Baker Boyer Bancorp 2011 Annual Report Guiding You to a Brighter Financial Future.
Mar 07, 2016
Baker Boyer Bancorp 2011 Annual Report
Guiding You to a Brighter Financial Future.
I am delighted to report that we had a record year in 2011,
reaching a new high in earnings, and
improving our Return on Equity and
Return on Assets. We accomplished
this in what everyone agrees was a most
challenging economic climate. I see
increasing signs that the economy is
improving in Eastern Washington and
nationally, and believe that the strate-
gies that we have in place will give us a
strong base for success in 2012.
But first, a little more about 2011. Net
income reached $5.96 million, 10.6%
ahead of last year’s $5.39 million.
Return on Assets was 1.22% compared
to 1.14% last year, and Return on Equity
was 14. 5%, up from 13. 9%. Net Inter-
est Margin at 4.36% remained flat. With
the Federal Reserve’s announcement
to maintain low interest rates we expect
margins to decline in 2012. This will be
a real pressure point on all community
bank earnings which makes our diversi-
fied source of income from Wealth Man-
agement a very important advantage.
While the year had many highlights,
two stand out for me. They were our
selection as Washington’s “Best Mid-
Sized Company to Work For” by Seattle
Business Magazine, and our designa-
tion by U.S. Banker Magazine as the
23rd best performing community bank
in the nation based on financial results.
In a volatile time we want employees
who look forward to coming to work
every day, and we must maintain solid
financial performance in order to keep
our edge in offering personalized advice
and services.
I often remind myself that a key ingredi-
ent of our success is the fact that we
can focus on our clients and respond
to their changing needs because we
don’t have to put all of our energy
into digging out from loan problems
like many of our competitors. In 2010
we updated our strategic plan tactics
which we refresh every three years. Our
priorities for these three years include
improving our tools to measure client/
household profitability, improving
our processes to provide advice and
guidance to clients with sophisticated
financial planning needs, and tactics to
grow the number of sophisticated/high
profit clients.
We live in a turbulent and intercon-
nected world, and we are working to be
adaptable and flexible—prepared for
any shift in the year ahead. For commu-
nity banks, living in a low interest rate
environment will be a serious issue that
is likely to result in further industry con-
solidation and shrinkage in the US com-
munity banking system. This trend is a
troublesome sign for rural economies
dependent on banks like Baker Boyer.
You can get a picture of how we plan to
deal with this challenge by looking at
our 2011 results. Our ability to provide
solid investment and banking advice fu-
eled our growth and allowed us to add
new banking and wealth management
clients in all of our geographic markets.
Many existing clients also brought
more of their business relationships to
Baker Boyer Bank because they know
we understand and can meet their
needs. To see what a few of our clients
said about Baker Boyer Bank please
check out the “Client Video” at
bakerboyer.com/itjustmakessense.
Dear Baker Boyer Shareholder
After serving on the Board of Directors
of the Portland Federal Reserve the
past year, I have now been named to the
San Francisco Board. This position al-
lows me to represent the concerns and
needs of Eastern Washington and gives
me a great insight into how national and
international issues might impact us.
Today the media is reporting stabiliza-
tion in the Eurozone (of course their
story changes daily). However I am
less optimistic that Europe will be
able to keep their house in order. I am
seeing a growing sentiment that the
long awaited devaluation of the Euro
currency will occur. Although my col-
leagues and I have been expecting this
for many years, the European Union
has so far been successful at shielding
the Euro from devaluation by putting
band-aids on some very large structural
problems in both their countries as well
as their banking system.
Our experienced team of profession-
als is focusing on providing long-term
growth in this ever-evolving world
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“We live in a turbulent and interconnected world, and we are working to be adaptable and flexible—prepared for any shift in the year ahead.”
economy. We also are positioning client
portfolios to withstand short term fluc-
tuations in the market while providing
long term growth with an eye toward
risk management.
Our careful approach to banking, listen-
ing to customers and managing their
assets like we manage our own will not
change in 2012. At the same time we
will continue to develop and explore
new approaches and identify and use the
new communication channels emerging
to help us remain close to our customers
and engage with new ones. During 2011
we doubled the number of followers
on Facebook and our page is now filled
with photos, videos and posts.
Last fall, our “It Just Makes Sense”
customer video was used in a “Let’s
Share” campaign, and almost half of our
employees shared the video on social
media sites, one of the key ways we got
the message out to the community.
You can see examples of what we are
doing on our website, bakerboyer.com,
including links to our Facebook ac-
count, Twitter feed and “It Just Makes
Sense” customer video.
As always, I want to tell you what an
honor it is to be President and CEO of
Baker Boyer Bank. I really have the best
job around. I welcome your comments
and questions and encourage you to
help us continue to grow by telling the
story of why it “Just Makes Sense” to
Bank with Baker Boyer.
Sincerely,
Megan F. ClubbPresident & CEO
2011...OUR FOCUS IN
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“All of a sudden the things that had been difficult to do ... they just disappear! And it was sort of like a great “ah ha” moment, like
“why haven’t I been here before?”—Lura Powell Former Director, PNNL Tri-Cities
It Just Makes Sense....never strayed from you.
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“With Baker Boyer you do get the personalized service of a small bank and the expertise of a big bank—well,
I think it’s even better than a big bank.
—Bruce Bacon President, Glacier Sales Yakima
To hear more comments from our clients, view the video at bakerboyer.com/itjustmakessense.
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Year-to-Date 12/31/11 12/31/10 % ChangeNet Income $ 5,962 $ 5,390 10.6Cash Dividends Paid 3,604 3,596 0.2Return on Avg. Assets 1.22 % 1.14 %Return on Avg. Shareholders’ Equity 14.45 % 13.92 %Average Number of Shares Outstanding 1,291,478 1,286,894
Per Share 12/31/11 12/31/10 % Change
Earnings * $ 4.62 $ 4.19 10.3Cash Dividends Paid 2.76 2.76 0.0Book Value 32.52 30.25 7.5
At December 31, 12/31/11 12/31/10 % Change
Total Assets $502,019 $466,011 7.7Total Loans 304,006 304,200 (0.1)Allowance for Loan Losses 6,265 5,820 7.6Total Investment Securities 110,537 96,035 15.1Total Deposits 437,078 406,921 7.4Total Shareholders’ Equity 42,482 39,407 7.8
Daily Average for the Year 12/31/11 12/31/10 % ChangeAssets $488,379 $471,013 3.7Loans - Net 299,628 298,804 0.3Investment Securities 111,968 81,277 37.8Deposits 422,661 407,003 3.8Shareholders’ Equity 41,255 38,716 6.6* Earnings per share are calculated on the weighted average number of shares outstanding.
Financial Highlights (Unaudited, Dollars in Thousands Except Per Share Amounts)
3.443.40 3.76 4.19 4.62
2007
$ Milli
ons
0
5
201020092008 2011
Earnings per Share
$59$62 $63
2007
$85 $70
Dolla
rs
$0
$100
201020092008 2011
Stock Trade Price
2007
$ Milli
ons
0
6
201020092008 2011
Net Income
5.96
4.38 4.4 4.85.4
2007
Dolla
rs
$3.00
$0.00201020092008 2011
Dividends per Share
$2.68 $2.86 $2.76 $2.76$2.76
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Per Share 2011 2010 2009 2008 2007 Earnings* 4.62 4.19 3.76 3.44 3.40 Cash dividends 2.76 2.76 2.76 2.86 2.68 Book value, year-end 32.52 30.25 28.84 27.50 26.83
For the Year (dollars in thousands) 2011 2010 2009 2008 2007 Net income $5,962 $5,390 $4,819 $4,407 $4,375 Cash dividends 3,604 3,596 3,586 3,709 3,477
Performance Measures 2011 2010 2009 2008 2007 Return on average assets 1.22 % 1.14 % 1.12 % 1.13 % 1.16 %Return on average equity 14.45 13.92 13.11 12.47 12.85 Yield on average earning assets - fully taxable equivalent 4.80 5.11 5.72 6.47 7.08 Average cost of interest bearing liabilities 0.58 0.94 1.34 2.30 3.17 Net interest margin - fully taxable equivalent 4.36 4.37 4.68 4.66 4.59 Average equity to average assets ratio 8.26 8.22 8.54 9.07 9.05 Dividend payout ratio 60.45 66.72 74.41 84.16 79.47 Net charge-offs to average loans 0.43 0.20 0.06 0.11 0.03 Year-end ratio of allowance for loan losses to total loans 2.06 1.91 1.74 1.43 1.27
Employment 2011 2010 2009 2008 2007 Number of Full-Time Equivalent Employees at Year-End 170 168 175 170 175
*Earnings per share are calculated on the weighted average number of shares outstanding, adjusted for stock dividends and stock splits. The weighted average number of shares outstanding was: 2011: 1,291,478; 2010: 1,286,894; 2009: 1,281,220; 2008: 1,282,586; 2007: 1,285,348.
Five Year Highlights (Unaudited)
12.4713.1112.85
13.92
14.45
200711%
15%
201020092008 2011
Return on Equity2007
1.3%
1%201020092008 2011
Return on Assets
1.161.13 1.12 1.14
1.22
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Average Daily Balance Sheets (Unaudited. Dollars in Thousands)
Assets2011 2010
Cash and amounts due from banks $ 3,517 $ 3,703Interest-bearing deposits at other financial institutions 52,300 66,034Federal funds sold 0 113Securities available for sale, at fair value 103,978 68,208Securities held to maturity, at cost 6,099 11,177Other investments, at cost 1,891 1,892
Loans 305,566 304,208Allowance for credit losses (5,938) (5,404)Net Loans 299,628 298,804
Premises and equipment, net 14,776 15,227Accrued interest receivable 2,699 2,636Other assets 3,491 3,219
Total Assets $ 488,379 $ 471,013
Liabilities and Shareholders’ EquityDepositsDemand, non-interest-bearing $ 94,871 $ 81,330Savings and interest-bearing demand 229,909 219,175Time 97,881 106,498Total Deposits 422,661 407,003
Federal funds purchased and security repurchase agreements 20,709 20,031Other borrowed funds 3,107 4,115Accrued interest payable 177 283Other liabilities 470 865
Total Liabilities 447,124 432,297
Shareholders’ EquityCommon Stock (no par value, stated value $3.125 per share) 4,080 4,063Additional paid-in capital 1,109 877Retained earnings 35,307 32,911Accumulated other comprehensive income (loss) 759 865Total Shareholders’ Equity 41,255 38,716
Total Liabilities and Shareholders’ Equity $ 488,379 $ 471,013
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President, CEO and Chairman of the BoardBaker Boyer Bancorp Member FDIC
Auditor & Stock InformationIndependent Public Accountants and AuditorsMoss Adams, llp - 601 West Riverside, Suite 1800, Spokane, WA 99201-0663 (509) 747-2600
Market Makers for Baker Boyer Bancorp StockJeffries Group, Inc - 520 Madison Avenue, New York, NY 10022 (212) 284-2300 Knight Equity Markets, lp - 545 Washington Blvd., Jersey City, NJ 07310 (800) 544-7508Monroe Securities, Inc. - 100 N. Riverside Plaza, Suite 1620, Chicago, IL 60606 (312) 327-2530Pershing Trading Co., lp - 1 Pershing Plaza, Jersey City, NJ 07399 (800) 459-1893Ryan, Beck & Co. - 220 S. Orange Avenue, Livingston, NJ 07039-5817 (800) 342-2325UBS Capital Markets, lp - 111 Pavonia Avenue East, Jersey City, NJ 07310 (800) 631-3094Wedbush Morgan Securities - 4949 SW Meadows Road, Suite 100, Lake Oswego, OR 97035 (503) 675-3100
Direct Contacts for Stock RepurchasesMark Hess, Executive Vice President/Chief Operating Officer (509) 526-1315Megan F. Clubb, President/Chief Executive Officer/Chairman of the Board (509) 526-1318
Corporate and Investor InformationBaker Boyer Bancorp is a Washington corporation registered under the Bank Holding Company Act of 1956 as a bank holding company. The Company’s shares are not registered under the Securities Exchange Act of 1934. As of April 1994, the Company’s shares were listed on the Over-The-Counter (OTC) Bulletin Board under the symbol BBBK. As of December 31, 2011, there were 1,306,370 shares of common stock issued and outstanding. General shareholder account inquiries should be directed to the Company’s Chief Operating Officer at the following address and telephone number:
Mark Hess, Executive Vice President/Chief Operating Officer 7 West Main Street, PO Box 2175, Walla Walla, WA 99362 (509) 525-2000 • (800) 234-7923
Annual Meeting of ShareholdersThe Annual Meeting of Shareholders will be held at 3:30 P.M. on Thursday, April 26, 2012, at the Marcus Whitman Hotel & Conference Center, Renaissance Room, 6 West Rose, Walla Walla, Washington.
I, the undersigned, hereby attest to the correctness of information contained in the Annual Report of Baker Boyer Bancorp and its wholly-owned subsidiary, Baker Boyer National Bank. This Annual Report is also furnished to customers of Bancorp pursuant to the requirements of the Federal Deposit Insurance Corporation (FDIC) to provide an annual disclosure state-ment. This Annual Report has not been reviewed for accuracy or relevance by the FDIC.
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The Board of Directors
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3
Lynne E. BushCommunity Volunteer Leader, Seattle, WAMember of Executive Compensation Committee
5
5
Fred J. KimballPresident, K-Farms, Inc., Walla Walla, WAMember of the Executive Compensation Committee
11
Peter Allen(not pictured)Vice President & Senior Trust & Financial Advisor, Baker Boyer National Bank
12
11
Jon S. BrenSecretary, Executive Vice President, Baker Boyer Bancorp, Executive Vice President,Baker Boyer National Bank
10
10
Dorsey F. BakerRetired General Service Manager, Holt California, Inc., Lodi, CAChairman of the Audit Committee
9
9
David B. GordonGeneral Manager, Northwest Grain Growers, Walla Walla, WAMember of the Audit Committee
8
8
Susan C. PrattAttorney; Retired Assistant Attorney General, State of Washington, Tacoma, WA,Member of the Executive Compensation Committee
7
7
4
Stephen G. KimballChairman Emeritus and retired President & CEO, Baker Boyer Bancorp, Chairman Emeritus and retired President and CEO, Baker Boyer National Bank, Member of the Audit Committee
6
6
Megan F. ClubbChairman, President and Chief Executive Officer, Baker Boyer Bancorp; Chairman, Presidentand Chief Executive Officer, Baker Boyer National Bank
1
Charles H. EglinBuilding Contractor,Owner Tri-Ply ConstructionYakima, WAMember of the Audit Committee
3
David B. CampbellFarming, Construction and Energy Systems, Retired, Walla Walla, WAChairman of the Executive Compensation Committee
4
John R. ValaasInvestor, retired President & CEO First Mutual Bank, Bellevue, WA, Member of the Executive Compensation Committee
2
2
To contact the board of directors, please email [email protected].
The Executive Committee
Mark A. HessExecutive Vice President,Chief Operating [email protected]
Teresa L. LarsonVP & Strategic Plan Coordinator, Secretary of Executive [email protected]
Mark H. Kajita, CPASenior VP & Senior Fiduciary Officer/Portfolio [email protected]
Lyle W. HansenExecutive Vice President, Banking Division [email protected]
Jon S. BrenExecutive Vice President, Wealth Management Division [email protected]
Megan F. ClubbChair of the Executive Committee, President, CEO, Chairman of the [email protected]
Eastgate Branch1931 E. Isaacs
Walla Walla, WA 99362
Wheatland Village Branch1500 S. Catherine StreetWalla Walla, WA 99362
Kennewick OfficeWealth Management & Business Banking
1149 N. Edison Street, Suite AKennewick, WA 99336
College Place Branch603 S. College AvenueCollege Place, WA 99324
Main Office7 W Main Street
Walla Walla, WA 99362
Milton-Freewater Branch320 N. ColumbiaMilton-Freewater, OR 97862
Plaza Branch1530 Plaza WayWalla Walla, WA 99362
Yakima OfficeWealth Management & Business Banking
909 Triple Crown Way, Suite 101Yakima, WA 98908
www.bakerboyer.com | (509) 525-2000 | (800) 234-7923 | [email protected]
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