<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]
For the fiscal year ended December 31, 1996
Commission file number 0-10402
WILSON BANK HOLDING COMPANY
(Exact name of registrant as specified in its charter)
Tennessee 62-1497076
- --------------------------------- ---------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
623 West Main Street
Lebanon, Tennessee 37087
- ---------------------------------------- ---------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(615) 444-2265
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $2.00 PAR VALUE PER SHARE
- --------------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant on March 15, 1997, was approximately $36,458,389. The market value
calculation was determined using $30.25 per share.
Shares of common stock, $2.00 par value per share, outstanding on March 15,
1997, were 1,392,182.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K Documents from which portions are incorporated by reference
- ----------------- -----------------------------------------------------------
Part II Portions of the Registrant's Annual Report to Shareholders
for the fiscal year ended December 31, 1996 are
incorporated by reference into Items 5, 6, 7 and 8.
Part III Portions of the Registrant's Proxy Statement relating
to the Registrant's Annual Meeting of Shareholders to be
held on April 15, 1997 are incorporated by reference into
Items 10, 11, 12 and 13.
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WILSON BANK HOLDING COMPANY
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I ...........................................................................................................1
ITEM 1. DESCRIPTION OF BUSINESS...............................................................................1
GENERAL...............................................................................................1
FINANCIAL AND STATISTICAL INFORMATION.................................................................2
REGULATION AND SUPERVISION............................................................................2
COMPETITION...........................................................................................3
MONETARY POLICIES.....................................................................................4
EMPLOYMENT............................................................................................4
ITEM 2. DESCRIPTION OF PROPERTY...............................................................................4
ITEM 3. LEGAL PROCEEDINGS.....................................................................................4
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................................................5
PART II ..........................................................................................................5
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS..............................................5
ITEM 6. SELECTED FINANCIAL DATA...............................................................................5
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................5
ITEM 8. FINANCIAL STATEMENTS..................................................................................5
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..................5
PART III .........................................................................................................5
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT....................................................5
ITEM 11. EXECUTIVE COMPENSATION................................................................................6
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................................6
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................................................6
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K......................................................................6
(a) Exhibits...............................................................................6
(b) Reports on Form 8-K....................................................................7
SIGNATURES ......................................................................................................8
</TABLE>
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
Wilson Bank Holding Company (the "Company") was incorporated on March 17, 1992
under the laws of the State of Tennessee. The purpose of the Company was to
acquire all of the issued and outstanding capital stock of Wilson Bank and Trust
(the "Bank") and act as a one bank holding company. On November 17, 1992, the
Company acquired 100% of the capital stock of the Bank pursuant to the terms of
a plan of share exchange and agreement.
All of the Company's banking business is conducted through the Bank, a state
chartered bank organized under the laws of the State of Tennessee, the Bank's
wholly-owned subsidiary Hometown Finance, Inc., DeKalb Community Bank ("DCB")
and Community Bank of Smith County ("CBSC"). The Bank on December 31, 1996 had
seven full service banking offices located in Wilson County, Tennessee. Hometown
Finance, Inc., a finance company organized under the Tennessee Industrial Loan
and Thrift Companies Act (the "Finance Company") had one office in Lebanon on
December 31, 1996. DCB had one office located in Smithville, Tennessee and CBSC
had one office located in Carthage, Tennessee. The Finance Company began
operations in September 1994, DCB in April 1996 and CBSC in December 1996 and,
to date, their revenues and expenses have not had a material effect on the
earnings of the Company.
The Company's principal executive office is located at 623 West Main Street,
Lebanon, Tennessee, which is also the principal location of the Bank. The Bank's
branch offices are located at 1444 Baddour Parkway, Lebanon, Tennessee; 200
Tennessee Boulevard, Lebanon, Tennessee; Public Square, Watertown, Tennessee;
8875 Stewart's Ferry Pike, Gladeville, Tennessee; 1476 North Mt. Juliet Road,
Mt. Juliet, Tennessee; and the Wal-Mart Super Center, Lebanon, Tennessee. The
Finance Company is located at 502 West Main, Lebanon, Tennessee 37087.
Management believes that Wilson County offers an environment for continued
growth and the Company's target market consists of local consumers,
professionals and small businesses. The Bank offers a wide range of banking
services, including checking, savings, and money market deposit accounts,
certificates of deposit and loans for consumer, commercial and real estate
purposes. The Bank also offers custodial, trust and discount brokerage services
to its customers. The Bank does not have a concentration of deposits obtained
from a single person or entity or a small group of persons or entities, the loss
of which would have a material adverse affect on the business of the Bank.
Furthermore, no concentration of loans exists within a single industry or group
of related industries.
The Bank was organized in 1987 to provide Wilson County a locally owned, locally
managed commercial bank. Since its opening, the Bank has experienced a steady
growth in deposits and loans as a result of providing personal, service oriented
banking services to its targeted market. For the year ended December 31, 1996,
the Company reported net earnings of approximately $3.1 million and had total
assets of approximately $275.3 million at December 31, 1996.
On February 20, 1997 the Bank opened a branch in Hartsville in adjacent
Trousdale County under the name "Trousdale Bank and Trust, an office of Wilson
Bank and Trust."
On October 16, 1995, the Company filed an application to form a branch in DeKalb
County, Tennessee and subsequently filed a related application to incorporate
such branch as a de novo bank under the name DeKalb Community Bank on November
29, 1995. The application was approved on March 8, 1996 and DCB opened for
business on April 18, 1996. DCB is 50% owned by the Company and 50% owned by
residents of DeKalb County. DCB received approval on December 5, 1996 to open a
full service branch in Alexandria, Tennessee and it is anticipated to open later
in 1997. DCB is considered a subsidiary of the Company for purposes of the Bank
Holding Company Act of 1956.
Management believes that DeKalb County offers an environment for continued
growth since it is geographically close to Wilson County, and two locally-owned
banks in DeKalb County recently were acquired by larger banks. DCB offers a wide
range of banking services, including checking, savings, and money market deposit
accounts, certificates of deposit and loans for consumer, commercial and real
estate purposes. DCB does not have a concentration of deposits
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obtained from a single person or entity or a small group of persons or entities,
the loss of which would have a material adverse affect on the business of DCB.
Furthermore, no concentration of loans exists within a single industry or group
of related industries.
On August 28, 1996, the Company filed an application to form a de novo bank in
Smith County, Tennessee under the name Community Bank of Smith County. The
application was approved on November 25, 1996 and CBSC opened for business on
December 16, 1996. CBSC is 50% owned by the Company and 50% owned by residents
of Smith County. CBSC is considered a subsidiary of the Company for purposes of
the Bank Holding Company Act of 1956. Management believes that Smith County
offers an environment for continued growth since it is contiguous to Wilson
County and has only three other financial institutions. CBSC offers a wide range
of banking services, including checking, savings, and money market deposit
accounts, certificates of deposit and loans for consumer, commercial and real
estate purposes. It is anticipated that CBSC will not have a concentration of
deposits obtained from a single person or entity or a small group of persons or
entities, the loss of which would have a material adverse affect on the business
of CBSC. Furthermore, no concentration of loans should exist within a single
industry or group of related industries.
FINANCIAL AND STATISTICAL INFORMATION
The Company's audited financial statements, selected financial data and
Management's Discussion and Analysis of Financial Condition and Results of
Operation contained in the Company's Annual Report to Shareholders for the year
ended December 31, 1996 filed as Exhibit 13 to this Form 10-K (the "1996 Annual
Report"), are incorporated herein by reference.
REGULATION AND SUPERVISION
In addition to the information set forth herein, Management's Discussion and
Analysis of Financial Condition and Results of Operations, incorporated by
reference in Item 6 hereof, further discusses recent banking legislation and
regulation and should be reviewed in conjunction herewith.
The Company, the Bank, DCB, CBSC and the Finance Company are subject to
extensive regulation under state and federal statutes and regulations. The
discussion in this section, which briefly summarizes certain of such statutes,
does not purport to be complete, and is qualified in its entirety by reference
to such statutes. Other state and federal legislation and regulations directly
and indirectly affecting banks are likely to be enacted or implemented in the
future; however, such legislation and regulations and their effect on the
business of the Company and its subsidiary cannot be predicted.
The Company is a bank holding company within the meaning of the Bank Holding
Company Act of 1956 (the "Act") and is registered with the Board of Governors of
the Federal Reserve System (the "Board"). The Company is required to file annual
reports with, and is subject to examination by, the Board. The Bank, DCB, CBSC
and the Finance Company are chartered under the laws of the state of Tennessee
and are subject to the supervision of, and are regularly examined by, the
Tennessee Department of Financial Institutions. The Bank, DCB and CBSC are also
regularly examined by the Federal Deposit Insurance Corporation.
Under the Tennessee Bank Structure Act, a bank holding company which controls
30% or more of the total deposits in all federally insured financial
institutions in Tennessee is prohibited from acquiring any bank in Tennessee.
Furthermore, no bank holding company may acquire any bank in Tennessee that has
been in operation less than five years or organize a new bank in Tennessee,
except in the case of certain interim bank mergers and acquisitions of banks in
financial difficulty. State banks and national banks in Tennessee, however, may
establish branches anywhere in the state.
Under the Act, a bank holding company may not directly or indirectly acquire
ownership or control or more than five percent of the voting shares or
substantially all of the assets of any company, including a bank, without the
prior approval of the Board. In addition, bank holding companies are generally
prohibited under the Act from engaging in non-banking activities, subject to
certain exceptions. Under the Act, the Board is authorized to approve the
ownership
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by a bank holding company of shares of any company whose activities have been
determined by the Board to be so closely related to banking or to managing or
controlling banks as to be a proper incident thereto.
Recently, congress enacted the Reigle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "IBBEA") which authorizes interstate acquisitions of
banks and bank holding companies without geographic limitation beginning on June
1, 1997. In addition, on that date, the IBBEA authorizes a bank to merge with a
bank in another state as long as neither of the states has opted out of
interstate branching between the date of enactment of the IBBEA and May 1, 1997.
Tennessee has enacted interstate branching laws in response to the federal law
which, effective June 1, 1997, will prohibit the establishment or acquisition in
Tennessee by any bank of a branch office, branch bank or other branch facility
in Tennessee except (i) a Tennessee-Chartered Bank, (ii) a national bank which
has its main office in Tennessee or (iii) a bank which merges or consolidates
with a Tennessee-Chartered bank or national bank with its main office in
Tennessee.
The Company, Bank, DCB and CBSC are subject to certain restrictions imposed by
the Federal Reserve Act and the Federal Deposit Insurance Act, respectively, on
any extensions of credit to the bank holding company or its subsidiary, on
investments in the stock or other securities of the bank holding company or its
subsidiary, and on taking such stock or other securities as collateral for loans
of any borrower.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
covers a wide expanse of banking regulatory issues. FDICIA deals with
recapitalization of the Bank Insurance Fund, with deposit insurance reform,
including requiring the FDIC to establish a risk-based premium assessment
system, and with a number of other regulatory and supervisory matters.
The Financial Reform, Recovery and Enforcement Act of 1989 ("FIRREA") provides
that a holding company's controlled insured depository institutions are liable
for any loss incurred by the FDIC in connection with the default of, or any
FDIC-assisted transaction involving, an affiliated insured bank or savings
association.
The maximum permissible rates of interest on most commercial and consumer loans
made by the Bank and the Finance Company are governed by Tennessee's general
usury law and the Tennessee Industrial Loan and Thrift Companies Act
("Industrial Loan Act"). Certain other usury laws affect limited classes of
loans, but the laws referenced above are by far the most significant.
Tennessee's general usury law authorizes a floating rate of 4% per annum over
the average prime or base commercial loan rate, as published by the Federal
Reserve Board from time to time, subject to an absolute 24% per annum limit. The
Industrial Loan Act, which is applicable to the Finance Company and also is
generally applicable to most of the loans made by the Bank in Tennessee,
authorizes an interest rate of up to 24% per annum and also allows certain loan
charges, generally on a more liberal basis than does the general usury law.
COMPETITION
The banking industry is highly competitive. The Company, through its subsidiary,
competes with national and state banks for deposits, loans, and trust and other
services.
The Bank competes with much larger commercial banks in Wilson County, including
three banks owned by regional multi-bank holding companies headquartered out of
Tennessee and four banks owned by Tennessee multi-bank holding companies. These
institutions enjoy existing depositor relationships and greater financial
resources than the Company and can be expected to offer a wider range of banking
services. These institutions enjoy existing depositor relationships and greater
financial resources than the Company and can be expected to offer a wider range
of banking services. In addition the Bank competes with one commercial bank
headquartered in Wilson County and one headquartered in an adjacent county. Two
credit unions provide additional competition.
DCB competes with much larger commercial banks in DeKalb County, including two
banks owned by Tennessee multi-bank holding companies. Both of these banks were
previously locally owned banks which were recently acquired by the larger banks.
While these institutions enjoy existing depositor relationships and greater
financial resources than the DCB and can be expected to offer a wider range of
banking services, DCB can expect to attract customers since it is
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locally owned and most loan and management decisions will be made at the local
level. In addition the Bank competes with one commercial bank headquartered in
DeKalb County and one headquartered in an adjacent county.
CBSC competes with three commercial banks in or near Smith County, including two
banks based in Smith County and one based in an adjacent county. These
institutions enjoy existing depositor relationships; however, the Company can be
expected to offer a wider range of banking services at CBSC through its
financial resources as well as programs offered by other subsidiaries of the
Company.
Given the competitive market place, the Company makes no predictions as to how
its relative position will change in the future.
MONETARY POLICIES
The results of operations of the Bank and the Company are affected by the
policies of the regulatory authorities, particularly the Board. An important
function of the Board is to regulate the national supply of bank credit in order
to combat recession and curb inflation. Among the instruments used to attain
these objectives are open market operations in U.S. government securities,
changes in the discount rate on bank borrowings and changes in reserve
requirements relating to member bank deposits. These instruments are used in
varying combinations to influence overall growth and distribution of bank loans,
investments and deposits, and their use may also affect interest rates charged
on loans and paid for deposits. Policies of the regulatory agencies have had a
significant effect on the operating results of commercial banks in the past and
are expected to do so in the future. The effect of such policies upon the future
business and results of operations of the Company, Bank, DCB and CBSC cannot be
predicted with accuracy.
EMPLOYMENT
The Company and is subsidiaries collectively employ 145 full-time equivalent
employees and 16 part-time employees. Additional personnel will be hired to meet
future growth.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's main office is owned by the Company and consists of approximately
four acres at 623 West Main Street, Lebanon, Tennessee. The building is a two
story, brick building, with approximately 35,000 square feet. The lot has
approximately 350 feet of road frontage on West Main Street. In addition
thereto, the Bank has six branch locations located at 1444 Baddour Parkway,
Lebanon, Tennessee; 200 Tennessee Boulevard, Lebanon, Tennessee; 8875 Stewart's
Ferry Pike, Gladeville, Tennessee; Public Square, Watertown, Tennessee and 1476
North Mt. Juliet Road, Mt. Juliet, Tennessee. Each of the branch facilities
contains approximately 1,000 square feet of space, except the Mt. Juliet office,
which contains approximately 16,000 square feet of space. The Bank owns four of
these branch facilities and leases the Lebanon facility at Tennessee Boulevard
under a long term lease. The Finance Company's principal place of business is at
502 West Main Street, Lebanon, Tennessee in a building of approximately 1,000
square feet, which the Bank leases. The Bank also leases space at three
locations within Wilson County where it maintains and operates automatic teller
machines. The Bank purchased a trailer in early 1997 which can be used as a bank
facility for use at new branch locations of the Company while a permanent
building is being constructed. The Bank will use this while the facility is
being constructed at Hartsville.
DCB a new bank facility at 576 West Broad Street in Smithville, Tennessee
containing approximately 6,800 square feet of space. This serves as the main
office for DCB. CBSC is currently leasing office space at 1210 Main Street
North. Sites are being studied upon which CBSC intends to construct a new bank
facility.
ITEM 3. LEGAL PROCEEDINGS
There were no material legal proceedings pending at December 31, 1996, against
the Company, the Bank, DCB, CBSC or the Finance Company.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders in the fourth quarter of
1996.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Information required by this item is contained under the heading "Wilson Bank
Holding Company Common Stock Market Information" on page 54 of the Company's
1996 Annual Report and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item is contained under the heading "Wilson Bank
Holding Company Financial Highlights Unaudited" on page 10 of the Company's 1996
Annual Report and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information required by this item is contained under the heading as set forth
for this item on pages 11 through 21 of the Company's 1996 Annual Report and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS
The consolidated financial statements and the independent auditors report of
Maggart & Associates, P.C. required by this item are contained in pages 22
through 53 and on page 22, respectively, of the Company's 1996 Annual Report and
are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to directors is incorporated
by reference herein by reference to "Election of Directors" in the Company's
Proxy Statement. The information required by this item with respect to executive
officers is set forth below:
James Randall Clemons (44) - Mr. Clemons is President and Chief
Executive Officer of the Company and the Bank. He has held such
positions with the Company since its formation in March 1992 and has
held his Bank positions since the Bank commenced operations in May
1987. Prior to that time, Mr. Clemons served as Senior Vice President
and Cashier for Peoples Bank, Lebanon, Tennessee.
Becky Taylor (52) - Ms. Taylor is the principal accounting officer of
the Company and a Senior Vice-President and Cashier of the Bank. She
has served as Vice President and Cashier of the Bank since May 1987 and
as the principal accounting officer of the Company since its formation
in March 1992. She has held her positions with the Bank since it
commenced operations. From 1963 to 1987, Ms. Taylor was employed by
Lebanon Bank, Lebanon, Tennessee, where her duties included Data
Processing Coordinator, Auditor, Security Officer and Compliance
Officer. Ms. Taylor held the title of Vice President and Cashier of
Lebanon Bank.
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Elmer Richerson (44) - Mr. Richerson joined the Bank in February 1989.
Prior to such time, Mr. Richerson was the manager of the Lebanon branch
of Heritage Federal Savings and Loan Association from March 1988 to
February 1989. From September 1986 until March 1988, Mr. Richerson was
a liquidation assistant for the Federal Deposit Insurance Corporation.
Currently, Mr. Richerson is an Executive Vice President and Senior Loan
Officer of the Bank and oversees the branch administration for the
Bank.
Larry Squires (44) - Mr. Squires joined the Bank in 1989 and is
currently Senior Vice President and Investment Officer. Prior to that
time Mr. Squires was Vice President of Liberty State Bank in Lebanon.
His principal duty is overseeing the Bank's investment and brokerage
center.
Gary Whitaker (39) - Mr. Whitaker joined the Bank in May 1996. Prior to
that time Mr. Whitaker was employed with NationsBank of Tennessee, N.A.
in Nashville (and its predecessors) from 1979. He has held positions in
collections, branch manager, construction lending, retail marketing,
automobile lending, loan administration, operations analyst and most
recently Vice President. His principal duties include overseeing the
Bank's lending function and loan operations.
Barry T. Buckley (44) - Mr. Buckley joined the Company in October 1995
as Vice President of Development. He also serves as Chief Executive
Officer for DCB and CBSC. Prior to joining the Company, Mr. Buckley
served as President and Chief Executive Officer of TransFinancial Bank
Tennessee, N.A. in Cookeville from April 1994 until September 1995. Mr.
Buckley also served as President and Chief Executive Officer of Peoples
Bank and Trust of the Cumberlands ("Peoples") located in Cookeville
from its formation in 1988 until its acquisition by TransFinancial
Bancorp, Inc. and conversion to TransFinancial Bank Tennessee, N.A. Mr.
Buckley served as President and Chief Executive Officer of Peoples
Financial Services, Inc. (the parent company of Peoples) from 1988
until its acquisition.
All officers serve at the pleasure of the Board of Directors. No officers are
involved in any legal proceedings which are material to an evaluation of their
ability and integrity.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is contained under the caption "Executive
Compensation" in the Company's Proxy Statement and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is contained under the caption "Security
Ownership of Certain Beneficial Owners and Management" in the Company's Proxy
Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is contained under the caption "Certain
Relationships and Related Transactions" in the Company's Proxy Statement and is
incorporated herein by reference.
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Charter (previously filed as Exhibit 3(a) to the
Company's Registration Statement on Form S-4 dated
March 18, 1992 (Registration No. 33-46469) and
incorporated herein by reference).
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3.2 Bylaws (previously filed as Exhibit 3(a) to the
Company's Registration Statement on Form S-4 dated
March 18, 1992 (Registration No. 33-46469) and
incorporated herein by reference).
13.1 Selected Portions of the Wilson Bank Holding Company
Annual Report to Shareholders for the year ended
December 31, 1996, incorporated by reference into
items 5, 6, 7 and 8.
21.1 Subsidiaries of the Company.
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
None.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WILSON BANK HOLDING COMPANY
By: /s/ J. Randall Clemons
--------------------------------
J. Randall Clemons
President and Chief Executive Officer
Date: March 25, 1997
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ J. Randall Clemons President, Chief March 25, 1997
- ------------------------------ Executive Officer
J. Randall Clemons and Director
/s/ Becky Taylor Principal March 25, 1997
- ------------------------------ Accounting Officer
Becky Taylor and Chief Financial
Officer
/s/ Charles Bell Director March 25, 1997
- ------------------------------
Charles Bell
/s/ Jack W. Bell Director March 25, 1997
- ------------------------------
Jack W. Bell
/s/ Mackey Bentley Director March 25, 1997
- ------------------------------
Mackey Bentley
/s/ James F. Comer Director March 25, 1997
- ------------------------------
James F. Comer
/s/ Jerry L. Franklin Director March 25, 1997
- ------------------------------
Jerry L. Franklin
/s/ John B. Freeman Director March 25, 1997
- ------------------------------
John B. Freeman
/s/ Marshall Griffith Director March 25, 1997
- ------------------------------
Marshall Griffith
</TABLE>
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<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Harold R. Patton Director March 25, 1997
- ------------------------------
Harold R. Patton
/s/ James Anthony Patton Director March 25, 1997
- ------------------------------
James Anthony Patton
/s/ John R. Trice Director March 25, 1997
- ------------------------------
John R. Trice
/s/ Robert T. VanHooser, Jr. Director March 25, 1997
- ------------------------------
Robert T. VanHooser, Jr.
</TABLE>
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EXHIBIT 13.1
Wilson Bank Holding Company
Common Stock Market Information
The common stock of Wilson Bank Holding Company is not traded on an
exchange nor is there a known active trading market. The number of stockholders
of record at December 31, 1996 was 1,068. Based solely on information made
available to the Company from limited number of buyers and sellers, the Company
believes that the following table sets forth the quarterly range of sale prices
for the Company's stock during the years 1996 and 1995.
STOCK PRICES
<TABLE>
<CAPTION>
1996 HIGH LOW
<S> <C> <C>
First Quarter $27.50 $27.00
Second Quarter 28.00 27.50
Third Quarter 28.50 28.00
Fourth Quarter 29.50 28.50
1995
First Quarter $25.00 $25.00
Second Quarter 25.50 25.00
Third Quarter 26.50 26.00
Fourth Quarter 27.00 26.50
</TABLE>
On January 1, 1995 and July 1, 1995 a $.35 per share cash dividend was
declared and paid to shareholders of record of that date. On January 1, 1996 and
July 1, 1996 a $.35 per share cash dividend was declared and paid to
shareholders of record of that date. Future dividends will be dependent upon the
Company's profitability, its capital needs and overall financial condition, and
economic and regulatory consideration.
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WILSON BANK HOLDING COMPANY FINANCIAL HIGHLIGHTS UNAUDITED
<TABLE>
<CAPTION>
In Thousands, Except Per Share Information
As of December 31,
----------------------------------------------------
1996 1995 1994 1993 1992
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED
BALANCE SHEETS:
- ---------------
Total assets end of year $275,304 226,689 192,406 170,737 154,117
Loans, net $183,642 146,738 123,177 89,730 73,846
Securities $ 55,545 52,023 43,128 58,186 64,231
Deposits $243,250 200,037 171,517 152,425 138,228
Stockholders' equity $ 21,252 18,398 15,618 13,996 12,014
<CAPTION>
Years Ended December 31
----------------------------------------------------
CONSOLIDATED STATEMENT 1996 1995 1994 1993 1992
OF EARNINGS: ----------------------------------------------------
- ------------
<S> <C> <C> <C> <C> <C>
Interest income $ 19,448 16,366 12,470 10,889 10,476
Interest expense 9,797 8,425 5,604 5,074 5,306
----------------------------------------------------
Net interest expense 9,651 7,941 6,866 5,815 5,170
Provision for possible
loan losses 685 527 298 434 439
----------------------------------------------------
Net interest income after
provision for possible
loan losses 8,986 7,414 6,568 5,381 4,731
Non-interest income 2,781 1,874 1,497 1,374 1,093
Non-interest expense 7,254 5,871 5,287 4,015 3,165
----------------------------------------------------
Earnings before income taxes
and cumulative effect of a change
in accounting principle 4,513 3,417 2,778 2,740 2,659
Income taxes 1,406 996 678 683 670
----------------------------------------------------
Net earnings before cumulative
effect of a change in
accounting principle 3,107 2,421 2,100 2,057 1,989
Cumulative effect of a change
in accounting principle -- -- -- 19 --
----------------------------------------------------
Net earnings $ 3,107 2,421 2,100 2,076 1,989
====================================================
Cash dividends declared $ 950 929 651 322 633
====================================================
PER SHARE DATA:
- ---------------
Earnings before cumulative effect
of a change in accounting principle* $ 2.27 1.81 1.60 1.60 1.56
Net earnings* $ 2.27 1.81 1.60 1.61 1.56
Cash dividends* $ 0.70 0.70 0.50 0.25 0.50
Book value* $ 15.42 13.63 11.84 10.79 9.34
RATIOS:
- -------
Return on average
stockholders' equity 16.87% 14.33% 14.09% 16.01% 17.98%
Return on average assets 1.27% 1.16% 1.18% 1.29% 1.44%
Capital to assets 7.72% 8.12% 8.12% 8.20% 7.80%
Dividends declared as percentage
of earnings 30.58% 38.67% 31.25% 15.53% 32.05%
</TABLE>
*On March 1, 1993 a 2 for 1 stock split in the form of a 100% stock dividend was
declared. All data with respect to earnings per share has been adjusted to
reflect this transaction.
<PAGE> 3
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Effective November 17, 1992, Wilson Bank Holding Company (the
"Company") acquired 100% of the common stock of Wilson Bank and Trust, and
accordingly, became a bank holding company. Management believes that the holding
company structure permits greater flexibility in the expansion of the Company's
present business and will allow the Company to be more responsive to its
customers' broadening and changing financial needs.
During 1996, the Company and other organizers consisting primarily of
residents of DeKalb and Smith Counties formed DeKalb Community Bank and
Community Bank of Smith County. The Company acquired 50% of the common stock of
each bank. Each of the banks were capitalized with $3,500,000; and accordingly,
the Company's investment in each bank was $1,750,000. DeKalb Community Bank and
Community Bank of Smith County are accounted for as consolidated subsidiaries of
the Company and their accounts are included in the consolidated financial
statements. The equity and earnings applicable to the minority stockholders are
shown as minority interest in the consolidated financial statements.
The Company's subsidiary bank are community banks headquartered in
Lebanon, Smithville and Carthage, Tennessee, serving Wilson County, DeKalb
County and Smith County, Tennessee as their primary market areas. The subsidiary
banks have nine locations including their three main offices. DeKalb and Smith
Counties adjoin Wilson County. Management believes that these counties offer an
environment for continued growth, and the Company's target market is local
consumers, professionals and small businesses. The banks offer a wide range of
banking services, including checking, savings, and money market deposit
accounts, certificates of deposit and loans for consumer, commercial and real
estate purposes. The Company also offers custodial and trust services and an
investment center which offers a full line of investment services to its
customers.
During 1997, Wilson Bank and Trust plans to open a branch facility in
Hartsville, Trousdale County, Tennessee which also adjoins Wilson County. DeKalb
Community Bank also plans a branch expansion in Alexandria, DeKalb County,
Tennessee.
The following discussion and analysis is designed to assist readers in
their analysis of the Company's consolidated financial statements and must be
read in conjunction with such consolidated financial statements.
RESULTS OF OPERATIONS
Net earnings for the year ended December 31, 1996 were $3,107,000 an
increase of $686,000 or 28.3% over 1995. Net earnings for the year ended
December 31, 1995 totaled $2,421,000 which was an increase of $321,000 or 15.3%
from $2,100,000 for 1994. On a per share basis, net income equaled $2.27 in
1996, $1.81 in 1995 and $1.60 in 1994.
NET INTEREST INCOME
Net interest income represents the amount by which interest earned on
various earning assets exceeds interest paid on deposits and other
interest-bearing liabilities and is the most significant component of the
Company's earnings. Total interest income in 1996 was $19,448,000 compared with
$16,366,000 in 1995 and $12,470,000 in 1994. The increase in total interest
income in 1996 was primarily due to a $34.8 million or 17.9% increase in average
earning assets over 1995. Average earning assets increased $28.9 million from
December 31, 1994 to December 31, 1995. The average interest rate earned on
earning assets was 8.73% in 1996 compared with 8.68% in 1995 and 7.90% in 1994.
Interest earned on earning assets does not include any interest income
which would have been recognized on non-accrual loans if such loans were
performing. The amount of interest not recognized on nonaccrual loans totaled
$12,000 in 1996 and $7,000 in 1995.
Total interest expense for 1996 was $9,797,000, an increase of
$1,372,000 or 16.3%, compared to total interest expense of $8,425,000 in 1995.
The increase in total interest expense was due
<PAGE> 4
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
to an increase in average interest bearing liabilities of approximately
$30,642,000 offset by a decrease in the weighted average cost of funds from
4.44% to 4.38%. Interest expense increased from $5,604,000 in 1994 to $8,425,000
in 1995 or an increase of $2,821,000 or 50.3%. The increase in 1995 was due to a
$27,763,000 increase in average interest bearing liabilities and an increase in
the weighted average cost of funds from 3.46% to 4.44%.
Net interest income for 1996 totaled $9,651,000 as compared to
$7,941,000 and $6,866,000 in 1995 and 1994, respectively. The net interest
spread, defined as the effective yield on earning assets less the effective cost
of deposits and borrowed funds (calculated on a fully taxable equivalent basis),
increased to 4.35% for 1996 as compared to 4.24% in 1995. The net interest
spread was 4.44% in 1994. The net interest yield, which is net interest income
expressed as a percentage of average earning assets, increased to 4.46% for 1996
compared to 4.35% in 1995 and 4.52% in 1994. Interest rates in general decreased
slightly during 1996 but are expected to remain stable in 1997. The Company is
in a position to reprice its liabilities faster than the assets are repricing.
Accordingly, management expects the projected stable interest rates to have an
insignificant impact on the net interest yield and net interest income.
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for loan losses represents a charge to earnings necessary
to establish an allowance for possible loan losses that, in management's
evaluation, is adequate to provide coverage for estimated losses on outstanding
loans and to provide for uncertainties in the economy. The 1996 provision for
loan losses was $665,000, an increase of $138,000 from the provision of $527,000
in 1995. Net charge-offs increased to $157,000 in 1996 from $139,000 in 1995.
Net charge-offs in 1994 totaled $45,000. The ratio of net charge-offs to average
total outstanding loans in 1996 was .09% and in 1995 was .10%. The provision for
loan losses in 1996 exceeded net charge-offs by $508,000 compared to $388,000 in
1995 and $253,000 in 1994.
The provision for loan losses raised the allowance for possible loan
losses (net of charge-offs and recoveries) to $2,452,000 at December 31, 1996
from $1,944,000 and $1,556,000 at December 31, 1995 and 1994, respectively.
This represents a 26.1% increase in the allowance at December 31, 1996 over
December 31, 1995. The allowance for possible loan losses was 1.32% of total
loans outstanding at December 31, 1996 compared to 1.31% at December 31, 1995
and 1.25% at December 31, 1994. Additionally, as a percentage of nonperforming
loans at year end 1996, 1995 and 1994, the allowance for loan losses
represented 235%, 675% and 362%, respectively.
The level of the allowance and the amount of the provision involve
evaluation of uncertainties and matters of judgment. Management believes the
allowance for possible loan losses at December 31, 1996 to be adequate.
NON-INTEREST INCOME
The components of the Company's non-interest income include service
charges on deposit accounts, other fees, gains on sale of loans, net gains on
sale of fixed assets and minority interest in net losses of subsidiaries. Total
non-interest income for 1996 was $2,781,000 compared with $1,874,000 in 1995 and
$1,497,000 in 1994. The 48.4% increase over 1995 was primarily due to increases
in service charges on deposit accounts (which increased $277,000), other fees
(which increased $436,000), net gains on sales of loans (which increased
$122,000) and minority interest in net losses of subsidiaries (which increased
$77,000). Management projects that gains on sales of loans will increase in 1997
due to increases in loan demand in the existing market, improved marketing plans
and expansion into a broader market area. Management intends to continue to
aggressively market the services of the trust department; however, trust income
is not expected to have a significant impact on earnings in the immediate
future.
NON-INTEREST EXPENSES
Non-interest expenses consist primarily of employee costs, occupancy
expenses, furniture and equipment expenses, loss on sale of other real estate,
<PAGE> 5
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FDIC insurance, Directors' fees, other operating expenses and security losses.
Total non-interest expenses for 1996 increased 23.6% to $7,254,000 from
$5,871,000 in 1995. The 1995 non-interest expense was up 11.0% over 1994 which
totaled $5,287,000. The increases in non-interest expenses resulted primarily
from increases in employee salaries and related benefits. This increase was
principally due to an increase in the number of employees necessary to support
the Company's expanded operations including the two new bank subsidiaries. The
FDIC insurance premiums decreased from $198,000 in 1995 to $3,000 in 1996 or
$195,000. The decrease from 1994 to 1995 was $148,000. The decrease in 1996
resulted from a suspension of premiums as of January 1, 1996 due to full
capitalization of the FDIC insurance fund. The decrease in 1995 FDIC premiums
resulted from a reduction in the assessment rate from .23% to .04% of eligible
deposits (the lowest rate under the newly enacted risk based assessment
regulations) effective June 1, 1995. Other operating expenses increased to
$1,810,000 in 1996 from $1,397,000 in 1995. These expenses included data
processing, supplies and general operating expenses, which increased as a result
of continued growth of the Company and expansion into new market areas.
INCOME TAXES
The Company's income tax expense was $1,406,000 for 1996 an increase of
$410,000 from 1995. The percentage of income tax expense to earnings before
taxes increased to 31.2% in 1996 from 29.1% in 1995. The percentage was 24.4% in
1994. The percentage for 1996 as compared to 1995 increased as a result of a
$137,000 in net operating losses of 50% owned bank subsidiaries not recognized
for Federal tax purposes and a decrease in the percentage of interest income
exempt from Federal income taxes to earnings before taxes from 30.8% in 1995 to
25.7% in 1996. The increase from 1994 to 1995 is due to a decrease of $172,000
in interest income which is exempt from Federal income taxes.
FINANCIAL CONDITION
BALANCE SHEET SUMMARY. The Company's total assets increased $48,615,000
or 21.4% to $275,304,000 at December 31, 1996, after increasing 17.8% in 1995 to
$226,689,000 at December 31, 1995. Loans, net of allowance for possible loan
losses, totaled $183,642,000 at December 31, 1996, a 25.1% increase compared to
December 31, 1995. Investment securities increased in 1996, primarily as a
result of the increased deposits. At year end 1996 securities totaled
$55,545,000, an increase of 6.8% from $52,023,000 at December 31, 1995. The
increase in securities in 1996 is net of a $160,000 decrease in unrealized gains
on securities available-for-sale.
Total liabilities increased $45,761,000 at December 31, 1996 to
$254,052,000 compared to $208,291,000 at December 31, 1995. This increase was
composed primarily of the $43,213,000 increase in total deposits to $243,250,000
(a 21.6% increase). Securities sold under repurchase agreements decreased to
$5,616,000 from $6,693,000 at the respective year ends 1996 and 1995.
Stockholders' equity increased $2,854,000 or 15.5% due to net earnings
and sales of stock pursuant to the Company's Dividend Reinvestment Plan, net of
dividends paid on the Company's common stock and $100,000 decrease in net
unrealized gains on available-for-sale securities. A more detailed discussion of
assets, liabilities and capital follows.
The Company currently expects to open two new branch facilities during
1997. The estimated cost for the physical assets is currently estimated to be
$1,000,000.
<PAGE> 6
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LOANS:
Loan categories are as follows:
<TABLE>
<CAPTION>
1996 1995
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
-------- ---------- -------- ----------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Commercial, financial,
and agricultural $ 57,449 30.6% $ 55,081 36.7%
Installment 32,558 17.3 23,615 15.7
Real estate-
mortgage 80,955 43.1 62,349 41.5
Real estate-
construction 16,828 9.0 9,022 6.1
-------- ----- -------- -----
TOTAL $187,790 100.0% $150,067 100.0%
======== ===== ======== =====
</TABLE>
Loans are the largest component of the Company's assets and are its
primary source of income. The Company's loan portfolio, net of allowance for
loan loses, increased 25.1% by year end 1996. The loan portfolio is composed of
four primary loan categories: commercial, financial and agricultural;
installment; real estate-mortgage; and real estate-construction. The table above
sets forth the loan categories and the percentage of such loans in the portfolio
at December 31 1996 and 1995.
As represented in the table, primary loan growth was in real estate
mortgage loans and installment loans. Real estate mortgage loans increased 29.8%
in 1996 and at December 31, 1996 comprised 43.1% of total loans compared to
41.5% of total loans at December 31, 1995. This increase was primarily due to
the favorable interest rate environment and the Company's ability to increase
its market share of such loans while maintaining its loan underwriting
standards. Installment loans increased 37.9% in 1996 and comprise 17.3% of the
total loan portfolio at December 31, 1996, compared to 15.7% at December 31,
1995. Real estate construction loans increased 86.5% from December 31, 1996 to
December 31, 1995 and as a percentage of the total loan portfolio they increased
from 6.1% to 9.0%.
Banking regulators define highly leveraged transactions to include
leveraged buy-outs, acquisition loans, and recapitalization loans of an existing
business. Under the regulatory definition, at December 31, 1996, the Company had
no highly leveraged transactions, and there were no foreign loans outstanding
during any of the reporting periods.
Non-performing loans, which include non-accrual loans and loans 90 days
past due, totaled $1,054,000 at December 31, 1996, an increase from $288,000 at
December 31, 1995. Non-accrual loans are loans on which accrual of interest is
stopped when management believes collection of such interest is doubtful due to
management's evaluation of the borrower's financial condition, collateral
liquidation value, economic and business conditions and other factors affecting
the borrower's ability to
<PAGE> 7
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
pay. Non-accrual loans totaled $260,000 at December 31, 1996 compared to
$117,000 at December 31, 1995. Loans 90 days past due, as a component of
non-performing loans, increased to $794,000 at December 31, 1996 from $171,000
at December 31, 1995. This increase is primarily a result of a corresponding
increase in real estate mortgage loans and installment loans that are 90 days
past due. The Bank had no renegotiated loans, which would have been included in
non-performing loans.
The Company also internally classifies loans about which management
questions the borrower's ability to comply with the repayment terms of the loan
agreement. These internally classified loans, inclusive of certain
non-performing loans, totaled $561,000 at December 31, 1996 as compared to
$1,631,000 at December 31, 1995. Of the internally classified loans at December
31, 1996, $165,000 are real estate related loans and $396,000 are various other
types of loans. The internally classified loans as a percentage of the allowance
for possible loan losses were 22.9% and 83.9%, respectively, at December 31,
1996 and 1995.
The allowance for possible loan losses is discussed under "Provision
for Possible Loan Losses." The Company maintains its allowance for possible loan
losses at an amount deemed by management to be adequate to provide for the
possibility of loan losses in the loan portfolio.
Essentially all of the Company's loans were from the Wilson County and
adjoining county area. The Company seeks to exercise prudent risk management in
lending, including diversification by loan category and industry segment (at
December 31, 1996 no single industry segment accounted for more than 10% of the
Company's portfolio), as well as by identification of credit risks.
The Company's management believes there is a significant opportunity to
continue to increase the loan portfolio in the Company's primary market area.
The Company has targeted commercial business lending, commercial and residential
real estate lending and consumer lending. Although it is the Company's objective
to achieve a loan portfolio equal to approximately 75% of deposit balances,
various factors, including demand for loans which meet its underwriting
standards, will determine the size of the loan portfolio in a given economic
climate. This is reflected in the past two years when the Company's average loan
to average deposit ratio was 77.0% and 73.3%. As a practice, the Company
generates its own loans and does not buy participations from other institutions.
The Company will sell loans it generates to other financial institutions if the
transaction profits the Company and improves the liquidity of the loan
portfolio. The Company seeks to build a loan portfolio which is capable of
adjusting to swings in the interest rate market, and it is the Company's policy
to maintain a diverse loan portfolio not dependent on any particular market or
industrial segment.
SECURITIES
Securities increased 6.8% to $55,545,000 at year end 1996 from
$52,023,000 at December 31, 1995, and comprised the second largest and other
primary component of the Company's earning assets. This increase followed a
20.6% securities portfolio decrease from year end 1994 to 1995. The growth in
securities in 1996 resulted from continued deposit growth in excess of funds
necessary to fund loan growth.
The primary increase in the Company's securities portfolio was in
obligations of state and political subdivisions which increased $2,491,000 or
13.7% in 1996. Mortgage-backed securities decreased $1,376,000 or 12.7%. The
average yield of the securities portfolio at December 31, 1996 was 6.9% with an
average maturity of 2.9 years, as compared to an average yield of 7.0% and an
average maturity of 3.8 years at December 31, 1995.
Effective January 1, 1994 the Company adopted the provisions of
Statement of Financial Accounting Standards No. 115 (SFAS No. 115), "Accounting
for Certain Investments in Debt and
<PAGE> 8
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Equity Securities". Under the provisions of the Statement, securities are to be
classified in three categories and accounted for as follows:
- - Debt securities that the enterprise has the positive intent and ability
to hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- - Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- - Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
The Company's classification of securities as of December 31, 1996 is as
follows:
<TABLE>
<CAPTION>
(In Thousands)
------------------------------------------------
HELD-TO-MATURITY AVAILABLE-FOR-SALE
---------------- ------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury and
other U.S.
Government
agencies and
Corporations $ 3,097 3,088 22,317 22,267
Obligations of
states and
political
subdivisions 15,961 16,173 4,561 4,727
Mortgage-backed
securities 7,477 7,441 2,010 2,016
------- ------ ------ ------
$26,535 26,702 28,888 29,010
======= ====== ====== ======
</TABLE>
No securities have been classified as trading securities.
<PAGE> 9
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The classification of a portion of the securities portfolio as
available for sale was made to provide for more flexibility in asset/liability
management and capital management.
The effect of the adoption of SFAS No. 115 was to increase the capital
of the Company as of January 1, 1994 by $595,000 which represents the unrealized
appreciation in securities available-for-sale of $959,000 less applicable taxes
of $364,000. The net increase in capital for the year ended December 31, 1995
totaled $519,000 which represents the unrealized appreciation in securities
available-for-sale of $836,000 less applicable tax expense of $317,000. During
the year ended December 31, 1996, the net decrease in capital totaled $100,000
which represents a decrease in the unrealized appreciation in securities
available-for-sale of $161,000 less applicable tax benefit of $61,000.
In November, 1995 the Financial Accounting Standards Board issued "A
Guide to Implementation of Statement 115 on Accounting for Certain Investments
in Debt and Equity Securities" which permits the reassessment of the
appropriateness of the classifications of all securities by December 31, 1995.
Reclassifications from the held-to-maturity classification that result from this
one-time reassessment will not call into question the intent of an entity to
hold other debt securities to maturity in the future. The Company transferred
securities with an amortized cost of $1,095,000 (market value - $1,088,000) to
the available-to-sale classification in December 1995 pursuant to these
provisions.
DEPOSITS
The increases in assets in 1996 and 1995 were funded primarily by
increases in deposits. Total deposits, which are the principal source of funds
for the Company, totaled $243,250,000 at December 31, 1996 compared to
$200,037,000 and $171,566,000 at December 31, 1995 and 1994, respectively. The
Company has targeted local consumers, professionals, and small businesses as its
central clientele; therefore, deposit instruments in the form of demand
deposits, savings accounts, money market demand accounts, certificates of
deposits and individual retirement accounts are offered to customers. Management
believes the Wilson County, DeKalb County and Smith County areas are growing
economic markets offering growth opportunities for the Company; however, the
Company competes with several of the larger bank holding companies that have
bank offices in these counties; and therefore, no assurances of market growth or
maintenance of current market share can be given. Even though the Company is in
a very competitive market, management believes that the market share will be
maintained or expanded.
The $43,213,000 or 21.6% growth in deposits in 1996 consisted of
changes in several deposit categories: savings accounts decreased $202,000
(2.1%) to $9,413,000; total certificates of deposit increased $28,067,000
(27.5%) to $130,267,000; money market demand accounts increased $7,294,000
(19.5%) to $44,649,000 and demand deposits increased $6,411,000 (30.8%) to
$27,205,000.
The average rate paid on average total interest-bearing deposits was
4.85% for 1996, compared to 4.91% for 1995. The average rate paid in 1994 was
3.83%.
The ratio of average loans to average deposits was 77.0% in 1996
compared with 73.3% and 67.8% in 1995 and 1994, respectively.
LIQUIDITY AND ASSET MANAGEMENT
The Company's management seeks to maximize net interest income by
managing the Company's assets and liabilities within appropriate constraints on
capital, liquidity and interest rate risk. Liquidity is the ability to maintain
sufficient cash levels necessary to fund operations, meet the requirements of
depositors and borrowers and fund attractive investment opportunities. Higher
levels of liquidity bear corresponding costs, measured in terms of lower yields
on short-term, more liquid earning assets and higher interest expense involved
in extending liability maturities. Liquid assets include cash and cash
equivalents and investment securities and money market instruments that will
mature within one year. At December 31, 1996, the Company's liquid assets
approximated $31 million.
<PAGE> 10
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company's primary source of liquidity is a stable core deposit
base. In addition short-term investments, loan payments and investment security
maturities provide a secondary source.
Interest rate risk (sensitivity) management focuses on the earnings
risk associated with changing interest rates. Management seeks to maintain
profitability in both immediate and long term earnings through funds
management/interest rate risk management. The Company's rate sensitivity
position has an important impact on earnings. Senior management of the Company
meets monthly to analyze the rate sensitivity position. These meetings focus on
the spread between the cost of funds and interest yields generated primarily
through loans and investments.
At December 31, 1996, the Company had a liability sensitive position (a
negative gap) for 1997. Liability sensitivity means that more of the Company's
liabilities are capable of repricing over certain time frames than assets. The
interest rates associated with these liabilities may not actually change over
this period but are capable of changing. The 1996 net earnings would have
deteriorated in a rising rate environment as compared with the fairly stable
rate environment. The 1995 and 1994 earnings were reduced by the rising interest
rates experienced in 1995 and 1994.
The following table shows the rate sensitivity gaps for different time periods
as of December 31, 1996:
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY GAPS One Year
December 31, 1996: 1-90 91-180 181-365 and
(In Thousands) Days Days Days Longer Total
- ------------------------------ ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest-earning assets $ 67,083 27,855 30,986 128,560 254,484
Interest-earning liabilities 113,083 40,927 39,780 27,871 221,661
------------------------------------------------------------
Interest-rate sensitivity gap $ (46,000) (13,072) (8,794) 100,689 32,823
============================================================
Cumulative gap $ (46,000) (59,072) (67,866) 32,823
------------------------------------------------------------
</TABLE>
At the present time there are no known trends or any known commitments,
demands, events or uncertainties that will result in or that are reasonably
likely to result in the Company's liquidity changing in any material way.
CAPITAL POSITION AND DIVIDENDS
CAPITAL. At December 31, 1996, total stockholders' equity was
$21,252,000 or 7.7% of total assets, which compares with $18,398,000 or 8.1% of
total assets at December 31, 1995, and $15,618,000 or 8.1% of total assets at
December 31, 1994. The dollar increase in stockholders' equity during 1996
reflects (i) the Company's net income of $3,107,000 less cash dividends of $.70
per share totaling $950,000, (ii) the issuance of 28,458 shares of common stock
for $797,000 in lieu of payment of cash dividends and (iii) reduction in the net
unrealized gains on available-for-sale securities of $100,000.
<PAGE> 11
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company's principal regulators have established minimum risk-based
capital requirements and leverage capital requirements for the Company and its
subsidiary banks. These guidelines classify capital into two categories of Tier
I and Tier II capital. Total capital consists of Tier I (or core) capital
(essentially common equity less intangible assets) and Tier II capital
(essentially qualifying long-term debt, of which the Company and subsidiary
banks have none, and a part of the allowance for possible loan losses). In
determining risk-based capital requirements, assets are assigned risk-weights of
0% to 100%, depending on regulatory assigned levels of credit risk associated
with such assets. The risk-based capital guidelines require the subsidiary banks
and the Company to have a total risk-based capital ratio of 8.0% and a Tier I
risk-based capital ratio of 4.0%. At December 31, 1996 the Company's total
risk-based capital ratio was 15.0% and its Tier I risk-based capital ratio was
13.7%, respectively, compared to a ratios of 13.8% and 12.5%, respectively at
December 31, 1995. The required Tier I leverage capital ratio (Tier I capital to
average assets for the most recent quarter) for the Company is 4%. At December
31, 1996, the Company had a leverage ratio of 9.2% compared to 8.2% at December
31, 1995.
SUPERVISION AND REGULATION
Bank Holding Company Act of 1956. As a Bank Holding Company, the
Company is subject to regulation under the Bank Holding Company Act of 1956 (the
"Act"), and the regulations adopted by the Board of Governors of the Federal
Reserve System (the "Board") under the Act. The Company is required to file
reports with, and is subject to examination to by, the Board. The subsidiary
banks are Tennessee state chartered banks, and are therefore subject to the
supervision of and is regularly examined by the Tennessee Department of
Financial Institutions (the "TDFI") and the Federal Deposit Insurance
Corporation ("FDIC").
Under the Act, a bank holding company may not directly or indirectly
acquire the ownership or control of more than five percent of the voting shares
or substantially all of the assets of any company, including a bank, without the
prior approval of the Board. In addition, bank holding companies are generally
prohibited under the Act from engaging in non-banking activities, subject to
certain exceptions. Under the Act, the Board is authorized to approve the
ownership by a bank holding company of shares of any company whose activities
have been determined by the Board to be so closely related to banking or to
managing or controlling banks as to be a proper incident thereto.
Under the Tennessee Bank Structure Act, a bank holding company which
controls 30% or more of the total deposits (excluding certain deposits) in all
federally insured financial institutions in Tennessee is prohibited from
acquiring any bank in Tennessee. Furthermore, no bank holding company may
acquire any bank in Tennessee that has been in operation less than five years or
organize a new bank in Tennessee, except in the case of certain interim bank
mergers and acquisitions of banks in financial difficulty. State banks and
national banks in Tennessee, however, may establish branches anywhere in the
state.
Recently, Congress enacted the Reigle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (the "IBBEA") which authorizes interstate
acquisitions of banks and bank holding companies without geographic limitation
beginning June 1, 1997. In addition, on that date, the IBBEA authorizes a bank
to merge with a bank in another state as long as neither of the states has opted
out of interstate branching between the date of enactment of the IBBEA and May
1, 1997. Tennessee has enacted interstate branching laws in response to the
federal law which, effective June 1, 1997, will prohibit the establishment or
acquisition in Tennessee by any bank of a branch office, branch bank or other
branch facility in Tennessee except (i) a Tennessee-chartered Bank (ii) a
national bank which has its main office in Tennessee, or (iii) a bank which
merges or consolidates with a Tennessee-chartered bank or a national bank with
its main office in Tennessee.
The Company and the subsidiary banks are subject to certain
restrictions imposed by the Federal Reserve Act and the Federal Deposit
Insurance Act, respectively, on any extensions of credit to the
<PAGE> 12
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Company or the subsidiary banks, on investments in the stock or other securities
of the Company or the subsidiary banks, and on taking such stock or other
securities as collateral for loans of any borrower.
FDICIA. Under the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA"), the federal banking regulators have assigned each insured
institution to one of five categories ("well capitalized," "adequately
capitalized" or one of three under capitalized categories) based upon the three
measures of capital adequacy discussed above. Institutions which have a Tier I
leverage capital ratio of 5%, a Tier I risk based capital ratio of 5% and a
total risk based capital ratio of 10% are defined as "well capitalized". All
institutions, regardless of their capital levels, are restricted from making any
capital distribution or paying any management fees that would cause the
institution to fail to satisfy the minimum levels for any of its capital
requirements for "adequately capitalized" status. The subsidiary banks currently
meet the requirements for "well capitalized" status.
An institution that fails to meet the minimum level for any relevant
capital measure (an "undercapitalized institution") may be: (i) subject to
increased monitoring by the appropriate federal banking regulator; (ii) required
to submit an acceptable capital restoration plan within 45 days (which must be
guaranteed by the institution's holding company); (iii) subject to asset growth
limits; and (iv) required to obtain prior regulatory approval for acquisitions,
branching and new lines of businesses. The bank regulatory agencies have
discretionary authority to reclassify a well capitalized institution as
adequately capitalized or to impose on an adequately capitalized institution
requirements or actions specified for undercapitalized institutions if the
agency determines that the institution is in an unsafe or unsound condition or
is engaging in an unsafe or unsound practice.
A "significantly undercapitalized" institution may be subject to a
number of additional requirements and restrictions, including orders to sell
sufficient voting stock to become "adequately capitalized," requirements to
reduce total assets and cessation of receipt of deposits from correspondent
banks. "Critically undercapitalized" institutions are subject to the appointment
of a receiver or conservator.
Under FDICIA, bank regulatory agencies have prescribed standards for
all insured depository institutions and their holding companies relating to
internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth,
compensation, a maximum ratio of classified assets to capital, minimum earnings
sufficient to absorb losses, a minimum ratio of market value to book value for
publicly traded shares and such other standards as the agencies deem
appropriate.
As a result of a federal law enacted in 1991 requiring each federal
banking agency to revise its risk-based capital standards to insure that those
standards take adequate account of interest rate risk, concentration of credit
risk and the risks of non-traditional activities, each of the federal banking
agencies has revised the risk-based capital guidelines described above to take
account of concentration of credit risk and risk of non-traditional activities.
In addition, the Board and the FDIC recently adopted a new rule that amended,
effective September 1, 1995, the capital standards to include explicitly a
bank's exposure to declines in the economic value of its capital due to changes
in interest rates as a factor to be considered in evaluating a bank's capital
adequacy. This rule does not codify a measurement framework for assessing the
level of a bank's interest rate exposure. These agencies, together with the
Office of the Comptroller of the Currency have issued for comment a joint policy
statement that describes the process to be used to measure and assess the
exposure of a bank's net economic value to changes in interest rates. These
agencies have indicated that they intend to issue a proposed rule that would
establish an explicit minimum capital charge for interest rate risk based on the
level of a bank's measured interest rate exposure. The agencies intend to
implement the proposed rule after they and the banking industry have had more
experience with the proposed supervisory and measurement process.
<PAGE> 13
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Pursuant to FDICIA, the FDIC has established a risk-based assessment
system for deposit insurance. Under the risk-based assessment regulations,
insured institutions such as the Bank, are assigned an assessment risk
classification based upon capital levels and supervisory evaluations. On August
8, 1995, the FDIC voted to reduce the assessment rates paid by most banks. Under
the revised rate structure, the best-rated banks would pay an assessment at
0.04% of insured deposits, while the weakest banks would continue to pay at a
0.31% rate. The revised rate structure became effective on a retroactive basis
as of June 1, 1995. As a result of the revised rate structure, the Company
received a refund of $111,000 in the third quarter of 1995. On November 14,
1995, the FDIC further reduced the rate structure starting in January, 1996.
Under the 1996 rate structure, the best rated banks will pay only the statutory
minimum assessment of $2,000 per year while the weakest banks will pay at a rate
of 0.27% of insured deposits. Wilson Bank and Trust paid the statutory annual
minimum assessment of $2,000 per year and DeKalb Community Bank paid $1,000 for
the half year it was in operation. Effective January 1, 1997 the banks will be
required to pay an annual assessment of .01296% of insured deposits.
Management is not aware of any current recommendations by the
regulatory authorities which, if implemented, would have a material effect on
the Registrant's liquidity, capital resources or operations.
Monetary Policy. The subsidiary banks are affected by commercial bank
credit policies of regulatory authorities, including the Board. An important
function of the Board is to regulate the national supply of bank credit in order
to attempt to combat recessionary and curb inflationary pressures. Among the
instruments of monetary policy used by the Board to implement these objectives
are: open market operations in U.S. Government securities, changes in discount
rates on member borrowings, changes in reserve requirements against bank
deposits and limitations on interest rates which member banks may pay on time
and savings deposits. These means are used in varying combinations to influence
overall growth of bank loans, investments and deposits, and may also affect
interest rates charged on loans or paid on deposits. The monetary policies of
the Board have had a significant effect on the operating results of commercial
banks, including nonmembers as well as members, in the past and are expected to
continue to do so in the future.
IMPACT OF INFLATION
Although interest rates are significantly affected by inflation, the
inflation rate is immaterial when reviewing the Company's results of operations.
<PAGE> 14
WILSON BANK HOLDING COMPANY
Consolidated Financial Statements
December 31, 1996 and 1995
(With Independent Auditor's Report Thereon)
<PAGE> 15
[LETTERHEAD] MAGGART & ASSOCIATES, P.C.
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Wilson Bank Holding Company
We have audited the accompanying consolidated balance sheets of Wilson Bank
Holding Company and Subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of earnings, changes in stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Wilson
Bank Holding Company and Subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
As discussed in note 1 to the consolidated financial statements, effective
January 1, 1994, the Company changed its method of accounting for debt and
equity securities to comply with the provisions of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities".
/s/ Maggart & Associates, P.C.
Nashville, Tennessee
January 10, 1997
<PAGE> 16
WILSON BANK HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
In Thousands
------------------
1996 1995
-------- -------
<S> <C> <C>
ASSETS
------
Loans, net of allowance for possible loan losses of $2,452,000
and $1,944,000, respectively $183,642 146,738
Securities:
Held-to-maturity, at amortized cost (market value $26,702,000
and $25,558,000, respectively) 26,535 25,391
Available-for-sale, at market (amortized cost $28,888,000 and
$26,350,000, respectively) 29,010 26,632
-------- -------
Total securities 55,545 52,023
-------- -------
Loans held for sale 2,219 1,715
Interest-bearing deposits in financial institutions -- 100
Federal funds sold 10,626 8,042
-------- -------
Total earning assets 252,032 208,618
-------- -------
Cash and due from banks 9,938 9,147
Premises and equipment, net 9,614 6,121
Accrued interest receivable 2,063 1,896
Organizational costs, net of accumulated amortization
of $32,000 and $16,000, respectively 104 9
Deferred income taxes 612 349
Other assets 941 549
-------- -------
$275,304 226,689
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits $243,250 200,037
Securities sold under repurchase agreements 5,616 6,693
Accrued interest and other liabilities 1,761 1,561
Minority interest 3,425 --
-------- -------
Total liabilities 254,052 208,291
-------- -------
Stockholders' equity:
Common stock, par value $2.00 per share, authorized 5,000,000,
1,378,074, and 1,349,616 shares issued and outstanding, respectively 2,756 2,699
Additional paid-in capital 6,684 5,944
Retained earnings 11,737 9,580
Net unrealized gains on available-for-sale securities net of taxes
of $46,000 and $107,000, respectively 75 175
-------- -------
Total stockholders' equity 21,252 18,398
-------- -------
COMMITMENTS AND CONTINGENCIES
$275,304 226,689
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 17
WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
In Thousands
Except Per Share Amounts
---------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 15,725 12,763 9,139
Interest and dividends on securities:
Taxable securities 1,934 1,792 1,769
Exempt from Federal income taxes 1,161 1,054 1,226
Interest on loans held for sale 106 126 97
Interest on Federal funds sold 517 622 213
Interest on interest-bearing deposits in financial
institutions 5 9 26
----------- --------- ---------
Total interest income 19,448 16,366 12,470
----------- --------- ---------
Interest expense:
Interest on negotiable order of withdrawal accounts 479 471 389
Interest on money market accounts and savings accounts 1,885 1,465 907
Interest on certificates of deposit 7,011 6,142 4,159
Interest on securities sold under repurchase
agreements 422 347 149
----------- --------- ---------
Total interest expense 9,797 8,425 5,604
----------- --------- ---------
Net interest income before provision for loan losses 9,651 7,941 6,866
Provision for possible loan losses (665) (527) (298)
----------- --------- ---------
Net interest income after provision for possible loan
losses 8,986 7,414 6,568
Non-interest income 2,781 1,874 1,497
Non-interest expense (7,254) (5,871) (5,287)
----------- --------- ---------
Earnings before income taxes 4,513 3,417 2,778
Income taxes 1,406 996 678
----------- --------- ---------
Net earnings $ 3,107 2,421 2,100
=========== ========= =========
Net earnings per common share $ 2.27 1.81 1.60
=========== ========= =========
Weighted average number of shares outstanding 1,368,675 1,339,070 1,310,795
=========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 18
WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Net
Unrealized
Gain (Loss)
Additional On Available
Common Paid-In Retained For-Sale
Stock Capital Earnings Securities Total
------- ---------- -------- ------------ ------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1993 $ 2,594 4,763 6,639 -- 13,996
Cash dividends declared,
$.50 per share -- -- (651) -- (651)
Issuance of 21,993 shares of stock
pursuant to dividend reinvestment
plan 44 473 -- -- 517
Effect of change to market value method
of accounting for debt and equity
securities as of January 1, 1994 -- -- -- 595 595
Net change in unrealized gain (loss) on
available-for-sale securities during
the year, net of tax benefits
of $574,000 -- -- -- (939) (939)
Net earnings for year -- -- 2,100 -- 2,100
------- ----- ------ ---- ------
Balance December 31, 1994 2,638 5,236 8,088 (344) 15,618
Cash dividends declared,
$.70 per share -- -- (929) -- (929)
Issuance of 30,482 shares of stock
pursuant to dividend reinvestment
plan 61 708 -- -- 769
Net change in unrealized gain (loss) on
available-for-sale securities during
the year, net of taxes of $317,000 -- -- -- 519 519
Net earnings for year -- -- 2,421 -- 2,421
------- ----- ------ ---- ------
Balance December 31, 1995 2,699 5,944 9,580 175 18,398
Cash dividends declared,
$.70 per share -- -- (950) -- (950)
Issuance of 28,458 shares of stock
pursuant to dividend reinvestment
plan 57 740 -- -- 797
Net change in unrealized gain on
available-for-sale securities during
the year, net of taxes of $61,000 -- -- -- (100) (100)
Net earnings for year -- -- 3,107 -- 3,107
------- ----- ------ ---- ------
Balance December 31, 1996 $ 2,756 6,684 11,737 75 21,252
======= ===== ====== ==== ======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 19
WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
In Thousands
------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Interest received $ 19,236 15,731 12,556
Fees received 2,213 1,328 1,098
Proceeds from sale of loans 31,803 24,018 28,314
Origination of loans held for sale (31,816) (24,356) (25,703)
Interest paid (9,814) (7,883) (5,397)
Cash paid to suppliers and employees (6,756) (5,320) (4,680)
Income taxes paid (1,595) (1,018) (755)
-------- ------- -------
Net cash provided by operating activities 3,271 2,500 5,433
-------- ------- -------
Cash flows from investing activities:
Purchase of available-for-sale securities (9,757) (16,241) (21,768)
Proceeds from sales of available-for-sale securities -- 4,542 17,104
Proceeds from maturities of available-for-sale securities 7,264 1,914 12,784
Purchase of held-to-maturity securities (4,143) (1,090) (1,411)
Proceeds from maturities of held-to-maturity securities 2,999 2,825 7,813
Loans made to customers, net of repayments (37,569) (24,088) (33,615)
Purchase of bank premise and equipment (4,162) (1,127) (2,123)
Proceeds from maturities of interest-bearing deposits in
financial institutions 100 -- 300
Proceeds from sale of fixed assets -- 14 130
Proceeds from sales of other real estate -- 20 9
Payments for organization costs (111) -- --
-------- ------- -------
Net cash used in investing activities (45,379) (33,231) (20,777)
-------- ------- -------
Cash flows from financing activities:
Net increase in non-interest bearing, savings and NOW deposit
accounts 14,302 12,311 8,804
Net increase in time deposits 28,911 16,210 10,288
Proceeds from sale of securities under agreements to repurchase -- 2,384 803
Payments on securities under agreements to repurchase (1,077) -- --
Dividends paid (950) (929) (651)
Proceeds from sale of common stock 797 769 517
Proceeds from sale of subsidiaries stock to minority
shareholders 3,500 -- --
-------- ------- -------
Net cash provided by financing activities 45,483 30,745 19,761
-------- ------- -------
Net increase in cash and cash equivalents 3,375 14 4,417
Cash and cash equivalents at beginning of year 17,189 17,175 12,758
-------- ------- -------
Cash and cash equivalents at end of year $ 20,564 17,189 17,175
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 20
WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
THREE YEARS ENDED DECEMBER 31, 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
In Thousands
----------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Reconciliation of net earnings to net cash provided by operating activities:
Net earnings $ 3,107 2,421 2,100
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 682 542 461
Provision for possible loan losses 665 527 298
Provision for deferred taxes (202) (112) (19)
Securities losses related to available-for-sale securities -- 26 9
Loss on sale of other real estate -- 11 9
Loss (gain) on sale of fixed assets 3 (5) (9)
FHLB dividend reinvestment (45) (37) (26)
Decrease (increase) in loans held for sale (504) (707) 2,220
Decrease (increase) in refundable income taxes (57) 6 (10)
Increase (decrease) in taxes payable 69 84 (48)
Decrease (increase) in accrued interest receivable (167) (598) 121
Increase (decrease) in interest payable (17) 542 207
Decrease (increase) in other assets (334) (172) 127
Increase (decrease) in accrued expenses 148 (28) (7)
Net losses of minority interests of commercial bank
subsidiaries (77) -- --
------- ----- ------
Total adjustments 164 79 3,333
------- ----- ------
Net cash provided by operating activities $ 3,271 2,500 5,433
======= ===== ======
Supplemental Schedule of Non-Cash Activities:
Investment securities transferred to available-for-sale $ -- 1,095 23,589
======= ===== ======
Unrealized gain (loss) in value of securities available-for-sale, net of taxes
of $61,000 in 1996, $317,000 in 1995 and $210,000
in 1994 $ (100) 519 (344)
======= ===== ======
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 21
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Wilson Bank Holding Company
and Subsidiaries are in accordance with generally accepted accounting
principles and conform to general practices within the banking
industry. The following is a brief summary of the significant policies.
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
the Company, its wholly-owned subsidiary, Wilson Bank & Trust,
Hometown Finance Company, a wholly-owned subsidiary of Wilson
Bank & Trust, DeKalb Community Bank, a 50% owned subsidiary,
and Community Bank of Smith County, a 50% owned subsidiary.
DeKalb Community Bank and Community Bank of Smith County were
organized in 1996. All significant intercompany accounts and
transactions have been eliminated in consolidation.
(b) NATURE OF OPERATIONS
Wilson Bank & Trust, DeKalb Community Bank and Community Bank
of Smith County operate under state bank charters and provide
full banking services. Wilson Bank & Trust also provides trust
services. As state banks, the subsidiary banks are subject to
regulations of the Tennessee Department of Financial
Institutions and the Federal Deposit Insurance Corporation.
The areas served by the banks include Wilson County, DeKalb
County, and Smith County, Tennessee and surrounding counties
in Middle Tennessee. Services are provided at the three main
offices and six branch locations.
(c) ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
(d) LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
Loans are stated at the principal amount outstanding. Unearned
interest on loans, which relates principally to installment
loans, is shown as a reduction of loans. Interest income on
certain installment loans is recognized by the sum of the
months' digits method, which approximates the interest method.
Interest on all other loans is computed on the outstanding
loan balance. Fees and incremental direct costs in excess of
the direct cost associated with the loan origination and
pricing process are deferred and amortized as yield
adjustments over the respective loan lives.
The allowance method is used by the Company to provide for
possible loan losses. Accordingly, all loan losses are charged
to the reserve for possible loan losses and all recoveries are
credited to it. Management's periodic evaluation of the
allowance is based on past loan experience and other factors
which, in management's judgment, deserve current recognition
in estimating possible loan losses. Such other factors
considered by management include growth and composition of the
loan portfolio, the relationship of the allowance for possible
loan losses to outstanding loans, adverse situations that may
effect the borrowers' ability to repay, the estimated value of
underlying collateral and current
7
<PAGE> 22
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
1
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(d) LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES, CONTINUED
economic conditions that may affect the borrower's ability to
repay. Impaired loans that are within the scope of Statement
of Financial Accounting Standards (SFAS) No. 114, "Accounting
by Creditors for Impairment of a Loan", as amended by SFAS No.
118, are measured based on the present value of expected
future cash flows discounted at the loan's effective interest
rate or, as a practical expedient, at the loan's observable
market price or the fair value of the collateral if the loan
is collateral dependent.
Accrual of interest is discontinued, and previously accrued
interest is reversed, on a loan when management believes,
after considering economic and business conditions and
collection efforts, that the borrower's financial condition is
such that collection of interest is doubtful. Management may
elect to continue the accrual of interest when the estimated
net realizable value of collateral is sufficient to cover the
principal balance and accrued interest.
(e) DEBT AND EQUITY SECURITIES
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 115 (SFAS No. 115), "Accounting for
Certain Investments in Debt and Equity Securities", effective
January 1, 1994. Under the provisions of the Statement,
securities are classified in three categories and accounted
for as follows:
- Securities Held-to-Maturity
Debt securities that the enterprise has the positive
intent and ability to hold to maturity are classified
as held-to-maturity securities and reported at
amortized cost. Amortization of premiums and
accretion of discounts are recognized by the interest
method.
- Trading Securities
Debt and equity securities that are bought and held
principally for the purpose of selling them in the
near term are classified as trading securities and
reported at fair value, with unrealized gains and
losses included in earnings.
- Securities Available-for-Sale
Debt and equity securities not classified as either
held-to-maturity securities or trading securities are
classified as available-for-sale securities and
reported at estimated fair value, with unrealized
gains and losses excluded from earnings and reported
in a separate component of stockholders' equity.
Premiums and discounts are recognized by the interest
method.
8
<PAGE> 23
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(e) DEBT AND EQUITY SECURITIES, CONTINUED
No securities have been classified as trading securities. On
January 1, 1994 the Company transferred $23,589,000 (market
value - $24,548,000) of investment securities to the
available-for-sale classification. The effect of the adoption
of SFAS No. 115 was to increase the capital of the Company by
$595,000 which represents the unrealized appreciation in
available-for-sale securities of $959,000 less applicable
taxes of $364,000.
In November, 1995 the Financial Accounting Standards Board
issued "A Guide to Implementation of Statement 115 on
Accounting for Certain Investments in Debt and Equity
Securities" which permits the reassessment of the
appropriateness of the classifications of all securities by
December 31, 1995. Reclassifications from the held-to-maturity
classification that result from this one-time reassessment
will not call into question the intent of an entity to hold
other debt securities to maturity in the future. The Company
transferred securities with an amortized cost of $1,095,000
(market value - $1,088,000) to the available-to-sale
classification in December, 1995 pursuant to the provisions of
this pronouncement.
Realized gains or losses from the sale of debt and equity
securities are recognized based upon the specific
identification method.
(f) LOANS HELD FOR SALE
Mortgage loans held for sale are reported at the lower of cost
or market value, determined by outstanding commitments from
investors at the balance sheet date. These loans are valued on
an aggregate basis.
(g) PREMISES AND EQUIPMENT
Premises and equipment are stated at cost. Depreciation is
computed primarily by the straight-line method over the
estimated useful lives of the related assets. Gain or loss on
items retired and otherwise disposed of is credited or charged
to operations and cost and related accumulated depreciation
are removed from the asset and accumulated depreciation
accounts.
Expenditures for major renewals and improvements of premises
and equipment are capitalized and those for maintenance and
repairs are charged to earnings as incurred.
(h) LONG-LIVED ASSETS
In March, 1995, Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," was
issued. SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used or
disposed of by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. During 1996, the
company adopted this statement and determined that no
impairment loss need be recognized for its long-lived assets.
9
<PAGE> 24
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(i) CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, amounts due from banks and
Federal funds sold. Generally, Federal funds sold are
purchased and sold for one-day periods. The Bank maintains
deposits with other financial institutions in excess of the
Federal insurance amounts. Management makes deposits only with
financial institutions it considers to be financially sound.
(j) INCOME TAXES
Provisions for income taxes are based on taxes payable or
refundable for the current year (after exclusion of
non-taxable income such as interest on state and municipal
securities) and deferred taxes on temporary differences
between the amount of taxable and pretax financial income and
between the tax bases of assets and liabilities and their
reported amounts in the financial statements. Deferred tax
assets and liabilities are included in the financial
statements at currently enacted income tax rates applicable to
the period in which the deferred tax asset and liabilities are
expected to be realized or settled as prescribed in SFAS No.
109, "Accounting for Income Taxes." As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are
adjusted through the provision of income taxes.
The Company and its wholly-owned subsidiaries file a
consolidated Federal income tax return. The 50% owned
subsidiaries file a separate Federal income tax return but are
included in the Company's consolidated state income tax
return. Each subsidiary provides for income taxes on a
separate-return basis.
(k) EARNINGS PER SHARE
Earnings per share is computed based upon the weighted average
number of common shares outstanding during the year.
(l) OTHER REAL ESTATE
Real estate acquired in settlement of loans is initially
recorded at the lower of cost (loan value of real estate
acquired in settlement of loans plus incidental expense) or
estimated fair value, less estimated cost to sell. Based on
periodic evaluations by management, the carrying values are
reduced by a direct charge to earnings when they exceed net
realizable value. Costs relating to the development and
improvement of the property are capitalized, while holding
costs of the property are charged to expense in the period
incurred.
(m) RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 and 1994
figures to conform to the presentation for 1996.
10
<PAGE> 25
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(n) OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
In the ordinary course of business the subsidiary bank has
entered into off-balance-sheet financial instruments
consisting of commitments to extend credit, commitments under
credit card arrangements, commercial letters of credit and
standby letters of credit. Such financial instruments are
recorded in the financial statements when they are funded or
related fees are incurred or received.
(2) LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
The classifications of loans at December 31, 1996 and 1995 is as
follows:
<TABLE>
<CAPTION>
In Thousands
----------------------
1996 1995
---- ----
<S> <C> <C>
Commercial, financial and agricultural $ 57,449 55,081
Installment 32,558 23,615
Real estate - construction 16,828 9,022
Real estate - mortgage 80,955 62,349
--------- -------
187,790 150,067
Unearned interest (1,696) (1,385)
Allowance for possible loan losses (2,452) (1,944)
--------- -------
$ 183,642 146,738
========= =======
</TABLE>
The principal maturities on loans at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
In Thousands
---------------------------------------------------------------------------
Commercial
Financial
and Real Estate- Real Estate-
Agricultural Installment Construction Mortgage Total
------------ ----------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C>
3 months or less $13,389 1,674 6,273 1,029 22,365
3 to 12 months 18,863 2,832 10,555 2,798 35,048
1 to 5 years 16,359 27,230 -- 23,521 67,110
Over 5 years 8,838 822 -- 53,607 63,267
------- ------ ------ ------ -------
$57,449 32,558 16,828 80,955 187,790
======= ====== ====== ====== =======
</TABLE>
11
<PAGE> 26
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(2) LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES, CONTINUED
At December 31, 1996, variable rate and fixed rate loans total
$71,874,000 and $114,220,000, respectively. At December 31, 1995,
variable rate loans were $64,938,000 and fixed rate loans totaled
$83,744,000.
In the normal course of business, the Company's subsidiary has made
loans at prevailing interest rates and terms to directors and executive
officers of the Company and to their affiliates. The aggregate amount
of these loans was $3,105,000 and $2,286,000 at December 31, 1996 and
1995, respectively. As of December 31, 1996 none of these loans were
restructured, nor were any related party loans charged-off during the
past three years.
An analysis of the activity with respect to such loans to related
parties is as follows:
<TABLE>
<CAPTION>
In Thousands
---------------------
December 31,
---------------------
1996 1995
---- ----
<S> <C> <C>
Balance, January 1 $ 2,286 2,205
New loans during the year 3,547 2,336
Repayments during the year (2,728) (2,255)
------- -----
Balance, December 31 $ 3,105 2,286
======= =====
</TABLE>
Loans which had been placed on non-accrual status totaled $260,000 and
$117,000 at December 31, 1996 and 1995, respectively. Had interest on
these loans been accrued, interest income would have been increased by
approximately $12,000 in 1996 and $7,000 in 1995.
Transactions in the allowance for possible loan losses for the years
ended December 31, 1996, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
In Thousands
---------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $ 1,944 1,556 1,303
Provision charged to operating expense 665 527 298
Loans charged off (174) (165) (59)
Recoveries on losses 17 26 14
------- ----- -----
Balance, end of year $ 2,452 1,944 1,556
======= ===== =====
</TABLE>
The Company's principal customers are basically in the Middle Tennessee
area with a concentration in Wilson County, Tennessee. Credit is
extended to businesses and individuals and is evidenced by promissory
notes. The terms and conditions of the loans including collateral
varies depending upon the purpose of the credit and the borrower's
financial condition.
In 1996, 1995 and 1994, the Company originated and sold loans in the
secondary market of $31,816,000, $24,356,000, and $25,703,000,
respectively. At December 31, 1996, the wholly-owned subsidiary Bank
had not been required to repurchase any of the loans originated by the
Bank and sold in the secondary market. The gain on sale of these loans
totaled $491,000, $369,000 and $391,000 in 1996, 1995 and 1994,
respectively.
12
<PAGE> 27
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(2) LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES, CONTINUED
Of the loans sold in the secondary market, the recourse to the
wholly-owned subsidiary Bank is limited. On loans sold to the Federal
Home Loan Mortgage Corporation, the Bank has a recourse obligation for
one year from the purchase date. At December 31, 1996, loans sold to
the Federal Home Loan Mortgage Corporation with existing recourse
totaled $2,659,000. All other loans sold in the secondary market
provide the purchase recourse to the Bank for a period of 90 days from
the date of purchase and only in the event of a default by the borrower
pursuant to the terms of the individual loan agreement. At December 31,
1996, total loans sold with recourse to the Bank, including those sold
to the Federal Home Loan Mortgage Corporation, aggregated $17,122,000.
Management expects no loss to result from these recourse provisions.
(3) DEBT AND EQUITY SECURITIES
Debt and equity securities have been classified in the balance sheet
according to management's intent. The Bank's classification of
securities at December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Securities Held-To-Maturity
-------------------------------------------------------
In Thousands
-------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S.
Government agencies and
corporations $ 3,097 3 12 3,088
Obligations of states and political
subdivision 15,961 263 51 16,173
Mortgage backed securities 7,477 33 69 7,441
------- --- ------ ------
$26,535 299 132 26,702
======= === ====== ======
</TABLE>
<TABLE>
<CAPTION>
Securities Available-For-Sale
-------------------------------------------------------
In Thousands
-------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S.
Government agencies and
corporations $22,317 34 84 22,267
Obligations of states and political
subdivision 4,561 169 3 4,727
Mortgage backed securities 2,010 25 19 2,016
------- --- ------ ------
$28,888 228 106 29,010
======= === ====== ======
</TABLE>
13
<PAGE> 28
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(3) DEBT AND EQUITY SECURITIES, CONTINUED
Debt and equity securities at December 31, 1995 consist of the
following:
<TABLE>
<CAPTION>
Securities Held-To-Maturity
-------------------------------------------------------
In Thousands
-------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S.
Government agencies and
corporations $ 3,550 4 42 3,512
Obligations of states and political
subdivision 13,509 307 31 13,785
Mortgage backed securities 8,332 33 104 8,261
------- --- --- ------
$25,391 344 177 25,558
======= === === ======
</TABLE>
<TABLE>
<CAPTION>
Securities Available-For-Sale
-------------------------------------------------------
In Thousands
-------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S.
Government agencies and
corporations $19,376 84 53 19,407
Obligations of states and political
subdivision 4,447 255 14 4,688
Mortgage backed securities 2,527 26 16 2,537
------- --- --- ------
$26,350 365 83 26,632
======= === === ======
</TABLE>
14
<PAGE> 29
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(3) DEBT AND EQUITY SECURITIES, CONTINUED
The amortized cost and estimated market value of debt securities at
December 31, 1996, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Market
Securities Held-To-Maturity Cost Value
--------------------------- --------- ---------
<S> <C> <C>
Due in one year or less $ 6,002 5,981
Due after one year through five years 7,580 7,706
Due after five years through ten years 3,026 3,087
Due after ten years 2,450 2,487
------- ------
19,058 19,261
Mortgage-backed securities 7,477 7,441
------- ------
$26,535 26,702
======= ======
</TABLE>
<TABLE>
<CAPTION>
Estimated
Amortized Market
Securities Available-For-Sale Cost Value
----------------------------- --------- ---------
<S> <C> <C>
Due in one year or less $ 4,612 4,604
Due after one year through five years 17,016 17,068
Due after five years through ten years 3,909 3,966
Due after ten years 633 648
------- ------
26,170 26,286
Mortgage-backed securities 2,010 2,016
Federal Home Loan Bank stock 708 708
------- ------
$28,888 29,010
======= ======
</TABLE>
15
<PAGE> 30
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(3) DEBT AND EQUITY SECURITIES, CONTINUED
Results from sales of debt and equity securities are as follows:
<TABLE>
<CAPTION>
In Thousands
-------------------------------
For the Year Ended December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Gross proceeds $ -- 4,542 17,104
==== ===== ======
Gross realized gains $ -- 20 104
Gross realized losses -- (46) (113)
---- ----- ------
Net realized losses $ -- (26) (9)
==== ===== ======
</TABLE>
The Company periodically applies the stress test to its securities
portfolio. To satisfy the stress test a security's estimated market
value should not decline more than certain percentages given certain
assumed interest rate increases. The Company had no securities that
failed to meet the stress test.
Securities carried in the balance sheet of approximately $41,451,000
(approximate market value of $41,546,000) and $36,109,000 (approximate
market value of $36,318,000), were pledged to secure public deposits
and for other purposes as required or permitted by law at December 31,
1996 and 1995, respectively.
Included in the securities above are $16,220,000 (market value of
$16,399,000) and $13,996,000 (market value of $14,283,000) at December
31, 1996 and 1995, respectively, in obligations of political
subdivisions located within the State of Tennessee. Management
purchases only obligations of such political subdivisions it considers
to be financially sound.
Securities that have rates that adjust prior to maturity totaled
$8,690,000 (market value $8,657,000) at December 31, 1996.
Included in the securities portfolio is stock of the Federal Home Loan
Bank amounting to $708,000 at December 31, 1996 and 1995. The stock can
be sold back at par and only to the Federal Home Loan Bank or to
another member institution.
(4) PREMISES AND EQUIPMENT
The detail of premises and equipment at December 31, 1996 and 1995 is
as follows:
<TABLE>
<CAPTION>
In Thousands
------------------------
1996 1995
---- ----
<S> <C> <C>
Land $ 1,506 1,214
Buildings 6,152 3,147
Leasehold improvements 151 148
Furniture and equipment 4,154 2,940
Automobiles 75 --
Construction in progress 57 494
------- ------
12,095 7,943
Less accumulated depreciation (2,481) (1,822)
------- ------
$ 9,614 6,121
======= ======
</TABLE>
16
<PAGE> 31
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(5) DEPOSITS
Deposits at December 31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
In Thousands
------------------
1996 1995
<S> <C> <C>
Demand deposits $ 27,205 20,794
Savings accounts 9,413 9,615
Negotiable order of withdrawal 20,138 19,339
Money market demand accounts 44,649 37,355
Certificates of deposit $100,000 or greater 39,712 30,479
Other certificates of deposit 90,555 71,721
Individual retirement accounts $100,000 or greater 1,898 2,045
Other individual retirement accounts 9,680 8,689
-------- -------
$243,250 200,037
======== =======
</TABLE>
Principal maturities of certificates of deposit and individual
retirement accounts at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
In Thousands
-----------------------------------------------
Single Deposits Single Deposits
Maturity Under $100,000 Over $100,000 Total
-------- -------------- ------------- -----
<S> <C> <C> <C>
3 months or less $ 19,642 13,625 33,267
3 to 6 months 29,155 11,773 40,928
6 to 12 months 30,077 9,703 39,780
1 to 5 years 21,361 6,509 27,870
$100,235 41,610 141,845
</TABLE>
The subsidiary banks are required to maintain cash balances or balances
with the Federal Reserve Bank or other correspondent banks based on
certain percentages of deposit types. The average required amounts for
the years ended December 31, 1996 and 1995 were approximately
$1,049,000 and $970,000, respectively.
(6) SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
The maximum amounts of outstanding repurchase agreements at any month
end during 1996 and 1995 was $11,552,000 and $10,661,000, respectively.
The average daily balance outstanding during 1996, 1995 and 1994 was
$8,224,000, $6,411,000 and $3,870,000, respectively. The underlying
securities are typically held by other financial institutions and are
designated as pledged.
17
<PAGE> 32
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(7) NON-INTEREST INCOME AND NON-INTEREST EXPENSE
The significant components of non-interest income and non-interest
expense for the years ended December 31 are presented below:
<TABLE>
<CAPTION>
In Thousands
----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Non-interest income:
Service charges on deposits $1,251 974 714
Other fees 962 526 383
Gains on sales of loans 491 369 391
Gains on sales of fixed assets -- 5 9
Minority interest in net losses
of subsidiaries 77 -- --
------ ----- -----
$2,781 1,874 1,497
====== ===== =====
Non-interest expense:
Employee salaries and benefits $3,805 3,009 2,623
Employee benefit plan 194 127 117
Occupancy expenses 469 290 280
Furniture and equipment expenses 624 568 442
Loss on sale of other real estate -- 11 9
FDIC insurance 3 198 346
Directors' fees 349 245 225
Other operating expenses 1,810 1,397 1,236
Security losses related to available-
for-sale securities -- 26 9
------ ----- -----
$7,254 5,871 5,287
====== ===== =====
</TABLE>
(8) INCOME TAXES
The components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
In Thousands
-------------------
December 31,
------------
1996 1995
---- ----
<S> <C> <C>
Deferred tax asset:
Federal $691 546
State 139 102
---- ----
830 648
---- ----
Deferred tax liability:
Federal (183) (252)
State (35) (47)
---- ----
(218) (299)
---- ----
$612 349
==== ====
</TABLE>
18
<PAGE> 33
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(8) INCOME TAXES, CONTINUED
The tax effects of each type of significant item that gave rise to
deferred taxes are:
<TABLE>
<CAPTION>
In Thousands
-------------
December 31,
------------
1996 1995
---- ----
<S> <C> <C>
Financial statement allowance for loan losses
in excess of tax allowance $ 835 645
Excess of depreciation deducted for tax purposes
over the amounts deducted in the financial statements (177) (192)
Financial statement deduction for deferred compensation
in excess of deduction for tax purposes 9 3
Financial statement deduction for preopening expenses in
excess of the amounts deducted for tax purposes 40 --
Unrealized gain on securities available-for-sale (46) (107)
----- ----
661 349
Benefit of 50% owned bank subsidiaries' Federal net
operating loss not recognized (49) --
----- ----
$ 612 349
===== ====
</TABLE>
The components of income tax expense (benefit) are summarized as
follows:
<TABLE>
<CAPTION>
In Thousands
--------------------------------
Federal State Total
------- ----- -----
<S> <C> <C> <C>
1996
----
Current $ 1,304 304 1,608
Deferred (162) (40) (202)
------- --- -----
Total $ 1,142 264 1,406
======= === =====
1995
----
Current $ 887 221 1,108
Deferred (95) (17) (112)
------- --- -----
Total $ 792 204 996
======= === =====
1994
----
Current $ 528 169 697
Deferred (16) (3) (19)
------- --- -----
Total $ 512 166 678
======= === =====
</TABLE>
19
<PAGE> 34
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(8) INCOME TAXES, CONTINUED
A reconciliation of actual income tax expense of $1,406,000, $996,000
and $678,000 for the years ended December 31, 1996, 1995 and 1994,
respectively, to the "expected" tax expense (computed by applying the
statutory rate of 34% to earnings before income taxes) is as follows:
<TABLE>
<CAPTION>
In Thousands
--------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax expense $ 1,534 1,162 945
State income taxes, net of Federal income
tax benefit 175 134 109
Tax exempt interest, net of interest expense
exclusion (331) (306) (371)
Tax expense related to minority interest loss
in subsidiaries (26) -- --
Net operating losses of 50% owned bank
subsidiaries not recognized 52 -- --
Other 2 6 (5)
------- ----- ----
$ 1,406 996 678
======= ===== ====
</TABLE>
Total income tax expense for 1995 and 1994 includes an income tax
benefit of $10,000 and $3,000, respectively related to the loss on sale
of securities. There were no sales of securities in 1996.
(9) COMMITMENTS AND CONTINGENT LIABILITIES
The Company is party to litigation and claims arising in the normal
course of business. Management, after consultation with legal counsel,
believes that the liabilities, if any, arising from such litigation and
claims will not be material to the consolidated financial position.
During the year ended December 31, 1993, a subsidiary bank entered into
an operating lease agreement for the land on which a branch facility is
located. The agreement is for a period of five years and can be renewed
for up to ten additional terms of five years each. In the fourth year,
the lease is to be adjusted for the annual rate of inflation as
determined by the Consumer Price Index. In August, 1994, the
wholly-owned subsidiary of the bank subsidiary entered into an
operating lease agreement for a building. The agreement is for a period
of three years and can be renewed for an additional term of five years.
During the year ending December 31, 1995, the subsidiary entered into
an operating lease agreement for facilities related to the operation of
a new branch. The agreement is for a period of five years and can be
renewed for up to two consecutive five year terms. During 1996, one of
the 50% owned bank subsidiaries entered into an operating lease
agreement for a building. The agreement is for one year with a six
month renewal option. The subsidiary bank also leases land on which a
stand-alone automatic teller machine is located. Future minimum rental
payments required under the terms of the noncancellable leases are as
follows:
<TABLE>
<CAPTION>
Years Ending December 31, In Thousands
------------------------- ------------
<S> <C>
1997 $ 50
1998 34
1999 26
2000 13
2001 2
----
$125
====
</TABLE>
20
<PAGE> 35
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(9) Commitments and Contingent Liabilities, Continued
Total rent expense amounted to $59,000, $40,000 and $31,000,
respectively, during the years ended December 31, 1996, 1995 and 1994.
(10) Financial Instruments with Off-Balance-Sheet Risk
The Company is party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of
its customers. These financial instruments consist primarily of
commitments to extend credit. These instruments involve, to varying
degrees, elements of credit risk in excess of the amount recognized in
the consolidated balance sheets. The contract or notional amounts of
those instruments reflect the extent of involvement the Company has in
particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit is represented by the contractual notional amount of those
instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.
<TABLE>
<CAPTION>
In Thousands
-------------------------
Contract or
Notional Amount
-------------------------
1996 1995
---- ----
<S> <C> <C>
Financial instruments whose contract
amounts represent credit risk:
Commercial loan commitments $20,022 15,958
Unfunded lines-of-credit 5,461 4,431
Letters of credit 826 1,687
------- ------
Total $26,309 22,076
======= ======
</TABLE>
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments are expected to be drawn upon, the total commitment amounts
generally represent future cash requirements. The Company evaluates
each customer's credit-worthiness on a case-by-case basis. The amount
of collateral, if deemed necessary by the Company upon extension of
credit, is based on management's credit evaluation of the counterparty.
Collateral normally consists of real property.
21
<PAGE> 36
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(11) CONCENTRATION OF CREDIT RISK
Practically all of the Company's loans, commitments, and commercial and
standby letters of credit have been granted to customers in the
Company's market area. Practically all such customers are depositors of
the subsidiary banks. Investment in state and municipal securities also
include governmental entities within the Company's market area. The
concentrations of credit by type of loan are set forth in note 2 to the
consolidated financial statements.
At December 31, 1996, the Company's cash and due from banks included
commercial bank deposit accounts aggregating $96,000 in excess of the
Federal Deposit Insurance Corporation limit of $100,000 per
institution.
In addition, Federal funds sold were deposited with five banks.
(12) EMPLOYEE BENEFIT PLAN
The Company has in effect a 401(k) plan which covers eligible
employees. To be eligible an employee must have obtained the age of 20
1/2. The provisions of the plan provide for both employee and employer
contributions. For the years ended December 31, 1996, 1995 and 1994,
the Bank contributed $188,000, $127,000, and $117,000, respectively, to
this plan.
(13) DIVIDEND REINVESTMENT PLAN
Under the terms of the Company's dividend reinvestment plan holders of
common stock may elect to automatically reinvest cash dividends in
additional shares of common stock. The Company may elect to sell
original issue shares or to purchase shares in the open market for the
account of participants. Original issue shares of 28,458 in 1996,
30,482 in 1995 and 21,993 in 1994 were sold to participants under the
terms of the plan.
(14) REGULATORY MATTERS AND RESTRICTIONS ON DIVIDENDS
The Company and its bank subsidiaries are subject to regulatory capital
requirements administered by the Federal Deposit Insurance Corporation,
the Federal Reserve and the Tennessee Department of Financial
Institutions. Failure to meet minimum capital requirements can initiate
certain mandatory -- and possibly additional discretionary-actions by
regulators that, if undertaken, could have a direct material effect on
the Company's financial statements. The Company's capital
classification is also subject to qualitative judgments about
components, risk weightings and other factors. Those qualitative
judgments could also affect the Bank's capital status and the amount of
dividends the subsidiary may distribute. At December 31, 1996,
management believes that the Company and all of its subsidiaries meet
all such capital requirements to which they are subject.
The Company and its subsidiary banks are required to maintain minimum
amounts of capital to total "risk weighted" assets, as defined by the
banking regulators. At December 31, 1996, the Company and its bank
subsidiaries are required to have minimum Tier I and Tier II (total
capital) ratios of 4% and 8%, respectively. The Company's actual ratios
at that date were 13.72% and 14.96%, respectively. The leverage ratio
at December 31, 1996 was 9.24% and the minimum requirements was 4%.
22
<PAGE> 37
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(15) DEFERRED COMPENSATION PLAN
Beginning in 1995, the Company's wholly-owned subsidiary bank provides
its executive officers a deferred compensation plan, which also
provides for death and disability benefits. The plan was established by
the Board of Directors to reward executive management for past
performance and to provide additional incentive to retain the service
of executive management. There were four employees participating in the
plan at December 31, 1996.
The plan provides retirement benefits for a period of 180 months after
the employee reaches the age of 65. This benefit can be reduced if the
wholly-owned subsidiaries Bank's average return on assets falls below
1%. The plan also provides benefits in the event the executive should
die or become disabled prior to reaching retirement. The wholly-owned
subsidiary bank has purchased insurance policies or other assets to
provide the benefits listed above. The insurance policies remain the
sole property of the wholly-owned subsidiary bank and are payable to
the Bank. At December 31, 1996 and 1995, the deferred compensation
liability totaled $24,000 and $9,000, respectively, the cash surrender
value of life insurance was $122,000 and $56,000, respectively, and the
face amount of the insurance policies in force approximated $1,480,000
and $1,290,000, respectively. The deferred compensation plan is not
qualified under Section 401 of the Internal Revenue Code.
23
<PAGE> 38
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(16) WILSON BANK HOLDING COMPANY -
PARENT COMPANY FINANCIAL INFORMATION
WILSON BANK HOLDING COMPANY
(PARENT COMPANY ONLY)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
In Thousands
------------------
1996 1995
---- ----
ASSETS
------
<S> <C> <C>
Cash on hand $ 61* 55*
Organizational costs, net 4 9
Investment in wholly-owned commercial bank subsidiary 17,698* 18,277*
Investment in 50% owned commercial bank subsidiaries 3,425* --
Refundable income taxes 58 41
Other assets 6 16
------- ------
Total assets $21,252 18,398
======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Stockholders' equity:
Common stock, par value $2.00 per share authorized
5,000,000 shares, issued and outstanding 1,378,074
and 1,349,616 shares, respectively $ 2,756 2,699
Additional paid-in capital 6,684 5,944
Retained earnings 11,737 9,580
Unrealized gain on available-for-sale securities,
net of taxes of $46,000 and $107,000,
respectively 75 175
------- ------
21,252 18,398
------- ------
Total liabilities and
stockholders equity $21,252 18,398
======= ======
</TABLE>
*Eliminated in consolidation.
24
<PAGE> 39
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(16) WILSON BANK HOLDING COMPANY -
PARENT COMPANY FINANCIAL INFORMATION
WILSON BANK HOLDING COMPANY
(PARENT COMPANY ONLY)
STATEMENTS OF EARNINGS
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
In Thousands
-------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Expenses:
Employee salary and benefits $ 9 14 --
Amortization of organizational costs 5 5 5
Directors fees 129 48 44
Other 11 4 6
------- ----- -----
Loss before Federal income tax benefits and
equity in undistributed earnings of
commercial bank subsidiaries (154) (71) (55)
Federal income tax benefits 58 27 21
------- ----- -----
(96) (44) (34)
Equity in undistributed earnings of commercial bank
subsidiaries 3,203* 2,465* 2,134*
------- ----- -----
Net earnings $ 3,107 2,421 2,100
======= ===== =====
</TABLE>
*Eliminated in consolidation.
25
<PAGE> 40
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(16) WILSON BANK HOLDING COMPANY -
PARENT COMPANY FINANCIAL INFORMATION
WILSON BANK HOLDING COMPANY
(PARENT COMPANY ONLY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Net
Unrealized
(Loss) Gain
Additional On Available
Common Paid-In Retained For-Sale
Stock Capital Earnings Securities Total
------- ---------- -------- ------------ -------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1993 $ 2,594 4,763 6,639 -- 13,996
Cash dividends declared -- -- (651) -- (651)
Issuance of stock pursuant to dividend
reinvestment plan 44 473 -- -- 517
Effect of change to market value method of
accounting for debt and equity securities
as of January 1, 1994 -- -- -- 595 595
Net change in unrealized gain (loss) on
available-for-sale securities during the
year, net of tax benefits of $574,000 -- -- -- (939) (939)
Net earnings for year -- -- 2,100 -- 2,100
------- ------- ------- ------- -------
Balance December 31, 1994 2,638 5,236 8,088 (344) 15,618
Cash dividends declared -- -- (929) -- (929)
Issuance of stock pursuant to dividend
reinvestment plan 61 708 -- -- 769
Net change in unrealized gain (loss) on
available-for-sale securities during the
year, net of taxes of $317,000 -- -- -- 519 519
Net earnings for year -- -- 2,421 -- 2,421
------- ------- ------- ------- -------
Balance December 31, 1995 2,699 5,944 9,580 175 18,398
Cash dividends declared -- -- (950) -- (950)
Issuance of stock pursuant to dividend
reinvestment plan 57 740 -- -- 797
Net change in unrealized gain on
available-for-sale securities during the
year, net of taxes of $61,000 -- -- -- (100) (100)
Net earnings for year -- -- 3,107 -- 3,107
------- ------- ------- ------- -------
Balance December 31, 1996 $ 2,756 6,684 11,737 75 21,252
======= ======= ======= ======= =======
</TABLE>
26
<PAGE> 41
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(16) WILSON BANK HOLDING COMPANY -
PARENT COMPANY FINANCIAL INFORMATION
WILSON BANK HOLDING COMPANY
(PARENT COMPANY ONLY)
STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
In Thousands
------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Cash paid to suppliers and other $ 114 55 50
------- ---- ----
Net cash used in operating activities (114) (55) (50)
------- ---- ----
Cash flows from investing activities:
Purchase of stock in minority owned subsidiaries (3,500) -- --
Decrease in due from subsidiaries 16 -- --
Dividend received from commercial bank subsidiary 3,757 257 187
------- ---- ----
Net cash provided by investing activities 273 257 187
------- ---- ----
Cash flows from financing activities:
Dividends paid (950) (929) (651)
Proceeds from sale of stock 797 769 517
------- ---- ----
Net cash used in financing activities (153) (160) (134)
------- ---- ----
Net increase in cash and cash equivalents 6 42 3
Cash and cash equivalents at beginning of period 55 13 10
------- ---- ----
Cash and cash equivalents at end of year $ 61 55 13
======= ==== ====
</TABLE>
27
<PAGE> 42
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(16) WILSON BANK HOLDING COMPANY -
PARENT COMPANY FINANCIAL INFORMATION, CONTINUED
WILSON BANK HOLDING COMPANY
(PARENT COMPANY ONLY)
STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
In Thousands
-----------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Reconciliation of net earnings to net cash used in
operating activities:
Net earnings $ 3,107 2,421 2,100
Adjustments to reconcile net earnings to net cash
used in operating
activities:
Equity in earnings of commercial bank subsidiaries (3,203) (2,465) (2,134)
Amortization of organization costs 5 5 5
Increase in other assets (6) (16) --
Increase in refundable income taxes (17) -- (21)
------- ------ ------
Total adjustments (3,221) (2,476) (2,150)
------- ------ ------
Net cash used in operating activities $ (114) (55) (50)
======= ====== ======
</TABLE>
28
<PAGE> 43
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(17) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures about
Fair Value of Financial Instruments (SFAS No. 107), requires that the
Company disclose estimated fair values for its financial instruments.
Fair value estimates, methods, and assumptions are set forth below for
the Company's financial instruments.
Cash and short-term investments
For those short-term instruments, the carrying amount is a
reasonable estimate of fair value.
Securities
The carrying amounts for short-term securities approximate
fair value because they mature in 90 days or less and do not
present unanticipated credit concerns. The fair value of
longer-term securities and mortgage-backed securities,
except certain state and municipal securities, is estimated
based on bid prices published in financial newspapers or bid
quotations received from securities dealers. The fair value
of certain state and municipal securities is not readily
available through market sources other than dealer
quotations, so fair value estimates are based on quoted
market prices of similar instruments, adjusted for
differences between the quoted instruments and the
instruments being valued.
SFAS No. 107 specifies that fair values should be calculated
based on the value of one unit without regard to any premium
or discount that may result from concentrations of ownership
of a financial instrument, possible tax ramifications, or
estimated transaction costs. Accordingly, these
considerations have not been incorporated into the fair
value estimates.
Loans
Fair values are estimated for portfolios of loans with
similar financial characteristics. Loans are segregated by
type such as commercial, mortgage, credit card and other
consumer. Each loan category is further segmented into fixed
and adjustable rate interest terms.
29
<PAGE> 44
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(17) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
Loans, Continued
The fair value of the various categories of loans is
estimated by discounting the future cash flows using the
current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same
remaining average estimated maturities.
The estimated maturity for mortgages is modified from the
contractual terms to give consideration to management's
experience with prepayments. Management has made estimates
of fair value discount rates that it believes to be
reasonable. However, because there is no market for many of
these financial instruments, management has no basis to
determine whether the fair value presented below would be
indicative of the value negotiated in an actual sale.
The value of the loan portfolio is also discounted in
consideration of the credit quality of the loan portfolio as
would be the case between willing buyers and sellers.
Particular emphasis has been given to loans on the
subsidiary bank's internal watch list. Valuation of these
loans is based upon borrower performance, collateral values
(including external appraisals), etc.
Deposit Liabilities
The fair value of demand deposits, savings accounts and
certain money market deposits is the amount payable on
demand at the reporting date. The fair value of
fixed-maturity certificates of deposit is estimated using
the rates currently offered for deposits of similar
remaining maturities. Under the provision of SFAS No. 107
the fair value estimates for deposits does not include the
benefit that results from the low cost funding provided by
the deposit liabilities compared to the cost of borrowing
funds in the market.
Securities Sold Under Repurchase Agreements
The securities sold under repurchase agreements are payable
upon demand. For this reason the carrying amount is a
reasonable estimate of fair value.
30
<PAGE> 45
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(17) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
Commitments to Extend Credit, Standby Letters of Credit and
Financial Guarantees Written
Loan commitments are made to customers generally for a
period not to exceed one year and at the prevailing interest
rates in effect at the time the loan is closed. Commitments
to extend credit related to construction loans are made for
a period not to exceed six months with interest rates at the
current market rate at the date of closing. In addition,
standby letters of credit are issued for periods up to three
years with rates to be determined at the date the letter of
credit is funded. Fees are only charged for the construction
loans and the standby letters of credit and the amounts
unearned at December 31, 1996 are insignificant.
Accordingly, these commitments have no carrying value and
management estimates the commitments to have no significant
fair value.
The carrying value and estimated fair values of the
Company's financial instruments at December 31, 1996 and
1995 are as follows:
<TABLE>
<CAPTION>
In Thousands
----------------------------------------------------------------
1996 1995
----------------------------- ---------------------------
Carrying Carrying
Amount Fair Value Value Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term
investments $ 20,564 20,564 17,289 17,289
Securities 55,545 55,712 52,023 52,190
Loans 186,094 148,682
Less: allowance for
loan losses (2,452) (1,944)
-------- ------- ------- -------
Loans, net of
allowance 183,642 183,263 146,738 147,386
-------- ------- ------- -------
Loans held for sale 2,219 2,219 1,715 1,715
-------- ------- ------- -------
Financial liabilities:
Deposits 243,250 243,962 200,037 200,900
Securities sold
under repurchase
agreements 5,616 5,616 6,693 6,693
Unrecognized financial
instruments:
Commitments to extend
credit -- -- -- --
Standby letters of credit -- -- -- --
</TABLE>
31
<PAGE> 46
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
(17) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
Limitations
Fair value estimates are made at a specific point in time,
based on relevant market information and information about
the financial instruments. These estimates do not reflect
any premium or discount that could result from offering for
sale at one time the Company's entire holdings of a
particular financial instrument. Because no market exists
for a significant portion of the Company's financial
instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic
conditions, risk characteristics of various financial
instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and matters
of significant judgment and therefore cannot be determined
with precision. Changes in assumptions could significantly
affect the estimates.
Fair value estimates are based on estimating
on-and-off-balance sheet financial instruments without
attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are
not considered financial instruments. For example, a
subsidiary Bank has a mortgage department that contributes
net fee income annually. The mortgage department is not
considered a financial instrument, and its value has not
been incorporated into the fair value estimates. Other
significant assets and liabilities that are not considered
financial assets or liabilities include deferred tax assets
and liabilities and property, plant and equipment. In
addition, the tax ramifications related to the realization
of the unrealized gains and losses can have a significant
effect on fair value estimates and have not been considered
in the estimates.
32
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of the Issuer
The Company has a wholly-owned subsidiary, Wilson Bank and Trust, a
state chartered bank incorporated under the laws of the State of Tennessee and
doing business under the same name. Wilson Bank and Trust has a wholly-owned
subsidiary, Hometown Finance Company, a state chartered loan and thrift company
incorporated under the laws of the State of Tennessee and doing business under
the same name. The Company also owns 50% of DeKalb Community Bank, a state
chartered bank incorporated under the laws of the State of Tennessee and doing
business under the same name and 50% of Community Bank of Smith County, a state
chartered bank incorporated under the laws of the State of Tennessee and doing
business under the same name.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 9,938
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 10,626
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 29,010
<INVESTMENTS-CARRYING> 26,535
<INVESTMENTS-MARKET> 26,702
<LOANS> 186,094
<ALLOWANCE> 2,452
<TOTAL-ASSETS> 275,304
<DEPOSITS> 243,250
<SHORT-TERM> 5,616
<LIABILITIES-OTHER> 5,186
<LONG-TERM> 0
0
0
<COMMON> 2,756
<OTHER-SE> 18,496
<TOTAL-LIABILITIES-AND-EQUITY> 275,304
<INTEREST-LOAN> 15,725
<INTEREST-INVEST> 3,095
<INTEREST-OTHER> 628
<INTEREST-TOTAL> 19,448
<INTEREST-DEPOSIT> 9,375
<INTEREST-EXPENSE> 9,797
<INTEREST-INCOME-NET> 9,651
<LOAN-LOSSES> 665
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,254
<INCOME-PRETAX> 4,513
<INCOME-PRE-EXTRAORDINARY> 4,513
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,107
<EPS-PRIMARY> 2.27
<EPS-DILUTED> 2.27
<YIELD-ACTUAL> 4.46
<LOANS-NON> 260
<LOANS-PAST> 794
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,054
<ALLOWANCE-OPEN> 1,944
<CHARGE-OFFS> 174
<RECOVERIES> 17
<ALLOWANCE-CLOSE> 2,452
<ALLOWANCE-DOMESTIC> 2,452
<ALLOWANCE-FOREIGN> 2,452
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
