<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 JUNE 30, 1998
[ ] 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 Identification
Incorporation or Organization) Number)
623 West Main Street, Lebanon, TN 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: 1,438,781 shares at August 4, 1998.
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PART 1: FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited consolidated financial statements of the registrant and its
subsidiaries are as follows:
Consolidated Balance Sheets - June 30, 1998 and December 31,
1997.
Consolidated Statements of Earnings - For the three months and
six months ended June 30, 1998 and 1997.
Consolidated Statements of Comprehensive Earnings - For the three
months and six months ended June 30, 1998 and 1997.
Consolidated Statements of Cash Flows - For the six months ended
June 30, 1998 and 1997.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
PART II: OTHER INFORMATION
Item 4. Submission of matters to a vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
Signatures
2
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WILSON BANK HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- --------
(In Thousands)
Assets
<S> <C> <C>
Loans $ 260,749 240,556
Less: Allowance for loan losses (3,216) (2,890)
--------- --------
Net loans 257,533 237,666
Securities:
Held to maturity, at cost (market value $22,947,000 and
$24,547,000, respectively) 22,635 24,251
Available-for-sale, at market (amortized cost $55,707,000
and $37,052,000, respectively) 55,783 37,246
--------- --------
Total securities 78,418 61,497
Loans held for sale 2,497 4,092
Federal funds sold 18,279 17,657
--------- --------
Total earning assets 356,727 320,912
Cash and due from banks 16,587 14,123
Bank premises and equipment, net 12,964 11,929
Accrued interest receivable 3,324 2,715
Organizational costs, net of accumulated amortization of $69,000
and $58,000, respectively 67 78
Other real estate 105 63
Deferred income tax asset 724 695
Other assets 1,093 1,194
--------- --------
Total assets $ 391,591 351,709
========= ========
Liabilities and Stockholders' Equity
Deposits $ 348,851 316,641
Securities sold under repurchase agreements 9,631 4,560
Accrued interest and other liabilities 2,541 2,236
Minority interest 3,496 3,455
--------- --------
Total liabilities 364,519 326,892
--------- --------
Stockholders' equity:
Common stock, $2.00 par value; authorized 5,000,000 shares, issued 1,422,585
at June 30, 1998 and 1,407,467 shares at
December 31, 1997, respectively 2,845 2,815
Additional paid-in capital 7,999 7,527
Retained earnings 16,182 14,362
Net unrealized gains on available-for-sale securities, net of tax
expense of $29,000 and $65,000, respectively 46 113
--------- --------
Total stockholders' equity 27,072 24,817
--------- --------
Total liabilities and stockholders' equity $ 391,591 351,709
========= ========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
3
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WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1998 1997 1998 1997
---------- --------- ---------- ---------
(Dollars In Thousands (Dollars in Thousands
Except Per Share Amounts) Except Per Share Amounts)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 6,194 5,288 $ 11,999 10,005
Interest and dividends on securities:
Taxable securities 924 609 1,668 1,196
Exempt from Federal income taxes 264 282 544 561
Interest on loans held for sale 66 28 127 54
Interest on federal funds sold 361 179 758 439
---------- --------- ---------- ---------
Total interest income 7,809 6,386 15,096 12,255
---------- --------- ---------- ---------
Interest expense:
Interest on negotiable order of withdrawal accounts 109 132 214 299
Interest on money market and savings accounts 917 613 1,829 1,154
Interest on certificates of deposit 2,854 2,179 5,496 4,224
Interest on securities sold under repurchase agreements 88 73 152 143
---------- --------- ---------- ---------
Total interest expense 3,968 2,997 7,691 5,820
---------- --------- ---------- ---------
Net interest income before provision for
possible loan losses 3,841 3,389 7,405 6,435
Provision for possible loan losses 284 201 512 388
---------- --------- ---------- ---------
Net interest income after provision for
possible loan losses 3,557 3,188 6,893 6,047
---------- --------- ---------- ---------
Non-interest income:
Service charges on deposit accounts 417 365 784 698
Other fees and commissions 411 150 767 284
Gain on sale of loans 274 180 543 314
Gain on sale of fixed assets -- -- 6 --
Minority interest in net loss of subsidiaries -- 3 -- 22
---------- --------- ---------- ---------
1,102 698 2,100 1,318
---------- --------- ---------- ---------
Non-interest expenses:
Salaries and employee benefits 1,462 1,308 2,881 2,491
Occupancy expenses, net 221 140 417 293
Furniture and equipment expense 243 358 444 680
Data processing expense 113 150 222 289
Other operating expenses 684 414 1,328 905
Loss on sale of other real estate -- -- 2 --
Minority interest in net earnings of subsidiaries 37 -- 69 --
---------- --------- ---------- ---------
2,760 2,370 5,363 4,658
---------- --------- ---------- ---------
Earnings before income taxes 1,899 1,516 3,630 2,707
Income taxes 651 506 1,247 893
---------- --------- ---------- ---------
Net earnings $ 1,248 1,010 $ 2,383 1,814
========== ========= ========== =========
Weighted average number of shares outstanding 1,422,585 1,392,182 1,420,079 1,389,844
========== ========= ========== =========
Basic earnings per common share $ .88 .73 $ 1.68 1.31
========== ========= ========== =========
Dividends per share $ -- -- $ .40 .35
========== ========= ========== =========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
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WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1998 1997 1998 1997
------- ----- ------- -----
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Net earnings $ 1,248 1,010 $ 2,383 1,814
------- ----- ------- -----
Other comprehensive earnings (losses) net of tax:
Unrealized gains (losses) on available-for-sale
securities arising during period, net of tax
benefits of $19,000, tax expense of $86,000,
tax benefits of $41,000 and tax expense of $2,000,
respectively (31) 141 (67) 4
------- ----- ------- -----
Other comprehensive earnings (losses) (31) 141 (67) 4
------- ----- ------- -----
Comprehensive earnings $ 1,217 1,151 $ 2,316 1,818
======= ===== ======= =====
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
5
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WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
-------- -------
(In Thousands)
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 14,446 11,811
Fees and commissions received 1,551 679
Proceeds from sale of loans 14,337 18,974
Origination of loans held for sale (12,199) (17,968)
Interest paid (7,418) (5,570)
Cash paid to suppliers and employees (4,667) (4,299)
Income taxes paid (1,160) (939)
-------- -------
Net cash provided by operating activities 4,890 2,688
-------- -------
Cash flows from investing activities:
Proceeds from maturities of held-to-maturity securities 2,886 4,450
Proceeds from maturities of available-for-sale securities 18,345 5,312
Purchase of held-to-maturity securities (1,264) (4,046)
Purchase of available-for-sale securities (36,965) (10,080)
Loans made to customers, net of repayments (20,484) (32,250)
Purchase of premises and equipment (1,630) (1,821)
Proceeds from sale of premises and equipment 27 --
Proceeds from sale of other real estate 61 --
-------- -------
Net cash used in investing activities (39,024) (38,435)
-------- -------
Cash flows from financing activities:
Net increase in non-interest bearing, savings and NOW
deposit accounts 8,502 21,319
Net increase in time deposits 23,708 16,952
Increase in securities sold under repurchase agreement 5,071 976
Dividends paid (563) (481)
Proceeds from sale of common stock 502 416
-------- -------
Net cash provided by financing activities 37,220 39,182
-------- -------
Net increase in cash and cash equivalents 3,086 3,435
Cash and cash equivalents at beginning of period 31,780 20,564
-------- -------
Cash and cash equivalents at end of period $ 34,866 23,999
======== =======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
6
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WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------- ------
(In Thousands)
<S> <C> <C>
Reconciliation of net earnings to net cash provided by operating activities:
Net earnings $ 2,383 1,814
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 575 497
Provision for loan losses 512 388
Net gains (losses) of minority interests of commercial
bank subsidiaries 69 (22)
FHLB dividend reinvestment (31) (25)
Gain on sale of premises and equipment (6) --
Loss on sale of other real estate 2 --
Decrease in loans held for sale 1,595 692
Decrease in refundable income taxes 175 --
Increase in deferred tax asset (6) --
Increase in other assets, net (74) (299)
Decrease in taxes payable (82) (50)
Increase in interest receivable (609) (426)
Increase (decrease) in other liabilities 114 (131)
Increase in interest payable 273 250
------- ------
Total adjustments 2,507 874
------- ------
Net cash provided by operating activities $ 4,890 2,688
======= ======
Supplemental schedule of non-cash activities:
Unrealized gain (loss) in values of securities available-for-sale, net of
income tax benefit of $36,000 and tax expense of $2,000 for the six
months ended June 30, 1998 and 1997, respectively $ (67) 4
======= ======
Non-cash transfers from loans to other real estate $ 105 288
======= ======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
7
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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 (Company), its wholly-owned subsidiary, Wilson Bank and
Trust, Hometown Finance Company, a wholly-owned subsidiary of Wilson Bank and
Trust, DeKalb Community Bank, a 50% owned subsidiary, and Community Bank of
Smith County, a 50% owned subsidiary.
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.
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 June 30, 1998 and December 31, 1997, and the results of
operations for the three months and six months ended June 30, 1998 and 1997,
comprehensive earnings for the three months and six months ended June 30, 1998
and 1997 and changes in cash flows for the six months ended June 30, 1998 and
1997. 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 1997
Annual Report to Stockholders. The results for interim periods are not
necessarily indicative of results to be expected for the complete fiscal year.
ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1998 1997
------- ------
(In Thousands)
<S> <C> <C>
Balance, January 1, 1998 and 1997, respectively $ 2,890 2,452
Add (deduct):
Losses charged to allowance (214) (108)
Recoveries credited to allowance 28 26
Provision for loan losses 512 388
------- ------
Balance, June 30, 1998 and 1997, respectively $ 3,216 2,758
======= ======
</TABLE>
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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 31.4% to $2,383,000 for the six months
ended June 30, 1998 from $1,814,000 in the first six months of 1997. Net
earnings were $1,248,000 for the quarter ended June 30, 1998, an increase of
$238,000 or 23.6% from $1,010,000 for the three months ended June 30, 1997 and
an increase of $113,000 or 10.0% over the quarter ended March 31, 1998. The
increase in net earnings during the six months ended June 30, 1998 was primarily
due to a 15.1% increase in net interest income and a 59.3% increase in
non-interest income which was partially offset by a 15.1% 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 $2,841,000 or 23.2% during the six months
ended June 30, 1998 as compared to the same period in 1997. The increase in
total interest income was $1,423,000 or 22.3% for the quarter ended June 30,
1998 as compared to the quarter ended June 30, 1997 and $522,000 or 7.2% over
the first three months of 1998. The increase in 1998 was primarily attributable
to an increase in average earning assets. The ratio of average earning assets to
total average assets was 90.7% and 92.2% for the six months ended June 30, 1998
and June 30, 1997, respectively, and 93.3% for the year ended December 31, 1997.
Interest expense increased $1,871,000 or 32.1% for the six months
ended June 30, 1998 as compared to the same period in 1997. The increase was
$971,000 or 32.4% for the three months ended June 30, 1998 as compared to the
same period in 1997. Interest expense increased $245,000 or 6.6% for the quarter
ended June 30, 1998 over the first three months of 1998. The overall increase in
total interest expense for the first six months of 1998 was primarily
attributable to an increase in weighted average interest-bearing liabilities.
The foregoing resulted in an increase in net interest income of
$970,000 or 15.1% for the first six months of 1998 as compared to the same
period in 1997. The increase was $452,000 or 13.3% for the quarter ended June
30, 1998 compared to the quarter ended June 30, 1997 and an increase of $277,000
or 7.8% when compared to the first quarter of 1998.
9
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WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses was $512,000 and $388,000,
for the first six months of 1998 and 1997, respectively. The provision for loan
losses during the three month periods ended June 30, 1998 and 1997 was $284,000
and $201,000, 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 $3,216,000, an increase of 11.3% from $2,890,000 at December 31, 1997.
The allowance for possible loan losses as a percentage of total outstanding
loans was 1.2% at June 30, 1998 and December 31, 1997, 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 June 30, 1998 to be adequate.
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, gain on sale of fixed assets and minority interest in net losses of
subsidiaries. Total non-interest income for the six months ended June 30, 1998
increased by 59.3% to $2,100,000 from $1,318,000 for the same period in 1997.
The increase was $404,000 or 57.9% during the quarter ended June 30, 1998
compared to the second quarter in 1997 and was $104,000 or 10.4% over the first
three months of 1998. The increases were due primarily to increases in other
fees and commissions and gains on sale of loans. Other fees and commissions
increased $483,000 or 170.1% during the six months ended June 30, 1998. Other
fees and commissions increased $261,000 or 174.0% during the quarter ended June
30, 1998 compared to the same quarter in 1997. Gains on sales of loans totaled
$543,000 and $314,000 during the six months ended June 30, 1998 and 1997,
respectively, an increase of $229,000 or 72.9% and $274,000 and $180,000 during
the quarters ended June 30, 1998 and 1997, respectively, an increase of $94,000
or 52.2%.
10
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WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
NON-INTEREST EXPENSE
Non-interest expense consists primarily of salaries and employee
benefits, occupancy expenses, furniture and equipment expenses, data processing
expenses, other operating expenses, and minority interest in net earnings of
subsidiaries. Total non-interest expense increased $705,000 or 15.1% during the
first six months of 1998 compared to the same period in 1997. The increase for
the quarter ended June 30, 1998 was $390,000 or 16.5% as compared to the
comparable quarter in 1997 and $157,000 or 6.0% as compared to the first three
months of 1998. The increases in non-interest expense are attributable primarily
to increases in salaries and employee benefits associated with an increase in
the number of employees necessary to support the Company's expanded operations,
which includes the addition of a new branch office. The number of employees
increased to 188 at June 30, 1998, an increase from 159 at June 30, 1997. The
increase in occupancy expenses was also due to the Company's expanded
operations. Other operating expenses for the six months ended June 30, 1998
increased to $1,328,000 from $905,000 for the comparable period in 1997. Other
operating expenses increased $270,000 or 65.2% during the quarter ended June 30,
1998 as compared to the same period in 1997 and $40,000 or 6.2% as compared to
the first three months of 1998. These expenses include Federal deposit insurance
premiums, 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 $1,247,000 for the six months
ended June 30, 1998, an increase of $354,000 over the comparable period in 1997.
Income tax expense was $651,000 for the quarter ended June 30, 1998, an increase
of $145,000 over the same period in 1997. The percentage of income tax expense
to net income before taxes was 34.4% and 33.0% for the six months ended June 30,
1998 and 1997, respectively and 34.3% and 33.4% for the quarters ended June 30,
1998 and 1997, respectively. The percentage of income tax expense to net income
before taxes was 34.4% for the first three months of 1998. The increase in the
percentage is due to a decrease in the amount of tax exempt interest income as a
percentage of total interest income. This percentage was 3.6% for the six months
ended June 30, 1998 compared to 4.6% for the six months ended June 30, 1997.
11
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WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
FINANCIAL CONDITION
BALANCE SHEET SUMMARY
The Company's total assets increased 11.3% to $391,591,000 during
the six months ended June 30, 1998 from $351,709,000 at December 31, 1997. Total
assets increased $7,062,000 or 1.8% and $32,820,000 or 9.3% during the
three-month periods ended June 30, 1998 and March 31, 1998, respectively. Loans,
net of allowance for possible loan losses totaled $257,533,000 at June 30, 1998
or a 8.4% increase compared to $237,666,000 at December 31, 1997. Net loans
increased $13,508,000 or 5.5% and $6,359,000 or 2.7% during the quarters ended
June 30, 1998 and March 31, 1998, 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 loan underwriting standards. Securities
increased $16,921,000 or 27.5% to $78,418,000 at June 30, 1998 from $61,497,000
at December 31, 1997. Securities increased $8,170,000 or 11.6% during the three
months ended June 30, 1998. The increase in securities included a net unrealized
gain of $76,000 during the six month period ending June 30, 1998. Federal funds
sold increased $622,000 to $18,279,000 at June 30, 1998 from $17,657,000 at
December 31, 1997.
Total liabilities increased by 11.5% to $364,519,000 at June 30,
1998 compared to $326,892,000 at December 31, 1997. The increase by quarter
totaled $5,845,000 or 1.6% and $31,782,000 or 9.7% during the quarters ended
June 30, 1998 and March 31, 1998, respectively. These increases were composed
primarily of a $32,210,000 or 10.2% increase in total deposits and an increase
of $5,071,000 or 111.2% in securities sold under repurchase agreements during
the six months ended June 30, 1998.
Effective January 1, 1995, the Company adopted on a prospective
basis 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.
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 future 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.
12
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WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
FINANCIAL CONDITION, CONTINUED
BALANCE SHEET SUMMARY, CONTINUED
The Company's first mortgage single family residential, consumer
and credit card loans which total approximately $101,448,000, $46,759,000 and
$1,298,000, respectively at June 30, 1998, are divided into various groups of
smaller-balance homogeneous loans that are collectively evaluated for impairment
and thus are not subject to the provisions of SFAS Nos. 114 and 118.
Substantially all other loans of the Company are evaluated for impairment under
the provisions of SFAS Nos. 114 and 118.
The Company considers all loans subject to the provisions of SFAS
114 and 118 that are on nonaccrual status to be impaired. Loans are placed on
nonaccrual status when doubt as to timely collection of principal or interest
exists, or when principal or interest is past due 90 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 90 days are considered insignificant
unless certain other factors are present which indicate impairment is probable.
The decision to place a loan on nonaccrual 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 nonaccrual 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 off
against the allowance for loan losses. Thereafter, interest on nonaccrual 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 nonaccrual 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 June
30, 1998, the Company had nonaccrual loans totaling $298,000 as compared to
$160,000 at December 31, 1997.
Loans not on nonaccrual 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 not
meet the Company's criteria for nonaccrual 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 their loan agreements. At June 30, 1998, the Company had no loans that
have had the terms modified in a troubled debt restructuring.
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WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
FINANCIAL CONDITION, CONTINUED
BALANCE SHEET SUMMARY, CONTINUED
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 loss amounts at June
30, 1998 and December 31, 1997 were as follows:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
----------------------- -----------------------
Allowance Allowance
Recorded for Recorded for
(In Thousands) Investment Loan Loss Investment Loan Loss
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Impaired loans with allowance for
loan loss $ - - 1,025 227
Impaired loans with no allowance
for loan loss - - - -
---------- --------- -------- --------
$ - - 1,025 227
========== ========= ======== ========
</TABLE>
The allowance for loan loss related to impaired loans was measured
based upon the estimated fair value of related collateral.
The average recorded investment in impaired loans for the year
ended December 31, 1997 was $543,000. The related amount of interest income
recognized on the accrual method for the period that such loans were impaired
was approximately $23,000.
The following schedule details selected information as to
non-performing loans of the Company at June 30, 1998:
<TABLE>
<CAPTION>
June 30, 1998
----------------------------
Past Due
90 Days Non-Accrual
-------- -----------
(In Thousands)
<S> <C> <C>
Real estate loans $ 506 119
Installment loans 461 165
Commercial, financial and agricultural 14 14
-------- --------
$ 981 298
======== ========
Renegotiated loans $ - -
======== ========
</TABLE>
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
FINANCIAL CONDITION, CONTINUED
BALANCE SHEET SUMMARY, CONTINUED
Non-performing loans, which included non-accrual loans and loans
90 days past due, at June 30, 1998 totaled $1,279,000, a decrease from
$1,379,000 at December 31, 1997. During the three months ended June 30, 1998,
non-performing loans increased $367,000 or 40.2% from $912,000 at March 31,
1998. The decrease in non-performing loans in the first six months of 1998 is
due primarily to an improvement in certain real estate loans.
At June 30, 1998, loans totaling $1,517,000 (including the above
past due and non-accrual loans) were included in the Company's internal
classified loan list. Of these loans $1,248,000 are real estate and $269,000 are
personal. The collateral values securing these loans total approximately
$1,316,000 ($1,180,000 related to real property and $136,000 related to personal
loans). The internally classified loans have increased from $1,162,000 at
December 31, 1997, to $1,517,000 at June 30, 1998. This increase is represented
by a decrease of $587,000 in personal loans offset by a $942,000 increase
related to real estate loans. Loans are listed as classified when information
obtained about possible credit problems of the borrower has 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.
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 June 30, 1998, the
Company's liquid assets totaled $34,947,000.
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 subsidiary bank.
These meetings focus on the spread between the Company's cost of funds and
interest yields generated primarily through loans and investments.
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
LIQUIDITY AND ASSET MANAGEMENT, CONTINUED
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 $6.9 million mature or will be subject to rate adjustments
within the next twelve months.
A secondary source of liquidity is the Company's loan portfolio.
At June 30, 1998 loans of approximately $170.7 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 $56.9 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
anticipates that there will be no significant withdrawals from these accounts in
the future.
Management believes that with present maturities, the anticipated
growth in deposit base, and the efforts of management in its asset/liability
management program, liquidity will not pose a problem in the near term future.
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 a materially adverse way.
CAPITAL POSITION AND DIVIDENDS
Capital. At June 30, 1998, total stockholders' equity was
$27,072,000 or 6.9% of total assets, which compares with $24,817,000 or 7.1% of
total assets at December 31, 1997. The dollar increase in stockholders' equity
during the six months ended June 30, 1998 results from the Company's net income
of $2,383,000, the net effect of a $67,000 unrealized loss on investment
securities net of applicable income taxes, less cash dividends declared of
$563,000 of which $502,000 was reinvested under the Company's dividend
reinvestment plan.
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
CAPITAL POSITION AND DIVIDENDS, CONTINUED
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 total risk-based capital. Total risk-based 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 June 30, 1998
the Company's total risk-based capital ratio was 13.1% and its Tier I risk-based
capital ratio was approximately 11.9% compared to ratios of 13.4% and 12.2%,
respectively at December 31, 1997. The required Tier I leverage capital ratio
(Tier I capital to average assets for the most recent quarter) for the Company
is 4.0%. At June 30, 1998 the Company had a leverage ratio of 7.9%, compared to
8.2% at December 31, 1997.
IMPACT OF INFLATION
Although interest rates are significantly affected by inflation,
the inflation rate is immaterial when reviewing the Company's results of
operations.
YEAR 2000
As with other companies, advances and changes in technology can
have a significant impact on the business and operations. Many computer programs
were originally designed to recognize calendar years by their last two digits.
Calculations performed using these truncated fields will not work properly with
dates from the year 2000 and beyond. This "Year 2000 computer issue" can create
risk for a company from unforeseen problems in its own computer systems and from
the company's vendors and customers.
The Company has implemented a plan in order to avoid any problems
related to the Year 2000 computer issue. Based upon current information,
management presently believes that specific costs related to the Company's Year
2000 systems issues will not have a material impact on the operations, cash
flows or financial condition of the Company.
FORWARD-LOOKING STATEMENTS
This form 10-Q contains certain forward-looking statements
regarding, among other things, the anticipated financial and operating results
of the Company. Investors are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release any modifications or revisions to
these forward-looking statements to reflect events or circumstances occurring
after the date hereof or to reflect the occurrence of unanticipated events.
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
FORWARD-LOOKING STATEMENTS, CONTINUED
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company cautions investors that
future financial and operating results may differ materially from those
projected in forward-looking statements made by, or on behalf of, the Company.
Such forward-looking statements involve known and unknown risks, uncertainties,
and other factors that may cause the actual results, performance, or
achievements of the Company to be materially different from any future results,
performance, or achievements expressed or implied by such forward-looking
statements. The Company's future operating results depend on a number of factors
which were derived utilizing numerous assumptions and other important factors
that could cause actual results to differ materially from those projected in
forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary component of market risk is interest rate
volatility. Fluctuations in interest rates will ultimately impact both the level
of income and expense recorded on a large portion of the Company's assets and
liabilities, and the market value of all interest-earning assets and
interest-bearing liabilities, other than those which possess a short term to
maturity. Based upon the nature of the Company's operations, the Company is not
subject to foreign currency exchange or commodity price risk.
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 the
spread between the cost of funds and interest yields generated primarily through
loans and investments.
There have been no material changes in reported market risks
during the six months ended June 30, 1998.
18
<PAGE> 19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of stockholders was held April 14, 1998.
(b) Election of the entire board of directors.
(c) (1) Each director was elected by the following tabulation:
<TABLE>
<CAPTION>
Number
of Shares Broker
Voting For Against Withheld Non-Votes
--------- --- ------- -------- ---------
<S> <C> <C> <C> <C> <C>
Charles Bell 806,311 806,072 239 0 0
Jack Bell 806,311 806,072 239 0 0
Mackey Bentley 806,311 806,072 239 0 0
Randall Clemons 806,311 806,072 239 0 0
Jimmy Comer 806,311 806,072 239 0 0
Jerry Franklin 806,311 806,072 239 0 0
John Freeman 806,311 806,072 239 0 0
Marshall Griffith 806,311 806,072 239 0 0
Harold Patton 806,311 806,072 239 0 0
James Patton 806,311 806,072 239 0 0
John Trice 806,311 806,072 239 0 0
Bob Van Hooser 806,311 805,583 728 0 0
</TABLE>
19
<PAGE> 20
PART II. OTHER INFORMATION, CONTINUED
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS, CONTINUED
(2) The election of Maggart & Associates, P.C. as
independent auditors for the Company was as
follows:
<TABLE>
<CAPTION>
Number
of Shares Broker
Voting For Against Abstain Non-Votes
--------- --- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
806,311 800,493 228 5,590 0
</TABLE>
(d) Not Applicable.
ITEM 5. OTHER INFORMATION
Shareholders intending to submit proposals for presentation at
the next Annual Meeting and inclusion in the Proxy Statement and form of proxy
for such meeting should forward such proposals to J. Randall Clemons, Wilson
Bank Holding Company, 623 West Main Street, Lebanon, Tennessee 37087. Proposals
must be in writing and must be received by the Company prior to November 14,
1998 in order to be included in the Company's Proxy Statement and form of proxy
relating to the 1999 Annual Meeting of Shareholders. In the event that a
proposal intended to be presented for action at the 1999 Annual Meeting of
Shareholders by any shareholder of the Company is not received by the Company on
or before January 28, 1999, then the management proxies would be allowed to use
their discretionary voting authority if the proposal is raised at the 1999
Annual Meeting, whether or not the matter is discussed in the Proxy Statement.
Proposals should be sent to the Company by certified mail, return receipt
requested.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 Financial Data Schedule (for SEC use only) - This
schedule contains summary financial information extracted from
the consolidated financial statements of the Company at June
30, 1998 (unaudited) and is qualified in its entirety by
reference to such financial statements as set forth in the
Company's quarterly report on Form 10-Q for the period ending
June 30, 1998.
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
20
<PAGE> 21
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: August 4, 1998 /s/ Randall Clemons
-------------- -------------------------------------
Randall Clemons, President and
Chief Executive Officer
DATE: August 4, 1998 /s/ Becky Taylor
-------------- -------------------------------------
Becky Taylor
Sr. Vice President & Cashier
21
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF WILSON BANK HOLDING COMPANY FOR THE SIX MONTHS ENDED
JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 16,587
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 18,279
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 55,783
<INVESTMENTS-CARRYING> 22,635
<INVESTMENTS-MARKET> 22,947
<LOANS> 260,749
<ALLOWANCE> 3,216
<TOTAL-ASSETS> 391,591
<DEPOSITS> 348,851
<SHORT-TERM> 9,631
<LIABILITIES-OTHER> 6,037
<LONG-TERM> 0
0
0
<COMMON> 2,845
<OTHER-SE> 24,227
<TOTAL-LIABILITIES-AND-EQUITY> 391,591
<INTEREST-LOAN> 11,999
<INTEREST-INVEST> 2,212
<INTEREST-OTHER> 885
<INTEREST-TOTAL> 15,096
<INTEREST-DEPOSIT> 7,539
<INTEREST-EXPENSE> 7,691
<INTEREST-INCOME-NET> 7,405
<LOAN-LOSSES> 512
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,363
<INCOME-PRETAX> 3,630
<INCOME-PRE-EXTRAORDINARY> 3,630
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,383
<EPS-PRIMARY> 1.68
<EPS-DILUTED> 1.68
<YIELD-ACTUAL> 2.11
<LOANS-NON> 298
<LOANS-PAST> 981
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,279
<ALLOWANCE-OPEN> 2,890
<CHARGE-OFFS> 214
<RECOVERIES> 28
<ALLOWANCE-CLOSE> 3,216
<ALLOWANCE-DOMESTIC> 3,216
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
