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 $0.07 per share was declared on January 29, 2019, payable on February 4, 2019. The dividend paid for the third quarter of 2018 was $0.09 per share. The dividend paid for the fourth quarter of 2017 was $0.06 per share. Yearly dividends of $0.30 per share were paid in 2018 compared to $0.29 per share paid in 2017. All per share information has been adjusted to reflect the impact of a nine-for-one stock dividend that was effective May 1, 2018.

The fourth quarter of 2018 was a landmark quarter for the Company as we successfully completed the acquisition of AmBank. Our entire team worked tirelessly to facilitate a seamless transition for the former AmBank employees and customers. We believe our additional products and services will be of great benefit to our new customers and the market at large. This acquisition provides us more opportunities to do business by expanding our footprint along the southern Wasatch Front and we are excited for the future growth that will come.

Net income for the fourth quarter of 2018 was $5.5 million compared to $6.8 million in the third quarter of 2018 and $2.7 million for the fourth quarter of 2017. The decline from third quarter to fourth quarter was primarily due to costs associated with the acquisition of AmBank. The fourth quarter of 2017 was impacted by a $1.6 million write down of our deferred tax asset upon the enactment of tax reform in December 2017. Despite the acquisition-related costs, we ended 2018 with net income of $23.4 million, compared to $15.3 million in 2017, a 53 percent increase. The $8.1 million growth over last year can be attributed to three main drivers. First, strong income and asset growth in each of our core business sectors, represented by pre-tax income of $29.3 million in 2018, compared to $24.6 million in 2017. Second, a reduction of the corporate tax rate. And third, the one-time adjustment to the deferred tax asset account in 2017.

All of the major lines of business added to the Company’s growth in income and assets. The loan portfolio grew $180 million in 2018, a 20.9 percent increase over 2017. This is primarily attributed to core loan production and $67.9 million of loans associated with the AmBank purchase. Year end Bank deposits increased by $186.8 million in 2018, a 12.5 percent increase over the prior year, which includes $78.1 million in deposits from AmBank. This level of liquidity allowed us to fund loan growth internally. Loan growth, increases in loan rates, and low cost funding allowed the Bank to earn $9.9 million more in net interest income in 2018 compared to 2017. The increase in earnings were put to good use; shareholders received increased quarterly dividends, customers benefitted with new products and services, and our employees earned increases in income through our annual bonus program and competitive compensation plans. Lastly, retained earnings will be used for future opportunities and to keep us secure when we are tested by fluctuations in the economy.

Future growth and the economy
We expect the core growth of the Company to continue on a steady, upward trend. Likewise, we anticipate healthy job markets, increased job growth and low unemployment rates in the areas we serve. Though the outlook appears positive, we are mindful that we are in the second longest period of economic prosperity in the country’s history. Therefore, we have positioned the Bank to succeed in all types of business environments.

Douglas L. DeFries
President and CEO