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EX-32.2 - EXHIBIT 32.2 - WILSON BANK HOLDING COexhibit32212312017.htm
EX-32.1 - EXHIBIT 32.1 - WILSON BANK HOLDING COexhibit32112312017.htm
EX-31.2 - EXHIBIT 31.2 - WILSON BANK HOLDING COexhibit31212312017.htm
EX-31.1 - EXHIBIT 31.1 - WILSON BANK HOLDING COexhibit31112312017.htm
EX-23.1 - EXHIBIT 23.1 - WILSON BANK HOLDING COexhibit23112312017.htm
EX-21.1 - EXHIBIT 21.1 - WILSON BANK HOLDING COexhibit21112312017.htm
EX-13.1 - EXHIBIT 13.1 - WILSON BANK HOLDING COexhibit13112312017.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, 2017
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, 2017, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $410,843,318. 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 $42.75 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 9, 2018 were 10,521,834.





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, 2017 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 24, 2018 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, 2017, had eleven full service banking offices located in Wilson County, Tennessee, one full service banking facility in Trousdale County, Tennessee, three full service banking offices in Davidson County, Tennessee, five 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.

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; 2930 West End Avenue, Nashville, Tennessee; 710 NW Broad St, Murfreesboro, Tennessee; 3110 Memorial Blvd, Murfreesboro, Tennessee; 210 Commerce Drive, Smyrna, Tennessee; 2640 South Church Street, Murfreesboro, Tennessee; 4195 Franklin Road, 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-to-medium-sized 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, 2017, the Company reported net earnings of approximately $23.53 million and at December 31, 2017 it had total assets of approximately $2.32 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, 2017 filed as Exhibit 13.1 to this Form 10-K (the “2017 Annual Report”), are incorporated herein by reference.
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 and the regulations promulgated thereunder 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

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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 for institutions with greater than $15.0 billion in total assets are among the provisions that do not directly impact the Company or the Bank either because of exemptions for institutions below a certain asset size or because of the nature of their 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 and the Bank 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 primary federal banking regulator.

Limiting the debit interchange fees that financial institutions with $10.0 billion in total assets 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.

Certain of the Dodd-Frank Act's provisions, 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 bank 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 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 unless the bank holding company already owns a majority of such company. In addition, bank holding companies are generally prohibited under the BHC Act from engaging directly or indirectly in activities other than those of banking or managing or controlling banks, or furnishing services to its subsidiaries, 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”). The GLB Act amended the BHC Act and expanded the activities in which bank holding companies and affiliates of banks are permitted to engage.

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Under the BHC Act, as amended by the GLB 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;

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. 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.

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

5



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. As noted below, FRB regulations limit dividends, stock repurchases and discretionary bonuses to executive officers if a bank holding company is below the level of regulatory minimums plus the applicable capital conservation buffer.

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.


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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. Tennessee state banks are required to have the capital structure that the TDFI deems adequate, and the Commissioner of the TDFI as well as federal regulators may require a state bank (or its holding company in the case of federal regulators) to increase its capital structure to the point deemed adequate by the Commissioner or such other federal regulator before granting approval of a branch application, merger application or charter amendment.

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.

In July 2013, the FRB and the FDIC approved final rules that substantially amend the regulatory capital rules applicable to the Bank and the Company, effective January 1, 2015. The final rules implement the regulatory capital reforms of the Basel Committee on Banking Supervision reflected in "Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems" (Basel III) and changes required by the Dodd-Frank Act.

Under these 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. Since January 1, 2015, the minimum capital level requirements applicable to bank holding companies and banks subject to the rules are: (i) a Tier 1 common equity ratio of 4.5%; (ii) a Tier 1 risk-based capital ratio of 6%; (iii) a total risk-based capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4% for all institutions. The rules also established a “capital conservation buffer” of 2.5% (to be phased in over three years) above the 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 phase in of the capital conservation buffer requirement began in January 2016 at 0.625% of risk-weighted assets and increases each year by a like percentage 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 minimum amounts plus the then applicable buffer. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions. For the quarters ending in calendar year 2018, neither the Company nor the Bank will be required to obtain regulatory approval for dividends, stock repurchases or payment of discretionary bonuses solely as a result of these buffers as long as its Tier 1 common equity ratio exceeds 6.375%, its Tier 1 capital ratio exceeds 7.875% and its total capital ratio exceeds 9.875%. Each of these amounts will increase by an additional 0.625% on January 1st of 2018 and 2019.

Under the 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

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than $15.0 billion in total assets as of December 31, 2009, 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 from the definition in place prior to January 1, 2015 for most banking organizations, subject to certain new eligibility criteria.

Tier 1 common equity 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.

Basel III prescribes a standardized approach for risk weightings that expand the risk-weighting categories from the four Basel I-derived categories (0%, 20%, 50% and 100%) to a much larger and more risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0% for U.S. government and agency securities, to 600% for certain equity exposures, and resulting in higher risk weights for a variety of asset categories. Specific changes to the rules impacting the Company’s and the Bank’s determination of risk-weighted assets include, among other things:

applying a 150% risk weight instead of a 100% risk weight for certain high volatility commercial real estate acquisition, development and construction loans;
assigning a 150% risk weight to exposures (other than residential mortgage exposures) that are 90 days past due;
providing for a 20% credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable (previously set at 0%);
providing for a risk weight, generally not less than 20% with certain exceptions, for securities lending transactions based on the risk weight category of the underlying collateral securing the transaction;
providing for a 100% risk weight for claims on securities firms; and
eliminating the 50% cap on the risk weight for OTC derivatives.

The final rules implementing Basel III 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 $10 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 regulatory capital ratios. 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 safety and soundness examination authority.
 
Failure to meet statutorily mandated capital guidelines or more restrictive ratios separately established for a financial institution or its holding company by its regulators 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 (excluding the Basel III capital conservation buffer amounts), as set forth in the following table:


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Tier 1 common equity 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%

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.
Banking organizations must have appropriate capital planning processes, with proper oversight from the board of directors. Accordingly, pursuant to a separate, general supervisory letter from the FRB, bank holding companies are expected to conduct and document comprehensive capital adequacy analyses prior to the declaration of any dividends (on common stock, preferred stock, trust preferred securities or other Tier 1 capital instruments), capital redemptions or capital repurchases. Moreover, the federal banking agencies have adopted a joint agency policy statement, noting that the adequacy and effectiveness of a bank’s interest rate risk management process and the level of its interest rate exposures are critical factors in the evaluation of the bank’s capital adequacy. A bank with material weaknesses in its interest rate risk management process or high levels of interest rate exposure relative to its capital will be directed by the relevant federal banking agencies to take corrective actions.

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 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 Bank's loan operations are also subject to federal laws applicable to credit transactions, such as the:

Federal Truth-In-Lending Act, governing disclosures of credit terms and costs to consumer borrowers giving consumers the right to cancel certain credit transactions, and defining requirements for servicing consumer loans secured by a dwelling;

Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

9




Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies;

Fair Debt Collection Practices Act, governing the manner in which consumer debts may be collected by collection agencies;

Service Members' Civil Relief Act, governing the repayment terms of, and property rights underlying, secured obligations of persons in active military service;

Rules and regulations of the various federal agencies charged with the responsibility of implementing the federal laws;

Electronic Funds Transfer Act, which regulates fees and other terms of electronic funds transactions;

Fair and Accurate Credit Transactions Act of 2003, which permanently extended the national credit reporting standards of the Fair Credit Reporting Act, and permits consumers, including the Bank’s customers, to opt out of information sharing among affiliated companies for marketing purposes and requires financial institutions, including banks, to notify a customer if the institution provides negative information about the customer to a national credit reporting agency or if the credit that is granted to the customer is on less favorable terms than those generally available;

the Fair Housing Act, which prohibits discriminatory practices relative to real estate related transactions, including the financing of housing and the rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws; and

the Real Estate Settlement and Procedures Act of 1974, which affords consumers greater protection pertaining to federally related mortgage loans by requiring, among other things, improved and streamlined good faith estimate forms including clear summary information and improved disclosure of yield spread premiums.

The Bank’s deposit operations are subject to the:

Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve to implement that act, which govern automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities (including with respect to the permissibility of overdraft charges) arising from the use of automated teller machines and other electronic banking services;

the Truth in Savings Act, which requires depository institutions to disclose the terms of deposit accounts to consumers;

the Expedited Funds Availability Act, which requires financial institutions to make deposited funds available according to specified time schedules and to disclose funds availability policies to consumers; and

the Check Clearing for the 21st Century Act (“Check 21”), which is designed to foster innovation in the payments system and to enhance its efficiency by reducing some of the legal impediments to check truncation. Check 21 created a new negotiable instrument called a substitute check and permits, but does not require, banks to truncate original checks, process check information electronically, and deliver substitute checks to banks that wish to continue receiving paper checks.

The Bank’s loan and deposit operations are both subject to the Bank Secrecy Act which governs how banks and other firms report certain currency transactions and maintain appropriate safeguards against "money laundering" activities.

The Office of Foreign Assets Control (“OFAC”), which is an office in the U.S. Department of the Treasury, is responsible for helping to ensure that U.S. entities do not engage in transactions with “enemies” of the United States, as defined by various Executive Orders and Acts of Congress. OFAC publishes lists of names of persons and organizations suspected of aiding, harboring or engaging in terrorist acts; owned or controlled by, or acting on behalf of target countries, and narcotics traffickers. If a bank finds a name on any transaction, account or wire transfer that is on an OFAC list, it must freeze or block the transactions on the account. The Bank has appointed a compliance officer to oversee the inspection of its accounts and the filing of any notifications. The Bank actively checks high-risk OFAC areas such as new accounts, wire transfers and customer files. These checks are performed using software that is updated each time a modification is made to the lists provided by OFAC and other agencies of Specially Designated Nationals and Blocked Persons.

10



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 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 Community Reinvestment Act of 1977 (the “Community Reinvestment Act”) requires that, in connection with examinations of financial institutions within their respective jurisdictions, the FRB and the FDIC shall evaluate the record of each financial institution in meeting the credit needs of its local community, including low- and moderate-income neighborhoods. These facts are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility. Failure to adequately meet these criteria could impose additional requirements and limitations on the Bank. Additionally, banks are required to publicly disclose the terms of various Community Reinvestment Act-related agreements. The Bank received an “outstanding” Community Reinvestment Act rating from its primary federal regulator on its most recent regulatory examination.

Under the GLB Act, financial institutions are required to disclose their policies for collecting and protecting confidential information. Customers generally may prevent financial institutions from sharing personal financial information with nonaffiliated third parties except for third parties that market the institutions' own products and services. Additionally, financial institutions generally may not disclose consumer account numbers to any nonaffiliated third party for use in telemarketing, direct mail marketing or other marketing through electronic mail to consumers. The Bank has established a privacy policy that it believes promotes compliance with these federal requirements.

Examination and enforcement by the state and federal banking agencies, and other such enforcement authorities, for non-compliance with consumer protection laws and their implementing regulations have increased and become more intense. The advent of the Consumer Financial Protection Bureau (the "CFPB") further heightens oversight and review of compliance with consumer protection laws and regulations. Due to these heightened regulatory concerns, including increased enforcement of the CRA by the federal banking agencies, and new powers and authority of the CFPB, the Bank may incur additional compliance costs or be required to expend additional funds for investments in its local community.

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, the Company's regulatory compliance costs. Failure to comply with the current requirements and any future requirements under the Dodd-Frank Act would negatively impact the Company's results of operations and financial condition. While the effect of any presently contemplated or future changes in the laws or regulations or their interpretations would have on the Company is unpredictable, such changes could be materially adverse to the Company’s investors.

New regulations and statutes are regularly proposed that contain wide-ranging provisions for altering the structures, regulations and competitive relationships of the nation’s financial institutions. Over the last year, the U.S. Congress has debated and proposed changes to the financial institution regulatory landscape, including proposed amendments to the Dodd-Frank Act. The Company cannot predict whether or in what form any proposed regulation or statute will be adopted or the extent to which the Company’s business may be affected by any new regulation or statute. Even if modifications are enacted to existing or proposed regulations, the Company may continue to face enhanced scrutiny from its regulators who may expect it to continue to comply with the current, more stringent requirements as part of their safety and soundness and compliance examinations and general oversight of our operations.



11



Competition

The banking business is highly competitive. The Company's primary market area consists of Wilson, Trousdale, Davidson, Rutherford, DeKalb, Smith, Sumner and Putnam Counties in Tennessee. The Company competes with numerous commercial banks and savings institutions with offices in these market areas. In addition to these competitors, the Company competes for loans with insurance companies, regulated small loan companies, credit unions, and certain government agencies. The Company also competes with numerous companies and financial institutions engaged in similar lines of business, such as mortgage banking companies, brokerage companies and lending companies. Some of the Company's competitors have significantly greater financial resources and offer a greater number of branch locations. To offset this advantage of its larger competitors, the Company believes it can attract customers by providing loan and management decisions at the local level. In addition, as a result of the passage of the Tax Cuts and Jobs Act, which was signed into law in late 2017, our competitors may choose to offer lower interest rates and pay higher deposit rates than we do. 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 9, 2018, the Company and its subsidiary collectively employed 471 full-time equivalent employees.

Available Information

The Company’s Internet website is http://www.wilsonbank.com. Please note that the Company's 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 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 the Company's 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 2017 Annual Report. Certain information not contained in the Company’s 2017 Annual Report, but required by Guide 3, is contained in the tables immediately following:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

12



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2017

 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 $6,773,000, $5,935,000 and $4,698,000 for 2017, 2016 and 2015, respectively, are included in loan income and represent an adjustment of the yield on these loans.


13



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2017
 
 
Dollars In Thousands
 
2017
 
2016
 
2017/2016 Change
 
Average
Balance
 
Rates/Yields
 
Income/
Expense
 
Average
Balance
 
Rates/Yields
 
Income/
Expense
 
Due to
Volume
 
Due to
Rate
 
Total
Loans, net of unearned interest
$
1,727,499

 
4.84
%
 
83,120

 
$
1,571,528

 
4.94
%
 
77,024

 
$
7,583

 
(1,487
)
 
6,096

Investment securities—taxable
277,511

 
1.94

 
5,397

 
308,251

 
1.85

 
5,714

 
(589
)
 
272

 
(317
)
Investment securities—tax exempt
61,868

 
1.95

 
1,208

 
60,464

 
1.97

 
1,191

 
27

 
(10
)
 
17

Taxable equivalent adjustment

 
1.01

 
622

 

 
1.02

 
614

 
15

 
(7
)
 
8

Total tax-exempt investment securities
61,868

 
2.96

 
1,830

 
60,464

 
2.99

 
1,805

 
42

 
(17
)
 
25

Total investment securities
339,379

 
2.13

 
7,227

 
368,715

 
2.04

 
7,519

 
(547
)
 
255

 
(292
)
Loans held for sale
8,657

 
3.74

 
324

 
12,228

 
3.20

 
391

 
(127
)
 
60

 
(67
)
Federal funds sold
60,703

 
.45

 
271

 
74,242

 
.41

 
304

 
(58
)
 
25

 
(33
)
Interest bearing deposits
27,378

 
2.01

 
549

 

 

 

 
549

 

 
549

Restricted equity securities
3,012

 
5.01

 
151

 
3,012

 
4.05

 
122

 

 
29

 
29

Total earning assets
2,166,628

 
4.25

 
91,642

 
2,029,725

 
4.23

 
85,360

 
7,400

 
(1,118
)
 
6,282

Cash and due from banks
10,581

 
 
 
 
 
12,997

 
 
 
 
 
 
 
 
 
 
Allowance for loan losses
(23,174
)
 
 
 
 
 
(23,013
)
 
 
 
 
 
 
 
 
 
 
Bank premises and equipment
48,888

 
 
 
 
 
42,418

 
 
 
 
 
 
 
 
 
 
Other assets
68,125

 
 
 
 
 
61,102

 
 
 
 
 
 
 
 
 
 
Total assets
$
2,271,048

 
 
 
 
 
$
2,123,229

 
 
 
 
 
 
 
 
 
 

14



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2017
 
 
Dollars In Thousands
 
2017
 
2016
 
2017/2016 Change
 
Average
Balance
 
Rates/Yields
 
Income/
Expense
 
Average
Balance
 
Rates/Yields
 
Income/
Expense
 
Due to
Volume
 
Due to
Rate
 
Total
Deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Negotiable order of withdrawal accounts
$
478,691

 
.27
%
 
1,308

 
$
449,053

 
.31
%
 
1,371

 
$
87

 
(150
)
 
(63
)
Money market demand accounts
635,072

 
.26

 
1,681

 
582,408

 
.25

 
1,471

 
137

 
73

 
210

Time deposits
519,732

 
1.03

 
5,353

 
511,590

 
.97

 
4,978

 
80

 
295

 
375

Other savings deposits
132,557

 
.40

 
530

 
117,802

 
.38

 
444

 
58

 
28

 
86

Total interest-bearing deposits
1,766,052

 
.50

 
8,872

 
1,660,853

 
.50

 
8,264

 
362

 
246

 
608

Securities sold under repurchase agreements
1,382

 
.65

 
9

 
1,214

 
.25

 
3

 

 
6

 
6

Federal funds purchased
1,176

 
.68

 
8

 
2,348

 
.72

 
17

 
(8
)
 
(1
)
 
(9
)
Total interest-bearing liabilities
1,768,610

 
.50

 
8,889

 
1,664,415

 
.50

 
8,284

 
354

 
251

 
605

Demand deposits
231,409

 
 
 
 
 
210,655

 
 
 
 
 
 
 
 
 
 
Other liabilities
11,352

 
 
 
 
 
10,831

 
 
 
 
 
 
 
 
 
 
Stockholders’ equity
259,677

 
 
 
 
 
237,328

 
 
 
 
 
 
 
 
 
 
Total liabilities and stockholders’ equity
$
2,271,048

 
 
 
 
 
$
2,123,229

 
 
 
 
 
 
 
 
 
 
Net interest income
 
 
 
 
82,753

 
 
 
 
 
77,076

 
 
 
 
 
 
Net yield on earning assets (1)
 
 
3.84
%
 
 
 
 
 
3.82
%
 
 
 
 
 
 
 
 
Net interest spread (2)
 
 
3.75
%
 
 
 
 
 
3.73
%
 
 
 
 
 
 
 
 
 
(1)
Net interest income on a tax equivalent basis divided by average interest-earning assets.
(2)
Average interest rate on interest-earning assets less average interest rate on interest-bearing liabilities.

15



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2017
 
 
Dollars In Thousands
 
2016
 
2015
 
2016/2015 Change
 
Average
Balance
 
Rates/Yields
 
Income/
Expense
 
Average
Balance
 
Rates/Yields
 
Income/
Expense
 
Due to
Volume
 
Due to
Rate
 
Total
Loans, net of unearned interest
$
1,571,528

 
4.94
%
 
77,024

 
$
1,418,561

 
5.08
%
 
71,543

 
$
7,621

 
(2,140
)
 
5,481

Investment securities—taxable
308,251

 
1.85

 
5,714

 
311,925

 
1.88

 
5,868

 
(69
)
 
(85
)
 
(154
)
Investment securities—tax exempt
60,464

 
1.97

 
1,191

 
37,810

 
2.03

 
768

 
447

 
(24
)
 
423

Taxable equivalent adjustment

 
1.02

 
614

 

 
1.05

 
396

 
230

 
(12
)
 
218

Total tax-exempt investment securities
60,464

 
2.99

 
1,805

 
37,810

 
3.08

 
1,164

 
677

 
(36
)
 
641

Total investment securities
368,715

 
2.04

 
7,519

 
349,735

 
2.01

 
7,032

 
608

 
(121
)
 
487

Loans held for sale
12,228

 
3.20

 
391

 
10,724

 
3.59

 
385

 
51

 
(45
)
 
6

Federal funds sold
74,242

 
.41

 
304

 
75,842

 
.20

 
154

 
(3
)
 
153

 
150

Interest bearing deposits

 

 

 

 

 

 

 

 

Restricted equity securities
3,012

 
4.05

 
122

 
3,012

 
4.02

 
121

 

 
1

 
1

Total earning assets
2,029,725

 
4.23

 
85,360

 
1,857,874

 
4.30

 
79,235

 
8,277

 
(2,152
)
 
6,125

Cash and due from banks
12,997

 
 
 
 
 
9,290

 
 
 
 
 
 
 
 
 
 
Allowance for loan losses
(23,013
)
 
 
 
 
 
(22,588
)
 
 
 
 
 
 
 
 
 
 
Bank premises and equipment
42,418

 
 
 
 
 
40,743

 
 
 
 
 
 
 
 
 
 
Other assets
61,102

 
 
 
 
 
55,198

 
 
 
 
 
 
 
 
 
 
Total assets
$
2,123,229

 
 
 
 
 
$
1,940,517

 
 
 
 
 
 
 
 
 
 

16



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2017
 
Dollars In Thousands
 
2016
 
2015
 
2016/2015 Change
 
Average
Balance
 
Rates/Yields
 
Income/
Expense
 
Average
Balance
 
Rates/Yields
 
Income/
Expense
 
Due to
Volume
 
Due to
Rate
 
Total
Deposits:
 
 
 
 
 
 
 
 
 
Negotiable order of withdrawal accounts
$
449,053

 
.31
%
 
1,371

 
$
398,881

 
.38
%
 
1,515

 
$
176

 
(320
)
 
(144
)
Money market demand accounts
582,408

 
.25

 
1,471

 
499,942

 
.29

 
1,463

 
223

 
(215
)
 
8

Time deposits
511,590

 
.97

 
4,978

 
532,042

 
.97

 
5,179

 
(199
)
 
(2
)
 
(201
)
Other savings deposits
117,802

 
.38

 
444

 
105,648

 
.42

 
443

 
48

 
(47
)
 
1

Total interest-bearing deposits
1,660,853

 
.50

 
8,264

 
1,536,513

 
.56

 
8,600

 
248

 
(584
)
 
(336
)
Securities sold under repurchase agreements
1,214

 
.25

 
3

 
2,505

 
.28

 
7

 
(3
)
 
(1
)
 
(4
)
Federal funds purchased
2,348

 
.72

 
17

 
90

 
1.11

 
1

 
16

 

 
16

Total interest-bearing liabilities
1,664,415

 
.50

 
8,284

 
1,539,108

 
.56

 
8,608

 
261

 
(585
)
 
(324
)
Demand deposits
210,655

 
 
 
 
 
178,281

 
 
 
 
 
 
Other liabilities
10,831

 
 
 
 
 
9,525

 
 
 
 
 
 
Stockholders’ equity
237,328

 
 
 
 
 
213,603

 
 
 
 
 
 
Total liabilities and stockholders’ equity
$
2,123,229

 
 
 
 
 
$
1,940,517

 
 
 
 
 
 
Net interest income
 
 
 
 
77,076

 
 
 
70,627

 
 
Net yield on earning assets (1)
 
 
3.82
%
 
 
 
 
 
3.83
%
 
 
 
 
Net interest spread (2)
 
 
3.73
%
 
 
 
 
 
3.74
%
 
 
 
 
(1)
Net interest income on a tax equivalent basis divided by average interest-earning assets.
(2)
Average interest rate on interest-earning assets less average interest rate on interest-bearing liabilities.


17



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2017
 
II.
Investment Portfolio:
A.    Investment securities at December 31, 2017 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
$
9,886

 
31

 
156

 
9,761

Obligations of states and political subdivisions
22,594

 
66

 
310

 
22,350

 
$
32,480

 
97

 
466

 
32,111

 
 
Securities Available-For-Sale
 
(In Thousands)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Market
Value
U.S. Government-sponsored enterprises (GSEs)
$
74,690

 
4

 
1,714

 
72,980

Mortgage-backed:
 
 
 
 
 
 
 
GSE residential
200,175

 
302

 
2,551

 
197,926

Asset-backed:
 
 
 
 
 
 
 
SBAP
26,387

 

 
789

 
25,598

Obligations of states and political subdivisions
37,197

 
7

 
992

 
36,212

 
$
338,449

 
313

 
6,046

 
332,716


18



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2017
 
II.
Investment Portfolio, Continued:
 
A.    Investment securities at December 31, 2016 consist of the following, continued:
 
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
$
11,856

 
48

 
230

 
11,674

Obligations of states and political subdivisions
24,768

 
142

 
439

 
24,471

 
$
36,624

 
190

 
669

 
36,145

 
 
Securities Available-For-Sale
 
(In Thousands)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Market
Value
U.S. Government-sponsored enterprises (GSEs)
$
61,879

 

 
2,391

 
59,488

Mortgage-backed:
 
 
 
 
 
 
 
GSE residential
166,316

 
496

 
2,447

 
164,365

Asset-backed:
 
 
 
 
 
 
 
SBAP
37,577

 
9

 
729

 
36,857

Obligations of states and political subdivisions
53,429

 
52

 
1,606

 
51,875

 
$
319,201

 
557

 
7,173

 
312,585


19



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2017
 
II.
Investment Portfolio, Continued
    
A.    Investment securities at December 31, 2015 consist of the following, continued:
 
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


20



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2017
 
 
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 mortgage-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, 2017:
Held-To-Maturity Securities
Amortized
Cost
 
Estimated
Market
Value
 
Weighted
Average
Yields
 
(In Thousands, Except Yields)
Mortgage-backed:
 
 
 
 
 
GSEs residential
$
9,886

 
9,761

 
2.61
%
Obligations of states and political subdivisions*:
 
 
 
 
 
Less than one year
3,594

 
3,591

 
1.87

One to three years
5,412

 
5,420

 
2.75

Three to five years
1,806

 
1,809

 
2.84

Five to ten years
8,809

 
8,652

 
2.65

More than ten years
2,973

 
2,878

 
3.25

Total obligations of states and political subdivisions
22,594

 
22,350

 
2.64

Total held-to-maturity securities
$
32,480

 
32,111

 
2.63
%
 *
Weighted average yield is stated on a tax-equivalent basis, assuming a weighted average Federal income tax rate of 21%.


21



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2017
 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
$
226,562

 
223,524

 
2.23
%
U.S. Government-sponsored enterprises (GSEs):
 
 
 
 
 
Less than one year

 

 

One to three years
2,275

 
2,257

 
1.84

Three to five years
10,000

 
9,801

 
1.68

Five to ten years
50,410

 
49,252

 
2.32

More than ten years
12,005

 
11,670

 
2.54

Total U.S. Government-sponsored enterprises (GSEs)
74,690

 
72,980

 
2.25

Obligations of states and political subdivisions*:
 
 
 
 
 
Less than one year
100

 
100

 
2.71

One to three years
1,735

 
1,723

 
2.09

Three to five years
2,760

 
2,715

 
2.16

Five to ten years
17,594

 
17,025

 
2.41

More than ten years
15,008

 
14,649

 
2.75

Total obligations of states and political subdivisions
37,197

 
36,212

 
2.51

Total available-for-sale securities
$
338,449

 
332,716

 
2.27
%
 
*
Weighted average yield is stated on a tax-equivalent basis, assuming a weighted average Federal income tax rate of 21%.



22



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2017
 
III.
Loan Portfolio:
A.    Loan Types
The following schedule details the loans of the Company at December 31, 2017, 2016, 2015, 2014 and 2013:
 
In Thousands
 
2017
 
2016
 
2015
 
2014
 
2013
Commercial, financial and agricultural
$
59,797

 
50,918

 
41,339

 
42,200

 
34,834

Real estate—construction
392,039

 
297,315

 
275,319

 
245,830

 
194,426

Real estate—mortgage
1,263,696

 
1,303,918

 
1,110,989

 
1,027,723

 
940,077

Installment
43,009

 
44,274

 
43,467

 
41,025

 
41,118

Total loans
1,758,541

 
1,696,425

 
1,471,114

 
1,356,778

 
1,210,455

Deferred loan fees
(7,379
)
 
(6,606
)
 
(5,035
)
 
(4,341
)
 
(3,253
)
Total loans, net of deferred fees
1,751,162

 
1,689,819

 
1,466,079

 
1,352,437

 
1,207,202

Less allowance for loan losses
(23,909
)
 
(22,731
)
 
(22,900
)
 
(22,572
)
 
(22,935
)
Net loans
$
1,727,253

 
1,667,088

 
1,443,179

 
1,329,865

 
1,184,267


23



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2017
 
III.
Loan Portfolio, Continued:
B.    Maturities and Sensitivities of Loans to Changes in Interest Rates
The following table classifies the Company's fixed and variable rate loans at December 31, 2017 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 the Company's variable rate loans pursuant to the contractual repricing dates of the underlying loans (dollars in thousands):
 
Amounts at December 31, 2017
 
 
 
Fixed
Rates
 
Variable
Rates
 
Totals
 
At
December
31, 2017
Based on contractual maturity:
 
 
 
 
 
 
 
Due within one year
$
228,440

 
29,209

 
257,649

 
14.6
%
Due in one year to five years
173,258

 
93,357

 
266,615

 
15.2

Due after five years
104,049

 
1,130,228

 
1,234,277

 
70.2

Totals
$
505,747

 
1,252,794

 
1,758,541

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

 
20,249

 
20,249

 
1.2
%
Due within one year
228,440

 
303,558

 
531,998

 
30.2

Due in one year to five years
173,258

 
816,637

 
989,895

 
56.3

Due after five years
104,049

 
112,350

 
216,399

 
12.3

Totals
$
505,747

 
1,252,794

 
1,758,541

 
100.0
%

The following table represents the contractual maturities of the loan portfolio as of December 31, 2017 (dollars in thousands):
 
Due
Within
One Year
 
Due
in One
to Five
Years
 
Due
After
Five
Years
 
Total
Commercial, financial and agricultural
$
11,592

 
22,162

 
26,043

 
59,797

Real estate—construction
144,457

 
97,427

 
150,155

 
392,039

Real estate—mortgage
86,737

 
120,160

 
1,056,799

 
1,263,696

Installment
14,863

 
26,866

 
1,280

 
43,009

 
$
257,649

 
266,615

 
1,234,277

 
1,758,541


24



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2017
 
III.
Loan Portfolio, Continued:
C.    Risk Elements
The following schedule details selected information as to non-performing loans of the Company at December 31, 2017, 2016, 2015, 2014 and 2013:
 
In Thousands, Except Percentages
 
2017
 
2016
 
2015
 
2014
 
2013
Non-accrual loans:









Commercial, financial and agricultural
$









Real estate—construction








3,524

Real estate—mortgage
2,039


3,565


4,909


616


2,053

Installment
1









Total non-accrual
$
2,040


3,565


4,909


616


5,577

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









Commercial, financial and agricultural
$




41


9


285

Real estate—construction
113


22




73


271

Real estate—mortgage
2,550


2,944


4,475


5,008


1,550

Installment
148


160


55


48


27

Total loans 90 days past due still accruing and non-performing TDRs
$
2,811


3,126


4,571


5,138


2,133

Total non-performing loans
$
4,851


6,691


9,480


5,754


7,710

Total loans, net of deferred fees
$
1,751,162


1,689,819


1,466,079


1,352,437


1,207,202

Percentage of total non-performing loans to total loans outstanding, net of deferred fees
.28
%

.40


.65


.43


.64

Other real estate owned
$
1,635


4,527


5,410


7,298


12,869


25



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2017
 
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 $2,040,000 at December 31, 2017, $3,565,000 at December 31, 2016, $4,909,000 at December 31, 2015, $616,000 at December 31, 2014 and $5,577,000 at December 31, 2013. Gross interest income on non-accrual loans that would have been recorded for the year ended December 31, 2017 if the loans had been current totaled $117,000 compared to $202,000 in 2016, $291,000 in 2015, $39,000 in 2014 and $296,000 in 2013. The amount of interest and fee income recognized on total loans during 2017 totaled $83,120,000 as compared to $77,024,000 in 2016, $71,543,000 in 2015, $66,685,000 in 2014 and $66,177,000 in 2013.
At December 31, 2017, loans, which include the above, totaling $16,199,000 were included in the Company’s internal classified loan list. Of these loans $16,027,000 are real estate secured and $172,000 are secured by various other types of collateral. The value collateralizing these loans is estimated by management to be approximately $27,065,000 ($27,057,000 related to real property securing real estate loans and $8,000 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, 2017, real estate construction and mortgage loans made up 22.3% and 71.9%, respectively, of the Company’s loan portfolio.
At December 31, 2017 and 2016, other real estate owned totaled $1,635,000 and $4,527,000, respectively.

26



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2017
 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, 2017 which would be required to be disclosed as past due, non-accrual, restructured or potential problem loans, if such interest-bearing assets were loans.

27




WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2017
 
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, 2017, 2016, 2015, 2014 and 2013 and for the years then ended:
 
In Thousands, Except Percentages
 
2017
 
2016
 
2015
 
2014
 
2013
Allowance for loan losses at beginning of period
$
22,731

 
22,900

 
22,572

 
22,935

 
25,497

Charge-offs:
 
 
 
 
 
 
 
 
 
Commercial, financial and agricultural
(16
)
 
(11
)
 

 
(37
)
 
(150
)
Real estate – construction

 
(66
)
 
(26
)
 
(7
)
 
(1,470
)
Real estate – mortgage
(132
)
 
(209
)
 
(414
)
 
(1,436
)
 
(3,247
)
Installment
(1,074
)
 
(674
)
 
(664
)
 
(387
)
 
(380
)
 
(1,222
)
 
(960
)
 
(1,104
)
 
(1,867
)
 
(5,247
)
Recoveries:
 
 
 
 
 
 
 
 
 
Commercial, financial and agricultural
6

 
15

 
7

 
464

 
38

Real estate – construction
121

 
34

 
39

 
324

 
179

Real estate – mortgage
174

 
131

 
767

 
84

 
123

Installment
418

 
232

 
231

 
134

 
168

 
719

 
412

 
1,044

 
1,006

 
508

Net loan charge-offs
(503
)
 
(548
)
 
(60
)
 
(861
)
 
(4,739
)
Provision for loan losses charged to expense
1,681

 
379

 
388

 
498

 
2,177

Allowance for loan losses at end of period
$
23,909

 
22,731

 
22,900

 
22,572

 
22,935

Total loans, net of deferred fees, at end of year
$
1,751,162

 
1,689,819

 
1,466,079

 
1,352,437

 
1,207,202

Average total loans outstanding, net of deferred fees, during year
$
1,727,499

 
1,571,528

 
1,418,561

 
1,261,131

 
1,205,296

Net charge-offs as a percentage of average total loans outstanding, net of deferred fees, during year
0.03
%
 
0.04

 
0.01

 
0.07

 
0.39

Ending allowance for loan losses as a percentage of total loans outstanding net of deferred fees, at end of year
1.37
%
 
1.35

 
1.56

 
1.67

 
1.90


28



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2017
 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 problem loans, 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, 2017
 
December 31, 2016
 
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
$
411

 
3.4
%
 
$
386

 
3.0
%
Real estate—construction
6,094

 
22.3

 
5,387

 
17.5

Real estate—mortgage
16,738

 
71.9

 
16,396

 
76.9

Installment
666

 
2.4

 
562

 
2.6

 
$
23,909

 
100.0
%
 
$
22,731

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

 
2.9
%
Real estate—construction
5,159

 
16.1

Real estate—mortgage
17,053

 
77.6

Installment
321

 
3.4

 
$
22,935

 
100.0
%


29



WILSON BANK HOLDING COMPANY
Form 10-K
December 31, 2017
 
V.
Deposits:
The average amounts and average interest rates for deposits for 2017, 2016 and 2015 are detailed in the following schedule:
 
2017
 
2016
 
2015
 
Average
Balance
In
Thousands
 
Average
Rate
 
Average
Balance
In
Thousands
 
Average
Rate
 
Average
Balance
In
Thousands
 
Average
Rate
Non-interest bearing deposits
$
231,409

 
%
 
$
210,655

 
%
 
$
178,281

 
%
Negotiable order of withdrawal accounts
478,691