pub-10k_20171231.htm

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes No ☒

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 check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark 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.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying 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 aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant at June 30, 2017 (the last business day of the most recent second quarter), was $390,218,372 (based on the price at which common equity was last sold as quoted on the NASDAQ Capital Market at the close of business on that date).

The number of the Registrant’s common shares outstanding on February 28, 2018 was 18,635,609. No preferred shares are issued or outstanding.

Portions of the 2018 Annual Meeting Proxy Statement related to the shareholder meeting scheduled for May 23, 2018 are incorporated by reference into Part III of this Form 10-K.

People’s Utah Bancorp (“PUB” or the “Company”) is a Utah registered bank holding company organized in 1998. As a Utah registered bank holding company, PUB is subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve System and by the Utah Department of Financial Institutions (“UDFI”). The Company operates all business activities through its wholly-owned banking subsidiary, People’s Intermountain Bank (“PIB” or the “Bank”), which was organized in 1913. The Bank is a Utah State chartered bank subject to primary regulation, supervision and examination by the Federal Deposit Insurance Corporation (“FDIC”) and by the UDFI.

Utah is one of the fastest growing states in the United States in terms of population, ranking third in 2017 percentage growth according to the U.S. Census Bureau. Over 75% of Utah’s population is concentrated along Interstate 15, specifically within Davis, Weber, Salt Lake and Utah Counties. The next largest population centers in the state are in Washington and Cache Counties. These six counties make up approximately 85% of Utah’s population. Most of the major business and economic activity in Utah is located in the counties where our branches are located.

On October 6, 2017, we completed our acquisition of $257 million in loans and seven Utah branch locations with $160 million in low-cost core deposits from Banner Corporation’s subsidiary Banner Bank. The Bank paid a deposit premium of $13.8 million based on average deposits at closing. The seven branch locations in Utah include Salt Lake City, Provo, South Jordan, Woods Cross, Orem, Salem, and Springville. The Woods Cross and Orem branches were consolidated into our existing Bank of American Fork Bountiful and Orem branches, respectively. We’re operating these acquired branches under the name of Bank of American Fork, a division of PIB.

On November 13, 2017, we completed the merger of Town & Country Bank located in St. George, Utah, including the acquisition of $117 million in loans and the assumption of $124 million in deposits. We consolidated our existing St. George branch and Town & Country’s branch into one branch. Under the terms of the merger, each outstanding Town & Country common share converted into the right to receive 0.2917 PUB common shares and $4.23 per common share in cash, including $2.0 million of cash held in escrow that is subject to future indemnification claims. Town & Country shareholders also received an additional cash distribution of $1.68 per common share in cash. A total of 466,546 PUB common shares were issued in this transaction. We operate this branch under the name of People’s Town & Country Bank, a division of PIB.

The banking and financial services business in our market areas is highly competitive. We compete for loans, deposits and customers with other commercial banks, local community banks, savings and loan associations, securities and brokerage companies, mortgage companies, insurance companies, finance companies, money market funds, credit unions and other non-bank financial services providers. Many of these competitors are much larger in total assets and capitalization, have greater access to capital markets, and offer a broader range of financial services than we can offer.

The competition for deposit and loan products is strong and directly affects the pricing of those products and the terms we offer to our customers. Price competition for deposits may adversely affect our ability to generate low-cost core deposits in our primary markets sufficient to fund our asset growth. As a result, we may seek alternative funding

through borrowings and we may need to price our deposit products more aggressively, which would result in an increase in our costs of funding and a reduction in our net interest margin. Both our deposit base and overall market share has increased. However, several larger banks have also grown their deposit market share in our markets. We believe aggressive marketing and advertising, branch expansion, expanded delivery channels and more attractive rates offered by larger bank competitors have allowed larger banks to continue to increase their overall market share. Technological innovation has also contributed to greater competition in the overall financial services sector.

The market share of PUB and our largest competitors in Utah as of June 30, 2017, ranked by deposit market share, as reported by S&P Global Market Intelligence is as follows:

We believe that in order to be competitive with larger financial institutions it is imperative that we provide superior customer service. Key elements to superior customer service include having seasoned relationship managers who understand our customers’ financial needs, provide direct access to decision makers, offer the products and services our customers want, give unparalleled responsiveness to our customer’s needs, and offer technology solutions that make it easier for our customers to transact with us.

We provide banking services to small to medium sized businesses and individuals in our primary markets including Utah, Salt Lake, Davis, Cache, and Washington counties. Our business customers are involved in a variety of industries including residential and commercial construction and development, manufacturing, distribution and other services. We also provide a broad range of banking services and products to individuals, including residential mortgage lending, personal checking and savings accounts and other consumer banking products, including electronic banking.

We offer a variety of lending products including commercial real estate, construction and development, commercial and industrial (“C&I”), multifamily residential, single family residential, home equity lines, equipment leasing, and other consumer loans. We have established portfolio thresholds for each of our lending categories and regularly monitor and evaluate the diversification of our portfolio. From time to time we purchase and sell non-consumer loan participations to or from other banks. Loan participations purchased by us have been underwritten using our standard and customary underwriting criteria.

We are focused on commercial and residential real estate lending throughout a project’s life-cycle, including acquisition and development loans, construction loans, and permanent, long-term mortgage financing.

Construction, Acquisition and Development Loans. Our construction loan portfolio consists of single-family residential properties, multifamily properties and commercial projects. Construction lending entails significant additional risks compared with residential mortgage lending. Construction loans often involve larger loan balances concentrated with single borrowers or groups of related borrowers. Construction loans also involve additional risks since funds are advanced while the property is under construction, and has uncertain value prior to the completion of construction. Thus, it is more difficult to evaluate accurately the total loan funds required to complete a project and whether related loan-to-value ratios will be sufficient to compensate for fluctuations in the real estate market to minimize the risk of loss. Maturities for construction loans generally range from six to 12 months for residential property and from 12 to 18 months for commercial and multifamily properties.

Our development loans are secured by the properties being platted and developed. Lending on raw land carries a significant risk of a change in market conditions during the development process. Our borrowers’ projects generally range from small plats of two to six lots to subdivisions with up to 40 lots. We also consider development loans for larger projects. During the development process, we fund costs for site clearing and grading and infrastructure, including utilities and roads. Lot release minimum prices are agreed upon at loan closing. Repayment of the development loan is generally structured to require net sale proceeds from lot sales or a minimum of 125% of the bank’s per-lot exposure. We target most development loans to be paid off at no more than 80% of total development sales. Loan-to-value ratios on development loans typically range from 55% to 70%, depending on the financial strength and experience of the developer. Most development loans have maturities of 12 to 24 months.

Commercial Real Estate Loans. We also originate mortgages for commercial real estate properties. These loans are primarily secured by commercial real estate, including office, retail, warehouse, industrial, and other non-residential properties and are made to the owners or occupants of such properties. The majority of these loans have maturities generally ranging from three to 10 years.

Commercial real estate lending entails significant additional risk compared with the residential mortgage lending. Commercial mortgage loans typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. Additionally, the repayment of loans secured by income-producing properties is typically dependent on the successful operation of a business or a real estate project and thus may be subject, to a greater extent than is the case with residential mortgage loans, to adverse conditions in the commercial real estate market or in the general economy. Our commercial real estate loan underwriting criteria requires an examination of debt service coverage ratios, the borrowers’ creditworthiness and prior credit history and reputation, and we generally require personal guarantees or endorsements with respect to these loans. In the loan underwriting process, we also carefully consider the location of the property serving as collateral.

Loan-to-value ratios for non-owner occupied commercial mortgage loans generally do not exceed 75%. We permit loan-to-value ratios of up to 75% if the property is owner-occupied and the borrower has strong liquidity, net worth, and cash flow. We have been active in both the construction lending and permanent financing of our commercial real estate portfolio. Construction and raw land loans are short-term in nature and generally do not exceed 18 months. Permanent commitments are primarily restricted to no greater than 10 year maturities with rate adjustment periods every three to five years when fixed commitments exist.

Residential Mortgage Loans. Our residential mortgage loans consist of residential first and second mortgage loans, residential construction loans and home equity lines of credit and term loans secured by first and second mortgages on the residences of borrowers. Second mortgage loans and home equity lines of credit are used for home improvements, education and other personal expenditures. We make mortgage loans with a variety of terms, including fixed, floating and variable interest rates and a variety of loan maturities. We sell substantially all of the first lien residential mortgage loans that we originate to larger financial institutions. We provide loan servicing for FNMA and Freddie Mac mortgage loans.

Residential mortgage loans generally are made on the basis of the borrowers’ ability to repay the loan from his or her salary and other income and are secured by residential real estate, the value of which is generally readily ascertainable. These loans are made consistent with our appraisal and real estate lending policies, which detail maximum loan-to-value ratios and maturities. Home equity lines of credit secured by owner-occupied property generally are made with a loan-to-value ratio of up to 80%, including the first mortgage, if applicable.

Commercial and Industrial Loans. We make C&I loans to qualified businesses in our market area. Our commercial lending portfolio consists primarily of C&I loans for the financing of accounts receivable, inventory, property, plant and equipment. We also offer loans guaranteed by the SBA.

C&I loans typically are made on the basis of the borrower’s ability to repay the loan from the cash flow from its business and are secured by business assets with less easily determinable or achievable value, such as accounts receivable, equipment and inventory. Lines of credit typically have a twelve month commitment with a variable rate and are secured by the asset that is being financed. In cases of larger commitments, a borrowing base certificate may be required to determine eligible collateral and advance parameters. Term loans seldom exceed 84 months, but in no case exceed the depreciable life of the tangible asset being financed. C&I loans generally include personal guarantees as additional support.

To manage these risks, our policy is to secure the commercial loans we make with both the assets of the borrowing business and other additional collateral and guarantees that may be available. In addition, we actively monitor certain measures of the borrower, including advance rate, cash flow, leverage, collateral value and other appropriate credit factors.

Leasing. We originate and purchase leases that fit our policies and procedures. These leases are used to purchase equipment essential to the operations of our commercial and industrial customers, which are located throughout the U.S. We have lending officers who have extensive backgrounds in leasing. Leases may be purchased directly from the lease originator or in some cases a loan is made to the originator and the lease secures the loan. We underwrite lease portfolios prior to purchase. Our leasing program is subject to the same general risks as our lending activities, including credit and interest rate risks, and the difficulty of attracting necessary personnel, among others.

Leasing is traditionally based on cash flow lending. Cash flow lending involves lending money to a customer based primarily on the expected cash flow, profitability and enterprise value of a customer rather than on the value of its assets or resale of the collateral for the loan or lease. For some types of leases, the Bank will own and have risk of loss on the leased property and the customer will make rental lease payments over a set lease period. The lease payments are determined, in part, based on the expected residual value of the property at the end of the lease. At the end of the lease, the Bank must sell or re-lease the property to the lessee or a third party. Leases with significant residual values have higher risk than many other types of lending because the economics of the lease also rely on the leased property’s value in addition to the other sources of repayment from the lease. We may be unable to re-lease or sell the property within a reasonable timeframe or may experience market price changes in the expected residual value of the leased property over the lease term. If we do not properly manage residual values of the leased property we may not be able to recover our investment.

Consumer Loans. Our consumer loans consist primarily of installment loans made to individuals for personal, family and household purposes. The specific types of consumer loans we make include home equity loans, home improvement loans, automobile loans, debt consolidation loans and general consumer lending.

Consumer loans may entail greater risk than real estate loans, particularly in the case of consumer loans that are unsecured, such as lines of credit, or secured by rapidly depreciable assets, such as automobiles. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. The remaining deficiency often does not warrant further substantial collection efforts against the borrower. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness, or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans. A loan may also give rise to claims and defenses by a consumer loan borrower against an assignee of such loan, such as a bank, and a borrower may be able to assert against such assignee claims and defenses that it has against the seller of the underlying collateral.

Our policy for consumer loans is to accept moderate risk while minimizing losses, primarily through a careful credit and financial analysis of the borrower. In evaluating consumer loans, we require our lending officers to review the borrower’s level and stability of income, past credit history, amount of debt currently outstanding and the impact of these factors on the ability of the borrower to repay the loan in a timely manner. In addition, we require our banking officers to maintain an appropriate margin between the loan amount and collateral value.

We also issue credit cards to certain of our customers. In determining to whom we will issue credit cards, we evaluate the borrower’s level and stability of income, past credit history and other factors. Finally, we make additional loans that are not classified in one of the above categories. In making such loans, we attempt to ensure that the borrower meets our loan underwriting standards.

We have been an SBA Preferred Lender since 2002. As a Preferred Lender, we can approve a loan within the authority delegated to us by the SBA and not be required to go through the SBA directly on a per loan basis.

SBA loans fall into two categories, loans originated under the SBA’s 7(a) Program, or SBA 7(a) Loans, and loans originated under the SBA’s 504 Program or SBA 504 Loans. Through SBA 7(a) Loans funds can be utilized to purchase or construct real property; however, we primarily use the 7(a) Program for working capital, inventory, or equipment needs and loans, which are included in our C&I loans. SBA 504 loans typically do not have an SBA guaranty, but rather, a low 50% loan to value ratio due to the assistance of the 504 program. SBA 504 loans are generally classified as commercial real estate. Our SBA lending program, and portions of our real estate lending, are dependent on the continual funding and programs of certain federal agencies or quasi-government corporations, including the SBA.

Our Credit Administration establishes our lending policies, which are approved by the Board of Directors. These lending policies are reviewed at least annually and evaluated from time to time by senior lending management. Key elements of our current policies are debt service coverage, monitoring concentration levels and maintaining strict approval and underwriting procedures.

Debt Service Coverage. Our risk management philosophy is to extend credit only when an applicant has proven cash flow to service the proposed debt. Additionally, it is generally necessary for the applicant to demonstrate an independent secondary source of repayment.

Monitor Concentration Levels. We have established maximum concentrations for each loan type and regularly monitor and evaluate the diversification of our loan portfolio. We have significant concentration in real estate loans.

Loans to One Borrower. In addition to the maximum concentration for loan types, state banking law generally limits the aggregate extensions of credit that a bank may make to a single borrower. Under Utah law, the aggregate extensions of credit that a bank may make to a single borrower generally may not exceed 15% of the bank’s Tier 1 capital.

Approval and Underwriting Procedures. All loan requests must be approved under specified approval guidelines, based upon Board approved authorities. Credit approval authority has four levels, as listed below from lowest to highest level. Management believes the current authority levels are appropriate to ensure overall credit quality, while ensuring we are able to respond in a timely manner to lending opportunities. Any conditions placed on loans in the approval process must be satisfied before our credit administration will release loan documentation for execution. Our credit administration works independently of loan production and has full responsibility for all loan disbursements.

Loan Grading and Loan Review. We seek to quantify the risk in our lending portfolio by maintaining a loan grading system consisting of nine different categories (Grades 1-9). The grading system is used to determine, in part, the provision for loan losses. The first five grades in the system are considered satisfactory. The other four grades range from a “Special Mention” category to a “Loss” category.

The originating loan officer initially assigns a grade to each credit as part of the loan approval process. Such grade may be changed as a loan application moves through the approval process. In addition to any dollar limitations that may require higher credit approval authority, each loan that is graded “Substandard” or worse requires prior approval of the Bank’s senior lending officers.

The grade on each individual loan is subject to review from time to time, and may be changed if warranted. The Bank’s senior lending officers monthly review a “Watch List” of loans that are over 60 days past due or graded 6 or higher. Additionally, changes in the grade for a loan may occur through any of the following means:

Special Mention — Grade 6. Generally acceptable asset quality, but frequent and thorough monitoring is required as temporary credit weaknesses may extend beyond financial into managerial and demographic issues. Borrowers may have strained cash flow and less-than- anticipated performance. Borrowers may have possible management weaknesses, perhaps demonstrated by an irregular flow of adequate or timely performance information required to support the credit. Borrowers may have a plausible plan to correct problems in the near future without material uncertainties. Borrowers may lack reserve capacity, so their risk rating will generally either improve or decline in a relatively short time frame since results of corrective actions should be apparent within 6 months or less. These loans exhibit an increasing reliance on collateral for repayment.

Loan Delinquencies. When a borrower fails to make a committed payment, we attempt to cure the deficiency by contacting the borrower to seek payment. Habitual delinquencies and loans delinquent 60 days or more are reviewed by the Chief Credit Officer regularly for possible changes in grading. Trends in loan delinquencies and non-performing loans are reviewed by our Board of Directors at each monthly board meeting. Our Special Asset Department was formed during the recession and meets quarterly to review classified assets. The Special Asset Department is comprised of senior lending officers, PIB President, PUB Chief Executive Officer, other senior officers and selected members of our Board of Directors.

Classified Assets. Federal regulations require that each insured bank classify its assets on a regular basis. In addition, in connection with examinations of insured institutions, examiners have authority to identify problem assets, and, if appropriate, reclassify them. We use grades 7 through 9 of our loan grading system to identify potential problem assets.

Our investment strategy is designed to be complementary to and interactive with our cash position; borrowed funds; quality, maturity, stability and earnings of loans; nature and stability of deposits; capital and tax planning. Investment securities consist primarily of U.S. Agency issues, mortgage-backed securities, and municipal bonds. In addition, for bank liquidity purposes, we use Federal Funds Sold which is temporary overnight sales of excess funds to correspondent banks. Our securities portfolio is managed in accordance with guidelines set by our investment policy. Specific day-to-day transactions affecting the securities portfolio are managed by treasury officers of the Bank. These securities activities are reviewed monthly by our Board of Directors.

Our primary sources of funds for use in our lending and investing activities consist of:

We closely monitor rates and terms of competing sources of funds and utilize those sources we believe to be the most cost-effective, consistent with our asset and liability management policies.

An important balance sheet component affecting our net interest margin is the composition and cost of our deposit base. We can improve our net interest margin to the extent that growth in deposits can be focused in the less volatile and somewhat more traditional core deposits, or total deposits less CDs greater than $250,000, commonly referred to as Jumbo CDs. We attempt to price our deposit products competitively with other financial institutions in our marketplace in order to promote deposit growth and satisfy our liquidity requirements and offer a variety of deposit products in order to satisfy our customers’ needs.

We provide a wide array of deposit products. We have historically relied upon, and expect to continue to rely upon, deposits to satisfy our needs for sources of funds. We offer regular checking, rewards checking, savings, and money market deposit accounts. We also offer fixed-rate, fixed maturity retail CDs ranging in terms from 30 days to six years, individual retirement accounts and Jumbo CDs. The primary sources of deposits are small and medium sized businesses and individuals within our target market. Senior management has the authority to set rates within specified parameters in order to remain competitive with other financial institutions in our market area. All deposits are insured by the Federal Deposit Insurance Corporation, or FDIC, up to the maximum amount permitted by law. We have a service fee schedule, which we believe is competitive with other financial institutions in our market, covering such matters as maintenance fees on checking accounts, per item processing fees on checking accounts, returned check charges and other similar fees.

We have a rewards checking deposit product named “MyRate” Checking. This product allows a customer to earn a premium interest rate by meeting certain account requirements, including a minimum monthly amount of electronic transfers and debit card usage and only receiving electronic statements for this account. Although the rate paid is higher, the overall net costs on this product are lower.

We intend to continue our efforts at attracting deposits from our business lending relationships in order to reduce our cost of funds and improve our net interest margin. Also, we believe that we have the ability to attract sufficient additional funding by re-pricing the yields on our CDs in order to meet loan demands during times that growth in core deposits differs from loan demand. In order to fund loan demand, we have also utilized funding from two programs offered by Promontory Interfinancial Network called Certificate of Deposit Registry Service or CDARS and Insured Cash Sweep or ICS. This relationship allows the Bank to utilize a national network of banks to offer deposit insurance coverage for large depositors. This protection occurs in deposit increments of less than $250,000 per participating bank to ensure that both principal and interest are eligible for full FDIC insurance. We also offer an Internet-based deposit product, which we branded as “SaveSmart”, where we have attracted deposits by offering competitive rates on savings accounts.

In addition to our traditional marketing methods, we attract new customers and deposits by:

Other Borrowings. We may occasionally use our overnight credit to support liquidity needs created by seasonal deposit flows, to temporarily satisfy funding needs from increased loan demand, and for other short-term purposes. We have an unsecured line of credit with a regional correspondent financial institution pursuant to which we can borrow funds generally on an overnight basis. The correspondent financial institution may impose collateral requirements or terminate the line of credit at any time. We have the collateral capacity to borrow from the Federal Reserve. We can also borrow from the Federal Home Loan Bank (“FHLB”) pursuant to an existing commitment based on the value of the collateral pledged which generally consists of certain real estate loans and investment securities. (Refer to Note 6 – Short-term Borrowings in the audited financial statements under Item 8 for additional information).

We are committed to maintaining internal controls to manage the risk associated with our growth and concentrations in real estate loans. We have identified credit risk, interest rate risk, liquidity risk, and operational risk as the areas that could have the greatest impact on capital. In order to mitigate and actively manage these areas of risk, we have established sound procedures and committed experienced human resources to this effort.

We believe that our organization allows management to maintain an accurate understanding of risk levels at all times. With this level of understanding, strategic plans are developed with the risk parameters designed to protect our capital.

The FDIC has given guidance recommending that if the sum of (i) certain categories of commercial real estate, or CRE, loans and (ii) acquisition, development and construction, or ADC, loans exceeds 300% of total risk-based capital, or if ADC loans exceed 100% of total risk based capital, heightened risk management practices should be employed to mitigate risk. Our concentration in ADC loans is cyclical and tends to increase in the second and third quarters of each year as demand for ADC loans increases. An increase in ADC loan concentration could cause our ratio for ADC loans to increase and even exceed the FDIC’s guideline. We have exceeded these guidance ratios at times in the past and may do so in the future. We actively monitor and believe that we effectively manage our CRE and ADC loan concentrations. If we exceed the FDIC’s guidelines and do not effectively manage the risk of our CRE and ADC loans, we may be subject to regulatory scrutiny including a requirement to raise additional capital, reduce our loan concentrations or undertake other remedial actions.

We refer to our employees as “associates.” We had a total of 483 full-time equivalent associates as of December 31, 2017. Our associates are not represented by a labor organization, and we are not aware of any activity to seek such organization. The Company and the Bank provide their associates with a comprehensive benefit program, including health, dental and vision insurance, life and accident insurance, long-term disability coverage, vacation and sick leave, 401(k) plan, profit-sharing plan and a stock-based compensation plan. The Company considers its associate relations to be excellent. See Note 11 in the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” for information regarding associate benefit plans and profit sharing.

Copies of the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through the Company’s website (www.peoplesutah.com) as soon as reasonably practicable after the Company has filed the material with, or furnished it to, the United States Securities and Exchange Commission (“SEC”). Copies can also be obtained by accessing the SEC’s website (www.sec.gov).

The following is a general summary of the material aspects of certain statutes and regulations that are applicable to us. These summary descriptions are not complete, and you should refer to the full text of the statutes, regulations, and formal and informal interpretive guidance for more information. Currently applicable statutes and regulations are subject to change, and additional statutes, regulations, and corresponding interpretative guidance may be adopted. We are unable to predict these future changes or the effects, if any, that these changes could have on our business or our revenues.

As a Utah registered bank holding company, PUB is subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve System and by the Utah Department of Financial Institutions (“UDFI”). In addition, as a Utah state-chartered bank that is not a member of the Federal Reserve, the Bank is subject to primary regulation, supervision and examination by the Federal Deposit Insurance Corporation (“FDIC”) and by the UDFI. Supervision, regulation, and examination of PUB and the Bank by the regulatory agencies are intended primarily for the protection of consumers, bank depositors and the Deposit Insurance Fund (“DIF”), rather than for holders of our capital stock.

In addition to the framework of regulation and supervision referenced above, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), created the Consumer Financial Protection Bureau (“CFPB”), a federal regulatory agency with broad authority to regulate the offering and provision of financial products and services to consumers. However, the primary authority to examine depository institutions with $10 billion or less in assets, such as the Bank, for compliance with federal consumer-protection laws remains with our Federal regulator, the FDIC, and State regulator, the UDFI.

As a result of the Dodd-Frank Act, the regulatory framework under which PUB and the Bank operate has changed and will continue to change substantially over the next several years. Many of the provisions of the Dodd-Frank Act became effective upon enactment, while others are subject to further study, rulemaking, and the discretion of regulatory bodies. In light of these significant changes and the discretion afforded to federal banking regulators, we cannot fully predict the effect that compliance with the Dodd-Frank Act or any of its implementing regulations will have on our business or on our ability to pursue future business opportunities.

Under the federal Bank Holding Company Act (“BHCA”), a bank holding company is generally permitted to engage in, or acquire direct or indirect control of more than five percent of any class of the voting shares of any company that is not a bank or bank holding company and that is engaged in certain enumerated activities that are related to banking. While the Federal Reserve has treated those activities as acceptable in the past for other bank holding companies, the Federal Reserve in the future may not allow us to conduct any or all of these activities. The Federal Reserve has the authority to order a bank holding company or its subsidiaries to terminate any of those activities or to terminate its ownership or control of any subsidiary when it has reasonable cause to believe that the bank holding company’s continued ownership, activity or control constitutes a serious risk to the financial safety, soundness or stability of it or any of its bank subsidiaries.

The BHCA requires the prior approval of the Federal Reserve for a bank holding company to acquire substantially all the assets of a bank or to acquire direct or indirect ownership or control of more than 5% of any class of the voting shares of any bank, bank holding company or savings association, or to increase any such non-majority ownership or control of any bank, bank holding company or savings association, or to merge or consolidate with any bank holding company.

Under current law and Federal Reserve policy, a bank holding company is expected to act as a source of financial and managerial strength to its depository institution subsidiaries and to maintain resources adequate to support such subsidiaries, which could require PUB to commit resources to support the Bank in situations where additional investments in a bank may not otherwise be warranted. A bank holding company may be required to contribute additional capital to its subsidiaries in the form of capital notes or other instruments that qualify as capital under applicable regulatory rules. Any such loan from a holding company to a subsidiary bank is likely to be unsecured and subordinated to the bank’s depositors and perhaps to other creditors of the bank. If PUB were to enter bankruptcy, any commitment by us to a federal bank regulatory agency to maintain the capital of the Bank would be assumed by the bankruptcy trustee and entitled to a priority of payment. Under the Federal Deposit Insurance Act, or FDIA, under certain circumstances, we may be responsible for the liabilities of the Bank and may be responsible for damages to the FDIC.

The Federal Reserve’s policy regarding dividends is that a bank holding company should not declare or pay a cash dividend which would impose undue pressure on the capital of any bank subsidiary or which would be funded only through borrowing or other arrangements that might adversely affect a bank holding company’s financial position. As a general matter, the Federal Reserve has indicated that the Board of Directors of a bank holding company should consult with the Federal Reserve and eliminate, defer or significantly reduce the bank holding company’s dividends if:

Should an insured depository institution controlled by a bank holding company be “significantly undercapitalized” under the applicable federal bank capital ratios, or if the bank subsidiary is “undercapitalized” and has failed to submit an acceptable capital restoration plan or has materially failed to implement such a plan, banking regulators (in the case of the Bank, the FDIC and the UDFI) may choose to require prior Federal Reserve approval for any capital distribution by the bank holding company. In addition, since we are a legal entity separate and distinct from the Bank and do not conduct stand-alone operations, an ability to pay dividends depends on the ability of the Bank to pay dividends to us and the FDIC and the UDFI may, under certain circumstances, prohibit the payment of dividends to us from the Bank as described below in “Bank Regulation—Bank Dividends.”

In July 2013, federal banking regulators, including the Federal Reserve and the FDIC, adopted the U.S. Basel III Capital Rules, implementing many aspects of the Basel III Capital Standards. The U.S. Basel III Capital Rules impose higher risk-based capital and leverage requirements than those previously in place. In order to avoid restrictions on capital distributions or discretionary bonus payments to executives, a covered banking organization must maintain a capital conservation buffer on top of its minimum risk-based capital requirements. This buffer must consist solely of Tier 1 Common Equity, but the buffer applies to all three measurements (Common Equity Tier 1, Tier 1 Capital and total capital). The capital conservation buffer will be phased in incrementally over time, becoming fully effective on January 1, 2019, and will consist of an additional amount of common equity equal to 2.5% of risk-weighted assets. The U.S. Basel III Capital Rules also increase the risk weight for certain assets, meaning that more capital must be held against such assets. For example, commercial real estate loans that do not meet certain new underwriting requirements must be risk-weighted at 150% rather than the current 100%.

Additionally, the Basel III Capital Standards provide for the deduction of three categories of assets: (i) deferred tax assets arising from temporary differences that cannot be realized through net operating loss carrybacks (net of related valuation allowances and of deferred tax liabilities), (ii) mortgage-servicing assets (net of associated deferred tax liabilities) and (iii) investments in more than 10% of the issued and outstanding common shares of unconsolidated financial institutions (net of associated deferred tax liabilities). Accumulated other comprehensive income (“AOCI”) is presumptively included in Common Equity Tier 1 Capital and often would operate to reduce this category of capital. The U.S. Basel III Capital Rules provided a one-time opportunity at the end of the first quarter of 2015 for covered banking organizations to opt out of much of this treatment of AOCI. We opted out of this treatment.

For a detailed discussion of PUB and the Bank’s actual capital ratios and capital adequacy see “Capital Resources” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Note 9 – Regulatory Capital Matters” in Item 8. Financial Statements and Supplementary Data.”

The Bank is a Utah state-chartered commercial bank, and is subject to supervision and regulation by the UDFI and the FDIC. The UDFI and the FDIC supervise and regulate all areas of the Bank’s operations including, without limitation, the making of loans, deposit operations, the conduct of the Bank’s corporate affairs, the satisfaction of capital-adequacy requirements, the payment of dividends, and the establishment or closing of banking offices. The UDFI and the FDIC periodically examine the Bank’s operations and financial condition and compliance with federal consumer-protection laws. In addition, the Bank’s deposit accounts are insured by the FDIC to the maximum extent permitted by law, and the FDIC has certain enforcement powers over the Bank.

Federal law and regulations establish a capital-based regulatory scheme designed to promote early intervention for troubled banks and require the FDIC to choose the least expensive resolution of bank failures. The capital-based regulatory framework contains five categories of regulatory capital requirements, including “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” To qualify as a “well capitalized” institution, a bank must have a leverage ratio of no less than 5.0%, a common equity to Tier 1 Capital ratio of no less than 6.5%, a Tier 1 Capital ratio of no less than 8.0%, and a total risk-based capital ratio of no less than 10.0%, and a bank must not be under any order or directive from the appropriate regulatory agency to meet and maintain a specific capital level. Generally, a financial institution must be “well capitalized” before the Federal Reserve will approve an application by a bank holding company to acquire a bank or merge with a bank holding company, and the FDIC applies the same requirement in approving bank merger applications. We meet these capital levels.

Immediately upon becoming undercapitalized, a depository institution becomes subject to the provisions of Section 38 of the Federal Deposit Insurance Act, or the FDIA, which, among other things: (i) restricts payment of capital distributions and management fees; (ii) require that the FDIC monitor the condition of the institution and its efforts to restore its capital; (iii) require submission of a capital restoration plan; (iv) restricts the growth of the institution’s assets; and (v) require prior approval of certain expansion proposals. Bank holding companies controlling depository institutions can be called upon to increase the depository institution’s capital and to partially guarantee the institutions’ performance under their capital restoration plans. The appropriate federal banking agency for an undercapitalized institution also may take any number of discretionary supervisory actions if the agency determines that any of these actions is necessary to resolve the problems of the institution at the least possible long-term cost to the FDIC’s Deposit Insurance Fund, subject in certain cases to specified procedures. These discretionary supervisory actions include: (i) requiring the institution to raise additional capital; (ii) restricting transactions with affiliates; (iii) requiring divestiture of the institution or the sale of the institution to a willing purchaser; (iv) requiring the institution to change and improve its management; (v) prohibiting the acceptance of deposits from correspondent banks; (vi) requiring prior Federal Reserve approval for any capital distribution by a bank holding company controlling the institution; and (vii) any other supervisory action that the agency deems appropriate. These and additional mandatory and permissive supervisory actions may be taken with respect to significantly undercapitalized and critically undercapitalized institutions.

The Bank currently exceeds the requirements contained in the applicable regulations, policies and directives pertaining to capital adequacy to be classified as “well capitalized.” Rapid growth, poor loan portfolio performance, or poor earnings performance, or a combination of these or other factors, could change the Bank’s capital position in a relatively short period of time, making additional capital infusions necessary. It should be noted that the minimum ratios referred to above in this section are merely guidelines, and the bank regulators possess the discretionary authority to require higher capital ratios.

The Federal Reserve requires all depository institutions, even if not members of the Federal Reserve, to maintain reserves against some deposit accounts. The balances maintained to meet the reserve requirements imposed by the Federal Reserve may be used to satisfy liquidity requirements. An institution may borrow from the Federal Reserve Bank “discount window” as a secondary source of funds, provided that the institution meets the Federal Reserve Bank’s credit standards.

Utah law places restrictions on the declaration of dividends by Utah state-chartered banks to their shareholders. This may decrease any amount available for the payment of dividends in a particular period if the surplus funds for the Bank fail to comply with this limitation. The FDIC and the UDFI may, under certain circumstances, prohibit the payment of dividends to PUB from the Bank. Utah corporate law also requires that dividends can only be paid out of funds legally available therefor.

Applicable rules regarding capital requirements under the FDIC’s prompt corrective action regulations limit the ability of banks to raise funds that meet the definition of “brokered deposits” under that regulation. To avoid the applicability of this limitation, the Bank must maintain the status of a “well capitalized” institution.

FDIC deposit insurance is critical to the continued operation of the Bank. The Bank pays deposit insurance assessments to the FDIC’s Deposit Insurance Fund, which is determined through a risk-based assessment system. The Bank’s deposit accounts are currently insured by the Deposit Insurance Fund, generally up to a maximum of $250,000 per separately insured depositor. The Bank pays assessments to the FDIC for such deposit insurance. Under the current assessment system, the FDIC assigns an institution to a risk category based on the institution’s most recent supervisory and capital evaluations, which are designed to measure risk. Under the FDIA, the FDIC may terminate a bank’s deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, agreement or condition imposed by the FDIC.

The Bank is subject to sections 23A and 23B of the Federal Reserve Act, or FRA, and the Federal Reserve’s implementing Regulation W. An affiliate of a bank is any company or entity that controls, is controlled by or is under common control with the Bank. Accordingly, certain asset transactions and contracts, between PUB, the Bank and any non-bank subsidiaries are subject to a number of restrictions. All such transactions, as well as contracts entered into between the Bank and affiliates, must be on terms that are no less favorable to the Bank than those that would be available from non-affiliated third parties.

Loans to executive officers, directors or principal shareholders are subject to restrictions under Sections 22(g) and 22(h) of the FRA and the Federal Reserve’s implementing Regulation O (collectively “Reg. O”). From time to time, the Bank makes loans to executive officers, directors and principal shareholders on terms permitted by Reg. O. We believe the Bank is in compliance with Reg. O and, therefore, we believe we are in compliance with the Sarbanes-Oxley Act of 2002 (“SOX”). All loans from the Bank to executive officers, directors or principal shareholders are made in the ordinary course of business, are of a type generally made available to the public and are on market terms no more favorable than those offered to persons not related to the Bank, except for the waiver of certain loan fees and a minor reduction in certain loan interest rates as part of a benefit program as allowed by Reg. O.

Subject to certain exceptions, the BHCA and the Change in Bank Control Act require prior approval from the Federal Reserve and/or the FDIC for any person or company to acquire “control” of a bank or a bank holding company. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities, and in general is presumed to exist if a person acquires 10 percent or more, but less than 25%, of any class of voting securities. In certain cases, a company may also be presumed to have control under the BHCA if it acquires 5% or more of any class of voting securities. Control may also be deemed to exist where a person or company is found to hold “controlling influence” over a bank or bank holding company.

The Community Reinvestment Act (“CRA”) and its implementing regulations are intended to encourage banks to help meet the credit needs of their service areas, including low- and moderate-income neighborhoods, consistent with safe and sound operations. The prudential bank regulatory agencies are required to assign and make public a rating of a bank’s performance under the CRA as either “outstanding,” “satisfactory,” “needs to improve,” or “substantial noncompliance.” The federal banking agencies consider a bank’s CRA rating when a bank submits an application to establish banking centers, merge, or acquire the assets and assume the liabilities of another bank. In the case of a bank holding company, the CRA performance record of all banks involved in the merger or acquisition are reviewed in connection with the filing of an application to acquire ownership or control of shares or assets of a bank or to merge with any other financial holding company. A less-than-satisfactory rating can substantially delay, block or impose conditions on the transaction. In its last CRA examination, the Bank received a rating of “outstanding.”

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Riegle-Neal Act”) provides that adequately capitalized and managed bank holding companies are permitted to acquire banks in any state. In addition, banks are permitted to establish branches in any state if that state would permit the establishment of the branch by a state bank chartered in that state, although setting up a branch remains subject to applicable regulatory approval and adherence to applicable legal requirements.

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”) provides the federal government with additional powers to address terrorist threats. This has been implemented through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. By way of amendments to the Bank Secrecy Act, or the BSA, the USA Patriot Act imposed new requirements that obligate financial institutions, such as banks, to take certain steps to monitor and control the risks associated with money laundering and terrorist financing.

Among other requirements, the USA Patriot Act and implementing regulations require banks to establish anti-money laundering programs that include, at a minimum:

Additionally, the USA Patriot Act requires each financial institution to develop a customer identification program, or CIP, as part of its anti-money laundering program. The key components of the CIP are identification, verification, government list comparison, notice and record retention. The purpose of the CIP is to enable the financial institution to determine the true identity and anticipated account activity of each customer. To make this determination, among other things, the financial institution must collect certain information from customers at the time they enter into the customer relationship with the financial institution. This information must be verified within a reasonable time through documentary and non-documentary methods. Furthermore, all customers must be screened against any CIP-related government lists of known or suspected terrorists. Financial institutions are also required to comply with various reporting and recordkeeping requirements. The Federal Reserve and the FDIC consider an applicant’s effectiveness in combating money laundering, among other factors, in connection with an application to approve a bank merger or acquisition of control of a bank or bank holding company.

Likewise, the Office of Foreign Assets Control, or OFAC, is responsible for helping to ensure that U.S. entities do not engage in transactions with the subjects of U.S. sanctions, as defined by various Executive Orders, laws, regulations, treaties, and related interpretations. OFAC assembles and provides lists of names of persons and organizations suspected of aiding, harboring or engaging in terrorist acts. If a bank finds a name on any transaction, account or wire transfer that is on an OFAC list, it must freeze such account, file a suspicious activity report and notify appropriate authorities.

The Bank has adopted policies, procedures and controls to comply with the BSA, the USA Patriot Act and OFAC regulations.

Federal and state banking laws grant substantial enforcement powers to federal and state banking regulators. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to initiate injunctive actions against banking organizations and “institution-affiliated parties,” such as management, employees and agents. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with regulatory authorities. When issued by a banking regulator, cease-and-desist and similar orders may, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications or guarantees against loss. A bank may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts, or take other actions determined to be appropriate by the ordering regulatory agency.

The FDIC has issued guidance recommending that if certain categories of commercial real estate (“CRE”) loans and acquisition, development and construction (“ADC”) loans exceed certain thresholds, then heightened risk management practices should be employed to mitigate risk. As of December 31, 2017, our ADC loans to Tier 2 capital were 148.9%, which exceeded the threshold set by the FDIC. We have exceeded these thresholds at times in the past and may do so again in the future. If we exceed the thresholds and do not manage the risk of our CRE and ADC loans, we may be subject to regulatory scrutiny, such as a requirement to raise additional capital, reduce our loan concentrations or undertake other remedial actions.

In 2015 the Federal Home Loan Bank of Des Moines and the Federal Home Loan Bank of Seattle completed their merger. As a result, the Bank is now a member of and owns stock in the Federal Home Loan Bank of Des Moines.

Under the Gramm–Leach–Bliley Act, also known as the Financial Services Modernization Act of 1999 (“GLBA”), federal banking regulators adopted rules limiting the ability of financial institutions to disclose non-public information about consumers to non-affiliated third parties. The rules require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to non-affiliated third parties. The GLBA also directed federal regulators to prescribe standards for the security of consumer information. The Bank is subject to such standards, as well as standards for notifying customers in the event of a security breach. State laws regarding privacy and security breach obligations are also applicable to the Company and the Bank.

The Bank is also subject to a number of other federal and state consumer laws and regulations that are designed to protect consumers in transactions with banks. While the list set forth below is not exhaustive, these laws and regulations include the Truth-in-Lending Act, the Truth-in-Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Check Clearing for the 21st Century Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Fair and Accurate Transactions Act, the Servicemembers Civil Relief Act, the Military Lending Act, and the Real Estate Settlement Procedures Act, among others. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with consumers when offering consumer financial products and services.

Rulemaking authority for most federal consumer-financial-protection laws rests with the CFPB. The CFPB also has broad authority to prohibit unfair, deceptive and abusive acts and practices, or UDAAP, and to investigate and penalize financial institutions that violate this prohibition. While the statutory language of the Dodd-Frank Act sets forth the standards for acts and practices that violate the prohibition on UDAAP, certain aspects of these standards are untested, and thus it is currently not possible to predict how the CFPB will exercise this authority.

The Dodd-Frank Act also authorized the CFPB to establish certain minimum standards for the origination of residential mortgages, including a determination of the borrower’s ability to repay. The rules also impose both underwriting standards and limits on the terms, including pricing, of such loans. In 2014, the CFPB adopted regulations that combine mortgage disclosures required by the Real Estate Settlement Procedures Act and its implementing Regulation X, and the Truth-in-Lending Act and its implementing Regulation Z. This new disclosure scheme requires mortgage lenders such as the Bank to substantially revise their loan-origination and disclosure systems in order to comply with the new regulations. The Bank has implemented necessary modifications in order to meet these requirements. In 2018, portions of a significant expansion of the Home Mortgage Disclosure Act and its implementing Regulation C will take effect.

The Volcker Rule prohibits insured depository institutions, such as the Bank, and their affiliates, such as PUB, from (i) engaging in “proprietary trading,” and (ii) investing in or sponsoring certain types of funds, or covered funds, in each case subject to certain limited exceptions. The final rules impose significant compliance and reporting obligations on banking entities. The Federal Reserve recently extended the conformance period for certain covered funds to July 21, 2017. PUB is reviewing the scope of any compliance program that may be required but is of the view that the impact of the Volcker Rule will not be material to its business operations.

The Dodd-Frank Act requires public companies to include, at least once every three years, a separate non-binding “say-on-pay” vote in their proxy statement by which shareholders may vote on the compensation of the public company’s named executive officers. In addition, if such public companies are involved in a merger, acquisition, or consolidation, or if they propose to sell or dispose of all or substantially all of their assets, shareholders have a right to an advisory vote on any golden parachute arrangements in connection with such transaction. Other provisions of the act may impact our corporate governance. In addition, the act requires the SEC to adopt rules requiring all exchange-traded companies to adopt claw-back policies for incentive compensation paid to executive officers in the event of accounting restatements based on material non-compliance with financial reporting requirements. We are an “Emerging Growth Company” under the JOBS Act and therefore subject to reduced disclosure requirements related to executive compensation.

Various legislative acts are from time to time enacted by Congress or by the Utah Legislature. Additionally, regulatory agencies frequently modify or create new regulations and guidance. Such acts and modifications or new regulation and guidance may change the environment in which PUB and the Bank operate in substantial and unpredictable ways. We cannot determine the ultimate impact that potential legislation, if enacted, or implementing regulations and guidance with respect thereto, would have upon PUB’s or the Bank’s financial condition or results of operations. Finally, on February 3, 2017, President Trump signed an Executive Order pursuant to which he ordered the Secretary of the Treasury to consult with the heads of the member agencies of the Financial Stability Oversight Council on the extent to which existing laws, treaties, regulations, guidance, reporting and recordkeeping requirements, and other government policies promote certain core principles laid out in the Executive Order. This may result in repeals of or amendments to existing laws, treaties, regulations, guidance, reporting and recordkeeping requirements and other government policies.

As Utah corporations, PUB and the Bank are subject to certain limitations and restrictions under applicable Utah corporate law. For example, state-law restrictions in Utah include limitations and restrictions relating to indemnification of directors; distributions to shareholders; transactions involving directors, officers, or interested shareholders; maintenance of books, records, and minutes; and observance of certain corporate formalities.

Our earnings and growth are affected not only by general economic conditions, but also by the fiscal and monetary policies of the Federal Government, particularly the Federal Reserve. The Federal Reserve can and does implement national monetary policy for such purposes as curbing inflation, combating recession, and facilitating the national debt. The nature and impact of future changes in monetary policies and their impact on us cannot be predicted with certainty.

An investment in the Company’s common shares involves certain risks. The following is a discussion of the most significant risks and uncertainties that may affect the Company’s business, financial condition and future results.

As a business operating in the financial services industry, our business and operations may be adversely affected in numerous and complex ways by weak economic conditions.

Our businesses and operations, which primarily consist of lending money to customers in the form of loans, borrowing money from customers in the form of deposits and investing in securities, are sensitive to general business and economic conditions in the United States. If the U.S. economy weakens, our growth and profitability from our lending, deposit and investment operations could be constrained. Uncertainty about the federal fiscal policymaking process, the medium and long-term fiscal outlook of the federal government, and future tax rates is a concern for businesses, consumers and investors in the United States. In addition, economic conditions in foreign countries could affect the stability of global financial markets, which could hinder U.S. economic growth. Weak economic conditions are characterized by deflation, fluctuations in debt and equity capital markets, a lack of liquidity and/or depressed prices in the secondary market for mortgage loans, increased delinquencies on mortgage, consumer and commercial loans, residential and commercial real estate price declines and lower home sales and commercial activity. All of these factors are detrimental to our business, and the interplay between these factors can be complex and unpredictable. Our business is also significantly affected by monetary and related policies of the U.S. federal government and its agencies. Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond our control. Adverse economic conditions and government policy responses to such conditions could have a material adverse effect on our business, financial condition and results of operations.

A substantial majority of our loans and operations are in Utah, Salt Lake, Davis, Cache and Washington counties, and therefore our business is particularly vulnerable to a downturn in the local economies of those counties.

Unlike larger financial institutions that are more geographically diversified, our business is concentrated primarily in the state of Utah. As of December 31, 2017, approximately 80.4% of our loans were secured by real estate, the substantial majority of which are located in Utah, Salt Lake, Davis, Cache and Washington counties. If the local economy and particularly the real estate market declines, the rates of delinquencies, defaults, foreclosures, bankruptcies and losses in our loan portfolio would likely increase. This risk increases for our variable rate loans which represent 73.0% of our loans. As a result of this lack of diversification in our loan portfolio, a downturn in the local economy generally and real estate market specifically could significantly reduce our profitability and growth and adversely affect our financial condition.

A large portion of our loan portfolio is tied to the real estate market and we may be negatively impacted by downturns in that market.

The majority of loans in our loan portfolio are real estate related, including loans for construction and land development projects and for the purchase, improvement or refinancing of residential and commercial real estate. A downturn in the real estate market could increase loan delinquencies, defaults and foreclosures, and significantly impair the value of our collateral and our ability to sell the collateral upon foreclosure. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. If real estate values decline, it is also more likely that we would be required to increase our allowance for loan losses. If during a period of reduced real estate values we are required to liquidate the property collateralizing a loan to satisfy the debt or to increase our allowance for loan losses, it could materially reduce our profitability and adversely affect our financial condition.

As of December 31, 2017, 22.6% of our loan portfolio consisted of real estate construction, and acquisition and land development loans, which generally have a higher degree of risk than long-term financing of existing properties because repayment depends on the completion of the project and usually on the sale of the property. In addition, these loans are often “interest-only loans,” which normally require only the payment of interest accrued prior to maturity. Interest-only loans carry greater risk than principal and interest loans because no principal is paid prior to maturity. This risk is particularly apparent during periods of rising interest rates and declining real estate values. If there is a significant decline in the real estate market due to a material increase in interest rates or for other reasons, many of these loans could default and result in foreclosure. Moreover, most of these loans are for projects located in our primary market area. If we are forced to foreclose on a project prior to completion, we may not be able to recover the entire unpaid portion of the loan or we may be required to fund additional money to complete the project or hold the property for an indeterminate period of time. Any of these outcomes may result in losses and reduce our earnings.

The FDIC has given guidance recommending that if the sum of (i) certain categories of commercial real estate, or CRE, loans and (ii) acquisition, development and construction, or ADC, loans exceeds 300% of total risk-based capital, or if ADC loans exceed 100% of total risk- based capital, heightened risk management practices should be employed to mitigate risk. As of December 31, 2017, our ratio for the sum of CRE and ADC loans was 273% and our ratio for ADC loans was 149%. Our concentration in ADC loans is cyclical and tends to increase in the second and third quarters of each year as demand for ADC loans increases. An increase in ADC loan concentration could cause our ratio for ADC loans to increase and even exceed the FDIC’s guideline. We have exceeded these guidance ratios at times in the past and may do so in the future. We actively monitor and believe that we effectively manage our CRE and ADC loan concentrations. If we exceed the FDIC’s guidelines and do not effectively manage the risk of our CRE and ADC loans, we may be subject to regulatory scrutiny including a requirement to raise additional capital, reduce our loan concentrations or undertake other remedial actions.

We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially and adversely affect our performance.

Our reputation is one of the most valuable components of our business. As such, we strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining associates who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and associates. If our reputation is negatively affected by the actions of our associates or otherwise, our business and, therefore, our operating results may be materially and adversely affected.

We could suffer material credit losses if we do not appropriately manage our credit risk.

There are risks inherent in making any loan, including risks inherent in dealing with individual borrowers, risks of non-payment, risks resulting from uncertainties as to the future value of collateral and risks resulting from changes in economic and industry conditions. Changes in the economy can cause the assumptions that we made at origination to change and can cause borrowers to be unable to make payments on their loans, and significant changes in collateral values can cause us to be unable to collect the full value of loans we make. There is no assurance that our credit risk monitoring and loan approval procedures are or will be adequate or will reduce the inherent risks associated with lending. Our credit administration personnel, and policies and procedures may not adequately adapt to changes in economic or any other conditions affecting customers and the quality of our loan portfolio. Any failure to manage such credit risks may materially adversely affect our business, financial condition and results of operations.

The small to medium sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair their ability to repay a loan, and such impairment could adversely affect our results of operations and financial condition.

We focus our business development and marketing strategy primarily on small to medium sized businesses. Small to medium sized businesses frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete and may experience substantial volatility in operating results, any of which may impair a borrower’s ability to repay a loan. In addition, the success of a small to medium sized business often depends on the management skills, talents and efforts of one or two people or a small group of people, and the death, disability or resignation of one or more of these people could have a material adverse impact on the business and its ability to repay its loan. If general economic conditions negatively impact Utah and small to medium sized businesses are adversely affected or our borrowers are otherwise affected by adverse business conditions, our business, financial condition and results of operations could be adversely affected.

If we are not able to maintain our past levels of growth, our future prospects and competitive position could be diminished and our profitability could be reduced.

We may not be able to sustain our growth at the rate we have enjoyed during the past several years. Our growth over the past several years has been driven primarily by a strong residential housing and commercial real estate market in our market areas and our ability to identify attractive expansion opportunities. A downturn in local economic market conditions, particularly in the real estate market, a failure to attract and retain high performing associates, heightened competition from other financial services providers, and an inability to attract additional core deposits and lending customers, among other factors, could limit our ability to grow as rapidly as we have in the past and as such have a negative effect on our business, financial condition and results of operations.

If we are unable to manage our growth effectively, we may incur higher than anticipated costs and our ability to execute our growth strategy could be impaired.

We expect to continue to grow our assets and deposits by increasing our product and service offerings and expanding our operations through new branches and possibly acquisitions. Our ability to manage growth successfully will depend on our ability to:

If we do not manage our growth effectively, we may be unable to realize the benefit from the investments in technology, infrastructure, and personnel that we have made to support our expansion. In addition, we may incur higher costs and realize less revenue growth than we expect, which would reduce our earnings and diminish our future prospects, and we may not be able to continue to implement our business strategy and successfully conduct our operations. Risks associated with failing to maintain effective financial and operational controls as we grow, such as maintaining appropriate loan underwriting procedures, determining adequate allowances for loan losses and complying with regulatory accounting requirements, including increased loan losses, reduced earnings and potential regulatory penalties and restrictions on growth, all could have a negative effect on our business, financial condition and results of operations.

We may grow through mergers or acquisitions, which strategy may not be successful or, if successful, may produce risks in successfully integrating and managing the merged companies or acquisition and may dilute our shareholders.

As part of our growth strategy, we may pursue mergers and acquisitions of banks and nonbank financial services companies within and outside of our principal market area. Although we regularly identify and explore specific acquisition opportunities as part of our ongoing business practices, we may not find a suitable merger or acquisition opportunity. Mergers and acquisitions involve numerous risks, any of which could harm our business, including:

Mergers and acquisitions also frequently result in the recording of goodwill and other intangible assets, which are subject to potential impairments in the future and that could harm our financial results. In addition, if we finance acquisitions by issuing convertible debt or equity securities, our existing shareholders may be diluted, which could affect the market price of our common shares. As a result, if we fail to properly evaluate mergers, acquisitions or investments, we may not achieve the anticipated benefits of any such merger or acquisition, and we may incur costs in excess of what we anticipate. The failure to successfully evaluate and execute mergers, acquisitions or investments or otherwise adequately address these risks could materially harm our business, financial condition and results of operations.

On October 6, 2017, we completed the acquisition of $257 million in loans and seven Utah branch locations with approximately $160 million in deposits from Banner Bank (“Banner”). Also, on November 13, 2017, we completed the acquisition of Town & Country Bank, Inc. (“T&C”), located in St. George, Utah. Realization of the anticipated synergies from these acquisitions depends on our ability to effectively integrate the operation of the acquired branches into our existing operations, including, among other things, the integration of information systems and personnel policies and practices. In addition to the risks identified above, failure to successfully integrate these acquired branches into our operations could materially harm our business. Further, we may be unable to retain customers of Banner or T&C, which could result in our loss of deposit balances and materially harm our financial condition.

A significant source of risk arises from the possibility that we could sustain losses due to loan defaults and non-performance on loans. We maintain an allowance for loan losses in accordance with accounting principles generally accepted in the United States to provide for such defaults and other non-performance. As of December 31, 2017, our allowance for loan losses (“ALLL”) as a percentage of loans held for investment was 1.12%. In accordance with acquisition accounting, loans acquired from the Utah branches of Banner Bank and Town & Country Bank were recorded at their estimated fair value, which resulted in a net discount to the loans’ contractual amounts, a portion of which reflects a discount for expected credit losses. Credit discounts are included in the determination of fair value, and as a result, no allowance for loan losses is recorded for acquired loans at the acquisition date. The discount recorded on the acquired loans is not reflected in the allowance for loan losses or related allowance coverage ratios. The determination of the appropriate level of loan loss allowance is an inherently difficult process and is based on numerous assumptions. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, which may be beyond our control. In addition, our underwriting policies, adherence to credit monitoring processes, and risk management systems and controls may not prevent unexpected losses. Our allowance for loan losses may not be adequate to cover actual loan losses. Moreover, any increase in our allowance for loan losses will adversely affect our earnings.

In June 2016, the Financial Accounting Standards Board (“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 anticipates 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 is developing 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 developing and implementing processes and procedures to ensure it is fully compliant at adoption date.

We may have difficulty attracting additional necessary personnel, which may divert resources and limit our ability to successfully expand our operations.

Our business plan includes, and is dependent upon, our hiring and retaining highly qualified and motivated associates at every level. We expect to experience substantial competition in identifying, hiring and retaining top-quality associates. If we are unable to hire and retain qualified associates we may be unable to successfully execute our business strategy and manage our growth.

The unexpected loss of key officers would materially and adversely affect our ability to execute our business strategy, and diminish our future prospects.

Our success to date and our prospects for success in the future are substantially dependent on our senior management team. The loss of key members of our senior management team could materially and adversely affect our ability to successfully implement our business plan and, as a result, our future prospects. The loss of senior management without qualified successors who can execute our strategy would also have an adverse impact on us.

Our profitability depends on interest rates generally, and we may be adversely affected by changes in market interest rates.

Our profitability depends in substantial part on our net interest income. Our net interest income depends on many factors that are partly or completely outside of our control, including competition, federal economic, monetary and fiscal policies, and economic conditions generally. Our net interest income will be adversely affected if market interest rates change so that the interest we pay on deposits and borrowings increases faster than the interest we earn on loans and investments. In addition, an increase in interest rates could adversely affect borrowers’ ability to pay the principal or interest on existing loans or reduce their desire to borrow more money. This may lead to an increase in our non-performing assets, a decrease in loan originations, or a reduction in the value of and income from our loans, any of which could have a material and negative effect on our results of operations. Fluctuations in market rates and other market disruptions are neither predictable nor controllable and may adversely affect our financial condition and earnings.

The ratio of variable to fixed-rate loans in our loan portfolio, the ratio of short-term (maturing at a given time within 12 months) to long-term loans, and the ratio of our demand, money market and savings deposits to CDs (and their time periods), are the primary factors affecting the sensitivity of our net interest income to changes in market interest rates. The composition of our rate-sensitive assets or liabilities is subject to change and could result in a more unbalanced position that would cause market rate changes to have a greater impact on our earnings. In periods of rising interest rates, commercial and consumer demand for new lending and re-financings decreases, this in turn adversely impacts our lending activities.

Our funding sources may prove insufficient to provide liquidity, replace deposits and support our future growth.

We rely on customer deposits, advances from the FHLB, the Federal Reserve System and lines of credit at other financial institutions to fund our operations. Although we have historically been able to replace maturing deposits and advances if desired, we may not be able to replace such funds in the future if our financial condition, the financial condition of the FHLB or market conditions were to change. Our financial flexibility will be severely constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. Finally, if we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs. In this case, our profitability would be adversely affected.

FHLB borrowings and other current sources of liquidity may not be available or, if available, sufficient to provide adequate funding for operations. Furthermore, our own actions could result in a loss of adequate funding. For example, our availability at the FHLB could be reduced if we are deemed to have poor documentation or processes. Accordingly, we may seek additional higher-cost debt in the future to achieve our long- term business objectives. Additional borrowings, if sought, may not be available to us or, if available, may not be available on favorable terms. If additional financing sources are unavailable or are not available on reasonable terms, our growth and future prospects could be adversely affected.

We may be adversely affected by the lack of soundness of other financial institutions or market utilities.

Our ability to engage in routine funding and other transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial institutions are interrelated as a result of trading, clearing, counterparty or other relationships. Defaults by, or even rumors or questions about, one or more financial institutions or market utilities, or the financial services industry generally, may lead to market-wide liquidity problems and losses of depositor, creditor and counterparty confidence and could lead to losses or defaults by us or by other institutions.

Impairment of investment securities could require charges to earnings, which would negatively impact our results of operations.

We maintain a significant amount of our assets in investment securities, and must periodically test our investment securities for impairment in value. In assessing whether the impairment of investment securities is other-than-temporary, we consider the length of time and extent to which the fair value has been less than cost, the financial condition and near- term prospects of the issuer, and the intent and ability to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value in the near term. If we conclude that impairment of investment securities is required, we could be required to incur charges to earnings, which would result in a negative impact on our results of operations. The impact of these impairment matters could have a material adverse effect on our business, results of operations, and financial condition.

We face strong competition from banks, credit unions and other financial services providers that offer banking services, which may limit our ability to attract and retain banking customers.

Competition in the banking industry generally, and in our geographic market specifically, is strong. Competitors include banks, as well as other financial services providers, such as savings and loan institutions, consumer finance companies, brokerage firms, insurance companies, credit unions, mortgage banks and other financial intermediaries. In particular, our competitors include several larger national and regional financial institutions whose greater resources may afford them a marketplace advantage by enabling them to maintain numerous banking locations and ATMs, offer a wider array of banking services and conduct extensive promotional and advertising campaigns. Additionally, banks and other financial institutions with larger capitalization and financial intermediaries not subject to bank regulatory restrictions have larger lending limits and are thereby able to serve the credit needs of a broader customer base than us. Larger competitors may also be able to offer better lending and deposit rates to customers, and could increase their competition as we become a public company and our growth becomes more visible. Moreover, larger competitors may not be as vulnerable as us to downturns in the local economy and real estate market since they have a broader geographic area and their loan portfolio is more diversified. While our deposit base has increased, several larger banks have grown their deposit market share in our markets faster than we have resulting in a declining relative deposit market share for us in our existing markets. We

believe our declining relative market share in deposits has resulted primarily from aggressive marketing and advertising, branch expansion, expanded delivery channels and more attractive rates offered by larger bank competitors. We also compete against community banks, credit unions and non-bank financial services companies that have strong local ties. These smaller institutions are likely to cater to the same small to medium sized businesses that we target. Additionally, financial technology companies (“Fintech”) have developed technology which allows customers to obtain loans via the internet in an expeditious manner and could become competitors to us. If we are unable to attract and retain banking customers, we may be unable to continue to grow our loan and deposit portfolios and our results of operations and financial condition may otherwise be adversely affected. Ultimately, we may be unable to compete successfully against current and future competitors.

Cyber-attacks or other security breaches could have a material adverse effect on our business.

In the normal course of business, we collect, process, and retain sensitive and confidential information regarding our customers. We also have arrangements in place with other third parties through whom we share and receive information about their customers who are or may become our customers. Although we devote significant resources and management focus to ensuring the integrity of our systems through information security and business continuity programs, our facilities and systems, and those of third party service providers, are vulnerable to external or internal security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming or human errors or other similar events.

Information security risks for financial institutions like us have increased recently in part because of new technologies, the use of the Internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others. In addition to cyber-attacks or other security breaches involving the theft of sensitive and confidential information, hackers recently have engaged in attacks against large financial institutions, particularly denial of service attacks that are designed to disrupt key business services, such as customer-facing websites. We are not able to anticipate or implement effective preventive measures against all security breaches of these types, especially because the techniques used change frequently and because attacks can originate from a wide variety of sources. We employ detection and response mechanisms designed to contain and mitigate security incidents, but early detection may be thwarted by sophisticated attacks and malware designed to avoid detection.

We also face risks related to cyber-attacks and other security breaches in connection with credit and debit card transactions that typically involve the transmission of sensitive information regarding our customers through various third parties, including merchant acquiring banks, payment processors, payment card networks and our processors. Some of these parties have in the past been the target of security breaches and cyber-attacks, and because the transactions involve third parties and environments such as the point of sale that we do not control or secure, future security breaches or cyber-attacks affecting any of these third parties could impact us through no fault of our own, and in some cases we may have exposure and suffer losses for breaches or attacks relating to them. We also rely on numerous other third party service providers to conduct other aspects of our business operations and face similar risks relating to them. While we regularly conduct security assessments on these third parties, we cannot be sure that their information security protocols are sufficient to withstand a cyber-attack or other security breach.

The access by unauthorized persons to, or the improper disclosure by us, of confidential information regarding our customers or our own proprietary information, software, methodologies, and business secrets could result in significant legal and financial exposure, supervisory liability, damage to our reputation or a loss of confidence in the security of our systems, products and services, which could have a material adverse effect on our business, financial condition or results of operations. In addition, recently there have been a number of well-publicized attacks or breaches affecting others in our industry that have heightened concern by consumers generally about the security of using credit and debit cards, which have caused some consumers, including our customers, to use our credit and debit cards less in favor of alternative methods of payment and has led to increased regulatory focus on, and potentially new regulations relating to, these matters. Further cyber-attacks or other breaches in the future, whether affecting us or others, could intensify consumer concern and regulatory focus and result in reduced use of our cards and increased costs, all of which could have a material adverse effect on our business. To the extent we are involved in any future cyber-attacks or other breaches, our brand and reputation could be affected, and this could also have a material adverse effect on our business, financial condition or results of operations. If we experience a cyber-attack, our insurance coverage may not cover all of our losses, and furthermore, we may experience a loss of reputation.

Our risk management framework may not be effective in mitigating risks and losses to us.

Our risk management framework is comprised of various processes, systems and strategies, and is designed to manage the types of risk to which we are subject, including, among others, credit, market, liquidity, interest rate and compliance. Our framework also includes financial or other modeling methodologies that involve management assumptions and judgment. Our risk management framework may not be effective under all circumstances and may not adequately mitigate any risk of loss to us. If our framework is not effective, we could suffer unexpected losses and our business, financial condition, results of operations or prospects could be materially and adversely affected. We may also be subject to potentially adverse regulatory consequences.

We are subject to certain operating risks, related to customer or employee fraud which could harm our reputation and business.

Employee error and employee and customer misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation. Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of our customers or improper use of confidential information. It is not always possible to prevent employee error and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Employee error could also subject us to financial claims for negligence. If our internal controls fail to prevent or detect an occurrence, or if any resulting loss is not insured, excess insurance coverage is denied or not available, it could have a material adverse effect on our business, financial condition and results of operations.

If we need additional capital in the future to continue our growth, we may not be able to obtain it on terms that are favorable.

We may need to raise additional capital in the future to support our continued growth and to maintain our capital levels. Our ability to raise capital through the sale of additional securities will depend primarily upon our financial condition and the condition of financial markets at that time. Accordingly, we may not be able to obtain additional capital in the amounts or on terms satisfactory to us. Our growth may be constrained if we are unable to raise additional capital as needed.

If third parties infringe upon our intellectual property or if we were to infringe upon the intellectual property of third parties, we may expend significant resources enforcing or defending our rights or suffer competitive injury.

We rely on a combination of copyright, trademark, trade secret laws and confidentiality provisions to establish and protect our proprietary rights. If we fail to successfully maintain, protect and enforce our intellectual property rights, our competitive position could suffer. Similarly, if we were to infringe on the intellectual property rights of others, our competitive position could suffer. Third parties may challenge, invalidate, circumvent, infringe or misappropriate our intellectual property, or such intellectual property may not be sufficient to permit us to take advantage of current market trends or otherwise to provide competitive advantages, which could result in costly redesign efforts, discontinuance of certain product or service offerings or other competitive harm. We may also be required to spend significant resources to monitor and police our intellectual property rights. Others, including our competitors may independently develop similar technology, duplicate our products or services or design around our intellectual property, and in such cases we could not assert our intellectual property rights against such parties. Further, our contractual arrangements may not effectively prevent disclosure of our confidential information or provide an adequate remedy in the event of unauthorized disclosure of our confidential or proprietary information. We may have to litigate to enforce or determine the scope and enforceability of our intellectual property rights, trade secrets and know-how, which could be time-consuming and expensive, could cause a diversion of resources and may not prove successful. The loss of intellectual property protection or the inability to obtain rights with respect to third party intellectual property could harm our business and ability to compete. In addition, because of the rapid pace of technological change in our industry, aspects of our business and our products and services rely on technologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms or at all.

In some instances, litigation may be necessary to enforce our intellectual property rights and protect our proprietary information, or to defend against claims by third parties that our products, services or technology infringe or otherwise violate their intellectual property or proprietary rights. Third parties may have, or may eventually be issued, patents that could be infringed by our products, services or technology. Any of these third parties could bring an infringement claim against us with respect to our products, services or technology. We may also be subject to third party infringement, misappropriation, breach or other claims with respect to copyright, trademark, license usage or other intellectual property rights. In addition, in recent years, individuals and groups, including patent holding companies, have been purchasing intellectual property assets in order to make claims of infringement and attempt to extract settlements from companies in the banking and financial services industry. Any litigation or claims brought by or against us, whether with or without merit, could result in substantial costs to us and divert the attention of our management, which could harm our business and results of operations. In addition, any intellectual property litigation or claims against us could result in the loss or compromise of our intellectual property and proprietary rights, subject us to significant liabilities, including damage awards, result in an injunction prohibiting us from marketing or selling certain of our services, require us to redesign affected products or services, or require us to seek licenses which may only be available on unfavorable terms, if at all, any of which could harm our business and results of operations.

We are exposed to risk of environmental liabilities with respect to properties to which we take title.

Approximately 80.4% of our outstanding loan portfolio was secured by real estate as of December 31, 2017. In the course of our business, we may foreclose and take title to real estate, and could be subject to environmental liabilities with respect to these properties. We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean up hazardous or toxic substances, or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. If we ever become subject to significant environmental liabilities, our business, financial condition, liquidity and results of operations could be materially and adversely affected.

We rely on our information technology and telecommunications systems and third party servicers, and the failure of these systems could adversely affect our business.

Our business is highly dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems and third party servicers. Our primary banking and accounting systems are third party software platforms operated on an in-house basis: however, we outsource certain of our information technology systems including our electronic funds transfer, or EFT, ATM and debit card processing, credit and debit card and transaction processing, and our online Internet bill payment and banking services. We rely on these systems to process new and renewal loans, provide customer service, facilitate collections and share data across our organization. The failure of these systems, or the termination of a third party software license or service agreement on which any of these systems is based, could interrupt our operations. Because our information technology and telecommunications systems interface with and depend on third party systems, we could experience service denials if demand for such services exceeds capacity or such third party systems fail or experience interruptions. If sustained or repeated, a system failure or service denial could result in a deterioration of our ability to process new and renewal loans and provide customer service or compromise our ability to collect loan payments in a timely manner. In addition, our ability to adopt new information technology and technological products needed to meet our customers’ banking needs may be limited if our third party servicers are slow to adopt or choose not to adopt such new technology and products. Such a failure to provide this technology and products to our customers could result in a loss of customers, which would negatively impact our business and results of operations.

We depend on the accuracy and completeness of information about customers and counterparties.

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information furnished to us by or on behalf of customers and counterparties, including financial statements and other financial information. We also may rely on representations of customers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. In deciding whether to extend credit, we may rely upon our customers’ representations that their financial statements conform to U.S. generally accepted accounting principles, or GAAP, and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. We also may rely on customer representations and certifications, or other auditors’ reports, with respect to the business and financial condition of our customers. Our financial condition, results of operations, financial reporting and reputation could be negatively affected if we rely on materially misleading, false, inaccurate or fraudulent information.

Our planned growth in our leasing division includes increased risks, including risks related to collateralizing leases, our relative inexperience in this area, and complying with state lending and other requirements with which we are unfamiliar.

We are growing our equipment lease financing business by originating direct leases on a national level through our GrowthFunding Equipment Finance (“GEF”) division. We formed our GEF division in 2016 to increase our leasing portfolio and to diversify our commercial and industrial loan portfolio. GEF is underwriting leases nationwide. These leases are used to purchase equipment essential to the operations of our borrowers/lessees and are secured by the specific equipment financed. Prior to forming GEF, we acquired rental streams of payments on leases from third-party leasing companies. The negotiation and administration of such leases is handled by third-party leasing companies. Because this division is a new line of business to the Bank, we are not certain how quickly a nationwide customer base will accept this business venture. Growing a new line of business requires significant investment in personnel which, if the business is not successful, may not be recovered. While we have hired personnel with experience in leasing, there is no assurance we will be profitable or will be able to properly administer the lease portfolio. Finally, this division is subject to state lending requirements and other laws with which we are unfamiliar, and failure to comply with these requirements and laws could result in significant penalties to the Bank.

Leasing is traditionally based on cash flow lending. Cash flow lending involves lending money based primarily on the expected cash flow, profitability and enterprise value of a business rather than on the value of the assets or resale of the collateral for the loan or lease. When cash flow loans or leases become non-performing, our primary resource to recover some, or all, of the principal of our loan or lease is to liquidate the collateral. If there is a shortfall in the collateral value, the Bank must pursue the corporate or personal guarantors, the sale of the entire company as a going concern, or restructure the company in a way we believe would enable us to generate sufficient cash flow over time to repay our loan or lease. These alternatives may not generate enough proceeds to repay the loan or lease.

For some types of leases, the Bank will own and have risk of loss on the leased property and the customer will make rental lease payments over a set lease period. The lease payments are determined, in part, based on the expected residual value of the property at the end of the lease. At the end of the lease, the Bank must sell or re-lease the property to the lessee or a third party. Leases with significant residual values have higher risk than many other types of lending because the economics of the lease also rely on the leased property’s value in addition to the other sources of repayment from the lease. We may be unable to re-lease or sell the property within a reasonable timeframe or may experience market price changes in the expected residual value of the leased property over the lease term. If we do not properly manage residual values of the leased property we may not be able to recover our investment.

We are subject to regulation, which increases the cost and expense of regulatory compliance and therefore reduces our net income and may restrict our growth and ability to acquire other financial institutions.

As a bank holding company under federal law, we are subject to regulation under the Bank Holding Company Act of 1956, as amended, or the BHCA, and the examination and reporting requirements of the Federal Reserve. In addition to supervising and examining us, the Federal Reserve, through its adoption of regulations implementing the BHCA, places certain restrictions on the activities that are deemed permissible for bank holding companies to engage in. Changes in the number or scope of permissible activities could have an adverse effect on our ability to realize our strategic goals.

As a Utah state-chartered bank that is not a member of the Federal Reserve System, the Bank is separately subject to regulation by both the FDIC and the Utah Department of Financial Institutions, or UDFI. The FDIC and UDFI regulate numerous aspects of the Bank’s operations, including adequate capital and financial condition, permissible types and amounts of extensions of credit and investments, permissible non- banking activities and restrictions on dividend payments. The Bank undergoes periodic examinations by the FDIC and UDFI. Following such examinations, the Bank may be required, among other things, to change its respective asset valuations or the amounts of required loan loss allowances or to restrict its respective operations, as well as increase its respective capital levels, which could adversely affect our results of operations.

Supervision, regulation, and examination of PUB and the Bank by the bank regulatory agencies are intended primarily for the protection of consumers, bank depositors and the Deposit Insurance Fund of the FDIC, rather than holders of our common shares.

Particularly as a result of new regulations and regulatory agencies under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, we may be required to invest significant management attention and resources to evaluate and make any changes necessary to comply with applicable laws and regulations. This allocation of resources, as well as any failure to comply with applicable requirements, may negatively impact our results of operations and financial condition.

Changes in laws, government regulation and monetary policy may have a material effect on our results of operations.

Financial institutions have been the subject of significant legislative and regulatory changes and may be the subject of further significant legislation or regulation in the future, none of which is within our control. For example, on February 3, 2017, President Trump signed an executive order pursuant to which he ordered the Secretary of the Treasury to consult with the heads of the member agencies of the Financial Stability Oversight Council on the extent to which existing laws, treaties, regulations, guidance, reporting and recordkeeping requirements, and other government policies promote certain core principles laid out in the executive order. This may result in repeals of, or amendments to, existing laws, treaties, regulations, guidance, reporting and recordkeeping requirements and other government policies. Significant new laws or regulations or changes in, or repeals of, existing laws or regulations, including those with respect to federal and state taxation, may cause our results of operations to differ materially. In addition, the costs and burden of compliance could adversely affect our ability to operate profitably. Further, federal monetary policy significantly affects the Bank’s credit conditions, as well as for the Bank’s depositors and borrowers, particularly as implemented through the Federal Reserve, primarily through open market operations in U.S. government securities, the discount rate for bank borrowings and reserve requirements. A material change in any of these conditions could have a material impact on us, the Bank and the Bank’s depositors and borrowers, and therefore on our results of operations.

The continuing enactment, potential repeal or amendment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 may have a material effect on our operations.

In 2010, the Dodd-Frank Act was adopted, which imposes significant regulatory and compliance changes. The key effects of the Dodd-Frank Act on our business are, or may include:

In addition, the Dodd-Frank Act restricts the ability of banks to engage in certain proprietary trading or to sponsor or invest in private equity or hedge funds. The Dodd-Frank Act also contains provisions designed to limit the ability of insured depository institutions, their holding companies and their affiliates to conduct certain swaps and derivatives activities and to take certain principal positions in financial instruments.

Some provisions of the Dodd-Frank Act have not been completely implemented. In addition, President Trump’s new administration has discussed the possibility of repealing or amending the Dodd-Frank Act and the February 3, 2017 executive order could lead to such repeals or amendments. The changes resulting from this executive order and the continuing implementation of the Dodd-Frank Act may impact the profitability of our business activities or otherwise adversely affect our business. Failure to comply with the requirements may negatively impact our results of operations and financial condition. While we cannot predict what effect any presently contemplated or future changes in the laws or regulations or their interpretations would have on us, these changes could be materially adverse to investors in our common shares.

New and future rulemaking by the CFPB and other regulators, as well as enforcement of existing consumer protection laws, may have a material effect on our operations and operating costs.

The CFPB has the authority to implement and enforce a variety of existing federal consumer protection statutes and to issue new regulations but, with respect to institutions of our size, does not have primary examination and enforcement authority with respect to such laws and regulations. The authority to examine depository institutions with $10.0 billion or less in assets, such as the Bank, for compliance with federal consumer laws remains largely with our primary federal regulator, the FDIC. However, the CFPB may participate in examinations of smaller institutions on a “sampling basis” and may refer potential enforcement actions against such institutions to their primary regulators. In some cases, regulators such as the Federal Trade Commission, or FTC, and the Department of Justice also retain certain rulemaking or enforcement authority, and we also remain subject to certain state consumer protection laws. As an independent bureau within the Federal Reserve, the CFPB may impose requirements more severe than the previous bank regulatory agencies. The CFPB has placed significant emphasis on consumer complaint management and has established a public consumer complaint database to encourage consumers to file complaints they may have against financial institutions. We are expected to monitor and respond to these complaints, including those that we deem frivolous, and doing so may require management to reallocate resources away from more profitable endeavors.

The CFPB has a number of significant rules which impact nearly every aspect of the lifecycle of a residential mortgage. These rules implement the Dodd-Frank Act amendments to the Equal Credit Opportunity Act, the Truth in Lending Act and the Real Estate Settlement Procedures Act. The rules require banks to, among other things: (i) develop and implement procedures to ensure compliance with a new “reasonable ability to repay” test and identify whether a loan meets a new definition for a “qualified mortgage;” (ii) implement new or revised disclosures, policies and procedures for servicing mortgages including, but not limited to, early intervention with delinquent borrowers and specific loss mitigation procedures for loans secured by a borrower’s principal residence; (iii) comply with additional restrictions on mortgage loan originator compensation; and (iv) comply with new disclosure requirements and standards for appraisals and escrow accounts maintained for “higher priced mortgage loans.” These rules create operational and strategic challenges for us, as we are both a mortgage originator and a servicer. For example, business models for cost, pricing, delivery, compensation, and risk management will need to be re-evaluated and potentially revised, perhaps substantially.

As a result of the Dodd-Frank Act and recent rulemaking, we will become subject to more stringent capital requirements.

Pursuant to the Dodd-Frank Act, the federal banking agencies adopted final rules, or the U.S. Basel III Capital Rules, to update their general risk-based capital and leverage capital requirements to incorporate agreements reflected in the Third Basel Accord adopted by the Basel Committee on Banking Supervision, or Basel III Capital Standards, as well as the requirements of the Dodd-Frank Act. The U.S. Basel III Capital Rules are described in more detail in “Supervision and Regulation — Basel III.” While we are continuing to prepare for the impact of the U.S. Basel III Capital Rules, the U.S. Basel III Capital Rules may still have a material impact on our business, financial condition and results of operations. In addition, the failure to meet the established capital requirements could result in one or more of our regulators placing limitations or conditions on our activities or restricting the commencement of new activities, and such failure could subject us to a variety of enforcement remedies available to the federal regulatory authorities, including limiting our ability to pay dividends, issuing a directive to increase our capital and terminating our FDIC deposit insurance. FDIC deposit insurance is critical to the continued operation of the Bank.

Our ability to raise additional capital, when and if needed, will depend on conditions in the capital markets, economic conditions and a number of other factors, including investor perceptions regarding the banking industry and market condition, and governmental activities, many of which are outside our control, and on our financial condition and performance. Accordingly, we may not be able to raise additional capital if needed or on terms acceptable to us. If we fail to meet these capital and other regulatory requirements, our financial condition, liquidity and results of operations would be materially and adversely affected. Higher capital levels could also lower our return on equity.

Our failure to meet applicable regulatory capital requirements, or to maintain appropriate capital levels in general, could affect customer and investor confidence, our ability to grow, our costs of funds and FDIC insurance costs, our ability to pay dividends on common shares, our ability to make acquisitions, and our business, results of operations and financial condition, generally.

We may be required to contribute capital or assets to the Bank that could otherwise be invested or deployed more profitably elsewhere.

Federal law and regulatory policy impose a number of obligations on bank holding companies that are designed to reduce potential loss exposure to the depositors of insured depository subsidiaries and to the FDIC’s deposit insurance fund. For example, a bank holding company is required to serve as a source of financial strength to its FDIC-insured depository subsidiaries and to commit financial resources to support such institutions where it might not do so otherwise, even if we would not ordinarily do so and even if such contribution is to our detriment or the detriment of our shareholders. These situations include guaranteeing the compliance of an “undercapitalized” bank with its obligations under a capital restoration plan, as described further in this prospectus.

A capital injection into the Bank may be required at times when we do not have the resources to provide it at the holding- company level, and therefore we may be required to issue common shares or debt to obtain the required capital. Issuing additional common shares would dilute our current shareholders’ percentage of ownership and could cause the price of our common shares to decline. If we are required to issue debt, and in the event of a bankruptcy by PUB, the bankruptcy trustee would assume any commitment by us to a federal bank regulatory agency to maintain the capital of the Bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of PUB’s general unsecured creditors, including the holders of any note obligations. Thus, any borrowing that must be done by PUB in order to make the required capital injection becomes more difficult and expensive and would adversely impact our cash flows, financial condition, results of operations and prospects. Pursuant to applicable laws and regulations, the liabilities of the Bank could harm us. Under the Federal Deposit Insurance Act, or FDIA, we may, under certain circumstances, be responsible for liabilities of the Bank and may be responsible for damages to the FDIC.

Banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions to which we become subject as a result of such examinations could materially and adversely affect us.

The UDFI, the FDIC, and the Federal Reserve periodically conduct examinations of our business, including compliance with laws and regulations. Accommodating such examinations may require management to reallocate resources, which would otherwise be used in the day-to-day operation of other aspects of our business. If, as a result of an examination, the UDFI or a federal banking agency were to determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of our operations had become unsatisfactory, or that we or our management was in violation of any law or regulation, it may take a number of different remedial actions as it deems appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to assess civil monetary penalties against us, our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance. FDIC deposit insurance is critical to the continued operation of the Bank. If we become subject to such regulatory actions, we could be materially and adversely affected.

We face a risk of non-compliance and enforcement actions with respect to the Bank Secrecy Act and other anti-money laundering statutes and regulations.

Like all U.S. financial institutions, we are subject to monitoring requirements under federal law, including anti-money laundering, or AML, and Bank Secrecy Act, or BSA, matters. Since September 11, 2001, banking regulators have intensified their focus on AML and BSA compliance requirements, particularly the AML provisions of the USA Patriot Act. There is also increased scrutiny of compliance with the rules enforced by the U.S. Treasury Department’s Office of Foreign Assets Control, or OFAC, which involve sanctions for dealing with certain persons or countries. While the Bank has adopted policies, procedures and controls to comply with the BSA, other AML statutes and regulations and OFAC regulations, this aggressive supervision and examination and increased likelihood of enforcement actions may increase our operating costs, which could negatively affect our results of operations and reputation.

We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties.

Federal and state fair lending laws and regulations, such as the Equal Credit Opportunity Act and the Fair Housing Act, impose non-discriminatory lending requirements on financial institutions. The FDIC, the Department of Justice, the CFPB and other federal and state agencies are responsible for enforcing these laws and regulations. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. A successful challenge to our performance under the fair lending laws and regulations could adversely impact our rating under the Community Reinvestment Act, or CRA, and result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on merger and acquisition activity and restrictions on expansion activity, which could negatively impact our reputation, business, financial condition and results of operations.

Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities.

We are subject to various privacy, information security and data protection laws, including requirements concerning security breach notification, and we could be negatively impacted by these laws. For example, our business is subject to the Gramm-Leach-Bliley Act which, among other things: (i) imposes certain limitations on our ability to share non-public personal information about our customers with non-affiliated third parties; (ii) requires that we provide certain disclosures to customers about our information collection, sharing and security practices and afford customers the right to “opt out” of any information sharing by us with non-affiliated third parties (with certain exceptions) and (iii) requires we develop, implement and maintain a written comprehensive information security program containing safeguards appropriate based on our size and complexity, the nature and scope of our activities, and the sensitivity of customer information we process, as well as plans for responding to data security breaches. Various state and federal banking regulators and states have also enacted data security breach notification requirements with varying levels of individual, consumer, regulatory or law enforcement notification in certain circumstances in the event of a security breach. Moreover, legislators and regulators in the United States are increasingly adopting or revising privacy, information security and data protection laws that potentially could have a significant impact on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of consumer or employee information, and some of our current or planned business activities. This could also increase our costs of compliance and business operations and could reduce income from certain business initiatives. This includes increased privacy-related enforcement activity at the federal level, by the FTC, as well as at the state level, such as with regard to mobile applications.

Compliance with current or future privacy, data protection and information security laws (including those regarding security breach notification) affecting customer or employee data to which we are subject could result in higher compliance and technology costs and could restrict our ability to provide certain products and services, which could have a material adverse effect on our business, financial conditions or results of operations. Our failure to comply with privacy, data protection and information security laws could result in potentially significant regulatory or governmental investigations or actions, litigation, fines, sanctions and damage to our reputation, which could have a material adverse effect on our business, financial condition or results of operations.

We have declared an annual cash dividend for over 50 years. We began declaring quarterly cash dividends in 2015 with the dividend being declared after the end of each quarter. Our ability to pay dividends depends on the following factors, among others:

The price of our common shares may fluctuate significantly and our stock may have low trading volumes which may make it difficult for you to resell common shares owned by you at times or prices you find attractive.

The stock market and, in particular, the market for financial institution stocks, has experienced significant volatility. The markets may produce downward pressure on stock prices for certain issuers without regard to those issuers’ underlying financial strength. As a result, the trading volume in our common shares may fluctuate and cause significant price variations to occur. This may make it difficult for you to resell common shares owned by you at times or at prices you find attractive. The low trading volume in our common shares on the Nasdaq Capital Market means that our shares may have less liquidity than other publicly traded companies. We cannot ensure that the volume of trading in our common shares or the price of our common shares will be maintained or will increase in the future.

The impacts of recent tax reform are not yet fully known, and these and other tax regulations could be subject to potential legislative, administrative, or judicial changes or interpretations.

The tax reform bill enacted on December 22, 2017 has had, and is expected to continue to have, far-reaching and significant effects on our Company, our customers and the U.S. economy. The tax reform bill lowered the corporate federal statutory tax rate and eliminated or limited certain federal corporate deductions. It is too early to evaluate all of the potential consequences of the tax reform bill, but such consequences could include lower commercial customer borrowings, either due to the increase in cash flows as a result of the reduction in the corporate statutory tax rate or the utilization by businesses in certain sectors of alternative non-debt financing and/or early retirement of existing debt. Further, there can be no assurance that any benefits realized by us as a result of the reduction in the corporate federal statutory tax rate will ultimately result in increased net income, whether due to decreased loan yields as a result of competition or to other factors. Uncertainty also exists related to state and other taxing jurisdictions' response to federal tax reform, which will continue to be monitored and evaluated. Federal income tax treatment of corporations may be further clarified and modified by other legislative, administrative or judicial changes or interpretations at any time. Any such changes could adversely affect us.

We conduct our business through our executive office, located in American Fork, Utah. We conduct our business through our 25 full-service branch offices in Utah, Salt Lake, Davis, Cache and Washington counties in Utah and in Preston, Idaho. We also have a mortgage banking center and an information technology and operations center. We own all of our facilities except for six branch properties which are leased. We also sublease portions of one of our buildings to other tenants under short-term lease arrangements. We believe that the leases to which we are subject are generally on terms consistent with prevailing market terms, and none of the leases are with our affiliates. We believe that our facilities are in good condition and are adequate to meet our operating needs for the foreseeable future.

There are no material pending legal proceedings to which we or our subsidiaries are a party or to which any of our properties are subject. There are no material proceedings known to us to be contemplated by any governmental authority. We are involved in a variety of litigation matters in the ordinary course of our business and anticipate that we will become involved in new litigation matters from time to time in the future.

Item 5 – Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

The Company’s shares trade on the NASDAQ Capital Market under the symbol “PUB”. As of February 28, 2018, there were approximately 1,856 shareholders of record for the Company’s common shares. The market range of high and low sales prices for the Company’s common shares for the periods indicated are shown below:

The following table summarizes the Company’s dividends declared per quarter for the periods indicated:

Future cash dividends will depend on a variety of factors, including net income, capital, asset quality, general economic conditions and regulatory considerations. Information regarding the regulation considerations is set forth under the heading “Supervision and Regulation” in “Item 1. Business.”

The following sets forth information regarding unregistered securities that were sold by the Registrant during the year ended December 31, 2017.

On November 13, 2017, we issued 466,546 of PUB common shares to approximately 300 shareholders of Town & Country Bank in connection with the merger of Town & Country Bank into PIB, at an agreed upon value of approximately $16.6 million, including cash as part of the consideration. The issuance of securities described above was made in reliance upon exemptions from federal securities registration under Section 3(a)(10) of the Securities Act, as a transaction in exchange for securities where the terms and conditions of such issuance and exchange were approved after a hearing upon the fairness of such terms and conditions by the State of Utah.

On June 11, 2015, the SEC declared effective our registration statement on Form S-1 registering common shares of the Company. On June 16, 2015, the Company completed the initial public offering (“IPO”) 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. In 2017, the net proceeds from the IPO were utilized as a capital contribution into PIB in connection with the acquisition of the Utah branches of Banner Bank and the merger of Town & Country Bank into PIB.

The following graphs compare the yearly cumulative total return of the Company’s common stock over the period since our initial public offering on June 11, 2015 with the yearly cumulative total return on the stocks included in 1) the Russell 2000 Index; and 2) the SNL Bank Index comprised of banks and bank holding companies with total assets between $1 billion and $5 billion. The stock performance graph is based upon an initial investment of $100 on June 11, 2015 and computed assuming the reinvestment of dividends at the frequency with which dividends were paid.

You should read the selected financial data set forth below in conjunction with our historical consolidated financial statements and related notes and with “Item 7– Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in this annual report on Form 10-K.

	As of December 31,
(Dollars in thousands)	2017			2016			2015			2014			2013
Selected Balance Sheet Information:
Cash and cash equivalents	$	51,027		$	67,938		$	42,349		$	47,702		$	94,406
Investment securities		337,710			409,121			398,618			330,839			320,388
Total loans held for investment		1,627,444			1,119,877			1,047,975			940,457			830,717
Total assets		2,123,529			1,665,981			1,555,982			1,367,125			1,299,190
Total deposits		1,814,632			1,425,074			1,309,185			1,199,233			1,144,314
Shareholders’ equity		257,418			228,517			209,408			157,659			143,672
Average balances:
Average earning assets		1,695,147			1,516,139			1,391,108			1,250,156			981,661
Average assets		1,787,810			1,598,198			1,468,942			1,331,291			1,039,561
Average shareholders' equity		242,759			221,044			186,889			152,788			126,453
	Years Ended December 31,
(Dollars in thousands except footnotes)	2017			2016			2015			2014			2013
Summary Income Statement Information:
Interest income	$	83,980		$	72,755		$	64,601		$	58,203		$	45,657
Interest expense		3,342			2,874			2,961			3,260			3,337
Net interest income		80,638			69,881			61,640			54,943			42,320
Provision for loan losses		2,750			900			1,000			1,700			1,500
Net interest income after provision for loan losses		77,888			68,981			60,640			53,243			40,820
Non-interest income		16,560			16,788			16,004			15,241			14,271
Non-interest expense		58,125			48,886			46,768			45,333			36,875
Income before income tax expense		36,323			36,883			29,876			23,151			18,216
Income tax expense		16,477			13,273			10,262			8,246			6,338
Net income	$	19,846		$	23,610		$	19,614		$	14,905		$	11,878

Basic earnings per share	$	1.10		$	1.33		$	1.21		$	1.02		$	0.92
Diluted earnings per share		1.08			1.30			1.17			0.98			0.89
Book value per share		13.91			12.82			11.92			10.68			9.83
Tangible book value per share ⁽¹⁾		12.29			12.79			11.88			10.63			9.75
Cash dividends per common share ⁽⁴⁾		0.34			0.29			0.18			0.22			0.13
Dividend ratio ⁽⁴⁾		30.77	%		21.77	%		15.22	%		21.76	%		14.13	%
Selected financial ratios:
Net interest margin ⁽²⁾		4.76	%		4.61	%		4.43	%		4.39	%		4.31	%
Efficiency ratio		59.80	%		56.41	%		60.23	%		64.59	%		65.16	%
Non-interest income to average assets		0.93	%		1.05	%		1.09	%		1.14	%		1.37	%
Non-interest expense to average assets		3.25	%		3.06	%		3.18	%		3.41	%		3.55	%
Return on average assets		1.11	%		1.48	%		1.34	%		1.12	%		1.14	%
Return on average equity		8.18	%		10.68	%		10.49	%		9.76	%		9.39	%
Non-performing assets to total assets		0.18	%		0.34	%		0.51	%		0.70	%		1.61	%
Loans held for investment to deposits		89.68	%		78.58	%		80.05	%		78.42	%		72.60	%
Net charge-offs (recoveries) to average loans		0.09	%		-0.02	%		0.06	%		0.11	%		0.13	%
Capital Ratios:
Tier 1 leverage capital		11.46	%		13.71	%		13.42	%		11.32	%		11.06	%
Total risk-based capital		14.67	%		20.19	%		19.02	%		16.01	%		16.27	%
Average equity to average assets		13.58	%		13.83	%		12.72	%		11.48	%		12.16	%
Tangible common equity to tangible assets ⁽³⁾		10.87	%		13.69	%		13.42	%		11.48	%		10.98	%

Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended to provide a comprehensive review of People’s Utah Bancorp (“Company”, “PUB”) operating results and financial condition. The information contained in this section should be read in conjunction with Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements in this Form 10-K.

This annual report on Form 10-K may contain certain forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended, (“Securities Act”), and section 21E of the Securities Exchange Act of 1934, as amended, (“Exchange Act”). These forward-looking statements reflect our current views and are not historical facts. These statements may include statements regarding projected performance for periods following the date of this report. 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. Statements that project future final 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 forward-looking statements 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 and other parts of this annual report on Form 10-K 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 annual report on Form 10-K:

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.

Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in “Item 1A. Risk Factors.” Please take into account that forward-looking statements speak only as of the date of this Annual Report on Form 10-K (or documents incorporated by reference, if applicable). The Company does not undertake any obligation to publicly correct or update any forward-looking statement if it later becomes aware that actual results are likely to differ materially from those expressed in such forward-looking statement.

People’s Utah Bancorp (“PUB”) is the holding company for People’s Intermountain Bank. People’s Intermountain Bank (“Bank, “PIB”) is a full-service community bank providing loans, deposit and cash management services to individuals and businesses. Our primary customers are small to medium sized businesses that require highly personalized commercial banking products and services. People’s Intermountain Bank has 25 branch locations in three banking divisions, Bank of American Fork, Lewiston State Bank, and People’s Town & Country Bank; a leasing division, GrowthFunding Equipment Finance; and a mortgage division, People’s Intermountain Bank Mortgage. The Bank has been serving communities in Utah and southern Idaho for more than 100 years.

We believe our recent loan growth is the result of mergers and acquisitions as well as organic growth generated by our seasoned relationship managers and supporting associates who provide outstanding service and quick responsiveness to our customers. The primary source of funding for our asset growth has been the generation of core deposits, which we raised through acquisitions as well as from our existing branch system.

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. 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 by the sum of net interest income and non-interest income.

Utah Branches from Banner Bank — On October 6, 2017, we completed our acquisition of $257 million in loans and seven Utah branch locations with $160 million in low-cost core deposits from Banner Corporation’s subsidiary Banner Bank. The Bank paid a deposit premium of $13.8 million based on average deposits at closing. The seven branch locations in Utah include Salt Lake City, Provo, South Jordan, Woods Cross, Orem, Salem, and Springville. The Woods Cross and Orem branches were consolidated into our existing Bank of American Fork Bountiful and Orem branches, respectively. We’re operating these acquired branches under the name of Bank of American Fork, a division of PIB.

Town & Country Bank — On November 13, 2017, we completed the merger of Town & Country Bank located in St. George, Utah, including the acquisition of $117 million in loans and the assumption of $124 million in deposits. We consolidated our existing St. George branch and Town & Country’s branch into one branch. Under the terms of the merger, each outstanding Town & Country common share converted into the right to receive 0.2917 PUB common shares and $4.23 per common share in cash, including $2.0 million of cash held in escrow that is subject to future indemnification claims. Town & Country shareholders also received an additional cash distribution of $1.68 per common share in cash. A total of 466,546 PUB common shares were issued in this transaction. We operate this branch under the name of People’s Town & Country Bank, a division of PIB.

Our financial statements are prepared in accordance with GAAP. Our most complex accounting policies require management’s judgment to ascertain the valuation of assets, liabilities, commitments and contingencies. We have established detailed policies and control procedures intended to ensure that valuation methods are well-controlled and applied consistently from period to period. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. The application of these

policies has a significant impact on the Company’s consolidated financial statements and financial results could differ materially if different judgments or estimates were to be applied. In the opinion of management, the accompanying Consolidated Statements of Financial Condition and related Consolidated Statements of Income, Comprehensive Income, Changes in Shareholders’ Equity and Cash Flows reflect all adjustments (which include reclassification and normal recurring adjustments) that are necessary for a fair presentation in conformity with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements. Our significant accounting policies are described in detail in Note 1, Summary of Significant Accounting Policies in “Item 8. Financial Statements and Supplemental Data.”

Use of Estimates — The preparation of these financial statements requires management to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses. On an ongoing basis, management evaluates the estimates used. Estimates are based upon historical experience, current economic conditions and other factors that management considers reasonable under the circumstances and the actual results may differ from these estimates under different assumptions. The allowance for loan losses, the valuation of real estate acquired through foreclosure, deferred income taxes, share-based compensation, and fair values of financial instruments are estimates which are particularly subject to change.

Allowance for Loan and Lease Losses — The allowance for loan losses represents our estimate of probable losses inherent in the existing loan portfolio. The allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged off, net of recoveries.

We evaluate our allowance for loan losses quarterly based on a number of quantitative and qualitative factors, including levels and trends of past due and non-accrual loans, asset classifications, loan grades, change in volume and mix of loans, collateral value, historical loss experience, size and complexity of individual credits and economic conditions. Allowance for loan losses are provided on both a specific and general basis. Specific allowances are provided for impaired credits for which the expected/anticipated loss is measurable. General valuation allowances are based on a portfolio segmentation based on risk grading, with a further evaluation of various quantitative and qualitative factors noted above.

We periodically review the assumptions and formulas by which additions are made to the specific and general valuation allowances for losses in an effort to refine such allowances in light of the current status of the factors described above, although we believe the levels of our ALLL as of December 31, 2017 and 2016 were adequate to absorb losses in the loan portfolio. A decline in local economic, or other factors, could result in increasing losses that cannot be reasonably predicted at this time.

Investment Securities — GAAP requires that investment securities available-for-sale be carried at fair value which is based on quoted market prices or if quoted market prices are not available, fair values are extrapolated from the quoted prices of similar instruments. Management utilizes the services of a reputable third party vendor to assist with the determination of estimated fair values. Unrealized holding gains and losses on securities classified as available-for-sale are excluded from earnings and are reported net of tax as accumulated other comprehensive income (“AOCI”), a component of shareholders’ equity, until realized.

Investment securities are evaluated for impairment on at least a quarterly basis and more frequently when economic or market conditions warrant such an evaluation to determine whether a decline in their value is other than temporary. Management utilizes criteria such as the magnitude and duration of the decline and our intent and ability to retain our investment in the securities for a period of time sufficient to allow for an anticipated recovery in fair value, in addition to the reasons underlying the decline, to determine whether the loss in value is other than temporary. The term “other than temporary” is not intended to indicate that the decline is permanent, but indicates that the prospect for a near-term recovery of value is not favorable, or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of the investment. Once a decline in value is determined to be other-than-temporary and we do not intend to sell the security or it is more likely than not that we will not be required to sell the security before recovery, only the portion of the impairment loss representing credit exposure is recognized as a charge to earnings, with the balance recognized as a charge to other comprehensive income. If management intends to sell the security or it is more likely than not that we will be required to sell the security before recovering its forecasted cost, the entire impairment loss is recognized as a charge to earnings.

Business Combinations — Business combinations are accounted for using the acquisition method of accounting and, accordingly, assets acquired and liabilities assumed, both tangible and intangible, and consideration exchanged are recorded at fair value on the acquisition date. The excess purchase consideration over fair value of net assets acquired is recorded as goodwill. Expenses incurred in connection with a business combination are expensed as incurred. Changes in deferred tax asset valuation allowances related to acquired tax uncertainties are recognized in net income after the measurement period.

Acquired Loans — Purchased loans, including loans acquired in business combinations, are recorded at fair value on the acquisition date. Credit discounts are included in the determination of fair value; therefore, an allowance for loan losses is not recorded on the acquisition date. Acquired loans are evaluated upon acquisition and classified as either purchased credit-impaired (“PCI”) or purchased non-credit impaired. PCI loans reflect credit deterioration since origination such that it is probable at acquisition that the Company will be unable to collect all contractually required payments. Credit discounts on PCI loans are not accreted to interest income. The accounting for PCI loans is periodically updated for changes in cash flow expectations, and reflected in interest income over the life of the loans as accretable yield. Any subsequent decreases in expected cash flows attributable to credit deterioration are recognized by recording a provision for loan losses.

For purchased non-credit-impaired loans, the difference between the fair value and unpaid principal balance of the loan at the acquisition date is amortized or accreted to interest income over the life of the loans. Any subsequent deterioration in credit quality is recognized by recording a provision for loan losses.

Goodwill — Goodwill represents the excess of the purchase considerations paid over the fair value of the assets acquired, net of the fair values of liabilities assumed in a business combination and is not amortized but is reviewed annually, or more frequently as current circumstances and conditions warrant, for impairment. An assessment of qualitative factors is completed to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative analysis concludes that further analysis is required, then a quantitative impairment test would be completed. The quantitative goodwill impairment compares the reporting unit's estimated fair values, including goodwill, to its carrying amount. If the carrying amount exceeds its reporting unit’s fair value, then an impairment loss would be recognized as a charge to earnings, but is limited by the amount of goodwill allocated to that reporting unit.

Other Intangible Assets — Other intangible assets consists primarily of core deposit intangibles (“CDI”), which are amounts recorded in business combinations or deposit purchase transactions related to the value of transaction-related deposits and the value of the customer relationships associated with the deposits. Core deposit intangibles are amortized over the estimated useful life of such deposits. These assets are reviewed at least annually for events or circumstances that could impact their recoverability. These events could include loss of the underlying core deposits, increased competition or adverse changes in the economy. To the extent other identifiable intangible assets are deemed unrecoverable, impairment losses are recorded in other non-interest expense to reduce the carrying amount of the assets.

Mortgage and Other Servicing Rights — Mortgage and other servicing rights are recognized as separate assets when rights are acquired through purchase of such rights or through the sale of loans. Generally, purchased servicing rights are capitalized at the cost to acquire the rights. For loans sold, the value of the servicing rights are estimated and capitalized. Fair value is based on market prices for comparable servicing rights contracts. Capitalized servicing rights are reported in other assets and are amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets.

Income Taxes — We file income taxes on a consolidated basis with our subsidiaries and allocate income tax expense (benefit) based each entity’s proportionate share of the consolidated provision for income taxes. Deferred income tax assets and liabilities are recognized for the tax consequences of temporary differences between the reported amounts of assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The determination of the amount of deferred income tax assets which are more likely than not to be realized is primarily dependent on projections of future earnings, which are subject to uncertainty and estimates that may change given economic conditions and other factors. The realization of deferred income tax assets is assessed and a valuation allowance is recorded if it is “more likely than not” that all or a portion of the deferred income tax asset will not be realized. “More likely than not” is defined as greater than a 50% probability. All available evidence, both positive and negative is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed.

Only tax positions that meet the more-likely-than-not recognition threshold are recognized. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest expense and penalties associated with unrecognized tax benefits are classified as income tax expense in the consolidated statements of income.

Share-Based Compensation — We recognize compensation expense in an amount equal to the fair value of all share-based payments which consist of stock options and RSUs granted to directors and associates. The fair value of each stock option is estimated on the date of grant and amortized over the service period using a Black-Scholes based option valuation model that requires the use of assumptions to estimate the grant date fair value. The estimates are based on assumptions of the expected option life, the level of estimated forfeitures, expected stock volatility and the risk-free interest rate. The calculation of the fair value of share-based payments is by nature inexact, and represents management’s best estimate of the grant date’s fair value of the share-based payments. RSUs are valued at the fair value of the common shares at the date of grant and amortized over the vesting period.

New authoritative accounting guidance from the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) that has either been issued or is effective during 2017 or 2016 and may possibly have a material impact on the Company includes amendments to:

For additional information on the topics and the impact on the Company see Note 1 to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data.”

In addition to financial results presented in accordance with generally accepted accounting principles ("GAAP"), this Management’s Discussion & Analysis contains certain non-GAAP financial measures. We have presented these non-GAAP financial measures because we believe that it provides useful and comparative information to assess trends in our core operations and facilitates the comparison of our financial performance with the performance of our peers and the comparative years presented. We have excluded acquisition related costs, net losses on the sale of securities to increase our liquidity position for the acquisition of the Utah branches of Banner Bank, and the write-down of our deferred income tax assets due to the reduction in the Federal corporate income tax rate from revenues, non-interest income, and other earnings information, as we believe these items are not part of our core operations.

However, these non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP. Where applicable, we have also presented comparable earnings information using GAAP financial measures. For a reconciliation of these non-GAAP financial measures, see the tables below. Because not all companies use the same calculations, our presentation may not be comparable to other similarly titled non-GAAP measures as calculated by other companies. See “Financial Overview for the Years Ended December 31, 2017 and 2016” for more detailed information about our financial performance.

Non-GAAP Financial Measures

	Years Ended December 31,
(Dollars in thousands except per share amounts)	2017			2016		2015
Revenue from Core Operations
Net interest income (GAAP)	$	80,638		$	69,881	$	61,640
Total non-interest income		16,560			16,788		16,004
Total GAAP revenues		97,198			86,669		77,644
Exclude net loss on sale of investment securities		499			-		-
Revenue from core operations (non-GAAP)	$	97,697		$	86,669	$	77,644

Non-interest Income from Core Operations
Total non-interest income (GAAP)	$	16,560		$	16,788	$	16,004
Exclude net loss on sale of investment securities		499			-		-
Non-interest income from core operations (non-GAAP)	$	17,059		$	16,788	$	16,004

Non-interest Expense from Core Operations
Total non-interest expense (GAAP)	$	58,125		$	48,886	$	46,768
Exclude acquisition-related costs		(4,784	)		-		-
Non-interest expense from core operations (non-GAAP)	$	53,341		$	48,886	$	46,768

Net Income from Core Operations
Net income (GAAP)	$	19,846		$	23,610	$	19,614
Exclude net loss on sale of investment securities		499			-		-
Exclude acquisition-related costs		4,784			-		-
Exclude tax related benefit		(1,709	)		-		-
Write down of deferred income tax assets (DTA)		4,729			-		-
Net income (non-GAAP)	$	28,149		$	23,610	$	19,614

Non-GAAP Financial Measures (continued)

	Years Ended December 31,
(Dollars in thousands except per share amounts)	2017			2016			2015
Acquisition Accounting Impact on Net Interest Margin
Net interest income (GAAP)	$	80,638		$	69,881		$	61,640
Exclude discount accretion (premium amortization) on purchased loans	$	5		$	(570	)	$	(307	)
Exclude premium amortization on acquired certificates of deposit ("CD")	$	(230	)	$	(577	)	$	(578	)
Net interest income before acquisition accounting impact (Non-GAAP)	$	80,413		$	68,734		$	60,755

Average earning assets (GAAP)	$	1,695,147		$	1,516,139		$	1,391,108
Exclude average net loan discount on acquired loans	$	1,524		$	1,296		$	1,663
Average earning before acquired loan discount (Non-GAAP)	$	1,696,671		$	1,517,435		$	1,392,771

Net interest margin ("NIM") (GAAP)		4.76	%		4.61	%		4.43	%
Exclude impact on NIM from discount accretion		0.00	%		-0.04	%		-0.04	%
Exclude impact on NIM from CD premium amortization		-0.02	%		-0.04	%		-0.02	%
Net interest margin before acquisition accounting adjustments (Non-GAAP)		4.74	%		4.53	%		4.37	%

Selected Financial Ratios

Diluted earnings per share (GAAP)	$	1.08		$	1.30		$	1.21
Diluted earnings per share (non-GAAP)	$	1.53		$	1.30		$	1.21

Efficiency ratio (GAAP)		59.80	%		56.41	%		60.23	%
Efficiency ratio (non-GAAP)		54.60	%		56.41	%		60.23	%

Non-interest income to average assets (GAAP)		0.93	%		1.05	%		1.09	%
Non-interest income to average assets (non-GAAP)		0.95	%		1.05	%		1.09	%

Non-interest expense to average assets (GAAP)		3.25	%		3.06	%		3.18	%
Non-interest expense to average assets (non-GAAP)		2.98	%		3.06	%		3.18	%

Return on average assets (GAAP)		1.11	%		1.48	%		1.34	%
Return on average assets (non-GAAP)		1.57	%		1.48	%		1.34	%

Return on average equity (GAAP)		8.18	%		10.68	%		10.49	%
Return on average equity (non-GAAP)		11.60	%		10.68	%		10.49	%

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 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.

	Years Ended December 31,
	2017								2016								2015
				Interest		Average						Interest		Average						Interest		Average
	Average			Income/		Yield/			Average			Income/		Yield/			Average			Income/		Yield/
(Dollars in thousands, except footnotes)	Balance			Expense		Rate			Balance			Expense		Rate			Balance			Expense		Rate
ASSETS
Interest earning deposits in other banks and federal funds sold	$	51,648		$	589		1.14	%	$	42,858		$	210		0.49	%	$	66,071		$	163		0.25	%
Securities: ⁽¹⁾
Taxable securities		281,938			4,738		1.68	%		285,903			4,279		1.50	%		257,480			3,947		1.53	%
Non-taxable securities⁽²⁾		90,060			1,663		1.85	%		89,647			1,655		1.85	%		82,211			1,626		1.98	%
Loans^{(3) (4)}		1,269,365			76,965		6.06	%		1,095,619			66,600		6.08	%		983,294			58,861		5.99	%
Non-marketable equity securities		2,136			25		1.17	%		2,112			11		0.52	%		2,052			4		0.19	%
Total interest earning assets		1,695,147		$	83,980		4.95	%		1,516,139		$	72,755		4.80	%		1,391,108		$	64,601		4.64	%
Allowance for loan losses		(17,220	)							(16,036	)							(15,431	)
Non-interest earning assets		109,883								98,095								93,265
Total average assets	$	1,787,810							$	1,598,198							$	1,468,942
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest bearing deposits:
Demand and savings accounts	$	680,174		$	1,783		0.26	%	$	607,714		$	1,685		0.28	%	$	557,917		$	1,553		0.28	%
Money market accounts		183,142			433		0.24	%		150,028			354		0.24	%		143,766			326		0.23	%
Certificates of deposit		161,852			1,059		0.65	%		168,549			794		0.47	%		188,433			1,076		0.57	%
Total interest bearing deposits		1,025,168			3,275		0.32	%		926,291			2,833		0.31	%		890,116			2,955		0.33	%
Short-term borrowings		7,462			67		0.90	%		12,072			41		0.34	%		2,607			6		0.23	%
Total interest bearing liabilities		1,032,630			3,342		0.32	%		938,363			2,874		0.31	%		892,723			2,961		0.33	%
Non-interest bearing deposits		501,761								426,487								379,468
Total funding		1,534,391			3,342		0.22	%		1,364,850			2,874		0.21	%		1,272,191			2,961		0.23	%
Other non-interest bearing liabilities		10,660								12,304								9,862
Shareholders’ equity		242,759								221,044								186,889
Total average liabilities and shareholders’ equity	$	1,787,810							$	1,598,198							$	1,468,942
Net interest income				$	80,638							$	69,881							$	61,640
Interest rate spread							4.63	%							4.49	%							4.31	%
Net interest margin ⁽⁵⁾							4.76	%							4.61	%							4.43	%

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.

	Year Ended December 31,								Year Ended December 31,
	2017 vs. 2016								2016 vs. 2015
	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	$	51		$	328		$	379	$	(72	)	$	119		$	47
Taxable securities		(60	)		519			459		427			(95	)		332
Non-taxable securities		8			-			8		141			(112	)		29
Loans		10,535			(170	)		10,365		6,816			923			7,739
Federal Home Loan Bank stock		-			14			14		-			7			7
Total interest income		10,534			691			11,225		7,312			842			8,154
Interest expense:
Demand and savings accounts		193			(95	)		98		138			(6	)		132
Money market accounts		78			1			79		14			14			28
Certificates of deposit		(33	)		298			265		(106	)		(176	)		(282	)
Short-term borrowings		(21	)		47			26		31			4			35
Total interest expense		217			251			468		77			(164	)		(87	)
Net interest income	$	10,317		$	440		$	10,757	$	7,235		$	1,006		$	8,241

Net interest income increased $10.8 million for the year ended December 31, 2017 compared to the same period in 2016. The increase in interest income was driven by organic loan growth, $362 million of loans purchased from the acquisition of the seven Utah branches of Banner Bank and the merger of Town & Country Bank, and improved loan and investment securities yields, offset by higher cost of funds from interest-bearing deposits.

Net interest income increased $8.2 million for the year ended December 31, 2016 compared to the same period in 2015. The increase in interest income was primarily driven by increased volume on loans and improved loan yields, offset by lower yields on investment securities. Additionally, lower deposit cost of funds offset the additional interest expense resulting from deposit growth.

Comparison of Results of Operations for the Years Ended December 31, 2017 and 2016

Net Income. Our net income declined by $3.8 million to $19.8 million for the year ended December 31, 2017 compared with $23.6 million for the same period in 2016 due to two large non-recurring items. The Company recorded $4.8 million in non-recurring acquisition-related costs for the acquisition of the seven Utah branches of Banner Bank and the merger of Town & Country Bank. In addition, the Company recorded additional income tax expense of $4.7 million related to the write-down of deferred income tax assets due to the reduction in the Federal corporate income tax rate. The Federal government signed into law the Tax Cuts and Jobs Act (the “Act”), which amended the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individual and businesses. For businesses, the Act reduces the federal corporate tax rate from a maximum of 35% to a flat rate of 21%. The rate reduction was effective January 1, 2018. Consequently, the lower corporate income tax rate reduces the future net tax benefits of timing differences between book and taxable income recorded by the Company as net deferred income tax assets. As a result, the Company re-measured its net deferred income tax assets at the end of 2017.

Net Interest Income and Net Interest Margin. Net interest income grew 15.4%, or $10.8 million, to $80.6 million compared with $69.9 million for all of 2016. The increase is primarily the result of average earning assets growing 11.8%, or $179 million, and yields on interest earning assets increasing 15 basis points for the same comparable periods to 4.95% for all of 2017. This contributed to a higher net interest margin of 4.76% for the year ended 2017 compared with 4.61% for all of 2016. The cost of funding our earning assets increased to 0.32% in 2017 from 0.31% in 2016 because of higher rates paid on deposits.

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

The provision for loan losses for the year ended December 31, 2017 was $2.8 million compared with $0.9 million for the same period in 2016. The Company incurred net charge-offs of $1.2 million for the year ended 2017 compared with net recoveries of $0.3 million for all of 2016. The increase in the provision for loan losses in 2017 compared to 2016 is primarily due to growth in total outstanding loans as well as an increase in net charge-offs.

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

Non-interest income was $16.6 million for the year ended December 31, 2017 compared with $16.8 million for all of 2016. The decrease was the result of lower mortgage banking income of $0.9 million and $0.5 million loss on sale of $80.4 million of investment securities, which were sold to raise liquidity to fund the purchase of net assets from the acquisition of the Utah branches of Banner Bank. The decline was offset by higher card processing fees and service charges on deposit accounts. We expect that mortgage banking income will continue to decline in the future as we expect interest rates on mortgage loans to increase, which we anticipate will result in lower mortgage loan originations.

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

For the year ended 2017, noninterest expense was $58.1 million compared with $48.9 million for all of 2016. The increase was primarily due to $4.8 million in non-recurring costs associated with the acquisition of the Utah branches of Banner Bank and merger of Town & Country Bank. In addition, noninterest expense for all of 2017 increased as a result of $3.0 million of higher salaries and employee benefits due to salary increases to existing employees, new employees hired to support the Bank’s balance sheet growth, and the addition of employees retained from the acquisition of Utah branches of Banner Bank and the merger of Town & Country Bank, and $0.5 million of higher occupancy, equipment and depreciation costs associated with the net increase of five branches from these transactions

Income Tax Expense. We recorded tax provisions of $16.5 million for the year ended December 31, 2017 compared with $13.3 million for the year ended 2016. The increase in income tax expense is due to a $4.7 million write-down on our deferred income tax assets resulting from the re-measurement of such assets due to the reduction in the Federal corporate income tax rate. Excluding the one-time adjustment to the Company’s deferred income tax assets related to the write-down of our deferred income tax assets for tax benefits that we’re not expected to realize, the effective tax rate for the year ended 2017 was 32.3% compared with 36.0% for the same period a year earlier. The lower effective tax rate in 2017 compared with 2016 is primarily due to tax benefits related to tax-deductible stock compensation expense and adjustments in the expected recoverability of certain tax credits. We expect an effective tax rate, including State income taxes, of 25% for 2018.

Comparison of Results of Operations for the Years Ended December 31, 2016 and 2015

Net Income. Our net income grew by $4.0 million to $23.6 million for the year ended December 31, 2016 as compared to $19.6 million for the same period in 2015. This was attributable principally to increases in net interest income of $8.2 million, non-interest income of $0.8 million, and a decline of $0.1 million in provision for loan loss. These increases to net income were offset by an increase of $2.1 million in non-interest expenses and a $3.0 million increase in income tax expense.

Net Interest Income and Net Interest Margin. The increase in net interest income for the year ended December 31, 2016 was primarily driven by interest earned on higher average balances in interest-earning assets attributable to internal growth. Interest expense for the year ended December 31, 2016 decreased $87,000 from the same period in 2015 due to lower deposit rates.

The yield on our average interest earning assets was 4.80% for the year ended December 31, 2016 compared to 4.64% for the same period in 2015. This is primarily attributable to a higher loan yield of 6.08% in 2016 compared to 5.99% in 2015 and average loans representing a higher percentage of average earning assets in 2016 compared to 2015.

The cost of funding our earning assets declined from 0.33% in 2015 to 0.31% in 2016 because of lower rates paid on deposits and accretion of fair value adjustments to certificates of deposit.

The provision for loan losses for the year ended December 31, 2016 was $0.9 million compared to $1.0 million for the same period in 2015. We experienced net loan recoveries in 2016 of $258,000 compared to net loans charged-off of $594,000 in 2015. The decrease in the provision for loan losses in 2016 compared to 2015 is primarily due to net recoveries, lower loss rates experienced based on improvements in the quality of the loan portfolio compared to December 31, 2015, and offset by additional reserves on increases in average loan balances.

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

The increase in total non-interest income during the year ended December 31, 2016 compared to the same period in 2015 was primarily influenced by an increase of 15.9% in mortgage banking income resulting from higher volumes of residential mortgage loans originated and sold during the year. The decrease in service charges on deposit accounts is primarily due to reduced volume of processed and returned items. Other operating income in 2016 has declined from 2015 primarily because of approximately $510,000 of gains on sales of foreclosed assets in 2015 compared to $171,000 in 2016.

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

Salaries and employee benefits of $31.4 million in the year ended December 31, 2016 represents 64.2% of our total non-interest expense, and increased 5.2% compared to the same period in 2015. This increase primarily resulted from an increase of nine average full-time equivalent new hires, salary increases, and variable compensation costs to support our balance sheet and income growth and an expansion of our leasing division.

Occupancy, equipment and depreciation expenses increased during 2016 primarily because of the loss of a sub lessee’s rental income. We also experienced increases in our marketing, advertising, and card processing expenses primarily from expanding our marketing efforts and costs associated with higher card processing income.

Provision for Income Taxes. We recorded tax provisions of $13.3 million for the year ended December 31, 2016 compared to $10.3 million for the same period in 2015. Our effective tax rate was approximately 36.0% for 2016 and 34.3% for the same period in 2015. Any difference from the federal statutory rate in either period was primarily due to the non-taxable nature of income from municipal securities and bank-owned life insurance, tax credits and state income taxes. As of December 31, 2016, the Company had an uncertain tax position of $200,000 related to the rehabilitation credit recorded in 2015. This uncertain tax position was resolved in 2017 in the Company’s favor.

Total assets grew $458 million, or 27.5%, to $2.1 billion at December 31, 2017 compared with $1.7 billion at December 31, 2016. Loans held for investment increased $507 million, or 45.3%, to $1.6 billion at December 31, 2017 compared with $1.1 billion at December 31, 2016. Total deposits increased $390 million, or 27.3%, to $1.81 billion at December 31, 2017 compared with $1.43 billion at December 31, 2016. Total assets acquired in the acquisition of the Utah branches of Banner Bank and the merger of Town & Country Bank were $417 million, which includes total loans acquired net of discounts of $362 million. Total liabilities assumed were $290 million, which includes total deposits assumed net of premiums of $284 million. The remaining increase in total assets, loans held for investment, and deposits was a result of organic growth.

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

	December 31,
(Dollars in thousands)	2017			2016			2015			2014			2013
Loans held for sale	$	10,871		$	20,826		$	17,947		$	12,272		$	13,555
Loans held for investment:
Commercial real estate loans:
Real estate term		784,148			582,029			577,804			521,536			455,827
Construction and land development		369,590			240,120			179,664			155,117			136,610
Total commercial real estate loans		1,153,738			822,149			757,468			676,653			592,437
Commercial and industrial		294,085			213,260			208,277			178,116			142,562
Consumer loans:
Residential and home equity		158,591			72,959			71,169			73,515			82,703
Consumer and other		25,591			15,678			14,945			15,421			15,238
Total consumer loans		184,182			88,637			86,114			88,936			97,941
Gross loans held for investment		1,632,005			1,124,046			1,051,859			943,705			832,940
Net deferred loan fees		(4,561	)		(4,169	)		(3,884	)		(3,248	)		(2,223	)
Loans held for investment		1,627,444			1,119,877			1,047,975			940,457			830,717
Allowance for loan losses		(18,303	)		(16,715	)		(15,557	)		(15,151	)		(14,390	)
Loans held for investment, net	$	1,609,141		$	1,103,162		$	1,032,418		$	925,306		$	816,327

	December 31,
(Percentage of gross loans held for investment)	2017			2016			2015			2014			2013
Loans held for investment:
Commercial real estate loans:
Real estate term		48.1	%		51.7	%		54.9	%		55.3	%		54.7	%
Construction and land development		22.6	%		21.4	%		17.1	%		16.4	%		16.4	%
Total commercial real estate loans		70.7	%		73.1	%		72.0	%		71.7	%		71.1	%
Commercial and industrial		18.0	%		19.0	%		19.8	%		18.9	%		17.1	%
Consumer loans:
Residential and home equity		9.7	%		6.5	%		6.8	%		7.8	%		10.0	%
Consumer and other		1.6	%		1.4	%		1.4	%		1.6	%		1.8	%
Total consumer loans		11.3	%		7.9	%		8.2	%		9.4	%		11.8	%
Gross loans held for investment		100.0	%		100.0	%		100.0	%		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, are 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.

										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	$	71,228		$	229,416	$	483,504	$	784,148	$	125,773	$	587,147
Construction and land development		315,769			35,061		18,760		369,590		19,256		34,565
Total commercial real estate loans		386,997			264,477		502,264		1,153,738		145,029		621,712
Commercial and industrial		123,066			118,093		52,926		294,085		100,445		70,574
Consumer loans:
Residential and home equity		23,983			33,213		101,395		158,591		20,060		114,548
Consumer and other		13,005			9,375		3,211		25,591		9,428		3,158
Total consumer loans		36,988			42,588		104,606		184,182		29,488		117,706
Gross loans held for investment	$	547,051	⁽¹⁾	$	425,158	$	659,796	$	1,632,005	$	274,962	$	809,992	⁽¹⁾

Concentrations. As of December 31, 2017, in management’s judgment, a concentration of loans existed in real estate related loans. As of that date, real estate related loans comprised 80.4% of gross loans held for investment, of which 48.1% are commercial real estate loans, 22.6% are construction and land development loans, and 9.7% are residential and home equity loans. Compared to the concentrations as of December 31, 2016, we experienced a decrease in commercial real estate loans of 2.4%, an increase in construction and land development loans of 1.2% and an increase in residential and home equity loans of 3.2%. We require collateral on real estate lending arrangements and typically maintain loan-to-value ratios of no greater than 80%. Within our real estate term portfolio, our largest concentration is in the category of office space representing $385.2 million or 23.6% of total gross loans held for investment.

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.

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:

	December 31,
(Dollars in thousands, except footnotes)	2017			2016			2015			2014			2013
Non-accrual loans, not troubled-debt restructured
Real estate term	$	644		$	2,386		$	2,961		$	1,465		$	3,943
Construction and land development		355			378			56			578			2,625
Commercial and industrial		1,578			1,211			1,176			1,787			2,147
Residential and home equity		-			142			631			428			612
Consumer and other		-			14			88			63			123
Total non-accrual, not troubled-debt restructured loans		2,577			4,131			4,912			4,321			9,450
Troubled-debt restructured loans non-accrual
Real estate term		-			808			1,153			1,106			4,801
Construction and land development		296			396			1,329			933			1,417
Commercial and industrial		-			-			21			1,200			-
Residential and home equity		-			-			-			289			1,138
Consumer and other		-			-			-			-			-
Total troubled-debt restructured, non-accrual loans		296			1,204			2,503			3,528			7,356
Total non-accrual loans⁽¹⁾		2,873			5,335			7,415			7,849			16,806
Accruing loans past due 90 days or more		1			22			3			15			7
Total non-performing loans (NPL)		2,874			5,357			7,418			7,864			16,813
OREO		994			245			568			1,673			4,092
Total non-performing assets (NPA)⁽²⁾	$	3,868		$	5,602		$	7,986		$	9,537		$	20,905

Accruing troubled debt restructured loans	$	3,307		$	5,572		$	7,049		$	8,399		$	7,393
Non-accrual troubled debt restructured loans		296			1,204			2,503			3,528			7,356
Total troubled debt restructured loans	$	3,603		$	6,776		$	9,552		$	11,927		$	14,749
Selected ratios:
NPL to total loans held for investment, net		0.18	%		0.49	%		0.72	%		0.84	%		2.03	%
NPA to total assets		0.18	%		0.34	%		0.51	%		0.70	%		1.61	%

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 either 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 either loan terms or below-market interest rate to the debtor that we would not otherwise consider. Total outstanding TDR loans were $3.6 million and $6.8 million as of December 31, 2017 and 2016, respectively. TDR loans that are designated as non-accrual were $296,000 and $1.2 million as of December 31, 2017 and 2016, respectively. 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:

We maintain an adequate allowance for loan losses, or ALLL, based on a comprehensive methodology that assesses the probable 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 general and specific components. The specific component relates to loans determined to be impaired that are individually evaluated for impairment. For loans individually evaluated for impairment, an allowance is established when the carrying value of the loan is higher than discounted cash flows, or the fair value of the collateral if the loan is collateral-dependent. The general component covers all loans not individually evaluated for impairment and are 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.

The following table sets forth the activity in our ALLL for the periods indicated:

	December 31,
(Dollars in thousands)	2017			2016			2015			2014			2013
Allowance for loan losses:
Beginning balance	$	16,715		$	15,557		$	15,151		$	14,390		$	13,706
Loans charged off:
Real estate term		(350	)		(17	)		(32	)		(705	)		(270	)
Construction and land development		-			-			(396	)		(26	)		(772	)
Commercial and industrial		(1,098	)		(1,511	)		(350	)		(949	)		-
Residential and home equity		(359	)		(6	)		-			(16	)		(57	)
Consumer and other		(231	)		(240	)		(281	)		(356	)		(197	)
Total		(2,038	)		(1,774	)		(1,059	)		(2,052	)		(1,296	)
Recoveries:
Real estate term		219			621			80			498			45
Construction and land development		129			652			46			365			70
Commercial and industrial		271			441			191			91			133
Residential and home equity		151			92			67			37			35
Consumer and other		106			226			81			122			197
Total		876			2,032			465			1,113			480
Net loan recoveries (charged off)		(1,162	)		258			(594	)		(939	)		(816	)
Provision for loan losses		2,750			900			1,000			1,700			1,500
Ending balance	$	18,303		$	16,715		$	15,557		$	15,151		$	14,390
Gross loans held for investment	$	1,632,005		$	1,124,046		$	1,051,859		$	943,705		$	832,940
Average loans		1,269,365			1,095,619			983,294			861,785			648,025
Non-performing loans		2,874			5,357			7,418			7,864			16,813
Selected ratios:
Net charge-offs to average loans		0.09	%		-0.02	%		0.06	%		0.11	%		0.13	%
Provision for loan losses to average loans		0.22	%		0.08	%		0.10	%		0.20	%		0.23	%
Allowance for loan losses to gross loans held for investment		1.12	%		1.49	%		1.48	%		1.61	%		1.73	%

The decrease in ALLL as a percentage of total loans from 2013 to 2016 is attributable to overall improvement in the credit quality of the underlying loan portfolio. The decrease in ALLL as a percentage of total loans in 2017 compared to 2016 is principally related to the accounting for loans acquired in the Banner Utah branch and Town & Country Bank acquisitions. In accordance with GAAP for business combinations, the ALLL originally associated with acquired loans are eliminated and the loans are recorded in loans held for investment at fair value, including an estimation of life of loan credit losses or credit mark.

Our construction and land development portfolio reflects some borrower concentration risk, and also carries 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 generally underwritten at a loan to value ratio of less than 75% with a minimum debt coverage ratio of 1.25 times.

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.

The following table indicates management’s allocation of the ALLL by loan type as of each of the following dates:

	December 31,
(Dollars in thousands)	2017		2016		2015		2014		2013
Commercial real estate loans:
Real estate term	$	6,706	$	6,770	$	6,783	$	5,181	$	7,268
Construction and land development		6,309		5,449		3,984		4,425		2,915
Total commercial real estate loans		13,015		12,219		10,767		9,606		10,183
Commercial and industrial		4,314		3,718		3,941		4,608		3,105
Consumer loans:
Residential and home equity		815		617		603		671		838
Consumer and other		159		161		246		266		264
Total consumer loans		974		778		849		937		1,102
Total	$	18,303	$	16,715	$	15,557	$	15,151	$	14,390

The carrying value of our investment securities totaled $337.7 million, $409.1 million and $398.6 million as of December 31, 2017, 2016 and 2015, respectively. The decrease in investment securities in 2017 compared to 2016 is related to the sale of investment securities in connection with the acquisition of the Utah branches of Banner Bank. Our portfolio of investment securities is comprised of both available-for-sale securities and securities that we intend to hold to maturity. As of December 31, 2017, we held no investment securities from any issuer, which totaled over 10% of our shareholders’ equity.

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:

						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	$	-		0.00	%	$	44,103		1.44	%	$	4,847		2.46	%	$	-		0.00	%	$	48,950		1.54	%
Municipal securities		2,969		3.63	%		6,202		2.85	%		3,848		2.08	%		291		2.51	%		13,310		2.79	%
Mortgage-backed securities		4		4.06	%		12,930		1.77	%		58,706		1.70	%		126,460		2.34	%		198,100		2.12	%
Other securities		-		0.00	%		-		0.00	%		5,000		3.35	%		500		0.00	%		5,500		3.35	%
Total		2,973		3.63	%		63,235		1.64	%		72,401		1.89	%		127,251		2.33	%		265,860		2.07	%
Held to maturity securities:
Municipal securities		7,554		1.27	%		44,502		1.64	%		16,266		1.97	%		6,332		2.33	%		74,654		1.73	%
Other securities		-		0.00	%		-		0.00	%		-		0.00	%		-		0.00	%		-		0.00	%
Total		7,554		1.27	%		44,502		1.64	%		16,266		1.97	%		6,332		2.33	%		74,654		1.73	%
Total investment securities	$	10,527		1.94	%	$	107,737		1.64	%	$	88,667		1.90	%	$	133,583		2.33	%	$	340,514		2.00	%

Expected 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.

Total deposits were $1.81 billion, $1.43 billion and $1.31 billion as of December 31, 2017, 2016 and 2015, respectively. The increase in total deposits is attributed primarily to the acquisition of the Utah branches of Banner Bank and the merger of Town & Country Bank, our growth in existing markets, and entering into new markets. Non-interest bearing demand deposits increased to $641.1 million, or 35.3% of total deposits as of December 31, 2017, from $443.1 million or 31.1% as of December 31, 2016 and $408.5 million or 31.2% as of December 31, 2015. Interest bearing deposits are comprised of money market accounts, regular savings accounts, and certificates of deposit.

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

	Year Ended					Year Ended					Year Ended
	December 31, 2017					December 31, 2016					December 31, 2015
	Average		Average			Average		Average			Average		Average
(Dollars in thousands)	Balance		Rate			Balance		Rate			Balance		Rate
Non-interest bearing deposits	$	501,761		0.00	%	$	426,487		0.00	%	$	379,468		0.00	%
Interest bearing deposits:
Interest bearing demand and savings		680,174		0.26	%		607,714		0.28	%		557,917		0.28	%
Money market		183,142		0.24	%		150,028		0.24	%		143,766		0.23	%
Certificates of deposit		161,852		0.65	%		168,549		0.47	%		188,433		0.57	%
Total interest bearing deposits		1,025,168		0.32	%		926,291		0.31	%		890,116		0.33	%
Total average deposits	$	1,526,929		0.21	%	$	1,352,778		0.21	%	$	1,269,584		0.23	%

Deposits are gathered from individuals and businesses 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. The average rate for interest bearing deposits has increased from 0.31% in 2016 to 0.32% in 2017. In a rising rate environment, it is likely the cost of interest bearing deposits will continue to rise in future periods.

As of December 31, 2017, our shareholders’ equity totaled $257.4 million, an increase of $28.9 million or 12.6%, since December 31, 2016. The increase in shareholders’ equity for the year ended December 31, 2017 resulted primarily from net income of $19.8 million for the year ended December 31, 2017, $14.0 million from the issuance of common shares related to the Town & Country Bank merger, stock options exercised of $1.4 million, less dividends declared during 2017 of $6.1 million.

We began paying quarterly dividends in 2015 with the dividend being declared after the end of each quarter. Dividends declared during 2017 represented a dividend payout ratio of 30.8% of net income for the year ended December 31, 2017. Future cash dividends will depend on a variety of factors, including net income, capital, asset quality, general economic conditions and regulatory considerations.

We are subject to risk-based capital adequacy guidelines related to the adoption of U.S. Basel III Capital Rules which impose higher risk-based capital and leverage requirements than those previously in place. Specifically, the rules impose, among other requirements, new minimum capital requirements including a Tier 1 leverage capital ratio of 4.0%, common equity Tier 1 risk-based capital ratio of 4.5%, a Tier 1 risk-based capital ratio of 6.0% and a total risk-based capital ratio of 8.0%.

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

The following table sets forth our off-balance sheet lending commitments as of December 31, 2017:

The following table sets forth our significant contractual obligations as of December 31, 2017:

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 the following borrowing lines available at December 31, 2017:

We believe our liquid assets and short-term borrowing credit lines are adequate to meet our cash flow needs for loan funding and deposit cash withdrawal for the next 60 to 90 days. We have $182.0 million in investment securities and $504.1 million in loans pledged as collateral on short-term borrowing credit lines. We have the option of either borrowing on our credit lines or selling these investment securities for cash flow needs.

We have outstanding short-term borrowings of $40 million under the credit lines described in the above table as of December 31, 2017. Based on favorable interest rates on our credit lines and our anticipation that the decrease in deposits was short-term, we utilized our credit lines with the Federal Home Loan Bank (“FHLB”) to meet our short-term loan funding requirements as of December 31, 2017. Historically, we have had a decline in deposit balances in the fourth quarter and the beginning of the year, with a subsequent increase in deposit balances by the end of the first quarter. 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 and deposit withdrawals. We believe we can meet all of these needs 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.

Our primary investing activities are the origination of real estate, commercial & industrial, consumer loans and purchases and sales of investment securities. As of December 31, 2017, we had outstanding loan and credit card commitments of $662.0 million and outstanding letters of credit of $27.9 million. We anticipate that we will have sufficient funds available to meet current loan commitments.

Net cash provided by financing activities has been impacted significantly by higher deposit levels. During the years ended December 31, 2017, 2016 and 2015, deposits increased $389.6 million, $115.9 million and $110.0 million respectively. For the year ended December 31, 2017, $284.1 million of the $389.6 million increase in deposits was related to the acquisition of the Utah Branches of Banner Bank and the merger of Town & Country Bank.

Market risk is the risk of loss in a financial instrument arising from adverse changes in market prices and rates, foreign currency exchange rates, commodity prices and equity prices. Our market risk arises primarily from interest rate risk inherent in our lending and deposit taking activities. Management actively monitors and manages our interest rate risk exposure. We do not have any market-risk sensitive instruments entered into for trading purposes. We manage our interest-rate sensitivity by matching the re-pricing opportunities on our earning assets to those on our funding liabilities.

Management uses various asset/liability strategies to manage the re-pricing characteristics of our assets and liabilities designed to ensure that exposure to interest rate fluctuations is limited within our guidelines of acceptable levels of risk-taking. Hedging strategies, including the terms and pricing of loans and deposits, and managing the deployment of our securities, are used to reduce mismatches in interest rate re-pricing opportunities of portfolio assets and their funding sources.

Interest rate risk is addressed by our Asset Liability Management Committee, or ALCO, which is comprised of certain of our executive officers and directors. The ALCO monitors interest rate risk by analyzing the potential impact on net interest income from potential changes in interest rates, and considers the impact of alternative strategies or changes in balance sheet structure. The ALCO manages our balance sheet in part to maintain the potential impact of changes in interest rates on net interest income within acceptable ranges despite changes in interest rates.

Our exposure to interest rate risk is reviewed on at least a quarterly basis by the ALCO and our Board of Directors. Interest rate risk exposure is measured using interest rate sensitivity analysis to determine our change in net interest income in the event of hypothetical changes in interest rates. If potential changes to net interest income resulting from hypothetical interest rate changes are not within the limits established by our Board of Directors, our Board of Directors may direct management to adjust the asset and liability mix to bring interest rate risk within board-approved limits.

Net Interest Income Simulation. In order to measure interest rate risk, we used a simulation model to project changes in net interest income that result from forecasted changes in interest rates. This analysis calculates the difference between net interest income forecasted using a rising and a falling interest rate scenario and a net interest income forecast using a base market interest rate derived from the current treasury yield curve. The income simulation model includes various assumptions regarding the re-pricing relationships for each of our products. Many of our assets are floating rate loans, which are assumed to re-price immediately, and to the same extent as the change in market rates according to their contracted index. Some loans and investment vehicles include the opportunity of prepayment (embedded options), and accordingly the simulation model uses national indexes to estimate these prepayments and assumes the reinvestment of the proceeds at current yields. Our non-term deposit products re-price more slowly, usually changing less than the change in market rates and at our discretion.

This analysis indicates the impact of changes in net interest income for the given set of rate changes and assumptions. It assumes the balance sheet grows modestly, but that its structure will remain similar to the structure as of the period presented. It does not account for all factors that impact this analysis, including changes by management to mitigate the impact of interest rate changes or secondary impacts such as changes to our credit risk profile as interest rates change.

Furthermore, loan prepayment-rate estimates and spread relationships change regularly. Interest rate changes create changes in actual loan prepayment rates that will differ from the market estimates incorporated in this analysis. Changes that vary significantly from the assumptions may have significant effects on our net interest income.

For the rising and falling interest rate scenarios, the base market interest rate forecast was increased or decreased, on an instantaneous and sustained basis, by 100 basis points. As of the periods presented, our net interest margin exposure related to these hypothetical changes in market interest rates was within the current guidelines established by us.

The ratio of variable to fixed-rate loans in our loan portfolio, the ratio of short-term (maturing at a given time within 12 months) to long-term loans, and the ratio of our demand, money market and savings deposits to CDs (and their time periods), are the primary factors affecting the sensitivity of our net interest income to changes in market interest rates. Our short-term loans are typically priced at prime plus a margin, and our long-term loans are typically priced based on a Federal Home Loan Bank, or FHLB, index for comparable maturities, plus a margin. The composition of our rate-sensitive assets or liabilities is subject to change and could result in a more unbalanced position that would cause market rate changes to have a greater impact on our net interest margin.

Gap Analysis. Another way to measure the impact that future changes in interest rates will have on net interest income is through a cumulative gap measure. The gap represents the net position of assets and liabilities subject to re-pricing in specified time periods.

The following table sets forth the distribution of re-pricing opportunities of our interest earning assets and interest bearing liabilities, the interest rate sensitivity gap (that is, interest rate sensitive assets less interest rate sensitive liabilities), cumulative interest earning assets and interest bearing liabilities, the cumulative interest rate sensitivity gap, the ratio of cumulative interest earning assets to cumulative interest bearing liabilities and the cumulative gap as a percentage of total assets and total interest earning assets as of the periods presented. The table also sets forth the time periods during which interest earning assets and interest bearing liabilities will mature or may re-price in accordance with their contractual terms. The interest rate relationships between the re-priceable assets and re-priceable liabilities are not necessarily constant and may be affected by many factors, including the behavior of customers in response to changes in interest rates. This table should, therefore, be used only as a guide as to the possible effect changes in interest rates might have on our net interest margins.

	Amounts Maturing or Re-pricing in
				Over Three			Over One
	Three			Months to			Year to			Over
	Months or			Twelve			Three			Three			Non-
(Dollars in thousands)	Less			Months			Years			Years			Sensitive			Total
Interest bearing assets:
Cash and due from banks	$	7,471		$	-		$	-		$	-		$	-		$	7,471
Federal funds sold		1,635			-			-			-			-			1,635
Investment securities		7,842			13,013			64,783			251,499			573			337,710
Loans		667,648			218,285			434,498			299,581			-			1,620,012
Total interest bearing assets		684,596			231,298			499,281			551,080			573			1,966,828
Interest bearing liabilities:
Interest bearing demand and savings		739,439			-			-			-			-			739,439
Money market		230,845			-			-			-			-			230,845
Certificates of deposit		39,556			75,929			50,247			40,111			-			205,843
Short-term borrowings		40,000			-			-			-			-			40,000
Total interest bearing liabilities		1,049,840			75,929			50,247			40,111			-			1,216,127
Period gap	$	(365,244	)	$	155,369		$	449,034		$	510,969		$	573		$	750,701

Cumulative interest earning assets	$	684,596		$	915,894		$	1,415,175		$	1,966,255		$	1,966,828
Cumulative interest bearing liabilities		1,049,840			1,125,769			1,176,016			1,216,127			1,216,127
Cumulative gap		(365,244	)		(209,875	)		239,159			750,128			750,701
Cumulative interest earning assets to cumulative interest bearing liabilities		65.21	%		81.36	%		120.34	%		161.68	%		161.73	%
Cumulative gap as a percent of:
Total assets		(17.20	)%		(9.88	)%		11.26	%		35.32	%		35.35	%
Interest earning assets		(53.35	)%		(22.91	)%		16.90	%		38.15	%		38.17	%

As of December 31, 2017, we had $915.9 million in assets, and $1.1 billion in liabilities re-pricing within one year. This means that more of our interest rate sensitive liabilities will change to the then-current rate than our interest rate sensitive assets (changes occur due to the instruments being at a variable rate or because the maturity of the instrument requires its replacement at the then current rate). The ratio of interest earning assets to interest bearing liabilities maturing or re-pricing within one year as of December 31, 2017 is 67.79%. This analysis indicates that if interest rates were to increase, the gap would result in a lower net interest margin. However, changes in the mix of earning assets or supporting liabilities can either increase or decrease the net interest margin without affecting interest rate sensitivity. In addition, the interest rate spread between an asset and its supporting liability can vary significantly while the timing of re-pricing of both the asset and its supporting liability can remain the same, thus impacting net interest income. This characteristic is referred to as basis risk, and generally relates to the re-pricing characteristics of short-term funding sources such as certificates of deposit.

Gap analysis has certain limitations. Measuring the volume of re-pricing or maturing assets and liabilities does not always measure the full impact on the portfolio value of equity or net interest income. Gap analysis does not account for rate caps on products, dynamic changes such as increasing prepayment speeds as interest rates decrease, basis risk, embedded options or the benefit of no-rate funding sources. The relation between product rate re-pricing and market rate changes (basis risk) is not the same for all products. The majority of interest earning assets generally re-price along with a movement in market rates, while non-term deposit rates in general move more slowly and usually incorporate only a fraction of the change in market rates. Products categorized as non-rate sensitive, such as our non-interest bearing demand deposits, in the gap analysis behave like long-term fixed rate funding sources. Management uses income simulation, net interest income rate shocks and market value of portfolio equity as its primary interest rate risk management tools.

Audited consolidated financial statements and related documents required by this item are included in the Annual Report on Form 10-K on the pages indicated:

Management of People’s Utah Bancorp is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange act of 1934. The Company’s internal control over financial reporting is designed by, or under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer and effected by the Company’s Board of Directors, Management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company’s internal control over financial reporting includes those policies and procedures that:

There are inherent limitations in any internal control, no matter how well designed and misstatements due to error or fraud may occur and not be detected, including the possibility of circumvention or overriding of controls. Accordingly, even an effective internal control system can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of an internal control system may vary over time.

Management assessed the effectiveness of the internal control structure over financial reporting as of December 31, 2017. This assessment was based on criteria for effective internal control over financial reporting set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management believes that the Company’s internal control over financial reporting is effective as of December 31, 2017.

Tanner LLC, the independent registered public accounting firm that audited the consolidated financial statements for the year ended December 31, 2017, has issued an attestation report on the Company’s internal control over financial reporting. Such attestation report expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board as of December 31, 2017 that appears on page 67.

Opinion on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of People’s Utah Bancorp and subsidiaries (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2017, and the related notes and supplementary data listed in the index (collectively referred to as the “financial statements”). We have also audited the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective control over financial reporting as of December 31, 2017 based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

	December 31,
(Dollars in thousands, except share data)	2017			2016
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	36,235		$	26,524
Interest bearing deposits		13,158			37,958
Federal funds sold		1,634			3,456
Total cash and cash equivalents		51,027			67,938
Investment securities:
Available for sale, at fair value		263,056			335,609
Held to maturity, at historical cost		74,654			73,512
Total investment securities		337,710			409,121
Non-marketable equity securities		3,706			1,827
Loans held for sale		10,871			20,826
Loans:
Loans held for investment		1,627,444			1,119,877
Allowance for loan losses		(18,303	)		(16,715	)
Total loans held for investment, net		1,609,141			1,103,162
Premises and equipment, net		30,399			21,926
Goodwill		26,008			-
Bank-owned life insurance		23,566			19,714
Deferred income tax assets		8,827			9,799
Accrued interest receivable		7,594			5,557
Other intangibles		3,854			581
Other real estate owned		994			245
Other assets		9,832			5,285
Total assets	$	2,123,529		$	1,665,981
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Non-interest bearing deposits	$	641,124		$	443,100
Interest bearing deposits		1,173,508			981,974
Total deposits		1,814,632			1,425,074
Short-term borrowings		40,000			3,199
Accrued interest payable		353			305
Other liabilities		11,126			8,886
Total liabilities		1,866,111			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; 18,511,797 and 17,819,538 shares issued and outstanding as of December 31, 2017 and December 31, 2016, respectively		185			178
Additional paid-in capital		84,532			68,657
Retained earnings		174,804			160,692
Accumulated other comprehensive income (loss)		(2,103	)		(1,010	)
Total shareholders’ equity		257,418			228,517
Total liabilities and shareholders’ equity	$	2,123,529		$	1,665,981

	Years Ended December 31,
(Dollars in thousands, except share and per share data)	2017			2016			2015
Interest income
Interest and fees on loans	$	76,965		$	66,600		$	58,861
Interest and dividends on investments		7,015			6,155			5,740
Total interest income		83,980			72,755			64,601
Interest expense		3,342			2,874			2,961
Net interest income		80,638			69,881			61,640
Provision for loan losses		2,750			900			1,000
Net interest income after provision for loan losses		77,888			68,981			60,640
Non-interest income
Service charges on deposit accounts		2,445			2,181			2,449
Card processing		4,956			4,451			4,250
Mortgage banking		7,536			8,478			7,316
Net loss on sale of investment securities		(499	)		(91	)		-
Other operating		2,122			1,769			1,989
Total non-interest income		16,560			16,788			16,004
Non-interest expense
Salaries and employee benefits		34,392			31,441			29,892
Occupancy, equipment and depreciation		4,827			4,296			3,953
Data processing		2,798			2,866			2,831
FDIC premiums		572			631			754
Card processing		2,166			2,178			2,017
Marketing and advertising		1,381			1,044			853
Acquisition-related costs		4,784			-			-
Other		7,205			6,430			6,468
Total non-interest expense		58,125			48,886			46,768
Income before income tax expense		36,323			36,883			29,876
Income tax expense		16,477			13,273			10,262
Net income	$	19,846		$	23,610		$	19,614
Earnings per common share:
Basic	$	1.10		$	1.33		$	1.21
Diluted	$	1.08		$	1.30		$	1.17
Weighted average common shares outstanding:
Basic		18,019,643			17,732,920			16,258,424
Diluted		18,447,621			18,214,924			16,829,205

										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, 2015		14,758,121	$	148	$	31,137	$	125,595		$	779		$	157,659
Comprehensive income		-		-		-		19,614			(1,108	)		18,506
Cash dividends declared ($0.18 per share)		-		-		-		(2,986	)		-			(2,986	)
Issuance of common shares		2,657,000		27		34,870		-			-			34,897
Share-based compensation						485		-			-			485
Exercise of stock options		152,033		1		846		-			-			847
Balance as of December 31, 2015		17,567,154	$	176	$	67,338	$	142,223		$	(329	)	$	209,408
Comprehensive income		-		-		-		23,610			(681	)		22,929
Cash dividends declared ($0.29 per share)		-		-		-		(5,141	)		-			(5,141	)
Share-based compensation		-		-		544		-			-			544
Exercise of stock options		252,384		2		775		-			-			777
Balance as of December 31, 2016		17,819,538	$	178	$	68,657	$	160,692		$	(1,010	)	$	228,517
Comprehensive income		-		-		-		19,846			(721	)		19,125
Cash dividends declared ($0.34 per share)		-		-		-		(6,106	)		-			(6,106	)
Share-based compensation		-		-		510		-			-			510
Reclassification of deferred tax rate change related to AOCI		-		-		-		372			(372	)		-
Issuance of common shares		466,546		5		13,972		-			-			13,977
Exercise of stock options and vested restricted stock units		225,713		2		1,393		-			-			1,395
Balance as of December 31, 2017		18,511,797	$	185	$	84,532	$	174,804		$	(2,103	)	$	257,418

	Years Ended December 31,
(Dollars in thousands)	2017			2016			2015
Cash flows from operating activities:
Net income	$	19,846		$	23,610		$	19,614
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		2,750			900			1,000
Depreciation and amortization		2,612			2,527			2,552
Deferred income taxes		3,990			(771	)		(250	)
Net amortization of securities discounts and premiums		2,822			3,080			3,174
Other		(61	)		423			364
Gain on sale of loans held for sale		(5,459	)		(6,341	)		(5,247	)
Originations of loans held for sale		(233,055	)		(278,083	)		(229,708	)
Proceeds from sale of loans held for sale		248,469			281,545			229,280
Net changes in:
Accrued interest receivable		(2,037	)		210			(514	)
Other assets		1,551			(219	)		(1,042	)
Accrued interest payable		48			(9	)		(29	)
Other liabilities		(4,062	)		(985	)		3,543
Net cash provided by operating activities		37,414			25,887			22,737
Cash flows from investing activities:
Net cash used in acquisition-related activities		(112,247	)		-			-
Net change in loans held for investment		(148,032	)		(72,126	)		(108,112	)
Purchase of available-for-sale securities		(68,425	)		(153,853	)		(167,397	)
Purchase of held-to-maturity securities		(12,198	)		(17,170	)		(40,535	)
Maturities/sales of available-for-sale securities		147,351			147,413			125,736
Maturities of held-to-maturity securities		10,278			8,923			9,461
Purchase of bank-owned life insurance		-			-			(12,157	)
Purchase of premises and equipment		(7,339	)		(2,345	)		(3,028	)
Sale of other real estate owned, net of improvements		587			923			1,206
Net change of non-marketable equity securities		(1,879	)		417			384
Net cash used in investing activities		(191,904	)		(87,818	)		(194,442	)
Cash flows from financing activities:
Net increase in deposits		105,489			115,889			109,952
Issuance of common shares		-			-			34,897
Exercise of stock options		1,395			777			847
Net change in short-term borrowings		36,801			(24,005	)		25,708
Cash dividends paid		(6,106	)		(5,141	)		(5,052	)
Net cash provided by financing activities		137,579			87,520			166,352
Net change in cash and cash equivalents		(16,911	)		25,589			(5,353	)
Cash and cash equivalents, beginning of year		67,938			42,349			47,702
Cash and cash equivalents, end of year	$	51,027		$	67,938		$	42,349
Supplemental disclosures of cash flow information:
Cash paid for interest	$	3,294		$	2,552		$	2,670
Income taxes paid	$	13,429		$	13,963		$	10,192
Supplemental disclosures of non-cash transactions:
Reclassifications from loans to other real estate owned	$	1,419		$	482		$	-
Dividends declared but not paid	$	-		$	-		$	-
Unrealized losses on securities available for sale	$	(1,168	)	$	(1,104	)	$	(1,781	)
Acquisitions:
Assets acquired	$	416,595		$	-		$	-
Liabilities assumed	$	290,371		$	-		$	-

Nature of Operations and basis of consolidation — People’s Utah Bancorp, Inc. (“PUB” or the “Company”) is a Utah corporation headquartered in American Fork, Utah. The Company operates all business activities through its wholly-owned banking subsidiary, People’s Intermountain Bank (“PIB or the “Bank”), which was organized in 1913. The Bank is a Utah State chartered bank. The Bank operates under the jurisdiction of the Utah Department of Financial Institutions, and its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”). The Bank is not a member of the Federal Reserve System; however, PUB is operated as a bank holding company under the Federal Bank Holding Company Act of 1956 and is the sole shareholder of the Bank. Both PUB and the Bank are subject to periodic examination by all of the applicable federal and state regulatory agencies and file periodic reports and other information with the agencies.

PIB is a community bank that provides highly personalized retail and commercial banking products and services to small and medium sized businesses and individuals. Products and services are offered primarily through 25 retail branches located throughout Utah and southern Idaho. PIB has three banking divisions, Bank of American Fork, Lewiston State Bank, and People’s Town & Country Bank; a leasing division, GrowthFunding Equipment Finance; and a mortgage division, People’s Intermountain Bank Mortgage. The Bank offers a full range of short-term to long-term commercial, personal and mortgage loans. Commercial loans include both secured and unsecured loans for working capital (including inventory and accounts receivable), business expansion (including acquisition of real estate and improvements), and purchase of equipment and machinery. Consumer loans include secured and unsecured loans to finance automobiles, home improvements, education, and personal investments. The Bank also offers mortgage loans secured by personal residences. The Bank offers a full range of deposit services typically available in most financial institutions, including checking accounts, savings accounts, and time deposits. The Bank solicits these accounts from individuals, businesses, associations and organizations, and governmental entities.

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

Use of Estimates — The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions. These estimates and assumptions 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 (“ALLL”), the determination of the fair value of certain financial instruments, the valuation of real estate acquired through foreclosure, deferred income tax assets, and share-based compensation.

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

Cash and cash equivalents — Cash and cash equivalents consist of cash on hand, amounts due from banks, interest bearing deposits, and federal funds sold, all of which have original maturities of three months or less. The Company places its cash with high credit quality institutions. The amounts on deposit fluctuate and, at times, exceed the insured limit by the FDIC, which potentially subjects the Company to credit risk.

Investment securities — Investment securities are classified as held-to-maturity (“HTM”) when the Company has the positive intent and ability to hold the securities to maturity. Investment securities are classified as available-for-sale (“AFS”) when the Company has the intent of holding the security for an indefinite period of time, but not necessarily to maturity. The Company determines the appropriate classification at the time of purchase, and periodically thereafter. Investment securities classified at HTM are carried at amortized cost. Investment securities classified at AFS are reported at fair value. As the fair value of AFS securities changes, the changes are reported (net of tax, if applicable) in comprehensive income and as an element of accumulated other comprehensive income/loss (“AOCI”) in shareholder’s equity. When AFS securities, specifically identified, are sold, the unrealized gain or loss is reclassified from AOCI to non-interest income.

When the estimated fair value of a security is lower than the book value, a security is considered to be temporarily impaired. On a quarterly basis, Management evaluates any securities in a loss position to determine whether the impairment is other-than-temporary. If there is intent to sell the security, or if the Company will be required to sell the security, or if the Company believes it will not recover the entire cost basis of the security, the security is other-than-temporarily impaired (“OTTI”) and impairment is recognized. The amount of impairment resulting from credit loss is recognized in earnings and impairment related to all other factors, such as general market conditions, is recognized in AOCI.

Management considers a number of factors in its analysis of whether a decline in a security’s estimated fair value is OTTI. Certain factors considered include, but are not limited to: (a) the length of time and the extent to which the security has been in an unrealized loss position, (b) changes in the financial condition of the issuer, (c) the payment structure of debt securities, (d) adverse changes in ratings issued by rating agencies, (e) and the intent and ability of the Company to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.

Interest income is recognized based on the coupon rate, and is increased by the accretion of discounts earned or decreased by the amortization of premiums paid. The amortization of premiums or the accretion of discounts are recognized in interest income using the effective interest method over the period of maturity.

Non-marketable equity securities — Non-marketable equity securities primarily consist of Federal Home Loan Bank (“FHLB”) stock. FHLB stock is restricted because such stock may only be sold to FHLB at its par value. Due to the restrictive terms, and the lack of a readily determinable market value, FHLB stock is carried at cost. The investments in FHLB stock are required investments related to the Company’s borrowings from FHLB. FHLB obtains its funding primarily through issuance of consolidated obligations of the FHLB system. The U.S. government does not guarantee these obligations, and each of the regional FHLBs are jointly and severally liable for repayment of each other’s debt.

Loans held for sale — Loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by aggregate outstanding commitments from investors or current investor yield requirements. Net estimated losses before sale, if any, are recognized through a valuation allowance by charges to income. Mortgage loans held for sale are generally sold with the mortgage servicing rights. Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loans sold. Substantially all of the residential mortgage loans originated are sold to larger financial institutions; however, the Company provides loan servicing for FNMA and Freddie Mac mortgage loans. Servicing income from servicing sold residential mortgages is not significant.

Loans held for investment — Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balance adjusted for any charge-offs, the allowance for loan losses, any deferred fees or costs on originated loans and unamortized premiums or discounts on acquired loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the effective interest method.

Impaired loans — The Company considers loans impaired when, based on current information and events, it is probable the Company will be unable to collect all principal and interest payments due according to the contractual terms of the loan agreement. Such loans are generally classified as Substandard or Doubtful loans (see Note 3). Impaired loans are measured 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. Changes in these values are recorded to provision for loan losses and as adjustments to the ALLL.

Factors considered by management in determining impairment include 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. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the 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.

Acquired loans - Loans acquired through purchase or through a business combination are recorded at their fair value at the acquisition date. Credit discounts are included in the determination of fair value; therefore, an allowance for loan losses is not recorded at the acquisition date. Should the Company’s allowance for credit losses methodology indicate that the credit discount associated with acquired, non-purchased credit impaired loans, is no longer sufficient to cover probable losses inherent in those loans, the Company will establish an allowance for those loans through a charge to provision for loan losses. At the time of an acquisition, the Company evaluates loans to determine if they are purchase credit impaired (“PCI”) loans. PCI loans are those acquired loans with evidence of credit deterioration for which it was probable at acquisition that the Company would be unable to collect all contractual payments. The Company makes this determination by considering past due and/or nonaccrual status, prior designation of a troubled debt restructuring, or other factors that may suggest we will not be able to collect all contractual payments. Credit discounts on PCI loans are not accreted to interest income. The accounting for PCI loans is periodically updated for changes in cash flow expectations, and reflected in interest income over the life of the loans as accretable yield. Any subsequent decreases in expected cash flows attributable to credit deterioration are recognized by recording a provision for loan losses. An acquired loan previously classified by the seller as a troubled debt restructuring is no longer classified as such at the date of acquisition. Past due status is reported based on contractual payment status.

Allowance for loan losses — Credit risk is inherent in the business of extending loans and leases to borrowers. Normally, this credit risk is addressed through a valuation allowance termed ALLL. The ALLL represents a creditor’s estimate of loan losses inherent within the loan portfolio at each balance sheet date. Netted against the outstanding loan balance, this allowance reduces the balance to the creditor’s estimate of what will be collected from borrowers. The ALLL is established through charges to current period earnings by recording a provision for loan losses. When losses become specifically identifiable and quantifiable, the loan balance is reduced through recording a charge-off against the ALLL. Should payments be received on charged-off loans, the payment is credited to the allowance as a recovery.

Charge-offs of loans are generally processed by policy as well as by regulatory guidance. Secured consumer loans, including residential real estate loans, that are 120 days past due, are written down to the fair value of the collateral. Unsecured loans are charged-off once the loan is 120 days past due. Decisions on when to charge-off commercial loans and loans secured by commercial real estate are made on an individual basis rather than length of delinquency, though it is a factor in the decision. The financial resources of the borrower and/or guarantor and the nature and value of any collateral are other factors considered.

The 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.

The ALLL consists of specific and general components. The specific component relates to loans determined to be impaired which 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 loan is collateral dependent, of the impaired loan is 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, real estate foreclosure rates, and trends in past due and classified credits.

Premises and equipment — Land is carried at cost. Premises and equipment are carried at cost, net of accumulated depreciation and amortization. Depreciation and amortization expense is computed using the straight-line method based on the estimated useful lives of the related assets, generally 10 to 30 years for buildings and 3 to 5 years for equipment, furniture, and software. Maintenance and repairs are expensed as incurred while major additions and improvements are capitalized.

Goodwill — Goodwill represents the excess of the purchase considerations paid over the fair value of the assets acquired, net of the fair values of liabilities assumed in a business combination and is not amortized but is reviewed annually, or more frequently as current circumstances and conditions warrant, for impairment. An assessment of qualitative factors is completed to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative analysis concludes that further analysis is required, then a quantitative impairment test would be completed. The quantitative goodwill impairment compares the reporting unit's estimated fair values, including goodwill, to its carrying amount. If the carrying amount exceeds its reporting unit’s fair value, then an impairment loss would be recognized as a charge to earnings but is limited by the amount of goodwill allocated to that reporting unit.

Other real estate owned — Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the lower of the carrying amount of the foreclosed loan or the fair value of the foreclosed asset, less costs to sell, at the date of foreclosure. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value, less selling costs. Revenues and expenses from operations and changes in the valuation allowance are included in other real estate owned expense.

Transfers of financial assets — Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Income taxes — Deferred income tax assets and deferred income tax liabilities represent the tax effect of temporary differences between financial reporting and tax reporting measured at enacted tax rates in effect for the year in which the differences are expected to reverse. The Company recognizes only the impact of tax positions that, based on their technical merits, are more likely than not to be sustained upon an audit by the taxing authority.

Developing the provision for income taxes, including the effective tax rate and analysis of potential tax exposure items, if any, requires significant judgment and expertise in federal and state income tax laws, regulations and strategies, including the determination of deferred income tax assets and liabilities and any estimated valuation allowances deemed necessary to value deferred income tax assets. Judgments and tax strategies are subject to audit by various taxing authorities. While the Company believes it has no significant uncertain income tax positions in the consolidated financial statements, adverse determinations by these taxing authorities could have a material adverse effect on the consolidated financial positions, result of operations, or cash flows.

Off-balance sheet credit related financial instruments — In the ordinary course of business, the Company has entered into commitments to extend credit, including commitments under credit card arrangements, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded when they are funded.

Incentive share-based plans — The fair value of incentive share-based awards is recorded as compensation expense over the vesting period of the award. Compensation expense for stock options is estimated at the date of grant using the Black-Scholes option-pricing model. Compensation expense for restricted stock units (“RSU”) is based on the fair value of the Company’s common shares at the date of grant.

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 RSU’s.

Comprehensive income — U.S. GAAP generally requires that recognized revenues, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, net of the related income tax effect, are reported as a separate component of the equity section of the consolidated balance sheets, such items, along with net income, are components of comprehensive income.

Advertising costs — Advertising costs are expensed when incurred and totaled $1,381,000 in 2017, $1,044,000 in 2016, and $853,000 in 2015.

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. Periodically, the FASB will issue Accounting Standard updates (“ASU”) to its ASC. 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 February 2018, the FASB issued ASU 2018-02, Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU gives businesses the option of reclassifying to retained earnings the so-called “stranded tax effects” left in accumulated other comprehensive income (“AOCI”) because of the reduction to the corporate income tax rate. The amendments are effective for all organizations for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The FASB said that businesses and organization should apply the amendments either in the period of adoption or retrospectively to each period in which the effect of the change in the tax rate is recognized. The Company has elected to early adopt this ASU.

In March 2017, FASB issued ASU 2017-08, "Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities." The ASU requires entities to amortize the premium on certain purchased callable debt securities to the earliest call date, which more closely aligns the amortization period of premiums and discounts to expectations incorporated in the market prices. Entities will no longer recognize a loss in earnings upon the debtor's exercise of a call on a purchased debt security held at a premium. The ASU does not require any accounting change for debt securities held at a discount; therefore the discount will continue to be amortized as an adjustment of yield over the contractual life of the investment. This ASU is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted for all entities. The adoption of ASU No. 2017-08 is not expected to have a material impact on the Company's Consolidated Financial Statements.

In January 2017, FASB issued ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." The ASU removes the requirement to compare the implied fair value of goodwill with its carrying value as required in Step 2 of the goodwill impairment test. Under the ASU, registrants would perform their goodwill impairment test and recognize an impairment charge for any amount the carrying value exceeds the reporting unit's fair value, but limited by the amount of goodwill allocated to that reporting unit. This ASU is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for all entities after January 1, 2017. The Company has elected to early adopt this ASU and adoption did not have a material effect on the Company's Consolidated Financial Statements.

In January 2017, FASB issued ASU 2017-03, "Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323)." The ASU amends the Codification for SEC staff announcements made at recent Emerging Issues Task Force (EITF) meetings. The SEC guidance that specifically relates to our Consolidated Financial Statements was from the September 2016 meeting, where the SEC staff expressed their expectations about the extent of disclosures registrants should make about the effects of the new FASB guidance as well as any amendments issued prior to adoption, on revenue (ASU 2014-09), leases (ASU 2016-02) and credit losses on financial instruments (ASU 2016-13) in accordance with SAB Topic 11.M. Registrants are required to disclose the effect that recently issued accounting standards will have on their financial statements when adopted in a future period. In cases where a registrant cannot reasonably estimate the impact of the adoption, then additional qualitative disclosures should be considered. The ASU incorporates these SEC staff views into ASC 250 and adds references to that guidance in the transition paragraphs of each of the three new standards. The Company has adopted the amendments in this ASU and appropriate disclosures have been included in this Note for each recently issued accounting standard.

In December 2016, FASB issued ASU No. 2016-19, "Technical Corrections and Improvements" and ASU 2016-20, "Technical Corrections and Improvements to Topic 606: Revenue from Contracts with Customers." On November 10, 2010 FASB added a standing project that will facilitate the FASB Accounting Standards Codification ("Codification”) updates for technical corrections, clarifications, and improvements. These amendments are referred to as Technical Corrections and Improvements. Maintenance updates include non-substantive corrections to the Codification, such as editorial corrections, various link-related changes, and changes to source fragment information. These updates contain amendments that will affect a wide variety of Topics in the Codification. The amendments in these ASUs will apply to all reporting entities within the scope of the affected accounting guidance and generally fall into one of four categories: amendments related to differences between original guidance and the Codification, guidance clarification and reference corrections, simplification, and minor improvements. In summary, the amendments represent changes to clarify the Codification, correct unintended application of guidance, or make minor improvements to the Codification that are not expected to have a significant effect on current accounting practice. Transition guidance varies based on the amendments in the ASUs. The amendments that require transition guidance are effective for fiscal years and interim reporting periods after December 15, 2016. Early adoption is permitted including adoption in an interim period. All other amendments are effective upon the issuance of these ASUs. Neither ASU 2016-19 nor ASU 2016-20 had a material impact on the Company's Consolidated Financial Statements.

In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments." The ASU amends the guidance on the classification of certain cash receipts and payments in the statement of cash flows and is intended to reduce the diversity in practice. This ASU is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted for all entities beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU 2016-5 on January 1, 2018 did not have a material impact on the Company’s Consolidated Financial Statements.

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The ASU significantly changes the impairment model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model to an expected loss model. This ASU is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for all entities beginning after December 15, 2018, including interim periods within those fiscal years. The Company is in the process of identifying required changes to the loan loss estimation models and processes and evaluating the impact of this new guidance. Once adopted, we expect our allowance for loan losses to increase, however, until our evaluation is complete the magnitude of the increase will be unknown.

In February 2016, the FASB issued ASU 2016-02, "Leases (ASC 842)." The guidance in this ASU requires most leases to be recognized on the balance sheet as a right-of-use asset and a lease liability. It will be critical to identify leases embedded in a contract to avoid misstating the lessee’s balance sheet. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. This ASU is effective for interim and annual periods beginning after December 15, 2018. We are currently evaluating the impact of this guidance on our Consolidated Financial Statements and the timing of adoption. The Company will compile an inventory of all leased assets to determine the impact of ASU 2016-02 on its financial condition and results of operations. Once adopted, we expect to report higher assets and liabilities on our Consolidated Balance Sheets as a result of including right-of-use assets and lease liabilities related to certain banking offices and certain equipment under noncancelable operating lease agreements, which currently are not reflected in our Consolidated Balance Sheets. We do not expect the guidance to have a material impact on the Consolidated Statements of Income or the Consolidated Statements of Changes in Stockholders' Equity.

In January 2016, the FASB issued ASU 2016-01, "Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities." The ASU amends the guidance in GAAP on the classification and measurement of financial instruments. The ASU includes the following changes: i) equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (ii) requires the use of exit price notion when measuring the fair value of financial instruments for disclosure purposes; (iii) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e. securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; (iv) allows an equity investment that does not have readily determinable fair values, to be measured at cost minus impairment (if any), plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer; (v) eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, and requires a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e. securities or loans and receivables) on the balance sheet or in the accompanying notes to the financial statements; and (vii) clarifies that a valuation allowance on a deferred tax asset related to available-for-sale securities should be evaluated in combination with the organization’s other deferred tax assets. This ASU is effective for interim and annual periods beginning after December 15, 2017. The adoption of ASU No. 2016-01 is not expected to have a material impact on the Company's Consolidated Financial Statements.

In September 2015, the FASB issued ASU No. 2015-16, "Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments." The ASU simplifies the accounting for measurement period adjustments. The amendments in this ASU require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period when the adjustment amounts are determined. The acquirer is required to record in the same period's financial statements the effect on earnings from changes in depreciation, amortization, or other income effects resulting from the change to provisional amounts, calculated as if the accounting had been completed at the acquisition date. The acquirer must present separately on the income statement, or disclose in the notes, the amount recorded in current-period earnings that would have been recorded in previous reporting periods if the provisional amount had been recognized at the acquisition date. This ASU was effective for interim and annual periods beginning after December 15, 2015. The adoption of ASU No. 2015-16 is not expected to have a material impact on the Company's Consolidated Financial Statements.

In August 2015, the Financial Accounting Standards Board ("FASB") issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606)”, which defers the effective date of Accounting Standard Update ("ASU") No. 2014-09 one year. ASU No. 2014-09 created Topic 606 and supersedes Topic 605, Revenue Recognition. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In general, the new guidance requires companies to use more judgment and make more estimates than under current guidance, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides clarifying guidance in certain narrow areas and adds some practical expedients, but does not change the core revenue recognition principle in Topic 606. ASU No. 2015-14 is effective for interim and annual periods beginning after December 15, 2017; early adoption is permitted for interim and annual periods beginning after December 15, 2016. For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. A significant amount of the Company’s revenues are derived from net interest income on financial assets and liabilities, which are excluded from the scope of the amended guidance. With respect to noninterest income, the Company is in its preliminary stages of identifying and evaluating the revenue streams and underlying revenue contracts within the scope of the guidance. The Company completed its assessment of revenue streams and associated incremental costs of contracts affected by the standard. The Company’s adoption of this standard did not change the method in which we recognized revenue. The Company has adopted this standard on January 1, 2018. The Company is evaluating the standard’s expanded disclosure requirements.

Subsequent events — The Company has evaluated events occurring subsequent to December 31, 2017 through March 15, 2017, which is the date the financial statements were available to be issued.

Amortized cost and approximate fair values 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		Gain		Months			Longer			Value
As of December 31, 2017
U.S. Government-sponsored securities	$	48,950	$	13	$	(6	)	$	(453	)	$	48,504
Municipal securities		13,310		184		(22	)		(18	)		13,454
Mortgage-backed securities		198,100		71		(1,145	)		(1,764	)		195,262
Corporate securities		5,500		573		-			(237	)		5,836
	$	265,860	$	841	$	(1,173	)	$	(2,472	)	$	263,056
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

Carrying amounts and estimated fair values of securities held-to-maturity are as follows:

The amortized cost and estimated fair values of investment securities that are available-for-sale and held-to-maturity at December 31, 2017, by contractual maturity, are as follows:

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

As of December 31, 2017, the Company held 304 investment securities with fair values 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.

	Year Ended December 31, 2017
	Real			Construction		Commercial			Residential			Consumer
	Estate			and Land		and			and Home			and
(Dollars in thousands)	Term			Development		Industrial			Equity			Other			Total
Balance at beginning of year	$	6,770		$	5,449	$	3,718		$	617		$	161		$	16,715
Additions: Provisions for loan losses		67			731		1,423			406			123			2,750
Deductions:
Gross loan charge-offs		(350	)		-		(1,098	)		(359	)		(231	)		(2,038	)
Recoveries		219			129		271			151			106			876
Net loan charge-offs		(131	)		129		(827	)		(208	)		(125	)		(1,162	)
Balance at end of year	$	6,706		$	6,309	$	4,314		$	815		$	159		$	18,303

	Year Ended December 31, 2016
	Real			Construction		Commercial			Residential			Consumer
	Estate			and Land		and			and Home			and
(Dollars in thousands)	Term			Development		Industrial			Equity			Other			Total
Balance at beginning of year	$	6,783		$	3,984	$	3,941		$	603		$	246		$	15,557
Additions: Provisions for loan losses		(617	)		813		847			(72	)		(71	)		900
Deductions:
Gross loan charge-offs		(17	)		-		(1,511	)		(6	)		(240	)		(1,774	)
Recoveries		621			652		441			92			226			2,032
Net loan charge-offs		604			652		(1,070	)		86			(14	)		258
Balance at end of year	$	6,770		$	5,449	$	3,718		$	617		$	161		$	16,715

	Year Ended December 31, 2015
	Real			Construction			Commercial			Residential			Consumer
	Estate			and Land			and			and Home			and
(Dollars in thousands)	Term			Development			Industrial			Equity			Other			Total
Balance at beginning of year	$	5,181		$	4,425		$	4,608		$	671		$	266		$	15,151
Additions: Provisions for loan losses		1,554			(91	)		(508	)		(135	)		180			1,000
Deductions:
Gross loan charge-offs		(32	)		(396	)		(350	)		-			(281	)		(1,059	)
Recoveries		80			46			191			67			81			465
Net loan charge-offs		48			(350	)		(159	)		67			(200	)		(594	)
Balance at end of year	$	6,783		$	3,984		$	3,941		$	603		$	246		$	15,557

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:

	December 31, 2017
			30-89 Days		90+ Days		Non-		Total		Total
(Dollars in thousands)	Current		Past Due		Past Due		accrual		Past Due		Loans
Commercial real estate:
Real estate term	$	781,261	$	2,243	$	-	$	644	$	2,887	$	784,148
Construction and land development		361,844		7,095		-		651		7,746		369,590
Total commercial real estate		1,143,105		9,338		-		1,295		10,633		1,153,738
Commercial and industrial		288,297		4,210		-		1,578		5,788		294,085
Consumer:
Residential and home equity		156,379		2,212		-		-		2,212		158,591
Consumer and other		25,307		283		1		-		284		25,591
Total consumer		181,686		2,495		1		-		2,496		184,182
Total gross loans	$	1,613,088	$	16,043	$	1	$	2,873	$	18,917	$	1,632,005

	December 31, 2016
			30-89 Days		90+ Days		Non-		Total		Total
(Dollars in thousands)	Current		Past Due		Past Due		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

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.

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:

	December 31, 2017
			Special		Substandard		Total		Total
(Dollars in thousands)	Pass		Mention		and Doubtful		Loans		Allowance
Commercial real estate:
Real estate term	$	758,575	$	13,055	$	12,518	$	784,148	$	6,706
Construction and land development		358,766		7,227		3,597		369,590		6,309
Total commercial real estate		1,117,341		20,282		16,115		1,153,738		13,015
Commercial and industrial		274,535		13,464		6,086		294,085		4,314
Consumer loans:
Residential and home equity		152,753		3,913		1,925		158,591		815
Consumer and other		25,461		45		85		25,591		159
Total consumer		178,214		3,958		2,010		184,182		974
Total	$	1,570,090	$	37,704	$	24,211	$	1,632,005	$	18,303

	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

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

	December 31, 2017
	Real		Construction		Commercial		Residential		Consumer
	Estate		and Land		and		and Home		and
(Dollars in thousands)	Term		Development		Industrial		Equity		Other		Total
Allowance for loan losses:
Individually evaluated for impairment	$	-	$	3	$	41	$	101	$	-	$	145
Collectively evaluated for impairment		6,706		6,306		4,273		714		159		18,158
Total	$	6,706	$	6,309	$	4,314	$	815	$	159	$	18,303
Outstanding loan balances:
Individually evaluated for impairment	$	7,201	$	3,218	$	9,058	$	1,150	$	-	$	20,627
Collectively evaluated for impairment		776,947		366,372		285,027		157,441		25,591		1,611,378
Total gross loans	$	784,148	$	369,590	$	294,085	$	158,591	$	25,591	$	1,632,005

	December 31, 2016
	Real		Construction		Commercial		Residential		Consumer
	Estate		and Land		and		and Home		and
(Dollars in thousands)	Term		Development		Industrial		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

	December 31, 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	$	8,681	$	7,201	$	-	$	7,201	$	-
Construction and land development		4,397		3,022		196		3,218		3
Total commercial real estate		13,078		10,223		196		10,419		3
Commercial and industrial		16,102		8,290		768		9,058		41
Consumer loans:
Residential and home equity		1,150		229		921		1,150		101
Consumer and other		-		-		-		-		-
Total consumer		1,150		229		921		1,150		101
Total	$	30,330	$	18,742	$	1,885	$	20,627	$	145

	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

	Year Ended December 31,
	2017				2016				2015
	Average		Interest		Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income		Recorded		Income
(Dollars in thousands)	Investment		Recognition		Investment		Recognition		Investment		Recognition
Commercial real estate:
Real estate term	$	6,489	$	187	$	7,435	$	240	$	10,317	$	380
Construction and land development		3,107		137		2,809		168		5,015		276
Total commercial real estate		9,596		324		10,244		408		15,332		656
Commercial and industrial		7,552		276		6,214		311		6,318		251
Consumer loans:
Residential and home equity		1,313		46		1,695		67		2,916		105
Consumer and other		-		-		60		1		24		1
Total consumer		1,313		46		1,755		68		2,940		106
Total	$	18,461	$	646	$	18,213	$	787	$	24,590	$	1,013

Purchased Loans -- Purchased loans, including loans acquired in business combinations, are recorded at fair value on the acquisition date. Credit discounts are included in the determination of fair value; therefore, an allowance for loan losses is not recorded on the acquisition date. Acquired loans are evaluated upon acquisition and classified as either purchased credit-impaired (“PCI loans”) or purchased non-credit impaired (“Performing purchased loans”).

The following table summarizes the performing loans purchased on the acquisition date for both the seven Utah branches of Banner Bank and Town & Country Bank (“Acquisitions”):

The following table summarizes the PCI loans purchased on the acquisition date for the Acquisitions:

The following table summarizes the balance of purchased loans as of December 31, 2017:

Loans to affiliates — The Company has entered into loan transactions with certain directors 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 $3.4 million and $330,000 at December 31, 2017 and 2016, respectively. Available lines of credit for loans and credit cards to affiliates were $548,000 at December 31, 2017.

The Company leases certain properties from third parties under operating leases. Total rent expense for the years ended December 31, 2017, 2016, and 2015 was $539,000, $344,000, and $283,000, respectively.

The total future minimum rental commitments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year at December 31, 2017 are as follows:

Scheduled maturities for certificates of deposit are as follows for the years ending December 31:

Deposits held by affiliates were $7.1 million and $7.8 million as of December 31, 2017 and 2016, respectively.

As of December 31, 2017, committed Federal funds lines of credit arrangements totaling $25.0 million were available to the Company from an unaffiliated bank. The average Federal funds interest rate as of December 31, 2017 was 1.64%.

The Company is a member of the FHLB of Des Moines and has a committed credit line of $480.2 million which is secured by $664.8 million in various real estate loans and investment securities pledged as collateral. Borrowings generally provide for interest at the then current published rates which was 1.63% as of December 31, 2017.

The Company holds $21.3 million in investment securities in its Federal Reserve Bank (“Fed”) account. As of December 31, 2017, the Company’s overnight borrowing capacity using the primary credit facilities from the Fed is $20.8 million. The borrowing rate is the current discount rate plus 25 basis points. There were no outstanding Fed advances as of December 31, 2017 and 2016.

Securities sold under agreements to repurchase are generally overnight financing arrangements with customers collateralized by the Company’s investment securities that mature within 166 months. As of December 31, 2017, the Company had no investment securities pledged for securities sold under agreements to repurchase and $4.0 million pledged as of December 31, 2016. At maturity, the securities underlying the agreements are returned to the Company.

Information concerning short-term borrowings consist of the following as of December 31:

The components of the income tax expense (benefit) are as follows for the years ended December 31:

The combined federal and state income tax expense differs from that computed at the federal statutory corporate tax rate as follows:

The nature and components of the Company’s net deferred income tax assets are as follows as of December 31:

The Federal government signed into law the Tax Cuts and Jobs Act (the “Act”), which amended the Internal Revenues Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the Act reduces the federal corporate tax rate from a maximum of 35% to a flat rate of 21%. The rate reduction was effective January 1, 2018. Consequently, the lower corporate income tax rate reduces the future net tax benefits of timing differences between book and taxable income recorded by the Company as net deferred income tax assets. As a result, the Company re-measured its net deferred income tax assets at the end of 2017, and recorded additional income tax expense of $4.7 million related to the write-down of deferred income tax assets due to the reduction in the Federal corporate income tax rate.

The Company believes, based on available information, that it is more likely than not that the net deferred income tax asset will be realized in the normal course of operations. The impact of a tax position is recognized in the financial statements if that position is more likely than not of being sustained on audit, based on the technical merits of the position. As of December 31, 2017, the Company did not have any significant uncertain tax positions. As of December 31, 2016, the Company had an uncertain tax position related to a rehabilitation credit, which was resolved in the Company’s favor in 2017. The Company includes any interest and penalties associated with unrecognized tax benefits within the provision for income taxes. As of December 31, 2017, there was no liability for unrecognized tax benefits. As of December 31, 2016, there was a liability of $200,000 for unrecognized tax benefits, which was resolved and recorded as an income tax credit in 2017. The Company does not expect a material change to the total amount of unrecognized tax benefits in the next twelve months.

The Company elected to adopt the provisions of Accounting Standards Update 2016-09, Compensation—Stock Compensation (Topic 718) in 2016. The credit to current tax expense related to tax-deductible stock compensation expense was $1.2 million in 2017 and $201,000 in 2016.

The Company files U.S. and state income tax returns in jurisdictions with various statutes of limitations. The 2014 through 2017 tax years remain subject to selection for examination as of December 31, 2017. None of the Company’s income tax returns are currently under audit. As of December 31, 2017 and 2016, the Company has no net operating loss or credit carry-forwards.

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.

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.

The Company is subject to various regulatory capital requirements administered by its primary federal regulator, the FDIC. Failure to meet the minimum regulatory capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company and its consolidated financial statements. Under the regulatory capital adequacy guidelines and regulatory framework for prompt corrective action, the Company must meet specific capital guidelines involving quantitative measures of the Company’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classification under the prompt corrective action guidelines are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

As of December 31, 2017, the Company was categorized as well capitalized under the regulatory framework. To be categorized as well capitalized, an institution must maintain minimum common Tier 1 (“CET1”), Tier 1 risk-based capital, total risk-based capital, and Tier 1 to average assets (“Tier 1 Leverage”) capital ratios as disclosed in the table below.

	December 31, 2017
						Minimum Capital					Well Capitalized
	Actual					Requirement					Requirement
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Consolidated
CET1 Capital to Risk-Weighted Assets	$	229,886		13.51	%	$	76,598		4.50	%	$	110,642		6.50	%
Tier 1 Capital to Risk-Weighted Assets		229,886		13.51	%		102,131		6.00	%		136,174		8.00	%
Total Risk-Based Capital to Risk-Weighted Assets		249,645		14.67	%		136,174		8.00	%		170,218		10.00	%
Tier 1 Leverage		229,886		11.46	%		80,249		4.00	%	NA		NA

People's Intermountain Bank
CET1 Capital to Risk-Weighted Assets	$	227,252		13.35	%	$	76,591		4.50	%	$	110,632		6.50	%
Tier 1 Capital to Risk-Weighted Assets		227,252		13.35	%		102,122		6.00	%		136,163		8.00	%
Total Risk-Based Capital to Risk-Weighted Assets		247,011		14.51	%		136,163		8.00	%		170,203		10.00	%
Tier 1 Leverage		227,252		11.32	%		80,323		4.00	%		100,403		5.00	%

	December 31, 2016
						Minimum Capital					Well Capitalized
	Actual					Requirement					Requirement
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Consolidated
CET1 Capital to Risk-Weighted Assets	$	229,312		18.93	%	$	54,519		4.50	%	$	78,750		6.50	%
Tier 1 Capital to Risk-Weighted Assets		229,312		18.93	%		72,692		6.00	%		96,923		8.00	%
Total Risk-Based Capital to Risk-Weighted Assets		244,655		20.19	%		96,923		8.00	%		121,154		10.00	%
Tier 1 Leverage		229,312		13.71	%		66,902		4.00	%	NA		NA

People's Intermountain Bank
CET1 Capital to Risk-Weighted Assets	$	193,277		16.05	%	$	54,174		4.50	%	$	78,251		6.50	%
Tier 1 Capital to Risk-Weighted Assets		193,277		16.05	%		72,232		6.00	%		96,309		8.00	%
Total Risk-Based Capital to Risk-Weighted Assets		208,526		17.32	%		96,309		8.00	%		120,386		10.00	%
Tier 1 Leverage		193,277		11.81	%		65,453		4.00	%		81,816		5.00	%

Federal Reserve Board Regulations require maintenance of certain minimum reserve balances based on certain average deposits. The Bank had reserve requirements of $6.0 million and $9.1 million as of December 31, 2017 and 2016, 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.

The following table summarizes dividends per share declared and paid per quarter for the periods indicated:

In June 2014, the Board of Directors (“Board”) and shareholders of the Company approved a share-based incentive plan (the “2014 Plan”) which replaced an existing share-based incentive plan. The 2014 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 2014 Plan is 800,000 common shares. The share-based awards are granted to participants at a price not less than the fair value on the date of grant and for terms of up to ten years. The 2014 Plan also allows for granting of share-based awards to directors and consultants who are not employees of the Company.

Under the plans, share-based options are exercisable at the time of grant or other times subject to such terms and conditions as determined by the Board. Share-based options granted may be exercised in whole or in part at any time during the maximum option term of ten years. All share-based options are adjustable for any future stock splits or stock dividends. The Board has the authority to grant to eligible participants one or more of the various share-based incentive awards. To date, the Company has issued incentive share-based options, non-qualified share-based options and restricted stock units to participants. Fair value of the exercise price prior to the Company’s initial public offering in June 2015 was set at the time of grant by the Board based on independent valuations and related models; and after the initial public offering, fair value is based on market prices at the date of grant. The Company’s policy is to issue common shares to the person exercising share-based options.

Note 11 — Incentive Share-Based Plan and Other Employee Benefits – Continued

						Weighted-
	Options			Weighted		Average
	Granted			Average		Remaining		Aggregate
	for Common			Exercise		Contractual		Intrinsic
(Dollars in thousands, except share and per share data)	Shares			Price		Term		Value
Outstanding at January 1, 2015		940,683		$	5.92
Granted		190,448			12.90
Exercised		(152,508	)		5.31
Forfeited		(16,368	)		4.85
Outstanding at December 31, 2015		962,255			7.42
Granted		86,831			15.66
Exercised		(285,568	)		5.62
Forfeited		(802	)		16.96
Outstanding at December 31, 2016		762,716			7.42
Granted		17,692			29.59
Exercised		(221,337	)		7.76
Forfeited		(14,358	)		15.41
Outstanding at December 31, 2017		544,713			10.14		4.06	$	12,198
Exercisable at December 31, 2017		405,256			8.53		3.86		7,423
Exercisable at December 31, 2016		481,959			7.29		3.83		9,426

The weighted-average grant-date fair value of options per share granted, using the Black-Scholes method of valuation, was $3.82, $2.26 and $2.65 during 2017, 2016 and 2015, respectively. The total intrinsic value of options exercised during the years ended December 31, 2017, 2016 and 2015 was $4.2 million, $3.5 million and $1.6 million, respectively. Shares issued upon exercises of stock options in 2017 were reduced by 11,462 shares related to net settled option exercises or existing shares tendered as consideration.

Note 11 — Incentive Share-Based Plan and Other Employee Benefits – Continued

The total intrinsic value of RSU’s vested during the years ended December 31, 2017, 2016, and 2015 were $423,000 and $244,000, and $56,000, respectively.

As of December 31, 2017, there was $711,000 of total unrecognized compensation expense related to stock options and RSU’s granted to be recognized over a weighted-average period of 1.2 years.

The Company recorded share-based compensation expense of $510,000, $544,000 and $485,000 for the years ended December 31, 2017, 2016 and 2015, respectively. The Company used the Black-Scholes pricing model using the following assumptions to calculate the fair value of incentive share-based options granted during 2017, 2016 and 2015: annual dividend yield of 0.7% to 2.3%; risk-free interest rates of 0.1% to 1.6%; expected option terms of 0.7 to 6.5 years; and volatility index of 13.3% to 29.9%. The assumptions for expected dividend yield and expected life reflected management’s judgment and include consideration of historical experience. Expected volatility is based on data from comparable public companies for the expected option term. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. Expected forfeitures are estimated based on the Company’s historical forfeiture experience. Management believes that the assumptions used in the option-pricing model are highly subjective and represent only one estimate of possible value as there is no active market for the options granted.

Share-based compensation expense related to restricted stock units and non-qualified stock options was $342,000, $371,000 and $287,000 for the years ended December 31, 2017, 2016 and 2015; and the related recognized income tax benefit associated with this expense is $131,000, $142,000 and $110,000, respectively.

401(k) plan — The Company offers a retirement savings 401(k) plan in which all eligible employees may participate. Currently, the Company contributes and allocates to each eligible participant’s account, a percentage of the participant’s elective deferral. The Company made contributions of $883,000, $778,000 and $708,000 in 2017, 2016 and 2015, respectively.

Profit-sharing — The Company provides an annual profit-sharing contribution to all eligible employees based on each year’s profitability and as approved by the Board of Directors. Profit sharing contributions were $725,000, $600,000 and $600,000 in 2017, 2016 and 2015, respectively.

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:

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 an observable market price (if available) or at the fair value of the loan’s collateral (if 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.

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

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 counter parties’ credit standing. The fair value of the fees as of December 31, 2017 and 2016 were insignificant.

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

Net loans — 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.

Litigation — The Company may from time to time be subject to legal proceedings arising in the normal course of business. Management does not believe the outcome of any currently pending matters will have a material impact on the financial condition, results of operations, or liquidity of the Company.

Concentrations of credit risk — The Company has concentrated credit risk exposure, including off-balance-sheet credit risk exposure, related to real estate loans as disclosed in Notes 3 and 8. The ultimate collectability of a substantial portion of the loan portfolio is susceptible to changes in economic and market conditions in the region. The Company generally requires collateral on all real estate lending arrangements and typically maintains loan-to-value ratios of no greater than 80%.

Investments in municipal securities principally involve governmental entities within the State of Utah. Loans are limited by state banking regulation to 15% of each Bank’s total capital, as defined by banking regulations. As a matter of practice and in accordance with applicable Utah state law, the Bank does not extend credit to any single borrower or group of related borrowers in excess of 15% of the Bank’s total capital. As of December 31, 2017, PIB’s lending limit was $38.6 million.

The contractual amounts of credit-related financial instruments, such as commitments to extend credit and credit-card arrangements, represent the amounts of potential accounting loss should the contract be fully drawn upon, the customer defaults, and the value of any existing collateral becomes worthless.

Financial information pertaining only to PUB, on a parent-only basis, is as follows as of and for the years ended December 31:

(Dollars in thousands)	2017			2016			2015
Statements of Cash Flows
Cash flows from operating activities:
Net income	$	19,846		$	23,610		$	19,614
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of the Banks		(15,536	)		(20,300	)		(17,023	)
Net amortization of securities discounts and premiums		-			89			55
Change in other assets and liabilities		(1,204	)		1,002			886
Net change provided by operating activities		3,106			4,401			3,532
Cash flows from investing activities:
Purchase of available-for-sale securities		-			(20,995	)		(50,227	)
Maturities/sales of available-for-sale securities		34,278			21,267			15,149
Investments in banking subsidiary		(46,977	)		-			-
Net change (used in) provided by investing activities		(12,699	)		272			(35,078	)
Cash flows from financing activities:
Issuance of common shares		13,977			-			34,897
Exercise of stock options		1,395			777			847
Dividends paid		(6,106	)		(5,141	)		(5,052	)
Net change provided by (used in) financing activities		9,266			(4,364	)		30,692
Net change in cash and cash equivalents		(327	)		309			(854	)
Cash and cash equivalents, beginning of year		2,946			2,637			3,491
Cash and cash equivalents, end of year	$	2,619		$	2,946		$	2,637

On October 6, 2017, the Company acquired the loans and deposits of seven Utah branch locations from Banner Bank (“Banner branches”). The Company acquired $257 million in loans and assumed $160 million in deposits and paid a deposit premium of $13.8 million based on average deposits at closing. Two of the seven branches were consolidated into existing Bank branches. The Company has successfully completed the conversion of these branches into its core-banking platform and integrated personnel into the Company’s operations.

The acquired assets and assumed liabilities was recorded at fair value at the date of the acquisition. In accordance with GAAP guidance for business combinations, the Company recorded $14.9 million of goodwill and $2.6 million of other intangibles as of the acquisition date. The other intangible asset is related to core deposits and are being amortized using a straight-line method over a period of ten years with no significant residual value. For tax purposes, the purchase accounting adjustments, including goodwill and other intangibles related to the Banner branch acquisition are taxable or deductible.

The following table summarizes the consideration paid and the fair value of the assets acquired and liabilities assumed and recognized at the acquisition date.

Direct costs related to the branch acquisition were expensed as incurred in the year ended December 31, 2017. Such expenses primarily related to professional and legal services, human resource costs and information system charges. For the year ended December 31, 2017, the Company incurred $1.7 million of expenses related to the acquisition of the Utah branches of Banner Bank.

Pro forma income statements are not being presented as the information is not practicable to produce.

The Company also completed the merger of Town & Country Bank located in St. George, Utah on November 13, 2017, including the acquisition of $117 million in loans and assumption of $124 million in deposits.

The Company successfully completed the conversion of this branch into its core-banking platform, consolidated its existing branch and the Town & Country Branch in St. George into one branch, and integrated personnel into the Company’s operations. The Company exchanged Town & Country Bank shares for 466,546 PUB common shares and paid cash of $11.6 million of which $2.0 million is being held in escrow to cover potential loss indemnifications.

The acquired assets and assumed liabilities were recorded at fair value at the date of the respective acquisitions. In accordance with GAAP guidance for business combinations, the Company recorded $11.1 million of goodwill and $845,000 of core deposit intangibles and $702,000 in deposit premium on certificates of deposit related to Town & Country Bank on the acquisition date. The core deposit intangible is being amortized using a straight-line method over a period of ten years with no significant residual value. The deposit premium is being accreted into net interest income over the life of the certificates of deposit. In accordance with the applicable accounting guidance for business combinations, there was no carry-over of TC Bank’s previously established allowance for loan losses. The acquisition was a tax-free exchange; therefore, for tax purposes, purchase accounting adjustments, including goodwill, for the TC Bank acquisition are all non-taxable and/or non-deductible.

The following table summarizes the consideration paid and the fair value of the assets acquired and liabilities assumed and recognized at the acquisition date.

(Dollars in thousands, except share data)
Purchase Price
PUB common shares issued for Town & Country shares				466,546
PUB share price at closing			$	29.96
Consideration from common stock conversion (0.2916 ratio)			$	13,977
Cash				11,603
Total Consideration			$	25,580
Recorded amounts of assets acquired and liabilities assumed
Assets
Cash and cash equivalents	$	13,401
Investment securities		9,585
Loans, net of discounts		110,334
Premises & equipment		145
Core deposit intangible		845
Bank owned life insurance		3,332
Deferred income tax asset		2,571
Other assets		4,161
Total assets		144,374
Liabilities
Deposits, net of premiums		123,777
Other liabilities		6,127
Total liabilities assumed		129,904
Total net assets from merger			$	14,470
Goodwill			$	11,110

The following table provides the unaudited pro forma information for the results of operations for the twelve months ended December 31, 2017 and 2016, as if the acquisition had occurred on January 1, 2016. These adjustments reflect the impact of certain purchase accounting fair value measurements, primarily comprised of TC Bank’s loan and deposit portfolios. In addition, the acquisition-related expenses are included in the twelve months ended December 31, 2017. These unaudited pro forma results are presented for illustrative purposes only and are not intended to represent or be indicative of the actual results of operations of the combined banking organization that would have been achieved had the acquisition occurred at the beginning of each period presented, nor are they intended to represent or be indicative of future results of operations. No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, expense efficiencies or asset dispositions.

Direct costs related to the branch acquisition were expensed as incurred in the year ended December 31, 2017. Such expenses primarily related to professional and legal services, human resource costs and information system charges. For the year ended December 31, 2017, the Company incurred $3.1 million of expenses related to the TC Bank acquisition, the majority of which is tax deductible.

The two acquisitions were consistent with the Company’s strategy to expand our presence in Utah. The acquisitions offer the Company the opportunity to increase profitability by introducing existing products and services to the acquired customer base as well as add new customers in Utah. Goodwill arising from the acquisition consisted largely of synergies and the cost savings resulting from the combined operations.

	Quarters Ended 2017
(Dollars in thousands, except share and per share data)	March 31		June 30		September 30		December 31
Net interest income	$	17,792	$	18,981	$	19,918	$	23,947
Provision for loan losses		200		900		900		750
Non-interest income		4,112		4,348		3,574		4,526
Non-interest expense		12,443		12,351		13,657		19,674
Income before income tax expense		9,261		10,078		8,935		8,049
Income tax expense		2,740		3,584		2,697		7,456
Net income	$	6,521	$	6,494	$	6,238	$	593
Earnings per common share:
Basic	$	0.36	$	0.37	$	0.35	$	0.03
Diluted	$	0.36	$	0.35	$	0.34	$	0.03


	Quarters Ended 2016
(Dollars in thousands, except share and per share data)	March 31		June 30		September 30		December 31
Net interest income	$	16,700	$	17,211	$	17,637	$	18,333
Provision for loan losses		200		225		325		150
Non-interest income		3,763		4,398		4,386		4,332
Non-interest expense		12,135		12,400		11,902		12,540
Income before income tax expense		8,128		8,984		9,796		9,975
Income tax expense		2,885		3,407		3,548		3,433
Net income	$	5,243	$	5,577	$	6,248	$	6,542
Earnings per common share:
Basic	$	0.30	$	0.31	$	0.35	$	0.37
Diluted	$	0.29	$	0.31	$	0.34	$	0.36

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There have been no changes or disagreements with accountants on accounting and financial disclosure.

An evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the disclosure controls and procedures (as required by Exchange Act Rules 240.13a-15(b) and 15d-14(a)). Based on that evaluation, the CEO and CFO have concluded that as of the end of the period covered by this report, the disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in reports that are filed or submitted under the Securities Exchange Act of 1934 are recorded, processed, summarized and timely reported as provided in the SEC’s rules and forms.

Management’s Annual Report on Internal Control Over Financial Reporting is incorporated by herein by reference in “Item 8. Financial Statements and Supplementary Data.”

Tanner LLC, the independent registered public accounting firm that audited the financial statements for the year ended December 31, 2017, has issued an attestation report on the Company’s internal control over financial reporting. Such attestation report expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017 and is included in “Item 8. Financial Statements and Supplementary Data.”

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 year ended December 31, 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.

Information regarding “Directors and Executive Officers” is set forth under the headings “Election of Directors” and “Management – Executive Officers who are not Directors” of the Company’s 2018 Annual Meeting Proxy Statement (“Proxy Statement”) and is incorporated herein by reference.

Information regarding “Compliance with Section 16(a) of the Exchange Act” is set forth under the section “Compliance with Section 16(a) Filing Requirements” of the Company’s Proxy Statement and is incorporated herein by reference.

Information regarding the Company’s audit committee is set forth under the heading “Meetings and Committees of the Board of Directors – Committee Membership” in the Company’s Proxy Statement and is incorporated by reference.

Consistent with the requirements of the Sarbanes-Oxley Act, the Company has a Code of Ethics applicable to senior financial officers including the principal executive officer, principal financial officer and principal accounting officer. The Code of Ethics can be accessed electronically by visiting the Company’s website at www.peoplesutah.com.

Information regarding “Executive Compensation” is set forth under the headings “Compensation of Directors” and “Executive Compensation” of the Company’s Proxy Statement and is incorporated herein by reference.

Information regarding “Compensation Committee Interlocks and Insider Participation” is set forth under such heading of the Company’s Proxy Statement and is incorporated herein by reference.

Information regarding the “Compensation Committee Report” is set forth under the heading “Report of Compensation Committee” of the Company’s Proxy Statement and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information regarding “Security Ownership of Certain Beneficial Owners and Management” is set forth under the headings “Beneficial Ownership” of the Company’s Proxy Statement and is incorporated herein by reference.

Information regarding “Equity Compensation Plan Information” is set forth under the headings “Equity Compensation Plan Information” of the Company’s Proxy Statement and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information regarding “Certain Relationships and Related Transactions, and Director Independence” is set forth under the heading “Transactions with Management” and “Corporate Governance – Director Independence” of the Company’s Proxy Statement and is incorporated herein by reference.

Information regarding “Principal Accounting Fees and Services” is set forth under the heading “Auditors – Fees Paid to Independent Registered Public Accounting Firm” of the Company’s Proxy Statement and is incorporated herein by reference.

(2) Financial Statement schedules required to be filed by Item 8 of this report.

(3) The following exhibits are required by Item 601 of Regulation S-K and are included as part of this Form 10-K:

All other financial statement schedules required by Regulation S-X are omitted because they are not applicable, not material or because the information is included in the consolidated financial statements or related notes.

Pursuant to the requirements of Section 13 or 15(d) 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 March 15, 2018.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 15, 2018, by the following persons on behalf of the registrant and in the capacities indicated.

	4.8	Subsidiaries	17
	4.9	Absence of Undisclosed Liabilities	17
	4.10	Books and Records	18
	4.11	No Material Adverse Changes	18
	4.12	Absence of Certain Developments	18
	4.13	Properties	20
	4.14	Environmental Matters	21
	4.15	Tax Matters	21
	4.16	Contracts and Commitments	22
	4.17	Litigation	23
	4.18	Brokers and Finders	23
	4.19	Employees	23
	4.20	Employee Benefit Plans	24
	4.21	Insurance	24
	4.22	Affiliate Transactions	25
	4.23	Compliance with Laws; Permits	25
	4.24	Administration of Fiduciary Accounts	25
	4.25	Regulatory Approvals	26
	4.26	Interest Rate Risk Management Instruments	26
	4.27	Voting Requirements	26
	4.28	Takeover Laws	26
	4.29	Investments	26
	4.30	Technology and Intellectual Property	27
	4.31	Fairness Hearing and Proxy Statement Information	28
	4.32	Disclosure	28

ARTICLE 5 CONDUCT OF BUSINESS PENDING THE MERGER			28

	5.1	Conduct of TC Business	28

ARTICLE 6 ADDITIONAL COVENANTS AND AGREEMENTS			32

	6.1	Filings and Approvals	32
	6.2	Certain Loans and Related Matters	32
	6.3	Financial Statements and Payroll Listings	32
	6.4	Consents and Authorizations	33
	6.5	No Negotiations, Etc.	33
	6.6	Notification of Certain Matters	35
	6.7	Access to Information; Confidentiality; Nonsolicitation of Employees	35
	6.8	Filing of Tax Returns and Adjustments	36
	6.9	Shareholder Approval; Registration	36
	6.10	Establishment of Accruals	37
	6.11	Tax Treatment	37
	6.12	Loan Participations	37
	6.13	Updated Schedules	37

	6.14	280G Approval	39
	6.15	Reasonable and Diligent Efforts	39
	6.16	Tail D&O Policy	39
	6.17	Legal Opinions	39

ARTICLE 7 CONDITIONS			39

	7.1	Conditions to Obligations of Each Party	39
	7.2	Additional Conditions to Obligation of TC	40
	7.3	Additional Conditions to Obligation of PUB and PIB	41

ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER			43

	8.1	Reasons for Termination	43
	8.2	Effect of Termination	46
	8.3	Expenses	46
	8.4	TC Termination Payments	46
	8.5	PUB Termination Payments	47

ARTICLE 9 SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES; CONTINUING COVENANTS			48

	9.1	Survival	48
	9.2	Agreement for PUB and PIB	48
	9.3	Agreement by PUB and PIB to Indemnify	50
	9.4	Limitations	50
	9.5	Notice of Claim	51
	9.6	Defense of Third-Party Claims	51
	9.7	Contents of Notice of Claim	52
	9.8	Resolution of Notice of Claim	52
	9.9	Appointment of Representative	53

ARTICLE 10 GENERAL PROVISIONS			54

	10.1	Press Releases and Announcements	54
	10.2	Notices	55
	10.3	Assignment	56
	10.4	No Third Party Beneficiaries	56
	10.5	Schedules	56
	10.6	Interpretation	57
	10.7	Severability	57
	10.8	Complete Agreement	57
	10.9	Amendment	57
	10.10	Waiver	57
	10.11	Governing Law	57
	10.12	Specific Performance	58

This MERGER AGREEMENT (this “Agreement”), dated May 31, 2017, is made and entered into by and among, People’s Utah Bancorp, a Utah corporation (“PUB”), People’s Intermountain Bank, a Utah state bank (“PIB”), Town & Country Bank, Inc., a Utah state bank (“TC”) and the Shareholders’ Representative. PUB, PIB and TC are each referred to in this Agreement as a “Party” and collectively as the “Parties.”

WHEREAS, the respective Boards of Directors of PUB, PIB and TC have determined that it is advisable and in the best interests of PUB, PIB and TC and their respective shareholders to consummate the merger of TC with and into PIB as described in Article 1 of this Agreement (the “Merger”);

WHEREAS, as a result of the Merger, all of the outstanding common shares, no par value, of TC (the “TC Common Shares”), will be converted into common shares, $0.01 par value, of PUB (“PUB Common Shares”) or cash on the terms and subject to the conditions set forth in this Agreement;

WHEREAS, in connection with the Merger and the entry by the Parties into this Agreement, PUB and PIB are together entering into a separate Voting and Support Agreement, of even date herewith (the “Support Agreement”), with each of the shareholders of TC whose names are set forth on the signature pages thereto (the “Support Agreement Parties”), pursuant to which, among other things, the Support Agreement Parties have agreed to vote all of the TC Common Shares owned by them in favor of adoption and approval of this Agreement and the Merger; and

WHEREAS, the Parties desire that the Merger be made on the terms and subject to the conditions set forth in this Agreement and that the Merger qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”).

NOW, THEREFORE, in consideration of the representations, warranties and covenants contained herein, the parties hereto agree as follows:

At the Effective Time (as defined below), TC will merge with and into PIB. PIB, in its capacity as the entity surviving the Merger, is sometimes referred to herein as the “Surviving Entity.” The Merger will be effected pursuant to the provisions of, and with the effect provided in, Section 16-10a-1106 of the Utah Revised Business Corporation Act (the “Utah Act”).

(b)The articles of incorporation and the bylaws of PIB, as in effect immediately prior to the Effective Time (attached hereto in their current form as Exhibit A-1 and Exhibit A-2, respectively) shall be the articles of incorporation and the bylaws of the Surviving Entity.

(c)From and after the Effective Time, the directors of PIB immediately prior to the Effective Time shall be the directors of the Surviving Entity.

(d)From and after the Effective Time, the officers of PIB immediately prior to the Effective Time shall be the officers of the Surviving Entity.

(e)To effect the Merger, the parties hereto will cause articles of merger relating to the Merger to be filed with the Utah Division of Corporations and Commercial Code (“Division of Corporations”). The Merger shall become effective upon the filing of such articles of merger. As used herein, the term “Effective Date” shall mean the date on which the Merger shall become effective as provided in the preceding sentence and the term “Effective Time” shall mean the time on the Effective Date when the Merger shall become effective. The Effective Date and the Effective Time shall take place on the Closing Date (as defined below).

1.2The Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) will take place at the offices of PUB or at a location otherwise agreed upon by TC and PUB. The Closing will take place as soon as practicable once the conditions in Article 7 have been satisfied or waived, but in any event within ten (10) Business Days after the date on which all such conditions have been satisfied or waived, unless the parties otherwise agree (the “Closing Date”). The failure of the Closing will not ipso facto result in termination of this Agreement and will not relieve any party of any obligation under this Agreement.

(a)Subject to the conditions set forth in this Agreement, on the Closing Date, TC will deliver to PUB:

(iii)a certificate of TC dated the Closing Date (A) stating the number of TC Common Shares outstanding immediately prior to the Closing, (B) stating that there are no other TC capital shares or options, warrants, rights to acquire, or securities convertible into TC capital shares, outstanding as of the Closing Date, and the number of TC Common Shares for which dissenters’ rights may be exercised;

(iv)the minute books, stock transfer records, corporate seal and other materials related to the corporate administration of TC;

(vi)certificates executed by the appropriate officials of the State of Utah dated as of a date not earlier than the third Business Day prior to the Closing as to (A) the good standing of TC and (B) payment of all applicable state Taxes by TC;

(vii)a consent in a form satisfactory to the Parties, to the transfer of that certain Lease Agreement between TC and 3S&G, LLC for the lease of the building located at 405 East St. George Boulevard, executed by each of TC and 3S&G, LLC (the “St. George Lease Transfer”);

(viii)an escrow agreement substantially in the form of Exhibit B attached hereto, pertaining to the Escrow Amount (the “Escrow Agreement”), executed by the Shareholders’ Representative;

(ix)counterpart signature pages to the Support Agreement referred to in Section 7.3(j) executed by each of the TC shareholders identified in Schedule 7.3(j); and

(x)such other certificates, documents and instruments that PUB reasonably requests for the purpose of (1) evidencing the accuracy of TC’s representations and warranties, (2) evidencing the performance and compliance by TC with agreements contained in this Agreement, (3) evidencing the satisfaction of any condition referred to in Section 7.3, or (4) otherwise facilitating the consummation of the transactions contemplated by this Agreement.

(b)Subject to the conditions set forth in this Agreement, on the Closing Date, PUB and PIB, as applicable, will deliver to TC:

(i)the certificates of PUB and PIB, dated the Closing Date, required by Section 7.2(d);

(ii)the certificates of PUB and PIB, dated the Closing Date, required by Section 7.2(e);

(iv)such other certificates, documents and instruments that TC reasonably requests for the purpose of (1) evidencing the accuracy of PUB’s representations and warranties, (2) evidencing the performance and compliance by PUB with agreements contained in this Agreement, (3) evidencing the satisfaction of any condition referred to in Section 7.2, or (4) otherwise facilitating the consummation of the transactions contemplated by this Agreement.

article 2
EFFECT OF MERGER ON THE CAPITAL SHARES OF THE CONSTITUENT CORPORATION; EXCHANGE OF CERTIFICATES

2.1Definitions. For purposes of this Article 2, the following definitions will apply:

(a)“Closing Total Purchase Price Payment” means the Total Purchase Price less the Escrow Amount.

(c)“Excess TC Closing Capital” means the amount of TC Closing Capital that has accrued since January 1, 2017 that exceeds the Minimum TC Closing Capital.

(d)“Income Tax Benefit” shall mean the income tax benefit that is available to PUB or PIB associated with the accrual or adjustment of the TC Classified Asset and Nonaccrual Adjustment. The Income Tax Benefit will be calculated for the TC Classified Asset and Nonaccrual Adjustment by multiplying the TC Classified Asset and Nonaccrual Adjustment by thirty-four percent.

(e)“Minimum TC Closing Capital” equals $14,300,000, plus any TC Annualized Net Income that exceeds $1,200,000.

(f)“Per Share Consideration” means the result obtained by dividing the Closing Total Purchase Price Payment by the number of outstanding TC Common Shares immediately prior to the Effective Time, including any TC Common Shares from the conversion of outstanding TC Preferred Shares or exercise of outstanding TC options.

(g)“Per Share Cash Consideration” means the product of the Per Share Consideration multiplied by 35%, which is subject to adjustment pursuant to Section 8.1.

(h)“Per Share Stock Consideration” means the number of PUB Common Shares obtained by dividing (1) the product of (i) the Per Share Consideration multiplied by (ii) 65% by (2) $26.70 , which is subject to adjustment pursuant to Section 8.1. Further, if PUB declares or effects a stock dividend, reclassification, recapitalization, split-up, combination, exchange of shares, or similar transaction between the Execution Date and the Effective Date, the Per Share Stock Consideration will be adjusted accordingly.

(i)“Per Share Stock Consideration Value” means the product obtained by multiplying (i) the Per Share Stock Consideration by (ii) the PUB Average Closing Market Price.

(j)“PUB Share Price” shall mean $26.70, as may be adjusted pursuant to Section 8.1.

(k)“TC Annualized Net Income” means TC’s 2017 net income as of June 30, 2017, calculated in accordance with GAAP and annualized based upon a 365 day year.

(l)“TC Closing Capital” means (i) TC’s tangible common equity at the Closing, calculated in accordance with GAAP, plus (2) the TC Closing Capital Adjustment. An example of how TC Closing Capital shall be calculated is set forth on Schedule 2.1(l).

(m)“TC Closing Capital Adjustment” means (i) if the TC Transaction Expenses are less than the TC Transaction Expenses Target, the difference between the TC Transaction Expenses and the TC Transaction Expenses Target, on an after-tax basis, (which amount shall be a positive number), (ii) if the TC Transaction Expenses are equal to or greater than TC Transaction Expenses Target, the difference between the Transaction Expenses Target and the TC Transaction Expenses, on an after-tax basis, (which amount shall be a negative number).

(n)“TC Classified Asset and Nonaccrual Adjustment” shall mean the sum of (A) the product of the larger of (1) the amount by which the principal amount of classified loans owned by TC (excluding the cumulative total of any portions of such classified loans that are secured by a guaranty of the SBA, USDA or any other governmental authority) (the “TC Classified Loans”), at the Closing Date, exceeds $5,600,000, or (2) the amount by which the principal amount of nonaccrual loans owned by TC (excluding the cumulative total of any portions of such classified loans that are secured by a guaranty of the SBA, USDA or any other governmental authority) (the “TC Nonaccrual Loans”), at the Closing Date, exceeds $1,734,000, multiplied by (3) eighteen percent, plus (B) the product of (1) the amount by which the principal amount of other real estate owned (the “TC OREO”), at the Closing Date, exceeds $0, multiplied by (2) ten percent; provided, however, that the TC Classified Asset and Nonaccrual Adjustment will be reduced by the amount of Income Tax Benefit attributable to the TC Classified Asset and Nonaccrual Adjustment. For purposes of this definition, the term “classified loans” and “nonaccrual loans” shall have the meaning described in the rules and regulations of Bank Regulators.

(o)“TC Transaction Expenses” shall mean the following expenses of TC relating to the Merger: (1) reorganization costs, (2) D&O insurance tail coverage, (3) data processing de-conversion costs and termination fee, (4) investment banking advisory fees and fairness opinion fees, (5) legal and accounting fees, and (6) if approved by TC shareholders, transaction bonuses paid to the Board of Directors of TC. A copy of the estimated TC Transaction Expenses is attached hereto as Schedule 2.1(o).

(q)“Total Purchase Price” shall be the amount that is calculated based upon the formula set forth in Schedule 2.1(q) attached hereto minus any TC Classified Asset and Nonaccrual Adjustment.

(a)Conversion of TC Common Shares . To effectuate the Merger, at the Effective Time, and without any further action of PUB or PIB, TC or any holder of TC Common Shares, each issued and outstanding TC Common Share (other than Dissenting Shares (as defined in Section 2.10)) shall be cancelled and extinguished and be converted into and become a right to receive the following:

(i)that number of fully paid and nonassessable PUB Common Shares equal to the Per Share Stock Consideration; and

(ii)an amount in cash, without interest, equal to the Per Share Cash Consideration.

(b)Preferred Shares. Immediately prior to the Effective Time, each outstanding preferred share, no par value (the “TC Preferred Shares”), of TC shall be converted and exchanged into two and one-half (2.5) TC Common Shares.

(c)Options. TC shall take all requisite action so that, at the Effective Time, each option to acquire shares of TC Common Stock (each, a “TC Stock Option”) that is outstanding under any stock or equity incentive plan of TC immediately prior to the Effective Time, whether or not then vested or exercisable, shall be, by virtue of the Merger and without any action on the part of the holder thereof, cancelled and converted into the right to receive from PUB and the Surviving Entity, as promptly as reasonably practicable after the Effective Time, an amount in cash, without interest, equal to the product of: (i) the aggregate number of TC Common Shares subject to such TC Stock Option; multiplied by (ii) the excess, if any, of the Per Share Consideration over the per share exercise price under such TC Stock Option, less any Taxes required to be withheld in accordance with Section 2.7. For the avoidance of doubt, in the event that the per share exercise price under any TC Stock Option is equal to or greater than the Per Share Consideration, such TC Stock Option shall be cancelled as of the Effective Time without payment therefor and shall have no further force or effect.

2.3Cancellation of Old Shares. Each TC Common Share issued and outstanding immediately prior to the Effective Time is referred to as an “Old Share.” At the Effective Time, Old Shares to be canceled pursuant to Section 2.2(a) will cease to be outstanding, will be cancelled and retired and will cease to exist, and, subject to the rights of holders of Dissenting Shares, each holder of a certificate formerly representing Old Shares will thereafter cease to have any rights with respect to such shares, except the right to receive, without interest, upon exchange of such Old Shares in accordance with Section 2.7, the Per Share Consideration applicable to such Old Shares.

2.4Excess TC Closing Capital Payment. To the extent there is Excess TC Closing Capital, PUB will pay to each holder of TC Common Shares who is a holder of TC Common Shares immediately prior to the Closing (after taking into account the conversions, exercises and payments described in Section 2.2(b) and Section 2.2(c)), on a pro rata basis, additional cash consideration equal to such Excess TC Closing Capital (the “Excess TC Closing Capital Payment”). The Excess TC Closing Capital Payment will be paid as set forth in Section 2.6.

2.5Determination of Purchase Price and Closing Capital . No later than the seventh (7th) Business Day before Closing, TC shall calculate in good faith the estimated Total Purchase Price and TC Closing Capital and shall provide PUB with a copy of the proposed TC financial statements for the month preceding the date of calculation (if not already provided in accordance with Section 6.3), together with internally prepared financial statements through the date of calculation, the impact of any pending adjustments required in the calculation of the TC Closing Capital, and any other documentation requested by PUB for purposes of confirming the amount of such Total Purchase Price and TC Closing Capital (including detail on the TC Transaction Expenses and TC Classified Asset and Nonaccrual Adjustment). PUB shall review such materials and, within two (2) Business Days following receipt thereof, notify TC as to whether PUB accepts or disputes the amount of the Total Purchase Price and TC Closing Capital. If PUB disputes such calculation, it shall describe in its notice the specific changes or adjustments that must be made. If PUB and TC are unable to resolve such dispute through good faith negotiations within three (3) Business Days after delivery of PUB’s notice of objection, then the Effective Time shall be postponed and the parties shall mutually engage and submit such dispute to, and the same shall be finally resolved by, an accounting firm that is mutually and reasonably acceptable to the parties (the “Independent Accountants”). The Independent Accountants shall determine and report in writing to PUB and TC the resolution of such disputed matters and the effect of such determinations on the calculation of the TC Closing Capital, and such determinations, as may be adjusted to reflect the delay in the Effective Time, if applicable, shall be final, binding and conclusive unless PUB and TC mutually agree upon a different amount. The fees and disbursements of the Independent Accountants shall be shared equally by PUB, on the one hand, and TC, on the other hand, and with respect to TC’s portion, shall be deducted from the TC Closing Capital. For purposes of this Agreement, “Business Day” shall mean any day other than Saturday, Sunday or a day on which banks in the state of Utah are required or permitted to be closed under federal or state law.

(a)At or before the Effective Time, PUB will make available or cause to be made available to an exchange agent appointed by PUB and reasonably acceptable to TC (the “Exchange Agent”) (i) a sufficient number of PUB Common Shares to be issued by book-entry transfer (each, a “New Share”), representing the PUB Common Shares issuable pursuant to Section 2.2(a) and (ii) cash to make the payments pursuant to Section 2.2(a) in each case, in amounts sufficient to allow the Exchange Agent to make all deliveries of New Shares and payments that may be required in exchange for Old Shares pursuant to this Article 2 (collectively, the “Exchange Fund”). For the avoidance of doubt, the Escrow Amount is a part of the Total Purchase Price even though such amount will not initially be paid at Closing and will not be paid to the Exchange Agent. Any portion of the Exchange Fund that remains unclaimed by the shareholders of TC for twelve (12) months after the Effective Time shall, to the extent permitted by applicable law, be paid to PUB or as directed by PUB. In such event, any holder of Old Shares that has not theretofore exchanged its Old Shares for the Per Share Consideration pursuant to this Article 2 will thereafter be entitled to look exclusively to PUB for the Per Share Consideration to which he or she may be entitled upon exchange of such Old Shares pursuant to this Article 2, in each case, without any interest thereon. Notwithstanding the foregoing, neither the Exchange Agent nor any party will be liable to any holder of Old Shares for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.

(b)As promptly as reasonably practicable following the time of mailing of a Proxy Statement to the holders of record of TC Common Shares, or on such other date as TC, PUB and PIB shall mutually agree, and thereafter from time to time as TC may reasonably request, PUB will cause the Exchange Agent to mail or deliver to each person who is a holder of record of TC Common Shares for purposes of the TC Shareholder Meeting a form of letter of transmittal (which will specify that delivery will be effected, and risk of loss and title to Old Shares will pass, only upon proper delivery of such certificates to the Exchange Agent) containing instructions for use in effecting the surrender of Old Shares in exchange for the consideration to which such person may be entitled pursuant to this Article 2.

(c)As promptly as reasonably practicable following the Effective Time, taking into account the computations contemplated by Section 2.7, each holder of record of Old Shares that has surrendered its Old Shares, together with a letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, will be entitled to receive New Shares representing the PUB Common Shares issuable in exchange therefor and a check representing cash payable pursuant to this Article 2. No interest will accrue or be paid with respect to any New Shares or cash to be delivered upon surrender of Old Shares. If any New Shares are to be issued or cash is to be paid in a name other than that in which the Old Shares surrendered in exchange therefor is registered, it will be a condition to the exchange that the Old Shares so surrendered shall be properly endorsed (or accompanied by an appropriate instrument of transfer) and otherwise in proper form for transfer and that the person requesting the exchange (x) pay any transfer or other Taxes required by reason of the issuance of the New Shares or the making of the cash payment in a name other than the name of the holder of the surrendered Old Shares or (y) establish to the satisfaction of PUB (or the Exchange Agent, as the case may be) that any such Taxes have been paid or are not applicable.

(d)No dividends or other distributions with respect to PUB Common Shares having a record date after the Effective Time will be paid to any holder of record of TC Common Shares until such holder has surrendered the Old Shares. Following surrender of any such Old Shares, there will be paid to the holder of New Shares issued in exchange therefor, without interest, the amount of dividends or other distributions with a record date after the Effective Time previously payable with respect to the PUB Common Shares represented thereby. To the extent permitted by law, holders of TC Common Shares who receive PUB Common Shares in the Merger will be entitled to vote after the Effective Time at any meeting of PUB shareholders the number of whole PUB Common Shares into which their respective TC Common Shares are converted, regardless of whether such holders have exchanged their Old Shares for New Shares in accordance with the provisions of this Agreement but, beginning 30 days after the Effective Time, no such holder will be entitled to vote on any matter until such holder surrenders such Old Shares for exchange as provided in this Section 2.6.

(e)At or after the Effective Time, there will be no transfers of Old Shares on the stock transfer books of the Surviving Entity.

(f)If any Old Shares will have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Old Shares to be lost, stolen or destroyed and, if required by PUB or the Exchange Agent, the posting by such person of a bond or an indemnity in such reasonable amount as PUB or the Exchange Agent may direct as indemnity against any claim that may be made against it with respect to such Old Shares, PUB or the Exchange Agent will, in exchange for such lost, stolen or destroyed Old Shares, issue or cause to be issued New Shares and pay or cause to be paid the amounts deliverable in respect of the Old Shares formerly represented by such Old Shares pursuant to this Article 2.

2.7Withholding Rights . Each of PUB and the Exchange Agent will be entitled to deduct and withhold from the consideration otherwise payable to any person pursuant to this Agreement such amounts as they are required to deduct and withhold with respect to such payment under the Code and the rules and regulations promulgated thereunder, or any provision of state, local or foreign Tax law. To the extent that amounts are so deducted or withheld by PUB or the Exchange Agent, as the case may be, such withheld amounts will be treated for all purposes of this Agreement as having been paid to the person in respect of which such deduction and withholding was made.

2.8Fractional Shares. Notwithstanding any other provision of this Article 2, no fractional PUB Common Shares will be issued pursuant to the Merger. Instead, PUB will pay or cause to be paid to the holder of any Old Shares that would, pursuant to Section 2.3, otherwise be entitled to receive fractional PUB Common Shares an amount in cash, rounded to the nearest cent and without interest, equal to the product of (x) the fraction of a share to which such holder would otherwise have been entitled (after taking into account all Old Shares owned by such holder at the Effective Time to be converted into PUB Common Shares) and (y) the PUB Share Price.

(a)Prior to the Effective Time, PUB and the Shareholders’ Representative shall enter into the Escrow Agreement with, a bank or trust company mutually acceptable to PUB and Shareholders’ Representative, to act as escrow agent hereunder (the “Escrow Agent”). At the Effective Time, PUB shall defer payment of the Escrow Amount and deliver such Escrow Amount to the Escrow Agent to be released as described in Article 9 and in the Escrow Agreement.

(b)At the end of the period that is eighteen months from the Closing Date (the “Survival Period”),

(i)if there have been no indemnification payments to or claims made by PUB Indemnified Person(s) in accordance with Article 9, the Escrow Agent shall release to the Shareholders’ Representative the Escrow Amount; or

(ii)if there have been indemnification payments to or claims made by PUB Indemnified Person(s) in accordance with Article 9, then the Escrow Agent shall release to the Shareholders’ Representative the Escrow Amount less the amount of any such indemnification payments or pending claims.

(c)Within five days following the resolution and payment of any indemnification claims that were pending at the end of the Survival Period, the Escrow Agent shall release to the Shareholders’ Representative such remaining amount from the Escrow Amount.

(d)On receiving any distribution with respect to the Escrow Amount pursuant to the above provisions, the Shareholders’ Representative shall distribute to each holder of TC Common Shares that has delivered all of the materials required by Section 2.6 and is thus entitled to receive PUB Common Shares and cash in connection with the Merger an amount equal to the product of (a) the amount of the Escrow Amount to be delivered at such time in accordance with Article 9 to the Shareholders’ Representative, multiplied by (b) the quotient obtained by dividing (i) the total number of shares of TC Common Shares held by such holder immediately prior to the Closing by (ii) the total number of TC Common Shares held by all shareholders that were outstanding immediately prior to the Closing. Any portion of the Escrow Amount delivered to the Shareholders’ Representative that is not delivered to the shareholders of TC pursuant to the prior sentence shall be delivered to PUB and shall be treated in the same manner as portions of the Exchange Fund that remain unclaimed by the shareholders of TC under Section 2.6.

2.10Dissenting Shares. If, in connection with the Merger, holders of TC Common Shares shall have demanded and perfected dissenters’ rights pursuant to Part 13 of the Utah Act (“Dissenting Shares”), none of such Dissenting Shares shall be converted into a right to receive a portion of the Total Purchase Price or any other amount deliverable with respect to such TC Common Shares in accordance with Article 2, but shall be converted into the right to receive such consideration as may be determined to be due with respect to such Dissenting Shares pursuant to the Utah Act. Each holder of Dissenting Shares who, pursuant to the provisions of the Utah Act, becomes entitled to payment of the fair value of such shares shall receive payment from PUB therefor in accordance with the Utah Act. In the event that any TC shareholder fails to make an effective demand for payment or fails to perfect its dissenters’ rights as to its TC Common Shares or any Dissenting Shares shall otherwise lose their status as Dissenting Shares, then any such shares shall immediately be converted into the right to receive the consideration issuable pursuant to Article 2 in respect of such shares as if such shares had never been Dissenting Shares, and PUB shall issue and deliver to the holder thereof, at (or as promptly as reasonably practicable after) the applicable time or times specified in Section 2.6, following the satisfaction of the applicable conditions set forth in Section 2.6, the amount of the Per Share Consideration and any other amounts, to which such TC shareholders would have been entitled under Section 2.2(a) with respect to such shares. TC shall give PUB (i) prompt notice of any demand received by TC for appraisal of TC Common Shares or notice of intent to exercise a TC shareholder’s dissenters’ rights in accordance with the Utah Act, as the case may be, and (ii) the opportunity to direct all negotiations and proceedings that take place after the Closing, with respect to demands for dissenters’ rights under such law. TC agrees that, except with PUB’s prior written consent, it shall not voluntarily make any payment or offer to make any payment with respect to, or settle or offer to settle, any such demand for appraisal or exercise of dissenters’ rights.

3.1Organization and Qualification. PUB is a corporation duly organized, validly existing and in good standing under the laws of the State of Utah, and has the requisite corporate power to carry on its business as now conducted. PUB is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act”). PIB is a validly existing Utah chartered state bank, is in good standing under the laws of the States of Utah and Idaho, and has the requisite corporate power to carry on its business as now conducted. Each of PUB and PIB is licensed or qualified to do business in every jurisdiction in which the nature of its business or its ownership of property requires it to be licensed or qualified, except where the failure to be so licensed or qualified would not have or would not reasonably be expected to have a material adverse effect on the business, operations or financial condition of PUB and PIB, taken as a whole.

(a)PUB and PIB each have the requisite corporate power and authority to enter into this Agreement, the Support Agreement, and the Escrow Agreement (the “Transaction Documents”) and to carry out their respective obligations hereunder. The execution and delivery of the Transaction Documents by PUB and PIB and the consummation by PUB and PIB of the transactions contemplated thereby have been duly authorized by the Board of Directors of PUB and PIB, and no other corporate proceedings on the part of PUB or PIB are necessary to authorize the Transaction Documents, the Merger and such transactions. The Transaction Documents have been duly executed and delivered by PUB and PIB and constitute valid and binding obligation of PUB and PIB, enforceable in accordance with their terms. Neither PUB nor PIB are subject to, or obligated under, any provision of (i) its Charter (as hereinafter defined) or Bylaws, (ii) any agreement, arrangement or understanding, (iii) any license, franchise or permit or (iv) subject to obtaining the approvals referred to in the next sentence, any law, regulation, order, judgment or decree, which would be breached or violated, or in respect of which a right of termination or acceleration or any encumbrance on any of its assets would be created, by its execution, delivery or performance of this Agreement or the consummation by it of the transactions contemplated hereby, other than any such breaches or violations which will not, individually or in the aggregate, have a material adverse effect on the business, operations or financial condition of PUB and PIB, taken as a whole, or the consummation of the transactions contemplated hereby.

(b)Other than in connection with (i) obtaining any approvals, as required, from the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (“FDIC”), the United States Small Business Administration (“SBA”) or from the Utah Department of Financial Institutions; (ii) obtaining approvals from the Utah Division of Securities (the process through which such approval is received being referred to herein as the “Fairness Hearing”) to issue the PUB Common Shares under the Securities Act of 1933, as amended, and the rules and regulations

thereunder (the “1933 Act”) (or to file a Form S-4 registration statement), requirements under other applicable state securities or blue sky laws, and the rules and regulations thereunder, and the rules of The Nasdaq Stock Market LLC (such approvals and filings identified in (i) and (ii) hereafter collectively referred to as the “Regulatory Approvals”); and (iii) the filing with respect to the Merger of articles of merger with the Division of Corporations, no authorization, consent or approval of, or filing with, any public body, court or authority is necessary on the part of PUB or PIB for the consummation by PUB and PIB of the transactions contemplated by this Agreement, except for such authorizations, consents, approvals and filings as to which the failure to obtain or make would not, individually or in the aggregate, have a material adverse effect on the business, operations or financial condition of PUB and PIB, taken as a whole, or the consummation of the transactions contemplated hereby. As used in this Agreement, the term “Charter” with respect to any corporation shall mean those instruments that at that time constitute its charter as filed or recorded under the general corporation or other applicable law of the jurisdiction of incorporation, including the articles of incorporation, any amendments thereto and any articles of merger or consolidation.

3.3Validity of PUB Common Shares. The PUB Common Shares to be issued pursuant to this Agreement will be, when issued, duly authorized, validly issued, fully paid and nonassessable and free and clear of any lien, pledge, security interest, encumbrance or charge of any kind, and not subject to any pre-emptive rights.

3.4Capitalization. The authorized capital shares of PUB consist of 30,000,000 PUB Common Shares, par value $0.01 per share, and 3,000,000 preferred shares, par value $0.01 per share. As of April 30, 2017, (a) 17,928,325 PUB Common Shares were issued and outstanding and 437,508 PUB Common Shares were reserved for issuance pursuant to PUB’s employee stock option, incentive, and employee stock purchase plans; and (b) no preferred shares were issued and outstanding.

3.5SEC Filings and Financial Statements. As of their respective filing dates (or, if amended or superseded by a subsequent filing, as of the date of the last such amendment or superseding filing prior to the date hereof), each of PUB’s filings with the Securities and Exchange Commission (the “SEC”) since January 1, 2016 (the “PUB SEC Documents”) complied as to form in all material respects with the applicable requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations of the SEC thereunder applicable to such PUB SEC Documents. None of the PUB SEC Documents, including any financial statements, schedules or exhibits included or incorporated by reference therein at the time they were filed (or, if amended or superseded by a subsequent filing, as of the date of the last such amendment or superseding filing prior to the date hereof), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. To the knowledge of PUB, none of the PUB SEC Documents is the subject of ongoing SEC review or outstanding SEC investigation and there are no outstanding or unresolved comments received from the SEC with respect to any of the PUB SEC Documents. Each of the consolidated financial statements (including, in each case, any notes and schedules thereto) contained in or incorporated by reference into the PUB SEC Documents: (i) complied as to form in all material respects with the published rules and regulations of the

SEC with respect thereto as of their respective dates; (ii) was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto and, in the case of unaudited interim financial statements, as may be permitted by the SEC for Quarterly Reports on Form 10-Q); and (iii) fairly presented in all material respects the consolidated financial position and the results of operations, changes in shareholders’ equity, and cash flows of PUB and its consolidated subsidiaries as of the respective dates of and for the periods referred to in such financial statements, subject, in the case of unaudited interim financial statements, to normal and year-end audit adjustments as permitted by GAAP and the applicable rules and regulations of the SEC (but only if the effect of such adjustments would not, individually or in the aggregate, be material).

3.6No Material Adverse Change. Since the date of the most recently filed PUB SEC Documents, there has been no material adverse change in, and no event, occurrence or development in the business of PUB that, taken together with other events, occurrences and developments with respect to such business, has had, or would reasonably be expected to have, a material adverse effect on the business, operations or financial condition of PUB or the ability of PUB to consummate the transactions contemplated hereby; provided, however, that a material adverse change or a material adverse effect shall not be deemed to include the impact of (a) any changes, conditions or effects in the United States economy or securities or financial markets in general (so long as PUB is not disproportionately affected thereby); (b) changes, conditions or effects that generally affect the banking industry, (so long as PUB is not disproportionately affected thereby), including changes in laws or interpretations thereof by courts or governmental authorities and (c) changes in GAAP or regulatory accounting requirements applicable to banks generally.

3.7Litigation. Except as disclosed in the PUB SEC Documents, there are no actions, suits, proceedings, orders or investigations pending or, to the knowledge of PUB, threatened against PUB or PIB, at law or in equity, or before or by any federal, state or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that arise to the level required to be disclosed in the PUB SEC Documents. To the knowledge of PUB, there are no SEC inquiries or investigations, other governmental inquiries or investigations, or internal investigations pending or threatened, in each case regarding any accounting practices of PUB or any of its subsidiaries or any malfeasance by any officer or director of PUB.

3.8Compliance with Laws; Permits. PUB has complied in all respects with all applicable laws and regulations of foreign, federal, state and local governments and all agencies thereof which affect the business or any owned or leased properties of PUB and to which PUB may be subject, except where the failure to so comply would not, individually or in the aggregate, have a material adverse effect on the business, operations or financial condition of PUB or PUB’s ability to consummate the transactions contemplated hereby; and no claims have been filed by any such governments or agencies against PUB alleging such a violation of any such law or regulation which have not been resolved to the satisfaction of such governments or agencies. PUB holds all of the permits, licenses, certificates and other authorizations of foreign, federal, state and local governmental agencies required for the conduct of its business, except where failure to obtain such authorizations would not, individually or in the aggregate, have a material adverse effect on the business, operations or financial condition of PUB, or the ability of

PUB to consummate the transactions contemplated hereby. PUB is not subject to any cease and desist order, written agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or is a recipient of any extraordinary supervisory agreement letter from, or has adopted any board resolutions at the request of Bank Regulators, nor has PUB been advised by any Bank Regulator that it is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, directive, written agreement, memorandum of understanding, extraordinary supervisory letter, commitment letter, board resolutions or similar undertaking.

3.9Regulatory Approvals. As of the date hereof, PUB is not aware of any fact that would likely result in the Regulatory Approvals not being obtained.

3.10Intended Tax Treatment. Neither PUB nor PIB has taken or agreed to take any action, and to the knowledge of PUB there exists no fact or circumstance, that is reasonably likely to prevent or impede the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code.

3.11Fairness Hearing and Proxy Statement Information. None of the information supplied or to be supplied by or on behalf of PUB or PIB for inclusion or incorporation by reference in the application or any other materials provided to the Utah Division of Securities or the Securities and Exchange Commission will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. None of the information supplied or to be supplied by or on behalf of PUB or PIB for inclusion or incorporation by reference in the Proxy Statement will, at the date it is first mailed to the TC shareholders or at the time of the TC Shareholder Meeting or at the time of any amendment or supplement thereof, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, no representation or warranty is made by PUB or PIB with respect to statements made or incorporated by reference therein based on information that were not supplied by or on behalf of PUB or PIB.

4.1Organization and Qualification. TC is a Utah chartered state bank, validly existing and in good standing under the laws of the State of Utah and has the requisite corporate power to carry on its business as now conducted. The copies of the Charter and Bylaws, if applicable, of TC that have been provided to PUB and PIB prior to the date of this Agreement are correct and complete and reflect all amendments made thereto through the date hereof. TC is licensed or qualified to do business in every jurisdiction in which the nature of its business or its ownership of property requires it to be licensed or qualified, except where the failure to be so licensed or qualified would not have or would not reasonably be expected to have a material adverse effect on the business, operations or financial condition of TC.

(a)TC has the requisite corporate power and authority to enter into the Transaction Documents and to carry out its obligations hereunder. The execution and delivery of the Transaction Documents by TC and the consummation by TC of the transactions contemplated thereby have been duly authorized by the Board of Directors of TC and, other than the approval of the Merger by shareholders of TC (the “Required TC Shareholder Vote”), no other corporate proceedings on the part of TC are necessary to authorize the Transaction Documents, the Merger and the transactions contemplated in this Agreement. Each of the Transaction Documents has been duly executed and delivered by TC and constitutes a valid and binding obligation of TC, enforceable in accordance with its terms. TC is not subject to, or obligated under, any provision of (i) its Charter or Bylaws, (ii) any agreement, arrangement or understanding, (iii) any license, franchise or permit or (iv) subject to obtaining the approvals referred to in Section 4.2(b), any law, regulation, order, judgment or decree, which would be breached or violated, or in respect of which a right of termination or acceleration or any encumbrance on any of its assets would be created, by the execution, delivery or performance of this Agreement, or the consummation of the transactions contemplated hereby, other than any such breaches or violations which will not, individually or in the aggregate, have a material adverse effect on the business, operations or financial condition of TC or the consummation of the transactions contemplated hereby.

(b)Other than the Regulatory Approvals, the Required Consents, and the filing of articles of merger with the Division of Corporations, no authorization, consent or approval of, or filing with, any public body, court or authority is necessary on the part of TC for the consummation by TC of the transactions contemplated by this Agreement, except for such authorizations, consents, approvals and filings as to which the failure to obtain or make would not, individually or in the aggregate, have a material adverse effect on the business, operations or financial condition of TC or the consummation of the transactions contemplated hereby.

4.3Capitalization. The authorized, issued and outstanding capital shares of TC as of the date hereof is set forth on Schedule 4.3. Except as set forth on Schedule 4.3, the issued and outstanding capital shares of TC are duly authorized, validly issued, fully paid and nonassessable and have not been issued in violation of any preemptive rights. Other than as set forth on Schedule 4.3, there are no options, warrants, conversion privileges or other rights, agreements, arrangements or commitments obligating TC to issue, sell, purchase or redeem any of its capital shares or securities or obligations of any kind convertible into or exchangeable for any of their capital shares or of any of their subsidiaries or affiliates, nor are there any stock appreciation, phantom or similar rights outstanding based upon the book value or any other attribute of any of the capital shares of TC, or the earnings or other attributes of TC.

4.4Financial Statements. TC has or within ten (10) Business Days following the date of this Agreement will have furnished PUB and PIB with copies of the audited balance sheets of TC as of December 31, 2014, 2015 and 2016 and the related statements of operations, changes in shareholders’ equity and cash flows for the years then ended (collectively, together with any notes thereto, the “TC Annual Financial Statements”). TC has or within ten

(10) Business Days following the date of this Agreement will have furnished PUB with copies of the unaudited balance sheets of TC as of March 31, 2017 and 2016, and the related statements of operations and changes in shareholders’ equity for the three-month periods then ended. The balance sheet of TC as of March 31, 2017 is herein referred to as the “Latest TC Balance Sheet,” and the related statement of income, shareholders’ equity and cash flows for the three-month period then ended are herein referred to as the “Related TC Statements.” The TC Annual Financial Statements, the Latest TC Balance Sheet and the Related TC Statements are collectively referred to as the “TC Financial Statements.” The TC Financial Statements are based upon the books and records of TC and have been prepared in accordance with GAAP applied on a consistent basis during the periods involved. The Latest TC Balance Sheet and the Related TC Statements have been reviewed by TC’s outside accountants and reflect any material changes identified by TC’s outside accountants during such review. The TC Financial Statements fairly present the financial position of TC as of the dates thereof and the results of operations and, as applicable, changes in shareholders’ equity and cash flows for the periods then ended.

(a)The documentation relating to each loan made by TC and relating to all security interests, mortgages and other liens with respect to all collateral for each such loan are adequate for the enforcement of the material terms of each such loan and of the related security interests, mortgages and other liens. The terms of each such loan and of the related security interests, mortgages and other liens comply in all material respects with all applicable laws, rules and regulations (including, without limitation, laws, rules and regulations relating to the extension of credit).

(b)Schedule 4.5(b) identifies concentrations in TC loans by setting forth (i) all standard industry classification codes that make up 10% or more of all outstanding TC loans and (ii) the percentage of TC loans for such standard industry classification codes.

(c)Except as set forth on Schedule 4.5(c), each loan made by TC was issued in accordance with TC’s internal grading system and the requirements of any governmental entity or agency, including without limitation the United States Department of Agriculture (“USDA”) and SBA. The internal loan grading system used by TC to evaluate each loan is accurate and conforms to standard industry practices. Nothing has come to the attention of TC that would cause it to believe that at the time of issuance any of its outstanding loans should have received a lower loan grade under its internal grading system.

(d)Except as set forth on Schedule 4.5(d), there are no loans, leases, other extensions of credit or commitments to extend credit of TC that have been or, to the knowledge of TC, should have been classified by TC (based upon historical practices) as non-accrual, as restructured, as 90 days past due, as still accruing and doubtful of collection or any comparable classification. TC has made proper allowance for loan and lease loss reserves on the Latest TC Balance Sheet for each of its loans, including those set forth on Schedule 4.5(d). In response to a request for information by PUB and PIB, TC has provided to PUB and PIB written information concerning the loan portfolios of TC that is true, correct and complete in all material respects, and no material information with respect to the loan portfolios of TC has been withheld from PUB or PIB.

(e)TC has serviced each of its outstanding loans and loans sold to third parties in compliance with its internal policies, all contractual obligations and all regulatory requirements. There are no outstanding claims or complaints against TC related to the servicing of outstanding loans.

(f)TC is not, and from any time since January 1, 2014 has not been, subject to any fine, suspension, or settlement or other administrative agreement or sanction by, any governmental entity or agency relating to the origination, sale or servicing of mortgage, USDA, SBA or consumer loans. TC has not received any written notice that any governmental agency, including without limitation the SBA and USDA, proposes to limit or terminate the underwriting authority of TC or to increase the guarantee fees payable to any such governmental entity or agency.

4.6Loan Guarantees. As to each loan that is secured, whether in whole or in part, by a guaranty of the SBA, USDA or any other governmental authority, such guaranty is in full force and effect, and will remain in full force and effect following the Closing Date, in each case, without any further action by TC subject to the fulfillment of its obligations under its Small Business Administration agreement that arise after the date hereof. None of the SBA, USDA or any other governmental entity has ever refused to guarantee any SBA, USDA or other governmental entity loan, as the case may be, issued by TC, and to TC’s knowledge, TC has no reason to believe that the SBA, USDA or any governmental entity will refuse to guarantee such loans in the future. No third-party that has purchased from TC a guaranteed loan has required TC to buy back such guaranteed loan.

4.7Reports and Filings. Since January 1, 2014, TC has filed each report or other filing that it was required to file with any federal or state banking or other applicable regulatory authorities having jurisdiction over it, including the FDIC and the Utah Department of Financial Institutions (together with all exhibits thereto, the “TC Regulatory Reports”). TC has provided or made available to PUB and PIB copies of all TC Regulatory Reports. As of their respective dates or as subsequently amended prior to the date hereof, each of the TC Regulatory Reports was true and correct and complied in all material respects with applicable laws, rules and regulations.

4.8Subsidiaries. TC does not own any shares, partnership interest, joint venture interest or any other security issued by any other corporation, organization or entity.

4.9Absence of Undisclosed Liabilities. All of the obligations or liabilities (whether accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due, and regardless of when asserted, including Taxes) with respect to or based upon transactions or events heretofore occurring (“Liabilities”) required to be reflected on the Latest TC Balance Sheet in accordance with GAAP have been so reflected. TC does not have any Liabilities except (a) as reflected on the Latest TC Balance Sheet, (b) Liabilities which have arisen after the date of the Latest TC Balance Sheet in an amount not in excess of $50,000, or (c) as otherwise disclosed on Schedule 4.9. Except as set forth on Schedule 4.9, between March 31, 2017 and ending on the date hereof, no agreements or commitments have been entered into that are binding upon TC, to extend credit, in the amount per “one borrower” (as combined and aggregated as set forth in 12 C.F.R. §32.5), of $100,000 or more.

4.10Books and Records. The books of account of TC are complete and correct and have been maintained in accordance with sound business practices. Each transaction is properly and accurately recorded on the books and records of TC, and each document upon which entries in TC’s books and records are based is complete and accurate in all material respects. TC maintains a system of internal accounting controls adequate to insure that it maintains no off-the-books accounts and that its assets are used only in accordance with its management directives. The minute books and stock or equity records of TC, all of which have been made available to PUB and PIB, are complete and correct. The minute books of TC contain accurate records of all meetings held and actions taken by the holders of shares or equity interests, the boards of directors and committees of the boards of directors or other governing body of TC, and no meeting of any such holders, boards of directors or other governing body or committees has been held for which minutes are not contained in such minute books. At the Closing, all such books and records will be in the possession of TC.

4.11No Material Adverse Changes. Since the date of the Latest TC Balance Sheet, there has been no material adverse change in, and no event, occurrence or development in the business of TC that, taken together with other events, occurrences and developments with respect to such business, has had, or would reasonably be expected to have, a material adverse effect on the business, operations or financial condition of TC or the ability of TC to consummate the transactions contemplated hereby; provided, however, that a material adverse change or a material adverse effect shall not be deemed to include the impact of (a) any changes, conditions or effects in the United States economy or securities or financial markets in general (so long as TC is not disproportionately affected thereby); (b) changes, conditions or effects that generally affect the banking industry, (so long as TC is not disproportionately affected thereby), including changes in laws or interpretations thereof by courts or governmental authorities; (c) changes in GAAP or regulatory accounting requirements applicable to banks generally; and (d) the taking of any action contemplated by this Agreement or consented to in writing by PUB or PIB.

4.12Absence of Certain Developments. Except as contemplated by this Agreement or as set forth in the Latest TC Balance Sheet, the Related TC Statements or on Schedule 4.12, since March 31, 2017, TC has not:

(a)issued or sold any of its equity securities, securities convertible into or exchangeable for its equity securities, warrants, options or other rights to acquire its equity securities, or any bonds or other securities, except deposit and other bank obligations and investment securities in the ordinary course of business;

(b)redeemed, purchased, acquired or offered to acquire, directly or indirectly, any capital shares or other securities of TC;

(c)split, combined or reclassified any outstanding capital shares of TC or declared, set aside or paid any dividends or other distribution payable in cash, property or otherwise with respect to any capital shares of TC or other securities;

(d)borrowed any amount or incurred or become subject to any material liability, except liabilities and deposit obligations incurred in the ordinary course of business, but in no event has TC entered into any long-term borrowings with terms of greater than one year;

(e)discharged or satisfied any material lien or encumbrance on the properties or assets of TC or paid any material liability other than in the ordinary course of business;

(f)sold, assigned, transferred, mortgaged, pledged or subjected to any lien or other encumbrance any of the assets of TC, except (A) in the ordinary course of business, (B) liens and encumbrances for current property taxes not yet due and payable and (C) liens and encumbrances which do not materially affect the value of, or interfere with the past or future use or ability to convey, the property subject thereto or affected thereby;

(g)canceled any material debts or claims or waived any rights of material value, except in the ordinary course of business or upon payment in full;

(h)suffered any theft, damage, destruction or loss of or to any property or properties owned or used by it, whether or not covered by insurance, which would, individually or in the aggregate, have a material adverse effect on the business, operations or financial condition of TC;

(i)made or granted any bonus or any wage, salary or compensation increase or severance or termination payment to, or promoted, any director, officer, employee, group of employees or consultant, entered into any employment contract or hired any employee, in each case, other than in the ordinary course of business and consistent with past practice as such past practice has been disclosed to PUB and PIB;

(j)made or granted any increase in the benefits payable under any employee benefit plan or arrangement, amended or terminated any existing employee benefit plan or arrangement or adopted any new employee benefit plan or arrangement, except as required by law;

(k)made any single or group of related capital expenditures or commitment therefor in excess of $10,000 or entered into any lease or group of related leases with the same party which involves aggregate lease payments payable of more than $10,000 for any individual lease or involves more than $25,000 for any group of related leases in the aggregate;

(l)acquired (by merger, exchange, consolidation, acquisition of shares or assets or otherwise) any corporation, partnership, joint venture or other business organization or division or material assets thereof, or assets or deposits that are material to TC;

(m)taken any other action or entered into any other transaction other than in the ordinary course of business;

(n)made any change in its accounting methods or practices, other than changes required by law or regulation made in accordance with GAAP or regulatory accounting principles generally applicable to depository institutions such as TC, as the case may be; or

(a)Except as set forth on Schedule 4.13, TC does not own any real property or any “other real estate owned” assets (other than interests constituting security interests, mortgages, liens, or other interests in collateral securing loans made by TC).

(b)TC owns good and marketable title to all of the personal property, fixtures, furniture and equipment reflected on the Latest TC Balance Sheet or acquired since the date thereof, free and clear of any material charge, claim, community property interest, easement, covenant, condition, equitable interest, lien, option, pledge, security interest, right of first refusal or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership (collectively, an “Encumbrance”).

(c)Schedule 4.13 correctly sets forth a brief description, including the term, of each lease for real property to which TC is a party as lessee (the “Real Property”). The Real Property is subject to no ground lease, master lease, mortgage, deed of trust or other Encumbrance or interests that would entitle the holder thereof to interfere with or disturb use or enjoyment of the Real Property or the exercise by the lessee of its rights under such lease so long as the lessee is not in default under such lease

(d)Schedule 4.13 correctly sets forth a brief description, including the term, of each lease of personal property to which TC is a party as lessee.

(e)TC has delivered to PUB and PIB complete and accurate copies of each of the leases described on Schedule 4.13, and none of such leases has been modified in any material respect, except to the extent that such modifications are disclosed by the copies delivered to PUB and PIB. The leases described on Schedule 4.13 are in full force and effect in all material respects. TC has a valid and existing leasehold interest under each lease described on Schedule 4.13 for the term set forth therein. TC is not in default, and, to TC’s knowledge, none of the other parties to any of such leases is in default under the leases described on Schedule 4.13, and no circumstances exist which could result in such a default under any of such leases. TC has not received any notice of cancellation, and to TC’s knowledge there has been no breach or anticipated breach, by any other party to any lease described on Schedule 4.13.

(f)Each parcel of Real Property occupied as a branch office has access sufficient for the conduct of the business as conducted or as proposed to be conducted by TC on such parcel of Real Property to public roads and to all utilities, including electricity, sanitary and storm sewer, potable water, natural gas, telephone, fiber optic, and other utilities used in the operation of the business at that location. To TC’s

knowledge, the zoning for each parcel of Real Property permits the existing improvements and the continuation of the business being conducted thereon as a conforming use or legal nonconforming use. TC is not in violation of any applicable zoning ordinance or other Law relating to the Real Property, and TC has not received any notice of any such violation or the existence of any condemnation or other proceeding with respect to any of the Real Property. To TC’s knowledge, there are no improvements made or contemplated to be made by any governmental entity, the costs of which are to be assessed as assessments, special assessments, special Taxes or charges against any of the Real Property for which TC is responsible for such costs, and there are no present assessments, special assessments, special Taxes or charges.

(g)Except as set forth in Schedule 4.13, all of the buildings, fixtures, furniture and equipment necessary for the conduct of the business of TC are in good condition and repair, ordinary wear and tear excepted, and are usable in the ordinary course of business. TC owns, or leases under valid leases, all buildings, fixtures, furniture, personal property, land improvements and equipment necessary for the conduct of its business as it is presently being conducted.

4.14Environmental Matters. To TC’s knowledge, neither its conduct nor its operation nor any condition of any property presently or previously owned, leased or operated by any of them (including in a fiduciary or agency capacity), violates or violated Environmental Laws, and no condition has existed or event has occurred with respect to any of them or any such property that, with notice or the passage of time, or both, would be reasonably likely to result in liability under Environmental Laws. To TC’s knowledge, no property on which TC holds a lien is in material violation of any Environmental Laws and no condition exists or event has occurred with respect to any such property that, with notice or the passage of time, or both, is reasonably likely to result in material liability under Environmental Laws. TC has not received any written notice from any person that TC or the operation or condition of any property ever owned, leased, operated or held as collateral or in a fiduciary capacity by any of them are or were in violation of or otherwise are alleged to have liability under any Environmental Law, including responsibility (or potential responsibility) for the cleanup or other remediation of any pollutants, contaminants or hazardous or toxic wastes, substances or materials at, on, beneath or originating from any such property. “Environmental Laws” means: all applicable local, state and federal environmental, health and safety laws and regulations, including the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation, and Liability Act, the Clean Water Act, the Clean Air Act and the Occupational Safety and Health Act; regulations promulgated thereunder; and state counterparts to the foregoing.

4.15Tax Matters. TC, and all members of any consolidated, affiliated, combined or unitary group of which TC is a member have timely filed all Tax (as hereinafter defined) and Tax information returns or reports required to be filed (taking into account permissible extensions) by them, and have paid (or have accrued or will accrue, prior to the Effective Time, amounts for the payment of) all Taxes relating to the time periods covered by such returns and reports. The accrued taxes payable accounts for Taxes reflected on the Latest TC Balance Sheet (or the notes thereto) are sufficient for the payment of all unpaid Taxes of TC accrued for or applicable to all periods ended on or prior to the date of the Latest TC Balance Sheet or which may subsequently be determined to be owing with respect to any such period. TC has not

waived any statute of limitations with respect to Taxes or agreed to any extension of time with respect to an assessment or deficiency for Taxes. TC has paid or will pay in a timely manner and as required by law all Taxes due and payable by it or which it is obligated to withhold from amounts owing to any employee or third party. All Taxes which will be due and payable, whether now or hereafter, for any period ending on, prior to or including the Effective Time, shall have been paid by or on behalf of TC or shall be reflected on the books of TC as an accrued Tax liability determined in a manner which is consistent with past practices and the Latest TC Balance Sheet, without taking into account the Merger. In the five years prior to the date of this Agreement, no Tax returns of TC have been audited by any governmental authority; and there are no unresolved questions, claims or disputes asserted by any relevant taxing authority concerning the liability for Taxes of TC. TC has not made an election under Section 341(f) of the Code for any taxable years not yet closed for statute of limitations purposes. In the five years prior to the date of this Agreement, no demand or claim has been made against TC with respect to any Taxes arising out of membership or participation in any consolidated, affiliated, combined or unitary group of which TC was at any time a member. The tax identification number for TC is set forth on Schedule 4.15. For purposes of this Agreement, the term “Tax” shall mean any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, property or windfall profits tax, environmental tax, customs duty, capital shares, deposits, franchise, employees’ income withholding, foreign or domestic withholding, social security, unemployment, disability, workers’ compensation, employment-related insurance, real property, personal property, sales, use, transfer, value added, alternative or add-on minimum or other tax, fee, assessment or charge of any kind whatsoever, including any interest, penalties or additions to, or additional amounts in respect of the foregoing. TC has not taken or agreed to take any action, and to the knowledge of TC there exists no fact or circumstance, that is reasonably likely to prevent or impede the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code.

(a)Except as set forth on Schedule 4.16(a), TC (i) is not party to any collective bargaining agreement or contract with any labor union, (ii) is not party to any written or oral contract relating to any consulting services or to severance pay for any person, (iii) is not party to any written or oral agreement or understanding to repurchase assets previously sold (or to indemnify or otherwise compensate PUB or PIB in respect of such assets), (iv) is not party to any (A) contract or group of related contracts with the same party for the purchase or sale of products or services, under which the undelivered balance of such products and services has a purchase price in excess of $10,000 for any individual contract or $25,000 for any group of related contracts in the aggregate, (B) other contract or group of related contracts with the same party continuing over a period of more than six months from the date or dates thereof, which is not entered into in the ordinary course of business and is either not terminable by it on 30 days’ or less notice without penalty or involves more than $10,000 for any individual contract or $25,000 in the aggregate for any group of related contracts, (C) contract, agreement, arrangement or understanding that restricts its ability to engage in any and all activities permissible under applicable laws and regulations, or (D) other agreement material to the business of TC, which is not entered into in the ordinary course of business, or (v) does not have any commitments for capital expenditures in excess of $10,000.

(b)Except as disclosed on Schedule 4.16(b), (i) since the date of the Latest TC Balance Sheet, no customer has indicated in writing addressed to a branch manager of TC or any other TC Employee with greater authority that it will stop or decrease the rate of business done with TC (except for changes in the ordinary course of such business) where the loss of such customer or the decrease in business would, individually or in the aggregate, have a material adverse effect on the business, operations or financial condition of TC; (ii) TC has performed all obligations required to be performed by it prior to the date hereof in connection with the contracts or commitments set forth on Schedule 4.16(a), and TC is not in receipt of any claim of default under any contract or commitment set forth on Schedule 4.16(a), except for any failures to perform, breaches or defaults which would not, individually or in the aggregate, have a material adverse effect on the business, operations or financial condition of TC; (iii) TC has not any present expectation or intention of not fully performing any material obligation pursuant to any contract or commitment set forth on Schedule 4.16(a); and (iv) to the knowledge of TC, there has been no cancellation, breach or anticipated breach by any other party to any contract or commitment set forth on Schedule 4.16(a), except for any cancellation, breach or anticipated breach which would not, individually or in the aggregate, have a material adverse effect on the business, operations or financial condition of TC.

4.17Litigation. Except as set forth on Schedule 4.17, there are no actions, suits, proceedings, orders or investigations pending or, to the knowledge of TC, threatened against TC, at law or in equity, or before or by any federal, state or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign. None of the matters set forth on Schedule 4.17, individually or in the aggregate, will have or could reasonably be expected to have a material adverse effect on the business, operations or financial condition of TC.

4.18Brokers and Finders. Except as provided in the letter agreement effective between TC and Sheshunoff & Co., there are no claims or basis for any claims for brokerage commissions, finders’ fees, investment advisory fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement, understanding, commitment or agreement made by or on behalf of TC.

4.19Employees. TC is not a party to or is bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization; nor are they the subject of a proceeding asserting that they have committed an unfair labor practice (within the meaning of the National Labor Relations Act of 1935) or seeking to compel it or any of its subsidiaries to bargain with any labor organization as to wages or conditions of employment, nor, to TC’s knowledge, is any such proceeding threatened; nor is there any strike or other material labor dispute involving it or any of its subsidiaries pending or, to its knowledge, threatened; nor, to its knowledge, is there any activity involving Employees seeking to certify a collective bargaining unit or engaging in other organizational activity. TC is in material compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment, wages, hours of work and occupational safety and health, except where the failure to comply therewith, individually or in the aggregate, has not and would not reasonably be expected to adversely interfere in any material respect with the conduct of its or any of its subsidiaries’ business.

(a)All benefit, employment, severance, change in control, bonus and other compensation and benefits plans, contracts, agreements, policies or arrangements under which TC’s current or former employees (“Employees”), directors, officers, independent contractors or consultants have any rights, including “employee benefit plans” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974 (“ERISA”), and supplemental pension and executive retirement, non-qualified deferred compensation, rabbi trust, stock option, stock purchase, stock appreciation, stock-based, incentive and bonus plans and agreements (“Benefit Plans”) have been previously provided to PUB, and Schedule 4.20(a) provides a list of all such Benefit Plans. Copies of all Benefit Plans and, as applicable, all amendments thereto, all summary plan descriptions, the most recently filed Form 5500, the most recent IRS determination or opinion letter, and the most recent actuarial valuation reports have all been made available to PUB and PIB.

(b)Except as set forth on Schedule 4.20(b), and except as would not be expected to result, individually or in the aggregate, in a material liability to TC, all Benefit Plans have been maintained and operated according to the terms thereof and the applicable requirements of ERISA, the Internal Revenue Code and other applicable laws. Each Benefit Plan that is intended to be qualified under Section 401(a) of the Internal Revenue Code has received a favorable determination or opinion letter from the Internal Revenue Service (the “IRS”), and TC is not aware of any circumstances that are reasonably likely to result in the loss of the qualification of such plan under Section 401(a) of the Internal Revenue Code.

(c)Neither TC nor any entity that is considered one employer with TC under Section 4001 of ERISA or Section 414 of the Internal Revenue Code maintains or contributes to or has maintained or contributed to within the past six (6) years an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA that is subject to Title IV of ERISA or that is a “multiemployer plan” within the meaning of Section 3(37) of ERISA.

(d)All material contributions required to be made under each Benefit Plan that is an “employee benefit plan” within the meaning of Section 3(3) of ERISA have been timely made, and all obligations to make contributions in respect of each Benefit Plan have been properly accrued and reflected in the regulatory filings as of the date of such filings.

4.21Insurance. Schedule 4.21 hereto lists each insurance policy maintained by TC with respect to its properties and assets, as well as all policies covering directors and officers of TC. Prior to the date hereof, TC has delivered to PUB and PIB complete and accurate copies of each of the insurance policies described on Schedule 4.21. All such insurance policies are in full force and effect, and TC is not in default with respect to its material obligations under any of such insurance policies.

4.22Affiliate Transactions. Except as set forth on Section 4.22 of the Disclosure Schedules, neither TC nor any of its respective executive officers or directors, or any member of the immediate family of any such executive officer or director (which for the purposes hereof shall mean a spouse, minor child or adult child living at the home of any such executive officer or director), or any entity which any of such persons “controls” (within the meaning of Regulation O of the FRB), has any loan agreement, note or borrowing arrangement or any other agreement with TC (other than normal employment arrangements or deposit account relationships) or any interest in any property, real, personal or mixed, tangible or intangible, used in or pertaining to the business of TC.

4.23Compliance with Laws; Permits. TC has complied in all respects with all applicable laws and regulations of foreign, federal, state and local governments and all agencies thereof which affect the business or any owned or leased properties of TC and to which TC may be subject (including, without limitation, the Occupational Safety and Health Act of 1970, the Home Owners Loan Act, the Bank Holding Company Act, the Federal Deposit Insurance Act, the Real Estate Settlement Procedures Act, the Home Mortgage Disclosure Act of 1975, the Fair Housing Act, the Equal Credit Opportunity Act, the Community Reinvestment Act, and the Federal Reserve Act, each as amended, and any other state or federal acts (including rules and regulations thereunder) regulating or otherwise affecting employee health and safety or the environment), except where the failure to so comply would not, individually or in the aggregate, have a material adverse effect on the business, operations or financial condition of TC or TC’s ability to consummate the transactions contemplated hereby; and no claims have been filed by any such governments or agencies against TC alleging such a violation of any such law or regulation which have not been resolved to the satisfaction of such governments or agencies. TC holds all of the permits, licenses, certificates and other authorizations of foreign, federal, state and local governmental agencies required for the conduct of its business, except where failure to obtain such authorizations would not, individually or in the aggregate, have a material adverse effect on the business, operations or financial condition of TC, or the ability of TC to consummate the transactions contemplated hereby. TC is not subject to any cease and desist order, written agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or is a recipient of any extraordinary supervisory agreement letter from, or has adopted any board resolutions at the request of federal or state governmental authorities charged with the supervision or regulation of banks or bank holding companies or engaged in the insurance of bank deposits (collectively, the “Bank Regulators”), nor has TC been advised by any Bank Regulator that it is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, directive, written agreement, memorandum of understanding, extraordinary supervisory letter, commitment letter, board resolutions or similar undertaking.

4.24Administration of Fiduciary Accounts. TC has properly administered and serviced all accounts for which it acts as a fiduciary, including but not limited to accounts for which it serves as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in all material respects in accordance with the terms of the governing documents and applicable state and federal law and regulation and common law. Neither TC nor any of its officers or directors has committed any breach of trust with respect to any such fiduciary account which is material to or could reasonably be expected to be material to the business, operations or financial condition of TC and the accountings for each such fiduciary account are true and correct in all material respects and accurately reflect the assets of such fiduciary account in all material respects.

4.25Regulatory Approvals. As of the date hereof, TC is not aware of any fact that would likely result in the Regulatory Approvals not being obtained.

(a)Schedule 4.26 sets forth a true, correct and complete list of all interest rate swaps, caps, floors and option agreements and other interest rate risk management arrangements to which TC is a party or by which any of their properties or assets may be bound. TC has delivered to PUB and PIB true, correct and complete copies of all such interest rate risk management agreements and arrangements.

(b)All interest rate swaps, caps, floors and option agreements and other interest rate risk management arrangements to which TC is a party or by which any of its properties or assets may be bound were entered into in the ordinary course of business and in accordance with prudent banking practice and applicable rules, regulations and policies of Bank Regulators and with counterparties believed to be financially responsible at the time and are legal, valid and binding obligations enforceable in accordance with their terms (except as may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies), and are in full force and effect. TC has duly performed in all material respects all of its obligations thereunder to the extent that such obligations to perform have accrued; and to the knowledge of TC, there are no breaches, violations or defaults or allegations or assertions of such by any party thereunder.

4.27Voting Requirements. The affirmative vote at the TC Shareholder Meeting of a majority of the outstanding common shares of TC issued and outstanding and entitled to vote at the TC Shareholder Meeting to approve and adopt this Agreement is the only vote of holders of any class or series of TC’s capital shares necessary to approve and adopt this Agreement and the transactions contemplated hereby, including the Merger.

4.28Takeover Laws. TC and the Board of Directors of TC have taken all action required to be taken by it in order to exempt this Agreement and the transactions contemplated hereby from any state antitakeover laws, including without limitation Utah’s Control Shares Acquisitions Act (Utah Code Ann. §61-6-1 et seq.).

(a)Set forth on Schedule 4.29(a) is a complete and correct list and description as of the date of this Agreement or the Closing Date, as applicable, of all investment and debt securities, mortgage-backed and related securities, marketable equity securities and securities purchased under agreements to resell that are owned by TC in a fiduciary or agency capacity (the “Investment Securities”). TC has good and marketable title to all Investment Securities held by it, free and clear of all Encumbrances, except to the extent such Investment Securities are pledged in the ordinary course of business consistent with prudent banking practices to secure obligations of TC. A complete and correct list of such pledged Investment Securities is included on Schedule 4.29(a). The Investment Securities are valued on the books of TC in accordance with GAAP.

(b)Except as set forth on Schedule 4.29(b) and as may be imposed by applicable securities laws, none of the Investment Securities is subject to any restriction, whether contractual or statutory, that materially impairs the ability of TC to dispose of such investment at any time. With respect to all material repurchase agreements to which TC is a party, TC has a valid, perfected first lien or security interest in the securities or other collateral securing each such repurchase agreement, and the value of the collateral securing each such repurchase agreement equals or exceeds the amount of the debt secured by such collateral under such agreement.

(c)TC has not sold or otherwise disposed of any Investment Securities in a transaction in which the acquiror of such Investment Securities or other person has the right, either conditionally or absolutely, to require TC to repurchase or otherwise reacquire any such Investment Securities.

(a)Attached as Schedule 4.30(a) is a Schedule of Intellectual Property, which sets forth a complete and correct list of all (i) registered trademarks, service marks, domain names, copyrights and patents; (ii) applications for registration or grant of any of the foregoing; (iii) unregistered trademarks, service marks, trade names, logos and assumed names; and (iv) licenses for any of the foregoing, in each case, owned by TC or used in or necessary for the use of TC’s name and to conduct TC’s businesses as presently conducted. The items on Schedule 4.30(a), together with all other trademarks, service marks, trade names, logos, assumed names, patents, copyrights, trade secrets, computer software, licenses, formulae, customer lists or other databases, business application designs and inventions currently used in or necessary to conduct the business of TC constitute the “Intellectual Property.”

(b)TC has ownership of, or such other rights by license, lease or other agreement in and to, the Intellectual Property as is necessary to permit TC to use the Intellectual Property in the conduct of its business as presently conducted. TC has not received notice (whether written or, to the knowledge of TC, oral) alleging that TC has infringed or violated any trademark, trade name, copyright, patent, trade secret right or other proprietary right of others, and to TC’s knowledge, it has not committed any such violation or infringement. To the knowledge of TC, there are no facts or circumstances that, upon consummation of the transactions contemplated hereby, would cause TC to be in any way more restricted in its use of any of the Intellectual Property than it was on the date hereof under any contract to which TC is a party or by which it is bound, or that use of such Intellectual Property by TC will, as a result of such consummation, violate or infringe the rights of any person, or subject PUB or PIB to liability of any kind, under any such contract.

(c)The IT Assets operate and perform in all material respects in accordance with their documentation and functional specifications and otherwise as required by TC in connection with their respective businesses, and have not materially malfunctioned or failed within the past three (3) years. “IT Assets” means the computers, computer software, firmware, servers, workstations, routers, hubs, switches, data communications

lines and all other information technology equipment, and all associated documentation, owned or leased by TC. To the knowledge of TC, the IT Assets do not contain any worms, viruses, bugs, faults or other devices or effects that (i) enable or assist any person or entity to access without authorization the IT Assets, or (ii) otherwise significantly adversely affect the functionality of the IT Assets, except as disclosed in its documentation. To the knowledge of TC, in the last three years no person or entity has gained unauthorized access to the IT Assets. TC has implemented reasonable back-up and disaster recovery technology consistent with industry practices. To the knowledge of TC and except for “off the shelf” software licensed by TC in the ordinary course of business, none of the IT Assets contains any shareware, open source code, or other software the use of which requires licensing of any intellectual property.

4.31Fairness Hearing and Proxy Statement Information. None of the information supplied or to be supplied by or on behalf of TC for inclusion or incorporation by reference in the application or any other materials provided to the Utah Division of Securities or the Securities and Exchange Commission will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. None of the information supplied or to be supplied by or on behalf of TC for inclusion or incorporation by reference in the Proxy Statement will, at the date it is first mailed to the TC shareholders or at the time of the TC Shareholder Meeting or at the time of any amendment or supplement thereof, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, no representation or warranty is made by TC with respect to statements made or incorporated by reference therein based on information that were not supplied by or on behalf of TC.

4.32Disclosure. The representations and warranties of TC contained in this Agreement do not omit any material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. There is no fact known to TC which has not been disclosed to PUB and PIB pursuant to this Agreement and the Schedules hereto which would have or would reasonably be expected to have a material adverse effect on the business, operations or financial condition of TC or the ability of TC to consummate the transactions contemplated hereby.

5.1Conduct of TC Business. From the date of this Agreement to the Effective Time, unless PUB shall otherwise agree in writing or as otherwise expressly contemplated or permitted by other provisions of this Agreement, including this Section 5.1:

(a)the business of TC shall be conducted only in, and TC shall not take any action except in, the ordinary course and in accordance, in all material respects, with all applicable laws, rules and regulations and past practices;

(ii)issue or sell any of its equity securities, securities convertible into or exchangeable for its equity securities, warrants, options or other rights to acquire its equity securities, or any bonds or other securities, except (A) deposit and other bank obligations in the ordinary course of business, (B) TC Common Shares issuable upon the conversion of TC preferred shares outstanding as of the date of this Agreement, (C) TC Common Shares issuable upon the exercise of the 301,460.8 options outstanding as of the date of this Agreement;

(iii)redeem, purchase, acquire or offer to acquire, directly or indirectly, any capital shares of or any other ownership interest in TC;

(v)declare, set aside or pay any dividend or other distribution payable in cash, property or otherwise with respect to capital shares of TC; provided, however, that TC may declare, set aside or pay a dividend or other distribution in cash to the extent that the amount of such dividend or distribution does not exceed the pro rata portion of up to $1,200,000 of actual annualized TC net income, with such pro rata portion to be calculated based on a 365-day year; provided, further, that any dividend on TC Preferred Shares to be paid in the ordinary course of TC’s business may be paid 10 Business Days after providing written notice to PUB and PIB;

(vi)borrow any amount or incur or become subject to any material liability, except liabilities incurred in the ordinary course of business or consistent with past practices, but in no event will TC enter into any long-term borrowings with a term of greater than one year;

(vii)discharge or satisfy any material lien or encumbrance on the properties or assets of TC or pay any material liability, except otherwise in the ordinary course of business or consistent with past practices;

(viii)sell, assign, transfer, mortgage, pledge or subject to any lien or other encumbrance any of its assets, except (A) the sale of any mortgage loan to a third party mortgage lender in the ordinary course of business; (B) the sale, assignment or transfer of any real property in the ordinary course of business; except, such sale, assignment or transfer of any real property shall not be considered in the ordinary course of business except where the value of the individual transaction is less than $40,000, (C) liens and encumbrances for current property taxes not yet due and payable and (D) liens and encumbrances which do not materially affect the value of, or interfere with the past or future use or ability to convey, the property subject thereto or affected thereby;

(ix)cancel any material debt or claims or waive any rights of material value, except in the ordinary course of business or consistent with past practices;

(x)acquire (by merger, exchange, consolidation, acquisition of shares or assets or otherwise) any corporation, partnership, joint venture or other business organization or division or material assets thereof, or assets or deposits that are material to TC, except in exchange for debt previously contracted;

(xi)sell an amount of loans that would cause the amount of outstanding loans of TC at Closing to fall below $107,500,000;

(xiii)except as required in any currently outstanding employment agreement, increase the salary of any employee or pay a bonus to any employee;

(xiv)other than as set forth on Schedule 4.12, make any single or group of related capital expenditures or commitments therefor in excess of $10,000 or enter into any lease or group of related leases with the same party which involves aggregate lease payments payable of more than $10,000 for any individual lease or involves more than $40,000 for any group of related leases in the aggregate;

(xv)make any negative provisions to its income statement and allowance for loan and lease losses, or fail to maintain an adequate reserve for loan and lease losses (determined in accordance with GAAP and existing regulatory guidance); or

(xvi)enter into or propose to enter into, or modify or propose to modify, any agreement, arrangement or understanding with respect to any of the matters set forth in this Section 5.1(b);

(c)TC shall not, directly or indirectly, enter into or modify any employment, severance or similar agreements or arrangements with, or grant any bonuses, wage, salary or compensation increases, or severance or termination pay to, or promote, any director, officer, employee, group of employees or consultant or hire any employee, except in the ordinary course of business consistent with past practice or as disclosed on Schedule 5.1(c);

(d)TC shall not adopt or amend any bonus, profit sharing, stock option, pension, retirement, deferred compensation, or other employee benefit plan, trust, fund, contract or arrangement for the benefit or welfare of any employees, except as and to the extent required by law or as disclosed on Schedule 5.1(d);

(e)TC shall not allow its current insurance policies to be canceled or terminated or any of the coverage thereunder to lapse, unless simultaneously with such termination, cancellation or lapse, replacement policies providing coverage substantially equal to the coverage under the canceled, terminated or lapsed policies are in full force and effect;

(f)TC shall not enter into any settlement or similar agreement with respect to, or take any other significant action with respect to the conduct of, any action, suit, proceeding, order or investigation which is set forth on Schedule 4.17 or to which TC becomes a party after the date of this Agreement, without prior consultation (as defined below) with PUB;

(g)(i) TC shall use reasonable efforts to preserve intact in all material respects the business organization and the goodwill of TC and keep available the services of its officers and employees as a group and preserve intact material agreements and credit facilities, and (ii) TC shall confer on a regular and frequent basis with representatives of PUB, as reasonably requested by PUB, to report on operational matters and the general status of ongoing operations;

(h)TC shall not acquire any Investment Securities with duration greater than one year without the prior written consent of PUB and PIB;

(i)TC shall not take any action with respect to Investment Securities held or controlled by it inconsistent with past practices, alter its investment portfolio duration policy as heretofore in effect or, without prior consultation with PUB, take any action that would have or could reasonably be expected to have a material effect on TC’s asset/liability position;

(j)TC shall not make any agreements or commitments binding it to extend credit except in a manner consistent with past practice and in accordance with TC’s lending policies as disclosed to PUB, and TC shall not make any agreements or commitments binding it to extend credit in an amount in excess of $1,000,000, or sell, assign or otherwise transfer any participation in any loan, in each case without prior consultation (as defined below) with PUB;

(k)with respect to properties leased by TC, TC shall not renew, exercise an option to extend, cancel or surrender any lease of real property nor allow any such lease to lapse, without the consent of PUB;

(l)TC shall not make any change in its accounting methods or practices, other than changes required by law or regulation made in accordance with GAAP or regulatory accounting principles generally applicable to depository institutions such as TC, as the case may be; and

For purposes of this Agreement, the words “prior consultation” with respect to any action means advance notice of such proposed action and a reasonable opportunity to discuss such action in good faith prior to taking such action.

6.1Filings and Approvals. PUB, PIB and TC will use all reasonable efforts and will cooperate with each other in the preparation and filing of, and PUB will file, as soon as practicable after the date of this Agreement (but in no event later than 60 days after execution of Agreement), all applications or other documents required to obtain the Regulatory Approvals, and provide copies of the non-confidential portions of such applications, filings and related correspondence to the other Party. As used in this Agreement, the term “reasonable efforts” means those actions objectively reasonable to produce the desired result, in the context of the agreements among the Parties set forth in this Agreement. Prior to filing each application, registration statement or other document with the applicable regulatory authority, each Party will provide the other Party with an opportunity to review and comment on the non-confidential portions of each such application, registration statement or other document and will discuss with the other Party which portions of this Agreement shall be designated as confidential portions of such applications. Each Party will use all reasonable efforts and will cooperate with the other Party in taking any other actions necessary to obtain such regulatory or other approvals and consents, including participating in any required hearings or proceedings. Subject to the terms and conditions herein provided, each Party will use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement.

6.2Certain Loans and Related Matters. From the date of this Agreement until the Effective Time, TC will furnish to PUB and PIB a complete and accurate list as of the end of each calendar month, within 15 Business Days after the end of each such calendar month, of (a) all of TC’s periodic internal credit quality reports prepared during such calendar month (which reports will be prepared in a manner consistent with past practices), (b) all loans of TC classified as non-accrual, as restructured, as 90 days past due, as still accruing and doubtful of collection or any comparable classification, (c) all new loans where the principal amount advanced exceeds $100,000; (e) any current repurchase obligations of TC with respect to any loans, loan participations or state or municipal obligations or revenue bonds and (f) any standby letters of credit issued by TC.

6.3Financial Statements and Payroll Listings . From the date of this Agreement until the Effective Time, TC shall furnish PUB and PIB with TC’s balance sheet as of the end of each calendar month and the related statements of income, within 15 days after the end of each such calendar month. Such financial statements shall be prepared on a basis consistent with the Latest TC Balance Sheet and the Related TC Statements and on a consistent basis during the periods involved and shall fairly present the financial position of TC as of the dates thereof and the results of operations of TC for the periods then ended, provided that such financial statements shall be subject to adjustments as provided by GAAP. TC shall also furnish PUB and PIB with TC’s balance sheet as of June 30, 2017 and, if the transactions contemplated by this Agreement have not yet closed by October 30, 2017, as of September 30, 2017, and the related statements of income for each quarterly period (together with the applicable balance sheet, the “Interim Financial Statements”), within 30 days after the end of each such quarterly period. The Interim Financial statements shall have been reviewed by TC’s outside accounts and shall reflect any material changes identified by such accountants during their review. TC shall make available to PUB and PIB TC’s payroll listings as of the end of each pay period, within one week after the end of such pay period.

6.4Consents and Authorizations. TC will obtain (at no cost or burden to PUB) the third party consents necessary for the consummation of the transactions contemplated by this Agreement that are set forth on Schedule 6.4 (the “Required Consents”). TC will keep PUB and PIB reasonably advised of the status of obtaining the Required Consents. For the avoidance of doubt, the Required Consents do not include the Regulatory Approvals.

(i)“Acquisition Transaction” means (a) a merger, consolidation or other business combination of TC, (b) a restructuring, recapitalization or liquidation of TC, (c) any disposition of any material assets of TC, (d) any issuance, disposition or sale of any capital shares of TC to any party other than PIB or PUB, or (d) any transaction in which a person or “group” (as defined in the Exchange Act and the rules promulgated thereunder) of persons directly or indirectly acquires beneficial or record ownership of securities representing more than 5% of the outstanding securities of any class of voting securities of TC.

(ii)“Acquisition Proposal” means any offer, proposal, inquiry or indication of interest (other than an offer, proposal, inquiry or indication of interest by PUB and PIB) contemplating or otherwise relating to any Acquisition Transaction.

(iii)“Superior Proposal” means any Acquisition Proposal by a third party on terms which TC’s Board of Directors determines in its good faith judgment, after receipt of written advice from, its financial advisors (which advice will be communicated to PUB and PIB), to be more favorable from a financial point of view to its shareholders than the Merger and the other transactions contemplated hereby, after taking into account the likelihood of consummation of such transaction on the terms set forth therein, taking into account all legal, financial (including the financing terms of any such proposal), regulatory and other aspects of such proposal, the likelihood of consummation of any such proposal and any other relevant factors permitted under applicable law, after giving PUB and PIB at least five Business Days to respond to such third-party Acquisition Proposal once the Board has notified PUB and PIB that in the absence of any further action by PUB and PIB it would consider such Acquisition Proposal to be a Superior Proposal, and then taking into account any amendment or modification to this Agreement proposed by PUB and PIB.

(b)TC will not, and will cause its officers, directors, employees, agents or other representatives (collectively, “Representatives”) not to, directly or indirectly, (i) solicit, initiate, encourage, induce or facilitate the making, submission or announcement of any Acquisition Proposal or take any action that could reasonably be expected to lead to an Acquisition Proposal, (ii) furnish any information regarding TC to any person in connection with or in response to an Acquisition Proposal or an inquiry or indication of interest that could reasonably be expected to lead to an Acquisition

Proposal, (iii) engage in discussions or negotiations with any person with respect to any Acquisition Proposal or that could reasonably be expected to lead to an Acquisition Proposal, (iv) approve, endorse or recommend any Acquisition Proposal, or (v) enter into any letter of intent or similar document or any Contract contemplating or otherwise relating to any Acquisition Transaction; provided, however, that prior to the adoption of this Agreement by the Required TC Shareholder Vote, this Section 6.5(b) will not prohibit the directors of TC from making or withdrawing any recommendation to the TC shareholders, and will not prohibit TC or the directors of TC from taking any action, or furnishing nonpublic information regarding TC to, or entering into discussions or negotiations with, any person, in each case as a result of or in response to any inquiry or indication of interest or a Superior Proposal from a third party that is submitted to TC by such person (and not withdrawn) if (1) neither TC nor any authorized representative of TC will have violated any of the restrictions set forth in this Section 6.5, (2) the Board of Directors of TC concludes in good faith, after having consulted with and considered the advice of its outside counsel, that such action is required in order for the Board of Directors of TC to comply with its fiduciary obligations to TC’s shareholders under applicable law, (3) at least two Business Days prior to furnishing any such nonpublic information to, or entering into discussions with, such person, TC gives PUB and PIB written notice of the identity of such person and of TC’s intention to furnish nonpublic information to, or enter into discussions with, such person, and TC receives from such person an executed confidentiality agreement containing customary limitations on the use and disclosure of all nonpublic written and oral information furnished to such person by or on behalf of TC, and (4) at least two Business Days prior to furnishing any such nonpublic information to such person, TC furnishes such nonpublic information to PUB and PIB (to the extent such nonpublic information has not been previously furnished by TC to PUB and PIB). Without limiting the generality of the foregoing, TC acknowledges and agrees that any violation of or the taking of any action inconsistent with any of the restrictions set forth in the preceding sentence by any representative of TC, whether or not such representative of TC is purporting to act on behalf of TC, will be deemed to constitute a breach of this Section 6.5 by TC.

(c)TC will promptly (and in no event later than 48 hours after receipt of any Acquisition Proposal, any inquiry or indication of interest that could lead to an Acquisition Proposal or any request for nonpublic information) advise PUB and PIB in writing of any Acquisition Proposal, any inquiry or indication of interest that could lead to an Acquisition Proposal or any request for nonpublic information relating to TC (including the identity of the person making or submitting such Acquisition Proposal, inquiry, indication of interest or request, and the terms thereof) that is made or submitted by any person prior to the Closing Date. TC will keep PUB and PIB fully informed with respect to the status of any such Acquisition Proposal, inquiry, indication of interest or request and any modification or proposed modification thereto.

(d)TC and its Representatives will immediately upon execution of this Agreement cease and cause to be terminated any existing discussions with any person that relate to any Acquisition Proposal.

(e)TC will not release or permit the release of any person from, or waive or permit the waiver of any provision of, any confidentiality, “standstill” or similar agreement to which TC is a party, and will enforce or cause to be enforced each such agreement at the request of PUB or PIB. TC will promptly request each person that has executed, within 12 months prior to the date of this Agreement, a confidentiality agreement in connection with its consideration of a possible Acquisition Transaction or equity investment to return all confidential information heretofore furnished to such person by or on behalf of TC.

6.6Notification of Certain Matters. Each Party shall give prompt notice to the other Parties of (a) the occurrence or failure to occur of any event or the discovery of any information, which occurrence, failure or discovery would be likely to cause any representation or warranty on its part contained in this Agreement to be materially untrue or inaccurate when made, at the Effective Time or at any time prior to the Effective Time and (b) any material failure of such party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder.

(a)Except as prohibited by applicable laws or regulations, TC, PUB and PIB shall each permit full access to the other party on reasonable notice and at reasonable hours to its properties and shall disclose and make available (together with the right to copy) to the other party and to the internal auditors, loan review officers, employees, attorneys, accountants and other representatives of the other party all non-attorney-client privileged books, papers and records relating to the assets, shares, properties, operations, obligations and liabilities of the party providing such access including, without limitation, all books of account (including, without limitation, the general ledgers), tax records, minute books of directors’ and shareholders’ meetings, organizational documents, bylaws, contracts and agreements, filings with any regulatory authority, accountants’ work papers, litigation files (including, without limitation, legal research memoranda, but not providing anything that would invade the attorney-client privilege), documents relating to assets and title thereto (including, without limitation, abstracts, title insurance policies, surveys, environmental reports, opinions of title and other information relating to the real and personal property), plans affecting employees, securities transfer records and shareholder lists, and any books, papers and records relating to other assets, business activities or prospects in which the inquiring party may have a reasonable interest, including, without limitation, its interest in planning for integration and transition with respect to the business of the party providing such access; provided, however, that the foregoing rights shall, whether or not and regardless of the extent to which the same are exercised, in no way affect the nature or scope of the representations, warranties and covenants of any party set forth herein. In addition, TC and PIB shall each instruct their respective officers, employees, counsel and accountants to be available for, and respond to any questions of, such representatives of the other party at reasonable hours and with reasonable notice by the other party to such individuals, and to cooperate fully with the other party in planning for the integration of the business of TC with the business of PIB and its affiliates (provided that counsel shall not be required to provide any information that would invade the attorney-client privilege).

(b)Any confidential information or trade secrets of the providing party received by the other party, its employees or agents in the course of the consummation of the Merger shall be treated confidentially, and any correspondence, memoranda, records, copies, documents and electronic or other media of any kind containing either such confidential information, or trade secrets or both shall be destroyed by the disclosing party’s request, returned to the disclosing party if this Agreement is terminated as provided in Article 8. Such information shall not be used by any party to the detriment of the party disclosing such information.

(c)In the event that this Agreement shall terminate, neither party shall disclose, except as required by law, pursuant to the request of an administrative agency or other regulatory body, or to enforce its rights hereunder in an appropriate proceeding, the basis or reason for such termination, without the consent of the other party.

(a)TC shall file at its own expense, on or prior to the due date, all Tax returns for all Tax periods ending on or before the Effective Time where the due date for such returns or reports (taking into account valid extensions of the respective due dates) falls on or before the Effective Time; provided, however, that TC shall not file any such Tax returns, or other returns, elections or information statements with respect to any liabilities for Taxes (other than federal, state or local sales, use, withholding or employment tax returns or statements), or consent to any adjustment or otherwise compromise or settle any matters with respect to Taxes, without prior consultation with PUB and PIB; provided, further, that TC shall not make any election or take any other discretionary position with respect to Taxes, in a manner inconsistent with past practices, without the prior written approval of PUB and PIB. TC shall provide PUB and PIB with a copy of appropriate workpapers, schedules, drafts and final copies of each federal and state income Tax return or election of TC at least ten days before filing such return or election and shall reasonably cooperate with any request by PUB or PIB in connection therewith.

(b)PIB, in its sole and absolute discretion and at its sole expense, will file (or cause to be filed) all Tax returns of TC due after the Effective Time. After the Effective Time, PIB, in its sole and absolute discretion and to the extent permitted by law, shall have the right to amend, modify or otherwise change all Tax returns of TC for all Tax periods. To the extent PIB amends any such Tax returns, other than an amendment at the request of the applicable federal, state, local or foreign Tax authority, and such amendment results in additional Taxes owing for any Tax period ending on or before the Effective Time, such additional Taxes shall not cause any representation of TC relating to Taxes to be untrue.

(a)TC shall call a meeting of its shareholders (the “TC Shareholder Meeting”) for the purpose of voting upon this Agreement and the Merger, and shall schedule such meeting based on consultation with PUB and PIB as soon as reasonably practicable after the date of this Agreement. PUB and TC shall work together and

provide each other such information as is necessary to jointly prepare and approve a proxy statement to be sent to TC’s shareholders in connection with the Merger, the issuance of the PUB Common Shares to the TC shareholders and the approval of the bonuses set forth in Schedule 5.1(c)(2) (the “Proxy Statement”).

(b)The Board of Directors of TC shall recommend that the shareholders approve the ratification and Closing of this Agreement and the Merger (the “Board Recommendation”), and shall use its best efforts (including, without limitation, soliciting proxies for such approval pursuant to the Proxy Statement) to obtain the Required TC Shareholder Vote. Except as provided in Section 6.5, the Board Recommendation may not be withdrawn or modified in a manner adverse to PUB, and no resolution by the Board of Directors of TC or any committee thereof to withdraw or modify the Board Recommendation in a manner adverse to TC may be adopted.

(c)TC shall bear all printing and mailing costs in connection with the preparation and mailing of the Proxy Statement to TC shareholders in connection with the TC Shareholder Meeting. PUB (including PIB) and TC shall each bear their own legal and accounting expenses in connection with the Proxy Statement and the issuance of the PUB Common Shares.

6.10Establishment of Accruals. If requested by PUB or PIB, on the 7^th Business Day immediately prior to the Closing Date, TC shall, consistent with GAAP, establish such additional accruals and reserves as PUB or PIB indicates are necessary to conform TC’s accounting and credit loss reserve practices and methods to those of PUB and PIB (as such practices and methods are to be applied to TC from and after the Effective Time) and reflect PUB and PIB’s plans with respect to the conduct of TC’s business following the Merger and to provide for the costs and expenses relating to the consummation by TC of the transactions contemplated by this Agreement, provided, however, that any such additional accruals and reserves shall not affect the determination of the Total Purchase Price or Per Share Consideration pursuant to Section 2.2(a).

6.11Tax Treatment. None of TC, PUB nor PIB shall take any action which would disqualify the Merger as a “reorganization” pursuant to Section 368(a) of the Code, except if requested to do so by an applicable Tax authority.

6.12Loan Participations. TC agrees that it will not sell any loan or loan participation or renew any loan participation without first offering to sell such loan or loan participation to PIB on the same terms as such sale or renewal.

(a)From time to time prior to the Closing, TC will have the right to supplement or amend the Schedules or prepare additional Schedules, but only to disclose any information related to facts, circumstances or events occurring after the date of this Agreement necessary in order to make each representation and warranty of TC set forth in Article 4 true and correct. If such additional disclosure (i) reveals any facts, circumstances or events that, individually or in the aggregate, would result in the failure of the condition set forth in ‎Section 7.3(a), (ii) TC is unable to cure such facts,

circumstances or events, and (iii) TC notifies PUB and PIB of this fact in connection with the delivery of additional disclosure (an “MAE Notice”); PUB or PIB may, at their option, terminate this Agreement as permitted under Section 8.1(d) without any liability to PUB or PIB by giving written notice to TC upon the earlier to occur of (x) 5:00 p.m., Salt Lake City time, on the fifth (5^th) day after receipt of the MAE Notice, with the day PUB and PIB receives the MAE Notice included in determining whether PUB or PIB’s termination of this Agreement is timely, or (y) the Closing Date. In addition, if PUB terminates this Agreement pursuant to this Section 6.13, it will be entitled to the break-up fee described in Section 8.4(a). If PUB or PIB do not give timely notice of the termination of this Agreement as permitted under this ‎Section 6.13 and the Closing occurs, this Agreement will be deemed to be amended to include the additional disclosures made by TC under this Section 6.13 that were identified in the MAE Notice as if such disclosures had been made as of the date of this Agreement. If PUB, PIB and TC disagree as to whether such additional disclosure would result in the failure of the conditions set forth in Section 7.3(a), the matter shall be submitted to arbitration pursuant to the procedures described in Section 9.8, except that the Shareholders Representative will not be a party to the arbitration, but instead the parties will be PUB, PIB and TC. If the additional disclosure will not result in the failure of the conditions set forth in Section 7.3(a), PUB and PIB will still have the ability to seek indemnification for such matters after the Closing, as provided herein.

(b)From time to time prior to the Closing, PUB and PIB will have the right to supplement or amend the Schedules or prepare additional Schedules, but only to disclose any information related to facts, circumstances or events occurring after the date of this Agreement necessary in order to make each representation and warranty of PUB and PIB set forth in Article 3 true and correct. If such additional disclosure (i) reveals any facts, circumstances or events that, individually or in the aggregate, would result in the failure of the condition set forth in ‎Section 7.2(a), (ii) PUB and PIB are unable to cure such facts, circumstances or events, and (iii) PUB and PIB notify TC of this fact by delivering an MAE Notice; TC may, at its option, terminate this Agreement as permitted under Section 8.1(d) without any liability to TC by giving written notice to PUB upon the earlier to occur of (x) 5:00 p.m., Salt Lake City time, on the fifth (5^th) day after receipt of the MAE Notice, with the day TC receives the MAE Notice included in determining whether TC’s termination of this Agreement is timely, or (y) the Closing Date. In addition, if TC terminates this Agreement pursuant to this Section 6.13, it will be entitled to the break-up fee described in Section 8.5. If TC does not give timely notice of the termination of this Agreement as permitted under this ‎Section 6.13 and the Closing occurs, this Agreement will be deemed to be amended to include the additional disclosures made by PUB and PIB under this Section 6.13 that were identified in the MAE Notice as if such disclosures had been made as of the date of this Agreement. If PUB, PIB and TC disagree as to whether such additional disclosure would result in the failure of the conditions set forth in Section 7.2(a), the matter shall be submitted to arbitration pursuant to the procedures described in Section 9.8, except that the Shareholders Representative will not be a party to the arbitration, but instead the parties will be PUB, PIB and TC. If the additional disclosure will not result in the failure of the conditions set forth in Section 7.2(a), TC will still have the ability to seek indemnification for such matters after the Closing, as provided herein.

6.14280G Approval. TC shall make no payments that separately or in the aggregate could or would result in the payment of any “excess parachute payments” within the meaning of Section 280G of the Code.

6.15Reasonable and Diligent Efforts. Subject to Section 6.5, the Parties shall use reasonable and diligent efforts in good faith to satisfy the various conditions to Closing and to consummate the Merger as soon as practicable. None of the Parties will intentionally take or intentionally permit to be taken any action that would be in breach of the terms or provisions of this Agreement (including any action that would impair or impede the timely obtainment of the Regulatory Approvals or that would cause any of the representations contained herein to be or become untrue).

6.16Tail D&O Policy. On or prior to the Closing Date TC will obtain at its own expense an extended reporting period policy, with terms and coverage no less advantageous than current insurance policies, covering directors and officers of TC for a period of not less than three (3) years from the Closing Date at no additional cost to PUB or PIB.

6.17Legal Opinions. Each party to this Agreement will provide Dorsey & Whitney LLP such representations of officers of PUB and TC reasonably satisfactory in form and substance to such counsel in order for it to issue any opinion relating to the tax effects of the Transaction.

7.1Conditions to Obligations of Each Party. The respective obligations of each party to effect the transactions contemplated hereby shall be subject to the fulfillment at or prior to the Effective Time of the following conditions:

(a)Regulatory Approvals. The Regulatory Approvals shall have been obtained and the applicable waiting periods, if any, under all statutory or regulatory waiting periods shall have lapsed. None of such approvals shall contain any conditions or restrictions that PUB or PIB reasonably believes will materially restrict or limit the business or activities of PUB, PIB, TC or their subsidiaries or have a material adverse effect on, or would be reasonably likely to have a material adverse effect on, the business, operations or financial condition of PUB and PIB, taken as a whole, on the one hand, or TC on the other hand.

(b)No Injunction. No injunction or other order entered by a state or federal court of competent jurisdiction shall have been issued and remain in effect which would impair the consummation of the transactions contemplated hereby.

(c)No Prohibitive Change of Law. There shall have been no law, statute, rule or regulation, domestic or foreign, enacted or promulgated which would materially impair the consummation of the transactions contemplated hereby.

(d)Governmental Action. There shall not be any action taken, or any statute, rule, regulation, judgment, order or injunction proposed, enacted, entered, enforced, promulgated, issued or deemed applicable to the transactions contemplated hereby by any federal, state or other court, government or governmental authority or agency, which would reasonably be expected to result, directly or indirectly, in (i) restraining or prohibiting the consummation of the transactions contemplated hereby or obtaining material damages from TC, PUB or PIB in connection with the transactions contemplated hereby, (ii) prohibiting direct or indirect ownership or operation by PUB of all or a material portion of the business or assets of TC or of PIB, or to compelling PUB or PIB, or TC to dispose of or to hold separately all or a material portion of the business or assets of PUB or PIB, or of TC, as a result of the transactions contemplated hereby, or (iii) requiring direct or indirect divestiture by PUB or PIB of any of their businesses or assets or of the business or assets of TC.

(e)No Termination. No party hereto shall have terminated this Agreement as permitted herein.

(f)Shareholder Approval by TC Shareholders. The Merger shall have been approved by the Required TC Shareholder Vote.

7.2Additional Conditions to Obligation of TC. The obligation of TC to consummate the transactions contemplated hereby in accordance with the terms of this Agreement is also subject to the following conditions:

(a)Representations and Warranties. The representations and warranties set forth in Article 3 that are not subject to materiality or material adverse effect qualifications will be true and correct in all material respects at and as of the Closing Date as though then made and as though the Closing Date had been substituted for the date of this Agreement in such representations and warranties, and the representations and warranties set forth in Article 3 that are subject to materiality or material adverse effect qualifications will be true and correct in all respects at and as of the Closing Date as though then made and as though the Closing Date had been substituted for the date of this Agreement in such representations and warranties, except that any representation or warranty expressly made as of a specified date will only need to have been true on and as of such date (without taking into account any supplemental disclosures after the date of this Agreement by PUB or PIB or the discovery of information by TC).

(b)PIB Southern Utah Advisory Board. PIB shall have appointed two persons affiliated with TC to its Southern Utah Advisory Board, subject to the closing of the Merger, and provided that the appointments must be reasonably acceptable to TC.

(c)Agreements. PUB and PIB shall have performed and complied with each of its agreements contained in this Agreement.

(d)Officer’s Certificate. PUB and PIB shall have furnished to TC a certificate of the Chief Executive Officer of PUB and PIB, dated as of the Effective Time, in which such officer shall certify that such officer has no reason to believe that the conditions set forth in Sections 7.2(a) and (b) have not been fulfilled.

(e)Secretary’s Certificate. PUB and PIB shall have furnished to TC (i) copies of the text of the resolutions by which the corporate action on the part of PUB and PIB necessary to approve this Agreement and the transactions contemplated hereby were taken, and (ii) a certificate dated as of the Effective Time executed on behalf of PUB and PIB by the corporate secretary of each, or one of their assistant corporate secretaries, certifying to TC that such copies are true, correct and complete copies of such resolutions and that such resolutions were duly adopted and have not been amended or rescinded.

(f)Change in Control of PUB or PIB. Neither PUB nor PIB shall have (i) been merged or consolidated with or into, or announced an agreement to merge with or into, another corporation in any transaction in which the holders of the voting securities of PUB or PIB would not hold a majority of the voting securities of the surviving corporation, (ii) sold all or substantially all of its assets, or (iii) had one person or group acquire, directly or indirectly, beneficial ownership of more than 50% of the outstanding PUB Common Shares or more than 50% of the outstanding common shares of PIB.

(g)Retention Agreements. PIB shall have delivered retention agreements, executed by PIB, substantially in the form of Exhibit E attached hereto, to each of the TC employees identified on Schedule 7.3(i).

7.3Additional Conditions to Obligation of PUB and PIB. The obligations of PUB and PIB to consummate the transactions contemplated hereby in accordance with the terms of this Agreement is also subject to the following conditions:

(a)Representations and Compliance. The representations and warranties set forth in Article 4 that are not subject to materiality or material adverse effect qualifications will be true and correct in all material respects at and as of the Closing Date as though then made and as though the Closing Date had been substituted for the date of this Agreement in such representations and warranties, except that any representation or warranty expressly made as of a specified date will only need to have been true on and as of such date, and the representations and warranties set forth in Article 4 that are subject to materiality or material adverse effect qualifications will be true and correct in all respects at and as of the Closing Date as though then made and as though the Closing Date had been substituted for the date of this Agreement in such representations and warranties, except that any representation or warranty expressly made as of a specified date will only need to have been true on and as of such date (without taking into account any supplemental disclosures after the date of this Agreement by TC or the discovery of information by PUB or PIB).

(b)Agreements. TC shall have performed and complied with each of its agreements contained in this Agreement.

(c)Officers’ Certificate of TC. TC shall have furnished to PUB and PIB a certificate of the Chief Financial Officer of TC, dated as of the Effective Time, in which such officers shall certify to the conditions set forth in Section 7.3(a) and 7.3(b).

(d)TC Secretary’s Certificate. TC shall have furnished to PUB and PIB (i) copies of the text of the resolutions by which the corporate action on the part of TC necessary to approve this Agreement and the transactions contemplated hereby were taken, and (ii) a certificate dated as of the Effective Time executed on behalf of TC by its corporate secretary or one of its assistant corporate secretaries certifying to PUB and PIB that such copies are true, correct and complete copies of such resolutions and that such resolutions were duly adopted and have not been amended or rescinded.

(e)St. George Lease Transfer. TC shall have furnished to PUB and PIB the St. George Lease Transfer, duly executed by TC and 3S&G, LLC.

(f)Dissenting Shares. PUB shall conclude, in its good faith determination, that the aggregate cash consideration to be paid for fractional shares, Dissenting Shares, the Escrow Amount and the amount of cash to be paid to the shareholders pursuant to Article 2 shall be equal to or less than 35% of the Total Purchase Price. In addition, the number of Dissenting Shares shall not exceed 8% of the total TC Common Shares issued and outstanding immediately prior to the Effective Time.

(g)Required Consents. Each Required Consent will have been obtained and be in full force and effect and such actions as PUB’s counsel may reasonably require will have been taken in connection therewith.

. Each of the people identified on Schedule 7.3(h) shall have delivered non-competition agreements, executed by each of them, substantially in the form of Exhibit D attached hereto, to PIB, provided that PIB shall have the ability to waive this requirement with respect to any of the people identified on Schedule 7.3(h).

(i)Retention Agreements. Each of the people identified on Schedule 7.3(i) shall have delivered retention agreements, within 30 days after the date hereof, executed by each of them, substantially in the form of Exhibit E attached hereto, to PIB, to be held in escrow until the Closing Date, provided that PIB shall have the ability to waive this requirement with respect to any of the people identified on Schedule 7.3(i).

(j)Support Agreement. Each of the shareholders listed on Schedule 7.3(j) shall have delivered the Support Agreement, substantially in the form of Exhibit C attached hereto, to PIB.

(k)Closing Capital. TC shall have TC Closing Capital as of the Closing Date greater than or equal to $14,300,000.

(l)Release Agreement. Each of the directors of TC shall have delivered an executed release agreement in form reasonably satisfactory to PUB.

(m)FIRPTA Certificate. TC shall have furnished to PUB and PIB a a certificate pursuant to Treasury Regulations Section 1.1445-2(b) that TC is not a foreign person within the meaning of Section 1445 of the Code.

8.1Reasons for Termination. This Agreement, by prompt written notice given to the other parties prior to or at the Closing, may be terminated:

(b)by PUB or PIB, or TC, if the Closing has not occurred (other than through the failure of any party seeking to terminate this Agreement to comply fully with its obligations under this Agreement) by December 31, 2017, or such later date as has been approved, in writing, by PUB, PIB and TC;

(c)by PUB or PIB, or TC, if the Required TC Shareholder Vote shall not have been obtained at the Shareholder Meeting or at any adjournment or postponement thereof;

(d)by PUB or PIB if: (i) TC has or will have breached any representation, warranty or agreement contained in this Agreement in any material respect, and if such is reasonably able to be cured, TC shall have failed to cure such breach to PUB’s or PIB’s reasonable satisfaction, or (ii) if any of the conditions in Section 7.1 (other than Section 7.1(a)) or 7.3 becomes impossible to satisfy (other than through the failure of PUB or PIB to comply with its obligations under this Agreement);

(e)by TC if (i) PUB or PIB has or will have breached any representation, warranty or agreement contained in this Agreement in any material respect, and if such is reasonably able to be cured, PUB or PIB shall have failed to cure such breach to TC’s reasonable satisfaction, or (ii) if any of the conditions in Section 7.1(other than Section 7.1(a)) or 7.2 becomes impossible to satisfy (other than through the failure of TC to comply with its obligations under this Agreement);

(f)By TC if (i) (x) the Closing Market Price is less than $22.70 and greater than or equal to $21.36 and (y) the PUB Price Ratio is less than the Index Ratio by more than 10%, or (ii) the Closing Market Price is less than $21.36;

(g)By PUB if (i) (x) the Closing Market Price is greater than $30.71 but less than or equal to $32.04 and (y) the PUB Price Ratio is greater than the Index Ratio by more than 10%, or (ii) the Closing Market Price is greater than $32.04;

(h)by either PUB, PIB or TC upon written notice to the other party 30 days after the date on which any request or application for a Regulatory Approval shall have been denied or withdrawn at the request or recommendation of the governmental entity which must grant such Regulatory Approval, unless within the 30-day period following such denial or withdrawal the parties agree to file, and have filed with the applicable governmental entity, a petition for rehearing (or other applicable appeal) or an amended application, provided, however, that no party shall have the right to terminate this Agreement pursuant to this Section 8.1(h) if such denial or request or recommendation for withdrawal shall be due to the failure of the party seeking to terminate this Agreement to perform or observe the covenants and agreements of such party set forth herein;

(i)by PUB, PIB or TC if a Superior Proposal is accepted by TC or consummated; or

(j)by PUB, PIB or TC if TC Annualized Net Income at the Closing Date would be less than $590,000.

If TC elects to exercise its termination right pursuant to this Section 8.1, it shall give prompt (but in any case within 24 hours of such determination) written notice thereof to PUB. During the five Business Day period commencing with its receipt of such notice, PUB may, at its option:

(i)in the case of Section 8.1(f)(i), adjust the Per Share Stock Consideration (or agree to pay additional cash consideration along with the Per Share Stock Consideration, or a combination thereof) such that the total value of PUB Common Shares to be issued in the Transaction, plus any such additional cash consideration (but not including the Per Share Cash Consideration), is equal to the result of (i) the number of shares of TC Common Shares outstanding at the Effective Time, multiplied by (ii) the Per Share Stock Consideration, multiplied by (iii) $22.70, and

(ii)in the case of Section 8.1(f)(ii), adjust the Per Share Stock Consideration (or agree to pay additional cash consideration along with the Per Share Stock Consideration, or a combination thereof) such that the total value of PUB Common Shares to be issued in the Transaction, plus any such additional cash consideration (but not including the Per Share Cash Consideration), is equal to the result of (i) the number of shares of TC Common Shares outstanding at the Effective Time, multiplied by (ii) the Per Share Stock Consideration, multiplied by (iii) $21.36.

Provided, however, that in the event PUB determines to pay the increase described in the preceding sentence, PUB may elect to pay the amount of such increase in cash or in PUB Common Shares (valued at the Closing Market Price).

If PUB makes the election contemplated by the preceding sentence within such five Business Day period, it shall give prompt written notice to TC of such election and the revised consideration, whereupon no termination shall have occurred pursuant to this Section 8.1 and this Agreement shall remain in effect in accordance with its terms (except as such consideration shall have been so modified).

If PUB elects to exercise its termination right pursuant to this Section 8.1, it shall give prompt (but in any case within 24 hours of such determination) written notice thereof to TC. During the five Business Day period commencing with its receipt of such notice, TC may, at its option:

(a)in the case of Section 8.1(g)(i), decrease the number of PUB Common Shares to be delivered for each TC Common Share pursuant to Section 2.2(a)(ii) to an amount equal to the quotient obtained by dividing (a) the quotient obtained by dividing (i) the result of (A) the number of TC Common Shares outstanding at the Effective Time, multiplied by (B) the Per Share Stock Consideration, further multiplied by (C) $30.71, by (ii) the PUB Closing Market Price (rounded up to the nearest whole share), and (b) the number of shares of TC Common Shares outstanding at the Effective Time (prior to taking into account the declaration or effects of a stock dividend, stock split, reverse stock split or similar transaction involving the issuance of PUB Common Shares for which no consideration is received between the date of this Agreement and the Closing Date), and

(b)in the case of Section 8.1(g)(ii), decrease the number of PUB Common Shares to be delivered for each TC Common Share pursuant to Section 2.2(a)(ii) to an amount equal to the quotient obtained by dividing (a) the quotient obtained by dividing (i) the result of (A) the number of TC Common Shares outstanding at the Effective Time, multiplied by (B) the Per Share Stock Consideration, further multiplied by (C) $32.04, by (ii) the PUB Closing Market Price (rounded up to the nearest whole share), and (b) the number of shares of TC Common Shares outstanding at the Effective Time (prior to taking into account the declaration or effects of a stock dividend, stock split, reverse stock split or similar transaction involving the issuance of PUB Common Shares for which no consideration is received between the date of this Agreement and the Closing Date).

If the outstanding PUB Common Shares or any company belonging to the NASDAQ Bank Index shall be changed into a different number of shares by reason of any stock dividend, reclassification, split-up, combination, exchange of shares or similar transaction between the date of the Agreement and the end of the Price Determination Period, the Starting Price, the Closing Market Price and the other amounts in this Section 8.1 shall be appropriately adjusted.

For purposes of this Section 8.1, the following terms shall have the meanings set forth below:

“Starting Price” shall mean $26.70, which was the closing price of PUB Common Shares as of February 27, 2017.

“PUB Closing Market Price” shall be the average closing price of PUB Common Shares, calculated to four decimal places, for the Price Determination Period, as reported on the NASDAQ Capital Market.

“PUB Price Ratio” shall mean the quotient (multiplied by 100 to express such quotient as a percentage) obtained by dividing the Closing Market Price by the Starting Price, calculated to four decimal places.

“Index Ratio” shall mean the quotient (multiplied by 100 to express such quotient as a percentage) obtained by dividing the Average NASDAQ Bank Index Value For The Price Determination Period by 3,933.01, which was the closing index value of the NASDAQ Bank Index on February 27, 2017.

“Average NASDAQ Bank Index Value For The Price Determination Period” shall mean the average closing index value of the NASDAQ Bank Index for the Price Determination Period, as quoted by NASDAQ.

“Price Determination Period” means the twenty consecutive Trading Days immediately preceding the date that is ten Trading Days before the Closing Date.

“NASDAQ Bank Index” shall mean the NASDAQ Market Index Sector, having the trading symbol “IXBK,” for certain bank stocks grouped by NASDAQ.

8.2Effect of Termination. Except as provided in Sections 8.3, 8.4 and 8.5, if this Agreement is terminated pursuant to Section 8.1, this Agreement shall forthwith become void, there shall be no liability under this Agreement on the part of PUB, PIB, TC or any of their respective representatives, and all rights and obligations of each party hereto shall cease; provided, however, that, subject to Sections 8.3, 8.4 and 8.5, nothing herein shall relieve any party from liability for the breach of any of its covenants or agreements set forth in this Agreement.

8.3Expenses. Except as provided in Sections 8.4 and 8.5, all Expenses (as defined below) incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such expenses, whether or not the Merger is consummated. “Expenses” as used in this Agreement shall consist of all out-of-pocket expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement, the solicitation of shareholder approvals and all other matters related to the consummation of the Merger.

(a)In the event that this Agreement is terminated by PUB or PIB pursuant to Section 8.1(d) (other than termination resulting from failure of the conditions set forth in Sections 7.1, 7.3(e), 7.3(h), 7.3(i) or 7.3(j) to be satisfied), unless such breach of representations and warranties referenced in Section 8.1(d) is a result of the failure by PUB or PIB to perform and comply in all material respects with any of its material obligations under this Agreement, which obligations or conditions are to be performed, complied with or fulfilled by it prior to or on the date of such termination, then, provided PUB or PIB, as the case may be, is in material compliance with all of its material obligations under this Agreement, TC shall pay to PUB a termination fee of $400,000,

plus documented reasonable out-of-pocket Expenses and costs (up to a maximum of $300,000 in such Expenses and costs). Except as provided in the following sentence and in Section 8.4(b), such sums shall constitute liquidated damages and the receipt thereof shall be PUB and PIB’s sole and exclusive remedy under this Agreement. Notwithstanding the foregoing, if this Agreement is terminated by PUB or PIB as a result of TC’s willful breach of this Agreement, then in addition to recovery of its out-of-pocket expenses and costs, PUB and PIB shall be entitled to recover such other amounts, including consequential damages, as it may be entitled to receive at law or in equity. As used in this Section 8.4(a), the term “willful breach” means an intentional act of a Party, which is taken with the knowledge, after reasonable inquiry, that such act will constitute a breach of the terms of this Agreement, and which terms were not waived or breach consented to by the other Party.

(b)In the event that this Agreement is terminated (i) by PUB or PIB as a result of a breach by TC of its covenant in Section 6.5, (ii) by PUB, PIB or TC pursuant to Section 8.1(i), or (iii) within twelve (12) months after the date of termination of this Agreement, TC has either consummated or entered into a definitive agreement relating to an Acquisition Proposal which was made known to any member of the TC board of directors prior to the date of such termination, then TC shall pay to PUB a termination fee equal to $1,000,000, plus documented reasonable out-of-pocket Expenses and costs (up to a maximum of an additional $300,000 in such costs and Expenses). Except as provided in Section 8.4(a), such sums shall constitute liquidated damages and the receipt thereof shall be PUB and PIB’s sole and exclusive remedy under this Agreement; provided that in no event shall PUB or PIB be entitled to a termination fee under both Sections 8.4(a) and 8.4(b).

8.5PUB Termination Payments. In the event that this Agreement is terminated by TC pursuant to Section 8.1(e) (other than termination resulting from failure of the conditions set forth in Section 7.1 to be satisfied), unless such breach of representations of warranties referenced in Section 8.1(e) is a result of the failure by TC to perform and comply in all material respects with any of its material obligations under this Agreement, which obligations or conditions are to be performed, complied with or fulfilled by it prior to or on the date of such termination, then, provided TC is in material compliance with all of its material obligations under this Agreement, PUB or PIB, as the case may be, shall pay TC a termination fee of $400,000, plus documented out-of-pocket Expenses and costs (up to a maximum of an additional $300,000 in such expenses and costs). Except as provided in the following sentence, such sums shall constitute liquidated damages and the receipt thereof shall be PUB and PIB’s sole and exclusive remedy under this Agreement. Notwithstanding the foregoing, if this Agreement is terminated by TC as a result of PUB or PIB’s willful breach of this Agreement, then in addition to recovery of its out-of-pocket Expenses and costs, TC shall be entitled to recover such other amounts, including consequential damages, as it may be entitled to receive at law or in equity.

article 9
SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION
AND REMEDIES; CONTINUING COVENANTS

9.1Survival. If the Merger is consummated, the representations and warranties of the parties contained in this Agreement and the certificates mentioned herein shall survive the Effective Time and remain in full force and effect for a period of 18 months, which is the Survival Period; provided, however, that the representations and warranties of TC contained in Section 4.1, Section 4.2, Section 4.3, Section 4.15, Section 4.18 and Section 4.20 shall remain operative and in full force and effect until 60 days past the expiration of the applicable statute of limitations; provided, further, that that the representations and warranties of PUB and PIB contained in Sections 3.1, Section 3.2, Section 3.3 and Section 3.4 shall remain operative and in full force and effect until 60 days past the expiration of the applicable statute of limitations; provided further, however, that no right to indemnification pursuant to this Article 9 in respect of any claim based upon any failure of a representation or warranty that is set forth in a Notice of Claim delivered prior to the applicable expiration date for such representation or warranty shall be affected by the expiration of such representation or warranty; and provided, further, that such expiration shall not affect the rights of any party under this Article 9 or otherwise to seek recovery of damages arising out of any fraud or intentional breach by the other party until the expiration of the applicable statute of limitations with respect thereto. If the Merger is consummated, all covenants of the parties shall expire and be of no further force or effect as of the Effective Time, except to the extent such covenants provide that they are to be performed after the Effective Time; provided, however, that no right to indemnification pursuant to this Article 9 in respect of any claim based upon any breach of a covenant shall be affected by the expiration of such covenant.

9.2Agreement for PUB and PIB. TC agrees that PUB and PIB and their respective officers, directors, agents, representatives, shareholders and employees, and each person, if any, who controls or may control PUB or PIB, as the case may be, within the meaning of the 1933 Act (each hereinafter referred to individually as an “PUB Indemnified Person” and collectively as “PUB Indemnified Persons”) shall be indemnified from and against any and all losses, reductions in value, costs, damages, Liabilities and expenses (including reasonable attorneys’ fees, other professionals’ and experts’ fees, costs of investigation and court costs for enforcement of this indemnification right and net of any insurance recovery received in connection with such losses, costs, damages, Liabilities and expenses (hereinafter collectively referred to as “Damages”)), directly or indirectly arising out of, resulting from or in connection with:

(a)any failure of any representation or warranty made by TC in this Agreement to be true and correct as of the date of this Agreement and as of the Closing Date (as though such representation or warranty were made as of the Closing Date rather than the date of this Agreement, except in the case of any individual representation and warranty which by its terms speaks only as of a specific date or dates);

(b)any failure of any certification made by TC to be true and correct as of the date such certificate is delivered to PUB or PIB;

(c)any breach of or default in connection with any of the covenants or agreements made by TC in this Agreement;

(d)any Third-Party Claim (as defined below) relating to any breach or failure referred to in clause (a) through (c) above;

(e)any pre-closing Taxes of TC not adequately reserved against in the TC Financial Statements;

(f)any claims, costs or liabilities in respect of any wages, severance, bonuses, unpaid salary or any other form of compensation or deferred compensation made by existing or former employees, consultants or agents of TC in respect of any work or services performed at any time prior to the Effective Time in connection with the consummation of the Merger at the Effective Time;

(g)any charge-offs, losses, write-downs or expenses associated with the loans set forth on Schedule 9.2(g) for which the amount of such charge-offs exceeds the amount reserved in TC’s allowance for loan and lease losses as set forth in the TC Financial Statements as of Closing and any losses, write-downs or expenses connected with any TC OREO, offset by any gains connected with any TC OREO. The measurement of the charge-offs, losses, write-downs or expenses, net of any gains related to TC OREO (together, “Adjustments”), connected with the TC Loans and OREO will be conducted at the end of the Survival Period and any Adjustments, net of income taxes, will be an adjustment of the Escrow Amount;

(h)payments made, or not made, by PUB based upon the Capitalization Schedule set forth in Schedule 4.3 or as set forth in Section 1.2(a)(iii);

(j)any Damages relating to the issuance, vesting or exercise of TC Stock Options;

If the Merger is consummated, all Claims for indemnity made by a PUB Indemnified Person pursuant to this Section 9.2 shall be raised and managed solely by and through PUB.

To the extent that an indemnified party otherwise would receive indemnification payments under this Agreement for 100% of all Damages and liabilities that are subject to a right of indemnification under this Agreement, then the amount of the indemnification payments for such Damages and liabilities shall be reduced by the amount, if any, of the actual tax savings that

such indemnified party determines in good faith would arise for such indemnified party as a result of a deduction, credit or other Tax benefit that is actually realized by the indemnified party in the taxable period in which the indemnification payment is made. For the avoidance of doubt, the amount of any such indemnification payment in respect of Damages under this Article 9 shall be decreased by taking into account any actual resulting reduction in Taxes of the indemnified party during such current taxable period.

9.3Agreement by PUB and PIB to Indemnify. PUB and PIB shall jointly indemnify and hold harmless TC shareholders, their officers, directors, agents, representatives, owners and employees (each hereinafter referred to individually as a “Shareholder Indemnified Person” and collectively as “Shareholder Indemnified Persons”) from and against any and all Damages directly or indirectly incurred, paid or accrued arising out of, resulting from or in connection with any breach of any representation, warranty or covenant given or made by PUB or PIB in this Agreement.

(a)There shall be no indemnification obligation under Section 9.2(a) unless and until the aggregate of all Damages relating thereto for which TC shareholders would, but for this proviso, be liable exceeds on a cumulative basis when aggregating all Damages an amount equal to $75,000 (the “Threshold Amount”), and then TC shareholders shall be liable for all such Damages, including the Threshold Amount.

(b)Neither PUB nor PIB shall have any indemnification obligation under Section 9.3 unless and until the aggregate of all Damages relating thereto for which PUB or PIB would, but for this proviso, be liable, exceeds on a cumulative basis when aggregating all Damages of PUB and PIB an amount equal to the Threshold Amount, and then PUB or PIB, as the case may be, shall be liable for all such Damages, including the Threshold Amount.

(c)In no event shall the PUB Indemnified Persons be indemnified pursuant to this Article 9 in an amount in excess of the Escrow Amount, and claims on the part of the PUB Indemnified Persons shall be paid solely out of the Escrow Amount pursuant to the terms of the Escrow Agreement; provided, however, that this limitation will not apply to the breach of any covenant under this Agreement to pay any specified amount.

(d)In no event shall the aggregate total liability of PUB and PIB, collectively, for indemnification under this Article 9 exceed the amount of the Escrow Amount; provided, however, that this limitation will not apply to the breach of any covenant under this Agreement to pay any specified amount.

(e)Except for (i) injunctive or other equitable remedies available under applicable law, (ii) the Escrow Amount specifically provided for in this Agreement or (iii) any remedy available in the event of fraud or intentional breach by TC, the sole remedy available to any PUB Indemnified Person for breaches of this Agreement or otherwise in connection with the transactions contemplated by this Agreement shall be the indemnification rights provided in this Article 9.

(a)As used herein, the term “Claim” means a claim for indemnification of PUB, PIB or any other PUB Indemnified Person from a TC shareholder for Damages under this Article 9, or a claim for indemnification of any Shareholder Indemnified Person from PUB for Damages under this Article 9.

(b)PUB or a Shareholder Indemnified Person may give notice of a Claim under this Agreement, whether for its own Damages or for Damages incurred by any other PUB Indemnified Person or Shareholder Indemnified Person, as applicable, and PUB or a Shareholder Indemnified Person, as applicable, shall give written notice of a Claim (a “Notice of Claim”) to the Shareholders’ Representative or to PUB, as applicable, promptly after PUB or a Shareholder Indemnified Person becomes aware of the existence of any potential claim by a PUB Indemnified Person or a Shareholder Indemnified Person for indemnification under Article 9, arising from or relating to:

(ii)the assertion, whether orally or in writing, against PUB, PIB or any other PUB Indemnified Person or against any Shareholder Indemnified Person of a claim, demand, suit, action, arbitration, investigation, inquiry or proceeding brought by a third party against PUB, PIB or such other PUB Indemnified Person or Shareholder Indemnified Person, as applicable (in each such case, a “Third-Party Claim”), that is based on, arises out of or relates to any matter specified in Section 9.2 or Section 9.3.

(a)PUB shall determine and conduct the defense or settlement of any Third-Party Claim, provided that the Shareholders’ Representative shall have a participation right to the extent set forth below, and the costs and expenses incurred by PUB in connection with such defense or settlement (including reasonable attorneys’ fees, other professionals’ and experts’ fees and court or arbitration costs) shall be included in the Damages for which PUB may seek indemnification pursuant to a Claim made by any PUB Indemnified Person hereunder.

(b)The Shareholders’ Representative may retain separate co-counsel and participate in the defense of any Third-Party Claim and the costs and expenses incurred by the Shareholders’ Representative in connection with such defense or settlement (including attorneys’ fees, other professionals’ and experts’ fees and court or arbitration costs) shall be borne by the Shareholders’ Representative and subject to reimbursement pursuant to Section 9.9 below; provided, however, that at all times PUB shall retain control over the defense or settlements of any Third-Party Claim, and PUB will not consent to the entry of judgment or enter into any settlement with respect to the Third-Party Claim without the prior written consent of the Shareholders’ Representative, which consent shall not be unreasonably withheld, conditioned or delayed and which shall be

deemed to have been given unless the Shareholders’ Representative shall have objected within twenty (20) days after a written request for such consent by PUB. The Shareholders’ Representative shall have the right to receive copies of all pleadings, notices and communications with respect to the Third-Party Claim and PUB agrees, to the extent reasonable and appropriate, to consult with the Shareholders’ Representative to the extent that the Shareholders’ Representative participates in the defense of any Third-Party Claim.

(c)No settlement of any such Third-Party Claim with any third party claimant shall be determinative of the existence of or amount of Damages relating to such matter or the right to indemnification hereunder.

9.7Contents of Notice of Claim. Each Notice of Claim given pursuant to Section 9.5 shall contain the following information:

(a)that a PUB Indemnified Person or Shareholder Indemnified Person has directly or indirectly incurred, paid or properly accrued or, in good faith, believes it shall have to directly or indirectly incur, pay or accrue, Damages in an aggregate stated amount arising from such Claim (which amount may be an estimated amount and may be the amount of damages claimed by a third party in an action brought against any PUB Indemnified Person or Shareholder Indemnified Person based on alleged facts, which if true, would give rise to liability for Damages to such PUB Indemnified Person or Shareholder Indemnified Person under this Article 9); and

(b)a brief description, in reasonable detail (to the extent reasonably available to PUB or the Shareholder Indemnified Person), of the facts, circumstances or events giving rise to the alleged Damages based on the PUB or the Shareholder Indemnified Person’s good faith belief thereof, including the identity and address of any third-party claimant (to the extent reasonably available) and copies of any formal demand or complaint, the amount of Damages (to the extent known), or the basis for such anticipated liability, and the specific nature of the breach to which such item is related.

9.8Resolution of Notice of Claim. Each Notice of Claim given shall be resolved as follows:

(a)If, within 30 days after a Notice of Claim is received by the Shareholders’ Representative or PUB, the Shareholders’ Representative or PUB does not contest such Notice of Claim in writing to the Person seeking indemnification, the Shareholders’ Representative or PUB shall be conclusively deemed to have consented, and in the case of the Shareholders’ Representative on behalf of all TC shareholders, to the recovery by the Person seeking indemnification of the full amount of Damages (subject to the limits contained in this Article 9) specified in the Notice of Claim in accordance with this Article 9, including if applicable the forfeiture of all or a portion of the Escrow Amount equal in value to the amount of such Damages, and, without further notice, to have stipulated to the entry of a final judgment for damages against TC shareholders or PUB for such amount in any court having jurisdiction over the matter where venue is proper.

(b)If the Shareholders’ Representative or PUB gives the Person seeking indemnification written notice contesting all or any portion of a Notice of Claim (a “Contested Claim”) within the 30 day period specified in Section 9.8(a) above, then such Contested Claim shall be resolved by either (i) a written settlement agreement or memorandum executed by PUB and the Shareholders’ Representative or the applicable Shareholder Indemnified Person, or (ii) in the absence of such a written settlement agreement within 30 days following receipt of the written notice of the Contested Claim, by binding arbitration between PUB and the Shareholders’ Representative or the applicable Shareholder Indemnified Person in accordance with the terms and provisions of Section 9.8(c) below.

(c)If no such agreement can be reached after good faith negotiation, either PUB or the Shareholders’ Representative or the Shareholder Indemnified Person may, by written notice to the other applicable party, demand arbitration of the matter unless the amount of the damage or loss is at issue in pending litigation with a third party, in which event arbitration shall not be commenced until such amount is ascertained or both parties agree to arbitration; and in either such event the matter shall be settled by arbitration conducted by three arbitrators. Within 15 days after such written notice is sent, PUB (on the one hand) and the Shareholders’ Representative or the Shareholder Indemnified Person (on the other hand) shall each select one arbitrator, and the two arbitrators so selected shall select a third arbitrator. The decision of the arbitrators as to the validity and amount of any claim in any disputed Notice of Claim shall be binding and conclusive upon the parties to this Agreement.

(d)Judgment upon any award rendered by the arbitrators may be entered in any court having jurisdiction. Any such arbitration shall be held in Utah County, Utah under the commercial rules then in effect of the American Arbitration Association. The non-prevailing party to an arbitration shall pay its own expenses, the fees of each arbitrator, the administrative fee of the American Arbitration Association, and the expenses, including, without limitation, the reasonable attorneys’ fees and costs, incurred by the prevailing party to the arbitration. The arbitration panel shall be authorized to determine which party to the arbitration is the prevailing party and which party is the non-prevailing party.

9.9Appointment of Representative. By voting in favor of the Merger or participating in the Merger and accepting the benefits thereof, each TC shareholder shall be deemed to have approved the designation of and designates Jason Lindsey (the “Shareholders’ Representative”) as the representative of TC shareholders, and as the attorney-in-fact and agent for and on behalf of each such Person with respect to claims for indemnification under this Article 9 and the taking by the Shareholders’ Representative of any and all actions and the making of any decisions required or permitted to be taken by the Shareholders’ Representative under this Agreement, including the exercise of the power to: (a) give and receive notices and communications to or from PUB (on behalf of itself of any other PUB Indemnified Person) relating to this Agreement or any of the transactions and other matters contemplated hereby (except to the extent that this Agreement expressly contemplates that any such notice or communication shall be given or received by such holders or participants individually); (b) authorize the release or delivery of all or a portion of the Escrow Amount; (c) agree to, object

to, negotiate, resolve, enter into settlements and compromises of, demand arbitration or litigation of, and comply with orders of arbitrators or courts with respect to, (i) indemnification claims by PUB or any other PUB Indemnified Person pursuant to this Article 9 or (ii) any dispute between any PUB Indemnified Person and any such holder or participant, in each case relating to this Agreement; and (d) take all actions necessary or appropriate in the judgment of the Shareholders’ Representative for the accomplishment of the foregoing. The Shareholders’ Representative shall have authority and power to act on behalf of each TC shareholder with respect to the disposition, settlement or other handling of all claims under this Article 9 and all rights or obligations arising under this Article 9. The TC shareholders shall be bound by all actions taken and documents executed by the Shareholders’ Representative in connection with this Article 9, and PUB and other PUB Indemnified Persons shall be entitled to rely on any action or decision of the Shareholders’ Representative. No bond shall be required of the Shareholders’ Representative, and the Shareholders’ Representative shall receive no compensation for his services. Notices or communications to or from the Shareholders’ Representative shall constitute notice to or from each of TC shareholders. In the event of the resignation, disability or death of the Shareholders’ Representative, his replacement shall be selected by a majority in interest vote of all TC shareholders who voted in favor of the merger. The term “majority in interest vote” shall mean a vote by record holders of a majority of PUB Common Shares at the time the vote is held, provided and only to the extent such holders received such shares in exchange for the surrender of their TC Common Shares in connection with the merger. The Shareholders’ Representative (i) shall not be liable to any of the TC shareholders for any error of judgment, act done or omitted by him in good faith, or mistake of fact or law unless caused by his own gross negligence or willful misconduct; (ii) shall be reimbursed from any escrow fund established under the terms of the Merger Agreement otherwise deliverable to the TC shareholders (including the Escrow Amount), for counsel fees and other out-of-pocket expenses incurred by the Shareholders ‘ Representative in connection with the carrying out of his duties hereunder. The escrow agent thereunder shall be entitled to rely upon the instruction of such Shareholders’ Representative.

10.1Press Releases and Announcements. Any public announcement, including any announcement to employees, customers, suppliers or others having dealings with TC, or similar publicity with respect to this Agreement or the transactions contemplated by this Agreement, will be issued, if at all, at such time and in such manner as the Parties mutually agree upon, determine and approve; provided, however, that PUB will be entitled to make any public announcement that it determines in its sole discretion is required by any applicable law, regulation or rule, including without limitation, of the SEC or The Nasdaq Stock Market LLC. PUB will have the right to be present for any in-person announcement by TC. Unless consented to by PUB or required by law, TC will keep this Agreement and the transactions contemplated by this Agreement confidential.

10.2Notices. All notices and other communications hereunder shall be in writing and shall be sufficiently given if made by hand delivery, by e-mail, by overnight delivery service, or by registered or certified mail (postage prepaid and return receipt requested) to the parties at the following addresses (or at such other address for a Party as shall be specified by it by like notice):

People’s Utah Bancorp
33 East Main Street
American Fork, Utah 84003
Attention: Richard Beard and Mark Olson
e-mail: richard.beard@peoplesutah.com

Dorsey & Whitney LLP
136 South Main Street
Suite 1000
Salt Lake City, Utah
Attention: Nolan Taylor and David Marx
e-mail: marx.david@dorsey.com

Town & Country Bank, Inc.
405 East Saint George Blvd.
St. George, Utah 84770
Attention: Jason Lindsey
e-mail: jasonclindsey@gmail.com

Jones Waldo Holbrook & McDonough, PC
170 S. Main St., Suite 1500
Salt Lake City, UT 84101
Attention: Daniel Daines
email: ddaines@joneswaldo.com

440 Michael Circle
Santa Clara, Utah 84765
Attention: Jason Lindsey
e-mail: jasonclindsey@gmail.com

Jones Waldo Holbrook & McDonough, PC
170 S. Main St., Suite 1500
Salt Lake City, UT 84101
Attention: Daniel Daines
email: ddaines@joneswaldo.com

All such notices and other communications shall be deemed to have been duly given as follows: when delivered by hand, if personally delivered; three Business Days after being deposited in the mail, postage prepaid, if delivered by mail; when receipt electronically acknowledged, if e-mailed; and the next day after being delivered to an overnight delivery service.

10.3Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated by any Party to this Agreement without the prior written consent of the other Parties to this Agreement, except that PUB may assign any of its rights under this Agreement to one or more subsidiaries of PUB, so long as PUB remains responsible for the performance of all of its obligations under this Agreement. Subject to the foregoing, this Agreement and all of the provisions of this Agreement will be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and permitted assigns.

10.4No Third Party Beneficiaries. Except as set forth in article 9, nothing expressed or referred to in this Agreement confers any rights or remedies upon any person that is not a Party or permitted assign of a Party to this Agreement.

10.5Schedules. The Schedules correspond to the specific sections contained in this Agreement. Nothing in a Schedule is deemed adequate to disclose an exception to a representation or warranty made in this Agreement unless the Schedule identifies in the corresponding schedule the exception with particularity and describes the relevant facts in detail. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item is not deemed adequate to disclose an exception to a representation or warranty unless the representation or warranty relates solely to the existence of the document or other item itself. Each Schedule relates only to the representations and warranties in the section and subsection of this Agreement to which they correspond and not to any other representation or warranty in this Agreement, except that a disclosure made on any Schedule with respect to any representation or warranty shall be deemed to be made with respect to any other representation or warranty requiring the same or similar disclosure to the extent that the relevance of such disclosure to such other representation or warranty is reasonably evident from the face of the disclosure schedule. Except for the specific qualifications and exceptions disclosed in the Schedules, in the event of any inconsistency between the statements in this Agreement and the statements in a Schedule, the statements in this Agreement will control.

10.6Interpretation. When a reference is made to a person’s knowledge, the knowledge of a person, or similar language, the term “knowledge” means the actual knowledge of any director or officer of that person, or the knowledge that it is reasonable to expect a prudent person with such a role and responsibility to hold. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. References to Sections and Articles refer to Sections and Articles of this Agreement unless otherwise stated. Words such as “herein,” “hereinafter,” “hereof,” “hereto,” “hereby” and “hereunder,” and words of like import, unless the context requires otherwise, refer to this Agreement (including the Exhibits and Schedules hereto). As used in this Agreement, the masculine, feminine and neuter genders shall be deemed to include the others if the context requires.

10.7Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the Parties shall negotiate in good faith to modify this Agreement and to preserve each Party’s anticipated benefits under this Agreement.

10.8Complete Agreement. This Agreement and the other agreements mentioned herein contains the complete agreement between the Parties and supersedes any prior understandings, agreements or representations by or between the parties, written or oral, including the letter of intent entered into between PUB, PIB and TC on March 15, 2017. TC acknowledges that PUB has made no representations, warranties, agreements, undertakings or promises except for those expressly set forth in this Agreement or in agreements referred to herein that survive the execution and delivery of this Agreement.

10.9Amendment. This Agreement may not be amended except by an instrument in writing approved by the Parties to this Agreement and signed on behalf of each of the Parties hereto.

10.10Waiver. At any time prior to the Effective Time, any Party hereto may (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto or (b) waive compliance with any of the agreements of any other parties or with any conditions to its own obligations, in each case only to the extent such obligations, agreements and conditions are intended for its benefit.

10.11Governing Law. THE DOMESTIC LAW, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, OF THE STATE OF UTAH WILL GOVERN ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE PERFORMANCE OF THE OBLIGATIONS IMPOSED BY THIS AGREEMENT.

10.12Specific Performance. Each of the parties acknowledges and agrees that the subject matter of this Agreement, including the business, assets and properties of TC, is unique, that the other Parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached, and that the remedies at law would not be adequate to compensate such other Parties not in default or in breach. Accordingly, each of the Parties agrees that the other Parties will be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions of this Agreement in addition to any other remedy to which they may be entitled, at law or in equity (without any requirement that PUB provide any bond or other security). The Parties waive any defense that a remedy at law is adequate and any requirement to post bond or provide similar security in connection with actions instituted for injunctive relief or specific performance of this Agreement.

10.13Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 10.13.

10.14Investigation of Representations, Warranties and Covenants. No investigation made by or on behalf of the Parties hereto or the results of any such investigation shall constitute a waiver of any representation, warranty or covenant of any other Party.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the date first written above by their respective duly elected and authorized officers.

This AMENDMENT NO. 1 TO MERGER AGREEMENT (this “Amendment”) is made effective as of August 31, 2017 by and among People’s Utah Bancorp, a Utah corporation (“PUB”), People’s Intermountain Bank, a Utah state bank (“PIB”), Town & Country Bank, Inc., a Utah state bank (“TC”) and the Shareholders’ Representative. PUB, PIB and TC are each referred to in this Amendment as a “Party” and collectively as the “Parties.”.

WHEREAS, the Parties are parties to that certain Merger Agreement dated as of May 31, 2017 (the “Merger Agreement”);

WHEREAS, the Parties desire to amend the Merger Agreement to (i) make clear that the Parties desire for the Merger (as defined in the Merger Agreement) to close at a month-end, (ii) change the measurement date for TC Annualized Net Income (as that term is defined in the Merger Agreement) and (iii) change the date of TC’s balance sheet required to be delivered to PUB and PIB;

WHEREAS, Section 10.9 of the Merger Agreement provides that the Merger Agreement may be amended by an instrument in writing approved by the Parties and signed on behalf of each of the Parties; and

WHEREAS, the Parties desire to amend the Merger Agreement as set forth in this Amendment.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

Section 1.1Amendment of Title of Merger Agreement. Effective immediately as of the date hereof, the title of the Merger Agreement shall be “Merger Agreement and Plan of Reorganization.” The Merger Agreement shall be amended in each applicable location to reflect such title.

Section 1.2Amendment of Section 1.2. Effective immediately as of the date hereof, the first paragraph of Section 1.2 of the Merger Agreement is hereby amended and restated in its entirety to read as follows:

1.2The Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) will take place at the offices of PUB or at a location otherwise agreed upon by TC and PUB. TC and PUB agree that it is desirable for the Closing to occur at the end of a calendar month, and agree that the Closing will take place at the end of the calendar month occurring subsequent to the satisfaction or waiver of the conditions in Article 7; provided, however, that PUB and TC agree to close sooner than the end of such calendar month if waiting until end of such calendar month would have an adverse impact on either PUB or TC (the “Closing Date”). The failure of the Closing will not ipso facto result in termination of this Agreement and will not relieve any party of any obligation under this Agreement.

Section 1.3Amendment of Section 2.1(k). Effective immediately as of the date hereof, Section 2.1(k) of the Merger Agreement is hereby amended and restated in its entirety to read as follows:

“(k)“TC Annualized Net Income” means TC’s 2017 net income as of July 31, 2017, calculated in accordance with GAAP and annualized based upon a 365 day year.”

Section 1.4Amendment of Section 2.1(l). Effective immediately as of the date hereof, Section 2.1(l) of the Merger Agreement is hereby amended and restated in its entirety to read as follows:

“(l)“TC Closing Capital” means (i) TC’s tangible common equity at the Closing, calculated in accordance with GAAP, plus (2) the TC Closing Capital Adjustment. An example of how TC Closing Capital shall be calculated (including certain adjustments that have been agreed to by the Parties but are not otherwise expressly stated in this Agreement) is set forth on Schedule 2.1(l).”

Section 1.5Amendment of Section 2.5. Effective immediately as of the date hereof, Section 2.5 of the Merger Agreement is hereby amended and restated in its entirety to read in full as follows:

“2.5Determination of Purchase Price and Closing Capital. No later than the twelfth (12th) Business Day before Closing, TC shall calculate in good faith the estimated Total Purchase Price and TC Closing Capital and shall provide PUB with a copy of the proposed TC financial statements for the month preceding the date of calculation (if not already provided in accordance with Section 6.3), together with internally prepared financial statements through the date of calculation, the impact of any pending adjustments required in the calculation of the TC Closing Capital, and any other documentation requested by PUB for purposes of confirming the amount of such Total Purchase Price and TC Closing Capital (including detail on the TC Transaction Expenses and TC Classified Asset and Nonaccrual Adjustment). PUB shall review such materials and, within seven (7) Business Days following receipt thereof, notify TC as to whether PUB accepts or disputes the amount of the Total Purchase Price and TC Closing Capital. If PUB disputes such calculation, it shall describe in its notice the specific changes or

adjustments that must be made. If PUB and TC are unable to resolve such dispute through good faith negotiations within three (3) Business Days after delivery of PUB’s notice of objection, then the Effective Time shall be postponed and the parties shall mutually engage and submit such dispute to, and the same shall be finally resolved by, an accounting firm that is mutually and reasonably acceptable to the parties (the “Independent Accountants”). The Independent Accountants shall determine and report in writing to PUB and TC the resolution of such disputed matters and the effect of such determinations on the calculation of the TC Closing Capital, and such determinations, as may be adjusted to reflect the delay in the Effective Time, if applicable, shall be final, binding and conclusive unless PUB and TC mutually agree upon a different amount. The fees and disbursements of the Independent Accountants shall be shared equally by PUB, on the one hand, and TC, on the other hand, and with respect to TC’s portion, shall be deducted from the TC Closing Capital. For purposes of this Agreement, “Business Day” shall mean any day other than Saturday, Sunday or a day on which banks in the state of Utah are required or permitted to be closed under federal or state law.

Section 1.6Amendment of Section 6.3. Effective immediately as of the date hereof, Section 6.3 of the Merger Agreement is hereby amended and restated in its entirety to read in full as follows:

“6.3Financial Statements and Payroll Listings. From the date of this Agreement until the Effective Time, TC shall furnish PUB and PIB with TC’s balance sheet as of the end of each calendar month and the related statements of income, within 15 days after the end of each such calendar month. Such financial statements shall be prepared on a basis consistent with the Latest TC Balance Sheet and the Related TC Statements and on a consistent basis during the periods involved and shall fairly present the financial position of TC as of the dates thereof and the results of operations of TC for the periods then ended, provided that such financial statements shall be subject to adjustments as provided by GAAP. TC shall also furnish PUB and PIB with TC’s balance sheet as of June 30, 2017, July 31, 2017 and, if the transactions contemplated by this Agreement have not yet closed by October 30, 2017, as of September 30, 2017, and the related statements of income for each quarterly or other period (together with the applicable balance sheet, the “Interim Financial Statements”), within 30 days after the end of each such quarterly or other period. The Interim Financial statements shall have been reviewed by TC’s outside accounts and shall reflect any material changes identified by such accountants during their review. TC shall make available to PUB and PIB TC’s payroll listings as of the end of each pay period, within one week after the end of such pay period.”

Section 1.7Amendment of Article VI. Effective immediately as of the date hereof, Article VI of the Merger Agreement is hereby amended by adding the following new Section 6.18:

“6.18PIB Southern Utah Advisory Board. After the Closing Date, PIB shall appoint two persons affiliated with TC to its Southern Utah Advisory Board, provided that the appointments must be reasonably acceptable to TC.”

Section 1.8Amendment of Section 7.2(b). Effective immediately as of the date hereof, Section 7.2(b) of the Merger Agreement is hereby amended and restated in its entirety to read in full as follows:

Section 1.10Amendment of Schedule 2.1(l). Effective immediately as of the date hereof, Schedule 2.1(l) to the Merger Agreement is hereby replaced in its entirety with the new Schedule 2.1(l) attached to this Amendment.

Section 2.1Effect of Amendment. This Amendment is not to be construed as a waiver of any term, condition or provision of the Merger Agreement, and that except as expressly provided for by this Amendment, all terms and conditions of the Merger Agreement as amended by this Amendment shall remain in full force and effect, without any modification whatsoever.

Section 2.2Counterparts. This Amendment may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one Party, but all such counterparts taken together shall constitute one and the same agreement.

IN WITNESS WHEREOF, the Parties have executed this Amendment No. 1 to Merger Agreement effective as of the date first written above.

This AMENDMENT NO. 2 TO MERGER AGREEMENT (this “Amendment”) is made effective as of October 25, 2017 by and among People’s Utah Bancorp, a Utah corporation (“PUB”), People’s Intermountain Bank, a Utah state bank (“PIB”), Town & Country Bank, Inc., a Utah state bank (“TC”) and the Shareholders’ Representative. PUB, PIB and TC are each referred to in this Amendment as a “Party” and collectively as the “Parties.”

WHEREAS, the Parties are parties to that certain Merger Agreement dated as of May 31, 2017, as amended on September 1, 2017 (the “Merger Agreement”);

WHEREAS, the Parties desire to amend the Merger Agreement to address the Gem Mine Litigation;

WHEREAS, Section 10.9 of the Merger Agreement provides that the Merger Agreement may be amended by an instrument in writing approved by the Parties and signed on behalf of each of the Parties; and

WHEREAS, the Parties desire to amend the Merger Agreement as set forth in this Amendment.

Section 1.2Effective immediately as of the date hereof, a new definition is added to Section 2.1 as follows: “Gem Mine Litigation” shall mean any litigation involving TC (or PIB as a successor to TC) relating to GEM Mine#1, LLC.

Section 1.3Amendment of Section 2.6. Effective immediately as of the date hereof, all references to Escrow Amount in Section 2.6 shall also include the Gem Mine Escrow Amount.

Section 1.4Amendment of Section 2.9. Effective immediately as of the date hereof, a new Section 2.9(e) is added as follows:

“Notwithstanding anything to the contrary herein, the Parties agree that they will enter into an escrow agreement relating to the Gem Mine Escrow Amount. At the Effective Time, PUB will defer payment of the Gem Mine Escrow Amount and deliver such Gem Mine Escrow Amount to the escrow agent to be released as described herein and in the escrow agreement. The escrow agreement will provide that the Gem Mine Escrow Amount will be retained in escrow until final resolution or settlement of the Gem Mine Litigation, which resolution is not subject to any appeals. After final resolution of the Gem Mine Litigation, the escrow agent shall release to the Shareholders’ Representative the Gem Mine Escrow Amount, less the amount of any indemnification payments relating to the Gem Mine Litigation owed by TC (or PIB as a successor to TC) and properly deducted therefrom pursuant to the terms of the escrow agreement. On receiving any distribution with respect to the Gem Mine Escrow Amount pursuant to the above provisions, the Shareholders’ Representative shall distribute to each holder of TC Common Shares that has delivered all of the materials required by Section 2.6 and is thus entitled to receive PUB Common Shares and cash in connection with the Merger, an amount equal to the product of (a) the amount of the Gem Mine Escrow Amount to be delivered at such time in accordance with this Agreement to the Shareholders’ Representative, multiplied by (b) the quotient obtained by dividing (i) the total number of shares of TC Common Shares held by such holder immediately prior to the Closing by (ii) the total number of TC Common Shares held by all TC shareholders that were outstanding immediately prior to the Closing. Any portion of the Gem Mine Escrow Amount delivered to the Shareholders’ Representative that is not delivered to the shareholders of TC pursuant to the prior sentence shall be delivered to PUB and shall be treated in the same manner as portions of the Exchange Fund that remain unclaimed by the TC shareholders under Section 2.6.”

Section 1.5Amendment of Section 7.3. Effective immediately as of the date hereof, a new Section 7.3(n) is hereby added as follows:

“(n)Certain Payments by TC. All amounts in respect of any bonuses or commissions earned by employees, consultants or agents of TC in respect of any work or services performed at any time prior to the Effective Time, which amounts are equal to $345,500, shall have been paid in full by TC on or prior to the Effective Time. Such payments will also have been recorded as a expense on the financial statements of TC.”

Section 1.6Amendment of Section 7.3(f). Effective immediately as of the date hereof, all references to Escrow Amount in Section 7.3(f) shall also include the Gem Mine Escrow Amount.

Section 1.7Amendment of Section 9.2. Effective immediately as of the date hereof, a new Section 9.2(n) is hereby added as follows:

Section 1.8Amendment of Section 9.4(c) and (e) and Section 9.9. Effective immediately as of the date hereof, all references to Escrow Amount in Section 9.4(c), Section 9.4(e) and Section 9.9 shall also include the Gem Mine Escrow Amount

Section 2.1Effect of Amendment. This Amendment is not to be construed as a waiver of any term, condition or provision of the Merger Agreement, and that except as expressly provided for by this Amendment, all terms and conditions of the Merger Agreement as amended by Amendment No. 1 to Merger Agreement and this Amendment shall remain in full force and effect, without any modification whatsoever.

IN WITNESS WHEREOF, the Parties have executed this Amendment No. 2 to Merger Agreement effective as of the date first written above.

It has been a delight to get to know you and get a feel for your experience in the banking industry and depth of knowledge in accounting, auditing and public company reporting. We are excited by the possibility of you joining our organization at this dynamic time in our history.

Pursuant to our recent discussions, People’s Utah Bancorp and subsidiaries (“Company or PUB”) extends to you an offer for full time employment as a Senior Vice President – Chief Financial Officer of People’s Intermountain Bank (PIB), wholly-owned subsidiary of PUB. Upon the retirement of Wolf Muelleck you will become the PUB Chief Financial Officer. This written offer is pending the results of a credit check, reference check and background investigation. The terms of your employment will be as follows:

If this offer is acceptable, please execute in the space set forth below. If you would like to discuss the terms of this letter please feel free to call me at 801.642.3130.

We are excited to move forward with this new partnership opportunity and look forward to a long and mutually beneficial relationship.

We hereby consent to the incorporation by reference in Registration Statement (File No. 333-205095) on Form S-8 of our report dated March 15, 2018, relating to our audit of the consolidated financial statements of People’s Utah Bancorp and subsidiaries and the effectiveness of internal control over financial reporting of People’s Utah Bancorp and subsidiaries, which appears in this Annual Report on Form 10-K of People’s Utah Bancorp and subsidiaries for the year ended December 31, 2017.

In connection with the annual report of People’s Utah Bancorp (the “Company”) on Form 10-K for the period ended December 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Len E. Williams, President and Chief Executive Officer, and Mark K. Olson, 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:

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)

Common shares, $0.01 par value per share		NASDAQ Capital Market
(Title of each class)		(Name of each exchange on which registered)

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

	2017				2016
	High		Low		High		Low
First quarter	$	27.30	$	23.95	$	17.46	$	14.16
Second quarter		29.35		24.63		18.02		15.41
Third quarter		33.60		26.00		21.28		16.18
Fourth quarter		33.30		29.05		27.85		18.49

			Amount of Commitment Expiration Per 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	$	637,029	$	434,406	$	95,002	$	13,520	$	94,101
Standby letters of credit		27,943		27,943		-		-		-
Credit cards		24,949		24,949		-		-		-
Operating leases		3,538		729		1,311		1,240		258
Total	$	693,459	$	488,027	$	96,313	$	14,760	$	94,359

		Page
PART I
Item 1	Business	3
Item 1A	Risk Factors	21
Item 1B	Unresolved Staff Comments	36
Item 2	Properties	36
Item 3	Legal Proceedings	36
Item 4	Mine Safety Disclosures	36
PART II
Item 5	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	37
Item 6	Selected Financial Data	39
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 7A	Quantitative and Qualitative Disclosure about Market Risk	61
Item 8	Financial Statements and Supplementary Data	64
	Report of Independent Registered Public Accounting Firm	66
	Consolidated Balance Sheets	68
	Consolidated Statements of Income	69
	Consolidated Statements of Comprehensive Income	70
	Consolidated Statements of Changes in Shareholders’ Equity	71
	Consolidated Statements of Cash Flows	72
	Notes to Audited Consolidated Financial Statements	73
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	108
Item 9A	Controls and Procedures	108
Item 9B	Other Information	108
PART III
Item 10	Directors, Executive Officers and Corporate Governance	109
Item 11	Executive Compensation	109
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	109
Item 13	Certain Relationships and Related Transactions, and Director Independence	109
Item 14	Principal Accounting Fees and Services	109
PART IV
Item 15	Exhibits, Financial Statement Schedules	110

SIGNATURES		112

	Number		Deposit
Largest	of		Market
Competitor	Branches		Share
Wells Fargo & Co.		110		29.20	%
Zions Bancorp.		99		25.89	%
JPMorgan Chase & Co.		53		22.14	%
KeyCorp		33		5.28	%
U.S Bancorp		71		3.72	%
People's Utah Bancorp		25		2.69	%
BOU Bancorp		14		1.48	%
Cache Valley Banking Co.		13		1.43	%

	Years Ended
	December 31,
(Dollars in thousands)	2017		2016		$ Change			% Change
Interest income	$	83,980	$	72,755	$	11,225			15.4	%
Interest expense		3,342		2,874		468			16.3	%
Net interest income		80,638		69,881		10,757			15.4	%
Provision for loan losses		2,750		900		1,850			205.6	%
Net interest income after provision for loan losses		77,888		68,981		8,907			12.9	%
Non-interest income		16,560		16,788		(228	)		(1.4	)%
Non-interest expense		58,125		48,886		9,239			18.9	%
Income before income tax expense		36,323		36,883		(560	)		(1.5	)%
Income tax expense		16,477		13,273		3,204			24.1	%
Net income	$	19,846	$	23,610	$	(3,764	)		(15.9	)%

	Basel III			PUB
	Regulatory			Actual as of			Actual as of
	Well Capitalized			December 31,			December 31,
	Requirement			2017			2016
CET1 risk-based capital ratio		6.50	%		13.51	%		18.93	%
Tier 1 risk-based capital		8.00	%		13.51	%		18.93	%
Total risk-based capital		10.00	%		14.67	%		20.19	%
Tier 1 leverage capital ratio		5.00	%		11.46	%		13.71	%

			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	$	205,844	$	113,347	$	52,257	$	32,018	$	8,222
Deposits without stated maturity		1,608,788		1,608,788		-		-		-
Short-term borrowings		40,000		40,000		-		-		-
Total	$	1,854,632	$	1,762,135	$	52,257	$	32,018	$	8,222

									Net Interest
									Margin
	Adjusted Net		Percentage			Net Interest			Change from
(Dollars in thousands)	Interest		Change			Margin			Base (in
Interest Rate Scenario	Income ⁽¹⁾		from Base			Percent ⁽¹⁾			basis points)
Up 300 basis points	$	86,734		2.92	%		5.07	%		0.44	%
Up 200 basis points		85,878		1.90	%		4.92	%		0.29	%
Up 100 basis points		85,048		0.91	%		4.77	%		0.14	%
BASE		84,277		0.00	%		4.63	%		0.00	%
Down 100 basis points		82,769		(1.79	)%		4.39	%		(0.24	)%

Management’s Report on Internal Controls Over Financial Reporting		65

Reports of Independent Registered Public Accounting Firm		66

Consolidated Balance Sheets as of December 31, 2016 and 2017		68

Consolidated Statements of Income for the three years ended December 31, 2017, 2016, and 2015		69

Consolidated Statements of Comprehensive Income for the three years ended December 31, 2017, 2016, and 2015		70

Consolidated Statements of Changes in Shareholders’ Equity for the three years ended December 31, 2017, 2015, and 2015		71

Consolidated Statements of Changes in Cash Flows for the three years ended December 31, 2017, 2016, and 2015		72

Notes to Consolidated Financial Statements		73

The following unaudited supplementary data is included in this Annual Report on Form 10-K on the page indicated:

Consolidated Quarterly Financial Data (Unaudited)

	Available-for-sale				Held-to-maturity
	Amortized		Fair		Amortized		Fair
(Dollars in thousands)	Cost		Value		Cost		Value
Securities maturing in:
One year or less	$	2,973	$	3,007	$	7,554	$	7,543
After one year through five years		63,235		62,721		44,502		44,253
After five years through ten years		72,401		71,224		16,266		16,152
After ten years		127,251		126,104		6,332		6,353
	$	265,860	$	263,056	$	74,654	$	74,301

(Dollars in thousands)	Acquisition Date
Contractually required principal payments receivable	$	359,624
Adjustment for credit, interest rate and liquidity		(7,259	)
Fair value of performing purchased loans	$	352,365

(Dollars in thousands)	Acquisition Date
Contractually required payments including interest	$	15,535
Amounts not expected to be collected - nonaccretable difference		(4,584	)
Cash flows expected to be collected		10,951
Accretable yield		(1,200	)

Fair value of PCI loans	$	9,751

(Dollars in thousands)	Performing Purchased Loans		PCI Loans		Total Acquired Loans
Commercial real estate loans:
Real estate term	$	220,009	$	1,013	$	221,022
Construction and land development		27,030		651		27,681
Total commercial real estate loans		247,039		1,664		248,703
Commercial and industrial loans		59,093		7,010		66,103
Consumer loans:
Residential and home equity		30,871		-		30,871
Consumer and other		8,770		-		8,770
Total consumer loans		39,641		-		39,641
Total loans carrying balance	$	345,773	$	8,674	$	354,447

Total loans unpaid principal balance	$	354,309	$	12,414	$	366,723

(Dollars in thousands)	Amount
2018	$	729
2019		680
2020		630
2021		629
2022 and beyond		870
	$	3,538

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.

	Carrying		Estimated
(Dollars in thousands)	Amount		Fair Value
As of December 31, 2017
Financial Assets:
Net loans held for investment	$	1,609,141	$	1,607,388
Financial Liabilities:
Interest bearing deposits		1,173,508		1,172,979

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

Exhibit Number		Description

2.1#		Purchase and Assumption Agreement between Banner Bank and People’s Intermountain Bank dated July 26, 2017 ⁽⁵⁾
2.2#		First Amendment to Purchase and Assumption Agreement between Banner Bank and People’s Intermountain Bank dated October 4, 2017 ⁽⁶⁾
2.3#		Merger Agreement among People’s Utah Bancorp, People’s Intermountain Bank, Town & Country Bank, Inc. and the Shareholders’ Representative dated May 31, 2017
2.4#		Amendment No. 1 to Merger Agreement dated August 31, 2017
2.5#		Amendment No. 2 to Merger Agreement dated October 25, 2017
3.1		Amended and Restated Articles of Incorporation of People’s Utah Bancorp ⁽¹⁾
3.2		Amended and Restated Bylaws of People’s Utah Bancorp ⁽¹⁾
4.1		Specimen Share Certificate for Common Shares of People’s Utah Bancorp ⁽³⁾
10.1*		People’s Utah Bancorp 2014 Incentive Plan ⁽¹⁾
10.2*		People’s Utah Bancorp Amended and Restated 2008 Incentive Plan ⁽¹⁾
10.3*		People’s Utah Bancorp Incentive Plan (1999 Incentive Plan) and all amendments thereto ⁽¹⁾
10.4*		People’s Utah Bancorp Deferred Compensation Plan for Directors ⁽¹⁾
10.5*		Form of 2014 Incentive Plan Notice of Stock Option Grant and Stock Option Agreement ⁽¹⁾
10.6*		Form of 2014 Incentive Plan Restricted Stock Unit Award Agreement ⁽¹⁾
10.7		Form of Director and Officer Indemnification Agreement ⁽²⁾
10.8*		Employment Agreement by and between People’s Utah Bancorp, People’s Intermountain Bank and Len E. Williams⁽⁴⁾
10.9*		Employment Agreement by and between People’s Utah Bancorp, People’s Intermountain Bank and Mark K. Olson
21		Subsidiaries of the Company ⁽⁷⁾
23		Consent of Tanner LLC
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 Annual Report on Form 10-K for the year ended December 31, 2017 is formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements

/s/ Len E. Williams		Director, President and Chief Executive Officer
Len E. Williams		(Principal Executive Officer)

/s/ Mark K. Olson		Executive Vice President and Chief Financial Officer
Mark K. Olson		(Principal Financial and Accounting Officer)

/s/ Paul R. Gunther		Director, Chairman
Paul R. Gunther

/s/ Dale O. Gunther		Director, Vice Chairman
Dale O. Gunther
/s/ David G. Anderson David G. Anderson /s/ R. Brent Anderson R. Brent Anderson		Director, Executive Vice President and Chief Credit Officer Director

/s/ Deborah S. Bayle		Director
Deborah S. Bayle

/s/ Richard T. Beard		Director
Richard T. Beard

/s/ Matthew S. Browning		Director
Matthew S. Browning

/s/ Fred W. Fairclough Jr.		Director
Fred W. Fairclough Jr. /s/ Jonathan B. Gunther Jonathan B. Gunther /s/ Wolfgang T. N. Muelleck Wolfgang T. N. Muelleck		Director Director
/s/ Douglas H. Swenson		Director
Douglas H. Swenson

			Page
ARTICLE 1 MERGER			1

	1.1	Effect of Merger	1
	1.2	The Closing	2

ARTICLE 2 EFFECT OF MERGER ON THE CAPITAL SHARES OF THE CONSTITUENT CORPORATION; EXCHANGE OF CERTIFICATES			4

	2.1	Definitions	4
	2.2	Effect on Equity Interests	6
	2.3	Cancellation of Old Shares	6
	2.4	Excess TC Closing Capital Payment	6
	2.5	Determination of Purchase Price and Closing Capital	7
	2.6	Payment and Exchange	7
	2.7	Withholding Rights	9
	2.8	Fractional Shares	9
	2.9	Escrow	9
	2.10	Dissenting Shares	10

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PUB AND PIB			11

	3.1	Organization and Qualification	11
	3.2	Authority Relative to this Agreement; Non-Contravention	11
	3.3	Validity of PUB Common Shares	12
	3.4	Capitalization	12
	3.5	SEC Filings and Financial Statements	12
	3.6	No Material Adverse Change	13
	3.7	Litigation	13
	3.8	Compliance with Laws; Permits	13
	3.9	Regulatory Approvals	14
	3.10	Intended Tax Treatment	14
	3.11	Fairness Hearing and Proxy Statement Information	14

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF TC			14

	4.1	Organization and Qualification	14
	4.2	Authority Relative to this Agreement; Non-Contravention	15
	4.3	Capitalization	15
	4.4	Financial Statements	15
	4.5	Loans	16
	4.6	Loan Guarantees	17
	4.7	Reports and Filings	17

	10.13	Waiver of Jury Trial	58
	10.14	Investigation of Representations, Warranties and Covenants	58

SIGNATURES			S-1
TABLE OF DEFINITIONS			DEF-1

PEOPLE’S UTAH BANCORP

By:		/s/ Richard T. Beard
Name:		Richard T. Beard
Title:		President & CEO

PEOPLE’S INTERMOUNTAIN BANK

By:		/s/ Richard T. Beard
Name:		Richard T. Beard
Title:		CEO

TOWN & COUNTRY BANK, INC.

By:		/s/ Kurt C. Johnson
Name:		Kurt C. Johnson
Title:		Chairman of the Board

SHAREHOLDERS’ REPRESENTATIVE

By:		/s/ Jason Lindsey
Name:		Jason Lindsey, an individual

TABLE OF DEFINITIONS
Defined Term	Section
1933 Act	3.2(b)
Acquisition Proposal	6.5(a)(ii)
Acquisition Transaction	6.5(a)(i)
Adjustments	9.2(g)
Agreement	Initial paragraph
Average NASDAQ Bank Index Value For the Price Determination Period	8.1
PIB	Initial paragraph
Bank Holding Company Act	3.1
Bank Regulators	4.23
Benefit Plans	4.20(a)
Board Recommendation	6.9(a)
Business Day	2.5
Charter	3.2(b)
Claim	9.5(a)
Closing	1.2
Closing Date	1.2
Code	Preamble
Contested Claim	9.8(b)
Damages	9.2
Dissenting Shares	2.10
Division of Corporations	1.1(e)
Effective Date	1.1(e)
Effective Time	1.1(e)
Employees	4.20(a)
Encumbrance	4.13(b)
Environmental Laws	4.14
ERISA	4.20(a)
Escrow Agent	2.9(a)
Escrow Agreement	1.2(a)(viii)
Excess TC Closing Capital Payment	2.4
Exchange Act	3.5
Exchange Agent	2.6(a)
Exchange Fund	2.6(a)
Expenses	8.3
Fairness Hearing	3.2(b)
FDIC	3.2(b)
Independent Accountant(s)	2.5
Index Ratio	8.1
Intellectual Property	4.30(a)
Interim Financial Statements	6.3

TOWN & COUNTRY BANK, INC.

By:		/s/ Kurt A. Johnson
Name:		Kurt A. Johnson
Title:		Chairman of the Board

March 15, 2018	/s/ Len E. Williams
	Len E. Williams
	President and Chief Executive Officer (Principal Executive Officer)

March 15, 2018	/s/ Mark K. Olson
	Mark K. Olson
	EVP and Chief Financial Officer (Principal Financial Officer)