<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
MARK ONE
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number 0-20402
-------
WILSON BANK HOLDING COMPANY
---------------------------
(Exact Name of Registrant As Specified in Its Charter)
Tennessee 62-1497076
--------- ----------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
623 West Main Street, Lebanon, Tennessee 37087
----------------------------------------------
(Address of principal executive offices and Zip Code)
(615) 444-2265
--------------
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common stock outstanding: 1,407,429 shares at November 11, 1997.
<PAGE> 2
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited consolidated financial statements of the registrant and its
wholly-owned subsidiary Wilson Bank & Trust ("WB&T" or "Wilson") and its
subsidiaries DeKalb Community Bank ("DCB" or "DeKalb" ) and Community Bank of
Smith County ("CBSC" or "Smith") of which there is also a minority interest
ownership are as follows:
Consolidated Balance Sheets - September 30, 1997 and December 31, 1996.
Consolidated Statements of Income - For the nine months ended September
30, 1997 and 1996.
Consolidated Statements of Income - For the quarters ended September
30, 1997 and 1996.
Consolidated Statements of Cash Flows - For the nine months ended
September 30, 1997 and 1996.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
PART II: OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
2
<PAGE> 3
WILSON BANK HOLDING COMPANY
Consolidated Balance Sheets
September 30, 1997 and December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1997 1996
(In Thousands)
<S> <C> <C>
ASSETS
Loans (less allowance for possible loan
losses of $2,899,000 and $2,452,000, respectively) $229,325 $183,642
Securities:
Held-to-maturity, at cost (market
value of $25,574,000 and $26,702,000, respectively) 25,309 26,535
Available-for-sale, at market (amortized
cost $36,390,000 and $28,888,000, respectively) 36,337 29,010
------------------
Total securities 61,646 55,545
------------------
Loans held for sale 1,252 2,219
Federal funds sold 20,153 10,626
------------------
Total earning assets 312,376 252,032
------------------
Cash and due from banks 11,560 9,938
Bank premises and equipment, net 11,729 9,614
Accrued interest receivable 2,707 2,063
Organizational costs 84 104
Deferred income tax asset 596 612
Other assets 959 941
------------------
TOTAL ASSETS $340,011 $275,304
==================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE> 4
WILSON BANK HOLDING COMPANY
Consolidated Balance Sheets
September 30, 1997 and December 31, 1996
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1997 1996
(In Thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $301,430 $243,250
Securities sold under agreement to
repurchase 9,110 5,616
Accrued interest 1,607 1,356
Other liabilities 292 405
Minority interest in assets of subsidiary 3,426 3,425
--------------------
Total liabilities 315,865 254,052
--------------------
STOCKHOLDERS' EQUITY
Common stock, $2.00 par value per share;
authorized 5,000,000 shares; 1,407,429
and 1,378,074 issued and outstanding at
September 30, 1997 and December 31, 1996,
respectively 2,815 2,756
Additional paid-in capital 7,527 6,684
Retained earnings 13,684 11,737
Net unrealized appreciation on available-
for-sale securities, net of taxes
of $77,000 of $46,000, respectively 120 75
--------------------
Total stockholders' equity 24,126 21,252
--------------------
Commitments and contingencies
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $340,011 $275,304
====================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE> 5
WILSON BANK HOLDING COMPANY
Consolidated Statements of Earnings
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
Sept. 30,
1997 1996
(Dollars In Thousands
Except Per Share Amounts)
<S> <C> <C>
Interest income:
Interest and fees on loans $15,637 $12,114
Interest and dividends on securities:
Taxable securities 1,842 1,447
Exempt from Federal income taxes 841 848
Interest on loans held for sale 80 67
Interest on federal funds sold 676 398
Interest on interest-bearing deposits in
financial institutions 0 5
--------------------
Total interest income 19,076 14,879
--------------------
Interest expense:
Interest on negotiable order of
withdrawal accounts 407 374
Interest on money market and
savings accounts 1,890 1,405
Interest on certificates of deposit 6,599 5,086
Interest on securities sold under
agreement to repurchase 237 282
--------------------
Total interest expense 9,133 7,147
--------------------
Net interest income before provisions for
possible loan losses 9,943 7,732
Provision for possible loan losses 575 442
--------------------
Net interest income after provision for
possible loan losses 9,368 7,290
--------------------
Non-interest income:
Service charges on deposit accounts 1,072 929
Other fees and commissions 485 263
Gain on sale of loans 507 482
Minority interest in net loss of
subsidiaries 2 14
--------------------
Total non-interest income 2,066 1,688
--------------------
</TABLE>
5
<PAGE> 6
WILSON BANK HOLDING COMPANY
Consolidated Statements of Earnings
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
(Continued)
<TABLE>
<S> <C> <C>
Non-interest expenses:
Salaries and employee benefits 3,759 2,943
Occupancy expenses, net 456 284
Furniture and equipment expense 977 638
Data processing expense 471 242
Other operating expenses 1,305 1,051
-----------------
Total non-interest expenses 6,968 5,158
-----------------
Earnings before income taxes 4,466 3,820
Income taxes 1,480 1,241
-----------------
Net earnings $2,986 $2,579
=================
Weighted average number of shares of
common stock outstanding 1,394,103 1,366,333
Net earnings per share $ 2.14 1.89
Dividends per share $ .80 .70
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE> 7
WILSON BANK HOLDING COMPANY
Consolidated Statements of Earnings
For the Quarters Ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Quarters Ended
Sept. 30,
1997 1996
(Dollars In Thousands
Except Per Share Amounts)
<S> <C> <C>
Interest income:
Interest and fees on loans $5,632 $ 4,328
Interest and dividends on securities:
Taxable securities 646 496
Exempt from Federal income taxes 280 287
Interest on loans held for sale 26 24
Interest on federal funds sold 237 65
-----------------
Total interest income 6,821 5,200
-----------------
Interest expense:
Interest on negotiable order of
withdrawal accounts 108 111
Interest on money market and
savings accounts 736 491
Interest on certificates of deposit 2,375 1,702
Interest on securities sold under
agreement to repurchase 94 120
-----------------
Total interest expense 3,313 2,424
-----------------
Net interest income before provisions for
possible loan losses 3,508 2,776
Provision for possible loan losses 187 165
-----------------
Net interest income after provision for
possible loan losses 3,321 2,611
-----------------
Non-interest income:
Service charges on deposit accounts 374 328
Other fees and commissions 201 123
Gain on sale of loans 193 160
-----------------
Total non-interest income 748 611
-----------------
</TABLE>
7
<PAGE> 8
WILSON BANK HOLDING COMPANY
Consolidated Statements of Earnings
For the Quarters Ended September 30, 1997 and 1996
(Unaudited)
(Continued)
<TABLE>
<S> <C> <C>
Non-interest expenses:
Salaries and employee benefits 1,268 1,041
Occupancy expenses, net 163 101
Furniture and equipment expense 297 229
Data processing expense 182 88
Other operating expenses 400 383
-------------------
Total non-interest expenses 2,310 1,845
-------------------
Net earnings before income taxes 1,759 1,377
Income taxes 587 443
-------------------
Net earnings $1,172 $ 934
===================
Weighted average number of shares of
common stock outstanding 1,392,182 1,375,908
Net earnings per share $ 0.84 $ 0.68
Dividends per share $ 0.40 $ 0.35
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
8
<PAGE> 9
WILSON BANK HOLDING COMPANY
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1997 and 1996
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
Sept. 30,
1997 1996
(In Thousands)
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 18,406 $ 14,683
Fees and commissions received 1,528 995
Proceeds from sale of loans 30,908 24,956
Origination of loans held for sale (29,434) (24,296)
Interest paid (8,882) (7,431)
Cash paid to suppliers and employees (6,199) (4,642)
Income taxes paid (1,617) (1,178)
-----------------------
Net cash provided by operating
activities 4,710 3,087
-----------------------
Cash flows from investing activities:
Proceeds from maturities of
held-to-maturity securities 5,286 3,038
Proceeds from maturities of
available-for-sale securities 10,638 6,558
Proceeds from sale of available-for-
sale securities 500 -
Proceeds from maturities of interest
bearing time deposits - 100
Purchase of held-to-maturity securities (4,046) (4,668)
Purchase of available-for-sale securities (18,378) (5,360)
Loans made to customers, net of repayments (46,546) (28,606)
Proceeds from sale of premises and
equipment - 1
Proceeds from sale of other real estate 288 -
Purchase of premises and equipment (2,840) (2,924)
-----------------------
Net cash used in investing activities (55,098) (31,861)
-----------------------
</TABLE>
9
<PAGE> 10
WILSON BANK HOLDING COMPANY
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1997 and 1996
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
Nine Months Ended
Sept. 30,
1997 1996
(In Thousands)
<S> <C> <C>
Cash flows from financing activities:
Net increase in non-interest bearing,
savings and NOW deposit accounts 28,090 8,591
Net increase in time deposits 30,090 14,157
Increase in securities sold
under agreement to repurchase 3,494 3,223
Sale of minority owned commercial
bank subsidiary common stock - 1,750
Dividends paid (1,039) (950)
Proceeds from reinvestment of dividends
- sale of common stock 902 797
----------------------
Net cash provided by financing activities 61,537 27,568
Net increase (decrease) in cash and cash equivalents 11,149 (1,206)
----------------------
Cash and cash equivalents at beginning of period 20,564 17,189
----------------------
Cash and cash equivalents at end of period $31,713 $15,983
======================
</TABLE>
10
<PAGE> 11
WILSON BANK HOLDING COMPANY
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1997 and 1996
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
<S> <C> <C>
Reconciliation of net earnings to net cash
provided by operating activities:
Net earnings $2,986 $2,579
Adjustments to reconcile net
earnings to net cash
provided by operating activities:
Depreciation and amortization 728 460
Provision for loan losses 575 442
Net loss of minority interest of
commercial bank subsidiary (2) (14)
FHLB stock dividends reinvested (40) (34)
Decrease in refundable income taxes - 80
Increase (decrease) in taxes payable (137) (17)
Decrease (increase) in other assets, net (18) 201
Decrease in loans held for sale 967 178
Increase in deferred tax asset 16 4
Increase in interest receivable (644) (202)
Increase in other liabilities 24 (96)
Increase in interest payable 251 (284)
----------------------
Total adjustments 1,724 508
----------------------
Net cash provided by operating activities $4,710 $3,087
======================
Supplemental schedule of noncash activities:
Unrealized gain (loss) in values of securities
available for sale, net of taxes of
$31,000 and $164,000 for the nine months
ended September 30, 1997 and 1996,
respectively. $ 45 $ (219)
======================
Transfer of loans to other real estate $ 288 $ -
======================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
11
<PAGE> 12
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements
(Unaudited)
BASIS OF PRESENTATION
The unaudited consolidated financial statements include the accounts of Wilson
Bank Holding Company (the "Company") and its wholly-owned subsidiary, Wilson
Bank and Trust ("WB&T") along with DeKalb Community Bank ("DCB"), a 50% owned
subsidiary, and Community Bank of Smith County ("CBSC"), a 50% owned subsidiary.
DCB opened for business on April 18, 1996 and CBSC opened for business on
December 16, 1996. WB&T also has a wholly-owned consolidated subsidiary,
Hometown Finance Company, which is a consumer finance company.
The accompanying consolidated financial statements have been prepared, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. All financial information except per share data has been rounded to
the nearest thousand of dollars for both the financial statements and
management's discussion and analysis of financial condition and results of
operations.
In the opinion of management, the consolidated financial statements contain all
adjustments and disclosures necessary to summarize fairly the financial position
of the Company as of September 30, 1997 and December 31, 1996, and the results
of operations for the nine months ended September 30, 1997 and 1996 and the
three months ended September 30, 1997 and 1996 and changes in cash flows for the
nine months ended September 30, 1997 and 1996. All significant intercompany
transactions have been eliminated. The interim consolidated financial statements
should be read in conjunction with the notes to the consolidated financial
statements presented in the Company's 1996 Annual Report to Stockholders. The
results for interim periods are not necessarily indicative of results to be
expected for the complete fiscal year.
12
<PAGE> 13
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The purpose of this discussion is to provide insight into the financial
condition and results of operations of the Company and its subsidiaries. This
discussion should be read in conjunction with the consolidated financial
statements.
RESULTS OF OPERATIONS
Net earnings increased 15.8% to $2,986,000 for the nine months ended September
30, 1997 from $2,579,000 in the first nine months of 1996. Net earnings were
$1,172,000 for the quarter ended September 30, 1997, an increase of $238,000 or
25.5% from $934,000 for the three months ended September 30, 1996 and an
increase of $162,000 or 16.0% from the quarter ended June 30, 1997. The increase
in net earnings during the nine months ended September 30, 1997 was primarily
due to a 28.5% increase in net interest income along with a 22.4% increase in
non-interest income as compared to a 35.1% increase in non-interest expenses.
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. The
Company's total interest income, excluding tax equivalent adjustments, increased
$4,197,000 or 28.2% during the nine months ended September 30, 1997 as compared
to the corresponding period in 1996. The increase in total interest income was
$1,621,000 or 31.2% for the quarter ended September 30, 1997 as compared to the
quarter ended September 30, 1996 and $435,000 or 6.8% over the second three
months of 1997. The increase in 1996 was primarily attributable to an increase
in average earning assets, combined with an increase in weighted average
interest rates. The addition of CBSC and growth of DCB added to the increase of
the average earning assets. The ratio of average earning assets to total average
assets was 92.9% and 93.2% for the quarters ended September 30, 1997 and 1996,
respectively, and 92.2% and 94.6% for the nine months ended September 30, 1997
and 1996, respectively.
Interest expense increased $1,986,000 or 27.8% for the nine months ended
September 30, 1997 as compared to the corresponding period in 1996. The increase
was $889,000 or 36.7% for the three months ended September 30, 1997 as compared
to the same period in 1996. Interest expense increased $316,000 or 10.6% for the
quarter ended September 30, 1997 over the quarter ended June 30, 1997. The
13
<PAGE> 14
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
overall increase in total interest expense for the first nine months of 1997 was
primarily attributable to an increase in weighted average interest-bearing
liabilities. The foregoing resulted in an increase in net interest income of
$2,211,000 or 28.6% for the first nine months of 1997 as compared to the same
period in 1996. The increase in net interest income was $732,000 or 26.4% for
the quarter ended September 30, 1997 compared to the quarter ended September 30,
1996 and an increase of $119,000 or 3.5% when compared to the second quarter of
1997.
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses was $575,000 and $442,000, for the first
nine months of 1997 and 1996, respectively. The provision for loan losses during
the three month periods ended September 30, 1997 and 1996 was $187,000 and
$165,000, respectively. The provision for possible loan losses is based on past
loan experience and other factors which, in management's judgment, deserve
current recognition in estimating possible loan losses. Such factors include
past loan loss experience, growth and composition of the loan portfolio, review
of specific problem loans, the relationship of the allowance for loan losses to
outstanding loans, and current economic conditions that may affect the
borrower's ability to repay. Management has in place a system designed for
monitoring its loan portfolio in an effort to identify potential problem loans.
The provision for possible loan losses raised the allowance for possible loan
losses to $2,899,000, an increase of 18.2% from $2,452,000 at December 31, 1996.
The allowance for possible loan losses as a percentage of total outstanding
loans (excluding loans held for sale) was 1.25% at September 30, 1997 compared
to 1.32% at December 31, 1996.
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 September 30, 1997 to be adequate. Transactions related
to the allowance for possible loan losses were as follows:
14
<PAGE> 15
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
(In Thousands)
<S> <C> <C>
Balance, January 1, 1997 and 1996, respectively $2,452 $1,944
Add (deduct):
Losses charged to allowance (156) (128)
Recoveries credited to allowance 28 9
Provision for loan losses 575 442
------------------
Balance, September 30, 1997 and 1996, respectively $2,899 $2,267
==================
</TABLE>
NON-INTEREST INCOME
The components of the Company's non-interest income include service charges on
deposit accounts, other fees and commissions, gain on sale of loans, offsetting
effect of third party interests in the results of operations of the subsidiary
banks. Total non-interest income for the nine months ended September 30, 1997
increased by 22.4% to $2,066,000 from $1,688,000 for the same period in 1996.
The increase was $137,000 or 22.4% during the quarter ended September 30, 1997
compared to the third quarter in 1996 and the amount during the third quarter of
1997 equaled the amount recognized during the second quarter of 1997. The
increase during the first nine months of 1997 was due primarily to increases in
service charges on deposit accounts as well as an increase in gains on sale of
loans. Service charges on deposit accounts increased $143,000 or 15.4% to
$1,072,000 during the nine months ended September 30, 1997. Service charges on
deposit accounts increased $46,000 or 14.0% during the quarter ended September
30, 1997 compared to the corresponding quarter in 1996. Gains on sales of loans
totaled $507,000 and $482,000 during the nine months ended September 30, 1997
and 1996, respectively, which represented an increase of 5.2%, and $193,000 and
$160,000 during the quarters ended September 30, 1997 and 1996, respectively,
which reflected a 20.6% increase in 1997 over the corresponding period in 1996.
NON-INTEREST EXPENSES
Non-interest expense consists primarily of employee salaries and benefits,
occupancy, furniture and equipment expense and other
15
<PAGE> 16
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
operating expenses. Total non-interest expense increased $1,810,000 or 35.1%
during the first nine months of 1997 compared to the corresponding period in
1996. The increase for the quarter ended September 30, 1997 was $465,000 or
25.2% as compared to the comparable quarter in 1996 and a decrease of $110,000
or 4.6% as compared to the second three months of 1996. The increases in
non-interest expense are attributable primarily to increases in employee
salaries and benefits associated with an increase in the number of employees
necessary to support the Company's expanded operations, which included the
opening of a new branch in 1997. The number of full-time equivalent employees
increased to 162 at September 30, 1997, an increase from 133 at September 30,
1996. This included 145 at the Bank and 11 at DCB and 6 at CBSC. Salaries and
employee benefits increased $816,000, or 27.7% during the first nine months of
1997 as compared to the corresponding period in 1996 and $227,000, or 21.8%
during the third quarter of 1997 as compared to the third quarter of 1996.
Increases in net occupancy expenses ($172,000 or 60.1% during the first nine
months of 1997 and $62,000 or 61.4% during the third quarter of 1997) and
furniture and equipment expenses ($339,000 or 53.1% during the first nine months
of 1997 and $85,000 or 29.7% during the third quarter of 1997) were also due to
the Company's expanded operations. Other operating expenses for the nine months
ended September 30, 1997 increased 24.2% to $1,305,000 from $1,051,000 for the
comparable period in 1996 and increased 4.4% from $383,000 to $400,000 for the
third quarter of 1997.
These other operating expenses include Federal Deposit Insurance Corporation
premiums assessed on deposits, supplies and general operating costs which
increased as a result of continued growth of the Company.
INCOME TAXES
The Company's income tax expense was $1,480,000 for the nine months ended
September 30, 1997, an increase of $239,000, or 19.3%, over the comparable
period in 1996. Income tax expense was $587,000 for the quarter ended September
30, 1997, an increase of $144,000, or 32.5%, over the corresponding period in
1996. The percentage of income tax expense to net income before taxes was 33.1%
and 32.5% for the nine months ended September 30, 1997 and 1996, respectively,
and 33.4% and 32.2% for the quarters ended September 30, 1997 and 1996,
respectively. The percentage of income tax expense to net income before taxes
was 33.4% for the second three months of 1997. The increase in the percentage is
due to a
16
<PAGE> 17
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
decrease in the amount of tax exempt interest income as a percentage of total
interest income. This percentage was 4.4% for the nine months ended September
30, 1997 compared to 5.7% for the nine months ended September 30, 1996.
FINANCIAL CONDITION
BALANCE SHEET SUMMARY
The Company's total assets increased 23.5% to $340,011,000 during the nine
months ended September 30, 1997 from $275,304,000 at December 31, 1996. Total
assets increased $23,636,000, or 7.47% during the third quarter of 1997 as
compared to an increase of $8,331,000, or 3.36%, during the third quarter of
1996. Total assets increased $12,490,000 or 4.1%, and $28,580,000, or 10.4%,
during the quarters ended June 30, 1997 and March 31, 1997, respectively.
Loans, (net of allowance for possible loan losses, unearned interest and
excluding loans held for sale - "Net Loans"), totaled $229,325,000 at September
30, 1997 and increased 24.9% from to $183,642,000 at December 31, 1996. Net
Loans increased $14,037,000 or 6.5% during the third quarter of 1997 as compared
to $9,690,000 or 5.9% during the third quarter of 1996 and increased $19,323,000
or 9.9%, and $12,323,000 or 6.7%, during the quarters ended June 30, 1997 and
March 31, 1997, respectively. These increases were primarily due to the
continued favorable interest rate environment which motivated the refinancing of
mortgages and the Company's ability to increase its market share of such loans
while maintaining its underwriting standards as well as the growth of DCB and
CBSC.
Total investment securities increased $6,101,000 or 11.0% to $61,646,000 at
September 30, 1997 from $55,545,000 at December 31, 1996. Investment securities
increased $1,411,000 or 2.4% during the three months ended June 30, 1997 and
increased $2,976,000 or 5.4% during the quarter ended March 31, 1997. Investment
securities increased $1,714,000 or 2.9% during the three months ended September
30, 1997 as compared to a decrease $971,000 or 1.8% during the quarter ended
September 30, 1996. The increase in securities included a net unrealized gain on
securities available for sale of $197,000 at September 30, 1997 as compared to
$121,000 at December 31, 1996. Federal funds sold increased $9,527,000, or
89.7%, to $20,513,000 at September 30, 1997 from $10,626,000 at December 31,
1996. Federal funds decreased 40.3%
17
<PAGE> 18
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
during the second quarter of 1997 to $15,330,000 from a balance of approximately
$25,697,000 at March 31, 1997.
Total liabilities increased by 24.3% to $315,865,000 at September 30, 1997
compared to $254,052,000 at December 31, 1996. The increase by quarter totaled
$22,495,000 or 7.7%, $11,339,000 or 4.5% and $27,979,000 or 10.5% during the
quarters ended September 30, 1997 and March 31, 1997, respectively, as compared
to an increase of $7,412,000 or 3.3% during the quarter ended September 30,
1996. This increase during the nine months ended September 30, 1997 was composed
primarily of a $58,180,000 or 23.9% increase in total deposits and an increase
of $3,494,000 or 62.2% in securities sold under repurchase agreements. Deposits
increased $19,909,000 or 7.1%, $11,166,000 or 4.1%, and $27,105,000 or 11.1%,
during the third, second and first quarters of 1997, respectively, as compared
to $6,013,000 or 2.8%, for the third quarter of 1996.
Effective January 1, 1995, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan"
and SFAS No. 118 "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures." These pronouncements apply to impaired loans
except for large groups of smaller-balance homogeneous loans that are
collectively evaluated for impairment including credit card, residential
mortgage and consumer installment loans. The adoption of these pronouncements
had no material impact on the Company's consolidated financial statements.
A loan is impaired when it is probable that the Company will be unable to
collect the scheduled payments of principal and interest due under the
contractual terms of the loan agreement. Impaired loans are measured at the
present value of expected cash flows discounted at the loan's effective interest
rate, at the loan's observable market price or the fair value of the collateral
if the loan is collateral dependent. If the measure of the impaired loan is less
than the recorded investment in the loan, the Company shall recognize an
impairment by creating a valuation allowance with a corresponding charge to the
provision for loan losses or by adjusting an existing valuation allowance for
the impaired loan with a corresponding charge or credit to the provision for
loan losses.
The Company's first mortgage single family residential, consumer and credit card
loans which total approximately $93,124,000, $37,277,000 and $912,000,
respectively at September 30, 1997, are divided into
18
<PAGE> 19
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
various groups of smaller-balance homogeneous loans that are collectively
evaluated for impairment and thus are not subject to the provisions of SFAS No.
114 nor 118. Substantially all other loans of the Company are evaluated for
impairment under the provisions of SFAS No. 114 and 118.
The Company considers all loans on non-accrual status to be impaired. Loans are
placed on non-accrual status when doubt as to timely collection of principal or
interest exists or when principal or interest is past due ninety days or more
unless such loans are well-secured and in the process of collection. Delays or
shortfalls in loan payments are evaluated with various other factors to
determine if a loan is impaired. Generally delinquencies under ninety days are
considered insignificant unless certain other factors are present which indicate
impairment is probable. The decision to place a loan on non-accrual status is
also based on an evaluation of the borrower's financial condition, collateral,
liquidation value and other factors that affect the borrower's ability to pay.
Generally at the time a loan is placed on non-accrual status, all interest
accrued on the loan in the current fiscal year is reversed from income and all
interest accrued and uncollected from the prior year is charged against the
allowance for possible loan losses. Thereafter, interest on non-accrual loans is
recognized as interest income only to the extent that cash is received and
future collection of principal is not in doubt. If the collectibility of
outstanding principal is doubtful, such interest received is applied as a
reduction of principal. A non-accrual loan may be restored to accruing status
when principal and interest are no longer past due and unpaid and future
collection of principal and interest on a timely basis is not in doubt. At
September 30, 1997, the Company had non-accrual loans totaling $259,000 as
compared to $260,000 at December 31, 1996.
Loans not on non-accrual status are classified as impaired in certain cases
where there is inadequate protection by the current net worth and financial
capacity of the borrower or of the collateral pledged, if any. In those cases,
such loans have a well-defined weakness or weaknesses that jeopardize the
liquidation of the debt and if such deficiencies are not corrected, there is a
probability that the Company will sustain some loss. In such cases, interest
income continues to accrue as long as the loan does
19
<PAGE> 20
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
not meet the Company's criteria for non-accrual status.
Generally the Company also classifies as impaired any loans the terms of which
have been modified in a troubled debt restructuring after January 1, 1995.
Interest is accrued on such loans that continue to meet the modified terms of
the loan agreements. At September 30, 1997, the Company had no loans that have
had terms modified in a troubled debt restructuring.
The Company's charge-off policy for impaired loans is similar to its charge-off
policy for all loans in that loans are charged-off in the month when they are
considered uncollectible.
Impaired loans and related allowance for loan losses at September 30, 1997 and
December 31, 1996 were as follows:
<TABLE>
<CAPTION>
September 30, 1997
------------------
Allowance
Recorded for
Investment Loan Loss
---------- ---------
(In Thousands)
<S> <C> <C>
Impaired loans with allowance for loan loss $367 $92
Impaired loans with no allowance for loan loss $ 44 -
Total $411 92
=================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
-----------------
Allowance
Recorded for
Investment Loan Loss
---------- ---------
(In Thousands)
<S> <C> <C>
Impaired loans with allowance for loan loss $356 89
Impaired loans with no allowance for loan loss $235 -
Total $591 89
===============
</TABLE>
20
<PAGE> 21
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The average recorded investment in impaired loans for the nine months ended
September 30, 1997 and 1996 was $383,000 and $511,000, respectively.
There were no material amounts of other interest-bearing assets
(interest-bearing deposits with other banks, municipal bonds, etc.) at September
30, 1997 which would be required to be disclosed as past due, non-accrual or
potentials problem loans, if such interest-bearing assets were loans.
The following schedule details selected information as to non-performing loans
of the Company at September 30, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
September 30, 1997
------------------
Past due
90 days
or more Non-accrual
------- -----------
(In Thousands)
<S> <C> <C>
Real estate loans $ 70 58
Installment loans 426 177
Credit cards 20 -
Commercial, financial and agricultural loans 64 24
----------------------
Total 90 days or more past due and
non-accrual loans $580 259
======================
Total 90 days or more past due and
non-accrual loans $782
Renegotiated loans -
------------
Total 90 days or more past due, non-accrual
and renegotiated loans $782
============
</TABLE>
21
<PAGE> 22
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
December 31, 1996
-----------------
Past due
90 days
or more Non-accrual
------- -----------
(In Thousands)
<S> <C> <C>
Real estate loans $ 344 59
Installment loans 370 177
Credit cards - -
Commercial, financial and agricultural loans 80 24
-------------------
Total 90 days or more past due and non-accrual loans $ 794 260
===================
Total 90 days or more past due and non-accrual loans $1,054
Renegotiated loans -
-------------
Total 90 days or more past due, non-accrual
and renegotiated loans $1,054
=============
</TABLE>
Non-performing loans at September 30, 1997 totaled $782,000, a decrease of 25.8%
from $1,054,000 at December 31, 1996. The decrease in non-performing loans in
the first nine months of 1997 is due primarily to an decrease in loans 90 or
more days past due by approximately $214,000 (which includes a decrease in real
estate mortgage loans by $274,000 and an increase of installment loans of
$56,000.)
At September 30, 1997, loans totaling $484,000 (including the above past due and
non-accrual loans) were included in the Company's internal classified loan list.
Of these loans $295,000 are secured by real estate, $30,000 are commercial and
$159,000 are installment loans. The collateral values securing these loans total
approximately $368,000 ($332,000 secured by real property, $7,000 relating to
commercial loans and $29,000 related to installment loans). The internally
classified loans have declined from $561,000 at December 31, 1996, to $484,000
at September 30, 1997. This decrease is represented by a decrease of $156,000 in
commercial loans and a decrease of $51,000 of installment loans along with an
increase of $130,000 in loans secured by real estate. The increase in loans
secured by real estate and decrease in commercial loans was the result of
additional real estate collateral being obtained on a loan previously classified
as commercial. Loans are listed as classified when information obtained about
possible credit problems of the borrower has
22
<PAGE> 23
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
prompted management to question the ability of the borrower to comply with the
repayment terms of the loan agreement. The loan classifications do not represent
or result from trends or uncertainties which management expects will materially
impact future operating results, liquidity or capital resources.
Fixed assets net of depreciation increased $2,115,000 during the first nine
months of 1997 to $11,729,000. An increase of approximately $656,000 can be
attributed to the construction in progress of the branch in Hartsville,
Tennessee, an increase of approximately $666,000 can be attributed to additions
to two branches in Lebanon, Tennessee and an increase of approximately $329,000
and $249,000 relate to the additions at DCB and CBSC, 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 securities and money market
instruments that will mature within one year. At September 30, 1997, the
Company's liquid assets totaled $31,713,000.
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) 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 of the banks. These meetings
23
<PAGE> 24
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
focus on the spread between the Company's cost of funds and interest yields
generated primarily through loans and investments. The Company's securities
portfolio consists of earning assets that provide interest income. For those
securities classified as held-to-maturity the Company has the ability and intent
to hold these securities to maturity or on a long-term basis. Securities
classified as available-for-sale include securities intended to be used as part
of the Company's asset/liability strategy and/or securities that may be sold in
response to changes in interest rate, prepayment risk, the need or desire to
increase capital and similar economic factors. Securities totaling $15.6 million
mature or will be subject to rate adjustments within the next twelve months.
A secondary source of liquidity is the Bank's loan portfolio. At September 30,
1997 loans of approximately $70.1 million either will become due or will be
subject to rate adjustments within twelve months from the respective date.
Continued emphasis will be placed on structuring adjustable rate loans.
As for liabilities, certificates of deposit of $100,000 or greater of
approximately $47.8 million will become due during the next twelve months.
Historically, there has been no significant reduction in immediately
withdrawable accounts such as negotiable order of withdrawal accounts, money
market demand accounts, demand deposit and regular savings. Management does not
anticipate that there will be significant withdrawals from these accounts in the
next twelve months.
Management believes that with present maturities, the anticipated growth in
deposit base, and the efforts of management in its asset/liability program,
management is positioned to effectively manage its liquidity in the near term.
CAPITAL POSITION AND DIVIDENDS
At September 30, 1997, total stockholders' equity was $24,126,000 or 7.1% of
total assets, which compares with $21,252,000 or 7.71% of total assets at
December 31, 1996. The dollar increase in stockholders' equity during the nine
months ended September 30, 1997 results from the Company's net income of
$2,986,000 less the net effect of a $45,000 increase in the net unrealized gain
on investment securities net of applicable income taxes and cash
24
<PAGE> 25
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
dividends declared of $1,059,000 (of which $902,000 was reinvested under the
Company's dividend reinvestment plan.)
The Company's principal regulators have established minimum risk-based capital
requirements and leverage capital requirements for the Company, WB&T, DCB and
CBSC. 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 there is none, and a part of the allowance
for possible loans 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 Company, WB&T, DCB and CBSC to have a total risk-based
capital ratio of 8.0% and a Tier I risk-based capital ratio of 4.0%.
The Company experienced loan growth of approximately 25% (approximately
$46,000,000) during the first nine months of 1997 while stockholders' equity
grew by 14% (approximately $3,000,000). As a result, the risk-weighted assets
increase significantly and caused a decrease in the risk-based capital ratios of
the Company and WB&T. Despite the slight decrease, the Company and its
subsidiaries are still "well capitalized" by FDIC definitions.
At September 30, 1997 the Company's total risk-based capital ratio was 11.6% and
their Tier I risk-based capital ratio was approximately 10.3% compared to ratios
of 15.0% and 13.7%, respectively at December 31, 1996.
At September 30, 1997 WB&T's total risk-based capital ratio was 11.2% and its
Tier I risk-based capital ratio was approximately 10.0% compared to ratios of
11.7% and 10.4%, respectively at December 31, 1996.
At September 30, 1997 DCB's total risk-based capital ratio was 26.2% and its
Tier I risk-based capital ratio was approximately 25.0% compared to ratios of
33.8% and 32.6%, respectively at December 31, 1996.
At September 30, 1997 CBSC's total risk-based capital ratio was 36.4% and its
Tier I risk-based capital ratio was approximately
25
<PAGE> 26
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
35.5% compared to ratios of 256.9% and 256.9%, respectively at December 31,
1996.
The required leverage capital ratio (Tier I capital to average assets for the
most recent quarter) for the Company, WB&T, DCB and CBSC is 4.0%. At September
30, 1997 the Company had a leverage ratio of 7.6%, compared to 9.2% at December
31, 1996. At September 30, 1997 WB&T had a leverage ratio of 7.5%, compared to
7.1% at December 31, 1996. At September 30, 1997 DCB had a leverage ratio of
14.8% compared to 24.6% at December 31, 1996. At September 30, 1997 CBSC had a
leverage ratio of 23.9% compared to 125.0% at December 31, 1996.
Dividends of $482,000 and $462,000 were declared and paid by the Company during
the nine months ended September 30, 1997 and 1996, respectively. Of these
amounts paid, $417,000 and $391,000 were reinvested in the Company's common
stock during the nine months ended September 30, 1997 and 1996, respectively.
IMPACT OF INFLATION
Although interest rates are significantly affected by inflation, the inflation
rate is immaterial when reviewing the Company's results of operations.
26
<PAGE> 27
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule (for SEC use only)
(b) No reports on Form 8-K have been filed during the quarter for which this
report is filed.
27
<PAGE> 28
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WILSON BANK HOLDING COMPANY
---------------------------
(Registrant)
DATE: November 12, 1997 /s/Randall Clemons
----------------- --------------------------------------
Randall Clemons, President and
Chief Executive Officer
DATE: November 12, 1997 /s/ Becky Taylor
----------------- --------------------------------------
Becky Taylor, Vice President, Cashier
and Principal Accounting Officer
28
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 11,560
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 20,153
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 36,337
<INVESTMENTS-CARRYING> 25,309
<INVESTMENTS-MARKET> 25,574
<LOANS> 232,224
<ALLOWANCE> 2,899
<TOTAL-ASSETS> 340,011
<DEPOSITS> 301,430
<SHORT-TERM> 9,110
<LIABILITIES-OTHER> 5,325
<LONG-TERM> 0
0
0
<COMMON> 2,815
<OTHER-SE> 21,311
<TOTAL-LIABILITIES-AND-EQUITY> 340,011
<INTEREST-LOAN> 15,717
<INTEREST-INVEST> 2,683
<INTEREST-OTHER> 676
<INTEREST-TOTAL> 19,076
<INTEREST-DEPOSIT> 8,896
<INTEREST-EXPENSE> 9,133
<INTEREST-INCOME-NET> 9,943
<LOAN-LOSSES> 575
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,968
<INCOME-PRETAX> 4,466
<INCOME-PRE-EXTRAORDINARY> 4,466
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,986
<EPS-PRIMARY> 2.14
<EPS-DILUTED> 2.14
<YIELD-ACTUAL> 0
<LOANS-NON> 202
<LOANS-PAST> 580
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 782
<ALLOWANCE-OPEN> 2,452
<CHARGE-OFFS> 156
<RECOVERIES> 28
<ALLOWANCE-CLOSE> 2,899
<ALLOWANCE-DOMESTIC> 2,899
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
