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 dividend of $0.07 per share was paid on June 24, 2019. Dividends declared for the first quarter of 2019 totaled $0.14. The dividend paid for the second quarter of 2018 was $0.08 per share.

In April, the Bank moved from the branch located at 711 South State Street and relocated deposit and lending personnel to our new City Creek Banking Center in the business district of downtown Salt Lake City. They were joined by Wealth Management and Corporate Trust teams to form a full-service financial center that facilitates synergy amongst departments and allows the Bank to consolidate operations.

Net income for the second quarter of 2019 was $7.2 million, compared to $9.0 million for the first quarter of 2019 and $6.0 million for the second quarter of 2018. Consolidated net income for the first quarter of 2019 included a pre-tax gain of $1.4 million on the sale of our 711 South branch. Minus this one-time gain, and a pre-tax gain of $156,000 on the sale of our property and casualty insurance business, adjusted net income was $7.9 million for the first quarter. Second quarter earnings represent a 20 percent gain compared to the second quarter of 2018 and a 8.3 percent decrease from the adjusted earnings in the first quarter of 2019.

Return on Average Equity (ROAE) continues to be in the upper tier of the industry at 15.62 percent, compared to 20.50 percent (including a one-time gain) for the first quarter of 2019 and 15.01 percent for the second quarter of 2018. The Bank’s multi-faceted community banking approach focuses on more income streams than net interest income and results in improved ROAE.

Net interest income (fully taxable equivalent basis) for the second quarter of 2019 was $15.4 million as compared to $16.0 million for the first quarter of 2019 and $13.2 million for the second quarter of 2018. The year-over-year increase was due to a 9.1 percent increase in loans outstanding. The net interest margin remained solid at 4.88 percent for the quarter as compared to 4.93 percent in the first quarter of 2019. We expect there will be some decline in net interest income through the end of the year as loan growth slows and more pressure is put on lowering loan rates and increasing interest paid on deposits. We are now in the longest expansion period in the history of the United States and we expect the economy to soften in the next few quarters. In an effort to keep the economy stable, the Federal Reserve Board of Governors lowered the Federal Fund target by .25 percent on July 30.

Economic Outlook
This past year, Utah added over 57,000 new residences and 42,000 new jobs. These increases were mainly in metro areas along the Wasatch Front. We anticipate that Utah will continue to be one of the top states for growth through 2020. To capitalize on this growth and keep our existing customers engaged with the Bank, we will continue to ensure our products and services are competitive and meeting the demands of today and the future. We are experiencing significant interest rate competition in both our lending and deposit gathering sectors of business. This, along with a slowing economic outlook, has decelerated the pace of our consistently strong growth over the past several years.

Making Connections
We believe the key to banking is to be actively involved in the communities in which we serve. Bank employees serve on over 80 community boards including chambers of commerce, charitable organizations, arts, government and banking. Additionally, we strive to get to know our customers and their businesses on a personal level. We visit them at their places of work and hold many events to inform and educate. We connect with them in person and virtually through our social media channels and the use of digital marketing. Today’s technology allows us many opportunities to stay involved with our customers and we intend to use it all to build lasting and profitable relationships with our customers.

Douglas L. DeFries
President and CEO