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 second quarter dividend of $0.08 per share paid on July 23, 2018. The dividend paid for the first quarter of 2018 was $0.07 per share. The dividend paid for the second quarter of 2017 was $0.06 per share. All per share information has been adjusted to reflect the impact of a nine-for-one stock dividend that was effective May 1, 2018. Despite a competitive and challenging banking environment, our core business lines continue to expand. Loan and deposit balances have both grown by more than $100 million in the past 12 months, while maintaining quality and customer service.

Net Income for the second quarter of 2018 was $6.0 million compared to $4.2 million for the second quarter of 2017, an increase of 42.8 percent. Consolidated net income for the six months ended June 30, 2018 was $11.1 million, compared to $7.9 million for the six months ended June 30, 2017, an increase of 40.1 percent. Of the $6.0 million earned in the second quarter, approximately $1.0 million was directly related to lower corporate tax rates. This equates to $1.7 million year to date.

Net interest income continues to be the main driver of revenue increases. Fully taxable equivalent net interest income for the second quarter of 2018 was $13.2 million, as compared to $11.1 million for the second quarter of 2017. Loans increased 14.1 percent or $117.0 million and deposits increased 15.5 percent or $148.1 million. The fully taxable equivalent net interest margin rose to 4.27 percent in the second quarter of 2018, as compared to 4.14 percent in the second quarter of 2017. We expect the Federal Reserve will raise rates at least two more times in 2018. We have positioned the Bank to be asset sensitive. This means that when rates rise, we expect our net interest margin spread to increase, which has happened in the past year.

This year, the Bank has benefited from opportunities in four areas: strong loan and deposit growth, stable growth in all other sectors of our business, a great economy in the markets we serve and the corporate tax reduction. The growth in these areas has kept us a leader in our industry. Bank of Utah continues to rank in the top 10 percent of our peer group, according to the Banker’s Caddy Report. This ranking has remained constant for the past several years. We work to remain conservative in our approach to operating the Company, but progressive in adding new products and services that enhance our customers’ experience.

The Utah economy remains one the strongest in the nation. Every major industrial sector expanded in 2017, contributing 43,500 new jobs over the year, according to the Kem C. Gardner Institute’s June 2018 economic summary. An annual employment growth rate of 3.1 percent is on par with the state’s long-term average. In addition, Utah’s population growth rate of 1.9 percent between 2016 and 2017 is the third highest in the nation. This represents an increase of 59,045 people during this period. The median household income has grown to $67,481, which is the twelfth highest in the nation.

We believe that the economic outlook for the rest of 2018 will remain strong for Utah and that it will continue to perform better than national averages. However, we are in the second longest period of economic expansion experienced in the United States. There will be a downturn sometime in the future. The Bank has acted appropriately to prepare for these future periods of decline. We are conservative lenders; our income sources are varied and we can withstand fluctuating markets.

As a top performing community bank, we will continue to pay attention to our most valued assets, our customers. We will listen to their needs and continually update, improve and reinvent to remain a leader in our industry and benefit the people we serve.

Douglas L. DeFries
President and CEO