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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
MARK ONE
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED June 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD
FROM _______________ TO _______________
Commission File Number 0-20402
WILSON BANK HOLDING COMPANY
------------------------------------------------------
(Exact Name of Registrant As Specified in its Charter)
Tennessee 62-1497076
- ------------------------------- ----------------------------------
(State or Other Jurisdiction of (IRS Employer Identification
Incorporation or Organization) Number)
623 West Main Street, Lebanon, TN 37087
---------------------------------------------------
(Address of Principal Executive Offices and Zip Code)
(615) 444-2265
---------------------------------------------------
(Registrant's Telephone Number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock outstanding: 2,106,686 shares at August 13, 2002
1
PART 1: FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited consolidated financial statements of the Company and its
subsidiaries are as follows:
Consolidated Balance Sheets - June 30, 2002 and December 31,
2001.
Consolidated Statements of Earnings - For the three months and
six months ended June 30, 2002 and 2001.
Consolidated Statements of Comprehensive Earnings - For the
three months and six months ended June 30, 2002 and 2001.
Consolidated Statements of Cash Flows - For the six months
ended June 30, 2002 and 2001.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Disclosures required by Item 3 are incorporated by reference to
Management's Discussion and Analysis of Financial Condition and
Results of Operation
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
Signatures
2
WILSON BANK HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2002 AND DECEMBER 31, 2001
(UNAUDITED)
June 30, December 31,
2002 2001
--------- ------------
(In Thousands)
Assets
Loans $ 528,075 494,766
Less: Allowance for loan losses (6,274) (5,489)
--------- -------
Net loans 521,801 489,277
Securities:
Held to maturity, at cost (market value $16,170,000 and $16,387,000,
respectively) 15,740 16,130
Available-for-sale, at market (amortized cost $89,992,000 and $ 80,239,000,
respectively) 90,857 80,428
--------- -------
Total securities 106,597 96,558
Loans held for sale 1,573 4,369
Other interest bearing assets 2,405 2,003
Federal funds sold 18,272 31,506
--------- -------
Total earning assets 650,648 623,713
Cash and due from banks 34,208 20,154
Bank premises and equipment, net 15,366 15,139
Accrued interest receivable 4,589 4,648
Other real estate 862 415
Deferred income tax asset 1,328 1,579
Other assets 2,382 2,156
--------- -------
Total assets $ 709,383 667,804
========= =======
Liabilities and Stockholders' Equity
Deposits $ 637,537 602,576
Securities sold under repurchase agreements 11,062 8,551
Federal Home Loan Bank Advances 1,110 1,370
Accrued interest and other liabilities 3,910 4,466
Minority interest 5,345 4,870
--------- -------
Total liabilities 658,964 621,833
--------- -------
Stockholders' equity:
Common stock, $2.00 par value; authorized 5,000,000 shares, issued 2,079,994
at June 30, 2002 and 2,054,089 shares at
December 31, 2001, respectively 4,160 4,108
Additional paid-in capital 12,819 11,847
Retained earnings 32,949 29,903
Net unrealized gains on available-for-sale securities, net of income
tax expense of $ 300,000 and $69,000, respectively 491 113
--------- -------
Total stockholders' equity 50,419 45,971
--------- -------
Total liabilities and stockholders' equity $ 709,383 667,804
========= ========
See accompanying notes to consolidated financial statements (unaudited).
3
WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------------------------------
2002 2001 2002 2001
---- ---- ---- ----
(Dollars In Thousands (Dollars In Thousands
Except Per Share Amounts) Except Per Share Amounts)
Interest income:
Interest and fees on loans $10,235 10,449 $20,411 20,607
Interest and dividends on securities:
Taxable securities 1,269 1,488 2,368 2,833
Exempt from Federal income taxes 184 182 357 368
Interest on loans held for sale 27 54 71 78
Interest on Federal funds sold 133 388 327 938
------- ------ ------- ------
Total interest income 11,848 12,561 23,534 24,824
------- ------ ------- ------
Interest expense:
Interest on negotiable order of withdrawal accounts 97 142 187 281
Interest on money market and savings accounts 1,016 1,226 1,947 2,514
Interest on certificates of deposit 3,365 5,386 7,014 10,745
Interest on securities sold under repurchase agreements 55 101 105 208
Interest on Federal Home Loan Bank advances 20 27 44 60
Interest on Fed funds purchased 4 -- 5 --
------- ------ ------- ------
Total interest expense 4,557 6,882 9,302 13,808
------- ------ ------- ------
Net interest income before provision for possible
loan losses 7,291 5,679 14,232 11,016
------- ------ ------- ------
Provision for possible loan losses 512 447 1,045 888
------- ------ ------- ------
Net interest income after provision for possible
loan losses 6,779 5,232 13,187 10,128
------- ------ ------- ------
Non-interest income:
Service charges on deposit accounts 1,077 1,027 1,993 1,906
Other fees and commissions 332 545 724 1,073
Gain on sale of loans 249 346 517 605
Gain on sale of other real estate -- 12 -- --
------- ------ ------- ------
Total non-interest income 1,658 1,930 3,234 3,584
------- ------ ------- ------
Non-interest expense:
Salaries and employee benefits 2,684 2,466 5,263 4,791
Occupancy expenses, net 278 303 601 583
Furniture and equipment expense 94 307 399 634
Data processing expense 82 102 187 197
Directors' fees 236 138 324 299
Other operating expenses 1,285 986 2,310 1,853
Loss on sale of other real estate 46 -- 43 5
Minority interest in net earnings of subsidiaries 236 153 452 282
------- ------ ------- ------
Total non-interest expense 4,941 4,455 9,579 8,644
------- ------ ------- ------
Earnings before income taxes 3,496 2,707 6,842 5,068
Income taxes 1,367 1,037 2,666 1,928
------- ------ ------- ------
Net earnings $ 2,129 1,670 $ 4,176 3,140
======= ===== ======= =====
Basic earnings per common share $ 1.02 .82 $ 2.01 1.55
======= ===== ======= =====
Diluted earnings per common share $ 1.02 .82 $ 2.01 1.55
======= ===== ======= =====
Dividends per share $ -- -- $ .55 .45
======= ===== ======= =====
See accompanying notes to consolidated financial statements (unaudited).
4
WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2002 2001 2002 2001
------ ------ ------ -----
(In Thousands) (In Thousands)
Net earnings $2,129 1,670 $4,176 3,140
------ ------ ------ -----
Other comprehensive earnings (losses), net of tax:
Unrealized gains (losses) on available-for-sale
securities
arising during period, net of tax expense of $331,000,
tax benefit of $84,000, tax expense of $231,000,
and tax expense of $ 416,000, respectively 540 (138) 378 680
------ ------ ------ -----
Other comprehensive earnings (losses) 540 (138) 378 680
------ ------ ------ -----
Comprehensive earnings $2,669 1,532 $4,554 3,820
====== ====== ====== =====
See accompanying notes to consolidated financial statements (unaudited).
5
WILSON BANK HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2002 AND 2001
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
2002 2001
-------- -------
(In Thousands)
Cash flows from operating activities:
Interest received $ 23,507 24,354
Fees and commissions received 2,717 2,979
Proceeds from sale of loans 24,567 31,660
Origination of loans held for sale (21,254) (34,186)
Interest paid (10,010) (13,481)
Cash paid to suppliers and employees (8,912) (7,517)
Income taxes paid (2,752) (2,253)
-------- -------
Net cash provided by operating activities 7,863 1,556
-------- -------
Cash flows from investing activities:
Proceeds from maturities of held-to-maturity securities 1,471 1,214
Proceeds from maturities of available-for-sale securities 33,425 41,944
Purchase of held-to-maturity securities (1,076) (1,173)
Purchase of available-for-sale securities (43,145) (48,926)
Loans made to customers, net of repayments (34,646) (31,611)
Purchase of premises and equipment (394) (309)
Proceeds from sale of other real estate 587 552
Proceeds from sale of premises and equipment -- 118
Increase in other interest bearing assets (354) --
-------- -------
Net cash used in investing activities (44,132) (38,191)
-------- -------
Cash flows from financing activities:
Net increase (decrease) in non-interest bearing, savings
and NOW deposit accounts (13,335) 7,170
Net increase in time deposits 48,296 25,070
Increase in securities sold under repurchase agreements 2,511 2,345
Net decrease in advances from Federal Home Loan Bank (260) (344)
Dividends paid (1,129) (903)
Dividends paid to minority shareholders (162) (120)
Proceeds from sale of stock to minority shareholders 145 107
Proceeds from sale of common stock 1,023 819
Proceeds from exercise of stock options -- 31
-------- -------
Net cash provided by financing activities 37,089 34,175
-------- -------
Net increase (decrease) in cash and cash equivalents 820 (2,460)
-------- -------
Cash and cash equivalents at beginning of period 51,660 57,866
-------- -------
Cash and cash equivalents at end of period $ 52,480 55,406
======== =======
See accompanying notes to consolidated financial statements (unaudited).
6
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
SIX MONTHS ENDED JUNE 30, 2002 AND 2001
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
2002 2001
---- ----
(In Thousands)
Reconciliation of net earnings to net cash provided by Operating activities:
Net earnings $ 4,176 3,140
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 129 536
Provision for loan losses 1,045 888
Minority interests in net earnings of commercial bank
Subsidiaries 452 282
FHLB dividend reinvestment (48) (58)
Loss on sale of other real estate 43 5
Decrease (increase) in loans held for sale 2,796 (3,131)
Increase in deferred tax assets (7) (7)
Increase in other assets, net (226) (388)
Decrease in taxes payable (79) (318)
Decrease in interest receivable 59 (301)
Increase in other liabilities 231 581
Increase (decrease) in interest payable (708) 327
------- ------
Total adjustments 3,687 (1,584)
------- ------
Net cash provided by operating activities $ 7,863 1,556
======= ======
Supplemental schedule of non-cash activities:
Unrealized gain in values of securities
available-for-sale, net of income tax expense of $231,000
and income tax expense of $ 416,000 for the six months ended
June 30,2002 and 2001, respectively $ 378 680
======= ======
Non-cash transfers from loans to other real estate $ 1,077 260
======= ======
See accompanying notes to consolidated financial statements (unaudited).
7
WILSON BANK HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The unaudited consolidated financial statements include the accounts of Wilson
Bank Holding Company (Company), its wholly-owned subsidiary, Wilson Bank and
Trust, Hometown Finance Company, a wholly-owned subsidiary of Wilson Bank and
Trust, DeKalb Community Bank, a 50% owned subsidiary, and Community Bank of
Smith County, a 50% owned subsidiary. The assets and liabilities of Hometown
Finance were distributed to Wilson Bank and Trust in December of 2001.
The accompanying consolidated financial statements have been prepared, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations.
In the opinion of management, the consolidated financial statements contain all
adjustments and disclosures necessary to summarize fairly the financial position
of the Company as of June 30, 2002 and December 31, 2001, the results of
operations for the three months and six months ended June 30, 2002 and 2001,
comprehensive earnings for the three months and six months ended June 30, 2002
and 2001 and changes in cash flows for the six months ended June 30, 2002 and
2001. All significant intercompany transactions have been eliminated. The
interim consolidated financial statements should be read in conjunction with the
notes to the consolidated financial statements presented in the Company's 2001
Annual Report to Stockholders. The results for interim periods are not
necessarily indicative of results to be expected for the complete fiscal year.
ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses were as follows:
Six Months Ended
June 30,
-----------------------
2002 2001
---- ----
(In Thousands)
Balance, January 1, 2002 and 2001, respectively $ 5,489 $ 4,525
Add (deduct):
Losses charged to allowance (394) (497)
Recoveries credited to allowance 134 136
Provision for loan losses 1,045 888
------- -------
Balance, June 30, 2002 and 2001, respectively $ 6,274 $ 5,052
======= =======
8
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The purpose of this discussion is to provide insight into the
financial condition and results of operations of the Company and its
subsidiaries. This discussion should be read in conjunction with the
consolidated financial statements. Reference should also be made to the
Company's Annual Report on Form 10-K for the year ended December 31, 2001 for a
more complete discussion of factors that impact liquidity, capital and the
results of operations.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains certain forward-looking statements
regarding, among other things, the anticipated financial and operating results
of the Company. Investors are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release any modifications or revisions to
these forward-looking statements to reflect events or circumstances occurring
after the date hereof or to reflect the occurrence of unanticipated events.
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company cautions investors that
future financial and operating results may differ materially from those
projected in forward-looking statements made by, or on behalf of, the Company.
The words "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, increased competition with
other financial institutions, lack of sustained growth in the Company's market
area, rapid fluctuations in interest rates, significant downturns in the
business of one or more large customers, changes in the legislative and
regulatory environment, inadequate allowance for loan losses and loss of key
personnel. These risks and uncertainties may cause the actual results or
performance of the Company to be materially different from any future results or
performance expressed or implied by such forward-looking statements. The
Company's future operating results depend on a number of factors which were
derived utilizing numerous assumptions and other important factors that could
cause actual results to differ materially from those projected in
forward-looking statements.
RESULTS OF OPERATIONS
Net earnings increased 33.0 % to $ 4,176,000 for the six months
ended June 30, 2002 from $3,140,000 in the first six months of 2001. Net
earnings were $ 2,129,000 for the quarter ended June 30, 2002, an increase of $
459,000 or 27.5% from $ 1,670,000 for the three months ended June 30, 2001 and
an increase of $ 82,000 or 4.0% over the quarter ended March 31, 2002. The
increase in net earnings during the six months ended June 30, 2002 was primarily
due to a 29.2% increase in net interest income.
9
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
NET INTEREST INCOME
Net interest income represents the amount by which interest earned
on various earning assets exceeds interest paid on deposits and other
interest-bearing liabilities and is the most significant component of the
Company's earnings. The Company's total interest income, excluding tax
equivalent adjustments, decreased $ 1,290,000 or 5.2% during the six months
ended June 30, 2002 as compared to the same period in 2001. The decrease in
total interest income was $ 713,000 or 5.7% for the quarter ended June 30, 2002
as compared to the quarter ended June 30, 2001. Interest income increased
$162,000 or 1.4% over the first three months of 2002. The decrease in the first
six months of 2002 was primarily attributable to the interest rate environment.
The ratio of average earning assets to total average assets was 95.7% and 94.5%
for the six months ended June 30, 2002 and June 30, 2001, respectively.
Interest expense decreased $ 4,506,000 or 32.6% for the six months
ended June 30, 2002 as compared to the same period in 2001. The decrease was $
2,325,000 or 33.8% for the three months ended June 30, 2002 as compared to the
same period in 2001. Interest expense decreased $ 188,000 or 4.0% for the
quarter ended June 30, 2002 over the first three months of 2002. The overall
decrease in total interest expense for the first six months of 2002 was
primarily attributable to a decrease in the rates paid on deposits.
The foregoing resulted in an increase in net interest income,
before the provision for possible loan losses, of $ 3,216,000 or 29.2% for the
first six months of 2002 as compared to the same period in 2001. The increase
was $ 1,612,000 or 28.4% for the quarter ended June 30, 2002 compared to the
quarter ended June 30, 2001 and an increase of $ 350,000 or 5.0% when compared
to the first quarter of 2002.
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses was $ 1,045,000 and $
888,000 for the first six months of 2002 and 2001, respectively. The provision
for loan losses during the three month periods ended June 30, 2002 and 2001 was
$ 512,000 and $ 447,000, respectively. The provision for possible loan losses is
based on past loan experience and other factors which, in management's judgment,
deserve current recognition in estimating possible loan losses. Such factors
include past loan loss experience, growth and composition of the loan portfolio,
review of specific problem loans, the relationship of the allowance for loan
losses to outstanding loans, and current economic conditions that may affect the
borrower's ability to repay. Management has in place a system designed for
monitoring its loan portfolio in an effort to identify potential problem loans.
The provision for possible loan losses raised the allowance for possible loan
losses (net of charge offs and recoveries) to $ 6,274,000, an increase of 14.3%
from $5,489,000 at December 31, 2001. The allowance for possible loan losses as
a percentage of total outstanding loans was 1.2% and 1.1% at June 30, 2002 and
December 31, 2001, respectively.
10
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
PROVISION FOR POSSIBLE LOAN LOSSES, CONTINUED
The level of the allowance and the amount of the provision involve
evaluation of uncertainties and matters of judgment. The Company maintains an
allowance for loan losses which management believes is adequate to absorb losses
inherent in the loan portfolio. A formal review is prepared bi-monthly by the
Loan Review Officer to assess the risk in the portfolio and to determine the
adequacy of the allowance for loan losses. The review includes analysis of
historical performance, the level of non-performing and adversely rated loans,
specific analysis of certain problem loans, loan activity since the previous
assessment, reports prepared by the Loan Review Officer, consideration of
current economic conditions, and other pertinent information. The level of the
allowance to net loans outstanding will vary depending on the overall results of
this bi-monthly assessment. The review is presented to the Finance Committee and
subsequently approved by the Board of Directors. Management believes the
allowance for possible loan losses at June 30, 2002 to be adequate.
NON-INTEREST INCOME
The components of the Company's non-interest income include
service charges on deposit accounts, other fees and commissions and gain on sale
of loans. Total non-interest income for the six months ended June 30, 2002
decreased 9.8% to $3,234,000 from $3,584,000 for the same period in 2001. The
decrease was $272,000 or 14.1% during the quarter ended June 30, 2002 compared
to the second quarter in 2001 and there was an increase of $79,000 or 5.0% over
the first three months of 2002. The decrease for the first six months of 2002
was due primarily to decreases in other fees and commissions and gain on sale of
loans. Gain on sale of loans decreased $88,000 or 14.5% during the six months
ended June 30, 2002 compared to the same period in 2001. Gain on sale of loans
decreased $97,000 or 28.0% during the quarter ended June 30, 2002 compared to
the same quarter in 2001. Other fees and commissions totaled $724,000 and
$1,073,000 during the six months ended June 30, 2002, respectively, a decrease
of $349,000 or 32.5% and $332,000 and $545,000 during the quarters ended June
30, 2002 and 2001, respectively, a decrease of $213,000 or 39.1%.
NON-INTEREST EXPENSES
Non-interest expenses consist primarily of employee costs,
occupancy expenses, furniture and equipment expenses, data processing expenses,
loss on sale of other real estate, other operating expenses and minority
interest in net earnings of subsidiaries. Total non-interest expenses increased
$935,000 or 10.8% during the first six months of 2002 compared to the same
period in 2001. The increases for the quarter ended June 30, 2002 was $486,000
or 10.9% as compared to the comparable quarter in 2001 and $300,000 or 6.5% as
compared to the first three months of 2002. The increase in non-interest
expenses are attributable primarily to increases in employee salaries and
benefits associated with an increase in the number of employees necessary to
support the Company's operations. The number of employees increased to 247 at
June 30, 2002 an increase from 234 at June 30, 2001. Increases in occupancy and
furniture and equipment expenses were also due to the Company's growth. Other
operating expenses for the six months ended June 30, 2002 increased to
$2,310,000 from $1,853,000 for the comparable period in 2001. Other operating
expenses increased $299,000 or 30.3% during the quarter ended June 30, 2002 as
compared to the same period in 2001. These expenses include Federal deposit
insurance premiums, supplies and general operating costs which increased as a
result of continued growth of the Company.
11
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
INCOME TAXES
The Company's income tax expense was $2,666,000 for the six months
ended June 30, 2002, an increase of $738,000 over the comparable period in 2001.
Income tax expense was $1,367,000 for the quarter ended June 30, 2002, and
increase of $330,000 over the same period in 2001. The percentage of income tax
expense to net income before taxes was 39.0% and 38.0% for the six months ended
June 30, 2002 and 2001, respectively and 39.1% and 38.3% for the quarters ended
June 30, 2002 and 2001. The percentage of income tax expense to net income
before taxes was 38.8% for the first three months of 2002. The increase in the
percentage is due to a decrease in the amount of tax exempt interest income as a
percentage of total interest income. This percentage was 1.5% for the six months
ended June 30, 2002 and June 30, 2001, respectively. The effective tax rate
exceeds the statutory tax rate as a result of permanent differences related to
life insurance premiums.
EARNINGS PER SHARE
The computation of basic earnings per share is based on the
weighted average number of common shares outstanding during the period. The
computation of diluted earnings per share for the Company begins with the basic
earnings per share plus the effect of common shares contingently issuable from
stock options.
The following is a summary of components comprising basic and
diluted earnings per share (EPS) for the three months and six months ended June
30, 2002 and 2001:
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -------------------------
2002 2001 2002 2001
---------- --------- ---------- ---------
(Dollars in Thousands (Dollars in Thousands
Except Per Share Amounts) Except Per Share Amounts)
Basic EPS Computation:
Numerator - Earnings available to common
Stockholders $ 2,129 1,670 $ 4,176 3,140
---------- --------- ---------- ---------
Denominator - Weighted average number
of common shares outstanding 2,079,994 2,029,555 2,075,557 2,025,616
---------- --------- ---------- ---------
Basic earnings per common share $ 1.02 .82 $ 2.01 1.55
========== ========= ========== =========
Diluted EPS Computation:
Numerator - Earnings available to common
Stockholders $ 2,129 1,670 $ 4,176 3,140
---------- --------- ---------- ---------
Denominator - Weighted average number
of common shares outstanding 2,079,994 2,029,555 2,075,557 2,025,616
Dilutive effect of stock options 2,083 809 2,083 809
---------- --------- ---------- ---------
2,082,077 2,030,364 2,077640 2,026,425
---------- --------- ---------- ---------
Diluted earnings per common share $ 1.02 .82 $ 2.01 1.55
========== ========= ========== =========
12
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
FINANCIAL CONDITION
BALANCE SHEET SUMMARY
The Company's total assets increased 6.2% to $ 709,383,000 during
the six months ended June 30, 2002 from $667,804,000 at December 31, 2001. Total
assets increased $5,573,000 or 0.8% and $36,006,000 or 5.4% during the
three-month periods ended June 30, 2002 and March 31, 2002, respectively. Loans,
net of allowance for possible loan losses, totaled $521,801,000 at June 30,
2002, a 6.6% increase compared to $ 489,277,000 at December 31, 2001. Net loans
increased $21,330,000 or 4.3% and $11,194,000 or 2.3% during the quarters ended
June 30, 2002 and March 31, 2002, respectively. These increases were primarily
due to the Company's ability to increase its market share of such loans while
maintaining its loan underwriting standards. Securities increased $10,039,000 or
10.4% to $106,597,000 at June 30, 2002 from $96,558,000 at December 31, 2001.
Securities increased $9,184,000 or 9.4% during the three months ended June 30,
2002. The increase in securities included a net unrealized gain of $ 676,000
during the six month period ending June 30, 2002 as a result of the increase in
the unrealized gain on available-for-sale securities. Federal funds sold
decreased $13,234,000 to $ 18,272,000 at June 30, 2002 from $ 31,506,000 at
December 31, 2001.
Total liabilities increased by 6.0% to $658,964,000 at June 30,
2002 compared to $621,833,000 at December 31, 2001. The increase by quarter
totaled $2,904,000 or .4% and $34,227,000 or 5.5% during the quarters ended June
30, 2002 and March 31, 2002, respectively. These increases were composed
primarily of a $34,961,000 or 5.8% increase in total deposits and an increase of
$2,511,000 or 29.4% in securities sold under repurchase agreements during the
six months ended June 30, 2002. Federal Home Loan Bank advances decreased
$260,000 during the six months ended June 30, 2002.
The following schedule details the loans of the Company at June
30, 2002 and December 31, 2001:
(In Thousands)
------------------ ----------------
June 30, December 31,
2002 2001
---------------- ----------------
Commercial, financial & agricultural $ 94,932 190,700
Real estate - construction 30,812 25,044
Real estate - mortgage 353,717 228,316
Installment 49,252 50,741
--------------- ----------------
528,713 494,801
Unearned interest (638) (35)
--------------- ----------------
$ 528,075 $ 494,766
=============== ================
13
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
The Company follows the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment
of a Loan" and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures". These pronouncements apply to impaired
loans except for large groups of smaller-balance homogeneous loans that are
collectively evaluated for impairment including credit card, residential
mortgage, and consumer installment loans.
A loan is impaired when it is probable that the Company will be
unable to collect the scheduled payments of principal and interest due under the
contractual terms of the loan agreement. Impaired loans are measured at the
present value of expected future cash flows discounted at the loan's effective
interest rate, at the loan's observable market price, or the fair value of the
collateral if the loan is collateral dependent. If the measure of the impaired
loan is less than the recorded investment in the loan, the Company shall
recognize an impairment by creating a valuation allowance with a corresponding
charge to the provision for loan losses or by adjusting an existing valuation
allowance for the impaired loan with a corresponding charge or credit to the
provision for loan losses.
The Company's first mortgage single family residential, consumer
and credit card loans which total approximately $ 285,537,000, $ 61,781,000 and
$ 2,030,000, respectively at June 30, 2002, are divided into various groups of
smaller-balance homogeneous loans that are collectively evaluated for impairment
and thus are not subject to the provisions of SFAS Nos. 114 and 118.
Substantially all other loans of the Company are evaluated for impairment under
the provisions of SFAS Nos. 114 and 118.
The Company considers all loans subject to the provisions of SFAS
114 and 118 that are on nonaccrual status to be impaired. Loans are placed on
nonaccrual status when doubt as to timely collection of principal or interest
exists, or when principal or interest is past due 90 days or more unless such
loans are well-secured and in the process of collection. Delays or shortfalls in
loan payments are evaluated with various other factors to determine if a loan is
impaired. Generally, delinquencies under 90 days are considered insignificant
unless certain other factors are present which indicate impairment is probable.
The decision to place a loan on nonaccrual status is also based on an evaluation
of the borrower's financial condition, collateral, liquidation value, and other
factors that affect the borrower's ability to pay.
Generally, at the time a loan is placed on nonaccrual status, all
interest accrued on the loan in the current fiscal year is reversed from income,
and all interest accrued and uncollected from the prior year is charged off
against the allowance for loan losses. Thereafter, interest on nonaccrual loans
is recognized as interest income only to the extent that cash is received and
future collection of principal is not in doubt. If the collectibility of
outstanding principal is doubtful, such interest received is applied as a
reduction of principal. A nonaccrual loan may be restored to accruing status
when principal and interest are no longer past due and unpaid and future
collection of principal and interest on a timely basis is not in doubt. At June
30, 2002, the Company had nonaccrual loans totaling $177,000 as compared to
$169,000 at December 31, 2001.
14
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
Other loans may be classified as impaired when the current net
worth and financial capacity of the borrower or of the collateral pledged, if
any, is viewed as inadequate. In those cases, such loans have a well-defined
weakness or weaknesses that jeopardize the liquidation of the debt, and if such
deficiencies are not corrected, there is a probability that the Company will
sustain some loss. In such cases, interest income continues to accrue as long as
the loan does not meet the Company's criteria for nonaccrual status.
Generally the Company also classifies as impaired any loans the
terms of which have been modified in a troubled debt restructuring after January
1, 1995. Interest is accrued on such loans that continue to meet the modified
terms of their loan agreements. At June 30, 2002, the Company had no loans that
have had the terms modified in a troubled debt restructuring.
The Company's charge-off policy for impaired loans is similar to
its charge-off policy for all loans in that loans are charged-off in the month
when they are considered uncollectible.
Impaired loans and related allowance for loan loss amounts at June 30,
2002 and December 31, 2001 were as follows:
June 30, 2002 December 31, 2001
--------------------------- -------------------------
Allowance Allowance
Recorded for Recorded For
(In Thousands) Investment Loan Loss Investment Loan Loss
-------- ---------- ---------- ---------
Impaired loans with allowance for
loan loss $ -- -- 168 55
Impaired loans with no allowance for
loan loss -- -- -- --
---------- ---------- ---------- ---------
$ -- -- $ 168 55
========== ========== ========== =========
The allowance for loan loss related to impaired loans was measured
based upon the estimated fair value of related collateral.
The average recorded investment in impaired loans for the three
months ended June 30, 2002 and June 30, 2001 was insignificant. There was no
interest income recognized on these loans during 2001.
15
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
The following schedule details selected information as to
non-performing loans of the Company at June 30, 2002:
June 30, 2002 December 31, 2001
---------------------------------- -----------------------------------
Past Due Past Due
90 Days Non-Accrual 90 Days Non-Accrual
------- ----------- ------- -----------
(In Thousands) (In Thousands)
Real estate loans $ 404 96 318 71
Installment loans 155 81 270 98
Commercial - - - -
-------------- -------------- -------------- --------------
$ 559 177 588 169
============== ============== ============== ==============
Renegotiated loans $ - - - -
============== ============== ============== ==============
Non-performing loans, which included non-accrual loans and loans
90 days past due, at June 30, 2002 totaled $736,000 a decrease from $757,000 at
December 31, 2001. During the three months ended June 30, 2002, non-performing
loans decreased $453,000 from $1,189,000 at March 31, 2002. The decrease in
non-performing loans during the six months ended June 30, 2002 of $21,000 is due
primarily to an increase in non-performing real estate loans of $111,000 and a
decrease in installment loans of $ 132,000. No material losses on these loans
are anticipated by management.
16
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
The following table presents total internally graded loans as of June
30, 2002 and December 31, 2001:
June 30, 2002
(In Thousands) Special
Total Mention Substandard Doubtful
------------------ -------------- -------------- ----------------
Commercial, financial and
Agricultural $ 72 39 33 -
Real estate mortgage 2,206 524 1,674 8
Real estate construction 131 - 131 -
Consumer 742 135 528 79
------------------ -------------- -------------- ----------------
$ 3,151 698 2,366 87
================== ============== ============== ================
December 31, 2001
(In Thousands) Special
Total Mention Substandard Doubtful
------------------ -------------- ----------- ----------
Commercial, financial and
Agricultural $ 138 43 80 15
Real estate mortgage 2,441 454 1,987 -
Real estate construction - - - -
Consumer 574 76 389 109
------------------ -------------- ---------- ----------
$ 3,153 573 2,456 124
================== ============== ========== ==========
The collateral values securing internally graded loans, based on
estimates received by management, total approximately $4,808,000 ($3,730,000
related to real property and $ 1,078,000 related to personal loans). The
internally classified loans have decreased $ 2,000 or .1% from $ 3,153,000 at
December 31, 2001. The increase in the internally classified loans is
concentrated in several loans that were downgraded during the six months ended
June 30, 2002. These loans were downgraded primarily due to bankruptcies and
foreclosures. Loans are listed as classified when information obtained about
possible credit problems of the borrower has prompted management to question the
ability of the borrower to comply with the repayment terms of the loan
agreement. The loan classifications do not represent or result from trends or
uncertainties which management expects will materially impact future operating
results, liquidity or capital resources.
Residential real estate loans that are internally classified totaling
$2,337,000 and $2,441,000 at June 30, 2002 and December 31, 2001 consist of 44
and 38 individual loans, respectively, that have been graded accordingly due to
bankruptcies, inadequate cash flows and delinquencies. No material loss on these
loans is anticipated by management.
17
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
The following detail provides a breakdown of the allocation of the
allowance for possible loan losses:
June 30, 2002 December 31, 2001
------------------------------------ --------------------------------------
Percent of Percent of
Loans In Loans In
In Each Category In Each Category
Thousands To Total Loans Thousands To Total Loans
--------- -------------- --------- --------------
Commercial, financial and
Agricultural $ 584 18.0% $ 651 38.5%
Real estate construction 265 5.8 236 5.1
Real estate mortgage 4,330 66.9 3,892 46.1
Installment 1,095 9.3 710 10.3
------ ----- ------ -----
$6,274 100% $5,489 100%
====== ===== ====== =====
LIQUIDITY AND ASSET MANAGEMENT
The Company's management seeks to maximize net interest income by
managing the Company's assets and liabilities within appropriate constraints on
capital, liquidity and interest rate risk. Liquidity is the ability to maintain
sufficient cash levels necessary to fund operations, meet the requirements of
depositors and borrowers and fund attractive investment opportunities. Higher
levels of liquidity bear corresponding costs, measured in terms of lower yields
on short-term, more liquid earning assets and higher interest expense involved
in extending liability maturities.
Liquid assets include cash and cash equivalents and securities and
money market instruments that will mature within one year. At June 30, 2002, the
Company's liquid assets totaled $ 63,641,000.
The Company maintains a formal asset and liability management process to
quantify, monitor and control interest rate risk and to assist management in
maintaining stability in the net interest margin under varying interest rate
environments. The Company accomplishes this process through the development and
implementation of lending, funding and pricing strategies designed to maximize
net interest income under varying interest rate environments subject to specific
liquidity and interest rate risk guidelines.
Analysis of rate sensitivity and rate gap analysis are the primary tools
used to assess the direction and magnitude of changes in net interest income
resulting from changes in interest rates. Included in the analysis are cash
flows and maturities of financial instruments held for purposes other than
trading, changes in market conditions, loan volumes and pricing and deposit
volume and mix. These assumptions are inherently uncertain, and, as a result,
net interest income can not be precisely estimated nor can the impact of higher
or lower interest rates on net interest income be precisely predicted. Actual
results will differ due to timing, magnitude and frequency of interest rate
changes and changes in market conditions and management's strategies, among
other factors.
18
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
LIQUIDITY AND ASSET MANAGEMENT, CONTINUED
The Company's primary source of liquidity is a stable core deposit
base. In addition loan payments, investment security maturities and short-term
borrowings provide a secondary source.
Interest rate risk (sensitivity) focuses on the earnings risk
associated with changing interest rates. Management seeks to maintain
profitability in both immediate and long-term earnings through funds
management/interest rate risk management. The Company's rate sensitivity
position has an important impact on earnings. Senior management of the Company
meets monthly to analyze the rate sensitivity position of the subsidiary banks.
These meetings focus on the spread between the Company's cost of funds and
interest yields generated primarily through loans and investments.
The Company's securities portfolio consists of earning assets that
provide interest income. For those securities classified as held-to-maturity,
the Company has the ability and intent to hold these securities to maturity or
on a long-term basis. Securities classified as available-for-sale include
securities intended to be used as part of the Company's asset/liability strategy
and/or securities that may be sold in response to changes in interest rate,
prepayment risk, the need or desire to increase capital and similar economic
factors. Securities totaling approximately $3.4 million mature or will be
subject to rate adjustments within the next twelve months.
A secondary source of liquidity is the Company's loan portfolio.
At June 30, 2002 loans totaling approximately $247.8 million either will become
due or will be subject to rate adjustments within twelve months from the
respective date. Continued emphasis will be placed on structuring adjustable
rate loans.
As for liabilities, certificates of deposit of $100,000 or greater
totaling approximately $116.7 million will become due or reprice during the next
twelve months. Historically, there has been no significant reduction in
immediately withdrawable accounts such as negotiable order of withdrawal
accounts, money market demand accounts, demand deposit and regular savings.
Management anticipates that there will be no significant withdrawals from these
accounts in the future.
Management believes that with present maturities, the anticipated
growth in deposit base, and the efforts of management in its asset/liability
management program, liquidity will not pose a problem in the near term future.
At the present time there are no known trends or any known commitments, demands,
events or uncertainties that will result in or that are reasonably likely to
result in the Company's liquidity changing in a materially adverse way.
CAPITAL POSITION AND DIVIDENDS
Capital. At June 30, 2002, total stockholders' equity was
$50,419,000 or 7.1% of total assets, which compares with $ 45,971,000 or 6.9% of
total assets at December 31, 2001. The dollar increase in stockholders' equity
during the six months ended June 30, 2002 results from the Company's net income
of $4,176,000, the net effect of a $378,000 unrealized gain on investment
securities net of applicable income taxes and cash dividends declared of
$1,129,000 of which $1,023,000 was reinvested under the Company's dividend
reinvestment plan.
19
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
In April, 1999, the stockholders of the Company approved the
Wilson Bank Holding Company 1999 Stock Option Plan (the "Stock Option Plan").
The Stock Option Plan provides for the granting of stock options, and authorizes
the issuance of common stock upon the exercise of such options, for up to
100,000 shares of common stock, to officers and other key employees of the
Company and its subsidiaries. Furthermore, the Company may issue additional
shares under the Stock Option Plan as needed in order that the aggregate number
of shares that may be issued during the term of the Plan is equal to five
percent (5%) of the shares of common stock then issued and outstanding. Under
the Stock Option Plan, stock option awards may be granted in the form of
incentive stock options or nonstatutory stock options, and are generally
exercisable for up to ten years following the date such option awards are
granted. Exercise prices of incentive stock options must be equal to or greater
than 100% of the fair market value of the common stock on the grant date. As of
June 30, 2002, the bank has granted key employees options to purchase a total of
49,816 shares of common stock. At June 30, 2002, 8,939 shares were exercisable.
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). The
impact of the adoption of SFAS No. 123 has been reflected as a proforma
disclosure in the notes to the annual consolidated financial statements.
The Company's principal regulators have established minimum
risk-based capital requirements and leverage capital requirements for the
Company and its subsidiary banks. These guidelines classify capital into two
categories of Tier I and total risk-based capital. Total risk-based capital
consists of Tier I (or core) capital (essentially common equity less intangible
assets) and Tier II capital (essentially qualifying long-term debt, of which the
Company and subsidiary banks have none, and a part of the allowance for possible
loan losses). In determining risk-based capital requirements, assets are
assigned risk-weights of 0% to 100%, depending on regulatory assigned levels of
credit risk associated with such assets. The risk-based capital guidelines
require the subsidiary banks and the Company to have a total risk-based capital
ratio of 8.0% and a Tier I risk-based capital ratio of 4.0%. At June 30, 2002
the Company's total risk-based capital ratio was 12.4% and its Tier I risk-based
capital ratio was approximately 11.2% compared to ratios of 12.2% and 11.0%,
respectively at December 31, 2001. The required Tier I leverage capital ratio
(Tier I capital to average assets for the most recent quarter) for the Company
is 4.0%. At June 30, 2002 the Company had a leverage ratio of 7.8% compared to
7.4% at December 31, 2001.
IMPACT OF INFLATION
Although interest rates are significantly affected by inflation,
the inflation rate is immaterial when reviewing the Company's results of
operations.
20
WILSON BANK HOLDING COMPANY
FORM 10-Q, CONTINUED
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary component of market risk is interest rate
volatility. Fluctuations in interest rates will ultimately impact both the level
of income and expense recorded on a large portion of the Company's assets and
liabilities, and the market value of all interest-earning assets and
interest-bearing liabilities, other than those which possess a short term to
maturity. Based upon the nature of the Company's operations, the Company is not
subject to foreign currency exchange or commodity price risk.
Interest rate risk (sensitivity) management focuses on the
earnings risk associated with changing interest rates. Management seeks to
maintain profitability in both immediate and long-term earnings through funds
management/interest rate risk management. The Company's rate sensitivity
position has an important impact on earnings. Senior management of the Company
meets monthly to analyze the rate sensitivity position. These meetings focus on
the spread between the cost of funds and interest yields generated primarily
through loans and investments.
There have been no material changes in reported market risks
during the six months ended June 30, 2002.
21
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of stockholders was held April 9, 2002.
(b) Election of the entire board of directors.
(c) (1) Each director was elected by the following tabulation:
Number
of Shares Broker
Voting For Against Abstain Non-Votes
------ --- ------- ------- ---------
Charles Bell 1,208,427 1,178,380 0 30,047 0
Jack Bell 1,208,427 1,178,380 0 30,047 0
Mackey Bentley 1,208,427 1,178,380 0 30,047 0
Randall Clemons 1,208,427 1,178,380 0 30,047 0
Jimmy Comer 1,208,427 1,157,256 21,124 30,047 0
Jerry Franklin 1,208,427 1,178,380 0 30,047 0
John Freeman 1,208,427 1,178,380 0 30,047 0
Marshall Griffith 1,208,427 1,178,380 0 30,047 0
Harold Patton 1,208,427 1,178,380 0 30,047 0
James Patton 1,208,427 1,177,351 1,029 30,047 0
Elmer Richerson 1,208,427 1,177,351 1,029 30,047 0
John Trice 1,208,427 1,178,380 0 30,047 0
Bob Van Hooser 1,208,427 1,177,351 1,029 30,047 0
(2) The election of Maggart & Associates, P.C. as
independent auditors for the Company was as follows:
Number
of Shares Broker
Voting For Against Abstain Non-Votes
------ --- ------- ------- ---------
1,208,427 1,195,507 1,386 11,534 0
(d) Not Applicable.
22
PART II. OTHER INFORMATION, CONTINUED
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 Certifications pursuant to 18 USC Section 1350 -
Sarbanes - Oxley Act of 2002
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
WILSON BANK HOLDING COMPANY
------------------------------------
(Registrant)
DATE: August 13, 2002 /s/ Randall Clemons
----------------------- ----------------------------------------
Randall Clemons
Chairman and Chief Executive Officer
DATE: August 13, 2002 /s/ Becky Taylor
----------------------- -----------------------------------------
Becky Taylor
Sr. Vice President & Cashier
24