and all collateral (which may be facsimiles or other electronic records of the same in lieu of originals) in the possession or control of and reasonably available to Seller relating to the Loans;

17

4832-5501-9850v.12 0058243-000353

(g)A statement substantially in the form attached as Exhibit A hereto (the “Closing Statement”);

(h)The Assumption Certificate;

(i)The resignation of Seller as custodian with respect to each IRA Deposit Liability account, and the designation of Purchaser as successor custodian with respect thereto;

(j)The FIRPTA Affidavits;

(k)ALTA standard owner’s title insurance policies, or marked-up title insurance commitments, preliminary to issuance of ALTA standard owner’s title insurance policies for the Real Property, in the amount of that portion of the Real Property Purchase Price attributable to each parcel, and insuring marketable fee title in Purchaser subject only to Permitted Liens;

(l)A certified copy of resolutions of Seller’s Board of Directors or authorized committee thereof authorizing the execution, delivery, and performance of this Agreement by Seller;

(m)A payoff letter from each secured lender, if any, as necessary to release any Liens (other than Permitted Liens) that may exist on any of the Purchased Assets;

(n)Any updates to the Seller’s Disclosure Statement required by this Agreement;

(o)A complete set of keys for each Branch, including keys for vaults and ATMs and combinations for all combination locks, appropriately tagged for identification, any manuals, access codes, passwords, or specifications with respect to vaults and ATMs, and all as-built drawings relating to the Branches that are in the possession of Seller;

(p)A limited power of attorney substantially in the form attached as Exhibit E; and

(q)Such other documents as may be required by this Agreement or are reasonably necessary to effect the transactions contemplated hereby as Purchaser shall reasonably request.

Purchaser’s Deliveries

.  On or before the Closing Date, the Purchaser shall deliver to Seller:

(a)The Assignment and Assumption of Lease for each of the Leases;

(b)The Assumption Certificate;

(c)Purchaser’s acceptance of its appointment as successor custodian of the IRA Deposit Liability accounts, and its assumption of the fiduciary obligations of the custodian with respect thereto;

18

4832-5501-9850v.12 0058243-000353

(d)The SBA Consents;

(e)A certified copy of resolutions of Purchaser’s Board of Directors or authorized committee thereof authorizing the execution, delivery, and performance of this Agreement by Purchaser;

(f)Evidence of receipt and the satisfaction of all required conditions in connection with Regulatory Approvals; and

(g)Such other documents as may be required by this Agreement or are reasonably necessary to effect the transactions contemplated hereby as Seller shall reasonably request.

ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF SELLER

Subject to the terms and conditions of this Agreement and except as otherwise set forth in a disclosure statement (the “Seller’s Disclosure Statement”) delivered to Purchaser as of the date of this Agreement, Seller represents and warrants to Purchaser as follows:

Organization

.  Seller is a Washington state chartered commercial bank, duly organized and validly existing under the laws of the State of Washington.  Seller is entitled to own, operate or lease its properties where such properties are now owned, operated or leased (including all of the Purchased Assets) and has the requisite power and authority to conduct its business as now being conducted at the Branches.  Seller is an insured depository institution pursuant to the provisions of the FDIA.

Authority

.  Seller has the power and authority to enter into and perform this Agreement and any instruments or other documents executed pursuant hereto. This Agreement and any instruments or other documents executed pursuant hereto and the execution, delivery, and performance hereof and thereof have been duly authorized and approved by all necessary corporate action on the part of Seller, and this Agreement and the instruments and documents executed pursuant hereto constitute, or when executed will constitute, valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms, except as enforcement may be limited by receivership, conservatorship, and supervisory powers of bank regulatory agencies generally as well as by bankruptcy, insolvency, reorganization, moratorium or other laws of general applicability relating to or affecting creditors’ rights, or the limiting effect of rules of law governing specific performance, equitable relief and other equitable remedies or the waiver of rights or remedies.

Non-Contravention

.  The execution and delivery of this Agreement and the instruments and documents executed pursuant hereto by Seller do not and, subject to the receipt of all of the Regulatory Approvals, the Landlord Consents, and SBA Consents, the consummation of the transactions contemplated by this Agreement will not (a) constitute a breach or violation of or default under any law, rule, regulation, judgment, order, governmental permit or license of Seller or to which Seller is subject, (b) constitute a breach or violation of or a default under the articles of incorporation or bylaws of Seller, (c) constitute a violation of or conflict with any court order, injunction, decree, cease and desist order, memorandum of

19

4832-5501-9850v.12 0058243-000353

understanding, or similar regulatory consent agreement or other legally binding order to which Seller is a party or subject, or by which Seller is bound, (d) constitute a violation, breach or default under, or extinguish any material rights with respect to, any agreement or instrument to which Seller is a party or subject, or by which Seller is bound, or (e) require any consent, approval, waiver, extension, amendment, or authorization under any law, regulation, or regulatory constraint, or under any agreement or instrument with respect to the Deposit Agreements, the Loan Agreements, the Assumed Liabilities, or the Purchased Assets, except to the extent failure to obtain any of the foregoing would not have a Material Adverse Effect on Seller.

Compliance with Law

.  The Branches and operations of the Branches are in all material respects being conducted in accordance with all applicable laws, rules and regulations of all Governmental Authorities.

Legal Proceedings

.  There are no actions, suits, or proceedings, whether civil, criminal or administrative, pending or, to the Knowledge of Seller, threatened which could prevent or materially delay Seller from performing its obligations under this Agreement, against or affecting (a) the Branches, the Purchased Assets or Assumed Liabilities, or (b) Seller.

Consents and Other Regulatory Matters

.  

(a)Except as set forth in Seller’s Disclosure Statement, the execution, delivery, and performance of this Agreement and the other agreements to be entered into in connection herewith by Seller do not and will not require any consent, approval, authorization or other order of, action or non-objection by, filing or registration with or notification to any Person or Governmental Authority other than the Regulatory Approvals, SBA Consents and the Landlord Consents.

(b)There are no pending, or to the Knowledge of Seller, threatened disputes or controversies between Seller and any federal, state, or local governmental authority, including without limitation with respect to capital requirements that (i) would reasonably be expected to prevent or materially delay Seller from being able to perform its obligations under this Agreement or (ii) would reasonably be expected to impair the validity or consummation of this Agreement or the transactions contemplated hereby. Seller has not received any indication from any Governmental Authority that such Governmental Authority would oppose or refuse to grant or issue its consent or approval, if required, with respect to the transactions contemplated hereby.

(c)The deposits of Seller are insured by the FDIC through the Deposit Insurance Fund in accordance with the FDIA, and Seller has paid all assessments and has filed all reports required to be filed by it by the FDIC.

(d)As of the date hereof, without giving effect to the transactions contemplated hereby, and following the transactions contemplated hereby, Seller is (i) at least “adequately capitalized,” as defined in the FDIA, and (ii) meets all capital requirements, standards, and ratios required by each state or federal bank regulator with jurisdiction over the Seller, including without limitation, any such higher requirement, standard or ratio as applies to institutions engaging in the acquisition of insured institution deposits, assets or branches.

20

4832-5501-9850v.12 0058243-000353

(e)Seller was rated “Satisfactory” or “Outstanding” following its most recent CRA examination by the FDIC.

Purchased Assets

.  Seller has and, upon consummation of the transaction contemplated by this Agreement, will have transferred to Purchaser, good, sufficient and marketable title to each of the owned Purchased Assets, whether real, personal or a combination of them, free and clear of any mortgages, liens, encumbrances, charges, easements, or restrictions of any kind whatsoever other than Permitted Liens.

Loans

.  With respect to each Loan:

(a)Except as set forth in Seller’s Disclosure Statement, Seller has good title to and is the sole owner of the Loans, free and clear of any liens, claims, encumbrances or other charges on the Loans whatsoever other than Permitted Liens.  Each Loan is subject to a valid and binding promissory note or other written promise to pay, enforceable against the obligor(s) of such note or other written promise to pay in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors’ rights generally and by general equity principles, regardless of whether such enforcement is considered in a proceeding in equity or at law.  The collateral for such Loan (if any) is the collateral described in the applicable security agreement, mortgage, deed of trust, pledge, collateral assignment or other security document.

(b)Each Loan was underwritten and originated in material compliance with applicable laws and regulations.

(c)All Loans have been made and maintained in the ordinary course of Seller’s business, in accordance with Seller’s internal loan grading system and in material compliance with the requirements of any Governmental Authority, including without limitation the SBA, and consistent with past practice.

(d)Except as set forth in Seller’s Disclosure Statement, none of the obligations represented by such Loan Agreements have been modified, subordinated, altered, forgiven, discharged, or otherwise disposed of except as indicated by such Loan Agreements, and to the Knowledge of Seller, no obligor on any Loan is in bankruptcy.  No Loan has been sold to another Person by Seller or is otherwise subject to an agreement to repurchase (other than Seller’s obligations to Purchaser pursuant to this Agreement).  Seller owns all servicing rights with respect to each of the Loans, and no other Person has any right, title, claim, or interest in or to any right to service any of the Loans.

(e)Except as set forth in Section 6.8(a) through (d) above, Seller makes no other representation or warranty of any kind to Purchaser relating to the Loans. Seller shall not be responsible for (i) the sufficiency, value or collectability of any Loan, (ii) any representation, warranty, or statement made by an obligor or other party in or in connection with any Loan, (iii) the financial condition or creditworthiness of any primary or secondary obligor under any Loan or any guarantor or surety or other obligor thereof, (iv) the performance or compliance by the borrower with any of the terms or provisions of any of the documents, instruments and

21

4832-5501-9850v.12 0058243-000353

agreements relating to any Loan, or (v) inspecting any of the property, books or records of any obligor.

Absence of Defaults Under Contracts

.  There is not under any contract or agreement to which Seller is a party, or by which Seller is bound, any existing default by Seller or to the Knowledge of Seller any other party on the Assumed Liabilities, the Purchased Assets or the Branches. There is not any existing default by Seller or, to the Knowledge of Seller, any other party under the Other Assigned Contracts.

Absence of Material Adverse Change

.  Since December 31, 2016, there has been no material adverse change in the business, properties or operations with respect to each of the Branches.

Real Property

.  With respect to the Real Property:

(a)None of the Real Property is the subject of any currently pending or, to Seller’s Knowledge, threatened condemnation action.

(b)Seller has not received written or, to the Knowledge of Seller, oral notice of any violation of any applicable zoning regulation, fire regulation, building code or restriction, restrictive covenant, ordinance, or other law, order, regulation or requirement.

(c)Except as disclosed by any Title Commitment obtained in connection with this Agreement, Seller has no Knowledge of any existing or pending, special assessments affecting any Real Property that may be assessed by any Governmental Authority;

(d)There are no outstanding agreements, options, rights of first offer, rights of first refusal, or other commitments of any nature obligating Seller to transfer any interest in any of the Real Property to any other Person;

(e)Except as disclosed by any Title Commitment obtained in connection with this Agreement, there are no easements or other instruments conveying any rights or interests in any of the Real Property to any other Person;

(f)Seller is in material compliance with all applicable health and safety related laws or requirements for the Real Property, including those under the Americans with Disabilities Act of 1990, as amended, and the Occupational Health and Safety Act of 1970, as amended; and

(g)Except as set forth in Seller’s Disclosure Statement, if any, delivered pursuant to this ARTICLE VI, or by any Title Commitment obtained in connection with this Agreement, there are no leases, subleases, licenses, or other rental agreements or occupancy agreements that grant any possessory interest in or to any space situated on or in any of the Real Property or that otherwise give rights with regard to the use of any of the Real Property or any portion of any of the Real Property.

Environmental Matters

.  With respect to the Real Property and the Leased Real Property and except as set forth in Section 6.12 of Seller’s Disclosure Statement, if any:

22

4832-5501-9850v.12 0058243-000353

(a) The Real Property and the Leased Real Property and all improvements, operations, and activities thereon are in material compliance with all applicable Environmental Laws.

(b) No Hazardous Substance has been used, handled, stored, discharged, released or disposed of on, in, under, or from the Real Property or the Leased Real Property by Seller or, to Seller’s Knowledge, any other Person in violation of applicable Environmental Laws.

(c) Except as disclosed by any Title Commitment obtained in connection with this Agreement, no lien has been imposed on the Real Property by any Governmental Authority in connection with the presence of any Hazardous Substance or pursuant to any Environmental Law.

(d) Seller has not:  (i) entered into or been subject to any consent decree, compliance order, or administrative order with respect to the Real Property or the Leased Real Property; or (ii) received any written request for information, notice, demand letter or administrative inquiry relating to the Real Property or the Leased Real Property pursuant to any Environmental Law or with respect to environmental matters. Seller has not received notice of any pending or, to the Knowledge of Seller, threatened, claims, lawsuits, citations or investigations by any Person relating to the environmental condition of the Real Property or the Leased Real Property. Neither the Real Property nor the Leased Real Property is currently undergoing investigation, removal, remediation or cleanup of Hazardous Substances.

(e) No underground storage tanks are or, to the Knowledge of Seller, have been located on the Real Property, and Seller has never operated an underground storage tank on the Leased Real Property.

Real Property Leases

.  With respect to the Leases and the Leased Real Property:

(a)Seller has delivered to Purchaser true and complete copies of the Leases and all amendments thereto and the Leases are in full force and effect.

(b)Seller has not received any notices of default under any provision of the Leases, and has undertaken no indemnification or defense of the landlord thereunder for events or claims arising under the Leases.

(c)Seller has not received written or, to the Knowledge of Seller, oral notice of any violation of any applicable zoning regulation, fire regulation, building code or restriction, restrictive covenant, ordinance, or other law, order, regulation or requirement applicable to the Leased Real Property, including without limitation, the Americans with Disabilities Act or regulations relating thereto.

23

4832-5501-9850v.12 0058243-000353

(d)Seller has not received written or, to the Knowledge of Seller, oral notice of any pending, special assessments affecting any Leased Real Property that may be assessed by any Governmental Authority; and

(e)Except as disclosed in Seller’s Disclosure Statement, if any, delivered pursuant to this ARTICLE VI, other than the Leases, there are no subleases, licenses, or other rental agreements or occupancy agreements that grant any possessory interest in or to any space leased by Seller situated on or in any of the Leased Real Property.

Fixed Assets

.  Each Fixed Asset having a book value in excess of $5,000 is in good, operable condition and repair (reasonable wear and tear excepted).  Net book values listed in Schedule 1.1(g) reflect the net book values for each Fixed Asset as shown on Seller’s system of record.

Deposit Agreements

.  

(a)Unless otherwise disclosed in Seller’s Disclosure Statement, no Deposit Agreements prohibits Seller from assigning and transferring to Purchaser all of Seller’s rights, duties, and obligations under the Deposit Agreements upon the terms and conditions set forth in this Agreement.  

(b)Unless otherwise disclosed in Seller’s Disclosure Statement, all Deposit Agreements other than time deposits legally permit Purchaser to unilaterally terminate or modify such agreements within thirty (30) days after the Closing Date, subject to delivery of any notice as may be specified in the Deposit Agreements, without the consent of the depositor or depositors and without penalty or additional obligation to Purchaser.

(c)The Deposit Liabilities have been originated, extended, acquired, administered, and maintained in the ordinary course of Seller’s business and in material compliance with the documents governing the relevant type of Deposit Liabilities and all applicable laws, regulations and rules of Governmental Authorities.  The Deposit Liabilities are insured by the FDIC through the Deposit Insurance Fund to the fullest extent provided for by applicable laws, rules and regulations, and all premiums and assessments due to date in connection with such insurance have been paid.  No proceedings for the termination or revocation of such insurance are pending, nor to Seller’s Knowledge threatened.

(d)All interest has been accrued on the Deposit Liabilities and Seller’s records accurately reflect such accrual of interest in accordance with GAAP.

(e)Seller has complied in all material respects with all laws, rules and regulations of the IRS regarding taxpayer identification number certification, interest information reporting, and backup withholding of interest payable in connection with all Deposit Liabilities, including reporting requirements applicable to all IRA Deposit Liabilities.

(f)Except for Deposit Liabilities securing a Loan and as otherwise disclosed in Seller’s Disclosure Statement, no Deposit Liabilities have been pledged to any other Person or are subject to any claims that are superior to the rights of Person(s) shown on the records delivered to Purchaser as the owner(s) of such Deposit Liabilities, other than claims against such

24

4832-5501-9850v.12 0058243-000353

owners such as state and federal tax liens, garnishments, and other judgment claims that have matured or may mature into claims against the respective Deposit Liabilities.

(g)Seller makes no representations or warranties to Purchaser as to whether, or the length of time during which, any accounts relating to Deposit Liabilities will be maintained by the owners of such Deposit Liabilities after the Closing Date.

Conduct of Business

.  With respect to the Branches, the Assumed Liabilities, and the Purchased Assets, Seller has conducted its banking business only in the ordinary course since December 31, 2016.

Tax Matters

.  

(a)Seller (i) has duly and timely filed all returns and reports required by applicable laws, including amendments, which are materially correct, complete and comply in all material respects with all applicable laws and regulations, (ii) has paid when due all real and personal property Taxes and assessments, all payroll and unemployment Taxes, and any other Taxes, including any related penalties, interest, and deficiencies, that have become due and payable with respect to, or may result in a lien upon, the Branches, Branch Employees, or any of the Purchased Assets, and (iii) has duly and timely withheld and paid to the appropriate governmental agencies all withholding Taxes, including any related penalties, interest, and deficiencies, relating to the payment of interest, earnings, or dividends on the Deposit Liabilities or relating to the payment of wages to the Branch Employees.

(b)There are no Liens for Taxes upon any of the Purchased Assets, except for Permitted Liens.

(c)For all completed tax years, and to the extent required by law or regulation, the Seller has duly and timely sent to each account holder with respect to the Deposit Liabilities an Internal Revenue Service Form 1099 (or a substitute form permitted by law) relating to the interest, earnings, or dividends paid on the Deposit Liabilities for those periods and has filed and provided all other material IRS Forms 1099 or related or similar material Tax returns as required by applicable laws in connection with the operation of the Branches.

Certain Employment Matters

.  With respect to any Branch Employee:

(a)There is no written or oral, express or implied, employment contract or agreement or assurance of job security.

(b)Seller has not experienced or been threatened by any strike, work stoppage, slowdown, lockout, concerted refusal to work overtime or other similar labor activity or dispute, organizational effort, or other attempt to unionize, and Seller is not party to any collective bargaining agreement.

(c)There is no dispute, claim, investigation, or charge, pending or, to Seller’s Knowledge, threatened, alleging breach of any express or implied employment contract or commitment, or breach of any applicable law, order, regulation, public policy, or ordinance relating to employment or terms and conditions of employment, unfair labor practices,

25

4832-5501-9850v.12 0058243-000353

employment discrimination, harassment, retaliation, equal pay or any other employment-related matter arising under applicable laws. Seller has been in compliance in all material respects with all applicable laws pertaining to employment and employment practices, workers’ compensation, terms and conditions of employment, worker safety, worker classification, wages and hours, civil rights, discrimination, immigration, and collective bargaining.

(d)Seller has no outstanding liability under the Worker Adjustment and Retraining Notification Act, 29 U.S.C. §2109 et seq. or the regulations promulgated thereunder or any similar state law, and Seller has not experienced a “mass layoff” or “plant closing” (within the meaning of the Worker Adjustment and Retraining Notification Act) or incurred any liability under such statute during the past three (3) years.

ERISA Matters

.  Neither Seller nor any of its ERISA Affiliates have any liability or liabilities under any Employee Benefit Plan that will become a liability or liabilities of Purchaser or any Affiliate of Purchaser or result in any Lien on the Purchased Assets or on any other assets of Purchaser or any of Purchaser’s Affiliates.  None of the Purchased Assets (a) are “plan assets” of any Employee Benefit Plan, (b) are subject to any Lien relating to any Employee Benefit Plan under ERISA, the Code, or otherwise, or (c) otherwise have been identified or earmarked as available for or relating to benefits under any Employee Benefit Plan.  No Employee Benefit Plan is subject to Title IV of ERISA or to the minimum funding standards of Section 302 of ERISA or Section 412 of the Code, or is a “multi-employer plan” (as defined in Section 3(37) of ERISA), and neither the Seller nor any ERISA Affiliate has ever contributed to or has ever been required to contribute to or has any current or contingent liability with respect to any such plan.  Neither the Seller nor any ERISA Affiliate:  (i) has withdrawn from any pension plan or terminated a pension plan under circumstances resulting (or expected to result) in any withdrawal liability or liability to the Pension Benefit Guaranty Corporation; or (ii) has engaged in any transaction which would give rise to a liability to the Seller or an ERISA Affiliate under Section 4069 or Section 4212(c) of ERISA.  The Seller does not have any obligation to provide or any current or contingent liability or obligation with respect to the provision of post-employment or post-termination health or life insurance or other welfare benefits to any Transferred Employee (as defined in Section 9.5(a)), other than as required under Section 601-609 of ERISA, Section 4980 of the Code or other applicable laws.

Books, Records, Documentation, Etc.

.  The Branch books and records are correct, accurate, and complete, in all material respects.  Seller’s Deposit Agreements and Loan Agreements comply in all material respects with applicable federal and state laws and regulations.

Custodial Duties

.  Seller has performed its duties in the capacity of custodian with respect to the IRA Deposit Liability accounts and in its capacity as escrow agent with respect to any escrow in a fashion which complies in all material respects with ERISA, the Code, and all other applicable laws, regulations, agreements, and instruments.

Insurance

.  Seller maintains in full force and effect insurance on the Purchased Assets in such amounts and against such risks and losses as deemed appropriate by management of Seller and as are customary and adequate for financial institutions comparable to Seller.

26

4832-5501-9850v.12 0058243-000353

Service Agreements

.  Each Service Agreement is the valid and binding obligation of Seller, and, to the Knowledge of Seller, of each other party to such Service Agreement.  There does not exist with respect to Seller’s obligations under a Service Agreement, or, to the Knowledge of Seller, with respect to the obligations of each other party to such Service Agreement, any default (or event or condition that constitutes or, after notice or passage of time or both, would constitute a default) on the part of Seller or, to the Knowledge of Seller, such other party, as applicable, under the Service Agreement.  A true and complete copy of each Service Agreement has been delivered to Purchaser.

No Broker

.  

(a)No broker or finder, or other party or agent performing similar functions, has been retained by Seller or its Affiliates or is entitled to be paid based on any arrangements, agreements or understandings made by Seller or its Affiliates in connection with the transactions contemplated hereby, and no brokerage fee or other commission has been agreed to be paid by Seller or its Affiliates on account of such transactions

(b)Seller has not dealt with any broker or other intermediary in connection with the sale of the Real Property.  If any broker or other intermediary claims to be entitled to a fee or commission by reason of having dealt with Seller in connection with the sale of the Real Property, or having introduced the Real Property to Seller for sale, or having been the inducing cause to the sale, Seller shall indemnify, defend and save harmless Purchaser of and from any claim for commission or compensation by such broker or other intermediary.

Effect of Representations and Warranties Limitation

.  

(a)Seller warrants that its representations and warranties in this Agreement will be true in all material respects at and as of the Closing.  All such representations and warranties made with respect to specified dates or events shall still be true at the Closing in all material respects with respect to such dates or events.

(b)During the term of this Agreement, if Seller becomes aware of any facts or of the occurrence or the impending occurrence of any event which would cause one or more of its representations or warranties contained in this Agreement to become untrue in any material respect, or would have caused one or more of such representations or warranties to be untrue had such facts been known or had such event occurred prior to the execution of this Agreement, then Seller shall promptly give detailed written notice of those matters to Purchaser.

(c)Purchaser’s receipt of information pursuant to this Section 6.25 shall not operate as a waiver or otherwise affect any representation, warranty or agreement given or made by Seller in this Agreement and shall not be deemed to amend or supplement the Seller’s Disclosure Statement.

(d)Except for the representations and warranties specifically set forth in this Agreement, neither Seller, nor any of its agents, Affiliates or representatives, nor any other Person, makes or shall be deemed to make any representation or warranty to Purchaser, express or implied, at law or in equity, with respect to the transactions contemplated hereby, and Seller

27

4832-5501-9850v.12 0058243-000353

disclaims any such representation or warranty whether by Seller or any of its officers, directors, employees, agents or representatives or any other Person.

Swap Agreements

. All swaps and other similar derivative transactions and risk management arrangements included in the Other Assigned Contracts, whether entered into for the account of Seller or for the account of a customer of Seller, were entered into in the ordinary course of business and in accordance with applicable rules, regulations and policies of any Governmental Authority and with counterparties believed to be financially responsible at the time and (assuming due authorization, execution and delivery by the applicable counterparty) are legal, valid and binding obligations of Seller enforceable in accordance with their terms and are in full force and effect.  Seller has duly performed in all material respects all of its material obligations thereunder to the extent that such obligations to perform have accrued, and, to Seller’s Knowledge, there are no material breaches, violations or defaults or allegations or assertions of such by any party thereunder.

ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants to Seller as follows:

Organization

.  Purchaser is Utah state chartered commercial bank, duly organized, validly existing and in good standing under the laws of the State of Utah.

Authority

.  Purchaser has the power and authority to enter into and perform this Agreement and any instruments or other documents executed pursuant hereto. This Agreement and any instruments or other documents executed pursuant hereto, and the execution, delivery and performance hereof and thereof have been duly authorized and approved by all necessary corporate action on the part of Purchaser, and this Agreement and the instruments and documents executed pursuant hereto constitute, or when executed will constitute, valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with their respective terms, except as enforcement may be limited by receivership, conservatorship, and supervisory powers of bank regulatory agencies generally as well as bankruptcy, insolvency, reorganization, moratorium or other laws of general applicability relating to or affecting creditors’ rights, or the limiting effect of rules of law governing specific performance, equitable relief and other equitable remedies or the waiver of rights or remedies.

Non-Contravention

.  The execution and delivery of this Agreement and the instruments and documents executed pursuant hereto by Purchaser do not and, subject to the receipt of all of the Regulatory Approvals, the consummation of the transactions contemplated by this Agreement will not, (a) constitute a breach or violation of or default under any law, rule, regulation, judgment, order, governmental permit or license of Purchaser or to which Purchaser is subject, (b) constitute a breach or violation of or a default under the articles of incorporation or bylaws of Purchaser, (c) constitute a violation of or conflict with any court order, injunction, decree, cease and desist order, memorandum of understanding, or similar regulatory consent agreement or other legally binding order to which Purchaser is a party or subject, or by which Purchaser is bound, (d) constitute a violation, breach or default under, or extinguish any material rights with respect to any agreement or instrument to which Purchaser is a party or subject, or by

28

4832-5501-9850v.12 0058243-000353

which Purchaser is bound, or (e) require any consent, approval, waiver, extension, amendment, or authorization under any law, regulation, or regulatory constraint, or under any agreement or instrument with respect to the Deposit Agreements, the Loan Agreements, the Assumed Liabilities, or the Purchased Assets, except to the extent failure to obtain any of the foregoing would not have a Material Adverse Effect on Purchaser.

Legal Proceedings

.  There are no actions, suits, or proceedings, whether civil, criminal or administrative, pending or, to the Knowledge of Purchaser, threatened against or affecting Purchaser which could prevent or materially delay Purchaser from performing its obligations under this Agreement.

Consents and Other Regulatory Matters

.  

(a)The execution, delivery, and performance of this Agreement and the other agreements to be entered into in connection herewith by Purchaser do not and will not require any consent, approval, authorization or other order of, action or non-objection by, filing or registration with or notification to any Person or Governmental Authority other than the Regulatory Approvals, SBA Consents and the Landlord Consents.

(b)There are no pending, or to the Knowledge of Purchaser, threatened disputes or controversies between Purchaser and any federal, state, or local governmental authority, including without limitation with respect to capital requirements that (i) would reasonably be expected to prevent or materially delay Purchaser from being able to perform its obligations under this Agreement or (ii) would reasonably be expected to impair the validity or consummation of this Agreement or the transactions contemplated hereby.  Purchaser has not received any indication from any Governmental Authority that such Governmental Authority would oppose or refuse to grant or issue its consent or approval, if required, with respect to the transactions contemplated hereby. Purchaser believes that it can satisfy all capital and other regulatory requirements necessary to obtain all of the Regulatory Approvals.

(c)The deposits of Purchaser are insured by the FDIC through the Deposit Insurance Fund in accordance with the FDIA, and Purchaser has paid all assessments and has filed all reports required to be filed by it by the FDIC.

(d)As of the date of this Agreement, Purchaser (i) is, and as of the Closing Date will be, at least “well capitalized” as defined by the FDIA and applicable FDIC regulations, and (ii) meets all capital requirements, standards and ratios required by each federal bank regulator with jurisdiction over Purchaser, and no such regulator has indicated that it will condition any of the Regulatory Approvals upon an increase in Purchaser’s capital or compliance with any capital requirement, standard or ratio.  In addition, Purchaser is not aware of any reason why the Regulatory Approvals will not be received in order to permit consummation of the transaction contemplated hereby on a timely basis.

No Broker

.  

(a)Other than D.A. Davidson & Co., no broker, consultant, or finder, or any other party or agent performing similar functions, has been retained by Purchaser or its Affiliates or is entitled to be paid based on any arrangements, agreements or understandings made by

29

4832-5501-9850v.12 0058243-000353

Purchaser or its Affiliates in connection with the transactions contemplated hereby and no brokerage fee or other commission has been agreed to be paid by Purchaser or its Affiliates on account of such transactions.

(b)Purchaser has not dealt with any broker or other intermediary in connection with the sale of the Real Property.  If any broker or other intermediary claims to be entitled to a fee or commission by reason of having dealt with Purchaser in connection with the sale of the Real Property, or having introduced the Real Property to Purchaser for sale, or having been the inducing cause to the sale, Purchaser shall indemnify, defend and save harmless Seller of and from any claim for commission or compensation by such broker or other intermediary.

Community Reinvestment Act

.  Purchaser has not been advised of any supervisory concerns regarding its compliance with the CRA, and has no knowledge or any planned or threatened objections by any community group to the transactions contemplated by this Agreement.  Purchaser was rated “Satisfactory” or “Outstanding” following its most recent CRA examination by the FDIC.

Capital Available

.  Purchaser has sufficient capital to acquire the Purchased Assets, to assume the Assumed Liabilities and to perform its other obligations under this Agreement and under any of the other instruments or documents executed in connection with this Agreement; it being understood by the Parties that Purchaser’s obligation to acquire the Purchased Assets, to assume the Assumed Liabilities and to perform its other obligations under this Agreement is not conditioned on raising any equity capital, obtaining specific financing, obtaining the consent of any lender or any other matter.

Effect of Representations and Warranties Limitation

.

(a)Purchaser warrants that its representations and warranties in this Agreement will be true in all material respects at and as of the Closing.  All such representations and warranties made with respect to specified dates or events shall still be true at the Closing in all material respects with respect to such dates or events.

(b)During the term of this Agreement, if Purchaser becomes aware of any facts or of the occurrence or the impending occurrence of any event which would cause one or more of their representations or warranties contained in this Agreement to become untrue in any material respect, or would have caused one or more of such representations or warranties to be untrue had such facts been known or had such event occurred prior to the execution of this Agreement, then Purchaser shall promptly give detailed written notice of those matters to Seller.

(c)Seller’s receipt of information pursuant to this Section 7.9 shall not operate as a waiver or otherwise affect any representation, warranty or agreement given or made by Purchaser in this Agreement.

(d)Except for the representations and warranties specifically set forth in this Agreement, neither Purchaser, nor any of its agents, Affiliates or representatives, nor any other Person, makes or shall be deemed to make any representation or warranty to Seller, express or implied, at law or in equity, with respect to the transactions contemplated hereby, and Purchaser

30

4832-5501-9850v.12 0058243-000353

disclaims any such representation or warranty whether by Purchaser or any of its officers, directors, employees, agents or representatives or any other Person.

ARTICLE VIII.
COVENANTS OF SELLER

Seller covenants and agrees with Purchaser as follows:

Conduct of Seller’s Business

.  

(a)From the date hereof through the Closing Date, Seller shall (i) conduct its business relating to the Purchased Assets, Assumed Liabilities and the Branches in the usual, regular and ordinary course consistent with past practice, (ii) use commercially reasonable efforts to maintain and preserve intact its relationships generally with its Branch Employees, Customers, and others having business relationships with it relating to the operation of the Branches, (iii) take no action that would materially adversely affect or delay the ability of any party hereto to obtain any regulatory approval or to perform its covenants and agreements under this Agreement, (iv) maintain the Real Property, Leased Real Property and Fixed Assets in their current condition, ordinary wear and tear and casualty damage excepted, (v) conduct the business of the Branches and preserve the Purchased Assets and Assumed Liabilities in accordance with prudent, safe and sound commercial banking practices, and applicable laws, rules and regulations, (vi) use its commercially reasonable efforts to satisfy the conditions to which the obligations of the parties are subject pursuant to this Agreement on or prior to the Closing Date, and (vii) fully cooperate to facilitate the consummation of the transactions contemplated by this Agreement; provided, however, that nothing set forth in this subsection (a) shall prohibit or limit Seller from taking any action (or omitting to taking any action) necessary for (A) Seller to comply with applicable laws, rules, and regulations, or (B) as contemplated hereby.

(b)Seller covenants with Purchaser that, from the date of this Agreement to Closing, Seller, except with the prior written consent of Purchaser (such consent not to be unreasonably withheld or delayed), shall not (i) sell, transfer, assign, lease, mortgage, pledge, or otherwise dispose of or encumber or enter into any contract, agreement, or understanding to sell, transfer, assign, lease, mortgage, pledge, or otherwise dispose of or encumber any of the Purchased Assets (other than use of Cash and supplies in the ordinary course of business consistent with past practice), (ii) establish new Deposit Liabilities at any Branch other than in the ordinary course of business, (iii) file any application or give any notice to relocate or close any Branch, except for any notice that may be required to be filed in order to consummate the transactions contemplated by this Agreement, (iv) transfer any Branch Employees (other than Excluded Employees) to another branch or office of Seller or any of its Affiliates, unless required by law or reasonable business practice, in which case Seller will notify Purchaser, (v) transfer any Purchased Assets or any Deposit Liabilities to any of Seller’s other operations or branches or those of its Affiliates, except upon the unsolicited request of a Customer, (vi) take any action that is intended or is reasonably likely to result in (x) any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time at or prior to the Closing, (y) any of the covenants or conditions to the transactions contemplated by this Agreement not being materially satisfied, or (z) a material violation of any provision of this Agreement, except (in each case) as may be required by applicable laws, rules,

31

4832-5501-9850v.12 0058243-000353

and regulations, (vii) fail to comply with any laws, rules, regulations, orders, or decrees applicable to it if such failure would have a material adverse effect on Seller’s ability to complete the transactions contemplated by this Agreement, (viii) amend, terminate, assign, encumber or extend, in any material respect, the Leases or make any material improvement to any property subject to the Leases or enter into any sublease, license or similar agreement permitting any person to lease, use or occupy space in the Branches; (ix) make any agreements or commitments binding it to extend credit at the Branches in an amount in excess of $2,000,000 (other than renewals of credit in the ordinary course of business consistent with past practice); or (x) agree with, or commit to any Person to do any of the things described in subsections (i) through (ix) of this Section 8.1(b) except as expressly contemplated by such subsection.

(c)In furtherance of its covenants under this Section 8.1, Seller agrees to maintain its current policies with respect to pricing the Deposit Liabilities and will change its pricing of the Deposit Liabilities only in accordance with (i) its general pricing practices for comparable deposit liabilities for branches located in the same geographic areas as the Branches, but that are not to be sold by Seller pursuant to this Agreement or other branch purchase and sale agreements, and (ii) promotional pricing of Deposit Agreements which are time deposits incident to general pricing practices carried on by Purchaser at all branch locations.

(d)Notwithstanding anything to the contrary in this Section 8.1, Seller shall be permitted, but not obligated, to establish an arrangement pursuant to which Seller may agree to pay or grant bonuses or other consideration to one or more Branch Employees as an incentive for such Branch Employees to assist in maintaining Deposit Liabilities at the applicable Branch after the date of this Agreement.

Regulatory Approvals

.  Subject to Section 9.2, Seller shall use its commercially reasonable efforts to obtain and, where necessary or appropriate, to assist Purchaser in obtaining the Regulatory Approvals and in making required filings in connection therewith. Except for applications and filings required to be made by Purchaser, Seller shall pay any fees charged by any Governmental Authorities to which it must apply to obtain any of the Regulatory Approvals.  Seller shall notify Purchaser, promptly (and in no event later than three (3) Business Days following notice) of any significant development with respect to any application or notice filed with any Governmental Authority in connection with the transactions contemplated by this Agreement.  Seller shall provide Purchaser or the appropriate Governmental Authorities with all information reasonably required to be submitted by Purchaser and/or Seller in connection with the Regulatory Approvals.  All information provided by Seller to Purchaser for applications or filings made in connection with the transactions contemplated by this Agreement is true and correct in all material respects.

Non-Solicitation of Customers

.  For a period beginning on the date of this Agreement and continuing for two (2) years following the Closing Date, Seller and its Affiliates shall not (i) directly or indirectly, solicit any Customer to open a deposit account, obtain a loan, transfer any Deposit Liability or Loan to any other branch office of Seller or to provide any banking or financial services to such Customer; provided, however, that this sub-Section shall not preclude, prohibit, or restrict Seller, its Affiliates, or any of their successors or assigns from (a) using newspaper, radio, television, internet, social media, or similar advertisements of a general nature not specifically targeted at Customers, or the geographic location of Utah, (b)

32

4832-5501-9850v.12 0058243-000353

soliciting or engaging in any business activity whatsoever with any Customer listed on Schedule 8.3(a) (which schedule shall list all Customers that either (x) have a loan with Seller that is not a Loan or (y) have a deposit account with Seller that is not a Deposit Liability, but shall not include (z) Credit Card Loans or Merchant Services Accounts, provided, however that Seller and its Affiliates may continue to provide banking or financial services solely with respect to the Credit Card Loans or Merchant Services Accounts), (c) continuing its existing lending, deposit, and other banking relationships with Customers between the date of this Agreement and the Closing Date relating to Seller’s other branch offices or facilities, including the operation of any automated teller machine that is not included as a Purchased Asset, (d) engaging in business activity with any Person, whether a Customer or not, who seeks the services of Seller or any of its Affiliates without being solicited, directly or indirectly, by Seller or any of its Affiliates in a manner that violates the provisions of this Section, (e) soliciting or engaging in any business activity from or with a multi-state depositor, whether a Customer or not; or (f) taking such actions as may be necessary or advisable to comply with any applicable laws, rules or regulations; provided that this Section shall not apply to any acquisition by Seller of another financial entity with any then-existing branch, facility or business.   Notwithstanding anything to the contrary in this Section 8.3, this Section 8.3 shall terminate effective upon Seller being acquired by an unaffiliated Person as part of a merger or similar transaction.

Insurance

.  Seller will maintain in effect until the Closing Date all casualty and liability policies relating to each Branch, the Real Property, the Leased Real Property, and the activities conducted on the Real Property and the Leased Real Property that are maintained by Seller as of the date of this Agreement or procure comparable replacement policies and maintain such replacement policies in effect until the Closing Date at equal or greater coverage levels. In the event of any material damage, destruction, or condemnation affecting any Real Property or any Leased Real Property between the date of this Agreement and the Closing Date, Seller shall either (a) take reasonable steps to repair or replace the damaged or destroyed property, or (b) deliver to Purchaser at Closing any insurance proceeds and other payments received by Seller as a result of such damage, destruction, or condemnation.

Landlord Consents

.  

(a)Seller shall use its commercially reasonable efforts to obtain the Landlord Consents.  Purchaser shall cooperate reasonably with Seller in obtaining the Landlord Consents. The Landlord Consents shall be in form and substance reasonably acceptable to Purchaser. To the extent any Landlord Consent imposes material payment obligations upon Seller, such Landlord Consent shall also be in form and substance reasonably acceptable to Seller.

(b)Notwithstanding anything in this Agreement to the contrary, Seller’s failure to obtain any Landlord Consent after using commercially reasonable efforts or any sublease as provided in Section 8.5(c) shall (i) entitle Purchaser to terminate this Agreement, and (ii) be a condition to Purchaser’s obligations under this Agreement as provided in Section 13.2 or otherwise, but shall not entitle Purchaser to any remedy or action other than as provided in this Section 8.5(b).

(c)In the event the Landlord Consents cannot be obtained through Seller’s commercially reasonable efforts (including if such consent cannot be obtained without the

33

4832-5501-9850v.12 0058243-000353

payment of an assignment fee, lump sum or rent increase or other consideration or initiation of a claim or proceeding against any Person), Seller shall, if permitted without the consent of the landlord under the Leases, sublease the Branches to Purchaser pursuant to a sublease agreement for the remainder of the existing term and any renewal term of the Leases, which will provide for Purchaser to perform all of the obligations of Seller under such Leases and will contain other mutually agreeable terms.  In such event, in addition to assuming the related Deposit Liabilities relating to the Branches and paying the Purchase Price, Purchaser shall be obligated to purchase the Fixed Assets located in such Branches and to hire the Transferred Employees associated with such Branches in accordance with the provisions of this Agreement.

Section 8.6 No Solicitation of Other Bids.

(a)Seller shall not, and shall not authorize or permit any of its Affiliates or any of its or their representatives to, directly or indirectly, (i) encourage, solicit, initiate, facilitate or continue inquiries regarding an Acquisition Proposal; (ii) enter into discussions or negotiations with, or provide any information to, any Person concerning a possible Acquisition Proposal; or (iii) enter into any agreements or other instruments (whether or not binding) regarding an Acquisition Proposal.  For purposes hereof, “Acquisition Proposal” shall mean any inquiry, proposal or offer from any Person (other than Purchaser or any of its Affiliates) concerning the sale of any of the Purchased Assets.

(b)Seller agrees that the rights and remedies for noncompliance with this Section 8.6 shall include having such provision specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to Purchaser and that money damages would not provide an adequate remedy to Purchaser.

COBRA

.  After the Closing Date, Seller and its Affiliates shall maintain a group health plan and shall provide COBRA continuation coverage to all “M&A qualified beneficiaries” (as that term is defined by Treas. Reg. 54.4980B-9 in the case of an asset sale (the “COBRA Regulations”)) who are not Transferred Employees.  Seller shall maintain the group health plan for at least the maximum period that COBRA continuation coverage must be available to the M&A qualified beneficiaries under the COBRA Regulations.  Purchaser shall not be a successor employer under the COBRA Regulations by virtue of Seller’s continued maintenance of a group health plan for the entire period the M&A qualified beneficiaries are entitled to COBRA continuation coverage.

ARTICLE IX.
COVENANTS OF PURCHASER

Purchaser covenants and agrees with Seller as follows:

Conduct of Purchaser’s Business

.  

(a)During the period from the date of this Agreement to the Closing Date, Purchaser shall (i) use its commercially reasonable efforts to satisfy the conditions to which the

34

4832-5501-9850v.12 0058243-000353

obligations of the parties are subject pursuant to this Agreement on or prior to the Closing Date; and (ii) fully cooperate to facilitate the consummation of the transactions contemplated by this Agreement.

(b)Purchaser covenants with Seller that Purchaser shall not (i) take any action that is intended or is reasonably likely to result in (x) any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time at or prior to the Closing, (y) any of the covenants or conditions to the transactions contemplated by this Agreement not being materially satisfied, or (z) a material violation of any provision of this Agreement, except (in each case) as may be required by applicable laws, rules or regulations, (ii) fail to comply with any law, rule, regulation, order or decree applicable to it if such failure would have a material adverse effect on Purchaser’s ability to complete the transactions contemplated by this Agreement, or (iii) agree with, or commit to, any Person to do any of the things described in subsections (i) through (ii) of this Section 9.1(b) except as expressly contemplated by such subsection.

Regulatory Approvals and Standards

.  

(a)Purchaser will use its commercially reasonable efforts to obtain as expeditiously as possible the Regulatory Approvals and SBA Consents and will file within twenty-one (21) days after the execution of this Agreement all necessary applications of Purchaser to obtain the Regulatory Approvals and SBA Consents. Purchaser will supply to Seller, at least five (5) Business Days prior to filing, copies of all proposed regulatory applications and filings and will use reasonable efforts to reflect any comments of Seller in such filings. Purchaser shall take all reasonably necessary actions to obtain each such approval as promptly as reasonably practicable and to permit the Closing to occur no later than the End Date and Purchaser shall not, and shall cause its Affiliates not to, knowingly take any action that would be expected to have the effect of denying or materially delaying or conditioning such approval.  Seller will cooperate in connection therewith (including the furnishing of any information and any reasonable undertaking or commitments that may be required to obtain the Regulatory Approvals).  Each party will provide the other with copies of any applications and all correspondence relating thereto prior to filing, other than material filed in connection therewith under a claim of confidentiality.  Except for applications and filings required to be made by Seller, Purchaser shall pay any fees charged by any Governmental Authorities to which it must apply to obtain any of the Regulatory Approvals or the SBA Consents. Purchaser shall notify Seller promptly (and in no event later than forty-eight (48) hours following notice) of any significant development with respect to any application or notice Purchaser files with any Governmental Authority in connection with the transactions contemplated by this Agreement.

(b)From the date hereof through the Closing Date, Purchaser shall (i) remain at least “well capitalized” as defined in the FDIA and applicable FDIC regulations, (ii) meet all capital requirements, standards, and ratios required by each state or federal bank regulator with jurisdiction over Purchaser, including without limitation, any such higher requirement, standard or ratio as shall apply to institutions engaging in the acquisition of insured institution deposits, assets or branches, and (iii) maintain its CRA ratings.

35

4832-5501-9850v.12 0058243-000353

Solicitation of Customers

.  Prior to the Closing Date, neither Purchaser nor any of its Affiliates shall solicit Customers through advertising specifically referencing or targeted to such Customers, nor transact its business in such a way (including promotional pricing that is not applicable to all branches of Purchaser that operate in the applicable market areas) that is reasonably likely to (a) induce such Customers to close Deposit Liability accounts and open deposit accounts directly with Purchaser or any of its Affiliates, (b) induce such Customers to refinance any Loan (or other loan currently maintained by Seller or any of its Affiliates that Purchaser became aware of in connection with the transactions contemplated by this Agreement) directly with Purchaser or any of its Affiliates, or (c) result in the transfer of all or a portion of an existing Deposit Liability or Loan from Seller. Notwithstanding the foregoing sentence, Purchaser and its Affiliates shall be permitted to (i) engage in its current practices relating to advertising, solicitations, promotions or marketing campaigns not primarily directed to or targeted at such Customers, (ii) engage in its current practices relating to lending, deposit, safe deposit, trust, or other financial services relationships existing as of the date hereof with such Customers through branch offices of Purchaser, (iii) respond to unsolicited inquiries by such Customers with respect to banking or other financial services offered by Purchaser, (iv) provide notices or communications relating to the transactions contemplated by this Agreement in accordance with the provisions hereof and (v) solicit or engage in any business activity whatsoever with any Customer that was also a customer of Purchaser prior to the Closing Date.

Recording of Instruments of Assignment

.  No later than six (6) months following the Closing Date, Purchaser shall have recorded all instruments required, necessary or desirable to evidence the acquisition, assignment and assumption of the Purchased Assets and the Assumed Liabilities, including, without limitation, all deeds relating to the Real Property and all assignments of mortgage, financing statements, and security agreements relating to the Loans.

Transferred Employees

.  Purchaser covenants to Seller, and Seller covenants to Purchaser where appropriate, that it will do or cause the following to occur:

(a)Prior to the Closing Date, Purchaser shall offer employment to each Branch Employee.  Purchaser shall make a written offer of employment to each Branch Employee.  Each offer of employment shall be effective on the day following the Closing Date and shall be for a comparable job.  Seller shall exercise commercially reasonable efforts to cause each Branch Employee to accept or reject such offer of employment within 10 Business Days of receipt of such offer from Purchaser.  Each Branch Employee who accepts Purchaser’s offer of employment (regardless of whether they are active employees or on leave of absence status as of the Closing Date) shall be a “Transferred Employee” for purposes of this Agreement, effective upon the day following the Closing Date and this date shall be referred to as the Transferred Employee’s “Transfer Date.”  Each Branch Employee who fails to accept Purchaser’s offer of employment, shall be an “Excluded Employee” for purposes of this Agreement.  Nothing in this Agreement shall give any employee any rights to claim status as a) a third party beneficiary of this Agreement, or b) any status with respect to Purchaser other than an at-will employee after the Closing Date.

(b)Within sixty (60) days of the after execution of this Agreement, Purchaser shall determine whether to offer employment to each Administrative Employee, and will make a written offer of employment to such Administrative Employees as Purchaser determines.   Each

36

4832-5501-9850v.12 0058243-000353

offer of employment shall be effective on the day following the Closing Date and shall be for a comparable job.  Seller shall exercise commercially reasonable efforts to cause each Administrative Employee to whom an offer of employment was made to accept or reject such offer of employment within 10 Business Days of receipt of such offer from Purchaser.  Each Administrative Employee who accepts Purchaser’s offer of employment (regardless of whether they are active employees or on leave of absence status as of the Closing Date) shall be a “Transferred Employee” for purposes of this Agreement, effective upon the Transfer Date.  Each Administrative Employee who is not offered employment, or is offered employment, but who fails to accept Purchaser’s offer of employment, shall be an “Excluded Employee” for purposes of this Agreement.  Nothing in this Agreement shall give any employee any rights to claim status as a) a third party beneficiary of this Agreement, or b) any status with respect to Purchaser other than an at-will employee after the Closing Date.

(c)Except as expressly provided in this Agreement, Seller shall pay, discharge, and be responsible for (but only to the extent required by Seller’s Employee Benefit Plans and/or applicable laws, rules and regulations) all salary, wages (including payment for any and all paid time off, vacation, sick time, or personal days accrued by the Transferred Employees as of the Transfer Date), bonuses, commissions, and any other form of compensation (including any deferred compensation) arising out of the employment of the Transferred Employees prior to the Transfer Date, and any employee benefits under the Seller’s Employee Benefit Plans arising out of Seller’s employment of the Transferred Employees, including welfare benefits with respect to claims incurred prior to the Transfer Date but reported after the Transfer Date.  Seller and the Employee Benefit Plans shall retain responsibility for all claims incurred by Excluded Employees (at any time) and for all claims incurred by Transferred Employees prior to the Transfer Date.  In addition, and notwithstanding anything in this Agreement to the contrary, Purchaser shall be responsible for the cost of any severance claims (in accordance with Seller’s Severance Pay Plan) in the event that a Branch Employee declines Purchaser’s offer of employment, to the extent that Excluded Employee remains employed by Seller to the Closing Date, and in the event such cost of any severance claim is paid by Seller, on Purchaser’s behalf, such cost will be treated as an item of proration in accordance with Section 3.5(b).  For the avoidance of doubt, any Branch Employee who accepts Purchaser’s offer of employment and then either (x) resigns or is terminated for cause by Purchaser within one (1) year after the Closing Date, or (y) resigns or is terminated more than one (1) year after the Closing Date (with or without cause),  shall not be entitled to the severance claims described in the previous sentence. Seller shall be solely responsible for the Excluded Employees in the transfer of Excluded Employees to other positions with Seller or in the termination of their employment with Seller.  In addition, Purchaser shall be responsible for the cost of any severance claims (in accordance with Seller’s Severance Pay Plan) for any Administrative Employee who is not offered employment by Purchaser, and in the event such cost of any severance claim is paid by Seller, on Purchaser’s behalf, such cost will be treated as an item of proration in accordance with Section 3.5(b).  

(d)Effective as of the Transfer Date, the Transferred Employees shall cease active participation in the Seller’s Employee Benefit Plans. To the extent possible pursuant to its benefit plans, Purchaser shall provide credit under its benefit plans for service by all Transferred Employees with Seller (and/or any of Seller’s Affiliates) for purposes of satisfying any waiting periods and for purposes of eligibility, vesting, and accrual of benefits, and for purposes of

37

4832-5501-9850v.12 0058243-000353

satisfying any evidence of insurability requirements or the application of any pre-existing condition limitations (provided, however, such service shall not be recognized to the extent that (x) such recognition would result in a duplication of benefits or (y) such service was not recognized under the corresponding Employee Benefit Plan of Seller), and Purchaser will make its regular medical coverage available to each such Transferred Employee no later than the Transfer Date.  The Code Section 401(k) plan offered by Purchaser to Transferred Employees will contain, or shall be amended to contain, provisions permitting such plan to accept rollovers with respect to the Transferred Employees from the Seller’s Code Section 401(k) plan into such plan of Purchaser, including the in-kind rollover any outstanding plan loans to Transferred Employees from Seller’s Code Section 401(k) plan as of the Closing Date to such Purchaser-sponsored plan.  Following the Transfer Date, Purchaser shall pay, discharge, and be responsible for any and all compensation and benefits, including salary, wages (including payment for any and all accrued paid time off, vacation, sick time, or personal days accrued by the Transferred Employees on and after the Transfer Date), bonuses, commissions, severance (in accordance with Seller’s current practices related thereto), and any other form of compensation (including any deferred compensation) arising out of the employment of the Transferred Employees on and after the Transfer Date.

(e)Pursuant to U.S. Treasury Regulations Section 1.409A-1(h)(4), Seller and Purchaser agree that, on the Transfer Date, each Transferred Employee shall be treated as having a “separation from service” with Seller and Seller’s Affiliates for purposes of Section 409A of the Code and Treasury Regulations Section 1.409A-1(h).

(f)Purchaser shall be responsible for all obligations (including obligations to provide notices) and liabilities, if any, which may arise in connection with any Transferred Employee under the WARN Act.  Purchaser shall indemnify and hold Seller and its Affiliates and their respective officers, directors, employees or agents harmless for any WARN Act obligations or liabilities of Seller and its Affiliates that are triggered by any mass layoff, plant closing or other employment action by Purchaser or its Affiliates within any ninety (90) day period following after Closing Date.

Landlord Consents

.  Purchaser shall use its commercially reasonable efforts to cooperate with Seller in obtaining the Landlord Consents.

ARTICLE X.
ACCESS; EMPLOYEE AND CUSTOMER COMMUNICATIONS

Access by Purchaser

.  Upon execution of this Agreement, Seller shall provide Purchaser and its representatives, accountants and counsel reasonable access during normal business hours and upon five (5) Business Days’ notice to Seller to the Branches, Branch Employees, depository records, Loan files, and all other documents and other information concerning the Branches as Purchaser may reasonably request. Notwithstanding the foregoing, in no event shall Seller be required to provide (a) any information that Seller reasonably deems proprietary, (b) any information that is protected by the attorney-client privilege or a similar privilege, or (c) its or any of its Affiliates’ tax returns.

38

4832-5501-9850v.12 0058243-000353

Communications to Employees; Training

.  

(a)Seller and Purchaser agree that promptly following the execution of this Agreement, meetings shall be held at such location as Purchaser and Seller shall mutually agree, provided that representatives of Seller shall be permitted to attend such meetings, to announce Purchaser’s proposed acquisition of the Purchased Assets to the Branch Employees. Seller and Purchaser shall mutually agree as to the scope and content of all communications to the Branch Employees.  Except as specifically provided in this Section 10.2, in no event shall Purchaser contact any Branch Employee without the prior express consent of Seller, which consent will not be unreasonably withheld or delayed.

(b)At mutually agreed upon times following the initial announcement described in Section 10.2(a), Purchaser shall be permitted to meet with the Branch Employees to discuss employment opportunities with Purchaser. Purchaser shall also be permitted to conduct training sessions outside of normal business hours or at other times as Seller may agree with the Branch Employees and may, at Seller’s option, conduct such training seminars at the Branches; provided that Purchaser will in good faith attempt to schedule such training sessions in a manner that does not unreasonably interfere with Seller’s normal business operations. Purchaser shall reimburse the Branch Employees for transportation costs to and from the location where Purchaser shall train such employees and compensate the Branch Employees or reimburse Seller at the Branch Employees respective applicable standard or overtime rates for the time spent in such training.

Communications with Customers

.  

(a)Within thirty (30) days after the Closing Date, Purchaser shall send statements to the Customers announcing the transactions contemplated hereby (such statements being herein called “Customer Notices”). The form and content of each Customer Notice shall be subject to the approval of both parties and the cost of printing and mailing the Customer Notices shall be borne by Purchaser. Purchaser shall also be required to provide at its own expense such other notices or communications to Customers relating to the transactions contemplated hereby as may be required by law; provided that the text of any such notice or communication and the timing of such notice or communication which is provided prior to the Closing shall be approved in advance by Seller, which approval shall not unreasonably be withheld or delayed.

(b)Except as specifically provided herein or as otherwise required by law or regulation, in no event will Purchaser contact any Customers prior to the Closing Date without the prior written consent of Seller.

(c)The parties acknowledge that Purchaser may elect to consolidate the branch located in Orem (the “Orem Branch”) and the branch located in Woods Cross (the “Woods Cross Branch” and, together with the Orem Branch, the “Consolidated Branches”) at or after the effective time of the transaction contemplated hereby.  In no event shall the Consolidated Branches be consolidated prior to such effective time.  It shall be the responsibility of Purchaser to file the required notices or applications to Governmental Authorities in connection with such consolidations; provided, however, in the event any such notices or applications are filed prior to the effective time, then Seller shall have the right to review them in

39

4832-5501-9850v.12 0058243-000353

the manner provided in Section 9.2 hereof.  All expenses and fees incurred in connection with the preparation and filing of such notices or applications shall be the responsibility of Purchaser.  In addition, in connection with any proposed consolidations of the Consolidated Branches, Purchaser shall be responsible for the preparation of notices or other communications to be sent to customers of the Consolidated Branches, posted in the applicable Consolidated Branch or published and for any other required actions in connection with any such consolidation.  In the event that any notices or other communications are sent, posted, published or otherwise made prior to the effective time, Seller shall have the right to review them in the manner provided in Section 9.2 hereof.  In the event that Purchaser desires to have any notice or other communication to customers of the Consolidated Branches sent prior to the effective time, the notice or other communication prepared by Purchaser will be sent by Seller on Purchaser’s behalf and Purchaser shall reimburse Seller for all costs, expenses and fees incurred by Seller in connection with the sending of such notices or other communications.  In addition, any other costs, expenses and fees incurred by Seller in connection with other notices, communications or activity relating to the consolidations of the Consolidated Branches shall be reimbursed by Purchaser.  Consolidations of the Consolidated Branches or approval or non-objection therefor shall not be a condition of either party’s obligation to close the transaction contemplated hereby.  The provisions of this Section 10.3(c) shall be applicable whether the consolidations of Consolidated Branches are regarded as a “closing,” a “discontinuing”, a “consolidation” or a “relocation” under applicable law or the regulations or policies of any Governmental Authority.

ARTICLE XI.
CERTAIN MUTUAL COVENANTS

Subject to the terms and conditions of this Agreement:

Non-Solicitation of Employees

.  In consideration of the consummation of the transactions contemplated hereby, Purchaser and Seller agree that, for a period of twenty-four (24) calendar months following the Closing Date, they shall not, directly or indirectly without the other party’s written consent, solicit for employment, retain as an independent contractor or consultant, induce to terminate employment with the other party or otherwise interfere with the other party’s employment relationship with any employee of the other party; provided, however, that this Section 11.1 shall not apply (a) if any such employee has been terminated by the other party or any of its Affiliates for any reason, or (b) if such employee is hired as a result of a general solicitation for employment in newspaper advertisements or other media or periodicals of general circulation not specifically targeted to employees of the other party.

Letters of Credit

.  Seller and Purchaser shall take all steps reasonably required to substitute a letter of credit issued by Purchaser for any letter of credit issued by Seller with respect to any Customer.  If Purchaser’s letter of credit cannot be substituted prior to the Closing and Seller’s letter of credit facility is cross-collateralized with any other Loans, then the purchase and assumption of that Customer’s loans, deposit liabilities, and relationship shall be excluded from this transaction to avoid splitting the relationship between the parties.

Real Property

.  Within ten (10) Business Days after execution of this Agreement, Purchaser shall cause Stewart Title Guaranty Company (the “Title Company”), to deliver to Seller and Purchaser a preliminary title commitment issued by the Title Company for

40

4832-5501-9850v.12 0058243-000353

each parcel of Real Property, naming Purchaser as the proposed insured, pursuant to which the Title Company shall expressly commit to issue an ALTA  standard owner’s policy of title insurance in the amount of that portion of the Real Property Purchase Price attributable to each parcel of Real Property as set forth on Schedule 1.1(n) (each, a “Title Commitment”) together with all exceptions or conditions to such title, including without limitation, all liens, mortgages, trust deeds, easements, restrictions, rights-of-way, covenants, reservations, and all other encumbrances affecting the Real Property.  To enable the issuance of an extended owner’s policy, Seller agrees to provide to the Title Company at Closing a commercially reasonable owner’s affidavit in form and substance reasonably acceptable to Seller for each parcel of Real Property.  If Purchaser desires to obtain extended coverage owner’s policies and/or endorsements thereto with respect to any such policy of title insurance, Purchaser may request the Title Company to issue such extended coverage, provided that the sole cost of such coverage shall be paid by Purchaser (including the cost of any survey), in no event shall Closing be delayed to accommodate issuance of any extended coverage form of title insurance  and Purchaser shall be solely responsible for satisfying any conditions or requirements imposed by the Title Company in order to issue such extended coverage.  Seller shall pay the premium for each title insurance policy issued pursuant to the Title Commitments, subject to Purchaser’s obligation to pay all costs and expenses associated with any extended coverage and additional endorsement requested by Purchaser, as described above.  

Participation Loans

.  Seller and Purchaser shall take all steps reasonably required to transfer the Participation Loans to Seller, in accordance with their customary loan participation procedures.

Counterparty Swap Agreements

.  Seller has entered into Swap Agreements with certain counterparties to offset the ISDA Agreements listed on Schedule 1.1(k).  Purchaser will use commercially reasonable efforts to become eligible to have the Swap Agreements assigned to it; however, if Purchaser is not able to become eligible to have such Swap Agreements assigned to it by the Closing Date, Seller will act as an interim counterparty for such Swap Agreements on terms to be mutually agreed between Seller and Purchaser.  For the avoidance of doubt, commercially reasonable efforts, shall not require Purchaser to increase the amount of its total assets in order to become eligible to have the Swap Agreement assigned to it.

ARTICLE XII.
TRANSITIONAL MATTERS

Notification to Branch Office Customers

.  

(a)Purchaser shall, jointly with Seller, as soon as reasonably practicable after the execution and delivery of this Agreement, prepare and mail to each depositor whose Deposit Liability account is to be assumed by Purchaser and to each party (other than Seller and its Affiliates) to the Safe Deposit Agreements, a letter, in form and substance mutually satisfactory to the parties, informing each such party of the nature of the transactions contemplated by this Agreement and the continuing availability of services to be provided by Purchaser in the Branches on and after the Closing Date.

41

4832-5501-9850v.12 0058243-000353

(b)Purchaser shall, at its own cost and expense, advise customers that customer checks and all other requisite banking transactional forms and supplies will need to be reissued and that Purchaser will assist customers with the cost and expense of the reissuance.  For each Deposit Liability account, Purchaser shall provide an initial supply of checks and other banking transactional forms (as applicable) to each customer having such an account so as to be received by such customer on or before three (3) days prior to the Closing Date. Customers will be advised that, from and after the Closing Date, such newly issued customer checks and banking transactional forms and supplies are to be used instead of the corresponding existing documents and supplies of Seller with respect to the customers’ Deposit Liability accounts, and that any such existing documents of Seller are to be destroyed.

(c)Purchaser shall, no later than fifteen (15) days prior to the Closing Date, prepare and transmit, at Purchaser’s sole cost and expense, to each obligor of each Loan, a notice in a form satisfying all legal requirements and reasonably acceptable to Seller, to the effect that the Loan will be transferred to Purchaser and directing that payments be made after the Closing Date to Purchaser at any address of Purchaser specified by Purchaser, with Purchaser’s name as payee on any items used to make such payments, and, with respect to all such Loans on which payment notices or coupon books have been issued, to issue new notices or coupon books reflecting the name and address of Purchaser as the Person to whom and the place at which payments are to be made.

(d)To the extent that any of the Loans transferred from Seller to Purchaser involve a transfer of servicing as defined and governed by the Real Estate Settlement Procedures Act (12 U.S.C. § 2601 etseq.), the Parties will jointly coordinate any appropriate required Customer Notices; provided, however, that both parties shall be equally responsible for the delivery of and all costs related to such notices.

(e)Purchaser shall provide borrowers of applicable Loans the notice of new creditor in accordance with 12 U.S.C. § 1641(g)

(f)Purchaser shall take any other actions required by law or regulation or by any court or regulatory authority to notify customers or depositors of the Branches or residents of the communities in which the Branches are located of the purchase and assumption transactions contemplated by this Agreement. The out-of-pocket cost of the mailings required by this Section 12.1 shall be borne by Purchaser.

Payment of Instruments

.  Following the Closing Date, Purchaser agrees to pay in accordance with applicable Deposit Agreements and law all checks, drafts, and withdrawal orders (including ACH debits) which are properly drawn by depositors with respect to the Deposit Liabilities, which are duly endorsed (or for which necessary endorsements are deemed supplied by applicable law) and otherwise properly payable, in light of credit balances and overdraft privileges, if any, applicable to such depositors, and presented to Purchaser by mail, over its counters, or through the check-clearing system of the banking industry, and in all other respects to discharge, in the usual course of the banking business, the duties and obligations of Seller with respect to the balances due and owing to the depositors whose Deposit Liability accounts are assumed by Purchaser. If any customer who has a Deposit Liability account draws checks, drafts, or negotiable orders of withdrawal against any such Deposit

42

4832-5501-9850v.12 0058243-000353

Liability account which are presented or delivered to Seller not later than ninety (90) days after the Closing Date, Seller shall use its commercially reasonable efforts to batch all such checks, drafts, negotiable orders of withdrawal, or other withdrawal order forms and to deliver the same to Purchaser at Purchaser’s sole expense. For a period of ninety (90) days following the Closing Date, Seller shall use such delivery methods to ensure that Purchaser receives such checks, drafts, negotiable orders or withdrawal order forms within 24 hours of Seller’s receipt of such items. Except to the extent that Seller does not satisfy its obligations under this Agreement, Purchaser acknowledges that any delay, failure, or inability on its part to comply with the obligations imposed upon it as a depository institution under applicable federal or state law, with regard to such checks, drafts, negotiable orders of withdrawal or other withdrawal orders shall not result in any liability or obligation of Seller and shall not affect any of the rights of Seller under this Agreement. Seller shall not be deemed to have made any representations or warranties to Purchaser with respect to any such checks, drafts, negotiable orders of withdrawal or other withdrawal orders and any such representations or warranties implied by law are hereby disclaimed and are the responsibility of Purchaser, except that Seller shall be chargeable with the warranties and representations implied by law with respect to any such check, draft, negotiable orders of withdrawal order, or other withdrawal order, which is paid by Seller over the counter. Purchaser hereby acknowledges that if, after the Closing Date, any customer who has a Deposit Liability account, instead of accepting the obligation of Purchaser to pay the Deposit Liabilities shall demand payment from Seller for all or any part of any such Deposit Liabilities, Seller shall not be liable or responsible for making such payment.

Statements

.  Seller shall issue statements to its customers which include all transactions with respect to the Deposit Liabilities, Safe Deposit Agreements and Loans through the close of business on the Closing Date, and Purchaser shall issue statements for all transactions with respect to the Deposit Liabilities and Loans thereafter.

Uncollected Items

.  To facilitate settlement of uncollected items pursuant to Section 12.2, at Closing, Purchaser shall establish an account with Seller (the “Clearing Account”). Purchaser and Seller shall settle daily through the Clearing Account the amount of all uncollected items (net of the applicable deposit premium paid by Purchaser for such Deposit Liability) included in the Deposit Liabilities on the Closing Date which are returned to Seller after the Closing Date as uncollected; provided, that Seller shall, upon Purchaser making such payment, deliver each such item to Purchaser and shall assign to Purchaser any and all rights which Seller may have or obtain in connection with such returned items.  In addition, pursuant to Section 12.11, on the date which is sixty-one (61) days after the Closing Date, Purchaser and Seller shall settle through the Clearing Account the amount of all uncollected overdrafts as of the close of business on the date which is sixty (60) days after the Closing Date net of the applicable deposit premium.

ACH and Wire Transfers

.  Beginning three (3) Business Days prior to the Closing Date, and for a period of one hundred twenty (120) days after such Closing Date, Seller will notify all Automated Clearing House (“ACH”) originators effecting debits or credits to Deposit Liability accounts of the purchase and assumption transactions contemplated by this Agreement, of the Purchaser’s transit-routing number.  For a period of sixty (60) days beginning on the first (1^st) Business Day after the Closing Date, Seller will promptly present to Purchase via a mutually agreed upon medium, each day’s ACH items that are to be posted that day  related

43

4832-5501-9850v.12 0058243-000353

to Deposit Liability accounts which are mistakenly routed or presented to Seller.  Seller will honor purchaser’s instructions to return an item for commercially acceptable reasons.  Purchaser’s instructions will be presented via a mutually agreed upon medium within 24 hours of receipt of the item from Purchaser.  Seller will make no charge to Purchaser for honoring such items. Items mistakenly routed or presented after the sixty (60) day period may be returned to the presenting party. Seller and Purchaser shall make arrangements to provide for the daily settlement through the Clearing Account with immediately available funds by Purchaser of any ACH items honored by Seller.  Beginning on the first (1^st) Business Day after the Closing Date and for a period of sixty (60) day days after the Closing Date, Seller will promptly present to Purchaser via a mutually agreed upon medium, each incoming wire transfer transaction related to Deposit Liabilities, Purchased Assets or other Customer accounts which is mistakenly routed or presented to Seller.  Seller will honor Purchaser’s instructions to return an item for commercially acceptable reasons.  Purchaser’s instructions will be presented to Seller via a mutually agreed upon medium within 24 hours of receipt of the wire transfer item from Purchaser.  Seller will make no charge to Purchaser for honoring such instructions.  Incoming wire transfers mistakenly routed or presented after the sixty (60) day period may be returned to the presenting party.  Seller and Purchaser shall make arrangements to provide for the daily settlement through the Clearing Account with immediately available funds by Purchaser of any ACH items honored by Seller.

Loans and Deposits

.  For a period of ninety (90) calendar days after the Closing Date, Seller will forward to Purchaser as soon as reasonably practicable any loan payments received by Seller made with respect to Loans purchased by Purchaser and any deposits received by Seller (other than ACH items or wire transfers) made with respect to Deposit Liabilities. Purchaser shall reimburse Seller within three Business Days after demand for checks returned on payments forwarded by Seller to Purchaser.

Maintenance of Records

.  Seller and Purchaser mutually agree to maintain all records and other documents relating to the Purchased Assets and Assumed Liabilities for six (6) years or as required by applicable law, and to examine, inspect, copy and reproduce such records and other documents relating to such Purchased Assets and Assumed Liabilities as may be reasonably requested by the other party. Any charges for such examination and photocopying shall be at a rate not greater than the examining party’s customary rates for similar requests by its customers.

Information Reporting

.  With respect to the Loans purchased and Deposit Liabilities assumed by Purchaser pursuant to this Agreement, Seller shall be responsible for reporting to the Customer and to the IRS (and any state or local taxing authority as required by law) all interest paid or earned by the Customer prior to and including the Closing Date and Purchaser shall be responsible for reporting to the Customer and to the Internal Revenue Service (and any state or local taxing authority as required) all interest paid or earned by the Customer after the Closing Date.

Transition

.  From and after the date of this Agreement, Seller and Purchaser agree to cooperate with and assist one another in connection with the transition and conversion of all customer accounts, files (including data processing files) and other information which are being purchased and assumed by Purchaser pursuant to the terms hereof. Additionally, each of Purchaser and Seller agree to provide each other, upon reasonable prior notice, with such

44

4832-5501-9850v.12 0058243-000353

information and data as is necessary to allow Seller and Purchaser to comply with all tax, regulatory reporting, audit or other compliance obligations relating to the customers, employees and operations of the Branches, and each of Seller and Purchaser agree to timely take any and all action as required by law to comply with such tax, regulatory and/or reporting obligations. Seller also agrees to provide to Purchaser any written or electronic documents or files needed to enable Purchaser to continue to underwrite or otherwise pursue any loans in process at the Branches. Finally, for a period of 90 days after the Closing Date, Seller agrees to forward to the Branch Employees all emails sent to the email addresses formerly used by the Branch Employees during their employment with Seller.

Actions With Respect to IRA Deposit Liabilities

.  

(a)On or before the Closing Date, Seller shall (i) resign as of the close of business on the Closing Date as the custodian of each IRA Deposit Liability account of which it is the custodian, (ii) to the extent permitted by the documentation governing each such IRA and applicable law, appoint Purchaser as successor custodian of each such IRA, and Purchaser hereby accepts each such custodianship under the terms and conditions of Purchaser’s plan documents for its IRA accounts, and assumes all custodial obligations with respect thereto as of the close of business on the Closing Date, and (iii) deliver to the grantor of each such IRA such notice of the foregoing as is required by the documentation governing each such IRA or applicable law. Purchaser shall be solely responsible for delivering its IRA documents to the applicable IRA Deposit Liability account grantor, including but not limited to a beneficiary designation form to be completed by the applicable IRA grantor; provided, however, that in the event that an IRA grantor dies before such time as Purchaser receives a properly completed beneficiary designation form, Seller shall make available to Purchaser such information as may exist in Seller’s files regarding any beneficiary designation it may have regarding such decedent. If, pursuant to the terms of the documentation governing any such IRA or applicable law, (y) Seller is not permitted to appoint Purchaser as successor custodian, or the IRA grantor objects in writing to such designation, or is entitled to, and does, in fact, name a successor custodian other than Purchaser, or (z) such IRA includes assets which are not Deposit Liabilities and are not being transferred to Purchaser, and the assumption of such deposit liabilities included in such IRA would result in a loss of qualification of such IRA under the Code or applicable IRS regulations, all deposit liabilities of Seller held under such IRA shall be excluded from the Deposit Liabilities (such excluded deposit liabilities being the “Excluded IRA Deposits”). Upon appointment as a successor custodian for such IRA Deposit Liability accounts, Purchaser shall perform the services and carry out the duties and obligations required of it under the applicable documents, the Code and applicable federal and state laws and regulations.  

(b)The Deposit Liabilities include certain IRAs that are required to make certain periodic distributions to the IRA account owner either at the account owner’s request or because the account owner has attained age 70-1/2. Effective as of the Closing Date, Purchaser agrees to continue to make such periodic distributions in accordance with the distribution instructions forwarded by Seller to Purchaser. Purchaser hereby assumes the obligation to pay each minimum distribution required by federal law by December 31 of the calendar year in which the Closing occurs and, in consideration thereof, Seller agrees not to withhold the amount of such distributions from the aggregate amount of the Deposit Liabilities.

45

4832-5501-9850v.12 0058243-000353

Overdrafts

.  If at the Closing Date there exists a negative balance in a Deposit Liability account (e.g., an overdraft), that account will be transferred to Purchaser and that negative balance will be netted against other positive balances in aggregating total Deposit Liabilities, but without duplication of any amounts included in the Negative Deposits.  Using the Clearing Account, Seller shall reimburse Purchaser for all overdrafts remaining uncollected as of the close of business on the date which is sixty (60) days after the Closing Date net of the applicable deposit premium.

New Telephone Numbers

.  Seller agrees to cooperate with Purchaser to transfer, if possible, telephone numbers for the Branches into Purchaser’s name.

New ATM/Debit Cards

.  Purchaser shall, no later than three (3) Business Days prior to the Closing Date, furnish ATM/Debit cards to Customers who have Deposit Liability accounts to replace Seller’s ATM/Debit cards. Purchaser shall, no later than three (3) Business Days prior to the Closing Date, notify affected Customers to destroy the Seller’s ATM/Debit cards as of the day after the Closing Date and shall notify such Customers of Purchaser’s withdrawal limits in effect immediately following the Closing Date.

Installation of Equipment by Purchaser

.  Subsequent to the date of receipt of Regulatory Approvals and prior to the Closing Date, Seller shall cooperate with and permit Purchaser, at Purchaser’s option and sole cost and expense, to make provision for the installation of teller equipment and telephone lines and systems in the Branches; provided, however, that Purchaser shall arrange for the installation of such equipment at such times and in a manner that does not unreasonably interfere with the normal business activities and operation of the Branches.

Deactivation of ATMs and ATM/Debit Cards

.  On the day after the Closing Date, Seller shall deactivate all ATM/Debit cards issued with respect to all Deposit Liability accounts and shall electronically block access of those cards to the Deposit Liability accounts, and shall deactivate the ATMs not later than 8:00 a.m. on the day after the Closing Date. Point of sale transactions shall be settled between Purchaser and Seller for a period of forty-five (45) days after the Closing Date.

Deposit Histories

.  In case of any dispute with or inquiry by any customer whose Deposit Liability account is included in the Assumed Liabilities, which dispute or inquiry relates to the servicing of such account by Seller prior to the date for which a deposit history has been provided to Purchaser, Seller will provide Purchaser, where available and to the extent reasonably requested by Purchaser and not already provided to Purchaser, and subject to the provisions of Section 12.7, information regarding the Deposit Liability account and copies of pertinent documents or instruments with respect to such dispute or inquiry so as to permit Purchaser to respond to such customer within a period of time and in a manner which would comply with applicable law and Deposit Agreements standard banking practices and customs.

Form W-2s

.  With respect to the Transferred Employees, Seller shall be responsible for preparing and issuing to such Transferred Employees Form W-2s for the service period beginning January 1, 2017 to and including the Closing Date and Purchaser shall be

46

4832-5501-9850v.12 0058243-000353

responsible for preparing and issuing to such Transferred Employees Form W-2s for the service periods after the Closing Date.

Solicitation Letter

.  Seller and Purchaser shall jointly prepare a letter for the solicitation by Purchaser of all Credit Card Loans and Merchant Services Accounts.

ARTICLE XIII.
CONDITIONS TO CLOSING

Conditions to Obligations of Seller

.  The obligations of Seller under this Agreement are subject to the satisfaction (or, if applicable, waiver in the sole discretion of Seller, except as to the condition described in Section 13.1(c)) on or before the Closing Date, of each of the following conditions;

(a)All of the covenants and other agreements required by this Agreement to be complied with and performed by Purchaser on or before the Closing Date shall have been duly complied with and performed in all material respects;

(b)The representations and warranties made by Purchaser herein or in any certificate or other document delivered pursuant to the provisions hereof or in connection with the transactions contemplated hereby shall be true and correct in all material respects, on and as of the Closing Date, with the same force and effect as though such representations and warranties had been made on the Closing Date (except to the extent such representations and warranties speak of an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date);

(c)All of the Regulatory Approvals shall have been obtained and shall be Final;

(d)The Landlord Consents shall have been obtained;

(e)No court or Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect to enjoin, or which prohibits, consummation of the transactions contemplated hereby; and

(f)Seller shall have received the items to be delivered by Purchaser pursuant to Section 5.3.

Conditions to Obligations of Purchaser

.  The obligations of Purchaser under this Agreement are subject to the satisfaction (or, if applicable, waiver in the sole discretion of Purchaser, except as to the condition described in Section 13.2(c)) on or before the Closing Date, of each of the following conditions:

(a)All of the covenants and agreements required by this Agreement to be complied with and performed by Seller on or before the Closing Date shall have been duly complied with and performed in all material respects;

47

4832-5501-9850v.12 0058243-000353

(b)The representations and warranties made by Seller herein or in any certificate or other document delivered pursuant to the provisions hereof or in connection with the transactions contemplated hereby shall be true and correct in all material respects, on and as of the Closing Date, with the same force and effect as though such representations and warranties had been made on the Closing Date (except to the extent such representations and warranties speak of an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date and except where the failure of such representations and warranties to be so true and correct would not have and would not be reasonably expected to have a material adverse effect on Purchaser);

(c)The Regulatory Approvals shall have been obtained and shall be Final;

(d)The Landlord Consents shall have been obtained in form and substance reasonably acceptable to purchaser;

(e)Title Company shall have agreed to issue to Purchaser an ALTA standard coverage (or equivalent) owner’s policy of title insurance (on terms equal to or better than the preliminary Title Commitment delivered pursuant to Section 11.3), insuring fee simple, marketable title to the Real Property in Purchaser in the aggregate amount of the Purchase Price, subject only to easements, conditions, restrictions and matters of record set forth in the Commitment;

(f)No court or Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect to enjoin, or which prohibits, consummation of the transactions contemplated hereby; and

(g)Purchaser shall have received the items to be delivered by Seller pursuant to Section 5.2.

ARTICLE XIV.
INDEMNITY

Seller’s Indemnity

.  Seller shall, subject to the other provisions of this ARTICLE XIV, indemnify, hold harmless and defend Purchaser, its Affiliates, and their respective successors, permitted assigns, directors, shareholders, officers, agents and employees from and against all claims, losses, liabilities, demands, and obligations of any nature whatsoever (including reasonable legal fees and expenses) (collectively, “Damages”) which Purchaser or any of its Affiliates or their respective successors, permitted assigns, directors, shareholders, officers, agents or employees shall receive, suffer or incur, arising out of or resulting from:

(a)Any liability of Seller (other than the Assumed Liabilities) including the Excluded Liabilities;

(b)The Excluded Assets;

(c)Other than with respect to the Assumed Liabilities, any actions taken or omitted to be taken by Seller on or before the Closing Date and relating to the Branches,

48

4832-5501-9850v.12 0058243-000353

Purchased Assets, Assumed Liabilities, or Transferred Employees, and any suits or proceedings commenced in connection therewith (other than proceedings to prevent or limit the consummation of the transactions contemplated in this Agreement);

(d)The breach of any representation or warranty made by Seller in this Agreement; or

(e)The breach of any covenant made by Seller in this Agreement.

Purchaser’s Indemnity

.  Purchaser shall indemnify, hold harmless, and defend Seller, its Affiliates and their respective successors, permitted assigns, directors, shareholders, officers, agents and employees from and against all Damages which Seller or any of its Affiliates or their respective successors, permitted assigns, directors, shareholders, officers, agents or employees shall receive, suffer or incur, arising out of or resulting from:

(a)Any liability of Purchaser, including the Assumed Liabilities;

(b)Purchaser’s ownership and operation of the Purchased Assets from and after the close of business on the Closing Date;

(c)Other than with respect to the Excluded Assets and Excluded Liabilities, any actions taken or omitted to be taken by Purchaser from or after the Closing Date and relating to the Branches, Purchased Assets, Assumed Liabilities, or Transferred Employees, and any suits or proceedings commenced in connection therewith (other than proceedings to prevent or limit the consummation of the transactions contemplated in this Agreement);

(d)The breach of any representation or warranty made by Purchaser in this Agreement; or

(e)The breach of any covenant made by Purchaser in this Agreement.

Indemnification Procedures

.  

(a)A claim for indemnification for any matter not involving a Third Party Claim may be asserted by written notice to the Indemnifying Party, which notice shall include a reasonable description of the basis for the claim and shall be paid or disputed in writing by the Indemnifying Party within ten (10) Business Days of the receipt of such notice.

(b)In the event that any legal proceedings shall be instituted or that any Third Party Claim is asserted, the Indemnified Party shall as soon as reasonably practicable cause written notice of the assertion of any Third Party Claim of which it has knowledge, which is covered by this ARTICLE XIV, to be forwarded to the Indemnifying Party.  If the Indemnifying Party acknowledges in writing its obligation to indemnify the Indemnified Party pursuant to this ARTICLE XIV against any Damages that may result from such Third Party Claim, the Indemnifying Party shall have the right, at its sole expense, to be represented by counsel and to defend against, negotiate, settle, or otherwise deal with any Third Party Claim that relates to any Damages for which indemnification is sought pursuant to this ARTICLE XIV.  If the Indemnifying Party elects to defend against, negotiate, settle, or otherwise deal with any Third

49

4832-5501-9850v.12 0058243-000353

Party Claim that relates to any Damages for which indemnification is sought pursuant to this ARTICLE XIV, it shall within ten (10) days (or sooner, if the nature of the Third Party Claim so requires) of receipt of notice of the Third Party Claim notify the Indemnified Party of its intent to do so.  If the Indemnifying Party elects not to defend against, negotiate, settle, or otherwise deal with any Third Party Claim that relates to any Damages for which indemnification is sought pursuant to this ARTICLE XIV, or fails to notify the Indemnified Party of its election within the timeframe provided for above, the Indemnified Party may then defend against, negotiate, settle, or otherwise deal with such Third Party Claim and the Indemnifying Party shall reimburse the Indemnified Party for the reasonable actual expenses of defending such Third Party Claim upon submission of periodic bills.  If the Indemnifying Party assumes the defense of the Third Party Claim, the Indemnified Party may participate, at its own expense, in the defense of such Third Party Claim; provided that such Indemnified Party shall be entitled to participate in any such defense with separate counsel at the expense of the Indemnifying Party if (i) so requested by the Indemnifying Party to participate, (ii) upon the reasonable advice of counsel to the Indemnified Party that a conflict or potential conflict exists between the interests of the Indemnified Party and the Indemnifying Party that would make such separate representation advisable, or (iii) such claim is based upon an investigation, inquiry, or other proceeding by a Governmental Authority; and provided, further, that the Indemnifying Party shall not be required to pay for more than one such counsel (and any appropriate local counsel) for the Indemnified Parties in connection with such Third Party Claim.  The parties agree to cooperate fully with each other in connection with the defense, negotiation, or settlement of any such Third Party Claim.

(c)After any final judgment or award shall have been rendered by a Governmental Authority of competent jurisdiction and the expiration of the time in which to appeal such judgment or award, or a settlement shall have been consummated, or the Indemnified Party and the Indemnifying Party shall have arrived at a mutually binding agreement with respect to a Third Party Claim pursuant to this ARTICLE XIV, the Indemnified Party shall forward to the Indemnifying Party notice of any sums due and owing (including any bills, records, or other documentation supporting such sums) by the Indemnifying Party pursuant to this Agreement with respect to such matter and the Indemnifying Party shall be required to dispute in writing or pay all of the sums so due and owing to the Indemnified Party by wire transfer of immediately available funds within five (5) Business Days after the date of such notice.

(d)The failure of the Indemnified Party to give reasonably prompt notice of any Third Party Claim shall not release, waive, or otherwise affect the Indemnifying Party’s obligations with respect to such Third Party Claim except to the extent that the Indemnifying Party can demonstrate actual Damages and prejudice as a result of such failure or delay.

Limitations on Liability

.  Notwithstanding anything to the contrary contained in this ARTICLE XIV, no party shall be liable for indemnification for breaches of representations and warranties until the aggregate Damages for all breaches of representations and warranties by such party exceed Two Hundred and Fifty Thousanddollars ($250,000), at which time such party shall only be liable for indemnification for Damages in excess of $125,000.  However, the $250,000 threshold shall not apply to breaches of the representations and warranties contained in Section 6.1, Section 6.2, Section 7.1 and Section 7.2 of this Agreement, or to claims arising from fraud, criminal activity or willful misconduct on the part of

50

4832-5501-9850v.12 0058243-000353

a party hereto in connection with the transactions contemplated by this Agreement. Notwithstanding anything to the contrary in this Agreement, in no event shall any party be entitled to any consequential or punitive Damages.

Exclusive Remedy for Monetary Damages

.  Except for (i) the parties’ rights to specific performance and injunctive relief as described in Section 16.13, and (ii) claims arising from fraud, criminal activity or willful misconduct on the part of a party hereto in connection with the transactions contemplated by this Agreement, the indemnification provided in this ARTICLE XIV shall be the exclusive post-Closing Date remedy available to any Indemnified Party with respect to any breach of any representation, warranty, covenant or agreement made by Purchaser or Seller in this Agreement.

Period of Indemnity

.  Except as provided in this Section, all representations, warranties and covenants contained in or made pursuant to this Agreement shall survive the execution and delivery of the Agreement and shall continue in full force and effect for a period of eighteen (18) months after the Closing Date and thereafter shall terminate, except as to any claim for which written notice shall have been given prior to such date; and provided, further, that all covenants or agreements shall survive in perpetuity, unless and to the extent that such covenant or agreement is limited to a specific period of time in this Agreement or performance of such covenant or agreement has been waived in writing.  Notwithstanding the foregoing, (a) the representations and warranties contained in Section 6.1, Section 6.2, Section 6.7, Section 6.24, Section 7.1, Section 7.2 and Section 7.6 of this Agreement shall survive forever; and (b) the representations and warranties contained in Section 6.12, Section 6.17, Section 6.19 and Section 6.21 of this Agreement shall survive until the expiration of the applicable statute of limitations.

ARTICLE XV.
POST- CLOSING MATTERS

Further Assurances

.  From and after the Closing Date:

(a)Except as specifically provided otherwise herein, Seller shall assist Purchaser in the orderly transition of the operations of the Branches and shall give such further assurances and execute, acknowledge and deliver all such instruments as may be necessary and appropriate to effectively vest in Purchaser title in the Purchased Assets in the manner contemplated hereby; and

(b)Except as specifically provided otherwise herein, Purchaser shall give such further assurances to Seller and shall execute, acknowledge, and deliver all such acknowledgments and other instruments and take such further action as may be necessary and appropriate to effectively relieve and discharge Seller from any obligations remaining with respect to the Deposit Liabilities or other Assumed Liabilities.

Access to and Retention of Books and Records

.  For a period of six (6) years from the Closing Date, each party shall have reasonable access to any books and records of the other party relating to the Purchased Assets and the Assumed Liabilities, and the requesting party, at its own expense, may make copies and extracts when such copies and extracts are

51

4832-5501-9850v.12 0058243-000353

required by Governmental Authorities, for litigation purposes, or for tax or accounting purposes. If such copies or extracts require use of a party’s equipment or facilities, the user shall reimburse the other party for all costs incurred, including without limitation employee expenses.

ARTICLE XVI.
MISCELLANEOUS

Expenses

.  

(a)Except as otherwise provided herein, Seller and Purchaser shall each pay all of their own out-of-pocket expenses in connection with this Agreement, including investment banking, appraisal, accounting, consulting, professional, and legal fees, if any, whether or not the transactions contemplated by this Agreement are consummated.

(b)Seller shall pay all costs and expenses for applications and filings required to be made by Seller to obtain any of the Regulatory Approvals, Seller shall pay all costs and expenses required for procuring Landlord Consents, and Purchaser shall pay all costs and expenses for applications and filings required to be made by Purchaser to obtain any of the Regulatory Approvals (including FDIC and UDFI).  Additionally, Purchaser shall pay all (i) recording, filing or other fees, cost and expenses (including without limitation fees, costs and expenses for (x) filing of any forms (including without limitation tax forms) with Governmental Authorities in connection with the transfer of the Real Property, the Leases, the Fixed Assets, or the other Purchased Assets, and (y) recording instruments or documents evidencing any transfers of interests in real property); and (ii) costs and expenses relating to the preparation, execution and recording of assignments of mortgages, financing statements, notes, security agreements or other instruments applicable to or arising in connection with the transfer, assignment or assumption of the Purchased Assets and Assumed Liabilities including, but not limited to, fees payable to the SBA in connection with the transfer to Purchaser of the SBA Loans.

Trade Names and Trademarks

.  

(a)Purchaser acknowledges and agrees that notwithstanding anything to the contrary contained herein, it has, and following the Closing shall have, no interest in or to the names “Banner Bank” or any trade name, trademark or service mark, logo or corporate name of any Seller, or any of its Affiliates.  After the Closing Date, Purchaser shall not use any of the trade names, trademarks, service marks, logos or corporate names of Seller or any of its Affiliates.

(b)From and after the Closing, Purchaser agrees not to use any forms or other documents bearing Seller’s name or logo, or the name or logo of any Affiliate of Seller, without the prior written consent of Seller, which consent may be denied or given in Seller’s sole discretion. If such consent is given, Purchaser hereby agrees that all forms or other documents to which such consent relates will be stamped or otherwise marked in such a way that identifies Purchaser as the party using the form or document.

Termination; Extension of Closing Date

.  This Agreement shall terminate and shall be of no further force or effect as between the parties hereto, except as to the liability for actual damages due to a material breach of any representation, warranty or covenant

52

4832-5501-9850v.12 0058243-000353

occurring or arising prior to the date of termination and except as set forth in Section 16.13, upon the occurrence of any of the following:

(a)Upon mutual agreement of the parties;

(b)Immediately upon receipt by Purchaser or Seller of notice from any Governmental Authority that Purchaser or Seller, as the case may be, has been denied any Regulatory Approval by Final order;

(c)Upon written notice by either party to the other, if the Closing has not occurred (through no failure by the terminating party to fulfill its obligations hereunder) by the End Date, or such later date mutually agreed upon by the parties in writing; provided however, that such termination date shall automatically be extended until December 31, 2017, if the impediment to Closing is based upon (i) a delay in the receipt of the Regulatory Approvals required by this Agreement, or (ii) an inability to complete the data processing conversion due to circumstances outside the control of Purchaser and Seller; and

(d)By either the Purchaser or Seller (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a material breach by the other of any of the representations, warranties, covenants or other agreements set forth in this Agreement on the part of the other party, which breach is not cured within thirty (30) days following written notice to the party committing such breach, or which breach, by its nature, cannot be cured prior to the Closing.

Modification and Waiver

.  No modification of any provision of this Agreement shall be binding unless in writing and executed by the party or parties sought to be bound thereby. Performance of or compliance with any covenant given herein or satisfaction of any condition to the obligations of either party hereunder may be waived by the party to whom such covenant is given or whom such condition is intended to benefit, except as otherwise provided in this Agreement or to the extent any such condition is required by law; provided, that, any such waiver must be in writing.

Binding Effect; Assignment

.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided, however, that neither this Agreement nor any rights, privileges, duties or obligations of the parties hereto may be assigned to any Person without the prior written consent of the other party.

Confidentiality

.  

(a)From and after the date hereof, the parties hereto and their Affiliates shall keep confidential the terms of this Agreement and the negotiations relating hereto and all documents and information obtained by a party from another party in connection with the transactions contemplated hereby, except (i) to the extent this Agreement and such negotiations need to be disclosed to obtain a regulatory approval, (ii) for disclosures made in accordance with the terms of this Agreement, and (iii) to the extent required by applicable law, regulations or rules of any national securities exchange. This Section shall survive any termination of this Agreement.

53

4832-5501-9850v.12 0058243-000353

(b)Except as otherwise required by law, or regulations or as otherwise permitted by this Agreement, the parties hereto shall each furnish to the other the text of all notices and communications, written or oral, proposed to be sent, transmitted, or filed by the furnishing party regarding the transactions contemplated hereby. Except as otherwise required by law, regulations or rules of any national securities exchange or as otherwise permitted by this Agreement, the furnishing party shall not send, transmit, or file such notices or communications or otherwise make them public unless and until the consent of the other party is received, which consent shall not be unreasonably withheld or delayed.  This Section shall survive any termination of this Agreement.

(c)Purchaser and Seller shall issue mutually agreed upon press releases on a mutually agreed date following execution of this Agreement.  Purchaser and Seller shall each furnish to the other copies of the text of all notices, advertisements, information or communications, written or oral, proposed to be sent or transmitted by the furnishing party to Branch Employees, Customers or to the public generally regarding the proposed or actual transfer of Deposit Liabilities, the Purchased Assets or the Assumed Liabilities and/or the purchase and sale of the Branches (including any public notices required to be given by law or regulation in connection with such transactions or applications for approval thereof), and the furnishing party shall not send or transmit such notices, advertisements, information or communications or otherwise make them public unless and until the prior consent of the other party shall have been received (such consent not to be unreasonably conditioned, withheld or delayed); provided, however, that nothing in this Section 16.6(c) shall prohibit any party from making any press release or announcement that its legal counsel reasonably deems necessary under law, if it makes a good faith effort to obtain the other party’s consent to the text of the press release or announcement before making it public.

Entire Agreement; Governing Law

.  This Agreement contains the entire agreement between the parties hereto with respect to the transactions covered and contemplated hereunder, and supersedes all prior agreements or understandings between the parties hereto relating to the subject matter hereof. This Agreement shall be governed by and construed in accordance with the laws of the State of Utah, without reference to conflicts or choice of law provisions.

Consent to Jurisdiction; Waiver of Jury Trial

.  EACH PARTY HERETO, TO THE EXTENT IT MAY LAWFULLY DO SO, HEREBY SUBMITS TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH, AS WELL AS TO THE JURISDICTION OF ALL COURTS FROM WHICH AN APPEAL MAY BE TAKEN OR OTHER REVIEW SOUGHT FROM THE AFORESAID COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF SUCH PARTY’S OBLIGATIONS UNDER OR WITH RESPECT TO THIS AGREEMENT OR ANY OF THE AGREEMENTS, INSTRUMENTS OR DOCUMENTS CONTEMPLATED HEREBY, AND EXPRESSLY WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE AS TO VENUE IN ANY OF SUCH COURTS.  EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY CONCERNED WITH THIS AGREEMENT OR ANY OF THE AGREEMENTS, INSTRUMENTS OR DOCUMENTS CONTEMPLATED HEREBY. NO PARTY HERETO, NOR ANY ASSIGNEE OR

54

4832-5501-9850v.12 0058243-000353

SUCCESSOR OF A PARTY HERETO SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER LITIGATION PROCEDURE BASED UPON, OR ARISING OUT OF, THIS AGREEMENT OR ANY OF THE AGREEMENTS, INSTRUMENTS OR DOCUMENTS CONTEMPLATED HEREBY. NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THIS PROVISION HAS BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND THIS PROVISION SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.

Severability

.  In the event that any provision of this Agreement shall be held invalid, illegal, or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions contained in this Agreement shall not in any way be affected or impaired thereby, and this Agreement shall otherwise remain in full force and effect.

Counterparts

.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties hereto.

Notices

.  All notices, consents, requests, instructions, approvals, waivers, stipulations and other communications provided for herein to be given by one party hereto to the other party shall be deemed validly given, made or served, in writing and delivered personally or sent by email, registered or certified mail, or overnight delivery, addressed as follows:

to Seller:

Banner Bank

Attention:  Marc Grescovich, Chief Executive Officer

3001 112th Avenue NE, Suite 100

Bellevue, WA  98004

Telephone:  (425) 576-4370

Email:  mgrescovich@bannerbank.com

Banner Bank

Attention:  Craig Miller, Executive Vice President and General Counsel

3001 112th Avenue NE, Suite 100

Bellevue, WA  98004

Telephone:  (425) 576-4322

Email:  craig.miller@bannerbank.com

and a copy to:

Davis Wright Tremaine LLP

Attention:  Ryan J. York

55

4832-5501-9850v.12 0058243-000353

1201 Third Avenue, Suite 2200

Seattle, WA 98101

Telephone:		(206) 757-8178
Email:	ryanyork@dwt.com

If to Purchaser:

People’s Intermountain Bank

Attention:  Rick Anderson

1 East Main Street

American Fork, UT 84003

Telephone: (801) 642-3289

Email: rick.anderson@bankaf.com

People’s Intermountain Bank

Attention:  Mark Olson

1 East Main Street

American Fork, UT 84003

Telephone: (801) 642-3137

Email: mark.olson@peoplesutah.com

with a copy to:

Dorsey & Whitney LLP

Attention: David Marx

111 South Main Street, 21st Floor

Salt Lake City, UT 84111-2176

Telephone:		(801) 933-7363
Email:	marx.david@dorsey.com

Interpretation

.  Article titles, headings to sections and any table of contents are inserted for convenience of reference only and are not intended to affect the meaning or interpretation hereof. The schedules and exhibits referred to herein shall be construed with and as an integral part of this Agreement to the same extent as if they were set forth verbatim herein. As used herein, “include,” “includes,” and “including” are deemed to be followed by “without limitation” whether or not they are in fact followed by such words or words of like import.  The parties acknowledge that each party and its counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation, construction and enforcement of this Agreement or any amendment, schedule or exhibit hereto.

Specific Performance

.  The parties hereto acknowledge that monetary damages could not adequately compensate either party hereto in the event of a breach of this Agreement by the other, that the non-breaching party would suffer irreparable harm in the event of such breach, (and more specifically, that irreparable damage would likewise occur if the transactions contemplated hereby were not consummated) and that the non-breaching party shall

56

4832-5501-9850v.12 0058243-000353

have, in addition to any other rights or remedies it may have at law or in equity, the right to seek specific performance and injunctive relief as a remedy for the enforcement hereof (including the parties’ obligation to consummate the transactions contemplated hereby, subject to the terms and conditions of the Agreement).

No Third Party Beneficiaries

.  Except for Persons entitled to indemnification pursuant to ARTICLE XIV, (a) the parties hereto intend that this Agreement shall not benefit or create any right or cause of action in or on behalf of any Person other than the parties hereto, and (b) no future or present employee or customer of either of the parties nor their Affiliates, successors or assigns or other Person shall be treated as a third party beneficiary in or under this Agreement.

[Signatures on following page.]

57

4832-5501-9850v.12 0058243-000353

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives, as of the day and year first above written.

BANNER BANK		PEOPLE’S INTERMOUNTAIN BANK
By:	/s/ Lloyd W. Baker	By:	/s/ Richard Beard
	Name: Lloyd W. Baker____		Name: _Richard Beard___________
	Title:  Executive Vice President_		Title: _CEO____________

58

4832-5501-9850v.7 0058243-000353

4822-7794-8235\6

4832-5501-9850v.12 0058243-000353

EX-31.1

Exhibit 31.1

CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Richard T. Beard, certify that:

1. I have reviewed this quarterly report on Form 10-Q of People’s Utah Bancorp.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 8, 2017	/s/ Richard T. Beard
	Richard T. Beard
	President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Wolfgang T. N. Muelleck, certify that:

1. I have reviewed this quarterly report on Form 10-Q of People’s Utah Bancorp.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 8, 2017	/s/ Wolfgang T. N. Muelleck
	Wolfgang T. N. Muelleck
	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of People’s Utah Bancorp (the “Company”) on Form 10-Q for the period ended June 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Richard T. Beard, President and Chief Executive Officer, and Wolfgang T. N. Muelleck, Executive Vice President and Chief Financial Officer, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to our knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 8, 2017	/s/ Richard T. Beard
	Richard T. Beard
	President and Chief Executive Officer (Principal Executive Officer)
August 8, 2017	/s/ Wolfgang T. N. Muelleck
	Wolfgang T. N. Muelleck
	EVP and Chief Financial Officer (Principal Financial Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Jul. 31, 2017
Document And Entity Information [Abstract]
Entity Registrant Name	PEOPLE'S UTAH BANCORP
Entity Central Index Key	0001636286
Document Type	10-Q
Document Period End Date	Jun. 30, 2017
Amendment Flag	false
Document Fiscal Year Focus	2017
Trading Symbol	PUB
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		17,958,487

XML

UNAUDITED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Cash and cash equivalents:
Cash and due from banks	$ 28,315	$ 26,524
Interest bearing deposits	26,027	37,958
Federal funds sold	3,093	3,456
Total cash and cash equivalents	57,435	67,938
Investment securities:
Available-for-sale, at fair value	325,172	335,609
Held-to-maturity, at historical cost	77,394	73,512
Total investment securities	402,566	409,121
Non-marketable equity securities	1,959	1,827
Loans held for sale	7,655	20,826
Loans:
Loans held for investment	1,201,391	1,119,877
Less allowance for loan losses	(17,271)	(16,715)
Total loans held for investment, net	1,184,120	1,103,162
Premises and equipment, net	23,551	21,926
Bank-owned life insurance	19,970	19,714
Deferred income tax assets	9,845	9,799
Accrued interest receivable	5,616	5,557
Other real estate owned	468	245
Other assets	5,190	5,866
Total assets	1,718,375	1,665,981
Deposits:
Non-interest bearing deposits	465,988	443,100
Interest bearing deposits	995,064	981,974
Total deposits	1,461,052	1,425,074
Short-term borrowings	3,302	3,199
Accrued interest payable	269	305
Other liabilities	13,850	8,886
Total liabilities	1,478,473	1,437,464
Commitments and contingencies
Shareholders’ equity:
Preferred shares, $0.01 par value: 3,000,000 shares authorized, no shares issued
Common shares, $0.01 par value: 30,000,000 shares authorized; 17,948,347 and 17,819,538 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively	179	178
Additional paid-in capital	69,623	68,657
Retained earnings	170,840	160,692
Accumulated other comprehensive loss	(740)	(1,010)
Total shareholders’ equity	239,902	228,517
Total liabilities and shareholders’ equity	$ 1,718,375	$ 1,665,981

XML

UNAUDITED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2017	Dec. 31, 2016
Statement Of Financial Position [Abstract]
Preferred shares, par value	$ 0.01	$ 0.01
Preferred shares, authorized	3,000,000	3,000,000
Preferred shares, issued	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	17,948,347	17,819,538
Common stock, shares outstanding	17,948,347	17,819,538

XML

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Interest income
Interest and fees on loans	$ 17,928	$ 16,420	$ 34,781	$ 32,271
Interest and dividends on investments	1,802	1,489	3,507	3,092
Total interest income	19,730	17,909	38,288	35,363
Interest expense	749	698	1,515	1,452
Net interest income	18,981	17,211	36,773	33,911
Provision for loan losses	900	225	1,100	425
Net interest income after provision for loan losses	18,081	16,986	35,673	33,486
Non-interest income
Mortgage banking	1,960	2,277	3,939	4,025
Card processing	1,208	1,136	2,332	2,167
Service charges on deposit accounts	578	531	1,114	1,044
Other operating	602	454	1,088	925
Total non-interest income	4,348	4,398	8,473	8,161
Non-interest expense
Salaries and employee benefits	7,762	7,959	15,729	15,843
Occupancy, equipment and depreciation	1,088	1,076	2,205	2,064
Data processing	661	740	1,336	1,447
Card processing	516	549	1,045	1,139
Marketing and advertising	349	290	611	459
FDIC premiums	130	188	256	383
Other	1,845	1,598	3,625	3,200
Total non-interest expense	12,351	12,400	24,807	24,535
Income before income tax expense	10,078	8,984	19,339	17,112
Income tax expense	3,584	3,407	6,324	6,292
Net income	$ 6,494	$ 5,577	$ 13,015	$ 10,820
Earnings per common share:
Basic	$ 0.37	$ 0.31	$ 0.73	$ 0.61
Diluted	$ 0.35	$ 0.31	$ 0.71	$ 0.60
Weighted average common shares outstanding:
Basic	17,937,926	17,738,182	17,911,125	17,685,235
Diluted	18,351,531	18,173,034	18,334,028	18,148,713

XML

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 6,494	$ 5,577	$ 13,015	$ 10,820
Other comprehensive income
Unrealized holding gains on securities available-for-sale	375	675	438	2,904
Tax effect	(143)	(258)	(168)	(1,110)
Unrealized holding gains on securities available-for-sale, net of tax	232	417	270	1,794
Total comprehensive income	$ 6,726	$ 5,994	$ 13,285	$ 12,614

XML

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Shares	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)
Balance, beginning at Dec. 31, 2015	$ 209,408	$ 176	$ 67,338	$ 142,223	$ (329)
Balance, beginning, Shares at Dec. 31, 2015		17,567,154
Comprehensive income	12,614			10,820	1,794
Cash dividends	(2,475)			(2,475)
Share-based compensation	252		252
Exercise of stock options	648	$ 2	646
Exercise of stock options, Shares		185,666
Balance, ending at Jun. 30, 2016	220,447	$ 178	68,236	150,568	1,465
Balance, ending, Shares at Jun. 30, 2016		17,752,820
Balance, beginning at Dec. 31, 2016	$ 228,517	$ 178	68,657	160,692	(1,010)
Balance, beginning, Shares at Dec. 31, 2016	17,819,538	17,819,538
Comprehensive income	$ 13,285			13,015	270
Cash dividends	(2,867)			(2,867)
Share-based compensation	218		218
Exercise of stock options	749	$ 1	748
Exercise of stock options, Shares		128,809
Balance, ending at Jun. 30, 2017	$ 239,902	$ 179	$ 69,623	$ 170,840	$ (740)
Balance, ending, Shares at Jun. 30, 2017	17,948,347	17,948,347

XML

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Statement Of Stockholders Equity [Abstract]
Cash dividends per share	$ 0.16	$ 0.14

XML

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash flows from operating activities:
Net income	$ 13,015	$ 10,820
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	1,100	425
Depreciation and amortization	1,267	1,290
Deferred income taxes	(214)
Net amortization of securities discounts and premiums	1,501	1,512
Increase in cash surrender value of bank owned life insurance	(256)	(278)
Share based compensation	218	252
Other	(159)	26
Gain on sale of loans held for sale	(2,838)	(3,033)
Originations of loans held for sale	(115,621)	(123,895)
Proceeds from sale of loans held for sale	131,630	132,960
Net changes in:
Accrued interest receivable	(59)	181
Other assets	676	554
Accrued interest payable	(36)	(11)
Other liabilities	4,964	3,177
Net cash provided by operating activities	35,188	23,980
Cash flows from investing activities:
Net change in loans held for investment	(82,558)	(47,920)
Purchase of available-for-sale securities	(24,599)	(12,997)
Purchase of held-to-maturity securities	(12,198)
Proceeds from maturities/sales of available-for-sale securities	34,350	66,721
Proceeds from maturities of held-to-maturity securities	7,939	4,143
Purchase of premises and equipment	(2,758)	(1,302)
Proceeds from sale of other real estate owned, net of improvements	302	133
Purchase of non-marketable equity securities	(2,368)	(2,663)
Proceeds from sale of non-marketable equity securities	2,236	3,080
Net cash (used in) provided by investing activities	(79,654)	9,195
Cash flows from financing activities:
Net increase in non-interest bearing deposits	22,888	21,487
Net increase in interest bearing deposits	13,090	15,691
Proceeds related to exercise of stock options	749	648
Net change in short-term borrowings	103	(24,349)
Cash dividends paid	(2,867)	(2,475)
Net cash provided by financing activities	33,963	11,002
Net change in cash and cash equivalents	(10,503)	44,177
Cash and cash equivalents, beginning of period	67,938	42,349
Cash and cash equivalents, end of period	57,435	86,526
Supplemental disclosures of cash flow information:
Cash paid for interest	1,551	1,285
Income taxes paid	6,217	5,610
Supplemental disclosures of non-cash transactions:
Reclassifications from loans to other real estate owned	468	237
Unrealized gains on securities available-for-sale	$ 438	$ 2,904

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2017

Basis Of Presentation [Abstract]

Basis of Presentation

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Basis of Presentation

People’s Utah Bancorp, Inc. (“PUB” or the “Company”) is a Utah corporation headquartered in American Fork, Utah. The Company’s subsidiary is People’s Intermountain Bank (“PIB” or the “Bank”), which includes two banking divisions doing business as (“dba”) Bank of American Fork (“BAF”) and Lewiston State Bank (“LSB”), an equipment leasing division dba GrowthFunding Equipment Finance and a mortgage division dba People’s Intermountain Bank Mortgage.  BAF and LSB have over 100 years of history and continue to do business as registered names of PIB.

The interim consolidated financial statements include the accounts of the Company together with its subsidiary Bank. All intercompany transactions and balances have been eliminated.

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial information. In the opinion of management, the interim statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows of the Company on a consolidated basis and all such adjustments are of a normal recurring nature. These financial statements and the accompanying notes should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2016, which are included in the Company’s 2016 Form 10-K.  Operating results for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017, or any other period.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of real estate acquired through foreclosure, deferred tax assets, and share-based compensation.

Earnings per share — Basic earnings per common share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares include shares that may be issued by the Company for outstanding stock options determined using the treasury stock method and for all outstanding restricted stock units (“RSU”).

Earnings per common share have been computed based on the following:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands, except share and per share data)	2017		2016		2017		2016
Numerator
Net income	$	6,494	$	5,577	$	13,015	$	10,820
Denominator
Weighted-average number of common shares outstanding		17,937,926		17,738,182		17,911,125		17,685,235
Incremental shares assumed for stock options and RSUs		413,605		434,852		422,903		463,478
Weighted-average number of dilutive shares outstanding		18,351,531		18,173,034		18,334,028		18,148,713
Basic earnings per common share	$	0.37	$	0.31	$	0.73	$	0.61
Diluted earnings per common share	$	0.35	$	0.31	$	0.71	$	0.60

Note 1 — Basis of Presentation – Continued

Reclassifications —Certain amounts in the prior period’s financial statements have been reclassified to conform to the current period’s presentation.

Impact of Recent Authoritative Accounting Guidance —The Accounting Standards Codification™ (“ASC”) is the Financial Accounting Standards Board’s (“FASB”) officially recognized source of authoritative GAAP applicable to all public and non-public non-governmental entities. Rules and interpretive releases of the SEC under the authority of the federal securities laws are also sources of authoritative GAAP for us as an SEC registrant. All other accounting literature is non-authoritative.

In June 2016, FASB amended FASB ASC Topic 326, Financial Instruments - Credit Losses. The amendments in this Update replace the current incurred loss model with a methodology that reflects expected credit losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. The amendments are effective for public business entities for the first interim and annual reporting periods beginning after December 15, 2019. The Company is currently evaluating the impact of these amendments to the Company’s financial position and results of operations and currently does not know or cannot reasonably quantify the impact of the adoption of the amendments as a result of the complexity and extensive changes from the amendments. The ALLL is a material estimate of the Company and given the change from an incurred loss model to a methodology that considers the credit loss over the life of the loan, there is the potential for an increase in the ALLL at adoption date. The Company is anticipating a significant change in the processes and procedures to calculate the ALLL, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model. The Company will also develop new procedures for determining an allowance for credit losses relating to held-to-maturity investment securities. In addition, the current accounting policy and procedures for other-than-temporary impairment on available-for-sale investment securities will be replaced with an allowance approach. The Company is expecting to begin developing and implementing processes and procedures during the next two years to ensure it is fully compliant with the amendments at adoption date. For additional information on the ALLL see Note 3

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (“ASU 2016-09”) which addresses certain aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification of awards on the statement of cash flows. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016 and for interim periods within such periods. Early application is permitted.  The Company implemented ASU 2016-09 during the annual reporting period of 2016.

XML

Investment Securities

6 Months Ended

Jun. 30, 2017

Investments Debt And Equity Securities [Abstract]

Investment Securities

Note 2 — Investment Securities

Amortized cost and estimated fair value of investment securities available-for-sale are summarized as follows:

					Gross Unrealized Losses
					Less			12
			Gross		Than			Months
	Amortized		Unrealized		12			or			Fair
(Dollars in thousands)	Cost		Gains		Months			Longer			Value
As of June 30, 2017
U.S. Government-sponsored securities	$	117,202	$	151	$	(544	)	$	(35	)	$	116,774
Municipal securities		18,117		385		(27	)		—			18,475
Mortgage-backed securities		181,051		767		(1,096	)		(604	)		180,118
Corporate securities		10,000		55		—			(250	)		9,805
	$	326,370	$	1,358	$	(1,667	)	$	(889	)	$	325,172
As of December 31, 2016
U.S. Government-sponsored securities	$	119,202	$	71	$	(669	)	$	(1	)	$	118,603
Municipal securities		25,176		401		(58	)		—			25,519
Mortgage-backed securities		182,867		679		(1,111	)		(614	)		181,821
Corporate securities		10,000		28		(32	)		(330	)		9,666
	$	337,245	$	1,179	$	(1,870	)	$	(945	)	$	335,609

Note 2 — Investment Securities – continued

Amortized cost and estimated fair value of investment securities held-to-maturity are as follows:

					Gross Unrealized Losses
					Less			12
			Gross		Than			Months
	Amortized		Unrealized		12			or			Fair
(Dollars in thousands)	Cost		Gains		Months			Longer			Value
As of June 30, 2017
Municipal securities	$	77,394	$	505	$	(177	)	$	(13	)	$	77,709
As of December 31, 2016
Municipal securities	$	73,512	$	105	$	(579	)	$	(38	)	$	73,000

The amortized cost and estimated fair value of investment securities that are available-for-sale and held-to-maturity at June 30, 2017, by contractual maturity, are as follows:

	Available-for-sale				Held-to-maturity
	Amortized		Fair		Amortized		Fair
(Dollars in thousands)	Cost		Value		Cost		Value
Securities maturing in:
One year or less	$	26,252	$	26,265	$	7,774	$	7,774
After one year through five years		102,578		102,260		45,458		45,636
After five years through ten years		89,162		88,789		17,132		17,246
After ten years		108,378		107,858		7,030		7,053
	$	326,370	$	325,172	$	77,394	$	77,709

Actual  maturities may differ from contractual maturities because issuers may have the right to call obligations with or without penalties and other securities may experience pre-payments.

As of June 30, 2017 and December 31, 2016, the Company held 254 and 302 investment securities, respectively, with fair value less than amortized cost. Management evaluated these investment securities and determined that the decline in value is temporary and related to the change in market interest rates since purchase. The decline in value is not related to any company or industry specific event. The Company anticipates full recovery of the amortized cost with respect to these securities at maturity, or sooner in the event of a more favorable market interest rate environment.

XML

Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2017

Receivables [Abstract]

Loans and Allowance for Loan Losses

Note 3 — Loans and Allowance for Loan Losses

Loans are summarized as follows:

	June 30,			December 31,
(Dollars in thousands)	2017			2016
Loans held for investment:
Commercial real estate loans:
Real estate term	$	643,756		$	582,029
Construction and land development		251,741			240,120
Total commercial real estate loans		895,497			822,149
Commercial and industrial loans		221,901			213,260
Consumer loans:
Residential and home equity		73,791			72,959
Consumer and other		14,936			15,678
Total consumer loans		88,727			88,637
Total gross loans		1,206,125			1,124,046
Less:
Net deferred loan fees		(4,734	)		(4,169	)
Total loans held for investment		1,201,391			1,119,877
Less: allowance for loan losses		(17,271	)		(16,715	)
Total loans held for investment, net	$	1,184,120		$	1,103,162

Changes in the allowance for loan losses (“ALLL”) are as follows:

	Three Months Ended June 30, 2017
	Real			Construction		Commercial			Residential			Consumer
	Estate			and Land		and			and			and
(Dollars in thousands)	Term			Development		Industrial			Home Equity			Other			Total
Balance at beginning of period	$	7,149		$	4,683	$	4,222		$	529		$	61		$	16,644
Additions: Provisions for loan losses		181			394		342			(28	)		11			900
Deductions:
Gross loan charge-offs		(350	)		—		(114	)		—			(48	)		(512	)
Recoveries		177			—		39			2			21			239
Net loan charge-offs		(173	)		—		(75	)		2			(27	)		(273	)
Balance at end of period	$	7,157		$	5,077	$	4,489		$	503		$	45		$	17,271

	Three Months Ended June 30, 2016
	Real		Construction		Commercial			Residential			Consumer
	Estate		and Land		and			and			and
(Dollars in thousands)	Term		Development		Industrial			Home Equity			Other			Total
Balance at beginning of period	$	6,692	$	4,344	$	3,921		$	595		$	171		$	15,723
Additions: Provisions for loan losses		172		351		(224	)		(44	)		(30	)		225
Deductions:
Gross loan charge-offs		—		—		—			—			(56	)		(56	)
Recoveries		5		30		71			77			77			260
Net loan charge-offs		5		30		71			77			21			204
Balance at end of period	$	6,869	$	4,725	$	3,768		$	628		$	162		$	16,152

 Note 3 — Loans and Allowance for Loan Losses – Continued 

	Six Months Ended June 30, 2017
	Real			Construction			Commercial			Residential			Consumer
	Estate			and Land			and			and			and
(Dollars in thousands)	Term			Development			Industrial			Home Equity			Other			Total
Balance at beginning of period	$	6,770		$	5,449		$	3,718		$	617		$	161		$	16,715
Additions: Provisions for loan losses		556			(451	)		966			84			(55	)		1,100
Deductions:
Gross loan charge-offs		(350	)		—			(272	)		(338	)		(113	)		(1,073	)
Recoveries		181			79			77			140			52			529
Net loan charge-offs		(169	)		79			(195	)		(198	)		(61	)		(544	)
Balance at end of period	$	7,157		$	5,077		$	4,489		$	503		$	45		$	17,271

	Six Months Ended June 30, 2016
	Real		Construction		Commercial			Residential			Consumer
	Estate		and Land		and			and			and
(Dollars in thousands)	Term		Development		Industrial			Home Equity			Other			Total
Balance at beginning of period	$	6,783	$	3,984	$	3,941		$	603		$	246		$	15,557
Additions: Provisions for loan losses		77		695		(209	)		(56	)		(82	)		425
Deductions:
Gross loan charge-offs		—		—		(72	)		—			(120	)		(192	)
Recoveries		9		46		108			81			118			362
Net loan charge-offs		9		46		36			81			(2	)		170
Balance at end of period	$	6,869	$	4,725	$	3,768		$	628		$	162		$	16,152

Non-accrual loans are summarized as follows:

	June 30,		December 31,
(Dollars in thousands)	2017		2016
Non-accrual loans, not troubled debt restructured:
Real estate term	$	4,089	$	2,386
Construction and land development		826		378
Commercial and industrial		1,513		1,211
Residential and home equity		116		142
Consumer and other		—		14
Total non-accrual loans, not troubled debt restructured		6,544		4,131
Troubled debt restructured loans, non-accrual:
Real estate term		663		808
Construction and land development		383		396
Commercial and industrial		—		—
Residential and home equity		—		—
Consumer and other		—		—
Total troubled debt restructured loans, non-accrual		1,046		1,204
Total non-accrual loans	$	7,590	$	5,335

Note 3 — Loans and Allowance for Loan Losses – Continued

Troubled debt restructured loans are summarized as follows:

	June 30,		December 31,
(Dollars in thousands)	2017		2016
Accruing troubled debt restructured loans	$	4,162	$	5,572
Non-accrual troubled debt restructured loans		1,046		1,204
Total troubled debt restructured loans	$	5,208	$	6,776

A restructured loan is considered a troubled debt restructured loan (“TDR”), if the Company, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession in terms or a below-market interest rate to the debtor that it would not otherwise consider. Each TDR loan is separately negotiated with the borrower and includes terms and conditions that reflect the borrower’s prospective ability to service the debt as modified.

Current and past due loans held for investment (accruing and non-accruing) are summarized as follows:

	June 30, 2017
			30-89 Days		90+ Days				Total		Total
(Dollars in thousands)	Current		Past Due		Past Due		Non-accrual		Past Due		Loans
Commercial real estate:
Real estate term	$	639,004	$	-	$	—	$	4,752	$	4,752	$	643,756
Construction and land development		249,428		1,104		—		1,209		2,313		251,741
Total commercial real estate		888,432		1,104		—		5,961		7,065		895,497
Commercial and industrial		220,047		341		—		1,513		1,854		221,901
Consumer:
Residential and home equity		73,602		73		—		116		189		73,791
Consumer and other		14,567		348		21		-		369		14,936
Total consumer		88,169		421		21		116		558		88,727
Total gross loans	$	1,196,648	$	1,866	$	21	$	7,590	$	9,477	$	1,206,125

	December 31, 2016
			30-89 Days		90+ Days				Total		Total
(Dollars in thousands)	Current		Past Due		Past Due		Non-accrual		Past Due		Loans
Commercial real estate:
Real estate term	$	577,134	$	1,701	$	—	$	3,194	$	4,895	$	582,029
Construction and land development		237,433		1,913		—		774		2,687		240,120
Total commercial real estate		814,567		3,614		—		3,968		7,582		822,149
Commercial and industrial		211,143		906		—		1,211		2,117		213,260
Consumer:
Residential and home equity		71,719		1,098		—		142		1,240		72,959
Consumer and other		15,168		474		22		14		510		15,678
Total consumer		86,887		1,572		22		156		1,750		88,637
Total gross loans	$	1,112,597	$	6,092	$	22	$	5,335	$	11,449	$	1,124,046

Credit Quality Indicators:

In addition to past due and non-accrual criteria, the Company also analyzes loans using a loan grading system. Performance-based grading follows the Company’s definitions of Pass, Special Mention, Substandard and Doubtful, which are consistent with published definitions of regulatory risk classifications.

Note 3 — Loans and Allowance for Loan Losses – Continued

Definitions of Pass, Special Mention, Substandard and Doubtful are summarized as follows:

Pass: A Pass asset is higher quality and does not fit any of the other categories described below. The likelihood of loss is considered remote.

Special Mention: A Special Mention asset has potential weaknesses that may be temporary or, if left uncorrected, may result in a loss. While concerns exist, the Company is currently protected and loss is considered unlikely and not imminent.

Substandard: A Substandard asset is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have well defined weaknesses and are characterized by the distinct possibility that the Company may sustain some loss if deficiencies are not corrected.

Doubtful: A Doubtful asset has all the weaknesses inherent in a Substandard asset with the added characteristics that the weaknesses make collection or liquidation in full highly questionable.

For Consumer loans, the Company generally assigns internal risk grades similar to those described above based on payment performance.

Outstanding loan balances (accruing and non-accruing) categorized by these credit quality indicators are summarized as follows:

	June 30, 2017
			Special		Substandard		Total		Total
(Dollars in thousands)	Pass		Mention		and Doubtful		Loans		Allowance
Commercial real estate:
Real estate term	$	622,611	$	13,871	$	7,274	$	643,756	$	7,157
Construction and land development		247,157		2,081		2,503		251,741		5,077
Total commercial real estate		869,768		15,952		9,777		895,497		12,234
Commercial and industrial		212,211		4,938		4,752		221,901		4,489
Consumer loans:
Residential and home equity		71,041		1,717		1,033		73,791		503
Consumer and other		14,822		—		114		14,936		45
Total consumer		85,863		1,717		1,147		88,727		548
Total	$	1,167,842	$	22,607	$	15,676	$	1,206,125	$	17,271

	December 31, 2016
			Special		Substandard		Total		Total
(Dollars in thousands)	Pass		Mention		and Doubtful		Loans		Allowance
Commercial real estate:
Real estate term	$	565,550	$	10,609	$	5,870	$	582,029	$	6,770
Construction and land development		234,359		2,222		3,539		240,120		5,449
Total commercial real estate		799,909		12,831		9,409		822,149		12,219
Commercial and industrial		205,933		2,266		5,061		213,260		3,718
Consumer loans:
Residential and home equity		69,287		1,869		1,803		72,959		617
Consumer and other		15,542		—		136		15,678		161
Total consumer		84,829		1,869		1,939		88,637		778
Total	$	1,090,671	$	16,966	$	16,409	$	1,124,046	$	16,715

Note 3 — Loans and Allowance for Loan Losses – Continued

The ALLL and outstanding loan balances reviewed according to the Company’s impairment method are summarized as follows:

	June 30, 2017
	Real		Construction		Commercial		Residential		Consumer
	Estate		and Land		and		and		and
(Dollars in thousands)	Term		Development		Industrial		Home Equity		Other		Total
Allowance for loan losses:
Individually evaluated for impairment	$	61	$	67	$	528	$	72	$	—	$	728
Collectively evaluated for impairment		7,096		5,010		3,961		431		45		16,543
Total	$	7,157	$	5,077	$	4,489	$	503	$	45	$	17,271
Outstanding loan balances:
Individually evaluated for impairment	$	4,854	$	2,327	$	2,684	$	634	$	—	$	10,499
Collectively evaluated for impairment		638,902		249,414		219,217		73,157		14,936		1,195,626
Total gross loans	$	643,756	$	251,741	$	221,901	$	73,791	$	14,936	$	1,206,125

	December 31, 2016
	Real		Construction		Commercial		Residential		Consumer
	Estate		and Land		and		and		and
(Dollars in thousands)	Term		Development		Industrial		Home Equity		Other		Total
Allowance for loan losses:
Individually evaluated for impairment	$	189	$	67	$	323	$	75	$	—	$	654
Collectively evaluated for impairment		6,581		5,382		3,395		542		161		16,061
Total	$	6,770	$	5,449	$	3,718	$	617	$	161	$	16,715
Outstanding loan balances:
Individually evaluated for impairment	$	5,778	$	2,995	$	6,045	$	1,476	$	—	$	16,294
Collectively evaluated for impairment		576,251		237,125		207,215		71,483		15,678		1,107,752
Total gross loans	$	582,029	$	240,120	$	213,260	$	72,959	$	15,678	$	1,124,046

Information on impaired loans is summarized as follows:

	June 30, 2017
			Recorded Investment
	Unpaid						Total
	Principal		With No		With		Recorded		Related
(Dollars in thousands)	Balance		Allowance		Allowance		Investment		Allowance
Commercial real estate:
Real estate term	$	4,940	$	3,291	$	1,563	$	4,854	$	61
Construction and land development		3,280		2,123		204		2,327		67
Total commercial real estate		8,220		5,414		1,767		7,181		128
Commercial and industrial		3,477		940		1,744		2,684		528
Consumer loans:
Residential and home equity		634		232		402		634		72
Consumer and other		—		—		—		—		—
Total consumer		634		232		402		634		72
Total	$	12,331	$	6,586	$	3,913	$	10,499	$	728

 Note 3 — Loans and Allowance for Loan Losses – Continued

	December 31, 2016
			Recorded Investment
	Unpaid						Total
	Principal		With No		With		Recorded		Related
(Dollars in thousands)	Balance		Allowance		Allowance		Investment		Allowance
Commercial real estate:
Real estate term	$	5,864	$	2,979	$	2,799	$	5,778	$	189
Construction and land development		3,949		2,790		205		2,995		67
Total commercial real estate		9,813		5,769		3,004		8,773		256
Commercial and industrial		6,937		4,458		1,587		6,045		323
Consumer loans:
Residential and home equity		1,476		1,071		405		1,476		75
Consumer and other		—		—		—		—		—
Total consumer		1,476		1,071		405		1,476		75
Total	$	18,226	$	11,298	$	4,996	$	16,294	$	654

The interest income recognized on impaired loans was as follows:  

	Three Months Ended
	June 30, 2017				June 30, 2016
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
(Dollars in thousands)	Investment		Recognition		Investment		Recognition
Commercial real estate:
Real estate term	$	4,734	$	6	$	8,416	$	74
Construction and land development		2,872		32		3,767		47
Total commercial real estate		7,606		38		12,183		121
Commercial and industrial		4,280		36		7,934		97
Consumer loans:
Residential and home equity		850		10		1,794		12
Consumer and other		—		—		15		—
Total consumer		850		10		1,809		12
Total	$	12,736	$	84	$	21,926	$	230

	Six Months Ended
	June 30, 2017				June 30, 2016
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
(Dollars in thousands)	Investment		Recognition		Investment		Recognition
Commercial real estate:
Real estate term	$	5,316	$	36	$	9,106	$	153
Construction and land development		2,660		63		3,865		102
Total commercial real estate		7,976		99		12,971		255
Commercial and industrial		4,365		90		7,243		185
Consumer loans:
Residential and home equity		1,055		23		1,980		34
Consumer and other		—		—		15		—
Total consumer		1,055		23		1,995		34
Total	$	13,396	$	212	$	22,209	$	474

Note 3 — Loans and Allowance for Loan Losses – Concluded

Loans and Deposits to affiliates— The Company has entered into loan transactions with certain directors, affiliated companies and executive committee members (“affiliates”). Such transactions were made in the ordinary course of business on substantially the same terms and conditions, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other customers, and did not, in the opinion of management, involve more than normal credit risk or present other unfavorable features. Total outstanding loans with affiliates were approximately $3,327,000 and $330,000 as of June 30, 2017 and December 31, 2016, respectively.  Available lines of credit for loans and credit cards to affiliates were approximately $509,000 as of June 30, 2017.  Deposits from affiliates were $7.6 million and $7.8 million as of June 30, 2017 and December 31, 2016, respectively.

XML

Commitments and Contingencies

6 Months Ended

Jun. 30, 2017

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 4 — Commitments and Contingencies

Litigation contingencies— The Company is involved in various claims, legal actions and complaints which arise in the ordinary course of business. In the Company’s opinion, all such matters are adequately covered by insurance, are without merit or are of such kind, or involve such amounts, that unfavorable disposition would not have a material adverse effect on the financial condition or results of operations of the Company.

Commitments to extend credit — In the normal course of business, the Company has outstanding commitments and contingent liabilities, such as commitments to extend credit and unused credit card lines, which are not included in the accompanying consolidated financial statements. The Company’s exposure to credit loss in the event of non-performance by other parties to the financial instruments for commitments to extend credit and unused credit card lines is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheets.

Contractual amounts of off-balance sheet financial instruments were as follows:

	June 30,		December 31,
(Dollars in thousands)	2017		2016
Commitments to extend credit, including unsecured    commitments of $12,185 and $11,230 as of    June 30, 2017 and December 31, 2016,    respectively	$	516,291	$	445,645
Stand-by letters of credit and bond commitments,    including unsecured commitments of $566 and    $660 as of June 30, 2017 and December 31,    2016, respectively		29,233		29,332
Unused credit card lines, all unsecured		25,337		25,803

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments to extend credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer.

Unused credit card lines are commitments for possible future extensions of credit to existing customers. These lines of credit are uncollateralized and usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed.

XML

Fair Value

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value

Note 5 — Fair Value

Fair value measurements — Fair value represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, GAAP has established a hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows:

Level 1	Quoted prices in active markets for identical assets or liabilities.
Level 2	Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data.
Level 3	Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

The following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation methodology:

Investment securities, available-for-sale — Where quoted prices are available in an active market, securities are classified within Level 1 of the hierarchy. Level 1 includes securities that have quoted prices in an active market for identical assets. If quoted market prices are not available, then fair values are estimated using pricing models, quoted prices of securities with similar characteristics or discounted cash flows, and accordingly, are classified as Level 2 or 3. The Company has categorized its available-for-sale investment securities as Level 1 or 2.

Impaired loans and other real estate owned — Fair value applies to loans and other real estate owned measured for impairment. Impaired loans are measured at the fair value of the loan’s collateral (if collateral dependent) or net present value of future cash flows (if not collateral dependent). Fair value of the loan’s collateral is determined by appraisals or independent valuation which is then adjusted for the cost related to liquidation of the collateral. The Company has categorized its impaired loans and other real estate owned as Level 2.    

Assets measured at fair value are summarized as follows:

(Dollars in thousands)	Level 1		Level 2		Level 3		Total
As of June 30, 2017
Fair valued on a recurring basis:
Investment securities available-for-sale	$	1,002	$	324,170	$	—	$	325,172
Fair valued on a non-recurring basis:
Impaired loans		—		3,185		—		3,185
As of December 31, 2016
Fair valued on a recurring basis:
Investment securities available-for-sale	$	1,008	$	334,601	$	—	$	335,609
Fair valued on a non-recurring basis:
Impaired loans		—		4,342		—		4,342

Note 5 — Fair Value - Continued

Fair value of financial instruments — The following table summarizes carrying amounts, estimated fair values and assumptions used to estimate fair values of financial instruments:

	Carrying		Estimated
(Dollars in thousands)	Value		Fair Value
As of June 30, 2017
Financial Assets:
Net loans held for investment	$	1,184,120	$	1,184,297
Financial Liabilities:
Interest bearing deposits		995,064		995,098
As of December 31, 2016
Financial Assets:
Net loans held for investment	$	1,103,162	$	1,101,890
Financial Liabilities:
Interest bearing deposits		981,974		982,380

The above summary excludes financial assets and liabilities for which carrying value approximates fair value. For financial assets, these include cash and cash equivalents, held-to-maturity securities (see Note 2), loans held for sale, bank-owned life insurance, accrued interest receivable, and FHLB stock. For financial liabilities, these include non-interest bearing deposits, short-term borrowings, and accrued interest payable. Also excluded from the summary are financial instruments recorded at fair value on a recurring basis, as previously described.

Fair values of off-balance sheet commitments such as lending commitments, standby letters of credit and guarantees are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of the fees as of June 30, 2017 and December 31, 2016 were insignificant.

The following methods and assumptions were used to estimate the fair value of financial instruments:

Net loans held for investment — The fair value is estimated by discounting the future cash flows and estimated prepayments using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining term. Some loan types were valued at carrying value because of their floating rate or expected maturity characteristics.

Interest bearing deposits — The fair value of interest bearing deposits is estimated by discounting the estimated future cash flows using the rates currently offered for deposits with similar remaining maturities.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in the above methodologies and assumptions could significantly affect the estimates. Further, certain financial instruments and all non-financial instruments are excluded from the applicable disclosure requirements. Therefore, the fair value amounts shown in the table do not, by themselves, represent the underlying value of the Company as a whole.

XML

Income Taxes

6 Months Ended

Jun. 30, 2017

Income Tax Disclosure [Abstract]

Income Taxes

Note 6 — Income Taxes

Income tax expense was $3.6 million and $3.4 million for the three months ended June 30, 2017 and 2016, respectively. The Company’s effective tax rate for the second quarter of 2017 was 35.6% compared with 37.9% in the second quarter of 2016. The tax rate in the second quarter of 2017 is lower than the same quarter in 2016 due primarily to adjustments in the expected recoverability of certain tax credits.

Income tax expense was $6.3 million and $6.3 million for the six months ended June 30, 2017 and 2016, respectively. The Company’s effective tax rate was 32.7% and 36.8% for the six months ended June 30, 2017 and 2016, respectively.  The tax rate in 2017 is lower than 2016 due primarily to tax-deductible stock compensation expense and the reversal of a liability related to an unrecognized tax benefit totaling, approximately $600,000 in taxable benefits.

XML

Regulatory Capital Matters

6 Months Ended

Jun. 30, 2017

Banking And Thrift [Abstract]

Regulatory Capital Matters

Note 7 — Regulatory Capital Matters

The consolidated Tier 1 Leverage ratio increased from 13.71% at December 31, 2016 to 14.15% as of June 30, 2017. Federal Reserve Board Regulations require maintenance of certain minimum reserve balances based on certain average deposits which as of June 30, 2017 and December 31, 2016 were $9.9 million and $9.1 million, respectively. The Company’s Board of Directors may declare a cash or stock dividend out of retained earnings provided the regulatory minimum capital ratios are met. The Company plans to maintain capital ratios that meet the well-capitalized standards per the regulations and, therefore, plans to limit dividends to amounts that are appropriate to maintain those well-capitalized regulatory capital ratios.

XML

Incentive Share-Based Plan and Other Employee Benefits

6 Months Ended

Jun. 30, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Incentive Share-Based Plan and Other Employee Benefits

Note 8 — Incentive Share-Based Plan and Other Employee Benefits  

In June 2014, the Board of Directors (“Board”) and shareholders of the Company approved a share-based incentive plan (“the Plan”). The Plan provides for various share-based incentive awards including incentive share-based options, non-qualified share-based options, restricted shares, and stock appreciation rights to be granted to officers, directors and other key employees. The maximum aggregate number of shares that may be issued under the Plan is 800,000 common shares. The share-based awards are granted to participants under the Plan at a price not less than the fair value on the date of grant and for terms of up to ten years. The Plan also allows for granting of share-based awards to directors and consultants who are not employees of the Company.

During the six months ended June 30, 2017, the Company granted options for the purchase of 769 common shares, which have a weighted average exercise price of $26.26 per share and a weighted average fair value as of the date of grant of $4.867 per share.  Additionally, the Company granted 104 restricted stock units (“RSU”) at a weighted-average fair value of $25.00 per unit.  The options and RSU’s generally vest over periods from one to three years. The Company recorded share-based compensation expense of $218,000 and $252,000 for the six months ended June 30, 2017 and 2016, respectively.

XML

Announced Transactions

6 Months Ended

Jun. 30, 2017

Business Combinations [Abstract]

Announced Transactions

Note 9 — Announced Transactions

Town & Country Bank:

On May 31, 2017, the Company entered into a definitive agreement to acquire Town & Country Bank Inc. (“Town & Country Bank”), a community based bank in St. George Utah, whereby Town & Country Bank will be merged with and into PIB, a wholly owned subsidiary of PUB.  Under the terms of the agreement, each outstanding share will receive $4.28 in cash and 0.2978 PUB common shares.  Based on the closing price of $25.55 for PUB shares on May 30, 2017, the transaction would result in an aggregate value of $20.9 million or $11.89 per fully diluted Town & Country Bank common share. $1.5 million of the cash to be paid to shareholders will be held in escrow for eighteen months after closing pending the resolution of certain contingencies.  Town & Country Bank shareholders may also receive additional cash consideration at closing subject to certain closing conditions.  

The transaction was unanimously approved by the boards of directors of both companies. The transaction is expected to close in the fourth quarter of 2017 subject to Town & Country Bank’s shareholder approval, required regulatory approval and the satisfaction of other customary closing conditions.  The Company’s primary reasons for the transaction are to solidify its market share in the St. George, Utah market, expand its customer base to enhance total revenues and leverage operating costs through economies of scale.  

Town & Country Bank currently operates one branch in St. George and one loan production office in Sandy, UT.  The Town & Country Bank office and PIB’s Bank of American Fork branch in St. George are expected to be consolidated in January 2018. Upon consolidation, the combined division will operate under the name “People’s Town & Country Bank.” Bank of American Fork branches in other areas will not be affected by this St. George-area name change. Town & Country Bank’s Sandy loan production office is expected to be consolidated with the current Bank of American Fork Sandy branch and will operate under the name Bank of American Fork. This merger is part of a larger bank-wide strategy to establish a community-banking network with local names throughout Utah and potentially in adjoining states.  As of March 31, 2017, Town & Country Bank had total assets of $135.1 million, gross loans of $97.3 million and total deposits of $119.7 million.

Banner Bank Utah Branches:

On July 27, 2017, the Company signed a purchase and assumption agreement to acquire approximately $266 million in loans and seven Utah branch locations with approximately $159 million in deposits from Banner Corporation’s banking subsidiary, Banner Bank.  PIB will operate the branches under the name of Bank of American Fork, a division of PIB.  The seven branches are located in Salt Lake City, Provo, South Jordan, Woods Cross, Orem, Salem, and Springville.  The Woods Cross and Orem branches will be consolidated into the existing Bank of American Fork Bountiful and Orem branches, respectively.  The transaction is expected to close in the fourth quarter of 2017 and is subject to certain closing conditions, including receipt of regulatory approval.

XML

Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2017

Basis Of Presentation [Abstract]

Schedule of Earnings Per Common Share

Earnings per common share have been computed based on the following:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands, except share and per share data)	2017		2016		2017		2016
Numerator
Net income	$	6,494	$	5,577	$	13,015	$	10,820
Denominator
Weighted-average number of common shares outstanding		17,937,926		17,738,182		17,911,125		17,685,235
Incremental shares assumed for stock options and RSUs		413,605		434,852		422,903		463,478
Weighted-average number of dilutive shares outstanding		18,351,531		18,173,034		18,334,028		18,148,713
Basic earnings per common share	$	0.37	$	0.31	$	0.73	$	0.61
Diluted earnings per common share	$	0.35	$	0.31	$	0.71	$	0.60

XML

Investment Securities (Tables)

6 Months Ended

Jun. 30, 2017

Investments Debt And Equity Securities [Abstract]

Summary of Amortized Cost and Estimated Fair Value of Investment Securities Available for Sale

Amortized cost and estimated fair value of investment securities available-for-sale are summarized as follows:

					Gross Unrealized Losses
					Less			12
			Gross		Than			Months
	Amortized		Unrealized		12			or			Fair
(Dollars in thousands)	Cost		Gains		Months			Longer			Value
As of June 30, 2017
U.S. Government-sponsored securities	$	117,202	$	151	$	(544	)	$	(35	)	$	116,774
Municipal securities		18,117		385		(27	)		—			18,475
Mortgage-backed securities		181,051		767		(1,096	)		(604	)		180,118
Corporate securities		10,000		55		—			(250	)		9,805
	$	326,370	$	1,358	$	(1,667	)	$	(889	)	$	325,172
As of December 31, 2016
U.S. Government-sponsored securities	$	119,202	$	71	$	(669	)	$	(1	)	$	118,603
Municipal securities		25,176		401		(58	)		—			25,519
Mortgage-backed securities		182,867		679		(1,111	)		(614	)		181,821
Corporate securities		10,000		28		(32	)		(330	)		9,666
	$	337,245	$	1,179	$	(1,870	)	$	(945	)	$	335,609

Summary of Amortized Cost and Estimated Fair Value of Investment Securities Held-to-Maturity

Note 2 — Investment Securities – continued

Amortized cost and estimated fair value of investment securities held-to-maturity are as follows:

					Gross Unrealized Losses
					Less			12
			Gross		Than			Months
	Amortized		Unrealized		12			or			Fair
(Dollars in thousands)	Cost		Gains		Months			Longer			Value
As of June 30, 2017
Municipal securities	$	77,394	$	505	$	(177	)	$	(13	)	$	77,709
As of December 31, 2016
Municipal securities	$	73,512	$	105	$	(579	)	$	(38	)	$	73,000

Amortized Cost and Estimated Fair Value of Investment Securities that are Available-for-Sale and Held-to-Maturity by Contractual Maturity

The amortized cost and estimated fair value of investment securities that are available-for-sale and held-to-maturity at June 30, 2017, by contractual maturity, are as follows:

	Available-for-sale				Held-to-maturity
	Amortized		Fair		Amortized		Fair
(Dollars in thousands)	Cost		Value		Cost		Value
Securities maturing in:
One year or less	$	26,252	$	26,265	$	7,774	$	7,774
After one year through five years		102,578		102,260		45,458		45,636
After five years through ten years		89,162		88,789		17,132		17,246
After ten years		108,378		107,858		7,030		7,053
	$	326,370	$	325,172	$	77,394	$	77,709

XML

Loans and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2017

Receivables [Abstract]

Summary of Loans

Loans are summarized as follows:

	June 30,			December 31,
(Dollars in thousands)	2017			2016
Loans held for investment:
Commercial real estate loans:
Real estate term	$	643,756		$	582,029
Construction and land development		251,741			240,120
Total commercial real estate loans		895,497			822,149
Commercial and industrial loans		221,901			213,260
Consumer loans:
Residential and home equity		73,791			72,959
Consumer and other		14,936			15,678
Total consumer loans		88,727			88,637
Total gross loans		1,206,125			1,124,046
Less:
Net deferred loan fees		(4,734	)		(4,169	)
Total loans held for investment		1,201,391			1,119,877
Less: allowance for loan losses		(17,271	)		(16,715	)
Total loans held for investment, net	$	1,184,120		$	1,103,162

Summary of Changes in Allowance for Loan Losses

Changes in the allowance for loan losses (“ALLL”) are as follows:

	Three Months Ended June 30, 2017
	Real			Construction		Commercial			Residential			Consumer
	Estate			and Land		and			and			and
(Dollars in thousands)	Term			Development		Industrial			Home Equity			Other			Total
Balance at beginning of period	$	7,149		$	4,683	$	4,222		$	529		$	61		$	16,644
Additions: Provisions for loan losses		181			394		342			(28	)		11			900
Deductions:
Gross loan charge-offs		(350	)		—		(114	)		—			(48	)		(512	)
Recoveries		177			—		39			2			21			239
Net loan charge-offs		(173	)		—		(75	)		2			(27	)		(273	)
Balance at end of period	$	7,157		$	5,077	$	4,489		$	503		$	45		$	17,271

	Three Months Ended June 30, 2016
	Real		Construction		Commercial			Residential			Consumer
	Estate		and Land		and			and			and
(Dollars in thousands)	Term		Development		Industrial			Home Equity			Other			Total
Balance at beginning of period	$	6,692	$	4,344	$	3,921		$	595		$	171		$	15,723
Additions: Provisions for loan losses		172		351		(224	)		(44	)		(30	)		225
Deductions:
Gross loan charge-offs		—		—		—			—			(56	)		(56	)
Recoveries		5		30		71			77			77			260
Net loan charge-offs		5		30		71			77			21			204
Balance at end of period	$	6,869	$	4,725	$	3,768		$	628		$	162		$	16,152

 Note 3 — Loans and Allowance for Loan Losses – Continued 

	Six Months Ended June 30, 2017
	Real			Construction			Commercial			Residential			Consumer
	Estate			and Land			and			and			and
(Dollars in thousands)	Term			Development			Industrial			Home Equity			Other			Total
Balance at beginning of period	$	6,770		$	5,449		$	3,718		$	617		$	161		$	16,715
Additions: Provisions for loan losses		556			(451	)		966			84			(55	)		1,100
Deductions:
Gross loan charge-offs		(350	)		—			(272	)		(338	)		(113	)		(1,073	)
Recoveries		181			79			77			140			52			529
Net loan charge-offs		(169	)		79			(195	)		(198	)		(61	)		(544	)
Balance at end of period	$	7,157		$	5,077		$	4,489		$	503		$	45		$	17,271

	Six Months Ended June 30, 2016
	Real		Construction		Commercial			Residential			Consumer
	Estate		and Land		and			and			and
(Dollars in thousands)	Term		Development		Industrial			Home Equity			Other			Total
Balance at beginning of period	$	6,783	$	3,984	$	3,941		$	603		$	246		$	15,557
Additions: Provisions for loan losses		77		695		(209	)		(56	)		(82	)		425
Deductions:
Gross loan charge-offs		—		—		(72	)		—			(120	)		(192	)
Recoveries		9		46		108			81			118			362
Net loan charge-offs		9		46		36			81			(2	)		170
Balance at end of period	$	6,869	$	4,725	$	3,768		$	628		$	162		$	16,152

Summary of Nonaccrual Loans

Non-accrual loans are summarized as follows:

	June 30,		December 31,
(Dollars in thousands)	2017		2016
Non-accrual loans, not troubled debt restructured:
Real estate term	$	4,089	$	2,386
Construction and land development		826		378
Commercial and industrial		1,513		1,211
Residential and home equity		116		142
Consumer and other		—		14
Total non-accrual loans, not troubled debt restructured		6,544		4,131
Troubled debt restructured loans, non-accrual:
Real estate term		663		808
Construction and land development		383		396
Commercial and industrial		—		—
Residential and home equity		—		—
Consumer and other		—		—
Total troubled debt restructured loans, non-accrual		1,046		1,204
Total non-accrual loans	$	7,590	$	5,335

Summary of Troubled Debt Restructured Loans

Note 3 — Loans and Allowance for Loan Losses – Continued

Troubled debt restructured loans are summarized as follows:

	June 30,		December 31,
(Dollars in thousands)	2017		2016
Accruing troubled debt restructured loans	$	4,162	$	5,572
Non-accrual troubled debt restructured loans		1,046		1,204
Total troubled debt restructured loans	$	5,208	$	6,776

Summary of Current and Past Due Loans Held For Investment (Accruing And Non-Accruing)

Current and past due loans held for investment (accruing and non-accruing) are summarized as follows:

	June 30, 2017
			30-89 Days		90+ Days				Total		Total
(Dollars in thousands)	Current		Past Due		Past Due		Non-accrual		Past Due		Loans
Commercial real estate:
Real estate term	$	639,004	$	-	$	—	$	4,752	$	4,752	$	643,756
Construction and land development		249,428		1,104		—		1,209		2,313		251,741
Total commercial real estate		888,432		1,104		—		5,961		7,065		895,497
Commercial and industrial		220,047		341		—		1,513		1,854		221,901
Consumer:
Residential and home equity		73,602		73		—		116		189		73,791
Consumer and other		14,567		348		21		-		369		14,936
Total consumer		88,169		421		21		116		558		88,727
Total gross loans	$	1,196,648	$	1,866	$	21	$	7,590	$	9,477	$	1,206,125

	December 31, 2016
			30-89 Days		90+ Days				Total		Total
(Dollars in thousands)	Current		Past Due		Past Due		Non-accrual		Past Due		Loans
Commercial real estate:
Real estate term	$	577,134	$	1,701	$	—	$	3,194	$	4,895	$	582,029
Construction and land development		237,433		1,913		—		774		2,687		240,120
Total commercial real estate		814,567		3,614		—		3,968		7,582		822,149
Commercial and industrial		211,143		906		—		1,211		2,117		213,260
Consumer:
Residential and home equity		71,719		1,098		—		142		1,240		72,959
Consumer and other		15,168		474		22		14		510		15,678
Total consumer		86,887		1,572		22		156		1,750		88,637
Total gross loans	$	1,112,597	$	6,092	$	22	$	5,335	$	11,449	$	1,124,046

Summary of Outstanding Loan Balances (Accruing and Non - Accruing) Categorized by Credit Quality Indicators

Outstanding loan balances (accruing and non-accruing) categorized by these credit quality indicators are summarized as follows:

	June 30, 2017
			Special		Substandard		Total		Total
(Dollars in thousands)	Pass		Mention		and Doubtful		Loans		Allowance
Commercial real estate:
Real estate term	$	622,611	$	13,871	$	7,274	$	643,756	$	7,157
Construction and land development		247,157		2,081		2,503		251,741		5,077
Total commercial real estate		869,768		15,952		9,777		895,497		12,234
Commercial and industrial		212,211		4,938		4,752		221,901		4,489
Consumer loans:
Residential and home equity		71,041		1,717		1,033		73,791		503
Consumer and other		14,822		—		114		14,936		45
Total consumer		85,863		1,717		1,147		88,727		548
Total	$	1,167,842	$	22,607	$	15,676	$	1,206,125	$	17,271

	December 31, 2016
			Special		Substandard		Total		Total
(Dollars in thousands)	Pass		Mention		and Doubtful		Loans		Allowance
Commercial real estate:
Real estate term	$	565,550	$	10,609	$	5,870	$	582,029	$	6,770
Construction and land development		234,359		2,222		3,539		240,120		5,449
Total commercial real estate		799,909		12,831		9,409		822,149		12,219
Commercial and industrial		205,933		2,266		5,061		213,260		3,718
Consumer loans:
Residential and home equity		69,287		1,869		1,803		72,959		617
Consumer and other		15,542		—		136		15,678		161
Total consumer		84,829		1,869		1,939		88,637		778
Total	$	1,090,671	$	16,966	$	16,409	$	1,124,046	$	16,715

Summary of Information on Impaired Loans

Note 3 — Loans and Allowance for Loan Losses – Continued

The ALLL and outstanding loan balances reviewed according to the Company’s impairment method are summarized as follows:

	June 30, 2017
	Real		Construction		Commercial		Residential		Consumer
	Estate		and Land		and		and		and
(Dollars in thousands)	Term		Development		Industrial		Home Equity		Other		Total
Allowance for loan losses:
Individually evaluated for impairment	$	61	$	67	$	528	$	72	$	—	$	728
Collectively evaluated for impairment		7,096		5,010		3,961		431		45		16,543
Total	$	7,157	$	5,077	$	4,489	$	503	$	45	$	17,271
Outstanding loan balances:
Individually evaluated for impairment	$	4,854	$	2,327	$	2,684	$	634	$	—	$	10,499
Collectively evaluated for impairment		638,902		249,414		219,217		73,157		14,936		1,195,626
Total gross loans	$	643,756	$	251,741	$	221,901	$	73,791	$	14,936	$	1,206,125

	December 31, 2016
	Real		Construction		Commercial		Residential		Consumer
	Estate		and Land		and		and		and
(Dollars in thousands)	Term		Development		Industrial		Home Equity		Other		Total
Allowance for loan losses:
Individually evaluated for impairment	$	189	$	67	$	323	$	75	$	—	$	654
Collectively evaluated for impairment		6,581		5,382		3,395		542		161		16,061
Total	$	6,770	$	5,449	$	3,718	$	617	$	161	$	16,715
Outstanding loan balances:
Individually evaluated for impairment	$	5,778	$	2,995	$	6,045	$	1,476	$	—	$	16,294
Collectively evaluated for impairment		576,251		237,125		207,215		71,483		15,678		1,107,752
Total gross loans	$	582,029	$	240,120	$	213,260	$	72,959	$	15,678	$	1,124,046

Information on impaired loans is summarized as follows:

	June 30, 2017
			Recorded Investment
	Unpaid						Total
	Principal		With No		With		Recorded		Related
(Dollars in thousands)	Balance		Allowance		Allowance		Investment		Allowance
Commercial real estate:
Real estate term	$	4,940	$	3,291	$	1,563	$	4,854	$	61
Construction and land development		3,280		2,123		204		2,327		67
Total commercial real estate		8,220		5,414		1,767		7,181		128
Commercial and industrial		3,477		940		1,744		2,684		528
Consumer loans:
Residential and home equity		634		232		402		634		72
Consumer and other		—		—		—		—		—
Total consumer		634		232		402		634		72
Total	$	12,331	$	6,586	$	3,913	$	10,499	$	728

 Note 3 — Loans and Allowance for Loan Losses – Continued

	December 31, 2016
			Recorded Investment
	Unpaid						Total
	Principal		With No		With		Recorded		Related
(Dollars in thousands)	Balance		Allowance		Allowance		Investment		Allowance
Commercial real estate:
Real estate term	$	5,864	$	2,979	$	2,799	$	5,778	$	189
Construction and land development		3,949		2,790		205		2,995		67
Total commercial real estate		9,813		5,769		3,004		8,773		256
Commercial and industrial		6,937		4,458		1,587		6,045		323
Consumer loans:
Residential and home equity		1,476		1,071		405		1,476		75
Consumer and other		—		—		—		—		—
Total consumer		1,476		1,071		405		1,476		75
Total	$	18,226	$	11,298	$	4,996	$	16,294	$	654

The interest income recognized on impaired loans was as follows:  

	Three Months Ended
	June 30, 2017				June 30, 2016
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
(Dollars in thousands)	Investment		Recognition		Investment		Recognition
Commercial real estate:
Real estate term	$	4,734	$	6	$	8,416	$	74
Construction and land development		2,872		32		3,767		47
Total commercial real estate		7,606		38		12,183		121
Commercial and industrial		4,280		36		7,934		97
Consumer loans:
Residential and home equity		850		10		1,794		12
Consumer and other		—		—		15		—
Total consumer		850		10		1,809		12
Total	$	12,736	$	84	$	21,926	$	230

	Six Months Ended
	June 30, 2017				June 30, 2016
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
(Dollars in thousands)	Investment		Recognition		Investment		Recognition
Commercial real estate:
Real estate term	$	5,316	$	36	$	9,106	$	153
Construction and land development		2,660		63		3,865		102
Total commercial real estate		7,976		99		12,971		255
Commercial and industrial		4,365		90		7,243		185
Consumer loans:
Residential and home equity		1,055		23		1,980		34
Consumer and other		—		—		15		—
Total consumer		1,055		23		1,995		34
Total	$	13,396	$	212	$	22,209	$	474

XML

Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2017

Commitments And Contingencies Disclosure [Abstract]

Summary of Contractual Amounts of Off-balance Sheet Financial Instruments

Contractual amounts of off-balance sheet financial instruments were as follows:

	June 30,		December 31,
(Dollars in thousands)	2017		2016
Commitments to extend credit, including unsecured    commitments of $12,185 and $11,230 as of    June 30, 2017 and December 31, 2016,    respectively	$	516,291	$	445,645
Stand-by letters of credit and bond commitments,    including unsecured commitments of $566 and    $660 as of June 30, 2017 and December 31,    2016, respectively		29,233		29,332
Unused credit card lines, all unsecured		25,337		25,803

XML

Fair Value (Tables)

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Summary of Asset Measured at Fair Value

Assets measured at fair value are summarized as follows:

(Dollars in thousands)	Level 1		Level 2		Level 3		Total
As of June 30, 2017
Fair valued on a recurring basis:
Investment securities available-for-sale	$	1,002	$	324,170	$	—	$	325,172
Fair valued on a non-recurring basis:
Impaired loans		—		3,185		—		3,185
As of December 31, 2016
Fair valued on a recurring basis:
Investment securities available-for-sale	$	1,008	$	334,601	$	—	$	335,609
Fair valued on a non-recurring basis:
Impaired loans		—		4,342		—		4,342

Fair Value of Financial Instruments

Fair value of financial instruments — The following table summarizes carrying amounts, estimated fair values and assumptions used to estimate fair values of financial instruments:

	Carrying		Estimated
(Dollars in thousands)	Value		Fair Value
As of June 30, 2017
Financial Assets:
Net loans held for investment	$	1,184,120	$	1,184,297
Financial Liabilities:
Interest bearing deposits		995,064		995,098
As of December 31, 2016
Financial Assets:
Net loans held for investment	$	1,103,162	$	1,101,890
Financial Liabilities:
Interest bearing deposits		981,974		982,380

XML

Basis of Presentation - Additional Information (Details)	Jun. 30, 2017 Division
People's Intermountain Bank [Member]
Basis Of Presentation [Line Items]
Number of banking divisions	2

XML

Basis of Presentation - Schedule of Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Numerator
Net income	$ 6,494	$ 5,577	$ 13,015	$ 10,820
Denominator
Weighted-average number of common shares outstanding	17,937,926	17,738,182	17,911,125	17,685,235
Incremental shares assumed for stock options and RSUs	413,605	434,852	422,903	463,478
Weighted-average number of dilutive shares outstanding	18,351,531	18,173,034	18,334,028	18,148,713
Basic earnings per common share	$ 0.37	$ 0.31	$ 0.73	$ 0.61
Diluted earnings per common share	$ 0.35	$ 0.31	$ 0.71	$ 0.60

XML

Investment Securities - Summary of Amortized Cost and Estimated Fair Value of Investment Securities Available for Sale (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Schedule Of Available For Sale Securities [Line Items]
Available-for-sale, Amortized Cost	$ 326,370	$ 337,245
Available-for-sale, Gross Unrealized Gains	1,358	1,179
Available-for-sale, Gross Unrealized Losses, Less Than 12 Months	(1,667)	(1,870)
Available-for-sale, Gross Unrealized Losses, 12 Months or Longer	(889)	(945)
Available-for-sale, Fair Value	325,172	335,609
U.S. Government Sponsored Securities
Schedule Of Available For Sale Securities [Line Items]
Available-for-sale, Amortized Cost	117,202	119,202
Available-for-sale, Gross Unrealized Gains	151	71
Available-for-sale, Gross Unrealized Losses, Less Than 12 Months	(544)	(669)
Available-for-sale, Gross Unrealized Losses, 12 Months or Longer	(35)	(1)
Available-for-sale, Fair Value	116,774	118,603
Mortgage-backed Securities
Schedule Of Available For Sale Securities [Line Items]
Available-for-sale, Amortized Cost	181,051	182,867
Available-for-sale, Gross Unrealized Gains	767	679
Available-for-sale, Gross Unrealized Losses, Less Than 12 Months	(1,096)	(1,111)
Available-for-sale, Gross Unrealized Losses, 12 Months or Longer	(604)	(614)
Available-for-sale, Fair Value	180,118	181,821
Municipal Securities
Schedule Of Available For Sale Securities [Line Items]
Available-for-sale, Amortized Cost	18,117	25,176
Available-for-sale, Gross Unrealized Gains	385	401
Available-for-sale, Gross Unrealized Losses, Less Than 12 Months	(27)	(58)
Available-for-sale, Fair Value	18,475	25,519
Corporate Securities
Schedule Of Available For Sale Securities [Line Items]
Available-for-sale, Amortized Cost	10,000	10,000
Available-for-sale, Gross Unrealized Gains	55	28
Available-for-sale, Gross Unrealized Losses, Less Than 12 Months		(32)
Available-for-sale, Gross Unrealized Losses, 12 Months or Longer	(250)	(330)
Available-for-sale, Fair Value	$ 9,805	$ 9,666

XML

Investment Securities - Summary of Amortized Cost and Estimated Fair Value of Investment Securities Held-to-Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Schedule Of Held To Maturity Securities [Line Items]
Held-to-maturity, Amortized Cost	$ 77,394	$ 73,512
Held-to-maturity, Fair Value	77,709
Municipal Securities
Schedule Of Held To Maturity Securities [Line Items]
Held-to-maturity, Amortized Cost	77,394	73,512
Held-to-maturity, Gross Unrealized Gains	505	105
Held-to-maturity, Gross Unrealized Losses, Less Than 12 Months	(177)	(579)
Held-to-maturity, Gross Unrealized Losses, 12 Months or Longer	(13)	(38)
Held-to-maturity, Fair Value	$ 77,709	$ 73,000

XML

Investment Securities - Amortized Cost and Estimated Fair Value of Investment Securities that are Available-for-Sale and Held-to-Maturity by Contractual Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Available-for-sale Securities by Maturity, Amortized Cost
Available-for-sale, Securities maturing in one year or less, Amortized cost	$ 26,252
Available-for-sale, Securities maturing in After one year through five years, Amortized cost	102,578
Available-for-sale, Securities maturing in After five years through ten years, Amortized cost	89,162
Available-for-sale, Securities maturing in After ten years, Amortized cost	108,378
Available-for-sale, Amortized Cost	326,370	$ 337,245
Available-for-sale Securities by Maturity, Fair Value
Available-for-sale, Securities maturing in one year or less, Fair Value	26,265
Available-for-sale, Securities maturing in After one year through five years, Fair Value	102,260
Available-for-sale, Securities maturing in After five years through ten years, Fair Value	88,789
Available-for-sale, Securities maturing in After ten years, Fair Value	107,858
Available-for-sale, Fair Value	325,172	335,609
Held-to-maturity Securities by Maturity, Amortized Cost
Held-to-maturity, Securities maturing in one year or less, Amortized Cost	7,774
Held-to-maturity, Securities maturing in After one year through five years, Amortized Cost	45,458
Held-to-maturity, Securities maturing in After five years through ten years, Amortized Cost	17,132
Held-to-maturity, Securities maturing in After ten years, Amortized Cost	7,030
Held-to-maturity, Amortized Cost	77,394	$ 73,512
Held-to-maturity Securities by Maturity, Fair Value
Held-to-maturity, Securities maturing in one year or less, Fair Value	7,774
Held-to-maturity, Securities maturing in After one year through five years, Fair Value	45,636
Held-to-maturity, Securities maturing in After five years through ten years, Fair Value	17,246
Held-to-maturity, Securities maturing in After ten years, Fair Value	7,053
Held-to-maturity, Fair Value	$ 77,709

XML

Investment Securities - Additional Information (Details) - Securities	Jun. 30, 2017	Dec. 31, 2016
Investments Debt And Equity Securities [Abstract]
Number of investment securities with fair value less than amortized cost	254	302

XML

Loans and Allowance for Loan Losses - Summary of Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015
Accounts Notes And Loans Receivable [Line Items]
Gross loans held for investment	$ 1,206,125		$ 1,124,046
Net deferred loan fees	(4,734)		(4,169)
Total loans held for investment	1,201,391		1,119,877
Less allowance for loan losses	(17,271)	$ (16,644)	(16,715)	$ (16,152)	$ (15,723)	$ (15,557)
Total loans held for investment, net	1,184,120		1,103,162
Real Estate Term
Accounts Notes And Loans Receivable [Line Items]
Gross loans held for investment	643,756		582,029
Less allowance for loan losses	(7,157)	(7,149)	(6,770)	(6,869)	(6,692)	(6,783)
Construction and Land Development
Accounts Notes And Loans Receivable [Line Items]
Gross loans held for investment	251,741		240,120
Less allowance for loan losses	(5,077)	(4,683)	(5,449)	(4,725)	(4,344)	(3,984)
Residential and Home Equity
Accounts Notes And Loans Receivable [Line Items]
Gross loans held for investment	73,791		72,959
Less allowance for loan losses	(503)	(529)	(617)	(628)	(595)	(603)
Consumer and Other
Accounts Notes And Loans Receivable [Line Items]
Gross loans held for investment	14,936		15,678
Less allowance for loan losses	(45)	(61)	(161)	(162)	(171)	(246)
Commercial Real Estate
Accounts Notes And Loans Receivable [Line Items]
Gross loans held for investment	895,497		822,149
Less allowance for loan losses	(12,234)		(12,219)
Commercial Real Estate | Real Estate Term
Accounts Notes And Loans Receivable [Line Items]
Gross loans held for investment	643,756		582,029
Less allowance for loan losses	(7,157)		(6,770)
Commercial Real Estate | Construction and Land Development
Accounts Notes And Loans Receivable [Line Items]
Gross loans held for investment	251,741		240,120
Less allowance for loan losses	(5,077)		(5,449)
Commercial and Industrial
Accounts Notes And Loans Receivable [Line Items]
Gross loans held for investment	221,901		213,260
Less allowance for loan losses	(4,489)	$ (4,222)	(3,718)	$ (3,768)	$ (3,921)	$ (3,941)
Consumer
Accounts Notes And Loans Receivable [Line Items]
Gross loans held for investment	88,727		88,637
Less allowance for loan losses	(548)		(778)
Consumer | Residential and Home Equity
Accounts Notes And Loans Receivable [Line Items]
Gross loans held for investment	73,791		72,959
Less allowance for loan losses	(503)		(617)
Consumer | Consumer and Other
Accounts Notes And Loans Receivable [Line Items]
Gross loans held for investment	14,936		15,678
Less allowance for loan losses	$ (45)		$ (161)

XML

Loans and Allowance for Loan Losses - Summary of Changes in Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Financing Receivable Allowance For Credit Losses [Line Items]
Balance at beginning of period	$ 16,644	$ 15,723	$ 16,715	$ 15,557
Provision for loan losses	900	225	1,100	425
Gross loan charge-offs	(512)	(56)	(1,073)	(192)
Recoveries	239	260	529	362
Net loan charge-offs	(273)	204	(544)	170
Balance at end of period	17,271	16,152	17,271	16,152
Real Estate Term
Financing Receivable Allowance For Credit Losses [Line Items]
Balance at beginning of period	7,149	6,692	6,770	6,783
Provision for loan losses	181	172	556	77
Gross loan charge-offs	(350)		(350)
Recoveries	177	5	181	9
Net loan charge-offs	(173)	5	(169)	9
Balance at end of period	7,157	6,869	7,157	6,869
Construction and Land Development
Financing Receivable Allowance For Credit Losses [Line Items]
Balance at beginning of period	4,683	4,344	5,449	3,984
Provision for loan losses	394	351	(451)	695
Recoveries		30	79	46
Net loan charge-offs		30	79	46
Balance at end of period	5,077	4,725	5,077	4,725
Residential and Home Equity
Financing Receivable Allowance For Credit Losses [Line Items]
Balance at beginning of period	529	595	617	603
Provision for loan losses	(28)	(44)	84	(56)
Gross loan charge-offs			(338)
Recoveries	2	77	140	81
Net loan charge-offs	2	77	(198)	81
Balance at end of period	503	628	503	628
Consumer and Other
Financing Receivable Allowance For Credit Losses [Line Items]
Balance at beginning of period	61	171	161	246
Provision for loan losses	11	(30)	(55)	(82)
Gross loan charge-offs	(48)	(56)	(113)	(120)
Recoveries	21	77	52	118
Net loan charge-offs	(27)	21	(61)	(2)
Balance at end of period	45	162	45	162
Commercial and Industrial
Financing Receivable Allowance For Credit Losses [Line Items]
Balance at beginning of period	4,222	3,921	3,718	3,941
Provision for loan losses	342	(224)	966	(209)
Gross loan charge-offs	(114)		(272)	(72)
Recoveries	39	71	77	108
Net loan charge-offs	(75)	71	(195)	36
Balance at end of period	$ 4,489	$ 3,768	$ 4,489	$ 3,768

XML

Loans and Allowance for Loan Losses - Summary of Non Accrual Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Financing Receivable Allowance For Credit Losses [Line Items]
Non-accrual loans, not troubled debt restructured	$ 6,544	$ 4,131
Troubled debt restructured loans, non-accrual	1,046	1,204
Total non-accrual loans	7,590	5,335
Real Estate Term
Financing Receivable Allowance For Credit Losses [Line Items]
Non-accrual loans, not troubled debt restructured	4,089	2,386
Troubled debt restructured loans, non-accrual	663	808
Construction and Land Development
Financing Receivable Allowance For Credit Losses [Line Items]
Non-accrual loans, not troubled debt restructured	826	378
Troubled debt restructured loans, non-accrual	383	396
Commercial and Industrial Loans
Financing Receivable Allowance For Credit Losses [Line Items]
Non-accrual loans, not troubled debt restructured	1,513	1,211
Residential and Home Equity
Financing Receivable Allowance For Credit Losses [Line Items]
Non-accrual loans, not troubled debt restructured	$ 116	142
Consumer and Other
Financing Receivable Allowance For Credit Losses [Line Items]
Non-accrual loans, not troubled debt restructured		$ 14

XML

Loans and Allowance for Loan Losses - Summary of Troubled Debt Restructured Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Loans And Leases Receivable Disclosure [Abstract]
Accruing troubled debt restructured loans	$ 4,162	$ 5,572
Non-accrual troubled debt restructured loans	1,046	1,204
Total troubled debt restructured loans	$ 5,208	$ 6,776

XML

Loans and Allowance for Loan Losses - Summary of Current and Past Due Loans Held For Investment (Accruing And Non-Accruing) (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Financing Receivable Recorded Investment Past Due [Line Items]
Current	$ 1,196,648	$ 1,112,597
30-89 Days Past Due	1,866	6,092
90+ Days Past Due	21	22
Non-accrual	7,590	5,335
Total Past-Due	9,477	11,449
Total loans	1,206,125	1,124,046
Real Estate Term
Financing Receivable Recorded Investment Past Due [Line Items]
Total loans	643,756	582,029
Construction and Land Development
Financing Receivable Recorded Investment Past Due [Line Items]
Total loans	251,741	240,120
Residential and Home Equity
Financing Receivable Recorded Investment Past Due [Line Items]
Total loans	73,791	72,959
Consumer and Other
Financing Receivable Recorded Investment Past Due [Line Items]
Total loans	14,936	15,678
Commercial Real Estate
Financing Receivable Recorded Investment Past Due [Line Items]
Current	888,432	814,567
30-89 Days Past Due	1,104	3,614
Non-accrual	5,961	3,968
Total Past-Due	7,065	7,582
Total loans	895,497	822,149
Commercial Real Estate | Real Estate Term
Financing Receivable Recorded Investment Past Due [Line Items]
Current	639,004	577,134
30-89 Days Past Due		1,701
Non-accrual	4,752	3,194
Total Past-Due	4,752	4,895
Total loans	643,756	582,029
Commercial Real Estate | Construction and Land Development
Financing Receivable Recorded Investment Past Due [Line Items]
Current	249,428	237,433
30-89 Days Past Due	1,104	1,913
Non-accrual	1,209	774
Total Past-Due	2,313	2,687
Total loans	251,741	240,120
Commercial and Industrial
Financing Receivable Recorded Investment Past Due [Line Items]
Current	220,047	211,143
30-89 Days Past Due	341	906
Non-accrual	1,513	1,211
Total Past-Due	1,854	2,117
Total loans	221,901	213,260
Consumer
Financing Receivable Recorded Investment Past Due [Line Items]
Current	88,169	86,887
30-89 Days Past Due	421	1,572
90+ Days Past Due	21	22
Non-accrual	116	156
Total Past-Due	558	1,750
Total loans	88,727	88,637
Consumer | Residential and Home Equity
Financing Receivable Recorded Investment Past Due [Line Items]
Current	73,602	71,719
30-89 Days Past Due	73	1,098
Non-accrual	116	142
Total Past-Due	189	1,240
Total loans	73,791	72,959
Consumer | Consumer and Other
Financing Receivable Recorded Investment Past Due [Line Items]
Current	14,567	15,168
30-89 Days Past Due	348	474
90+ Days Past Due	21	22
Non-accrual		14
Total Past-Due	369	510
Total loans	$ 14,936	$ 15,678

XML

Loans and Allowance for Loan Losses - Summary of Outstanding Loan Balances (Accruing and Non - Accruing) Categorized by Credit Quality Indicators (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	$ 1,206,125		$ 1,124,046
Total Allowance	17,271	$ 16,644	16,715	$ 16,152	$ 15,723	$ 15,557
Real Estate Term
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	643,756		582,029
Total Allowance	7,157	7,149	6,770	6,869	6,692	6,783
Construction and Land Development
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	251,741		240,120
Total Allowance	5,077	4,683	5,449	4,725	4,344	3,984
Residential and Home Equity
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	73,791		72,959
Total Allowance	503	529	617	628	595	603
Consumer and Other
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	14,936		15,678
Total Allowance	45	61	161	162	171	246
Commercial Real Estate
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	895,497		822,149
Total Allowance	12,234		12,219
Commercial Real Estate | Real Estate Term
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	643,756		582,029
Total Allowance	7,157		6,770
Commercial Real Estate | Construction and Land Development
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	251,741		240,120
Total Allowance	5,077		5,449
Commercial and Industrial
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	221,901		213,260
Total Allowance	4,489	$ 4,222	3,718	$ 3,768	$ 3,921	$ 3,941
Consumer
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	88,727		88,637
Total Allowance	548		778
Consumer | Residential and Home Equity
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	73,791		72,959
Total Allowance	503		617
Consumer | Consumer and Other
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	14,936		15,678
Total Allowance	45		161
Pass
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	1,167,842		1,090,671
Pass | Commercial Real Estate
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	869,768		799,909
Pass | Commercial Real Estate | Real Estate Term
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	622,611		565,550
Pass | Commercial Real Estate | Construction and Land Development
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	247,157		234,359
Pass | Commercial and Industrial
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	212,211		205,933
Pass | Consumer
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	85,863		84,829
Pass | Consumer | Residential and Home Equity
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	71,041		69,287
Pass | Consumer | Consumer and Other
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	14,822		15,542
Special Mention
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	22,607		16,966
Special Mention | Commercial Real Estate
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	15,952		12,831
Special Mention | Commercial Real Estate | Real Estate Term
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	13,871		10,609
Special Mention | Commercial Real Estate | Construction and Land Development
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	2,081		2,222
Special Mention | Commercial and Industrial
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	4,938		2,266
Special Mention | Consumer
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	1,717		1,869
Special Mention | Consumer | Residential and Home Equity
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	1,717		1,869
Substandard and Doubtful
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	15,676		16,409
Substandard and Doubtful | Commercial Real Estate
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	9,777		9,409
Substandard and Doubtful | Commercial Real Estate | Real Estate Term
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	7,274		5,870
Substandard and Doubtful | Commercial Real Estate | Construction and Land Development
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	2,503		3,539
Substandard and Doubtful | Commercial and Industrial
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	4,752		5,061
Substandard and Doubtful | Consumer
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	1,147		1,939
Substandard and Doubtful | Consumer | Residential and Home Equity
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	1,033		1,803
Substandard and Doubtful | Consumer | Consumer and Other
Financing Receivable Allowance For Credit Losses [Line Items]
Total Loans	$ 114		$ 136

XML

Loans and Allowance for Loan Losses - Summary of ALLL And Outstanding Loan Balances According To The Company's Impairment Method (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for loan losses, Individually evaluated for impairment	$ 728		$ 654
Allowance for loan losses, Collectively evaluated for impairment	16,543		16,061
Allowance for loan losses, Total	17,271	$ 16,644	16,715	$ 16,152	$ 15,723	$ 15,557
Outstanding loan balances, Individually evaluated for impairment	10,499		16,294
Outstanding loan balances, Collectively evaluated for impairment	1,195,626		1,107,752
Total loans	1,206,125		1,124,046
Real Estate Term
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for loan losses, Individually evaluated for impairment	61		189
Allowance for loan losses, Collectively evaluated for impairment	7,096		6,581
Allowance for loan losses, Total	7,157	7,149	6,770	6,869	6,692	6,783
Outstanding loan balances, Individually evaluated for impairment	4,854		5,778
Outstanding loan balances, Collectively evaluated for impairment	638,902		576,251
Total loans	643,756		582,029
Construction and Land Development
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for loan losses, Individually evaluated for impairment	67		67
Allowance for loan losses, Collectively evaluated for impairment	5,010		5,382
Allowance for loan losses, Total	5,077	4,683	5,449	4,725	4,344	3,984
Outstanding loan balances, Individually evaluated for impairment	2,327		2,995
Outstanding loan balances, Collectively evaluated for impairment	249,414		237,125
Total loans	251,741		240,120
Residential and Home Equity
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for loan losses, Individually evaluated for impairment	72		75
Allowance for loan losses, Collectively evaluated for impairment	431		542
Allowance for loan losses, Total	503	529	617	628	595	603
Outstanding loan balances, Individually evaluated for impairment	634		1,476
Outstanding loan balances, Collectively evaluated for impairment	73,157		71,483
Total loans	73,791		72,959
Consumer and Other
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for loan losses, Collectively evaluated for impairment	45		161
Allowance for loan losses, Total	45	61	161	162	171	246
Outstanding loan balances, Collectively evaluated for impairment	14,936		15,678
Total loans	14,936		15,678
Commercial and Industrial
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for loan losses, Individually evaluated for impairment	528		323
Allowance for loan losses, Collectively evaluated for impairment	3,961		3,395
Allowance for loan losses, Total	4,489	$ 4,222	3,718	$ 3,768	$ 3,921	$ 3,941
Outstanding loan balances, Individually evaluated for impairment	2,684		6,045
Outstanding loan balances, Collectively evaluated for impairment	219,217		207,215
Total loans	$ 221,901		$ 213,260

XML

Loans and Allowance for Loan Losses - Summary of Information On Impaired Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Financing Receivable Impaired [Line Items]
Unpaid Principal Balance	$ 12,331	$ 18,226
Recorded investment With No Allowance	6,586	11,298
Recorded investment With Allowance	3,913	4,996
Total Recorded Investment	10,499	16,294
Related Allowance	728	654
Commercial Real Estate
Financing Receivable Impaired [Line Items]
Unpaid Principal Balance	8,220	9,813
Recorded investment With No Allowance	5,414	5,769
Recorded investment With Allowance	1,767	3,004
Total Recorded Investment	7,181	8,773
Related Allowance	128	256
Commercial Real Estate | Real Estate Term
Financing Receivable Impaired [Line Items]
Unpaid Principal Balance	4,940	5,864
Recorded investment With No Allowance	3,291	2,979
Recorded investment With Allowance	1,563	2,799
Total Recorded Investment	4,854	5,778
Related Allowance	61	189
Commercial Real Estate | Construction and Land Development
Financing Receivable Impaired [Line Items]
Unpaid Principal Balance	3,280	3,949
Recorded investment With No Allowance	2,123	2,790
Recorded investment With Allowance	204	205
Total Recorded Investment	2,327	2,995
Related Allowance	67	67
Commercial and Industrial
Financing Receivable Impaired [Line Items]
Unpaid Principal Balance	3,477	6,937
Recorded investment With No Allowance	940	4,458
Recorded investment With Allowance	1,744	1,587
Total Recorded Investment	2,684	6,045
Related Allowance	528	323
Consumer
Financing Receivable Impaired [Line Items]
Unpaid Principal Balance	634	1,476
Recorded investment With No Allowance	232	1,071
Recorded investment With Allowance	402	405
Total Recorded Investment	634	1,476
Related Allowance	72	75
Consumer | Residential and Home Equity
Financing Receivable Impaired [Line Items]
Unpaid Principal Balance	634	1,476
Recorded investment With No Allowance	232	1,071
Recorded investment With Allowance	402	405
Total Recorded Investment	634	1,476
Related Allowance	$ 72	$ 75

XML

Loans and Allowance for Loan Losses - Summary of Interest Income Recognized on Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Financing Receivable Impaired [Line Items]
Average Recorded Investment	$ 12,736	$ 21,926	$ 13,396	$ 22,209
Interest Income Recognition	84	230	212	474
Commercial Real Estate
Financing Receivable Impaired [Line Items]
Average Recorded Investment	7,606	12,183	7,976	12,971
Interest Income Recognition	38	121	99	255
Commercial Real Estate | Real Estate Term
Financing Receivable Impaired [Line Items]
Average Recorded Investment	4,734	8,416	5,316	9,106
Interest Income Recognition	6	74	36	153
Commercial Real Estate | Construction and Land Development
Financing Receivable Impaired [Line Items]
Average Recorded Investment	2,872	3,767	2,660	3,865
Interest Income Recognition	32	47	63	102
Commercial and Industrial
Financing Receivable Impaired [Line Items]
Average Recorded Investment	4,280	7,934	4,365	7,243
Interest Income Recognition	36	97	90	185
Consumer
Financing Receivable Impaired [Line Items]
Average Recorded Investment	850	1,809	1,055	1,995
Interest Income Recognition	10	12	23	34
Consumer | Residential and Home Equity
Financing Receivable Impaired [Line Items]
Average Recorded Investment	850	1,794	1,055	1,980
Interest Income Recognition	$ 10	12	$ 23	34
Consumer | Consumer and Other
Financing Receivable Impaired [Line Items]
Average Recorded Investment		$ 15		$ 15

XML

Loans and Allowance for Loan Losses - Additional Information (Details) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Related Party Transaction [Line Items]
Available lines of credit for loans and credit cards to affiliates	$ 509,000
Deposits from affiliates	7,600,000	$ 7,800,000
Affiliates
Related Party Transaction [Line Items]
Outstanding loans with affiliates	$ 3,327,000	$ 330,000

XML

Commitments and Contingencies - Summary of Contractual Amounts of Off-balance Sheet Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Commitments to Extend Credit [Member]
Commitments And Contingencies [Line Items]
Off-balance sheet financial instrument, contractual amount	$ 516,291	$ 445,645
Stand-by Letters of Credit and Bond Commitments [Member]
Commitments And Contingencies [Line Items]
Off-balance sheet financial instrument, contractual amount	29,233	29,332
Unused Credit Card Lines, All Unsecured [Member]
Commitments And Contingencies [Line Items]
Off-balance sheet financial instrument, contractual amount	$ 25,337	$ 25,803

XML

Commitments and Contingencies - Summary of Contractual Amounts of Off-balance Sheet Financial Instruments (Parenthetical) (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Unsecured Commitments Included in Commitments to Extend Credit [Member]
Commitments And Contingencies [Line Items]
Off-balance sheet financial instrument, contractual amount	$ 12,185	$ 11,230
Unsecured Commitments Included in Stand-by Letters of Credit and Bond Commitments [Member]
Commitments And Contingencies [Line Items]
Off-balance sheet financial instrument, contractual amount	$ 566	$ 660

XML

Fair Value - Summary of Asset Measured at Fair Value (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale	$ 325,172	$ 335,609
Fair Valued on a Recurring Basis [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale	325,172	335,609
Fair Valued on a Non-Recurring Basis [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Impaired loans	3,185	4,342
Level 1 [Member] | Fair Valued on a Recurring Basis [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale	1,002	1,008
Level 2 [Member] | Fair Valued on a Recurring Basis [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Investment securities available-for-sale	324,170	334,601
Level 2 [Member] | Fair Valued on a Non-Recurring Basis [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Impaired loans	$ 3,185	$ 4,342

XML

Fair Value - Summary of Carrying Amounts, Estimated Fair Values and Assumptions Used to Estimate Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Carrying Value [Member]
Financial Assets:
Net loans held for investment	$ 1,184,120	$ 1,103,162
Financial Liabilities:
Interest bearing deposits	995,064	981,974
Estimated Fair Value [Member]
Financial Assets:
Net loans held for investment	1,184,297	1,101,890
Financial Liabilities:
Interest bearing deposits	$ 995,098	$ 982,380

XML

Income Taxes - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Tax Disclosure [Abstract]
Income tax expense	$ 3,584,000	$ 3,407,000	$ 6,324,000	$ 6,292,000
Effective tax rate	35.60%	37.90%	32.70%	36.80%
Deferred tax liability, unrecognized tax benefits	$ 600,000		$ 600,000

XML

Regulatory Capital Matters - Additional Information (Details) - USD ($) $ in Millions	Jun. 30, 2017	Dec. 31, 2016
Banking And Thrift [Abstract]
Consolidated Tier 1 Leverage ratio	14.15%	13.71%
Investment securities	$ 9.9	$ 9.1

XML

Incentive Share-Based Plan and Other Employee Benefits - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2014
Options [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options issued to purchase common shares	769
Exercise price of common shares	$ 26.26
Fair value as of date of grant per share	$ 4.867
Share-based compensation expense	$ 218	$ 252
Restricted Stock Units [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units granted	104
Fair value of restricted stock units	$ 25.00
Share-Based Incentive Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Maximum number of shares available for issuance under the plan			800,000
Maximum [Member] | Options [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period	3 years
Maximum [Member] | Restricted Stock Units [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period	3 years
Maximum [Member] | Share-Based Incentive Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based awards granted term			10 years
Minimum [Member] | Options [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period	1 year
Minimum [Member] | Restricted Stock Units [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period	1 year

XML

Announced Transactions - Additional Information (Details) $ / shares in Units, $ in Thousands				6 Months Ended
	Jul. 27, 2017 USD ($) Locations	May 31, 2017 $ / shares shares	May 30, 2017 USD ($) $ / shares	Jun. 30, 2017 USD ($)	Mar. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Business Acquisition [Line Items]
Closing share price | $ / shares			$ 25.55
Total assets				$ 1,718,375		$ 1,665,981
Total Loans				1,206,125		1,124,046
Total deposits				$ 1,461,052		$ 1,425,074
Town & Country Bank Inc. [Member] | Definitive Agreement [Member]
Business Acquisition [Line Items]
Business acquisition, agreement date				May 31, 2017
Business acquisition, share price | $ / shares		$ 4.28
Business acquisition, shares issuable | shares		0.2978
Aggregate value of acquisition			$ 20,900
Business acquisition, price per fully diluted common share | $ / shares			$ 11.89
Cash to be paid to shareholders held in escrow			$ 1,500
Period of escrow deposit held				18 months
Total assets					$ 135,100
Total Loans					97,300
Total deposits					$ 119,700
Banner Bank [Member] | Purchase and Assumption Agreement [Member] | Subsequent Event [Member]
Business Acquisition [Line Items]
Loans aqcuired	$ 266,000
Number of branch location acquired | Locations	7
Deposits acquired	$ 159,000