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Section 1: 10-Q (10-Q)

pub-10q_20190930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended September 30, 2019

OR

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

For the transition period from                 to                

Commission file number 001-37416

 

PEOPLE’S UTAH BANCORP

(Exact name of registrant as specified in its charter)

 

 

Utah

 

87-0622021

(State or other jurisdiction of

 

(IRS Employer

incorporation or organization)

 

Identification No.)

 

1 East Main Street

American Fork, Utah

 

84003

(Address of principal executive offices)

 

(Zip Code)

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

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

PUB

 

The Nasdaq Stock Market LLC

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes      No  

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

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

 

 

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

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

As of October 31, 2019, the registrant had 18,855,868 shares of common stock $0.01 par value per share, outstanding. No preferred shares are issued or outstanding.

 


TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

Item 1 – Financial Statements

 

Unaudited Consolidated Balance Sheets

3

Unaudited Consolidated Statements of Income

4

Unaudited Consolidated Statements of Comprehensive Income

5

Unaudited Consolidated Statements of Changes in Shareholders’ Equity

6

Unaudited Consolidated Statements of Cash Flows

7

Notes to Unaudited Consolidated Financial Statements

8

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

24

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

42

Item 4 – Controls and Procedures

42

PART II. OTHER INFORMATION

 

Item 1 – Legal Proceedings

43

Item 1A – Risk Factors

43

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

43

Item 3 – Defaults upon Senior Securities

43

Item 4 – Mine Safety Disclosures

43

Item 5 – Other Information

43

Item 6 – Exhibits

44

Signatures

45

 

 

 

 


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

 

 

 

September 30,

 

 

December 31,

 

(Dollars in thousands, except share data)

 

2019

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

45,196

 

 

$

39,471

 

Interest-bearing deposits

 

 

195,082

 

 

 

7,456

 

Federal funds sold

 

 

100,118

 

 

 

1,620

 

Total cash and cash equivalents

 

 

340,396

 

 

 

48,547

 

Investment securities:

 

 

 

 

 

 

 

 

Available for sale, at fair value

 

 

319,857

 

 

 

280,964

 

Held to maturity, at historical cost

 

 

-

 

 

 

65,462

 

Total investment securities

 

 

319,857

 

 

 

346,426

 

Non-marketable equity securities

 

 

2,623

 

 

 

2,551

 

Loans held for sale

 

 

19,554

 

 

 

10,267

 

Loans:

 

 

 

 

 

 

 

 

Loans held for investment

 

 

1,675,147

 

 

 

1,678,902

 

Allowance for loan losses

 

 

(30,471

)

 

 

(25,245

)

Total loans held for investment, net

 

 

1,644,676

 

 

 

1,653,657

 

Premises and equipment, net

 

 

37,958

 

 

 

36,532

 

Goodwill

 

 

25,673

 

 

 

25,673

 

Bank-owned life insurance

 

 

26,885

 

 

 

26,433

 

Deferred income tax assets, net

 

 

9,169

 

 

 

11,514

 

Accrued interest receivable

 

 

8,850

 

 

 

8,282

 

Other intangibles

 

 

3,080

 

 

 

3,412

 

Other real estate owned

 

 

-

 

 

 

-

 

Other assets

 

 

5,742

 

 

 

11,000

 

Total assets

 

$

2,444,463

 

 

$

2,184,294

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Non-interest bearing deposits

 

$

777,041

 

 

$

642,594

 

Interest bearing deposits

 

 

1,324,671

 

 

 

1,234,461

 

Total deposits

 

 

2,101,712

 

 

 

1,877,055

 

Short-term borrowings

 

 

-

 

 

 

-

 

Accrued interest payable

 

 

571

 

 

 

483

 

Other liabilities

 

 

19,461

 

 

 

16,594

 

Total liabilities

 

 

2,121,744

 

 

 

1,894,132

 

 

 

 

 

 

 

 

 

 

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; 18,855,710

 

 

 

 

 

 

 

 

and 18,728,823 shares issued and outstanding as of September 30, 2019

 

 

 

 

 

 

 

 

and December 31, 2018, respectively

 

 

189

 

 

 

187

 

Additional paid-in capital

 

 

87,704

 

 

 

86,308

 

Retained earnings

 

 

233,634

 

 

 

207,779

 

Accumulated other comprehensive income/(loss)

 

 

1,192

 

 

 

(4,112

)

Total shareholders’ equity

 

 

322,719

 

 

 

290,162

 

Total liabilities and shareholders’ equity

 

$

2,444,463

 

 

$

2,184,294

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

3


 

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

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

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Interest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

27,544

 

 

$

27,420

 

 

$

82,152

 

 

$

80,276

 

Interest and dividends on investments

 

 

2,937

 

 

 

1,679

 

 

 

7,531

 

 

 

5,018

 

Total interest income

 

 

30,481

 

 

 

29,099

 

 

 

89,683

 

 

 

85,294

 

Interest expense

 

 

2,290

 

 

 

1,917

 

 

 

6,865

 

 

 

5,190

 

Net interest income

 

 

28,191

 

 

 

27,182

 

 

 

82,818

 

 

 

80,104

 

Provision for loan losses

 

 

2,100

 

 

 

1,925

 

 

 

5,800

 

 

 

5,450

 

Net interest income after provision for loan losses

 

 

26,091

 

 

 

25,257

 

 

 

77,018

 

 

 

74,654

 

Non-interest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage banking

 

 

2,116

 

 

 

1,668

 

 

 

5,154

 

 

 

4,811

 

Card processing

 

 

976

 

 

 

826

 

 

 

2,405

 

 

 

2,347

 

Service charges on deposit accounts

 

 

744

 

 

 

737

 

 

 

2,106

 

 

 

2,114

 

Net gain on sale of investment securities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

336

 

Other

 

 

631

 

 

 

563

 

 

 

1,737

 

 

 

1,970

 

Total non-interest income

 

 

4,467

 

 

 

3,794

 

 

 

11,402

 

 

 

11,578

 

Non-interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

10,410

 

 

 

9,885

 

 

 

29,822

 

 

 

30,504

 

Occupancy, equipment and depreciation

 

 

1,439

 

 

 

1,476

 

 

 

4,453

 

 

 

4,430

 

Data processing

 

 

879

 

 

 

890

 

 

 

2,861

 

 

 

2,823

 

Marketing and advertising

 

 

805

 

 

 

342

 

 

 

1,147

 

 

 

1,109

 

FDIC premiums

 

 

6

 

 

 

239

 

 

 

244

 

 

 

867

 

Acquisition-related costs

 

 

-

 

 

 

(118

)

 

 

-

 

 

 

232

 

Other

 

 

2,529

 

 

 

2,566

 

 

 

7,156

 

 

 

7,186

 

Total non-interest expense

 

 

16,068

 

 

 

15,280

 

 

 

45,683

 

 

 

47,151

 

Income before income tax expense

 

 

14,490

 

 

 

13,771

 

 

 

42,737

 

 

 

39,081

 

Income tax expense

 

 

3,355

 

 

 

3,288

 

 

 

10,108

 

 

 

9,127

 

Net income

 

$

11,135

 

 

$

10,483

 

 

$

32,629

 

 

$

29,954

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.59

 

 

$

0.56

 

 

$

1.73

 

 

$

1.60

 

Diluted

 

$

0.59

 

 

$

0.55

 

 

$

1.72

 

 

$

1.58

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

18,840,381

 

 

 

18,713,410

 

 

 

18,809,334

 

 

 

18,664,339

 

Diluted

 

 

19,029,350

 

 

 

19,010,600

 

 

 

19,008,883

 

 

 

18,979,405

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

4


 

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(Dollars in thousands)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income

 

$

11,135

 

 

$

10,483

 

 

$

32,629

 

 

$

29,954

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains/(losses) on securities available for sale

 

 

1,075

 

 

 

(1,161

)

 

 

7,071

 

 

 

(4,948

)

Income tax (expense)/benefit

 

 

(269

)

 

 

290

 

 

 

(1,767

)

 

 

1,237

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains/(losses) on securities available for sale,

   net of tax

 

 

806

 

 

 

(871

)

 

 

5,304

 

 

 

(3,711

)

Total comprehensive income

 

$

11,941

 

 

$

9,612

 

 

$

37,933

 

 

$

26,243

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

5


 

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

Common

 

 

Common

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

 

 

 

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

 

Shares

 

 

Stock

 

 

Capital

 

 

Earnings

 

 

Income (Loss)

 

 

Total

 

Balance as of January 1, 2018

 

 

18,511,797

 

 

$

185

 

 

$

84,532

 

 

$

174,804

 

 

$

(2,103

)

 

$

257,418

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9,004

 

 

 

-

 

 

 

9,004

 

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,851

)

 

 

(1,851

)

Cash dividends ($0.09 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,672

)

 

 

-

 

 

 

(1,672

)

Share-based compensation

 

 

-

 

 

 

-

 

 

 

216

 

 

 

-

 

 

 

-

 

 

 

216

 

Issuance of shares under stock incentive plans

 

 

162,435

 

 

 

2

 

 

 

682

 

 

 

-

 

 

 

-

 

 

 

684

 

Balance as of March 31, 2018

 

 

18,674,232

 

 

$

187

 

 

$

85,430

 

 

$

182,136

 

 

$

(3,954

)

 

$

263,799

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,467

 

 

 

-

 

 

 

10,467

 

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(989

)

 

 

(989

)

Cash dividends ($0.10 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,868

)

 

 

-

 

 

 

(1,868

)

Share-based compensation

 

 

-

 

 

 

-

 

 

 

154

 

 

 

-

 

 

 

-

 

 

 

154

 

Issuance of shares under stock incentive plans

 

 

9,651

 

 

 

-

 

 

 

36

 

 

 

-

 

 

 

-

 

 

 

36

 

Balance as of June 30, 2018

 

 

18,683,883

 

 

$

187

 

 

$

85,620

 

 

$

190,735

 

 

$

(4,943

)

 

$

271,599

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,483

 

 

 

-

 

 

 

10,483

 

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(871

)

 

 

(871

)

Cash dividends ($0.11 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,057

)

 

 

-

 

 

 

(2,057

)

Share-based compensation

 

 

-

 

 

 

-

 

 

 

313

 

 

 

-

 

 

 

-

 

 

 

313

 

Issuance of shares under stock incentive plans

 

 

35,613

 

 

 

-

 

 

 

165

 

 

 

-

 

 

 

-

 

 

 

165

 

Balance as of September 30, 2018

 

 

18,719,496

 

 

$

187

 

 

$

86,098

 

 

$

199,161

 

 

$

(5,814

)

 

$

279,632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2019

 

 

18,728,823

 

 

$

187

 

 

$

86,308

 

 

$

207,779

 

 

$

(4,112

)

 

$

290,162

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,505

 

 

 

-

 

 

 

10,505

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,143

 

 

 

2,143

 

Cash dividends ($0.11 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,068

)

 

 

-

 

 

 

(2,068

)

Share-based compensation

 

 

-

 

 

 

-

 

 

 

191

 

 

 

-

 

 

 

-

 

 

 

191

 

Issuance of shares under stock incentive plans

 

 

68,457

 

 

 

1

 

 

 

393

 

 

 

-

 

 

 

-

 

 

 

394

 

Balance as of March 31, 2019

 

 

18,797,280

 

 

$

188

 

 

$

86,892

 

 

$

216,216

 

 

$

(1,969

)

 

$

301,327

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,989

 

 

 

-

 

 

 

10,989

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,355

 

 

 

2,355

 

Cash dividends ($0.12 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,255

)

 

 

-

 

 

 

(2,255

)

Share-based compensation

 

 

-

 

 

 

-

 

 

 

190

 

 

 

-

 

 

 

-

 

 

 

190

 

Issuance of shares under stock incentive plans

 

 

22,052

 

 

 

-

 

 

 

193

 

 

 

-

 

 

 

-

 

 

 

193

 

Balance as of June 30, 2019

 

 

18,819,332

 

 

$

188

 

 

$

87,275

 

 

$

224,950

 

 

$

386

 

 

$

312,799

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

11,135

 

 

 

-

 

 

 

11,135

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

806

 

 

 

806

 

Cash dividends ($0.13 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,451

)

 

 

-

 

 

 

(2,451

)

Share-based compensation

 

 

-

 

 

 

-

 

 

 

415

 

 

 

-

 

 

 

-

 

 

 

415

 

Issuance of shares under stock incentive plans

 

 

36,378

 

 

 

1

 

 

 

14

 

 

 

-

 

 

 

-

 

 

 

15

 

Balance as of September 30, 2019

 

 

18,855,710

 

 

$

189

 

 

$

87,704

 

 

$

233,634

 

 

$

1,192

 

 

$

322,719

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

 

6


 

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Nine Months Ended

 

 

 

September 30,

 

(Dollars in thousands)

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

32,629

 

 

$

29,954

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

5,800

 

 

 

5,450

 

Depreciation and amortization

 

 

2,921

 

 

 

2,401

 

Deferred income taxes

 

 

577

 

 

 

(1,160

)

Net amortization of securities discounts and premiums

 

 

1,773

 

 

 

1,991

 

Increase in cash surrender value of bank-owned life insurance

 

 

(452

)

 

 

(460

)

Share-based compensation

 

 

796

 

 

 

683

 

Gain on sale of loans held for sale

 

 

(3,424

)

 

 

(3,099

)

Originations of loans held for sale

 

 

(170,832

)

 

 

(162,308

)

Proceeds from sale of loans held for sale

 

 

164,969

 

 

 

167,811

 

Net changes in:

 

 

 

 

 

 

 

 

Accrued interest receivable

 

 

(568

)

 

 

(1,172

)

Other assets

 

 

5,682

 

 

 

(2,546

)

Accrued interest payable

 

 

88

 

 

 

71

 

Other liabilities

 

 

698

 

 

 

7,739

 

Net cash provided by operating activities

 

 

40,657

 

 

 

45,355

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Net change in loans held for investment

 

 

3,181

 

 

 

(93,643

)

Purchase of available for sale securities

 

 

(29,227

)

 

 

(30,832

)

Proceeds from maturities/sales of available for sale securities

 

 

59,724

 

 

 

32,504

 

Proceeds from maturities of held to maturity securities

 

 

1,370

 

 

 

6,930

 

Purchase of bank-owned life insurance

 

 

-

 

 

 

(2,250

)

Purchase of premises and equipment

 

 

(4,566

)

 

 

(9,442

)

Proceeds from sa