On behalf of BOU Bancorp, Inc., the holding company of Bank of Utah (Bank) and Utah Risk Management, Inc., collectively known as the Company, I am pleased to report a first quarter cash dividend of $0.55 per share paid on April 21, 2017. The dividend paid for the fourth quarter of 2016 was $0.60 per share. The dividend paid for the first quarter of 2016 was $0.55 per share. A growing asset base allowed us to return solid earnings in the first quarter. We are very excited about the loan growth experienced during the quarter. This will provide a boost to earnings throughout the year. Additionally, healthy contributions from our non-interest-earning lines of business added to the bottom line.
Net income for the first quarter of 2017 was $3.7 million, compared to $4.0 million for the fourth quarter of 2016, a decrease of 7.5 percent. This is equal to net income of $3.7 million for the first quarter of 2016. Though net income remained flat in comparison to the first quarter of 2016, the Company did experience a year-over-year increase in interest income of $0.66 million. Strong loan growth and higher earnings on variable rate loans contributed to the increase.
The Company recorded a $0.30 million loan loss provision in the first quarter of 2017, the Company did not take a loan loss provision in the first quarter of 2016. The allowance for loan loss to gross loans was 1.26 percent at the end of the first quarter 2017, compared to 1.20 percent for the same period in 2016. The provision was due to the growth in the loan portfolio, as asset quality remains exceptional.
Additional investments in information security and personnel were made in the first quarter of 2017, compared to the first quarter of 2016. Investing in these areas will help guard customer information and continue to keep the Bank competitive in the industry.
Return on average equity was 10.2 percent as compared to 11.0 percent in the fourth quarter of 2016. Growth in capital was $2.8 million for the quarter, this was a result of strong earnings. Total risk-based capital at the Bank level declined to 16.9 percent in the first quarter of 2017, from 17.4 percent in the fourth quarter of 2016. This was due to growth in the Bank’s assets.
Future Growth and the Economy
The state of Utah continues to be one of the best states in the nation for business growth. This is due, in-part, to population growth. Utah ranked number one in population growth in 2016 and it is the youngest state in terms of average age. This growth drives new consumers into the market with purchasing power. The state’s unemployment rate is also one of the nation’s lowest at 3.1%. Wages are rising and home values are increasing as a result of supply and demand for both. There has been increased migration into the state, resulting in more commercial and residential projects being constructed and new businesses emerging all along the Wasatch Front. This spring, the Bank is opening a new office in Bountiful, Utah to take advantage of this influx. This location fits our profile and our experienced bankers are ready to grow the Bank in this market.
Douglas L. DeFries
Bank-President and CEO