Attached files

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EX-21.1 - EXHIBIT 21.1 - WILSON BANK HOLDING COexhibit211.htm
EX-31.1 - EXHIBIT 31.1 - WILSON BANK HOLDING COexhibit311.htm
EX-31.2 - EXHIBIT 31.2 - WILSON BANK HOLDING COexhibit312.htm
EX-23.1 - EXHIBIT 23.1 - WILSON BANK HOLDING COexhibit231.htm
EX-13.1 - EXHIBIT 13.1 - WILSON BANK HOLDING COexhibit131.htm
EX-10.46 - EXHIBIT 10.46 - WILSON BANK HOLDING COexhibit1046.htm
EX-32.1 - EXHIBIT 32.1 - WILSON BANK HOLDING COexhibit321.htm
EX-32.2 - EXHIBIT 32.2 - WILSON BANK HOLDING COexhibit322.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________________________________
FORM 10-K
__________________________________________________________
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
or 
o
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, Tennessee
37087
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code:
(615) 444-2265
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $2.00 par value per share
(Title of class)
__________________________________________________________
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  o    No  x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  o    No  x
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  o
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  o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o



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
 
o
  
Accelerated filer
 
x
Non-accelerated filer
 
o   (Do not check if a smaller reporting company)
  
Smaller reporting company
 
o
The aggregate market value of the voting stock held by non-affiliates of the registrant on June 30, 2015, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $338,143,418. For purposes of this calculation, “affiliates” are considered to be the directors and executive officers of the registrant. The market value calculation was determined using $48.95 per share.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  o   No  x
Shares of common stock, $2.00 par value per share, outstanding on March 14, 2016 were 7,692,627.





DOCUMENTS INCORPORATED BY REFERENCE
 
Part of Form 10-K
  
Documents from which portions are incorporated by reference
Part II
  
Portions of the Registrant’s Annual Report to Shareholders for the fiscal year ended December 31, 2015 are incorporated by reference into Items 1, 5, 6, 7, 7A and 8.
 
 
Part III
  
Portions of the Registrant’s Proxy Statement relating to the Registrant’s Annual Meeting of Shareholders to be held on April 12, 2016 are incorporated by reference into Items 10, 11, 12, 13 and 14.




PART I
Item 1. Business.
General

Wilson Bank Holding Company (the “Company”) was incorporated on March 17, 1992 under the laws of the State of Tennessee. The purpose of the Company was to acquire all of the issued and outstanding capital stock of Wilson Bank and Trust (the “Bank”) and act as a one-bank holding company. On November 17, 1992, the Company acquired 100% of the capital stock of the Bank pursuant to the terms of an agreement and plan of share exchange.

All of the Company’s banking business is conducted through the Bank, a state chartered bank organized under the laws of the State of Tennessee. The Bank, on December 31, 2015, had eleven full service banking offices located in Wilson County, Tennessee, one full service banking facility in Trousdale County, Tennessee, two full service banking offices in eastern Davidson County, Tennessee, four full service banking offices located in Rutherford County, Tennessee, two full service banking offices in DeKalb County, Tennessee, two full service banking offices in Smith County, Tennessee, two full service banking office in Sumner County, Tennessee and one full service banking office in Putnam County, Tennessee.

Prior to March 31, 2005, the Company owned a 50% interest in DeKalb Community Bank and Community Bank of Smith County. On March 31, 2005, the Company acquired the minority interest in the subsidiaries when the two subsidiaries were merged into the Bank with the shareholders of these subsidiaries, other than the Company, receiving shares of the Company’s common stock in exchange for their shares of common stock in the subsidiaries. Prior to March 31, 2005, these two 50% owned subsidiaries were included in the consolidated financial statements.

The Company’s principal executive office is located at 623 West Main Street, Lebanon, Tennessee, which is also the principal location of the Bank. The Bank’s branch offices are located at 1444 Baddour Parkway, Lebanon, Tennessee; 200 Tennessee Boulevard, Lebanon, Tennessee; 402 Public Square, Watertown, Tennessee; 8875 Stewart’s Ferry Pike, Gladeville, Tennessee; 1476 North Mt. Juliet Road, Mt. Juliet, Tennessee; 11835 Highway 70, Mt. Juliet, Tennessee; 127 McMurry Boulevard, Hartsville, Tennessee; 1130 Castle Heights Avenue North, Lebanon, Tennessee; the Wal-Mart Super Center, Lebanon, Tennessee; 440 Highway 109 North, Lebanon, Tennessee; 1436 West Main Street, Lebanon, Tennessee; 709 South Mt. Juliet Road, Mt. Juliet, Tennessee 37122; 4736 Andrew Jackson Parkway in Hermitage, Tennessee; 217 Donelson Pike, Nashville, Tennessee; 710 NW Broad St, Murfreesboro, Tennessee; 3110 Memorial Blvd, Murfreesboro, Tennessee; 210 Commerce Drive, Smyrna, Tennessee; 2640 South Church Street, Murfreesboro, Tennessee; 576 West Broad Street, Smithville, Tennessee; 306 Brush Creek Road, Alexandria, Tennessee; 1300 Main Street North, Carthage, Tennessee; 7 New Middleton Highway, Gordonsville, Tennessee; 455 West Main Street, Gallatin, Tennessee; 175 East Main Street, Hendersonville, Tennessee and 320 South Jefferson Avenue, Cookeville, Tennessee. Management believes that Wilson County, Trousdale County, Davidson County, Rutherford County, DeKalb County, Smith County, Sumner County, and Putnam County offer an environment for continued banking growth in the Company’s target market, which consists of local consumers, professionals and small businesses. The Bank offers a wide range of banking services, including checking, savings, and money market deposit accounts, certificates of deposit and loans for consumer, commercial and real estate purposes. The Bank also offers custodial, trust and discount brokerage services to its customers. The Bank does not have a concentration of deposits obtained from a single person or entity or a small group of persons or entities, the loss of which would have a material adverse effect on the business of the Bank.

The Bank was organized in 1987 to provide Wilson County with a locally-owned, locally-managed commercial bank. Since its opening, the Bank has experienced a steady growth in deposits and loans as a result of providing personal, service-oriented banking services to its targeted market. For the year ended December 31, 2015, the Company reported net earnings of approximately $23.86 million and at December 31, 2015 if had total assets of approximately $2.02 billion.

Financial and Statistical Information
The Company’s audited consolidated financial statements, selected financial data and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s Annual Report to Shareholders for the year ended December 31, 2015 filed as Exhibit 13.1 to this Form 10-K (the “2015 Annual Report”), are incorporated herein by reference.



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Regulation and Supervision

Both the Company and the Bank are subject to extensive state and federal banking laws and regulations that impose restrictions on and provide for general regulatory oversight of the Company’s and the Bank’s operations. These laws and regulations are generally intended to protect depositors and borrowers, and may not necessarily protect shareholders.

In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law. The Dodd-Frank Act implements far-reaching reforms of major elements of the financial landscape, particularly for larger financial institutions. Many of its most far-reaching provisions do not directly apply to community-based institutions like the Company or the Bank. For instance, provisions that regulate derivative transactions and limit derivatives trading activity of federally-insured institutions, enhance supervision of “systemically significant” institutions, impose new regulatory authority over hedge funds, limit proprietary trading by banks, and phase-out the eligibility of trust preferred securities for Tier 1 capital are among the provisions that do not directly impact the Company either because of exemptions for institutions below a certain asset size or because of the nature of the Company’s operations. Those provisions that have been adopted or are expected to be adopted that have impacted and, in some cases, will continue to impact the Company include the following:

Changing the assessment base for federal deposit insurance from the amount of insured deposits to consolidated assets less tangible capital, eliminating the ceiling and increasing the size of the floor of the Deposit Insurance Fund, and offsetting the impact of the increase in the minimum floor on institutions with less than $10 billion in assets.

Making permanent the $250,000 limit for federal deposit insurance and increasing the cash limit of Securities Investor Protection Corporation protection to $250,000.

Repealing the federal prohibition on payment of interest on demand deposits, thereby permitting depositing institutions to pay interest on business transaction and other accounts.

Centralizing responsibility for consumer financial protection by creating a new agency, the Consumer Financial Protection Bureau, responsible for implementing federal consumer protection laws, although banks below $10 billion in assets will continue to be examined and supervised for compliance with these laws by their federal banking regulator.

Restricting the preemption of state law by federal law and disallowing national bank subsidiaries from availing themselves of such preemption.

Limiting the debit interchange fees that certain financial institutions are permitted to charge.

Imposing new requirements for mortgage lending, including new minimum underwriting standards, prohibitions on certain yield-spread compensation to mortgage originators, special consumer protections for mortgage loans that do not meet certain provision qualifications, prohibitions and limitations on certain mortgage terms and various new mandated disclosures to mortgage borrowers.

Applying the same leverage and risk based capital requirements that apply to insured depository institutions to their holding companies.

Permitting national and state banks to establish de novo interstate branches at any location where a bank based in that state could establish a branch, and requiring that bank holding companies and banks be well-capitalized and well managed in order to acquire banks located outside their home state.

Imposing new limits on affiliated transactions and causing derivative transactions to be subject to lending limits.

Implementing certain corporate governance revisions that apply to all public companies.

Many aspects of the Dodd-Frank Act, including some described above, are not yet effective and remain subject to rulemaking and will take effect over several years, and their impact on the Company or the financial industry is difficult to predict before such regulations are adopted.

The Company is a bank holding company within the meaning of the Bank Holding Company Act of 1956 (the “BHC Act”) and is registered with the Board of Governors of the Federal Reserve System (the “FRB”). The Company is required to file annual reports and other information regarding its business operations and those of its subsidiary with, and is subject to examination by, the FRB. The Bank is chartered under the laws of the State of Tennessee and is subject to the supervision of, and is regularly examined by, the Tennessee Department of Financial Institutions (the “TDFI”). The Bank is also regularly examined by the

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Federal Deposit Insurance Corporation (“FDIC”), the government entity that insures the Bank’s deposits subject to applicable limitations.

Under the BHC Act, a bank holding company may not directly or indirectly acquire ownership or control of more than five percent of the voting shares or substantially all of the assets of any company, including a bank, without the prior approval of the FRB. In addition, bank holding companies are generally prohibited under the BHC Act from engaging in non-banking activities, subject to certain exceptions and the modernization of the financial services industry in connection with the passing of the Gramm-Leach-Bliley Act of 1999 (the “GLB Act”). Under the BHC Act, the FRB is authorized to approve the ownership by a bank holding company of shares of any company whose activities have been determined by the FRB to be so closely related to banking or to managing or controlling banks as to be a proper incident thereto.

Subject to various exceptions, the BHC Act and the Federal Change in Bank Control Act, together with related regulations, require FRB approval prior to any person or company acquiring "control" of a bank holding company. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of the bank holding company. Control is refutably presumed to exist if a person or company acquires 10% or more, but less than 25%, of any class of voting securities and either:

The bank holding company has registered securities under Section 12 of the Securities Exchange Act of 1934; or

No other person owns a greater percentage of that class of voting securities immediately after the transaction.

The Company’s common stock is registered under Section 12 of the Securities Exchange Act of 1934. The regulations provide a procedure for challenge of the rebuttable control presumption.

Under the GLB Act, a “financial holding company” may engage in activities the FRB determines to be financial in nature or incidental to such financial activity or complementary to a financial activity and not a substantial risk to the safety and soundness of such depository institutions or the financial system. Generally, such companies may engage in a wide range of securities activities and insurance underwriting and agency activities. The Company has not made application to the FRB to become a “financial holding company.”

Under the BHC Act, a bank holding company, which has not qualified or elected to become a financial holding company, is generally prohibited from engaging in or acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in nonbanking activities unless, prior to the enactment of the Gramm-Leach-Bliley Act, the FRB found those activities to be so closely related to banking as to be a proper incident to the business of banking. Activities that the FRB has found to be so closely related to banking as to be a proper incident to the business of banking include:

Factoring accounts receivable;

Acquiring or servicing loans;

Leasing personal property;

Conducting discount securities brokerage activities;

Performing selected data processing services;

Acting as agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions; and

Underwriting certain insurance risks of the holding company and its subsidiaries.


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Despite prior approval, the FRB may order a bank holding company or its subsidiaries to terminate any of these activities or to terminate its ownership or control of any subsidiary when it has reasonable cause to believe that the bank holding company’s continued ownership, activity or control constitutes a serious risk to the financial safety, soundness, or stability of any of its bank subsidiaries.

Under the Tennessee Bank Structure Act, a bank holding company which controls 30% or more of the total deposits (excluding certain deposits) in all federally insured financial institutions in Tennessee is prohibited from acquiring any bank in Tennessee. With prior regulatory approval, Tennessee law permits banks based in the state to either establish new or acquire existing branch offices throughout Tennessee. As a result of the Dodd-Frank Act, the Bank and other state-chartered or national banks generally may establish new branches in another state to the same extent as banks chartered in the other state may establish new branches in that state.

The Company and the Bank are subject to certain restrictions imposed by the Federal Reserve Act and the Federal Deposit Insurance Act, respectively, on any extensions of credit to the bank holding company or its subsidiary bank, on investments in the stock or other securities of the bank holding company or its subsidiary bank, and on taking such stock or other securities as collateral for loans of any borrower. The Bank takes Company common stock as collateral for borrowings subject to the aforementioned restrictions.

Both the Company and the Bank are subject to the provisions of Section 23A of the Federal Reserve Act. Section 23A places limits on the amount of:

A bank’s loans or extensions of credit, including purchases of assets subject to an agreement to repurchase, to or for the benefit of affiliates;

A bank’s investment in affiliates;

Assets a bank may purchase from affiliates, except for real and personal property exempted by the FRB;

The amount of loans or extensions of credit to third parties collateralized by the securities or obligations of affiliates;

Transactions involving the borrowing or lending of securities and any derivative transaction that results in credit exposure to an affiliate; and

A bank’s guarantee, acceptance or letter of credit issued on behalf of an affiliate.

The total amount of the above transactions is limited in amount, as to any one affiliate, to 10% of a bank’s capital and surplus and, as to all affiliates combined, to 20% of a bank’s capital and surplus. In addition to the limitation on the amount of these transactions, each of the above transactions must also meet specified collateral requirements. The Bank must also comply with other provisions designed to avoid the taking of low-quality assets.

The Company and the Bank are also subject to the provisions of Section 23B of the Federal Reserve Act which, among other things, prohibits an institution from engaging in the above transactions with affiliates unless the transactions are on terms substantially the same, or at least as favorable to the institution or its subsidiaries, as those prevailing at the time for comparable transactions with nonaffiliated companies.

The Bank is also subject to restrictions on extensions of credit to its executive officers, directors, principal stockholders and their related interests. These extensions of credit (1) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties, and (2) must not involve more than the normal risk of repayment or present other unfavorable features.

The FRB has the power to prohibit dividends by bank holding companies if their actions constitute unsafe or unsound practices. The FRB has issued a policy statement expressing its view that a bank holding company should pay cash dividends only to the extent that the company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the company’s capital needs, asset quality, and overall financial condition.


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The Company is a legal entity separate and distinct from the Bank. Over time, the principal source of the Company’s cash flow, including cash flow to pay dividends to the Company’s common stock shareholders, will be dividends that the Bank pays to the Company as its sole shareholder. Under Tennessee law, the Company is not permitted to pay dividends if, after giving effect to such payment, the Company would not be able to pay its debts as they become due in the normal course of business or the Company’s total assets would be less than the sum of its total liabilities plus any amounts needed to satisfy any preferential rights if the Company were dissolving. In addition, in deciding whether or not to declare a dividend of any particular size, the Company’s board of directors must consider the Company’s current and prospective capital, liquidity, and other needs.

Statutory and regulatory limitations also apply to the Bank’s payment of dividends to the Company. Under Tennessee law, the Bank in any one calendar year can only pay dividends to the Company in an amount equal to or less than the total amount of its net income for that calendar year combined with retained net income for the preceding two years. Payment of dividends in excess of this amount requires the consent of the Commissioner of the TDFI.

The payment of dividends by the Bank and the Company may also be affected by other factors, such as the requirement to maintain adequate capital above regulatory guidelines. The federal banking agencies have indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe and unsound banking practice. Under the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), a depository institution may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized. Moreover, the federal agencies have issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings.

Under the Dodd-Frank Act, and previously under FRB policy, the Company is required to act as a source of financial strength for the Bank and to commit resources to support the Bank. This support can be required at times when it would not be in the best interest of the Company’s shareholders or creditors to provide it. Further, if the Bank’s capital levels were to fall below certain minimum regulatory guidelines, the Bank would need to develop a capital plan to increase its capital levels and the Company would be required to guarantee the Bank’s compliance with the capital plan in order for such plan to be accepted by the federal regulatory agency. In the event of bankruptcy, any commitment by the Company to a federal regulatory agency to maintain the capital of the Bank would be assumed by the bankruptcy trustee and entitled to a priority of payment.

Both the Company and the Bank are required to comply with the capital adequacy standards established by the FRB, in the Company’s case, and the FDIC, in the case of the Bank. The FRB has established a risk-based and a leverage measure of capital adequacy for bank holding companies, like the Company. The Bank is also subject to risk-based and leverage capital requirements adopted by the FDIC, which are substantially similar to those adopted by the FRB for bank holding companies. In addition, the FDIC and TDFI may require state banks that are not members of the FRB, like the Bank, to maintain capital at levels higher than those required by general regulatory requirements.

The risk-based capital standards are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies, to account for off-balance-sheet exposure, and to minimize disincentives for holding liquid assets. Assets and off-balance-sheet items, such as letters of credit and unfunded loan commitments, are assigned to broad risk categories, each with appropriate risk weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance-sheet items.

The Company’s and the Bank’s principal regulators have established minimum risk-based capital requirements and leverage capital requirements for the Company and the Bank. These guidelines in effect prior to January 1, 2015 classified capital into two categories of Tier 1 and Total risk-based capital. Total risk-based capital consisted of Tier 1 (or core) capital (generally consisting of common stock, minority interests in the equity accounts of consolidated subsidiaries, noncumulative perpetual preferred stock, and a limited amount of cumulative perpetual preferred stock, less goodwill and other specified intangible assets) and Tier 2 capital (generally consisting of qualifying long-term debt, of which the Bank has none, and a part of the allowance for possible loan losses). The total amount of Tier 2 capital was limited to 100% of Tier 1 capital. In determining risk-based capital requirements, assets were assigned risk-weights of 0% to 100%, depending on regulatory assigned levels of credit risk associated with such assets. Under the FRB’s regulations in effect prior to January 1, 2015, for a bank holding company, like the Company, to be considered “well-capitalized” it was required to maintain a Total risk-based capital ratio of at least 10%, a Tier 1 risk-based capital ratio of at least 6% and not be subject to a written agreement, order or directive to maintain a specific capital level. In addition, the FRB had established minimum leverage ratio guidelines for bank holding companies. These guidelines provided that a minimum ratio of Tier 1 capital to average assets, less goodwill and other specified intangible assets, of at least 4% should be maintained by most bank holding companies. The guidelines also provided that bank holding companies experiencing high internal growth or making acquisitions would be expected to maintain strong capital positions substantially above the minimum supervisory levels. Furthermore, the FRB has indicated that it will consider a bank holding company’s Tier 1 capital leverage ratio, after deducting all intangibles, and other indicators of capital strength in evaluating proposals for expansion or new activities.

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Under FDIC regulations in effect prior to January 1, 2015, a state nonmember bank was "well capitalized" if it had a Tier 1 to average assets capital ratio of 5% or better, a Tier 1 risk-based capital ratio of 6% or better, a total risk-based capital ratio of 10% or better, and was not subject to a regulatory agreement, order or directive to maintain a specific level for any capital measure. A state nonmember bank was considered "adequately capitalized" prior to January 1, 2015 if it had a Tier 1 to average assets capital ratio of at least 4%, a Tier 1 risk-based capital ratio of at least 4%, a total risk-based capital ratio of at least 8% and did not meet the definition of a well-capitalized bank. Lower levels of capital result in a bank being considered undercapitalized, significantly undercapitalized and critically undercapitalized.

State nonmember banks are required to be “well-capitalized" in order to take advantage of expedited procedures on certain applications, such as branches and mergers, and to accept and renew brokered deposits without further regulatory approval.

In late 2010, the Basel Committee on Banking Supervision issued “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems” (“Basel III”), a new capital framework for banks and bank holding companies. Basel III imposes a stricter definition of capital, with more focus on common equity for those banks to which it is applicable. In July 2013, the federal bank regulatory authorities, including the FRB and the FDIC, approved final rules that revised their risk-based and leverage capital requirements and their method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel III Committee on Banking Supervision in Basel III and certain provisions of the Dodd-Frank Act. The final rules, which became effective as to the Company and the Bank on January 1, 2015, apply to all depository institutions, top-tier bank holding companies with total consolidated assets of $1 billion or more, and top-tier savings and loan holding companies (“banking organizations”). Under the rules, the leverage and risk-based capital ratios of bank holding companies may not be lower than the leverage and risk-based capital ratios for insured depository institutions. The rules, among other things, included new minimum risk-based capital and leverage ratios. Moreover, these rules refined the definition of what constitutes “capital” for purposes of calculating those ratios. The new minimum capital level requirements applicable to bank holding companies and banks subject to the rules are: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6% (increased from 4%); (iii) a total risk-based capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 to average assets capital ratio of 4% for all institutions. The rules also established a “capital conservation buffer” of 2.5% (to be phased in over three years with the first 0.625% phased in on January 1, 2016) above the new regulatory minimum capital ratios, and result in the following minimum ratios once the capital conservation buffer is fully phased in: (i) a common equity Tier 1 risk-based capital ratio of 7.0%, (ii) a Tier 1 risk-based capital ratio of 8.5%, and (iii) a total risk-based capital ratio of 10.5%. The capital conservation buffer requirement is to be phased in beginning in January 2016 at 0.625% and is scheduled to increase each year until fully implemented in January 2019. An institution will be subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if its capital levels fall below the buffer amounts. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions.

Under the new rules implementing Basel III, Tier 1 capital generally consists of common stock (plus related surplus) and retained earnings, limited amounts of minority interest in the form of additional Tier 1 capital instruments, and non-cumulative preferred stock and related surplus, subject to certain eligibility standards, less goodwill and other specified intangible assets and other regulatory deductions. Cumulative preferred stock and trust preferred securities issued after May 19, 2010, will no longer qualify as Tier 1 capital, but such securities issued prior to May 19, 2010, including in the case of bank holding companies with less than $15.0 billion in total assets, trust preferred securities issued prior to that date, will continue to count as Tier 1 capital subject to certain limitations. The definition of Tier 2 capital is generally unchanged for most banking organizations, subject to certain new eligibility criteria.

Common equity Tier 1 capital generally consists of common stock (plus related surplus) and retained earnings plus limited amounts of minority interest in the form of common stock, less goodwill and other specified intangible assets and other regulatory deductions.

The final rules allow banks and their holding companies with less than $250 billion in assets a one-time opportunity to opt-out of a requirement to include unrealized gains and losses in accumulated other comprehensive income in their capital calculation. The Company and the Bank each opted out of this requirement.

The FRB has adopted regulations applicable to bank holding companies with assets over $50 billion that require such holding companies to develop and submit to the FRB annually capital plans demonstrating the company’s ability to meet, under various stressed economic conditions and over a nine-quarter planning horizon, the above-described minimum leverage capital, Tier 1 risk-based capital and total risk-based capital requirements, as well as a minimum Tier 1 common capital ratio (Tier 1 risk-based capital less preferred stock and trust preferred securities) of at least 5%. While these regulations are not applicable to the Company, the Company’s federal regulator may seek to impose similar stress testing on the Company through its examination authority.
 

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Failure to meet statutorily mandated capital guidelines or more restrictive ratios separately established for a financial institution could subject a bank or bank holding company to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting or renewing brokered deposits, limitations on the rates of interest that the institution may pay on its deposits, limitations on the ability to hire senior executive officers or add directors without prior approval and other restrictions on its business. As described above, significant additional restrictions can be imposed on FDIC-insured depository institutions that fail to meet applicable capital requirements.

Additionally, the FDICIA establishes a system of prompt corrective action to resolve the problems of undercapitalized financial institutions. Under this system, the federal banking regulators have established five capital categories (well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized) into one of which all institutions are categorized. Federal banking regulators are required to take various mandatory supervisory actions and are authorized to take other discretionary actions with respect to institutions in the three undercapitalized categories. The severity of the action depends upon the capital category in which the institution is placed. Generally, subject to a narrow exception, the banking regulator must appoint a receiver or conservator for an institution that is critically undercapitalized. The federal banking agencies have specified by regulation the relevant capital level for each category. Effective as of January 1, 2015, the relevant compete ratios associated with each of these categories is as set forth on the following table:

 
Common Equity Tier 1 Risk-based Capital ratio
Total Risk-based Capital ratio
Tier 1 Risk-based Capital ratio
Tier 1 Leverage ratio
Well capitalized
6.5%
10%
8%
5%
Adequately capitalized
4.5%
8%
6%
4%
Undercapitalized
< 4.5%
< 8%
< 6%
< 4%
Significantly undercapitalized
< 3%
< 6%
< 4%
< 3%
Critically undercapitalized
Tangible Equity/Total Assets ≤ 2%

The FDIC has adopted a risk-based assessment system for insured depository institutions that takes into account the risks attributable to different categories and concentrations of assets and liabilities. Under the Dodd-Frank Act, the FDIC has adopted regulations that base deposit insurance assessments on total assets less capital rather than deposit liabilities and include off-balance sheet liabilities of institutions and their affiliates in risk-based assessments.

The Dodd-Frank Act increased the basic limit on federal deposit insurance coverage to $250,000 per depositor. The Dodd-Frank Act also repealed the prohibition on paying interest on demand transaction accounts, but did not extend unlimited insurance protection for these accounts.

The FDIC may terminate its insurance of deposits if it finds that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

The Financial Reform, Recovery and Enforcement Act of 1989 provides that a holding company’s controlled insured depository institutions are liable for any loss incurred by the FDIC in connection with the default of, or any FDIC-assisted transaction involving, an affiliated insured bank or savings association.

The maximum permissible rates of interest on most commercial and consumer loans made by the Bank are governed by Tennessee’s general usury law and the Tennessee Industrial Loan and Thrift Companies Act (“Industrial Loan Act”). Certain other usury laws affect limited classes of loans, but the Company believes that the laws referenced above are the most significant. Tennessee’s general usury law authorizes a floating rate of 4% per annum over the average prime or base commercial loan rate, as published by the FRB from time to time, subject to an absolute 24% per annum limit. The Industrial Loan Act, which is generally applicable to most of the loans made by the Bank in Tennessee, authorizes an interest rate of up to 24% per annum and also allows certain loan charges, generally on a more liberal basis than does the general usury law.

The President of the United States signed the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the “Patriot Act”), into law on October 26, 2001. The Patriot Act established a wide variety of new and enhanced ways of combating international terrorism. The provisions that affect banks (and other financial institutions) most directly are contained in Title III of the act. In general, Title III amended existing law - primarily the Bank Secrecy Act - to provide the Secretary of the U.S. Department of the Treasury (the “Treasury”) and other departments and

9



agencies of the federal government with enhanced authority to identify, deter, and punish international money laundering and other crimes.

Among other things, the Patriot Act prohibits financial institutions from doing business with foreign "shell" banks and requires increased due diligence for private banking transactions and correspondent accounts for foreign banks. In addition, financial institutions will have to follow new minimum verification of identity standards for all new accounts and will be permitted to share information with law enforcement authorities under circumstances that were not previously permitted. These and other provisions of the Patriot Act became effective at varying times, and the Treasury and various federal banking agencies are responsible for issuing regulations to implement the law.

The banking industry is generally subject to extensive regulatory oversight. The Company, as a bank holding company with securities registered under the Securities Exchange Act of 1934, and the Bank, as a state-chartered bank with deposits insured by the FDIC, are subject to a number of laws and regulations. Many of these laws and regulations have undergone significant change in recent years. In July 2010, the U.S. Congress passed the Dodd-Frank Act, which includes significant consumer protection provisions related to, among other things, residential mortgage loans that have increased, and are likely to further increase, our regulatory compliance costs. With the enactment of the Dodd-Frank Act and the significant amount of regulations that have already been adopted and that are to come from the passage of that legislation, the nature and extent of the future legislative and regulatory changes affecting financial institutions and the resulting impact on those institutions is very unpredictable at this time. The Dodd-Frank Act, in particular, required that a significant number of new regulations be adopted by various financial regulatory agencies, many of which have been implemented but some of which remain to be implemented.

Competition

The banking business is highly competitive. Our primary market area consists of Wilson, Trousdale, Davidson, Rutherford, DeKalb, Smith, Sumner and Putnam Counties in Tennessee. We compete with numerous commercial banks and savings institutions with offices in these market areas. In addition to these competitors, we compete for loans with insurance companies, regulated small loan companies, credit unions, and certain government agencies. We also compete with numerous companies and financial institutions engaged in similar lines of business, such as mortgage banking companies, brokerage companies and lending companies. Some of our competitors have significantly greater financial resources and offer a greater number of branch locations. To offset this advantage of our larger competitors, the Company believes it can attract customers by providing loan and management decisions at the local level. The Company does not experience significant seasonal trends in its operations.

Monetary Policies

The results of operations of the Bank and the Company are affected by the policies of the regulatory authorities, particularly the FRB. An important function of the FRB is to regulate the national supply of bank credit in order to combat recession and curb inflation. Among the instruments used to attain these objectives are open market operations in U.S. government securities, changes in the discount rate on bank borrowings and changes in reserve requirements relating to member bank deposits. These instruments are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, and their use may also affect interest rates charged on loans and paid for deposits. Policies of the regulatory agencies have had a significant effect on the operating results of commercial banks in the past and are expected to do so in the future. The effect of such policies upon the future business and results of operations of the Company and the Bank cannot be predicted with accuracy.

Employment
As of March 14, 2016, the Company and its subsidiary collectively employed 446 full-time equivalent employees.

Available Information

The Company’s Internet website is http://www.wilsonbank.com. Please note that our website address is provided as an inactive textual reference only. The Company makes available free of charge on its website the Company’s annual reports on

10



Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after it electronically files or furnishes such materials to the Securities and Exchange Commission (the “SEC”). The information provided on our website is not part of this report, and is therefore not incorporated by reference herein unless such information is otherwise specifically referenced elsewhere in this report.

Statistical Information Required by Guide 3

The statistical information required to be displayed under Item 1 pursuant to Guide 3, “Statistical Disclosure by Bank Holding Companies,” of the Exchange Act Industry Guides is incorporated herein by reference to the Consolidated Financial Statements and the notes thereto and the Management’s Discussion and Analysis sections in the Company’s 2015 Annual Report. Certain information not contained in the Company’s 2015 Annual Report, but required by Guide 3, is contained in the tables immediately following:
[REMINDER OF PAGE INTENTIONALLY LEFT BLANK]

11



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2015

 I.
Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential
The schedule which follows indicates the average balances for each major balance sheet item, an analysis of net interest income and net interest expense and the change in interest income and interest expense attributable to changes in volume and changes in rates.
The difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities is net interest income, which is the Company’s gross margin. Analysis of net interest income is more meaningful when income from tax-exempt earning assets is adjusted to a tax equivalent basis. Accordingly, the following schedule includes a tax equivalent adjustment of tax-exempt earning assets, assuming a weighted average Federal income tax rate of 34%.
In this schedule, “change due to volume” is the change in volume multiplied by the interest rate for the prior year. “Change due to rate” is the change in interest rate multiplied by the volume for the prior year. Changes in interest income and expense not due solely to volume or rate changes have been allocated to the “change due to volume” and “change due to rate” in proportion to the relationship of the absolute dollar amounts of the change in each category.
Non-accrual loans have been included in the loan category. Loan fees of $5,082,000, $4,338,000 and $3,802,000 for 2015, 2014 and 2013, respectively, are included in loan income and represent an adjustment of the yield on these loans.


12



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2015
 
 
Dollars In Thousands
 
2015
 
2014
 
2015/2014 Change
 
Average
Balance
 
Average Yield
 
Income/
Expense
 
Average
Balance
 
Average Yield
 
Income/
Expense
 
Due to
Volume
 
Due to
Rate
 
Total
Loans, net of unearned interest
$
1,418,561

 
5.04
%
 
71,543

 
$
1,261,131

 
5.29
%
 
66,685

 
$
8,098

 
(3,240
)
 
4,858

Investment securities—taxable
311,925

 
1.88

 
5,868

 
340,969

 
1.90

 
6,464

 
(531
)
 
(65
)
 
(596
)
Investment securities—tax exempt
37,810

 
2.03

 
768

 
32,814

 
2.07

 
679

 
102

 
(13
)
 
89

Taxable equivalent adjustment

 
1.05

 
396

 

 
1.07

 
350

 
53

 
(7
)
 
46

Total tax-exempt investment securities
37,810

 
3.08

 
1,164

 
32,814

 
3.14

 
1,029

 
155

 
(20
)
 
135

Total investment securities
349,735

 
2.01

 
7,032

 
373,783

 
2.00

 
7,493

 
(376
)
 
(85
)
 
(461
)
Loans held for sale
10,724

 
3.59

 
385

 
7,342

 
3.58

 
263

 
121

 
1

 
122

Federal funds sold and interest bearing deposits
75,842

 
.20

 
154

 
85,987

 
.19

 
167

 
(21
)
 
8

 
(13
)
Restricted equity securities
3,012

 
4.02

 
121

 
3,012

 
4.05

 
122

 

 
(1
)
 
(1
)
Total earning assets
1,857,874

 
4.26

 
79,235

 
1,731,255

 
4.32

 
74,730

 
7,822

 
(3,317
)
 
4,505

Cash and due from banks
9,290

 
 
 
 
 
10,597

 
 
 
 
 
 
 
 
 
 
Allowance for loan losses
(22,588
)
 
 
 
 
 
(23,230
)
 
 
 
 
 
 
 
 
 
 
Bank premises and equipment
40,743

 
 
 
 
 
39,293

 
 
 
 
 
 
 
 
 
 
Other assets
55,198

 
 
 
 
 
50,452

 
 
 
 
 
 
 
 
 
 
Total assets
$
1,940,517

 
 
 
 
 
$
1,808,367

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

13



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2015
 
 
Dollars In Thousands
 
2015
 
2014
 
2015/2014 Change
 
Average
Balance
 
Average Yield
 
Income/
Expense
 
Average
Balance
 
Average Yield
 
Income/
Expense
 
Due to
Volume
 
Due to
Rate
 
Total
Deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Negotiable order of withdrawal accounts
$
398,881

 
.38
%
 
1,515

 
$
349,375

 
.45
%
 
1,587

 
$
199

 
(271
)
 
(72
)
Money market demand accounts
499,942

 
.29

 
1,463

 
439,867

 
.42

 
1,831

 
237

 
(606
)
 
(369
)
Individual retirement accounts
89,340

 
.95

 
846

 
93,687

 
1.12

 
1,047

 
(47
)
 
(154
)
 
(201
)
Other savings deposits
105,648

 
.42

 
443

 
99,753

 
.54

 
535

 
31

 
(123
)
 
(92
)
Certificates of deposit $100,000 and over
226,762

 
1.06

 
2,408

 
242,838

 
1.06

 
2,574

 
(165
)
 

 
(165
)
Certificates of deposit under $100,000
215,940

 
.89

 
1,925

 
231,472

 
.94

 
2,170

 
(137
)
 
(108
)
 
(245
)
Total interest-bearing deposits
1,536,513

 
.56

 
8,600

 
1,456,992

 
.67

 
9,744

 
118

 
(1,262
)
 
(1,144
)
Securities sold under repurchase agreements
2,505

 
.28

 
7

 
5,784

 
.40

 
23

 
(10
)
 
(6
)
 
(16
)
Federal funds purchased
90

 
1.11

 
1

 
123

 
.81

 
1

 

 

 

Total interest-bearing liabilities
1,539,108

 
.56

 
8,608

 
1,462,899

 
.67

 
9,768

 
108

 
(1,268
)
 
(1,160
)
Demand deposits
178,281

 
 
 
 
 
146,473

 
 
 
 
 
 
 
 
 
 
Other liabilities
9,525

 
 
 
 
 
9,186

 
 
 
 
 
 
 
 
 
 
Stockholders’ equity
213,603

 
 
 
 
 
189,809

 
 
 
 
 
 
 
 
 
 
Total liabilities and stockholders’ equity
$
1,940,517

 
 
 
 
 
$
1,808,367

 
 
 
 
 
 
 
 
 
 
Net interest income
 
 
 
 
70,627

 
 
 
 
 
64,962

 
 
 
 
 
 
Net yield on earning assets (1)
 
 
3.80
%
 
 
 
 
 
3.75
%
 
 
 
 
 
 
 
 
Net interest spread (2)
 
 
3.70
%
 
 
 
 
 
3.65
%
 
 
 
 
 
 
 
 
 
(1)
Net interest income divided by average earning assets.
(2)
Average interest rate on earning assets less average interest rate on interest-bearing liabilities.

14



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2015
 
 
Dollars In Thousands
 
2014
 
2013
 
2014/2013 Change
 
Average
Balance
 
Average Yield
 
Income/
Expense
 
Average
Balance
 
Average Yield
 
Income/
Expense
 
Due to
Volume
 
Due to
Rate
 
Total
Loans, net of unearned interest
$
1,261,131

 
5.29
%
 
66,685

 
$
1,205,296

 
5.49
%
 
66,177

 
$
2,983

 
(2,475
)
 
508

Investment securities—taxable
340,969

 
1.90

 
6,464

 
293,100

 
1.50

 
4,411

 
780

 
1,273

 
2,053

Investment securities—tax exempt
32,814

 
2.07

 
679

 
27,970

 
2.16

 
603

 
102

 
(26
)
 
76

Taxable equivalent adjustment

 
1.07

 
350

 

 
1.11

 
311

 
50

 
(11
)
 
39

Total tax-exempt investment securities
32,814

 
3.14

 
1,029

 
27,970

 
3.27

 
914

 
152

 
(37
)
 
115

Total investment securities
373,783

 
2.00

 
7,493

 
321,070

 
1.66

 
5,325

 
932

 
1,236

 
2,168

Loans held for sale
7,342

 
3.58

 
263

 
8,358

 
3.09

 
258

 
(33
)
 
38

 
5

Federal funds sold, and interest bearing deposits
85,987

 
.19

 
167

 
100,888

 
.21

 
215

 
(29
)
 
(19
)
 
(48
)
Restricted equity securities
3,012

 
4.05

 
122

 
3,012

 
4.98

 
150

 

 
(28
)
 
(28
)
Total earning assets
1,731,255

 
4.32

 
74,730

 
1,638,624

 
4.40

 
72,125

 
3,853

 
(1,248
)
 
2,605

Cash and due from banks
10,597

 
 
 
 
 
10,046

 
 
 
 
 
 
 
 
 
 
Allowance for loan losses
(23,230
)
 
 
 
 
 
(25,885
)
 
 
 
 
 
 
 
 
 
 
Bank premises and equipment
39,293

 
 
 
 
 
36,330

 
 
 
 
 
 
 
 
 
 
Other assets
50,452

 
 
 
 
 
44,374

 
 
 
 
 
 
 
 
 
 
Total assets
$
1,808,367

 
 
 
 
 
$
1,703,489

 
 
 
 
 
 
 
 
 
 

15



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2015
 
Dollars In Thousands
 
2014
 
2013
 
2014/2013 Change
 
Average
Balance
 
Average Yield
 
Income/
Expense
 
Average
Balance
 
Average Yield
 
Income/
Expense
 
Due to
Volume
 
Due to
Rate
 
Total
Deposits:
 
 
 
 
 
 
 
 
 
Negotiable order of withdrawal accounts
$
349,375

 
.45
%
 
1,587

 
$
311,466

 
.51
%
 
1,589

 
$
189

 
(191
)
 
(2
)
Money market demand accounts
439,867

 
.42

 
1,831

 
369,769

 
.50

 
1,847

 
312

 
(328
)
 
(16
)
Individual retirement accounts
93,687

 
1.12

 
1,047

 
98,006

 
1.28

 
1,255

 
(54
)
 
(154
)
 
(208
)
Other savings deposits
99,753

 
.54

 
535

 
95,226

 
.59

 
560

 
26

 
(51
)
 
(25
)
Certificates of deposit $100,000 and over
242,838

 
1.06

 
2,574

 
254,568

 
1.16

 
2,956

 
(133
)
 
(249
)
 
(382
)
Certificates of deposit under $100,000
231,472

 
.94

 
2,170

 
250,440

 
1.05

 
2,621

 
(189
)
 
(262
)
 
(451
)
Total interest-bearing deposits
1,456,992

 
.67

 
9,744

 
1,379,475

 
.78

 
10,828

 
151

 
(1,235
)
 
(1,084
)
Securities sold under repurchase agreements
5,784

 
.40

 
23

 
9,438

 
.53

 
50

 
(17
)
 
(10
)
 
(27
)
Federal funds purchased
123

 
.81

 
1

 
75

 
1.33

 
1

 

 

 

Total interest-bearing liabilities
1,462,899

 
.67

 
9,768

 
1,388,988

 
.78

 
10,879

 
134

 
(1,245
)
 
(1,111
)
Demand deposits
146,473

 
 
 
 
 
131,427

 
 
 
 
 
 
Other liabilities
9,186

 
 
 
 
 
10,594

 
 
 
 
 
 
Stockholders’ equity
189,809

 
 
 
 
 
172,480

 
 
 
 
 
 
Total liabilities and stockholders’ equity
$
1,808,367

 
 
 
 
 
$
1,703,489

 
 
 
 
 
 
Net interest income
 
 
 
 
64,962

 
 
 
61,246

 
 
Net yield on earning assets (1)
 
 
3.75
%
 
 
 
 
 
3.74
%
 
 
 
 
Net interest spread (2)
 
 
3.65
%
 
 
 
 
 
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.

16



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2015
 
II.
Investment Portfolio:
A.    Investment securities at December 31, 2015 consist of the following:
 
Securities Held-To-Maturity
 
(In Thousands)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Market
Value
Mortgage-backed:
 
 
 
 
 
 
 
U.S. Government-sponsored enterprises (GSEs) residential
$
9,375

 
60

 
169

 
9,266

Obligations of states and political subdivisions
18,820

 
288

 
9

 
19,099

 
$
28,195

 
348

 
178

 
28,365

 
 
Securities Available-For-Sale
 
(In Thousands)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Market
Value
U.S. Government-sponsored enterprises (GSEs)
$
77,177

 
215

 
483

 
76,909

Mortgage-backed:
 
 
 
 
 
 
 
GSE residential
192,983

 
430

 
1,498

 
191,915

Asset-backed:
 
 
 
 
 
 
 
SBAP
31,253

 
54

 
273

 
31,034

Obligations of states and political subdivisions
31,093

 
274

 
97

 
31,270

 
$
332,506

 
973

 
2,351

 
331,128


17



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2015
 
II.
Investment Portfolio, Continued
 
A.    Continued: 
Investment securities at December 31, 2014 consist of the following:
 
Securities Held-To-Maturity
 
(In Thousands)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Market
Value
Mortgage-backed:
 
 
 
 
 
 
 
U.S. Government-sponsored enterprises (GSEs) residential
$
7,398

 
76

 
147

 
7,327

Obligations of states and political subdivisions
20,725

 
389

 
41

 
21,073

 
$
28,123

 
465

 
188

 
28,400

 
 
Securities Available-For-Sale
 
(In Thousands)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Market
Value
U.S. Government-sponsored enterprises (GSEs)
$
131,767

 
129

 
1,329

 
130,567

Mortgage-backed:
 
 
 
 
 
 
 
GSE residential
170,802

 
731

 
464

 
171,069

Asset-backed:
 
 
 
 
 
 
 
SBAP
30,627

 
98

 
205

 
30,520

Obligations of states and political subdivisions
14,324

 
98

 
158

 
14,264

 
$
347,520

 
1,056

 
2,156

 
346,420


18



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2015
 
II.
Investment Portfolio, Continued
    
A.    Continued:
 
Investment securities at December 31, 2013 consist of the following:
 
Securities Held-To-Maturity
 
(In Thousands)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Market
Value
Mortgage-backed:
 
 
 
 
 
 
 
U.S. Government-sponsored enterprises (GSEs) residential
$
8,649

 
73

 
520

 
8,202

Obligations of states and political subdivisions
18,174

 
424

 
239

 
18,359

 
$
26,823

 
497

 
759

 
26,561

 
 
Securities Available-For-Sale
 
(In Thousands)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Market
Value
U.S. Government-sponsored enterprises (GSEs)
$
141,968

 
10

 
5,892

 
136,086

Mortgage-backed:
 
 
 
 
 
 
 
GSE residential
175,855

 
808

 
1,481

 
175,182

Asset-backed:
 
 
 
 
 
 
 
SBAP
4,801

 

 
69

 
4,732

Obligations of states and political subdivisions
13,711

 
71

 
409

 
13,373

 
$
336,335

 
889

 
7,851

 
329,373


19



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2015
 
 
II.
Investment Portfolio, Continued:    
B.
The following schedule details the contractual maturities and weighted average yields of investment securities of the Company. Actual maturities may differ from contractual maturities of mortage-backed securities because the mortgages underlying the securities may be called or prepaid with or without penalty. Therefore, these securities are not included in the maturity categories noted below as of December 31, 2015:
Held-To-Maturity Securities
Amortized
Cost
 
Estimated
Market
Value
 
Weighted
Average
Yields
 
(In Thousands, Except Yields)
Mortgage-backed:
 
 
 
 
 
GSEs residential
$
9,375

 
9,266

 
4.29
%
Obligations of states and political subdivisions*:
 
 
 
 
 
Less than one year
1,309

 
1,321

 
4.38

One to three years
5,173

 
5,238

 
2.77

Three to five years
5,217

 
5,303

 
2.84

Five to ten years
3,985

 
4,050

 
3.04

More than ten years
3,136

 
3,187

 
2.99

Total obligations of states and political subdivisions
18,820

 
19,099

 
3.00

Total held-to-maturity securities
$
28,195

 
28,365

 
3.43
%
 *
Weighted average yield is stated on a tax-equivalent basis, assuming a weighted average Federal income tax rate of 34%.


20



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2015
 II.
Investment Portfolio, Continued;
B.    Continued:
Available-For-Sale Securities
Amortized
Cost
 
Estimated
Market
Value
 
Weighted
Average
Yields
 
(In Thousands, Except Yields)
Mortgage and asset-backed securities
$
224,236

 
222,949

 
3.09
%
U.S. Government-sponsored enterprises (GSEs):
 
 
 
 
 
Less than one year

 

 

One to three years
3,198

 
3,168

 
1.77

Three to five years
32,424

 
32,401

 
2.72

Five to ten years
41,555

 
41,340

 
3.25

More than ten years

 

 

Total U.S. Government-sponsored enterprises (GSEs)
77,177

 
76,909

 
2.97

Obligations of states and political subdivisions*:
 
 
 
 
 
Less than one year

 

 

One to three years
966

 
963

 
2.29

Three to five years
6,181

 
6,235

 
2.44

Five to ten years
21,205

 
21,319

 
3.01

More than ten years
2,741

 
2,753

 
3.80

Total obligations of states and political subdivisions
31,093

 
31,270

 
2.94

Total available-for-sale securities
$
332,506

 
331,128

 
3.05
%
 
*
Weighted average yield is stated on a tax-equivalent basis, assuming a weighted average Federal income tax rate of 34%.



21



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2015
 
III.
Loan Portfolio:
A.    Loan Types
The following schedule details the loans of the Company at December 31, 2015, 2014, 2013, 2012 and 2011:
 
In Thousands
 
2015
 
2014
 
2013
 
2012
 
2011
Commercial, financial and agricultural
$
41,339

 
42,200

 
34,834

 
35,521

 
48,080

Real estate—construction
275,319

 
245,830

 
194,426

 
190,356

 
166,460

Real estate—mortgage
1,110,989

 
1,027,723

 
940,077

 
902,930

 
866,060

Installment
43,467

 
41,025

 
41,118

 
41,713

 
44,689

Total loans
1,471,114

 
1,356,778

 
1,210,455

 
1,170,520

 
1,125,289

Deferred loan fees
(5,035
)
 
(4,341
)
 
(3,253
)
 
(2,912
)
 
(2,031
)
Total loans, net of deferred fees
1,466,079

 
1,352,437

 
1,207,202

 
1,167,608

 
1,123,258

Less allowance for loan losses
(22,900
)
 
(22,572
)
 
(22,935
)
 
(25,497
)
 
(24,525
)
Net loans
$
1,443,179

 
1,329,865

 
1,184,267

 
1,142,111

 
1,098,733


22



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2015
 
III.
Loan Portfolio, Continued:
B.    Maturities and Sensitivities of Loans to Changes in Interest Rates
The following table classifies our fixed and variable rate loans at December 31, 2015 according to contractual maturities of: (1) one year or less, (2) after one year through five years, and (3) after five years. The table also classifies our variable rate loans pursuant to the contractual repricing dates of the underlying loans (dollars in thousands):
 
Amounts at December 31, 2015
 
 
 
Fixed
Rates
 
Variable
Rates
 
Totals
 
At
December
31, 2015
Based on contractual maturity:
 
 
 
 
 
 
 
Due within one year
$
229,037

 
35,172

 
264,209

 
17.96
%
Due in one year to five years
175,698

 
90,526

 
266,224

 
18.10

Due after five years
95,951

 
844,730

 
940,681

 
63.94

Totals
$
500,686

 
970,428

 
1,471,114

 
100.0
%
Based on contractual repricing dates:
 
 
 
 
 
 
 
Daily floating rate
$

 
10,013

 
10,013

 
0.68
%
Due within one year
229,037

 
304,142

 
533,179

 
36.24

Due in one year to five years
175,698

 
473,305

 
649,003

 
44.12

Due after five years
95,951

 
182,968

 
278,919

 
18.96

Totals
$
500,686

 
970,428

 
1,471,114

 
100.0
%

The following table represents the contractual maturities of the loan portfolio as of December 31, 2015 (dollars in thousands):
 
Due
Within
One Year
 
Due
in One
to Five
Years
 
Due
After
Five
Years
 
Total
Commercial, financial and agricultural
$
6,171

 
10,337

 
24,831

 
41,339

Real estate—construction
139,136

 
68,829

 
67,354

 
275,319

Real estate—mortgage
102,532

 
160,928

 
847,529

 
1,110,989

Installment
16,370

 
26,130

 
967

 
43,467

 
$
264,209

 
266,224

 
940,681

 
1,471,114


23



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2015
 
III.
Loan Portfolio, Continued:
C.    Risk Elements
The following schedule details selected information as to non-performing loans of the Company at December 31, 2015, 2014, 2013, 2012 and 2011:
 
In Thousands, Except Percentages
 
2015
 
2014
 
2013
 
2012
 
2011
Non-accrual loans:









Commercial, financial and agricultural








35

Real estate—construction




3,524


9,626


14,378

Real estate—mortgage
4,909


616


2,053


7,229


10,552

Installment









Total non-accrual
4,909


616


5,577


16,855


24,965

Loans 90 days past due still accruing and non-performing TDRs:









Commercial, financial and agricultural
41


9


285


54


158

Real estate—construction


73


271


24


95

Real estate—mortgage
4,475


5,008


1,550


736


5,339

Installment
55


48


27


105


78

Total loans 90 days past due still accruing and non-performing TDRs
4,571


5,138


2,133


919


5,670

Total non-performing loans
9,480


5,754


7,710


17,774


30,635

Total loans, net of deferred fees
1,466,079


1,352,437


1,207,202


1,167,608


1,123,258

Percentage of total non- performing loans to total loans outstanding, net of deferred fees
0.65


0.43


0.64


1.52


2.73

Other real estate
5,410


7,298


12,869


15,307


19,117


24



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2015
 
III.
Loan Portfolio, Continued:
C.    Risk Elements, Continued:
The accrual of interest income is discontinued when it is determined that collection of interest is less than probable or the collection of any amount of principal is doubtful. The decision to place a loan on a non-accrual status is based on an evaluation of the borrower’s financial condition, collateral liquidation value, economic and business conditions and other factors that affect the borrower’s ability to pay. At the time a loan is placed on a non-accrual status, the accrued but unpaid interest is also evaluated as to collectability. If collectability is doubtful, the unpaid interest is charged off. Thereafter, interest on non-accrual loans is recognized only as received. Non-accrual loans totaled $4,909,000 at December 31, 2015, $616,000 at December 31, 2014, $5,577,000 at December 31, 2013, $16,855,000 at December 31, 2012 and $24,965,000 at December 31, 2011. Gross interest income on non-accrual loans that would have been recorded for the year ended December 31, 2015 if the loans had been current totaled $291,000 compared to $39,000 in 2014, $296,000 in 2013, $775,000 in 2012 and $875,000 in 2011. The amount of interest and fee income recognized on total loans during 2015 totaled $71,543,000 as compared to $66,685,000 in 2014, $66,177,000 in 2013, $66,080,000 in 2012 and $66,031,000 in 2011.
At December 31, 2015, loans, which include the above, totaling $25,217,000 were included in the Company’s internal classified loan list. Of these loans $25,090,000 are real estate and $127,000 are various other types of loans. The value collateralizing these loans is estimated by management to be approximately $50,407,000 ($50,394,000 related to real property securing real estate loans and $13,000 related to the various other types of loans). Such loans are listed as classified when information obtained about possible credit problems of the borrowers has prompted management to question the ability of the borrower to comply with the repayment terms of the loan agreement. The loan classifications do not represent or result from trends or uncertainties which management expects will materially impact future operating results, liquidity or capital resources.
At December 31, 2015, real estate construction and mortgage loans made up 18.72% and 75.52%, respectively, of the Company’s loan portfolio.
At December 31, 2015 and 2014, other real estate totaled $5,410,000 and $7,298,000, respectively.

25



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2015
 III.    Loan Portfolio, Continued;
C.    Risk Elements, Continued;
There were no material amounts of other interest-bearing assets (interest-bearing deposits with other banks, municipal bonds, etc.) at December 31, 2015 which would be required to be disclosed as past due, non-accrual, restructured or potential problem loans, if such interest-bearing assets were loans.

26




WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2015
 
IV.
Summary of Loan Loss Experience
The following schedule details selected information related to the allowance for loan loss account of the Company at December 31, 2015, 2014, 2013, 2012 and 2011 and the years then ended.
 
In Thousands, Except Percentages
 
2015
 
2014
 
2013
 
2012
 
2011
Allowance for loan losses at beginning of period
$
22,572

 
22,935

 
25,497

 
24,525

 
22,177

Charge-offs:
 
 
 
 
 
 
 
 
 
Commercial, financial and agricultural

 
(37
)
 
(150
)
 
(454
)
 
(517
)
Real estate – construction
(26
)
 
(7
)
 
(1,470
)
 
(2,226
)
 
(1,681
)
Real estate – mortgage
(414
)
 
(1,436
)
 
(3,247
)
 
(6,066
)
 
(4,103
)
Installment
(664
)
 
(387
)
 
(380
)
 
(412
)
 
(461
)
 
(1,104
)
 
(1,867
)
 
(5,247
)
 
(9,158
)
 
(6,762
)
Recoveries:
 
 
 
 
 
 
 
 
 
Commercial, financial and agricultural
7

 
464

 
38

 
71

 
22

Real estate – construction
39

 
324

 
179

 
174

 
67

Real estate – mortgage
767

 
84

 
123

 
169

 
106

Installment
231

 
134

 
168

 
188

 
237

 
1,044

 
1,006

 
508

 
602

 
432

Net loan charge-offs
(60
)
 
(861
)
 
(4,739
)
 
(8,556
)
 
(6,330
)
Provision for loan losses charged to expense
388

 
498

 
2,177

 
9,528

 
8,678

Allowance for loan losses at end of period
$
22,900

 
22,572

 
22,935

 
25,497

 
24,525

Total loans, net of deferred fees, at end of year
$
1,466,079

 
1,352,437

 
1,207,202

 
1,167,608

 
1,123,258

Average total loans outstanding, net of deferred fees, during year
$
1,418,561

 
1,261,131

 
1,205,296

 
1,138,525

 
1,108,335

Net charge-offs as a percentage of average total loans outstanding, net of deferred fees, during year
0.004
%
 
0.07

 
0.39

 
0.75

 
0.57

Ending allowance for loan losses as a percentage of total loans outstanding net of deferred fees, at end of year
1.56
%
 
1.67

 
1.90

 
2.18

 
2.18


27



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2015
 IV.    Summary of Loan Loss Experience, Continued:
The allowance for loan losses is an amount that management believes will be adequate to absorb possible losses on existing loans that may become uncollectible. The provision for loan losses charged to operating expense is based on past loan loss experience and other factors which, in management’s judgment, deserve current recognition in estimating possible loan losses. Such other factors considered by management include growth and composition of the loan portfolio, review of specific loan problems, the relationship of the allowance for loan losses to outstanding loans, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral and current economic conditions that may affect the borrower’s ability to pay.
Management conducts a continuous review of all loans that are delinquent, previously charged down or which are determined to be potentially uncollectible. Loan classifications are reviewed periodically by a person independent of the lending function. The Board of Directors of the Company periodically reviews the adequacy of the allowance for loan losses.
The following detail provides a breakdown of the allocation of the allowance for loan losses:
 
December 31, 2015
 
December 31, 2014
 
In
Thousands
 
Percent of
Loans In
Each Category
To Total Loans
 
In
Thousands
 
Percent of
Loans In
Each Category
To Total Loans
Commercial, financial and agricultural
$
339

 
2.8
%
 
$
178

 
3.1
%
Real estate construction
5,136

 
18.7

 
5,578

 
18.1

Real estate mortgage
16,983

 
75.5

 
16,492

 
75.8

Installment
442

 
3.0

 
324

 
3.0

 
$
22,900

 
100.0
%
 
$
22,572

 
100.0
%
 
 
December 31, 2013
 
December 31, 2012
 
In
Thousands
 
Percent of
Loans In
Each Category
To Total Loans
 
In
Thousands
 
Percent of
Loans In
Each Category
To Total Loans
Commercial, financial and agricultural
$
402

 
2.9
%
 
$
397

 
3.0
%
Real estate construction
5,159

 
16.1

 
7,191

 
16.3

Real estate mortgage
17,053

 
77.6

 
17,515

 
77.1

Installment
321

 
3.4

 
394

 
3.6

 
$
22,935

 
100.0
%
 
$
25,497

 
100.0
%
 
December 31, 2011
 
In
Thousands
 
Percent of
Loans In
Each Category
To Total Loans
Commercial, financial and agricultural
$
1,328

 
4.3
%
Real estate construction
6,223

 
14.8

Real estate mortgage
16,518

 
77.0

Installment
456

 
3.9

 
$
24,525

 
100.0
%


28



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2015
 
V.
Deposits:
The average amounts and average interest rates for deposits for 2015, 2014 and 2013 are detailed in the following schedule:
 
2015
 
2014
 
2013
 
Average
Balance
In
Thousands
 
Average
Rate
 
Average
Balance
In
Thousands
 
Average
Rate
 
Average
Balance
In
Thousands
 
Average
Rate
Non-interest bearing deposits
$
178,281

 

 
$
146,473

 

 
$
131,427

 

Negotiable order of withdrawal accounts
398,881

 
0.38
%
 
349,375

 
0.45
%
 
311,466

 
0.51
%
Money market demand accounts
499,942

 
0.29
%
 
439,867

 
0.42
%
 
369,769

 
0.50
%
Individual retirement accounts
89,340

 
0.95
%
 
93,687

 
1.12
%