<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, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
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: 2,005,958 shares at November 10, 2000.
---------
1
<PAGE> 2
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited consolidated financial statements of the Company and its
subsidiaries are as follows:
Consolidated Balance Sheets - September 30, 2000 and December 31, 1999.
Consolidated Statements of Earnings - For the three months and nine months
ended September 30, 2000 and 1999.
Consolidated Statements of Comprehensive Earnings - For the three months
and nine months ended September 30, 2000 and 1999.
Consolidated Statements of Cash Flows - For the nine months ended
September 30, 2000 and 1999.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Disclosures required by Item 3 are incorporated by reference to
Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities and Use of Proceeds.
Item 3. Defaults upon Senior Securities.
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
<PAGE> 3
WILSON BANK HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
(In Thousands)
<S> <C> <C>
Assets
Loans $ 415,992 358,605
Less: Allowance for loan losses (4,297) (3,847)
--------- --------
Net loans 411,695 354,758
Securities:
Held-to-maturity, at cost (market value $16,402,000 and
$16,475,000, respectively) 16,564 16,737
Available-for-sale, at market (amortized cost $72,602,000
and $69,931,000, respectively) 69,697 67,043
--------- --------
Total securities 86,261 83,780
Loans held for sale 930 1,835
Federal funds sold 12,064 13,928
--------- --------
Total earning assets 510,950 454,301
Cash and due from banks 14,619 16,721
Bank premises and equipment, net 15,695 16,259
Accrued interest receivable 4,611 3,894
Other real estate 317 221
Deferred income tax asset 2,086 2,077
Other assets 1,736 1,745
--------- --------
Total assets $ 550,014 495,218
========= ========
Liabilities and Stockholders' Equity
Deposits $ 491,636 447,792
Securities sold under repurchase agreements 11,804 8,543
Federal Home Loan Bank Advances 1,892 --
Accrued interest and other liabilities 4,369 2,965
Minority interest 4,008 3,668
--------- --------
Total liabilities 513,709 462,968
--------- --------
Stockholders' equity:
Common stock, $2.00 par value; authorized 5,000,000
shares; issued 2,005,958 at September 30, 2000 and
1,963,163 shares at December 31, 1999, respectively 4,012 3,926
Additional paid-in capital 10,163 8,822
Retained earnings 23,757 21,118
Net unrealized losses on available-for-sale securities,
net of income tax benefit of $996,000 and $988,000,
respectively (1,627) (1,616)
--------- --------
Total stockholders' equity 36,305 32,250
--------- --------
Total liabilities and stockholders' equity $ 550,014 495,218
========= ========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
3
<PAGE> 4
WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ------------------------
2000 1999 2000 1999
---- ---- ---- ----
(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 $ 9,441 7,526 $26,372 21,688
Interest and dividends on securities:
Taxable securities 1,216 1,150 3,627 3,277
Exempt from Federal income taxes 172 180 533 575
Interest on loans held for sale 26 30 70 108
Interest on Federal funds sold 210 192 625 828
------- ------ ------- ------
Total interest income 11,065 9,078 31,227 26,476
------- ------ ------- ------
Interest expense:
Interest on negotiable order of withdrawal accounts 148 106 434 295
Interest on money market and savings accounts 1,147 965 3,451 2,982
Interest on certificates of deposit 4,533 3,203 11,957 9,296
Interest on securities sold under repurchase agreements 143 119 336 286
Interest on Federal Home Loan Bank Advances 27 -- 55 --
Interest on Federal funds purchased 4 1 8 2
------- ------ ------- ------
Total interest expense 6,002 4,394 16,241 12,861
------- ------ ------- ------
Net interest income before provision for possible loan losses 5,063 4,684 14,986 13,615
Provision for possible loan losses 298 258 864 849
------- ------ ------- ------
Net interest income after provision for possible loan losses 4,765 4,426 14,122 12,766
------- ------ ------- ------
Non-interest income:
Service charges on deposit accounts 724 548 1,997 1,520
Other fees and commissions 589 410 1,578 1,206
Gain on sale of loans 205 193 559 655
Gain on sale of other real estate -- 5 -- 8
------- ------ ------- ------
1,518 1,156 4,134 3,389
------- ------ ------- ------
Non-interest expenses:
Salaries and employee benefits 2,140 1,914 6,408 5,601
Occupancy expenses, net 280 264 850 796
Furniture and equipment expenses 320 310 916 831
Data processing expense 99 109 302 295
Directors' fees 131 132 413 406
Other operating expenses 721 674 2,221 2,015
Loss on sale of other real estate -- -- 15 --
Loss on sale of premises and equipment -- 10 -- 10
Minority interest in net earnings of subsidiaries 127 81 353 181
------- ------ ------- ------
3,818 3,494 11,478 10,135
------- ------ ------- ------
Earnings before income taxes 2,465 2,088 6,778 6,020
Income taxes 935 775 2,558 2,192
------- ------ ------- ------
Net earnings $ 1,530 1,313 $ 4,220 3,828
======= ====== ======= ======
Basic earnings per common share $ .76 .67 $ 2.12 1.97
======= ====== ======= ======
Diluted earnings per common share $ .76 .67 $ 2.12 1.97
======= ====== ======= ======
Dividends per share $ .40 .375 $ .80 .75
======= ====== ======= ======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
4
<PAGE> 5
WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ---------------------
2000 1999 2000 1999
---- ---- ---- ----
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Net earnings $1,530 1,313 $ 4,220 3,828
------ ------ ------- ------
Other comprehensive earnings (losses) net of tax:
Unrealized gains (losses) on available-for-sale
securities arising during period, net of tax
expense of $308,000, tax benefit of $385,000,
tax benefit of $8,000 and tax benefit of
$1,052,000, respectively 503 (629) (11) (1,717)
------ ------ ------- ------
Other comprehensive earnings (losses) 503 (629) (11) (1,717)
------ ------ ------- ------
Comprehensive earnings $2,033 684 $ 4,209 2,111
====== ====== ======= ======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
5
<PAGE> 6
WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
---- ----
(In Thousands)
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 30,439 25,727
Fees and commissions received 3,575 2,726
Proceeds from sale of loans 26,684 34,390
Originations of loans held for sale (25,220) (31,273)
Interest paid (15,643) (12,941)
Cash paid to suppliers and employees (9,202) (8,583)
Income taxes paid (2,741) (1,901)
-------- -------
Net cash provided by operating activities 7,892 8,145
-------- -------
Cash flows from investing activities:
Proceeds from maturities of available-for-sale securities 1,750 15,093
Proceeds from maturities of held-to-maturity securities 1,840 4,235
Purchase of held-to-maturity securities (1,670) (863)
Purchase of available-for-sale securities (4,347) (33,085)
Loans made to customers, net of repayments (58,117) (48,426)
Purchase of premises and equipment (373) (1,572)
Proceeds from sale of premises and equipment 11 --
Proceeds from sale of other real estate 205 246
-------- -------
Net cash used in investing activities (60,701) (64,372)
-------- -------
Cash flows from financing activities:
Net increase in non-interest bearing, savings and NOW
deposit accounts 6,005 4,608
Net increase in time deposits 37,839 25,874
Increase in securities sold under repurchase agreements 3,261 4,189
Net increase in advances from Federal Home Loan Bank 1,892 --
Proceeds from advances from Federal funds purchased -- 2,355
Repayment of advances from Federal funds purchased -- (2,355)
Dividends paid (1,580) (1,447)
Proceeds from sale of common stock 1,426 1,282
-------- -------
Net cash provided by financing activities 48,843 34,506
-------- -------
Net decrease in cash and cash equivalents (3,966) (21,721)
Cash and cash equivalents at beginning of period 30,649 41,000
-------- -------
Cash and cash equivalents at end of period $ 26,683 19,279
======== =======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
6
<PAGE> 7
WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
---- ----
(In Thousands)
<S> <C> <C>
Reconciliation of net earnings to net cash
provided by operating activities:
Net earnings $ 4,220 3,828
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 910 923
Provision for loan losses 864 849
Minority interests in net earnings of commercial
bank subsidiaries 353 181
FHLB dividend reinvestment (68) (54)
Loss on sale of premises and equipment -- 10
Loss (gain) on sale of other real estate 15 (8)
Decrease in loans held for sale 905 2,462
Decrease in refundable income taxes 26 347
Increase in deferred tax asset (3) (10)
Increase in other assets, net (17) (122)
Increase in interest receivable (717) (690)
Decrease in taxes payable (206) (46)
Increase in other liabilities 1,012 555
Increase (decrease) in interest payable 598 (80)
------- ------
Total adjustments 3,672 4,317
------- ------
Net cash provided by operating activities $ 7,892 8,145
======= ======
Supplemental schedule of non-cash activities:
Unrealized loss in values of securities
available-for-sale, net of income tax benefit of
$8,000 and $1,052,000 for the nine months
ended September 30, 2000 and 1999, respectively $ (11) (1,717)
======= ======
Non-cash transfers from loans to other real estate $ 316 331
======= ======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
7
<PAGE> 8
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 &
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 September 30, 2000 and December 31, 1999, and the results
of operations for the three months and nine months ended September 30, 2000 and
1999, comprehensive earnings for the three months and nine months ended
September 30, 2000 and 1999 and changes in cash flows for the nine months ended
September 30, 2000 and 1999. 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 1999 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>
Nine Months Ended
September 30,
-----------------------
2000 1999
---- ----
(In Thousands)
<S> <C> <C>
Balance, January 1, 2000 and 1999, respectively $ 3,847 3,244
Add (deduct):
Losses charged to allowance (494) (452)
Recoveries credited to allowance 80 73
Provision for loan losses 864 849
---------- ----------
Balance, September 30, 2000 and 1999, respectively $ 4,297 3,714
========== ==========
</TABLE>
STOCK SPLIT
The Company's Board of Directors voted a 4 for 3 stock split for stockholders of
record as of September 30, 1999. Each stockholder received one (1) additional
share for each three (3) shares owned with no allowance for fractional shares.
Per share data for 1999 included in these financial statements has been restated
to give effect to the stock split.
8
<PAGE> 9
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
EARNINGS PER SHARE
The computation of basic earnings per share is based on the weighted average
number of common shares outstanding during the period. The computation of
diluted earnings per share for the Company begins with the basic earnings per
share plus the effect of common shares contingently issuable from stock options.
The following is a summary of components comprising basic and diluted earnings
per share (EPS) for the three and nine months ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ------------------------
(In Thousands, except share amounts) 2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic EPS Computation:
Numerator - earnings available to common
shareholders $ 1,530 1,313 4,220 3,828
---------- --------- --------- ---------
Denominator - weighted average number
of common shares outstanding 1,999,203 1,954,632 1,987,512 1,942,768
---------- --------- --------- ---------
Basic earnings per common share $ .76 .67 2.12 1.97
========== ========= ========= =========
Diluted EPS Computation:
Numerator - earnings available to common
shareholders $ 1,530 1,313 4,220 3,828
---------- --------- --------- ---------
Denominator:
Weighted average number of common
shares outstanding 1,999,203 1,954,632 1,987,512 1,942,768
Dilutive effect of stock options 583 -- 407 --
---------- --------- --------- ---------
1,999,786 1,954,632 1,987,919 1,942,768
---------- --------- --------- ---------
Diluted earnings per common share $ .76 .67 2.12 1.97
========== ========= ========= =========
</TABLE>
9
<PAGE> 10
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. Reference should also be made to the Company's Annual Report on Form
10-K for the year ended December 31, 1999 for a more complete discussion of
factors that impact liquidity, capital and the results of operations.
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.
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 and
uncertainties, including, but not limited to sudden adverse interest rate
changes, inadequate allowance for loan losses and loss of key personnel. These
risks and uncertainties may cause the actual results or performance of the
Company to be materially different from any future results or performance
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.
RESULTS OF OPERATIONS
Net earnings increased 10.2% to $4,220,000 for the nine months ended
September 30, 2000 from $3,828,000 in the first nine months of 1999. Net
earnings were $1,530,000 for the quarter ended September 30, 2000, an increase
of $217,000 or 16.5% from $1,313,000 for the three months ended September 30,
1999 and an increase of $102,000 or 7.1% over the quarter ended June 30, 2000.
The increase in net earnings during the nine months ending September 30, 2000
was primarily due to a 10.1% increase in net interest income and a 22.0%
increase in non-interest income which was partially offset by a 13.3% 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 $4,751,000 or 17.9% during the nine months
ended September 30, 2000 as compared to the same period in 1999. The increase in
total interest income was $1,987,000 or 21.9% for the quarter ended September
30, 2000 as compared to the quarter ended September 30, 1999 and $717,000 or
6.9% over the second quarter of 2000. The increase in 2000 was primarily
attributable to an increase in average earning assets and an increase in
interest rates. The ratio of average earning assets to total average assets was
94.0%, 93.7% and 92.6% for the quarters ended September 30, 2000, June 30, 2000
and March 31, 2000, respectively.
10
<PAGE> 11
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
NET INTEREST INCOME, CONTINUED
Interest expense increased $3,380,000 or 26.3% for the nine months
ended September 30, 2000 as compared to the same period in 1999. The increase
was $1,608,000 or 36.6% for the three months ended September 30, 2000 as
compared to the same period in 1999. Interest expense increased $693,000 or
13.1% for the quarter ended September 30, 2000 over the second quarter of 2000.
The overall increase in total interest expense for the first nine months of 2000
was primarily attributable to an increase in weighted average interest-bearing
liabilities.
The foregoing resulted in an increase in net interest income of
$1,371,000 or 10.1% for the first nine months of 2000 as compared to the same
period in 1999. The increase was $379,000 or 8.1% for the quarter ended
September 30, 2000 compared to the quarter ended September 30, 1999 and an
increase of $24,000 or 0.5% when compared to the second quarter of 2000.
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses was $864,000 and $849,000 for
the first nine months of 2000 and 1999, respectively. The provision for possible
loan losses during the three month periods ended September 30, 2000 and 1999 was
$298,000 and $258,000, 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 $4,297,000, an increase of 11.7% from $3,847,000 at December 31, 1999.
The allowance for possible loan losses as a percentage of total outstanding
loans was 1.0% and 1.1% at September 30, 2000 and December 31, 1999,
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 September 30, 2000 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
and gain on sale of other real estate. Total non-interest income for the nine
months ended September 30, 2000 increased by 22.0% to $4,134,000 from $3,389,000
for the same period in 1999. The increase was $362,000 or 31.3% during the
quarter ended September 30, 2000 compared to the third quarter in 1999 and the
increase was $63,000 or 4.3% over the quarter ended June 30, 2000. The overall
increase in non-interest income was due primarily to increases in service
charges on deposit accounts and other fees and commissions. Service charges on
deposit accounts totaled $1,997,000 and $1,520,000 during the nine months ended
September 30, 2000 and 1999, respectively, an increase of $477,000 or 31.4%.
Service charges on deposit accounts totaled $724,000 and $548,000 during the
quarters ended September 30, 2000 and 1999, respectively, an increase of
$176,000 or 32.1%. Other fees and commissions increased $372,000 or 30.8% during
the nine months ended September 30, 2000 compared to the same period in 1999.
Other fees and commissions increased $179,000 or 43.7% during the quarter ended
September 30, 2000 compared to the same period in 1999.
11
<PAGE> 12
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, directors' fees, other operating expenses, loss on sale of other real
estate, loss on sale of premises and equipment and minority interest in net
earnings of subsidiaries. Total non-interest expense increased $1,343,000 or
13.3% during the first nine months of 2000 compared to the same period in 1999.
The increase for the quarter ended September 30, 2000 was $324,000 or 9.3% as
compared to the comparable quarter in 1999 and the decrease was $86,000 or 2.2%
as compared to the second quarter of 2000. The overall increase in non-interest
expense was attributable primarily to increases in salaries and employee
benefits associated with an increase in the number of employees necessary to
support the Company's operations. The number of employees increased to 221 at
September 30, 2000, an increase from 195 at September 30, 1999. Increases in
occupancy and furniture and equipment expenses were also due to the Company's
growth, specifically as a result of the opening of a new branch in Hermitage,
Tennessee since September 30, 1999. Other operating expenses for the nine months
ended September 30, 2000 increased to $2,221,000 from $2,015,000 for the
comparable period in 1999. Other operating expenses increased $47,000 or 7.0%
during the quarter ended September 30, 2000 as compared to the same period in
1999. 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 $2,558,000 for the nine months
ended September 30, 2000, an increase of $366,000 as compared to the comparable
period in 1999. Income tax expense was $935,000 for the quarter ended September
30, 2000, an increase of $160,000 over the same period in 1999. The percentage
of income tax expense to net income before taxes was 37.7% and 36.4% for the
nine months ended September 30, 2000 and 1999, respectively and 37.9% and 37.1%
for the quarters ended September 30, 2000 and 1999, respectively. The percentage
of income tax expense to net income before tax was 37.8% for the second quarter
of 2000. 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 1.7% for the nine months ended September 30, 2000 compared to
2.2% for the nine months ended September 30, 1999.
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, CONTINUED
FINANCIAL CONDITION
BALANCE SHEET SUMMARY
The Company's total assets increased 11.1% to $550,014,000 during the
nine months ended September 30, 2000 from $495,218,000 at December 31, 1999.
Total assets increased $17,635,000 or 3.3%, $22,221,000 or 4.4% and $14,940,000
or 3.0% during the three month periods ended September 30, 2000, June 30, 2000
and March 31, 2000, respectively. Loans, net of allowance for possible loan
losses totaled $411,695,000 at September 30, 2000 or a 16.0% increase compared
to $354,758,000 at December 31, 1999. Net loans increased $17,617,000 or 4.4%,
$23,160,000 or 6.2% and $16,160,000 or 4.6% during the quarters ended September
30, 2000, June 30, 2000 and March 31, 2000, respectively. These increases were
primarily due to the Company's ability to increase its market share of such
loans while maintaining its loan underwriting standards. Securities increased
$2,481,000 or 3.0% to $86,261,000 at September 30, 2000 from $83,780,000 at
December 31, 1999. Securities increased $1,348,000 or 1.6% during the three
months ended September 30, 2000. The increase in securities included a net
unrealized loss of $17,000 during the nine month period ending September 30,
2000. Federal funds sold decreased $1,864,000 to $12,064,000 at September 30,
2000 from $13,928,000 at December 31, 1999.
Total liabilities increased by 11.0% to $513,709,000 for the nine
months ended September 30, 2000 compared to $462,968,000 at December 31, 1999.
The increase by quarter totaled $15,677,000 or 3.1%, $20,872,000 or 4.4% and
$14,192,000 or 3.1% during the quarters ended September 30, 2000, June 30, 2000
and March 31, 2000, respectively. These increases were composed primarily of a
$43,844,000 or 9.8% increase in total deposits and an increase of $3,261,000 or
38.2% in securities sold under repurchase agreements during the nine months
ended September 30, 2000. Federal Home Loan Bank Advances increased $1,892,000
during the nine months ended September 30, 2000.
The Company follows the provisions of 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.
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
The Company's first mortgage single family residential, consumer and
credit card loans, which total approximately $202,254,000, $53,443,000 and
$2,074,000, respectively at September 30, 2000, 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
September 30, 2000, the Company had nonaccrual loans totaling $132,000 as
compared to $84,000 at December 31, 1999.
Other loans may be classified as impaired when the current net worth
and financial capacity of the borrower or of the collateral pledged, if any, is
viewed as inadequate. 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 September 30, 2000, the Company had no loans that
have had the 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.
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
Impaired loans and related allowance for loan loss amounts at September
30, 2000 and December 31, 1999 were as follows:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
---------------------- -----------------------
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 $ -- -- 84 30
Impaired loans with no allowance for
loan loss -- -- -- --
-------- ------- -------- --------
$ -- -- 84 30
======== ======= ======== ========
</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 nine months
ended September 30, 2000 and September 30, 1999 was insignificant. There was no
interest income recognized on these loans during 1999.
The following schedule details selected information as to
non-performing loans of the Company at September 30, 2000:
<TABLE>
<CAPTION>
Past Due
90 Days Non-Accrual
------- -----------
(In Thousands)
<S> <C> <C>
Real estate loans $ 652 126
Installment loans 178 6
Commercial, financial and agricultural
loans -- --
---------- ---------
$ 830 132
========== =========
Renegotiated loans $ -- --
========== =========
</TABLE>
Non-performing loans, which included non-accrual loans and loans 90
days past due, at September 30, 2000 totaled $962,000, an increase from $506,000
at December 31, 1999. During the three months ended September 30, 2000,
non-performing loans increased $151,000 or 18.6% from $811,000 at June 30, 2000.
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
At September 30, 2000, loans totaling $1,208,000 (including the above
past due and non-accrual loans) were included in the Company's internal
classified loan list. Of these loans, $834,000 are real estate loans and
$374,000 are other types of loans. The collateral values securing these loans
total approximately $1,385,000, ($1,104,000 related to real property and
$281,000 related to other loans). The internally classified loans have increased
$470,000 or 63.7% from $738,000 at December 31, 1999. Internally classified real
estate loans increased $446,000 and other loans increased $24,000 from December
31, 1999 amounts. 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 September 30,
2000, the Company's liquid assets totaled $40,305,000.
The Company's primary source of liquidity is its core deposit base. In
addition, loan payments, investment security maturities and short-term
borrowings 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 banks.
These meetings 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 $3.5 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, 2000 loans of approximately $290.4 million either will become due
or will be subject to rate adjustments within twelve months from that date.
Continued emphasis will be placed on structuring adjustable rate loans.
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
LIQUIDITY AND ASSET MANAGEMENT, CONTINUED
As for liabilities, certificates of deposit of $100,000 or greater
totaling approximately $91.3 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
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 September 30, 2000, total stockholders' equity was
$36,305,000 or 6.6% of total assets, which compares with $32,250,000 or 6.5% of
total assets at December 31, 1999. The dollar increase in stockholders' equity
during the nine months ended September 30, 2000 results from the Company's net
income of $4,220,000, the net effect of a $11,000 unrealized loss on investment
securities net of applicable income taxes, less cash dividends declared of
$1,580,000, of which $1,426,000 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 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 its
subsidiary banks have 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 requires 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 September 30, 2000 the
Company's total risk-based capital ratio was 11.6% and its Tier I risk-based
capital ratio was approximately 10.5% compared to ratios of 12.0% and 10.9%,
respectively at December 31, 1999. 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 September 30, 2000, the Company had a leverage ratio of 7.5%,
compared to 7.7% at December 31, 1999.
IMPACT OF INFLATION
Although interest rates are significantly affected by inflation, the
inflation rate is immaterial when reviewing the Company's results of operations.
17
<PAGE> 18
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
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 on
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
nine months ended September 30, 2000.
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
None
ITEM 5. OTHER INFORMATION
None
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 September
30, 2000 (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
September 30, 2000.
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
19
<PAGE> 20
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 10, 2000 /s/ Randall Clemons
-------------------------- ------------------------------------------
Randall Clemons
President and Chief Executive Officer
DATE: November 10, 2000 /s/ Becky Taylor
------------------------- ------------------------------------------
Becky Taylor
Sr. Vice President & Cashier
20
