On behalf of the Board of Directors and the management team of BOU Bancorp, Inc. and Bank of Utah (Bank), we are pleased to report on the Bank’s performance for the year ending December 31, 2012.

The Bank marked a year of strong financial performance in 2012. Our outstanding results are a particularly remarkable achievement against a backdrop of record low interest rates and an improving, yet still uncertain economy. Most American banks did well this year, but the Bank continued to outshine and outperform its competing peer groups, including most of the banks in its market. In addition to setting financial records, our exceptional team of employees dedicated themselves to building a dynamic set of Cultural Beliefs that focused on achieving the Bank’s Key Results. It was a year of team development that helped each member of our organization to understand more fully the Bank’s vision to “be the preeminent community bank in Utah.”

Rewarding Our Shareholders

A top priority for the Bank’s management team and our Board of Directors is to reinvest in our banking business, as well as return capital to shareholders in the form of dividends. Our strong earnings, coupled with strong capital levels, gave us the ability to pay dividends throughout the year. Dividends paid to shareholders in 2012 totaled $1.50 per share, which is approximately a 2.5 percent cash return to shareholders based on the Bank’s book value.

Key Results

One of the most far reaching activities that began in 2012 was the process of establishing a set of performance metrics we call our Key Results. The outcome and commentary of the results are clearly outlined in the “Key Results for 2012” section of this report. They address what we consider to be the most important performance aspects of the Bank — Profitability, Growth and Customer Loyalty. The strategy is to develop goals that represent our core beliefs. These are beliefs that the entire Bank team can visualize and relate to. We trust you will agree with this simple, hard-hitting formula.

Focusing on the Key Results is a significant strategy in overcoming persistent economic headwinds. The banking industry has been severely affected by a struggling economic recovery, the prolonged low level of interest rates and a regulatory environment with unprecedented requirements. Our team’s focus on the Key Results will help us stay on target, despite the distractions of daily economic events.

Team Development

In business we seek to recruit and retain the best talent possible — the contribution that can be made by talented people is unmistakably important. It’s also important to organize these talented individuals into effective and dynamic teams. However, it is even more vital to the success of any organization to develop teams that are singular in purpose. There is enormous leverage when we structure teams correctly. Teams must be able to work with each other not only within individual departments, but across functional boundaries as well. Among big banks, knocking down “silos” is a common and constant challenge. Likewise, we are aware that this challenge is present in community banks. With this in mind, we will continue to build dynamic teams that are focused on and equally accountable for achieving a single set of Key Results.
Being a member of a strong team doesn’t relieve each team member of individual accountability … in fact, it reinforces the need to be accountable. The simple mantra of “See It, Own It, Solve It and Do It” clarifies our expectations of individuals and teams in our Bank. We want to thank Roger Connors, Partners in Leadership, for his expert help and guidance in implementing these ideas in our Bank.

Business Environment

The Bank did remarkably well in 2012. The economy is slowly improving; however, this country is still faced with many problems. The rising debt, aging population, aging infrastructure, and multiplying of regulations, as well as complex tax codes and broken immigration system are just a few of the issues facing us and our children. This country’s businesses are sitting on nearly $2 trillion in cash and are hesitant to invest, in part because of a lack of confidence in Washington politics.

At the Bank, we prefer to execute on the positive outlook of our local and regional economy and the underlying strength of this country. America is still a country of great opportunity, and the people in the Bank who see the real economy at work on a daily basis know this well. That includes our relationship managers, mortgage loan officers and trust professionals.

Recent projections show economic growth between two and three percent. One major Wall Street firm recently predicted that the Federal Reserve will shorten the estimated lifespan on its bond-buying program. This is a positive change. Consumer balance sheets are being repaired and the stock market is hitting pre-recession highs. The private sector is rebounding.

Some of this is cyclical, but it reflects the fact that beyond the beltway, the rest of the country is actively tackling its problems. Some people are concerned about the state-against-state competition for economic development and its resulting jobs. We at the Bank call economic development a good thing that demonstrates, again, how local and small business will continue to fi x the economy. We are pleased with successful efforts of Utah’s economic development in 2012. It is because of these economic development efforts that Utah is one of the leading states in healing the economy.

The bottom line is clear to us … political gridlock may be bad for this economy, but the underlying growth prospects are better than they seem.


Our customers are the driving force behind our success. That is why we spend an inordinate amount of time developing and nurturing relationships with our customers and community partners. Our Spring Economic Outlook Breakfast and Fall Author Event have become institutionalized. For these and many other events, 2012 was a great year. Utah’s Lieutenant Governor Greg Bell presented his thoughts on the economy to us and our friends in the community in the spring, and Roger Connors, a New York Times bestselling author who co-wrote The Oz Principle and Change the Culture, Change the Game, presented in the fall. Our goal is to bring valuable information to our customers and create an environment for real and productive conversations.

Our commitment to customer service is displayed in numerous ways. One way in which we have displayed such commitment is through improving the branch experience. In 2012, the lease on the South Ogden branch was coming due and the building was in need of several improvements. We took advantage of a tremendous opportunity to relocate to a new location at 4605 Harrison Boulevard, Ogden Utah, which satisfied existing customers and opened up new business opportunities. At our Logan branch, site changes and obsolescence required an extensive remodel, which was completed mid-year. Furthermore, we also added new mortgage branches in South Towne, Logan, and St. George for better customer convenience. Customer feedback has been positive for each location and these changes have greatly added to our ability to provide the best customer service.

Thank You

In addition to the pride we have felt for what the Bank’s team has accomplished for our shareholders over the past several years, we are especially proud of our employee’s commitment to the communities we serve. The list is too long and the accolades too many to do justice here. Nevertheless, we would like to share a few examples. Each year many of our employees volunteer to help those in our community who need assistance with tax return preparation by participating in the Volunteer Income Tax Assistance (VITA) program. The amount of tax refunds coming back to the working class in our community is significant. During the summer, our mortgage team participated in the Christmas in July program to supply clothing to needy kids, and then during the Christmas season the entire Bank undertook the second annual “Warm Bodies, Warm Souls” drive for cold-weather clothing. Our mortgage team has also demonstrated exemplary service by helping facilitate the donation of a building lot to the Have a Heart program last spring. Before the end of 2012, a new home was completed and presented to a special needs family. In addition to the building lot donation, we have donated over $110,000 to charitable organizations in our communities. The Bank’s pride is contagious and we received great support from our customers and community members in accomplishing these many service efforts.

Our Future

With a great team of talented individuals here at the Bank who all share an optimistic outlook on an improving economy, the Bank has an opportunity to repeat much of the success experienced in 2012. Exciting new initiatives in 2013, which include building a private banking program and a competitive consumer loan program, will add to the foundation of success we established in 2012.
You can count on our continued effort to earn the position as Utah’s preeminent community bank. The continued support and loyalty of our shareholders, board members and customers is crucial to our success. Combined with a talented and loyal team here at the Bank and an unwavering focus on achieving our Key Results, we remain confident as we move ahead to 2013 and beyond.

Frank W. Browning,
Chairman, BOU Bancorp, Inc.

Douglas L. DeFries,
President, Bank of Utah