OREANDA-NEWS. July 28, 2016. People’s Utah Bancorp (the “Company”) (Nasdaq:PUB) today announced results for the quarter ended June 30, 2016.

Consolidated net income for the quarter ended June 30, 2016 was \\$5.6 million compared to \\$5.2 million in the first quarter of 2016 and \\$4.7 million for the second quarter of 2015, an increase of 6.4% and 19.6%, respectively.  Diluted earnings per share was \\$0.31 compared to \\$0.29 in the first quarter of 2016 and \\$0.30 for the second quarter in 2015. Diluted earnings per share for the first and second quarters of 2016 includes the impact of the increased shares issued in the June 2015 initial public offering.

 “PUB continues its positive trend of posting strong operating results for the second quarter of 2016 compared to the prior quarter of 2016.  Our current quarter’s net income, diluted earnings per share, return on average equity and return on average assets all increased compared to the prior quarter.  We are also pleased with our overall loan growth year-over-year, the improvement in our net interest margin and efficiency ratio.  On the credit quality side we experienced a relatively low level of nonperforming assets for the quarter.  We are pleased to once again be included in the Russell 2000 Index,” said Richard Beard, President and Chief Executive Officer of People’s Utah Bancorp.

Highlights of the Second Quarter of 2016

  • Net income of \\$5.6 million and diluted earnings per share of \\$0.31.
  • Declared a quarterly dividend of \\$0.07 per share.
  • Net interest margin increased to 4.66%.
  • Return on average equity increased to 10.23%.
  • Return on average assets increased to 1.43%.
  • Efficiency ratio improved to 57.38%.
  • Loans held for investment at quarter-end grew 10.5% year-over-year.
  • Deposits at quarter-end grew 5.6% year over year.
  • PUB included in the Russell 2000 Index.

Earnings Summary

Net income for the second quarter of 2016 of \\$5.6 million compared to \\$5.2 million in the first quarter of 2016 was impacted primarily by the following factors: (a) higher net interest income of \\$0.5 million, (b) an increase in non-interest income of \\$0.6 million, (c) offset by an increase in non-interest expense of \\$0.3 million and in income tax expense of \\$0.5 million. These factors contributed to diluted earnings per share increasing to \\$0.31 per share in the second quarter of 2016 compared to \\$0.29 per share in the first quarter of 2016.

Net income for the second quarter of 2016 of \\$5.6 million compared to \\$4.7 million in the second quarter of 2015 was impacted primarily by the following factors: (a) higher net interest income of \\$2.3 million, (b) an increase in non-interest income of \\$0.3 million, (c) offset by an increase in non-interest expense of \\$0.9 million and in income tax expense of \\$0.9 million.  Additionally, weighted-average shares increased by 2.5 million shares or 15.9% during the second quarter of 2016 compared to the comparable quarter in 2015 resulting primarily from our initial public offering in June 2015.  These factors, in spite of the increase in weighted-average shares, contributed to higher diluted earnings per share of \\$0.31 per share in the first quarter of 2016 compared to \\$0.30 per share in the second quarter of 2015.

Return on average assets for the quarter ended June 30, 2016 was 1.43% compared to 1.36% in the first quarter of 2016.  Return on average equity for the second quarter of 2016 was 10.23% compared to 9.88% in the first quarter of 2016.

Net Interest Income and Margin

Net interest income for the second quarter of 2016 increased \\$0.5 million compared to the first quarter of 2016, primarily due to a higher percentage of loans held for investment in our earning asset mix and an increase in loans held for investment of \\$25.7 million.  This contributed to a higher net interest margin of 4.66% in the current quarter compared to 4.58% in first quarter of 2016. 

Net interest income for the second quarter of 2016 increased \\$2.3 million compared to the comparable quarter of 2015, primarily due to a higher percentage of loans held for investment in our earning asset mix, an increase in loans held for investment of \\$104.4 million and higher loan yields.  This resulted in the higher net interest margin of 4.66% in the current quarter compared to 4.44% in the second quarter of 2015. 

Provision for Loan Losses

The provision for loan losses for the second quarter of 2016 was \\$25,000 higher compared to the first quarter of 2016 principally due to loan growth experienced during the second quarter.  The provision for loan losses for the second quarter of 2016 was \\$225,000 lower than the allowance for second quarter of 2015 due to continuing improvement in credit quality, net recoveries in the current quarter, and minimal net charge-offs in the current and recent quarters.  Additionally, we continue to experience low levels of non-performing assets which was 0.38% of total assets for the quarter ended June 30, 2016.

Non-interest Income

Non-interest income for the second quarter of 2016 increased by 16.9% compared to the first quarter of 2016 and increased by 6.2% compared to the second quarter of 2015 primarily due to higher mortgage banking and card processing income, offset by declines in service charges. Although the Company has experienced higher mortgage banking income and residential mortgage loan volumes compared to prior years, this growth may not continue in future periods because the mortgage banking business has historically been a cyclical business.

Non-interest Expense

Non-interest expense for the second quarter of 2016 increased by \\$0.3 million or 2.2% compared to the first quarter of 2016 and increased by \\$0.9 million or 8.0% compared to the second quarter of 2015.  The increase in non-interest expense in the second quarter of 2016 compared to the first quarter 2016 was primarily driven by higher marketing and advertising expenses of \\$0.1 million and various other expenses of \\$0.3 million, offset by lower data processing expenses of \\$0.1 million when compared to the first quarter of 2016.  The increase in the second quarter 2016 compared to the comparable quarter in 2015 is primarily from higher salaries and benefits of \\$0.7 million and various other expenses of \\$0.2 million, including expenses related to higher marketing and advertising and occupancy costs. The increase in salaries and benefits is primarily due to annual salary increases, higher payroll tax and medical benefits, new hires related to the expansion of our leasing division, and variable compensation costs to support our balance sheet and income growth. 

Our efficiency ratio for the second quarter of 2016 improved to 57.4% compared to 59.3% in the first quarter of 2016 and 60.29% in the second quarter of 2015. While we continue to focus on improving our efficiency ratio, the ratio could be impacted by investments in new branches which we hope to open in 2016 and early 2017, and the expansion of the leasing division. Since 2012 our leasing division has purchased lease paper from other originators.  In the second quarter of 2016 we began hiring leasing personnel and incurring expenses for the expansion of our leasing division to begin originating leases.  We anticipate modest growth in 2016 from our current portfolio.

Income Tax Provision

The effective tax rate for the second quarter of 2016 was 37.9% compared to 35.5% for the first quarter of 2016 and 34.4% in the second quarter of 2015. The tax rate in 2016 is higher than 2015 due primarily to a one-time tax credit of approximately \\$400,000 in 2015.  Income tax expense for the second quarter of 2016 increased compared to the first quarter of 2016 due to adjustments in the expected recoverability of certain tax credits. 

Loans and Credit Quality

Loans held for investment in the second quarter of 2016 increased 10.5% year-over-year and 4.6% from December 31, 2015.  Average loans grew \\$119.3 million to \\$1.1 billion from the second quarter of 2015 to the current quarter of 2016. 

Non-performing loans increased slightly to \\$5.4 million as of June 30, 2016 compared to \\$5.2 million as of the first quarter 2016 and declined from \\$7.4 million as of the year-end 2015 and \\$8.7 million as of the second quarter of 2015 due to improving credit quality in the loan portfolio.  As of June 30, 2016, the ratio of non-performing assets to total assets was 0.38% compared to 0.37% as of March 31, 2016,  0.51% as of the December 31, 2015 and 0.62% as of June 30, 2015. The allowance for loan losses to loans was 1.45% as of June 30, 2016, 1.39% as of March 31, 2016, 1.45% as of December 31, 2015 and 1.56% as of June 30, 2015. 

Investment Securities

Investment securities at June 30, 2016 declined by 14.2% to \\$342.1 million compared to \\$398.6 million at year-end 2015 to partially fund loan growth; and increased 8.9% from \\$314.2 million at June 30, 2015 primarily from the investment of net proceeds received from the Company’s initial public offering and the year-over-year growth in deposits.

Deposits and Liabilities

Total deposits at the end of the second quarter of 2016 were \\$1.35 billion compared to \\$1.31 billion at December 31, 2015 and \\$1.27 billion at June 30, 2015.  Increases during these periods were primarily due to growth of the client base and new customers. Non-interest-bearing deposits were 31.9% of total deposits as of June 30, 2016 compared to 31.2% as of December 31, 2015 and 30.4% as of June 30, 2015.  Short-term borrowings declined from \\$27.2 million at December 31, 2015 to \\$2.9 million at June 30, 2016.

Shareholders’ Equity

Shareholders’ equity increased to \\$220.4 million at June 30, 2016 compared to \\$209.4 million as of year-end 2015 and \\$201.6 million at June 30, 2015. The increase resulted primarily from net income during the intervening periods net of cash dividends paid to shareholders.

Dividend

As previously announced on July 20, 2016, the Board of Directors declared a quarterly cash dividend of \\$0.07 per share. The dividend will be payable to shareholders of record on August 1, 2016 and paid on August 12, 2016. The dividend payout ratio for earnings for the six months ended June 30, 2016 was 22.9%.

Conference Call and Webcast

Management will conduct a live conference call and webcast for investors, analysts and the public relating to the Company's results for the second quarter of 2016 at 11:00 a.m. Eastern time on Thursday, July 28, 2016. The conference call will be accessible by telephone and through the internet. Interested individuals are invited to listen to the call by telephone at 888-317-6003 (international calls 412-317-6061) and the conference ID is 8242498. Please dial in 10-15 minutes early so the name and company information can be collected prior to the start of the conference.

To participate on the webcast, log on to: http://services.choruscall.com/links/pub160428

If you are unable to participate during the live webcast, the call will be archived on www.peoplesutah.com or at the webcast URL above until August 31, 2016. Forward-looking and other material information may be discussed on this conference call.

Forward-Looking Statements

Statements in this release that are based on information other than historical data or that express the Company’s expectations regarding future events or determinations are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Statements based on historical data are not intended and should not be understood to indicate the Company’s expectations regarding future events. Forward-looking statements provide current expectations or forecasts of future events or determinations. These forward-looking statements are not guarantees of future performance or determinations, nor should they be relied upon as representing management’s views as of any subsequent date.  These forward-looking statements include, but are not limited to, (i) statements concerning our plan to hire additional staff and incur expenses to accommodate the expansion of our leasing portfolio, and (ii) our belief that we will have modest growth in 2016 in our leasing portfolio.

Forward-looking statements involve significant risks and uncertainties, and actual results may differ materially from those presented, either expressed or implied, in this release. Factors that could cause actual results to differ materially from those expressed in the forward-looking statements include: (i) market and economic conditions; (ii) capital sufficiency; (iii) operational, liquidity, interest rate and credit risks; (iv) deterioration of asset quality; (v) achieving loan and deposit growth; (vi) increased competition; (vii) adequacy of reserves; (viii) investments in new branches and new business opportunities; and (ix) changes in the regulatory or legal environment; as well as other factors discussed in the section titled “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission.

The foregoing factors should not be construed as exhaustive. The Company does not intend, or undertake any obligation to publicly update these forward-looking statements.

About People’s Utah Bancorp

People’s Utah Bancorp is the holding company for People’s Intermountain Bank with 18 locations in two banking divisions, Bank of American Fork and Lewiston State Bank and one leasing division, GrowthFunding Equipment Finance. The Company has been serving communities in Utah and southern Idaho for more than 100 years. PUB is committed to preserving the community bank model with a full range of bank products and technologies. More information about PUB is available at www.peoplesutah.com.

  
PEOPLE’S UTAH BANCORP 
SUMMARY FINANCIAL INFORMATION 
  
  As of or Year-to-Date 
  June 30,  March 31,  December 31,  June 30, 
(Dollars in thousands, except share data) 2016  2016  2015  2015 
Financial Condition Data:                
Average loans \\$1,078,689  \\$1,060,783  \\$983,294  \\$963,058 
Average earning assets  1,474,149   1,466,419   1,391,108   1,337,886 
Average total assets  1,555,227   1,546,945   1,468,942   1,407,788 
Average shareholders’ equity  216,074   213,443   186,889   166,525 
                 
Selected Balance Sheet Financial Ratios:                
Book value per share \\$12.42  \\$12.16  \\$11.92  \\$11.55 
Tangible book value per share \\$12.38  \\$12.12  \\$11.88  \\$11.51 
Non-performing assets to total assets  0.38%  0.37%  0.51%  0.62%
Allowance for loan losses to gross loans  1.45%  1.39%  1.45%  1.56%
Loans to Deposits  81.08%  80.61%  80.23%  77.27%
                 
Asset Quality Data:                
Non-performing loans \\$5,383  \\$5,183  \\$7,418  \\$8,675 
Non-performing assets  6,027   5,827   7,986   9,290 
Net charge-offs (recoveries)  (170)  34   594   96 
                 
Capital Ratios:                
Tier 1 leverage capital (1)  13.99%  13.85%  13.38%  14.09%
Total risk–based capital (1)  19.20%  19.07%  18.96%  19.36%
Average equity to average assets  13.89%  13.80%  12.72%  11.83%
Tangible common equity to tangible assets (4)  13.89%  13.81%  13.42%  13.50%
  Three Months Ended  Six Months Ended 
  June 30,  March 31,  June 30,  June 30,  June 30, 
  2016  2016  2015  2016  2015 
Selected Performance Ratios:                    
Basic earnings per share \\$0.31  \\$0.30  \\$0.31  \\$0.61  \\$0.63 
Diluted earnings per share \\$0.31  \\$0.29  \\$0.30  \\$0.60  \\$0.61 
Net interest margin (2)  4.66%  4.58%  4.44%  4.63%  4.43%
Efficiency ratio (3)  57.38%  59.30%  60.29%  58.32%  60.24%
Non-interest income to average assets  1.13%  0.98%  1.17%  1.06%  1.19%
Non-interest expense to average assets  3.18%  3.16%  3.23%  3.17%  3.25%
Return on average assets  1.43%  1.36%  1.31%  1.40%  1.36%
Return on average equity  10.23%  9.88%  10.88%  10.07%  11.46%
Net charge-offs (recoveries) to average loans  -0.07%  0.01%  0.04%  -0.03%  0.02%
                     

(1) Tier 1 leverage capital and Total risk-based capital as of June 30, 2016 are estimates.
(2) Net interest margin is defined as net interest income divided by average earning assets.
(3) Represents the sum of non-interest expense all divided by the sum of net interest income and non-interest income.
(4) Represents the sum of total shareholders’ equity less intangible assets all divided by the sum of total assets less intangible assets. Intangible assets were \\$630,000, \\$654,000, \\$679,000 and \\$727,000 at June 30, 2016, March 31, 2016, December 31, 2015, and June 30, 2015, respectively.

  
  
PEOPLE’S UTAH BANCORP  
UNAUDITED CONSOLIDATED BALANCE SHEETS 
  
  June 30,  March 31,  December 31,  June 30, 
(Dollars in thousands, except share data) 2016  2016  2015  2015 
ASSETS                
Cash and due from banks \\$21,092  \\$20,973  \\$19,745  \\$18,465 
Interest bearing deposits  59,535   20,434   20,428   113,535 
Federal funds sold  5,899   5,488   2,176   5,064 
Total cash and cash equivalents  86,526   46,895   42,349   137,064 
Investment securities:                
Available for sale, at fair value  280,705   313,641   332,736   276,398 
Held to maturity, at historical cost  61,437   64,272   65,882   37,799 
Total investment securities  342,142   377,913   398,618   314,197 
Non-marketable equity securities  1,827   1,827   2,244   1,644 
Loans held for sale  11,915   13,123   17,947   9,322 
Loans:                
Loans held for investment  1,095,828   1,070,146   1,047,975   991,422 
Less allowance for loan losses  (16,152)  (15,723)  (15,557)  (15,655)
Total loans held for investment, net  1,079,676   1,054,423   1,032,418   975,767 
Premises and equipment, net  22,120   22,027   22,104   22,753 
Accrued interest receivable  5,586   5,826   5,767   5,338 
Deferred income tax assets  7,495   7,753   8,606   7,697 
Other real estate owned  644   644   568   615 
Bank-owned life insurance  19,448   19,308   19,170   6,749 
Other assets  5,637   5,933   6,191   7,713 
Total assets \\$1,583,016  \\$1,555,672  \\$1,555,982  \\$1,488,859 
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY                
Deposits:                
Non-interest bearing deposits \\$429,995  \\$407,849  \\$408,508  \\$387,971 
Interest bearing deposits  916,368   916,467   900,677   886,819 
Total deposits  1,346,363   1,324,316   1,309,185   1,274,790 
Short-term borrowings  2,855   2,549   27,204   2,334 
Accrued interest payable  303   309   314   314 
Other liabilities  13,048   13,116   9,871   9,850 
Total liabilities  1,362,569   1,340,290   1,346,574   1,287,288 
Commitments and contingencies                
Shareholders’ equity:                
Preferred shares, \\$0.01 par value  -   -   -   - 
Common shares, \\$0.01 par value  178   177   176   175 
Additional paid-in capital  68,236   67,924   67,338   66,425 
Retained earnings  150,568   146,233   142,223   134,170 
Accumulated other comprehensive income  1,465   1,048   (329)  801 
Total shareholders’ equity  220,447   215,382   209,408   201,571 
Total liabilities and shareholders’ equity \\$1,583,016  \\$1,555,672  \\$1,555,982  \\$1,488,859 
                 
Common shares outstanding  17,752,820   17,715,348   17,567,154   17,452,101 
PEOPLE’S UTAH BANCORP 
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME 
  
  Three Months Ended  Six Months Ended 
(Dollars in thousands, except share June 30,  March 31,  June 30,  June 30,  June 30, 
 and per share data) 2016  2016  2015  2016  2015 
Interest income                    
Interest and fees on loans \\$16,420  \\$15,851  \\$14,346  \\$32,271  \\$28,155 
Interest and dividends on investments  1,489   1,603   1,297   3,092   2,747 
Total interest income  17,909   17,454   15,643   35,363   30,902 
Interest expense  698   754   740   1,452   1,500 
Net interest income  17,211   16,700   14,903   33,911   29,402 
Provision for loan losses  225   200   450   425   600 
Net interest income after provision for loan losses  16,986   16,500   14,453   33,486   28,802 
Non-interest income                    
Service charges on deposit accounts  531   513   614   1,044   1,257 
Card processing  1,136   1,031   1,066   2,167   2,068 
Mortgage banking  2,277   1,748   2,025   4,025   3,797 
Other operating  454   471   438   925   1,165 
Total non-interest income  4,398   3,763   4,143   8,161   8,287 
Non-interest expense                    
Salaries and employee benefits  7,959   7,884   7,308   15,843   14,502 
Occupancy, equipment and depreciation  1,076   988   955   2,064   1,945 
Data processing  670   777   848   1,447   1,537 
FDIC premiums  188   195   191   383   378 
Card processing  549   590   534   1,139   1,004 
Other real estate owned  5   32   40   37   57 
Marketing and advertising  290   169   204   459   377 
Other  1,663   1,500   1,403   3,163   2,902 
Total non-interest expense  12,400   12,135   11,483   24,535   22,702 
Income before income tax expense  8,984   8,128   7,113   17,112   14,387 
Income tax expense  3,407   2,885   2,449   6,292   4,925 
Net income \\$5,577  \\$5,243  \\$4,664  \\$10,820  \\$9,462 
                     
Earnings per common share:                    
Basic \\$0.31  \\$0.30  \\$0.31  \\$0.61  \\$0.63 
Diluted \\$0.31  \\$0.29  \\$0.30  \\$0.60  \\$0.61 
                     
Weighted average common shares outstanding:                    
Basic  17,738,182   17,632,288   15,197,106   17,685,235   14,984,885 
Diluted  18,173,034   18,124,846   15,684,499   18,148,713   15,493,816 
PEOPLE’S UTAH BANCORP 
SELECTED AVERAGE BALANCES AND YIELDS 
  
  Three Months Ended 
  June 30, 2016  June 30, 2015 
      Interest  Average      Interest  Average 
  Average  Income/  Yield/  Average  Income/  Yield/ 
(Dollars in thousands, except footnotes) Balance  Expense  Rate  Balance  Expense  Rate 
Taxable securities (1) \\$271,850  \\$1,047   1.55% \\$235,488  \\$867   1.48%
Non-taxable securities (1) (2)  90,428   646   2.87%  77,852   529   2.73%
Loans (3) (4)  1,096,584   16,421   6.02%  977,277   14,346   5.89%
Total interest earning assets  1,481,879   18,136   4.92%  1,346,354   15,781   4.70%
Total average assets  1,563,509           1,424,316         
Total interest bearing deposits  918,147   698   0.31%  888,062   740   0.33%
Shareholders’ equity  218,705           171,899         
Net interest income (tax-equivalent)      17,438           15,041     
Net interest margin (tax-equivalent)          4.73%          4.48%
                         
                         
  Six Months Ended 
  June 30, 2016  June 30, 2015 
      Interest  Average      Interest  Average 
  Average  Income/  Yield/  Average  Income/  Yield/ 
(Dollars in thousands, except footnotes) Balance  Expense  Rate  Balance  Expense  Rate 
Taxable securities (1) \\$281,738  \\$2,186   1.56% \\$241,419  \\$1,890   1.58%
Non-taxable securities (1) (2)  92,923   1,328   2.87%  77,277   1,067   2.78%
Loans (3) (4)  1,078,687   32,272   6.02%  963,058   28,155   5.90%
Total interest earning assets  1,474,149   35,828   4.89%  1,337,886   31,179   4.70%
Total average assets  1,555,227           1,407,788         
Total interest bearing deposits  926,164   1,452   0.32%  885,574   1,500   0.34%
Shareholders’ equity  216,074           166,525         
Net interest income (tax-equivalent)      34,376           29,679     
Net interest margin (tax-equivalent)          4.69%          4.47%
                         

(1) Excludes average unrealized gains of \\$1.5 million and \\$2.6 million for the three months ended June 30, 2016 and 2015, respectively, and \\$1.1 million and \\$2.2 million for the six months ended June 30, 2016 and 2015, respectively.
(2) Includes tax effect on tax-exempt investment security income of \\$226,000 and \\$286,000 for the three months ended June 30, 2016 and 2015, respectively and \\$464,000 and \\$426,000 for the six months ended June 30, 2016 and 2015, respectively.
(3) Loan interest income includes loan fees of \\$1.4 million and \\$1.1 million for the three months ended June 30, 2016 and 2015, respectively, and \\$2.8 million and \\$2.1 million for the six months ended June 30, 2016 and 2015, respectively.
(4) Excludes average non-accrual loans of \\$5.3 million and \\$7.4 million for the three months ended June 30, 2016 and 2015, respectively, and \\$5.8 million and \\$7.2 million for the six months ended June 30, 2016 and 2015, respectively.