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Guiding You to a Brighter Financial Future.

Baker Boyer Bancorp 2011 Annual Report


Dear Baker Boyer Shareholder the Federal Reserve’s announcement

household profitability, improving

to maintain low interest rates we expect

our processes to provide advice and

margins to decline in 2012. This will be

guidance to clients with sophisticated

a real pressure point on all community

financial planning needs, and tactics to

bank earnings which makes our diversi-

grow the number of sophisticated/high

fied source of income from Wealth Man-

profit clients.

agement a very important advantage.

We live in a turbulent and intercon-

While the year had many highlights,

nected world, and we are working to be

two stand out for me. They were our

adaptable and flexible—prepared for

selection as Washington’s “Best Mid-

any shift in the year ahead. For commu-

Sized Company to Work For” by Seattle

nity banks, living in a low interest rate

Business Magazine, and our designa-

environment will be a serious issue that

I am delighted to report

tion by U.S. Banker Magazine as the

is likely to result in further industry con-

23rd best performing community bank

solidation and shrinkage in the US com-

that we had a record year in 2011,

in the nation based on financial results.

munity banking system. This trend is a

reaching a new high in earnings, and

In a volatile time we want employees

troublesome sign for rural economies

improving our Return on Equity and

who look forward to coming to work

dependent on banks like Baker Boyer.

Return on Assets. We accomplished

every day, and we must maintain solid

this in what everyone agrees was a most

financial performance in order to keep

challenging economic climate. I see

our edge in offering personalized advice

increasing signs that the economy is

and services.

improving in Eastern Washington and

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-

I often remind myself that a key ingredi-

eled our growth and allowed us to add

ent of our success is the fact that we

new banking and wealth management

strong base for success in 2012.

can focus on our clients and respond

clients in all of our geographic markets.

to their changing needs because we

Many existing clients also brought

But first, a little more about 2011. Net

don’t have to put all of our energy

more of their business relationships to

income reached $5.96 million, 10.6%

into digging out from loan problems

Baker Boyer Bank because they know

ahead of last year’s $5.39 million.

like many of our competitors. In 2010

we understand and can meet their

Return on Assets was 1.22% compared

we updated our strategic plan tactics

needs. To see what a few of our clients

to 1.14% last year, and Return on Equity

which we refresh every three years. Our

said about Baker Boyer Bank please

was 14. 5%, up from 13. 9%. Net Inter-

priorities for these three years include

check out the “Client Video” at

est Margin at 4.36% remained flat. With

improving our tools to measure client/

bakerboyer.com/itjustmakessense.

nationally, and believe that the strategies that we have in place will give us a


After serving on the Board of Directors

economy. We also are positioning client

Share” campaign, and almost half of our

of the Portland Federal Reserve the

portfolios to withstand short term fluc-

employees shared the video on social

past year, I have now been named to the San Francisco Board. This position allows 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 stabilization in the Eurozone (of course their story changes daily). However I am less optimistic that Europe will be

“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.” tuations in the market while providing

media sites, one of the key ways we got

long term growth with an eye toward

the message out to the community.

risk management.

You can see examples of what we are

able to keep their house in order. I am

Our careful approach to banking, listen-

doing on our website, bakerboyer.com,

seeing a growing sentiment that the

ing to customers and managing their

including links to our Facebook ac-

long awaited devaluation of the Euro

assets like we manage our own will not

count, Twitter feed and “It Just Makes

currency will occur. Although my col-

change in 2012. At the same time we

Sense” customer video.

leagues and I have been expecting this

will continue to develop and explore

for many years, the European Union

new approaches and identify and use the

has so far been successful at shielding

new communication channels emerging

the Euro from devaluation by putting

to help us remain close to our customers

band-aids on some very large structural

and engage with new ones. During 2011

problems in both their countries as well

we doubled the number of followers

as their banking system.

on Facebook and our page is now filled

Our experienced team of profession-

with photos, videos and posts.

als is focusing on providing long-term

Last fall, our “It Just Makes Sense”

growth in this ever-evolving world

customer video was used in a “Let’s

Sincerely,

Megan F. Clubb President & CEO

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.

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OUR FOCUS IN

2011... 2

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


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

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...never strayed from you.

It Just Makes Sense. To hear more comments from our clients, view the video at bakerboyer.com/itjustmakessense.


Financial Highlights Year-to-Date Net Income Cash Dividends Paid Return on Avg. Assets Return on Avg. Shareholders’ Equity Average Number of Shares Outstanding

12/31/11 $ 5,962 3,604 1.22 % 14.45 % 1,291,478

12/31/10 % Change $ 5,390 10.6 3,596 0.2 1.14 % 13.92 % 1,286,894

Per Share

12/31/11

12/31/10

Earnings * Cash Dividends Paid Book Value

At December 31, Total Assets Total Loans Allowance for Loan Losses Total Investment Securities Total Deposits Total Shareholders’ Equity

$ 4.62 2.76 32.52

% Change

$ 4.19 2.76 30.25

10.3 0.0 7.5

12/31/11

12/31/10

% Change

$502,019 304,006 6,265 110,537 437,078 42,482

$466,011 304,200 5,820 96,035 406,921 39,407

7.7 (0.1) 7.6 15.1 7.4 7.8

Daily Average for the Year 12/31/11 Assets $488,379 Loans - Net 299,628 Investment Securities 111,968 Deposits 422,661 Shareholders’ Equity 41,255 * Earnings per share are calculated on the weighted average number of shares outstanding.

12/31/10 $471,013 298,804 81,277 407,003 38,716

% Change 3.7 0.3 37.8 3.8 6.6

0

4.38

4.4

4.8

2007

2008

2009

5.96

5.4

5 $ Millions

$ Millions

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2010

2011

0

3.40

3.44

3.76

2007

2008

2009

Net Income $3.00 $2.68

$2.86

$0.00

2008

2010

4.62

2011

$100 $2.76

$2.76

$2.76 Dollars

2007

4.19

Earnings per Share

Dollars

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(Unaudited, Dollars in Thousands Except Per Share Amounts)

2009

2010

Dividends per Share

2011

$0

$62

$59

$63

2007

2008

2009

$85

$70

2010

2011

Stock Trade Price


Five Year Highlights

(Unaudited)

Per Share Earnings* Cash dividends Book value, year-end

2011 4.62 2.76 32.52

2010 4.19 2.76 30.25

2009 3.76 2.76 28.84

2008 3.44 2.86 27.50

2007 3.40 2.68 26.83

For the Year (dollars in thousands) Net income Cash dividends

2011 $5,962 3,604

2010 $5,390 3,596

2009 $4,819 3,586

2008 $4,407 3,709

2007 $4,375 3,477

Performance Measures Return on average assets Return on average equity Yield on average earning assets - fully taxable equivalent Average cost of interest bearing liabilities Net interest margin - fully taxable equivalent Average equity to average assets ratio Dividend payout ratio Net charge-offs to average loans Year-end ratio of allowance for loan losses to total loans

2011 2010 1.22 % 1.14 % 14.45 13.92 4.80 5.11 0.58 0.94 4.36 4.37 8.26 8.22 60.45 66.72 0.43 0.20 2.06 1.91

2009 2008 1.12 % 1.13 % 13.11 12.47 5.72 6.47 1.34 2.30 4.68 4.66 8.54 9.07 74.41 84.16 0.06 0.11 1.74 1.43

2007 1.16 % 12.85 7.08 3.17 4.59 9.05 79.47 0.03 1.27

Employment Number of Full-Time Equivalent Employees at Year-End

2011 170

2009 175

2007 175

2010 168

2008 170

*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.

1.3%

1.22

15%

14.45 13.92

1.16 1%

2007

1.13

1.12

1.14

2008

2009

2010

Return on Assets

12.85 2011

11%

2007

12.47 2008

13.11 2009

2010

Return on Equity

2011

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Average Daily Balance Sheets

(Unaudited. Dollars in Thousands) 2011

2010

Assets Cash and amounts due from banks Interest-bearing deposits at other financial institutions Federal funds sold Securities available for sale, at fair value Securities held to maturity, at cost Other investments, at cost Loans Allowance for credit losses Net Loans

Premises and equipment, net Accrued interest receivable Other assets

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Total Assets

$

3,517 $ 3,703 52,300 66,034 0 113 103,978 68,208 6,099 11,177 1,891 1,892 305,566 (5,938) 299,628

304,208 (5,404) 298,804

14,776 2,699 3,491

15,227 2,636 3,219

$ 488,379 $ 471,013

Liabilities and Shareholders’ Equity Deposits Demand, non-interest-bearing Savings and interest-bearing demand Time Total Deposits

Federal funds purchased and security repurchase agreements Other borrowed funds Accrued interest payable Other liabilities Total Liabilities

$ 94,871 $ 81,330 229,909 219,175 97,881 106,498 422,661 407,003 20,709 3,107 177 470

20,031 4,115 283 865

447,124

432,297

4,080 1,109 35,307 759 41,255

4,063 877 32,911 865 38,716

Shareholders’ Equity Common Stock (no par value, stated value $3.125 per share) Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Total Shareholders’ Equity Total Liabilities and Shareholders’ Equity

$ 488,379 $ 471,013


Auditor & Stock Information Independent Public Accountants and Auditors

Moss Adams, llp - 601 West Riverside, Suite 1800, Spokane, WA 99201-0663 (509) 747-2600

Market Makers for Baker Boyer Bancorp Stock

Jeffries Group, Inc - 520 Madison Avenue, New York, NY 10022 (212) 284-2300 Knight Equity Markets, lp - 545 Washington Blvd., Jersey City, NJ 07310 (800) 544-7508 Monroe Securities, Inc. - 100 N. Riverside Plaza, Suite 1620, Chicago, IL 60606 (312) 327-2530 Pershing Trading Co., lp - 1 Pershing Plaza, Jersey City, NJ 07399 (800) 459-1893 Ryan, Beck & Co. - 220 S. Orange Avenue, Livingston, NJ 07039-5817 (800) 342-2325 UBS Capital Markets, lp - 111 Pavonia Avenue East, Jersey City, NJ 07310 (800) 631-3094 Wedbush Morgan Securities - 4949 SW Meadows Road, Suite 100, Lake Oswego, OR 97035 (503) 675-3100

Direct Contacts for Stock Repurchases

Mark Hess, Executive Vice President/Chief Operating Officer (509) 526-1315 Megan F. Clubb, President/Chief Executive Officer/Chairman of the Board (509) 526-1318

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Corporate and Investor Information

Baker 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 Shareholders

The 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 statement. This Annual Report has not been reviewed for accuracy or relevance by the FDIC.

President, CEO and Chairman of the Board Baker Boyer Bancorp

Member FDIC


The Board of Directors

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4

2 3

5

10

9

8 7

1

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8 To contact the board of directors, please email info@bakerboyer.com.

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Megan F. Clubb

Chairman, President and Chief Executive Officer, Baker Boyer Bancorp; Chairman, President and Chief Executive Officer, Baker Boyer National Bank

2

John R. Valaas

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6

Charles H. Eglin

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David B. Campbell

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Farming, Construction and Energy Systems, Retired, Walla Walla, WA Chairman of the Executive Compensation Committee

Stephen G. Kimball

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Susan C. Pratt

General Manager, Northwest Grain Growers, Walla Walla, WA Member of the Audit Committee

Jon S. Bren

Secretary, Executive Vice President, Baker Boyer Bancorp, Executive Vice President, Baker Boyer National Bank

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Fred J. Kimball

President, K-Farms, Inc., Walla Walla, WA Member of the Executive Compensation Committee

Attorney; Retired Assistant Attorney General, State of Washington, Tacoma, WA, Member of the Executive Compensation Committee

David B. Gordon

Dorsey F. Baker

Retired General Service Manager, Holt California, Inc., Lodi, CA Chairman of the Audit Committee

Chairman Emeritus and retired President & CEO, Baker Boyer Bancorp, Chairman Emeritus and retired President and CEO, Baker Boyer National Bank, Member of the Audit Committee

Building Contractor, Owner Tri-Ply Construction Yakima, WA Member of the Audit Committee

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Community Volunteer Leader, Seattle, WA Member of Executive Compensation Committee

Investor, retired President & CEO First Mutual Bank, Bellevue, WA, Member of the Executive Compensation Committee

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Lynne E. Bush

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Peter Allen (not pictured)

Vice President & Senior Trust & Financial Advisor, Baker Boyer National Bank


The Executive Committee

Mark A. Hess

Jon S. Bren

Executive Vice President, Chief Operating Officer hessm@bakerboyer.com

Executive Vice President, Wealth Management Division Manager brenj@bakerboyer.com

Megan F. Clubb

Chair of the Executive Committee, President, CEO, Chairman of the Board clubbm@bakerboyer.com

Lyle W. Hansen

Executive Vice President, Banking Division Manager hansenl@bakerboyer.com

Mark H. Kajita, CPA Senior VP & Senior Fiduciary Officer/Portfolio Manager kajitam@bakerboyer.com

Teresa L. Larson

VP & Strategic Plan Coordinator, Secretary of Executive Committee larsont@bakerboyer.com


Our Locations

Main Office

7 W Main Street Walla Walla, WA 99362

Kennewick Office

Wealth Management & Business Banking 1149 N. Edison Street, Suite A Kennewick, WA 99336

Yakima Office

Wealth Management & Business Banking 909 Triple Crown Way, Suite 101 Yakima, WA 98908

Eastgate Branch

1931 E. Isaacs Walla Walla, WA 99362

Milton-Freewater Branch 320 N. Columbia Milton-Freewater, OR 97862

College Place Branch 603 S. College Avenue College Place, WA 99324

Plaza Branch

1530 Plaza Way Walla Walla, WA 99362

Wheatland Village Branch 1500 S. Catherine Street Walla Walla, WA 99362

www.bakerboyer.com | (509) 525-2000 | (800) 234-7923 | info@bakerboyer.com

2011 Annual Report  

2011 Annual Report