<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission file number 0-10402
WILSON BANK HOLDING COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Tennessee 62-1497076
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
623 West Main Street
Lebanon, Tennessee 37087
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code:
(615) 444-2265
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $2.00 PAR VALUE PER SHARE
(Title of class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant on March 1, 2000, was approximately $54,274,112. The market value
calculation was determined using $32.00 per share.
Shares of common stock, $2.00 par value per share, outstanding on March 1, 2000
were 1,985,242.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K Documents from which portions are incorporated by
reference
Part II Portions of the Registrant's Annual Report to
Shareholders for the fiscal year ended December 31,
1999 are incorporated by reference into Items 5, 6,
7, and 8.
Part III Portions of the Registrant's Proxy Statement relating
to the Registrant's Annual Meeting of Shareholders to
be held on April 11, 2000 are incorporated by
reference into Items 10, 11, 12 and 13.
<PAGE> 2
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
Wilson Bank Holding Company (the "Company") was incorporated on March 17, 1992
under the laws of the State of Tennessee. The purpose of the Company was to
acquire all of the issued and outstanding capital stock of Wilson Bank and Trust
(the "Bank") and act as a one bank holding company. On November 17, 1992, the
Company acquired 100% of the capital stock of the Bank pursuant to the terms of
a plan of share exchange and agreement.
All of the Company's banking business is conducted through the Bank, a state
chartered bank organized under the laws of the State of Tennessee, DeKalb
Community Bank ("DCB") and Community Bank of Smith County ("CBSC"). The Bank on
December 31, 1999 had eight full service banking offices located in Wilson
County, Tennessee, one full service banking facility in Trousdale County,
Tennessee and one full service banking office in eastern Davidson County. DCB
had two full service banking offices in DeKalb County, one office located in
Smithville, Tennessee and one office located in Alexandria, Tennessee. CBSC had
one office located in Carthage, Smith County, Tennessee. DCB began operations in
April 1996 and CBSC in December 1996. As of December 31, 1999, revenues and
expenses of DCB and CBSC, have not had a material effect on the earnings of the
Company. On October 1, 1999, the Company stopped transacting new business
through its wholly-owned subsidiary Hometown Finance, Inc. (the "Finance
Company"). The loans made by the Finance Company, while still assets of the
Finance Company, are currently being collected by the Company. Additionally, all
of the employees of the Finance Company are currently employees of the Company.
The Company's principal executive office is located at 623 West Main Street,
Lebanon, Tennessee, which is also the principal location of the Bank. The Bank's
branch offices are located at 1444 Baddour Parkway, Lebanon, Tennessee; 200
Tennessee Boulevard, Lebanon, Tennessee; Public Square, Watertown, Tennessee;
8875 Stewart's Ferry Pike, Gladeville, Tennessee; 1476 North Mt. Juliet Road,
Mt. Juliet, Tennessee; 127 McMurry Boulevard, Hartsville, Tennessee; 1130 Castle
Heights Avenue North, Lebanon, Tennessee (which opened on December 5, 1998); the
Wal-Mart Super Center, Lebanon, Tennessee; and 4736 Andrew Jackson Parkway in
Hermitage, Tennessee. Management believes that Wilson County and Trousdale
County offer an environment for continued banking growth in the Company's target
market, which consists of local consumers, professionals and small businesses.
The Bank offers a wide range of banking services, including checking, savings,
and money market deposit accounts, certificates of deposit and loans for
consumer, commercial and real estate purposes. The Bank also offers custodial,
trust and discount brokerage services to its customers. The Bank does not have a
concentration of deposits obtained from a single person or entity or a small
group of persons or entities, the loss of which would have a material adverse
effect on the business of the Bank. Furthermore, no concentration of loans
exists within a single industry or group of related industries.
The Bank was organized in 1987 to provide Wilson County a locally-owned,
locally-managed commercial bank. Since its opening, the Bank has experienced a
steady growth in deposits and loans as a result of providing personal, service
oriented banking services to its targeted market. For the year ended December
31, 1999, the Company reported net earnings of approximately $4.9 million and
had total assets of approximately $495.2 million.
DeKalb County Bank was organized and began operations as a de novo state
chartered bank in 1996. DCB is 50% owned by the Company and 50% owned by
residents of DeKalb County. DCB operates two full service branches, one in
Smithville and one in Alexandria, Tennessee. DCB is considered a subsidiary of
the Company for purposes of the Bank Holding Company Act of 1956.
Management believes that DeKalb County offers an environment for continued
growth since it is geographically close to Wilson County and two locally-owned
banks in DeKalb County were acquired by larger banks in 1998. DCB offers a wide
range of banking services, including checking, savings, and money market deposit
accounts, certificates of deposit and loans for consumer, commercial and real
estate purposes. DCB does not have a concentration of deposits obtained from a
single person or entity or a small group of persons or entities, the loss of
which would have a material adverse effect on the business of DCB. Furthermore,
no concentration of loans exists within a single industry or group of related
industries.
1
<PAGE> 3
Community Bank of Smith County was organized as a de novo state chartered bank
in 1996. CBSC is 50% owned by the Company and 50% owned by residents of Smith
County. CBSC is considered a subsidiary of the Company for purposes of the Bank
Holding Company Act of 1956. Management believes that Smith County offers an
environment for continued growth since it is contiguous to Wilson County and has
only three other financial institutions. CBSC offers a wide range of banking
services, including checking, savings, and money market deposit accounts,
certificates of deposit and loans for consumer, commercial and real estate
purposes. CBSC does not have a concentration of deposits obtained from a single
person or entity or a small group of persons or entities, the loss of which
would have a material adverse effect on the business of CBSC. Furthermore, no
concentration of loans exists within a single industry or group of related
industries.
FINANCIAL AND STATISTICAL INFORMATION
The Company's audited financial statements, selected financial data and
Management's Discussion and Analysis of Financial Condition and Results of
Operation contained in the Company's Annual Report to Shareholders for the year
ended December 31, 1999 filed as Exhibit 13 to this Form 10-K (the "1999 Annual
Report"), are incorporated herein by reference.
REGULATION AND SUPERVISION
In addition to the information set forth herein, Management's Discussion and
Analysis of Financial Condition and Results of Operations, incorporated by
reference in Item 7 hereof, further discusses recent banking legislation and
regulation and should be reviewed in conjunction herewith.
The Company, the Bank, DCB and CBSC are subject to extensive regulation under
state and federal statutes and regulations. The discussion in this section,
which briefly summarizes certain of such statutes, does not purport to be
complete, and is qualified in its entirety by reference to such statutes. Other
state and federal legislation and regulations directly and indirectly affecting
banks are likely to be enacted or implemented in the future; however, such
legislation and regulations and their effect on the business of the Company and
its subsidiaries cannot be predicted.
The Company is a bank holding company within the meaning of the Bank Holding
Company Act of 1956 (the "Act") and is registered with the Board of Governors of
the Federal Reserve System (the "Board"). The Company is required to file annual
reports with, and is subject to examination by, the Board. The Bank, DCB and
CBSC are chartered under the laws of the state of Tennessee and are subject to
the supervision of, and are regularly examined by, the Tennessee Department of
Financial Institutions. The Bank, DCB and CBSC are also regularly examined by
the Federal Deposit Insurance Corporation.
Under the Act, a bank holding company may not directly or indirectly acquire
ownership or control of more than five percent of the voting shares or
substantially all of the assets of any company, including a bank, without the
prior approval of the Board. In addition, bank holding companies are generally
prohibited under the Act from engaging in non-banking activities, subject to
certain exceptions and the recent modernization of the financial services
industry in connection with the passing of the Gramm-Leach-Bliley Act of 1999.
Under the Act, the Board is authorized to approve the ownership by a bank
holding company of shares of any company whose activities have been determined
by the Board to be so closely related to banking or to managing or controlling
banks as to be a proper incident thereto.
In November 1999, the Gramm-Leach-Bliley Act of 1999 (the "GLB Act") became law.
Under the GLB Act, a "financial holding company" may engage in activities the
Board determines to be financial in nature or incidental to such financial
activity or complementary to a financial activity and not a substantial risk to
the safety and soundness of such depository institutions or the financial
system. Generally, such companies may engage in a wide range of securities
activities and insurance underwriting and agency activities.
Under the Tennessee Bank Structure Act, a bank holding company which controls
30% or more of the total deposits in all federally insured financial
institutions in Tennessee is prohibited from acquiring any bank in Tennessee.
Furthermore, no bank holding company may acquire any bank in Tennessee that has
been in operation less than five years or organize a new bank in Tennessee,
except in the case of certain interim bank mergers and acquisitions of banks in
financial difficulty. State banks and national banks in Tennessee, however, may
establish branches anywhere in the state.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"IBBEA") authorized interstate acquisitions of banks and bank holding companies
without geographic limitation beginning on June 1, 1997. In addition, on that
date, the IBBEA authorized a bank to merge with a bank in another state as long
as neither of the states has opted out of interstate branching between the date
of enactment of the IBBEA and May 1, 1997. Tennessee enacted interstate
branching laws in response to the federal law which prohibit the establishment
or acquisition in Tennessee by any bank of a branch office, branch bank or other
branch facility in Tennessee except (i) a Tennessee-chartered bank, (ii) a
national bank which has its main office in Tennessee or (iii) a bank which
merges or consolidates with a Tennessee-chartered bank or national bank with its
main office in Tennessee.
2
<PAGE> 4
The Company, the Bank, DCB and CBSC are subject to certain restrictions imposed
by the Federal Reserve Act and the Federal Deposit Insurance Act, respectively,
on any extensions of credit to the bank holding company or its subsidiary banks,
on investments in the stock or other securities of the bank holding company or
its subsidiary banks, and on taking such stock or other securities as collateral
for loans of any borrower.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
covers a wide expanse of banking regulatory issues. FDICIA deals with
recapitalization of the Bank Insurance Fund, with deposit insurance reform,
including requiring the FDIC to establish a risk-based premium assessment
system, and with a number of other regulatory and supervisory matters.
The Financial Reform, Recovery and Enforcement Act of 1989 ("FIRREA") provides
that a holding company's controlled insured depository institutions are liable
for any loss incurred by the FDIC in connection with the default of, or any
FDIC-assisted transaction involving, an affiliated insured bank or savings
association.
The maximum permissible rates of interest on most commercial and consumer loans
made by the Company's bank subsidiaries are governed by Tennessee's general
usury law and the Tennessee Industrial Loan and Thrift Companies Act
("Industrial Loan Act"). Certain other usury laws affect limited classes of
loans, but the laws referenced above are by far the most significant.
Tennessee's general usury law authorizes a floating rate of 4% per annum over
the average prime or base commercial loan rate, as published by the Federal
Reserve Board from time to time, subject to an absolute 24% per annum limit. The
Industrial Loan Act, which is generally applicable to most of the loans made by
the Company's bank subsidiaries in Tennessee, authorizes an interest rate of up
to 24% per annum and also allows certain loan charges, generally on a more
liberal basis than does the general usury law.
COMPETITION
The banking industry is highly competitive. The Company, through its subsidiary
banks, competes with national and state banks for deposits, loans, and trust and
other services.
The Bank competes with much larger commercial banks in Wilson County, including
four banks owned by regional multi-bank holding companies headquartered out of
Tennessee and four banks owned by Tennessee multi-bank holding companies. These
institutions enjoy existing depositor relationships and greater financial
resources than the Company and can be expected to offer a wider range of banking
services. In addition, the Bank competes with two credit unions located in
Wilson County.
DCB competes with much larger commercial banks in DeKalb County, including two
banks owned by Tennessee multi-bank holding companies. While these institutions
enjoy existing depositor relationships and greater financial resources than DCB
and can be expected to offer a wider range of banking services, it is believed
that DCB can expect to attract customers since it is locally owned and most loan
and management decisions will be made at the local level. In addition, the Bank
competes with one commercial bank headquartered in DeKalb County.
CBSC competes with three commercial banks in or near Smith County, including two
banks based in Smith County and one based in an adjacent county. These
institutions enjoy existing depositor relationships; however, the Company
believes that CBSC can be expected to offer a wider range of banking services at
CBSC through its financial resources as well as programs offered by other
subsidiaries of the Company.
Given the competitive market place, the Company makes no predictions as to how
its relative position will change in the future.
MONETARY POLICIES
The results of operations of the Bank, the Company and the Company's other bank
subsidiaries are affected by the policies of the regulatory authorities,
particularly the Board. An important function of the Board is to regulate the
national supply of bank credit in order to combat recession and curb inflation.
Among the instruments used to attain these objectives are open market operations
in U.S. government securities, changes in the discount rate on bank borrowings
and changes in reserve requirements relating to member bank deposits. These
instruments are used in varying combinations to influence overall growth and
distribution of bank loans, investments and deposits, and their use may also
affect interest rates charged on loans and paid for deposits. Policies of the
regulatory agencies have had a significant effect on the operating results of
commercial banks in the past and are expected to do so in the future. The effect
of such policies upon the future business and results of operations of the
Company, the Bank, DCB and CBSC cannot be predicted with accuracy.
3
<PAGE> 5
EMPLOYMENT
As of March 20, 2000, the Company and its subsidiaries collectively employed 193
full-time equivalent employees and 22 part-time employees. Additional personnel
will be hired as needed to meet future growth.
YEAR 2000
Many currently installed computer systems, software programs, and embedded data
chips are programmed using a 2-digit date field and are therefore unable to
distinguish dates beyond the 20th century. A failure to identify and correct any
mission-critical internal or third party year 2000 processing problem could have
a material adverse operational or financial consequence to the Company.
The Company established a Year 2000 Committee that, together with external
consultants, developed a process for addressing the year 2000 issue including
performing an inventory, an assessment, remediation procedures (to the extent
necessary) and testing procedures of all mission-critical information systems
and equipment and machinery that contain embedded technology, as well as
obtaining assurances from all mission-critical third parties as to their own
year 2000 preparedness. As of the date hereof, all of the Company's
mission-critical systems have been successfully tested for year 2000 compliance
and the Company has not experienced any significant year 2000 problems with its
own mission-critical systems or any mission-critical third parties. Although the
Company has not experienced any significant year 2000 problems to date, it plans
to continue to monitor the situation closely.
The Company cannot be sure that it will be completely successful in its efforts
to address the year 2000 issue or that problems arising from the year 2000 issue
will not cause a material adverse effect on its operating results or financial
condition. The Company believes, however, that its most reasonably likely
worst-case scenario would relate to problems with the systems of third parties
rather than with its internal systems. The Company is limited in its efforts to
address the year 2000 issue as it relates to third parties and relies solely on
the assurance of these third parties as to their year 2000 preparedness.
For further information on Year 2000, please refer to "Year 2000 Issues" under
the heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on page 20 of the Company's 1999 Annual Report, which is
incorporated herein by reference.
STATISTICAL INFORMATION REQUIRED BY GUIDE 3
The statistical information required to be displayed under Item 1 pursuant to
Guide 3, "Statistical Disclosure by Bank Holding Companies," of the Exchange Act
Industry Guides is incorporated herein by reference to the Consolidated
Financial Statements and the notes thereto and the Management's Discussion and
Analysis sections in the Company's 1999 Annual Report. Certain information not
contained in the Company's 1999 Annual Report, but required by Guide 3, is
contained in the tables immediately following:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
4
<PAGE> 6
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
I. Distribution of Assets, Liabilities and Stockholders' Equity:
Interest Rate and Interest Differential
The Schedule which follows indicates the average balances for each
major balance sheet item, an analysis of net interest income and the
change in interest income and interest expense attributable to changes
in volume and changes in rates.
The difference between interest income on interest-earning assets and
interest expense on interest-bearing liabilities is net interest
income, which is the Company's gross margin. Analysis of net interest
income is more meaningful when income from tax-exempt earning assets is
adjusted to a tax equivalent basis. Accordingly, the following schedule
includes a tax equivalent adjustment of tax-exempt earning assets,
assuming a weighted average Federal income tax rate of 34%.
In this Schedule "change due to volume" is the change in volume
multiplied by the interest rate for the prior year. "Change due to
rate" is the change in interest rate multiplied by the volume for the
current year. Changes in interest income and expense not due solely to
volume or rate changes are included in the "change due to rate"
category.
Non-accrual loans have been included in the loan category. Loan fees of
$394,000, $488,000 and $271,000 for 1999, 1998 and 1997, respectively,
are included in loan income and represent an adjustment of the yield on
these loans.
5
<PAGE> 7
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT INTEREST RATES
------------------------------------------------------------------------------------------------
1999 1998 1999/1998 CHANGE
-------------------------------- ----------------------------- ------------------------------
Average Interest Income/ Average Interest Income/ Due to Due to
Balance Rate Expense Balance Rate Expense Volume Rate Total
--------------------------------- ----------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans, net of unearned interest $ 326,396 8.87% 28,937 263,605 9.40% 24,790 5,902 (1,755) 4,147
Investment securities - taxable 66,096 6.61 4,371 52,371 6.64 3,480 911 (20) 891
Investment securities -
tax exempt 15,758 5.27 830 20,356 5.53 1,126 (254) (42) (296)
Taxable equivalent adjustment -- 2.72 428 -- 2.85 580 (131) (21) (152)
------------------------------- --------------------------- -------
Total tax-exempt
investment securities 15,758 7.99 1,258 20,356 8.38 1,706 (385) (63) (448)
------------------------------- --------------------------- -------
Total investment securities 81,854 6.88 5,629 72,727 7.13 5,186 651 (208) 443
------------------------------- --------------------------- -------
Loans held for sale 2,270 5.64 128 3,534 6.20 219 (78) (13) (91)
Federal funds sold 20,151 4.60 927 26,113 5.11 1,335 (305) (103) (408)
------------------------------- --------------------------- -------
Total earning assets 430,671 8.27 35,621 365,979 8.62 31,530 5,576 (1,485) 4,091
------------------------------- --------------------------- -------
Cash and due from banks 13,019 11,041
Allowance for possible loan
losses (3,573) (3,170)
Bank premises and equipment 15,274 13,110
Other assets 6,612 4,856
------------ -----------
Total assets $ 462,003 391,816
============ ===========
</TABLE>
6
<PAGE> 8
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT INTEREST RATES
---------------------------------------------------------------------------------------------------
1999 1998 1999/1998 CHANGE
----------------------------- ------------------------------ ------------------------------
Average Interest Income/ Average Interest Income/ Due to Due to
Balance Rate Expense Balance Rate Expense Volume Rate Total
----------------------------- ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Deposits:
Negotiable order of
withdrawal accounts $ 25,287 1.61% 406 21,821 1.94% 423 67 (84) (17)
Money market demand
accounts 89,737 3.47 3,117 72,828 3.79 2,758 640 (281) 359
Individual retirement
accounts 19,444 5.46 1,061 16,530 5.68 939 165 (43) 122
Other savings deposits 20,867 4.07 850 18,225 4.57 833 121 (104) 17
Certificates of deposit
$100,000 and over 80,567 5.34 4,301 66,993 5.82 3,902 790 (391) 399
Certificates of deposit
under $100,000 135,085 5.41 7,312 117,296 5.76 6,760 1,025 (473) 552
------------------------------ ------------------------------- ---------
Total interest-bearing
deposits 370,987 4.60 17,047 313,693 4.98 15,615 2,853 (1,421) 1,432
Demand 44,246 -- -- 36,513 -- -- --
------------------------------ ------------------------------- ---------
Total deposits 415,233 4.11 17,047 350,206 4.46 15,615 2,900 (1,468) 1,432
------------------------------ ------------------------------- ---------
Securities sold under
repurchase agreements 9,374 4.35 408 8,503 4.54 386 39 (17) 22
Federal funds purchased 48 4.17 2 54 3.70 2 -- -- --
------------------------------ ------------------------------- ---------
Total deposits and
borrowed funds 424,655 4.11 17,457 358,763 4.46 16,003 2,939 1,485 1,454
------------------------------ ------------------------------- ---------
Other liabilities 6,788 6,118
Stockholders' equity 30,560 26,935
-------- --------
Total liabilities and
stockholders' equity $462,003 391,816
======== ========
Net interest income 18,164 15,527
====== ======
Net yield on earning assets 4.22% 4.24%
==== ====
Net interest spread 4.16% 4.16%
==== ====
</TABLE>
7
<PAGE> 9
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT INTEREST RATES
---------------------------------------------------------------------------------------------------
1998 1997 1998/1997 CHANGE
-------------------------------- -------------------------------- -------------------------------
Average Interest Income/ Average Interest Income/ Due to Due to
Balance Rate Expense Balance Rate Expense Volume Rate Total
---------- -------- ------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans, net of unearned interest $263,605 9.40% 24,790 215,073 9.52% 20,466 4,620 (296) 4,324
Investment securities - taxable 52,371 6.64 3,480 38,609 6.36 2,457 875 148 1,023
Investment securities -
tax exempt 20,356 5.53 1,126 20,346 5.73 1,166 1 (41) (40)
Taxable equivalent adjustment -- 2.85 580 -- 2.95 600 -- (20) (20)
------------------------------ ------------------------------ --------
Total tax-exempt
investment securities 20,356 8.38 1,706 20,346 8.68 1,766 1 (61) (60)
------------------------------ ------------------------------ --------
Total investment securities 72,727 7.13 5,186 58,955 7.16 4,223 986 (23) 963
------------------------------ ------------------------------ --------
Loans held for sale 3,534 6.20 219 2,062 5.38 111 79 29 108
Federal funds sold 26,113 5.11 1,335 18,356 5.13 941 398 (4) 394
------------------------------ ------------------------------ --------
Total earning assets 365,979 8.62 31,530 294,446 8.74 25,741 6,252 (463) 5,789
------------------------------ ------------------------------ --------
Cash and due from banks 11,041 8,943
Allowance for possible loan
losses (3,170) (2,730)
Bank premises and equipment 13,110 10,855
Other assets 4,856 4,113
---------- ---------
Total assets $391,816 315,627
========== =========
</TABLE>
8
<PAGE> 10
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT INTEREST RATES
---------------------------------------------------------------------------------------------------
1998 1997 1998/1997 CHANGE
-------------------------------- -------------------------------- --------------------------------
Average Interest Income/ Average Interest Income/ Due to Due to
Balance Rate Expense Balance Rate Expense Volume Rate Total
----------------------------- ----------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Deposits:
Negotiable order of
withdrawal accounts $ 21,821 1.94% 423 23,232 2.22% 515 (31) (61) (92)
Money market demand
accounts 72,828 3.79 2,758 54,222 3.82 2,069 711 22 689
Individual retirement 16,530 5.68 939 13,765 5.72 787 159 7 152
accounts
Other savings deposits 18,225 4.57 833 12,766 4.57 583 250 -- 250
Certificates of deposit
$100,000 and over 66,993 5.82 3,902 51,315 5.76 2,957 903 42 945
Certificates of deposit
under $100,000 117,296 5.76 6,760 95,813 5.65 5,411 1,214 135 1,349
---------------------------- ---------------------------- --------
Total interest-bearing
deposits 313,693 4.98 15,615 251,113 4.91 12,322 3,073 220 3,293
Demand 36,513 -- -- 28,865 -- -- --
---------------------------- ---------------------------- --------
Total deposits 350,206 4.46 15,615 279,978 4.40 12,322 3,090 203 3,293
---------------------------- ---------------------------- --------
Securities sold under
repurchase agreements 8,503 4.54 386 7,326 4.82 353 57 (24) 33
Federal funds purchased 54 3.70 2 -- -- -- 2 -- 2
---------------------------- ---------------------------- --------
Total deposits and
borrowed funds 358,763 4.46 16,003 287,304 4.41 12,675 3,151 177 3,328
---------------------------- ---------------------------- --------
Other liabilities 6,118 5,458
Stockholders' equity 26,935 22,865
-------- ------
Total liabilities and
stockholders' equity $391,816 315,627
======== =======
Net interest income 15,527 13,066
========= ========
Net yield on earning assets 4.24% 4.44%
==== ====
Net interest spread 4.16% 4.33%
==== ====
</TABLE>
9
<PAGE> 11
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
II. Investment Portfolio:
A. Securities at December 31, 1999 consist of the following:
<TABLE>
<CAPTION>
SECURITIES HELD-TO-MATURITY
------------------------------------------------------------------
(In Thousands)
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Obligations of state and
political subdivisions $ 13,398 59 298 13,159
Mortgage-backed securities 3,339 14 37 3,316
------------- ------------- ------------- -------------
$ 16,737 73 335 16,475
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
SECURITIES AVAILABLE-FOR-SALE
------------------------------------------------------------------
(In Thousands)
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
U.S. Treasury and other
U.S. Government agencies
and corporations $ 66,859 1 2,882 63,978
Obligations of state and
political subdivisions 2,232 13 8 2,237
Mortgage-backed securities 840 2 14 828
------------- ------------- ------------- -------------
$ 69,931 16 2,904 67,043
============= ============= ============= =============
</TABLE>
10
<PAGE> 12
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
II. Investment Portfolio, Continued:
A. Continued
Investment securities at December 31, 1998 consist of the
following:
<TABLE>
<CAPTION>
SECURITIES HELD-TO-MATURITY
------------------------------------------------------------------
(In Thousands)
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
U.S. Treasury and other
U.S. Government agencies
and corporations $ 1,097 7 -- 1,104
Obligations of state and
political subdivisions 15,202 479 -- 15,681
Mortgage-backed securities 4,109 15 39 4,085
------------- ------------- ------------- -------------
$ 20,408 501 39 20,870
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
SECURITIES AVAILABLE-FOR-SALE
------------------------------------------------------------------
(In Thousands)
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
U.S. Treasury and other
U.S. Government agencies
and corporations $ 49,189 283 43 49,429
Obligations of state and
political subdivisions 2,732 91 -- 2,823
Mortgage-backed securities 922 7 1 928
------------- ------------- ------------- -------------
$ 52,843 381 44 53,180
============= ============= ============= =============
</TABLE>
11
<PAGE> 13
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
II. Investment Portfolio, Continued:
B. The following schedule details the estimated maturities and
weighted average yields of investment securities (including
mortgage backed securities) of the Company at December 31, 1999.
<TABLE>
<CAPTION>
Estimated Weighted
Amortized Market Average
Held-To-Maturity Securities Cost Value Yields
------------- -------------- ----------------
(In Thousands, Except Yields)
<S> <C> <C> <C>
U.S. Treasury and other U.S. Government
agencies and corporations, including
mortgage-backed securities:
Less than one year $ 147 147 6.10%
One to five years 4 4 10.00
Five to ten years 2,487 2,461 7.04
More than ten years 701 704 6.31
------------- -------------- ----------------
Total securities of U.S. Treasury
and other U.S. Government
agencies and corporations 3,339 3,316 6.85
------------- -------------- ----------------
Obligations of states and political subdivisions*:
Less than one year 1,521 1,527 8.56
One to five years 3,228 3,252 6.40
Five to ten years 4,503 4,444 6.41
More than ten years 4,146 3,936 5.67
------------- -------------- ----------------
Total obligations of states and
political subdivisions 13,398 13,159 6.42
------------- -------------- ----------------
Total investment securities $ 16,737 16,475 6.51%
============= ============== ================
</TABLE>
* Weighted average yield is stated on a tax-equivalent basis, assuming a
weighted average Federal income tax rate of 34%.
12
<PAGE> 14
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
II. Investment Portfolio, Continued:
B. Continued
<TABLE>
<CAPTION>
Estimated Weighted
Amortized Market Average
Available-For-Sale Securities Cost Value Yields
------------- -------------- ----------------
(In Thousands, Except Yields)
<S> <C> <C> <C>
U.S. Treasury and other U.S. Government
agencies and corporations, including
mortgage-backed securities:
Less than one year $ 2,596 2,589 5.89%
One to five years 6,600 6,451 6.61
Five to ten years 50,952 48,520 6.37
More than ten years 6,396 6,091 7.10
------------- -------------- ----------------
Total securities of U.S. Treasury
and other U.S. Government
agencies and corporations 66,544 63,651 6.39
------------- -------------- ----------------
Obligations of states and political subdivisions*:
Less than one year 577 581 6.98
One to five years 989 986 4.71
Five to ten years 467 472 5.50
More than ten years 199 198 5.62
------------- -------------- ----------------
Total obligations of states and
political subdivisions 2,232 2,237 5.54
------------- -------------- ----------------
Other:
Federal Home Loan Bank stock 1,155 1,155 6.91
------------- -------------- ----------------
Total investment securities $ 69,931 67,043 6.38%
============= ============== ================
</TABLE>
* Weighted average yield is stated on a tax-equivalent basis, assuming a
weighted average Federal income tax rate of 34%.
13
<PAGE> 15
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
III. Loan Portfolio:
A. Loan Types
The following schedule details the loans of the Company at
December 31, 1999, 1998, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
In Thousands
---------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 121,438 100,217 82,515 57,449 55,081
Real estate - construction 27,184 21,809 18,159 16,828 9,022
Real estate - mortgage 164,852 130,927 103,155 80,955 62,349
Installment 45,710 44,299 38,423 32,558 23,615
------------- ------------- ------------- ------------- -------------
Total loans 359,184 297,252 242,252 187,790 150,067
Less unearned interest (579) (1,322) (1,696) (1,696) (1,385)
------------- ------------- ------------- ------------- -------------
Total loans, net of
unearned interest 358,605 295,930 240,556 186,094 148,682
Less allowance for
possible loan losses (3,847) (3,244) (2,890) (2,452) (1,944)
------------- ------------- ------------- ------------- -------------
Net loans $ 354,758 292,686 237,666 183,642 146,738
============= ============= ============= ============= =============
</TABLE>
14
<PAGE> 16
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
III. Loan Portfolio, Continued:
B. Maturities and Sensitivities of Loans to Changes in Interest
Rates
The following schedule details maturities and sensitivity to
interest rates changes for commercial loans of the Company at
December 31, 1999.
<TABLE>
<CAPTION>
1 Year to
Less Than Less Than After 5
1 Year 5 Years Years Total
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Maturity Distribution:
Commercial, financial
and agricultural $ 63,808 35,480 22,150 121,438
Real estate - construction 25,754 159 1,271 27,184
------------- ------------- ------------- -------------
$ 89,562 35,639 23,421 148,622
============= ============= ============= =============
Interest-Rate Sensitivity:
Fixed interest rates $ 81,878 24,425 9,064 115,367
Floating or adjustable
interest rates 7,684 11,214 14,357 33,255
------------- ------------- ------------- -------------
Total commercial,
financial and
agricultural loans
plus real estate -
construction loans $ 89,562 35,639 23,421 148,622
============= ============= ============= =============
</TABLE>
*Includes demand loans, bankers acceptances, commercial paper and deposit notes.
15
<PAGE> 17
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
III. Loan Portfolio, Continued:
C. Risk Elements
The following schedule details selected information as to
non-performing loans of the Company at December 31, 1999, 1998,
1997, 1996 and 1995.
<TABLE>
<CAPTION>
In Thousands, Except Percentages
-----------------------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Non-accrual loans:
Commercial, financial and
agricultural $ -- -- 1 24 4
Real estate -
construction -- -- -- -- --
Real estate - mortgage -- 25 6 59 --
Installment 84 198 153 177 113
Lease financing
receivable -- -- -- -- --
-------- ------- ------- ------- -------
Total non-accrual $ 84 223 160 260 117
======== ======= ======= ======= =======
Loans 90 days past due:
Commercial, financial and
agricultural $ -- -- 30 80 8
Real estate -
construction -- -- -- -- --
Real estate - mortgage 197 118 66 344 --
Installment 225 438 1,123 370 163
Lease financing
receivable -- -- -- -- --
-------- ------- ------- ------- -------
Total loans 90 days
past due $ 422 556 1,219 794 171
======== ======= ======= ======= =======
Renegotiated loans:
Commercial, financial and
agricultural $ -- -- -- -- --
Real estate -
construction -- -- -- -- --
Real estate - mortgage -- -- -- -- --
Installment -- -- -- -- --
Lease financing
receivable -- -- -- -- --
-------- ------- ------- ------- -------
Total renegotiated
loans past due $ -- -- -- -- --
======== ======= ======= ======= =======
Loans current - considered
uncollectible $ -- -- -- -- --
======== ======= ======= ======= =======
Total non-performing
loans $ 506 779 1,379 1,054 288
======== ======= ======= ======= =======
Total loans, net of
unearned interest $358,605 295,930 240,556 186,094 148,682
======== ======= ======= ======= =======
Percent of total
loans outstanding,
net of unearned
interest 0.14% 0.26 0.57 0.57 .19
======== ======= ======= ======= =======
Other real estate $ 221 138 63 -- --
======== ======= ======= ======= =======
</TABLE>
16
<PAGE> 18
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
III. Loan Portfolio, Continued:
C. Risk Elements, Continued
The accrual of interest income is discontinued when it is
determined that collection of interest is less than probable or
the collection of any amount of principal is doubtful. The
decision to place a loan on a non-accrual status is based on an
evaluation of the borrower's financial condition, collateral
liquidation value, economic and business conditions and other
factors that affect the borrower's ability to pay. At the time a
loan is placed on a non-accrual status, the accrued but unpaid
interest is also evaluated as to collectibility. If
collectibility is doubtful, the unpaid interest is charged off.
Thereafter, interest on non-accrual loans is recognized only as
received. Non-accrual loans totaled $84,000 at December 31,
1999, $223,000 at December 31, 1998, $160,000 at December 31,
1997, $260,000 at December 31, 1996 and $117,000 at December 31,
1995. Gross interest income on non-accrual loans, that would
have been recorded for the year ended December 31, 1999 if the
loans had been current totaled $8,000 as compared to $16,000 in
1998, $11,000 in 1997, $12,000 in 1996 and $7,000 in 1995. The
amount of interest income recognized on total loans during 1999
totaled $28,937,000 as compared to $24,790,000 in 1998,
$20,466,000 in 1997, $15,725,000 in 1996 and $12,763,000 in
1995.
At December 31, 1999, loans, which include the above, totaling
$738,000 were included in the Company's internal classified loan
list. Of these loans $388,000 are real estate and $350,000 are
various other types of loans. The collateral values securing
these loans total approximately $849,000, ($558,000 related to
real property and $291,000 related to the various other types of
loans). Such loans are listed as classified when information
obtained about possible credit problems of the borrowers 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.
At December 31, 1999 there were no loan concentrations that
exceeded ten percent of total loans other than as included in
the preceding table of types of loans. Loan concentrations are
amounts loaned to a multiple number of borrowers engaged in
similar activities which would cause them to be similarly
impacted by economic or other conditions.
At December 31, 1999 and 1998 other real estate totaled $221,000
and $138,000, respectively.
17
<PAGE> 19
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
III. Loan Portfolio, Continued:
C. Risk Elements, Continued
There were no material amounts of other interest-bearing assets
(interest-bearing deposits with other banks, municipal bonds,
etc.) at December 31, 1999 which would be required to be
disclosed as past due, non-accrual, restructured or potential
problem loans, if such interest-bearing assets were loans.
18
<PAGE> 20
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
IV. Summary of Loan Loss Experience:
The following schedule details selected information related to the
allowance for possible loan loss account of the Company at December 31,
1999, 1998, 1997, 1996 and 1995 and the years then ended.
<TABLE>
<CAPTION>
In Thousands, Except Percentages
-----------------------------------------------------------------
1999 1998 1997 1996 1995
--------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Allowance for loan losses
at beginning of period $ 3,244 2,890 2,452 1,944 1,556
--------- ------- ------- ------- -------
Less: net of loan
charge-offs:
Charge-offs:
Commercial, financial and
agricultural -- -- -- (1) (87)
Real estate construction -- -- -- -- --
Real estate - mortgage (50) (100) (9) -- --
Installment (539) (605) (477) (173) (78)
Lease financing -- -- -- -- --
--------- ------- ------- ------- -------
(589) (705) (486) (174) (165)
--------- ------- ------- ------- -------
Recoveries:
Commercial, financial and
agricultural -- -- -- -- --
Real estate construction -- -- -- -- --
Real estate - mortgage -- 2 -- -- --
Installment 89 47 96 17 26
Lease financing -- -- -- -- --
--------- ------- ------- ------- -------
89 49 96 17 26
--------- ------- ------- ------- -------
Net loan charge-offs (500) (656) (390) (157) (139)
--------- ------- ------- ------- -------
Provision for loan losses
charged to expense 1,103 1,010 828 665 527
--------- ------- ------- ------- -------
Allowance for loan losses at
end of period $ 3,847 3,244 2,890 2,452 1,944
========= ======= ======= ======= =======
Total loans, net of unearned
interest, at end of year $ 358,605 295,930 240,556 186,094 148,682
========= ======= ======= ======= =======
Average total loans out-
standing, net of unearned
interest, during year $ 326,396 263,605 215,073 165,807 134,552
========= ======= ======= ======= =======
Net charge-offs as a
percentage of average total
loans outstanding, net of
unearned interest, during
year 0.15% 0.25 0.18 0.09 .10
========= ======= ======= ======= =======
Ending allowance for loan
losses as a percentage of
total loans outstanding net
of unearned interest, at
end of year 1.07% 1.10 1.20 1.32 1.31
========= ======= ======= ======= =======
</TABLE>
19
<PAGE> 21
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
IV. Summary of Loan Loss Experience, Continued:
The allowance for possible loan losses is an amount that management
believes will be adequate to absorb possible losses on existing loans
that may become uncollectible. The provision for possible loan losses
charged to operating expense is based on past loan loss experience and
other factors which, in management's judgment, deserve current
recognition in estimating possible loan losses. Such other factors
considered by management include growth and composition of the loan
portfolio, review of specific loan problems, the relationship of the
allowance for possible loan losses to outstanding loans, adverse
situations that may affect the borrower's ability to repay, the
estimated value of any underlying collateral and current economic
conditions that may affect the borrower's ability to pay.
Management conducts a continuous review of all loans that are
delinquent, previously charged down or loans which are determined to be
potentially uncollectible. Loan classifications are reviewed
periodically by a person independent of the lending function. The Board
of Directors periodically reviews the adequacy of the allowance for
possible loan losses.
The following detail provides a breakdown of the allocation of the
allowance for possible loan losses:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
------------------------------- --------------------------------
Percent of Percent of
Loans In Loans In
In Each Category In Each Category
Thousands To Total Loans Thousands To Total Loans
------------ --------------- ------------ ----------------
<S> <C> <C> <C> <C>
Commercial, financial
and agricultural $ 463 33.8% $ 396 33.7%
Real estate construction 232 7.6 184 7.3
Real estate mortgage 2,171 45.9 1,785 44.1
Installment 981 12.7 879 14.9
------------ --------------- ------------ ----------------
$ 3,847 100.0% $ 3,244 100.0%
============ =============== ============ ================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
------------------------------- --------------------------------
Percent of Percent of
Loans In Loans In
In Each Category In Each Category
Thousands To Total Loans Thousands To Total Loans
------------ --------------- ------------ ----------------
<S> <C> <C> <C> <C>
Commercial, financial
and agricultural $ 483 34.1% $ 357 30.6%
Real estate construction 249 7.5 217 9.0
Real estate mortgage 1,552 42.6 1,348 43.1
Installment 606 15.8 530 17.3
------------ --------------- ------------ ----------------
$ 2,890 100.0% $ 2,452 100.0%
============ =============== ============ ================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
-------------------------------
Percent of
Loans In
In Each Category
Thousands To Total Loans
------------ ---------------
<S> <C> <C>
Commercial, financial
and agricultural $ 801 36.7%
Real estate construction 283 6.0
Real estate mortgage 566 41.5
Installment 294 15.8
------------ ---------------
$ 1,944 100.0%
============ ===============
</TABLE>
20
<PAGE> 22
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
V. Deposits:
The average amounts and average interest rates for deposits for 1999
and 1998 are detailed in the following schedule:
<TABLE>
<CAPTION>
1999 1998
--------------------------------- ---------------------------------
Average Average
Balance Balance
--------------- Average --------------- Average
In Thousands Rate In Thousands Rate
--------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Non-interest bearing deposits $ 44,246 -- % 36,513 -- %
Negotiable order of
withdrawal accounts 25,287 1.61% 21,821 1.94%
Money market demand
accounts 89,737 3.47% 72,828 3.79%
Individual retirement
accounts 19,444 5.46% 16,530 5.68%
Other savings 20,867 4.07% 18,225 4.57%
Certificates of deposit
$100,000 and over 80,567 5.34% 66,993 5.82%
Certificates of deposit under
$100,000 135,085 5.41% 117,296 5.76%
--------------- -------------- --------------- -------------
$ 415,233 4.11% 350,206 4.46%
=============== ============== =============== =============
</TABLE>
The following schedule details the maturities of certificates of
deposit and individual retirement accounts of $100,000 and over at
December 31, 1999.
<TABLE>
<CAPTION>
In Thousands
----------------------------------------------------
Certificates Individual
of Retirement
Deposit Accounts Total
--------------- --------------- -------------
<S> <C> <C> <C>
Less than three months $ 27,977 166 28,143
Three to six months 24,110 1,004 25,114
Six to twelve months 22,438 3,114 25,552
More than twelve months 10,890 923 11,813
--------------- --------------- -------------
$ 85,415 5,207 90,622
=============== =============== =============
</TABLE>
21
<PAGE> 23
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
VI. Return on Equity and Assets:
The following schedule details selected key ratios of the Company at
December 31, 1999, 1998, and 1997.
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- -------------
<S> <C> <C> <C>
Return on assets (1) 1.12% 1.18% 1.17%
(Net income divided by average total assets)
Return on equity 16.04% 16.72% 16.02%
(Net income divided by average equity)
Dividend payout ratio 29.76% 27.00% 28.43%
(Dividends declared per share divided by
net income per share) (2)
Equity to asset ratio 6.61% 6.87% 7.24%
(Average equity divided by average total
assets)
Leverage capital ratio 7.76% 7.78% 8.21%
(Equity divided by fourth quarter
average total assets, excluding the net
unrealized loss on available-for-sale
securities and including minority interest)
</TABLE>
The minimum leverage capital ratio required by the regulatory agencies
is 4%.
Beginning January 1, 1991, new risk-based capital guidelines were
adopted by regulatory agencies. Under these guidelines, a credit risk
is assigned to various categories of assets and commitments ranging
from 0% to 100% based on the risk associated with the asset.
(1) Includes minority interest earnings of consolidated subsidiaries.
(2) Per share data has been retroactively adjusted to reflect a 4 for 3
stock split which occurred effective September 30, 1999.
22
<PAGE> 24
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
VI. Return on Equity and Assets, Continued:
The following schedule details the Company's risk-based capital at
December 31, 1999 excluding the net unrealized loss on
available-for-sale securities which is shown as a deduction in
stockholders' equity in the consolidated financial statements:
<TABLE>
<CAPTION>
In Thousands
-----------------
<S> <C>
Tier I capital:
Stockholders' equity, excluding the net unrealized
loss on available-for-sale securities $ 33,866
Add: Minority interest (limited to 25% of Tier I
capital) 3,668
-----------------
Total Tier I capital 37,534
Total capital:
Allowable allowance for loan losses (limited to 1.25%
of risk-weighted assets) 3,847
-----------------
Total capital $ 41,381
=================
Risk-weighted assets $ 345,200
=================
Risk-based capital ratios:
Tier I capital ratio 10.87%
=================
Total risk-based capital ratio 11.99%
=================
</TABLE>
23
<PAGE> 25
WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 1999
VI. Return on Equity and Assets, Continued:
The Company is required to maintain a Total capital to risk-weighted
asset ratio of 8% and a Tier I capital to risk-weighted asset ratio of
4%. At December 31, 1999, the Company and its subsidiary banks were in
compliance with these requirements.
The following schedule details the Company's interest rate sensitivity
at December 31, 1999:
<TABLE>
<CAPTION>
Repricing Within
-----------------------------------------------------------------------------------------------
(In Thousands) Total 0-30 Days 31-90 Days 91-180 Days 181-365 Days Over 1 Year
-------- --------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans, net of
unearned interest $358,605 151,967 14,221 28,848 44,619 118,950
Securities 83,780 4,414 1,632 1,037 2,506 74,191
Loans held for sale 1,835 1,835 -- -- -- --
Federal funds sold 13,928 13,928 -- -- -- --
-------- -------- ------- -------- ------- -------
Total earning
assets 458,148 172,144 15,853 29,885 47,125 193,141
-------- -------- ------- -------- ------- -------
Interest-bearing
liabilities:
Negotiable order
of withdrawal
accounts 26,346 26,346 -- -- -- --
Money market demand
accounts 99,456 99,456 -- -- -- --
Individual retirement
accounts 20,774 6,197 1,284 2,800 5,643 4,850
Other savings 21,610 21,610 -- -- -- --
Certificates of
deposit,
$100,000 and over 85,415 2,875 25,101 24,110 22,438 10,891
Certificates of
deposit,
under $100,000 149,760 1,892 32,196 36,113 49,631 29,928
Securities sold
under repurchase
agreements 8,543 8,543 -- -- -- --
-------- -------- ------- -------- ------- -------
411,904 166,919 58,581 63,023 77,712 45,669
-------- -------- ------- -------- ------- -------
Interest-sensitivity
gap $ 46,244 5,225 (42,728) (33,138) (30,587) 147,472
======== ======== ======= ======== ======= =======
Cumulative gap 5,225 (37,503) (70,641) (101,228) 46,244
======== ======= ======== ======== =======
Interest-sensitivity
gap as % of total assets 1.06 (8.63) (6.69) (6.18) 29.78
======== ======= ======== ======= =======
Cumulative gap as %
of total assets 1.06 (7.57) (14.26) (20.44) 9.34
======== ======= ======== ======= =======
</TABLE>
The Company presently maintains a liability sensitive position over the
next twelve months. However, management expects that liabilities of a
demand nature will renew and that it will not be necessary to replace
them with significantly higher cost funds.
24
<PAGE> 26
ITEM 2. DESCRIPTION OF PROPERTY
The Company's main office is owned by the Company and consists of approximately
four acres at 623 West Main Street, Lebanon, Tennessee. The building is a two
story, brick building, with approximately 35,000 square feet. The lot has
approximately 350 feet of road frontage on West Main Street. In addition
thereto, the Bank has ten branch locations located at 1444 Baddour Parkway,
Lebanon, Tennessee; 200 Tennessee Boulevard, Lebanon, Tennessee; 8875 Stewart's
Ferry Pike, Gladeville, Tennessee; Public Square, Watertown, Tennessee; 1476
North Mt. Juliet Road, Mt. Juliet, Tennessee; 1130 Castle Heights Avenue North,
Lebanon, Tennessee; 127 McMurry Blvd., Hartsville, Tennessee; the Wal-Mart
Supercenter, Lebanon, Tennessee; and 4736 Andrew Jackson Parkway in Hermitage,
Tennessee.
The Mt. Juliet office contains approximately 16,000 square feet of space; the
new Castle Heights Office contains 2,400 square feet of space and the new
Hartsville Office contains 8,000 square feet of space. The Hermitage branch
opened in the fall of 1999 and contains 8,000 square feet of space. The
Gladeville branch expanded its office building with new office space opening
December 6, 1998. The Gladeville branch now contains approximately 3,400 square
feet of space. The Lebanon facility at Tennessee Boulevard was expanded in 1997
to 2,200 square feet of space. Each of the branch facilities of the Bank not
otherwise described above contains approximately 1,000 square feet of space. The
Bank owns all of its branch facilities except for the Lebanon facility at
Tennessee Boulevard and its space in the Wal-mart Supercenter, which are leased.
The Bank also leases space at five locations within Wilson County where it
maintains and operates automatic teller machines.
DCB has a bank facility at 576 West Broad Street in Smithville, Tennessee
containing approximately 6,800 square feet of space and a bank facility at 306
Brush Creek Road in Alexandria, Tennessee which occupies approximately 2,400
square feet of space. DCB owns both facilities. This serves as the main office
for DCB. CBSC recently replaced its one and only banking facility with a new
office building it owns at 1300 Main Street North, Carthage, Tennessee. CBSC's
new facility contains approximately 8,000 square feet of space.
ITEM 3. LEGAL PROCEEDINGS
There were no material legal proceedings pending at December 31, 1999, against
the Company, the Bank, DCB or CBSC.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders in the fourth quarter of
1999.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Information required by this item is contained under the heading "Wilson Bank
Holding Company Common Stock Market Information" on page 60 of the Company's
1999 Annual Report and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item is contained under the heading "Wilson Bank
Holding Company Financial Highlights (Unaudited)" on page 9 of the Company's
1999 Annual Report and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information required by this item is contained under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations" as set
forth on pages 10 through 20 of the Company's 1999 Annual Report and is
incorporated herein by reference.
ITEM 7A. 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
25
<PAGE> 27
sensitivity position. These meetings focus on the spread between the cost of
funds and interest yields generated primarily through loans and investments.
The following table provides information about the Company's financial
instruments that are sensitive to changes in interest rates as of December 31,
1999.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
EXPECTED MATURITY DATE - YEAR ENDING DECEMBER 31,
---------------------------------------------------------------- FAIR
2000 2001 2002 2003 2004 Thereafter TOTAL VALUE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans, net of unearned
interest:
Variable rate $ 75,596 11,015 15,780 8,694 6,765 22,265 140,115 140,115
Average interest rate 8.61% 8.35% 8.44% 8.44% 7.71% 7.72% 8.40%
Fixed rate 109,905 27,015 20,187 18,175 16,115 27,093 218,490 215,185
Average interest rate 8.81% 8.59% 9.31% 8.28% 7.94% 7.79% 8.52%
Securities 4,745 1,390 1,700 2,244 7,285 66,416 83,780 83,518
Average interest rate 7.17% 6.32% 6.60% 7.41% 6.54% 6.70% 6.70%
Loans held for sale 1,835 -- -- -- -- -- 1,835 1,835
Average interest rate 5.64% -- -- -- -- -- 5.64%
Federal funds sold 13,928 -- -- -- -- -- 13,928 13,928
Average interest rate 4.60% -- -- -- -- -- 4.60%
Interest-bearing deposits 354,893 37,099 10,483 320 566 -- 403,361 403,970
Average interest rate 4.18% 5.63% 5.92% 5.87% 6.05% -- 4.29%
Short-term borrowings 8,543 -- -- -- -- -- 8,543 8,543
Average interest rate 4.35% -- -- -- -- -- 4.35%
</TABLE>
ITEM 8. FINANCIAL STATEMENTS
The consolidated financial statements and the independent auditors report of
Maggart & Associates, P.C. required by this item are contained in pages 21
through 57 and on page 21, respectively, of the Company's 1999 Annual Report and
are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to directors is incorporated
by reference herein by reference to "Election of Directors" in the Company's
Proxy Statement. The information required by this item with respect to executive
officers is set forth below:
James Randall Clemons (47) - Mr. Clemons is President and Chief
Executive Officer of the Company and the Bank. Mr. Clemons also serves
on the Board of Directors of the Company and the Bank. He has held such
positions with the Company since its formation in March 1992 and has
held his Bank positions since the Bank commenced operations in May
1987. Prior to that time, Mr. Clemons served as Senior Vice President
and Cashier for Peoples Bank, Lebanon, Tennessee.
Becky Taylor (55) - Ms. Taylor is the principal accounting officer of
the Company and a Senior Vice-President and Cashier of the Bank. She
has served as Vice President and Cashier of the Bank since May 1987 and
as the principal accounting officer
26
<PAGE> 28
of the Company since its formation in March 1992. She has held her
positions with the Bank since it commenced operations. From 1963 to
1987, Ms. Taylor was employed by Lebanon Bank, Lebanon, Tennessee,
where her duties included Data Processing Coordinator, Auditor,
Security Officer and Compliance Officer. Ms. Taylor held the title of
Vice President and Cashier of Lebanon Bank.
Elmer Richerson (47) - Mr. Richerson joined the Bank in February 1989.
Prior to such time, Mr. Richerson was the manager of the Lebanon branch
of Heritage Federal Savings and Loan Association from March 1988 to
February 1989. From September 1986 until March 1988, Mr. Richerson was
a liquidation assistant for the Federal Deposit Insurance Corporation.
Mr. Richerson serves as an Executive Vice President and Senior Loan
Officer of the Bank and oversees the branch administration for the
Bank. Mr. Richerson also serves on the Board of Directors of the Bank
and in 1998 was appointed to serve on the Board of Directors of the
Company as well.
Larry Squires (47) - Mr. Squires joined the Bank in 1989 and is
currently Senior Vice President and Investment Officer. Prior to that
time Mr. Squires was Vice President of Liberty State Bank in Lebanon.
His principal duty is overseeing the Bank's investment and brokerage
center.
Gary Whitaker (42) - Mr. Whitaker joined the Bank in May 1996. Prior to
that time Mr. Whitaker was employed with NationsBank of Tennessee, N.A.
in Nashville (and its predecessors) from 1979. He has held positions in
collections, as branch manager, in construction lending, retail
marketing, automobile lending, loan administration, operations analyst,
as Vice President and most recently Senior Vice President. His
principal duties include overseeing the Bank's lending function and
loan operations.
David Boudreaux (36) - Mr. Boudreaux joined the Bank in June of 1996
and is currently Senior Vice President. Mr. Boudreaux is the manager of
the Mt. Juliet Office and is responsible for the operation of two other
branch locations. Prior to that time, Mr. Boudreaux was Vice President
and Commercial Loan Officer with Hibernia National Bank in Houma,
Thibodaux, LA.
Mike Baker (38) - Mr. Baker is Senior Vice President in charge of the
Main Office of Wilson Bank and Trust. Mr. Baker joined the bank in
November of 1991. Prior to that time he was Asst. Vice President and
Loan Officer at Sun Trust, Lebanon, Tennessee.
Lisa Sorrell (35) - Ms. Sorrell is Senior Vice President and the Chief
Financial Office of Wilson Bank and Trust. Ms. Sorrell has held several
positions including Asst. Cashier, Asst. Vice President and Vice
President since the bank's formation in May of 1987. Prior to 1987 Ms.
Sorrell was employed by People's Bank, Lebanon, TN 37087.
All officers serve at the pleasure of the Board of Directors. No officers are
involved in any legal proceedings which are material to an evaluation of their
ability and integrity.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is contained under the caption "Executive
Compensation" in the Company's Proxy Statement and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is contained under the caption "Security
Ownership of Certain Beneficial Owners and Management" in the Company's Proxy
Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is contained under the caption "Certain
Relationships and Related Transactions" in the Company's Proxy Statement and is
incorporated herein by reference.
27
<PAGE> 29
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a)(1) Financial Statements. See Item 8.
(a)(2) Financial Statement Schedules. Inapplicable.
(a)(3) Exhibits. See Index to Exhibits.
(b) Reports on Form 8-K
None.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
28
<PAGE> 30
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WILSON BANK HOLDING COMPANY
By: /s/ J. Randall Clemons
---------------------------------------
J. Randall Clemons
President and Chief Executive Officer
Date: March 27, 2000
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ J. Randall Clemons President, Chief March 27, 2000
- -------------------------------------------- Executive Officer
J. Randall Clemons and Director
/s/ Becky Taylor Principal March 27, 2000
- -------------------------------------------- Accounting Officer
Becky Taylor and Chief Financial
Officer
/s/ Elmer Richerson Executive Vice March 27, 2000
- -------------------------------------------- President &
Elmer Richerson Director
/s/ Charles Bell Director March 27, 2000
- --------------------------------------------
Charles Bell
/s/ Jack W. Bell Director March 27, 2000
- --------------------------------------------
Jack W. Bell
/s/ Mackey Bentley Director March 27, 2000
- --------------------------------------------
Mackey Bentley
/s/ James J. Comer Director March 27, 2000
- --------------------------------------------
James F. Comer
/s/ Jerry L. Franklin Director March 27, 2000
- --------------------------------------------
Jerry L. Franklin
/s/ John B. Freeman Director March 27, 2000
- --------------------------------------------
John B. Freeman
</TABLE>
29
<PAGE> 31
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Marshall Griffith Director March 27, 2000
- --------------------------------------------
Marshall Griffith
/s/ Harold R. Patton Director March 27, 2000
- --------------------------------------------
Harold R. Patton
/s/ James Anthony Patton Director March 27, 2000
- --------------------------------------------
James Anthony Patton
/s/ John R. Trice Director March 27, 2000
- --------------------------------------------
John R. Trice
/s/ Robert T. VanHooser, Jr. Director March 27, 2000
- --------------------------------------------
Robert T. VanHooser, Jr.
</TABLE>
30
<PAGE> 32
INDEX TO EXHIBITS
3.1 Charter (previously filed as Exhibit 3(a) to the Company's Registration
Statement on Form S-4 dated March 18, 1992 (Registration No. 33-46469)
and incorporated herein by reference).
3.2 Bylaws (previously filed as Exhibit 3(a) to the Company's Registration
Statement on Form S-4 dated March 18, 1992 (Registration No. 33-46469)
and incorporated herein by reference).
10.1 Wilson Bank Holding Company 1999 Stock Option Plan (incorporated herein
by reference to the Registrant's definitive Proxy Statement for the
Annual Meeting of Shareholders held April 13, 1999.
13.1 Selected Portions of the Wilson Bank Holding Company Annual
Report to Shareholders for the year ended December 31, 1999,
incorporated by reference into items 5, 6, 7 and 8.
21.1 Subsidiaries of the Company.
23 Consent of Independent Auditors
27 Financial Data Schedules (for SEC use only).
31
<PAGE> 1
EXHIBIT 13.1
WILSON BANK HOLDING COMPANY
COMMON STOCK MARKET INFORMATION
The common stock of Wilson Bank Holding Company is not traded on an exchange nor
is there a known active trading market. The number of stockholders of record at
December 31, 1999 was 1,253. Based solely on information made available to the
Company from limited number of buyers and sellers, the Company believes that
the following table sets forth the quarterly range of sale prices for the
Company's stock during the years 1999 and 1998.
STOCK PRICES (1)
<TABLE>
<S> <C> <C>
1999 HIGH LOW
First Quarter $24.38 $24.38
Second Quarter 24.94 24.58
Third Quarter 26.06 24.94
Fourth Quarter 26.63 26.06
1998 HIGH LOW
First Quarter $28.57 $26.63
Second Quarter 30.56 28.87
Third Quarter 31.13 30.56
Fourth Quarter 32.00 31.00
</TABLE>
- ------------------
(1) Stock prices and cash dividend per share information have been
retroactively adjusted to reflect a 4 for 3 split which occurred
September 30, 1999.
On January 1, 1999 a $.375 per share cash dividend was declared and on
July 1, 1999 a $.375 per share cash dividend was declared and paid to
shareholders of record on those dates. On January 1, 1998 a $.30 per share cash
dividend was declared and on July 1, 1998 a $.34 per share cash dividend was
declared and paid to shareholders of record on those dates, and on September 30,
1999 the stock split 4-for-3. Future dividends will be dependent upon the
Company's profitability, its capital needs, overall financial condition and
economic and regulatory consideration.
<PAGE> 2
WILSON BANK HOLDING COMPANY FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT PER SHARE INFORMATION
AS OF DECEMBER 31,
----------------------------------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED
BALANCE SHEETS:
Total assets end of year $495,218 431,975 351,709 275,304 226,689
Loans, net $354,758 292,686 237,666 183,642 146,738
Securities $ 83,780 73,588 61,497 55,545 52,023
Deposits $447,792 389,105 316,641 243,250 200,037
Stockholders' equity $ 32,250 29,265 24,817 21,252 18,398
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT Years Ended December 31
---------------------------------------------------------------
OF EARNINGS: 1999 1998 1997 1996 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Interest income $35,193 30,950 25,141 19,448 16,366
Interest expense 17,457 16,003 12,675 9,797 8,425
------- ------ ------ ------ ------
Net interest income 17,736 14,947 12,466 9,651 7,941
Provision for possible loan losses 1,103 1,010 828 665 527
------- ------ ------ ------ ------
Net interest income after provision for
possible loan losses 16,633 13,937 11,638 8,986 7,414
Non-interest income 4,350 4,200 3,410 2,781 1,874
Non-interest expense 13,265 11,376 9,618 7,254 5,871
------- ------ ------ ------ ------
Earnings before income taxes 7,718 6,761 5,430 4,513 3,417
Income taxes 2,816 2,257 1,766 1,406 996
------- ------ ------ ------ ------
Net earnings $ 4,902 4,504 3,664 3,107 2,421
======= ====== ====== ====== ======
Comprehensive earnings $ 3,091 4,586 3,702 3,007 2,940
======= ====== ====== ====== ======
Cash dividends declared $ 1,447 1,203 1,039 950 929
======= ====== ====== ====== ======
PER SHARE DATA: (1)
Basic earnings per common share $ 2.52 2.37 1.97 1.70 1.36
Diluted earnings per common share $ 2.52 2.37 1.97 1.70 1.36
Cash dividends $ 0.75 0.64 0.56 0.53 0.53
Book value $ 16.43 15.26 13.22 11.57 10.22
RATIOS:
Return on average stockholders'
equity 16.04% 16.72% 16.02% 16.87% 14.33%
Return on average assets (2) 1.12% 1.18% 1.17% 1.24% 1.16%
Capital to assets (3) 7.25% 7.61% 8.04% 8.96% 8.12%
Dividends declared per share as percentage
of basic earnings per share 29.76% 27.00% 28.43% 31.18% 38.97%
</TABLE>
(1) Per share data has been retroactively adjusted to reflect a 4 for 3 stock
split which occurred effective September 30, 1999.
(2) Includes minority interest earnings of consolidated subsidiaries in
numerator.
(3) Includes minority interest of consolidated subsidiaries in numerator.
<PAGE> 3
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Wilson Bank Holding Company (the "Company") is a registered bank holding
company that owns 100% of the common stock of Wilson Bank and Trust, a state
bank headquartered in Lebanon, Tennessee. The Company was formed in 1992.
During 1996, the Company and other organizers consisting primarily of
residents of DeKalb and Smith Counties, Tennessee formed DeKalb Community Bank
and Community Bank of Smith County. The Company acquired 50% of the common stock
of each bank. Each of the banks were capitalized with $3,500,000; and
accordingly, the Company's investment in each bank was $1,750,000. DeKalb
Community Bank and Community Bank of Smith County are accounted for as
consolidated subsidiaries of the Company and their accounts are included in the
consolidated financial statements. The equity and earnings applicable to the
minority stockholders are shown as minority interest in the consolidated
financial statements.
The Company's subsidiary banks are community banks headquartered in
Lebanon, Smithville and Carthage, Tennessee, respectively, serving Wilson
County, DeKalb County, Smith County, Trousdale County, and the eastern part of
Davidson County, Tennessee as their primary market areas. The subsidiary banks
have thirteen locations including their three main offices. Davidson, DeKalb,
Smith and Trousdale Counties adjoin Wilson County. Management believes that
these counties offer an environment for continued growth, and the Company's
target market is local consumers, professionals and small businesses. The banks
offer a wide range of banking services, including checking, savings, and money
market deposit accounts, certificates of deposit and loans for consumer,
commercial and real estate purposes. The Company also offers custodial and trust
services and an investment center which offers a full line of investment
services to its customers.
During 1999, Wilson Bank and Trust opened an additional branch facility in
Davidson County, Tennessee. Management believes that the opportunity for growth
in western Wilson County and eastern Davidson County, Tennessee is exceptionally
good for two reasons. First, the area is a very high growth area. Secondly, two
key competitors were acquired by larger banks during 1999.
The following discussion and analysis is designed to assist readers in
their analysis of the Company's consolidated financial statements and must be
read in conjunction with such consolidated financial statements.
RESULTS OF OPERATIONS
Net earnings for the year ended December 31, 1999 were $4,902,000 an
increase of $398,000 or 8.8% over 1998. Net earnings for the year ended December
31, 1998 totaled $4,504,000 which was an increase of $840,000 or 22.9% from
$3,664,000 for 1997. On a per share basis, net income equaled $2.52 in 1999,
$2.37 in 1998 and $1.97 in 1997. The Company's Board of Directors voted in favor
of a 4 for 3 stock split effective September 30, 1999. The per share data has
been restated to reflect the stock split.
NET INTEREST INCOME
Net interest income represents the amount by which interest earned on
various earning assets exceeds interest paid on deposits and other
interest-bearing liabilities and is the most significant component of the
Company's earnings. Total interest income in 1999 was $35,193,000 compared with
$30,950,000 in 1998 and $25,141,000 in 1997. The increase in total interest
income in 1999 was primarily due to a $64.7 million or 17.7% increase in average
earning assets over 1998. Average earning assets increased $71.5 million from
December 31, 1997 to December 31, 1998. The average interest rate earned on
earning assets was 8.27% in 1999 compared with 8.62% in 1998 and 8.74% in 1997.
Interest earned on earning assets does not include any interest income
which would have been recognized on non-accrual loans if such loans were
performing. The amount of interest not recognized
<PAGE> 4
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
on nonaccrual loans totaled $8,000 in 1999, $16,000 in 1998 and $11,000 in 1997.
Total interest expense for 1999 was $17,457,000, an increase of $1,454,000
or 9.1%, compared to total interest expense of $16,003,000 in 1998. The increase
in total interest expense was due to an increase in average interest bearing
deposits of approximately $57,294,000 and offset by a decrease in the weighted
average cost of funds from 4.46% to 4.11%. Interest expense increased from
$12,675,000 in 1997 to $16,003,000 in 1998 or an increase of $3,328,000 or
26.3%. The increase in 1998 was due to a $62,580,000 increase in average
interest bearing deposits and an increase in the weighted average cost of funds
from 4.41% to 4.46%.
Net interest income for 1999 totaled $17,736,000 as compared to
$14,947,000 and $12,466,000 in 1998 and 1997, respectively. The net interest
spread, defined as the effective yield on earning assets less the effective cost
of deposits and borrowed funds (calculated on a fully taxable equivalent basis),
remained unchanged for 1999 at 4.16% primarily as a result of a relatively small
decrease in the yield on earning assets. The net interest spread was 4.33% in
1997. The net interest yield, which is net interest income expressed as a
percentage of average earning assets, decreased to 4.22% for 1999 compared to
4.24% in 1998 and 4.44% in 1997. Interest rates declined during 1998 but began
to increase in 1999. They are expected to remain stable or increase slightly in
2000. The Company is in a position to reprice its liabilities faster than the
assets are repricing. Management believes that it will be particularly difficult
to maintain an interest spread of over 4% during periods of higher interest
rates because the subsidiary banks' deposits tend to reprice more quickly that
the loans and investments securities. Management believes that the profit levels
can be maintained by maintaining significant growth. A significant increase in
interest rates could have an adverse impact on net interest yields and earnings.
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for loan losses represents a charge to earnings necessary to
establish an allowance for possible loan losses that, in management's
evaluation, is adequate to provide coverage for estimated losses on outstanding
loans and to provide for uncertainties in the economy. The 1999 provision for
loan losses was $1,103,000, an increase of $93,000 from the provision of
$1,010,000 in 1998. The increase in the provision was primarily a result of
increases in the loans. The provision for loan losses was $828,000 in 1997. Net
charge-offs decreased to $500,000 in 1999 from $656,000 in 1998. Net charge-offs
in 1997 totaled $390,000. The ratio of net charge-offs to average total
outstanding loans in 1999 was .15% and in 1998 was .25%. The provision for loan
losses in 1999 exceeded net charge-offs by $603,000 compared to $354,000 in 1998
and $438,000 in 1997.
The provision for loan losses raised the allowance for possible loan
losses (net of charge-offs and recoveries) to $3,847,000 at December 31, 1999
from $3,244,000 and $2,890,000 at December 31, 1998 and 1997, respectively. This
represents a 18.6% increase in the allowance at December 31, 1999 over December
31, 1998 as compared to a 21.2% increase in total loans. The allowance for
possible loan losses was 1.07% of total loans outstanding at December 31, 1999
compared to 1.10% at December 31, 1998 and 1.20% at December 31, 1997.
Additionally, as a percentage of nonperforming loans at year end 1999, 1998 and
1997, the allowance for loan losses represented 760%, 416% and 210%,
respectively.
The level of the allowance and the amount of the provision involve
evaluation of uncertainties and matters of judgment. Management believes the
allowance for possible loan losses at December 31, 1999 to be adequate.
NON-INTEREST INCOME
The components of the Company's non-interest income include service
charges on deposit accounts, other fees, gains on sale of loans, net gains on
sale of fixed assets. Total non-interest income for 1999 was $4,350,000 compared
with $4,200,000 in 1998 and $3,410,000 in 1997. The 3.6% increase over 1998 was
primarily due to increases in service charges on deposit accounts (which
increased $385,000), other fees (which increased $182,000) and a decrease in net
gains on sales of loans (which
<PAGE> 5
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
decreased $406,000). Management believes that the decrease in the gain on sale
of loans was caused by a reduction in the number of refinancings as compared to
1998 and by the increases in interest rates in 1999. Management projects that
gains on sales of loans will increase in 2000 due to increases in loan demand in
the existing market, improved marketing plans and expansion into a broader
market area. Increases in interest rates could have a negative impact on gains
on sales of loans. Management intends to continue to aggressively market the
services of the trust department; however, trust income is not expected to have
a significant impact on earnings in the immediate future. The Company has
recently entered into a commission participation arrangement with a local
insurance agency to sell insurance products. Management does not anticipate that
this arrangement will materially impact 2000 non-interest income.
NON-INTEREST EXPENSES
Non-interest expenses consist primarily of employee costs, occupancy
expenses, furniture and equipment expenses, loss on sale of other real estate,
FDIC insurance, Directors' fees and other operating expenses. Total non-interest
expenses for 1999 increased 16.6% to $13,265,000 from $11,376,000 in 1998. The
1998 non-interest expense was up 18.3% over 1997 which totaled $9,618,000. The
increases in non-interest expenses resulted primarily from increases in employee
salaries and related benefits. This increase was principally due to an increase
in the number of employees necessary to support the Company's expanded
operations, including the new branch which was opened in 1999. Other operating
expenses increased to $3,474,000 in 1999 from $2,921,000 in 1998. These expenses
included data processing, supplies and general operating expenses, which
increased as a result of continued growth of the Company and expansion into new
market areas.
INCOME TAXES
The Company's income tax expense was $2,816,000 for 1999 an increase of
$559,000 from 1998. The percentage of income tax expense to earnings before
taxes increased to 36.5% in 1999 from 33.4% in 1998. The percentage was 32.5% in
1997. The percentage for 1999 as compared to 1998 increased primarily as a
result of a decrease in the percentage of interest income exempt from Federal
income taxes to earnings before taxes from 16.7% in 1998 to 10.8% in 1999. The
increase from 1997 to 1998 is also due to a decrease in the percentage of
interest income exempt from Federal income taxes from 21.5% in 1997 to 16.7% in
1998. Management continues to evaluate the increases in the effective income tax
rate and has determined that the after tax yields on taxable securities are
generally higher than the yields presently available on non-taxable securities.
FINANCIAL CONDITION
BALANCE SHEET SUMMARY. The Company's total assets increased $63,243,000 or
14.6% to $495,218,000 at December 31, 1999, after increasing 22.8% in 1998 to
$431,975,000 at December 31, 1998. Loans, net of allowance for possible loan
losses, totaled $354,758,000 at December 31, 1999, a 21.2% increase compared to
December 31, 1998. Investment securities increased in 1999, primarily as a
result of increased deposits. At year end 1999 securities totaled $83,780,000,
an increase of 13.9% from $73,588,000 at December 31, 1998. The increase in
securities in 1999 is net of a $3,225,000 decrease in unrealized gains and
losses on securities available-for-sale.
Total liabilities increased $60,258,000 at December 31, 1999 to
$462,968,000 compared to $402,710,000 at December 31, 1998. This increase was
composed primarily of the $58,687,000 increase in total deposits to $447,792,000
(a 15.1% increase). Securities sold under repurchase agreements increased to
$8,543,000 from $7,258,000 at the respective year ends 1999 and 1998.
Stockholders' equity increased $2,985,000 or 10.2% due to net earnings and
sales of stock pursuant to the Company's Dividend Reinvestment Plan, net of
dividends paid on the Company's common stock. The increase is net of a
$1,811,000 decrease in unrealized gains and losses on available-for-sale
securities, net of taxes. A more detailed discussion of assets, liabilities and
capital follows.
<PAGE> 6
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LOANS:
Loan categories are as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------- -----------------------
(In Thousands) AMOUNT PERCENTAGE AMOUNT PERCENTAGE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Commercial, financial,
and agricultural $121,438 33.8% $100,217 33.7%
Installment 45,710 12.7 44,299 14.9
Real estate - mortgage 164,852 45.9 130,927 44.1
Real estate - construction 27,184 7.6 21,809 7.3
-------- ----- -------- -----
TOTAL $359,184 100.0% $297,252 100.0%
======== ===== ======== =====
</TABLE>
Loans are the largest component of the Company's assets and are its
primary source of income. The Company's loan portfolio, net of allowance for
loan loses, increased 21.2% by year end 1999. The loan portfolio is composed of
four primary loan categories: commercial, financial and agricultural;
installment; real estate-mortgage; and real estate-construction. The table above
sets forth the loan categories and the percentage of such loans in the portfolio
at December 31 1999 and 1998.
As represented in the table, primary loan growth was in real estate
mortgage loans and commercial loans. Real estate mortgage loans increased 25.9%
in 1999 and at December 31, 1999 comprised 45.9% of total loans compared to
44.1% of total loans at December 31, 1998. This increase was primarily due to
the favorable interest rate environment and the Company's ability to increase
its market share of such loans while maintaining its loan underwriting
standards. Commercial loans increased 21.2% in 1999 and comprised 33.8% of the
total loan portfolio at December 31, 1999, compared to 33.7% at December 31,
1998.
Banking regulators define highly leveraged transactions to include
leveraged buy-outs, acquisition loans, and recapitalization loans of an existing
business. Under the regulatory definition, at December 31, 1999, the Company had
no highly leveraged transactions, and there were no foreign loans outstanding
during any of the reporting periods.
Non-performing loans, which include non-accrual loans, loans 90 days past
due, and renegotiated loans totaled $506,000 at December 31, 1999, a decrease
from $779,000 at December 31, 1998. Non-accrual loans are loans on which accrual
of interest is stopped when management believes collection of such interest is
doubtful due to management's evaluation of the borrower's financial condition,
collateral liquidation value, economic and business conditions and other factors
affecting the borrower's ability to pay. Non-accrual loans totaled $84,000 at
December 31, 1999 compared to $223,000 at December 31, 1998. Loans 90 days past
due, as a component of non-performing loans, decreased to $422,000 at December
31, 1999 from $556,000 at December 31, 1998. This decrease is primarily a result
of decreases in installment loans that are 90 days past due offset by an
increase of real estate mortgage loans 90 days past due. The Company had no
renegotiated loans, which would have been included in non-performing loans.
The Company also internally classifies loans about which management
questions the borrower's ability to comply with the repayment terms of the loan
agreement. These internally classified loans, inclusive of certain
non-performing loans, totaled $738,000 at December 31, 1999 as compared to
$1,603,000 at December 31, 1998. Of the internally classified loans at December
31, 1999, $388,000 are real estate related loans and $350,000 are various other
types of loans. The internally classified loans as a percentage of the allowance
for possible loan losses were 19.2% and 49.4%, respectively, at December 31,
1999 and 1998.
<PAGE> 7
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The allowance for possible loan losses is discussed under "Provision for
Possible Loan Losses." The Company maintains its allowance for possible loan
losses at an amount deemed by management to be adequate to provide for the
possibility of loan losses in the loan portfolio.
Essentially all of the Company's loans were from Wilson, DeKalb, Smith,
Trousdale and adjacent counties. The Company seeks to exercise prudent risk
management in lending, including diversification by loan category and industry
segment (at December 31, 1999 no single industry segment accounted for more than
10% of the Company's portfolio other than real estate loans), as well as by
identification of credit risks.
The Company's management believes there is a significant opportunity to
continue to increase the loan portfolio in the Company's primary market area
which has been expanded in 1999 to include eastern Davidson County, Tennessee.
The Company has targeted commercial business lending, commercial and residential
real estate lending and consumer lending. Although it is the Company's objective
to achieve a loan portfolio equal to approximately 75% of deposit balances,
various factors, including demand for loans which meet its underwriting
standards, will determine the size of the loan portfolio in a given economic
climate. This is reflected in the past two years when the Company's average loan
to average deposit ratio was 78.6% and 75.3%. As a practice, the Company
generates its own loans and does not buy participations from other institutions.
The Company may sell some of the loans it generates to other financial
institutions if the transaction profits the Company and improves the liquidity
of the loan portfolio. The subsidiary banks sell loan participations to other
banks within the consolidated group. The Company seeks to build a loan portfolio
which is capable of adjusting to swings in the interest rate market, and it is
the Company's policy to maintain a diverse loan portfolio not dependent on any
particular market or industrial segment.
SECURITIES
Securities increased 13.9% to $83,780,000 at year end 1999 from
$73,588,000 at December 31, 1998, and comprised the second largest and other
primary component of the Company's earning assets. The growth in the carrying
value of securities for 1999 was net of a $3,225,000 decrease in market value of
securities classified as available-for-sale. This increase followed a 19.7%
securities portfolio increase from year end 1997 to 1998. The growth in
securities resulted from continued deposit growth in excess of funds necessary
to fund loan growth.
The primary increase in the Company's securities portfolio was in U.S.
Treasury and other U.S. Government agencies which increased $13,452,000 or 26.6%
in 1999. Mortgage-backed securities decreased $870,000 or 17.3%. The average
yield of the securities portfolio at December 31, 1999 was 6.40% with an average
maturity of 7.42 years, as compared to an average yield of 6.93% and an average
maturity of 7.42 years at December 31, 1998. During 1998 management extended the
average maturity of securities to increase or maintain the average yield.
The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 115 (SFAS No. 115), "Accounting for Certain Investments
in Debt and Equity Securities". Under the provisions of the Statement,
securities are to be classified in three categories and accounted for as
follows:
- - Debt securities that the enterprise has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and reported
at amortized cost.
- - Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading securities
and reported at fair value, with unrealized gains and losses included in
earnings.
- - Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of shareholders'
equity.
<PAGE> 8
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company's classification of securities as of December 31, 1999 is as
follows:
<TABLE>
<CAPTION>
(In Thousands) HELD-TO-MATURITY AVAILABLE-FOR-SALE
------------------------- ----------------------------
Amortized Estimated Amortized Estimated
Cost Market Value Cost Market Value
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury and other
U.S. Government agencies
and Corporations $ -- -- 66,859 63,978
Obligations of states and
political subdivisions 13,398 13,159 2,232 2,237
Mortgage-backed securities 3,339 3,316 840 828
------- ------ ------ ------
$16,737 16,475 69,931 67,043
======= ====== ====== ======
</TABLE>
No securities have been classified as trading securities
The classification of a portion of the securities portfolio as
available-for-sale was made to provide for more flexibility in asset/liability
management and capital management.
The increase in net unrealized gain on securities available-for-sale for
the year ended December 31, 1997 totaled $38,000 which represents the unrealized
appreciation in securities available-for-sale of $57,000 less applicable income
taxes of $19,000. During the year ended December 31, 1998, the increase totaled
$82,000 which represents an increase in the unrealized appreciation in
securities available-for-sale of $138,000 less applicable income taxes of
$56,000. During the year ended December 31, 1999, the decrease totaled
$1,811,000 which represents a decrease in the unrealized appreciation in
securities available-for-sale of $2,920,000 less applicable income taxes of
$1,109,000.
DEPOSITS
The increases in assets in 1999 and 1998 were funded primarily by
increases in deposits. Total deposits, which are the principal source of funds
for the Company, totaled $447,792,000 at December 31, 1999 compared to
$389,105,000 and $316,641,000 at December 31, 1998 and 1997, respectively. The
Company has targeted local consumers, professionals, and small businesses as its
central clientele; therefore, deposit instruments in the form of demand
deposits, savings accounts, money market demand accounts, certificates of
deposits and individual retirement accounts are offered to customers. Management
believes the Wilson County, Davidson County, DeKalb County, Smith County and
Trousdale County areas are growing economic markets offering growth
opportunities for the Company; however, the Company competes with several of the
larger bank holding companies that have bank offices in these counties; and
therefore, no assurances of market growth or maintenance of current market share
can be given. Even though the Company is in a very competitive market,
management currently believes that its market share will be maintained or
expanded. Management believes that the acquisition of two of its primary
competitors by larger bank holding companies during 1999 will provide greater
opportunity to expand the Company's market share.
The $58,687,000 or 15.1% growth in deposits in 1999 consisted of changes
in several deposit categories: savings accounts increased $2,139,000 (11.0%) to
$21,610,000, total certificates of deposit (including individual retirement
accounts) increased $36,879,000 (16.8%) to $255,949,000, money market demand
accounts increased $17,818,000 (21.8%) to $99,456,000 and demand deposits
increased $1,086,000 (2.5%) to $44,431,000.
<PAGE> 9
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The average rate paid on average total interest-bearing deposits was 4.6%
for 1999, compared to 5.0% for 1998. The average rate paid in 1997 was 4.9 %.
The ratio of average loans to average deposits was 78.6% in 1999 compared
with 75.3% and 76.8% in 1998 and 1997, respectively.
LIQUIDITY AND ASSET MANAGEMENT
The Company's management seeks to maximize net interest income by managing
the Company's assets and liabilities within appropriate constraints on capital,
liquidity and interest rate risk. Liquidity is the ability to maintain
sufficient cash levels necessary to fund operations, meet the requirements of
depositors and borrowers and fund attractive investment opportunities. Higher
levels of liquidity bear corresponding costs, measured in terms of lower yields
on short-term, more liquid earning assets and higher interest expense involved
in extending liability maturities. Liquid assets include cash and cash
equivalents and investment securities and money market instruments that will
mature within one year. At December 31, 1999, the Company's liquid assets
approximated $49.6 million.
The Company's primary source of liquidity is a stable core deposit base.
In addition, short-term investments, loan payments and investment security
maturities provide a secondary source.
Interest rate risk (sensitivity) management focuses on the earnings risk
associated with changing interest rates. Management seeks to maintain
profitability in both immediate and long term earnings through funds
management/interest rate risk management. The Company's rate sensitivity
position has an important impact on earnings. Senior management of the Company
meets monthly to analyze the rate sensitivity position. These meetings focus on
the spread between the cost of funds and interest yields generated primarily
through loans and investments.
At December 31, 1999, the Company had a liability sensitive position (a
negative gap) for 1999. Liability sensitivity means that more of the Company's
liabilities are capable of repricing over certain time frames than its assets.
The interest rates associated with these liabilities may not actually change
over this period but are capable of changing. The 1999 net earnings would have
deteriorated in a rising rate environment as compared with the fairly stable
rate environment that existed for most of 1999. The 1998 and 1997 earnings would
have also deteriorated in a rising rate environment as compared with the fairly
stable rate environment that existed during most of 1998.
The following table shows the rate sensitivity gaps for different time periods
as of December 31, 1999:
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY GAPS One Year
December 31, 1999 1-90 91-180 181-365 and
(In Thousands) Days Days Days Longer Total
--------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Interest-earning assets $ 187,997 29,885 47,125 193,141 458,148
Interest-bearing liabilities 225,500 63,023 77,712 45,669 411,904
--------- ------- -------- ------- -------
Interest-rate sensitivity gap $ (37,503) (33,138) (30,587) 147,472 46,244
========= ======= ======== ======= =======
Cumulative gap $ (37,503) (70,641) (101,228) 46,244
========= ======== ======= =======
</TABLE>
<PAGE> 10
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
At the present time there are no known trends or any known commitments,
demands, events or uncertainties that will result in or that are reasonably
likely to result in the Company's liquidity changing in any material way.
CAPITAL POSITION AND DIVIDENDS
CAPITAL. At December 31, 1999, total stockholders' equity was $32,250,000
or 6.5% of total assets, which compares with $29,265,000 or 6.8% of total assets
at December 31, 1998, and $24,817,000 or 7.1% of total assets at December 31,
1997. The dollar increase in stockholders' equity during 1999 reflects (i) the
Company's net income of $4,902,000 less cash dividends of $.75 per share
totaling $1,447,000, (ii) the issuance of 32,363 shares of common stock for
$1,281,000 in lieu of payment of cash dividends, (iii) sale of 2,000 shares of
common stock for $60,000 and (iv) decrease in the net unrealized gain (loss) on
available-for-sale securities of $1,811,000.
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 December 31, 1999 the
Company's total risk-based capital ratio was 12.0% and its Tier I risk-based
capital ratio was 10.9%, respectively, compared to ratios of 12.3% and 11.2%,
respectively at December 31, 1998. The required Tier I leverage capital ratio
(Tier I capital to average assets for the most recent quarter) for the Company
is 4%. At December 31, 1999, the Company had a leverage ratio of 7.7% compared
to 7.8% at December 31, 1998. Management believes it can adequately capitalize
its growth for the next few years with earnings.
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. The following table provides information about
the Company's financial instruments that are sensitive to changes in interest
rates as of December 31, 1999.
<PAGE> 11
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
EXPECTED MATURITY DATE - YEAR ENDING DECEMBER 31, FAIR
--------------------------------------------------
2000 2001 2002 2003 2004 THEREAFTER TOTAL VALUE
-------- ------ ------ ----- ----- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans, net of unearned interest:
Variable rate $ 75,596 11,015 15,780 8,694 6,765 22,265 140,115 140,115
Average interest rate 8.61% 8.35% 8.44% 8.44% 7.71% 7.72% 8.40%
Fixed rate 109,905 27,015 20,187 18,175 16,115 27,093 218,490 215,185
Average interest rate 8.81% 8.59% 9.31% 8.28% 7.94% 7.79% 8.52%
Securities 4,745 1,390 1,700 2,244 7,285 66,416 83,780 83,518
Average interest rate 7.17% 6.32% 6.60% 7.41% 6.54% 6.70% 6.70%
Loans held for sale 1,835 -- -- -- -- -- 1,835 1,835
Average interest rate 5.64% -- -- -- -- -- 5.64%
Federal funds sold 13,928 -- -- -- -- -- 13,928 13,928
Average interest rate 4.60% -- -- -- -- -- 4.60%
Interest-bearing deposits 354,893 37,099 10,483 320 566 -- 403,361 403,970
Average interest rate 4.18% 5.63% 5.92% 5.87% 6.05% -- 4.29%
Short-term borrowings 8,543 -- -- -- -- -- 8,543 8,543
Average interest rate 4.35% -- -- -- -- -- 4.35%
</TABLE>
SUPERVISION AND REGULATION
Bank Holding Company Act of 1956. As a Bank Holding Company, the Company
is subject to regulation under the Bank Holding Company Act of 1956 (the "Act"),
and the regulations adopted by the Board of Governors of the Federal Reserve
System (the "Board") under the Act. The Company is required to file reports
with, and is subject to examination by, the Board. The subsidiary banks are
Tennessee state chartered banks, and are therefore subject to the supervision of
and are regularly examined by the Tennessee Department of Financial Institutions
(the "TDFI") and the Federal Deposit Insurance Corporation ("FDIC").
Under the Act, a bank holding company may not directly or indirectly
acquire the ownership or control of more than five percent of the voting shares
or substantially all of the assets of any company, including a bank, without the
prior approval of the Board. In addition, bank holding companies are generally
prohibited under the Act from engaging in non-banking activities, subject to
certain exceptions. Under the Act, the Board is authorized to approve the
ownership by a bank holding company of shares of any company whose activities
have been determined by the Board to be so closely related to banking or to
managing or controlling banks as to be a proper incident thereto.
In November, 1999, the Gramm-Leach-Bliley Act of 1999 (the "GLB Act")
became law. Under the GLB Act, a "financial holding company" may engage in
activities the Board determines to be financial in nature or incidental to such
financial activity or complementary to a financial activity and not a
substantial risk to the safety and soundness of such depository institutions or
the financial system. Generally, such companies may engage in a wide range of
securities activities and insurance underwriting and agency activities.
Under the Tennessee Bank Structure Act, a bank holding company which
controls 30% or more of the total deposits (excluding certain deposits) in all
federally insured financial institutions in Tennessee is prohibited from
acquiring any bank in Tennessee.
<PAGE> 12
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
State banks and national banks in Tennessee may establish branches anywhere in
the state.
Congress enacted the Reigle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "IBBEA") which authorizes interstate acquisitions of
banks and bank holding companies without geographic limitation beginning June 1,
1997. In addition, on that date, the IBBEA authorizes a bank to merge with a
bank in another state as long as neither of the states has opted out of
interstate branching between the date of enactment of the IBBEA and May 1, 1997.
Tennessee has enacted interstate branching laws in response to federal law
which, effective June 1, 1997, will prohibit the establishment or acquisition in
Tennessee by any bank of a branch office, branch bank or other branch facility
in Tennessee except (i) a Tennessee-chartered Bank (ii) a national bank which
has its main office in Tennessee, or (iii) a bank which merges or consolidates
with a Tennessee-chartered bank or a national bank with its main office in
Tennessee.
The Company and the subsidiary banks are subject to certain restrictions
imposed by the Federal Reserve Act and the Federal Deposit Insurance Act,
respectively, on any extensions of credit to the Company or the subsidiary
banks, on investments in the stock or other securities of the Company or the
subsidiary banks, and on taking such stock or other securities as collateral for
loans of any borrower.
FDICIA. Under the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA"), the federal banking regulators have assigned each insured
institution to one of five categories ("well capitalized," "adequately
capitalized" or one of three under capitalized categories) based upon the three
measures of capital adequacy discussed above. Institutions which have a Tier I
leverage capital ratio of 5%, a Tier I risk based capital ratio of 5% and a
total risk based capital ratio of 10% are defined as "well capitalized". All
institutions, regardless of their capital levels, are restricted from making any
capital distribution or paying any management fees that would cause the
institution to fail to satisfy the minimum levels for any of its capital
requirements for "adequately capitalized" status. The subsidiary banks currently
meet the requirements for "well capitalized" status.
An institution that fails to meet the minimum level for any relevant
capital measure (an "undercapitalized institution") may be: (i) subject to
increased monitoring by the appropriate federal banking regulator; (ii) required
to submit an acceptable capital restoration plan within 45 days (which must be
guaranteed by the institution's holding company); (iii) subject to asset growth
limits; and (iv) required to obtain prior regulatory approval for acquisitions,
branching and new lines of businesses. The bank regulatory agencies have
discretionary authority to reclassify a well capitalized institution as
adequately capitalized or to impose on an adequately capitalized institution
requirements or actions specified for undercapitalized institutions if the
agency determines that the institution is in an unsafe or unsound condition or
is engaging in an unsafe or unsound practice.
A "significantly undercapitalized" institution may be subject to a number
of additional requirements and restrictions, including orders to sell sufficient
voting stock to become "adequately capitalized," requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks.
"Critically undercapitalized" institutions are subject to the appointment of a
receiver or conservator.
Under FDICIA, bank regulatory agencies have prescribed standards for all
insured depository institutions and their holding companies relating to internal
controls, information systems, internal audit systems, loan documentation,
credit underwriting, interest rate exposure, asset growth, compensation, a
maximum ratio of classified assets to capital, minimum earnings sufficient to
absorb losses, a minimum ratio of market value to book value for publicly traded
shares and such other standards as the agencies deem appropriate.
As a result of a federal law enacted in 1991 requiring each federal
banking agency to revise its risk-based capital standards to insure that those
standards take adequate account of interest rate risk, concentration of credit
risk and the risks of non-traditional activities, each of the federal banking
agencies have revised the risk-based capital guidelines described above to take
account of concentration of credit risk and risk of non-traditional
<PAGE> 13
WILSON BANK HOLDING COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
activities. In addition, the Board and the FDIC recently adopted a new rule that
amended, effective September 1, 1995, the capital standards to include
explicitly a bank's exposure to declines in the economic value of its capital
due to changes in interest rates as a factor to be considered in evaluating a
bank's capital adequacy. This rules does not codify a measurement framework for
assessing the level of a bank's interest rate exposure. These agencies, together
with the Office of the Comptroller of the Currency have issued for comment a
joint policy statement that describes the process to be used to measure and
assess the exposure of a bank's net economic value to changes in interest rates.
These agencies have indicated that they intend to issue a proposed rule that
would establish an explicit minimum capital charge for interest rate risk based
on the level of a bank's measured interest rate exposure. The agencies intend to
implement the proposed rule after they and the banking industry have had more
experience with the proposed supervisory and measurement process.
The subsidiary banks are assessed annually at the rate of .0212% of
insured deposits for deposit insurance. The assessments are paid quarterly.
Management is not aware of any current recommendations by the regulatory
authorities which, if implemented, would have a material effect on the Company's
liquidity, capital resources or operations.
Monetary Policy. The subsidiary banks are affected by commercial bank
credit policies of regulatory authorities, including the Board. An important
function of the Board is to regulate the national supply of bank credit in order
to attempt to combat recessionary and curb inflationary pressures. Among the
instruments of monetary policy used by the Board of implement these objectives
are: open market operations in U.S. Government securities, changes in discount
rates on member borrowings, changes in reserve requirements against bank
deposits and limitations on interest rates which member banks may pay on time
and savings deposits. These means are used in varying combinations to influence
overall growth of bank loans, investments and deposits, and may also affect
interest rates charged on loans or paid on deposits. The monetary policies of
the Board have had a significant effect on the operating results of commercial
banks, including nonmembers as well as members, in the past and are expected to
continue to do so in the future.
IMPACT OF INFLATION
Although interest rates are significantly affected by inflation, the
inflation rate is immaterial when reviewing the Company's results of operations.
YEAR 2000 ISSUES
The term "Year 2000 issue" refers to the necessity of converting computer
information systems so that such systems recognize more than two digits to
identify a year in any given date field, and are thereby able to differentiate
between years in the twentieth and twenty-first centuries ending with the same
two digits (e.g., 1900 and 2000). The Company experienced no significant
problems upon the change to Year 2000. The Company estimates its cost for
becoming Year 2000 compliant totaled $184,000. Of this amount, $49,000
represented costs incurred for testing the operating system and computers and
promotion of the Customer Awareness Program. The cost of renovations was minimal
because there were not any major renovations, upgrades, or software conversions
needed. One of the more costly aspects of the Y2K project was the personnel
cost. The personnel cost incurred was approximately $135,000, of which $80,000
was incurred in 1999 and $55,000 was incurred in 1998. The personnel costs were
expensed through the regular salary structure.
Management is not aware of any of the Company's customers that have
experienced significant problems related to the Year 2000 Issue.
<PAGE> 14
WILSON BANK HOLDING COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(WITH INDEPENDENT AUDITOR'S REPORT THEREON)
<PAGE> 15
MAGGART & ASSOCIATES, P.C.
Certified Public Accountants
FIRST UNION TOWER
SUITE 2150
150 FOURTH AVENUE, NORTH
NASHVILLE, TENNESSEE 37219-2417
Telephone (615) 252-6100
Facsimile (615) 252-6105
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Wilson Bank Holding Company:
We have audited the accompanying consolidated balance sheets of Wilson Bank
Holding Company and Subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of earnings, comprehensive earnings, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Wilson
Bank Holding Company and Subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with generally accepted
accounting principles.
/s/ Maggart & Associates, P.C.
Nashville, Tennessee
January 11, 2000
<PAGE> 16
WILSON BANK HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
In Thousands
------------------------
1999 1998
--------- -------
<S> <C> <C>
ASSETS
Loans, net of allowance for possible loan losses of $3,847,000
and $3,244,000, respectively $ 354,758 292,686
Securities:
Held-to-maturity, at amortized cost (market value $16,475,000
and $20,870,000, respectively) 16,737 20,408
Available-for-sale, at market (amortized cost $69,931,000 and
$52,843,000, respectively) 67,043 53,180
--------- -------
Total securities 83,780 73,588
Loans held for sale 1,835 3,881
Federal funds sold 13,928 24,976
--------- -------
Total earning assets 454,301 395,131
--------- -------
Cash and due from banks 16,721 16,024
Premises and equipment, net 16,259 14,807
Accrued interest receivable 3,894 3,373
Organizational costs, net of accumulated amortization
of $136,000 and $108,000, respectively -- 28
Deferred income taxes 2,077 714
Other real estate 221 138
Other assets 1,745 1,760
--------- -------
Total assets $ 495,218 431,975
========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 447,792 389,105
Securities sold under repurchase agreements 8,543 7,258
Accrued interest and other liabilities 2,965 2,760
Minority interest 3,668 3,587
--------- -------
Total liabilities 462,968 402,710
--------- -------
Stockholders' equity:
Common stock, par value $2.00 per share, authorized 5,000,000,
1,963,163 and 1,438,781 shares issued and outstanding, respectively 3,926 2,877
Additional paid-in capital 8,822 8,530
Retained earnings 21,118 17,663
Net unrealized gains (losses) on available-for-sale securities, net of income
tax benefit of $988,000 and income taxes of $121,000, respectively (1,616) 195
--------- -------
Total stockholders' equity 32,250 29,265
--------- -------
COMMITMENTS AND CONTINGENCIES
Total liabilities and stockholders' equity $ 495,218 431,975
========= =======
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 17
WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
In Thousands
--------------------------------------
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 28,937 24,790 20,466
Interest and dividends on securities:
Taxable securities 4,371 3,480 2,457
Exempt from Federal income taxes 830 1,126 1,166
Interest on loans held for sale 128 219 111
Interest on Federal funds sold 927 1,335 941
-------- ------- -------
Total interest income 35,193 30,950 25,141
-------- ------- -------
Interest expense:
Interest on negotiable order of withdrawal accounts 406 423 515
Interest on money market accounts and other
savings accounts 3,967 3,591 2,652
Interest on certificates of deposit 12,674 11,601 9,155
Interest on securities sold under repurchase agreements 408 386 353
Interest on Federal funds purchased 2 2 --
-------- ------- -------
Total interest expense 17,457 16,003 12,675
-------- ------- -------
Net interest income before provision for possible loan losses 17,736 14,947 12,466
Provision for possible loan losses (1,103) (1,010) (828)
-------- ------- -------
Net interest income after provision for possible loan losses 16,633 13,937 11,638
Non-interest income 4,350 4,200 3,410
Non-interest expense (13,265) (11,376) (9,618)
-------- ------- -------
Earnings before income taxes 7,718 6,761 5,430
Income taxes 2,816 2,257 1,766
-------- ------- -------
Net earnings $ 4,902 4,504 3,664
======== ======= =======
Basic earnings per common share $ 2.52 2.37 1.97
======== ======= =======
Diluted earnings per common share $ 2.52 2.37 1.97
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 18
WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
In Thousands
----------------------------------
1999 1998 1997
------- ------ -----
<S> <C> <C> <C>
Net earnings: $ 4,902 4,504 3,664
------- ------ -----
Other comprehensive earnings (loss), net of tax:
Unrealized gains (losses) on available-for-sale securities
arising during period, net of tax benefit of $1,109,000,
and tax expenses of $53,000 and $19,000, respectively (1,811) 87 38
Less: reclassification adjustment for gains included
in net earnings, net of tax expense of $3,000 -- (5) --
------ -----
Other comprehensive earnings (loss) (1,811) 82 38
------- ------ -----
Comprehensive earnings $ 3,091 4,586 3,702
======= ====== =====
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 19
WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
In Thousands
---------------------------------------------------------------
Net Unrealized
Additional Gain (Loss) On
Common Paid-In Retained Available-For-
Stock Capital Earnings Sale Securities Total
------ ---------- -------- --------------- -------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1996 $2,756 6,684 11,737 75 21,252
Cash dividends declared, $.56 per share -- -- (1,039) -- (1,039)
Issuance of 29,393 shares of stock
pursuant to dividend reinvestment plan 59 843 -- -- 902
Net change in unrealized gain on
available-for-sale securities during the
year, net of taxes of $19,000 -- -- -- 38 38
Net earnings for year -- -- 3,664 -- 3,664
------ ------ ------- ------ -------
Balance December 31, 1997 2,815 7,527 14,362 113 24,817
Cash dividends declared, $.64 per share -- -- (1,203) -- (1,203)
Issuance of 31,314 shares of stock
pursuant to dividend reinvestment plan 62 1,003 -- -- 1,065
Net change in unrealized gain on
available-for-sale securities during the
year, net of taxes of $56,000 -- -- -- 82 82
Net earnings for year -- -- 4,504 -- 4,504
------ ------ ------- ------ -------
Balance December 31, 1998 2,877 8,530 17,663 195 29,265
Cash dividends declared, $.75 per share -- -- (1,447) -- (1,447)
Issuance of 32,363 shares of stock
pursuant to dividend reinvestment
plan 65 1,216 -- -- 1,281
Sale of 2,000 shares of stock 4 56 -- -- 60
Issuance of 490,019 shares of stock
pursuant to a 4 for 3 stock split 980 (980) -- -- --
Net change in unrealized gain on
available-for-sale securities during the
year, net of taxes of $1,109,000 -- -- -- (1,811) (1,811)
Net earnings for year -- -- 4,902 -- 4,902
------ ------ ------- ------ -------
Balance December 31, 1999 $3,926 8,822 21,118 (1,616) 32,250
====== ====== ======= ====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 20
WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1999
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
In Thousands
--------------------------------------
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Interest received $ 34,597 30,226 24,434
Fees received 3,781 3,214 2,789
Proceeds from sale of loans 42,392 66,623 39,406
Origination of loans held for sale (39,786) (65,446) (40,663)
Interest paid (17,298) (15,714) (12,206)
Cash paid to suppliers and employees (11,960) (10,134) (8,734)
Income taxes paid (2,601) (2,459) (1,939)
-------- ------- -------
Net cash provided by operating activities 9,125 6,310 3,087
-------- ------- -------
Cash flows from investing activities:
Purchase of available-for-sale securities (31,619) (60,182) (22,813)
Proceeds from sales of available-for-sale securities -- 1,507 --
Proceeds from maturities of available-for-sale securities 14,606 42,753 14,704
Purchase of held-to-maturity securities (861) (3,439) (5,133)
Proceeds from maturities of held-to-maturity securities 4,532 7,487 7,417
Loans made to customers, net of repayments (63,706) (56,424) (54,915)
Purchase of bank premises and equipment (2,699) (4,113) (3,335)
Proceeds from sale of fixed assets 1 35 6
Proceeds from sales of other real estate 404 262 --
-------- ------- -------
Net cash used in investing activities (79,342) (72,114) (64,069)
-------- ------- -------
Cash flows from financing activities:
Net increase in non-interest bearing savings and
NOW deposit accounts 21,808 31,307 37,323
Net increase in time deposits 36,879 41,157 36,068
Proceeds from sale of securities under agreements to repurchase 1,285 2,698 --
Payments on securities under agreements to repurchase -- -- (1,056)
Dividends paid (1,447) (1,203) (1,039)
Proceeds from sale of common stock 1,341 1,065 902
-------- ------- -------
Net cash provided by financing activities 59,866 75,024 72,198
-------- ------- -------
Net increase (decrease) in cash and cash equivalents (10,351) 9,220 11,216
Cash and cash equivalents at beginning of year 41,000 31,780 20,564
-------- ------- -------
Cash and cash equivalents at end of year $ 30,649 41,000 31,780
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 21
WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
THREE YEARS ENDED DECEMBER 31, 1999
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
In Thousands
------------------------------------
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Reconciliation of net earnings to net cash provided by operating activities:
Net earnings $ 4,902 4,504 3,664
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 1,265 1,247 1,045
Provision for possible loan losses 1,103 1,010 828
Provision for deferred taxes (137) (78) (106)
Security gains related to available-for-sale securities -- (8) --
Loss on sale of other real estate 2 57 --
Net loss (gain) on sale of fixed assets 9 (12) (5)
FHLB dividend reinvestment (75) (66) (55)
Decrease (increase) in loans held for sale 2,046 211 (1,873)
Write-off of temporary facilities -- 15 --
Decrease (increase) in refundable income taxes 321 (172) (38)
Increase (decrease) in taxes payable 33 49 (28)
Increase in accrued interest receivable (521) (658) (652)
Increase in interest payable 159 289 469
Increase in other assets (266) (395) (216)
Increase in accrued expenses 13 186 34
Net gains of minority interests of commercial
bank subsidiaries 271 131 20
------- ------ ------
Total adjustments 4,223 1,806 (577)
------- ------ ------
Net cash provided by operating activities $ 9,125 6,310 3,087
======= ====== ======
Supplemental Schedule of Non-Cash Activities:
Investment securities transferred to held-to-maturity $ -- 205 --
======= ====== ======
Unrealized gain (loss) in value of securities available-for-sale,
net of taxes of $1,109,000 in 1999, $56,000 in 1998,
and $19,000 in 1997 $(1,811) 82 38
======= ====== ======
Non-cash transfers from loans to other real estate $ 403 394 63
======= ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE> 22
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Wilson Bank Holding Company
and Subsidiaries ("the Company") are in accordance with generally
accepted accounting principles and conform to general practices within
the banking industry. The following is a brief summary of the
significant policies.
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
the Company, its wholly-owned subsidiary, Wilson Bank & Trust,
Hometown Finance Company, a wholly-owned subsidiary of Wilson
Bank & Trust, DeKalb Community Bank, a 50% owned subsidiary,
and Community Bank of Smith County, a 50% owned subsidiary.
DeKalb Community Bank and Community Bank of Smith County were
organized in 1996. All significant intercompany accounts and
transactions have been eliminated in consolidation.
(b) NATURE OF OPERATIONS
Wilson Bank & Trust, DeKalb Community Bank and Community Bank
of Smith County operate under state bank charters and provide
full banking services. Wilson Bank & Trust also provides trust
services. As state banks, the subsidiary banks are subject to
regulations of the Tennessee Department of Financial
Institutions and the Federal Deposit Insurance Corporation.
The areas served by the banks include Wilson County, DeKalb
County, Smith County and Trousdale County, Tennessee and
surrounding counties in Middle Tennessee. Services are
provided at the three main offices and ten branch locations.
(c) ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates. Material estimates that are particularly
susceptible to significant change in the near term relate to
determination of the allowance for possible loan losses and
the valuation of debt and equity securities and the related
deferred taxes.
(d) LOANS
Loans are stated at the principal amount outstanding. Unearned
discount, deferred loan fees net of loan acquisition costs,
and the allowance for possible loan losses are shown as
reductions of loans. Loan origination and commitment fees and
certain loan-related costs are being deferred and the net
amount amortized as an adjustment of the related loan's yield
over the contractual life of the loan. Unearned discount
represents the unamortized amount of finance charges,
principally related to certain installment loans. Interest
income on most loans is accrued based on the principal amount
outstanding.
8
<PAGE> 23
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(d) LOANS, CONTINUED
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
residential mortgage and 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 possible loan
losses or by adjusting an existing valuation allowance for the
impaired loan with a corresponding charge or credit to the
provision for possible loan losses.
The Company's installment loans 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 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 along 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 and uncollected 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 possible 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 cash received is
applied as a reduction of principal. A nonaccrual loan may be
restored to an 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.
9
<PAGE> 24
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(d) LOANS, CONTINUED
Loans not on nonaccrual status are classified as impaired in
certain cases when 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. Interest is generally accrued on such loans
that continue to meet the modified terms of their loan
agreements.
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.
(e) ALLOWANCE FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses represents a charge to
earnings necessary, after loan charge-offs and recoveries, to
maintain the allowance for possible loan losses at an
appropriate level which is adequate to absorb estimated losses
inherent in the loan portfolio. Such estimated losses arise
primarily from the loan portfolio but may also be derived from
other sources, including commitments to extend credit and
standby letters of credit. The level of the allowance is
determined on a quarterly basis using procedures which
include: (1) categorizing commercial and commercial real
estate loans into risk categories to estimate loss
probabilities based primarily on the historical loss
experience of those risk categories and current economic
conditions; (2) analyzing significant commercial and
commercial real estate credits and calculating specific
reserves as necessary; (3) assessing various homogeneous
consumer loan categories to estimate loss probabilities based
primarily on historical loss experience; (4) reviewing
unfunded commitments; and (5) considering various other
factors, such as changes in credit concentrations, loan mix,
and economic conditions which may not be specifically
quantified in the loan analysis process.
The allowance for possible loan losses consists of an
allocated portion and an unallocated, or general portion. The
allocated portion is maintained to cover estimated losses
applicable to specific segments of the loan portfolio. The
unallocated portion is maintained to absorb losses which
probably exist as of the evaluation date but are not
identified by the more objective processes used for the
allocated portion of the allowance due to risk of errors or
imprecision. While the total allowance consists of an
allocated portion and an unallocated portion, these terms are
primarily used to describe a process. Both portions of the
allowance are available to provide for inherent loss in the
entire portfolio.
10
<PAGE> 25
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(e) ALLOWANCE FOR POSSIBLE LOAN LOSSES, CONTINUED
The allowance for possible loan losses is increased by
provisions for possible loan losses charged to expense and is
reduced by loans charged off net of recoveries on loans
previously charged off. The provision is based on management's
determination of the amount of the allowance necessary to
provide for estimated loan losses based on its evaluation of
the loan portfolio. Determining the appropriate level of the
allowance and the amount of the provision involves
uncertainties and matters of judgment and therefore cannot be
determined with precision.
(f) DEBT AND EQUITY SECURITIES
The Company applies the provisions of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". Under the
provisions of the Statement, securities are classified in
three categories and accounted for as follows:
- Securities Held-to-Maturity
Debt securities that the enterprise has the positive
intent and ability to hold to maturity are classified as
held-to-maturity securities and reported at amortized
cost. Amortization of premiums and accretion of
discounts are recognized by the interest method.
- Trading Securities
Debt and equity securities that are bought and held
principally for the purpose of selling them in the near
term are classified as trading securities and reported
at fair value, with unrealized gains and losses included
in earnings.
- Securities Available-for-Sale
Debt and equity securities not classified as either
held-to-maturity securities or trading securities are
classified as available-for-sale securities and reported
at estimated fair value, with unrealized gains and
losses excluded from earnings and reported in a separate
component of stockholders' equity. Premiums and
discounts are recognized by the interest method.
No securities have been classified as trading securities.
Realized gains or losses from the sale of debt and equity
securities are recognized based upon the specific
identification method.
(g) LOANS HELD FOR SALE
Mortgage loans held for sale are reported at the lower of cost
or market value, determined by outstanding commitments from
investors at the balance sheet date. These loans are valued on
an aggregate basis.
11
<PAGE> 26
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(h) PREMISES AND EQUIPMENT
Premises and equipment are stated at cost. Depreciation is
computed primarily by the straight-line method over the
estimated useful lives of the related assets. Gain or loss on
items retired and otherwise disposed of is credited or charged
to operations and cost and related accumulated depreciation
are removed from the asset and accumulated depreciation
accounts.
Expenditures for major renewals and improvements of premises
and equipment are capitalized and those for maintenance and
repairs are charged to earnings as incurred.
(i) LONG-LIVED ASSETS
Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" requires that long-lived
assets and certain identifiable intangibles to be held and
used or disposed of by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The
Company has determined that no impairment loss need be
recognized for its long-lived assets.
(j) CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, amounts due from banks and
Federal funds sold. Generally, Federal funds sold are
purchased and sold for one-day periods. The Company maintains
deposits with other financial institutions in excess of the
Federal insurance amounts. Management makes deposits only with
financial institutions it considers to be financially sound.
(k) INCOME TAXES
Provisions for income taxes are based on taxes payable or
refundable for the current year (after exclusion of
non-taxable income such as interest on state and municipal
securities) and deferred taxes on temporary differences
between the amount of taxable and pretax financial income and
between the tax bases of assets and liabilities and their
reported amounts in the financial statements. Deferred tax
assets and liabilities are included in the financial
statements at currently enacted income tax rates applicable to
the period in which the deferred tax asset and liabilities are
expected to be realized or settled as prescribed in Statement
of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." As changes in tax laws or rates are enacted,
deferred tax assets and liabilities are adjusted through the
provision for income taxes.
The Company and its wholly-owned subsidiaries file a
consolidated Federal income tax return. The 50% owned
subsidiaries file a separate Federal income tax return but are
included in the Company's consolidated state income tax
return. Each subsidiary provides for income taxes on a
separate-return basis.
12
<PAGE> 27
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(l) ADVERTISING COSTS
Advertising costs are expensed when incurred.
(m) 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 included in these financial statements has been
restated to give effect to the stock split.
(n) OTHER REAL ESTATE
Real estate acquired in settlement of loans is initially
recorded at the lower of cost (loan value of real estate
acquired in settlement of loans plus incidental expense) or
estimated fair value, less estimated cost to sell. Based on
periodic evaluations by management, the carrying values are
reduced by a direct charge to earnings when they exceed net
realizable value. Costs relating to the development and
improvement of the property are capitalized, while holding
costs of the property are charged to expense in the period
incurred.
(o) RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 and 1997
figures to conform to the presentation for 1999.
(p) OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
In the ordinary course of business the subsidiary banks have
entered into off-balance-sheet financial instruments
consisting of commitments to extend credit, commitments under
credit card arrangements, commercial letters of credit and
standby letters of credit. Such financial instruments are
recorded in the financial statements when they are funded or
related fees are incurred or received.
(2) LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
The classification of loans at December 31, 1999 and 1998 is as
follows:
<TABLE>
<CAPTION>
In Thousands
-------------------------
1999 1998
--------- --------
<S> <C> <C>
Commercial, financial and agricultural $ 121,438 100,217
Installment 45,710 44,299
Real estate - construction 27,184 21,809
Real estate - mortgage 164,852 130,927
--------- --------
359,184 297,252
Unearned interest (579) (1,322)
Allowance for possible loan losses (3,847) (3,244)
--------- --------
$ 354,758 292,686
========= ========
</TABLE>
13
<PAGE> 28
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(2) LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES, CONTINUED
The principal maturities on loans at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
In Thousands
------------------------------------------------------------------------
Commercial,
Financial
and Real Estate - Real Estate-
Agricultural Installment Construction Mortgage Total
------------ ----------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
3 months or less $ 19,142 2,276 10,811 893 33,122
3 to 12 months 44,666 2,866 14,943 2,212 64,687
1 to 5 years 35,480 39,075 159 32,274 106,988
Over 5 Years 22,150 1,493 1,271 129,473 154,387
-------- ------ ------- ------- -------
$121,438 45,710 27,184 164,852 359,184
======== ====== ======= ======= =======
</TABLE>
At December 31, 1999, variable rate and fixed rate loans total
$140,413,000 and $218,771,000, respectively. At December 31, 1998,
variable rate loans were $105,365,000 and fixed rate loans totaled
$191,887,000.
In the normal course of business, the Company's subsidiaries have made
loans at prevailing interest rates and terms to directors and executive
officers of the Company and to their affiliates. The aggregate amount
of these loans was $9,433,000 and $4,657,000 at December 31, 1999 and
1998, respectively. As of December 31, 1999 none of these loans were
restructured, nor were any related party loans charged-off during the
past three years.
An analysis of the activity with respect to such loans to related
parties is as follows:
<TABLE>
<CAPTION>
In Thousands
------------------------
December 31,
------------------------
1999 1998
-------- ------
<S> <C> <C>
Balance January 1 $ 4,657 6,387
New loans during the year 12,025 5,534
Repayments during the year (7,249) (7,264)
-------- ------
Balance, December 31 $ 9,433 4,657
======== ======
</TABLE>
A director of the Company performs appraisals related to certain loan
customers. Fees paid to the director for these services were $239,000
in 1999, $273,000 in 1998 and $225,000 in 1997.
Loans which had been placed on non-accrual status totaled $84,000 and
$223,000 at December 31, 1999 and 1998, respectively. Had interest on
these loans been accrued, interest income would have been increased by
approximately $8,000 in 1999 and $16,000 in 1998. In 1997, interest
income that would have been earned had there been no non-accrual loans
totaled approximately $11,000.
14
<PAGE> 29
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(2) LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES, CONTINUED
Transactions in the allowance for possible loan losses for the years
ended December 31, 1999, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
In Thousands
---------------------------------------
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Balance, beginning of year $ 3,244 2,890 2,452
Provision charged to operating expense 1,103 1,010 828
Loans charged off (589) (705) (486)
Recoveries on losses 89 49 96
------- ------ ------
Balance, end of year $ 3,847 3,244 2,890
======= ====== ======
</TABLE>
The Company's principal customers are basically in the Middle Tennessee
area with a concentration in Wilson County, Tennessee. Credit is
extended to businesses and individuals and is evidenced by promissory
notes. The terms and conditions of the loans including collateral
varies depending upon the purpose of the credit and the borrower's
financial condition.
Impaired loans and related loan loss reserve amounts at December 31,
1999 and 1998 were as follows:
<TABLE>
<CAPTION>
In Thousands
----------------
December 31,
----------------
1999 1998
---- ----
<S> <C> <C>
Recorded investment $84 241
Loan loss reserve $30 156
</TABLE>
The average recorded investment in impaired loans for the years ended
December 31, 1999 and 1998 was $41,000 and $219,000, respectively.
There was no interest income recognized on these loans during 1999 or
1998.
In 1999, 1998 and 1997, the Company originated and sold loans in the
secondary market of $39,786,000, $65,446,000, and $40,663,000,
respectively. At December 31, 1999, the wholly-owned subsidiary Bank
had not been required to repurchase any of the loans originated by the
Bank and sold in the secondary market. The gain on sale of these loans
totaled $560,000, $966,000, and $616,000 in 1999, 1998 and 1997,
respectively.
15
<PAGE> 30
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(2) LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES, CONTINUED
Of the loans sold in the secondary market, the recourse to the
wholly-owned subsidiary Bank is limited. On loans sold to the Federal
Home Loan Mortgage Corporation, the Bank has a recourse obligation for
one year from the purchase date. At December 31, 1999, loans sold to
the Federal Home Loan Mortgage Corporation with existing recourse
totaled $525,000. All other loans sold in the secondary market provide
the purchase recourse to the Bank for a period of 90 days from the date
of purchase and only in the event of a default by the borrower pursuant
to the terms of the individual loan agreement. At December 31, 1999,
total loans sold with recourse to the Bank, including those sold to the
Federal Home Loan Mortgage Corporation, aggregated $8,444,000.
Management expects no loss to result from these recourse provisions.
(3) DEBT AND EQUITY SECURITIES
Debt and equity securities have been classified in the consolidated
balance sheet according to management's intent. Debt and equity
securities at December 31, 1999 consist of the following:
<TABLE>
<CAPTION>
Securities Held-To-Maturity
---------------------------------------------------
In Thousands
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Obligations of states and political
subdivisions $13,398 59 298 13,159
Mortgage-backed securities 3,339 14 37 3,316
------- --- ------ ------
$16,737 73 335 16,475
======= === ====== ======
</TABLE>
<TABLE>
<CAPTION>
Securities Available-For-Sale
---------------------------------------------------
In Thousands
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S.
Government agencies and
Corporations $66,859 1 2,882 63,978
Obligations of states and political
subdivisions 2,232 13 8 2,237
Mortgage-backed securities 840 2 14 828
------- ----- ------ ------
$69,931 16 2,904 67,043
======= ===== ====== ======
</TABLE>
16
<PAGE> 31
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(3) DEBT AND EQUITY SECURITIES, CONTINUED
The Company's classification of securities at December 31, 1998 is as
follows:
<TABLE>
<CAPTION>
Securities Held-To-Maturity
------------------------------------------------
In Thousands
------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S.
Government agencies and
corporations $ 1,097 7 -- 1,104
Obligations of states and political
subdivisions 15,202 479 -- 15,681
Mortgage-backed securities 4,109 15 39 4,085
------- ------- ------- -------
$20,408 501 39 20,870
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Securities Available-For-Sale
------------------------------------------------
In Thousands
------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S.
Government agencies and
corporations $49,189 283 43 49,429
Obligations of states and political
subdivisions 2,732 91 -- 2,823
Mortgage-backed securities 922 7 1 928
------- ------- ------- -------
$52,843 381 44 53,180
======= ======= ======= =======
</TABLE>
17
<PAGE> 32
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(3) DEBT AND EQUITY SECURITIES, CONTINUED
The amortized cost and estimated market value of debt securities at
December 31, 1999, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
Securities Held-To-Maturity Estimated
--------------------------- Amortized Market
Cost Value
--------- ---------
<S> <C> <C>
Due in one year or less $ 1,521 1,527
Due after one year through five years 3,228 3,252
Due after five years through ten years 4,503 4,444
Due after ten years 4,146 3,936
------- -------
13,398 13,159
Mortgage-backed securities 3,339 3,316
------- -------
$16,737 16,475
======= =======
</TABLE>
<TABLE>
<CAPTION>
Securities Available-For-Sale Estimated
----------------------------- Amortized Market
Cost Value
--------- ---------
<S> <C> <C>
Due in one year or less $ 2,978 2,978
Due after one year through five years 7,590 7,436
Due after five years through ten years 51,419 48,992
Due after ten years 5,949 5,654
------- -------
67,936 65,060
Mortgage-backed securities 840 828
Federal Home Loan Bank stock 1,155 1,155
------- -------
$69,931 67,043
======= =======
</TABLE>
Results from sales of debt and equity securities are as follows:
<TABLE>
<CAPTION>
In Thousands
---------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Gross proceeds $ -- 1,507 --
===== ===== =====
Gross realized gains $ -- 8 --
Gross realized losses -- -- --
----- ----- -----
Net realized gains $ -- 8 --
===== ===== =====
</TABLE>
18
<PAGE> 33
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(3) DEBT AND EQUITY SECURITIES, CONTINUED
The Company periodically applies the stress test to its securities
portfolio. To satisfy the stress test a security's estimated market
value should not decline more than certain percentages given certain
assumed interest rate increases. The Company had no securities that
failed to meet the stress test.
Securities carried in the balance sheet of approximately $68,885,000
(approximate market value of $64,416,000) and $46,076,000 (approximate
market value of $46,626,000), were pledged to secure public deposits
and for other purposes as required or permitted by law at December 31,
1999 and 1998, respectively.
Included in the securities above are $13,185,000 (market value of
$12,898,000) and $14,751,000 (market value of $15,159,000) at December
31, 1999 and 1998, respectively, in obligations of political
subdivisions located within the State of Tennessee. Management
purchases only obligations of such political subdivisions it considers
to be financially sound.
Securities that have rates that adjust prior to maturity totaled
$3,650,000 (market value $3,627,000) and $4,750,000 (market value
$4,726,000) at December 31, 1999 and 1998, respectively.
Included in the securities portfolio is stock of the Federal Home Loan
Bank amounting to $1,155,000 and $1,012,000 at December 31, 1999 and
1998, respectively. The stock can be sold back at par and only to the
Federal Home Loan Bank or to another member institution.
(4) PREMISES AND EQUIPMENT
The detail of premises and equipment at December 31, 1999 and 1998 is
as follows:
<TABLE>
<CAPTION>
In Thousands
-----------------------
1999 1998
-------- --------
<S> <C> <C>
Land $ 3,398 2,898
Buildings 11,194 9,815
Leasehold improvements 137 137
Furniture and equipment 7,293 6,466
Automobiles 106 106
Construction in progress -- 24
-------- --------
22,128 19,446
Less accumulated depreciation (5,869) (4,639)
-------- --------
$ 16,259 14,807
======== ========
</TABLE>
Building additions during 1999 and 1998 include payments of $1,059,000
and $1,281,000, respectively, to a construction company owned by a
director of the Company.
19
<PAGE> 34
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(5) DEPOSITS
Deposits at December 31, 1999 and 1998 are summarized as follows:
<TABLE>
<CAPTION>
In Thousands
----------------------
1999 1998
-------- --------
<S> <C> <C>
Demand deposits $ 44,431 43,345
Savings accounts 21,610 19,471
Negotiable order of withdrawal 26,346 25,581
Money market demand accounts 99,456 81,638
Certificates of deposit $100,000 or greater 85,415 74,596
Other certificates of deposit 149,760 126,674
Individual retirement accounts $100,000 or greater 5,207 4,619
Other individual retirement accounts 15,567 13,181
-------- --------
$447,792 389,105
======== ========
</TABLE>
Principal maturities of certificates of deposit and individual
retirement accounts at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
In Thousands
---------------------------------------------
Single Deposits Single Deposits
Maturity Under $100,000 Over $100,000 Total
-------- --------------- --------------- -----
<S> <C> <C> <C>
3 months or less $ 36,328 28,143 64,471
3 to 6 months 39,603 25,114 64,717
6 to 12 months 53,678 25,552 79,230
1 to 5 years 35,718 11,813 47,531
-------- -------- --------
$165,327 90,622 255,949
======== ======== ========
</TABLE>
The subsidiary banks are required to maintain cash balances or balances
with the Federal Reserve Bank or other correspondent banks based on
certain percentages of deposit types. The average required amounts for
the years ended December 31, 1999 and 1998 were approximately
$2,834,000 and $2,091,000, respectively.
(6) SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
The maximum amounts of outstanding repurchase agreements at any month
end during 1999 and 1998 was $11,568,000 and $12,399,000, respectively.
The average daily balance outstanding during 1999, 1998 and 1997 was
$9,374,000, $8,503,000, and $7,327,000, respectively. The underlying
securities are typically held by other financial institutions and are
designated as pledged.
20
<PAGE> 35
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(7) NON-INTEREST INCOME AND NON-INTEREST EXPENSE
The significant components of non-interest income and non-interest
expense for the years ended December 31 are presented below:
<TABLE>
<CAPTION>
In Thousands
---------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Non-interest income:
Service charges on deposits $ 2,105 1,720 1,430
Other fees 1,675 1,493 1,351
Gains on sales of loans 560 966 616
Security gains -- 8 --
Gains on sales of fixed assets 1 12 5
Other income 9 1 8
------- ------- -------
$ 4,350 4,200 3,410
======= ======= =======
Non-interest expense:
Employee salaries and benefits $ 6,466 5,605 4,583
Employee benefit plan 404 334 271
Occupancy expenses 917 775 725
Furniture and equipment expenses 1,115 1,039 811
Loss on sales of fixed assets 10 -- --
Loss on sale of other real estate 2 57 --
FDIC insurance 46 39 30
Directors' fees 560 475 397
Other operating expenses 3,474 2,921 2,781
Minority interest in net income of
subsidiaries 271 131 20
------- ------- -------
$13,265 11,376 9,618
======= ======= =======
</TABLE>
(8) INCOME TAXES
The components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
In Thousands
-----------------------
1999 1998
------- -------
Deferred tax asset:
<S> <C> <C>
Federal $ 2,070 964
State 389 181
------- -------
2,459 1,145
------- -------
Deferred tax liability:
Federal (322) (363)
State (60) (68)
------- -------
(382) (431)
------- -------
$ 2,077 714
======= =======
</TABLE>
21
<PAGE> 36
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(8) INCOME TAXES, CONTINUED
The tax effects of each type of significant item that gave rise to
deferred taxes are:
<TABLE>
<CAPTION>
In Thousands
---------------------
1999 1998
------- -------
<S> <C> <C>
Financial statement allowance for loan losses
in excess of tax allowance $ 1,301 1,094
Excess of depreciation deducted for tax purposes
over the amounts deducted in the financial statements (261) (224)
Financial statement deduction for deferred compensation
in excess of deduction for tax purposes 38 26
Financial statement deduction for preopening expenses and
organizational costs in excess of the amounts deducted
for tax purposes 22 24
Financial statement income on FHLB stock dividends
not recognized for tax purposes (121) (78)
Unrealized loss (gain) on securities available-for-sale 1,098 (128)
------- -------
$ 2,077 714
======= =======
</TABLE>
The components of income tax expense (benefit) are summarized as
follows:
<TABLE>
<CAPTION>
In Thousands
---------------------------------------------
Federal State Total
<S> <C> <C> <C>
1999
Current $ 2,448 505 2,953
Deferred (115) (22) (137)
------------- ------------- -----------
Total $ 2,333 483 2,816
============= ============= ===========
1998
Current $ 1,913 422 2,335
Deferred (72) (6) (78)
------------- ------------- -----------
Total $ 1,841 416 2,257
============= ============= ===========
1997
Current $ 1,524 348 1,872
Deferred (91) (15) (106)
------------- ------------- -----------
Total $ 1,433 333 1,766
============= ============= ===========
</TABLE>
22
<PAGE> 37
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(8) INCOME TAXES, CONTINUED
A reconciliation of actual income tax expense of $2,816,000, $2,257,000
and $1,766,000 for the years ended December 31, 1999, 1998 and 1997,
respectively, to the "expected" tax expense (computed by applying the
statutory rate of 34% to earnings before income taxes) is as follows:
<TABLE>
<CAPTION>
In Thousands
-----------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Computed "expected" tax expense $ 2,624 2,299 1,846
State income taxes, net of Federal income tax benefit 319 276 220
Tax exempt interest, net of interest expense exclusion (239) (315) (335)
Tax expense related to minority interest income in
subsidiaries 92 45 7
Tax benefits of net operating losses of 50% owned
bank subsidiaries not recognized -- -- 31
Tax benefits of net operating losses of 50% owned
bank subsidiaries not previously recognized -- (46) (33)
Other 20 (2) 30
------- ------- -------
$ 2,816 2,257 1,766
======= ======= =======
</TABLE>
Total income tax expense for 1998 includes income tax expense of $3,000
related to the gain on sale of securities. There were no sales of
securities in 1999 or 1997.
(9) COMMITMENTS AND CONTINGENT LIABILITIES
The Company is party to litigation and claims arising in the normal
course of business. Management, after consultation with legal counsel,
believes that the liabilities, if any, arising from such litigation and
claims will not be material to the consolidated financial position.
The subsidiary banks lease land for certain branch facilities and
automatic teller machine locations. Future minimum rental payments
required under the terms of the noncancellable leases are as follows:
<TABLE>
<CAPTION>
Years Ending December 31, In Thousands
------------------------- ------------
<S> <C>
2000 $ 32
2001 24
2002 24
2003 12
------------
$ 92
============
</TABLE>
Total rent expense amounted to $74,000, $85,000 and $80,000,
respectively, during the years ended December 31, 1999, 1998 and 1997.
23
<PAGE> 38
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(10) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of
its customers. These financial instruments consist primarily of
commitments to extend credit. These instruments involve, to varying
degrees, elements of credit risk in excess of the amount recognized in
the consolidated balance sheets. The contract or notional amounts of
those instruments reflect the extent of involvement the Company has in
particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit is represented by the contractual notional amount of those
instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.
<TABLE>
<CAPTION>
In Thousands
--------------------
Contract or
Notional Amount
--------------------
1999 1998
------- -------
<S> <C> <C>
Financial instruments whose contract amounts represent credit risk:
Commercial loan commitments $40,504 28,327
Unfunded lines-of-credit 13,226 9,929
Letters of credit 2,627 1,277
------- -------
Total $56,357 39,533
======= =======
</TABLE>
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments are expected to be drawn upon, the total commitment amounts
generally represent future cash requirements. The Company evaluates
each customer's credit-worthiness on a case-by-case basis. The amount
of collateral, if deemed necessary by the Company upon extension of
credit, is based on management's credit evaluation of the counterparty.
Collateral normally consists of real property.
(11) CONCENTRATION OF CREDIT RISK
Practically all of the Company's loans, commitments, and commercial and
standby letters of credit have been granted to customers in the
Company's market area. Practically all such customers are depositors of
the subsidiary banks. Investment in state and municipal securities also
include governmental entities within the Company's market area. The
concentrations of credit by type of loan are set forth in note 2 to the
consolidated financial statements.
At December 31, 1998, the Company's cash and due from banks included
commercial bank deposit accounts aggregating $100,000 in excess of the
Federal Deposit Insurance Corporation limit of $100,000 per
institution.
In addition, Federal funds sold were deposited with six banks.
24
<PAGE> 39
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(12) EMPLOYEE BENEFIT PLAN
The Company has in effect a 401(k) plan which covers eligible
employees. To be eligible an employee must have obtained the age of 20
1/2. The provisions of the plan provide for both employee and employer
contributions. For the years ended December 31, 1999, 1998 and 1997,
the subsidiary banks contributed $404,000, $334,000 and $271,000,
respectively, to this plan.
(13) DIVIDEND REINVESTMENT PLAN
Under the terms of the Company's dividend reinvestment plan holders of
common stock may elect to automatically reinvest cash dividends in
additional shares of common stock. The Company may elect to sell
original issue shares or to purchase shares in the open market for the
account of participants. Original issue shares of 32,363 in 1999,
31,314 in 1998 and 29,393 in 1997 were sold to participants under the
terms of the plan.
(14) REGULATORY MATTERS AND RESTRICTIONS ON DIVIDENDS
The Company and its bank subsidiaries are subject to regulatory capital
requirements administered by the Federal Deposit Insurance Corporation,
the Federal Reserve and the Tennessee Department of Financial
Institutions. Failure to meet minimum capital requirements can initiate
certain mandatory -- and possibly additional discretionary-actions by
regulators that, if undertaken, could have a direct material effect on
the Company's financial statements. The Company's capital
classification is also subject to qualitative judgments about
components, risk weightings and other factors. Those qualitative
judgments could also affect the subsidiary banks' capital statuses and
the amount of dividends the subsidiaries may distribute.
The Company and its subsidiary banks are required to maintain minimum
amounts of capital to total "risk weighted" assets, as defined by the
banking regulators. At December 31, 1999, the Company and its bank
subsidiaries are required to have minimum Tier I and total risk-based
capital ratios of 4% and 8%, respectively. The Company's actual ratios
at that date were 10.87% and 11.99%, respectively, compared to ratios
of 11.20% and 12.31%, respectively, at December 31, 1998. The leverage
ratio at December 31, 1999 was 7.67%, compared to 7.78% at December 31,
1998. The minimum requirement was 4%. At December 31, 1999, management
believes that the Company and all of its subsidiaries meet all capital
requirements to which they are subject.
As of December 31, 1999, the most recent notification from the banking
regulators categorized the Company and its subsidiaries as well
capitalized under the regulatory framework for prompt corrective
action. There are no conditions or events since the notification that
management believes have changed the Bank's category.
25
<PAGE> 40
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(15) DEFERRED COMPENSATION PLAN
The Company's wholly-owned subsidiary bank provides its executive
officers a deferred compensation plan, which also provides for death
and disability benefits. The plan was established by the Board of
Directors to reward executive management for past performance and to
provide additional incentive to retain the service of executive
management. There were five employees participating in the plan at
December 31, 1999.
The plan provides retirement benefits for a period of 180 months after
the employee reaches the age of 65. This benefit can be reduced if the
wholly-owned subsidiary bank's average return on assets falls below 1%.
The plan also provides benefits in the event the executive should die
or become disabled prior to reaching retirement. The wholly-owned
subsidiary bank has purchased insurance policies or other assets to
provide the benefits listed above. The insurance policies remain the
sole property of the wholly-owned subsidiary bank and are payable to
the Bank. At December 31, 1999 and 1998, the deferred compensation
liability totaled $100,000 and $69,000, respectively, the cash
surrender value of life insurance was $364,000 and $283,000,
respectively, and the face amount of the insurance policies in force
approximated $2,280,000 in 1999 and 1998. The deferred compensation
plan is not qualified under Section 401 of the Internal Revenue Code.
(16) STOCK OPTION PLAN
In April, 1999, the stockholders of the Company approved the Wilson
Bank Holding Company 1999 Stock Option Plan (the "Stock Option Plan").
The Stock Option Plan provides for the granting of stock options, and
authorizes the issuance of common stock upon the exercise of such
options, for up to 100,000 shares of common stock, to officers and
other key employees of the Company and its subsidiaries. Furthermore,
the Company may issue additional shares under the Stock Option Plan as
needed in order that the aggregate number of shares that may be issued
during the term of the Plan is equal to five percent (5%) of the shares
of common stock then issued and outstanding.
Under the Stock Option Plan, stock option awards may be granted in the
form of incentive stock options or nonstatutory stock options, and are
generally exercisable for up to ten years following the date such
option awards are granted. Exercise prices of incentive stock options
must be equal to or greater than 100% of the fair market value of the
common stock on the grant date.
26
<PAGE> 41
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(16) STOCK OPTION PLAN, CONTINUED
Statement of Financial Accounting Standards (SFAS) No. 123 "Accounting
for Stock Based Compensation" sets forth the method for recognition of
cost of plans similar to those of the Company. As is permitted,
management has elected to account for the plan under APB Opinion 25 and
related Interpretations. However, under SFAS No. 123, the Company is
required to make proforma disclosures as if cost had been recognized in
accordance with the pronouncement. Had compensation cost for the
Company's stock option plan been determined based on the fair value at
the grant dates for awards under the plan consistent with the method of
SFAS No. 123, the Company's net earnings, basic earnings per common
share and diluted earnings per common share would have not been
affected as indicated in the proforma amounts below:
<TABLE>
<CAPTION>
In Thousands
Except Per Share Amounts
----------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C> <C>
Net earnings As Reported $ 4,902 4,504 3,664
Proforma $ 4,902 4,504 3,664
Basic earnings per As Reported $ 2.52 2.37 1.97
common share Proforma $ 2.52 2.37 1.97
Diluted earnings per As Reported $ 2.52 2.37 1.97
common share Proforma $ 2.52 2.37 1.97
</TABLE>
A summary of the stock option activity for 1999, 1998, and 1997 is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------- --------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year -- $ -- -- -- -- --
Granted 48,311 30.56 -- -- -- --
Exercised -- -- -- -- -- --
Forfeited -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Outstanding at end of
year 48,311 $ 30.56 -- -- -- --
======= ======= ======= ======= ======= =======
Options exercisable at
Year end -- -- --
======= ======= =======
</TABLE>
27
<PAGE> 42
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(16) STOCK OPTION PLAN, CONTINUED
The following table summarizes information about fixed stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------- --------------------------
Weighted
Weighted Average Weighted
Range of Number Average Remaining Number Average
Exercise Outstanding Exercise Contractual Exercisable Exercise
Prices at 12/31/99 Price Life at 12/31/99 Price
------ ----------- ----- ---- ----------- -----
<S> <C> <C> <C> <C> <C>
$30.56 48,311 $ 30.56 10 years -- $ --
</TABLE>
(17) EARNINGS PER SHARE
In 1997, Statement of Financial Accounting Standards (SFAS) No. 128
"Earnings Per Share" established uniform standards for computing and
presenting earnings per share. SFAS No. 128 replaces the presentation
of primary earnings per share with the presentation of basic earnings
per share and diluted earnings per share. The computation of basic
earnings per share is based on the weighted average number of common
shares outstanding during the period. For the Company the computation
of diluted earnings per share begins with the basic earnings per share
plus the effect of common shares contingently issuable from stock
options.
The following is a summary of the components comprising basic and
diluted earnings per share (EPS):
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Basic EPS Computation:
Numerator - Earnings available to
common stockholders $ 4,902 4,504 3,664
---------- ---------- ----------
Denominator - Weighted average number
of common shares outstanding 1,947,404 1,904,233 1,863,295
---------- ---------- ----------
Basic earnings per common share $ 2.52 2.37 1.97
========== ========== ==========
Diluted EPS Computation:
Numerator - Earnings available to
common stockholders $ 4,902 4,504 3,664
---------- ---------- ----------
Denominator:
Weighted average number of common
shares outstanding 1,947,404 1,904,233 1,863,295
Dilutive effect of stock options (none
exercisable at December 31, 1999) -- -- --
---------- ---------- ----------
1,947,404 1,904,233 1,863,295
---------- ---------- ----------
Diluted earnings per common
share $ 2.52 2.37 1.97
========== ========== ==========
</TABLE>
28
<PAGE> 43
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(18) WILSON BANK HOLDING COMPANY -
PARENT COMPANY FINANCIAL INFORMATION
WILSON BANK HOLDING COMPANY
(PARENT COMPANY ONLY)
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
In Thousands
------------
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Cash $ 77* 1*
Investment in wholly-owned commercial bank subsidiary 28,393* 25,596*
Investment in 50% owned commercial bank subsidiaries 3,668* 3,587*
Refundable income taxes 112 81
-------- --------
Total assets $ 32,250 29,265
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity:
Common stock, par value $2.00 per share, authorized
5,000,000 shares, issued and outstanding 1,963,163
and 1,438,781 shares, respectively $ 3,926 2,877
Additional paid-in capital 8,822 8,530
Retained earnings 21,118 17,663
Unrealized gain (losses) on available-for-sale securities,
net of income tax benefit of $988,000 and income
taxes of $121,000, respectively (1,616) 195
-------- --------
32,250 29,265
-------- --------
Total liabilities and stockholders' equity $ 32,250 29,265
======== ========
</TABLE>
*Eliminated in consolidation.
29
<PAGE> 44
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(18) WILSON BANK HOLDING COMPANY -
PARENT COMPANY FINANCIAL INFORMATION
WILSON BANK HOLDING COMPANY
(PARENT COMPANY ONLY)
STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS
THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
-------------------------------------
In Thousands
-------------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Expenses:
Employee salary and benefits $ -- -- 20
Amortization of organizational costs -- -- 4
Directors fees 267 198 167
Other 27 15 20
------- ------- -------
Loss before Federal income tax benefits
and equity in undistributed earnings of
commercial bank subsidiaries (294) (213) (211)
Federal income tax benefits 112 81 80
------- ------- -------
(182) (132) (131)
Equity in undistributed earnings of commercial
bank subsidiaries 5,084* 4,636* 3,795*
------- ------- -------
Net earnings 4,902 4,504 3,664
------- ------- -------
Other comprehensive earnings (loss), net of tax:
Unrealized gains (losses) on available-for-sale
Securities arising during period, net of tax
benefit of $1,109,000 and tax expense of
$53,000 and $19,000, respectively (1,811) 87 38
Less: reclassification adjustment for gains included
in net earnings, net of tax expense of $3,000 -- (5) --
------- ------- -------
Other comprehensive earnings (loss) (1,811) 82 38
------- ------- -------
Comprehensive earnings $ 3,091 4,586 3,702
======= ======= =======
</TABLE>
*Eliminated in consolidation.
30
<PAGE> 45
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(18) WILSON BANK HOLDING COMPANY -
PARENT COMPANY FINANCIAL INFORMATION
WILSON BANK HOLDING COMPANY
(PARENT COMPANY ONLY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
In Thousands
--------------------------------------------------------------
Net Unrealized
Additional Gain (Loss) On
Common Paid-In Retained Available-For-
Stock Capital Earnings Sale Securities Total
------- ---------- ------- --------------- -------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1996 $ 2,756 6,684 11,737 75 21,252
Cash dividends declared, $.56 per share -- -- (1,039) -- (1,039)
Issuance of 29,393 shares of stock pursuant
to dividend reinvestment plan 59 843 -- -- 902
Net change in unrealized gain on available-
for-sale securities during the year, net of
taxes of $19,000 -- -- -- 38 38
Net earnings for year -- -- 3,664 -- 3,664
------- ------- ------- ------- -------
Balance December 31, 1997 2,815 7,527 14,362 113 24,817
Cash dividends declared, $.64 per share -- -- (1,203) -- (1,203)
Issuance of 31,314 shares of stock pursuant
to dividend reinvestment plan 62 1,003 -- -- 1,065
Net change in unrealized gain on available-
for-sale securities during the year, net of
taxes of $56,000 -- -- -- 82 82
Net earnings for year -- -- 4,504 -- 4,504
------- ------- ------- ------- -------
Balance December 31, 1998 2,877 8,530 17,663 195 29,265
Cash dividends declared, $.75 per share -- -- (1,447) -- (1,447)
Issuance of 32,363 shares of stock pursuant
to dividend reinvestment plan 65 1,216 -- -- 1,281
Issuance of 2,000 shares of stock 4 56 -- -- 60
Issuance of 490,019 shares of stock pursuant
to a 4 for 3 stock split 980 (980) -- -- --
Net change in unrealized gain on available-
for-sale securities during the year, net of
taxes of $1,109,000 -- -- -- (1,811) (1,811)
Net earnings for year -- -- 4,902 -- 4,902
------- ------- ------- ------- -------
Balance December 31, 1999 $ 3,926 8,822 21,118 (1,616) 32,250
======= ======= ======= ======= =======
</TABLE>
31
<PAGE> 46
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(18) WILSON BANK HOLDING COMPANY -
PARENT COMPANY FINANCIAL INFORMATION
WILSON BANK HOLDING COMPANY
(PARENT COMPANY ONLY)
STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1999
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
In Thousands
-----------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash paid to suppliers and other $ (294) (213) (201)
Tax benefits received 81 80 58
------- ------- -------
Net cash used in operating activities (213) (133) (143)
------- ------- -------
Cash flows from investing activities:
Dividend received from commercial bank subsidiary 395 256 235
------- ------- -------
Net cash provided by investing activities 395 256 235
------- ------- -------
Cash flows from financing activities:
Dividends paid (1,447) (1,203) (1,039)
Proceeds from sale of stock 1,341 1,065 902
------- ------- -------
Net cash used in financing activities (106) (138) (137)
------- ------- -------
Net increase (decrease) in cash and cash
equivalents 76 (15) (45)
Cash and cash equivalents at beginning of period 1 16 61
------- ------- -------
Cash and cash equivalents at end of year $ 77 1 16
======= ======= =======
</TABLE>
32
<PAGE> 47
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(18) WILSON BANK HOLDING COMPANY -
PARENT COMPANY FINANCIAL INFORMATION, CONTINUED
WILSON BANK HOLDING COMPANY
(PARENT COMPANY ONLY)
STATEMENTS OF CASH FLOWS, CONTINUED
THREE YEARS ENDED DECEMBER 31, 1999
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
In Thousands
-----------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Reconciliation of net earnings to net cash used in operating
activities:
Net earnings $ 4,902 4,504 3,664
Adjustments to reconcile net earnings to net cash used in operating
activities:
Equity in earnings of commercial bank
subsidiaries (5,084) (4,636) (3,795)
Amortization of organization costs -- -- 4
Decrease in other assets -- -- 6
Increase in refundable income taxes (31) (1) (22)
------- ------- -------
Total adjustments (5,115) (4,637) (3,807)
------- ------- -------
Net cash used in operating activities $ (213) (133) (143)
======= ======= =======
</TABLE>
33
<PAGE> 48
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(19) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures about
Fair Value of Financial Instruments (SFAS No. 107), requires that the
Company disclose estimated fair values for its financial instruments.
Fair value estimates, methods, and assumptions are set forth below for
the Company's financial instruments.
Cash and short-term investments
For those short-term instruments, the carrying amount is a
reasonable estimate of fair value.
Securities
The carrying amounts for short-term securities approximate
fair value because they mature in 90 days or less and do not
present unanticipated credit concerns. The fair value of
longer-term securities and mortgage-backed securities,
except certain state and municipal securities, is estimated
based on bid prices published in financial newspapers or bid
quotations received from securities dealers. The fair value
of certain state and municipal securities is not readily
available through market sources other than dealer
quotations, so fair value estimates are based on quoted
market prices of similar instruments, adjusted for
differences between the quoted instruments and the
instruments being valued.
SFAS No. 107 specifies that fair values should be calculated
based on the value of one unit without regard to any premium
or discount that may result from concentrations of ownership
of a financial instrument, possible tax ramifications, or
estimated transaction costs. Accordingly, these
considerations have not been incorporated into the fair
value estimates.
Loans
Fair values are estimated for portfolios of loans with
similar financial characteristics. Loans are segregated by
type such as commercial, mortgage, credit card and other
consumer. Each loan category is further segmented into fixed
and adjustable rate interest terms.
34
<PAGE> 49
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(19) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
Loans, Continued
The fair value of the various categories of loans is
estimated by discounting the future cash flows using the
current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same
remaining average estimated maturities.
The estimated maturity for mortgages is modified from the
contractual terms to give consideration to management's
experience with prepayments. Management has made estimates
of fair value discount rates that it believes to be
reasonable. However, because there is no market for many of
these financial instruments, management has no basis to
determine whether the fair value presented below would be
indicative of the value negotiated in an actual sale.
The value of the loan portfolio is also discounted in
consideration of the credit quality of the loan portfolio as
would be the case between willing buyers and sellers.
Particular emphasis has been given to loans on the
subsidiary banks' internal watch list. Valuation of these
loans is based upon borrower performance, collateral values
(including external appraisals), etc.
Deposit Liabilities
The fair value of demand deposits, savings accounts and
certain money market deposits is the amount payable on
demand at the reporting date. The fair value of
fixed-maturity certificates of deposit is estimated using
the rates currently offered for deposits of similar
remaining maturities. Under the provision of SFAS No. 107
the fair value estimates for deposits does not include the
benefit that results from the low cost funding provided by
the deposit liabilities compared to the cost of borrowing
funds in the market.
Securities Sold Under Repurchase Agreements
The securities sold under repurchase agreements are payable
upon demand. For this reason the carrying amount is a
reasonable estimate of fair value.
35
<PAGE> 50
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(19) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
Commitments to Extend Credit, Standby Letters of Credit and
Financial Guarantees Written
Loan commitments are made to customers generally for a
period not to exceed one year and at the prevailing interest
rates in effect at the time the loan is closed. Commitments
to extend credit related to construction loans are made for
a period not to exceed six months with interest rates at the
current market rate at the date of closing. In addition,
standby letters of credit are issued for periods up to three
years with rates to be determined at the date the letter of
credit is funded. Fees are only charged for the construction
loans and the standby letters of credit and the amounts
unearned at December 31, 1999 are insignificant.
Accordingly, these commitments have no carrying value and
management estimates the commitments to have no significant
fair value.
The carrying value and estimated fair values of the
Company's financial instruments at December 31, 1999 and
1998 are as follows:
<TABLE>
<CAPTION>
In Thousands
---------------------------------------------------
1999 1998
---------------------------------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term
investments $ 30,649 30,649 41,000 41,000
Securities 83,780 83,518 73,588 74,050
Loans 358,605 295,930
Less: allowance for
loan losses 3,847 3,244
-------- --------
Loans, net of allowance 354,758 351,453 292,686 293,108
-------- --------
Loans held for sale 1,835 1,835 3,881 3,881
-------- --------
Financial liabilities:
Deposits 447,792 448,401 389,105 391,720
Securities sold
under repurchase
agreements 8,543 8,543 7,258 7,258
Unrecognized financial
instruments:
Commitments to
extend credit -- -- -- --
Standby letters of credit -- -- -- --
</TABLE>
36
<PAGE> 51
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
(19) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
Limitations
Fair value estimates are made at a specific point in time,
based on relevant market information and information about
the financial instruments. These estimates do not reflect
any premium or discount that could result from offering for
sale at one time the Company's entire holdings of a
particular financial instrument. Because no market exists
for a significant portion of the Company's financial
instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic
conditions, risk characteristics of various financial
instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and matters
of significant judgment and therefore cannot be determined
with precision. Changes in assumptions could significantly
affect the estimates.
Fair value estimates are based on estimating
on-and-off-balance sheet financial instruments without
attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are
not considered financial instruments. For example, a
subsidiary Bank has a mortgage department that contributes
net fee income annually. The mortgage department is not
considered a financial instrument, and its value has not
been incorporated into the fair value estimates. Other
significant assets and liabilities that are not considered
financial assets or liabilities include deferred tax assets
and liabilities and property, plant and equipment. In
addition, the tax ramifications related to the realization
of the unrealized gains and losses can have a significant
effect on fair value estimates and have not been considered
in the estimates.
37
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of the Issuer
The Company has a wholly-owned subsidiary, Wilson Bank and Trust, a
state chartered bank incorporated under the laws of the State of Tennessee and
doing business under the same name. Wilson Bank and Trust has a wholly-owned
subsidiary, Hometown Finance Company, a state chartered loan and thrift company
incorporated under the laws of the State of Tennessee and doing business under
the same name. The Company also owns 50% of DeKalb Community Bank, a state
chartered bank incorporated under the laws of the State of Tennessee and doing
business under the same name and 50% of Community Bank of Smith County, a state
chartered bank incorporated under the laws of the State of Tennessee and doing
business under the same name.
<PAGE> 1
EXHIBIT 23
MAGGART & ASSOCIATES, P.C.
Certified Public Accountants
FIRST UNION TOWER
SUITE 2150
150 FOURTH AVENUE, NORTH
NASHVILLE, TENNESSEE 37219-2417
Telephone (615) 252-6100
Facsimile (615) 252-6105
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8, No. 333-32442) pertaining to the Wilson Bank Holding Company 1999
Stock Option Plan of our report dated January 11, 2000, with respect to the
consolidated financial statements of Wilson Bank Holding Company included in the
Annual Report (Form 10-K) for the year ended December 31, 1999.
/s/ MAGGART & ASSOCIATES, P.C.
----------------------------------------
MAGGART & ASSOCIATES, P.C.
Nashville, Tennessee
March 29, 2000
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 16,721
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 13,928
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 67,043
<INVESTMENTS-CARRYING> 16,737
<INVESTMENTS-MARKET> 16,475
<LOANS> 358,605
<ALLOWANCE> 3,847
<TOTAL-ASSETS> 495,218
<DEPOSITS> 447,792
<SHORT-TERM> 8,543
<LIABILITIES-OTHER> 6,633
<LONG-TERM> 0
0
0
<COMMON> 3,926
<OTHER-SE> 28,324
<TOTAL-LIABILITIES-AND-EQUITY> 495,218
<INTEREST-LOAN> 28,937
<INTEREST-INVEST> 5,201
<INTEREST-OTHER> 1,055
<INTEREST-TOTAL> 35,193
<INTEREST-DEPOSIT> 17,047
<INTEREST-EXPENSE> 17,457
<INTEREST-INCOME-NET> 17,736
<LOAN-LOSSES> 1,103
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 13,265
<INCOME-PRETAX> 7,718
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,902
<EPS-BASIC> 2.52
<EPS-DILUTED> 2.52
<YIELD-ACTUAL> 4.22
<LOANS-NON> 84
<LOANS-PAST> 422
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 506
<ALLOWANCE-OPEN> 3,244
<CHARGE-OFFS> 589
<RECOVERIES> 89
<ALLOWANCE-CLOSE> 3,847
<ALLOWANCE-DOMESTIC> 3,847
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
