2012 annual report for shareholders - bth bank · maintain our balance sheet free of problem, past...

2012 Annual Report for Shareholders

financial highlightsAs of or for the year ended December 31, (In thousands, except per share data) 2012 2011

BT Holdings

Total Income $2,104 $1,535

Total Expense 349 512

Net Ordinary Income 1,870 1,186

Earnings Per Share 95¢ 54¢

Total Assets 37,073 35,848

Total Liabilities 7,545 7,270

Total Equity 29,528 28,579

BankTexas

Yield on Earning Assets 4.25% 5.20%

Cost of Funding Earning Assets 0.57 0.71

Net Interest Margin 4.19 4.48

Return on Assets (ROA) 0.92 0.76

Return on Equity (ROE) 8.97 7.53

Net Charge-offs to Loans 0.01 0.02

Noncurrent Loans to Loans 0.27 0.02

Core Capital (Leverage) Ratio 9.46 9.61

Tier I Risk-Based Capital Ratio 14.93 15.86

Total Risk-Based Capital Ratio 16.12 17.04

Moving ForwardBT Holdings, Inc. performed well in 2012 and laid a foundation for continuedsuccess in 2013.

to my fellow shareholders,

BT Holdings 2012 Annual Repor t | 1

I am pleased to report that in a year that the national economy remained sluggish, your company performed exceptionally well. BT Holdings, Inc. earned $2,084,498, up $916,012 from the $1,168,486 reported for 2011. The Company also achieved a strong net income for 2012. This increase in income was partially due to investment profits, but it was also the result of loan growth greater than what we have seen in the last two previous years. On a consolidated basis, we ended the year with total assets at $237,840,353, up $12,065,441 from last year. Combined net income before taxes was up 79.1% to $2,113,754 from $1,180,389 in 2011. Earnings per share, net of taxes, were 95.1 cents compared to last year’s 53.3 cents. Return on Assets (ROA) ended 2012 at .92%, up 16 basis points from 2011’s .76%. A graph has been included on page 4 that details the pre-tax ROA of other East Texas banks of similar size and how their ROA compares to that of BankTexas.

Much of our progress this past year was due to the commitment and hard work of our 72 associates who continue to embrace and enhance our company culture. We salute them for their efforts, sacrifices, and continued belief in and support of BankTexas. As a team we remain focused on delivering the best banking experience possible to our customers and increasing shareholder value for our owners.

This letter recaps the actions taken this year within each major area of the Company to ensure that we continue to position BT Holdings for the future. It also briefly touches on the changes we have made in early 2013 to build value in BankTexas and BT Holdings.

captialMaintaining a strong capital position is essential to our long-term success, since capital provides us with the financial capacity to grow and expand our business. Once again, BankTexas finished the year well capitalized, with total shareholder equity of $21,246,141 and a Tier I ratio of 9.58%. Our risk-based capital ratio ended 2012 at 15.83%, well above regulatory minimums and earning the Bank a “well capitalized” designation.

credit qualityOur lenders are some of the best in the business, as demonstrated by our net charge-off ratio for 2012. Their efforts to maintain our balance sheet free of problem, past due and charged-off loans resulted in outstanding credit metrics for 2012. Net loans charged-off were again small, ending the year at $68 thousand, or .06% of loans, a very small number. Non-performing assets ended the year at .27%. The allowance for loan losses remains at 1.3% of loans, and the balance increased from $1,461,072 to $1,671,742. Increased loan volume led to a provision expense of $278,100 for the year.

Our lenders are some of the best in the business.

2 | BT Holdings 2011 Annual Repor t BT Holdings 2012 Annual Repor t | 3

loan growthOver the past few years, many of us have heard the national media and others imply that banks are not lending. For institutions with limited capital, this statement may be true. However, as previously mentioned, BankTexas has very strong capital and is, and has been, lending in all of the East Texas communities that we serve. After two years of somewhat lethargic loan growth amidst a slow economy, we saw a $15.4 million increase in new loans in 2012, a 13.3% increase. Much of that growth originated in our Tyler and Longview stores, primarily in the commercial real estate and industrial type loans.

The continued low interest rate environment is still providing consumers with opportunities for refinancing, especially home refinancing, which we continue to profit from. Secondary market loan rates are at historic lows, which has caused the Bank to lose some loans previously held in our portfolio as they have moved to the secondary market. With that in mind, we ask that if you are aware of anyone with a mortgage over 5%, that you refer them to one of our mortgage lenders to analyze their options for a lower rate mortgage with BankTexas. Our team is happy to discuss refinancing options with customers and potential customers alike.

N e t L o a n s

Construction &Land Development

Commercial OwnerOccupied

1-4 Family Farmland Commerical &Industrial

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$10,000,000

Q 4 2012

Q 2 2012

Q 4 2011

asset and deposit growthIn 2012, the Bank’s net assets grew 5.9% to $223,545,466, up from 2011’s $211,374,746. Much of this growth stemmed from the growth of deposits. BankTexas, like most banks in Texas and across the nation, has enjoyed strong deposit growth as both companies and individuals have been reluctant to invest cash in what has been an unstable market. We believe many customers continue to place a higher reliance on higher capitalized banks, like BankTexas, for the investment of their funds, and we have seen evidence of that behavior over the past year.

6 | BT Holdings 2011 Annual Repor t

“ ”

2 | BT Holdings 2011 Annual Repor t BT Holdings 2012 Annual Repor t | 3

” East Texas is HomeBankTexas is proud to call East Texas home. We currently have stores located in Quitman, Mineola, Holly Lake Ranch, Winnsboro, Lindale, Kilgore, Tyler and Longview.

interest expense

investment security activity

This year your company’s Trust Preferred Securities (TrUPS), interest expense decreased significantly. The TrUPS interest rate began floating based on LIBOR in June, after a five-year fixed rate period of 6.964%. The rate fell to 1.95% for the third quarter and ended the year at 1.62%. The savings from this reduction in rates saved BT Holdings $205,159 during 2012 and is expected to save $380 thousand during 2013 since the entire year will be at a lower rate.

Despite selling over $19 million of securities during the year, the balance of securities increased $4.6 million to over $70 million. The sale of securities in 2012 resulted in a gain of $946 thousand for the year. The bulk of the securities portfolio continues to be invested in tax-exempt municipals. Although all of the securities are issued by political subdivisions in Texas, this year we took the opportunity to sell any security with any perceived weakness, as well as securities with lower rates and longer terms.

2 0 1 2 P r e - t a x R e t u r n o n A v e r a g e A s s e t s ( B a n k T e x a s & P e e r s )

0.50%

0.00%

1.00%

1.50 %

BankTexas Average bank

with assets of $100 to $300 mm

Mineola Community

Bank

First NationalBank of

Winnsboro

LindaleState Bank

Springhill StateBank

First State Bank

Ben Wheeler

Source: Federal Deposit Insurance Corporation, December 31, 2012.

2.00%

1.68

1.22

0.97

0.12

0.72

1.081.23

1.12

First National

Bank Emory

1.46

First National

Bank Gilmer


We are only a few months into 2013 and we have already experienced many developments that will shape the rest of the year for BankTexas and BT Holdings. On December 18, 2012 the shareholders gathered at a special-called meeting where they overwhelmingly approved proposals to increase the authorized outstanding number of common stock from 5,000,000 to 10,000,000 and to allow the use of equity options for future compensation. The Board and I are enthusiastic about these decisions, as both of these actions will allow the Company to grow into the future.

strategic alignment of interests


American State Bank

Arp

0.94

Total deposits & other borrowings increased over $11 million during the year. Federal Home Loan Bank (FHLB) advances were eliminated in 2012. It is not anticipated the Bank will rely on this source of funds in the future for any purpose other than short-term needs. Although FHLB advances are a low-cost source of funds, the Bank wants to concentrate on funding the balance sheet with core deposits gathered from depositors in the markets BankTexas serves. The Bank does not ever use deposits gathered by brokers for funding sources. The “other borrowings” category is funds from large customers who need additional coverage because of the size of their deposits. This category is a repurchase agreement sold with the intent of “repurchasing” at some future date with interest and is backed by one or more of the Bank’s securities. The “other borrowings” category increased over $4 million in 2012.


More Than a BankWe believe that community banking is about relationships.

With that in mind, we make exceptional customer service the center of all that we do.


This past January, we announced the election of John R. (Bob) Dyer as the Company’s Vice Chairman, as well as the addition of a group of executives with significant lending experience in the Tyler and Longview markets. We have re-ferred to this development as an “alignment of interests” as we believe we are making a strong step for our Company. With our new business plan, we have joined BankTexas’ stores, associates and infrastructure with a group of lenders and support staff who collectively have over 100 years of experience making, servicing and developing commercial, industrial, professional and executive banking relationships. We welcome these new faces to our team and are excited about the potential we have in growing markets with their leadership and influence. BankTexas has already grown over $30 million since this group joined the Bank.

While our capital ratio is strong, our legal lending limit is too low for active lending in the Tyler and Longview markets. To accommodate our expected growth with our alignment of interests plan, a capital campaign is in full swing with promising results as of this writing. Additional capital will allow the Bank to increase the lending limits and thereby accommodate larger loans that cannot be made with our current capital position. During the annual meeting, an update on the progress of the capital raise will be given as part of the presentation. Our goal is to increase capital by at least $20 million to expand BankTexas’ legal lending limit to the level needed to compete in the Tyler and Longview markets.

locally-owned community banking BankTexas continues to embrace the relationship banking strategy that has been our business model for many years. Due to the strength of our brand and unique way of doing business, we have made BankTexas a bank of choice for businesses and consumers across East Texas. We have also built a Company with value that is attractive to investors. As we raise capital and grow our base of owners, know that our new shareholders will continue to be East Texas neighbors and friends. We will continue to seek a diversified and broad-based shareholder who is interested in the long-term prospects of our Bank.

It is no secret that the financial world has changed significantly over the past several years. Size and scalability are more important now than ever, as we all too often see the consolidation of banks both across the nation and here in East Texas.

BankTexas remains only one of a very few widely held banks in our region and possibly the state. While we may be one of only a few, we are stronger than ever. We remain well positioned to take advantage of opportunities that may arise and thrive in the years to come. At almost $250 million in assets as of this writing and our broad-based ownership of over 400 shareholders and growing, we have the strength and capability to compete effectively in the current banking environment and into the future by leveraging our ability to provide exceptional products and world-class customer service.

We expect exciting developments for BankTexas in 2013. As we add experienced executives and associates to our team and continue to expand our presences in the Tyler and Longview markets, we foresee accelerated growth in the years to come.

On behalf of all of BankTexas’ associates and our Board of Directors, we thank you for your continued support and encouragement. We ask you, our owners, to continue to help promote BankTexas to your family, friends and neighbors in the year ahead.

Best regards,

Troy M. RobinsonPresident


As technology’s role in our daily lives continues to change, the banking environment must evolve as well. At BankTexas, our goal is to provide both our commercial and consumer customers with a banking experience that goes beyond their expectations. For that reason, we are continuing to invest in new technologies, including new mobile banking conveniences, enhanced ATM abilities, treasury management services and web-based banking. Our bank stores continue to play a critical role in our customer experience and compliment all our innovations.

Although we recognize the need to continue to add to our offered technologies, our goal is not to be just high-tech, but to remain high-touch too. We know that a customer’s personal banker makes all the difference in their experience with BankTexas, so we will continue to invest in training our team to be the best bankers we can be, always putting an emphasis on delivering the friendly, effective customer service we are known for.

looking ahead

“ ”


BankTexas remains only one of very few widely held banks

in our region and possibly the state. While we may be one of only a few,

we are stonger than ever.


”

Together we’re moving

forward.


Board of Directors

The Annual Meeting of Shareholders will be held at 10:30 a.m. on Wednesday, April 15, 2013, at the Quitman Public Library located at 202 E. Goode Street in Quitman, Texas.

BT Holdings, an independent bank holding company, is the parent company of BankTexas, National Association. BT Holdings is owned by a coalition of local investors, allowing its profits to be distributed into the local community. BT Holdings was founded in 2006 by seven members of the BankTexas board of directors. They believed that keeping BankTexas local was in the best interest of all stakeholders: shareholders, employees, and customers. Today, BankTexas is staffed by local people and is committed to supporting local projects, chari-ties, and schools. BT Holdings and BankTexas look forward to continued profitable growth by emphasizing an unparalleled combination of quality customer service, convenient products, and community support.

More information can be found at btholdings.org or banktexas.org.

About BT Holdings

William AdamsonPresident – Sabine Pipe, Inc.

Joe E. BrunsonChairman – Team Worldwide, Inc.

Hoyt CampRetired Business Owner

Debbie GriffinInvestments

Ben J. Kerr, III, Esq.Partner – Brown, Kerr & King

Beth MedlinSecretary/Treasurer – Medlin Electric, Inc.

Juan D. Nichols (Chairman)Retired General Manager – Wood County Electric Cooperative, Inc.

Richard E. Roberts, Esq.Vice President – Don Roberts Abstract & Title Co.

Troy M. Robinson (President)President – BankTexas

PresidentTroy M. Robinson

Executive Vice PresidentsBrenda CatesClay Thompson

Senior Vice PresidentMike Fitzhugh

Vice PresidentsLeisa CummingsJason FraizerRyan GentryKeith HaistenRyan JamesCindy KarchTammy LewisCharlie RandCindy Simmons

Assistant Vice PresidentJaney Hayes

Annual Meeting

Offiicers of BankTexas


The Holding Company for BankTexas btholdings.org


2012 annual report for shareholders - bth bank · maintain our balance sheet free of problem, past...

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