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People's Utah Bancorp looking for additional M&A following latest deal

People's Utah Bancorp's pending acquisition of Town & Country Bank Inc. will give the company a better foothold in one of Utah's fastest growing markets, company executives said.

On a conference call for investors and analysts, the executives also said the small cash-and-stock deal, valued at an aggregate of $20.9 million, will not necessarily hinder the company from completing another near-term transaction.

Executives of the American Fork, Utah-based company said Town & Country's position in St. George made for an attractive acquisition, since it will further expand its statewide bank franchise and consolidate its existing branch in the area to improve visibility and enhance savings.

"Our St. George branch has done well from a financial standpoint, but the physical location has been fairly poor and hard to find," President and CEO Richard Beard said. "We're excited that we can consolidate these two and have a much more visible physical presence here."

Sandler O'Neill & Partners analyst Andrew Liesch wrote that the deal, though small in size — adding just $135.1 million in assets, $97.3 million in loans and $119.7 million in deposits — makes sense for the company.

"The economy there is diverse, supported by tourism, transportation and healthcare," Liesch said. "And, upon completion of the deal, People's Utah will rank sixth in deposit market share in Washington County."

Liesch said the transaction will add a strong Small Business Administration lending team that will complement People's Utah's strategy. Town & Country's loan growth for the year-over-year period ended March 31 was "exceptional" at 20%, he said.

"It is strategically located along the I-15 Corridor, which is the main freeway that runs north to south through Utah," Beard said. "It serves as the gateway to Utah's five national parks, that are referred to as 'the mighty five,' that include Zion National Park, with a record 4.3 million visitors in 2016.'

Beard said the company hopes to extend its footprint further north, into Davis County, and further south into Utah County. When asked by an analyst if the company would be able to take on another deal as early as next week, Beard said: "We could do it."

"It's a great little bank, but it's not a huge thing to integrate it," Beard said of Town & Country. "Obviously, we'll be working hard at that, but we could certainly do another one. Our preference, and the people that we would be looking at, would probably be in the $100 [million] to $300 million range. If there were larger banks that at some point wanted to talk to us, we would certainly entertain that."

The deal is People's Utah's first since the company completed an initial public offering in June 2015. In a research note, FIG Partners analyst John Rodis wrote that it "appears to be a nice in-market transaction that leverages the capital." The company's last deal was its acquisition of Lewiston, Utah-based Lewiston Bancorp in 2013.

The company currently operates 17 branches in Utah and one in southern Idaho. Beard said the company, with roughly $1.72 billion in total assets, prides itself on maintaining its position as the second-largest bank headquartered in Utah and the largest community bank in the state.

"It's a significant opportunity for us to increase market share and to become a competitor in southern Utah and the market here," Beard said. "The increased scale will assist in capitalizing on both organic and M&A growth opportunities in this part of Utah."

Liesch wrote that the deal, which executives expect to close in September 2017, "shouldn't pose significant merger or integration-related risks."