Publicis Groupe Annual Report 2017

FY2017 Annual Report · Publicis Groupe

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2017 ANNUAL REPORT

Dear Shareholders:

LETTER TO SHAREHOLDERS

As we begin our 105th year as an independent community bank, we are pleased with the progress we have
made in providing value for our stakeholders by delivering on our vision of being the most-distinguished
provider of financial services in the markets where we operate. 2017 was a transformational year for us as we
successfully completed the acquisition, conversion, and integration of the seven Utah Banner Bank branches
and Town & Country Bank, located in St. George, Utah. The branches acquired from Banner Bank are
strategically located in strong growth markets in Utah, including Salt Lake City, South Jordan, Provo, Orem,
Woods Cross, Salem, and Springville. We consolidated the Woods Cross and Orem branches into our existing
Bank of American Fork Bountiful and Orem branches, which significantly increased the size of these two
existing locations. We also consolidated our St. George branch with the Town & Country Bank facility,
which significantly increased the size of this combined location as well. These transactions brought with
them an incredible group of new associates who share our vision, values, work ethic, and commitment to our
customers. We are excited to have these associates as a part of our team.

These in-market transactions strengthen our standing as the largest community bank in Utah and bolster our
market presence along the I-15 corridor in the Intermountain West Region. With over $2.1 billion in assets,
we are the second largest Utah based bank, with our nearest community bank competitor approximately half
our size. We are now the largest community bank in Salt Lake County. We have a physical presence in
downtown Salt Lake City, where we are operating one of the two Salt Lake County commercial banking
centers we acquired in the Banner transaction. Our market share increased in Utah County, where we
continue to be the third largest bank and the largest community bank. We remain the second largest
community bank in Cache County and the fourth largest bank. We increased our market position in
Washington County to be the fourth largest Utah based bank and the third largest community bank in the
market. We remain the sixth largest bank in Utah and have improved our overall market position.

These transactions provide our existing customers with the added convenience and service of five new
branch locations. It gives our new customers the opportunity to enjoy outstanding personalized service and
the commitment of an over 100 year-old, Utah based community bank with 25 locations from the southern
border of Utah to Southeastern Idaho. These transactions allowed us to further deploy our solid capital base
and to strategically grow our company.

We are fortunate to be operating in one of the strongest economic markets in the country. Utah’s
unemployment rate is 3.2%, versus the national rate of 4.1%. Utah had the third fastest population growth in
the nation in 2017. Job growth was 2.9% year-over-year, versus 1.4% nationally. And Utah had the nation’s
second highest personal income growth.

Our communities matter to us and we are committed to our Utah and Idaho markets. In 2017, we donated
thousands of hours and tens of thousands of dollars to charitable organizations in the communities we serve.
These organizations include schools, libraries, nonprofits, sports teams, arts and music groups, cities, and
youth organizations. We believe success is not only reflected in the value we create for our shareholders but
also in the efforts we make to give back to the communities we serve.

The Year in Review

PUB’s theme for 2017 was growth. We achieved strong organic growth in both loans and deposits, as well as
from the two acquisition transactions. Our net income was impacted by two large, non-recurring items. We
recorded $4.8 million in non-recurring acquisition related costs for the two acquisitions. In addition, we
recorded one-time income tax expense of $4.7 million related to the re-measurement of our deferred income
tax assets related to the reduction in the Federal corporate income tax rate. Excluding these two large,
non-recurring items and the loss on sale of investment securities sold to raise liquidity to fund the acquisition
of the Utah branches of Banner Bank, we derived non-GAAP financial information related to the Company’s
core operations. We believe this non-GAAP financial information is useful in understanding our core
financial performance. The following financial highlights include these non-GAAP financial measures:

• Total deposits grew $390 million, or 27.3%, to $1.8 billion year-over-year;

• Loans held for investment grew $508 million, or 45.3% to $1.6 billion year-over-year;

• Net-interest margin widened 33 bps to 4.76% year-over-year;

• Efficiency ratio improved to 54.60% in 2017, compared with 56.41% in 2016;

• Earnings per diluted common share increased 17.7% to $1.53 in 2017, compared with $1.30 in 2016;

• Return on average assets increased to 1.57% in 2017, compared with 1.48% in 2016; and

• Return on average equity increased to 11.60% in 2017, compared with 10.68% in 2016.

As we look forward to 2018, we believe that we can continue to grow our business organically and diversify
our loan portfolio, particularly with our larger footprint. We are excited about our prospects in the Salt Lake
City market with our two Commercial Banking Centers located in downtown Salt Lake City and South
Jordan, which are focused on expanding and further diversifying our loan base with a focus on commercial
and industrial lending activities. We plan to focus on increasing our overall franchise value by continuing to
increase our overall low-cost core-deposit base. We will actively continue to evaluate other potential
acquisition opportunities, both in Utah and in states contiguous to Utah, particularly along the I-15 corridor.

We sincerely want to wish both Rick Beard and Wolf Muelleck the very best in their retirement and thank
them for their years of service and for the successes the Company has achieved as a result of their exceptional
vision and leadership. Both gentlemen will continue to give guidance to the Company as they serve on our
board of directors.

We appreciate all the many stakeholders who contributed to our success in 2017. We thank our team of
outstanding associates who live our core values each day, share in our vision, gave great effort in executing
our two acquisition transactions, and provide outstanding service to our clients. We thank our clients for their
business and loyalty. It is an honor to work with them. We deeply appreciate their confidence and trust. We
appreciate the men and women who are involved in our communities, and value the opportunity to work with
them to improve our local quality of life. And finally, we thank you, our shareholders. We are grateful for the
continued confidence that you place in People’s Utah Bancorp. We are committed to continue building value
for all of our stakeholders in the years ahead.

Sincerely,
y,

Len E. Williams
President and Chief Executive Officer

Paul R. Gunther
Chairman of the Board

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(cid:3) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017 or

(cid:4)

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number 001-37416

PEOPLE’S UTAH BANCORP
(Exact name of registrant as specified in its charter)

UTAH
(State or other jurisdiction of
incorporation or organization)

1 East Main Street, American Fork, Utah
(Address of principal executive offices)

87-0622021
(IRS Employer
Identification No.)

84003
(Zip Code)

(801) 642-3998
Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Common shares, $0.01 par value per share
(Title of each class)

NASDAQ Capital Market
(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. (cid:4) Yes No (cid:3)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. (cid:4) Yes No (cid:3)

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. (cid:3) Yes No (cid:4)

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). (cid:3) Yes No (cid:4)

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. (cid:4)

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.

Large accelerated filer
Non-accelerated filer
Emerging growth company

(cid:4)
(cid:4) (Do not check if a smaller reporting company)
(cid:3)

Accelerated filer
(cid:3)
Smaller reporting company (cid:4)

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. (cid:3)
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). (cid:4) Yes No (cid:3)
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.

Documents incorporated by Reference

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.

TABLE OF CONTENTS

Page

PART I

Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4

Business..................................................................................................................................
Risk Factors............................................................................................................................
Unresolved Staff Comments ..................................................................................................
Properties................................................................................................................................
Legal Proceedings ..................................................................................................................
Mine Safety Disclosures.........................................................................................................

PART II

Item 5

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer

Item 6
Item 7

Item 7A
Item 8

Purchases of Equity Securities ............................................................................................
Selected Financial Data ..........................................................................................................
Management’s Discussion and Analysis of Financial Condition and

Results of Operations ..........................................................................................................
Quantitative and Qualitative Disclosure about Market Risk..................................................
Financial Statements and Supplementary Data ......................................................................
Report of Independent Registered Public Accounting Firm..........................................
Consolidated Balance Sheets .........................................................................................
Consolidated Statements of Income...............................................................................
Consolidated Statements of Comprehensive Income ....................................................
Consolidated Statements of Changes in Shareholders’ Equity......................................
Consolidated Statements of Cash Flows........................................................................
Notes to Audited Consolidated Financial Statements....................................................

Item 9

Changes in and Disagreements with Accountants on Accounting and Financial

Disclosures ..........................................................................................................................
Controls and Procedures.........................................................................................................
Other Information...................................................................................................................

Item 9A
Item 9B

PART III

Item 10
Item 11
Item 12

Item 13
Item 14

Directors, Executive Officers and Corporate Governance.....................................................
Executive Compensation........................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters ............................................................................................................
Certain Relationships and Related Transactions, and Director Independence.......................
Principal Accounting Fees and Services ................................................................................

PART IV

Item 15

Exhibits, Financial Statement Schedules ...............................................................................

SIGNATURES..................................................................................................................................................

3
21
36
36
36
36

37
39

40
61
64
66
68
69
70
71
72
73

108
108
108

109
109

109
109
109

110

112

Item 1. Business

Organizational Structure

PART I

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.

Market Area

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.

Recent Developments

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.

Competition

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:

Largest
Competitor
Wells Fargo & Co. ......................
Zions Bancorp. ............................
JPMorgan Chase & Co................
KeyCorp ......................................
U.S Bancorp ................................
People's Utah Bancorp..............
BOU Bancorp..............................
Cache Valley Banking Co...........

Number
of
Branches
110
99
53
33
71
25
14
13

Deposit
Market
Share

29.20%
25.89%
22.14%
5.28%
3.72%
2.69%
1.48%
1.43%

Our Business Activities

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.

Lending

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.

Our customers are generally comprised of the following groups:

•

Real estate developers and contractors in need of land, construction and permanent financing for
commercial and residential developments;

Small to medium sized businesses in need of secured and unsecured lines of credit through SBA financing
or C&I term loans, equipment lease financing, or owner occupied commercial real estate loans;

Individuals in need of residential mortgage and consumer loan products; and

Professionals and professional firms, such as medical, architectural, engineering, and insurance and
financial firms, in need of operating facilities.

Real Estate

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:

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

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.

SBA Loans

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.

Loan Underwriting and Credit Policies:

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.

Bank Lending Authorities:

•

Individual Authorities — Branch Managers typically have credit approval authority to loan up to
$350,000 for secured loans provided there are no exceptions to loan policy. Within this authority, there
are typically sub-limits for unsecured loans, equipment secured, accounts receivable and inventory
secured loans, and other types of loans.

PIB Regional Loan Committee — The PIB Division Regional Loan Committee meets as needed, and
consists of Senior Vice President — Regional Managers. The committee has credit approval authority to
approve secured loans up to $3.0 million and unsecured loans up to $500,000.

LSB Division Loan Committee -- The LSB Division Loan Committee meets as needed and consists of
the LSB President, LSB Senior Vice President – Chief Credit Officer, and other senior lending officers.
The committee has credit approval authority to approve secured loans up to $3.0 million and unsecured
loans up to $500,000.

PIB Loan Committee — The PIB Loan Committee which generally meets twice a week, and consists of the
Executive Vice President — Chief Credit Officer, the Senior Vice President — Loan Administration, the
President/Chief Operations Officer and other senior lending officers. The committee has unlimited credit
approval authority for secured loans and unsecured loans, subject to ratification by the Board Loan
Committee for real estate secured loan total aggregate debt relationships over $6.0 million and non-real estate
secured loan total aggregate debt relationships over $2.5 million. If a credit decision requires immediate
attention, a Senior Committee (consisting of the Chief Credit Officer, Chief Credit Administration Officer,
and one Regional Loan Manager) has the same approval authority as the Loan Committee.

Board Loan Committee — The Board Loan Committee is comprised of seven directors, including our
Chairman, Vice Chairman, President and Chief Executive Officer, with five committee members
required for a quorum. All real estate secured loans and/or aggregate real estate loan secured
relationships of $6.0 million and above or total aggregate non-real estate secured debt relationships
exceeding $4.0 million require the approval of this committee. The committee meets weekly to approve
loans approved by the Bank’s Loan Committee. This committee has approval authority up to our legal
lending limit, which was approximately $38.6 million as of December 31, 2017.

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:

•

review of loans on the monthly Watch List;

specific changes in loan grades by the loan officer, upon receiving new information that adversely
impacts the borrower’s credit standing or other perceived credit risks;

random reviews of the loan portfolio conducted by senior lending officers;

loan reviews conducted by an outside loan reviewer and the internal loan reviewer;

•

bank regulatory examinations; and

monthly action plans submitted to the Chief Credit Officer by the responsible lending officers for each
credit on the Watch List.

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.

The following describes grades 7 through 9 of our loan grading system:

•

Substandard — Grade 7. Unacceptable business credit; asset is inadequately protected by the current net
worth and paying capacity of the borrower or of the collateral pledged, if any. Assets so classified must
have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Though no loss
is envisioned, the outlook is sufficiently uncertain to preclude ruling out the possibility; some
liquidation of assets may be necessary as a corrective measure. Assets in this category may demonstrate
performance problems such as cash flow deterioration trends including current or long-term debt service
deficiencies with no immediate relief; borrower’s inability to adjust to prolonged and unfavorable
industry or economic trends; management character and/or effectiveness have become suspect.

Doubtful — Grade 8. Undesirable credit with loss potential. An asset classified doubtful has all the
weaknesses inherent in one classified substandard with the added characteristics that the weaknesses
make collection or liquidation in full, on the basis of currently existing facts, conditions, and values,
highly questionable and improbable. The possibility of loss is extremely high, but because of certain
important and reasonably specific pending factors which may work to the advantage and strengthening
of the asset, its classification as an estimated loss is deferred until its more exact status may be
determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital
injection, perfecting liens on additional collateral, and refinancing plans. At the point where a loss is
identified, all or that portion deemed a loss is immediately classified as “Loss” and charged off.

Loss — Grade 9. Total loss is expected. An uncollectible asset or one of such little value that it does not
warrant classification as an active, earning asset. Such an asset may, however, have recovery or salvage
value, but not to the point of deferring full write-off, even though some recovery may occur in the
future. Our policy is to charge off such assets as a loss during the accounting period in which they were
identified. These assets have been determined to have identifiable, uncollectible components. Typically,
a partial charge-off of the loss will have occurred, and the balance remaining would be reflective of
management’s best estimate of collectability.

Our Investment Activities

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 general objectives with respect to our investment portfolio are to:

•

achieve an acceptable asset/liability gap position based on our separate policy related to asset and liability
management that provides guidance for how investments are to be used to manage asset and liability gaps;

provide liquidity necessary to meet cyclical and long-term changes in the mix of assets and liabilities;

provide a suitable balance of quality and diversification to our assets;

provide a stable flow of dependable earnings;

maintain collateral for pledging requirements; and

manage interest rate risk.

Deposit Products and Other Sources of Funds

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

•

deposits;

maturities and principal and interest payments on loans and securities; and

other short-term borrowings.

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:

•

expanding long-term business customer relationships, including referrals from our customers; and

deploying personnel to work new leads with loan officers and branch managers to obtain new business
customers.

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).

Other Products and Services

We offer a variety of other products and services, including:

•

Mobile and Internet Banking. We believe there is a strong demand for mobile and Internet banking.
These services allow both consumer and business customers to access detailed account information and
manage their accounts, including on-line balance transfers and bill payment. These services enable our
customers to conduct their banking business and monitor their bank accounts from remote locations at
any time. We believe our mobile and Internet banking services are invaluable in attracting and retaining
customers and we encourage customers to consider us for all their banking and financial needs.

Automatic Teller Machines, or ATMs. We provide ATM services at all of our branches and offer ATM
fee reimbursement to our customers, allowing them to use certain ATM networks nationwide without
paying a per transaction fee. Each checking and deposit account has a monthly reimbursement limit.
Our ATMs provide for cash withdrawals, balance transfers and inquiries, and check or cash deposits.

Treasury Management Services. We offer cash management systems and services to assist our business
customers with their day-to-day funds management. This includes the ability to originate electronic
payments and withdrawals, create wire transfers, and request stop payments.

Remote Deposit Capture. This product, branded “ExpressDeposit” and “Merchant Check Capture”,
allows businesses to send their deposits electronically to the Bank, which allows us to reach a larger
group of business customers that are not close to one of our physical locations. We believe this product
gives us an edge in gaining new customers and it contributes to the growth of our deposits. We
primarily target professional service companies, preferably with multiple offices including real estate
offices, attorneys, doctors, dentists and accountants.

Bill Pay. We offer a user-friendly bill payment product that was designed to meet our customers’ needs.
This payment system allows our customers to pay bills electronically or by check. Customers can also
utilize the bill presentment feature or future date their bills for a time period such as a vacation when
they may not be accessible at the time their bills are due.

Other Products. We offer other banking-related specialized products and services to our customers,
such as cashier’s checks, money orders, credit and debit cards, and safe deposit services.

Risk Management

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 have focused our risk management in the following areas:

•

Our Board established the Enterprise Risk Management Committee to monitor all material risks of the
Company;

Our executive management committee assesses enterprise risks monthly and takes appropriate action to
mitigate such risks, if necessary;

We have a dedicated enterprise risk management team who actively monitors enterprise risks;

Our credit department is staffed to maintain all credit policies and procedures, loan documentation,
disbursement of loan proceeds and to manage the integrity of the credit risk rating system;

Our finance department is staffed with experienced personnel to manage interest rate and liquidity risk;

Our operations administration is managed by PIB’s President and Chief Operations Officer and includes
staff experienced in compliance with banking regulations and in information technology and related
security issues;

Our Internal Audit Department reports its independent audit findings directly to our Board’s Audit and
Compliance Committee. This department also performs audits and reviews of loan grades, loan
documentation, regulatory compliance and other areas of higher risk profile; and

Our general counsel coordinates the efforts of our compliance officers with respect to our risk
management programs.

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.

Employees

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.

Website Access

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).

Supervision and Regulation

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.

General

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.

Changes as a Result of the Dodd-Frank Act

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.

Holding Company Regulation

Permitted Activities

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.

Acquisitions Subject to Prior Regulatory Approval

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.

Bank Holding Company Obligations to Bank Subsidiaries

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.

Restrictions on Bank Holding Company Dividends

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:

•

its net income available to shareholders for the past four quarters, net of dividends previously paid
during that period, is not sufficient to fully fund the dividends;

its prospective rate of earnings retention is not consistent with its capital needs and overall current and
prospective financial condition; or

it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.

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.”

Capital Regulations – U.S. Basel III Capital Rules

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.”

Bank Regulation

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.

Capital Adequacy

See “Holding Company Regulation—Capital Regulations” above.

Capitalization Levels and Prompt Corrective Action

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.

Bank Reserves

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.

Bank Dividends

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.

Limitations on Brokered Deposits

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.

Insurance of Accounts and Other Assessments

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.

Restrictions on Transactions with Affiliates

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 Insiders

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.

Change in Control

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.

Community Reinvestment Act

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.”

Interstate Branching

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.

Anti-Money Laundering and Economic Sanctions

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:

•

internal policies, procedures and controls designed to implement and maintain the bank’s compliance
with all of the requirements of the USA Patriot Act, the BSA and related laws and regulations;

systems and procedures for monitoring and reporting of suspicious transactions and activities;

a designated compliance officer;

employee training;

an independent audit function to test the anti-money laundering program;

procedures to verify the identity of each customer upon the opening of accounts; and

heightened due diligence policies, procedures and controls applicable to certain foreign accounts and
relationships.

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.

Regulatory Enforcement Authority

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.

Loan Concentrations

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.

Federal Home Loan Bank System

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.

Privacy and Data Security

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.

Consumer Laws and Regulations

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.

Other Dodd-Frank Act Reforms

Volcker Rule

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.

Executive Compensation and Corporate Governance

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.

Future Legislative and Regulatory Developments

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.

State Corporate Law Restrictions

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.

Effects of Government Monetary Policy

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.

Item 1A. Risk Factors

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.

Risks Relating to Our Business and Market

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:

•

identify suitable markets for expansion;

attract and retain qualified management;

attract funding to support additional growth;

maintain asset quality and cost controls;

maintain adequate regulatory capital and profitability to support our lending activities; and

find attractive acquisition candidates and successfully acquire and integrate the acquisitions in an
efficient manner.

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:

•

difficulties in integrating the operations, technologies, existing contracts, accounting processes and
personnel of the target and realizing the anticipated synergies of the combined businesses;

difficulties in supporting and transitioning customers of the target company;

diversion of financial and management resources from existing operations;

the price we pay or other resources that we devote may exceed the value we realize, or the value we
could have realized if we had allocated the purchase price or other resources to another opportunity;

entering new markets or areas in which we have limited or no experience;

potential loss of key associates and customers from either our business or the target’s business;

•

assumption of unanticipated problems or latent liabilities of the target; and

inability to generate sufficient revenue to offset acquisition costs.

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.

Our allowance for loan losses may not be adequate to cover actual losses.

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.

Risks Related to Our Regulatory Environment

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:

•

increases in regulatory capital requirements and additional restrictions on the types of instruments that
may satisfy such requirements;

creation of new government regulatory agencies (particularly the Consumer Financial Protection
Bureau, or CFPB, which develops and enforces rules for bank and non-bank providers of consumer
financial products);

changes to deposit insurance assessments;

regulation of debit interchange fees we earn;

changes in retail banking regulations, including potential limitations on certain fees we may charge;

changes in regulation of consumer mortgage loan origination and risk retention; and

changes in corporate governance requirements for public companies.

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 may be unable to, or choose not to, pay dividends on our common shares.

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:

•

because PUB is a legal entity separate and distinct from the Bank and does not conduct stand-alone
operations, our ability to pay dividends depends on the ability of the Bank to pay dividends to PUB and
the FDIC, the UDFI and Utah state law may, under certain circumstances, prohibit the payment of
dividends to us from the Bank;

the Federal Reserve policy requires bank holding companies to pay cash dividends on common shares
only out of net income available over the past year and only if prospective earnings retention is
consistent with the organization’s expected future needs and financial condition; and

our Board of Directors may determine that, even though funds are available for dividend payments,
retaining the funds for internal uses, such as expansion of our operations, is necessary or appropriate in
light of our business plan and objectives.

Such a failure to pay dividends may negatively impact your investment.

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.

Item 1B – Unresolved Staff Comments

None

Item 2 – Properties

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.

Item 3 – Legal Proceedings

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 4 – Mine Safety Disclosures

Not Applicable.

Part II

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:

First quarter ............................................................ $
Second quarter........................................................
Third quarter...........................................................
Fourth quarter .........................................................

27.30 $
29.35
33.60
33.30

23.95
24.63
26.00
29.05

17.46 $
18.02
21.28
27.85

14.16
15.41
16.18
18.49

2017

2016

High

Low

High

Low

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

Years Ended December 31,

2017

2016

First quarter ........................................................... $
Second quarter.......................................................
Third quarter .........................................................
Fourth quarter........................................................
Total ...................................................................... $

0.08 $
0.08
0.09
0.09
0.34 $

0.07
0.07
0.07
0.08
0.29

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.”

Unregistered securities

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.

Use of Proceeds from Initial Public Offering

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.

Issuer stock purchases

The Company made no stock repurchases during 2017 and 2016.

Stock performance graphs

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.

Item 6 – Selected Financial Data

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.

(Dollars in thousands)
Selected Balance Sheet Information:

2017

2016

As of December 31,
2015

2014

2013

51,027
Cash and cash equivalents .................................... $
337,710
Investment securities ............................................
Total loans held for investment ............................ 1,627,444
Total assets ........................................................... 2,123,529
Total deposits........................................................ 1,814,632
257,418
Shareholders’ equity .............................................

67,938
409,121
1,119,877
1,665,981
1,425,074
228,517

42,349
398,618
1,047,975
1,555,982
1,309,185
209,408

47,702
330,839
940,457
1,367,125
1,199,233
157,659

94,406
320,388
830,717
1,299,190
1,144,314
143,672

Average balances:

Average earning assets ......................................... 1,695,147
Average assets ...................................................... 1,787,810
242,759
Average shareholders' equity................................

1,516,139
1,598,198
221,044

1,391,108
1,468,942
186,889

1,250,156
1,331,291
152,788

981,661
1,039,561
126,453

(Dollars in thousands except footnotes)
Summary Income Statement Information:

2017

Years Ended December 31,
2015

2014

2016

2013

Interest income ..................................................... $
Interest expense ....................................................
Net interest income ...............................................
Provision for loan losses.......................................
Net interest income after provision for loan
losses.....................................................................
Non-interest income .............................................
Non-interest expense ............................................
Income before income tax expense ......................
Income tax expense ..............................................
Net income............................................................ $

83,980
3,342
80,638
2,750

77,888

16,560
58,125
36,323
16,477
19,846

72,755
2,874
69,881
900

68,981

16,788
48,886
36,883
13,273
23,610

64,601
2,961
61,640
1,000

60,640

16,004
46,768
29,876
10,262
19,614

Basic earnings per share ....................................... $
Diluted earnings per share ....................................
Book value per share ............................................
Tangible book value per share (1)..........................
Cash dividends per common share (4) ...................
Dividend ratio (4) ...................................................

Selected financial ratios:

Net interest margin (2) ...........................................
Efficiency ratio .....................................................
Non-interest income to average assets..................
Non-interest expense to average assets ................
Return on average assets.......................................
Return on average equity ......................................
Non-performing assets to total assets ...................
Loans held for investment to deposits ..................
Net charge-offs (recoveries) to average loans ......

Capital Ratios:

Tier 1 leverage capital ..........................................
Total risk-based capital.........................................
Average equity to average assets..........................
Tangible common equity to tangible assets (3)......

1.10
1.08
13.91
12.29
0.34
30.77%

4.76%
59.80%
0.93%
3.25%
1.11%
8.18%
0.18%
89.68%
0.09%

11.46%
14.67%
13.58%
10.87%

1.33
1.30
12.82
12.79
0.29
21.77%

4.61%
56.41%
1.05%
3.06%
1.48%
10.68%
0.34%
78.58%
-0.02%

13.71%
20.19%
13.83%
13.69%

1.21
1.17
11.92
11.88
0.18
15.22%

4.43%
60.23%
1.09%
3.18%
1.34%
10.49%
0.51%
80.05%
0.06%

13.42%
19.02%
12.72%
13.42%

58,203
3,260
54,943
1,700

53,243

15,241
45,333
23,151
8,246
14,905

1.02
0.98
10.68
10.63
0.22

21.76%

4.39%
64.59%
1.14%
3.41%
1.12%
9.76%
0.70%
78.42%
0.11%

11.32%
16.01%
11.48%
11.48%

45,657
3,337
42,320
1,500

40,820

14,271
36,875
18,216
6,338
11,878

0.92
0.89
9.83
9.75
0.13
14.13%

4.31%
65.16%
1.37%
3.55%
1.14%
9.39%
1.61%
72.60%
0.13%

11.06%
16.27%
12.16%
10.98%

(1)

(2)

(3)

(4)

Represents the sum of total shareholders’ equity less intangible assets all divided by common shares outstanding.
Intangible assets were $29.9 million, $581,000, $679,000, $776,000 and $1.2 million at December 31, 2017, 2016, 2015,
2014 and 2013, respectively.
Net interest margin is defined as net interest income divided by average earning assets.
Represents the sum of total shareholders’ equity less intangible assets all divided by the sum of total assets less intangible assets.
Dividends per common share for 2015 do not include a dividend on fourth quarter of 2015 earnings of $0.07 per share
which was declared and paid subsequent to December 31, 2015. Total dividends declared on 2015 earnings were $0.25 per
share or a dividend yield of 21.52%.

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.

FORWARD-LOOKING STATEMENTS

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:

•

•
•

•

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

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

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

higher defaults on our loan portfolio than we expect;

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

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

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

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

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

technological changes;

regulatory or judicial proceedings; and

other factors and risks including those described under “Risk Factors” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations.”

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.

Overview

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.

Mergers & Acquisitions

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.

Critical Accounting Policies

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.

Impact of Recently Issued Accounting Standards

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:

•

FASB ASC Topic 220, Balance Sheet;

FASB ASC Subtopic 310-20, Nonrefundable Fees and Other Costs;

FASB ASC Topic 250, Accounting Changes and Error Corrections;

FASB ASC Topic 350, Goodwill and Other Intangibles;

FASB ASC Topic 606, Revenue from Contracts with Customers;

FASB ASC Topic 230, Statement of Cash Flows;

FASB ASC Topic 326, Financial Statements-Credit Losses

FASB ASC Topic 842, Leases;

FASB ASC Subtopic 825-10, Overall Financial Instruments; and

FASB ASC Topic 805, Business Combinations.

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.”

Non-GAAP Financial Measures

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

(Dollars in thousands except per share amounts)

Revenue from Core Operations
Net interest income (GAAP) ................................................................ $
Total non-interest income..................................................................
Total GAAP revenues ..........................................................................
Exclude net loss on sale of investment securities..............................
Revenue from core operations (non-GAAP)........................................ $

Years Ended December 31,
2016

2017

2015

80,638 $
16,560
97,198
499
97,697 $

69,881 $
16,788
86,669
-

86,669 $

61,640
16,004
77,644
-
77,644

Non-interest Income from Core Operations
Total non-interest income (GAAP) ...................................................... $
Exclude net loss on sale of investment securities..............................
Non-interest income from core operations (non-GAAP) ..................... $

16,560 $
499
17,059 $

16,788 $

16,004
-
16,004

Non-interest Expense from Core Operations
Total non-interest expense (GAAP) ..................................................... $
Exclude acquisition-related costs ......................................................
Non-interest expense from core operations (non-GAAP).................... $

58,125 $
(4,784)
53,341 $

48,886 $

46,768
-
46,768

Net Income from Core Operations
Net income (GAAP)............................................................................. $
Exclude net loss on sale of investment securities..............................
Exclude acquisition-related costs ......................................................
Exclude tax related benefit ................................................................
Write down of deferred income tax assets (DTA).............................
Net income (non-GAAP) ..................................................................... $

19,846 $
499
4,784
(1,709)
4,729
28,149 $

23,610 $

-
-
-
-

23,610 $

19,614
-
-
-
-
19,614

Non-GAAP Financial Measures (continued)

(Dollars in thousands except per share amounts)

Acquisition Accounting Impact on Net Interest Margin
Net interest income (GAAP) ............................................................... $

Exclude discount accretion (premium amortization) on
purchased loans.............................................................................. $
Exclude premium amortization on acquired certificates
of deposit ("CD") ........................................................................... $

Net interest income before acquisition accounting
impact (Non-GAAP) ........................................................................ $

Years Ended December 31,
2016

2017

2015

80,638

69,881

61,640

(570) $

(307)

(230) $

(577) $

(578)

80,413

68,734

60,755

Average earning assets (GAAP).......................................................... $ 1,695,147
1,524
Average earning before acquired loan discount (Non-GAAP) ........... $ 1,696,671

Exclude average net loan discount on acquired loans ...................... $

$ 1,516,139
$
1,296
$ 1,517,435

$1,391,108
$
1,663
$1,392,771

Net interest margin ("NIM") (GAAP) .................................................
Exclude impact on NIM from discount accretion.............................
Exclude impact on NIM from CD premium amortization................

Net interest margin before acquisition accounting
adjustments (Non-GAAP) ................................................................

4.76%
0.00%
-0.02%

4.61%
-0.04%
-0.04%

4.43%
-0.04%
-0.02%

4.74%

4.53%

4.37%

Selected Financial Ratios

Diluted earnings per share (GAAP) .................................................... $
Diluted earnings per share (non-GAAP) ............................................. $

1.08
1.53

$
$

1.30
1.30

$
$

1.21
1.21

Efficiency ratio (GAAP)......................................................................
Efficiency ratio (non-GAAP) ..............................................................

59.80%
54.60%

56.41%
56.41%

60.23%
60.23%

Non-interest income to average assets (GAAP)..................................
Non-interest income to average assets (non-GAAP)...........................

Non-interest expense to average assets (GAAP).................................
Non-interest expense to average assets (non-GAAP) .........................

Return on average assets (GAAP).......................................................
Return on average assets (non-GAAP)................................................

0.93%
0.95%

3.25%
2.98%

1.11%
1.57%

1.05%
1.05%

3.06%
3.06%

1.48%
1.48%

1.09%
1.09%

3.18%
3.18%

1.34%
1.34%

Return on average equity (GAAP) ......................................................
Return on average equity (non-GAAP)...............................................

8.18%
11.60%

10.68%
10.68%

10.49%
10.49%

Results of Operations

Factors that determine the level of net income include the volume of earning assets and interest bearing

liabilities, yields earned and rates paid, fee income, non-interest expense, the level of non-performing loans and
other non-earning assets, and the amount of non-interest bearing liabilities supporting earning assets. Non-interest
income 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.

2017

Years Ended December 31,
2016

2015

Interest Average

(Dollars in thousands, except footnotes) Balance Expense Rate
ASSETS

Average Income/ Yield/

Average Income/ Yield/
Balance Expense Rate

51,648 $

589

1.14% $

42,858 $

210

0.49% $

66,071 $

163

0.25%

Interest earning deposits in other banks
and federal funds sold ......................... $
Securities: (1)...........................................
Taxable securities ...............................
Non-taxable securities (2).....................

4,738
1,663
Loans (3) (4)............................................... 1,269,365 76,965
25
Non-marketable equity securities ..........
Total interest earning assets......... 1,695,147 $ 83,980

281,938
90,060

2,136

Allowance for loan losses ......................
Non-interest earning assets ....................

(17,220)
109,883
Total average assets................................. $1,787,810

LIABILITIES AND
SHAREHOLDERS’ EQUITY

Interest bearing deposits:

Short-term borrowings........................

Demand and savings accounts............ $ 680,174 $ 1,783
433
Money market accounts......................
1,059
Certificates of deposit.........................
3,275
67
3,342

183,142
161,852
Total interest bearing deposits ........ 1,025,168
7,462
Total interest bearing liabilities.......... 1,032,630
Non-interest bearing deposits ................
501,761
Total funding ........................................ 1,534,391
10,660
Other non-interest bearing liabilities .....
242,759
Shareholders’ equity ..............................

3,342

4,279
285,903
1.68%
1.85%
1,655
89,647
6.06% 1,095,619 66,600
1.17%
11
4.95% 1,516,139 $ 72,755
(16,036)
98,095
$1,598,198

2,112

3,947
257,480
1.50%
82,211
1,626
1.85%
983,294 58,861
6.08%
0.52%
4
4.80% 1,391,108 $ 64,601
(15,431)
93,265
$1,468,942

2,052

0.26% $ 607,714 $ 1,685
354
150,028
0.24%
794
168,549
0.65%
2,833
926,291
0.32%
41
12,072
0.90%
938,363
2,874
0.32%
426,487
0.22% 1,364,850
12,304
221,044

2,874

0.28% $ 557,917 $ 1,553
326
143,766
0.24%
1,076
188,433
0.47%
2,955
890,116
0.31%
6
2,607
0.34%
892,723
2,961
0.31%
379,468
0.21% 1,272,191
9,862
186,889

2,961

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 .................................
Net interest margin (5)..............................

4.63%
4.76%

4.49%
4.61%

(1)

(2)

(3)

(4)

(5)

Excludes average unrealized gains (losses) of $(1.1) million, $1.2 million and $1.7 million for the years ended December
31, 2017, 2016 and 2015, respectively which are included in non-interest earning assets.
The average yield does not include the federal tax benefits at an assumed rate of 35% related to income earned on tax-
exempt municipal securities totaling $896,000, $893,000 and $875,000 for the years ended December 31, 2017, 2016 and
2015, respectively.
Loan interest income includes loan fees of $6.4 million, $6.1 million and $4.9 million for the years ended December 31,
2017, 2016 and 2015, respectively.
Average loans do not include average non-accrual loans of $5.6 million, $5.5 million and $8.0 million for years ended
December 31, 2017, 2016 and 2015, respectively, which are included in non-interest earning assets.
Net interest margin is computed by dividing net interest income by average interest earning assets.

1.53%
1.98%
5.99%
0.19%
4.64%

0.28%
0.23%
0.57%
0.33%
0.23%
0.33%

0.23%

4.31%
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.

(Dollars in thousands)
Interest income:

Year Ended December 31,
2017 vs. 2016
Increase (Decrease) Due to:
Rate

Net

Volume

Year Ended December 31,
2016 vs. 2015
Increase (Decrease) Due to:
Rate

Net

Volume

Interest earning deposits in other banks and
federal funds sold.......................................... $
Taxable securities.............................................
Non-taxable securities......................................
Loans................................................................
Federal Home Loan Bank stock.......................
Total interest income.....................................

51 $
(60)
8
10,535
-
10,534

Interest expense:

Demand and savings accounts .........................
Money market accounts ...................................
Certificates of deposit ......................................
Short-term borrowings .....................................
Total interest expense....................................

193
78
(33)
(21)
217

Net interest income..................................... $10,317 $

328 $
519
-
(170)
14
691

379 $
459
8
10,365
14
11,225

(72) $
427
141
6,816
-
7,312

119 $
(95)
(112)
923
7
842

47
332
29
7,739
7
8,154

132
(95)
28
1
(282)
298
35
47
251
(87)
440 $10,757 $ 7,235 $ 1,006 $ 8,241

(6)
14
(176)
4
(164)

138
14
(106)
31
77

98
79
265
26
468

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

Years Ended
December 31,

(Dollars in thousands)
Interest income ........................................................ $
Interest expense .......................................................
Net interest income..................................................
Provision for loan losses..........................................
Net interest income after provision for
loan losses.............................................................
Non-interest income ................................................
Non-interest expense ...............................................
Income before income tax expense .........................
Income tax expense .................................................
Net income............................................................... $

2017

2016

$ Change

% Change

83,980 $
3,342
80,638
2,750

77,888
16,560
58,125
36,323
16,477
19,846 $

72,755 $
2,874
69,881
900

68,981
16,788
48,886
36,883
13,273
23,610 $

11,225
468
10,757
1,850

8,907
(228)
9,239
(560)
3,204
(3,764)

15.4%
16.3%
15.4%
205.6%

12.9%
(1.4)%
18.9%
(1.5)%
24.1%
(15.9)%

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:

Years Ended
December 31,

(Dollars in thousands)
Service charges on deposit accounts ....................... $
Card processing .......................................................
Mortgage banking....................................................
Net loss on sale of investment securities.................
Other operating........................................................
Total non-interest income........................................ $

2017

2016

$ Change

% Change

2,445 $
4,956
7,536
(499)
2,122
16,560 $

2,181 $
4,451
8,478
(91)
1,769
16,788 $

264
505
(942)
(408)
353
(228)

12.1%
11.3%
(11.1)%
448.4%
20.0%
(1.4)%

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:

Years Ended
December 31,

(Dollars in thousands)
Salaries and employee benefits ............................... $
Occupancy, equipment and depreciation.................
Data processing .......................................................
FDIC premiums .......................................................
Card processing .......................................................
Marketing and advertising.......................................
Acquisition-related costs .........................................
Other ........................................................................
Total non-interest expense....................................... $

2017

2016

$ Change

% Change

34,392 $
4,827
2,798
572
2,166
1,381
4,784
7,205
58,125 $

31,441 $
4,296
2,866
631
2,178
1,044
-
6,430
48,886 $

2,951
531
(68)
(59)
(12)
337
4,784
775
9,239

9.4%
12.4%
(2.4)%
(9.4)%
(0.6)%
32.3%
NM
12.1%
18.9%

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

Years Ended
December 31,

2016

2015

$ Change

% Change

72,755 $
2,874
69,881
900

68,981
16,788
48,886
36,883
13,273
23,610 $

64,601 $
2,961
61,640
1,000

60,640
16,004
46,768
29,876
10,262
19,614 $

8,154
(87)
8,241
(100)

8,341
784
2,118
7,007
3,011
3,996

12.6%
(2.9)%
13.4%
(10.0)%

13.8%
4.9%
4.5%
23.5%
29.3%
20.4%

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.

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 loan losses inherent in the loan portfolio.

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:

Years Ended
December 31,

2016

2015

$ Change

% Change

2,181 $
4,451
8,478
(91)
1,769
16,788 $

2,449 $
4,250
7,316
-
1,989
16,004 $

(268)
201
1,162
(91)
(220)
784

(10.9)%
4.7%
15.9%
NM
(11.1)%
4.9%

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:

Years Ended
December 31,

(Dollars in thousands)
Salaries and employee benefits ............................... $
Occupancy, equipment and depreciation.................
Data processing .......................................................
FDIC premiums .......................................................
Card processing .......................................................
Marketing and advertising.......................................
Other ........................................................................
Total non-interest expense....................................... $

2016

2015

$ Change

% Change

31,441 $
4,296
2,866
631
2,178
1,044
6,430
48,886 $

29,892 $
3,953
2,831
754
2,017
853
6,468
46,768 $

1,549
343
35
(123)
161
191
(38)
2,118

5.2%
8.7%
1.2%
(16.3)%
8.0%
22.4%
(0.6)%
4.5%

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.

Financial Condition

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.

Loans

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

the periods presented.

(Dollars in thousands)
Loans held for sale ............................................ $
Loans held for investment:

Commercial real estate loans:

2017
10,871 $

2016
20,826 $

December 31,
2015
17,947 $

2014
12,272 $

2013
13,555

Real estate term ...........................................
Construction and land development ............

784,148
369,590
Total commercial real estate loans............ 1,153,738
294,085

Commercial and industrial .............................
Consumer loans:

582,029
240,120
822,149
213,260

577,804 521,536 455,827
179,664 155,117 136,610
757,468 676,653 592,437
208,277 178,116 142,562

Residential and home equity........................
Consumer and other.....................................
Total consumer loans ................................

82,703
15,238
97,941
Gross loans held for investment ..................... 1,632,005 1,124,046 1,051,859 943,705 832,940
(2,223)
(4,561)
Net deferred loan fees .......................................
Loans held for investment................................. 1,627,444 1,119,877 1,047,975 940,457 830,717
(14,390)
(18,303)
Allowance for loan losses .................................
$ 816,327

Loans held for investment, net.................. $1,609,141

158,591
25,591
184,182

73,515
15,421
88,936

71,169
14,945
86,114

72,959
15,678
88,637

$1,032,418

$1,103,162

$ 925,306

(15,557)

(15,151)

(16,715)

(3,884)

(3,248)

(4,169)

(Percentage of gross loans held for investment)
Loans held for investment:

Commercial real estate loans:

Real estate term ...........................................
Construction and land development ............
Total commercial real estate loans............
Commercial and industrial .............................
Consumer loans:

Residential and home equity........................
Consumer and other.....................................
Total consumer loans ................................
Gross loans held for investment .....................

2017

2016

December 31,
2015

2014

2013

48.1%
22.6%
70.7%
18.0%

51.7%
21.4%
73.1%
19.0%

54.9%
17.1%
72.0%
19.8%

55.3%
16.4%
71.7%
18.9%

9.7%
1.6%
11.3%
100.0%

6.5%
1.4%
7.9%
100.0%

6.8%
1.4%
8.2%
100.0%

7.8%
1.6%
9.4%
100.0%

54.7%
16.4%
71.1%
17.1%

10.0%
1.8%
11.8%
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.

Contractual maturities as of December 31, 2017 are as follows:

Maturity

One

through

Five
Years

After
Five
Years

One
Year
or Less

Rate Structure for
Loans Maturing Over
One Year

Total

Fixed Rate

Adjustable
Rate

(Dollars in thousands)
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

369,590

19,256

18,760

35,061

34,565

Total commercial real estate
loans..................................... 386,997
Commercial and industrial ........... 123,066
Consumer loans:

264,477 502,264 1,153,738 145,029 621,712
70,574
118,093

294,085 100,445

52,926

Residential and home equity .....
Consumer and other ..................
Total consumer loans..............

20,060 114,548
3,158
9,428
29,488 117,706
Gross loans held for investment ..... $ 547,051 (1)$ 425,158 $ 659,796 $1,632,005 $ 274,962 $ 809,992 (1)

33,213 101,395
3,211
9,375
42,588 104,606

158,591
25,591
184,182

23,983
13,005
36,988

(1)

The sum of adjustable rate loans maturing after one year and total loans maturing within one year is $1.36
billion or 83.2% of total loans at December 31, 2017.

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:

(Dollars in thousands, except footnotes)
Non-accrual loans, not troubled-debt
restructured

Real estate term ............................................. $
Construction and land development ..............
Commercial and industrial.............................
Residential and home equity..........................
Consumer and other.......................................

Total non-accrual, not troubled-debt
restructured loans.....................................

Troubled-debt restructured loans
non-accrual ....................................................
Real estate term .............................................
Construction and land development ..............
Commercial and industrial.............................
Residential and home equity..........................
Consumer and other.......................................

Total troubled-debt restructured,
non-accrual loans .....................................
Total non-accrual loans (1) ........................
Accruing loans past due 90 days or more ........
Total non-performing loans (NPL)................
OREO ...............................................................
Total non-performing assets (NPA) (2)........... $

Accruing troubled debt restructured loans ....... $
Non-accrual troubled debt
restructured loans ..........................................
Total troubled debt restructured loans.............. $
Selected ratios:

NPL to total loans held for
investment, net............................................
NPA to total assets.........................................

2017

2016

December 31,
2015

2014

2013

644
355
1,578
-
-

2,386
378
1,211
142
14

2,961
56
1,176
631
88

1,465
578
1,787
428
63

3,943
2,625
2,147
612
123

2,577

4,131

4,912

4,321

9,450

-
296
-
-
-

296
2,873
1
2,874
994
3,868

808
396
-
-
-

1,204
5,335
22
5,357
245
5,602

1,153
1,329
21
-
-

2,503
7,415
3
7,418
568
7,986

1,106
933
1,200
289
-

3,528
7,849
15
7,864
1,673
9,537

4,801
1,417
-
1,138
-

7,356
16,806
7
16,813
4,092
$ 20,905

3,307

5,572

7,049

8,399

7,393

296
3,603

1,204
6,776

2,503
9,552

3,528
$ 11,927

7,356
$ 14,749

0.18%
0.18%

0.49%
0.34%

0.72%
0.51%

0.84%
0.70%

2.03%
1.61%

(1) We estimate that approximately $185,000 of interest income would have been recognized on loans accounted
for on a non-accrual basis for the year ended December 31, 2017 had such loans performed pursuant to
contractual terms.
As of December 31, 2017, non-performing assets had not been reduced by U.S. government guarantees of
$206,647.

(2)

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:

(Dollars in thousands)
Balance, beginning of period............................................... $
Additions .............................................................................
Write-downs ........................................................................
Sales.....................................................................................
Balance, end of period......................................................... $

December 31,

2017

2016

245 $

1,419
-
(670)
994 $

568
482
(53)
(752)
245

Allowance for Loan Losses

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:

(Dollars in thousands)
Allowance for loan losses:

2017

2016

2015

2014

2013

December 31,

Beginning balance ...................................... $

16,715

15,557

15,151

$ 14,390

$ 13,706

Loans charged off:

(350)
-

(1,098)
(359)
(231)
(2,038)

(17)
-

(1,511)
(6)
(240)
(1,774)

(32)
(396)
(350)
-
(281)
(1,059)

(705)
(26)
(949)
(16)
(356)
(2,052)

(270)
(772)
-
(57)
(197)
(1,296)

Recoveries:

Real estate term .............................................
Construction and land development..............
Commercial and industrial ............................
Residential and home equity .........................
Consumer and other ......................................
Total............................................................
Net loan recoveries (charged off) ....................
Provision for loan losses ..................................
Ending balance ........................................... $

219
129
271
151
106
876
(1,162)
2,750
18,303
Gross loans held for investment....................... $1,632,005
Average loans................................................... 1,269,365
Non-performing loans......................................
2,874
Selected ratios:

621
652
441
92
226
2,032
258
900
$
16,715
$1,124,046
1,095,619
5,357

80
46
191
67
81
465
(594)
1,000
$
15,557
$1,051,859
983,294
7,418

498
365
91
37
122
1,113
(939)
1,700
$ 15,151
$ 943,705
861,785
7,864

45
70
133
35
197
480
(816)
1,500
$ 14,390
$ 832,940
648,025
16,813

Net charge-offs to average loans...................
Provision for loan losses to average loans ....

0.09%
0.22%

-0.02%
0.08%

0.06%
0.10%

0.11%
0.20%

0.13%
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:

(Dollars in thousands)
Commercial real estate loans:

Real estate term............................................... $
Construction and land development ...............
Total commercial real estate loans...............
Commercial and industrial ................................
Consumer loans:

Residential and home equity...........................
Consumer and other ........................................
Total consumer loans ...................................
Total................................................................... $

2017

2016

2015

2014

2013

December 31,

6,706 $
6,309
13,015
4,314

6,770 $
5,449
12,219
3,718

6,783 $
3,984
10,767
3,941

5,181 $
4,425
9,606
4,608

815
159
974
18,303 $

617
161
778
16,715 $

603
246
849
15,557 $

671
266
937
15,151 $

7,268
2,915
10,183
3,105

838
264
1,102
14,390

Investments

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

(Dollars in thousands)
Available for sale securities:

U.S. Government agencies ............................................. $
Municipal securities .......................................................
Mortgage-backed securities............................................
Corporate securities........................................................
Total.............................................................................

Held to maturity securities:

Municipal securities .......................................................
Other securities...............................................................
Total.............................................................................

Total investment securities ....................................... $

December 31,
2017

December 31,
2016

December 31,
2015

48,504 $
13,454
195,262
5,836
263,056

74,654
-
74,654
337,710 $

118,603 $
25,519
181,821
9,666
335,609

73,512
-
73,512
409,121 $

103,990
37,730
181,386
9,630
332,736

63,650
2,232
65,882
398,618

The following table shows the amortized cost for maturities of investment securities and the weighted average

yields of such securities, including the benefit of tax-exempt securities:

Investment securities maturities at amortized cost as of December 31, 2017:

Within One
Year
Amount Yield

After One but
within Five
Years
Amount Yield

After Five but

within Ten Years
Amount Yield

After Ten Years
Amount Yield

Total
Amount Yield

(Dollars in thousands)
Available for sale securities:

U.S. Government agencies ..... $
Municipal securities................
Mortgage-backed securities....
Other securities.......................
Total ....................................

Held to maturity securities:

Municipal securities................
Other securities.......................
Total ....................................

2,969 3.63%

- 0.00% $ 48,950 1.54%
- 0.00% $ 44,103 1.44% $ 4,847 2.46% $
291 2.51% 13,310 2.79%
3,848 2.08%
4 4.06% 12,930 1.77% 58,706 1.70% 126,460 2.34% 198,100 2.12%
5,500 3.35%
5,000 3.35%
- 0.00%
2,973 3.63% 63,235 1.64% 72,401 1.89% 127,251 2.33% 265,860 2.07%

6,202 2.85%

500 0.00%

- 0.00%

7,554 1.27% 44,502 1.64% 16,266 1.97%
- 0.00%
7,554 1.27% 44,502 1.64% 16,266 1.97%

- 0.00%

6,332 2.33% 74,654 1.73%
- 0.00%
6,332 2.33% 74,654 1.73%

- 0.00%

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.

Deposits

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
December 31, 2017

Year Ended
December 31, 2016

Year Ended
December 31, 2015

(Dollars in thousands)
Non-interest bearing deposits .............. $ 501,761
Interest bearing deposits:

Average
Balance

Average
Rate

Average
Balance

Average
Rate

Average
Balance

Average
Rate

0.00% $ 426,487

0.00% $ 379,468

0.00%

Interest bearing demand
and savings .....................................
Money market ...................................
Certificates of deposit .......................

680,174
183,142
161,852
Total interest bearing deposits........ 1,025,168
Total average deposits.......................... $1,526,929

607,714
0.26%
150,028
0.24%
168,549
0.65%
926,291
0.32%
0.21% $1,352,778

0.28%
0.24%
0.47%
0.31%
0.21% $1,269,584

557,917
143,766
188,433
890,116

0.28%
0.23%
0.57%
0.33%
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.

Shareholders’ Equity

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.

Capital Resources

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%.

The following table sets forth our capital ratios.

CET1 risk-based capital ratio .................
Tier 1 risk-based capital .........................
Total risk-based capital ..........................
Tier 1 leverage capital ratio....................

Basel III
Regulatory
Well Capitalized
Requirement
6.50%
8.00%
10.00%
5.00%

PUB

Actual as of
December 31,
2017
13.51%
13.51%
14.67%
11.46%

Actual as of
December 31,
2016
18.93%
18.93%
20.19%
13.71%

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

Off-Balance Sheet Arrangements

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

Amount of Commitment Expiration Per Period

Total

Amounts
Other Commitments (Dollars in thousands)
Committed
Commitments to extend credit................... $ 637,029
27,943
Standby letters of credit.............................
24,949
Credit cards................................................
Operating leases.........................................
3,538
Total........................................................... $ 693,459

Less than
One Year
$ 434,406
27,943
24,949
729
$ 488,027

One to
Three
Years

Three to
Five
Years

After
Five
Years

95,002
-
-
1,311
96,313

13,520
-
-
1,240
14,760

94,101
-
-
258
94,359

Contractual Obligations

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

Contractual Obligations (Dollars in thousands)
Time certificates of deposit ....................... $ 205,844
Deposits without stated maturity ............... 1,608,788
Short-term borrowings...............................
40,000
Total........................................................... $ 1,854,632

Total

Liquidity

Less than
One Year
$ 113,347
1,608,788
40,000
$ 1,762,135

Payments Due by Period

One to
Three
Years

Three to
Five
Years

After
Five
Years

52,257
-
-
52,257

32,018
-
-
32,018

8,222
-
-
8,222

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:

(Dollars in thousands)
Federal Funds ............................................ $
Federal Home Loan Bank..........................
Federal Reserve .........................................

Total
Credit Line
Limit

25,000
480,203
20,780
$ 525,983

Current
Credit Line
Available
$

25,000
480,203
20,780
$ 525,983

Amount
Outstanding
-
$
40,000
-
40,000

Remaining
Credit Line
Available
$
25,000
$ 440,203
$
20,780
$ 485,983

Value of
Collateral
Pledged

-
664,790
21,326
$ 686,116

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.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

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.

Our sensitivity of net interest income as of December 31, 2017 is as follows:

(Dollars in thousands)
Interest Rate Scenario
Up 300 basis points................................................ $
Up 200 basis points................................................
Up 100 basis points................................................
BASE .....................................................................
Down 100 basis points ...........................................

Adjusted Net
Interest
Income (1)

Percentage
Change

from Base

Net Interest
Margin
Percent (1)

Net Interest

Margin
Change from
Base (in

basis points)

86,734
85,878
85,048
84,277
82,769

2.92%
1.90%
0.91%
0.00%
(1.79)%

5.07%
4.92%
4.77%
4.63%
4.39%

0.44%
0.29%
0.14%
0.00%
(0.24)%

(1)

These percentages are not comparable to other information discussing the percent of net interest margin since
the income simulation does not take into account loan fees.

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.

Our gap analysis as of December 31, 2017 is as follows:

Amounts Maturing or Re-pricing in

Three
Months or
Less

Over Three
Months to
Twelve
Months

Over One
Year to
Three
Years

Over
Three
Years

Non-

Sensitive

Total

(Dollars in thousands)
Interest bearing assets:

Cash and due from banks........ $
Federal funds sold...................
Investment securities ..............
Loans.......................................

7,471
1,635
7,842
667,648

-
-
13,013
218,285

-
-
64,783
434,498

-
-
251,499
299,581

-
-
573
-

7,471
1,635
337,710
1,620,012

Total interest bearing
assets .................................

Interest bearing liabilities:
Interest bearing demand
and savings...........................
Money market .........................
Certificates of deposit .............
Short-term borrowings............

684,596

231,298

499,281

551,080

573

1,966,828

739,439
230,845
39,556
40,000

-
-
75,929
-

-
-
50,247
-

-
-
40,111
-

-
-
-
-

739,439
230,845
205,843
40,000

Total interest bearing
liabilities............................ 1,049,840
Period gap.................................. $ (365,244)

75,929
$ 155,369

50,247
$ 449,034

40,111
$ 510,969

-
573

1,216,127
$ 750,701

Cumulative interest
earning assets.......................... $ 684,596
Cumulative interest
bearing liabilities .................... 1,049,840
Cumulative gap..........................
(365,244)
Cumulative interest earning
assets to cumulative interest
bearing liabilities ....................
Cumulative gap as a percent of:
Total assets..............................
Interest earning assets .............

65.21%

(17.20)%
(53.35)%

$ 915,894

$1,415,175

$1,966,255

$1,966,828

1,125,769
(209,875)

1,176,016
239,159

1,216,127
750,128

1,216,127
750,701

81.36%

120.34%

161.68%

161.73%

(9.88)%
(22.91)%

11.26%
16.90%

35.32%
38.15%

35.35%
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.

Item 8. Financial Statements and Supplemental Data

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’s Report on Internal Controls Over Financial Reporting ...........................................................

Reports of Independent Registered Public Accounting Firm...........................................................................

Consolidated Balance Sheets as of December 31, 2016 and 2017...................................................................

Consolidated Statements of Income for the three years ended December 31, 2017, 2016, and 2015 .............

Consolidated Statements of Comprehensive Income for the three years ended December 31, 2017, 2016,

and 2015 ......................................................................................................................................................

Consolidated Statements of Changes in Shareholders’ Equity for the three years ended December 31,

2017, 2015, and 2015 ..................................................................................................................................

Consolidated Statements of Changes in Cash Flows for the three years ended December 31, 2017, 2016,

and 2015 ......................................................................................................................................................

Notes to Consolidated Financial Statements ....................................................................................................

The following unaudited supplementary data is included in this Annual Report on Form 10-K on the page indicated:

Consolidated Quarterly Financial Data (Unaudited)

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Board of Directors and Shareholders

People’s Utah Bancorp

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:

(1)

(2)

(3)

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Company;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with GAAP, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of the Company; and

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.

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.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of People’s Utah Bancorp:

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.

Basis for Opinion

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.

Definition and Limitations of Internal Control over Financial Reporting

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.

/s/ TANNER LLC

Salt Lake City, Utah
March 15, 2018
We have served as the Company’s auditor since 2006

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

Cash and cash equivalents:

ASSETS

December 31,

2017

2016

Cash and due from banks ........................................................................................... $
Interest bearing deposits.............................................................................................
Federal funds sold ......................................................................................................
Total cash and cash equivalents ...........................................................................

36,235 $
13,158
1,634
51,027

Investment securities:

Available for sale, at fair value ..................................................................................
Held to maturity, at historical cost .............................................................................
Total investment securities ...................................................................................
Non-marketable equity securities..................................................................................
Loans held for sale ........................................................................................................
Loans:

263,056
74,654
337,710
3,706
10,871

26,524
37,958
3,456
67,938

335,609
73,512
409,121
1,827
20,826

Loans held for investment ..........................................................................................
Allowance for loan losses...........................................................................................
Total loans held for investment, net.....................................................................
Premises and equipment, net.........................................................................................
Goodwill........................................................................................................................
Bank-owned life insurance............................................................................................
Deferred income tax assets ...........................................................................................
Accrued interest receivable ...........................................................................................
Other intangibles ...........................................................................................................
Other real estate owned.................................................................................................
Other assets ...................................................................................................................

1,119,877
(16,715)
1,103,162
21,926
-
19,714
9,799
5,557
581
245
5,285
Total assets ............................................................................................................. $ 2,123,529 $ 1,665,981

1,627,444
(18,303)
1,609,141
30,399
26,008
23,566
8,827
7,594
3,854
994
9,832

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits:

Non-interest bearing deposits..................................................................................... $
Interest bearing deposits.............................................................................................
Total deposits .........................................................................................................
Short-term borrowings ..................................................................................................
Accrued interest payable ...............................................................................................
Other liabilities..............................................................................................................
Total liabilities........................................................................................................

1,173,508
1,814,632
40,000
353
11,126
1,866,111

641,124 $

443,100
981,974
1,425,074
3,199
305
8,886
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
178
and December 31, 2016, respectively .....................................................................
68,657
Additional paid-in capital...........................................................................................
160,692
Retained earnings .......................................................................................................
(1,010)
Accumulated other comprehensive income (loss)......................................................
Total shareholders’ equity ....................................................................................
228,517
Total liabilities and shareholders’ equity ............................................................ $ 2,123,529 $ 1,665,981

185
84,532
174,804
(2,103)
257,418

See accompanying notes to the consolidated financial statements.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except share and per share data)
Interest income

Interest and fees on loans ........................................................... $
Interest and dividends on investments........................................
Total interest income ...............................................................
Interest expense ...........................................................................
Net interest income......................................................................
Provision for loan losses.............................................................
Net interest income after provision for loan losses .................

Non-interest income

Service charges on deposit accounts ..........................................
Card processing ..........................................................................
Mortgage banking.......................................................................
Net loss on sale of investment securities....................................
Other operating...........................................................................
Total non-interest income ........................................................

Non-interest expense

Salaries and employee benefits ..................................................
Occupancy, equipment and depreciation....................................
Data processing ..........................................................................
FDIC premiums..........................................................................
Card processing ..........................................................................
Marketing and advertising..........................................................
Acquisition-related costs ............................................................
Other...........................................................................................
Total non-interest expense.......................................................
Income before income tax expense ............................................
Income tax expense ....................................................................
Net income ................................................................................... $
Earnings per common share:

Basic ........................................................................................... $
Diluted ........................................................................................ $

Weighted average common shares outstanding:

2017

Years Ended December 31,
2016

2015

76,965 $
7,015
83,980
3,342
80,638
2,750
77,888

2,445
4,956
7,536
(499)
2,122
16,560

34,392
4,827
2,798
572
2,166
1,381
4,784
7,205
58,125
36,323
16,477
19,846 $

66,600 $
6,155
72,755
2,874
69,881
900
68,981

2,181
4,451
8,478
(91)
1,769
16,788

31,441
4,296
2,866
631
2,178
1,044
-
6,430
48,886
36,883
13,273
23,610 $

1.10 $
1.08 $

1.33 $
1.30 $

58,861
5,740
64,601
2,961
61,640
1,000
60,640

2,449
4,250
7,316
-
1,989
16,004

29,892
3,953
2,831
754
2,017
853
-
6,468
46,768
29,876
10,262
19,614

1.21
1.17

Basic ...........................................................................................
Diluted ........................................................................................

18,019,643
18,447,621

17,732,920
18,214,924

16,258,424
16,829,205

See accompanying notes to the consolidated financial statements.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)
Net income ................................................................................... $
Other comprehensive income

2017

Years Ended December 31,
2016

2015

19,846 $

23,610 $

19,614

Unrealized holding losses on securities available for sale .........
Tax effect....................................................................................

(1,168)
447

(1,104)
423

Unrealized holding losses on securities available for
sale, net of tax.......................................................................
Comprehensive income............................................................... $

(721)
19,125 $

(681)
22,929 $

(1,781)
673

(1,108)
18,506

See accompanying notes to the consolidated financial statements.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the Three Years Ended December 31, 2017

Common
Shares

(Dollars in thousands, except share data)
Balance as of January 1, 2015 .................... 14,758,121 $
-

Comprehensive income ..............................
Cash dividends declared ($0.18
per share) .................................................
-
Issuance of common shares ........................ 2,657,000
Share-based compensation..........................
Exercise of stock options ............................

152,033
Balance as of December 31, 2015 ............... 17,567,154 $
-

Comprehensive income ..............................
Cash dividends declared ($0.29
per share) .................................................
Share-based compensation..........................
Exercise of stock options ............................

-
-
252,384
Balance as of December 31, 2016 ............... 17,819,538 $
-

Comprehensive income ..............................
Cash dividends declared ($0.34
per share) .................................................
Share-based compensation..........................
Reclassification of deferred tax rate
change related to AOCI ...........................
Issuance of common shares ........................
Exercise of stock options and vested
restricted stock units ................................

Additional
Paid-in Retained Comprehensive

Accumulated
Other

Amount Capital

Earnings Income (Loss) Total

148 $ 31,137 $125,595 $
- 19,614

779 $157,659
(1,108) 18,506

(2,986)
-
-
27 34,870
-
485
-
846
176 $ 67,338 $142,223 $
- 23,610

-
-
2

(5,141)
-
-
544
-
775
178 $ 68,657 $160,692 $
- 19,846

-
(2,986)
- 34,897
485
-
847
-
(329) $209,408
(681) 22,929

-
-
-

(5,141)
544
777
(1,010) $228,517
(721) 19,125

-
-

-
510

(6,106)
-

-
-

(6,106)
510

-
466,546

-
-
5 13,972

372
-

(372)

-
- 13,977

225,713
Balance as of December 31, 2017 ............... 18,511,797 $

1,393

-
185 $ 84,532 $174,804 $

1,395
(2,103) $257,418

See accompanying notes to the consolidated financial statements.

Years Ended December 31,
2016

2015

2017

19,846 $

23,610 $

19,614

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)
Cash flows from operating activities:

Net income ............................................................................................................... $
Adjustments to reconcile net income to net cash provided by
operating activities:

Provision for loan losses .......................................................................................
Depreciation and amortization ..............................................................................
Deferred income taxes ..........................................................................................
Net amortization of securities discounts and premiums .......................................
Other......................................................................................................................
Gain on sale of loans held for sale ........................................................................
Originations of loans held for sale ........................................................................
Proceeds from sale of loans held for sale..............................................................
Net changes in:

Accrued interest receivable................................................................................
Other assets ........................................................................................................
Accrued interest payable....................................................................................
Other liabilities...................................................................................................
Net cash provided by operating activities .........................................................

Cash flows from investing activities:

Net cash used in acquisition-related activities .........................................................
Net change in loans held for investment ..................................................................
Purchase of available-for-sale securities ..................................................................
Purchase of held-to-maturity securities....................................................................
Maturities/sales of available-for-sale securities .......................................................
Maturities of held-to-maturity securities..................................................................
Purchase of bank-owned life insurance....................................................................
Purchase of premises and equipment .......................................................................
Sale of other real estate owned, net of improvements..............................................
Net change of non-marketable equity securities ......................................................
Net cash used in investing activities...................................................................

Cash flows from financing activities:

2,750
2,612
3,990
2,822
(61)
(5,459)
(233,055)
248,469

(2,037)
1,551
48
(4,062)
37,414

(112,247)
(148,032)
(68,425)
(12,198)
147,351
10,278
-
(7,339)
587
(1,879)
(191,904)

900
2,527
(771)
3,080
423
(6,341)
(278,083)
281,545

210
(219)
(9)
(985)
25,887

-
(72,126)
(153,853)
(17,170)
147,413
8,923
-
(2,345)
923
417
(87,818)

Net increase in deposits............................................................................................
Issuance of common shares......................................................................................
Exercise of stock options..........................................................................................
Net change in short-term borrowings.......................................................................
Cash dividends paid .................................................................................................
Net cash provided by financing activities .........................................................
Net change in cash and cash equivalents .................................................................
Cash and cash equivalents, beginning of year.............................................................
Cash and cash equivalents, end of year ....................................................................... $

105,489
-
1,395
36,801
(6,106)
137,579
(16,911)
67,938
51,027 $

115,889
-
777
(24,005)
(5,141)
87,520
25,589
42,349
67,938 $

Supplemental disclosures of cash flow information:

Cash paid for interest................................................................................................ $
Income taxes paid..................................................................................................... $

3,294 $
13,429 $

2,552 $
13,963 $

2,670
10,192

Supplemental disclosures of non-cash transactions:

Reclassifications from loans to other real estate owned........................................... $
Dividends declared but not paid............................................................................... $
Unrealized losses on securities available for sale .................................................... $
Acquisitions:

1,419 $
- $
(1,168) $

482 $
- $
(1,104) $

-
-
(1,781)

Assets acquired ..................................................................................................... $
Liabilities assumed................................................................................................ $

416,595 $
290,371 $

- $
- $

-
-

See accompanying notes to the consolidated financial statements

1,000
2,552
(250)
3,174
364
(5,247)
(229,708)
229,280

(514)
(1,042)
(29)
3,543
22,737

-
(108,112)
(167,397)
(40,535)
125,736
9,461
(12,157)
(3,028)
1,206
384
(194,442)

109,952
34,897
847
25,708
(5,052)
166,352
(5,353)
47,702
42,349

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 —Summary of Significant Accounting Policies

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.

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.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1 —Summary of Significant Accounting Policies – Continued

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.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1 —Summary of Significant Accounting Policies – Continued

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.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1 —Summary of Significant Accounting Policies – Continued

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 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.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1 —Summary of Significant Accounting Policies – Continued

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.

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.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1 —Summary of Significant Accounting Policies – Continued

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

(Dollars in thousands, except share and per share data)
Numerator
Net income ................................................................................ $
Denominator
Weighted-average number of common shares outstanding ......
Incremental shares assumed for stock options and RSUs.........
Weighted-average number of dilutive shares outstanding ........
Basic earnings per common share............................................. $
Diluted earnings per common share.......................................... $

2017

Year ended December 31,
2016

2015

19,846 $

23,610 $

19,614

18,019,643
427,978
18,447,621

17,732,920
482,004
18,214,924

1.10 $
1.08 $

1.33 $
1.30 $

16,258,424
570,781
16,829,205
1.21
1.17

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.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1 —Summary of Significant Accounting Policies – Continued

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.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1 —Summary of Significant Accounting Policies – Continued

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.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1 —Summary of Significant Accounting Policies – Continued

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.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2 — Investment Securities

Amortized cost and approximate fair values of investment securities available for sale are summarized as follows:

(Dollars in thousands)
As of December 31, 2017
U.S. Government-sponsored
securities.........................................
Municipal securities ..........................
Mortgage-backed securities ..............
Corporate securities...........................

As of December 31, 2016
U.S. Government-sponsored
securities.........................................
Municipal securities ..........................
Mortgage-backed securities ..............
Corporate securities...........................

Amortized

Cost

Gross
Unrealized
Gain

Gross Unrealized Losses
Less
Than
12

Months

or
Longer

Months

Fair
Value

48,950
13,310
198,100
5,500
265,860 $

13
184
71
573
841 $

(6)
(22)
(1,145)
-

(1,173) $

(453)
(18)
(1,764)
(237)
(2,472) $

48,504
13,454
195,262
5,836
263,056

119,202 $

71 $

(669)

(1) $

118,603

25,176
182,867
10,000
337,245 $

401
679
28
1,179 $

(58)
(1,111)
(32)
(1,870) $

-
(614)
(330)
(945) $

25,519
181,821
9,666
335,609

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

(Dollars in thousands)
As of December 31, 2017

Amortized

Cost

Gross
Unrealized
Gain

Gross Unrealized Losses
Less
Than
12

Months

or
Longer

Months

Fair
Value

Municipal securities ....................... $
$

74,654 $
74,654 $

As of December 31, 2016

Municipal securities ....................... $
$

73,512 $
73,512 $

167 $
167 $

105 $
105 $

(293) $
(293) $

(579) $
(579) $

(227) $
(227) $

74,301
74,301

(38) $
(38) $

73,000
73,000

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2 — Investment Securities – Continued

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:

(Dollars in thousands)
Securities maturing in:

Available-for-sale

Held-to-maturity

Amortized
Cost

Fair
Value

Amortized
Cost

Fair
Value

One year or less ....................................... $
After one year through five years ............
After five years through ten years ...........
After ten years .........................................

2,973 $
63,235
72,401
127,251
265,860 $

3,007 $
62,721
71,224
126,104
263,056 $

7,554 $
44,502
16,266
6,332
74,654 $

7,543
44,253
16,152
6,353
74,301

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.

Note 3 — Loans and Allowance for Loan Losses

Loans are summarized as follows:

(Dollars in thousands)
Loans held for investment:

Commercial real estate loans:
Real estate term ................................................................. $
Construction and land development..................................
Total commercial real estate loans .................................
Commercial and industrial loans.......................................
Consumer loans:

2017

2016

784,148 $
369,590
1,153,738
294,085

582,029
240,120
822,149
213,260

Residential and home equity ..........................................
Consumer and other........................................................
Total consumer loans......................................................
Gross loans held for investment ..................................

158,591
25,591
184,182
1,632,005

72,959
15,678
88,637
1,124,046

Less:

Net deferred loan fees.....................................................
Loans held for investment ...........................................
Less: allowance for loan losses .........................................

Loans held for investment, net.................................. $

(4,561)
1,627,444
(18,303)
1,609,141 $

(4,169)
1,119,877
(16,715)
1,103,162

Changes in the allowance for loan losses are as follows:

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3 — Loans and Allowance for Loan Losses – Continued

(Dollars in thousands)
Balance at beginning of year............ $
Additions: Provisions for
loan losses .....................................
Deductions:

Gross loan charge-offs ..................
Recoveries .....................................
Net loan charge-offs ...................
Balance at end of year...................... $

(Dollars in thousands)
Balance at beginning of year............ $
Additions: Provisions for
loan losses .....................................
Deductions:

Gross loan charge-offs ..................
Recoveries .....................................
Net loan charge-offs ...................
Balance at end of year...................... $

(Dollars in thousands)
Balance at beginning of year............ $
Additions: Provisions for
loan losses .....................................
Deductions:

Gross loan charge-offs ..................
Recoveries .....................................
Net loan charge-offs ...................
Balance at end of year...................... $

Year Ended December 31, 2017
Construction Commercial Residential Consumer

Real
Estate
and Land
Term Development

and
Industrial

and Home
Equity

and
Other

Total

6,770 $

5,449 $

3,718 $

617 $

161 $ 16,715

731

1,423

406

123

2,750

(350)
219
(131)
6,706 $

-
129
129
6,309 $

(1,098)
271
(827)
4,314 $

(359)
151
(208)
815 $

(2,038)
(231)
876
106
(125)
(1,162)
159 $ 18,303

Year Ended December 31, 2016
Construction Commercial Residential Consumer

Real
Estate
and Land
Term Development

and
Industrial

and Home
Equity

and
Other

Total

6,783 $

3,984 $

3,941 $

603 $

246 $ 15,557

(617)

813

847

(72)

(71)

900

(17)
621
604
6,770 $

-
652
652
5,449 $

(1,511)
441
(1,070)
3,718 $

(6)
92
86
617 $

(1,774)
(240)
2,032
226
(14)
258
161 $ 16,715

Year Ended December 31, 2015
Construction Commercial Residential Consumer

Real
Estate
and Land
Term Development

and
Industrial

and Home
Equity

and
Other

Total

5,181 $

4,425 $

4,608 $

671 $

266 $ 15,151

1,554

(91)

(508)

(135)

180

1,000

(32)
80
48
6,783 $

(396)
46
(350)
3,984 $

(350)
191
(159)
3,941 $

-
67
67
603 $

(1,059)
(281)
465
81
(200)
(594)
246 $ 15,557

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3 — Loans and Allowance for Loan Losses Continued

Non-accrual loans are summarized as follows:

(Dollars in thousands)
Non-accrual loans, not troubled debt restructured:

Real estate term ................................................................. $
Construction and land development..................................
Commercial and industrial ................................................
Residential and home equity .............................................
Consumer and other ..........................................................

Total non-accrual loans, not troubled debt
restructured ..................................................................

Troubled debt restructured loans, non-accrual:

Real estate term .................................................................
Construction and land development..................................
Commercial and industrial ................................................
Residential and home equity .............................................
Consumer and other ..........................................................
Total troubled debt restructured loans, non-accrual .......

Total non-accrual loans................................................ $

2017

2016

644
355
1,578
-
-

2,577

-
296
-
-
-
296
2,873

2,386
378
1,211
142
14

4,131

808
396
-
-
-
1,204
5,335

2016

5,572
1,204
6,776

Troubled debt restructured loans are summarized as follows:

(Dollars in thousands)
Accruing troubled debt restructured loans........................... $
Non-accrual troubled debt restructured loans ......................

Total troubled debt restructured loans............................... $

2017

3,307
296
3,603

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.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3 — Loans and Allowance for Loan Losses Continued

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

(Dollars in thousands)
Commercial real estate:

Current

30-89 Days
Past Due

December 31, 2017
Non-
accrual

90+ Days
Past Due

Total

Past Due

Total
Loans

2,243 $

- $

644 $

2,887 $ 784,148

Real estate term ............................. $ 781,261 $
Construction and land
development ...............................

361,844
Total commercial real estate....... 1,143,105
288,297

Commercial and industrial...............
Consumer:

7,095
9,338
4,210

Residential and home equity .........
Consumer and other ......................
Total consumer ...........................

2,212
283
2,495
Total gross loans ...................... $1,613,088 $ 16,043 $

156,379
25,307
181,686

-
-
-

-
1
1
1 $

651
1,295
1,578

369,590
7,746
10,633 1,153,738
294,085
5,788

-
-
-

158,591
2,212
25,591
284
184,182
2,496
2,873 $ 18,917 $1,632,005

(Dollars in thousands)
Commercial real estate:

Current

30-89 Days
Past Due

December 31, 2016
Non-
accrual

90+ Days
Past Due

Total

Past Due

Total
Loans

Real estate term ............................. $ 577,134 $
Construction and land
development ...............................
Total commercial real estate.......
Commercial and industrial...............
Consumer:

237,433
814,567
211,143

1,701 $

- $

3,194 $

4,895 $ 582,029

1,913
3,614
906

-
-
-

774
3,968
1,211

2,687
7,582
2,117

240,120
822,149
213,260

Residential and home equity .........
Consumer and other ......................
Total consumer ...........................

71,719
15,168
86,887
Total gross loans ...................... $1,112,597 $

1,098
474
1,572
6,092 $

-
22
22
22 $

142
14
156

1,240
72,959
510
15,678
88,637
1,750
5,335 $ 11,449 $1,124,046

Credit Quality Indicators:

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

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.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3 — Loans and Allowance for Loan Losses – Continued

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:

(Dollars in thousands)
Commercial real estate:

Real estate term .............................. $
Construction and land
development ................................
Total commercial real estate........
Commercial and industrial ................
Consumer loans:

Special
Mention

December 31, 2017
Substandard
and Doubtful

Pass

Total
Loans

Total
Allowance

758,575 $

13,055 $

12,518 $

784,148 $

6,706

358,766
1,117,341
274,535

7,227
20,282
13,464

3,597
16,115
6,086

369,590
1,153,738
294,085

Residential and home equity ..........
Consumer and other........................
Total consumer ............................

152,753
25,461
178,214

Total .......................................... $ 1,570,090 $

3,913
45
3,958
37,704 $

1,925
85
2,010

158,591
25,591
184,182

24,211 $ 1,632,005 $

6,309
13,015
4,314

815
159
974
18,303

(Dollars in thousands)
Commercial real estate:

Residential and home equity ..........
Consumer and other........................
Total consumer ............................

Special
Mention

December 31, 2016
Substandard
and Doubtful

Pass

Total
Loans

Total
Allowance

565,550 $

10,609 $

5,870 $

582,029 $

6,770

234,359
799,909
205,933

69,287
15,542
84,829

2,222
12,831
2,266

1,869
-
1,869
16,966 $

3,539
9,409
5,061

1,803
136
1,939

240,120
822,149
213,260

72,959
15,678
88,637

16,409 $ 1,124,046 $

5,449
12,219
3,718

617
161
778
16,715

Total .......................................... $ 1,090,671 $

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3 — Loans and Allowance for Loan Losses – Continued

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

December 31, 2017

Real
Estate
and Land
Term Development

Construction Commercial Residential Consumer

and
Industrial

and Home
Equity

and
Other

Total

- $

3 $

41 $

101 $

- $

145

6,706
6,706 $

6,306
6,309 $

4,273
4,314 $

714
815 $

159
159 $

18,158
18,303

7,201 $

3,218 $

9,058 $

1,150 $

- $

20,627

25,591 1,611,378
Total gross loans......................... $ 784,148 $ 369,590 $ 294,085 $ 158,591 $ 25,591 $1,632,005

366,372 285,027 157,441

776,947

Construction Commercial Residential Consumer

December 31, 2016

Real
Estate
and Land
Term Development

and
Industrial

and Home
Equity

and
Other

Total

189 $

67 $

323 $

75 $

- $

654

6,581
6,770 $

5,382
5,449 $

3,395
3,718 $

542
617 $

161
161 $

16,061
16,715

(Dollars in thousands)
Allowance for loan losses:
Individually evaluated for
impairment .................................
Collectively evaluated for
impairment .................................

Total............................................ $

Outstanding loan balances:
Individually evaluated for
impairment .................................
Collectively evaluated for
impairment .................................

(Dollars in thousands)
Allowance for loan losses:
Individually evaluated for
impairment .................................
Collectively evaluated for
impairment .................................

Total............................................ $

Outstanding loan balances:
Individually evaluated for
impairment .................................
Collectively evaluated for
impairment .................................

5,778 $

2,995 $

6,045 $

1,476 $

- $

16,294

15,678 1,107,752
Total gross loans......................... $ 582,029 $ 240,120 $ 213,260 $ 72,959 $ 15,678 $1,124,046

237,125 207,215

576,251

71,483

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3 — Loans and Allowance for Loan Losses – Continued

Information on impaired loans is summarized as follows:

(Dollars in thousands)
Commercial real estate:

Residential and home equity ..........
Consumer and other........................
Total consumer ............................

Total .......................................... $

(Dollars in thousands)
Commercial real estate:

Residential and home equity ..........
Consumer and other........................
Total consumer ............................

Total .......................................... $

December 31, 2017

Recorded Investment

Unpaid
Principal
Balance

With No
Allowance

With
Allowance

Total
Recorded
Investment

Related
Allowance

8,681 $

7,201 $

- $

7,201 $

4,397
13,078
16,102

3,022
10,223
8,290

196
196
768

3,218
10,419
9,058

1,150
-
1,150
30,330 $

229
-
229
18,742 $

921
-
921
1,885 $

1,150
-
1,150
20,627 $

3
3
41

101
-
101
145

December 31, 2016

Recorded Investment

Unpaid
Principal
Balance

With No
Allowance

With
Allowance

Total
Recorded
Investment

Related
Allowance

5,864 $

2,979 $

2,799 $

5,778 $

3,949
9,813
6,937

2,790
5,769
4,458

205
3,004
1,587

2,995
8,773
6,045

1,476
-
1,476
18,226 $

1,071
-
1,071
11,298 $

405
-
405
4,996 $

1,476
-
1,476
16,294 $

189

67
256
323

75
-
75
654

276
656
251

105
1
106
1,013

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3 — Loans and Allowance for Loan Losses – Continued

The interest income recognized on impaired loans was as follows:

2017

Year Ended December 31,
2016

2015

Average
Recorded

Interest
Income

Average
Recorded

Interest
Income

Average
Recorded

Interest
Income

Investment Recognition

(Dollars in thousands)
Commercial real estate:

6,489 $

187 $

7,435 $

240 $ 10,317 $

380

Real estate term ............................. $
Construction and land
development ...............................
Total commercial real estate.......
Commercial and industrial...............
Consumer loans:

3,107
9,596
7,552

137
324
276

2,809
10,244
6,214

168
408
311

5,015
15,332
6,318

Residential and home equity .........
Consumer and other ......................
Total consumer ...........................

1,313
-
1,313
Total......................................... $ 18,461 $

46
-
46

1,695
60
1,755
646 $ 18,213 $

67
1
68

2,916
24
2,940
787 $ 24,590 $

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”):

(Dollars in thousands)

Acquisition Date

Contractually required principal payments receivable ........................... $
Adjustment for credit, interest rate and liquidity....................................
Fair value of performing purchased loans .............................................. $

359,624
(7,259)
352,365

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

(Dollars in thousands)

Acquisition Date

Contractually required payments including interest ............................... $
Amounts not expected to be collected - nonaccretable difference .........
Cash flows expected to be collected .......................................................
Accretable yield ...................................................................................

15,535
(4,584)
10,951
(1,200)

Fair value of PCI loans......................................................................... $

9,751

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3 — Loans and Allowance for Loan Losses – Concluded

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

(Dollars in thousands)

Commercial real estate loans:
Real estate term ...................................................................... $
Construction and land development .......................................
Total commercial real estate loans ......................................
Commercial and industrial loans............................................
Consumer loans:

Residential and home equity................................................
Consumer and other.............................................................
Total consumer loans...........................................................

Total loans carrying balance ............................................. $

Performing
Purchased
Loans

PCI Loans

Total Acquired
Loans

220,009
27,030
247,039
59,093

30,871
8,770
39,641
345,773

1,013 $
651
1,664
7,010

-
-
-
8,674 $

221,022
27,681
248,703
66,103

30,871
8,770
39,641
354,447

12,414 $

366,723

Total loans unpaid principal balance ................................ $

354,309

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.

Note 4 — Premises and Equipment

Premises and equipment are summarized as follows as of December 31:

(Dollars in thousands)
Land and buildings ..................................................... $
Equipment, furniture, and software ............................

Accumulated depreciation and amortization ..............

2017

2016

36,278 $
23,707
59,985
(29,586)
30,399 $

28,997
19,908
48,905
(26,979)
21,926

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.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4 — Premises and Equipment – Continued

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:

(Dollars in thousands)
2018...................................................................................... $
2019......................................................................................
2020......................................................................................
2021......................................................................................
2022 and beyond ..................................................................

Amount

729
680
630
629
870
3,538

Note 5 — Deposits

Deposit account balances are summarized as follows as of December 31:

(Dollars in thousands)
Non-interest bearing .......................................................

2017

2016

641,124

443,100

Interest bearing deposits:

Interest bearing demand and savings...........................
Money market accounts...............................................
Certificates of deposit..................................................
Total interest bearing deposits ..................................
Total deposits .........................................................

736,820
230,844
205,844
1,173,508
1,814,632

654,541
169,369
158,064
981,974
1,425,074

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

(Dollars in thousands)
2017......................................................................................... $
2018.........................................................................................
2019.........................................................................................
2020.........................................................................................
2021 and beyond .....................................................................

Amount

113,347
32,108
20,149
13,691
26,549
205,844

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

Note 6 — Short-term borrowings

Short-term borrowings consist the following as of December 31:

(Dollars in thousands)
Security repurchase agreements .....................................
Other short-term borrowings:

Federal Home Loan Bank advances ............................
Total other short-term borrowings............................
Total short-term borrowings ..................................

2017

2016

3,199

40,000
40,000
40,000

-
-
3,199

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 6 — Short-term borrowings – Continued

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:

(Dollars in thousands)
Security repurchase agreements:

2017

2016

Average daily balance ..................................................... $
Weighted average rate .....................................................
Highest month-end balance ............................................. $
Year-end balance ............................................................. $
Weighted average rate on outstanding at year-end..........

2,568

$
0.14%
3,789
$
$
-
0.00%

Other short-term borrowings:

Average daily balance ..................................................... $
Weighted average rate .....................................................
Highest month-end balance ............................................. $
Year-end balance .............................................................
Weighted average rate on outstanding at year-end..........

4,894

$
1.28%
$

40,000
40,000

1.63%

2,713

0.15%

3,315
3,199

0.15%

9,359

0.39%

45,000
-
0.00%

Note 7 — Income Taxes

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

(Dollars in thousands)
Current:

Federal ............................................................................ $
State ................................................................................

Deferred:
Federal...............................................................................
State ................................................................................
Deferred..........................................................................
Income tax expense ........................................................... $

2017

2016

2015

10,778 $
1,709
12,487

12,194 $
1,850
14,044

3,468
522
3,990
16,477 $

(670)
(101)
(771)
13,273 $

9,060
1,452
10,512

(217)
(33)
(250)
10,262

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7 — Income Taxes - Continued

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

Federal statutory rate ........................................................
Tax rate change ................................................................
State taxes, net of federal income tax benefit...................
Tax-exempt interest and income ......................................
Equity awards expense .....................................................
Other, net ..........................................................................
Effective tax rate ..............................................................

2017

2016

2015

35.0%
13.0%
2.9%
(2.1)%
(2.8)%
(0.6)%
45.4%

35.0%
-

3.1%
(2.1)%
(0.3)%
0.3%
36.0%

35.0%
-
3.1%
(2.4)%
-
(1.4)%
34.3%

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

(Dollars in thousands)
Deferred income tax assets:

Allowance for loan losses ................................................... $
Deferred loan fees and costs ...............................................
Fair value adjustments on certificates of deposit................
Deferred compensation .......................................................
Unrealized loss on securities ..............................................
State franchise taxes ...........................................................
Other ...................................................................................

Deferred income tax liabilities:

FHLB dividends..................................................................
Mortgage servicing rights ...................................................
Basis difference in premises, equipment and
other assets.......................................................................

Net deferred income tax assets .............................................. $

2017

2016

5,792 $
1,436
170
427
701
362
740
9,628

157
192

452

801
8,827 $

6,724
1,594
79
565
626
630
563
10,781

241
328

413

982
9,799

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.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7 — Income Taxes - Continued

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.

Note 8 — Commitments and Contingencies

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

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

(Dollars in thousands)
Commitments to extend credit, including unsecured
commitments of $13,625 and $11,230 as of December 31,
2017 and 2016, respectively........................................................ $ 637,029 $ 445,645
Stand-by letters of credit and bond commitments, including
unsecured commitments of $440 and $660 as of December 31,
2017 and 2016, respectively........................................................
Unused credit card lines, all unsecured ..........................................

27,943
24,949

29,332
25,803

2016

2017

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.

Note 9 — Regulatory Capital Matters

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.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9 — Regulatory Capital Matters – Continued

The Company’s actual and required capital amounts and ratios are as follows:

(Dollars in thousands)
Consolidated

Actual

December 31, 2017
Minimum Capital

Requirement

Well Capitalized

Requirement

Amount

Ratio

Amount

Ratio

Amount

Ratio

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.....................................
Tier 1 Leverage .................................................. 229,886 11.46%

14.67% 136,174

8.00% 170,218

80,249 4.00%

NA NA

249,645

10.00%

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.....................................
Tier 1 Leverage .................................................. 227,252 11.32%

170,203 10.00%
80,323 4.00% 100,403 5.00%

247,011 14.51%

136,163

8.00%

(Dollars in thousands)
Consolidated

Actual

December 31, 2016
Minimum Capital

Requirement

Well Capitalized

Requirement

Amount

Ratio

Amount

Ratio

Amount

Ratio

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%
96,923 8.00%
Total Risk-Based Capital to
Risk-Weighted Assets.....................................
Tier 1 Leverage .................................................. 229,312 13.71%

96,923 8.00%
66,902 4.00%

72,692 6.00%

121,154 10.00%

244,655 20.19%

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%
96,309 8.00%
Total Risk-Based Capital to
Risk-Weighted Assets.....................................
Tier 1 Leverage .................................................. 193,277 11.81%

96,309 8.00%
65,453 4.00%

120,386 10.00%
81,816 5.00%

72,232 6.00%

208,526 17.32%

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.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 10 — Shareholders’ Equity

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

First quarter....................................................................... $
Second quarter ..................................................................
Third quarter .....................................................................
Fourth quarter ...................................................................
Total.................................................................................. $

0.08 $
0.08
0.09
0.09
0.34 $

0.07
0.07
0.07
0.08
0.29

Years Ended December 31,
2016
2017

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

In June 2014, the Board of Directors (“Board”) and shareholders of the Company approved a share-based incentive
plan (the “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.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Share-based option transactions are summarized as follows:

Weighted-

(Dollars in thousands, except share and per share data)
Outstanding at January 1, 2015 ............................................
Granted ..............................................................................
Exercised ...........................................................................
Forfeited ............................................................................
Outstanding at December 31, 2015 ......................................
Granted ..............................................................................
Exercised ...........................................................................
Forfeited ............................................................................
Outstanding at December 31, 2016 ......................................
Granted ..............................................................................
Exercised ...........................................................................
Forfeited ............................................................................
Outstanding at December 31, 2017 ......................................
Exercisable at December 31, 2017 .......................................
Exercisable at December 31, 2016 .......................................

Options
Granted
for Common
Shares

Weighted
Average
Exercise
Price

Average

Remaining
Contractual

Term

Aggregate
Intrinsic
Value

940,683 $
190,448
(152,508)
(16,368)
962,255
86,831
(285,568)
(802)
762,716
17,692
(221,337)
(14,358)
544,713
405,256
481,959

5.92
12.90
5.31
4.85
7.42
15.66
5.62
16.96
7.42
29.59
7.76
15.41
10.14
8.53
7.29

4.06 $
3.86
3.83

12,198
7,423
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.

Restricted stock unit transactions are summarized as follows:

(Dollars in thousands, except share and per share data)
Non-vested at January 1, 2015 ...................................................
Granted ....................................................................................
Vested ......................................................................................
Non-vested at December 31, 2015 .............................................
Granted ....................................................................................
Vested ......................................................................................
Forfeited ..................................................................................
Non-vested at December 31, 2016 .............................................
Granted ....................................................................................
Vested ......................................................................................
Forfeited ..................................................................................
Non-vested at December 31, 2017 .............................................

Options
Granted
for Common Grant Date

Weighted
Average

Fair Value

3,198 $
40,035
(3,304)
39,929
3,866
(14,228)
(1,672)
27,895
27,811
(15,838)
(292)
39,576

11.10
12.54
11.13
11.10
16.50
12.81
12.54
12.97
28.92
13.37
12.10
24.02

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

Note 12 — Fair Value

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

Level 1 Quoted prices in active markets for identical assets or liabilities.

Level 2 Observable inputs other than Level 1 including quoted prices for similar assets or liabilities,
quoted prices in less active markets, or other observable inputs that can be corroborated by
observable market data.

Level 3 Unobservable inputs supported by little or no market activity for financial instruments whose

value is determined using pricing models, discounted cash flow methodologies, or similar
techniques, as well as instruments for which the determination of fair value requires significant
management judgment or estimation.

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 12 — Fair Value – Continued

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.

Assets measured at fair value are summarized as follows:

(Dollars in thousands)
As of December 31, 2017
Fair valued on a recurring basis:

Level 1

Level 2

Level 3

Total

Investment securities available for sale .......... $

- $

263,056 $

- $

263,056

Fair valued on a non-recurring basis:

Impaired loans ................................................

1,740

As of December 31, 2016
Fair valued on a recurring basis:

Investment securities available for sale .......... $

1,008 $

334,601 $

- $

335,609

Fair valued on a non-recurring basis:

Impaired loans ................................................

4,342

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

(Dollars in thousands)
As of December 31, 2017
Financial Assets:

Carrying
Amount

Estimated
Fair Value

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

100

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 12 — Fair Value – Continued

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.

Note 13 — Contingencies and Concentrations of Credit Risk

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.

101

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14 — Condensed Financial Statements of Parent Company

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)
Balance Sheets
Assets .......................................................................................

2017

2016

Cash and cash equivalents..................................................... $
Available for sale investment securities, at fair value...........
Investment in subsidiaries .....................................................
Other assets ...........................................................................

Total assets ......................................................................... $

2,619 $
-
254,784
801
258,204 $

Liabilities and shareholders' equity..........................................

Due to subsidiaries, net ......................................................... $
Other liabilities......................................................................
Shareholders' equity ..............................................................

Total liabilities and shareholders' equity ............................ $

369 $
417
257,418
258,204 $

2,946
34,507
192,578
391
230,422

1,411
494
228,517
230,422

(Dollars in thousands)
Statements of Income
Dividend and other income from subsidiaries ................................ $
Interest and dividends on investment securities & other income....
Total income.................................................................................

2017

2016

2015

5,300 $
310
5,610

3,884 $
363
4,247

Salaries and employee benefits .......................................................
Other expenses ................................................................................
Total expenses ..............................................................................

1,455
420
1,875

1,100
461
1,561

Income before income taxes ...........................................................
Income tax benefit...........................................................................

Equity in undistributed net income of subsidiaries .........................

Net income ................................................................................... $

3,735
575
4,310
15,536
19,846 $

2,686
624
3,310
20,300
23,610 $

102

8,730
174
8,904

6,100
429
6,529

2,375
216
2,591
17,023
19,614

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14 — Condensed Financial Statements of Parent Company – Continued

(Dollars in thousands)
Statements of Cash Flows
Cash flows from operating activities:

Net income ................................................................................... $
Adjustments to reconcile net income to net cash provided
by operating activities:

Equity in undistributed net income of the Banks ......................
Net amortization of securities discounts and premiums ............
Change in other assets and liabilities.........................................
Net change provided by operating activities...........................

Cash flows from investing activities:

Purchase of available-for-sale securities ......................................
Maturities/sales of available-for-sale securities ...........................
Investments in banking subsidiary ...............................................
Net change (used in) provided by investing activities ............

Cash flows from financing activities:

Issuance of common shares..........................................................
Exercise of stock options..............................................................
Dividends paid..............................................................................
Net change provided by (used in) financing activities............
Net change in cash and cash equivalents ........................................
Cash and cash equivalents, beginning of year ................................
Cash and cash equivalents, end of year........................................... $

2017

2016

2015

19,846 $

23,610 $

19,614

(15,536)
-
(1,204)
3,106

-
34,278
(46,977)
(12,699)

(20,300)
89
1,002
4,401

(20,995)
21,267
-
272

13,977
1,395
(6,106)
9,266
(327)
2,946
2,619 $

-
777
(5,141)
(4,364)
309
2,637
2,946 $

(17,023)
55
886
3,532

(50,227)
15,149
-
(35,078)

34,897
847
(5,052)
30,692
(854)
3,491
2,637

Note 15 —Acquisitions

Utah Banner Bank Branch Acquisition

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.

103

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 15 —Acquisitions (continued)

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)
Purchase Price
Cash .....................................................................................
Premium paid on average deposits ......................................
Total Consideration........................................................

Recorded amounts of assets acquired and liabilities
assumed
Assets

Loans, net of discounts ..................................................... $
Premises & equipment ......................................................
Core deposit intangible .....................................................
Other assets .......................................................................
Total assets.....................................................................

Liabilities

Deposits, net of premiums ................................................
Other liabilities .................................................................
Total liabilities assumed.................................................
Total net assets from merger.............................................

100,283
13,762
114,045

251,782
3,467
2,604
1,761
259,614

160,292
175
160,467

99,147

Goodwill.........................................................................

14,898

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.

Town & Country Bank Acquisition

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.

104

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 15 —Acquisitions (continued)

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 ...
PUB share price at closing ..................................................
Consideration from common stock conversion
(0.2916 ratio) ....................................................................
Cash .....................................................................................
Total Consideration ..........................................................

Recorded amounts of assets acquired and liabilities
assumed
Assets

Cash and cash equivalents ................................................ $
Investment securities ........................................................
Loans, net of discounts .....................................................
Premises & equipment ......................................................
Core deposit intangible .....................................................
Bank owned life insurance................................................
Deferred income tax asset.................................................
Other assets .......................................................................
Total assets.....................................................................

Liabilities

466,546
29.96

13,977
11,603
25,580

13,401
9,585
110,334
145
845
3,332
2,571
4,161
144,374

123,777
6,127
129,904

$
$

14,470
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.

105

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 15 —Acquisitions (continued)

The following table is Unaudited Pro Forma Statements of Income

(Dollars in thousands)
Net interest income.............................................................. $
Provision for loan losses......................................................
Non-interest income ............................................................
Non-interest expense ...........................................................
Income before income tax expense .....................................
Income tax expense .............................................................
Net income........................................................................... $

Years Ended December 31,
2016
2017

87,294 $
2,895
18,623
64,950
38,072
17,152
20,920 $

75,075
1,009
18,426
54,116
38,376
13,533
24,843

Earnings per share:

Basic ................................................................................. $
Diluted .............................................................................. $

1.13 $
1.11 $

1.37
1.33

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.

106

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 16— Unaudited Quarterly Financial Data

Summarized unaudited quarterly financial data is as follows:

Quarters Ended 2017

(Dollars in thousands, except share and per share data)
Net interest income ..................................................... $
Provision for loan losses .............................................
Non-interest income ....................................................
Non-interest expense...................................................
Income before income tax expense .............................
Income tax expense .....................................................
Net income .................................................................. $
Earnings per common share:

March 31

June 30

17,792 $
200
4,112
12,443
9,261
2,740
6,521 $

September 30 December 31
23,947
750
4,526
19,674
8,049
7,456
593

19,918 $
900
3,574
13,657
8,935
2,697
6,238 $

18,981 $
900
4,348
12,351
10,078
3,584
6,494 $

Basic ......................................................................... $
Diluted ...................................................................... $

0.36 $
0.36 $

0.37 $
0.35 $

0.35 $
0.34 $

0.03
0.03

Quarters Ended 2016

March 31

June 30

16,700 $
200
3,763
12,135
8,128
2,885
5,243 $

September 30 December 31
18,333
150
4,332
12,540
9,975
3,433
6,542

17,637 $
325
4,386
11,902
9,796
3,548
6,248 $

17,211 $
225
4,398
12,400
8,984
3,407
5,577 $

Basic ......................................................................... $
Diluted ...................................................................... $

0.30 $
0.29 $

0.31 $
0.31 $

0.35 $
0.34 $

0.37
0.36

107

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.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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 Report on Internal Control Over Financial Reporting

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.”

Changes in Internal Controls

There have not been any changes in the Company’s internal control over financial reporting (as such term is

defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the 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.

Item 9B. Other Information

None

108

PART III

Item 10. Directors, Executive Officers and Corporate Governance

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.

Item 11. Executive Compensation

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.

Item 14. Principal Accounting Fees and Services

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.

109

PART IV

Item 15. Exhibits

List of Financial Statements and Financial Statement Schedules

(a) The following documents are filed as a part of this report:

(1) Financial Statements and

(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:

Exhibit
Number

2.1#

2.2#

2.3#

2.4#

2.5#

3.1

3.2

4.1

10.1*

10.2*

10.3*

10.4*

10.5*

10.6*

10.7

10.8*

10.9*

31.1

31.2

101

Description

Purchase and Assumption Agreement between Banner Bank and People’s Intermountain Bank dated
July 26, 2017 (5)
First Amendment to Purchase and Assumption Agreement between Banner Bank and People’s
Intermountain Bank dated October 4, 2017 (6)

Merger Agreement among People’s Utah Bancorp, People’s Intermountain Bank, Town & Country
Bank, Inc. and the Shareholders’ Representative dated May 31, 2017

Amendment No. 1 to Merger Agreement dated August 31, 2017

Amendment No. 2 to Merger Agreement dated October 25, 2017

Amended and Restated Articles of Incorporation of People’s Utah Bancorp (1)

Amended and Restated Bylaws of People’s Utah Bancorp (1)

Specimen Share Certificate for Common Shares of People’s Utah Bancorp (3)

People’s Utah Bancorp 2014 Incentive Plan (1)

People’s Utah Bancorp Amended and Restated 2008 Incentive Plan (1)

People’s Utah Bancorp Incentive Plan (1999 Incentive Plan) and all amendments thereto (1)

People’s Utah Bancorp Deferred Compensation Plan for Directors (1)

Form of 2014 Incentive Plan Notice of Stock Option Grant and Stock Option Agreement (1)

Form of 2014 Incentive Plan Restricted Stock Unit Award Agreement (1)

Form of Director and Officer Indemnification Agreement (2)

Employment Agreement by and between People’s Utah Bancorp, People’s Intermountain Bank and
Len E. Williams(4)

Employment Agreement by and between People’s Utah Bancorp, People’s Intermountain Bank and
Mark K. Olson

Subsidiaries of the Company (7)

Consent of Tanner LLC

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes - Oxley Act of 2002

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes - Oxley Act of 2002

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
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

110

*
#

(1)

(2)

(3)

(4)

(5)

(6)

(7)

Compensatory plan or arrangement
Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company
agrees to furnish a copy of any such omitted schedule or exhibit to the SEC upon request.
Filed as part of the Registrant's Draft Registration Statement on Form S-1 filed on March 11, 2015.
Filed as part of the Registrant's Registration Statement on Form S-1 filed on April 20, 2015.
Filed as part of the Registrant's Amendment No.1 to Registration Statement on Form S-1 filed on May 5,
2015.
Filed as part of the Registrant’s Quarterly Report on Form 10-Q filed on May 9, 2017.
Filed as part of the Registrant's Quarterly Report on Form 10-Q filed on August 8, 2017.
Filed as part of the Registrant's Quarterly Report on Form 10-Q filed on November 7, 2017.
Filed as part of the Registrant’s Annual Report on Form 10-K filed on March 10, 2017.

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.

Item 16. Form 10-K Summary

None.

111

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.

SIGNATURES

PEOPLE’S UTAH BANCORP

/s/ Len E. Williams
Len E. Williams
President and Chief Executive Officer
(Principal Executive Officer)

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.

/s/ Len E. Williams
Len E. Williams

/s/ Mark K. Olson
Mark K. Olson

/s/ Paul R. Gunther
Paul R. Gunther

/s/ Dale O. Gunther
Dale O. Gunther

/s/ David G. Anderson
David G. Anderson

/s/ R. Brent Anderson
R. Brent Anderson

/s/ Deborah S. Bayle
Deborah S. Bayle

/s/ Richard T. Beard
Richard T. Beard

/s/ Matthew S. Browning
Matthew S. Browning

/s/ Fred W. Fairclough Jr.
Fred W. Fairclough Jr.

/s/ Jonathan B. Gunther
Jonathan B. Gunther

/s/ Wolfgang T. N. Muelleck
Wolfgang T. N. Muelleck

/s/ Douglas H. Swenson
Douglas H. Swenson

Director, President and Chief Executive Officer
(Principal Executive Officer)

Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

Director, Chairman

Director, Vice Chairman

Director, Executive Vice President and Chief Credit Officer

Director

112

CORPORATE HEADQUARTERS

STOCK LISTING

One East Main Street
American Fork, Utah 84003

801-642-3998

www.peoplesutah.com

People’s Utah Bancorp’s
common shares are traded on
the Nasdaq Capital Market
under the symbol “PUB”.

INVESTOR RELATIONS

Mark K. Olson
EVP/Chief Financial Officer

InvestorRelations@PeoplesUtah.com

Phone: 801-642-3998

INDEPENDENT REGISTERED
PUBLIC ACCOUNTANTS

Moss Adams LLP

601 West Riverside Avenue
Suite 1800
Spokane, Washington 99201

509-747-2600

www.mossadams.com

STOCK TRANSFER AGENT

LEGAL COUNSEL

Transfer Online

512 SE Salmon Street
Portland, Oregon 97214

503-227-2950

info@transferonline.com

www.transferonline.com

Dorsey & Whitney LLP

111 South Main Street
Suite 2100
Salt Lake City, UT 84111

801-933-7360

www.dorsey.com

1 East Main Street | American Fork UT | 84003
peoplesutah.com