Broker-Dealer The Baker Group on Community Bank Bonds & ALM

When it comes to creating a top-performing investment portfolio, one move can make all the difference: buying bonds.

“The most important thing community banks can do today is to simply participate in this bond market,” says Ryan Hayhurst, president of The Baker Group LP, a full-service broker-dealer based in Oklahoma City. 

“Many community banks stopped buying bonds in the past several years because interest rates went up and the values of portfolios went down. In some cases, banks decided to sit on cash, because they thought rates might go even higher,” says Hayhurst. “However, the best-performing banks are those that stayed in the market and benefited from bond yields that are now at 20‑year highs.”

Earlier this year, The Baker Group was named the exclusively endorsed broker-dealer of ICBA Securities. This partnership provides community banks nationwide with fixed-income products, asset-liability management, bond accounting tools and joint educational programs.

“Our mission is to always operate ‘the Baker way,’ which essentially is taking a holistic approach to our relationship with our clients and always striving to provide white-glove service,” adds Phil Stenseth, managing partner and chairman of The Baker Group. 

A trusted investment partner for community banks

Although the endorsement is new, The Baker Group is a familiar name to many in community banking. The company was founded in 1979 by a community banker, James Baker Jr. Today, community banks represent more than 80% of its customer base, including about 1,200 institutions across the country.

“One thing that The Baker Group does really well is explaining bond options and helping us understand what we’re buying and why,” says Sharon K. Anderson, president and CEO of $240 million-asset Williamstown Bank in Williamstown, West Virginia. The community bank has worked with The Baker Group for almost six years. 

As a small bank, Williamstown Bank had historically focused on buying municipal and West Virginia bonds. 

“The Baker Group has helped us greatly diversify our portfolio into a mix that fits what our needs are at a particular time,” says Anderson. “As those needs change, they help us to determine how best to adjust our portfolio to meet the new goals and needs.”

Brian Bazemore, president and CEO of $205 million-asset Citizens Bank of Cochran in Cochran, Georgia, says his community bank has been a Baker client for 12 years. 

“Over the years, our relationship with The Baker Group has become much more than simply a business relationship,” he says. “It has truly been a partnership. 

“We value the knowledge, guidance, education, technology and personal service they provide,” he adds. “Most importantly, we feel like we have a trusted partner who understands our bank and our community and is genuinely interested in helping us make sound decisions for the future.”

In addition to being named the exclusive broker-dealer provider for ICBA Securities, The Baker Group is endorsed by 38 state community bank associations. 

“We’ve been working with some of these associations for more than 40 years,” Hayhurst says, “so we know what it takes to build relationships and serve the needs of those associations and their members.”

Investment education for bankers

Bankers who have worked with The Baker Group commend its commitment to the industry, which includes a strong education platform. Education has been a focus for the company from day one: Baker was both a community banker and university professor who taught finance and banking. 

“We’re a big believer that an educated banker is going to be a higher-performing banker,” says Hayhurst. 

The company hosts between 50 and 70 education events each year, with webinars, workshops and training sessions covering topics such as bank investment strategies, interest rate risk management and other relevant issues.

Searching for high performance and net interest margin

The past five years have been extremely volatile for bankers, with a COVID-era surge in liquidity followed by a spike in inflation and Federal Reserve rate hikes. All of those factors have had a big impact on net interest margin. 

“The more educated community banks can be about the process of asset-liability management and understanding their balance sheet risk, the better prepared they’re going to be for that kind of volatility,” says Hayhurst.

He names three things that can put a community bank on the right path to having a high-performing investment portfolio: 

• Viewing your bond portfolio as the most controllable risk management tool that can be used to correct or improve asset-liability exposure
• Managing the bond portfolio in the context of the overall balance sheet, not in isolation 
• Having a formal written investment strategy that drives decision‑making

In addition to providing fixed-income and bond sales, The Baker Group offers a variety of services related to asset-liability management, public finance and software solutions, including ALM consulting, bond accounting and loan sales and trading.

“We are listening to the needs of our clients,” says Stenseth. “And we are committed to building franchise-wide services to include SBA securitization, loan securitization, stablecoin payments, enterprise risk management, capital markets, and any other services needed to assist our clients in maximizing their bank’s performance.”

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