Baker Boyer Bancorp 2010 Annual Report It Just Makes Sense.

We enjoyed a phenomenal year in 2010. The bank’s reputation for offer-ing sophisticated services in a warm, welcoming environment, combined with our reputation as a trusted and safe place to do business, led to substantial growth in deposits and investments. These gains helped offset the very real challenge we faced from historically low interest rates and large increases in FDIC insurance assessments.

We achieved record earnings in 2010. Net income grew by 12 percent to $4.19 per share. I am proud that we reached this milestone at a time when many of

our competitors were reporting record losses. Based on 2010 annual data, of the 55 commercial banks headquartered in WA, 30 of the banks showed positive net income. That is to say, only 54.5% of Washington banks generated positive net income in 2010. This contrast speaks strongly for our con-sistent conservative practices.

To understand our strong financial performance, I believe you need to look to our proud culture and tradition of making sure we handle our clients’ hard earned money with the same care and concern we give to handling our own. We live our mission of “Guiding you to a brighter financial future” and we make sure the best interest of our clients is always considered in our recommenda-tions and guidance.

However, our approach encompasses a lot more than just being conserva-tive. It has its foundation in “Listening, Learning and Advising.” I consider it so important that I meet with each new employee to share stories of how this approach impacts our customers.

In these meetings, I always include the story of a young couple that came to Baker Boyer Bank for their first car loan. After getting to know the couple, our banker suggested they also open an

account to save for the down payment on their first home and offered them a loan for a car in a price range they could afford. This is what “Listening, Learning and Advising” means and it is a win-win-win for clients, shareholders and employees.

Our current marketing campaign is entitled “It Just Makes Sense” to empha-size why this is the ideal time to grow with Baker Boyer Bank. Since much of the new business I mentioned above came from referrals from our sharehold-ers and customers, I want to make sure you are aware of the three strengths that will continue to set us apart and why “It Just Makes Sense” for your friends and neighbors to bank with us.

Dear Baker Boyer Shareholder

“You wouldn’t keep hanging out with a friend if you felt they were using you for personal gain. It is the same with your banker.”

Our Commitment for 2011 is to continue to strengthen our relationships with even more “Listening, Learning and Advis-ing.” Being there for our clients also means changing and evolving with them. We want to make sure we go where our clients are by reaching out to the growing numbers of people (of all age groups) who utilize online communities of their peers on social media sites such as Facebook when making business decisions. We’ve also put time and energy into making our Web Site more relationship-focused. Our presence will be a way to listen, learn and get to know clients better. It really does just make sense.

We also intend to allocate even more time to meeting with clients and prospects—face-to-face and in groups—to share our expertise and experience as well as to listen to their needs and better understand what they are looking for. So please be candid with me or any Baker Boyer Bank employee who asks “How are we doing?” and “What else can we do to meet your needs?” We really want to know.

I am honored to serve as the President and CEO of this unique organization and to lead our employee team. While I am proud of our 2010 performance, I also look forward to the new possibilities that our relationships, our stability and our com-mitment will generate for Baker Boyer Bank in 2011.

Megan F. Clubb President & CEO

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Our first strength comes from our Relationships—you wouldn’t keep hanging out with a friend if you felt they were using you for personal gain. It is the same with your banker. You should feel comfortable they are looking out for you. We focus on our clients’ needs while being aware that giving away too much or offering them loans they can’t pay back doesn’t benefit anyone.

Our second strength comes from our Stability—we don’t follow the pack like many banks and financial institu-tions did in recent years. We were care-ful to think for ourselves while many of our competitors fell and continue to be in financial strife together. That finan-cial stability now means we are ready to help our customers as the economy improves and their needs increase.

Relationships and stability are not enough in today’s fast-changing, volatile business and economic climate. That’s where our third strength—our Commitment comes in. The hard work and commitment of our employees, demonstrated through our efforts to listen, learn and advise has paid off for Baker Boyer Bank—but we have no intention of standing still.

2 JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER2010WHAT HAPPENED IN

January, 2010Megan F. Clubb appointed to the Board of Directors of the San Francisco branch of the Federal Reserve.

July 15, 2010Dodd-Frank Wall Street Reform and Consumer Protection Act passes.

June, 2010Baker Boyer recognized by USBanker magazine as number 44 of the top 200 community banks in the entire nation.

3JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER

October 29, 2010Baker Boyer moves its Weston branch operations to Milton-Freewater.

September 29, 2010Baker Boyer rolls out a new media-rich, relationship-centric web site.

August 30, 2010Expansion remodel of the Yakima branch begins.

AND ON TO A BRIGHTER

FINANCIAL FUTURE

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Year-to-Date 12/31/10 12/31/09 % ChangeNet Income $ 5,390 $ 4,819 11.8Cash Dividends Paid 3,596 3,586 0.3Return on Avg. Assets 1.14 % 1.12 %Return on Avg. Shareholders’ Equity 13.92 % 13.11 %Average Number of Shares Outstanding 1,286,894 1,281,220

Per Share 12/31/10 12/31/09 % Change

Earnings * $ 4.19 $ 3.76 11.4Cash Dividends Paid 2.76 2.76 0.0Book Value 30.25 28.84 4.9

At December 31, 12/31/10 12/31/09 % Change

Total Assets $466,011 $449,284 3.7Total Loans 304,200 298,077 2.1Allowance for Loan Losses 5,820 5,183 12.3Total Investment Securities 96,035 62,260 54.2Total Deposits 406,921 390,026 4.3Total Shareholders’ Equity 39,407 37,489 5.1

Daily Average for the Year 12/31/10 12/31/09 % ChangeAssets $471,013 $430,229 9.5Loans - Net 298,804 290,989 2.7Investment Securities 81,277 62,645 29.7Deposits 407,003 362,669 12.2Shareholders’ Equity 38,716 36,756 5.3* Earnings per share are calculated on the weighted average number of shares outstanding.

Financial Highlights (Dollars in Thousands Except Per Share Amounts)

3.443.403.39 3.76 4.19

2006

$ Milli

ons

0

5

200920082007 2010

Earnings per Share

$58.13$61.21$53.87 $56.94

2006

$73.79

Dolla

rs

$0

$100

200920082007 2010

Avg YTD Stock Trade Price

2006

$ Milli

ons

0

6

200920082007 2010

Net Income

4.37 4.38 4.4 4.85.4

2006

Dolla

rs

$3.00

$0.00200920082007 2010

Dividends per Share

$2.60 $2.68 $2.86 $2.76 $2.76

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Per Share 2010 2009 2008 2007 2006 Earnings* 4.19 3.76 3.44 3.40 3.39 Cash dividends 2.76 2.76 2.86 2.68 2.60 Book value, year-end 30.25 28.84 27.50 26.83 26.05

For the Year (dollars in thousands) 2010 2009 2008 2007 2006 Net income $5,390 $4,819 $4,407 $4,375 $4,374 Cash dividends 3,596 3,586 3,709 3,477 3,377

Performance Measures 2010 2009 2008 2007 2006 Return on average assets 1.14 % 1.12 % 1.13 % 1.16 % 1.19 %Return on average equity 13.92 13.11 12.47 12.85 13.17 Yield on average earning assets - fully taxable equivalent 5.11 5.72 6.47 7.08 6.70 Average cost of interest bearing liabilities 0.94 1.34 2.30 3.17 2.60 Net interest margin - fully taxable equivalent 4.37 4.68 4.66 4.59 4.67 Average equity to average assets ratio 8.22 8.54 9.07 9.05 9.00 Dividend payout ratio 66.72 74.41 84.16 79.47 77.21 Net charge-offs to average loans 0.20 0.06 0.11 0.03 0.05 Year-end ratio of allowance for loan losses to total loans 1.91 1.74 1.43 1.27 1.32

Employment 2010 2009 2008 2007 2006 Number of Full-Time Equivalent Employees at Year-End 168 175 170 175 180

Audit fees paid by the Company for the audit provided by Moss Adams LLP for fiscal years ending 2010 and 2009 were approximately $73,700 and $62,800, respectively. Tax fees paid to Moss Adams LLP for 2010 and 2009, were approxi-mately $11,500 and $9,800, respectively.

*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: 2010: 1,286,894, 2009: 1,281,220, 2008: 1,282,586, 2007: 1,285,348, 2006: 1,289,428.

Five Year Highlights (Unaudited)

12.4713.1112.85

13.9213.17

200611%

15%

200920082007 2010

Return on Equity2006

1.3%

1%200920082007 2010

Return on Assets

1.191.16

1.13 1.12 1.14

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Average Daily Balance Sheets (Unaudited. Dollars in Thousands)

Assets2010 2009

Cash and amounts due from banks $ 3,703 $ 3,953Interest-bearing deposits at other financial institutions 66,034 52,421Federal funds sold 113 1,178Securities available for sale, at fair value 68,208 46,377Securities held to maturity, at cost 11,177 14,385Other investments, at cost 1,892 1,883

Loans 304,208 295,615Allowance for credit losses (5,404) (4,626)Net Loans 298,804 290,989

Premises and equipment, net 15,227 14,831Accrued interest receivable 2,636 2,704Other assets 3,219 1,507

Total Assets $ 471,013 $ 430,228

Liabilities and Shareholders’ EquityDepositsDemand, non-interest-bearing $ 81,330 $ 74,954Savings and interest-bearing demand 219,175 180,979Time 106,498 106,736Total Deposits 407,003 362,669

Federal funds purchased and security repurchase agreements 20,031 18,755Other borrowed funds 4,115 10,625Accrued interest payable 283 373Other liabilities 865 1,050

Total Liabilities 432,297 393,472

Shareholders’ EquityCommon Stock (no par value, stated value $3.125 per share) 4,063 4,059Additional paid-in capital 877 633Retained earnings 32,911 31,538Accumulated other comprehensive income (loss) 865 526Total Shareholders’ Equity 38,716 36,756

Total Liabilities and Shareholders’ Equity $ 471,013 $ 430,228

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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) 842-2300 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 (866) 491-7828

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, 2010, there were 1,302,711 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 28, 2011, 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

Megan F. ClubbChairman, President and Chief Executive Officer, Baker Boyer Bancorp; Chairman, Presidentand Chief Executive Officer, Baker Boyer National Bank

Jon S. BrenSecretary, Executive Vice President, Baker Boyer Bancorp, Executive Vice President,Baker Boyer National Bank

Susan C. PrattAttorney; Retired Assistant Attorney General, State of Washington, Tacoma, WA,Chairman of the Executive Compensation Committee

David B. GordonGeneral Manager, Northwest Grain Growers, Walla Walla, WAMember of the Audit Committee

Dorsey F. BakerRetired General Service Manager, Holt California, Inc., Lodi, CAChairman of the Audit Committee

Fred J. KimballPresident, K-Farms, Inc., Walla Walla, WAMember of the Executive Compensation Committee

John R. ValaasInvestor, retired President & CEO First Mutual Bank, Bellevue, WA

Charles H. EglinBuilding Contractor,Owner Tri-Ply ConstructionYakima, WA

David B. CampbellFarming, Construction and Energy Systems, Retired, Walla Walla, WAMember of the Audit Committee, Member of the Executive Compensation Committee

Lynne E. BushCommunity Volunteer Leader, Seattle, WAMember of the Audit Committee and Executive Compensation Committee

Stephen G. KimballChairman Emeritus andretired President & CEO, Baker Boyer Bancorp,Chairman Emeritus andretired President and CEO, Baker Boyer National Bank

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

The Executive Committee

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Mark A. HessExecutive Vice President,Chief Operating Officerhessm@bakerboyer.com

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Teresa L. LarsonVP & Strategic Plan Coordinator, Secretary of Executive Committeelarsont@bakerboyer.com

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Mark H. Kajita, CPASenior VP & Senior Fiduciary Officer/Portfolio Managerkajitam@bakerboyer.com

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Lyle W. HansenExecutive Vice President, Banking Division Managerhansenl@bakerboyer.com

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Jon S. BrenExecutive Vice President, Wealth Management Division Managerbrenj@bakerboyer.com

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Megan F. ClubbChair of the Executive Committee, President, CEO, Chairman of the Boardclubbm@bakerboyer.com

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Eastgate Branch1931 E. IsaacsWalla Walla, WA 99362

Wheatland Village Branch1500 S. Catherine StreetWalla Walla, WA 99362

Kennewick OfficeWealth Management & Business Banking1149 N. Edison Street, Suite AKennewick, WA 99336

College Place Branch603 S. College AvenueCollege Place, WA 99324

Main Office7 W Main StreetWalla Walla, WA 99362

Milton-Freewater Branch320 N. ColumbiaMilton-Freewater, OR 97862

Plaza Branch1530 Plaza WayWalla Walla, WA 99362

Yakima OfficeWealth Management & Business Banking909 Triple Crown Way, Suite 101Yakima, WA 98908

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