President's Message

On behalf of BOU Bancorp, Inc., the holding company of Bank of Utah (Bank) and Utah Risk Management, Inc. (URM), collectively known as the Company, I am pleased to report a fourth quarter dividend of $0.60 per share paid on January 26, 2018. The dividend paid for third quarter earnings of 2017 was $1.15 per share. The dividend paid for the fourth quarter of 2016 was $0.60 per share. Yearly dividends of $2.90 per share were paid in 2017 compared to $2.25 per share paid in 2016. The fourth quarter was another solid quarter, especially considering the seasonality in our fee-based business lines. Overall, 2017 was another profitable year driven by strong production in each of our core businesses.

Net Income for the fourth quarter of 2017 was $2.7 million compared to $4.6 million for the third quarter of 2017 and $4.0 million for the fourth quarter of 2016, a decrease of 41.4 percent and 31.9 percent, respectively. The reduction in income was due to a one-time write down of $1.6 million in the Company’s deferred tax asset. This was in response to the passage of the Tax Cuts and Jobs Act of 2017, which will lower the federal corporate tax rate in the future. Before the write down, consolidated net income for the year was $16.9 million, an increase of 1.3 percent over the prior year. The change in the federal maximum corporate tax rate from 35 percent to 21 percent bodes well for earnings in 2018 and will add value to our shareholders in the long run.

All of the major lines of business added to the value of the Bank. Leading the way in growth was commercial lending with a 14.5 percent increase in loans outstanding, while deposit gathering branches were able to maintain a low cost of funds. The increase in earning assets enabled the net interest income to surpass 2016 by $5.2 million. Residential lending production was down in 2017; however, the gain on sale of loans continued to be a strong component of our earnings for the year. Average deposits grew 15.4 percent and our wealth management group brought a steady source of revenue to the Bank. The corporate trust division increased its fee income with an expertise in aircraft owner trusts and life settlement accounts.

Future Growth and the Economy
The year began with much uncertainty in our nation, but we believe the year ahead holds tremendous promise. Locally, the State of Utah continues to prosper in the business sector. Job growth for the year is 2.7 percent compared to 1.4 percent nationwide and the unemployment rate is 3.3 percent as compared to the national average of 4.1 percent. We realize that in the long-run we will not always outrun the national economy, but the state’s diversity will help it withstand periods of decline. Likewise, Bank of Utah has a unique mix of businesses that diversify its earnings.

The Bank ended the year very strong, thanks to your loyalty. We will continue building on this success and strive to operate a bank that is safe for our investors, helpful to our customers and be a quality workplace for our employees. We look forward to serving you in the coming year!

Douglas L. DeFries
Bank-President and CEO
Company-Vice President