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EX-31.2 - EX-31.2 - WILSON BANK HOLDING COd342385dex312.htm
EX-32.1 - EX-32.1 - WILSON BANK HOLDING COd342385dex321.htm
EX-31.1 - EX-31.1 - WILSON BANK HOLDING COd342385dex311.htm
EX-32.2 - EX-32.2 - WILSON BANK HOLDING COd342385dex322.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

Mark One

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission File Number 0-20402

 

 

WILSON BANK HOLDING COMPANY

(Exact name of registrant as specified in its charter)

 

 

 

Tennessee   62-1497076

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

623 West Main Street, Lebanon, TN   37087
(Address of principal executive offices)   (Zip Code)

(615) 444-2265

(Registrant’s telephone number, including area code)

 

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by checkmark 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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x     No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     

YES  ¨     NO  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock outstanding: 7,346,919 shares at May 9, 2012

 

 

 


 

Part I: FINANCIAL INFORMATION

  

Item 1. Financial Statements

     1   

The unaudited consolidated financial statements of the Company and its subsidiary are as follows:

  

Consolidated Balance Sheets—March 31, 2012 and December 31, 2011

     1   

Consolidated Statements of Earnings—For the three months ended March 31, 2012 and 2011

     2   

Consolidated Statements of Comprehensive Earnings—For the three months ended March  31, 2012 and 2011

     3   

Consolidated Statements of Cash Flows - For the three months ended March 31, 2012 and 2011

     4   

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     26   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     38   

Disclosures required by Item 3 are incorporated by reference to Management’s Discussion and Analysis of Financial Condition and Results of Operations.

  

Item 4. Controls and Procedures

     39   

Part II: OTHER INFORMATION

  

Item 1. Legal Proceedings

     40   

Item 1A. Risk Factors

     40   

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     40   

Item 3. Defaults Upon Senior Securities

     40   

Item 4. Mine Safety Disclosures

     40   

Item 5. Other Information

     40   

Item 6. Exhibits

     40   

Signatures

     41   

EX-31.1 SECTION 302 CERTIFICATION OF THE CEO

EX-31.2 SECTION 302 CERTIFICATION OF THE CFO

EX-32.1 SECTION 906 CERTIFICATION OF THE CEO

EX-32.2 SECTION 906 CERTIFICATION OF THE CFO

EX-101 INTERACTIVE DATA FILE

  


Part I. Financial Information

Item 1. Financial Statements

WILSON BANK HOLDING COMPANY

Consolidated Balance Sheets

March 31, 2012 and December 31, 2011

(Unaudited)

 

     March 31,     December 31,  
     2012     2011  
     (Dollars in Thousands)  

Assets

    

Loans

   $ 1,138,427      $ 1,123,258   

Less: Allowance for loan losses

     (25,801     (24,525
  

 

 

   

 

 

 

Net loans

     1,112,626        1,098,733   
  

 

 

   

 

 

 

Securities:

    

Held to maturity, at cost (market value $16,101 and $15,266, respectively)

     15,357        14,464   

Available-for-sale, at market (amortized cost $323,786 and $309,329, respectively)

     324,838        310,731   
  

 

 

   

 

 

 

Total securities

     340,195        325,195   
  

 

 

   

 

 

 

Loans held for sale

     12,690        14,775   

Federal funds sold

     30,710        13,215   

Restricted equity securities

     3,012        3,012   
  

 

 

   

 

 

 

Total earning assets

     1,499,233        1,454,930   

Cash and due from banks

     47,207        40,959   

Bank premises and equipment, net

     35,545        35,437   

Accrued interest receivable

     5,820        5,930   

Deferred income tax asset

     8,646        8,488   

Other real estate

     20,158        19,117   

Goodwill

     4,805        4,805   

Other intangible assets, net

     13        112   

Other assets

     7,402        7,592   
  

 

 

   

 

 

 

Total assets

   $ 1,628,829      $ 1,577,370   
  

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

    

Deposits

   $ 1,452,697      $ 1,406,042   

Securities sold under repurchase agreements

     7,997        7,419   

Accrued interest and other liabilities

     8,688        6,561   
  

 

 

   

 

 

 

Total liabilities

     1,469,382        1,420,022   
  

 

 

   

 

 

 

Shareholders’ equity:

    

Common stock, $2.00 par value; authorized 15,000,000 shares, issued 7,346,061 and 7,304,186 shares, respectively

     14,692        14,608   

Additional paid-in capital

     48,330        46,734   

Retained earnings

     95,775        95,141   

Net unrealized gains on available-for-sale securities, net of income taxes of $402 and $537, respectively

     650        865   
  

 

 

   

 

 

 

Total shareholders’ equity

     159,447        157,348   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 1,628,829      $ 1,577,370   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements (unaudited).

 

1


WILSON BANK HOLDING COMPANY

Consolidated Statements of Earnings

Three Months Ended March 31, 2012 and 2011

(Unaudited)

 

     2012      2011  
     (Dollars in Thousands Except
Per Share Amounts)
 

Interest income:

  

Interest and fees on loans

   $ 16,273       $ 16,239   

Interest and dividends on securities:

     

Taxable securities

     1,358         1,461   

Exempt from Federal income taxes

     101         110   

Interest on loans held for sale

     98         54   

Interest on Federal funds sold

     33         15   

Interest and dividends on restricted securities

     42         36   
  

 

 

    

 

 

 

Total interest income

     17,905         17,915   
  

 

 

    

 

 

 

Interest Expense:

     

Interest on negotiable order of withdrawal accounts

     506         551   

Interest on money market and savings accounts

     757         690   

Interest on certificates of deposits

     2,670         3,442   

Interest on securities sold under repurchase agreements

     14         14   

Interest on Federal funds purchased

     1         2   
  

 

 

    

 

 

 

Total interest expense

     3,948         4,699   
  

 

 

    

 

 

 

Net interest income before provision for loan losses

     13,957         13,216   

Provision for loan loss

     2,256         1,969   
  

 

 

    

 

 

 

Net interest income after provision for loan losses

     11,701         11,247   
  

 

 

    

 

 

 

Non-interest income:

     

Service charges on deposit accounts

     1,210         1,288   

Other fees and commissions

     1,833         1,640   

Gain on sale of loans

     621         300   

Gain on sale of other assets

     3         —     

Gain on sale of securities

     23         —     
  

 

 

    

 

 

 

Total non-interest income

     3,690         3,228   
  

 

 

    

 

 

 

Non-interest expense:

     

Salaries and employee benefits

     5,849         5,332   

Occupancy expenses, net

     625         572   

Furniture and equipment expense

     273         247   

Data processing expense

     309         314   

Director’s fees

     202         200   

Other operating expenses

     2,720         3,224   

Loss on sale of other assets

     —           5   

Loss on sale of other real estate

     782         551   
  

 

 

    

 

 

 

Total non-interest expense

     10,760         10,445   
  

 

 

    

 

 

 

Earnings before income taxes

     4,631         4,030   

Income taxes

     1,806         1,554   
  

 

 

    

 

 

 

Net earnings

   $ 2,825       $ 2,476   
  

 

 

    

 

 

 

Weighted avg number of shares outstanding-basic

     7,331,514         7,258,143   
  

 

 

    

 

 

 

Weighted avg number of shares outstanding-diluted

     7,337,322         7,265,259   
  

 

 

    

 

 

 

Basic earnings per common share

   $ 0.39       $ 0.34   
  

 

 

    

 

 

 

Diluted earnings per common share

   $ 0.39       $ 0.34   
  

 

 

    

 

 

 

Dividends per share

   $ 0.30       $ 0.30   
  

 

 

    

 

 

 

See accompanying notes to consolidated financial statements (unaudited).

 

2


WILSON BANK HOLDING COMPANY

Consolidated Statements of Comprehensive Earnings

Three Months Ended March 31, 2012 and 2011

(Unaudited)

 

     2012     2011  
     (In Thousands)  

Net earnings

   $ 2,825      $ 2,476   
  

 

 

   

 

 

 

Other comprehensive earnings (losses), net of tax:

    

Unrealized gains (losses) on available-for-sale securities arising during period, net of taxes of $126 and $876, respectively

     (201     1,413   

Reclassification adjustment for net gains included in net earnings, net of taxes of $9 and $0, respectively

     (14     —     
  

 

 

   

 

 

 

Other comprehensive earnings (losses)

     (215     1,413   
  

 

 

   

 

 

 

Comprehensive earnings

   $ 2,610      $ 3,889   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements (unaudited).

 

3


WILSON BANK HOLDING COMPANY

Consolidated Statements of Cash Flows

Three Months Ended March 31, 2012 and 2011

Increase in Cash and Cash Equivalents

(Unaudited)

 

     2012     2011  
     (In Thousands)  

Cash flows from operating activities:

    

Interest received

   $ 18,811      $ 18,328   

Fees and commissions received

     3,043        2,928   

Proceeds from sale of loans held for sale

     27,747        19,760   

Origination of loans held for sale

     (25,041     (15,630

Interest paid

     (4,750     (5,777

Cash paid to suppliers and employees

     (7,949     (7,386

Income taxes paid

     (266     (403
  

 

 

   

 

 

 

Net cash provided by operating activities

     11,595        11,820   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchase of held-to-maturity securities

     (1,386     (2,025

Purchase of available-for-sale securities

     (68,490     (4,970

Proceeds from maturities, calls and principal payments of available for sale securities

     53,278        32,542   

Proceeds from sale of other real estate

     1,290        1,424   

Proceeds from maturities, calls and principal payments of held-to-maturity securities

     475        126   

Increase in loans made to customers

     (19,271     (8,097

Purchase of premises and equipment

     (476     (598

Proceeds from sale of other assets

     12        41   
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (34,568     18,443   
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Net increase in non-interest bearing, savings and NOW deposit accounts

     71,637        24,503   

Net increase (decrease) in time deposits

     (24,982     (17,306

Decrease in securities sold under repurchase agreements

     578        (384

Dividends paid

     (2,191     (2,168

Proceeds from sale of common stock pursuant to to dividend reinvestment plan

     1,599        1,626   

Proceeds from sale of common stock pursuant to exercise of stock options

     75        46   
  

 

 

   

 

 

 

Net cash provided by financing activities

     46,716        6,317   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     23,743        36,580   

Cash and cash equivalents at beginning of period

     54,174        38,282   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 77,917      $ 74,862   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements (unaudited).

 

4


WILSON BANK HOLDING COMPANY

Consolidated Statements of Cash Flows, Continued

Three Months Ended March 31, 2012 and 2011

Increase in Cash and Cash Equivalents

(Unaudited)

 

     2012     2011  
     (In Thousands)  

Reconciliation of net earnings to net cash provided by operating activities:

    

Net earnings

   $ 2,825      $ 2,476   

Adjustments to reconcile net earnings to net cash provided by operating activities:

    

Depreciation and amortization

     1,263        936   

Stock option compensation

     6        6   

Provision for loan losses

     2,256        1,969   

Loss on sale of other real estate

     782        551   

Loss (gain) on sale of other assets

     (3     5   

Gain on sale of securities

     (23     —     

Decrease in loans held for sale

     2,085        3,830   

Decrease in deferred tax assets, net

     (193     (24

Increase in taxes payable

     1,733        1,175   

Decrease in other assets, net

     190        584   

Increase in other liabilities

     1,366        1,490   

Decrease (increase) in interest receivable

     110        (100

Decrease in interest payable

     (802     (1,078
  

 

 

   

 

 

 

Total adjustments

   $ 8,770      $ 9,344   
  

 

 

   

 

 

 

Net cash provided by operating activities

   $ 11,595      $ 11,820   
  

 

 

   

 

 

 

Supplemental schedule of non-cash activities:

    

Unrealized gain (loss) in value of securities available-for-sale, net of income taxes of $402 and $2,685 for the quarters ended March 31, 2012 and 2011, respectively.

   $ (215   $ 1,413   
  

 

 

   

 

 

 

Non—cash transfers from loans to other real estate

   $ 3,199      $ 7,485   
  

 

 

   

 

 

 

Non—cash transfers from other real estate to loans

   $ 86      $ 3,972   
  

 

 

   

 

 

 

Non-cash transfers from loans to other assets

   $ 9      $ 11   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements (unaudited).

 

5


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. Summary of Significant Accounting Policies

Nature of Business — Wilson Bank Holding Company (the “Company”) is a bank holding company whose primary business is conducted by its wholly-owned subsidiary, Wilson Bank & Trust (the “Bank”). The Bank is a commercial bank headquartered in Lebanon, Tennessee. The Bank provides a full range of banking services in its primary market areas of Wilson, Davidson, Rutherford, Trousdale, Sumner, Dekalb, and Smith Counties, Tennessee.

Basis of Presentation —The accompanying unaudited, consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles. All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods covered by the report have been included. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and related notes appearing in the 2011 Annual Report previously filed on Form 10-K.

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. Significant intercompany transactions and accounts are eliminated in consolidation.

Use of Estimates —The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the balance sheet date 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 include the determination of the allowance for loan losses, the valuation of deferred tax assets, determination of any impairment of intangibles, other-than-temporary impairment of securities, the valuation of other real estate, and the fair value of financial instruments.

Loans — Loans are reported at their outstanding principal balances less unearned income, the allowance for loan losses and any deferred fees or costs on originated loans. Interest income on loans is accrued based on the principal balance outstanding. Loan origination fees, net of certain loan origination costs, are deferred and recognized as an adjustment to the related loan yield using a method which approximates the interest method.

Loans are charged off when management believes that the full collectability of the loan is unlikely. As such, a loan may be partially charged-off after a “confirming event” has occurred which serves to validate that full repayment pursuant to the terms of the loan is unlikely.

Loans are placed on nonaccrual status when there is a significant deterioration in the financial condition of the borrower, which often is determined when the principal or interest is more than 90 days past due, unless the loan is both well-secured and in the process of collection. Generally, all interest accrued but not collected for loans that are placed on nonaccrual status, is reversed against current income. Interest income is subsequently recognized only to the extent cash payments are received while the loan is classified as nonaccrual, but interest income recognition is reviewed on a case-by-case basis. A nonaccrual loan is returned to accruing status once the loan has been brought current and collection is reasonably assured or the loan has been “well-secured” through other techniques. Past due status is determined based on the contractual due date per the underlying loan agreement.

 

6


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

All loans that are placed on nonaccrual are further analyzed to determine if they should be classified as impaired loans. At December 31, 2011 and at March 31, 2012, there were no loans classified as nonaccrual that were not also deemed to be impaired. A loan is considered to be impaired when it is probable the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan. This determination is made using a variety of techniques, which include a review of the borrower’s financial condition, debt-service coverage ratios, global cash flow analysis, guarantor support, other loan file information, meetings with borrowers, inspection or reappraisal of collateral and/or consultation with legal counsel as well as results of reviews of other similar industry credits (e.g. builder loans, development loans, church loans, etc). Generally, loans with an identified weakness and principal balance of $100,000 or more are subject to individual identification for impairment. Individually identified impaired loans are measured based on the present value of expected payments using the loan’s original effective rate as the discount rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. If the recorded investment in the impaired loan exceeds the measure of fair value, a specific valuation allowance is established as a component of the allowance for loan losses or, in the case of collateral dependent loans, the excess is charged off. Changes to the valuation allowance are recorded as a component of the provision for loan losses. Any subsequent adjustments to present value calculations for impaired loan valuations as a result of the passage of time, such as changes in the anticipated payback period for repayment, are recorded as a component of the provision for loan losses. For loans less than $100,000, the Company assigns a valuation allowance to these loans utilizing an allocation rate equal to the allocation rate calculated for loans of a similar type greater than $100,000.

Allowance for Loan Losses —The allowance for loan losses is maintained at a level that management believes to be adequate to absorb probable losses in the loan portfolio. Loan losses are charged against the allowance when they are known. Subsequent recoveries are credited to the allowance. Management’s determination of the adequacy of the allowance is based on an evaluation of the portfolio, current economic conditions, volume, growth, composition of the loan portfolio, homogeneous pools of loans, risk ratings of specific loans, historical loan loss factors, loss experience of various loan segments, identified impaired loans and other factors related to the portfolio. This evaluation is performed quarterly and is inherently subjective, as it requires material estimates that are susceptible to significant change including the amounts and timing of future cash flows expected to be received on any impaired loans.

In assessing the adequacy of the allowance, we also consider the results of our ongoing independent loan review process. We undertake this process both to ascertain whether there are loans in the portfolio whose credit quality has weakened over time and to assist in our overall evaluation of the risk characteristics of the entire loan portfolio. Our loan review process includes the judgment of management, independent loan reviewers, and reviews that may have been conducted by third-party reviewers. We incorporate relevant loan review results in the loan impairment determination. In addition, regulatory agencies, as an integral part of their examination process, will periodically review the Company’s allowance for loan losses, and may require the Company to record adjustments to the allowance based on their judgment about information available to them at the time of their examinations.

Recently Adopted Accounting Pronouncements

In April 2011, FASB issued Accounting Standards Update (“ASU”) No. 2011-02 A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring, intended to provide additional guidance to assist creditors in determining whether a restructuring of a receivable meets the criteria to be considered a troubled debt restructuring. The amendments in this ASU were effective for the quarter ended September 30, 2011 and have been applied retrospectively to the beginning of 2011. As a result of applying these amendments, the Company reviewed all substandard loans that were renewed since January 1, 2011 and identified two new loan modifications that qualified as a troubled debt restructuring. Pursuant to the guidance set forth in the standard, an impairment amount was calculated on each identified transaction consistent with the methodology followed for other impaired loans, described above.

 

7


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

In September 2011, the FASB issued ASU No. 2011-8, Intangibles-Goodwill and Other, regarding testing goodwill for impairment. The new guidance provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity determines that this is the case, it is required to perform the currently prescribed two-step goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit (if any). Based on the qualitative assessment, if an entity determines that the fair value of a reporting unit is more than its carrying amount, the two-step goodwill impairment test is not required. The new guidance was effective for the Company beginning January 1, 2012. This adoption did not have an impact on the Company’s financial position or results of operations.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income, new disclosure guidance related to the presentation of the Statement of Comprehensive Income. This guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity and requires presentation of reclassification adjustments on the face of the income statement. This adoption did not have any impact on our financial position or results of operations.

In May 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (Topic 820)-Fair Value Measurement (ASU 2011-04), to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for level 3 fair value measurements. ASU 2011-04 is effective for the Company in its first quarter of fiscal 2012 and will be applied prospectively. This adoption did not have an impact on the Company’s financial position or results of operations.

Other than those pronouncements discussed above, there were no other recently issued accounting pronouncements that are expected to impact the Company.

Note 2. Loans and Allowance for Loan Losses

For financial reporting purposes, the Company classifies its loan portfolio based on the underlying collateral utilized to secure each loan. This classification is consistent with those utilized in the Quarterly Report of Condition and Income filed with the Federal Deposit Insurance Corporation (“FDIC”).

 

8


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

The following schedule details the loans of the Company at March 31, 2012 and December 31, 2011:

 

     (In Thousands)  
     March 31,
2012
    December 31,
2011
 

Mortgage Loans on real estate

    

Residential 1-4 family

   $ 339,104      $ 344,029   

Multifamily

     10,439        9,791   

Commercial real estate

     444,120        410,837   

Construction and land development

     175,977        166,460   

Farmland

     28,538        35,691   

Second mortgage

     13,670        14,711   

Equity lines of credit

     37,871        39,307   
  

 

 

   

 

 

 

Total mortgage loans on real estate

     1,049,719        1,020,826   
  

 

 

   

 

 

 

Commercial loans

     38,908        50,430   
  

 

 

   

 

 

 

Agriculture loans

     2,389        2,556   
  

 

 

   

 

 

 

Consumer installment loans

    

Personal

     39,281        41,521   

Credit Cards

     3,043        3,168   
  

 

 

   

 

 

 

Total consumer installment loans

     42,324        44,689   

Other loans

     7,243        6,788   
  

 

 

   

 

 

 
     1,140,583        1,125,289   
  

 

 

   

 

 

 

Net deferred loan fees

     (2,156     (2,031
  

 

 

   

 

 

 

Total loans

     1,138,427        1,123,258   
  

 

 

   

 

 

 

Less: Allowance for loan losses

     (25,801     (24,525
  

 

 

   

 

 

 

Net loans

   $ 1,112,626      $ 1,098,733   
  

 

 

   

 

 

 

The adequacy of the allowance for loan losses is assessed at the end of each calendar quarter. The level of the allowance is based upon evaluation of the loan portfolio, past loan loss experience, current asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay (including the timing of future payment), the estimated value of any underlying collateral, composition of the loan portfolio, economic conditions, historical loss experience, industry and peer bank loan quality indications and other pertinent factors, including regulatory recommendations.

 

9


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

Transactions in the allowance for loan losses for the quarter ending March 31, 2012 and 2011 are summarized as follows:

 

    In Thousands  
    Residential
1-4 Family
    Multifamily     Commercial
Real Estate
    Construction     Farmland     Second
Mortgages
    Equity Lines
of Credit
    Commercial     Agricultural     Installment
and Other
    Total  

March 31, 2012

                     

Allowance for loan losses:

                     

Beginning balance

  $ 5,414      $ 54      $ 8,242      $ 6,223      $ 1,829      $ 326      $ 653      $ 1,309      $ 19      $ 456      $ 24,525   

Provision

    452        3        1,057        717        419        —          (255     (81     (1     (55     2,256   

Charge-offs

    (246     —          (515     (77     (34     (47     (41     (203     —          (71     (1,234

Recoveries

    26        —          5        160        —          —          —          13        —          50        254   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

  $ 5,646        57        8,789        7,023        2,214        279        357        1,038        18        380        25,801   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance individually evaluated for impairment

  $ 1,200        —          3,775        2,713        1,688        48        14        535        —          —          9,973   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance collectively evaluated for impairment

  $ 4,446        57        5,014        4,310        526        231        343        503        18        380        15,828   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance loans acquired with deteriorated credit quality

  $ —          —          —          —          —          —          —          —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans:

                     

Ending balance

  $ 339,104        10,439        444,120        175,977        28,538        13,670        37,871        38,908        2,389        49,567        1,140,583   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance individually evaluated for impairment

  $ 5,454        —          16,306        8,448        4,106        156        171        620        —          —          35,261   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance collectively evaluated for impairment

  $ 333,650        10,439        427,814        167,529        24,432        13,514        37,700        38,288        2,389        49,567        1,105,322   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance loans acquired with deteriorated credit quality

  $ —          —          —          —          —          —          —          —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

10


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

    In Thousands  
    Residential
1-4 Family
    Multifamily     Commercial
Real Estate
    Construction     Farmland     Second
Mortgages
    Equity Lines
of Credit
    Commercial     Agricultural     Installment
and Other
    Total  

December 31, 2011

                     

Allowance for loan losses:

                     

Beginning balance

  $ 5,140        46        7,285        5,558        988        276        767        1,163        67        887        22,177   

Provision

    2,311        8        2,228        2,279        1,137        311        18        640        (47     (207     8,678   

Charge-offs

    (2,108     —          (1,283     (1,681     (296     (268     (148     (516     (1     (461     (6,762

Recoveries

    71        —          12        67        —          7        16        22        —          237        432   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

  $ 5,414        54        8,242        6,223        1,829        326        653        1,309        19        456        24,525   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance individually evaluated for impairment

  $ 1,053        —          3,744        2,228        1,193        41        15        754        —          —          9,028   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance collectively evaluated for impairment

  $ 4,361        54        4,498        3,995        636        285        638        555        19        456        15,497   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance loans acquired with deteriorated credit quality

  $ —          —          —          —          —          —          —          —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans:

                     

Ending balance

  $ 344,029        9,791        410,837        166,460        35,691        14,711        39,307        50,430        2,556        51,477        1,125,289   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance individually evaluated for impairment

  $ 11,573        412        23,682        16,633        4,261        922        170        849        —          —          58,502   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance collectively evaluated for impairment

  $ 332,456        9,379        387,155        149,827        31,430        13,789        39,137        49,581        2,556        51,477        1,066,787   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance loans acquired with deteriorated credit quality

  $ —          —          —          —          —          —          —          —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

11


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

At March 31, 2012, the Company had certain impaired loans of $25,437,000 which were on non-accruing interest status. At December 31, 2011, the Company had certain impaired loans of $24,965,000 which were on non-accruing interest status. In each case, at the date such loans were placed on nonaccrual status, the Company reversed all previously accrued interest income against current year earnings. The following table presents the Company’s impaired loans at March 31, 2012 and December 31, 2011, respectively:

 

     (In thousands)  
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 

March 31, 2012

              

With no related allowance recorded:

              

Residential 1-4 family

   $ 5,227         5,227         —           5,802         71   

Multifamily

     410         410         —           411         6   

Commercial real estate

     5,505         5,505         —           6,107         35   

Construction

     9,182         9,682         —           8,821         37   

Farmland

     147         147         —           74         2   

Second Mortgages

     729         729         —           668         1   

Equity Lines of Credit

     —           —           —           —           —     

Commercial

     —           —           —           —           —     

Agricultural

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 21,200         21,700         —           21,883         152   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

With allowance recorded:

              

Residential 1-4 family

   $ 5,454         5,630         1,200         5,380         58   

Multifamily

     —           —           —           —           —     

Commercial real estate

     16,306         16,510         3,775         16,524         219   

Construction

     8,448         8,448         2,713         8,332         19   

Farmland

     4,107         4,327         1,688         4,104         24   

Second Mortgages

     156         156         48         236         2   

Equity Lines of Credit

     171         171         14         171         3   

Commercial

     620         620         535         735         6   

Agricultural

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 35,262.00         35,862         9,973         35,482         331   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Residential 1-4 family

     10,681         10,857         1,200         11,182         129   

Multifamily

     410         410         —           411         6   

Commercial real estate

     21,811         22,015         3,775         22,631         254   

Construction

     17,630         18,130         2,713         17,153         56   

Farmland

     4,254         4,474         1,688         4,178         26   

Second Mortgages

     885         885         48         904         3   

Equity Lines of Credit

     171         171         14         171         3   

Commercial

     620         620         535         735         6   

Agricultural

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 56,462         57,562         9,973         57,365         483   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

12


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

 

     (In thousands)  
     Recorded
Investment
     Unpaid
Principal
Balance
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 

December 31, 2011

              

With no related allowance recorded:

              

Residential 1-4 family

   $ 6,263         6,439         —           4,670         271   

Multifamily

     412         412         —           414         23   

Commercial real estate

     6,711         6,711         —           4,461         268   

Construction

     8,418         8,918         —           7,327         186   

Farmland

     —           —           —           1,366         —     

Second Mortgages

     606         606         —           606         —     

Equity Lines of Credit

     —           —           —           93         —     

Commercial

     —           176         —           51         —     

Agricultural

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 22,410         23,262         —           18,988         748   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

With allowance recorded:

              

Residential 1-4 family

   $ 5,310         5,310         1,053         7,361         262   

Multifamily

     —           —           —           —           —     

Commercial real estate

     16,971         16,971         3,744         15,826         673   

Construction

     8,215         8,215         2,228         12,250         137   

Farmland

     4,261         4,261         1,193         3,181         129   

Second Mortgages

     316         316         41         199         10   

Equity Lines of Credit

     170         170         15         43         8   

Commercial

     849         849         754         928         32   

Agricultural

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 36,092         36,092         9,028         39,788         1,251   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Residential 1-4 family

     11,573         11,749         1,053         12,031         533   

Multifamily

     412         412         —           414         23   

Commercial real estate

     23,682         23,682         3,744         20,287         941   

Construction

     16,633         17,133         2,228         19,577         323   

Farmland

     4,261         4,261         1,193         4,547         129   

Second Mortgages

     922         922         41         805         10   

Equity Lines of Credit

     170         170         15         136         8   

Commercial

     849         1,025         754         979         32   

Agricultural

     —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 58,502         59,354         9,028         58,776         1,999   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Impaired loans also include loans that the Company may elect to formally restructure due to the weakening credit status of a borrower such that the restructuring may facilitate a repayment plan that minimizes the potential losses that the Company may have to otherwise incur. These loans are classified as impaired loans and, if on non-accruing status as of the date of restructuring, the loans are included in the nonperforming loan balances noted above. Not included in nonperforming loans are loans that have been restructured that were performing as of the restructure date. At March 31, 2012, there were $4.1 million of accruing restructured loans that remain in a performing status. At December 31, 2011, there were $4.2 million of accruing restructured loans.

 

13


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

Potential problem loans, which include nonperforming loans, amounted to approximately $66.2 million at March 31, 2012 compared to $67.3 million at December 31, 2011. Potential problem loans represent those loans with a well-defined weakness and where information about possible credit problems of borrowers has caused management to have serious doubts about the borrower’s ability to comply with present repayment terms. This definition is believed to be substantially consistent with the standards established by the FDIC, the Company’s primary federal regulator, for loans classified as special mention, substandard, or doubtful, excluding the impact of nonperforming loans.

The following table presents our loan balances by primary loan classification and the amount classified within each risk rating category. Pass rated loans include all credits other than those included in special mention, substandard and doubtful which are defined as follows:

 

   

Special Mention loans have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.

 

   

Substandard loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize liquidation of the debt. Substandard loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

 

   

Doubtful loans have all the characteristics of substandard loans with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The Company considers all doubtful loans to be impaired and places the loan on nonaccrual status.

 

14


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

 

                                  (In Thousands)                                
    Residential           Commercial                 Second     Equity Lines                 Installment        
    1-4 Family     Multifamily     Real Estate     Construction     Farmland     Mortgages     of Credit     Commercial     Agricultural     & Other     Total  

March 31, 2012

                     

Credit Risk Profile by Internally Assigned Grade

                     

Pass

    321,522        9,895        421,784        157,973        24,022        12,185        37,379        38,171        2,363        49,092        1,074,386   

Special Mention

    10,364        53        5,923        459        309        643        342        37        5        161        18,296   

Substandard

    7,218        491        16,413        17,545        4,207        842        150        700        21        314        47,901   

Doubtful

    —          —          —          —          —          —          —          —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    339,104        10,439        444,120        175,977        28,538        13,670        37,871        38,908        2,389        49,567        1,140,583   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2011

                     

Credit Risk Profile by Internally Assigned Grade

                     

Pass

    326,406        9,245        386,765        149,451        31,251        13,158        38,803        49,385        2,534        51,010        1,058,008   

Special Mention

    9,537        53        7,963        459        76        517        316        37        —          157        19,115   

Substandared

    8,086        493        16,109        16,550        4,364        1,036        188        1,008        22        310        48,166   

Doubtful

    —          —          —          —          —          —          —          —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    344,029        9,791        410,837        166,460        35,691        14,711        39,307        50,430        2,556        51,477        1,125,289   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

15


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

Note 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 March 31, 2012 and December 31, 2011 are summarized as follows:

 

     March 31, 2012  
     Securities Available-For-Sale  
     In Thousands  
            Gross      Gross      Estimated  
     Amortized      Unrealized      Unrealized      Market  
     Cost      Gains      Loss      Value  

Debt securities:

           

U.S. Government-sponsored enterprises (GSEs)*

   $ 125,501       $ 126       $ 643       $ 124,984   

Mortgage-backed:

           

GSE residential

     196,764         1,672         213         198,223   

Obligations of states and political Subdivisions

     1,521         110         —           1,631   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 323,786       $ 1,908       $ 856       $ 324,838   
  

 

 

    

 

 

    

 

 

    

 

 

 
     March 31, 2012  
     Securities Held-to-Maturity  
     In Thousands  
            Gross      Gross      Estimated  
     Amortized      Unrealized      Unrealized      Market  
     Cost      Gains      Loss      Value  

Debt securities:

           

U.S. Government-sponsored enterprises (GSEs)*

   $ —         $ —         $ —         $ —     

Mortgage-backed:

           

GSE residential

     3,642         116         27         3,731   

Obligations of states and political Subdivisions

     11,715         655         —           12,370   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 15,357       $ 771       $ 27       $ 16,101   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

16


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

 

     December 31, 2011  
     Securities Available-For-Sale  
     In Thousands  
            Gross      Gross      Estimated  
     Amortized      Unrealized      Unrealized      Market  
     Cost      Gains      Loss      Value  

Debt securities:

           

U.S. Government-sponsored enterprises (GSEs)*

   $ 114,819       $ 268       $ 161         114,926   

Mortgage-backed:

           

GSE residential

     192,988         1,379         201         194,167   

Obligations of states and political Subdivisions

     1,522         117         —           1,638   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 309,329       $ 1,764       $ 362       $ 310,731   
  

 

 

    

 

 

    

 

 

    

 

 

 
     December 31, 2011  
     Securities Held-to-Maturity  
     In Thousands  
            Gross      Gross      Estimated  
     Amortized      Unrealized      Unrealized      Market  
     Cost      Gains      Loss      Value  

Debt securities:

           

U.S. Government-sponsored enterprises (GSEs)*

   $ —         $ —         $ —         $ —     

Mortgage-backed:

           

GSE residential

   $ 2,425       $ 103       $ —         $ 2,528   

Obligations of states and political Subdivisions

     12,039         699         —           12,738   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 14,464       $ 802       $ —         $ 15,266   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

* Such as Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Federal Home Loan Banks, Federal Farm Credit Banks, and government National Mortgage Association.

 

 

17


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

The amortized cost and estimated market value of debt securities at March 31, 2012, 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.

 

     Held-to-Maturity      Available-for-sale  
     In Thousands  
            Estimated             Estimated  
     Amortized      Market      Amortized      Market  
     Cost      Value      Cost      Value  

Due in one year or less

   $ 1,027       $ 1,047       $ —         $ —     

Due after one year through five years

     5,348         5,598         76,515         76,350   

Due after five years through ten years

     3,393         3,616         171,144         171,592   

Due after ten years

     5,589         5,840         76,127         76,896   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 15,357       $ 16,101       $ 323,786       $ 324,838   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2012 and December 31, 2011.

 

     In Thousands, Except Number of Securities  
     Less than 12 Months      12 Months or More      Total  
     Fair Value      Unrealized
Losses
     Number
of
Securities
Included
     Fair
Value
     Unrealized
Losses
     Number
of
Securities
Included
     Fair Value      Unrealized
Losses
 

March 31, 2012

                       

Held to Maturity Securities:

                       

Debt securities:

                       

U. S. Government-sponsored enterprises (GSEs)

   $ —         $ —           —         $ —         $ —           —         $ —         $ —     

Mortgage-backed:

                       

GSE residential

     1,362         27         2         —           —           —           1,362         27   

Obligations of states and political subdivisions

     —           —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,362       $ 27         2       $ —           —           —         $ 1,362       $ 27   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-Sale Securities:

                       

Debt securities:

                       

U. S. Government- sponsored enterprises (GSEs)

   $ 79,893       $ 643         21       $ —         $ —           —         $ 79,893       $ 643   

Mortgage-backed:

                       

GSE residential

     47,973         213         11         —           —           —           47,973         213   

Obligations of states and political subdivisions

     —           —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 127,866       $ 856         32       $ —         $ —           —         $ 127,866       $ 856   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

18


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

     In Thousands, Except Number of Securities  
     Less than 12 Months      12 Months or More      Total  
     Fair Value      Unrealized
Losses
     Number
of
Securities
Included
     Fair
Value
     Unrealized
Losses
     Number
of
Securities
Included
     Fair Value      Unrealized
Losses
 

December 31, 2011

                       

Held to Maturity Securities:

                       

Debt securities:

                       

Mortgage-backed:

                       

GSE residential

   $ —         $ —           —         $ —         $ —           —         $ —         $ —     

Obligations of states and political subdivisions

     —           —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ —         $ —           —         $ —         $ —           —         $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-Sale Securities:

                       

Debt securities:

                       

U.S. Government and Federal agencies

   $ —         $ —           —         $ —         $ —           —         $ —         $ —     

GSEs

     48,810         161         14         —           —           —           48,810         161   

Mortgage-backed:

                       

GSE residential

     58,130         201         12         —           —           —           58,130         201   

Obligations of states and political subdivisions

     —           —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 106,940       $ 362         26       $ —         $ —           —         $ 106,940       $ 362   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Because the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost bases, which may be maturity, the Company does not consider these securities to be other-than-temporarily impaired at March 31, 2012.

The carrying values of the Company’s investment securities could decline in the future if the financial condition of issuers deteriorate and management determines it is probable that the Company will not recover the entire amortized cost bases of the securities. As a result, there is a risk that other-than-temporary impairment charges may occur in the future given the current economic environment.

Note 4. Earnings Per Share

The computation of basic earnings per share is based on the weighted average number of common shares outstanding during the period. The computation of diluted earnings per share for the Company begins with the basic earnings per share plus the effect of common shares contingently issuable from stock options.

 

19


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

The following is a summary of components comprising basic and diluted earnings per share (“EPS”) for the three months ended March 31, 2012 and 2011:

 

     Three Months Ended  
     March 31,  
     2012      2011  
     (Dollars in Thousands  
     Except Per Share Amounts)  

Basic EPS Computation:

     

Numerator – Earnings available to common Stockholders

   $ 2,825       $ 2,476   
  

 

 

    

 

 

 

Denominator – Weighted average number of common shares outstanding

     7,331,514         7,258,143   
  

 

 

    

 

 

 

Basic earnings per common share

   $ .39       $ .34   
  

 

 

    

 

 

 

Diluted EPS Computation:

     

Numerator – Earnings available to common Stockholders

   $ 2,825       $ 2,476   
  

 

 

    

 

 

 

Denominator – Weighted average number of common shares outstanding

     7,331,514         7,258,143   

Dilutive effect of stock options

     5,808         7,116   
  

 

 

    

 

 

 
     7,337,322         7,265,259   
  

 

 

    

 

 

 

Diluted earnings per common share

   $ .39       $ .34   
  

 

 

    

 

 

 

Note 5. Income Taxes

Accounting Standards Codification (“ASC”) 740, Income Taxes, defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. This section also provides guidance on the derecognition, measurement and classification of income tax uncertainties, along with any related interest and penalties, and includes guidance concerning accounting for income tax uncertainties in interim periods. As of March 31, 2012, the Company had no unrecognized tax benefits related to Federal or State income tax matters and does not anticipate any material increase or decrease in unrecognized tax benefits relative to any tax positions taken prior to March 31, 2012.

As of March 31, 2012, the Company has accrued no interest and no penalties related to uncertain tax positions. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

The Company and its subsidiaries file consolidated U.S. Federal and state of Tennessee income tax returns. The Company is currently open to audit under the statute of limitations by the state of Tennessee for the years ended December 31, 2008 through 2011.

Note 6. Commitments and Contingent Liabilities

In the normal course of business, the Company has entered into off-balance sheet financial instruments which include commitments to extend credit (i.e., including unfunded lines of credit) and standby letters of credit. Commitments to extend credit are usually the result of lines of credit granted to existing borrowers under agreements that the total outstanding indebtedness will not exceed a specific amount during the term of the indebtedness. Typical borrowers are commercial concerns that use lines of credit to supplement their treasury management functions, thus their total outstanding indebtedness may fluctuate during any time period based on the seasonality of their business and the resultant timing of their cash flows. Other typical lines of credit are related to home equity loans granted to consumers. Commitments to extend credit generally have fixed expiration dates or other termination clauses and may require payment of a fee.

 

20


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

Standby letters of credit are generally issued on behalf of an applicant (our customer) to a specifically named beneficiary and are the result of a particular business arrangement that exists between the applicant and the beneficiary. Standby letters of credit have fixed expiration dates and are usually for terms of two years or less unless terminated beforehand due to criteria specified in the standby letter of credit. A typical arrangement involves the applicant routinely being indebted to the beneficiary for such items as inventory purchases, insurance, utilities, lease guarantees or other third party commercial transactions. The standby letter of credit would permit the beneficiary to obtain payment from the Company under certain prescribed circumstances. Subsequently, the Company would then seek reimbursement from the applicant pursuant to the terms of the standby letter of credit.

The Company follows the same credit policies and underwriting practices when making these commitments as it does for on-balance sheet instruments. Each customer’s creditworthiness is evaluated on a case-by-case basis, and the amount of collateral obtained, if any, is based on management’s credit evaluation of the customer. Collateral held varies but may include cash, real estate and improvements, marketable securities, accounts receivable, inventory, equipment, and personal property.

The contractual amounts of these commitments are not reflected in the consolidated financial statements and would only be reflected if drawn upon. Since many of the commitments are expected to expire without being drawn upon, the contractual amounts do not necessarily represent future cash requirements. However, should the commitments be drawn upon and should our customers default on their resulting obligation to us, the Company’s maximum exposure to credit loss, without consideration of collateral, is represented by the contractual amount of those instruments.

A summary of the Company’s total contractual amount for all off-balance sheet commitments at March 31, 2012 is as follows:

 

Commitments to extend credit

   $ 184,023,000   

Standby letters of credit

     19,265,000   

The Company originates residential mortgage loans, sells them to third-party purchasers, and does not retain the servicing rights. These loans are originated internally and are primarily to borrowers in the Company’s geographic market footprint. These sales are typically on a best efforts basis to investors that follow conventional government sponsored entities (GSE) and the Department of Housing and Urban Development/U.S. Department of Veterans Affairs (HUD/VA) guidelines. Generally, loans sold to the HUD/VA are underwritten by the Company while the majority of the loans sold to other investors are underwritten by the purchaser of the loans.

Each purchaser has specific guidelines and criteria for sellers of loans, and the risk of credit loss with regard to the principal amount of the loans sold is generally transferred to the purchasers upon sale. While the loans are sold without recourse, the purchase agreements require the Company to make certain representations and warranties regarding the existence and sufficiency of file documentation and the absence of fraud by borrowers or other third parties such as appraisers in connection with obtaining the loan. If it is determined that the loans sold were in breach of these representations or warranties, the Company has obligations to either repurchase the loan for the unpaid principal balance and related investor fees or make the purchaser whole for the economic benefits of the loan.

To date, repurchase activity pursuant to the terms of these representations and warranties has been insignificant and has resulted in insignificant losses to the Company.

 

21


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

Based on information currently available, management believes that it does not have significant exposure to contingent losses that may arise relating to the representations and warranties that it has made in connection with its mortgage loan sales.

Various legal claims also arise from time to time in the normal course of business. In the opinion of management, the resolution of these claims outstanding at March 31, 2012 will not have a material impact on the Company’s financial statements.

Note 7. Fair Value Measurements

In September 2006, the FASB issued ASC 820, “Fair Value Measurements and Disclosures.” FASB ASC 820, which defines fair value, establishes a framework for measuring fair value in U.S. generally accepted accounting principles and expands disclosures about fair value measurements. FASB ASC 820 applies only to fair-value measurements that are already required or permitted by other accounting standards and is expected to increase the consistency of those measurements. The definition of fair value focuses on the exit price, i.e., the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, not the entry price, i.e., the price that would be paid to acquire the asset or received to assume the liability at the measurement date. The statement emphasizes that fair value is a market-based measurement; not an entity-specific measurement. Therefore, the fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability.

Valuation Hierarchy

FASB ASC 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Level 1 —inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 —inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 —inputs to the valuation methodology are unobservable and significant to the fair value measurement.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Following is a description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.

Assets

Securities available for sale — Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government securities and certain other products. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows and are classified within Level 2 of the valuation hierarchy. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.

 

22


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

Impaired loans—A loan is considered to be impaired when it is probable the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement. Impaired loans are measured based on the present value of expected payments using the loan’s original effective rate as the discount rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. If the recorded investment in the impaired loan exceeds the measure of fair value, a valuation allowance may be established as a component of the allowance for loan losses or the expense is recognized as a charge-off. Impaired loans are classified within Level 3 of the hierarchy.

Other real estate—Other real estate, consisting of properties obtained through foreclosure or in satisfaction of loans, is initially recorded at fair value, determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources, adjusted for estimated selling costs. At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is treated as a charge against the allowance for loan losses. Gains or losses on sale and any subsequent adjustments to the fair value are recorded as a component of foreclosed real estate expense. Other real estate is included in Level 3 of the valuation hierarchy.

Other assets—Included in other assets are certain assets carried at fair value, including the cash surrender value of bank owned life insurance policies. The carrying amount of the cash surrender value of bank owned life insurance is based on information received from the insurance carriers indicating the financial performance of the policies and the amount the Company would receive should the policies be surrendered. The Company reflects these assets within Level 3 of the valuation hierarchy.

The following tables present the financial instruments carried at fair value as of March 31, 2012, by caption on the consolidated balance sheets and by FASB ASC 820 valuation hierarchy (as described above) (dollars in thousands)

Fair Value Measurements at March 31, 2012

 

(in Thousands)    Carrying
Value at
March 31,
2012
     Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
     Significant Other
Observable
Inputs (Level 2)
     Significant
Unobservable
Inputs (Level 3)
 

Assets:

     

Available-for-sale securities

   $ 324,838       $ —         $ 324,838       $ —     

Cash surrender value

     2,278         —           —           2,278   

 

23


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

Fair Value Measurements at March 31, 2012

 

(in Thousands)    Carrying
Value at
March 31,
2012
     Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
     Significant Other
Observable
Inputs (Level 2)
     Significant
Unobservable
Inputs (Level 3)
 

Assets:

     

Impaired loans

   $ 46,489       $ —         $ —         $ 46,489   

Other real estate

     20,158         —           —           20,158   

Repossesed assets

     9         —           —           9   

Changes in level 3 fair value measurements

The table below includes a roll forward of the balance sheet amounts for the three months ended March 31, 2012 (including the change in fair value) for financial instruments classified by the Company within Level 3 of the valuation hierarchy for assets and liabilities measured at fair value on a recurring basis. When a determination is made to classify a financial instrument within Level 3 of the valuation hierarchy, the determination is based upon the significance of the unobservable factors to the overall fair value measurements. However, since Level 3 financial instruments typically include, in addition to the unobservable or Level 3 components, observable components (that is, components that are actively quoted and can be validated to external sources), the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology.

Three months ended March 31, 2012 (in thousands)

 

     Assets      Liabilities  

Fair Value, January 1, 2012

   $ 2,001       $ —     

Total realized gains included in income

     14         —     

Purchases, issuances and settlements, net

     263         —     

Transfers in and/or (out) of Level 3

     —           —     
  

 

 

    

 

 

 

Fair Value, March 31, 2012

   $ 2,278       $ —     
  

 

 

    

 

 

 

Total realized gains (losses) included in income related to financial assets and liabilities still on the consolidated balance sheet at March 31, 2012

   $ —         $ —     
  

 

 

    

 

 

 

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments that are not measured at fair value. In cases where quoted market prices are not available, fair values are based on estimates using discounted cash flow models. Those models are significantly affected by the assumptions used, including the discount rates and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. The use of different methodologies may have a material effect on the estimated fair value amounts. The fair value estimates presented herein are based on pertinent information available to management as of March 31, 2012 and December 31, 2011. Such amounts have not been revalued for purposes of these consolidated financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

 

24


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

Cash, Due From Banks and Federal Funds Sold—The carrying amounts of cash, due from banks, and federal funds sold approximate their fair value.

Securities held to maturity—Estimated fair values for securities held to maturity are based on quoted market prices where available. If quoted market prices are not available, estimated fair values are based on quoted market prices of comparable instruments.

Loans—For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values approximate carrying values. For other loans, fair values are estimated using discounted cash flow models, using current market interest rates offered for loans with similar terms to borrowers of similar credit quality. Fair values for impaired loans are estimated using discounted cash flow models or based on the fair value of the underlying collateral.

Mortgage loans held-for-sale—Mortgage loans held-for-sale are carried at the lower of cost or fair value and are classified within Level 2 of the valuation hierarchy. The inputs for valuation of these assets are based on the anticipated sales price of these loans as the loans are usually sold within a few weeks of their origination.

Deposits, Securities Sold Under Agreements to Repurchase, Federal Home Loan Bank Advances—The carrying amounts of demand deposits, savings deposits, securities sold under agreements to repurchase, floating rate advances from the Federal Home Loan Bank and floating rate subordinated debt approximate their fair values. Fair values for certificates of deposit and fixed rate advances from the Federal Home Loan Bank are estimated using discounted cash flow models, using current market interest rates offered on certificates, advances and other borrowings with similar remaining maturities.

 

25


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

The carrying value and estimated fair values of the Company’s financial instruments at March 31, 2012 and December 31, 2011 are as follows:

 

     In Thousands  
     March 31, 2012      December 31, 2011  
     Carrying             Carrying         
     Amount      Fair Value      Amount      Fair Value  

Financial assets:

           

Cash and short-term Investments

   $ 77,917         77,917       $ 54,174         54,174   

Securities available-for-sale

     324,838         324,838         310,731         310,731   

Securities, held to maturity

     15,357         16,101         14,464         15,266   

Loans, net of unearned Interest

     1,138,427            1,123,258      

Less: allowance for loan Losses

     25,801            24,525      
  

 

 

       

 

 

    

Loans, net of allowance

     1,112,626         1,115,662         1,098,733         1,107,440   
  

 

 

       

 

 

    

Loans held for sale

     12,690         12,690         14,775         14,775   

Restricted equity securities

     3,012         3,012         3,012         3,012   

Accrued interest receivable

     5,820         5,820         5,930         5,930   

Cash surrender value of life insurance

     2,278         2,278         2,001         2,001   

Other real estate

     20,158         20,158         19,117         19,117   

Financial liabilities:

           

Deposits

     1,452,697         1,454,557         1,406,042         1,408,071   

Securities sold under repurchase agreements

     7,997         7,997         7,419         7,389   

Accrued interest payable

     2,196         2,196         2,998         2,998   

Unrecognized financial instruments:

           

Commitments to extend credit

     —           —           —           —     

Standby letters of credit

     —           —           —           —     

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The purpose of this discussion is to provide insight into the financial condition and results of operations of the Company and its subsidiary. This discussion should be read in conjunction with the consolidated financial statements. Reference should also be made to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 for a more complete discussion of factors that impact liquidity, capital and the results of operations.

Forward-Looking Statements

This Form 10-Q contains certain forward-looking statements regarding, among other things, the anticipated financial and operating results of the Company. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly release any modifications or revisions to these forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.

 

26


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company cautions investors that future financial and operating results may differ materially from those projected in forward-looking statements made by, or on behalf of, the Company. The words “expect,” “intend,” “should,” “may,” “could,” “believe,” “suspect,” “anticipate,” “seek,” “plan,” “estimate” and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical fact may also be considered forward-looking. Such forward-looking statements involve known and unknown risks and uncertainties, including, but not limited to those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, and also include, without limitation, (i) deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for these losses, (ii) greater than anticipated deterioration in the real estate market conditions in the Company’s market areas, (iii) increased competition with other financial institutions, (iv) the deterioration of the economy in the Company’s market area, (v) continuation of the extremely low short-term interest rate environment or rapid fluctuations in short-term interest rates, (vi) significant downturns in the business of one or more large customers, (vii) changes in state or Federal regulations, policies, or legislation applicable to banks and other financial service providers, including regulatory or legislative developments arising out of current unsettled conditions in the economy, including implementation of the Dodd Frank Wall Street Reform and Consumer Protection Act, (vii) changes in capital levels and loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments, (ix) inadequate allowance for loan losses, (x) the effectiveness of the Company’s activities in improving, resolving or liquidating lower quality assets, (xi) results of regulatory examinations, and (xii) loss of key personnel. These risks and uncertainties may cause the actual results or performance of the Company to be materially different from any future results or performance expressed or implied by such forward-looking statements. The Company’s future operating results depend on a number of factors which were derived utilizing numerous assumptions that could cause actual results to differ materially from those projected in forward-looking statements.

Critical Accounting Estimates

The accounting principles we follow and our methods of applying these principles conform with U.S. generally accepted accounting principles and with general practices within the banking industry. In connection with the application of those principles, we have made judgments and estimates which, in the case of the determination of our allowance for loan losses and the assessment of impairment of the intangibles resulting from our mergers with Dekalb Community Bank and Community Bank of Smith County in 2005 have been critical to the determination of our financial position and results of operations.

Allowance for Loan Losses (“allowance”). Our management assesses the adequacy of the allowance prior to the end of each calendar quarter. This assessment includes procedures to estimate the allowance and test the adequacy and appropriateness of the resulting balance. The level of the allowance is based upon management’s evaluation of the loan portfolio, past loan loss experience, current asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay (including the timing of future payment), the estimated value of any underlying collateral, composition of the loan portfolio, economic conditions, industry and peer bank loan quality indications and other pertinent factors, including regulatory recommendations. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. Loan losses are charged off when management believes that the full collectability of the loan is unlikely. A loan may be partially charged-off after a “confirming event” has occurred which serves to validate that full repayment pursuant to the terms of the loan is unlikely. Allocation of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, is deemed to be uncollectible.

 

27


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Collection of all amounts due according to the contractual terms means that both the interest and principal payments of a loan will be collected as scheduled in the loan agreement.

An impairment allowance is recognized if the fair value of the loan is less than the recorded investment in the loan (recorded investment in the loan is the principal balance plus any accrued interest, net of deferred loan fees or costs and unamortized premium or discount). The impairment is recognized through the allowance. Loans that are impaired are recorded at the present value of expected future cash flows discounted at the loan’s effective interest rate, or if the loan is collateral dependent, impairment measurement is based on the fair value of the collateral, less estimated disposal costs. If the measure of the impaired loan is less than the recorded investment in the loan, the Company recognizes an impairment by creating a valuation allowance with a corresponding charge to the provision for loan losses or by adjusting an existing valuation allowance for the impaired loan with a corresponding charge or credit to the provision for loan losses. Management believes it follows appropriate accounting and regulatory guidance in determining impairment and accrual status of impaired loans.

The level of allowance maintained is believed by management to be adequate to absorb probable losses inherent in the portfolio at the balance sheet date. The allowance is increased by provisions charged to expense and decreased by charge-offs, net of recoveries of amounts previously charged-off.

In assessing the adequacy of the allowance, we also consider the results of our ongoing loan review process. We undertake this process both to ascertain whether there are loans in the portfolio whose credit quality has weakened over time and to assist in our overall evaluation of the risk characteristics of the entire loan portfolio. Our loan review process includes the judgment of management, the input from our independent loan reviewers, and reviews that may have been conducted by bank regulatory agencies as part of their usual examination process. We incorporate loan review results in the determination of whether or not it is probable that we will be able to collect all amounts due according to the contractual terms of a loan.

As part of management’s quarterly assessment of the allowance, management divides the loan portfolio into eleven segments based on bank call reporting requirements. Each segment is then analyzed such that an allocation of the allowance is estimated for each loan segment.

The allowance allocation begins with a process of estimating the probable losses in each of the eleven loan segments. The estimates for these loans are based on our historical loss data for that category over the last eight quarters.

The estimated loan loss allocation for all twelve loan portfolio segments is then adjusted for several “environmental” factors. The allocation for environmental factors is particularly subjective and does not lend itself to exact mathematical calculation. This amount represents estimated probable inherent credit losses which exist, but have not yet been identified, as of the balance sheet date, and are based upon quarterly trend assessments in delinquent and nonaccrual loans, unanticipated charge-offs, credit concentration changes, prevailing economic conditions, changes in lending personnel experience, changes in lending policies or procedures and other influencing factors. These environmental factors are considered for each of the twelve loan segments and the allowance allocation, as determined by the processes noted above for each component, is increased or decreased based on the incremental assessment of these various environmental factors.

 

28


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

We then test the resulting allowance by comparing the balance in the allowance to industry and peer information. Our management then evaluates the result of the procedures performed, including the result of our testing, and concludes on the appropriateness of the balance of the allowance in its entirety. The board of directors reviews and approves the assessment prior to the filing of quarterly and annual financial information.

Other-than-temporary Impairment. A decline in the fair value of any available-for-sale or held-to-maturity security below cost that is deemed to be other-than-temporary results in a reduction in the carrying amount of the security. To determine whether impairment is other-than-temporary, management considers whether the entity expects to recover the entire amortized cost basis of the security by reviewing the present value of the future cash flows associated with the security. The shortfall of the present value of the cash flows expected to be collected in relation to the amortized cost basis is referred to as a credit loss and is deemed to be other-than temporary impairment. If a credit loss is identified, the credit loss is recognized as a charge to earnings and a new cost basis for the security is established. If management concludes that no credit loss exists and it is not more-likely-than-not that it will be required to sell the security before maturity, then the security is not other-than-temporarily impaired and the shortfall is recorded as a component of equity.

Results of Operations

Net earnings increased 14.1% to $2,825,000 for the three months ended March 31, 2012 from $2,476,000 in the first quarter of 2011. The increase in net earnings was primarily due to a 14.3% increase in non-interest income and a 5.6% increase in net interest income, partially offset by a 3.0% increase in the non-interest expense. Net yield on earning assets for the quarter ended March 31, 2012 was 3.75% as compared to 3.80% for the first quarter of 2011, reflecting an increase in average earning assets exceeding the increase in net interest income.

The average balances, interest, and average rates for the three-month periods ended March 31, 2012 and March 31, 2011 are presented in the following table:

 

     March 31, 2012      March 31, 2011  
     Average     Interest     Income/      Average     Interest     Income/  
     Balance     Rate     Expense      Balance     Rate     Expense  

Loans, net of unearned interest

   $ 1,125,503        5.78     16,273         1,093,610        5.94     16,239   

Investment securities—taxable

     309,307        1.76        1,358         267,633        2.18        1,461   

Investment securities—tax exempt

     12,896        3.14        101         14,857        2.96        110   

Taxable equivalent adjustment

     —          1.62        52         —          1.53        57   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total tax-exempt investment securities

     12,896        4.76        153         14,857        4.49        167   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total investment securities

     322,203        1.88        1,511         282,490        2.30        1,628   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Loans held for sale

     12,068        3.24        98         5,148        4.20        54   

Federal funds sold

     30,215        .43        33         12,989        .46        15   

Restricted equity securities

     3,012        5.63        42         3,012        4.78        36   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total earning assets

     1,493,001        4.80     17,957         1,397,249        5.14     17,972   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Cash and due from banks

     43,834             35,456       

Allowance for loan losses

     (25,754          (22,325    

Bank premises and equipment

     35,466             32,040       

Other assets

     46,314             46,846       
  

 

 

        

 

 

     

Total assets

   $ 1,592,861             1,489,266       
  

 

 

        

 

 

     

 

29


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

     March 31, 2012      March 31, 2011  
     Average      Interest     Income/      Average      Interest     Income/  
     Balance      Rate     Expense      Balance      Rate     Expense  

Deposits:

               

Negotiable order of withdrawal accounts

   $ 262,521         0.77     506         240,532         .92     551   

Money market demand accounts

     309,563         0.72        555         260,863         .79        513   

Individual retirement accounts

     98,439         1.87        460         95,645         2.27        542   

Other savings deposits

     94,676         .85        202         63,642         1.11        177   

Certificates of deposit $100,000 and over

     265,087         1.68        1,116         273,632         2.12        1,453   

Certificates of deposit under $100,000

     281,542         1.55        1,094         296,527         1.95        1,447   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total interest-bearing deposits

     1,311,828         1.20        3,933         1,230,841         1.52        4,683   

Securities sold under repurchase agreements

     7,303         0.77        14         5,849         .96        14   

Federal funds purchased

     384         1.04        1         763         1.05        2   

Advances from Federal Home

               

Loan Bank

     —           —          —           —           —          —     
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total interest-bearing liabilities

     1,319,515         1.20        3,948         1,237,453         1.52        4,699   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Demand deposits

     108,966              102,647        

Other liabilities

     7,275              6,506        

Stockholders’ equity

     157,105              142,660        
  

 

 

         

 

 

      

Total liabilities and stockholders’ equity

   $ 1,592,861            $ 1,489,266        
  

 

 

         

 

 

      

Net interest income

        $ 14,009            $ 13,273   
       

 

 

         

 

 

 

Net yield on earning assets (1)

        3.75           3.80  
     

 

 

         

 

 

   

Net interest spread (2)

        3.60           3.62  
     

 

 

         

 

 

   

 

(1) Net interest income divided by average earning assets.
(2) Average interest rate on earning assets less average interest rate on interest-bearing liabilities.

Net Interest Income

Net interest income represents the amount by which interest earned on various earning assets exceeds interest paid on deposits and other interest-bearing liabilities and is the most significant component of the Company’s earnings. The Company’s interest income, excluding tax equivalent adjustments, decreased $10,000, or 0.1%, to $17,905,000 during the three months ended March 31, 2012, reflecting the continuing impact of low interest rate policies initiated by the Federal Reserve Board and a growth in the lower yielding securities portfolio. The ratio of average earning assets to total average assets was 93.7% and 93.8% for the quarters ended March 31, 2012 and March 31, 2011, respectively.

Interest expense decreased $751,000, or 16.0%, to $3,948,000 for the three months ended March 31, 2012 compared to the same period in 2011. The decrease for the quarter ended March 31, 2012 was due to a decrease in the rates paid on deposits, particularly time deposits, reflecting the low interest rate environment and a shift in the mix of deposits from certificates of deposits to transaction and money market accounts.

Interest expense declined more than interest income and resulted in an increase in net interest income, before the provision for loan losses, of $741,000, or 5.6%, for the first three months of 2012 as compared to the first quarter of 2011.

 

30


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

Provision for Loan Losses

The provision for loan losses was $2,256,000 and $1,969,000, respectively, for the first three months of 2012 and 2011, respectively. The increase in the provision was primarily related to management’s quarterly assessment of the adequacy of the allowance for loan losses. The allowance for loan losses is based on past loan experience and other factors which, in management’s judgment, deserve current recognition in estimating possible loan losses. Such factors include growth and composition of the loan portfolio, review of specific problem loans, review of updated appraisals and borrower financial information, the recommendations of the Company’s regulators, and current economic conditions that may affect the borrower’s ability to repay. Management has in place a system designed for monitoring its loan portfolio and identifying potential problem loans. Net charge-offs of $980,000 was less than the provision by $1,276,000 which increased the allowance for loan losses to $25,801,000, an increase of 5.2% from $24,525,000 at December 31, 2011. The allowance for loan losses was 2.27% and 2.18% of total loans outstanding at March 31, 2012 and December 31, 2011, respectively.

Management believes the allowance for loan losses at March 31, 2012 to be adequate, but if economic conditions continue to deteriorate beyond management’s current expectations and additional charge-offs are incurred, the allowance for loan losses may require an increase through additional provision for loan losses which would negatively impact earnings.

Non-Interest Income

The components of the Company’s non-interest income include service charges on deposit accounts, gains on the sale of investments, other fees and commissions, and gain on sale of loans. Total non-interest income for the three months ended March 31, 2012 increased to $3,690,000 from $3,228,000, or 14.3%, for the same period in 2011. Gain on sale of loans increased $321,000, or 106.9%, to $621,000 relating primarily to the increase in mortgage originations and refinancings which occurred during the first quarter of 2012 as compared to the first quarter of 2011. Other fees and commissions increased $193,000, or 11.8%, to $1,833,000 in the first quarter of 2012 when compared to the first quarter of 2011 relating primarily to an increase in income on brokerage accounts. Other fees and commissions include income on brokerage accounts, insurance policies sold, and various other fees. Service charges on deposit accounts decreased $78,000, or 6.0%, to $1,210,000 for the three months ended March 31, 2012 when compared to the same period in 2011. The Company expects to see a continued slight decline in service charges on deposit accounts due to the FDIC Final Overdraft Payment Supervisory Guidance.

Non-Interest Expenses

Non-interest expenses consist primarily of employee costs, occupancy expenses, furniture and equipment expenses, data processing expenses, directors’ fees, advertising and marketing expenses, expenses associated with carrying and selling other real estate, and other operating expenses. Total non-interest expenses increased $315,000, or 3.0%, during the first three months of 2012 compared to the same period in 2011. The increase in non-interest expenses is primarily attributable to an increase in salaries and employee benefits associated with the number of employees necessary to support the Company’s operations as well as an increase in the loss on the sale of other real estate. Other operating expenses for the three months ended March 31, 2012 decreased $504,000 relating primarily to a decrease in costs associated with the disposal and maintenance of other real estate.

 

31


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

Income Taxes

The Company’s income tax expense was $1,806,000 for the three months ended March 31, 2012, an increase of $252,000 over the comparable period in 2011. The percentage of income tax expense to net income before taxes was 39.0% and 38.6% for the periods ended March 31, 2012 and 2011, respectively.

Financial Condition

Balance Sheet Summary

The Company’s total assets increased 3.26% to $1,628,829,000 during the three months ended March 31, 2012 from $1,577,370,000 at December 31, 2011. Loans, net of allowance for loan losses, totaled $1,112,626,000 at March 31, 2012, a 1.26% increase from $1,098,733,000 at December 31, 2011. Securities increased $15,000,000, or 4.6%, to $340,195,000 at March 31, 2012 and Federal funds sold increased $17,495,000 to $30,710,000 at March 31, 2012 from $13,215,000 at December 31, 2011, resulting from a growth in deposits that exceeded loan growth and a reduction in securities.

Total liabilities increased by 3.5% to $1,469,382,000 during the three months ended March 31, 2012 compared to $1,420,022,000 at December 31, 2011. This increase was composed primarily of a $46,655,000 increase in total deposits from $1,406,042,000 at December 31, 2011 to $1,452,697,000 at March 31, 2012. The increase in deposits included an increase in demand deposits, NOW and savings accounts of $71,637,000 offset by a decrease in time deposits of $24,982,000. Securities sold under repurchase agreements increased $578,000 during the quarter ended March 31, 2012.

Non Performing Assets

The following tables present the Company’s non-accrual loans and past due loans as of March 31, 2012 and December 31, 2011.

Loans on Nonaccrual Status

 

     In Thousands  
     2012      2011  

Residential 1-4 family

   $ 1,824         2,256   

Multifamily

     —           —     

Commercial real estate

     5,214         4,995   

Construction

     15,231         14,378   

Farmland

     2,527         2,695   

Second mortgages

     606         606   

Equity lines of credit

     —           —     

Commercial

     35         35   

Installment and other

     —           —     
  

 

 

    

 

 

 

Total

   $ 25,437       $ 24,965   
  

 

 

    

 

 

 

 

 

32


WILSON BANK HOLDING COMPANY

FORM 10-Q, CONTINUED

 

Past due loans:

 

     (In thousands)  
     30-59
Days
Past Due
     60-89
Days
Past Due
     Greater
than

90 Days
     Total
Past Due
     Current      Total
Loans
     Recorded
Investment
Greater Than
90 Days and
Accruing
 

March 31, 2012

                    

Residential 1-4 family

     4,287         1,212         2,773         8,272         330,832         339,104         949   

Multifamily

     —           —           —           —           10,439         10,439         —     

Commercial real estate

     712         —           7,025         7,737         436,383         444,120         1,811   

Construction

     672         32         15,231         15,935         160,042         175,977         —     

Farmland

     12         214         2,527         2,753         25,785         28,538         —     

Second Mortgages

     717         —           630         1,347         12,323         13,670         24   

Equity Lines of Credit

     219         23         —           242         37,629         37,871         —     

Commercial

     486         35         67         588         38,320         38,908         32   

Agricultural

     2         42         5         49         2,340