**Exhibit3.1**

**AMENDEDAND RESTATED ARTICLES OF INCORPORATIONOFSKAGIT STATE BANCORP, INC.**

 

**ARTICLE I**

The name of thiscorporation shall be and is SKAGIT STATE BANCORP, INC.

**ARTICLE II**

The principaloffice and place of business of this corporation shall be located inBurlington, County of Skagit, State of Washington.

**ARTICLE III**

The purpose forwhich the corporation is organized is to carry on such activities as arepermitted to corporations under applicable law.

**ARTICLE IV**

## SECTION  4.1.       The number of shares of stock which thecorporation is authorized to issue is Five Million (5,000,000), all of whichare of one class of voting common stock with no par value per share.

## SECTION  4.2.       The corporation, at any time and fromtime to time, may authorize and issue debt obligations, whether or notsubordinated, without the approval of the shareholders, but subject to the requirementsof applicable law.

**ARTICLE V**

The period ofexistence of this corporation shall be perpetual.

**ARTICLE VI**

Holders of sharesof all classes of the capital stock of the corporation shall have thepreemptive right to acquire unissued shares of capital stock of thecorporation, whether now or hereafter authorized, and to acquire anyobligations issued or sold which are convertible into stock of the corporation,subject to such other rights, if any, as the Board of Directors, in itsdiscretion, may from time to time determine, and at such price as the Board ofDirectors may from time to time fix.

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**ARTICLE VII**

Each shareholderentitled to vote at any election for directors shall have the right to vote, inperson or by proxy, the number of shares owned by such shareholder for as manypersons as there are directors to be elected and for whose election suchshareholder has the right to vote.  Suchvotes may not be cumulated.

**ARTICLE VIII**

The Board ofDirectors shall have full power to adopt, alter, amend or repeal the Bylaws ofthe corporation or to adopt new Bylaws. Nothing herein, however, shall deny the concurrent power of theshareholders to adopt, alter, amend or repeal the Bylaws.

**ARTICLE IX**

The corporationreserves the right to amend, alter, change or repeal any provision of itsArticles of Incorporation to the extent permitted by the laws of the State ofWashington.  All rights of shareholders aregranted subject to this reservation.

**ARTICLE X**

## SECTION  10.1.     The Board of Directors shall consist of notfewer than five (5) nor more than eleven (11) individuals.  The exact number shall be determined byresolution of the Board of Directors.

## SECTION  10.2.     Commencing with the 2006 Annual Meeting ofShareholders, the Board of Directors shall be divided into three classes:  Class 1, Class 2, and Class 3, which shall beas nearly equal in number as possible. Each director shall serve for a term ending on the date of the thirdannual meeting of shareholders following the annual meeting at which suchdirector was elected; provided, however, that each initial director in Class 1shall hold office until the annual meeting of shareholders in 2007; eachinitial director in Class 2 shall hold office until the annual meeting ofshareholders in 2008; and each initial director in Class 3 shall hold officeuntil the annual meeting of shareholders in 2009; and in each case until theirsuccessors are duly elected and have qualified or until their earlierresignation, removal from office or death.

The initial Boardof Directors of this corporation shall be composed of seven directors.  The names of the persons who, as directors,are to manage the corporation until the first annual meeting of itsshareholders and until their successors are elected and shall qualify are:
| *Class 1   Term expires 2007**Michael E. Pegram   Daniel R. Peth  Gerald W. Christiansen* | *Class  1I   Term expires 2008**Cheryl R. Bishop   B. Marvin Andal* | *Class  II1   Term expires 2009**Michael F. Janicki   Richard N. Nelson* |
|-------------------------------------------------------------------------------------------|---------------------------------------------------------------------|--------------------------------------------------------------------------|

 

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## SECTION  10.3.     No director may be removed from officewithout cause except by a vote of 66-2/3% of the shares then entitled to voteat an election of directors.  Except asotherwise provided by law, cause for removal shall exist only if the Board ofDirectors has reasonable grounds to believe that the corporation has sufferedor will suffer substantial injury as a result of the gross negligence ordishonesty of the director whose removal is proposed.

**ARTICLE XI**

## SECTION  11.1.     Defined Terms.  As used in this Article:

### (a)           “Egregious conduct” by a person shallmean acts or omissions that involve intentional misconduct or a knowingviolation of law, or participation in any transaction from which the personwill personally receive a benefit in money, property, or services to which theperson is not legally entitled.

### (b)           “Finally adjudged” shall mean statedin a judgment based upon clear and convincing evidence by a court havingjurisdiction, from which there is no further right to appeal.

### (c)           “Director” shall mean any person whois a director of the corporation and any person who, while a director of thecorporation, is serving at the request of the corporation as a director,officer, partner, trustee, employee, or agent of another foreign or domesticcorporation, partnership, joint venture, trust, or other enterprise, or is afiduciary or party in interest in relation to any employee benefit plancovering any employee of the corporation or of any employer in which it has anownership interest; and “conduct as a director” shall include conduct while adirector is acting in any of such capacities.

### (d)           “Officer-director” shall mean anyperson who is simultaneously both an officer and director of the corporationand any person who, while simultaneously both an officer and director of thecorporation, is serving at the request of the corporation as a director,officer, partner, trustee, employee, or agent of another foreign or domesticcorporation, partnership, joint ventured trust, or other enterprise, or is afiduciary or party in interest in relation to any employee benefit plancovering any employee of the corporation or of any employer in which it has anownership interest; and “conduct as an officer-director” shall include conductwhile an officer-director is acting as an officer of the corporation or in anyof such other capacities.

### (e)           “Subsidiary corporation” shall meanany corporation at least eighty percent of the voting stock of which is heldbeneficially by this corporation.

## SECTION  11.2.     Liability of Directors.  No director, officer-director, formerdirector or former officer-director of the corporation shall be personallyliable to the corporation or its shareholders for monetary damages for conductas a director or officer-director occurring after the effective date of thissection (as set forth in section 11.10) unless the conduct is finally adjudgedto have been egregious conduct, as defined herein.

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## SECTION  11.3.     Indemnification of Directors.  The corporation shall indemnify any personwho is, or is threatened to be made, a party to any action, suit, orproceeding, whether civil, criminal, administrative, or investigative, andwhether by or in the right of the corporation or its shareholders or by anyother party, by reason of the fact that the person is or was a director orofficer-director of the corporation or of any subsidiary corporation againstjudgments, penalties or penalty taxes, fines, settlements (even if paid orpayable to the corporation or its shareholders or to a subsidiary corporation)and reasonable expenses, including attorneys’ fees, actually incurred inconnection with such proceeding unless the liability and expenses were onaccount of conduct finally adjudged to be egregious conduct, as definedherein.  The reasonable expenses,including attorneys’ fees, of such person incurred in connection with suchproceeding shall be paid or reimbursed by the corporation, upon request of suchperson, in advance of the final disposition of such proceeding upon receipt bythe corporation of a written, unsecured promise by the person to repay suchamount if it shall be finally adjudged that the person is not eligible forindemnification.  All expenses incurredby such person in connection with such proceeding shall be consideredreasonable unless finally adjudged to be unreasonable.

## SECTION  11.4.     Procedure.  No action by the Board of Directors, theshareholders, independent counsel, or any other person or persons shall benecessary or appropriate to the determination of the corporation’sindemnification obligation in any specific case, to the determination of thereasonableness of any expenses incurred by a person entitled to indemnificationunder this Article, nor to the authorization of indemnification in any specificcase.

## SECTION  11.5.     Internal Claims Excepted.  Notwithstanding section 11.3, the corporationshall not be obligated to indemnify any person for any expenses, includingattorneys’ fees, incurred to assert any claim against the corporation (except aclaim based on section 11.6) or any person related to or associated with it,including any person who would be entitled hereby to indemnification inconnection with the claim.

## SECTION  11.6.     Enforcement of Rights.  The corporation shall indemnify any persongranted indemnification rights under this Article against any reasonableexpenses incurred by the person to enforce such rights.

## SECTION  11.7.     Set-off of Claims.  Any person granted indemnification rightsherein may directly assert such rights in set-off of any claim raised againstthe person by or in the right of the corporation and shall be entitled to havethe same tribunal which adjudicates the corporation’s claim adjudicate theperson’s entitlement to indemnification by the corporation.

SECTION11.8 - Continuation of Rights.  The indemnification rights provided in thisArticle shall continue as to a person who has ceased to be a director orofficer-director and shall inure to the benefit of the heirs, executors, andadministrators of such person.

SECTION11.9 - Effect of Amendment or Repeal.  Any amendment or repeal of this Article shallnot adversely affect any right or protection of a director, officer-director,former director or former officer-director existing at the time of suchamendment or repeal with respect to acts or omissions occurring prior to suchamendment or repeal.

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SECTION11.10 - Effectiveness and Severability of Provisions.  Each of the provisions of this Article shallbe effective upon the filing of these Articles of Incorporation with theWashington Secretary of State.  Each ofthe substantive provisions of this Article is separate and independent of theothers, so that if any provision hereof shall be held to be invalid or unenforceablefor any reason, such invalidity or unenforceability shall not affect thevalidity or enforceability of the other provisions.

**ARTICLE XII**

To the extent notinconsistent with applicable state and federal banking laws, the corporationmay enter into a contract and otherwise transact business as vendor, purchaser,or otherwise, with its directors, officers and shareholders, and withcorporations, associations, firms and entities in which they are or may becomeinterested as directors, officers, shareholders, members or otherwise, asfreely as though such adverse interest did not exist, even though the vote,action or presence of such director, officer or shareholder may be necessary toobligate the corporation upon such contract or transaction; and in the absenceof fraud, no such contract or transaction shall be avoided and no suchdirector, officer or shareholder shall be held liable to account to thecorporation, by reason of such adverse interest or any fiduciary relationshipto the corporation arising out of such office or stock ownership, for anyprofit or benefit realized by him through any such contract or transaction;provided that the nature of the interest of such director, officer orshareholder though not necessarily the details or extent thereof, be disclosedor known to the Board of Directors or shareholders of the corporation, at ameeting thereof, at which such contract or transaction is authorized orconfirmed.  A general notice that adirector, officer or shareholder of the corporation is interested in anycorporation, association, firm or entity shall be sufficient disclosure as tosuch director, officer or shareholder with respect to all contracts andtransactions with that corporation, association, firm or entity.

**ARTICLE XIII**

To the extentauthorized by applicable law, the corporation may use its unreserved andunrestricted capital surplus to purchase its own shares and may, from time totime, distribute to its shareholders cash or property out of its capitalsurplus.

**ARTICLE XIV**

## SECTION  14.1.     For purposes of this Article:

### (a)           An interested shareholder transactionmeans any transaction between a corporation, or any subsidiary thereof, and aninterested shareholder of such corporation or an affiliated person to aninterested shareholder, that must be authorized pursuant to applicable law by avote of the shareholders.

### (b)           An interested shareholder:

#### (1)           includes any personor group of affiliated persons who beneficially own twenty percent or more ofthe outstanding voting shares of a corporation. An affiliated person is any person who either acts jointly or in concertwith, or directly or indirectly controls, is controlled by, or is under commoncontrol with another person; and

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#### (2)           excludes any personwho, in good faith and not for the purpose of circumventing this Article, is anagent, custodial bank, broker, nominee, or trustee for another person, if suchother person is not an interested shareholder under Section 14.1(b) (1) of thisArticle.

Except as providedin Section 14.3 of this Article, an interested shareholder transaction must beapproved by the affirmative vote of the holders of two-thirds of the sharesentitled to be counted under this Section 14.2, or if any class of shares isentitled to vote thereon as a class, then by the affirmative vote of two-thirdsof the shares of each class entitled to be counted under this Section 14.2 andof the total shares entitled to be counted under this Section 14.2.  All outstanding shares entitled to vote underapplicable law or the Articles of Incorporation shall be entitled to be countedunder this Section 14.2, except shares owned by or voted under the control ofan interested shareholder may not be counted to determine whether shareholdershave approved a transaction for purposes of this Section 14.2.  The vote of the shares owned by or votedunder the control of an interested shareholder, however, shall be counted indetermining whether a transaction is approved under other provisions ofapplicable law and for purposes of determining a quorum.

## SECTION  14.2.     This Article shall not apply to atransaction:

### (a)           Approved by a majority vote of theBoard of Directors.  For such purpose,the vote of directors whose votes are otherwise entitled to be counted underthe Articles of Incorporation and applicable law who are directors or officersof, or have a material financial interest in, an interested shareholder, or whowere nominated for election as a director as a result of an arrangement with aninterested shareholder and first elected as a director within twenty-fourmonths of the proposed transaction, shall not be counted in determining whetherthe transaction is approved by such directors; or

### (b)           In which a majority of directorswhose votes are entitled to be counted under Section 14.3(a) determines thatthe fair market value of the consideration to be received by noninterestedshareholders for shares of any class of which shares are owned by anyinterested shareholder is not less than the highest fair market value of theconsideration paid by any interested shareholder in acquiring shares of thesame class within twenty-four months of the proposed transaction.

## SECTION  14.3.     This Article may be amended or repealedonly by the affirmative vote of the holders of two-thirds of the sharesentitled to be counted under this Section 14.4. All outstanding shares entitled to vote under applicable law or theArticles of Incorporation shall be entitled to be counted under this Section14.4, except shares owned by or voted under the control of an interested shareholdermay not be counted to determine whether shareholders have voted to approve theamendment or repeal.  The vote of theshares owned by or voted under the control of an interested shareholder,however, shall be counted in determining whether the amendment or repeal isapproved under other provisions of applicable law and for purposes ofdetermining a quorum.

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## SECTION  14.4.     The requirements imposed by this Articleare to be in addition to, and not in lieu of, requirements imposed on anytransaction by any provision of applicable law, or any other provision of theArticles of Incorporation, or the Bylaws or otherwise.

**ARTICLE XV**

The Board ofDirectors of this corporation, when evaluating any offer of another party to(a) make a tender or exchange offer for any equity security of thiscorporation, (b) merge or consolidate this corporation with anothercorporation, or (c) purchase or otherwise acquire all or substantially all ofthe properties and assets of this corporation, shall, in connection with the exerciseof its judgment in determining what is in the best interests of thiscorporation and its stockholders, give due consideration to all relevantfactors, including without limitation the social and economic effects on theemployees, customers, suppliers and other constituents of this corporation andits subsidiaries and on the communities in which this corporation and itssubsidiaries operate or are located.

**ARTICLEXVI**

The name andstreet address of the initial registered agent of this corporation are SkagitState Bank, 301 E Fairhaven Avenue, Burlington, WA 98233.

*              *              *

IN WITNESSWHEREOF, the undersigned incorporator has hereunto set his hands this 12th day of January, 2006.

 
|        | /s/ Stephen M. Klein                              |   |
|--------|---------------------------------------------------|--------|
|   | Stephen M. Klein                                  |
|   | Assistant Secretary of G&D Inc., Incorporator |
|   | 2801 Alaskan Way, Suite 300                       |
|   | Seattle, WA 98121                                 |

 

 

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