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.

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 July 31, ~~2020,~~2021, the registrant had ~~18,794,120~~18,887,450 shares of common stock $0.01 par value per share, outstanding. ~~No preferred shares are issued or outstanding.~~

	June 30,			December 31,			June 30,			December 31,
(Dollars in thousands, except share amounts)	2020			2019			2021			2020
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	47,088		$	38,987		$	35,446		$	39,312
Interest-bearing deposits		275,920			171,955			27,045			197,769
Federal funds sold		829			1,039			838			2,793
Total cash and cash equivalents		323,837			211,981			63,329			239,874
Investment securities - available for sale, at fair value		973,457			405,995			1,491,707			1,320,393
Non-marketable equity securities		2,890			2,623			4,042			2,890
Loans held for sale		29,264			18,669			6,672			14,152
Loans:
Loans held for investment		1,659,018			1,680,918			1,873,685			1,695,496
Allowance for credit losses		(42,683	)		(31,426	)		(34,958	)		(41,236	)
Total loans held for investment, net		1,616,335			1,649,492			1,838,727			1,654,260
Premises and equipment, net		38,673			39,474			34,821			36,460
Goodwill		25,673			25,673			25,673			25,673
Bank-owned life insurance		27,330			27,037			43,234			42,720
Deferred income tax assets, net		8,586			9,716			11,787			7,389
Accrued interest receivable		11,682			7,904			9,537			11,336
Other intangibles		2,749			2,970			4,831			4,451
Other real estate owned		-			-			-			-
Other assets		5,169			4,800			6,445			6,630
Total assets	$	3,065,645		$	2,406,334		$	3,540,805		$	3,366,228
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Non-interest bearing deposits	$	985,455		$	719,410		$	1,145,009		$	1,039,844
Interest bearing deposits		1,627,884			1,336,957			2,011,698			1,876,464
Total deposits		2,613,339			2,056,367			3,156,707			2,916,308
Short-term borrowings		83,490			-			-			64,554
Accrued interest payable		408			546			325			616
Other liabilities		18,278			17,059			13,142			13,612
Total liabilities		2,715,515			2,073,972			3,170,174			2,995,090

Shareholders’ equity:
Preferred shares, $0.01 par value: 3,000,000 shares authorized; 0 shares issued		-			-			-			-
Common shares, $0.01 par value: 30,000,000 shares authorized; 18,793,217
and 18,870,498 shares issued and outstanding as of June 30, 2020
and December 31, 2019, respectively		188			189
Common shares, $0.01 par value: 30,000,000 shares authorized; 18,880,610
and 18,828,522 shares issued and outstanding as of June 30, 2021
and December 31, 2020, respectively								189			188
Additional paid-in capital		86,721			87,913			88,209			87,574
Retained earnings		252,032			242,878			285,633			269,157
Accumulated other comprehensive income		11,189			1,382
Accumulated other comprehensive (loss) / income								(3,400	)		14,219
Total shareholders’ equity		350,130			332,362			370,631			371,138
Total liabilities and shareholders’ equity	$	3,065,645		$	2,406,334		$	3,540,805		$	3,366,228

	Three Months Ended					Six Months Ended				Three Months Ended						Six Months Ended
	June 30,					June 30,				June 30,						June 30,
(Dollars in thousands, except share and per share amounts)	2020			2019		2020		2019		2021			2020			2021			2020
Interest income
Interest and fees on loans	$	23,649		$	27,628	$	49,574	$	54,608	$	22,573		$	23,649		$	45,387		$	49,574
Interest and dividends on investments		3,753			2,422		7,212		4,594		4,190			3,753			6,520			7,212
Total interest income		27,402			30,050		56,786		59,202		26,763			27,402			51,907			56,786
Interest expense		1,613			2,330		3,776		4,575		1,466			1,613			3,012			3,776
Net interest income		25,789			27,720		53,010		54,627		25,297			25,789			48,895			53,010
Provision for credit losses		2,100			2,150		2,750		3,700
(Recapture) / provision for credit losses											(5,000	)		2,100			(5,000	)		2,750
Net interest income after provision for credit losses		23,689			25,570		50,260		50,927		30,297			23,689			53,895			50,260
Non-interest income
Mortgage banking		3,036			1,621		4,746		3,038		2,404			3,036			5,185			4,746
Card processing		917			814		1,624		1,429		1,211			917			2,282			1,624
Service charges on deposit accounts		763			705		1,543		1,362		651			763			1,343			1,543
Net gain on sale of investment securities		1,441			-		1,441		-		-			1,441			206			1,441
Other		(41	)		458		502		1,106		1,026			(41	)		1,658			502
Total non-interest income		6,116			3,598		9,856		6,935		5,292			6,116			10,674			9,856
Non-interest expense
Salaries and employee benefits		10,786			9,526		21,630		19,412		10,707			10,786			21,794			21,630
Occupancy, equipment and depreciation		831			1,558		2,370		3,014		1,209			831			2,404			2,370
Data processing		2,383			1,018		3,519		1,982		2,434			2,383			4,283			3,519
Marketing and advertising		339			226		771		342		330			339			636			771
FDIC premiums		165			148		165		238		247			165			473			165
Acquisition-related costs											2,215			-			2,215			-
Other		1,771			2,223		3,981		4,627		1,713			1,771			3,595			3,981
Total non-interest expense		16,275			14,699		32,436		29,615		18,855			16,275			35,400			32,436
Income before income tax expense		13,530			14,469		27,680		28,247		16,734			13,530			29,169			27,680
Income tax expense		3,192			3,480		6,569		6,753		4,034			3,192			7,031			6,569
Net income	$	10,338		$	10,989	$	21,111	$	21,494	$	12,700		$	10,338		$	22,138		$	21,111
Earnings per common share:
Basic	$	0.55		$	0.58	$	1.12	$	1.14	$	0.67		$	0.55		$	1.17		$	1.12
Diluted	$	0.55		$	0.58	$	1.11	$	1.13	$	0.67		$	0.55		$	1.16		$	1.11
Weighted average common shares outstanding:
Basic		18,789,561			18,805,760		18,837,209		18,793,553		18,876,688			18,789,561			18,870,626			18,837,209
Diluted		18,932,511			19,007,297		18,985,319		18,998,480		19,036,575			18,932,511			19,028,175			18,985,319

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
(Dollars in thousands)	2020			2019			2020			2019			2021			2020			2021			2020
Net income	$	10,338		$	10,989		$	21,111		$	21,494		$	12,700		$	10,338		$	22,138		$	21,111
Other comprehensive income
Unrealized holding gains on securities available for sale		3,951			3,140			14,518			5,996
Unrealized holding gains / (loss) on securities available for sale														14,034			3,951			(23,286	)		14,518
Reclassification adjustment for gains on available for sale securities		(1,441	)		-			(1,441	)		-			-			(1,441	)		(206	)		(1,441	)
Net unrealized holding gains on securities available for sale		2,510			3,140			13,077			5,996
Net unrealized holding gains / (loss) on securities available for sale														14,034			2,510			(23,492	)		13,077

Income tax expense		(627	)		(785	)		(3,270	)		(1,498	)
Other comprehensive income, net of tax		1,883			2,355			9,807			4,498
Income tax (expense) / benefit														(3,508	)		(627	)		5,873			(3,270	)
Other comprehensive income / (loss), net of tax														10,526			1,883			(17,619	)		9,807
Total comprehensive income	$	12,221		$	13,344		$	30,918		$	25,992		$	23,226		$	12,221		$	4,519		$	30,918

													Accumulated																		Accumulated
							Additional						Other												Additional						Other
(Dollars in thousands, except share and per share	Common			Common			Paid-in			Retained			Comprehensive						Common			Common			Paid-in			Retained			Comprehensive
amounts)	Shares			Stock			Capital			Earnings			Income (Loss)			Total			Shares			Stock			Capital			Earnings			Income (Loss)			Total
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

Balance as of January 1, 2020		18,870,498		$	189		$	87,913		$	242,878		$	1,382		$	332,362			18,870,498		$	189		$	87,913		$	242,878		$	1,382		$	332,362
Net income		-			-			-			10,773			-			10,773			-			-			-			10,773			-			10,773
Other comprehensive income		-			-			-			-			7,924			7,924			-			-			-			-			7,924			7,924
Cash dividends ($0.14 per share)		-			-			-			(2,646	)		-			(2,646	)		-			-			-			(2,646	)		-			(2,646	)
Reclass related to ASC 326 adoption (CECL)		-			-			-			(6,680	)		-			(6,680	)		-			-			-			(6,680	)		-			(6,680	)
Shares repurchased		(120,906	)		(1	)		(2,139	)		-			-			(2,140	)		(120,906	)		(1	)		(2,139	)		-			-			(2,140	)
Share-based compensation		-			-			385			-			-			385			-			-			385			-			-			385
Issuance of shares under stock incentive plans		38,218			-			159			-			-			159			38,218			-			159			-			-			159
Balance as of March 31, 2020		18,787,810		$	188		$	86,318		$	244,325		$	9,306		$	340,137			18,787,810		$	188		$	86,318		$	244,325		$	9,306		$	340,137
Net income		-			-			-			10,338			-			10,338			-			-			-			10,338			-			10,338
Other comprehensive income		-			-			-			-			1,883			1,883			-			-			-			-			1,883			1,883
Cash dividends ($0.14 per share)		-			-			-			(2,631	)		-			(2,631	)		-			-			-			(2,631	)		-			(2,631	)
Share-based compensation		-			-			380			-			-			380			-			-			380			-			-			380
Issuance of shares under stock incentive plans		5,407			-			23			-			-			23			5,407			-			23			-			-			23
Balance as of June 30, 2020		18,793,217		$	188		$	86,721		$	252,032		$	11,189		$	350,130			18,793,217		$	188		$	86,721		$	252,032		$	11,189		$	350,130

Balance as of January 1, 2021																				18,828,522		$	188		$	87,574		$	269,157		$	14,219		$	371,138
Net income																				-			-			-			9,438			-			9,438
Other comprehensive loss																				-			-			-			-			(28,145	)		(28,145	)
Cash dividends ($0.15 per share)																				-			-			-			(2,830	)		-			(2,830	)
Share-based compensation																				-			-			351			-			-			351
Issuance of shares under stock incentive plans																				45,399			1			(82	)		-			-			(81	)
Balance as of March 31, 2021																				18,873,921		$	189		$	87,843		$	275,765		$	(13,926	)	$	349,871
Net income																				-			-			-			12,700			-			12,700
Other comprehensive income																				-			-			-			-			10,526			10,526
Cash dividends ($0.15 per share)																				-			-			-			(2,832	)		-			(2,832	)
Share-based compensation																				-			-			343			-			-			343
Issuance of shares under stock incentive plans																				6,689			-			23			-			-			23
Balance as of June 30, 2021																				18,880,610		$	189		$	88,209		$	285,633		$	(3,400	)	$	370,631

	Six Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2020			2019			2021			2020
Cash flows from operating activities:
Net income	$	21,111		$	21,494		$	22,138		$	21,111
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		2,750			3,700
(Recapture) / provision for credit losses								(5,000	)		2,750
Depreciation and amortization		1,822			1,889			1,407			1,822
Loss on sale of OREO		1			-
Deferred income taxes		(24	)		837			1,475			(24	)
Net amortization of securities discounts and premiums		1,541			1,172
Net amortization of securities premiums and discounts								9,411			1,541
Gain on sale of available for sale securities								(206	)		-
Increase in cash surrender value of bank-owned life insurance		(293	)		(301	)		(514	)		(293	)
Share-based compensation		765			381			694			765
Gain on sale of loans held for sale		(3,467	)		(1,984	)		(3,878	)		(3,467	)
Originations of loans held for sale		(136,459	)		(99,270	)		(192,536	)		(136,459	)
Proceeds from sale of loans held for sale		129,331			93,075			203,894			129,332
Net changes in:
Accrued interest receivable		(3,778	)		(360	)		1,799			(3,778	)
Other assets		(938	)		3,596			238			(938	)
Accrued interest payable		(138	)		63			(291	)		(138	)
Other liabilities		1,552			(2,149	)		(1,518	)		1,552
Net cash provided by operating activities		13,776			22,143			37,113			13,776
Cash flows from investing activities:
Net change in loans held for investment		22,057			5,412			(178,086	)		22,057
Purchase of available for sale securities		(674,709	)		(12,831	)		(663,600	)		(674,709	)
Proceeds from maturities/sales of available for sale securities		118,783			27,949			459,589			118,783
Proceeds from maturities of held to maturity securities		-			1,370
Purchase of premises and equipment		(1,354	)		(3,464	)		(534	)		(1,354	)
Proceeds from sale of assets		-			2,297
Proceeds from sale of other real estate owned, net of improvements		343			-
Proceeds from sale of OREO, net of improvements								-			343
Purchase of non-marketable equity securities		(267	)		(4,032	)		(5,891	)		(267	)
Proceeds from sale of non-marketable equity securities		-			3,960			4,739			-
Net cash (used in) provided by investing activities		(535,147	)		20,661
Net cash used in investing activities								(383,783	)		(535,147	)
Cash flows from financing activities:
Net increase in deposits		556,972			104,851			240,399			556,972
Proceeds related to exercise of stock options		182			587
(Costs) / Proceeds related to exercise of stock options								(58	)		182
Net change in short-term borrowings		83,490			-			(64,554	)		83,490
Net cash used in share repurchase program		(2,140	)		-			-			(2,140	)
Cash dividends paid		(5,277	)		(4,323	)		(5,662	)		(5,277	)
Net cash provided by financing activities		633,227			101,115			170,125			633,227
Net change in cash and cash equivalents		111,856			143,919			(176,545	)		111,856
Cash and cash equivalents, beginning of period		211,981			48,547			239,874			211,981
Cash and cash equivalents, end of period	$	323,837		$	192,466		$	63,329		$	323,837
Supplemental disclosures of cash flow information:
Cash paid for interest	$	3,914		$	4,512		$	3,303		$	3,914
Income taxes paid	$	25		$	6,510		$	4,470		$	25
Supplemental disclosures of non-cash investing transactions:
Reclassifications from loans to other real estate owned	$	344		$	-		$	-		$	344
Unrealized gains on securities available for sale	$	13,077		$	5,996
Transfer of HTM securities to AFS	$	-		$	64,648
Net unrealized (loss) / gains on securities available for sale							$	(23,492	)	$	13,077

Nature of operations and basis of consolidation — Altabancorp^TM (“ALTA” ~~or the “Company”~~) is a Utah corporation headquartered in American Fork, ~~Utah.~~Utah and is the bank holding company for Altabank^TM (the “Bank” and together with ALTA, the “Company”). The Company operates all business activities through ~~its wholly-owned banking subsidiary, Altabank~~^TM ~~(the “Bank”),~~the Bank, which was organized in 1913. ~~Altabank~~^TMThe Bank is a Utah state-chartered bank. ~~Altabank~~^TMThe Bank operates under the jurisdiction of the Utah Department of Financial Institutions (“UDFI”), and its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”). ~~Altabank~~^TMThe Bank is not a member of the Federal Reserve System; however, ALTA ~~is operated~~operates as a bank holding company under the Federal Bank Holding Company Act of 1956 and is the sole shareholder of ~~Altabank~~^TM.the Bank. Both ALTA and ~~Altabank~~^TMthe Bank are subject to periodic examination by ~~all of the~~these applicable federal and state regulatory agencies and file periodic reports and other information with ~~such~~the agencies. The Company considers ~~Altabank~~^TMthe Bank to be its sole operating segment.

~~Altabank~~^TMThe Bank is a community bank that provides highly personalized retail and commercial banking products and services to small-to-medium sized businesses and to individuals. Products and services are offered primarily through 2625 retail branches located throughout Utah and southern Idaho. ~~Altabank~~^TMThe 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. ~~Altabank~~^TMThe Bank also offers mortgage loans secured by ~~single family~~personal residences. ~~Altabank~~^TMThe Bank offers a full range of deposit services typically available in most financial institutions, including checking accounts, savings accounts, and time deposits. ~~Altabank~~^TMThe Bank solicits these accounts from individuals, businesses, associations, ~~and~~ organizations, and governmental entities.

The accompanying unaudited interim consolidated financial statements include the accounts of ~~the Company~~ALTA together with its subsidiary Bank. All intercompany transactions and balances have been eliminated. These unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ~~(GAAP)~~(“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission ~~(SEC)~~(the “SEC”). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC and the accounting standards for interim financial statements.

Use of estimates — The preparation of consolidated financial statements in conformity with ~~accounting principles generally accepted in~~GAAP requires the ~~United States of America~~Company’s management (“~~GAAP”~~Management”) ~~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 credit losses (“ACL”), 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 reclassifications have been made to the ~~2019~~2020 Consolidated Financial Statements and/or schedules to conform to the ~~2020~~2021 presentation. These reclassifications may have affected certain ratios for the prior periods. The effect of these reclassifications is considered immaterial.

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.~~period.

Note 1 — Basis of Presentation and 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 as HTM are carried at amortized cost. Investment securities classified as AFS are reported at fair value. AsPurchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Debt securities classified as held to maturity are carried at cost, net of the allowance for credit losses on debt securities, adjusted for amortization of premiums and discounts to the earliest callable date. Debt securities classified as available for sale are measured at fair ~~value of AFS~~value. Unrealized holding gains and losses on debt securities ~~changes, the changes~~classified as available for sale are excluded from earnings and are reported ~~(net~~net of tax ~~if applicable) in comprehensive income and~~ as ~~an element of~~ accumulated other comprehensive ~~income/loss~~income (“AOCI”) ~~in shareholder’s equity.~~

~~Interest income includes amortization~~, a component of purchase premium or discount. Premiums and discounts on securities are generally amortized on the level-yield method without anticipating prepayments, except for callable debt securities. Premiums on callable debt securities are amortized to the earliest call date.shareholders’ equity, until realized. When AFS securities, specifically identified, are sold, the unrealized gain or loss is reclassified from AOCI to non-interest income. Debt securities classified as trading are also measured at fair value. Unrealized holding gains and losses on securities classified as trading are included in earnings.

~~A debt security is placed on nonaccrual status at~~FASB ASC Subtopic 326-30, Financial Instruments—Credit Losses—Available for Sale Debt Securities - describes the ~~time any principal or interest payments become greater than 90 days delinquent. Delinquent interest accrued but not received~~accounting for ~~a security placed on nonaccrual is reversed against interest income. The Company did not have any accrued interest reversed against interest income for the six months ended June 30, 2020.~~

~~Allowance for~~expected credit losses –associated with AFS ~~securities—For~~debt securities. Credit losses for AFS debt securities ~~in an unrealized loss position, management assesses whether the Company intends to sell or it is more likely than not that the Company will be required to sell the security before recovery~~are evaluated as of its amortized cost basis. If either criterion regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to the fair value through non-interest income. For AFS debt securities that do not meet the aforementioned criteria, management evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to whicheach reporting date when the fair value is less than amortized ~~cost, any changes~~cost. FASB ASC Subtopic 326-30 requires credit losses to ~~the rating of the security by~~be calculated individually, rather than collectively, using a ~~rating agency, and any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists,~~discounted cash flow method, through which Management compares the present value of expected cash flows ~~expected to be collected from the security is compared to~~with the amortized cost basis of the security. IfAn ACL is established, with a charge to the ~~present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance~~provision for credit losses ~~is recorded for~~(“PCL”), to reflect the credit loss ~~which~~component of the decline in fair value below amortized cost. If the fair value of the security increases over time, any ACL that has not been written off may be reversed through a credit to the PCL. The ACL for an available for sale debt security is limited by the amount that the fair value is less than the amortized cost, ~~basis. Any impairment that has~~which is referred to as the fair value floor.

If the Company intends to sell an AFS debt security or will more likely than not ~~been recorded through an allowance for~~be required to sell the security before recovery of the amortized cost basis, the security’s ACL should be written off and the amortized cost basis of the security should be written down to its fair value at the reporting date with any incremental credit losses ~~is recognized~~reported in ~~AOCI.~~

~~Changes~~income. A change during the reporting period in the ~~allowance for credit losses are recorded as a Provision for Credit Losses (“PCL”). Losses are charged against the allowance when management believes the uncollectibility~~non-credit component of any decline in fair value below amortized cost on an AFS debt security is ~~confirmed or when either~~reported in AOCI, net of applicable income taxes.

The Company has excluded accrued interest receivable from the amortized cost of the ~~criterion regarding intent~~debt securities and from the calculation of current expected credit losses.

Each reporting period, Management reviews all AFS debt securities. If the debt securities are guaranteed by a Federal government agency or ~~requirement~~Federal government sponsored agency, Management believes that any change in the fair value of such securities is only related to ~~sell~~changes in interest rates, and no ACL will be recorded. Management reviews the remaining debt securities by evaluating the credit rating provided by Nationally Recognized Statistical Ration Organizations (“NRSRO”). If the NRSRO credit rating is ~~met.~~investment grade rated or higher, Management believes that any change in the fair value of such securities is only related to changes in interest rates, and no ACL will be recorded. If any remaining debt securities either have a NRSRO credit rating that is below investment grade or is unrated, Management will determine if an ACL should be recorded by comparing the net present value of expected cash flows with the amortized cost basis of the security with any difference recorded to ACL.

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 Bank’s borrowings from FHLB. FHLB obtains its funding primarily through issuance of consolidated obligations of the FHLB system. The U.S. ~~government~~Government does not guarantee these obligations, and each of the regional FHLBs isare jointly and severally liable for repayment of each other’s ~~debt.~~obligations.

Note 1 — Basis of Presentation and Significant Accounting Policies – Continued

Loans held for sale ~~—Single-family~~— Single-family residential mortgage loans originated with the intent to be sold in the secondary market are considered held for sale. Loans with best effort delivery commitments are carried at the lower of aggregate cost or estimated fair value. Loans under mandatory delivery commitments are carried at fair value ~~in order~~ to match changes in the value of the loans with the value of the economic hedges on the loans. Fair values for loans held for sale are determined by comparing actual loan rates to current secondary market prices for similar loans. Net unrealized losses on loans held for sale that are carried at lower of cost or market are recognized through the 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.~~

Loans held for investment — Loans that ~~management~~Management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at ~~amortized cost, net of~~their outstanding principal balance adjusted for any charge-offs, the allowance for credit ~~losses. Amortized cost includes the principal balance outstanding, net of purchase~~losses, any deferred fees or costs on originated loans, and unamortized premiums ~~and~~or discounts ~~deferred loan fees and costs. Accrued interest is reported as a separate line item~~ on ~~the unaudited consolidated balance sheets.~~acquired loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized ~~in interest income~~as an adjustment of the related loan yield using the effective interest ~~method without anticipating prepayments.~~method. The Company has excluded accrued interest receivable from the amortized cost of loans held for investment and from the calculation of current expected credit losses.

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 ~~on mortgage and commercial loans~~ is discontinued and placed on nonaccrual status at the time the loan is 90 days delinquent, unless the loan is well secured and in process of collection. Mortgage loans are charged off at 180 days past due, and commercial loan are charged-offsubsequently recognized only to the extent ~~principal~~cash payments are received, or interest is deemed uncollectible. Consumer and credit card loans continue to accrue interest until they are charged-off no later than 120 days past due unless the loan is in the process of collection. Past-due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charge-off at an earlier date if collection of principal or interestpayment is considered ~~doubtful.~~

All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest income is recorded when the payment is received in cash.certain. Loans ~~are~~may be returned to accrual status when all ~~principal~~delinquent interest and ~~interest~~principal amounts contractually due are brought current and future payments are reasonably assured.

Troubled debt ~~restructurings (“TDR”)~~restructuring —A loan for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, is considered to be a TDR. TDRs are then evaluated to determine if the TDR loan has estimatedExpected credit losses ~~using~~on financial assets modified in troubled debt restructurings (“TDRs”) are estimated under the same current expected credit loss (“CECL”) methodology ~~used for~~that is applied to other ~~individually~~financial assets measured at amortized cost. Expected credit losses can be evaluated ~~loans as described in the next section. With the recent COVID-19 pandemic, the number of loans that have had loan payments deferred has significantly increased. In accordance~~either on a collective basis or on an individual basis if a TDR does not share similar risk characteristics with ~~regulatory guidance, to the extent that the borrower was not experiencing~~other financial ~~difficulties prior to the pandemic, such modifications have not been classified as TDRs.~~assets.

~~Individually evaluated loans~~ ~~— The Company considers loans individually evaluated~~FASB ASC Topic 326 allows an institution to use any appropriate loss estimation method to estimate ACLs for TDRs. However, there are circumstances when ~~based on current information and events, it~~specific measurement methods are required. If a TDR is ~~probable~~collateral-dependent, 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). Individually evaluated 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, orACL is estimated using the fair value of collateral.

In addition, the ~~collateral, adjusted for selling costs, if~~expected effect of the modification (e.g., term extension or interest rate concession) will be included in the estimate of the ACL. Management will determine, support, and document how the Company identifies and estimates the effect of a reasonably expected TDR and how the Company estimates the related ACL. The Company may include the estimated effect of reasonably expected TDRs in its qualitative factor adjustments.

The Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”) and the Consolidated Appropriations Act 2021 (the “CAA”) provide guidance regarding modification of loans as a result of the COVID-19 pandemic, including that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief are not TDRs. This includes short-term (e.g., six months) modifications, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. To qualify as an eligible loan ~~is collateral dependent. Changes in these values are recorded~~under the CARES Act, a loan modification must be: (1) related to COVID-19; (2) involve a loan that was not more than 30 days past due as of December 31, 2019; and (3) occur between March 1, 2020 and the ~~ACL~~earlier of (a) 60 days after the date of termination of the national emergency declared by the President or (b) December 31, 2020. The CAA extended the modification relief offered under the CARES Act through the ~~PCL.~~

~~Factors considered by management in determining estimated credit losses include payment status, collateral value and~~earlier of January 1, 2022, or 60 days after 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 individually evaluated. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration allend of the ~~circumstances surrounding~~national emergency declared by 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.President.

Note 1 — Basis of Presentation and Significant Accounting Policies – Continued

As a result, the Company has not recognized eligible loan modifications under the CARES Act as TDRs. Additionally, loans qualifying for such modification are not required to be reported as delinquent, nonaccrual, impaired, or criticized having resulted from the economic effects of the COVID-19 pandemic. Modifications include deferral of principal and interest payments, as well as interest only periods. The Company accrues and recognizes interest income on loans under payment relief based on the original contractual interest rates. When payments resume at the end of the relief period, loans are generally re-amortized with an extended maturity date to keep the monthly payment similar to before the COVID-related deferral occurred.

Purchased credit-deteriorated assets – ASC Topic 326 introduces the concept of purchased credit-deteriorated (“PCD”) assets. PCD assets are acquired financial assets that, at acquisition, have experienced more-than-insignificant deterioration in credit quality since origination.

~~Acquired loans~~ – ~~Loans acquired through purchase or through a business combination~~PCD assets are recorded at ~~their~~ fair value at the ~~acquisition date, including estimates~~time of current expected credit losses. Some acquired loans have experienced more than insignificant credit deterioration since origination. Such loans are defined as Purchased Credit Deteriorated (“PCD”). The Company makes the determination if a loan is PCD by considering past due and/or nonaccrual status, prior designation of a troubled debt restructuring, or other factors that may suggest the Company will not be able to collect all contractual payments due. Subsequent to acquisition,acquisitions. Subsequently, the amount of expected credit losses as of the acquisition date is added to the ~~purchase price~~carrying value of the PCD ~~loans~~assets with an offsetting entry to ACL. Any difference between the unpaid principal balance of the PCD assets and the amortized cost basis of the ~~PCD loan~~assets as of the acquisition date is the non-credit discount or premium. The initial ACL and non-credit discount ~~recorded~~or premium determined on a collective basis at that acquisition ~~is amortized or accreted into interest income over~~date will be allocated to the ~~remaining life of the~~individual PCD ~~loan on an effective interest method.~~ assets.

To the extent that ~~management~~Management changes the Company’s estimate of expected credit losses on PCD ~~loans,~~assets, the Company’s ACL will be increased or decreased with a corresponding entry to PCL. The non-credit discount recorded at acquisition will be accreted to interest income over the remaining life of the PCD assets on a level-yield basis.

~~Some acquired loans may~~Purchased assets not ~~have experienced more than insignificant~~ credit ~~deterioration since origination. Such loans~~deteriorated – ASC Topic 326 provides guidance regarding purchased assets that are ~~defined as Purchased non-Credit Deteriorated~~not credit deteriorated (“Non-PCD”) ~~loans.~~. Non-PCD ~~loans~~assets are also recorded at fair value at the time of acquisition, including estimates of current expected credit losses. However, ~~any current~~ASB ASC Topic 326 does not allow for expected credit losses ~~estimated~~ as of the acquisition date ~~are not~~to be added to the purchase price of Non-PCD assets with an offsetting entry to ACL. Current expected credit losses for Non-PCD loans are to be set aside in ACL ~~but rather such estimate is~~with an offsetting entry to PCL. Expected credit losses included in the ~~difference between the unpaid principal balance and the amortized cost basis~~fair value of ~~the~~a Non-PCD ~~loan. This credit and non-credit discount is amortized or~~loan are accreted ~~into~~to interest income over the remaining life of ~~the~~a Non-PCD loan on ~~an effective interest method. In addition, an allowance for credit losses is determined for Non-PCD loans using the same methodology as loans held for investment with an offset recorded to PCL.~~

~~An acquired loan previously classified by the seller as~~ a TDR is no longer classified as such at the date of acquisition. Past due status is reported based on contractual payment status. Changes to the ACL for acquired loans are recorded through PCL after adoption.level-yield basis.

Allowance for credit losses – Loans — On January 1, 2020, the Company adopted Accounting Standard Update (“ASU”) No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit ~~risk is inherent in~~Losses on Financial Instruments.” The ASU significantly changed the ~~business of extending~~accounting for credit loss measurement on loans and ~~leases~~debt securities. The ASU requires a financial asset (or a group of financial assets) measured at amortized cost basis to ~~borrowers. Normally, this credit risk~~be presented at the net amount expected to be collected. The ACL is ~~addressed through~~ a valuation ~~allowance termed allowance~~account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.

The income statement reflects the measurement of credit losses for ~~credit losses. The ACL represents management’s estimate~~newly recognized financial assets, as well as the expected increase or decrease of ~~current~~ expected credit losses ~~(“CECL”) inherent~~that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity must use judgment in determining the ~~loan portfolio at each balance sheet date. Netted against~~relevant information and estimation methods that are appropriate in its circumstances.

For loans and held to maturity debt securities, the ~~outstanding loan balance, this ACL reduces the balance~~ASU requires a CECL measurement to ~~the Company’s~~ estimate of what will be collected from borrowers. The ACL is established through charges to current period earnings by recording a PCL. When losses become specifically identifiable and quantifiable, the loan balance is reduced through recording a charge-off against the ACL. Should payments be received on a charged-off loan, the payment is credited to the ACL ~~as a recovery.~~

~~Management estimates~~for the ~~ACL~~remaining estimated life of the financial asset (including off-balance sheet credit exposures) using ~~relevant available information, from internal and external sources, relating to past events,~~historical experience, current conditions, and reasonable and supportable forecasts. ~~Historical~~The ASU eliminated the existing guidance for Purchased Credit Impaired (“PCI”) loans but requires an allowance for purchased financial assets with more than an insignificant deterioration since origination, otherwise known as PCD assets. In addition, the ASU modified the other-than-temporary impairment (“OTTI”) model for available for sale debt securities to require an allowance for credit ~~loss experience, either internal or peer information, provides~~losses instead of a direct write-down, which allows for reversal of credit losses in future periods based on an improvement in credit.

Note 1 — Basis of Presentation and Significant Accounting Policies – Continued

Both the ~~basis for~~Federal Financial Institution Regulatory Agencies (“FFIRA”) and the ~~estimation of~~Securities and Exchange Commission (“SEC”), confirmed that smaller, less complex organizations are not required to implement complex models, developed by outside vendors to calculate current expected credit losses. ~~Adjustments~~These agencies have noted that there is no expectation that a less complex entity should have to implement a sophisticated model to satisfy the requirements of Update 2016-13. If an entity is using a loss rate-based method today, that entity may be able to continue with a comparable method, including the WARM method. However, compared with the method it uses today to estimate incurred losses, the entity’s assumptions and inputs will need to change to arrive at an estimate for expected credit losses that contemplates the contractual term of the financial assets adjusted for prepayments as well as reasonable and supportable forecasts.

Given the size of the organization, the Company has developed a CECL reserve model that uses the weighted average remaining maturity (“WARM”) methodology, adjusting for prepayments. The foundation of CECL modeling is the ability to estimate expected credit losses over the lifetime of a loan. The Company uses relevant available information about past events (e.g., historical ~~loss information are made, using qualitative factors, when management expects~~losses), current conditions, and reasonable and supportable forecasts about future conditions. Historical losses serve as the starting point to estimate expected credit losses. The Company determined to use a “through-the-cycle” historical credit loss experience as its baseline for historical credit losses. The Company determined a representative period for a full credit cycle would be 2008 to 2017 (ten-year credit cycle). The Company has collected historical loss information on its own loan portfolio, as well as peer group information, by seventeen loan segments over this time horizon. The Company calculated WARM for seventeen loan segments using its Asset/Liability Management (“ALM”) models, which has been certified by independent specialists.

Management has identified the following loan portfolio segments to evaluate and measure the Company’s ACL:

Real estate term: Includes farmland, multifamily, owner-occupied commercial real estate, and non-owner occupied commercial real estate term loans.

Construction and land development: Includes 1-4 family residential construction loans, other construction loans, land development loans, and other land loans.

Commercial and industrial: Includes agricultural loans, commercial and industrial loans, municipal loans, and lease financing receivables.

Residential and home equity: Includes revolving 1-4 family residential lines of credit, first lien 1-4 family residential term loans, and junior lien 1-4 family residential term loans.

Consumer and other: Includes consumer credit cards, automobile loans, revolving consumer lines of credit, and other consumer loans.

The Company evaluates macroeconomic information, as well as internal trends in credit performance on the Company’s loan portfolio, to assist in determining current conditions and its economic forecast. The Company uses qualitative factors as defined by the Interagency Policy Statement on the Allowance for Loan and Lease Losses (the “Interagency Policy Statement”). The Interagency Policy Statement notes that after determining the appropriate historical loss rate for each group of loans with similar risk characteristics, management should consider those current qualitative or environmental factors that are likely to cause estimated credit losses as of the evaluation date to differ from the ~~conditions~~group’s historical loss experience. Institutions typically reflect the overall effect of these factors on a loan group as an adjustment that, ~~existed~~as appropriate, increases or decreases the historical loss rate applied to the loan group. Alternatively, the effect of these factors may be reflected through separate standalone adjustments within the FAS 5 [superseded by ASC Topic 326] component of the ALLL. Both methods are consistent with GAAP provided the adjustments for qualitative or environmental factors are reasonably and consistently determined, are adequately documented, and represent estimated credit losses. For each group of loans, an institution should apply its adjusted historical loss rate, or its historical loss rate and separate standalone adjustments, to the ~~period over which historical information was evaluated.~~ recorded investment in the group when determining its estimated credit losses.

Note 1 — Basis of Presentation and Significant Accounting Policies – Continued

Management must exercise significant judgment when evaluating the effect of qualitative factors on the amount of the ~~ACL~~ALLL because data may not be reasonably available or directly applicable for management to determine the precise impact of a factor on the collectability of the institution’s loan portfolio as of the evaluation date. Accordingly, institutions should support adjustments to historical loss rates and explain how the adjustments reflect current information, events, circumstances, and conditions in the loss measurements. Management should maintain reasonable documentation to support which factors affected the analysis and the impact of those factors on the loss measurement. Support and documentation include descriptions of each factor, management’s analysis of how each factor has changed over time, which loan groups’ loss rates have been adjusted, the amount by which loss estimates have been adjusted for changes in conditions, an explanation of how management estimated the impact, and other available data that supports the reasonableness of the adjustments. Examples of underlying supporting evidence could include, but are not limited to, relevant articles from newspapers and other publications that describe economic events affecting a particular geographic area, economic reports and data, and notes from discussions with borrowers.

~~Management~~As defined by the Interagency Policy Statement, the Company considers qualitative or environmental factors that are likely to cause estimated credit losses associated with ~~our~~the Company’s existing portfolio to differ from historical loss experience, as defined in the Interagency Guidance, including but not limited to: ~~i) changes in lending policies and procedures; ii) changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses; iii)~~

Charge-offs of loans are generally processed by policy as well as 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 ~~portfolio, including~~collateral. Unsecured loans are charged-off once the ~~condition~~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 ~~various market segments; iv) changes~~delinquency, though it is a factor in the decision. The financial resources of the borrower and/or guarantor and the nature and volume of the portfolio and in the terms of loans; v) changes in the experience, ability, and depth of lending management and other relevant staff; vi) changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans; vii) changes in the quality of the institution’s loan review system; viii) changes in the value of ~~underlying~~any collateral ~~for collateral-dependent loans; ix) the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and, x) the effect of~~are other ~~external~~ factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the institution’s existing portfolio. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision, as more information becomes available.

~~Note 1 — Basis of Presentation and Significant Accounting Policies – Continued~~

The Company used the weighted average remaining maturity (or “WARM”) approach, adjusted for prepayments, to calculate CECL at June 30, 2020 and segmented its loan portfolio into 17 loan segments based on similar risk characteristics. Management may change the approach used to calculated current expected credit losses or loan segments from time-to-time as the Company improves credit loss estimation techniques. The Company has elected to exclude accrued interest receivable from its calculation of the ACL.

~~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.

~~Allowance for credit losses on off-balance sheet credit exposures~~ — The Company estimates expected credit losses on off-balance sheet credit exposures using the same CECL historical loss rates applied to loans held for investment over the contractual period in which the Company is exposed to credit risk through a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company, adjusted for funding factors. The allowance for credit losses on off-balance sheet credit exposures is reported in other liabilities on the unaudited consolidated balance sheets with an offset to other non-interest expense. The estimate of CECL includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated life.considered.

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 below:

Note 1 — Basis of Presentation and Significant Accounting Policies – Continued

Maintenance and repairs are expensed as incurred while major additions and improvements are capitalized.

Bank-owned life insurance (“BOLI”) — The Bank has purchased life insurance policies. These policies provide protection against the adverse financial effects that could result from the death of a key employee and provide tax-exempt income to offset expenses associated with the plans. It is the Bank’s intent to hold these policies as a long-term investment; however, there may be an income tax impact if the Bank chooses to surrender certain policies. Although the lives of individual current or former management-level employees are insured, the Bank is the owner and sole or partial beneficiary. BOLI is carried at the cash surrender value (“CSV”) of the underlying insurance contract. Changes in the CSV and any death benefits received in excess of the CSV are recognized as non-interest income.

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 consist 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 client 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 affect 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;~~unrecoverable, impairment losses are recorded in other non-interest expense to reduce the carrying amount of the assets.

~~Note 1 — Basis of Presentation and 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 fair 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~~intangibles 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 (”OREO”) — 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, ~~management~~Management periodically performs valuations 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.

Note 1 — Basis of Presentation and Significant Accounting Policies – Continued

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.

Allowance for credit losses on off-balance sheet credit exposures — The Company estimates expected credit losses on off-balance sheet credit exposures using the same CECL historical loss rates applied to loans held for investment over the contractual period in which the Company is exposed to credit risk through a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company, adjusted for funding factors. The allowance for credit losses on off-balance sheet credit exposures is reported in other liabilities on the unaudited consolidated balance sheets with an offset to other non-interest expense. The estimate of CECL includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated life.

The Company recognizes provision for credit losses on the allowance for off-balance sheet credit exposures (e.g., unfunded loan commitments) together with provision for credit losses on the loan portfolio in the income statement line item provision for credit losses. The following table presents the provision for credit losses on the loan portfolio and off-balance sheet exposures:

Share-based compensation 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 RSUs is based on the fair value of the Company’s common shares at the date of grant. RSU awards generally vest in thirds over three years from 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 RSUs.

Note 1 — Basis of Presentation and Significant Accounting Policies – Continued

Comprehensive income ~~— U.S. GAAP~~—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.

Impact of recent authoritative accounting guidance — The Accounting Standards Codification™ (“ASC”) is the ~~Financial Accounting Standards Board’s (“FASB”)~~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~~to use as an SEC registrant. All other accounting literature is non-authoritative.

In December 2019, FASB issued ASU 2019-12, Income Taxes. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption of the amendments is permitted, including adoption in any interim period for (1) public business entities for periods for which financial statements have not yet been issued and (2) all other entities for periods for which financial statements have not yet been made available for issuance. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. Adoption of ASU 2019-12 is not expected to have a material impact on the Company’s Consolidated Financial Statements.

~~Note 1 — Basis of Presentation and Significant Accounting Policies – Continued~~

In August 2018, FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this ASU broaden the scope of ASC Subtopic 350-40 to include costs incurred to implement a hosting arrangement that is a service contract. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The costs are capitalized or expensed depending on the nature of the costs and the project stage during which they are incurred, consistent with the accounting for costs for internal-use software. The amendments in this ASU result in consistent capitalization of implementation costs of a hosting arrangement that is a service contract and implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this ASU. The amendments in this ASU were applied prospectively to all implementation costs incurred after the date of adoption. Adoption of ASU 2018-15 did not have a material impact on the Company’s Consolidated Financial Statements.

In August 2018, FASB issued ASU 2018-13, Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The ASU removes, modifies and adds disclosure requirements in Topic 820. The following disclosure requirements were removed: 1) the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, 2) the policy for timing of transfers between levels, and 3) the valuation processes for Level 3 fair value measurements. This ASU modified disclosure requirements by requiring that the measurement uncertainty disclosure communicates information about the uncertainty in measurement as of the reporting date. The following disclosure requirements were added: 1) changes in unrealized gains and losses for the period included in other comprehensive income for the recurring Level 3 fair value measurements held at the end of the reporting period, and 2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Adoption of ASU 2018-13 did not have a material impact on the Company’s Consolidated Financial Statements.

In June 2016, the Financial Accounting Standard Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The ASU significantly changes the accounting for credit loss measurement on loans and debt securities. For loans and held-to-maturity debt securities, the ASU requires a current expected credit loss measurement to estimate the allowance for credit losses for the remaining estimated life of the financial asset (including off-balance sheet credit exposures) using historical experience, current conditions, and reasonable and supportable forecasts. The ASU eliminates the existing guidance for purchased credit impaired (“PCI”) loans but requires an allowance for purchased financial assets with more than an insignificant deterioration since origination, otherwise known as purchased credit deteriorated assets. In addition, the ASU modifies the other-than-temporary impairment model for available-for-sale debt securities to require an allowance for credit impairment instead of a direct write-down, which allows for reversal of credit impairments in future periods based on an improvement in credit. This ASU was effective for interim and annual reporting periods beginning after December 15, 2019.

On October 16, 2019, the FASB voted to delay the adoption of CECL by two years to January 2023 for private companies, not-for-profit companies, and certain small public companies that meet the definition of a smaller reporting company (“SRC”), as defined by the Securities and Exchange Commission. To meet the requirements of an SRC, an entity must be an issuer as defined by the SEC and have public float of less than $250 million, or public float of less than $700 million and annual revenues of less than $100 million. As of June 30, 2019, our public float was $466 million and annual revenues for 2018 were $130 million. As a result, we are not an SRC and, therefore, were required to adopt the ASU effective January 1, 2020.

~~Note 1 — Basis of Presentation and Significant Accounting Policies – Continued~~

On January 1, 2020, the Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for reporting periods beginning after January 1, 2020, are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company adopted ASC 326 using the prospective transition approach for financial assets purchased through an acquisition or business combination. Loans that were previously classified as PCI and accounted for under ASC 310-30 were reclassified as PCD loans. In accordance with the new standard, ~~management~~Management did not reassess whether PCI loans met the criteria of PCD loan as of the date of adoption. On January 1, 2020, the amortized cost basis for PCD loans was increased by $1.5 million to reflect the addition of credit discounts to ACL. The remaining noncredit discount will be accreted into interest income over the remaining life of the portfolio. For Non-PCD loans, the Company increased its ACL by $2.6 million using the same methodology used for loans held for investment. The remaining credit and noncredit discount will be accreted into interest income over the remaining life of the portfolio. ~~The~~Additionally, the Company further increased its ACL by $5.4 million to reflect the change in accounting methodology for CECL.

The following table illustrates the impact of the adoption of ~~ASC 326:~~CECL (ASC 326):

	January 1, 2020							January 1, 2020
(Dollars in thousands)	Reported Under ASC 326		Reported Pre Adoption		Impact of ASC 326 Adoption			Reported Under ASC 326		Reported Pre Adoption		Impact of ASC 326 Adoption
Assets:
Allowance for credit losses:
Commercial real estate loans:
Real estate term	$	12,683	$	12,275	$	408		$	12,683	$	12,275	$	408
Construction and land development		13,393		6,990		6,403			13,393		6,990		6,403
Total commercial real estate		26,076		19,265		6,811			26,076		19,265		6,811
Commercial and industrial		11,541		10,892		649
Commercial and industrial loans									11,541		10,892		649
Consumer loans:
Residential and home equity		2,635		1,118		1,517			2,635		1,118		1,517
Consumer and other		640		151		489			640		151		489
Total consumer		3,275		1,269		2,006			3,275		1,269		2,006
Total allowance for credit losses on loans	$	40,892	$	31,426	$	9,466		$	40,892	$	31,426	$	9,466

Liabilities and shareholders’ equity:
Liabilities and shareholders' equity:
Reserve for off-balance sheet obligations		1,669		880		789			1,669		880		789

Shareholders’ equity		325,682		332,362		(6,680	)
Shareholders' equity									325,682		332,362		(6,680	)

The Company expects greater volatility in its earnings and those of other banks after adoption due to the nature and time horizon used to calculate CECL. In addition, the Company expects a potential negative impact to credit availability and reduced loan terms to borrowers as this ASU is adopted by financial institutions. Lastly, the Company expects a lack of comparability with financial performance to many of its peers as it adopts this ASU, due to delayed adoption for public companies with total assets similar in size to us and the recent option to delay implementation.

Subsequent events — The Company has evaluated events occurring subsequent to June 30, ~~2020~~2021 for disclosure in the consolidated financial statements.

Amortized cost and estimated fair value of investment securities available for sale are summarized as follows:

					Gross Unrealized Losses												Gross Unrealized Losses
					Less			12									Less			12
			Gross		Than			Months							Gross		Than			Months
	Amortized		Unrealized		12			or			Fair		Amortized		Unrealized		12			or			Fair
(Dollars in thousands)	Cost		Gains		Months			Longer			Value		Cost		Gains		Months			Longer			Value
As of June 30, 2020
As of June 30, 2021
U.S. Government-sponsored securities	$	13,480	$	391	$	-		$	-		$	13,871	$	12,373	$	252	$	(3	)	$	(3	)	$	12,619
Municipal securities		45,723		1,210		-			-			46,933		30,140		989		-			-			31,129
Mortgage-backed securities		894,335		14,307		(694	)		(37	)		907,911		1,448,728		7,677		(13,339	)		(4	)		1,443,062
Corporate securities		5,000		1		-			(259	)		4,742		5,000		9		-			(112	)		4,897
	$	958,538	$	15,909	$	(694	)	$	(296	)	$	973,457	$	1,496,241	$	8,927	$	(13,342	)	$	(119	)	$	1,491,707
As of December 31, 2019
As of December 31, 2020
U.S. Government-sponsored securities	$	20,957	$	235	$	-		$	(2	)	$	21,190	$	12,844	$	369	$	-		$	(8	)	$	13,205
Municipal securities		56,252		670		(1	)		(9	)		56,912		36,010		1,277		-			-			37,287
Mortgage-backed securities		321,944		2,188		(481	)		(543	)		323,108		1,247,581		17,587		(134	)		(8	)		1,265,026
Corporate securities		5,000		-		-			(215	)		4,785		5,000		5		-			(130	)		4,875
	$	404,153	$	3,093	$	(482	)	$	(769	)	$	405,995	$	1,301,435	$	19,238	$	(134	)	$	(146	)	$	1,320,393

At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the gross unrealized losses and the fair value for securities available for sale ~~and held to maturity~~ were as follows:

	As of June 30, 2020															As of June 30, 2021
	Less Than 12 Months					12 Months or More					Total					Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses			Value		Losses			Value		Losses			Value		Losses			Value		Losses			Value		Losses
Available for Sale
U.S. Government-sponsored securities	$	-	$	-		$	-	$	-		$	-	$	-		$	225	$	(3	)	$	568	$	(3	)	$	793	$	(6	)
Municipal securities		-		-			-		-			-		-			-		-			-		-			-		-
Mortgage-backed securities		95,605		(694	)		3,031		(37	)		98,636		(731	)		858,172		(13,339	)		590		(4	)		858,762		(13,343	)
Corporate securities		-		-			2,741		(259	)		2,741		(259	)		-		-			2,887		(112	)		2,887		(112	)
	$	95,605	$	(694	)	$	5,772	$	(296	)	$	101,377	$	(990	)	$	858,397	$	(13,342	)	$	4,045	$	(119	)	$	862,442	$	(13,461	)

	As of December 31, 2019															As of December 31, 2020
	Less Than 12 Months					12 Months or More					Total					Less Than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses			Value		Losses			Value		Losses			Value		Losses			Value		Losses			Value		Losses
Available for Sale
U.S. Government-sponsored securities	$	-	$	-		$	5,998	$	(2	)	$	5,998	$	(2	)	$	-	$	-		$	777	$	(8	)	$	777	$	(8	)
Municipal securities		3,060		(1	)		1,338		(9	)		4,398		(10	)		-		-			-		-			-		-
Mortgage-backed securities		115,243		(481	)		70,383		(543	)		185,626		(1,024	)		76,978		(134	)		1,785		(8	)		78,763		(142	)
Corporate securities		-		-			4,785		(215	)		4,785		(215	)		-		-			2,870		(130	)		2,870		(130	)
	$	118,303	$	(482	)	$	82,504	$	(769	)	$	200,807	$	(1,251	)	$	76,978	$	(134	)	$	5,432	$	(146	)	$	82,410	$	(280	)

The Company monitors the credit quality of debt securities AFS through the use of credit ratings from ~~Nationally Recognized Statistical Ration Organizations (“NRSRO”)~~NRSRO to assist in the determination of any current expected credit losses. At June 30, ~~2020,~~2021, the Company had no allowance for credit losses on AFS securities. The following table summarizes the amortized cost of AFS debt securities ~~AFS~~ at June 30, ~~2020,~~2021, aggregated by credit quality indicator.

					Gross Unrealized Losses												Gross Unrealized Losses
					Less			12									Less			12
			Gross		Than			Months							Gross		Than			Months
	Amortized		Unrealized		12			or			Fair		Amortized		Unrealized		12			or			Fair
(Dollars in thousands)	Cost		Gains		Months			Longer			Value		Cost		Gains		Months			Longer			Value
As of June 30, 2020
As of June 30, 2021
U.S. Government-backed securities⁽¹⁾	$	907,815	$	14,698	$	(694	)	$	(37	)	$	921,782	$	1,461,101	$	7,929	$	(13,342	)	$	(7	)	$	1,455,681
Investment grade rating		42,486		950		-			(259	)		43,177		28,651		785		-			(112	)		29,324
Below investment grade		-		-		-			-			-		-		-		-			-			-
Unrated investment securities		8,237		261		-			-			8,498		6,489		213		-			-			6,702
	$	958,538	$	15,909	$	(694	)	$	(296	)	$	973,457	$	1,496,241	$	8,927	$	(13,342	)	$	(119	)	$	1,491,707
As of December 31, 2019
As of December 31, 2020
U.S. Government-sponsored securities⁽¹⁾	$	342,901	$	2,423	$	(481	)	$	(545	)	$	344,298	$	1,260,425	$	17,956	$	(134	)	$	(16	)	$	1,278,231
Investment grade rating		50,793		544		(1	)		(224	)		51,112		33,063		1,008		-			(130	)		33,941
Below investment grade		-		-		-			-			-		-		-		-			-			-
Unrated investment securities		10,459		126		-			-			10,585		7,947		274		-			-			8,221
	$	404,153	$	3,093	$	(482	)	$	(769	)	$	405,995	$	1,301,435	$	19,238	$	(134	)	$	(146	)	$	1,320,393

The amortized cost and estimated fair value of investment securities that are available for sale ~~and held to maturity~~ at June 30, ~~2020,~~2021, by contractual maturity, are as follows:

	Available For Sale				Available For Sale
	Amortized		Fair		Amortized		Fair
(Dollars in thousands)	Cost		Value		Cost		Value
Securities maturing in:
One year or less	$	13,658	$	13,720	$	11,785	$	11,882
After one year through five years		37,643		38,598		23,612		24,225
After five years through ten years		40,723		41,720		25,449		26,402
After ten years		866,514		879,419		1,435,395		1,429,198
	$	958,538	$	973,457	$	1,496,241	$	1,491,707

~~Actual~~Expected maturities may differ from contractual maturities because issuers may have the right to call obligations with or without penalties and other securities may experience pre-payments.

As of June 30, ~~2020,~~2021, the Company held ~~23 available for sale~~55 AFS investment securities with fair ~~value~~values less than amortized cost, compared to ~~146~~21 at December 31, ~~2019. In addition, the Company had 0 held to maturity securities at June 30, 2020, and December 31, 2019.~~2020. 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~~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. In addition, the Company had 0 HTM securities at June 30, 2021, and December 31, 2020.

The Company sold $~~48.2~~$131 million ~~available for sale~~AFS securities during the six months ended June 30, ~~2020,~~2021, and recorded a ~~$1.4~~$0.2 million gain on sale of investment securities. The Company did 0t sell any ~~available for sale~~AFS securities during the six months ended June 30, ~~2019.~~2020. There were 0 ~~available for sale~~AFS securities in a nonaccrual status at June 30, ~~2020,~~2021 or December 31, ~~2019.~~

During the year ended December 31, 2019, the Company elected to make a one-time transfer of 140 securities from the held to maturity classification of $64.6 million to the available for sale classification, and recorded an unrecognized loss of $19,000, net of taxes, to other comprehensive income.2020.

	June 30,			December 31,			June 30,			December 31,
(Dollars in thousands)	2020			2019			2021			2020
Loans held for investment:
Commercial real estate loans:
Real estate term	$	958,783		$	948,073		$	1,092,120		$	1,021,880
Construction and land development		243,212			273,963			288,699			228,213
Total commercial real estate loans		1,201,995			1,222,036			1,380,819			1,250,093
Commercial and industrial loans		310,837			284,738			225,050			257,240
Consumer loans:
Residential and home equity		141,174			162,559			265,680			185,470
Consumer and other		11,548			16,036			9,378			8,948
Total consumer loans		152,722			178,595			275,058			194,418
Total gross loans		1,665,554			1,685,369			1,880,927			1,701,751
Net deferred loan fees		(6,536	)		(4,451	)		(7,242	)		(6,255	)
Total loans held for investment		1,659,018			1,680,918			1,873,685			1,695,496
Allowance for credit losses		(42,683	)		(31,426	)		(34,958	)		(41,236	)
Total loans held for investment, net	$	1,616,335		$	1,649,492		$	1,838,727		$	1,654,260

At June 30, ~~2020,~~2021, the Company held ~~333~~260 loans totaling ~~$84.6~~$47.5 million of SBA PPP loans included in commercial and industrial loans above. The SBA guarantees 100% of the outstanding balance, and that guarantee is backed by the full faith and credit of the United ~~States.~~

~~Note 3 — Loans~~States Government. SBA PPP loans have virtually no risk of loss and ~~Allowance for Credit Losses – Continued~~we expect the vast majority of the PPP loans to be fully forgiven by the SBA.

	Three Months Ended June 30, 2020																	Three Months Ended June 30, 2021
	Real			Construction			Commercial			Residential		Consumer						Real			Construction			Commercial			Residential		Consumer
	Estate			and Land			and			and Home		and						Estate			and Land			and			and Home		and
(Dollars in thousands)	Term			Development			Industrial			Equity		Other			Total			Term			Development			Industrial			Equity		Other			Total
Balance at beginning of period	$	12,997		$	13,677		$	11,468		$	2,553	$	558		$	41,253		$	19,820		$	12,848		$	5,756		$	2,262	$	327		$	41,013
Provision for credit losses		(460	)		1,452			905			211		(8	)		2,100			(4,653	)		(1,518	)		(756	)		587		(41	)		(6,381	)
Gross loan charge-offs		(99	)		(43	)		(654	)		-		(61	)		(857	)		-			-			-			-		(20	)		(20	)
Recoveries		69			35			41			3		39			187			-			1			284			20		41			346
Net loan (charge-offs) / recoveries		(30	)		(8	)		(613	)		3		(22	)		(670	)		-			1			284			20		21			326
Balance at end of period	$	12,507		$	15,121		$	11,760		$	2,767	$	528		$	42,683		$	15,167		$	11,331		$	5,284		$	2,869	$	307		$	34,958

	Six Months Ended June 30, 2019																	Three Months Ended June 30, 2020
	Real		Construction			Commercial			Residential			Consumer						Real			Construction			Commercial			Residential		Consumer
	Estate		and Land			and			and Home			and						Estate			and Land			and			and Home		and
(Dollars in thousands)	Term		Development			Industrial			Equity			Other			Total			Term			Development			Industrial			Equity		Other			Total
Balance at beginning of period	$	9,968	$	7,022		$	7,227		$	729		$	299		$	25,245
Balance at beginning of period, prior to adoption of ASC 326																		$	12,997		$	13,677		$	11,468		$	2,553	$	558		$	41,253
Provision for credit losses		480		19			3,246			30			(75	)		3,700			(460	)		1,452			905			211		(8	)		2,100
Gross loan charge-offs		-		(5	)		(1,583	)		(19	)		(174	)		(1,781	)		(99	)		(43	)		(654	)		-		(61	)		(857	)
Recoveries		24		351			347			32			121			875			69			35			41			3		39			187
Net loan (charge-offs) / recoveries		24		346			(1,236	)		13			(53	)		(906	)		(30	)		(8	)		(613	)		3		(22	)		(670	)
Balance at end of period	$	10,472	$	7,387		$	9,237		$	772		$	171		$	28,039		$	12,507		$	15,121		$	11,760		$	2,767	$	528		$	42,683

	June 30,		December 31,		June 30,		December 31,
(Dollars in thousands)	2020		2019		2021		2020
Non-accrual loans, not troubled debt restructured:
Real estate term	$	131	$	2,416	$	1,482	$	150
Construction and land development		139		60		-		-
Commercial and industrial		545		1,550
Commercial and industrial loans						1,146		922
Residential and home equity		549		45		34		254
Consumer and other		2		8		-		-
Total non-accrual loans, not troubled debt restructured		1,366		4,079		2,662		1,326
Troubled debt restructured loans, non-accrual:
Real estate term		2,521		2,393		4,346		6,421
Construction and land development		-		-		-		-
Commercial and industrial		2,499		658
Commercial and industrial loans						224		1,272
Residential and home equity		-		-		-		-
Consumer and other		-		-		-		-
Total troubled debt restructured loans, non-accrual		5,020		3,051		4,570		7,693
Total non-accrual loans	$	6,386	$	7,130	$	7,232	$	9,019

Non-performing assets as of June 30, ~~2020~~2021 and December 31, ~~2019~~2020 have not been reduced by U.S. ~~government~~Government guarantees of ~~$1.8~~$4.0 million and ~~$859,000,~~$4.2 million, respectively.

	June 30,		December 31,		June 30,		December 31,
(Dollars in thousands)	2020		2019		2021		2020
Accruing troubled debt restructured loans	$	5,480	$	25,346	$	209	$	2,774
Non-accrual troubled debt restructured loans		5,020		3,051		4,570		7,693
Total troubled debt restructured loans	$	10,500	$	28,397	$	4,779	$	10,467

As of June 30, ~~2020,~~2021, TDRs totaling ~~$15.0~~$5.9 million met the criteria to be delisted for reporting purposes. To be delisted as a TDR, the Company follows established regulatory guidelines. For a loan that is a TDR, if the restructuring agreement specifies a contractual interest rate that is a market interest rate at the time of the restructuring and the loan is in compliance with its modified terms, the loan need not continue to be reported as a TDR in calendar years after the year in which the restructuring took place. A market interest rate is a contractual interest rate that at the time of the restructuring is greater than or equal to the rate that the institution was willing to accept for a new loan with comparable risk. To be considered in compliance with its modified terms, a loan that is a TDR must be in accrual status and must be current or less than 30 days past due on its contractual principal and interest payments under the modified repayment ~~terms~~terms.

The below table summarize TDRs outstanding as of June 30, 2021, by year of occurrence:

~~The below tables summarize TDRs by year of occurrence and type of modification:~~

TheThe following tables present TDRs that occurred during the periods presented by type of modification and the TDRs for which the payment default occurred within twelve months of the restructure date. A default on a TDR results in a transfer to nonaccrual status, a charge-off, or a combination of ~~both~~.both. There were no new TDRs occurring during the six months ended June 30, 2021.

													Six Months Ended June 30, 2020
													# of		$ of		# of Non-		$ of Non-		# of		$ of
													Accruing		Accruing		accrual		accrual		Total		Total
(Dollars in thousands)													TDR		TDR		TDR		TDR		TDR		TDR
Interest rate reduction														-	$	-		-	$	-		-	$	-
Loan payment deferment														-		-		1		113		1		113
Loan re-amortization														-		-		-		-		-		-
Loan extension														-		-		-		-		-		-
Total														-	$	-		1	$	113		1	$	113

	Six Months Ended June 30, 2020												Six Months Ended June 30, 2020
	Real		Construction		Commercial		Residential		Consumer				Real		Construction		Commercial		Residential		Consumer
	Estate		and Land		and		and Home		and				Estate		and Land		and		and Home		and
(Dollars in thousands)	Term		Development		Industrial		Equity		Other		Total		Term		Development		Industrial		Equity		Other		Total
TDRs that occurred during the period ⁽¹⁾
Number of loans		2		-		2		-		-		4		1		-		-		-		-		1
Pre-modification balance	$	583	$	-	$	128	$	-	$	-	$	711	$	113	$	-	$	-	$	-	$	-	$	113
Post-modification balance	$	583	$	-	$	128	$	-	$	-	$	711	$	113	$	-	$	-	$	-	$	-	$	113

TDRs that subsequently defaulted
Number of loans		1		-		-		-		-		1		1		-		-		-		-		1
Recorded balance	$	113	$	-	$	-	$	-	$	-	$	113	$	113	$	-	$	-	$	-	$	-	$	113


	Six Months Ended June 30, 2019
	Real		Construction		Commercial		Residential		Consumer
	Estate		and Land		and		and Home		and
(Dollars in thousands)	Term		Development		Industrial		Equity		Other		Total
TDRs that occurred during the period ⁽¹⁾
Number of loans		6		-		25		2		-		33
Pre-modification balance	$	5,076	$	-	$	9,848	$	277	$	-	$	15,201
Post-modification balance	$	5,076	$	-	$	9,848	$	277	$	-	$	15,201

TDRs that subsequently defaulted
Number of loans		-		-		1		-		-		1
Recorded balance	$	-	$	-	$	18	$	-	$	-	$	18

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

	June 30, 2020												June 30, 2021
			30-89												30-89
			Days		90+ Days		Non-		Total		Total				Days		90+ Days		Non-		Total		Total
(Dollars in thousands)	Current		Past Due		Past Due		accrual		Past Due		Loans		Current		Past Due		Past Due		accrual		Past Due		Loans
Commercial real estate:
Real estate term	$	955,545	$	586	$	-	$	2,652	$	3,238	$	958,783	$	1,083,090	$	3,202	$	-	$	5,828	$	9,030	$	1,092,120
Construction and land development		242,808		265		-		139		404		243,212		288,666		33		-		-		33		288,699
Total commercial real estate		1,198,353		851		-		2,791		3,642		1,201,995		1,371,756		3,235		-		5,828		9,063		1,380,819
Commercial and industrial		306,437		1,356		-		3,044		4,400		310,837
Commercial and industrial loans														221,904		1,776		-		1,370		3,146		225,050
Consumer:
Residential and home equity		139,888		737		-		549		1,286		141,174		265,601		45		-		34		79		265,680
Consumer and other		11,463		81		2		2		85		11,548		9,141		237		-		-		237		9,378
Total consumer		151,351		818		2		551		1,371		152,722		274,742		282		-		34		316		275,058
Total gross loans	$	1,656,141	$	3,025	$	2	$	6,386	$	9,413	$	1,665,554	$	1,868,402	$	5,293	$	-	$	7,232	$	12,525	$	1,880,927

	December 31, 2019														December 31, 2020
			30-89								Purchased						30-89
			Days		90+ Days		Non-		Total		Credit		Total				Days		90+ Days		Non-		Total		Total
(Dollars in thousands)	Current		Past Due		Past Due		accrual		Past Due		Impaired		Loans		Current		Past Due		Past Due		accrual		Past Due		Loans
Commercial real estate:
Real estate term	$	942,370	$	534	$	-	$	4,809	$	5,343	$	360	$	948,073	$	1,013,914	$	1,395	$	-	$	6,571	$	7,966	$	1,021,880
Construction and land development		273,268		570		-		60		630		65		273,963		227,054		1,159		-		-		1,159		228,213
Total commercial real estate		1,215,638		1,104		-		4,869		5,973		425		1,222,036		1,240,968		2,554		-		6,571		9,125		1,250,093
Commercial and industrial		279,072		403		-		2,208		2,611		3,055		284,738
Commercial and industrial loans																253,833		1,170		43		2,194		3,407		257,240
Consumer:
Residential and home equity		162,360		154		-		45		199		-		162,559		184,566		650		-		254		904		185,470
Consumer and other		15,727		298		3		8		309		-		16,036		8,703		243		2		-		245		8,948
Total consumer		178,087		452		3		53		508		-		178,595		193,269		893		2		254		1,149		194,418
Total gross loans	$	1,672,797	$	1,959	$	3	$	7,130	$	9,092	$	3,480	$	1,685,369	$	1,688,070	$	4,617	$	45	$	9,019	$	13,681	$	1,701,751

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

Definitions of Pass, Special Mention, Substandard, and Doubtful are summarized as follows:

Pass: A Pass asset is higher quality and does not fit any of the other categories described below. The likelihood of loss is considered remote.

Special Mention: A Special Mention asset has potential weaknesses that may be temporary or, if left uncorrected, may result in a loss. While concerns exist, the Company is currently protected, and loss is considered unlikely and not imminent.

Substandard: A Substandard asset is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have well defined weaknesses and are characterized by the distinct possibility that the Company may sustain some loss if deficiencies are not corrected.

Doubtful: A Doubtful asset has all the weaknesses inherent in a Substandard asset with the added characteristics that the weaknesses make collection or liquidation in full highly questionable.

For consumer loans, the Company generally assigns internal risk grades similar to those described above based on payment performance.

Outstanding loan balances (accruing and non-accruing) categorized by these credit quality indicators are summarized as follows:

	June 30, 2020												June 30, 2021
			Special						Total		Total				Special						Total		Total
(Dollars in thousands)	Pass		Mention		Substandard		Doubtful		Loans		ACL		Pass		Mention		Substandard		Doubtful		Loans		ACL
Commercial real estate:
Real estate term	$	908,884	$	22,746	$	27,153	$	-	$	958,783	$	12,507	$	1,049,629	$	18,932	$	23,559	$	-	$	1,092,120	$	15,167
Construction and land development		228,769		11,151		3,292		-		243,212		15,121		288,319		380		-		-		288,699		11,331
Total commercial real estate		1,137,653		33,897		30,445		-		1,201,995		27,628		1,337,948		19,312		23,559		-		1,380,819		26,498
Commercial and industrial		293,321		6,588		10,928		-		310,837		11,760
Commercial and industrial loans														213,591		6,104		5,305		50		225,050		5,284
Consumer loans:
Residential and home equity		137,524		-		3,650		-		141,174		2,767		264,643		-		1,037		-		265,680		2,869
Consumer and other		11,545		-		3		-		11,548		528		9,378		-		-		-		9,378		307
Total consumer		149,069		-		3,653		-		152,722		3,295		274,021		-		1,037		-		275,058		3,176
Total	$	1,580,043	$	40,485	$	45,026	$	-	$	1,665,554	$	42,683	$	1,825,560	$	25,416	$	29,901	$	50	$	1,880,927	$	34,958

	December 31, 2019												December 31, 2020
			Special						Total		Total				Special						Total		Total
(Dollars in thousands)	Pass		Mention		Substandard		Doubtful		Loans		ACL		Pass		Mention		Substandard		Doubtful		Loans		ACL
Commercial real estate:
Real estate term	$	903,910	$	23,202	$	20,961	$	-	$	948,073	$	12,275	$	978,945	$	17,248	$	25,687	$	-	$	1,021,880	$	20,627
Construction and land development		259,245		10,182		4,536		-		273,963		6,990		224,066		3,785		362		-		228,213		10,532
Total commercial real estate		1,163,155		33,384		25,497		-		1,222,036		19,265		1,203,011		21,033		26,049		-		1,250,093		31,159
Commercial and industrial		263,588		6,629		14,521		-		284,738		10,892
Commercial and industrial loans														247,983		4,348		4,020		889		257,240		8,095
Consumer loans:
Residential and home equity		159,176		204		3,179		-		162,559		1,118		183,306		-		2,164		-		185,470		1,662
Consumer and other		16,034		-		2		-		16,036		151		8,948		-		-		-		8,948		320
Total consumer		175,210		204		3,181		-		178,595		1,269		192,254		-		2,164		-		194,418		1,982
Total	$	1,601,953	$	40,217	$	43,199	$	-	$	1,685,369	$	31,426	$	1,643,248	$	25,381	$	32,233	$	889	$	1,701,751	$	41,236

The following table represents outstanding loan balances by credit quality indicators and vintage year by class of financing receivable as of June 30, ~~2020:~~2021:

	June 30, 2020																June 30, 2021
	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans				Term Loans Amortized Cost Basis by Origination Year												Revolving Loans
(Dollars in thousands)	2020		2019		2018		2017		2016		Prior		Amortized Cost		Total		2021		2020		2019		2018		2017		Prior		Amortized Cost		Total
Loans held for investment:
Commercial real estate:
Real estate term
Risk rating
Pass	$	91,900	$	143,466	$	100,325	$	93,752	$	56,269	$	201,275	$	221,897	$	908,884	$	122,311	$	256,571	$	116,584	$	75,650	$	85,369	$	209,569	$	183,575	$	1,049,629
Special mention		-		-		3,668		2,344		2,957		13,162		615		22,746		-		-		-		653		3,086		13,851		1,342		18,932
Substandard		1,265		1,243		195		377		300		5,296		18,477		27,153		-		1,223		2,755		2,408		1,407		4,462		11,304		23,559
Doubtful		-		-		-		-		-		-		-		-		-		-		-		-		-		-		-		-
Total real estate term loans	$	93,165	$	144,709	$	104,188	$	96,473	$	59,526	$	219,733	$	240,989	$	958,783	$	122,311	$	257,794	$	119,339	$	78,711	$	89,862	$	227,882	$	196,221	$	1,092,120
Construction and land development
Risk rating
Pass	$	6,996	$	8,139	$	10,714	$	3,492	$	6,750	$	8,941	$	183,737	$	228,769	$	7,390	$	7,957	$	2,817	$	7,701	$	949	$	8,434	$	253,071	$	288,319
Special mention		-		-		-		-		-		-		11,151		11,151		-		-		-		-		-		-		380		380
Substandard		-		-		-		-		-		60		3,232		3,292		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-		-		-		-		-		-		-		-
Total construction and land development loans	$	6,996	$	8,139	$	10,714	$	3,492	$	6,750	$	9,001	$	198,120	$	243,212	$	7,390	$	7,957	$	2,817	$	7,701	$	949	$	8,434	$	253,451	$	288,699
Total commercial real estate loans	$	100,161	$	152,848	$	114,902	$	99,965	$	66,276	$	228,734	$	439,109	$	1,201,995	$	129,701	$	265,751	$	122,156	$	86,412	$	90,811	$	236,316	$	449,672	$	1,380,819
Commercial and industrial
Commercial and industrial loans
Risk rating
Pass	$	96,206	$	35,106	$	39,473	$	19,902	$	11,832	$	45,044	$	45,758	$	293,321	$	38,518	$	38,488	$	22,136	$	21,649	$	12,182	$	42,699	$	37,919	$	213,591
Special mention		-		197		446		-		1,227		4,522		196		6,588		-		28		-		2,304		755		108		2,909		6,104
Substandard		-		1,973		732		1,467		437		4,691		1,628		10,928		-		102		602		1,178		431		1,471		1,521		5,305
Doubtful		-		-		-		-		-		-		-		-		-		-		-		50		-		-		-		50
Total commercial and industrial loans	$	96,206	$	37,276	$	40,651	$	21,369	$	13,496	$	54,257	$	47,582	$	310,837	$	38,518	$	38,618	$	22,738	$	25,181	$	13,368	$	44,278	$	42,349	$	225,050
Consumer:
Residential real estate
Risk rating
Pass	$	11,250	$	28,060	$	23,884	$	18,786	$	12,897	$	35,303	$	7,344	$	137,524	$	105,999	$	74,682	$	20,901	$	14,991	$	14,251	$	29,416	$	4,403	$	264,643
Special mention		-		-		-		-		-		-		-		-		-		-		-		-		-		-		-		-
Substandard		183		-		85		242		780		2,360		-		3,650		-		590		-		45		237		165		-		1,037
Doubtful		-		-		-		-		-		-		-		-		-		-		-		-		-		-		-		-
Total residential real estate loans	$	11,433	$	28,060	$	23,969	$	19,028	$	13,677	$	37,663	$	7,344	$	141,174	$	105,999	$	75,272	$	20,901	$	15,036	$	14,488	$	29,581	$	4,403	$	265,680
Consumer and other
Risk rating
Pass	$	4,652	$	2,610	$	1,941	$	957	$	364	$	1,018	$	3	$	11,545	$	4,043	$	1,794	$	1,400	$	861	$	424	$	856	$	-	$	9,378
Special mention		-		-		-		-		-		-		-		-		-		-		-		-		-		-		-		-
Substandard		2		-		-		-		1		-		-		3		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-		-		-		-		-		-		-		-
Total consumer and other loans	$	4,654	$	2,610	$	1,941	$	957	$	365	$	1,018	$	3	$	11,548	$	4,043	$	1,794	$	1,400	$	861	$	424	$	856	$	-	$	9,378
Total consumer loans	$	16,087	$	30,670	$	25,910	$	19,985	$	14,042	$	38,681	$	7,347	$	152,722	$	110,042	$	77,066	$	22,301	$	15,897	$	14,912	$	30,437	$	4,403	$	275,058
Total gross loans	$	212,454	$	220,794	$	181,463	$	141,319	$	93,814	$	321,672	$	494,038	$	1,665,554	$	278,261	$	381,435	$	167,195	$	127,490	$	119,091	$	311,031	$	496,424	$	1,880,927

~~The ACL and outstanding loan balances reviewed according to the Company’s estimated credit loss methods are summarized as follows:~~

The following ~~table provides~~tables provide amortized cost basis less government guarantees of $3.8 million and $8.8 million for collateral dependent loans as of June 30, ~~2020:~~2021 and December 31, 2020, respectively:

	June 30, 2020												June 30, 2021

	Real		Accounts										Real		Accounts
(Dollars in thousands)	Estate		Receivable		Equipment		Livestock		Auto		Total		Estate		Receivable		Equipment		Livestock		Auto		Total
Commercial real estate:
Real estate term	$	891	$	-	$	-	$	-	$	-	$	891	$	1,871	$	-	$	-	$	-	$	-	$	1,871
Construction and land development		4,806		-		-		-		-		4,806		-		-		-		-		-		-
Total commercial real estate		5,697		-		-		-		-		5,697		1,871		-		-		-		-		1,871
Commercial and industrial		-		3,794		3,415		70		148		7,427
Commercial and industrial loans														-		432		-		-		50		482
Consumer:
Residential and home equity		399		-		-		-		-		399		560		-		-		-		-		560
Consumer and other		-		-		-		-		-		-		-		-		-		-		-		-
Total consumer		399		-		-		-		-		399		560		-		-		-		-		560
Total collateral dependent loans	$	6,096	$	3,794	$	3,415	$	70	$	148	$	13,523	$	2,431	$	432	$	-	$	-	$	50	$	2,913

													December 31, 2020

													Real		Accounts
(Dollars in thousands)													Estate		Receivable		Equipment		Livestock		Auto		Total
Commercial real estate:
Real estate term													$	4,118	$	-	$	-	$	-	$	-	$	4,118
Construction and land development														362		-		-		-		-		362
Total commercial real estate														4,480		-		-		-		-		4,480
Commercial and industrial loans														-		1,165		-		-		43		1,208
Consumer:
Residential and home equity														216		-		-		-		-		216
Consumer and other														-		-		-		-		-		-
Total consumer														216		-		-		-		-		216
Total collateral dependent loans													$	4,696	$	1,165	$	-	$	-	$	43	$	5,904

~~Interest income recognized on the average recorded investment of individually evaluated loans was as follows:~~

~~Purchased credit-deteriorated loans and purchased non-credit-deteriorated loans~~. Prior to adoption of ASC 326, purchased loans, including loans acquired in business combinations, were recorded at their fair value at the acquisition date. Credit discounts were included in the determination of fair value; therefore, an allowance for loan and lease losses was not recorded at the acquisition date. Acquired loans were evaluated upon acquisition and classified as either 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. The outstanding contractual unpaid principal balance of PCI loans, excluding acquisition accounting adjustments, was $6.2 million at December 31, 2019. As of December 31, 2019, the non-accretable difference between the contractually required payments and cash flows expected to be collected were $2.8million. The carrying balance of PCI loans was $3.5 million at December 31, 2019. On January 1, 2020, the Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company adopted ASC 326 using the prospective transition approach for financial assets purchased through an acquisition or business combination. Loans that were previously classified as PCI and accounted for under ASC 310-30 were reclassified as PCD loans. In accordance with the new standard, management did not reassess whether PCI loans met the criteria of PCD loan as of the date of adoption. On January 1, 2020, the amortized cost basis for PCD loans was increased by $1.5 million to reflect the addition of ACL. The remaining noncredit discount will continue to be accreted into interest income over the remaining life of the portfolio. The outstanding contractual unpaid principal balance of PCD loans was $2.5 million at June 30, 2020.

The following table presents the changes in the accretable yield for non-PCD loans for the six months ended June 30, ~~2020,~~2021 and ~~2019:~~

	Six Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2020			2019			2021			2020
Balance, beginning of period	$	4,247		$	5,884		$	2,803		$	4,247
Accretion to interest income		(1,192	)		(874	)		(532	)		(1,192	)
Reclassification from non-accretable difference		402			96			-			402
Balance, end of period	$	3,457		$	5,106		$	2,271		$	3,457

Loans and ~~Deposits~~deposits to affiliates — The Company has entered into loan transactions with certain directors, principal shareholders, affiliated companies, and executive officers (“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 approximately ~~$7.9~~$17.2 million and ~~$5.4~~$11.7 million as of June 30, ~~2020,~~2021 and December 31, ~~2019,~~2020, respectively. Available lines of credit for loans and credit cards to affiliates were approximately ~~$3.9~~$10.9 million and ~~$278,000~~$11.3 million as of June 30, ~~2020,~~2021 and December 31, ~~2019,~~2020, respectively. Deposits from affiliates were ~~$8.0~~$23.4 million and ~~$4.5~~$7.8 million as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Litigation contingencies — The Company is involved in various claims, legal actions, and complaints which arise in the ordinary course of business. In the Company’s opinion, all such matters are adequately covered by insurance, are without merit, or are of such kind, or involve such amounts, that unfavorable disposition would not have a material adverse effect on the financial condition or results of operations of the Company.

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.

	June 30,		December 31,		June 30,		December 31,
(Dollars in thousands)	2020		2019		2021		2020
Commitments to extend credit, including unsecured commitments of $12,822 and $32,995 as of June 30, 2020 and December 31, 2019, respectively	$	659,794	$	632,577
Stand-by letters of credit and bond commitments, including unsecured commitments of $403 and $555 as of June 30, 2020 and December 31, 2019, respectively		23,493		23,860
Commitments to extend credit, including unsecured commitments of $12,276 and $12,039 as of June 30, 2021 and December 31, 2020, respectively					$	813,317	$	656,914
Stand-by letters of credit and bond commitments, including unsecured commitments of $1,079 and $727 as of June 30, 2021 and December 31, 2020, respectively						36,242		26,036
Unused credit card lines, all unsecured		26,860		26,121		29,237		29,111

Commitments to extend credit are agreements to lend to a ~~customer~~client 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~~Management’s credit evaluation of the ~~customer.~~client.

Unused credit card lines are commitments for possible future extensions of credit to existing ~~customers.~~clients. These lines of credit are uncollateralized and usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed.

The Company measures and discloses certain assets and liabilities at fair value. The standard requires ~~us to maximize~~ the use of observable inputs and ~~minimize~~minimizes the use of unobservable inputs when measuring fair value. These two types of inputs create the following fair value hierarchy:

The estimated fair value amounts of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize at a future date. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. In addition, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates that must be made given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation methodologies also introduces a greater degree of subjectivity to these estimated fair values.

The following methods were used to estimate the fair value of each class of financial instruments:

Cash and cash equivalents: The carrying amount of these items is a reasonable estimate of their fair value.

Securities: The estimated fair values of investment securities are priced using current active market quotes, if available, which are considered Level 1 measurements. ~~For~~The Company utilizes matrix pricing to fair value most of its securities portfolio. Matrix pricing compares the ~~portfolio, matrix pricing based on the securities’~~ relationship of each security to other benchmark quoted ~~prices is used to establish the fair value.~~prices. These measurements are considered Level 2. Level 3 measurements were determined using discounted cash flow analyses based on the net present value of each security’s projected cash flows using observable market data for similar securities.

Non-marketable securities: The fair value is based upon the redemption value of the stock, which equates to its carrying value.

Loans held for sale: The carrying ~~value~~amount of these items is a reasonable estimate of their fair value.

Loans held for investment: 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’ fair value approximated carrying value because of their floating rate or expected maturity characteristics.

Deposits: The carrying amount of deposits with no stated maturity, such as savings and checking accounts, is a reasonable estimate of their fair value. The market value of certificates of deposit is based upon the discounted value of contractual cash flows. The discount rate is determined using the rates currently offered on comparable instruments.

The following table presents estimated fair values of the Company’s financial instruments as of June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

			June 30, 2020				December 31, 2019						June 30, 2021				December 31, 2020
			Carrying		Estimated		Carrying		Estimated				Carrying		Estimated		Carrying		Estimated
(Dollars in thousands)	Level		Value		Fair Value		Value		Fair Value		Level		Value		Fair Value		Value		Fair Value
Financial Assets:
Cash and cash equivalents		1	$	323,837	$	323,837	$	211,981	$	211,981		1	$	63,329	$	63,329	$	239,874	$	239,874
Investment securities available for sale		2		964,959		964,959		395,410		395,410		2		1,485,005		1,485,005		1,312,172		1,312,172
Investment securities available for sale		3		8,498		8,498		10,585		10,585		3		6,702		6,702		8,221		8,221
Non-marketable securities		2		2,890		2,890		2,623		2,623		2		4,042		4,042		2,890		2,890
Loans held for sale		2		29,264		29,264		18,669		18,669		2		6,672		6,672		14,152		14,152
Loans held for investment		3		1,616,335		1,583,362		1,649,492		1,639,480		3		1,838,727		1,792,740		1,654,260		1,618,743

Financial Liabilities:
Total deposits		2	$	2,613,339	$	2,465,845	$	2,056,367	$	1,851,954		2	$	3,156,707	$	2,862,951	$	2,916,308	$	2,751,715

(Dollars in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
As of June 30, 2020
As of June 30, 2021
Fair valued on a recurring basis:
Investment securities available for sale	$	-	$	964,959	$	8,498	$	973,457	$	-	$	1,485,005	$	6,702	$	1,491,707
Fair valued on a non-recurring basis:
Individually evaluated loans		-		-		945		945		-		-		425		425

As of December 31, 2019
As of December 31, 2020
Fair valued on a recurring basis:
Investment securities available for sale	$	-	$	395,410	$	10,585	$	405,995	$	-	$	1,312,172	$	8,221	$	1,320,393
Fair valued on a non-recurring basis:
Individually evaluated loans		-		-		17,497		17,497		-		-		1,804		1,804

Non-recurring Measurements: Impaired loans are classified with Level 3 of the fair value hierarchy. The estimated fair value of impaired loans is based on the fair value of the collateral, less estimated costs to sell. The Company receives an appraisal or performs an evaluation for each impaired loan. The key inputs used to determine the fair value of impaired loans include selling costs, and adjustment to comparable collateral. Valuations and significant inputs obtained by independent sources are reviewed by the Company for accuracy and reasonableness. Appraisals are typically obtained at least on an annual basis. The Company also considers other factors and events that may affect the fair value. The appraisals or evaluations are reviewed at least on a quarterly basis to determine if any adjustments are needed. After review and acceptance of the appraisal or evaluation, adjustments to impaired loans may occur.

Income tax expense was ~~$3.2~~$4.0 million and ~~$3.5~~$3.2 million for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The Company’s effective tax rate for the second quarter of ~~2020~~2021 was ~~23.6%~~24.1%, compared with ~~24.1%~~23.6% in the second quarter of ~~2019.~~2020.

Income tax expense was ~~$6.6~~$7.0 million and ~~$6.8~~$6.6 million for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The Company’s effective tax rate for the six months ended June 30, ~~2020~~2021 was ~~23.7%~~24.1% compared with ~~23.9% for~~23.7% in the ~~same period in 2019.~~

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 June 30, ~~2020,~~2021, 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.

	June 30, 2020															June 30, 2021
						Minimum Capital					Well Capitalized										Minimum Capital					Well Capitalized
	Actual					Requirement					Requirement					Actual					Requirement					Requirement
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
Consolidated
CET1 Capital to Risk-Weighted Assets	$	310,678		17.94	%	$	77,941		4.50	%	$	112,581		6.50	%	$	346,137		16.91	%	$	92,093		4.50	%	$	133,024		6.50	%
Tier 1 Capital to Risk-Weighted Assets		310,678		17.94	%		103,921		6.00	%		138,561		8.00	%		346,137		16.91	%		122,791		6.00	%		163,721		8.00	%
Total Risk-Based Capital to Risk-Weighted Assets		332,608		19.20	%		138,561		8.00	%		173,202		10.00	%		371,877		18.17	%		163,721		8.00	%		204,652		10.00	%
Tier 1 Leverage		310,678		11.68	%		106,380		4.00	%	NA		NA				346,137		9.84	%		140,640		4.00	%	NA		NA

Altabank^TM
CET1 Capital to Risk-Weighted Assets	$	305,829		17.66	%	$	77,922		4.50	%	$	112,554		6.50	%	$	339,013		16.57	%	$	92,045		4.50	%	$	132,954		6.50	%
Tier 1 Capital to Risk-Weighted Assets		305,829		17.66	%		103,896		6.00	%		138,528		8.00	%		339,013		16.57	%		122,727		6.00	%		163,636		8.00	%
Total Risk-Based Capital to Risk-Weighted Assets		327,759		18.93	%		138,528		8.00	%		173,160		10.00	%		364,740		17.83	%		163,636		8.00	%		204,545		10.00	%
Tier 1 Leverage		305,829		11.52	%		106,207		4.00	%		132,759		5.00	%		339,013		9.64	%		140,664		4.00	%		175,830		5.00	%

Federal Reserve Board Regulations require maintenance of certain minimum reserve balances based on certain average deposits. On March 15, 2020, the Board of Governors of the Federal Reserve reduced reserve requirement ratios to 0 percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions. ~~The Bank had a reserve requirement of $9.4 million as of December 31, 2019.~~

The Company’s Board of Directors (the “Board”) 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, dividend amounts may be correspondingly limited.

In May 2020, on approval by and at the recommendation of the Board, ~~of Directors (“Board”), the~~ALTA’s shareholders ~~of the Company~~ approved a share-based incentive plan (“(the “Plan”). The effective date of the ~~Plan”~~Plan was May 27, 2020 (the “Effective Date”). The 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 Plan is 1,000,000 common shares. The share-based awards are granted to participants under the Plan at a price not less than the fair value on the date of grant and for terms of up to ten years. The Plan also allows for granting of share-based awards to directors and consultants who are not employees of the Company.

During the six months ended June 30, ~~2020,~~2021, the Company granted ~~55,187~~64,402 restricted stock units (“~~RSU”~~RSUs”) at a weighted-average fair value of ~~$29.02~~$28.05 per unit. All awards granted ~~thru~~after the Effective Date and through June 30, ~~2020 were done so~~2021, have been under the ~~prior employee incentive plan. Beginning July 1, 2020, any new grants awarded to associates will be under the new~~ Plan. The RSUs generally vest over periods from one to three years. The Company recorded share-based compensation expense of ~~$765,000~~$694,000 and ~~$381,000~~$765,000 for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Additionally, the Company did 0t grant any options for the purchase of common shares during the six months ended June 30, 2021 and 2020, ~~and 2019,~~ respectively. Outstanding RSU grants will vest on an accelerated basis upon closing of the pending merger transaction, details of which are provided in Note 9 – Merger Agreement below.

On May 18, 2021, the Company and the “Bank, entered into a Plan and Agreement of Merger (the “Merger Agreement”) with Glacier Bancorp, Inc., a Montana corporation (“GBCI”), and its wholly owned subsidiary, Glacier Bank, a Montana state-chartered bank. Under the terms of the Merger Agreement, the Company will merge with and into GBCI, with GBCI as the surviving entity (the “Holding Company Merger”). Immediately thereafter, the Bank will merge with and into Glacier Bank, with Glacier Bank surviving as a wholly owned subsidiary of GBCI (the “Bank Merger”).

Subject to the terms and conditions of the Merger Agreement, at the date and time when the Holding Company Merger becomes effective (the “Effective Time”), each share of the Company’s common stock issued and outstanding will be converted into the right to receive from GBCI 0.7971 shares of GBCI’s common stock, subject to potential adjustment as follows, in each case, as further described in the Merger Agreement (the “Merger Consideration”):

accordance with the terms of the Merger Agreement, is less than $342,937,000 (subject to specified adjustments as set forth in the Merger Agreement), the per share stock consideration will be reduced on a per share basis in accordance with the formula set forth in the Merger Agreement.

Holders of the Company’s common stock will also be entitled to receive cash in lieu of fractional shares of the Company’s common stock.

Under the terms of the Merger Agreement, immediately prior to the Effective Time, each outstanding restricted stock unit under the People’s Utah Bancorp 2014 Incentive Plan, the Altabancorp 2020 Equity Incentive Plan and the People’s Utah Bancorp Amended and Restated 2008 Stock Incentive Plan (the “Company Stock Plans”) will automatically vest and be settled, and each share of the Company’s common stock issued as a result will have the right to receive the Merger Consideration and cash in lieu of fractional shares of the Company’s common stock at the Effective Time. Outstanding options to purchase shares of the Company’s common stock under the Company Stock Plans (the “Company Options”), whether vested or unvested, will be automatically canceled at the Effective Time, and the holders of Company Options will be paid in cash an amount per share equal to the spread, if any, between (a) the product of the GBCI Average Closing Price (as defined in the Merger Agreement) multiplied by the Merger Consideration (the “Total Consideration Value Per Share”) and (b) the exercise price per share of such Company Option, net of any cash which must be withheld under applicable tax laws. Any Company Option that has an exercise price per share that is greater than the Total Consideration Value Per Share will be cancelled without any payment.

Consummation of the Holding Company Merger is subject to the receipt of required regulatory approvals, and certain other customary conditions of closing, including, among others (a) approval of the Merger Agreement and the Holding Company Merger by the Company’s shareholders, (b) the absence of any actual or threatened action or proceeding to restrain, prohibit or invalidate the Holding Company Merger, (c) subject to certain exceptions, the accuracy of the representations and warranties of the Company, in the case of GBCI, and GBCI, in the case of the Company, (d) performance in all material respects by the Company, in the case of GBCI, and GBCI, in the case of the Company, of its respective obligations under the Merger Agreement, (e) the absence of an event that has had or would reasonably be expected to have a Material Adverse Effect (as defined in the Merger Agreement), on the Company, in the case of GBCI, and GBCI, in the case of the Company, (f) in the case of GBCI’s obligation to complete the Holding Company Merger, receipt by GBCI of an opinion from its counsel to the effect that the Holding Company Merger will be a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and (g) in the case of the Company’s obligation to complete the Holding Company Merger, the receipt of a similar opinion from its counsel.

During the second quarter of 2021, the Company incurred approximately $2.2 million of expenses associated with the Holding Company Merger. These expenses are recorded in acquisition-related costs.

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

The following discussion is intended to provide a more comprehensive review of ~~Altabancorp~~^TM’sthe Company’s operating results and financial condition than can be obtained from reading the Unaudited Consolidated Financial Statements alone. The discussion should be read in conjunction with the Unaudited Consolidated Financial Statements and the notes thereto included in “Part I. Item 1. Financial Statements.”

This Quarterly Report on Form 10–Q may contain certain forward-looking statements within the meaning of Section 27A the ~~Private~~ Securities ~~Litigation Reform~~ Act of ~~1995.~~1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect ~~our~~the Company’s current views and are not historical facts. 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~~the Company’s future financial condition, results of operations, objectives, strategies, plans, goals or future performance and business are also forward-looking statements. Statements that project future financial 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~~the Company’s ability to control or predict. For those statements, ~~we claim~~the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. These ~~are~~ forward-looking statements ~~and~~ 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 in this report and ~~our~~the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 (“Form 10-K”), and other parts of this report 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 ~~filing:~~Form 10-Q:

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.

Please take into account that forward-looking statements speak only as of the date of this Form 10-Q. ~~We do~~The Company does not undertake any obligation to release publicly ~~our~~ revisions to such forward-looking statements to reflect events or circumstances after the date of this Form 10-Q, except as required by law.

ALTA is a Utah registered bank holding company organized in 1998. As a Utah registered bank holding company, ~~ALTA~~the Company 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~~ALTA operates all business activities through the Bank, its ~~wholly-owned~~wholly owned banking subsidiary, ~~Altabank~~^TM ~~(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.

The ~~Company received federal trademark approval for the operating bank and holding company name and accompanying logos in July 2020.~~

~~Altabank~~^TMBank is the largest community bank in Utah. ~~Altabank~~^TM,The Bank, a full-service bank, provides loans, deposit and cash management services to businesses and individuals through 2625 branch locations from Preston, Idaho to St. George, Utah. ~~Our~~The Bank’s clients have direct access to bankers and decision-makers who work with clients to understand their specific needs and offer customized financial solutions. ~~Altabank~~^TMThe Bank has been serving communities in Utah and southern Idaho for more than 100 years. ~~Our loan~~Loan growth historically has been the result of mergers and acquisitions as well as organic growth that ~~we believe~~the Bank believes was generated by ~~our~~ seasoned relationship managers and supporting associates who provide outstanding service and quick responsiveness to ~~our customers.~~its clients. The primary source of funding for ~~our~~the Company’s asset growth has been the generation of core deposits, which wethe Company raised from ~~our~~its existing branch system as well as through acquisitions.

~~Our results~~Results of operations are largely dependent on net interest income. Net interest income is the difference between interest income ~~we earn~~earned on interest earning assets, which are comprised of loans, investment securities and short-term investments and the interest ~~we pay~~paid 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~~The Company measures 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~~the Company’s 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. WeThe Company also ~~measure our~~measures performance by ~~our~~its efficiency ratio, which is calculated by dividing non-interest expense by the sum of net interest income and non-interest income.

On May 18, 2021, the Company and the Bank entered into the Merger Agreement with GBCI and its wholly owned subsidiary Glacier Bank, a Montana state-chartered bank. Under the terms of the Merger Agreement, the Company will merge with and into GBCI, with GBCI as the surviving entity. Immediately thereafter, the Bank will merge with and into Glacier Bank, with Glacier Bank surviving as a wholly owned subsidiary of GBCI.

The Company expects to complete the Holding Company Merger in the fourth quarter of 2021. However, the transaction could close earlier, following and subject to the satisfaction or waiver of customary closing conditions, including, among others, receipt of regulatory approvals and approval of the Company’s shareholders, in each case as further described in the Merger Agreement.

On March 11, 2020, the World Health Organization declared COVID-19 to be a global pandemic. Local and national governments and regulatory authorities ~~have~~ systematically implemented remedial measures to try to slow and curb the spread of COVID-19, including business closures and operating restrictions, travel bans, and shelter in place, stay home, and similar directives and orders. In response to the COVID-19 pandemic and in adherence with state and local guidelines, ~~we have~~the Company implemented ~~our~~its business continuity plan and other measures and activities to protect ~~our associates~~employees and, at the same time, to assist ~~our~~ clients and the communities of which ~~we are~~it is a part, including remote working for the majority of ~~our associates,~~its employees, increased mobile banking and electronic transaction options for clients, payment deferral assistance to commercial and consumer borrowers, and participation in the SBA’s Paycheck Protection Program for loans to qualifying small businesses.

~~As previously announced, the Company temporarily suspended its share repurchase program effective March 25, 2020.~~ The Company ~~made this decision,~~has begun to resume some normal business operations as COVID-related restrictions have been eased, such as reopening branch lobbies and bringing some employees back to its operational facilities. The Company’s return to full normal business operations depends on, in part, ~~to provide maximum flexibility to use its capital~~widespread vaccinations and ~~liquidity to support new lending~~applicable state and ~~to assist commercial~~local transmission indices and ~~consumer borrowers with deferrals on existing loans during~~reopening guidelines, the ~~pendency~~timing and extent of the COVID-19 pandemic. The Company is well-capitalized and, as such, may determine to reinstate its share repurchase program in accordance with Board authorization and as executive management deems advisable, taking into account market conditions and other considerations.which are not yet known.

You should read the selected financial information data set forth below in conjunction with ~~our historical~~the Company’s annual consolidated financial statements and related notes.


	June 30,			March 31,			December 31,			June 30,			June 30,			March 31,			December 31,			June 30,
(Dollars in thousands, except share data)	2020			2020			2019			2019			2021			2021			2020			2020
Selected Balance Sheet Information:
Book value per share	$	18.63		$	18.10		$	17.61		$	16.62		$	19.63		$	18.54		$	19.71		$	18.63
Tangible book value per share	$	17.12		$	16.59		$	16.09		$	15.09		$	18.01		$	16.94		$	18.21		$	17.04
Non-performing loans to total loans		0.39	%		0.41	%		0.53	%		0.31	%		0.39	%		0.42	%		0.54	%		0.39	%
Non-performing assets to total assets		0.21	%		0.27	%		0.37	%		0.22	%		0.20	%		0.21	%		0.27	%		0.21	%
Allowance for credit losses to loans held for investment		2.57	%		2.51	%		1.87	%		1.68	%		1.87	%		2.28	%		2.43	%		2.57	%
Loans to Deposits		62.97	%		76.48	%		81.12	%		83.91	%		58.46	%		55.85	%		57.21	%		62.97	%

Asset Quality Data:
Non-performing loans	$	6,388		$	6,590		$	8,814		$	5,104		$	7,232		$	7,332		$	9,064		$	6,388
Non-performing assets	$	6,388		$	6,590		$	8,814		$	5,104		$	7,232		$	7,332		$	9,064		$	6,388

Capital Ratios:
Tier 1 leverage capital		11.68	%		12.74	%		12.67	%		12.78	%		9.84	%		10.06	%		10.47	%		11.68	%
Total risk-based capital		19.20	%		18.62	%		18.43	%		17.24	%		18.17	%		18.41	%		19.17	%		19.20	%
Average equity to average assets		12.57	%		13.82	%		13.63	%		13.69	%		10.18	%		10.94	%		11.15	%		12.57	%
Tangible common equity to tangible assets ⁽¹⁾		10.59	%		12.73	%		12.77	%		12.44	%		9.69	%		9.16	%		10.27	%		10.55	%

	Three Months Ended									Six Months Ended						Three Months Ended									Six Months Ended
	June 30,			March 31,			June 30,			June 30,			June 30,			June 30,			March 31,			June 30,			June 30,			June 30,
	2020			2020			2019			2020			2019			2021			2021			2020			2021			2020
Selected Financial Information:
Basic earnings per share	$	0.55		$	0.57		$	0.58		$	1.12		$	1.14		$	0.67		$	0.50		$	0.55		$	1.17		$	1.12
Diluted earnings per share	$	0.55		$	0.57		$	0.58		$	1.11		$	1.13		$	0.67		$	0.50		$	0.55		$	1.16		$	1.11
Net interest margin ⁽²⁾		3.96	%		4.79	%		5.24	%		4.35	%		5.27	%		2.97	%		2.91	%		3.96	%		2.94	%		4.35	%
Efficiency ratio		51.01	%		52.20	%		46.93	%		51.60	%		48.11	%		61.64	%		57.09	%		51.01	%		59.43	%		51.60	%
Non-interest income to average assets		0.90	%		0.63	%		0.64	%		0.77	%		0.63	%		0.60	%		0.64	%		0.90	%		0.62	%		0.77	%
Non-interest expense to average assets		2.39	%		2.71	%		2.63	%		2.54	%		2.69	%		2.13	%		1.98	%		2.39	%		2.06	%		2.54	%
Return on average assets		1.52	%		1.80	%		1.96	%		1.65	%		1.96	%		1.44	%		1.13	%		1.52	%		1.29	%		1.65	%
Return on average equity		12.06	%		13.05	%		14.33	%		12.55	%		14.35	%		14.12	%		10.30	%		12.06	%		12.20	%		12.55	%
Net charge-offs	$	670		$	289		$	34		$	959		$	906		$	(326	)	$	223		$	670		$	(103	)	$	959
Annualized net charge-offs to average loans		0.16	%		0.07	%		0.01	%		0.11	%		0.11	%		-0.07	%		0.05	%		0.16	%		-0.01	%		0.11	%

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 primarily 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.

Pending Acquisition. In May 2021, ALTA announced the signing of definitive agreement with GBCI, to merge with and into GBCI, with GBCI as the surviving entity. The acquisition is subject to required regulatory approvals and other customary conditions of closing and is expected to be completed in the fourth quarter of 2021. During the first six months of 2021, ALTA incurred approximately $2.2 million of expenses associated with the Holding Company Merger. These expenses are recorded in acquisition-related costs. The Company expects to continue to record additional merger-related costs until the closing of the sale to GBCI.

Average Balance and Yields. The following tables summarize 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.

	Three Months Ended																Three Months Ended
	June 30, 2020								June 30, 2019								June 30, 2021								June 30, 2020
				Interest		Average						Interest		Average						Interest		Average						Interest		Average
	Average			Income/		Yield/			Average			Income/		Yield/			Average			Income/		Yield/			Average			Income/		Yield/
(Dollars in thousands, except footnotes)	Balance			Expense		Rate			Balance			Expense		Rate			Balance			Expense		Rate			Balance			Expense		Rate
ASSETS
Interest earning deposits in other banks and federal funds sold	$	228,032		$	52		0.09	%	$	88,654		$	511		2.31	%	$	45,977		$	10		0.09	%	$	228,032		$	52		0.09	%
Securities: ⁽¹⁾
Taxable securities		645,720			3,452		2.15	%		276,993			1,572		2.28	%		1,491,313			3,988		1.07	%		645,720			3,452		2.15	%
Non-taxable securities⁽²⁾		45,670			229		2.02	%		66,425			312		1.88	%		32,504			169		2.08	%		45,670			229		2.02	%
Total securities		691,390			3,681		2.14	%		343,418			1,884		2.20	%		1,523,817			4,157		1.09	%		691,390			3,681		2.14	%
Loans⁽³⁾
Real estate term		945,680			13,165		5.60	%		902,214			13,447		5.98	%		1,075,930			12,915		4.81	%		945,680			13,165		5.60	%
Construction and land development		257,561			4,157		6.49	%		313,412			6,304		8.07	%		268,706			4,079		6.09	%		257,561			4,157		6.49	%
Commercial and industrial		303,809			3,885		5.14	%		294,488			5,255		7.16	%
Commercial and industrial loans																		232,431			2,944		5.08	%		303,809			3,885		5.14	%
Residential and home equity		175,837			2,235		5.11	%		161,299			2,371		5.89	%		259,546			2,479		3.83	%		175,837			2,235		5.11	%
Consumer and other		11,306			207		7.38	%		16,039			251		6.27	%		9,287			156		6.73	%		11,306			207		7.38	%
Total loans		1,694,193			23,649		5.61	%		1,687,452			27,628		6.57	%		1,845,900			22,573		4.90	%		1,694,193			23,649		5.61	%

Non-marketable equity securities		2,890			20		2.79	%		2,624			27		4.07	%		4,653			23		2.01	%		2,890			20		2.79	%
Total interest earning assets		2,616,505			27,402		4.21	%		2,122,148			30,050		5.68	%		3,420,347			26,763		3.14	%		2,616,505			27,402		4.21	%
Allowance for loan losses		(42,213	)							(26,008	)							(41,061	)							(42,213	)
Non-interest earning assets		167,969								149,431								164,602								167,969
Total average assets	$	2,742,261							$	2,245,571							$	3,543,888							$	2,742,261

LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits:
Demand and savings accounts	$	911,270		$	539		0.24	%	$	815,687		$	1,034		0.51	%	$	1,224,887		$	602		0.20	%	$	911,270		$	539		0.24	%
Money market accounts		416,458			505		0.49	%		274,667			677		0.99	%		662,375			478		0.29	%		416,458			505		0.49	%
Certificates of deposit less than or equal to $250,000		129,378			368		1.14	%		140,637			436		1.24	%		116,027			231		0.80	%		129,378			368		1.14	%
Certificates of deposit greater than $250,000		44,005			201		1.84	%		38,604			183		1.90	%		36,166			144		1.59	%		44,005			201		1.84	%
Total interest bearing deposits		1,501,111			1,613		0.43	%		1,269,595			2,330		0.74	%		2,039,455			1,455		0.29	%		1,501,111			1,613		0.43	%
Short-term borrowings		24,410			-		0.00	%		-			-		0.00	%		15,257			11		0.28	%		24,410			-		0.00	%
Total interest-bearing liabilities		1,525,521			1,613		0.43	%		1,269,595			2,330		0.74	%		2,054,712			1,466		0.29	%		1,525,521			1,613		0.43	%
Non-interest bearing deposits		858,566								650,836								1,117,396								858,566
Total funding		2,384,087			1,613		0.27	%		1,920,431			2,330		0.49	%		3,172,108			1,466		0.19	%		2,384,087			1,613		0.27	%
Other non-interest bearing liabilities		13,490								17,610								11,040								13,490
Shareholders’ equity		344,684								307,530								360,740								344,684
Total average liabilities and shareholders’ equity	$	2,742,261							$	2,245,571							$	3,543,888							$	2,742,261
Net interest income				$	25,789							$	27,720							$	25,297							$	25,789
Interest rate spread							3.79	%							4.94	%							2.85	%							3.79	%
Net interest margin							3.96	%							5.24	%							2.97	%							3.96	%

	Six Months Ended
	June 30, 2021								June 30, 2020
				Interest		Average						Interest		Average
	Average			Income/		Yield/			Average			Income/		Yield/
(Dollars in thousands, except footnotes)	Balance			Expense		Rate			Balance			Expense		Rate
ASSETS
Interest earning deposits in other banks and federal funds sold	$	103,916		$	37		0.07	%	$	165,566		$	368		0.45	%
Securities: ⁽¹⁾
Taxable securities		1,419,696			6,091		0.87	%		547,457			6,320		2.32	%
Non-taxable securities⁽²⁾		33,592			346		2.08	%		48,093			482		2.02	%
Total securities		1,453,288			6,437		0.89	%		595,550			6,802		2.30	%
Loans⁽³⁾
Real estate term		1,050,352			25,675		4.93	%		940,716			26,632		5.69	%
Construction and land development		258,296			7,899		6.17	%		267,641			9,181		6.90	%
Commercial and industrial loans		235,819			6,798		5.81	%		291,543			8,791		6.06	%
Residential and home equity		238,557			4,686		3.96	%		173,302			4,521		5.25	%
Consumer and other		9,225			329		7.21	%		13,208			449		6.84	%
Total loans		1,792,249			45,387		5.11	%		1,686,410			49,574		5.91	%

Non-marketable equity securities		3,839			46		2.39	%		2,764			42		3.04	%
Total interest earning assets		3,353,292			51,907		3.12	%		2,450,290			56,786		4.66	%
Allowance for credit losses		(41,233	)							(42,174	)
Non-interest earning assets		157,973								163,773
Total average assets	$	3,470,032							$	2,571,889

LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits:
Demand and savings accounts	$	1,177,881		$	1,171		0.20	%	$	871,676		$	1,318		0.30	%
Money market accounts		665,217			1,002		0.30	%		384,289			1,316		0.69	%
Certificates of deposit less than or equal to $250,000		117,624			492		0.84	%		130,133			760		1.17	%
Certificates of deposit greater than $250,000		38,957			310		1.60	%		41,392			382		1.85	%
Total interest bearing deposits		1,999,679			2,975		0.30	%		1,427,490			3,776		0.53	%
Short-term borrowings		20,564			37		0.36	%		12,205			-		0.00	%
Total interest-bearing liabilities		2,020,243			3,012		0.30	%		1,439,695			3,776		0.53	%
Non-interest bearing deposits		1,073,010								779,173
Total funding		3,093,253			3,012		0.20	%		2,218,868			3,776		0.34	%
Other non-interest bearing liabilities		10,716								14,684
Shareholders’ equity		366,063								338,337
Total average liabilities and shareholders’ equity	$	3,470,032							$	2,571,889
Net interest income				$	48,895							$	53,010
Interest rate spread							2.82	%							4.13	%
Net interest margin							2.94	%							4.35	%

Six Months Ended

June 30, 2020

June 30, 2019

Interest

Average

Interest

Average

Average

Income/

Yield/

Average

Income/

Yield/

(Dollars in thousands, except footnotes)

Balance

Expense

Rate

Balance

Expense

Rate

ASSETS

Interest earning deposits in other banks and
   federal funds sold

$
165,566

$
368

0.45
%

$
63,016

$
730

2.33
%
Securities: ⁽¹⁾

Taxable securities

547,457

6,320

2.32
%

276,948

3,176

2.31
%
Non-taxable securities⁽²⁾

48,093

482

��
2.02
%

67,965

634

1.88
%
Total securities

595,550

6,802

2.30
%

344,913

3,810

2.23
%
Loans⁽³⁾

Real estate term

940,716

26,632

5.69
%

895,700

26,494

5.96
%
Construction and land development

267,641

9,181

6.90
%

314,604

12,535

8.04
%
Commercial and industrial

291,543

8,791

6.06
%

295,668

10,383

7.08
%
Residential and home equity

173,302

4,521

5.25
%

158,813

4,687

5.95
%
Consumer and other

13,208

449

6.84
%

16,404

509

6.25
%
Total loans

1,686,410

49,574

5.91
%

1,681,189

54,608

6.55
%

Non-marketable equity securities

2,764

42

3.04
%

2,785

54

3.90
%
Total interest earning assets

2,450,290

56,786

4.66
%

2,091,903

59,202

5.71
%
Allowance for loan losses

(42,174
)

(25,907
)

Non-interest earning assets

163,773

150,474

Total average assets

$
2,571,889

$
2,216,470

LIABILITIES AND SHAREHOLDERS’
   EQUITY

Interest-bearing deposits:

Demand and savings accounts

$
871,676

$
1,318

0.30
%

$
807,043

$
2,027

0.51
%
Money market accounts

384,289

1,316

0.69
%

262,171

1,281

0.99
%
Certificates of deposit less than or equal to $250,000

130,133

760

1.17
%

142,450

849

1.20
%
Certificates of deposit greater than $250,000

41,392

382

1.85
%

38,136

354

1.87
%
Total interest bearing deposits

1,427,490

3,776

0.53
%

1,249,800

4,511

0.73
%
Short-term borrowings

12,205

-

0.00
%

4,879

64

2.63
%
Total interest-bearing liabilities

1,439,695

3,776

0.53
%

1,254,679

4,575

0.74
%
Non-interest bearing deposits

779,173

643,642

Total funding

2,218,868

3,776

0.34
%

1,898,321

4,575

0.49
%
Other non-interest bearing liabilities

14,684

16,173

Shareholders’ equity

338,337

301,976

Total average liabilities and shareholders’
   equity

$
2,571,889

$
2,216,470

Net interest income

$
53,010

$
54,627

Interest rate spread

4.13
%

4.97
%
Net interest margin

4.35
%

5.27
%

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.

	Three Months Ended June 30,									Six Months Ended June 30,									Three Months Ended June 30,									Six Months Ended June 30,
	2020 vs. 2019									2020 vs. 2019									2021 vs. 2020									2021 vs. 2020
	Increase (Decrease) Due to:									Increase (Decrease) Due to:									Increase (Decrease) Due to:									Increase (Decrease) Due to:
(Dollars in thousands)	Volume			Rate			Net			Volume			Rate			Net			Volume			Rate			Net			Volume			Rate			Net
Interest income:
Interest earning deposits in other banks and federal funds sold	$	324		$	(783	)	$	(459	)	$	546		$	(908	)	$	(362	)	$	(40	)	$	(2	)	$	(42	)	$	(102	)	$	(229	)	$	(331	)
Taxable securities		1,976			(96	)		1,880			3,123			21			3,144			2,885			(2,349	)		536			5,532			(5,761	)		(229	)
Non-taxable securities		(103	)		20			(83	)		(196	)		44			(152	)		(68	)		8			(60	)		(149	)		13			(136	)
Total securities		1,873			(76	)		1,797			2,927			65			2,992			2,817			(2,341	)		476			5,383			(5,748	)		(365	)
Loans
Real estate term		630			(912	)		(282	)		1,301			(1,163	)		138			1,689			(1,939	)		(250	)		2,909			(3,866	)		(957	)
Construction and land development		(1,018	)		(1,129	)		(2,147	)		(1,736	)		(1,618	)		(3,354	)		175			(253	)		(78	)		(312	)		(970	)		(1,282	)
Commercial and industrial		162			(1,532	)		(1,370	)		(143	)		(1,449	)		(1,592	)
Commercial and industrial loans																				(904	)		(37	)		(941	)		(1,620	)		(373	)		(1,993	)
Residential and home equity		202			(338	)		(136	)		406			(572	)		(166	)		890			(646	)		244			1,448			(1,283	)		165
Consumer and other		(82	)		38			(44	)		(106	)		46			(60	)		(35	)		(16	)		(51	)		(142	)		22			(120	)
Total Loans		(106	)		(3,873	)		(3,979	)		(278	)		(4,756	)		(5,034	)		1,815			(2,891	)		(1,076	)		2,283			(6,470	)		(4,187	)

Non-marketable equity securities		2			(9	)		(7	)		-			(12	)		(12	)		10			(7	)		3			14			(10	)		4
Total interest income		2,093			(4,741	)		(2,648	)		3,195			(5,611	)		(2,416	)		4,602			(5,241	)		(639	)		7,578			(12,457	)		(4,879	)
Interest expense:
Demand and savings accounts		109			(604	)		(495	)		152			(861	)		(709	)		164			(101	)		63			383			(530	)		(147	)
Money market accounts		260			(432	)		(172	)		488			(453	)		35			227			(254	)		(27	)		657			(971	)		(314	)
Certificates of deposit less than or equal to $250,000		(33	)		(35	)		(68	)		(72	)		(17	)		(89	)		(35	)		(102	)		(137	)		(68	)		(200	)		(268	)
Certificates of deposit greater than $250,000		24			(6	)		18			30			(2	)		28			(33	)		(24	)		(57	)		(21	)		(51	)		(72	)
Short-term borrowings		-			-			-			38			(102	)		(64	)		-			11			11			-			37			37
Total interest expense		360			(1,077	)		(717	)		636			(1,435	)		(799	)		323			(470	)		(147	)		951			(1,715	)		(764	)
Net interest income	$	1,733		$	(3,664	)	$	(1,931	)	$	2,559		$	(4,176	)	$	(1,617	)	$	4,279		$	(4,771	)	$	(492	)	$	6,627		$	(10,742	)	$	(4,115	)

Net Interest Income and Net Interest Margin.For the three months ended June 30, ~~2020,~~2021, net interest income decreased ~~$1.9~~$0.5 million, or ~~6.97%~~1.91%, to ~~$25.8~~$25.3 million, compared with ~~$27.7~~$25.8 million for the same period a year earlier. The decrease is primarily the result of net interest margins narrowing ~~128~~99 basis points to ~~3.96% for the same comparable periods offset by average interest earning assets increasing $494 million, or 23.30%, to $2.6 billion~~2.97% for the same comparable periods. The narrowing of net interest margins is primarily the result of the Federal Reserve reducing benchmark rates to almost zero and an increase in the average amount of lower yielding cash and investment securities held by the Company stemming from average core deposits increasing ~~$232~~$797 million, or ~~18.24%~~33.78%, for the same respective periods. Average interest earning assets increased $804 million, or 30.72%, to $3.42 billion for the same comparable periods. The percentage of average loans to total average interest earning assets decreased to ~~64.75%~~53.97% for the three months ended June 30, ~~2020~~2021 compared with ~~79.52%~~64.75% for the same period a year earlier.

~~Yields~~Yield on interest earning assets declined ~~147~~107 basis points to ~~4.21%~~3.14% for the three months ended June 30, ~~2020~~2021, compared with ~~5.68%~~4.21% for the same period a year earlier. The decline in ~~yields~~yield on interest earning assets is primarily the result of the average amount of cash and investment securities held by the Company increasing ~~$487~~$650 million, or ~~112.79%~~70.74%, to ~~$919 million~~$1.57 billion for the same comparable periods with the yield on cash and investment securities ~~decreasing 59~~declining 57 basis points to 1.06% for the second quarter of 2021 compared with 1.63% for the same comparable ~~periods.~~period. This decline is primarily the result of yield on investment securities declining 105 basis points to 1.09% for the same comparable periods as prepayment rates on mortgage-backed securities remained elevated in the second quarter of 2021.

In addition, the yield on loans declined 9671 basis points to 4.90% for the second quarter of 2021 compared with 5.61% for the same comparable ~~periods and average~~periods. Average loans outstanding increased ~~$6.7~~$152 million for the second quarter of 2021, or ~~0.40%~~8.95%, to ~~$1.69~~$1.85 billion for the same comparable periods. Yields on loans were negatively impacted by the lower yield on SBA PPP loans. For the three months ended June 30, 2020, the yield on SBA PPP loans was 2.77%, including the amortization of deferred fees and costs recognized over the contractual term of the loans. The Company expects that the yield on SBA PPP loans will increase as it begins the process of loan forgiveness with the SBA.period.

For the three months ended June 30, ~~2020,~~2021, total cost of interest bearing liabilities decreased 3114 basis points to ~~0.43%~~0.29%, compared with ~~0.74%~~0.43% for the same period a year earlier and ~~is the result of the cost of interest bearing deposits decreasing 31 basis points to 0.43% compared with 0.74% for the same period a year ago. For the three months ended June 30, 2020,~~ the total cost of funds decreased 228 basis points to ~~0.27%~~0.19%, compared with ~~0.49%~~0.27% for the same period a year ago.

For the three months ended June 30, ~~2020,~~2021, acquisition accounting adjustments, including the accretion of loan discounts and fair value amortization on time deposits, added 5three basis points to net interest margin.

For the six months ended June 30, ~~2020,~~2021, net interest income decreased ~~$1.6~~$4.1 million, or ~~2.96%~~7.76%, to ~~$53.0~~$48.9 million, compared with $54.6 million for the same period a year earlier. The decrease is primarily the result of the narrowing of net interest margins resulting from the Federal Reserve reducing benchmark rates to almost zero and an increase in the average amount of lower yielding cash and investment securities held by the Company stemming from average core deposits increasing $178 million, or 14.22%, for the same respective periods. The percentage of average loans to total average interest earning assets decreased to 68.82% for the six months ended June 30, 2020 compared with 80.37% for the same period a year earlier. This decrease was offset by average interest earning assets increasing $358 million, or 17.13%, to $2.5 billion for the same comparable periods.

Yields on interest earning assets declined 105 basis points to 4.66% for the six months ended June 30, 2020 compared with 5.71% for the same period a year earlier. The decline in yields on interest earning assets is primarily the result of the average amount of cash and investment securities held by the Company increasing $353 million, or 86.58%, to $761 million for the same comparable periods with the yield on cash and securities decreasing 35 basis points to 1.89% for the same comparable periods. In addition, the yield on loans declined 64 basis points for the same comparable periods and average loans outstanding increased $5.2 million, or 0.31%, to $1.69 billion for the same comparable periods.

For the six months ended June 30, 2020, total cost of interest bearing liabilities decreased 21 basis points to 0.53% compared with 0.74% for the same period a year earlier, and is the result of the cost of interest bearing deposits decreasing 20 basis points to 0.53% compared with 0.73% for the same period a year ago. For the six months ended June 30, 2020, the total cost of funds decreased 15 basis points to 0.34% compared with 0.49% for the same period a year ago.

For the six months ended June 30, 2020, acquisition accounting adjustments, including the accretion of loan discounts and fair value amortization on time deposits, added 10 basis points to net interest margin.

The Company expects its net interest income and net interest margins to continue to be adversely impacted in future periods because of the Federal Reserve lowering benchmark rates to near zero and the current asset mix of the Company’s balance sheet. The amount of the impact is dependent upon the length in time that the Federal Reserve holds benchmark rates to near zero, and the amount of time the Company holds a higher percentage of low yielding cash and investment securities.

~~Net Income.~~ Net income decreased $0.7 million to $10.3 million for the three months ended June 30, 2020, compared with $11.0 million for the three months ended June 30, 2019. This was primarily attributable to a decrease in net interest income of $1.9 million, and an increase in non-interest expense of $1.6 million, offset by an increase in non-interest income of $2.5 million and a decrease in income tax expense of $0.3 million.

~~Net Interest Income and Net Interest Margin.~~ ~~For the three months ended June 30, 2020, net interest income decreased $1.9 million, or 6.97%, to $25.8 million compared with $27.7~~$53.0 million for the same period a year earlier. The decrease is primarily the result of net interest margins narrowing ~~128~~141 basis points to ~~3.96% for the same comparable periods offset by average interest earning assets increasing $494 million, or 23.30%, to $2.6 billion~~2.94% for the same comparable periods. The narrowing of net interest margins is primarily the result of the Federal Reserve reducing benchmark rates to almost zero and an increase in the average amount of lower yielding cash and investment securities held by the Company stemming from average core deposits increasing ~~$232~~$866 million, or ~~18.24%~~39.25%, for the same respective ~~periods.~~period. Average interest earning assets increased $903 million, or 36.85%, to $3.35 billion for the same comparable period. The percentage of average loans to total average interest earning assets decreased to ~~64.75%~~53.45% for the ~~three~~six months ended June 30, ~~2020~~2021 compared with ~~79.52%~~68.82% for the same period a year earlier.

Yield on interest earning assets declined ~~147~~154 basis points to ~~4.21%~~3.12% for the ~~three~~six months ended June 30, ~~2020~~2021 compared with ~~5.68%~~4.66% for the same period a year earlier. The decline in ~~yields~~yield on interest earning assets is primarily the result of the average amount of cash and investment securities held by the Company increasing ~~$487~~$796 million, or ~~112.79%~~105%, to ~~$919 million~~$1.56 billion for the same comparable periods with the yield on cash and investment securities ~~decreasing 59~~declining 52 basis points to ~~1.63%~~0.42% for the six months ended June 30, 2021 compared with 0.94% for the same comparable periods. This decline is primarily the result of yield on investment securities declining 141 basis points to 0.89% for the same comparable periods as prepayment rates on mortgage-backed securities remained elevated for the six months ended June 30, 2021.

In addition, the yield on loans declined 9680 basis points to 5.11% for the six months ended 2021 compared with 5.91% for the same comparable ~~periods and average~~period. Average loans outstanding increased ~~$6.7~~$106 million, or ~~0.40%~~6.28%, to ~~$1.69~~$1.79 billion for the same comparable ~~periods.~~period.

~~Yields on loans were negatively impacted by the lower yield on SBA PPP loans.~~

For the ~~three~~six months ended June 30, 2020, the yield on SBA PPP loans was 2.77%, including the amortization of deferred fees and costs recognized over the contractual term of the loans. The Company expects that the yield on SBA PPP loans will increase as it begins the process of loan forgiveness with the SBA.

~~For the three months ended June 30, 2020,~~2021, total cost of interest bearing liabilities decreased 3123 basis points to ~~0.43%~~0.30%, compared with ~~0.74%~~0.53% for the same period a year earlier and ~~is the result of the cost of interest bearing deposits decreasing 31 basis points to 0.43% compared with 0.74% for the same period a year ago. For the three months ended June 30, 2020,~~ the total cost of funds decreased 2214 basis points to ~~0.27%~~0.20%, compared with ~~0.49%~~0.34% for the same period a year ago.

For the ~~three~~six months ended June 30, ~~2020,~~2021, acquisition accounting adjustments, including the accretion of loan discounts and fair value amortization on time deposits, added 5four basis points to net interest margin.

Net Income. Net income increased $2.4 million to $12.7 million for the three months ended June 30, 2021, compared with $10.3 million for the three months ended June 30, 2020. This was primarily attributable to a recapture of provision for credit losses offset by a decrease in net interest income of $0.5 million, a decrease in non-interest income of $0.8 million, an increase in income tax expense of $0.8 million and an increase in non-interest expense of $2.6 million.

Provision/(Recapture) for Credit Losses. The ~~provision~~Company records provision/(recapture) for credit losses into earnings each period ~~is a charge against earnings in that period. The provision is that amount required~~ to maintain the allowance for credit losses associated with investment securities, loans held for investment, and unfunded commitments at ~~a level~~levels that, in ~~management’s judgment, is~~Management’s judgement, are adequate to absorb current expected credit losses in ~~the loan portfolio.~~these portfolios.

For the three months ended June 30, ~~2020,~~2021, the Company recorded a recapture for credit losses associated with loans held for investment of $6.4 million and provision for credit losses ~~was $2.1~~associated with unfunded loan commitments of $1.4 million compared with ~~$2.2 million~~a recording of provision for ~~the same period a year earlier. For the three months ended June 30, 2020, the Company incurred net charge-offs~~credit losses for loans held for investment of ~~$0.7 million compared with net charge-offs less than $0.1~~$2.1 million for the same period a year ago. The ~~decrease in~~recapture of provision for credit losses is primarily the result of lower qualitative factors applied in the Company’s current expected credit losses model as forecasted economic indicators have improved and the negative effects of the COVID-19 pandemic have abated. The provision for credit losses recorded during the three months ended June 30, 2020, ~~is due primarily to no loan growth quarter-over-quarter offset by higher~~reflected the deterioration in forecasted economic indicators and the economic outlook resulting from the negative effects of the COVID-19 pandemic. The Company incurred net recoveries of $0.3 million for the three months ended June 30, 2021, compared with net charge-offs inof $0.7 million for the ~~second quarter.~~same period a year ago.

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

	Three Months Ended											Three Months Ended
	June 30,			June 30,		$ Better /			% Better /			June 30,		June 30,			$ Better /			% Better /
(Dollars in thousands)	2020			2019		(Worse)			(Worse)			2021		2020			(Worse)			(Worse)
Mortgage banking	$	3,036		$	1,621	$	1,415			87.3	%	$	2,404	$	3,036		$	(632	)		-20.8	%
Card processing		917			814		103			12.7	%		1,211		917			294			32.1	%
Service charges on deposit accounts		763			705		58			8.2	%		651		763			(112	)		-14.7	%
Net gain on sale of investment securities		1,441			-		1,441			0.0	%		-		1,441			(1,441	)		-100.0	%
Other		(41	)		458		(499	)		-109.0	%		1,026		(41	)		1,067			2602.4	%
Total non-interest income	$	6,116		$	3,598	$	2,518			70.0	%	$	5,292	$	6,116		$	(824	)		-13.5	%

~~For~~Noninterest income decreased $0.8 million, or 13.47%, to $5.3 million for the three months ended June 30, ~~2020, noninterest income increased $2.5 million, or 69.98%, to $6.1 million~~2021, compared with ~~$3.6~~$6.1 million the same period a year ago. The ~~increase~~decrease was primarily due to a $1.4 million increase in mortgage banking income resulting from higher loan volume of refinanced mortgages, which was driven by a lower interest rate environment for the same comparable periods. Total loans sold increased $27.9 million, or 58.37%, to $75.7 million for the three months ended June 30, 2020, compared with $47.8 million for the same period a year earlier. In addition, the Company ~~recorded~~recording a $1.4 million gain on sale of $127 million in investment securities induring the second quarter of 2020 and a $0.6 million decline in mortgage banking income as itmortgage loans sold ~~$48~~declined $26.0 million, or 34.0%, to $50.6 million for the second quarter of ~~securities to re-balance its investment securities portfolio.~~2021 compared with the same period a year earlier.

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

	Three Months Ended										Three Months Ended
	June 30,		June 30,		$ Better /			% Better /			June 30,		June 30,		$ Better /			% Better /
(Dollars in thousands)	2020		2019		(Worse)			(Worse)			2021		2020		(Worse)			(Worse)
Salaries and employee benefits	$	10,786	$	9,526	$	(1,260	)		-13.2	%	$	10,707	$	10,786	$	79			0.7	%
Occupancy, equipment and depreciation		831		1,558		727			46.7	%		1,209		831		(378	)		-45.5	%
Data processing		2,383		1,018		(1,365	)		-134.1	%		2,434		2,383		(51	)		-2.1	%
Marketing and advertising		339		226		(113	)		-50.0	%		330		339		9			2.7	%
FDIC premiums		165		148		(17	)		-11.5	%		247		165		(82	)		-49.7	%
Acquisition-related costs												2,215		-		(2,215	)		0.0	%
Other		1,771		2,223		452			20.3	%		1,713		1,771		58			3.3	%
Total non-interest expense	$	16,275	$	14,699	$	(1,576	)		-10.7	%	$	18,855	$	16,275	$	(2,580	)		-15.9	%

~~For~~Noninterest expense was $18.9 million for the three months ended June 30, ~~2020, noninterest expense was $16.3 million~~2021 compared with ~~$14.7~~$16.3 million for the same period a year earlier. ~~For~~The Company’s efficiency ratio was 61.64% for the three months ended June 30, ~~2020, the Company’s efficiency ratio was 51.01%~~2021 compared with ~~46.93%~~51.01% for the same period a year ago.

Noninterest expense for the three months ended June 30, 2021 was impacted by the Company recording $2.2 million in costs associated with merger-related activities. The Company expects to continue to record additional merger-related costs until the expected closing of the Holding Company Merger in the fourth quarter.

The increase in noninterest expense for the three months ended June 30, 2021 was also the result of higher data processing expenses due to technology investments made by the Company. Additionally, the Company recorded higher FDIC insurance premiums in 2021 compared with 2020 as the Company was ~~primarily~~able to apply the small bank assessment credits in 2020.

Lastly, the increase in noninterest expense was also the result of higher salaries and employee benefits ~~resulting from~~due to higher incentive payments ~~made primarily to~~paid for net loan growth and mortgage loan ~~officers, higher data processing costs and higher marketing and advertising costs. These higher amounts were partially offset by lower occupancy, equipment and depreciation costs.~~originations.

Income Tax Expense. The Company recorded income tax expense of $4.0 million for the three months ended June 30, 2021 compared with $3.2 million for the same period a year earlier due primarily to higher income. For the three months ended June 30, ~~2020, income tax expense was $3.2 million compared with $3.5 million for the same period a year earlier. For the three months ended June 30, 2020,~~2021, the effective tax rate was ~~23.59%~~24.11%, compared with ~~24.05%~~23.59% for the same period a year ago.

Financial Overview for the Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020

	Six Months Ended										Six Months Ended
	June 30,		June 30,		$ Better /			% Better /			June 30,			June 30,		$ Better /			% Better /
(Dollars in thousands)	2020		2019		(Worse)			(Worse)			2021			2020		(Worse)			(Worse)
Interest income	$	56,786	$	59,202	$	(2,416	)		-4.1	%	$	51,907		$	56,786	$	(4,879	)		-8.6	%
Interest expense		3,776		4,575		799			17.5	%		3,012			3,776		764			20.2	%
Net interest income		53,010		54,627		(1,617	)		-3.0	%		48,895			53,010		(4,115	)		-7.8	%
Provision for credit losses		2,750		3,700		950			25.7	%		(5,000	)		2,750		7,750			281.8	%
Net interest income after provision for credit losses		50,260		50,927		(667	)		-1.3	%		53,895			50,260		3,635			7.2	%
Non-interest income		9,856		6,935		2,921			42.1	%		10,674			9,856		818			8.3	%
Non-interest expense		32,436		29,615		(2,821	)		-9.5	%		35,400			32,436		(2,964	)		-9.1	%
Income before income tax expense		27,680		28,247		(567	)		-2.0	%		29,169			27,680		1,489			5.4	%
Income tax expense		6,569		6,753		184			2.7	%		7,031			6,569		(462	)		-7.0	%
Net income	$	21,111	$	21,494	$	(383	)		-1.8	%	$	22,138		$	21,111	$	1,027			4.9	%

Net Income. Net income ~~decreased $0.4~~increased $1.0 million to $22.2 million for the six months ended June 30, 2021, compared with $21.1 million for the six months ended June 30, ~~2020, compared with $21.5 million for the six months ended June 30, 2019.~~2020. This was primarily attributable to a recapture of provision for credit losses, and an increase in non-interest income of $0.8 million, offset by a decrease in net interest income of ~~$1.6~~$4.1 million, an increase in income tax expense of $0.5 million and an increase in non-interest expense of ~~$2.8 million, offset by an increase in non-interest income of $2.9 million, a decrease in provision~~$3.0 million.

Provision/(Recapture) for Credit Losses. The Company records provision/(recapture) for credit losses ~~of $1.0 million and a decrease in income tax expense of $0.2 million~~

~~Net Interest Income and Net Interest Margin.~~ ~~For~~to earnings each period to maintain the ~~six months ended June 30, 2020, net interest income decreased $1.6 million, or 2.96%, to $53.0 million compared~~allowance for credit losses associated with $54.6 million for the same period a year earlier. The decrease is primarily the result of the narrowing of net interest margins resulting from the Federal Reserve reducing benchmark rates to almost zero and an increase in the average amount of lower yielding cash and investment securities, loans held ~~by the Company stemming from average core deposits increasing $178 million, or 14.22%,~~ for ~~the same respective periods. The percentage of average loans~~investment, and unfunded commitments at levels that, in Management’s judgement, are adequate to total average interest earning assets decreased to 68.82% for the six months ended June 30, 2020 compared with 80.37% for the same period a year earlier. This decrease was offset by average interest earning assets increasing $358 million, or 17.13%, to $2.5 billion for the same comparable periods.

~~Yields on interest earning assets declined 105 basis points to 4.66% for the six months ended June 30, 2020 compared with 5.71% for the same period a year earlier. The decline~~absorb current expected credit losses in yields on interest earning assets is primarily the result of the average amount of cash and investment securities held by the Company increasing $353 million, or 86.58%, to $761 million for the same comparable periods with the yield on cash and securities decreasing 35 basis points to 1.89% for the same comparable periods. In addition, the yield on loans declined 64 basis points for the same comparable periods and average loans outstanding increased $5.2 million, or 0.31%, to $1.69 billion for the same comparable periods.these portfolios.

For the six months ended June 30, ~~2020, total cost~~2021, the Company recorded a recapture for credit losses associated with loans held for investment of ~~interest bearing liabilities decreased 21 basis points to 0.53% compared with 0.74% for the same period a year earlier,~~$6.4 million and is the result of the cost of interest bearing deposits decreasing 20 basis points to 0.53% compared with 0.73% for the same period a year ago. For the six months ended June 30, 2020, the total cost of funds decreased 15 basis points to 0.34% compared with 0.49% for the same period a year ago.

~~Provision for Credit Losses.~~ ~~The~~ provision for credit losses ~~in each period is~~associated with unfunded loan commitments of $1.4 million compared with a charge against earnings in that period. The provision is that amount required to maintain the allowance for credit losses at a level that, in management’s judgment, is adequate to absorb current expected credit losses in the loan portfolio.

~~For the six months ended June 30, 2020,~~recording of provision for credit losses ~~was~~for loans held for investment of $2.8 million compared with $3.7 million for the same period a year earlier. For the six months ended June 30, 2020, the Company incurred net charge-offs of $1.0 million compared with net charge-offs of $0.9 million for the same period a year ago. The ~~decrease in~~recapture of provision for credit losses of $6.4 million associated with loans held for investment is primarily the result of lower qualitative factors applied in the Company’s current expected credit losses model as forecasted economic indicators have improved and the negative effects of the COVID-19 pandemic have abated. The provision for credit losses of $1.4 million associated with unfunded loan commitments was the result of total unfunded loan commitments increasing $160 million, or 23.5%, for the first six months of 2021. The provision for credit losses recorded during the first half a year ago reflected the deterioration in forecasted economic indicators and the economic

outlook resulting from the negative effects of the COVID-19 pandemic. For the six months ended June 30, ~~2020 is due primarily to~~2021, the Company incurred net recoveries of $0.1 million compared with net charge-offs $1.0 million for the same period a ~~decrease of reserves on individually evaluated loans and no loan growth during the six months ended June 30, 2020.~~year earlier.

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

	Six Months Ended										Six Months Ended
	June 30,		June 30,		$ Better /			% Better /			June 30,		June 30,		$ Better /			% Better /
(Dollars in thousands)	2020		2019		(Worse)			(Worse)			2021		2020		(Worse)			(Worse)
Mortgage banking	$	4,746	$	3,038	$	1,708			56.2	%	$	5,185	$	4,746	$	439			9.2	%
Card processing		1,624		1,429		195			13.6	%		2,282		1,624		658			40.5	%
Service charges on deposit accounts		1,543		1,362		181			13.3	%		1,343		1,543		(200	)		-13.0	%
Net gain on sale of investment securities		1,441		-		1,441			0.0	%		206		1,441		(1,235	)		-85.7	%
Other		502		1,106		(604	)		-54.6	%		1,658		502		1,156			230.3	%
Total non-interest income	$	9,856	$	6,935	$	2,921			42.1	%	$	10,674	$	9,856	$	818			8.3	%

For the six months ended June 30, ~~2020,~~2021, noninterest income increased ~~$2.9~~$0.8 million, or ~~42.12%,~~8.30% to ~~$9.9~~$10.7 million, compared with ~~$6.9 million~~ the same period a year ago. The increase ~~was primarily due to a $1.7~~is the result of $1.2 million ~~increase~~higher other operating income, $0.7 million in higher card processing income, and $0.4 million in higher mortgage banking income ~~resulting from higher loan volume of refinanced mortgages, which was driven by a lower interest rate environment for~~even as mortgage loans sold decreased $14.3 million, or 11.3%, to $112 million compared with the same comparable periods and gains on sale of investment securities. Total loans sold increased $34.9 million, or 38.31%, to $126 million for the six months ended June 30, 2020, compared with $91.1 million for the samerespective period a year ~~ago.~~earlier as margins on loans sold improved.

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

	Six Months Ended										Six Months Ended
	June 30,		June 30,		$ Better /			% Better /			June 30,		June 30,		$ Better /			% Better /
(Dollars in thousands)	2020		2019		(Worse)			(Worse)			2021		2020		(Worse)			(Worse)
Salaries and employee benefits	$	21,630	$	19,412	$	(2,218	)		-11.4	%	$	21,794	$	21,630	$	(164	)		-0.8	%
Occupancy, equipment and depreciation		2,370		3,014		644			21.4	%		2,404		2,370		(34	)		-1.4	%
Data processing		3,519		1,982		(1,537	)		-77.5	%		4,283		3,519		(764	)		-21.7	%
Marketing and advertising		771		342		(429	)		-125.4	%		636		771		135			17.5	%
FDIC premiums		165		238		73			30.7	%		473		165		(308	)		-186.7	%
Acquisition-related costs												2,215		-		(2,215	)		0.0	%
Other		3,981		4,627		646			14.0	%		3,595		3,981		386			9.7	%
Total non-interest expense	$	32,436	$	29,615	$	(2,821	)		-9.5	%	$	35,400	$	32,436	$	(2,964	)		-9.1	%

For the six months ended June 30, ~~2020,~~2021, noninterest expense was ~~$32.4~~$35.4 million compared with ~~$29.6~~$32.4 million for the same period a year ~~earlier.~~ago. For the six months ended June 30, ~~2020,~~2021, the Company’s efficiency ratio was ~~51.60%~~59.43% compared with ~~48.11%~~51.60% for the same period a year ~~ago.~~earlier.

Noninterest expense for the six months ended June 30, 2021 was impacted by the Company recording $2.2 million in costs associated with merger-related activities. The Company expects to continue to record additional merger-related costs until the expected closing of the Holding Company Merger in the fourth quarter.

The increase in noninterest expense for the six months ended June 30, 2021 was also the result of higher data processing expenses due to technology investments made by the Company. Additionally, the Company recorded higher FDIC insurance premiums in 2021 compared with 2020 as the Company was ~~primarily~~able to apply the small bank assessment credits in 2020.

Income Tax Expense. For the six months ended June 30, ~~2020,~~2021, income tax expense was ~~$6.6~~$7.0 million, compared with ~~$6.8~~$6.6 million for the same period a year ~~earlier.~~earlier due primarily to higher income. For the six months ended June 30, ~~2020,~~2021, the effective tax rate was ~~23.73%~~24.10% compared with ~~23.91%~~23.73% for the same period a year ago.

Total assets were ~~$3.1~~$3.5 billion at June 30, ~~2020,~~2021, representing a ~~27.4%~~5.2% increase compared with December 31, ~~2019.~~2020. Total loans held for investment were ~~$1.7~~$1.8 billion at June 30, ~~2020, a decrease~~2021, an increase of ~~1.3%~~11.2% from December 31, ~~2019.~~2020. Total deposits were ~~$2.6~~$3.2 billion at June 30, ~~2020,~~2021, an increase of ~~27.1%~~8.2% compared with December 31, ~~2019.~~2020.

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

	June 30,			December 31,			June 30,			December 31,
(Dollars in thousands)	2020			2019			2021			2020
Loans held for sale	$	29,264		$	18,669		$	6,672		$	14,152

Loans held for investment:
Commercial real estate loans:
Real estate term	$	958,783		$	948,073		$	1,092,120		$	1,021,880
Construction and land development		243,212			273,963			288,699			228,213
Total commercial real estate loans		1,201,995			1,222,036			1,380,819			1,250,093
Commercial and industrial loans		310,837			284,738			225,050			257,240
Consumer loans:
Residential and home equity		141,174			162,559			265,680			185,470
Consumer and other		11,548			16,036			9,378			8,948
Total consumer loans		152,722			178,595			275,058			194,418
Total gross loans		1,665,554			1,685,369			1,880,927			1,701,751
Net deferred loan fees		(6,536	)		(4,451	)		(7,242	)		(6,255	)
Total loans held for investment		1,659,018			1,680,918			1,873,685			1,695,496
Allowance for credit losses		(42,683	)		(31,426	)		(34,958	)		(41,236	)
Total loans held for investment, net	$	1,616,335		$	1,649,492		$	1,838,727		$	1,654,260

	June 30,			December 31,			June 30,			December 31,
(Percentage of total gross loans)	2020			2019			2021			2020
Loans held for investment:
Commercial real estate loans:
Real estate term		57.5	%		56.2	%		58.1	%		60.1	%
Construction and land development		14.6	%		16.3	%		15.3	%		13.4	%
Total commercial real estate loans		72.1	%		72.5	%		73.4	%		73.5	%
Commercial and industrial loans		18.7	%		16.9	%		12.0	%		15.1	%
Consumer loans:
Residential and home equity		8.5	%		9.6	%		14.1	%		10.9	%
Consumer and other		0.7	%		1.0	%		0.5	%		0.5	%
Total consumer loans		9.2	%		10.6	%		14.6	%		11.4	%
Total loans held for investment		100.0	%		100.0	%		100.0	%		100.0	%

~~We originate~~The Company originates 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~~the Company considers the carrying value of these loans held for sale to be the approximate fair value.

The following table shows the amounts of outstanding loans, which, based on remaining scheduled repayments of principal, were 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~~table also ~~present,~~presents, for loans with maturities over one year, an analysis with respect to fixed interest rate loans and adjustable interest rate loans.

										Rate Structure for														Rate Structure for
										Loans Maturing Over														Loans Maturing Over
	Maturity									One Year					Maturity									One Year
				One														One
	One			through		After									One			through		After
	Year			Five		Five						Adjustable			Year			Five		Five						Adjustable
(Dollars in thousands)	or Less			Years		Years		Total		Fixed Rate		Rate			or Less			Years		Years		Total		Fixed Rate		Rate
Loans held for investment:
Commercial real estate loans:
Real estate term	$	55,394		$	196,592	$	706,797	$	958,783	$	160,851	$	742,538		$	103,597		$	173,189	$	815,334	$	1,092,120	$	226,958	$	761,565
Construction and land development		203,291			24,887		15,034		243,212		10,856		29,065			210,820			57,950		19,929		288,699		7,520		70,359
Total commercial real estate loans		258,685			221,479		721,831		1,201,995		171,707		771,603			314,417			231,139		835,263		1,380,819		234,478		831,924
Commercial and industrial loans		87,162			190,207		33,468		310,837		166,489		57,186			81,105			112,441		31,504		225,050		96,060		47,885
Consumer loans:
Residential and home equity		16,716			24,532		99,926		141,174		8,090		116,368			124,818			24,166		116,696		265,680		26,107		114,755
Consumer and other		1,667			7,526		2,355		11,548		9,541		340			1,295			6,199		1,884		9,378		7,776		307
Total consumer loans		18,383			32,058		102,281		152,722		17,631		116,708			126,113			30,365		118,580		275,058		33,883		115,062
Total gross loans held for investment	$	364,230	⁽¹⁾	$	443,744	$	857,580	$	1,665,554	$	355,827	$	945,497	⁽¹⁾	$	521,635	⁽¹⁾	$	373,945	$	985,347	$	1,880,927	$	364,421	$	994,871	⁽¹⁾

Concentrations. As of June 30, ~~2020,~~2021, in ~~management’s~~Management’s judgment, a concentration of loans existed in real estate related loans. At that date, real estate related loans comprised ~~80.7%~~87.5% of total loans held for investment, of which ~~57.6%~~58.1% are real estate term loans, ~~14.6%~~15.3% are construction and land development loans, and ~~8.5%~~14.1% are residential and home equity loans. ~~We require~~The Company requires collateral on real estate lending arrangements and typically maintain loan-to-value ratios of up to 85%, except for some residential construction loans of up to 95% loan-to-value provided the loan includes pre-approved long-term financing and some commercial real estate loans of up to 75% with a minimum debt coverage ratio of 1.25 times. ~~Our~~The Company’s concentration in commercial and industrial loans ~~has increased~~decreased to ~~18.7%~~12.0% at June 30, ~~2020~~2021 from ~~16.9%~~15.1% at December 31, ~~2019.~~2020.

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~~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 non-performing assets 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 TDRs, and OREO:

	June 30,		December 31,		June 30,		December 31,
(Dollars in thousands)	2020		2019		2021		2020
Non-accrual loans, not troubled-debt restructured
Real estate term	$	131	$	2,416	$	1,482	$	150
Construction and land development		139		60		-		-
Commercial and industrial		545		1,550
Commercial and industrial loans						1,146		922
Residential and home equity		549		45		34		254
Consumer and other		2		8		-		-
Total non-accrual, not troubled-debt restructured loans		1,366		4,079		2,662		1,326
Troubled-debt restructured loans non-accrual
Real estate term		2,521		2,393		4,346		6,421
Construction and land development		-		-		-		-
Commercial and industrial		2,499		658
Commercial and industrial loans						224		1,272
Residential and home equity		-		-		-		-
Consumer and other		-		-		-		-
Total troubled-debt restructured, non-accrual loans		5,020		3,051		4,570		7,693
Total non-accrual loans⁽¹⁾		6,386		7,130		7,232		9,019
Accruing loans past due 90 days or more		2		3		-		45
Total non-performing loans (NPL)		6,388		7,133		7,232		9,064

OREO		-		-		-		-
Total non-performing assets (NPA)⁽²⁾	$	6,388	$	7,133	$	7,232	$	9,064
Accruing troubled debt restructured loans	$	5,480	$	25,346	$	209	$	2,774
Non-accrual troubled debt restructured loans		5,020		3,051		4,570		7,693
Total troubled debt restructured loans	$	10,500	$	28,397	$	4,779	$	10,467

Individually ~~evaluated~~Evaluated Loans. Individually evaluated loans arewhen a loan no longer shares similar risk characteristics with other loans, ~~for which~~based on current information and events, whether it is probable ~~that we~~the Company will be unable to collect all principal and interest payments due according to the contractual terms of the loan ~~agreement. We measure~~agreement or when identified through its credit monitoring process. The Company measures estimated credit losses 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.

In determining whether or not a loan is individually evaluated, ~~we consider~~the Company considers 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 individually evaluated. ~~We determine~~The Company determines 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~~the Company expects to collect all amounts due, are not considered individually evaluated.

Troubled-debt Restructured Loans. A restructured loan is considered a troubled debt restructuring, or TDR, if ~~we,~~the Company, for economic or legal reasons related to the debtor’s financial difficulties, ~~grant~~grants a concession in terms or a below-market interest rate to the debtor that wethe Company would not otherwise consider. TDRs were ~~$10.5~~$4.8 million and ~~$28.4~~$10.5 million at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. ~~Our~~ TDRs are considered individually evaluated loans of which ~~$5.0~~$4.6 million and ~~$3.1~~$7.7 million were designated as non-accrual at June 30, ~~2020,~~2021 and December 31, ~~2019,~~2020, 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.

The ~~Bank implemented borrower~~Company offered a loan deferment relief ~~programs~~program of up to ~~assist commercial and consumer~~six months to clients impacted by the COVID-19 pandemic. ~~The Bank offered full deferral~~Under rare circumstances, loans will be re-evaluated at the end of ~~loan payments to qualifying commercial clients of up to six months with a subsequent re-amortization of payments after~~ the deferral period. ~~Commercial clients who qualified~~To qualify for ~~payment deferrals complied with contractual terms~~a second loan deferral, the Company will require a full re-underwriting of ~~their loan; and provided support regarding~~ the ~~effect the COVID-19 pandemic had on the results of their operations.~~ credit.

The Company offered temporary loan payment relief to ~~435~~445 businesses and ~~108~~118 individuals totaling approximately ~~$327~~$345 million ~~or 19.7% of total loans, excluding SBA PPP loans,~~ to address cash flow challenges for those impacted by the COVID-19 pandemic. ~~Of the $327~~The deferral period has ended for all 563 clients. We entered into another loan payment deferment agreement with six clients, who had an initial loan payment deferment agreement. Total dollars outstanding for these clients is $19.0 million. There are six other clients with outstanding balances totaling $1.4 million, inwho have not made a subsequent loan payment for 30 days or greater, after their payment deferment agreement expired. We have charged-off $0.1 million on these six accounts. Since these loans ~~where the payments~~ were ~~deferred, 89.54% were on~~performing loans that were ~~secured by real estate~~current on their payments prior to the COVID-19 pandemic, these modifications are not considered to be troubled debt restructurings pursuant to applicable accounting and regulatory guidance.

Under the first round of the SBA PPP loan program, the Company funded 333 loans, totaling $84.6 million. The Company has filed 274 forgiveness applications (approximately 82%) with ~~a weighted average~~the SBA, totaling $69.3 million and has received loan ~~to value (“LTV”) ratio~~forgiveness on 267 loans, totaling $66.1 million, or 80% of ~~approximately 50%. Loans that~~all SBA PPP loans funded. To date, the Company has ~~offered temporary~~not received a denial on any loan ~~payment relief included approximately $88.5 million that~~forgiveness application submitted to the SBA. Under the second round of the SBA PPP loan program, the Company has identified as higher risk business sectors, including hotels, retail, restaurants and assisted living centers. The Company expects to reamortize each loan at the end of the payment deferral period to extend the maturity date rather than retain the original maturity date with a balloon payment upon maturity. The Company believes this approach provides its clients with the short-term payment relief they need to address the negative cash flow effects resulting from the pandemic and mitigates unusual large cash outlays after the deferment.

~~The Company~~ funded ~~333 applications from businesses that participated in the~~221 loans, totaling $31.8 million. Total SBA PPP ~~for a total of $84.6 million. The SBA announced that they would begin taking applications for loan forgiveness on August 10, 2020,~~loans decreased $13.1 million, or 21.62%, to $47.5 million at ~~which time the Company intends to begin filing such applications.~~June 30, 2021, compared with $60.6 million at December 31, 2020.

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 usthe Company 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:

	Six Months Ended					Six Months Ended
	June 30,			June 30,		June 30,		June 30,
(Dollars in thousands)	2020			2019		2021		2020
Balance, beginning of period	$	-		$	-	$	-	$	-
Additions		(344	)		-		-		(344	)
Write-downs		1			-		-		1
Sales		343			-		-		343
Balance, end of period	$	-		$	-	$	-	$	-

~~We maintain~~The Company maintains an adequate allowance for credit losses, or ACL, based on a comprehensive methodology that determines ~~our~~the Company’s current expected credit losses (“CECL”) for investment securities available for sale, loans held for investment, and off balance sheet commitments.

Management estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience, either internal or peer information, provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made, using qualitative factors, when management expects current conditions and reasonable and supportable forecasts to differ from the conditions that existed for the period over which historical information was evaluated. Management must exercise significant judgment when evaluating the effect of qualitative factors on the amount of the ACL because data may not be reasonably available or directly applicable for management to determine the precise impact of a factor on the collectability of the loan portfolio as of the evaluation date.

Management considers qualitative or environmental factors that are likely to cause estimated credit losses associated with ~~our~~the Company’s existing portfolio to differ from historical loss experience, including but not limited ~~to; i)~~to: (i) changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses; ~~ii)~~(ii) changes in international, national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments; ~~iii)~~(iii) changes in the nature and volume of the portfolio and in the terms of loans; ~~iv)~~(iv) changes in the experience, ability, and depth of lending management and other relevant staff; v)(v) changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans; ~~vi)~~(vi) changes in the quality of the institution’s loan review system; ~~vii)~~(vii) changes in the value of underlying collateral for collateral-dependent loans; ~~viii)~~(viii) the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and, ~~ix)~~(ix) the effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the institution’s existing portfolio. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision, as ~~more~~additional information becomes ~~available.~~available or circumstances change.

The Company used the weighted average remaining maturity ~~(or “WARM”~~(“WARM”) approach, adjusted for prepayments, to calculate CECL at June 30, ~~2020~~2021 and segmented its loan portfolio into seventeen loan segments based on similar risk characteristics. Management may change the approach used to calculate current expected credit losses or loan segments from time-to-time as wethe Company improved credit loss estimation techniques. The Company has elected to exclude accrued interest receivable and net deferred fees from its calculation of ACL.

The following table sets forth the activity in ~~our~~the Company’s allowance for credit losses for the periods indicated:

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,			June 30,			June 30,			June 30,			June 30,
(Dollars in thousands)	2020			2019			2020			2019			2021			2020			2021			2020
Allowance for credit losses:
Beginning balance	$	41,253		$	25,923		$	31,426		$	25,245		$	41,013		$	41,253		$	41,236		$	31,426
Impact of adopting ASC 326		-			-			9,466			-			-			-			-			9,466
Loans charged off:
Real estate term		(99	)		-			(113	)		-			-			(99	)		-			(113	)
Construction and land development		(43	)		-			(73	)		(5	)		-			(43	)		-			(73	)
Commercial and industrial		(654	)		(497	)		(1,040	)		(1,583	)
Commercial and industrial loans														-			(654	)		(922	)		(1,040	)
Residential and home equity		-			-			-			(19	)		-			-			-			-
Consumer and other		(61	)		(110	)		(183	)		(174	)		(20	)		(61	)		(68	)		(183	)
Total charge-offs		(857	)		(607	)		(1,409	)		(1,781	)		(20	)		(857	)		(990	)		(1,409	)
Recoveries:
Real estate term		69			24			69			24			-			69			-			69
Construction and land development		35			319			49			351			1			35			3			49
Commercial and industrial		41			167			167			347
Commercial and industrial loans														284			41			974			167
Residential and home equity		3			10			25			32			20			3			22			25
Consumer and other		39			53			140			121			41			39			94			140
Total recoveries		187			573			450			875			346			187			1,093			450
Net loan charge-offs		(670	)		(34	)		(959	)		(906	)		326			(670	)		103			(959	)
Provision for credit losses		2,100			2,150			2,750			3,700			(6,381	)		2,100			(6,381	)		2,750
Ending balance ACL	$	42,683		$	28,039		$	42,683		$	28,039		$	34,958		$	42,683		$	34,958		$	42,683
Loans held for investment	$	1,659,018		$	1,672,584		$	1,659,018		$	1,672,584		$	1,873,685		$	1,661,634		$	1,873,685		$	1,661,634
Average loans		1,694,193			1,687,452			1,686,410			1,681,189			1,845,900			1,694,193			1,792,249			1,686,410
Selected ratios:
Net loan charge-offs to average loans		0.16	%		0.01	%		0.11	%		0.11	%		-0.07	%		0.16	%		-0.01	%		0.11	%
Provision for credit losses to average loans		0.50	%		0.51	%		0.33	%		0.44	%		-1.09	%		0.50	%		-0.56	%		0.33	%
Allowance for credit losses to loans held for investment		2.57	%		1.68	%		2.57	%		1.68	%		1.87	%		2.57	%		1.87	%		2.57	%

The ACL to loans held for investment was 1.87% at June 30, 2021, compared with 2.57% at June 30, ~~2020, compared with 1.68% at June 30, 2019.~~2020. The allowance for credit losses is also adjusted based on changes to the underlying loan portfolio, changes to ~~our~~the Company’s historical loss rates, and adjustments to qualitative ACL factors due to changes in current conditions.

The Company’s construction and land development portfolio reflects borrower concentration risk, and also carries the enhanced risks encountered with construction loans generally. 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~~The Company’s commercial real estate loans are a mixture of new and seasoned properties, retail, office, warehouse, and some industrial properties. Loans on properties are usually underwritten at a loan to value ratio of up to 75% with a minimum debt coverage ratio of 1.25 times.

The following table indicates management’s allocation of the ACL in each category to total loans as of ~~each of~~ the following dates:

	June 30,		December 31,		June 30,		December 31,
(Dollars in thousands)	2020		2019		2021		2020
Commercial real estate loans:
Real estate term	$	12,507	$	12,275	$	15,167	$	20,627
Construction and land development		15,121		6,990		11,331		10,532
Total commercial real estate loans		27,628		19,265		26,498		31,159
Commercial and industrial loans		11,760		10,892		5,284		8,095
Consumer loans:
Residential and home equity		2,767		1,118		2,869		1,662
Consumer and other		528		151		307		320
Total consumer loans		3,295		1,269		3,176		1,982
Total	$	42,683	$	31,426	$	34,958	$	41,236

Investment securities were ~~$973.5 million~~$1.5 billion at June 30, ~~2020~~2021 and ~~$406.0 million~~$1.3 billion at December 31, ~~2019.~~2020. As of June 30, ~~2020, our~~2021, the Company’s portfolio of investment securities was comprised of available for sale securities. At June 30, ~~2020, we~~2021, the Company held no investment securities from any issuer which totaled over 10% of ~~our~~ shareholders’ equity.

The carrying value of ~~our~~the Company’s portfolio of investment securities was as follows:

	June 30,		December 31,		June 30,		December 31,
(Dollars in thousands)	2020		2019		2021		2020
Available for sale securities: (Fair Value)
U.S. Government agencies	$	13,871	$	21,190	$	12,619	$	13,205
Municipal securities		46,933		56,912		31,129		37,287
Mortgage-backed securities		907,911		323,108		1,443,062		1,265,026
Corporate securities		4,742		4,785		4,897		4,875
Total investment securities	$	973,457	$	405,995	$	1,491,707	$	1,320,393

The following table shows the amortized cost for maturities of investment securities as of June 30, 2021, and the weighted average yields of such securities, including the benefit of tax-exempt securities:

						After One but					After Five but																				After One but					After Five but
	Within One Year					within Five Years					within Ten Years					After Ten Years					Total					Within One Year					within Five Years					within Ten Years					After Ten Years					Total
(Dollars in thousands)	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Available for sale securities:
U.S. Government agencies	$	-		0.00	%	$	13,480		1.65	%	$	-		0.00	%	$	-		0.00	%	$	13,480		1.65	%	$	5,239		2.11	%	$	6,058		2.29	%	$	786		3.65	%	$	290		2.35	%	$	12,373		2.30	%
Municipal securities		13,658		2.09	%		17,253		1.91	%		14,812		2.19	%		-		0.00	%		45,723		2.05	%		6,546		1.75	%		12,783		2.06	%		10,811		2.28	%		-		0.00	%		30,140		2.07	%
Mortgage-backed securities		-		0.00	%		4,910		1.78	%		22,911		2.07	%		866,514		2.19	%		894,335		2.18	%		-		0.00	%		2,771		2.39	%		10,852		2.37	%		1,435,105		1.52	%		1,448,728		1.53	%
Other securities		-		0.00	%		2,000		1.99	%		3,000		0.59	%		-		0.00	%		5,000		1.15	%		-		0.00	%		2,000		1.22	%		3,000		0.93	%		-		0.00	%		5,000		1.04	%
Total investment securities	$	13,658		2.09	%	$	37,643		1.80	%	$	40,723		2.00	%	$	866,514		2.19	%	$	958,538		2.16	%	$	11,785		1.91	%	$	23,612		2.20	%	$	25,449		2.12	%	$	1,435,395		1.52	%	$	1,496,241		1.55	%

~~Actual~~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~~The Company evaluates and records an ACL on an AFS debt security when it determines that the decline in fair value on an AFS debt security is credit loss-related at least on an annual basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) ~~our~~ intent and ability to retain ~~our~~ investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Total deposits were ~~$2.6~~$3.16 billion at June 30, ~~2020~~2021 and ~~$2.06~~$2.92 billion at December 31, ~~2019.~~2020. The increase in total deposits is attributed primarily to monies received by clients from government relief programs and relief programs the Company offered as well as organic growth. Non-interest bearing demand deposits were ~~$779.2 million,~~$1.1 billion, or ~~37.7%~~36.3% of total deposits at June 30, ~~2020~~2021 compared with ~~$719.4 million,~~$1.04 billion, or ~~35.0%~~35.7% of total deposits at December 31, ~~2019.~~2020. Interest bearing deposits are comprised of interest bearing DDA accounts, money market accounts, regular savings accounts, certificates of deposit of $250,000 or less, and certificates of deposit of more than $250,000.

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

	Six Months Ended					Six Months Ended					Six Months Ended					Six Months Ended
	June 30, 2020					June30, 2019					June 30, 2021					June 30, 2020
	Average		Average			Average		Average			Average		Average			Average		Average
(Dollars in thousands)	Balance		Rate			Balance		Rate			Balance		Rate			Balance		Rate
Non-interest bearing deposits	$	779,173		0.00	%	$	643,642		0.00	%	$	1,073,010		0.00	%	$	779,173		0.00	%
Interest bearing deposits:
Interest bearing demand and savings		871,676		0.30	%		807,043		0.51	%		1,177,881		0.20	%		871,676		0.30	%
Money market		384,289		0.69	%		262,171		0.99	%		665,217		0.30	%		384,289		0.69	%
Certificates of deposit less than or equal to $250,000		130,133		1.17	%		142,450		1.20	%		117,624		0.84	%		130,133		1.17	%
Certificates of deposit greater than $250,000		41,392		1.85	%		38,136		1.87	%		38,957		1.60	%		41,392		1.85	%
Total interest bearing deposits		1,427,490		0.53	%		1,249,800		0.73	%		1,999,679		0.30	%		1,427,490		0.53	%
Total	$	2,206,663		0.34	%	$	1,893,442		0.48	%	$	3,072,689		0.20	%	$	2,206,663		0.34	%

Additionally, the following table shows the maturities of CDs of $250,000 or more:

	June 30,		June 30,
(Dollars in thousands)	2020		2021
Due in three months or less	$	3,217	$	4,344
Due in over three months through six months		6,852		6,900
Due in over six months through twelve months		9,032		5,552
Due in over twelve months		26,254		17,483
Total	$	45,355	$	34,279

Deposits are gathered from individuals, partnerships, and corporations in ~~our~~the Company’s market areas. The interest rates paid are competitively priced for each particular deposit product and structured to meet ~~our~~the Company’s funding requirements. WeThe Company will continue to manage interest expense through deposit pricing.

Shareholders’ equity totaled ~~$350.1~~$370.6 million at June 30, ~~2020, an increase~~2021, a slight decrease of ~~$17.8~~$0.5 million, or ~~5.35%~~0.14%, since December 31, ~~2019.~~2020. The ~~increase~~decrease in shareholders’ equity for the six months ended June 30, ~~2020~~2021 was primarily due to ~~an increase~~a decrease of ~~$9.8~~$17.6 million in accumulated other comprehensive income ~~and~~offset by net income of ~~$21.1~~$22.1 million for the period less dividends paid of ~~$5.3 million, the impact to capital of adopting ASC 326 of $6.7 million and shares repurchased of $2.1~~$5.7 million.

Dividends of ~~$0.28~~$0.30 per share were declared during the six months ended June 30, ~~2020~~2021, representing ~~25.5%~~25.6% of the net income for the same period. WeThe Company announced a quarterly dividend of ~~$0.13~~$0.17 per share on July ~~29, 2020,~~28, 2021, payable on August ~~17, 2020~~16, 2021 for ~~shareholders’~~shareholders of record on August ~~10, 2020.~~9, 2021. Future cash dividends will depend on a variety of factors, including net income, capital, asset quality, general economic conditions, and regulatory considerations.

~~We are~~The Company is subject to risk-based capital adequacy guidelines related to the adoption of U.S. Basel III Capital Rules. Specifically, the rules impose, among other requirements, minimum capital requirements including a Tier 1 leverage capital ratio of 4.0%, a common equity Tier 1 risk-based capital ratio of 4.5%, a Tier 1 risk-based capital ratio of 6% and a total risk-based capital ratio of 8%.

	Basel III												Basel III
	Regulatory												Regulatory
	Requirements -												Requirements -
	Well Capitalized												Well Capitalized
	(Greater than or			ALTA									(Greater than or			Altabancorp^TM
	Equal to Stated			June 30,			December 31,			June 30,			Equal to Stated			June 30,			March 31,			June 30,
	Percentage)			2020			2019			2019			Percentage)			2021			2021			2020
Common equity tier 1 capital		6.50	%		17.94	%		17.18	%		15.99	%		6.50	%		16.91	%		17.15	%		17.94	%
Tier 1 risk-based capital		8.00	%		17.94	%		17.18	%		15.99	%		8.00	%		16.91	%		17.15	%		17.94	%
Total risk-based capital		10.00	%		19.20	%		18.43	%		17.24	%		10.00	%		18.17	%		18.41	%		19.20	%
Tier 1 leverage capital ratio		5.00	%		11.68	%		12.67	%		12.78	%		5.00	%		9.84	%		10.06	%		11.68	%

~~Altabancorp~~^TMBoth ALTA and ~~Altabank~~^TMthe Bank met the requirements to be defined as a “well-capitalized” institution at June 30, ~~2020, December~~2021, March 31, ~~2019~~2021 and June 30, ~~2019~~2020 for federal regulatory purposes.

The following table sets forth ~~our~~ off-balance sheet lending commitments as of June 30, ~~2020:~~2021:

			Payments Due by Period										Payments Due by Period
	Total				One to		Three to		After		Total				One to		Three to		After
	Amounts		Less than		Three		Five		Five		Amounts		Less than		Three		Five		Five
Other Commitments (Dollars in thousands)	Committed		One Year		Years		Years		Years		Committed		One Year		Years		Years		Years
Commitments to extend credit	$	659,794	$	448,691	$	107,625	$	15,939	$	87,539	$	813,317	$	517,299	$	203,375	$	26,328	$	66,315
Standby letters of credit		23,493		23,493		-		-		-		36,242		36,242		-		-		-
Credit cards		26,860		26,860		-		-		-		29,237		29,237		-		-		-
Total	$	710,147	$	499,044	$	107,625	$	15,939	$	87,539	$	878,796	$	582,778	$	203,375	$	26,328	$	66,315

The following table sets forth ~~our~~ significant contractual obligations as of June 30, ~~2020:~~2021:

			Payments Due by Period										Payments Due by Period
					One to		Three to		After						One to		Three to		After
			Less than		Three		Five		Five				Less than		Three		Five		Five
Contractual Obligations (Dollars in thousands)	Total		One Year		Years		Years		Years		Total		One Year		Years		Years		Years
Time certificates of deposit	$	173,349	$	88,853	$	47,959	$	32,699	$	3,838	$	148,630	$	83,788	$	49,493	$	19,570	$	3,648
Deposits without stated maturity		2,439,990		2,439,990		-		-		-		3,008,077		3,008,077		-		-		-
Short-term borrowings		83,490		83,490		-		-		-		-		-		-		-		-
Total	$	2,696,829	$	2,612,333	$	47,959	$	32,699	$	3,838	$	3,156,707	$	3,091,865	$	49,493	$	19,570	$	3,648

The ability to have readily available funds sufficient to repay fully maturing liabilities is of primary importance to depositors, creditors, and regulators. ~~Our liquidity,~~Liquidity, which is 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~~To ensure funds are available at all times, ~~we devote~~the Company devotes resources to projecting, on a monthly basis, the amount of funds that will be required, and ~~we maintain~~the Company maintains 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 Company has borrowing lines at a correspondent bank totaling $25.0 million. WeThe Company also ~~have~~has a current borrowing line with the FHLB, totaling $1.3 billion at June 30, ~~2020,~~2021, which is secured by various real estate loans pledged as collateral totaling ~~$757.5~~$976.5 million and investment securities of ~~$850.4~~$636.9 million. To provide liquidity to small business lenders, to help stabilize the financial system, and to provide economic relief to small businesses nationwide, the Board of Governors of the Federal Reserve System authorized each of the Federal Reserve Banks to participate in the Paycheck Protection Program Lending Facility (“PPPLF”). Under the PPPLF, each of the Federal Reserve Banks will extend non-recourse loans to eligible financial institutions to fund loans guaranteed by the Small Business Administration under the Paycheck Protection Program. In addition, loans originated under the SBA PPP will receive a zero percent risk weight under the agencies’ regulatory capital rule. The Company funded 333 applications from businesses that participated in the SBA PPP for a total of $84.6 million. The Company participated in the PPPLF for a substantial portion of SBA PPP round one loans; such loans are no longer pledged to the PPPLF. The Company has chosen not to participate in the PPPLF ~~and has a balance~~during the second round of ~~$83.5 million collateralized by these~~ SBA PPP ~~loans.~~loan funding. The Company has an additional borrowing line with the Federal Reserve Bank of ~~$22.2~~$470.4 million, which is secured by ~~$22.8~~$479.6 million of investment securities.

~~We believe our~~The Company believes its liquid assets are adequate to ~~meet our~~address cash flow needs for loan funding and deposit cash withdrawal for the next 60 to 90 days. At June 30, ~~2020, we~~2021, the Company had approximately ~~$418.8~~$287.7 million in net liquid assets comprised of ~~$323.8~~$63.3 million in cash and cash equivalents, ~~including~~which includes interest bearing deposits of ~~$275.9~~$27.0 million and federal funds sold of $0.8 million, ~~$973.5 million~~$1.5 billion in available for sale investment securities and ~~$29.3~~$6.7 million in loans held for sale, less ~~$907.8 million~~$1.3 billion of available for sale securities pledged as collateral for short-term borrowings.

On a long-term basis, ~~our~~the Company’s liquidity will be met by changing the relative distribution of ~~our~~its asset portfolios by reducing ~~our~~its investment or loan volumes, or selling or encumbering assets. Further, wethe Company will increase liquidity by soliciting higher levels of deposit accounts through promotional activities and/or borrowing from ~~our~~its correspondent banks, as well as the FHLB. At the current time, ~~our~~the Company’s long-term liquidity needs primarily relate to funds required to support loan originations and commitments, deposit withdrawals and pending acquisitions. All of these needs can currently be met by cash flows from investment payments and maturities, and investment sales if the need arises.

~~Our~~The Company’s 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, depreciation and amortization, amortization of investment discount and premiums, share based compensation, changes in the value of bank owned life insurance and other gains and losses.

~~Our~~The Company’s primary investing activities are the origination of real estate, commercial and consumer loans, and purchases and sales of investment securities. At June 30, 2020, wethe Company had outstanding loan commitments of ~~$659.8~~$813.3 million, credit card commitments of ~~$26.9~~$29.3 million and outstanding letters of credit of ~~$23.5~~$36.2 million. ~~We anticipate~~The Company anticipates that weit will have sufficient funds available to meet current loan commitments.

Net cash provided by financing activities for the six months ended June 30, ~~2020~~2021 was ~~$633.2~~$170.1 million, principally from an increase in deposit balances ~~an increase~~offset by a decrease in short-term borrowings ~~offset by~~and dividends paid to shareholders during the ~~period and share repurchases.~~period.

The Company’s assessment of market risk at June 30, ~~2020~~2021 indicates there have been no material changes in the quantitative and qualitative disclosures from those made in ~~our~~the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC.

The Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as required by Exchange Act Rules 240.13a-15(b) and 15d-14(a)) at June 30, ~~2020.~~2021. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s current disclosure controls and procedures are effective and timely, providing them with material information relating to the Company required to be disclosed in the reports the Company files or submits under the Exchange Act.

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 ~~three~~six months ended June 30, ~~2020,~~2021, to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company is involved in various claims, legal actions, and complaints ~~which~~that arise in the ordinary course of business. In the Company’s opinion, all such matters are adequately covered by insurance, are without merit or are of such kind, or involve such amounts, that unfavorable disposition would not have a material adverse effect on the financial condition or results of operations of the Company.

~~Our~~We refer you to the Company’s risk factors set forth in Part I, Item 1A, “Risk Factors,” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019 (“Form 10-K 2019”) identifies various market, credit,~~2020 and operations risk factors that could affect our results of operations. For example, we explained therein that the Company’s “profitability depends on interest rates generally, and we may be adversely affected by changes in market interest rates.” Form 10-K 2019 at page 29. Specifically, “[i]n response to market concerns arising from the spread of COVID-19, among other domestic and global events, interest rates in the U.S. have recently declined” and “interest rates may decrease further as a result of such events, which could adversely affect our financial condition and earnings.” As conditions and circumstances related to COVID-19, including its declaration as a global pandemic by the World Health Organization on March 11, 2020, are continuing to evolve, the Company provides the following supplement to the risk factors ~~identified~~and other cautionary statements contained in ~~its Form 10-K 2019:~~

~~The COVID-19 pandemic has significantly adversely impacted the global and national economies since its onset in late 2019. This pandemic is expected~~our other SEC filings, including our joint proxy statement/prospectus that was filed on July 21, 2021 pursuant to continue to adversely impact the global economy, though the scope, extent, and duration of such impact is presently not known or quantifiable. The future direct and indirect qualitative and quantitative impacts of the COVID-19 pandemic on the Company’sRule 424(b)(3) (the “Proxy Statement/Prospectus”), which could materially affect our business, ~~operations, and~~ financial condition ~~remain uncertain. As~~or future results. Except for as set forth in the ~~COVID-19 pandemic persists and global and national economies continue to decline,~~Proxy Statement/Prospectus, there have been no material changes from the effects on the Company’s business and operations could include, without limitation: (i) increased margin compression as lower interest rates persist; (ii) increased noninterest expenses; (iii) increased credit losses and net charge-offs; (iv) deterioration of asset and collateral values due to declining financial condition of consumer and commercial borrowers; and (v) decreased demand for financial products and services.

National government and regulatory authorities have taken steps to try to stimulate the economy and counteract the effects of the COVID-19 pandemic, including the passage of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which included the implementation of the SBA’s Paycheck Protection Program (PPP), providing loans to eligible small businesses to fund payroll and other qualifying expenses. The Board of Governors of the Federal Reserve System (Federal Reserve) has also taken economic stimuli steps by lowering the federal funds rate and the interest rate on the Federal Reserve’s discount window; issuing clarifying guidance on loan modifications due to COVID-19-related non-payment, and implementing and expanding the scope and access of its Main Street Lending Program and its Paycheck Protection Program Liquidity Facility for SBA-qualified lenders. The impact of these prophylactic measures is not yet known.

The Company continues to monitor the COVID-19 pandemic situation closely. The scope and duration of the COVID-19 pandemic is not yet known and, as such, its potential adverse impact on the Company’s business, results of operations, and financial results is highly uncertain. As recession-like economic conditions persist in global, national, and local economies, however, the COVID-19 pandemic could have a long-term negative effect on the Company’s business, results of operations, and financial condition.risk factors previously disclosed.

⁽¹⁾~~Filed as part of the Registrant’s Definitive Proxy Statement filed on April 17, 2020.~~

⁽²⁾~~Filed as part of the Registrant’s Current Report on Form 8-K filed on May 28, 2020.~~

Pursuant to the requirements 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 August ~~7, 2020.~~9, 2021.

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)

PART I. FINANCIAL INFORMATION
Item 1 – Financial Statements
Unaudited Consolidated Balance Sheets	32
Unaudited Consolidated Statements of Income	43
Unaudited Consolidated Statements of Comprehensive Income	54
Unaudited Consolidated Statements of Changes in Shareholders’ Equity	65
Unaudited Consolidated Statements of Cash Flows	76
Notes to Unaudited Consolidated Financial Statements	87
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	3431
Item 3 – Quantitative and Qualitative Disclosures about Market Risk	5452
Item 4 – Controls and Procedures	5453
PART II. OTHER INFORMATION
Item 1 – Legal Proceedings	5554
Item 1A – Risk Factors	5554
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	5654
Item 3 – Defaults upon Senior Securities	5654
Item 4 – Mine Safety Disclosures	5654
Item 5 – Other Information	5654
Item 6 – Exhibits	5754
Signatures	5855


Building and building improvements		15 to 40 years
Leasehold improvements		3 to 15 years
Furniture and equipment		3 to 15 years
Computers, software and equipment		3 to 5 years

	December 31, 2019
			Recorded Investment
	Unpaid						Total
	Principal		With No		With		Recorded		Related
(Dollars in thousands)	Balance		Allowance		Allowance		Investment		ACL
Commercial real estate:
Real estate term	$	18,305	$	11,684	$	6,621	$	18,305	$	825
Construction and land development		4,474		121		4,353		4,474		1,305
Total commercial real estate		22,779		11,805		10,974		22,779		2,130
Commercial and industrial		14,467		2,591		11,876		14,467		4,901
Consumer loans:
Residential and home equity		3,701		3,194		507		3,701		401
Consumer and other		-		-		-		-		-
Total consumer		3,701		3,194		507		3,701		401
Total	$	40,947	$	17,590	$	23,357	$	40,947	$	7,432


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


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

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☒☐

	Three Months Ended June 30, 2019
	Real		Construction			Commercial			Residential			Consumer
	Estate		and Land			and			and Home			and
(Dollars in thousands)	Term		Development			Industrial			Equity			Other			Total
Balance at beginning of period	$	10,172	$	7,182		$	7,602		$	804		$	163		$	25,923
Provision for credit losses		276		(114	)		1,965			(42	)		65			2,150
Gross loan charge-offs		-		-			(497	)		-			(110	)		(607	)
Recoveries		24		319			167			10			53			573
Net loan (charge-offs) / recoveries		24		319			(330	)		10			(57	)		(34	)
Balance at end of period	$	10,472	$	7,387		$	9,237		$	772		$	171		$	28,039

	Six Months Ended June 30, 2021
	Real			Construction		Commercial			Residential		Consumer
	Estate			and Land		and			and Home		and
(Dollars in thousands)	Term			Development		Industrial			Equity		Other			Total
Balance at beginning of period	$	20,627		$	10,532	$	8,095		$	1,662	$	320		$	41,236
Provision for credit losses		(5,460	)		796		(2,863	)		1,185		(39	)		(6,381	)
Gross loan charge-offs		-			-		(922	)		-		(68	)		(990	)
Recoveries		-			3		974			22		94			1,093
Net loan (charge-offs) / recoveries		-			3		52			22		26			103
Balance at end of period	$	15,167		$	11,331	$	5,284		$	2,869	$	307		$	34,958

Exhibit Number		Description

~~3.1~~2.1		~~Second Restated Articles~~Plan and Agreement of ~~Incorporation~~Merger, dated as of ~~the Company~~May 18, 2021, by and between Altabancorp^TM, Altabank^TM, Glacier Bancorp, Inc. and Glacier Bank⁽¹⁾

~~3.2~~		~~Amended and Restated Bylaws~~⁽²⁾

10.1		~~People’s Utah Bancorp 2020 Equity Incentive Plan~~Form of Voting Agreement⁽²⁾

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

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

32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002

101		The following financial information from Altabancorp^TM Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2020~~2021 is formatted in Inline XBRL: (i) the Unaudited Consolidated Balance ~~Sheets,~~Sheets; (ii) the Unaudited Consolidated Statements of ~~Income,~~Income; (iii) the Unaudited Consolidated Statements of Comprehensive ~~Income,~~Income; (iv) the Unaudited Consolidated Statements of Changes in Stockholders’ ~~Equity~~Equity; (v) the Unaudited Consolidated Statements of Cash ~~Flows,~~Flows; and (vi) the Notes to Unaudited Consolidated Financial ~~Statements~~Statements.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


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

	/s/ Mark K. Olson
	Mark K. Olson
	Executive Vice President and Chief Financial Officer (Principal Financial Officer)