EDGAR 10-K Filing

Company CIK: 885275
Filing Year: 2025
Filename: 885275_10-K_2025_0000950170-25-029576.json

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ITEM 1. BUSINESS
Item 1. Business.
The disclosures set forth in this item are qualified by Item 1A. Risk Factors and the section captioned “Forward-Looking Statements” appearing elsewhere in this Annual Report on Form 10-K and other cautionary statements set forth elsewhere in this report.
General
Wilson Bank Holding Company (the “Company”) is a bank holding company that 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. The Bank is the only direct subsidiary of the Company. The Bank also holds an ownership interest in Encompass Home Loan Lending, LLC ("Encompass"), a company offering mortgage banking services that is 51% owned by Wilson Bank and 49% owned by two home builders operating in Wilson Bank's market areas.
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 February 28, 2025, had the following full service banking offices located in the following Tennessee counties:
Tennessee
County
Number of Full
Service Banking Offices
Davidson
DeKalb
Putnam
Rutherford
Smith
Sumner
Trousdale
Williamson
Wilson
Total
The Company's management believes that Wilson County, Trousdale County, Davidson County, Rutherford County, DeKalb County, Smith County, Sumner County, Putnam County and Williamson County offer an environment for continued banking growth in the Company’s target market, which consists of local consumers, professionals and small businesses. In addition, the Bank expects to open a full service banking office location in Hamilton County late in the first quarter or early in the second quarter of 2025 and, as described elsewhere in this Annual Report on Form 10-K, has entered into an agreement to acquire certain assets and assume certain liabilities of a branch office of another bank located in Putnam County, Tennessee. 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 through a relationship with a third-party investment advisory firm, 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 reasonably be expected to 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, while expanding into other counties in and around middle Tennessee in Lebanon, Tennessee as a result of providing personal, service-oriented banking services to its targeted market. For the year ended December 31, 2024, the Company reported net earnings of approximately $56.530 million and at December 31, 2024 it had total assets of approximately $5.359 billion.
Products and Services
Lending Services. Through the Bank, the Company offers a full range of lending products, including commercial, real estate and consumer loans to individuals, businesses and professional entities. The Bank competes for these loans with competitors who are also well established in the Bank’s geographic markets as well as other non-depository institution lenders that are subject to less regulation than the Bank.
The Bank's lending activities are subject to a variety of lending limits imposed by federal and state law. Differing limits apply based on the type of loan or the nature of the borrower, including the borrower's relationship to the Bank. These legal limits will increase or decrease as the Bank's capital increases or decreases as a result of its earnings or losses, the injection of additional capital, payments of dividends, acquisitions, or for other reasons. In addition to the legal lending limits, the Bank also has internal loan limits that serve to limit the
amounts that the Bank can lend to any one borrower or group of affiliated borrowers.
The principal economic risk associated with each category of loans that the Bank has made or may in the future make is the creditworthiness of the borrower. General economic factors affecting a commercial or consumer borrower's ability to repay include interest, inflation and unemployment rates, as well as other factors affecting a borrower's assets, clients, business, suppliers and employees. Many of the Bank's commercial loans are made to small- to medium-sized businesses that are sometimes less able to withstand competitive, economic and financial pressures than larger borrowers. During periods of economic weakness or periods of increased inflation, these businesses may be more rapidly and more adversely affected than other enterprises and may cause increased levels of nonaccrual or other problem loans, loan charge-offs and higher provision for credit losses.
The Bank's commercial clients borrow for a variety of purposes. The terms of these loans (which include, among others, equipment loans and working capital loans) will vary by purpose and by type of underlying collateral, if any. Commercial loans may be unsecured or secured by accounts receivable or by other business assets. The Bank also makes a variety of commercial real estate loans, including loans secured by investment properties and business loans secured by real estate.
The Bank also makes a variety of loans secured and unsecured to individuals for personal, family, investment and household purposes, including installment and term loans, lines of credit, residential first mortgage loans, home equity loans and home equity lines of credit. The Bank also offers credit cards for consumers and businesses directly.
Deposit Services. The Bank seeks to establish a broad base of core deposits, including savings, noninterest-bearing checking, interest-bearing checking, money market and certificate of deposit accounts, including access to products offered through the IntraFi Deposit Network. The Bank is focused on attracting operating accounts and other core deposits while also lowering its cost of funds. Rates paid on such deposits vary across geographic markets and deposit categories due to different market competition, products and services, deposit size, and other services rendered. The Bank acts as a depository for many state and local governments, government agencies, education systems and power and utility organizations. Such public fund deposits are often subject to competitive bid and in many cases must be secured by pledging a portion of the Bank’s investment securities or a letter of credit.
To attract deposits, the Bank employs a reputation management plan within its geographic markets based on relationship banking. These plans feature broad product lines, competitive pricing, and services it believes will support clients' growth. The Bank believes that its ability to gather deposits is enhanced by the comprehensive relationships its directors and bankers have built with the businesses and individuals who live and do business in the Bank’s various markets. The primary sources of deposits are businesses, their owners and employees along with individuals interested in a comprehensive banking relationship in the Bank’s geographic markets.
Additionally, the Bank offers its targeted small business and commercial clients a comprehensive array of treasury management services. The Bank's treasury management services include, among other services, remote deposit services, which allow electronic deposits to be made from the client's place of business, online wire origination, enhanced ACH origination services, positive pay, zero balance and sweep accounts, automated bill pay services, electronic receivables processing, lockbox processing, merchant card acceptance services, small business and commercial credit cards corporate purchasing cards and virtual accounting/deposit escrow solutions.
Mortgage Banking Services. The Bank originates mortgage loans throughout its geographic footprint as well as through purchases from correspondents. Mortgage loans are typically sold in the secondary market. Mortgage banking has provided the Bank a source of noninterest income and referrals for other banking services including home equity lines of credit and deposit products.
Investment, Trust and Insurance Services. The Bank contracts with Raymond James Financial Services, Inc. ("RJFS"), a registered broker-dealer and investment adviser, to offer and sell various securities and other financial products to the public through associates who are employed by both the Bank and RJFS. RJFS is a subsidiary of Raymond James Financial, Inc.
The Bank offers, through RJFS, non-FDIC insured investment products to help clients achieve their financial objectives within their risk tolerances. The brokerage and investment advisory program offered by RJFS complements the Bank's general banking business and further supports its business philosophy and strategy of delivering to the Bank’s clients a comprehensive array of products and services that meet their financial needs. Pursuant to its contract, RJFS is primarily responsible for the compliance monitoring of dual employees of RJFS and the Bank. The Bank receives a percentage of commission credits and fees generated by the program. The Bank remains responsible for various expenses associated with the program, including furnishings, equipment and promotional expenses and general personnel costs, including commissions paid to licensed brokers.
Financial and Statistical Information
The Company’s audited consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Part II, Item 7 and Part II, Item 8 of this report contain certain financial and statistical information.
Regulation and Supervision
The banking industry is generally subject to extensive regulatory oversight. 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. Many of these laws and regulations have undergone significant change in recent years.
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 implemented 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 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.
Failure by the Company or the Bank to comply with the requirements of applicable state and federal banking regulations would negatively impact the Company’s results of operations and financial condition and could limit its growth or expansion activities. While the Company cannot predict what effect any presently contemplated or future changes in the laws or regulations or their interpretations would have on it or the Bank, such changes could be materially adverse to the Company’s investors.
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 their 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. 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 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 rebuttably 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, as amended (the “Exchange Act”); 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. The regulations provide a procedure for challenge of the rebuttable control presumption.
In August 2024, the FDIC issued a proposed rule that seeks to eliminate an exemption to its regulatory filing requirements related to acquisitions of voting securities of depository institution holding companies, which rules, if adopted, would require change in bank control filings associated with bank holding company securities to be made with, and approved by, the FDIC in addition to the FRB.
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 securities of any company engaged in nonbanking activities unless, prior to the enactment of the GLB 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 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 that is a credit transaction 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 shareholders and their related interests. Among other requirements and limitations, 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 the cash dividends and only if the rate of earnings retention appears consistent with the company’s current and expected future 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’s capital is below the level of regulatory minimums plus the applicable capital conservation buffer. FRB policy also provides that a bank holding company should inform the FRB reasonably in advance of declaring or paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in a material adverse change to the bank holding company's capital structure.
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.
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 levels 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 amended the regulatory capital rules applicable to the Bank and the Company, effective January 1, 2015. The final rules implemented 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 like the Company may not be lower than the leverage and risk-based capital ratios for insured depository institutions like the Bank. The final capital rules implementing Basel III, among other things, included new minimum risk-based capital and leverage ratios for banks and their holding companies. Moreover, these rules refined the definition of what constitutes “capital” for purposes of calculating those ratios, including the definitions of Tier 1 capital
and Tier 2 capital. Total capital consists of two components, Tier 1 capital and Tier 2 capital. 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 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 as of December 31, 2009, trust preferred securities issued prior to that date, continue to count as Tier 1 capital subject to certain limitations. Tier 2 capital generally consists of perpetual preferred stock and related surplus not meeting the Tier 1 capital definition, qualifying subordinated debt, qualifying mandatorily convertible debt securities, and a limited amount of the allowance for credit losses.
The minimum capital level requirements applicable to bank holding companies and banks subject to the rules are: (i) a Tier 1 common equity (“CET1”) capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6%; (iii) a total 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% (consisting of CET1 capital) above the regulatory minimum capital ratios, and have resulted in the following minimum ratios: (i) a CET1 capital ratio of 7%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. An institution will be subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if capital levels fall below minimum levels plus the buffer amounts. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions.
Under the Basel III capital rules, CET1 capital consists of common stock and paid in capital and retained earnings. CET1 capital is reduced by goodwill, certain intangible assets, net of associated deferred tax liabilities, deferred tax assets that arise from tax credit and net operating loss carryforwards, net of any valuation allowance, and certain other items specified in the Basel III capital rules. The Basel III capital rules also provide for a number of deductions from and adjustments to CET1 capital. These include, for example, the requirement that mortgage servicing rights, deferred tax assets arising from temporary differences that could not be realized through net operating loss carrybacks and investments in non-consolidated financial institutions be deducted from CET1 capital to the extent that any one such category exceeds 25% of CET1 capital.
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.
Additionally, the FDICIA establishes a system of prompt corrective action ("PCA") 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:
CET1 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%
Failure to meet statutorily mandated capital guidelines or more restrictive ratios separately established for a depository 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.
On July 30, 2024, the FDIC proposed a rule that would amend the current rules governing brokered deposits. The proposed rule would, among other things, (i) amend the definition of "deposit broker"; (ii) eliminate the exclusive deposit placement arrangement exception; (iii) eliminate the enabling transactions designated business exception; (iv) revise the "25 percent test" designated business exception for a primary purpose exception to be available only to broker-dealer and investment advisers and only if less than 10% of the total assets that the broker-dealer or investment adviser has under management for its customers is placed at one or more insured depository institutions; (v) revise the interpretation of the primary purpose exception to consider the third party intent in placing customer funds at a particular
insured depository institution; (vi) allow only insured depository institutions to file notices and applications for primary purpose exceptions; and (vii) clarify how an insured depository institution that loses its "agent institution" status regains that status. The Bank is currently evaluating the effect of the proposed rule on the Bank were it to be adopted as a final rule and monitoring the status of this rulemaking which may be impacted by the recent change in the Presidential administration.
A state regulated bank which is not a member of the Federal Reserve, like the Bank, is required to be “well-capitalized” under PCA 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.
The Basel III capital rules prescribe 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 the unsecured portion of non-residential mortgage loans that are 90 days past due or otherwise on nonaccrual status;
•applying a 250% risk weight to any non-deducted mortgage servicing rights;
•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; and
•eliminating the 50% cap on the risk weight for OTC derivatives.
In December 2017, the Basel Committee on Banking Supervision published the last version of the Basel III accord, generally referred to as “Basel IV” or the “Basel III Endgame.” The Basel Committee stated that a key objective of the revisions incorporated into the framework is to reduce excessive variability of risk-weighted assets (“RWA”), which will be accomplished by enhancing the robustness and risk sensitivity of the standardized approaches for credit risk and operational risk, which will facilitate the comparability of banks’ capital ratios; constraining the use of internally modeled approaches; and complementing the risk-weighted capital ratio with a finalized leverage ratio and a revised and robust capital floor. In July 2023, federal banking regulators issued a joint agency proposal that sought to implement the final components of the Basel III Endgame as well as seeking to make changes aimed at addressing the underlying causes of the turmoil in the banking industry that was experienced in the first half of 2023 with the failure of certain larger financial institutions. The proposal sought to revise the capital framework for banks with total assets of $100 billion or more in four main areas of credit risk, market risk, operational risk and credit valuation adjustment risk. The proposal also would have required banks with total assets of $100 billion or more to include unrealized gains and losses from certain securities in their capital ratios, to comply with supplementary leverage ratio requirements and to comply with countercyclical capital buffer requirements, if activated. Even though because of their size, these rules would not directly apply to the Company or the Bank, regulators may have sought to improve elements of the changes on the Company or the Bank through the regulatory oversight process. The comment period for these proposed changes ended in the first quarter of 2024 and the proposed rule changes have not yet been finalized. As a result of the recent change in the Presidential administration, we believe the regulatory agencies may re-propose a modified version of the proposed rules that would remove most of the Basel III Endgame changes on the $100 billion to $250 billion asset sized banks, but as of the date of this Annual Report on Form 10-K no re-proposed rules have been issued.
In 2018, the U.S. Congress passed, and the President signed into law, the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (the “Growth Act”). The Growth Act, among other things, required the federal banking agencies to issue regulations allowing community bank organizations with total assets of less than $10.0 billion and limited amounts of certain assets and off-balance sheet exposures to access a simpler capital regime focused on a bank’s Tier 1 leverage capital levels rather than risk-based capital levels that are the focus of the capital rules issued under the Dodd-Frank Act implementing Basel III.
In October 2019, the federal banking agencies approved final rules that, under the Growth Act, exempt from the risk-based and leverage capital requirements of the capital rules issued under the Dodd-Frank Act any qualifying community bank and its holding company that have leverage ratios, calculated as Tier 1 capital over average total consolidated assets (the “Community Bank Leverage Ratio”), of greater than 9 percent and hold 25% or less of total assets in off-balance sheet exposures and 5% or less of total assets in trading assets and liabilities. Tier 1 capital for purposes of calculating the Community Bank Leverage Ratio is defined as total equity less accumulated other comprehensive income, less goodwill, less all other intangible assets, less deferred tax assets that arise from net operating loss and tax carryforwards, net of any related valuation allowances. Off-balance sheet exposures include, among other items, unused portions of commitments, securities lent or borrowed, credit enhancement and financial standby letters of credit. A qualifying community banking organization and its holding company that have chosen the proposed framework are no longer required to calculate the generally applicable
risk-based and leverage capital requirements. Such a bank is also considered to have met the capital ratio requirements to be well capitalized for the agencies’ PCA rules provided it has a Community Bank Leverage Ratio greater than 9 percent. The final rules also established a grace period of two fiscal quarters during which a qualifying financial institution that temporarily failed to meet any of the qualifying criteria for use of the Community Bank Leverage Ratio would nonetheless be considered well capitalized so long as the institution maintained a Community Bank Leverage Ratio of greater than 7%.
Pursuant to the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), lenders, like the Bank, were given the option to defer the implementation of ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“CECL”) until 60 days after the declaration of the end of the public health emergency related to the COVID-19 pandemic or December 31, 2020, whichever came first. The Coronavirus Relief Act subsequently gave lenders the option to further defer the implementation of CECL until January 1, 2022. In addition, the Securities and Exchange Commission (“SEC”) staff has stated that opting to delay the implementation of CECL shall be considered to be in accordance with generally accepted accounting principles. As a result, the Bank elected to delay implementation of CECL until January 1, 2022.
In February 2019, the federal bank regulatory agencies issued a final rule (the “2019 CECL Rule”) that revised certain capital regulations to account for changes to credit loss accounting under U.S. generally accepted accounting principles (“GAAP”). The 2019 CECL Rule included a transition option that allows banking organizations to phase in, over a three-year period, the day-one adverse effects of adopting a new accounting standard related to the measurement of CECL on their regulatory capital ratios (three-year transition option). In March 2020, the federal bank regulatory agencies issued an interim final rule that maintains the three-year transition option of the 2019 CECL Rule following the adoption of CECL. If adopted, the cumulative amount of transition adjustments will become fixed at the start of the three-year period, and will be phased out of the regulatory capital calculations evenly over such period, with 75% recognized in year one, 50% recognized in year two, and 25% recognized in year three. The Company did not take advantage of this option and recognized the effects of its adoption of CECL in full upon its adoption of CECL on January 1, 2022.
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 at each insured depository institution. 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 a depository 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, rules and regulations 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;
•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; 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 also subject to federal regulation, including the following:
•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;
•the 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 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. Failure to comply with these sanctions could have serious financial, legal and reputational consequences. Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these obligations.
Pursuant to the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”), as amended, financial institutions are subject to prohibitions against specified financial transactions and account relationships as well as enhanced due diligence and “know your customer” standards in their dealings with foreign financial institutions and foreign customers.
A major focus of governmental policy on financial institutions has been aimed at combating money laundering and terrorist financing. The Bank Secrecy Act (the "BSA") and its implementing regulations and parallel requirements of the federal banking regulators require the Bank to maintain a risk-based anti-money laundering (“AML”) program reasonably designed to prevent and detect money laundering and terrorist financing and to comply with the recordkeeping and reporting requirements of the BSA, including the requirement to report suspicious activity. The Patriot Act substantially broadened the scope of AML laws and regulations by imposing significant new compliance and due diligence obligations on financial institutions, creating new crimes and penalties and expanding the extra-territorial
jurisdiction of the United States. Financial institutions, including banks, are required under final rules implementing Section 326 of the Patriot Act to establish procedures for collecting standard information from customers opening new accounts and verifying the identity of these new account holders within a reasonable period of time. Financial institutions are also prohibited from entering into specified financial transactions and account relationships and must take certain steps to assist government agencies in detecting and preventing money laundering and to report certain types of suspicious transactions. In May 2016, Treasury’s Financial Crimes Enforcement Network issued rules under the BSA requiring financial institutions to identify the beneficial owners who own or control certain legal entity customers at the time an account is opened and to update their AML compliance programs to include risk-based procedures for conducting ongoing customer due diligence. In January 2021, the Anti-Money Laundering Act of 2020 (“AMLA”), which amends the BSA, was enacted as part of the National Defense Authorization Act for Fiscal Year 2021. Among other things, the AMLA codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the development of standards for evaluating technology and internal processes for BSA compliance; and expands enforcement and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower incentives and protections. The Bank currently has policies and procedures in place designed to comply with the Patriot Act, the BSA and the other regulations targeting terrorism and money laundering, and it will modify these policies and procedures as necessary to comply with the changes reflected in the AMLA and its future implementing regulations. In July 2024, federal banking regulatory agencies issued proposed rules that would revise each agency’s rules for anti-money laundering and countering the financing of terrorism. These proposed rules were meant to align with rule changes proposed by the U.S. Treasury to its AML/CFT rules. These rule changes, if they become effective, would require the Bank to implement additional compliance measures.
The Community Reinvestment Act of 1977 (the “CRA”) 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 communities, including low- and moderate-income neighborhoods consistent with safe and sound operations of the institutions. 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 CRA-related agreements. The Bank received a “satisfactory” CRA rating from its primary federal regulator on its most recent regulatory examination.
In December 2019, the FDIC and the Office of the Comptroller of the Currency (“OCC”) jointly proposed rules that would have significantly changed existing CRA regulations. In May 2020, the OCC issued its final CRA rule, effective October 1, 2020, however in December 2021, the OCC revoked the newly issued rule and largely reverted to its prior CRA rule. On October 24, 2023, the OCC, FRB and FDIC issued a final rule that the regulators believe will strengthen and modernize regulations implementing the CRA. The stated key objectives of the rule are to (1) strengthen the achievement of the core purpose of the CRA, (2) adapt to changes in the banking industry, including the expanded role of mobile and online banking, (3) provide greater clarity and consistency in the application of CRA regulations, (4) tailor performance standards to account for differences in bank size, business models and local conditions, (5) tailor data collection and reporting requirements and use existing data whenever possible, (6) promote transparency and public engagement, (7) confirm that CRA and fair lending responsibilities are mutually reinforcing and (8) promote a consistent regulatory approach that applies to banks regulated by all three agencies. This final rule had an initial effective date of April 1, 2024 though there is a multiyear phase-in period, though the federal banking regulators issued a final supplemental rule in March 2024 extending the applicability date of the facility-based assessment areas and public file provisions of the final rule from April 1, 2024 to January 1, 2026. Because of the Bank’s asset size it will be evaluated for compliance with the new rule under each of the rules four tests - the retail lending test, the retail services and products tests, a community development financing test and a community development services test. Among other things, the new rule expands those assessment areas where the Bank’s activities will be tested for compliance with the rules to include areas where the Bank may not have a physical presence but nonetheless engages in activity as a result of online banking activities. The Company is evaluating the impact of the changes within these new rules on its operations and the potential impact to its financial condition, results of operations, and/or liquidity, which cannot be predicted at this time. In addition, the rule is the subject of ongoing legal challenges that create uncertainty regarding when the rule will ultimately be effective, what elements of the rule change will survive legal challenge and the ultimate impact on the Company of the rule change.
On September 17, 2024, the FDIC approved a final Statement of Policy on Bank Merger Transactions addressing the scope of transactions subject to FDIC approval, the FDIC's process for evaluating merger applications, and the principles that guide the FDIC's consideration of the applicable statutory factors as set forth in the Bank Merger Act.
The Bank is also subject to fair lending requirements and reporting obligations involving its home mortgage lending operations. Fair lending laws prohibit discrimination in the provision of banking services, and bank regulators have increasingly focused on the enforcement of these laws. Fair lending laws include the Equal Credit Opportunity Act of 1974 and the Fair Housing Act of 1968, which prohibit discrimination in credit and residential real estate transactions on the basis of prohibited factors including, among others, race, color, national origin, gender and religion. The Bank may be liable, either through administrative enforcement or private civil actions, for policies that result in a disparate treatment of or have a disparate impact on a protected class of applicants or borrowers. If a pattern or practice of lending discrimination is alleged by a regulator, then that agency may refer the matter to the U.S. Department of Justice (“DOJ”) for investigation. Pursuant to a Memorandum of Understanding, the DOJ and the Consumer Financial Protection Bureau (“the CFPB”)
have agreed to share information, coordinate investigations and generally commit to strengthen their coordination efforts. The Bank is required to have a fair lending program that is of sufficient scope to monitor the inherent fair lending risk of the institution and that appropriately remediates issues which are identified. State and federal banking regulators have issued various policy statements and, in some cases, regulations, emphasizing the importance of technology risk management and supervision. In July 2023, the SEC adopted rules that require disclosure of material cybersecurity incidents, as well as cybersecurity risk management, strategy and governance. The final rule applicable to the cybersecurity disclosure to be included in the Company’s (i) Current Reports on Form 8-K became effective on December 18, 2023 and (ii) Annual Report on Form 10-K became effective for any fiscal year ending on or after December 15, 2023. On November 18, 2021, the federal banking agencies issued a joint final rule that requires a banking organization to notify their primary federal regulator within 36 hours of becoming aware that a significant “computer-security incident” has occurred. In general, a banking organization must notify its primarily federal regulator for incidents that have materially disrupted, degraded or impaired - or are reasonably likely to materially disrupt, degrade or impair - (i) the ability of such banking organization to carry out banking operations and activities or deliver banking products and services, (ii) such banking organization’s results of operations, or (iii) the financial stability of the financial sector. The final rule also requires a bank service provider to notify each of its affected customers as soon as possible when it determines that it has experienced a computer-security incident that has caused, or is reasonably likely to cause, a material service disruption for four or more hours. Compliance with the final rule was required by May 1, 2022. This new rule and the earlier such policy statements and regulations indicate that financial institutions should design multiple layers of security controls to establish lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing internet-based services of the financial institution. A financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the institution’s operations after a cyber-attack involving destructive malware. A financial institution is expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type of cyber-attack.
Federal statutes and regulations, including the GLB Act and the Right to Financial Privacy Act of 1978, limit the Company’s and the Bank’s ability to disclose non-public information about consumers, customers and employees to nonaffiliated third parties. Specifically, the GLB Act requires disclosure of the Company’s privacy policies and practices relating to sharing non-public information and enables retail customers to opt out of the institution’s ability to share information with unaffiliated third parties under certain circumstances. The GLB Act also requires the Company and the Bank to implement a comprehensive information security program that includes administrative, technical and physical safeguards to ensure the security and confidentiality of customer records and information and, if applicable state law is more protective of customer privacy than the GLB Act, financial institutions, including the Bank, will be required to comply with such state law. In addition to their obligations to safeguard customer information under GLB Act regulations, financial institutions, like the Bank, are subject to regulations that require the institutions when they become aware of an incident of unauthorized access to sensitive customer information, to conduct a reasonable investigation to promptly determine the likelihood that the information has been or will be misused. If the institution determines that misuse of the sensitive customer information has occurred or is reasonably possible, it should notify the affected customers as soon as possible. An increasing number of state laws and regulations have been enacted in recent years to implement privacy and cybersecurity standards and regulations, including data breach notification and data privacy requirements. This trend of state-level activity is expected to continue to expand, requiring continual monitoring of developments in the states in which the Company's customers are located and ongoing investments in the Company's information systems and compliance capabilities.
Other laws and regulations impact the Company’s and the Bank’s ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes. These regulations affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. In connection with the regulations governing the privacy of consumer financial information, the federal banking agencies, including the FDIC, have adopted guidelines for establishing information security standards and programs to protect such information. In addition, the Bank has established a privacy policy that it believes promotes compliance with the federal requirements.
Under President Biden's administration, examination and enforcement by the state and federal banking agencies, including the CFPB, and other such enforcement authorities, for non-compliance with consumer protection laws and their implementing regulations increased and became more intense, though we currently expect the CFPB's oversight and enforcement priorities may change over the next few years under the new Presidential administration. If heightened regulatory concerns persist in these areas, the Bank may incur additional compliance costs or be required to expend additional funds for investments in its local community or other assessments areas. Under President Biden's administration, federal banking regulators significantly increased their focus on compliance by banks with existing regulations, including those that seek to prevent unfair and deceptive trade practices, including a focus on deposit and other service charges and fees banks charge customers who overdraw their accounts or have checks or other items presented when a customer’s account does not have sufficient funds to cover those checks or other items. Should the banking regulatory agencies' focus on these areas persist, the Bank may incur increased costs and record lower levels of noninterest income associated with service charges on deposit accounts.
The Company’s securities are registered under the Exchange Act. As such, the Company is subject to the information, proxy solicitation, insider trading, corporate governance, and other requirements and restrictions of the Exchange Act. As a public company, the Company
is also subject to the accounting oversight and corporate governance requirements of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), including, among other things, required executive certification of financial presentations, increased requirements for board audit committees and their members, and enhanced requirements relating to disclosure controls and procedures and internal control over financial reporting.
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. 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 or change in applicable rules or regulations, though we do expect that the Trump administration will seek to implement a regulatory reform agenda that is significantly different from that of the Biden administration, impacting the rulemaking, supervision, examination and enforcement priorities of the federal banking agencies. Even if modifications are enacted to existing or proposed regulations, including raising certain assets thresholds above those currently in place, 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 the Company’s operations.
Competition
The banking business is highly competitive. The Company’s primary market areas consist of Wilson, Trousdale, Davidson, Rutherford, DeKalb, Smith, Sumner, Putnam, Williamson and Hamilton 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, private equity firms, 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 non-bank lending companies. Also, technology has lowered barriers to entry and made it possible for nonbanks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of the Company's non-bank competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than the Bank can. Continued consolidation in the financial services industry has contributed to increases in the number of large competitors the Company faces in its markets. 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 and by being more responsive to customers than some of its larger competitors. 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.
Human Capital
As of February 26, 2025, the Company and the Bank collectively employed 596 full-time equivalent employees. As an independent, community-based bank, the Bank strives to provide friendly, professional, personal service from a caring staff, while offering an extensive assortment of financial services to its customers. As such, the Bank’s employees are central to the successful execution of its business strategy.
The Bank strives to recruit, attract and retain employees and future leaders whose skills and experience advance the mission of the Bank. The Bank's Human Resources Department works closely with its Training Department, managers and mentors to ensure a positive start for new employees. With regard to talent development, the Bank works to identify future leaders within the Bank to develop the skills necessary for career growth. The Bank is committed to professional development for all of its employees through internal and external training programs, mentorships and dedicated leadership workshops. The Bank has also established career development tracks for each specific role in the organization. These tracks outline the progression paths and growth opportunities available within the Bank and chart a course for employees' professional development. In 2024, an employee engagement survey was conducted with a response rate of 87%. The survey resulted in an employee engagement score of 88% and an employee satisfaction rate of 88%. Although these are considered strong scores by industry observers, the Bank continually works to improve its relations with its employee and those employees’ experiences. In 2024, the Bank's retention rate was 88%.
The Bank strives to hire, train and develop a workforce made up of associates that believe they are treated fairly because it believes doing so allows it to better meet the financial needs of the communities the Bank serves. The Bank believes that all employees should feel a sense of belonging where they work and that collaboration among employees of various backgrounds improves the day-to-day experience of all of its employees.
The health and safety of the Bank’s employees has been and continues to be a top priority.
In addition to the substantial investments in employee professional development and safety, the Bank’s benefits and compensation programs are designed to ensure it recruits and retains top talent. The Bank offers employees a comprehensive health benefits package, provides a 401(k) match of $0.50 on the dollar on the first 8% of an employee's contributions to encourage retirement savings, and structures its bonus program for employees to create meaningful performance-based incentives. The Bank believes that these programs, combined with an intentional focus to create a positive, values-based culture will help to ensure that the Bank retains its status as a leading community bank in the markets that it serves.
Serving the needs of all of the members of the Company’s communities also remains a vital part of the Bank’s and the Company’s mission. Besides continuing its annual donations, fundraising and sponsorships in 2024, the Bank’s departments and employees were able to support local nonprofit organizations of their choosing through the We Believe Together giving program - including hundreds of hands-on volunteer hours with the recipient organizations that could permit them. The Bank created the We Believe Together Program in 2017 as a way for employees to contribute work hours and earn matching contribution funds from the Bank for local charities. The Bank also actively participates in the School Bank Program which allows elementary students to become familiar with banking at a young age. The Company also sponsors popular community events in its market areas, including the annual Southern Home & Garden Expo and the Wilson County Fair.
Environmental Matters
There is an increasing concern among individuals and governments over the risks of a changing climate and extreme weather events and related environmental sustainability and the Company’s management and board is continuing to monitor developments in this area and evaluate those things that the Company can do to aid in addressing these concerns. To date, the Company has taken steps to reduce the amount of paper it uses by encouraging clients to receive digital statements. The use of e-signatures by clients has also increased in recent years, further reducing the amount of paper that the Company utilizes in its operations. Expansion of online and digital banking tools in recent years has allowed the Bank to further reduce the number of trips that customers have to make in person to branch locations. These digital and online offerings include remote deposit and mobile banking applications that allow customers to deposit checks without the need for physical delivery to the Bank’s branches.
In addition, the Bank's operations center contains many environmentally friendly features, including solar panels, LED motion-activated lighting and an HVAC computer-controlled system.
Information about our Executive Officers
The following information regarding the Company’s executive officers is included in Part I of this report in lieu of being included in the Company’s definitive proxy materials to be filed in connection with the Company’s 2025 Annual Meeting of Shareholders.
John McDearman (55) - Mr. McDearman is President and Chief Executive Officer of the Company and Chief Executive Officer of the Bank. Mr. McDearman joined the Bank in November of 1998. He has held positions in branch administration and commercial lending. From November 2002 to January 2009, he held the position of Senior Vice President-Central Division of the Bank. From January 2009 to January 2018, he served as Executive Vice President of the Bank and from January 2018 to January 1, 2020, he served as President of the Bank. Prior to joining the Bank in 1998, he was Assistant Vice President, Banking Center Manager for NationsBank, Chattanooga, Tennessee, a position he held from 1994 to 1998. Mr. McDearman also serves on the Boards of Directors of the Company and the Bank, including as the Chairman of the Bank’s Board of Directors.
John Foster (52) - Mr. Foster joined the Bank in January 1998. He has held positions in branch administration and consumer lending. From August 2017 to July 2018, Mr. Foster served as Senior Vice President/Head of Consumer Lending for the Bank, after having served as a Senior Vice President of the Bank from January 2013 to August 2017. From July 2018 to April 2019, he served as Executive Vice President/Small Business & Consumer Lending for the Bank. From April 2019 to January 1, 2020, he served as the Bank’s Executive Vice President/Chief Consumer/Commercial Banking Officer. Currently, he serves as President of the Bank, a position he has held since January 1, 2020.
Kayla Hawkins (37) - On March 1, 2024, Kayla Hawkins was appointed the Chief Financial Officer of Wilson Bank Holding Company and the Bank, replacing Lisa Pominski in that role in advance of Ms. Pominski’s retirement from the Company and the Bank on March 31, 2024. Ms. Hawkins had been employed by the Bank as Executive Vice President, Reporting Manager since
December 11, 2023. Prior to that she served as the senior vice president, reporting manager, vice president, reporting manager, and assistant vice president, reporting manager, from December 1, 2021 to December 11, 2023, from March 10, 2020 to November 30, 2021 and from May 1, 2018 to March 9, 2020, respectively. Before that she served as reporting manager officer and reporting manager from November 30, 2015 to April 30, 2018 and December 5, 2011 to November 29, 2015, respectively. Ms. Hawkins earned a BBA in Accounting and Master of Business Administration both from Middle Tennessee State University and is a certified public accountant. Prior to joining the Bank, she worked in public accounting where, among other duties, she was engaged in performing audits of financial institutions. Ms. Hawkins serves as the Company’s principal financial officer and principal accounting officer.
Clark Oakley (55) - Mr. Oakley joined the Bank in October of 1995. He has held positions in mortgage origination and branch administration. From 2008 to 2016 he held the position of Senior Vice President- Eastern Division of the Bank, and since January 1, 2017, he has served as Executive Vice President and Chief Operating Officer of the Bank. Prior to joining the Bank, Mr. Oakley was most recently employed at Union Planters Bank in Alexandria, Tennessee. His primary duties include overseeing the operations of the Company and the Bank.
Taylor Walker (41) - Mr. Walker has served as the Bank’s Chief Credit Officer since January 1, 2023. Prior to this he was employed by the Bank as Executive Vice President - Head of Commercial Lending since April 2022. Prior to that he served as Senior Vice President - Head of Commercial Lending from January 2021 through March 2022. From January 2017 through December 2022, Mr. Walker served as the Bank’s Senior Vice President and North Region President. Before that he was a Vice President and Business Development Manager from January 2016 through December 2016 and a Vice President and Office Manager from August 2012 through December 2015.
Available Information
The Company’s headquarters is located at 623 West Main Street, Lebanon, Tennessee where its phone number is (615) 444-2265. Its 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 files or furnishes such materials to 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 incorporated by reference.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
Investing in the Company’s common stock involves various risks which are particular to the Company, its industry and its market areas. Several risk factors regarding investing in the Company’s common stock are discussed below. If any of the following risks were to occur, the Company may not be able to conduct its business as currently planned and its financial condition or operating results could be materially and negatively impacted. These matters could cause the value of the Company’s common stock to decline in future periods.
Summary Risk Factors
The Company’s business is subject to a number of risks, including risks that may prevent the Company from achieving its business objectives or may adversely affect its business, financial condition, results of operations, cash flows, and prospects. These risks are discussed more fully below and include, but are not limited to, risks related to:
Interest Rate Risks
●The Company’s net interest margin, and consequently its net earnings, are significantly affected by interest rate levels and movements in short-term rates as well as competitive pressures the Company faces.
●The Company’s hedging strategy may not be effective, including in the event that interest rates move in unanticipated manners.
●The performance of the Company’s investment securities portfolio is subject to fluctuation due to changes in interest rates and market conditions, including credit deterioration of the issuers of individual securities.
Credit and Lending Risks
●The Company’s loan portfolio includes a significant amount of real estate loans, including construction and development loans, which loans have a greater credit risk than residential mortgage loans.
●The Company has significant credit exposure to borrowers that are homebuilders and land developers and the Company also targets small businesses.
●An inadequate allowance for credit losses would negatively impact the Company’s results of operations and financial condition.
●The Company’s accounting estimates and risk management processes rely on analytical and forecasting models and tools.
●The Company could sustain losses if its asset quality declines.
●Environmental liability associated with commercial lending could result in losses.
●The Company depends on the accuracy and completeness of information about customers.
●The Company may be subject to claims and litigation asserting lender liability.
Liquidity and Capital Risks
●Liquidity risk could impair the Company’s ability to fund its operations and jeopardize its financial condition.
●Excess levels of liquidity could negatively impact the Company’s earnings.
●The ability to maintain required capital levels and adequate sources of funding and liquidity could be impacted by changes in the capital markets and deteriorating economic and market conditions.
Operational and Market Risks
●Negative developments in the U.S. and local economies in the Company’s market areas may adversely impact the Company’s results in the future.
●The Company is geographically concentrated in Wilson County, Tennessee and its surrounding counties and changes in local economic conditions could impact its profitability.
●The Company's business may suffer if there are significant declines in the value of real estate.
●The Company has sought to expand its franchise by developing new markets or expanding its operations in existing markets and may continue to do so in future years.
●The Company is dependent on its information technology and telecommunications systems and third-party servicers, and systems failures, interruptions or breaches of security could have an adverse effect on its financial condition.
●Competition from financial institutions and other financial service providers may adversely affect the Company’s profitability.
●The Company’s key management personnel may leave at any time.
●An ineffective risk management framework could have a material adverse effect on the Company’s strategic planning and its ability to mitigate risks and/or losses and could have adverse regulatory consequences.
●The Company’s selection of accounting policies and methods may affect its reported financial results.
●The Company currently invests in bank owned life insurance and may continue to do so in the future.
●The Company’s business reputation and relationships are important and any damage to them could have a material adverse effect on its business.
●The Company’s business is dependent on technology, and an inability to invest in technological improvements may adversely affect the Company’s results of operations and financial condition.
●The Company is subject to regulatory oversight and certain litigation, and its expenses related to this regulatory oversight and litigation may adversely affect its results.
●The soundness of other financial institutions, including those with whom the Company has engaged in transactions, could adversely affect the Company.
●Natural disasters and the effects of a changing climate may adversely affect the Company and its customers.
●The Company’s asset valuations may include methodologies, estimations and assumptions which are subject to differing interpretations and could result in changes to asset valuations that may materially and adversely affect its results of operations or financial condition.
●If the Company fails to maintain an effective system of internal control over financial reporting, it may not be able to accurately report its financial results.
Regulatory and Compliance Risks
●Federal or state legislation or regulation may increase the Company’s expenses and reduce earnings.
●The Company, as well as the Bank, operates in a highly regulated environment and each is supervised and examined by various federal and state regulatory agencies who may adversely affect their ability to conduct business.
●The Company and the Bank must maintain adequate regulatory capital to support their business objectives.
●The Company is required to act as a source of financial and managerial strength for the Bank in times of stress.
●Non-compliance with the USA Patriot Act, the Bank Secrecy Act or other laws and regulations, like those issued by OFAC, could result in fines or sanctions against the Company or the Bank.
Risks Relating to the Company’s Securities
●The Company’s common stock is thinly traded, and recent prices may not reflect the prices at which the stock would trade in an active trading market.
●The Company’s ability to declare and pay dividends is limited.
●An investment in the Company’s common stock is not an insured deposit.
Interest Rate Risks
The Company’s net interest margin, and consequently its net earnings, are significantly affected by interest rate levels and movements in short-term rates as well as competitive pressures the Company faces.
The Company’s profitability is dependent to a large extent on net interest income, which is the difference between interest income earned on loans and investment securities and other interest-earning assets and interest expense paid on deposits and other borrowings. The absolute level of interest rates as well as changes in interest rates or that affect the yield curve may affect the Company’s level of interest income, the primary component of its gross revenue, as well as the level of its interest expense. Interest rate fluctuations are caused by many factors which, for the most part, are not under the Company’s direct control. For example, national monetary policy has played a significant role in the determination of interest rates and we expect this trend to continue during 2025. Additionally, competition, including competitor pricing, and the resulting negotiations that occur with the Company’s customers also impact the rates the Company collects on loans and the rates it pays on deposits as does its liquidity position and then-current loan demand and its orientation toward loan growth.
Changes in the level of interest rates also may negatively affect the Company’s ability to originate real estate loans, the value of its assets (as is currently the case with the Company’s investment securities portfolio) and its ability to realize gains from the sale of its assets, all of which could ultimately affect the Company’s results of operations and financial condition. A decline in the market value of the Company’s assets may limit the Company’s ability to borrow funds or otherwise create issues for the Company should its liquidity levels decline. As a result, the Company could be required to sell some of its loans and investments under adverse market conditions, upon terms that are not favorable to the Company, in order to maintain its liquidity. If those sales are made at prices lower than the amortized costs of the investments, which is the case with a portion of the Company’s investment securities portfolio at this time, the Company will incur losses. Following changes in the general level of interest rates, the Company’s ability to maintain a positive net interest spread and to increase its net interest margin is dependent on its ability to increase (in a rising rate environment) or maintain or minimize the decline in (in a falling rate environment) its loan offering rates, minimize increases on its deposit rates in a rising rate environment or promptly reduce the rates it pays on deposits in a falling rate environment, and maintain an acceptable level and mix of funding. Although at times the Company has implemented strategies it believes will reduce the potential effects of changes in interest rates on its net interest income, these strategies may not always be successful. Accordingly, changes in levels of market interest rates could materially and adversely affect the Company’s net income, net interest income and net interest margin, asset quality, loan origination volume, liquidity, and overall profitability. The Company cannot assure you that it can minimize its interest rate risk.
As interest rates change, the Company expects that it will periodically experience “gaps” in the interest rate sensitivities of its assets and liabilities, meaning that either its interest-bearing liabilities (usually deposits and borrowings) will be more sensitive to changes in market interest rates than its interest-earning assets (usually loans and investment securities), or vice versa. In either event, if market interest rates should move contrary to the Company’s position, this “gap” may work against the Company, and its results of operations and financial condition may be negatively affected. The Company attempts to manage its risk from changes in market interest rates by adjusting the rates, maturity, repricing characteristics, and balances of the different types of interest-earning assets and interest-bearing liabilities. Interest rate risk management techniques are not exact. The Company employs the use of models and modeling techniques to quantify the levels of risk to net interest income, which inherently involve the use of assumptions, judgments, and estimates. While the Company strives to ensure the accuracy of its modeled interest rate risk profile, there are inherent limitations and imprecisions in this determination and actual results may differ.
Short-term interest rates rose significantly in 2022 and continued to be at elevated levels throughout 2023 and 2024. Short-term interest rates began to decline in the second half of 2024, but remain at elevated levels and may remain at elevated levels through 2025. In an elevated rate environment the Bank’s ability to maintain or increase the rates it charges on loans while limiting any further increase in, or potentially reducing, the rates it pays on deposits will be critical to maintaining or expanding the Company’s net interest margin. Elevated levels of interest rates, like those experienced in recent years, can also have a negative impact on the Company's business by reducing the amount of money its clients borrow or by adversely affecting their ability to repay outstanding loan balances that may increase due to adjustments in their variable rates. The Company expects deposit rates to remain at or near their current levels in 2025; however, this may not happen if short-term interest rates rise or if competitive pressures in the Company's markets re-intensify.
Short-term interest rates fell during 2024. If those rates continue to fall in 2025, the Company’s ability to lower the rates it pays on deposits will be critical to the Company’s ability to maintain or slow any potential decline in its net interest margin, as the Company anticipates that loan pricing in a falling rate environment would be competitive and existing loans that the Company has made may be refinanced at lower interest rates, particularly in the case of fixed rate loans with no prepayment penalties. The Company may also be limited in its ability to lower, in a timely manner, the rates it pays on its time deposits with stated maturities, the balances of which increased during 2024.
The Company attempts to manage its risk from changes in market interest rates by adjusting the rates, maturities, repricing characteristics, and balances of the different types of its interest-earning assets and interest-bearing liabilities and by utilizing hedging strategies to reduce the impact of changes in rates. Interest-rate risk management techniques are not exact. From time to time the Company has repositioned a portion of its investment securities portfolio in an effort to better position its balance sheet for potential changes in short-term rates. The Company employs the use of models and modeling techniques to quantify the levels of risks to net interest income, which inherently involve the use of assumptions, judgments, and estimates. While the Company strives to ensure the accuracy of its modeled interest rate risk profile, there are inherent limitations and imprecisions in this determination and actual results may differ.
The Company’s hedging strategy may not be effective, including in the event that interest rates move in unanticipated manners.
At times, the Company has entered into certain hedging transactions including interest rate swaps, which are designed to lessen elements of its interest rate exposure. During the second quarter of 2020, the Company entered into a hedge that converted the fixed interest rates on certain of the Bank’s outstanding loans to Secured Overnight Financing Rate (“SOFR”)-based variable interest rates (as a successor to LIBOR-based variable rates). The Company terminated this hedging transaction in 2023. In the event that short-term interest rates do not change in the manner or at the pace that the Company anticipates at the times it institutes its hedging strategies such transactions may materially and adversely affect its results of operations.
Hedging creates certain risks for the Company, including the risk that the other party to the hedge transaction will fail to perform (counterparty risk, which is a type of credit risk), and the risk that the hedge will not fully protect the Company from loss as intended (hedge failure risk). Unexpected counterparty failure or hedge failure could have a significant adverse effect on the Company’s liquidity and earnings.
The performance of the Company’s investment securities portfolio is subject to fluctuation due to changes in interest rates and market conditions, including credit deterioration of the issuers of individual securities.
Changes in interest rates can negatively affect the performance of most of the Company’s investment securities. Interest rate volatility can reduce unrealized gains or increase unrealized losses in the Company’s portfolio, as was the case in 2022 and 2023 with the rising interest rate environment. Interest rates are highly sensitive to many factors including monetary policies, domestic and international economic, social and political conditions and issues, including trade disputes and global health pandemics, and other factors beyond the Company’s control. Fluctuations in interest rates can materially affect both the returns on and market value of the Company’s investment securities. Additionally, actual investment income and cash flows from investment securities that carry prepayment risk, such as mortgage-backed securities and callable securities, may materially differ from those anticipated at the time of investment or subsequently as a result of changes in interest rates and market conditions.
The Company’s investment securities portfolio consists of several securities whose trading markets are “not active.” As a result, the Company utilizes alternative methodologies for pricing these securities that include various estimates and assumptions. There can be no assurance that the Company can sell these investment securities at the price derived by these methodologies, or that it can sell these investment securities at all, which could have an adverse effect on the Company’s financial condition, results of operations and liquidity.
The Company monitors the financial position of the various issuers of investment securities in its portfolio, including each of the state and local governments and other political subdivisions where it has exposure. To the extent the Company has securities in its portfolio from issuers who have experienced a deterioration of financial condition, or who may experience future deterioration of financial condition, the value of such securities may decline and could result in an other-than-temporary impairment charge, which could have an adverse effect on the Company’s financial condition, results of operations and liquidity.
In addition, from time to time the Company may restructure portions of its investment securities portfolio as part of its asset liability management strategies or in response to liquidity needs, and it may incur losses, which may be material, in connection with any such restructuring. The Company currently has a significant amount of unrealized losses in its securities portfolio. These losses are largely the result of the rising interest rate environment the Company experienced in recent years, and the continued elevated interest rate environment the Company has experienced since 2024. If the Company were to sell any of these securities before their value recovers, including as a result of asset liability management strategies or in response to liquidity needs, the Company would be required to recognize these losses and the recognition of those losses could materially and adversely affect the Company’s results of operations, capital and financial condition.
Credit and Lending Risks
The Company’s loan portfolio includes a significant amount of real estate loans, including construction and development loans, which loans have a greater credit risk than residential mortgage loans.
As of December 31, 2024, approximately 94% of the Company’s loans held for investment were secured by real estate. Of this amount, approximately 40% were commercial and multi-family real estate loans, 36% were residential 1-4 family real estate loans and 1-4 family equity lines of credit and 24% were construction and development and farmland loans. In total these loans made up approximately 97% of the Company’s non-performing loans at December 31, 2024. Construction and development lending is generally considered to have relatively high credit risks because the principal is concentrated in a limited number of loans with repayment dependent on the successful completion and operation of the related real estate project. Real estate industry pricing dynamics in the geographical markets in which the Company operates can vary from year to year, and with respect to construction, can vary between project funding and project completion. Asset values to which the Company underwrites loans can fluctuate from year to year and impact collateral values and the ability of its borrowers to repay their loans.
Weakness in residential real estate market prices as well as demand could result in price reductions in home and land values adversely affecting the value of collateral securing some of the construction and development loans that the Company holds. Reduced demand for new residential mortgage loans, whether the result of higher mortgage interest rates, inflationary pressures on building costs, depressed inventory levels or other factors, could also continue to cause reduced demand for mortgage loans, which would reduce the Company’s net interest income and noninterest income levels. If economic and real estate market conditions further deteriorate in the Company’s markets, the Company may experience increases in non-performing loans and other real estate owned, increased losses and expenses from the management and disposition of non-performing assets, increased charge-offs from the disposition of non-performing assets, increases in provision for credit losses, and increases in operating expenses as a result of the allocation of management time and resources to the collection and work out of these loans, all of which would negatively impact the Company’s financial condition and results of operations.
The Company has significant credit exposure to borrowers that are homebuilders and land developers and the Company also targets small businesses.
At December 31, 2024, the Company had significant credit exposures to borrowers in certain businesses, including new home builders and land subdividers. If the uneven economic conditions currently being experienced as a result of inflation and elevated short-term interest rates extend deep into 2025 or beyond, or worsen (including as a result of increased geopolitical tensions around the world or terrorist activity in the United States), and negatively impact real estate conditions in the Company’s markets more than has been the case thus far, these industry or other concentrations could result in higher than normal deterioration in credit quality, past dues, loan charge-offs and collateral value declines, all of which would negatively impact the Company’s financial condition and results of operations. Furthermore, any of the Company’s large credit exposures that deteriorate unexpectedly could cause the Company to have to make significant additional loan loss provisions, negatively impacting the Company’s financial condition and results of operations.
A substantial focus of the Company’s marketing and business strategy is to serve small businesses in its market areas. As a result, a relatively high percentage of the Company’s loan portfolio consists of commercial loans primarily to small businesses. Small businesses frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, or other operational challenges like those resulting from supply chain disruption, labor shortages or inflationary pressures on their costs, often need substantial
additional capital to expand or compete and may experience substantial volatility in operating results, any of which may impair a borrower’s ability to repay a loan. In addition, the success of a small business often depends on the management skills, talents and efforts of one or two people or a small group of people, and the death, disability or resignation of one or more of these people could have an adverse impact on the business and its ability to repay its obligation to the Company. If general economic conditions negatively impact the markets in which the Company operates and small businesses are adversely affected or the Company’s borrowers are otherwise harmed by adverse business developments, the ability of such businesses to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact the Company’s results of operations and financial condition
An inadequate allowance for credit losses would negatively impact the Company’s results of operations and financial condition.
The Company maintains an allowance for credit losses on loans, securities and off-balance sheet exposures. The risk of credit losses on loans varies with, among other things, general economic conditions, the type of loan being made, the creditworthiness of the borrower over the term of the loan and, in the case of a collateralized loan, the value and marketability of the collateral for the loan. The Company’s management makes various assumptions and judgments about the expected losses in the Company’s loan portfolio, including the credit worthiness of the Company’s borrowers and the collateral securing the loans. Utilizing objective and subjective factors, the Company maintains an allowance for credit losses, established through a provision for credit losses charged to expense, to cover its estimate of the current expected credit losses in its loan and securities portfolios. In determining the size of this allowance, the Company utilizes estimates based on analyses of volume and types of loans, internal loan classifications, trends in classifications, volume and trends in delinquencies, nonaccruals and charge-offs, loss experience of various loan categories, national and local economic conditions, including unemployment statistics, industry and peer bank loan quality indications, and other pertinent factors and information. Actual losses are difficult to forecast, especially if those losses stem from factors beyond the Company’s historical experience or are otherwise inconsistent with its credit quality assessments. If the Company’s assumptions are inaccurate, its current allowance may not be sufficient to cover potential credit losses, and additional provisions may be necessary which would negatively impact its results of operations and financial condition.
In addition, federal and state regulators periodically review the Company’s loan portfolio and may require it to increase its allowance for credit losses or recognize loan charge-offs. Their conclusions about the quality of the Company’s loan portfolio may be different than the Company’s. Any increase in the Company’s allowance for credit losses or loan charge-offs as required by these regulatory agencies could have a negative effect on the Company’s results of operations or financial condition. Moreover, additions to the allowance may be necessary based on changes in economic and real estate market conditions and forecasted conditions, new information regarding existing loans or borrowers, identification of additional problem loans and other factors, both within and outside of the Company’s management’s control. These additions may require increased provision expense which would negatively impact the Company’s results of operations.
The Company’s accounting estimates and risk management processes rely on analytical and forecasting models and tools.
The processes the Company uses to estimate expected credit losses, calculate its various allowances for credit losses and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates and other measures of the Company’s financial condition and results of operations, depend upon the use of analytical and forecasting models and tools. These models and tools reflect assumptions that may not be accurate, particularly in times of market stress or other unforeseen circumstances. Even if these assumptions are accurate, the models and tools may prove to be inadequate or inaccurate because of other flaws in their design or their implementation. Any such failure in the Company’s analytical or forecasting models and tools could have a material adverse effect on its business, financial condition and results of operations.
The Company could sustain losses if its asset quality declines.
The Company’s earnings are significantly affected by its ability to properly originate, underwrite and service loans. The Company could sustain losses if it incorrectly assesses the creditworthiness of its borrowers or fails to detect or respond to deterioration in asset quality in a timely manner. Problems with asset quality, particularly within the commercial real estate segment of the Company’s loan portfolio, could cause the Company’s interest income and net interest margin to decrease and its provisions for credit losses and non-interest expenses to increase, which could adversely affect its results of operations and financial condition.
Environmental liability associated with commercial lending could result in losses.
In the course of business, the Bank may acquire, through foreclosure, properties securing loans it has originated or purchased which are in default. Particularly in commercial real estate lending, there is a risk that hazardous substances could be discovered on these properties. In this event, the Company, or the Bank, might be required to remove these substances from the affected properties at the Company’s or the Bank's sole cost and expense. The cost of this removal could substantially exceed the value of affected properties. The Company and the Bank may not have adequate remedies against the prior owner or other responsible parties, or those persons may not have sufficient resources to compensate the Company for its damages, and the Company could find it difficult or impossible to sell the affected properties. These events could have a material adverse effect on the Company’s business, results of operations and financial condition.
The Company has acquired a number of retail banking facilities and other real properties, any of which may contain hazardous or toxic
substances. If hazardous or toxic substances are found, the Company may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require the Company to incur substantial expenses and may materially reduce the affected property’s value or limit the Company’s ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase the Company’s exposure to environmental liability.
The Company depends on the accuracy and completeness of information about customers.
In deciding whether to extend credit or enter into certain transactions, the Company relies on information furnished by or on behalf of customers and other counterparties, including financial statements, credit reports, tax returns and other financial information. The Company may also rely on representations of those customers or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading personal information, financial statements, credit reports, tax returns or other financial information, including information falsely provided as a result of identity theft, could have an adverse effect on the Company’s business, financial condition and results of operations.
The Company may be subject to claims and litigation asserting lender liability.
From time to time, and particularly during periods of economic stress, customers, including real estate developers and consumer borrowers, may make claims or otherwise take legal action pertaining to performance of the Company’s responsibilities. These claims are often referred to as “lender liability” claims and are sometimes brought in an effort to produce or increase leverage against the Company in workout negotiations or debt collection proceedings. Lender liability claims frequently assert one or more of the following allegations: breach of fiduciary duties, fraud, economic duress, breach of contract, breach of the implied covenant of good faith and fair dealing, and similar claims. Whether customer claims and legal action related to the performance of the Company’s responsibilities are founded or unfounded, if such claims and legal actions are not resolved in a favorable manner, they may result in significant financial liability and/or adversely affect the Company’s market reputation, products and services, as well as potentially affecting customer demand for those products and services. Any financial liability or reputation damage could have a material adverse effect on the Company’s business, which, in turn, could have a material adverse effect on its financial condition, results of operations and liquidity.
Liquidity and Capital Risks
Liquidity risk could impair the Company’s ability to fund its operations and jeopardize its financial condition.
Liquidity represents an institution’s ability to provide funds to satisfy demands from depositors, borrowers and other creditors by either converting assets into cash or accessing new or existing sources of incremental funds. Liquidity risk arises from the possibility that the Company may be unable to satisfy current or future funding requirements and needs.
The objective of managing liquidity risk is to ensure that the Company’s cash flow requirements resulting from depositor, borrower and other creditor demands are met, as well as the Company’s operating cash needs, and that the Company’s cost of funding such requirements and needs is reasonable. The Company maintains an asset/liability and interest rate risk policy and a liquidity and funds management policy, including a contingency funding plan that, among other things, include procedures for managing and monitoring liquidity risk. Generally the Company relies on deposits, repayments of loans and cash flows from its investment securities as its primary sources of funds. The Company’s principal deposit sources include consumer, commercial and public funds customers in the Company’s markets. The Company has used these funds, together with wholesale deposit sources such as brokered deposits, federal funds purchased and other sources of short-term and long-term borrowings, including advances from the Federal Home Loan Bank of Cincinnati (“FHLB Cincinnati”), to make loans, acquire investment securities and other assets and to fund continuing operations.
An inability to maintain or raise funds in amounts necessary to meet the Company’s liquidity needs could have a substantial negative effect, individually or collectively, on the Company’s and the Bank’s liquidity. The Company’s access to funding sources in amounts adequate to finance its activities, including its loan growth, or on terms attractive to it, could be impaired by factors that affect the Company specifically or the financial services industry in general. For example, factors that could detrimentally impact the Company’s access to liquidity sources include a decrease in the level of its business activity due to a market downturn or adverse regulatory action against it or the Bank, a reduction in any then-published credit rating, any damage to its reputation or any other decrease in depositor or investor confidence in the Company’s creditworthiness and business. The Company’s access to liquidity could also be impaired by factors that are not specific to it, such as a decrease in the money supply as a result of actions by the Federal Reserve, severe volatility or disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole. Any such event or failure to manage the Company’s liquidity effectively could affect its competitive position, increase its borrowing costs and the interest rates it pays on deposits, limit its access to the capital markets, require it to sell investment securities when they are in a loss position, cause its regulators to criticize its operations and have a material adverse effect on its financial condition or results of operations.
The Company’s ability to grow its loan portfolio is dependent on its ability to fund loan growth, which the Company primarily seeks to do through growth in deposits. Deposit levels may be affected by a number of factors, including demands by customers, rates paid by competitors, general interest rate levels, returns available to customers on alternative investments, general economic and market conditions
and other factors, including a loss of confidence in the Company by its customers. Loan repayments are a relatively stable source of funds but are subject to the borrowers’ ability to repay loans, which can be adversely affected by a number of factors including changes in general economic and geopolitical conditions, rising interest rates, adverse trends or events affecting business industry groups or specific businesses, declines in real estate values or markets, business closings or lay-offs, inclement weather, natural disasters, prolonged government shutdowns and other factors. Furthermore, loans generally are not readily convertible to cash. Accordingly, the Company may be required from time to time to rely on secondary sources of liquidity to meet growth in loans, deposit withdrawal demands or otherwise fund operations. Such secondary sources include advances from the FHLB Cincinnati, brokered deposits, secured and unsecured federal funds lines of credit from correspondent banks, FRB borrowings, liquidating securities that the Company owns in its investment securities portfolio and/or accessing the equity or debt capital markets. The Company was able to decrease its level of brokered deposits during 2024 as a result of its ability to grow lower cost core deposits; however, the Company may be required to once again increase its levels of brokered deposits, which may require the Company to pay higher rates of interest than the Company pays on deposits from customers if competition once again limits its ability to grow core deposits.
The Company anticipates it will continue to rely primarily on deposits, loan repayments, interest-bearing deposits in other banks and cash flows from its investment securities to provide liquidity. Additionally, where necessary, the secondary sources of borrowed funds described above, like advances from the FHLB Cincinnati, which the Bank has accessed from time to time, will be used to augment the Company’s primary funding sources. If the Company is unable to access any of these secondary funding sources when needed, it might be required to convert illiquid assets, like its bank owned life insurance contracts, to cash, which could result in the payment of associated taxes and penalties, or be unable to meet its customers’ or creditors’ needs, which would adversely affect its financial condition, results of operations, and liquidity.
The Company’s and the Bank’s ability to maintain required capital levels and adequate sources of funding and liquidity could be impacted by changes in the capital markets and deteriorating economic and market conditions.
Federal and state bank regulators require the Company and the Bank to maintain adequate levels of capital to support operations. At December 31, 2024, the Company’s and the Bank’s regulatory capital ratios were at “well-capitalized” levels under regulatory guidelines. Growth in assets (either organically or as a result of acquisitions), like the Bank's proposed acquisition of certain assets in connection with its pending acquisition of a branch office of another bank located in Cookeville, Tennessee, at rates in excess of the rate at which the Bank’s capital is increased through retained earnings, or significant losses, including as a result of selling investment securities that are in a loss position at the time of sale, will reduce its capital ratios unless it continues to increase capital. Failure by the Company or the Bank to meet applicable capital guidelines or to satisfy certain other regulatory requirements could subject the Bank and the Company to a variety of enforcement remedies available to the federal regulatory authorities and would negatively impact the Company’s ability to pursue expansion opportunities, including through the opening of new branch locations.
The Company may need to raise additional capital (including through the issuance of common stock or additional Tier 2 capital instruments) in the future to provide the Company and the Bank with sufficient capital resources and liquidity to meet their commitments and business needs or in connection with growth or as a result of deterioration in asset quality. The Company’s and the Bank’s ability to maintain capital levels, sources of funding and liquidity could be impacted by negative perceptions of their businesses or prospects, changes in the capital markets and deteriorating economic and market conditions. The Bank is required to obtain regulatory approval in order to pay dividends to the Company unless the amount of such dividends does not exceed its net income for that calendar year plus retained net income for the preceding two years. Any restriction on the ability of the Bank to pay dividends to the Company could impact the Company’s ability to continue to pay dividends on its common stock or its ability to pay interest on its any then outstanding indebtedness.
In addition, the Company receives additional capital from the issuance of common stock under its dividend reinvestment plan. Any unexpected termination or suspension of the Company’s dividend reinvestment plan, or the related payment of its historical cash dividend, could materially and adversely affect the Company’s capital levels.
Operational and Market Risks
Negative developments in the U.S. and local economies in the Company’s markets may adversely impact the Company’s results in the future.
The Company’s financial performance is highly dependent on the business environment in the markets where it operates and in the U.S. as a whole. Unfavorable or uncertain economic, political and market conditions can be caused by declines in economic growth, business activity, investor or business confidence, consumer sentiment, limitations on the availability or increases in the cost of credit and capital, increases in inflation or interest rates, natural disasters, international trade disputes and retaliatory tariffs, supply-chain disruptions, labor shortages (including as a result of deportations), terrorist attacks, global pandemics, acts of war, or a combination of these or other factors. Inflation rose sharply at the end of 2021 and continued at heightened levels throughout 2023 and into 2024, and, while inflation started to ease through 2024, prices are currently expected to remain elevated for many goods and services in the near term. The Company and its customers experienced an uncertain and volatile economic environment during 2023 and 2024 due to issues of national security, inflation,
and the pressure of sustained high levels of short-term interest rates. The Company believes that it is possible it and its customers will continue to experience an uneven economic environment in 2025 for many of the same reasons. A worsening of business and economic conditions (including as a result of escalating geopolitical tensions around the world, including the ongoing conflicts in Ukraine and the Middle East or increased terrorist activity in the United States), or persistent inflationary pressures, and actions taken by the Federal Reserve in response thereto, intensifying trade disputes and tariffs, or supply chain disruptions or labor shortages, generally or specifically in the principal markets in which the Company conducts business could have adverse effects, including the following:
●a decrease in deposit balances or the demand for loans and other products and services the Company offers;
●an increase in the number of borrowers who become delinquent, file for protection under bankruptcy laws or default on their loans or other obligations to the Company, which could lead to higher levels of nonperforming assets, net charge-offs and provisions for credit losses;
●a decrease in the value of loans and other assets secured by real estate;
●a decrease in net interest income from the Company’s lending and deposit gathering activities; and
●an increase in competition resulting from financial services companies.
There can be no assurance that economic conditions will improve in the near term or that conditions will not worsen. Such conditions could adversely affect the Company’s business, financial condition, and results of operations.
In addition, over the last several years, the federal government has shut down several times, in some cases for prolonged periods, and it is possible that the federal government may shut down again in the future. If a prolonged government shutdown occurs, it could significantly impact business and economic conditions generally or specifically in the Company’s markets, which could have a material adverse effect on the Company’s results of operations and financial condition.
The Company is geographically concentrated in Wilson County, Tennessee and its surrounding counties and changes in local economic conditions could impact its profitability.
The Company operates primarily in Wilson, DeKalb, Trousdale, Smith, Rutherford, Putnam, Davidson, Williamson and Sumner counties in Tennessee and certain of the surrounding counties and substantially all of its loan customers and most of its deposit and other customers live or have operations in this same geographic area. Accordingly, the Company’s success significantly depends upon the growth in population, income levels, and deposits in these areas, along with the continued attraction of business ventures to the area and the area’s economic stability and strength of the housing market, and its profitability is impacted by the changes in general economic conditions in these markets. The Company cannot assure investors that economic conditions in its markets will not remain uneven during 2025 or thereafter, and continued volatile economic conditions in the Company’s markets could cause the Company to constrict its growth rate, affect the ability of its customers to repay their loans and negatively impact the Company’s financial condition and results of operations.
The Company is less able than a larger institution to spread the risks of unfavorable local economic conditions across a large number of diversified economies. Moreover, the Company cannot give any assurance that it will benefit from any market growth or return of more favorable economic conditions in its primary market areas if they do occur.
The Company’s business may suffer if there are significant declines in the value of real estate.
The market value of real estate can fluctuate significantly in a short period of time, including as a result of market conditions in the geographic area in which the real estate is located. If the value of the real estate serving as collateral for the Company’s loan portfolio were to decline materially, a significant part of the Company’s loan portfolio could become under-collateralized. If the loans that are collateralized by real estate become troubled during a time when market conditions are declining or have declined, the Company may not be able to realize the value of the security anticipated when it originated the loan, which in turn could have an adverse effect on the Company’s allowance and provision for credit losses and its financial condition, results of operations and liquidity..
Most of the Company’s foreclosed assets have historically been comprised of real estate properties. The Company carries these properties, if any, at their estimated fair values less estimated selling costs. While the Company believes the carrying values for such assets are reasonable and appropriately reflect current market conditions, there can be no assurance that the values of such assets will not further decline prior to sale or that the amount of proceeds realized upon disposition of foreclosed assets will approximate the carrying value of such assets. If the proceeds from any such dispositions are less than the carrying value of foreclosed assets, the Company will record a loss on the disposition of such assets, which in turn could have an adverse effect on the Company’s results of operations.
The Company has sought to expand its franchise by developing new markets or expanding its operations in existing markets and may continue to do so in future years.
Since 2014, the Company has opened branch locations in Putnam County, Rutherford County, Sumner County, Davidson County and Williamson County as it sought to expand its footprint beyond its historical markets. Expansion, whether by opening new branches or
acquiring existing branches (like the branch office it is currently seeking to acquire in Cookeville, Tennessee) or whole banks, involves various risks, including:
Management of Growth. The Company may be unable to successfully:
•maintain loan quality in the context of significant loan growth;
•identify and expand into suitable markets;
•obtain regulatory and other approvals;
•identify and acquire suitable sites for new banking offices;
•attract sufficient deposits and capital to fund anticipated loan growth;
•avoid diversion or disruption of its existing operations or management as well as those of an acquired institution;
•maintain adequate management personnel and systems to oversee and support such growth;
•maintain adequate internal audit, loan review, risk management and compliance functions; and
•implement additional policies, procedures and operating systems required to support and monitor the risk associated with such growth.
Results of Operations. There is no assurance that existing branches or future branches will maintain or achieve deposit levels, loan balances or other operating results necessary to avoid losses or produce profits. If the Company is unable to grow its revenues in amounts necessary to support the higher expense base associated with increased locations, its results of operations will be negatively impacted. Execution on a growth strategy could lead to increases in overhead expenses if the Company were to add new offices and staff. The Company’s historical results may not be indicative of future results or results that may be achieved if it were to increase the number and concentration of its branch offices in its existing or new markets.
Development of Offices. There are considerable costs involved in opening branches, and new branches generally do not generate sufficient revenues to offset their costs until they have been in operation for at least a year or more. Accordingly, any new branches the Company organically establishes can be expected to negatively impact the Company’s earnings for some period of time until they reach certain economies of scale. The same is true for the Company’s efforts to expand in these markets with the hiring of additional seasoned professionals with significant experience in that market. The Company’s expenses could be further increased if it encounters delays in opening any of its new branches, including as a result of supply-chain disruption and labor challenges like those affecting the construction industry over the last few years, or regulatory actions or delays. The Company may be unable to accomplish future branch expansion plans due to a lack of available satisfactory sites, difficulties in acquiring such sites, failure to receive any required regulatory approvals, on a timely basis or at all, increased expenses or loss of potential sites due to complexities associated with zoning and permitting processes, higher than anticipated construction costs or other factors. Finally, any branch may not meet the Company’s long-term profitability expectations or otherwise be successful even after it has been established or acquired, as the case may be.
Regulatory and Economic Factors. The growth of the Bank may be adversely affected by a number of regulatory and economic developments or other events. Failure to obtain required regulatory approvals, changes in laws and regulations or other regulatory developments and changes in prevailing economic conditions or other unanticipated events may prevent or adversely affect the Company’s growth and expansion. Such factors may cause the Company to alter its growth and expansion plans or slow or halt the growth and expansion process, which may prevent the Company from entering into or expanding in its targeted markets or allow competitors to gain or retain market share in the Company’s existing markets.
Failure to successfully address these and other issues related to the Company’s expansion could have a material adverse effect on its financial condition and results of operations, and could adversely affect its ability to successfully implement its business strategy.
The Company is dependent on its information technology and telecommunications systems and third-party servicers, and systems failures, interruptions or breaches of security could have an adverse effect on its financial condition and results of operations, as well as cause legal or reputational harm.
The Company is dependent upon information technologies, computer systems and networks, including those the Company maintains and those maintained and provided to the Company by third parties, to conduct operations and is reliant on technology to help increase efficiency in its business. These systems could become unavailable or impaired due to a variety of causes, including storms and other natural disasters, terrorist attacks, fires, phishing schemes, social engineering, utility outages, internal or external theft or fraud, design defects, human error, misconduct or complications or failures encountered as existing systems are maintained, replaced or upgraded. For example, the Company’s financial, accounting, data processing, or other operating or security systems or infrastructure or those of third parties upon which it relies may fail to operate properly or become compromised, disabled or damaged, which could adversely affect the Company’s ability to process transactions or provide services. In the event that backup systems are utilized, they may not process data as quickly as the Company’s primary systems and the Company may experience data losses in the course of such recovery. The Company continuously updates the systems on which it relies to support its operations and growth and to remain compliant with all applicable laws, rules and regulations. This updating entails significant costs and creates risks associated with implementing new systems and integrating them with existing ones, including business interruptions that may occur in the course of such implementation challenges. The Company maintains a system of internal controls and security to mitigate the risks of many of these occurrences and maintains insurance coverage for certain risks; however, should an event, including a cyberattack (including a ransomware attack), occur that is not prevented or detected by the Company’s internal controls, causes an interruption, degradation or outage in service, causes the Company to pay a ransom fee or is uninsured against or in excess of applicable insurance limits, such occurrence could have an adverse effect on the Company’s business and its reputation, which, in turn, could have a material adverse effect on its financial condition, results of operations and liquidity.
The Company’s operations rely on the secure processing, storage and transmission of confidential, proprietary, personal and other information in its computer systems and networks. Although the Company takes protective measures and endeavors to modify these systems as circumstances warrant, the security of its computer systems, software and networks may be vulnerable to breaches, unauthorized access, misuse, computer viruses or other malicious code and other events that could have a security impact. The Company provides its customers the ability to bank remotely, including over the Internet or through their mobile device. The secure transmission of confidential information is a critical element of remote and mobile banking. The Company’s network, and the systems of parties with whom it contracts or on which it relies, as well as those of its customers and regulators, could be vulnerable to unauthorized access, computer viruses, phishing schemes, social engineering, spam attacks, ransomware attacks, human error, natural disasters, power loss and other security breaches. Sources of attacks vary and may include hackers, disgruntled employees or vendors, organized crime, terrorists, foreign governments, corporate espionage and activists. In recent periods, there continues to be a rise in electronic fraudulent activity (including wire fraud), security breaches and cyber-attacks within the financial services industry, especially in the commercial banking sector due to cyber criminals targeting commercial bank accounts or seeking to infiltrate legitimate transactions, including through the compromise of the Bank's clients' email systems. The Company believes these types of efforts will continue to increase in frequency and in their level of sophistication. The Company has established policies, processes, and procedures to identify, measure, monitor, mitigate, report, and analyze risks associated with fraud, and continues to invest in systems, resources, and controls to detect and prevent it. There are inherent limitations, however, to the Company’s risk management strategies, systems, and controls as they may exist, or develop in the future. The Company may not appropriately anticipate, monitor, or identify these risks. If the Company’s risk management framework proves ineffective in connection with any fraudulent activity, it could suffer unexpected losses, it may have to expend resources detecting and correcting the failure in its systems, and it may be subject to potential claims from third parties and government agencies. The Company may also suffer reputational damage. Any of these consequences could adversely affect the Company’s business, financial condition, or results of operations.
Cybersecurity risks for banking organizations have significantly increased in recent years in part because of the proliferation of new technologies, and the use of the Internet and telecommunications technologies to conduct financial transactions. For example, cybersecurity risks may increase in the future as the Company continues to increase its mobile-payment and other Internet-based product offerings and expand its internal use of cloud-based products and applications. Even the most advanced internal control environment may be vulnerable to compromise. Targeted social engineering attacks are becoming more prevalent and sophisticated, and are extremely difficult to prevent. The rapid evolution and increased adoption of generative artificial intelligence is further increasing risks in this area, including by making fraud detection more difficult, particularly with detection devices that use voice recognition or authentication. The techniques used by bad actors change frequently, may not be recognized until launched and may not be recognized until well after a breach has occurred. Additionally, the existence of cyber-attacks or security breaches at third parties with access to the Company’s data, such as vendors, may not be disclosed to the Company in a timely manner. Consistent with industry trends, the Company remains at risk for attempted electronic fraudulent activity, as well as attempts at security breaches and cybersecurity-related incidents. The Company spends significant capital and other resources to protect against the threat of security breaches and computer viruses, and may be required to spend significant capital and other resources to alleviate problems caused by security breaches or viruses. To the extent that the Company’s activities or the activities of its vendors, regulators or customers involve the storage and transmission of confidential information, security breaches (including breaches of security of customer, vendor or regulatory systems and networks) and viruses could expose the Company to claims, litigation and other possible liabilities. Any inability to prevent or promptly detect security breaches or computer viruses could
also cause existing customers to lose confidence in the Company’s systems and could adversely affect its reputation, results of operations and ability to attract and retain customers and businesses. In addition, a security breach could also subject the Company to additional regulatory scrutiny, expose it to civil litigation and possible financial liability and cause reputational damage.
The Company contracts with third-party vendors to provide software or services for many of its major systems, such as data processing, loan servicing and deposit processing system. The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could interrupt the Company’s operations. Because the Company’s information technology and telecommunications systems interface with and depend on third-party systems, the Company could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions, including as a result of viruses or other attacks. If sustained or repeated, a system failure or service denial could result in a deterioration of the Company’s ability to process new and renewal loans, gather deposits and provide customer service, compromise its ability to operate effectively, damage its reputation, result in a loss of customer business and/or subject it to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on the Company’s financial condition, results of operations and liquidity.
The Company also faces the risk of operational disruption, failure, termination, or capacity constraints of any of the third parties that facilitate its business activities, including vendors, exchanges, and other financial intermediaries. Such parties could also be the source or cause of an attack on, or breach of, the Company’s operational systems, data or infrastructure, and could disclose such attack or breach to the Company in a delayed manner or not at all. In addition, the Company may be at risk of an operational failure with respect to its customers’ systems. The Company’s risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats and the continued uncertain global economic environment.
As cybersecurity threats continue to evolve, the Company will likely expend significant additional resources to continue to modify or enhance its protective measures, investigate and remediate any information security vulnerabilities, or respond to any changes to state or federal regulations, policy statements or laws concerning information systems or security. Any failure to maintain adequate security over its information systems, its technology-driven products and services or its customers’ personal and transactional information could negatively affect the Company’s business and its reputation and result in fines, penalties, or other costs, including litigation expense and/or additional compliance costs, all of which could have a material adverse effect on its financial condition, results of operations and liquidity. Furthermore, the public perception that a cyber-attack on the Company’s systems has been successful, whether or not this perception is correct, may damage the Company’s reputation with customers and third parties with whom it does business. A successful penetration or circumvention of system security could result in negative consequences for the Company, including loss of customers and business opportunities, disruption to the Company’s operations and business, misappropriation or destruction of the Company’s confidential information and/or that of its customers, or damage to its customers’ and/or third parties’ computers or systems, and could result in a violation of applicable privacy laws and other laws, litigation exposure, regulatory fines, penalties or intervention, loss of confidence in the Company’s security measures, reputational damage, reimbursement or other compensatory costs, additional compliance costs, and could adversely impact the Company’s financial condition, results of operations and liquidity.
Competition from financial institutions and other financial service providers may adversely affect the Company’s profitability.
The banking business is highly competitive and the Company experiences competition in each of its markets from many other financial and non-financial institutions. The Company competes with commercial banks, credit unions, savings and loan associations, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market funds, and other mutual funds, mobile payment platforms, as well as other community banks and super-regional and national financial institutions that operate offices in the Company’s primary market areas and elsewhere. Many of the Company’s competitors are well-established, larger financial institutions that have greater resources and lending limits and a lower cost of funds than the Company.
Additionally, the Company faces competition from similarly sized and smaller community banks and credit unions, including those with senior management who were previously affiliated with other local or regional banks or credit unions or those controlled by investor groups with strong local business and community ties. These community banks may offer higher deposit rates or lower cost loans in an effort to attract the Company’s customers, and may attempt to hire the Company’s management and employees.
Some of the Company’s competitors, including credit unions, are not subject to certain regulatory constraints, such as the CRA, which requires the Company to, among other things, implement procedures to make and monitor loans throughout the communities it serves, and which is expected to become more expansive in 2025. Credit unions also have federal tax exemptions that may allow them to offer lower rates on loans and higher rates on deposits than taxpaying financial institutions such as commercial banks. In addition, non-depository institution competitors are generally not subject to the extensive regulation applicable to institutions, like the Bank, that offer federally insured deposits, which affords them the advantage of operating with greater flexibility and lower cost structures. Other institutions may have other competitive advantages in particular markets or may be willing to accept lower profit margins on certain products.
The Company competes with these other financial and non-financial institutions both in attracting deposits and in making loans. In addition, the Company has to attract its customer base from other existing financial institutions and from new residents. This competition at times has made it more difficult for the Company to make new loans and at times has forced the Company to offer higher deposit rates or utilize secondary sources of liquidity. Price competition for loans and deposits might result in the Company earning less interest on its loans and paying more interest on its deposits, which reduces the Company’s net interest income. The Company’s profitability depends upon its continued ability to successfully compete with an array of financial and non-financial institutions in its market areas.
The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as mobile payment and other automatic transfer and payment systems, and for banks that do not have a physical presence in the Company’s markets to compete for deposits. The absence of regulatory requirements may give non-bank financial companies a competitive advantage over the Company.
The Company’s key management personnel may leave at any time.
The Company’s future success depends to a significant extent on the continued service of its key management personnel, especially John McDearman, III, its president and chief executive officer, and John Foster, the president of the Bank. While the Company does not have employment agreements with any of its personnel and can provide no assurance that it will be able to retain any of its key officers and employees, particularly in times of intense competition for talent, as the Bank is currently experiencing, or attract and retain qualified personnel in the future, it has entered into non-competition agreements with such persons which would prevent them, in most circumstances, from competing with the Bank for one year following their termination. In addition, these persons are parties to certain deferred compensation, supplemental retirement and equity incentive plans, the benefits of which would cease to accrue upon the termination of the person’s employment with the Company or the Bank or the person competing with the Bank after the termination of their employment.
An ineffective risk management framework could have a material adverse effect on the Company’s strategic planning and its ability to mitigate risks and/or losses and could have adverse regulatory consequences.
The Company has implemented a risk management framework in an effort to identify and manage its risk exposure. This framework is comprised of various processes, systems and strategies, and is designed to manage the types of risk to which it is subject, including, among others, credit, market, liquidity, fraud, operational, capital, cybersecurity, compliance, strategic and reputational risks. The Company’s framework also includes financial, analytical, forecasting, or other modeling methodologies, which involves management assumptions and judgment. However, there is no assurance that the Company’s risk management framework will be effective under all circumstances or that it will adequately identify, manage or mitigate any risk or loss to it. If the Company’s risk management framework is not effective, it could suffer unexpected losses and become subject to regulatory consequences, as a result of which its business, financial condition, results of operations or prospects could be materially adversely affected.
The Company’s selection of accounting policies and methods may affect its reported financial results.
The Company’s accounting policies and methods are fundamental to how the Company records and reports its financial condition and results of operations. The Company’s management must exercise judgment in selecting and applying many of these accounting policies and methods so they comply with GAAP and reflect management’s judgment of the most appropriate manner to report its financial condition and results of operations. In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which may be reasonable under the circumstances, which may result in the Company reporting materially different results than would have been reported under a different alternative.
Certain accounting policies are critical to presenting the Company’s financial condition and results of operations. They require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates. Because of the uncertainty of estimates involved in these matters, the Company may be required to do one or more of the following: significantly increase the allowance for credit losses or sustain loan losses that are significantly higher than the reserve provided; reduce the carrying value of an asset measured at fair value; recognize an other-than-temporary impairment of securities; or significantly increase the Company’s accrued tax liability. Any of these could have a material adverse effect on the Company’s business, financial condition or results of operations. For a discussion of the Company’s critical accounting policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates” contained in this report.
The Company currently invests in bank owned life insurance (“BOLI”) and may continue to do so in the future.
The Company had approximately $61.9 million in general, hybrid and separate account BOLI contracts at December 31, 2024. BOLI is an illiquid long-term asset that provides tax savings because cash value growth and life insurance proceeds are not taxable, subject to certain exceptions. However, if the Company needed additional liquidity and converted the BOLI to cash, such transaction would be subject to ordinary income tax and applicable penalties. The Company is also exposed to the credit risk of the underlying securities in the investment portfolio and to the insurance carrier’s credit risk (in a general account contract). If BOLI was exchanged to another carrier, additional fees would be incurred and a tax-free exchange could only be done for insureds that were still actively employed by the Company at that time. There is interest rate risk relating to the market value of the underlying investment securities associated with the BOLI in that there is no assurance that the market value of these securities will not decline. Investing in BOLI exposes the Company to liquidity, credit and interest rate risk, which could adversely affect the Company’s results of operations, financial condition and liquidity.
The Company’s business reputation and relationships are important and any damage to them could have a material adverse effect on its business.
The Company’s reputation is very important in sustaining its business and it relies on its relationships with its current, former and potential clients and shareholders and other actors in the industries that it serves. Any damage to the Company’s reputation, whether arising from regulatory, supervisory or enforcement actions, matters affecting the Company’s financial reporting or compliance with SEC requirements, negative publicity, the way in which the Company conducts its business or otherwise could strain its existing relationships and make it difficult for the Company to develop new relationships. Any such damage to the Company’s reputation and relationships could in turn lead to a material adverse effect on its business.
The Company’s business is dependent on technology, and an inability to invest in technological improvements may adversely affect the Company’s results of operations and financial condition.
The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. The Company has made significant investments in data processing, management information systems and internet banking accessibility, but additional investments may be required or necessary. The Company’s future success will depend in part upon its ability to create additional efficiencies in its operations through the use of technology. Many of the Company’s competitors have substantially greater resources to invest in technological improvements. The Company cannot make assurances that its technological improvements will increase its operational efficiency or that it will be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to its customers.
The Company is subject to regulatory oversight and certain litigation, and its expenses related to this regulatory oversight and litigation may adversely affect its results.
The Company is from time to time subject to certain litigation in the ordinary course of its business. The Company may also be subject to claims related to its loan servicing programs, particularly those involving servicing of commercial real estate loans, and the fees it charges deposit customers who overdraw their accounts or have insufficient funds in their accounts to cover items when items are presented for payment. These and other claims and legal actions, as well as supervisory and enforcement actions by the Company’s regulators, including those with oversight of its loan servicing programs, could involve large monetary claims, capital directives, agreements with federal regulators, cease and desist penalties and orders and significant defense costs. The outcome of any such cases or actions is uncertain. Substantial legal liability or significant regulatory action against the Company could have material adverse financial effects or cause significant reputational harm to the Company, which in turn could seriously harm its business prospects.
In accordance with GAAP, for matters where a loss is not probable or the amount of the loss cannot be estimated, no accrual is established. For matters where it is probable the Company will incur a loss and the amount can be reasonably estimated, the Company establishes an accrual for the loss. Once established, the accrual is adjusted periodically to reflect any relevant developments. The actual cost of any outstanding legal proceedings or threatened claims, however, may turn out to be substantially higher than the amount accrued. Further, the Company’s insurance may not cover all litigation, other proceedings or claims, or the costs of defense. Future developments could result in an unfavorable outcome for any existing or new lawsuits or investigations in which the Company is, or may become, involved, which may have a material adverse effect on its business and its results of operations.
The soundness of other financial institutions, including those with whom the Company has engaged in transactions, could adversely affect the Company.
The Company’s ability to engage in routine funding transactions could be adversely affected by the actions and financial stability of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. The Company has exposure to various counterparties, including brokers and dealers, commercial and correspondent banks, and others. As a result, defaults by, or rumors or questions about, one or more financial services institutions, or the financial services industry generally,
may result in market-wide liquidity problems and could lead to losses or defaults by such other institutions. Such occurrences could expose the Company to credit risk in the event of default of one or more counterparties and could have a material adverse effect on the Company’s financial position, results of operations and liquidity.
Natural disasters and the effects of a changing climate may adversely affect the Company and its customers.
The Company’s operations and customer base are located in markets where natural disasters, including tornadoes, severe storms, and floods often occur. Such natural disasters, like the tornado that struck the Company’s markets in March 2020, could significantly impact the local population and economies and the Company’s business, and could pose physical risks to its properties. Although the Company maintains insurance coverages for such events, a significant natural disaster in or near one or more of the Company’s markets could have a material adverse effect on its financial condition, results of operations or liquidity.
In addition to natural disasters, the impact of a changing climate, such as rising average global temperatures and rising sea levels, and any increasing frequency and severity of extreme weather events and natural disasters such as droughts, floods, wildfires and hurricanes could negatively impact the Company’s operations including its ability to provide financial products and services to its customers. A changing climate also has the potential to negatively affect the collateral the Company takes to secure loans that it makes, the valuations of home prices or commercial real estate or the Company’s customers’ (particularly those that are engaged in industries that could be negatively affected by a shift to a low-carbon economy) ability and/or willingness to pay fees, repay outstanding loans or afford new products. The impact of natural disasters occurring in our market areas, including those that may be a result of a changing climate could also cause insurability risk and/or increased insurance costs for the Company or its customers.
The Company’s asset valuation may include methodologies, estimations and assumptions which are subject to differing interpretations and could result in changes to asset valuations that may materially adversely affect its results of operations or financial condition.
The Company uses estimates, assumptions, and judgments when financial assets and liabilities are measured and reported at fair value. Assets and liabilities carried at fair value inherently result in a higher degree of financial statement volatility. Fair values and the information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices and/or other observable inputs provided by independent third-party sources, when available. When such third-party information is not available, fair value is estimated primarily by using cash flow and other financial modeling techniques utilizing assumptions such as credit quality, liquidity, interest rates and other relevant inputs. Changes in underlying factors, assumptions, or estimates in any of these areas could materially impact the Company’s future financial condition and results of operations.
During periods of market disruption, including periods of significantly rising or high interest rates, rapidly widening credit spreads or illiquidity, it may be difficult to value certain assets if trading becomes less frequent and/or market data becomes less observable. There may be certain asset classes that were in active markets with significant observable data that become illiquid due to the current financial environment. In such cases, certain asset valuations may require more subjectivity and management judgment. As such, valuations may include inputs and assumptions that are less observable or require greater estimation. Further, rapidly changing and unprecedented credit and equity market conditions could materially impact the valuation of assets as reported within the Company’s consolidated financial statements and the period-to-period changes in value could vary significantly. Decreases in value may have a material adverse effect on results of operations or financial condition.
Valuation methodologies which are particularly susceptible to the conditions mentioned above include those used to value certain securities in the Company’s available for sale investment portfolio such as non-agency mortgage and asset-backed securities, in addition to loans held for sale and intangible assets.
If the Company fails to maintain an effective system of internal control over financial reporting, it may not be able to accurately report its financial results. As a result, current and potential holders of the Company’s common stock could lose confidence in the Company’s financial reporting, which would harm the Company’s business and the trading price of its securities.
Maintaining and adapting the Company’s internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, is expensive and requires significant management attention. Moreover, as the Company continues to grow, its internal controls may become more complex and require additional resources to ensure they remain effective amid dynamic regulatory and other guidance. Failure to maintain effective controls or implement required new or improved controls or difficulties encountered in the process may harm the Company’s results of operations and financial condition or cause it to fail to meet its reporting obligations. If the Company or its independent registered public accounting firm identify material weaknesses in the Company’s internal control over financial reporting or the Company is required to restate the its financial statements, the Company could be required to implement expensive and time-consuming remedial measures and could lose investor confidence in the accuracy and completeness of its financial reports. The Company may also face regulatory enforcement or other actions. This could have an adverse effect on the Company’s business, financial condition or results of operations, as well as the trading price of the Company’s securities, and could potentially subject the Company to litigation.
Changes in financial accounting and reporting standards, or the interpretation of those standards could affect the way the Company accounts for its operations and these changes could have a material adverse effect on the Company’s financial condition and results of operations.
The Financial Accounting Standards Board and the SEC may change the financial accounting and reporting standards, or the interpretation of those standards, that govern the preparation of the Company’s external financial statements from time to time. The impact of these changes or the application thereof on the Company’s financial condition and operations can be difficult to predict.
Regulatory and Compliance Risks
Federal or state legislation or regulation may increase the Company’s expenses and reduce earnings.
Federal bank regulators continue to closely scrutinize financial institutions, and additional restrictions have been proposed or adopted by regulators and by Congress. Changes in tax law, federal legislation, regulation or policies, such as bankruptcy laws, deposit insurance, consumer protection laws, laws and regulations regarding fair lending and investments in communities (including the recently adopted changes to the CRA rules), and capital requirements, among others, can result in significant increases in the Company’s expenses and/or charge-offs, which may adversely affect its results of operations and financial condition. Changes in state or federal tax laws or regulations can have a similar impact. State and municipal governments, including the State of Tennessee, could seek to increase their tax revenues through increased tax levies which could have a meaningful impact on the Company’s results of operations. Furthermore, financial institution regulatory agencies may continue to be aggressive in responding to concerns and trends identified in examinations, including in the case of service charges banks impose on customers related to overdrafts and instances in which customers’ accounts do not have sufficient funds to cover items that are presented. Elevated regulatory scrutiny of our industry could include the issuance of additional formal or informal enforcement or supervisory actions and the imposition of monetary penalties, and whether formal or informal, could result in the Company’s or the Bank’s agreeing to limitations or monetary penalties or to take actions that limit its operational flexibility, restrict its growth, increase its operating expenses, lower the Company’s non-interest income or increase its capital or liquidity levels, any of which could materially and adversely affect the Company’s results of operations and financial condition. Failure to comply with any formal or informal regulatory actions or restrictions, including informal supervisory actions, could lead to further regulatory enforcement actions. Negative developments in the financial services industry and the impact of legislation (or interpretation of existing legislation) in response to those developments could negatively impact the Company’s operations by restricting its business operations, including its ability to originate or sell loans or by requiring it to hold move elevated levels of capital or deduct from its regulatory capital unrealized losses in its securities portfolio, and adversely impact its financial performance. In addition, industry, legislative or regulatory developments may cause the Company to materially change its existing strategic direction, business policies, capital strategies, compensation or operating plans.
Additionally, the Company is subject to laws regarding its handling, disclosure and processing of personal and confidential information of certain parties, such as its employees, customers, suppliers, counterparties and other third parties. The GLB Act requires the Company to periodically disclose its privacy policies and practices relating to sharing such information and enables retail customers to opt out of the Company’s ability to share information with unaffiliated third parties, under certain circumstances. Other laws and regulations impact the Company’s ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes, or to contact customers with marketing offers. In addition to their obligations to safeguard customer information under GLB Act regulations, financial institutions, like the Bank, are subject to regulations that require the institutions when they become aware of an incident of unauthorized access to sensitive customer information, to conduct a reasonable investigation to promptly determine the likelihood that the information has been or will be misused. If the institution determines that misuse of the sensitive customer information has occurred or is reasonably possible, it should notify the affected customers as soon as possible. The Company is subject to laws that require it to implement a comprehensive information security program that includes administrative, technical and physical safeguards to protect the security and confidentiality of customer records and information. Additionally, other legislative and regulatory activity continue to lend uncertainty to privacy compliance requirements that impact the Company’s business. The Company also expects that there will continue to be new laws, regulations and industry standards concerning privacy, data protection and information security proposed and enacted in various jurisdictions. The potential effects of pending legislation are far-reaching and may require the Company to modify its data processing practices and policies and to incur substantial costs and expenses in an effort to comply.
The Company, as well as the Bank, operate in an increasingly highly regulated environment and are supervised and examined by various federal and state regulatory agencies who may adversely affect the Company’s ability to conduct business.
The TDFI and the FRB supervise and examine the Bank and the Company, respectively. Because the Bank’s deposits are federally insured, the FDIC also regulates its activities. These and other regulatory agencies impose certain regulations and restrictions on the Bank, including:
●explicit standards as to capital and financial condition;
●limitations on the permissible types, amounts and extensions of credit and investments;
●restrictions on permissible non-banking activities; and
●restrictions on dividend payments.
Federal and state regulatory agencies have extensive discretion and power to prevent or remedy unsafe or unsound practices or violations of law by banks and bank holding companies. As a result, the Company must expend significant time and expense to assure that it is in compliance with regulatory requirements and agency practices.
The Company, as well as the Bank, also undergoes periodic examinations by one or more regulatory agencies. Following such examinations, the Company or the Bank may be required, among other things, to make additional provisions to its allowance for credit loss, to restrict its operations or to increase its capital levels. These actions would result from the regulators’ judgments based on information available to them at the time of their examination. The Bank’s operations are also governed by a wide variety of state and federal consumer protection laws and regulations. These federal and state regulatory restrictions limit the manner in which the Company and the Bank may conduct business and obtain financing. These laws and regulations can and do change significantly from time to time, and any such changes could adversely affect the Company’s results of operations.
There is uncertainty as to the level of regulatory reform that the new Presidential administration may seek to undertake. The prior administration implemented a regulatory reform agenda that included an increased level of attention and focus on consumer protection, deposit fees, fair lending and investments in communities, the regulation of loan portfolios and credit concentrations to borrowers impacted by climate change or that operate in industries that would not be favored in a low-carbon economy and heightened scrutiny of BSA and AML requirements among other areas. While the new Presidential administration may be less focused on the areas targeted by the prior administration, the effects of changes implemented by the prior administration, if not rolled back, are likely to increase the Company’s compliance costs, negatively impacting its profitability.
The Company and the Bank must maintain adequate regulatory capital to support the Company’s business objectives.
Under regulatory capital adequacy guidelines and other regulatory requirements, the Company and the Bank must satisfy capital requirements based upon quantitative measures of assets, liabilities and certain off-balance sheet items. The satisfaction of these requirements by the Company and the Bank is subject to qualitative judgments by regulators that may differ materially from management’s and that are subject to being determined retroactively for prior periods. Additionally, regulators can make subjective assessments about the adequacy of capital levels, even if the Bank’s reported capital exceeds the “well-capitalized” requirements.
Failure to meet regulatory capital standards could have a material adverse effect on the Company’s business, including damaging the confidence of customers in the Company, and adversely impacting its reputation and competitive position and retention of key personnel. Any of these developments could limit the Company’s access to:
●brokered deposits;
●the FRB discount window;
●advances from the FHLB Cincinnati;
●capital markets transactions; and
●development of new financial services
Failure to meet regulatory capital standards may also result in higher FDIC assessments. If the Bank falls below guidelines for being deemed “adequately capitalized” the FDIC or FRB could impose restrictions on the Company’s activities and a broad range of regulatory requirements in order to effect “prompt corrective action.” The capital requirements applicable to the Company and the Bank are in a process of continuous evaluation and revision in connection with actions of the Basel Committee and the Company’s and the Bank’s regulators. In July 2023, federal banking regulators issued a joint agency proposal that sought to implement the final components of the Basel III Endgame as well as make changes aimed at addressing the underlying causes of the turmoil in the banking industry that was experienced in the first half of 2023 with the failure of certain larger financial institutions. The proposal sought to revise the capital framework for banks with total assets of $100 billion or more in four main areas of credit risk, market risk, operational risk and credit valuation adjustment risk. The proposal also would have required banks with total assets of $100 billion or more to include unrealized gains and losses from certain securities in their capital ratios, to comply with supplementary leverage ratio requirements and to comply
with countercyclical capital buffer requirements, if activated. Even though because of their size, these rules would not directly apply to the Company or the Bank, regulators may have sought to impose elements of the changes on the Company or the Bank through the regulatory oversight process. The comment period for these proposed changes ended in the first quarter of 2024 and the proposed rule changes have not yet been finalized. As a result of the recent change in the Presidential administration, we believe the regulatory agencies may re-propose a modified version of the proposed rules that would remove most of the Basel III Endgame changes on the $100 billion to $250 billion asset sized banks, but as of the date of this Annual Report on Form 10-K no re-proposed rules have been issued. If such re-proposal does occur, certain of the more stringent requirements could still be imposed on the Company or the Bank through the ongoing regulatory oversight process, which could adversely impact the Company’s profitability or, if it fails to satisfy any such requirements, its financial condition and results of operations.
The Company is required to act as a source of financial and managerial strength for the Bank in times of stress.
Under federal law, the Company is required to act as a source of financial and managerial strength to the Bank, and to commit resources to support the Bank if necessary. The Company may be required to commit additional resources to the Bank, or guarantee the Bank’s compliance with a capital plan developed by the Bank to raise capital, at times when the Company may not be in a financial position to provide such resources or guarantee or when it may not be in the Company’s, or its shareholders’ or its creditors’ best interests to do so. Providing such support is more likely during times of financial stress for the Company and the Bank, which may make any capital the Company is required to raise to provide such support more expensive than it might otherwise be. In addition, any capital loans the Company makes to the Bank are subordinate in right of payment to depositors and to certain other indebtedness of the Bank. In the event of the Company’s bankruptcy, any commitment by it to a federal banking regulator to maintain the capital of the Bank will be assumed by the bankruptcy trustee and entitled to priority of payment.
Non-compliance with the Patriot Act, the BSA or other laws and regulations, like those issued by OFAC, could result in fines or sanctions against the Company.
The BSA, as amended by the Patriot Act, requires financial institutions to design and implement programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the Treasury’s Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures and maintain staffing levels that are sufficient for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these and other regulations aimed at combatting terrorism, money laundering and preventing transactions with "enemies" of the United States could result in fines or sanctions, including restrictions on conducting acquisitions or establishing new branches, as well as additional operating expenses to add staff and/or technological enhancements to the Company’s systems to better comply.
Risks Relating to the Company’s Securities
The Company’s common stock is thinly traded, and recent prices may not reflect the prices at which the stock would trade in an active trading market.
The Company’s common stock is not traded through an organized exchange, but rather is traded in individually-arranged transactions between buyers and sellers. As a result, shares of the Company's common stock have less liquidity than shares traded through an organized exchange. Therefore, recent prices at which the stock has traded may not necessarily reflect the actual value of the Company’s common stock. A shareholder’s ability to sell the shares of Company common stock in a timely manner, or in desired amounts, may be substantially limited by the lack of a trading market for the common stock.
The Company’s ability to declare and pay dividends is limited.
While the Company has historically paid a biannual cash dividend on its common stock, there can be no assurance of whether or when it may pay dividends on its common stock in the future. Future dividends, if any, will be declared and paid at the discretion of the Company’s board of directors and will depend on a number of factors, including the Company’s and the Bank’s capital levels. The Company’s principal source of funds used to pay cash dividends on its common stock will be dividends that it receives from the Bank. Although the Bank’s asset quality, earnings performance, liquidity and capital requirements will be taken into account before the Company declares or pays any future dividends on its common stock, the Company’s board of directors will also consider its liquidity and capital requirements and its board of directors could determine to declare and pay dividends without relying on dividend payments from the Bank.
Federal and state banking laws and regulations and state corporate laws restrict the amount of dividends the Company may declare and pay and that the Bank may declare and pay to the Company. For example, FRB regulations implementing the capital rules required under Basel III do not permit dividends unless capital levels exceed those minimum levels required to be adequately capitalized plus those amounts required by the capital conservation buffers. In addition, the FRB has issued supervisory guidance advising bank holding companies to eliminate, defer or reduce dividends paid on common stock and other forms of Tier 1 capital where the company’s net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully
fund the dividends, the company’s prospective rate of earnings retention is not consistent with the company’s capital needs and overall current and prospective financial condition or the company will not meet, or is in danger of not meeting, minimum regulatory capital adequacy ratios. Supplements to this guidance reiterate the need for bank holding companies to inform their applicable reserve bank sufficiently in advance of the proposed payment of a dividend in certain circumstances.
An investment in the Company’s common stock is not an insured deposit.
The Company’s common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other public or private entity. Investment in the Company’s common stock is inherently risky for the reasons described in this “Risk Factors” section and elsewhere in this report and is subject to the equity market forces like other common stock. As a result, if you acquire the Company’s stock, you could lose some or all of your investment.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
None.

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ITEM 2. PROPERTIES
Item 2. Properties
The Company’s main office is owned by the Company and consists of approximately four acres at 623 West Main Street, Lebanon, Tennessee. The building is a two story, brick building, with approximately 35,000 square feet. The lot has approximately 350 feet of road frontage on West Main Street. The Bank's 67,000 square foot operations center is located at 105 North Castle Heights Avenue, Lebanon, Tennessee, which is adjacent to the 623 West Main Street office. In addition thereto, the Bank has twenty-nine branch locations located at the following locations: 1444 Baddour Parkway, Lebanon, Tennessee; 200 Tennessee Boulevard, Lebanon, Tennessee; 8875 Stewart’s Ferry Pike, Gladeville, Tennessee; 402 Public Square, Watertown, Tennessee; 1476 North Mt. Juliet Road, Mt. Juliet, Tennessee; 11835 Highway 70, Mount Juliet, Tennessee; 1130 Castle Heights Avenue North, Lebanon, Tennessee; 127 McMurry Blvd., Hartsville, Tennessee; 440 Highway 109 North, Lebanon, Tennessee; 4736 Andrew Jackson Parkway, Hermitage, Tennessee; 3110 Memorial Blvd Murfreesboro, Tennessee; 210 Commerce Drive Smyrna, Tennessee; 2640 South Church Street, Murfreesboro, Tennessee; 217 Donelson Pike, Nashville, Tennessee; 2930 West End Avenue, Nashville, Tennessee; 710 NW Broad 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; 709 South Mt. Juliet Road, Mt. Juliet, Tennessee; 455 West Main Street, Gallatin, Tennessee; 175 East Main Street, Hendersonville, Tennessee; 1630 Nashville Pike, Suite 100, Gallatin, Tennessee; 320 South Jefferson Avenue, Cookeville, Tennessee; 9200 Carothers Parkway, Suite 108, Franklin, Tennessee; 5029 Harpeth Drive, Brentwood, Tennessee; and 2141 Century Farms Parkway, Suite 1009, Nashville, Tennessee. In addition, the Company expects to open a branch office location late in the first quarter or early in the second quarter of 2025 located at 1101 Broad Street, Chattanooga, Tennessee.
The Mt. Juliet office contains approximately 16,000 square feet of space; the Castle Heights Office contains 2,400 square feet of space; the Hartsville Office contains 8,000 square feet of space; the Leeville-109 branch contains approximately 4,000 square feet. The Hermitage branch opened in the fall of 1999 and contains 8,000 square feet of space. The Gladeville branch contains approximately 3,400 square feet of space. The Lebanon facility at Tennessee Boulevard was expanded in 1997 to 2,200 square feet of space. The Mt. Juliet facility on Highway 70 was completed in July 2004 and contains approximately 3,450 square feet of space and the Providence facility which was opened in 2011 contains approximately 4,450 square feet of space. The NorthWest Broad Street facility was relocated from a leased office to an office owned by the Bank in 2011 and contains approximately 6,300 square feet of space. The Smyrna office opened in September of 2006 and contains approximately 3,600 square feet of space. The Memorial Blvd office in Murfreesboro opened in October of 2006 and contains approximately 7,800 square feet of space. The Highway 96 office in Murfreesboro opened in January 2017 and contains approximately 4,700 square feet of space. The South Church Street office in Murfreesboro opened in January 2008 and contains approximately 7,800 square feet of space. The West End office in Nashville opened in August 2017 and contains approximately 7,062 square feet of space. The Cool Springs office in Franklin opened in December 2018 and contains approximately 5,940 square feet of space. The Maryland Farms office in Brentwood opened in April 2023 and contains approximately 4,454 square feet of space. The Greenlea office in Gallatin opened in January 2022 and contains approximately 3,200 square feet of space. The Century Farms office in Nashville opened in December 2024 and contains approximately 2,225 square feet of space. The Chattanooga full-service office in Chattanooga is set to open late in the first quarter or early in the second quarter of 2025 and is expected to contain approximately 4,270 square feet of space. Each of the branch facilities of the Bank not otherwise described above contains approximately 1,000 square feet of space.
The Bank also has a facility at 576 West Broad Street in Smithville, Tennessee which was expanded in 2001 and now contains approximately 10,300 square feet of space and a facility at 306 Brush Creek Road in Alexandria, Tennessee which occupies approximately 2,400 square feet of space. The Bank owns both facilities. The Bank also owns a building at 1300 Main Street North, Carthage, Tennessee, which was expanded in 2005 and now contains approximately 11,000 square feet and a second facility in Gordonsville, Tennessee at 7 New Middleton Highway, Gordonsville, Tennessee. The Bank owns a building at 455 West Main Street in Gallatin, Tennessee which occupies approximately 4,800 square feet of space and a building at 175 East Main Street in Hendersonville, Tennessee which occupies approximately 6,300 square feet of space. The Bank owns a building at 217 Donelson Pike, Donelson, Tennessee which occupies approximately 8,000 square feet of space and a building at 320 South Jefferson Avenue, Cookeville, Tennessee, which occupies approximately 6,300 square feet of space. The Bank owns all of its branch facilities except for the Lebanon facility at Tennessee Boulevard, its West End office in Nashville, its Cool Springs office in Franklin, its Greenlea office in Gallatin, it's Century Farms office in Nashville, and its Chattanooga office in Chattanooga set to open late in the first quarter or early in the second quarter of 2025. The Bank also leases space at four locations within Wilson County, DeKalb County, Putnam County, and Rutherford County where it maintains and operates automated teller machines.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
As of the date hereof, there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of its properties are subject; nor are there material proceedings known to the Company or its subsidiaries to be contemplated by any governmental authority; nor are there material proceedings known to the Company or its subsidiaries, pending or contemplated, in which any director, officer or affiliate or any principal security holder of the Company or any of its subsidiaries or any associate of any of the foregoing, is a party or has an interest adverse to the Company or any of its subsidiaries.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not Applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Holding Company & Stock Information
Wilson Bank Holding Company Directors
James F. Comer, Chairman; James Anthony Patton; J. Randall Clemons; Jack W. Bell; William P. Jordan; John C. McDearman III; Clinton M. Swain; Michael G. Maynard; H. Elmer Richerson and Lisa T. Pominski.
Common Stock Market Information
The common stock of Wilson Bank Holding Company is not traded on an exchange nor is there a known active trading market. The number of shareholders of record at February 26, 2025 was 4,960. Based solely on information made available to the Company from limited numbers of buyers and sellers, the Company believes that the following table sets forth the quarterly range of sale prices for the Company’s common stock during the years 2023 and 2024.
On January 1, 2023, a $.75 per share cash dividend was declared and on July 1, 2023, a $.75 per share cash dividend was declared and thereafter paid to shareholders of record as of those dates. On January 1, 2024, a $.75 per share cash dividend was declared and on July 1, 2024, a $1.00 per share cash dividend was declared and paid to shareholders of record on those dates. Future dividends will be dependent upon the Company’s profitability, its capital needs, overall financial condition and economic and regulatory considerations.
Stock Prices
High
Low
First Quarter
$
69.00
$
67.85
Second Quarter
$
70.00
$
67.85
Third Quarter
$
75.00
$
70.00
Fourth Quarter
$
71.75
$
70.00
High
Low
First Quarter
$
72.25
$
71.50
Second Quarter
$
75.00
$
72.25
Third Quarter
$
74.10
$
73.10
Fourth Quarter
$
75.10
$
73.10
1. Represents one transaction of 303 shares during the second quarter of 2023 of which the Company is aware where the sale price was at least $1.15 lower than any other completed trade during the quarter. The volume weighted average stock price during the second quarter of 2023 was $69.21.
2. Represents one transaction of 102 shares during the third quarter of 2023 of which the Company is aware where the sale price was at least $4.25 higher than any other completed trade during the quarter. The volume weighted average stock price during the third quarter of 2023 was $70.07.
3. Represents one transaction of 50 shares during the fourth quarter of 2023 of which the Company is aware where the sale price was at least $0.25 higher than any other completed trade during the quarter. The volume weighted average stock price during the fourth quarter of 2023 was $70.90.
4. Represents one transaction of 406 shares and one transaction of 311 shares during the fourth quarter of 2023 of which the Company is aware where the sale price was at least $.75 lower than any other completed trade during the quarter. The volume weighted average stock price during the fourth quarter of 2023 was $70.90.
5. Represents one transaction of 23 shares during the second quarter of 2024 of which the Company is aware where the sale price was at least $1.90 higher than any other completed trade during the quarter. The volume weighted average stock price during the second quarter of 2024 was $72.29.
6. Represents one transaction of 20 shares during the fourth quarter of 2024 of which the Company is aware where the sale price was at least $1.00 lower than any other completed trade during the quarter. The volume weighted average stock price during the fourth quarter of 2024 was $74.41.
The Company did not repurchase any shares of its common stock during the quarter ended December 31, 2024. On October 28, 2024, the Company's board of directors authorized a share repurchase program for up to $4.0 million of the Company's outstanding common stock.
The authorization for this program remains in effect through March 31, 2025. On January 27, 2025, the Company's Board of Directors authorized an $8.0 million share repurchase program that will commence upon expiration of the current program. This authorization remains in effect through March 31, 2026. Share repurchases under the authorized programs may be made from time to time in privately negotiated transactions, at the discretion of the management of the Company. The approved share repurchase programs do not obligate the Company to repurchase any dollar amount or number of shares, and the programs may be extended, modified, suspended or discontinued at any time. The timing of these repurchases will depend on market conditions and other requirements. As of the date of this filing, the Company has not repurchased any shares of its common stock under these share repurchase programs.
Important Information Regarding Stock Transfers
The Bank serves as the Company's transfer agent and all transfers of shares of the capital stock of the Company, including sales or purchases, shall be made only on the books of the Company through the Bank, as the Company's transfer agent. In order for the Company’s transfer agent to record any transfer of the capital stock of the Company, the Company’s transfer agent must be provided with the actual name and contact information of the transferor(s) and transferee(s) so the transactions may be recorded on the books of the Company by the Company’s transfer agent. If a transferor or transferee is a trust or entity, then the appropriate authority documentation will need to be provided as deemed necessary in the reasonable discretion of the Company’s transfer agent. The Company’s transfer agent will be happy to furnish customary transaction forms necessary for transfer of the capital stock of the Company, including by sale or purchase, upon notice to the Company's stock department at 615-443-5900 (or WBHCStocktransfer@wilsonbank.com).

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved
Not Applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion of our financial condition at December 31, 2024 and 2023 and our results of operations for each of the years in the three-year period ended December 31, 2024. The purpose of this discussion is to focus on information about our financial condition and results of operations which is not otherwise apparent from our consolidated financial statements. The following discussion and analysis should be read along with our consolidated financial statements and the related notes included elsewhere herein, as well as the information included in Part I Item 1A "Risk Factors" and under the caption "Forward-Looking Statements" below.
Forward-Looking Statements
This report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, regarding, among other things, the anticipated financial and operating results of the Company. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly release any modifications or revisions to these forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.
The Company cautions investors that future financial and operating results may differ materially from those projected in forward-looking statements made by, or on behalf of, the Company. The words “expect,” “intend,” “should,” “may,” “could,” “believe,” “suspect,” “anticipate,” “seek,” “plan,” “estimate” and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical fact may also be considered forward-looking. Such forward-looking statements involve known and unknown risks and uncertainties, including, but not limited to those described in this annual report for the year ended December 31, 2024 and also include, without limitation, (i) deterioration in the financial condition of borrowers resulting in significant increases in credit losses and provisions for these losses, (ii) deterioration in the real estate market conditions in the Company’s market areas, including demand for residential real estate loans as a result of elevated rates on residential real estate mortgage loans, (iii) the impact of increased competition with other financial institutions, including pricing pressures on loans and deposits, and the resulting impact on the Company's results, including as a result of compression to net interest margin, (iv) adverse conditions in local or national economies, including the economy in the Company’s market areas, including as a result of the impact of escalating geopolitical tensions (including the ongoing conflicts in Ukraine and the Middle East or increased terrorist activities in the United States), inflationary pressures and the elevated rate environment, international trade disputes and retaliatory tariffs, increased terrorist activity in the United States, supply chain disruptions and labor shortages (including as a result of deportations) on our customers and on their businesses, (v) fluctuations or differences in interest rates on earning assets and interest bearing liabilities from those that the Company is modeling or anticipating, including as a result of the Bank's inability to maintain deposit rates or defer increases to those rates in an elevated rate environment or lower rates in a falling rate environment, (vi) the ability to grow and retain low-cost core deposits, (vii) significant downturns in the business of one or more large customers, (viii) the inability of the Company to comply with regulatory capital requirements, including those resulting from changes to capital calculation methodologies, required capital maintenance levels, or regulatory requests or directives, (ix) changes in state or Federal regulations, policies, or legislation applicable to banks and other financial service providers, including regulatory or legislative developments arising out of current unsettled conditions in the economy, (x) changes in capital levels and loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments, (xi) inadequate allowance for credit losses, (xii) the effectiveness of the Company’s activities in improving, resolving or liquidating lower quality assets, (xiii) results of regulatory examinations, (xiv) the vulnerability of the Company's network and online banking portals, and the systems of parties with whom the Company contracts, to unauthorized access, computer viruses, phishing schemes, social engineering, fraud, spam attacks, ransomware attacks, human error, natural disasters, power loss, and other security breaches, (xv) the possibility of additional increases to compliance costs or other operational expenses as a result of increased regulatory oversight, (xvi) loss of key personnel, and (xvii) adverse results (including costs, fines, reputational harm and/or other negative effects) from current or future litigation, examinations or other legal and/or regulatory actions. These risks and uncertainties may cause the actual results or performance of the Company to be materially different from any future results or performance expressed or implied by such forward-looking statements. The Company’s future operating results depend on a number of factors which were derived utilizing numerous assumptions that could cause actual results to differ materially from those projected in forward-looking statements
General
The Company is a registered bank holding company that owns 100% of the common stock of Wilson Bank and Trust (“Wilson Bank” or “the Bank”), a Tennessee state-chartered bank headquartered in Lebanon, Tennessee. The Company was formed in 1992. Wilson Bank commenced operations in 1987.
Wilson Bank is a community bank headquartered in Lebanon, Tennessee, principally serving Wilson County, DeKalb County, Smith County, Trousdale County, Rutherford County, Davidson County, Putnam County, Sumner County, Hamilton County, and Williamson County, Tennessee as its primary market areas. The markets served by the Bank are largely within the Nashville-Davidson-Murfreesboro-Franklin, Tennessee metropolitan statistical area. At December 31, 2024, Wilson Bank had thirty-one office locations in Wilson, Davidson,
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DeKalb, Smith, Sumner, Rutherford, Putnam, Trousdale, Hamilton, and Williamson counties in Tennessee. Management believes that these counties offer an environment for continued growth, and the Company’s target market is local consumers, professionals and small businesses. Wilson 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 Company also offers an investment center which offers a full line of investment services to its customers.
Wilson Bank also holds an ownership interest in Encompass Home Loan Lending, LLC ("Encompass"), a company offering mortgage banking services that is 51% owned by Wilson Bank and 49% owned by two home builders operating in Wilson Bank's market areas. The results of Encompass, which commenced operations on June 1, 2022, are consolidated in the Company's financial statements included elsewhere in this Annual Report on From 10-K.
The following discussion and analysis is designed to assist readers in their analysis of the Company’s consolidated financial statements and should be read in conjunction with such consolidated financial statements and the notes thereto.
Application of Critical Accounting Policies and Accounting Estimates
We follow accounting and reporting policies that conform, in all material respects, to accounting principles generally accepted in the United States and to general practices within the financial services industry. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While we base estimates on historical experience, current information, forecasted economic conditions, and other factors deemed to be relevant, actual results could differ from those estimates.
We consider accounting estimates to be critical to reported financial results if (i) the accounting estimate requires management to make assumptions about matters that are highly uncertain and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on our financial statements.
Accounting policies related to the allowance for credit losses on financial instruments including loans and off-balance-sheet credit exposures are considered to be critical as these policies involve considerable subjective judgment and estimation by management. As discussed in Note 1 - Summary of Significant Accounting Policies, our policies related to allowances for credit losses changed on January 1, 2022 in connection with the adoption of a new accounting standard update as codified in Accounting Standards Codification (“ASC”) Topic 326 (“ASC 326”) Financial Instruments - Credit Losses. In the case of loans, the allowance for credit losses is a contra-asset valuation account, calculated in accordance with ASC 326, that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. In the case of off-balance-sheet credit exposures, the allowance for credit losses is a liability account, calculated in accordance with ASC 326, reported as a component of accrued interest payable and other liabilities in our consolidated balance sheets. The amount of each allowance account represents management's best estimate of current expected credit losses on these financial instruments considering available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of the instrument. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts. While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant factors. While management utilizes its best judgment and information available, the ultimate adequacy of our allowance accounts is dependent upon a variety of factors beyond our control, including the performance of our portfolios, the economy, changes in interest rates and the view of the regulatory authorities toward classification of assets. For additional information regarding critical accounting policies, refer to Note 1 - Summary of Significant Accounting Policies and Note 2 - Loans and Allowance for Credit Losses in the notes to consolidated financial statements contained elsewhere in this Annual Report.
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Selected Financial Data
Set forth below is certain selected financial data related to the Company's operations as of and for the twelve months ended December 31, 2024, 2023, 2022, 2021, and 2020.
In Thousands, Except Per Share Information
As Of December 31,
CONSOLIDATED BALANCE SHEETS:
Total assets end of year
$
5,358,659
4,846,476
4,285,650
3,989,596
3,369,604
Loans, net
$
4,042,392
3,550,675
3,113,796
2,444,282
2,282,766
Securities
$
827,893
811,081
822,812
897,585
580,543
Deposits
$
4,830,034
4,367,106
3,892,705
3,555,071
2,960,595
Shareholders’ equity
$
479,703
429,405
360,452
413,717
380,121
Years Ended December 31,
CONSOLIDATED STATEMENTS OF EARNINGS:
Interest income
$
284,116
222,583
157,540
129,841
122,968
Interest expense
126,809
83,679
16,133
11,636
18,219
Net interest income
157,307
138,904
141,407
118,205
104,749
Provision for credit losses - loans
5,192
6,300
8,656
1,143
9,696
Provision for credit losses - off-balance sheet exposures
(592
)
(2,989
)
(1,014
)
Net interest income after provision for credit losses
152,707
135,593
133,765
116,800
94,794
Non-interest income
28,954
28,289
27,281
32,850
29,795
Non-interest expense
108,421
100,951
92,970
85,492
76,479
Earnings before income taxes
73,240
62,931
68,076
64,158
48,110
Income taxes
16,576
13,939
15,056
14,732
9,618
Net earnings
56,664
48,992
53,020
49,426
38,492
Net loss (gain) attributable to noncontrolling interest
(134
)
(54
)
-
-
Net earnings attributable to Wilson Bank Holding Company
$
56,530
48,938
53,042
49,426
38,492
Cash dividends declared
$
20,552
17,303
20,880
14,909
13,013
PER SHARE DATA:
Basic earnings per common share
$
4.79
4.21
4.66
4.44
3.52
Diluted earnings per common share
$
4.78
4.20
4.65
4.43
3.51
Cash dividends
$
1.75
1.50
1.85
1.35
1.20
Book value
$
40.39
36.74
31.42
36.93
34.58
RATIOS:
Return on average shareholders’ equity
12.41
%
12.47
14.36
12.45
10.65
Return on average assets
1.12
%
1.08
1.29
1.35
1.24
Total capital to assets
8.95
%
8.86
8.41
10.37
11.28
Dividends declared per share as a percentage of basic earnings per share
36.53
%
35.63
39.70
30.41
34.09
Non-GAAP Financial Measures
This Annual Report contains certain financial measures that are not measures recognized under U.S. GAAP and, therefore, are considered non-GAAP financial measures. Members of Company management use these non-GAAP financial measures in their analysis of the Company’s performance, financial condition, and efficiency of operations. Management of the Company believes that these non-GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods. Management of the Company also believes that investors find these non-GAAP financial measures useful as they assist investors in understanding underlying operating performance and identifying and analyzing ongoing operating trends. However, the non-GAAP financial measures discussed herein should not be considered in isolation or as a substitute for the most directly comparable or other
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
financial measures calculated in accordance with U.S. GAAP. Moreover, the manner in which the non-GAAP financial measures discussed herein are calculated may differ from the manner in which measures with similar names are calculated by other companies. You should understand how other companies calculate their financial measures similar to, or with names similar to, the non-GAAP financial measures we have discussed herein when comparing such non-GAAP financial measures.
The non-GAAP measures in this Annual Report include “pre-tax pre-provision income,” “pre-tax pre-provision basic earnings per share,” “pre-tax pre-provision return on average shareholders' equity,” and “pre-tax pre-provision return on average assets.” A reconciliation of these measures to the comparable GAAP measures is included below.
Selected Financial Information
The executive management and Board of Directors of the Company evaluate key performance indicators (KPIs) on a continuing basis. These KPIs serve as benchmarks of Company performance and are used in making strategic decisions and, in some cases, are utilized for purposes of setting performance targets for our executive officers' incentive-based cash compensation. The following table represents the KPIs that management has determined to be important in making decisions for the Bank, in each case for the years ended December 31, 2024, 2023 and 2022 (for the per share data and performance ratios) and as of December 31, 2024 and 2023 (for the consolidated balance sheet ratios):
PER SHARE DATA:
Basic earnings per common share (GAAP)
$
4.79
$
4.21
$
4.66
Pre-tax pre-provision basic earnings per share (1)
$
6.58
$
5.70
$
6.66
Diluted earnings per common share (GAAP)
$
4.78
$
4.20
$
4.65
Cash dividends per common share
$
1.75
$
1.50
$
1.85
Dividends declared per common share as a percentage of basic earnings per common share
36.53
%
35.63
%
39.70
%
(1)Excludes income tax expense, provision for credit losses-loans, provision for credit losses-available for sale securities, and provision for credit losses on off-balance sheet exposures.
PERFORMANCE RATIOS:
Return on average shareholders' equity (GAAP) (1)
12.41
%
12.47
%
14.36
%
Pre-tax pre-provision return on average shareholders' equity (2)
17.06
%
16.86
%
20.51
%
Return on average assets (GAAP) (3)
1.12
%
1.08
%
1.29
%
Pre-tax pre-provision return on average assets (2)
1.54
%
1.47
%
1.84
%
Efficiency ratio (GAAP) (4)
58.21
%
60.38
%
55.11
%
(1)Return on average shareholders' equity is the result of net income divided by average shareholders' equity.
(2)Excludes income tax expense, provision for credit losses-loans, provision for credit losses-available for sale securities, and provision for credit losses on off-balance sheet exposures.
(3)Return on average assets is the result of net income divided by average assets.
(4)Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and non-interest income.
December 31, 2024
December 31, 2023
CONSOLIDATED BALANCE SHEET RATIOS:
Total capital to assets ratio
8.95
%
8.86
%
Equity to assets ratio (Average equity divided by average total assets)
9.00
%
8.69
%
Tier 1 capital to average assets
10.38
%
10.60
%
Non-performing asset ratio
0.10
%
0.03
%
Book value per common share
$
40.39
$
36.74
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Reconciliation of Non-GAAP Financial Measures
December 31, 2024
December 31, 2023
December 31, 2022
Pre-tax pre-provision income:
Net income attributable to common shareholders (GAAP)
$
56,530
$
48,938
$
53,042
Add: provision for credit losses - loans
5,192
6,300
8,656
Add: provision expense (benefit) for credit losses on off-balance sheet exposures
(592
)
(2,989
)
(1,014
)
Add: Provision for credit losses - available-for-sale securities
-
-
-
Add: income tax expense
16,576
13,939
15,056
Pre-tax pre-provision income
$
77,706
$
66,188
$
75,740
Pre-tax pre-provision basic earnings per share:
Pre-tax pre-provision income
$
77,706
$
66,188
$
75,740
Weighted average shares
11,806,822
11,611,690
11,377,617
Basic earnings per common share (GAAP)
$
4.79
$
4.21
$
4.66
Provision for credit losses - loans
$
0.44
$
0.54
$
0.76
Provision expense (benefit) for credit losses on off-balance sheet exposures
$
(0.05
)
$
(0.26
)
$
(0.09
)
Provision for credit losses - available-for-sale securities
$
-
$
-
$
-
Income tax expense
$
1.40
$
1.21
$
1.33
Pre-tax pre-provision basic earnings per common share
$
6.58
$
5.70
$
6.66
Pre-tax pre-provision return on average shareholders' equity:
Pre-tax pre-provision income
$
77,706
$
66,188
$
75,740
Average total shareholders' equity
455,466
392,466
369,314
Return on average shareholders' equity (GAAP)
12.41
%
12.47
%
14.36
%
Provision for credit losses - loans
1.14
%
1.61
%
2.34
%
Provision expense (benefit) for credit losses on off-balance sheet exposures
(0.13
)%
(0.76
)%
(0.27
)%
Provision for credit losses - available-for-sale securities
-
%
-
%
-
%
Income tax expense
3.64
%
3.54
%
4.08
%
Pre-tax pre-provision return on average shareholders' equity
17.06
%
16.86
%
20.51
%
Pre-tax pre-provision return on average assets:
Pre-tax pre-provision income
$
77,706
$
66,188
$
75,740
Average assets
5,060,367
4,517,697
4,107,738
Return on average assets (GAAP)
1.12
%
1.08
%
1.29
%
Provision for credit losses - loans
0.10
%
0.14
%
0.21
%
Provision expense (benefit) for credit losses on off-balance sheet exposures
(0.01
)%
(0.07
)%
(0.02
)%
Provision for credit losses - available-for-sale securities
-
%
-
%
-
%
Income tax expense
0.33
%
0.32
%
0.36
%
Pre-tax pre-provision return on average assets
1.54
%
1.47
%
1.84
%
Results of Operations
Net earnings for the year ended December 31, 2024 were $56,530,000, an increase of $7,592,000, or 15.51%, compared to net earnings of $48,938,000 for the year ended December 31, 2023. Our 2023 net earnings were 7.74%, or $4,104,000, lower than our net earnings of $53,042,000 for 2022. Basic earnings per share were $4.79 in 2024, compared with $4.21 in 2023 and $4.66 in 2022. Diluted earnings per share were $4.78 in 2024, compared to $4.20 in 2023 and $4.65 in 2022. The increase in net earnings and diluted and basic earnings per share during the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily due to an increase in
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
net interest income before provision for credit losses and an increase in non-interest income partially offset by an increase in non-interest expense and an increase in provision for credit losses. The increase in net interest income was due to an increase in average interest earning asset balances and an increase in the yield earned on interest earning assets, partially offset by an increase in cost of funds and an increase in average interest bearing deposit balances. Net interest margin for both the years ended December 31, 2024 and December 31, 2023 was 3.30%, and 3.70% for the year ended December 31, 2022. Net interest spread for the year ended December 31, 2024 was 2.88%, compared to 2.97% and 3.62% for the years ended December 31, 2023 and December 31, 2022, respectively. The increase in non-interest expense was primarily due to increases in salaries and employee benefits and data processing fees. See below for further discussion regarding variances related to net interest income, provision for credit losses, non-interest income, non-interest expense and income taxes.
The decrease in net earnings for the year ended December 31, 2023 as compared to the year ended December 31, 2022 was primarily due to a decrease in net interest income before provision for credit losses and an increase in non-interest expense, partially offset by an increase in non-interest income and a decrease in provision for credit losses-loans. The decrease in net interest income was due to an increase in cost of funds between the relevant periods, partially offset by an increase in average interest earning asset balances and an increase in the yield earned on interest earning assets. The increase in non-interest expense largely resulted from the Company's continued growth as well as rising costs of employees' salaries and benefits as a result of competition we experienced for human capital in our market areas.
The increase in Return on Average Assets (ROA) for the year ended December 31, 2024 when compared to December 31, 2023 as set forth in the table above was primarily attributable to an increase in net interest income and an increase in brokerage income, partially off-set by increases in salaries and employee benefits, data processing costs, an increase in the loss on sale of securities, an increase in provision for credit losses, and an increase in average assets.
The decrease in ROA for the year ended December 31, 2023 when compared to December 31, 2022 as set forth in the table above was primarily attributable to net interest margin compression, an increase in salaries and employee benefits, and an increase in FDIC insurance and data processing costs; partially offset by a decrease in the loss on sale of securities, an increase in service charges on deposit accounts, and a decrease in the provision for credit losses.
On November 12, 2024, Wilson Bank entered in a purchase and assumption agreement pursuant to which it has agreed to acquire certain assets, including certain loans, and assume certain liabilities, including certain deposits, of a branch office in Cookeville, Tennessee that is currently operated by another bank. Total assets to be acquired are estimated to be approximately $17 million as of the date hereof, while total deposits and other liabilities to be assumed are estimated to be approximately $30 million as of the date hereof. The Company expects the transaction to close in the first half of 2025. The acquisition is not expected to significantly impact the Bank's operations.
Subsequent to December 31, 2024, Wilson Bank committed to expand the Chattanooga loan production office to a full service branch. As a part of this expansion the Bank entered into a lease for the location for the new full service branch and is currently remodeling the space. The costs associated with this expansion, including construction, equipment and lease expenses, are not expected to be significant.
Net Interest Income
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. An 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 21% for 2024, 2023 and 2022.
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.
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Dollars In Thousands
2024/2023 Change
Average
Rates/
Income/
Average
Rates/
Income/
Due to
Due to
Percent
Balance
Yields
Expense
Balance
Yields
Expense
Volume
Rate
Total
Change
Loans, net of unearned interest (1) (2)
$
3,797,527
6.66
%
250,273
$
3,398,070
5.93
%
198,739
$
25,085
26,449
51,534
Investment securities-taxable
780,122
2.76
21,569
731,172
2.41
17,597
1,232
2,740
3,972
Investment securities-tax exempt
56,664
2.63
1,488
66,600
2.36
1,574
(250
)
(86
)
Taxable equivalent adjustment (3)
-
0.70
-
0.63
(66
)
(22
)
Total tax-exempt investment securities
56,664
3.32
1,884
66,600
2.99
1,992
(316
)
(108
)
Total investment securities
836,786
2.80
23,453
797,772
2.46
19,589
2,948
3,864
Loans held for sale
3,000
6.30
4,637
5.26
(97
)
(55
)
Federal funds sold
9,686
5.30
8,157
5.16
Interest bearing deposits
203,372
4.80
9,753
92,655
3.99
3,697
5,181
6,056
Restricted equity securities
3,739
8.85
3,551
8.76
Total earning assets
4,854,110
5.92
284,512
4,304,842
5.24
223,001
31,183
30,328
61,511
27.58
%
Cash and due from banks
25,789
25,066
Allowance for credit losses - loans
(45,523
)
(42,214
)
Bank premises and equipment
62,044
62,013
Other assets
163,947
167,990
Total assets
$
5,060,367
$
4,517,697
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Dollars In Thousands
2024/2023 Change
Average
Rates/
Income/
Average
Rates/
Income/
Due to
Due to
Percent
Balance
Yields
Expense
Balance
Yields
Expense
Volume
Rate
Total
Change
Deposits:
Negotiable order of withdrawal accounts
$
927,902
0.86
%
8,014
$
976,154
0.60
%
5,847
$
(302
)
2,469
2,167
Money market demand accounts
1,237,236
2.79
34,529
1,123,482
2.03
22,769
2,489
9,271
11,760
Time deposits
1,671,006
4.70
78,491
1,264,602
3.98
50,341
18,045
10,105
28,150
Other savings deposits
329,283
1.73
5,709
322,458
1.43
4,625
1,084
Total interest-bearing deposits
4,165,427
3.04
126,743
3,686,696
2.27
83,582
20,332
22,829
43,161
Federal Home Loan Bank advances
-
-
-
3.05
(1
)
(1
)
(2
)
Fed funds purchased
6.29
4.48
(30
)
(23
)
Finance leases
2,236
2.91
2,266
3.14
(1
)
(5
)
(6
)
Total interest-bearing liabilities
4,167,676
3.04
126,809
3,689,566
2.27
83,679
20,300
22,830
43,130
51.54
%
Demand deposits
391,942
399,683
Other liabilities
45,283
35,982
Shareholders’ equity
455,466
392,466
Total liabilities and shareholders’ equity
$
5,060,367
$
4,517,697
Net interest income
$
157,703
$
139,322
$
10,883
$
7,498
$
18,381
13.19
%
Net interest margin (4)
3.30
%
3.30
%
Net interest spread (5)
2.88
%
2.97
%
(1)Yields on loans and total earning assets include the impact of State income tax credits related to incentive loans at below market rates and tax exempt loans to municipalities of $2.7 million for the years ended December 31, 2024 and 2023.
(2)Loan fees of $15.2 million are included in interest income in 2024. Loan fees of $12.0 million are included in interest income in 2023.
(3)The tax equivalent adjustments have been computed using a 21% Federal tax rate.
(4)Net interest income on a tax equivalent basis divided by average interest-earning assets.
(5)Average interest rate on interest-earning assets less average interest rate on interest-bearing liabilities.
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Dollars In Thousands
2023/2022 Change
Average
Rates/
Income/
Average
Rates/
Income/
Due to
Due to
Percent
Balance
Yields
Expense
Balance
Yields
Expense
Volume
Rate
Total
Change
Loans, net of unearned interest (1) (2)
$
3,398,070
5.93
%
198,739
$
2,796,301
5.05
%
138,161
$
33,519
27,059
60,578
Investment securities-taxable
731,172
2.41
17,597
814,716
1.95
15,902
(1,747
)
3,442
1,695
Investment securities-tax exempt
66,600
2.36
1,574
72,724
1.91
1,392
(124
)
Taxable equivalent adjustment (3)
-
0.63
-
0.51
(33
)
Total tax-exempt investment securities
66,600
2.99
1,992
72,724
2.42
1,762
(157
)
Total investment securities
797,772
2.46
19,589
887,440
1.99
17,664
(1,904
)
3,829
1,925
Loans held for sale
4,637
5.26
7,131
3.70
(110
)
(20
)
Federal funds sold
8,157
5.16
15,486
0.72
(76
)
Interest bearing deposits
92,655
3.99
3,697
204,548
0.74
1,522
(1,238
)
3,413
2,175
Restricted equity securities
3,551
8.76
4,768
3.94
(58
)
Total earning assets
4,304,842
5.24
223,001
3,915,674
4.11
157,910
30,133
34,958
65,091
41.22
%
Cash and due from banks
25,066
24,087
Allowance for credit losses - loans
(42,214
)
(36,444
)
Bank premises and equipment
62,013
61,807
Other assets
167,990
142,614
Total assets
$
4,517,697
$
4,107,738
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Dollars In Thousands
2023/2022 Change
Average
Rates/
Income/
Average
Rates/
Income/
Due to
Due to
Percent
Balance
Yields
Expense
Balance
Yields
Expense
Volume
Rate
Total
Change
Deposits:
Negotiable order of withdrawal accounts
$
976,154
0.60
%
5,847
$
1,083,028
0.24
%
2,546
$
(274
)
3,575
3,301
Money market demand accounts
1,123,482
2.03
22,769
1,250,916
0.47
5,905
(661
)
17,524
16,863
Time deposits
1,264,602
3.98
50,341
601,100
1.08
6,486
12,762
31,094
43,856
Other savings deposits
322,458
1.43
4,625
332,918
0.34
1,116
(36
)
3,545
3,509
Total interest-bearing deposits
3,686,696
2.27
83,582
3,267,962
0.49
16,053
11,791
55,738
67,529
Federal Home Loan Bank advances
3.05
-
-
-
-
Fed funds purchased
4.48
5.47
(3
)
Finance leases
2,266
3.14
1,928
3.43
(6
)
Total interest-bearing liabilities
3,689,566
2.27
83,679
3,270,146
0.49
16,133
11,817
55,729
67,546
418.68
%
Demand deposits
399,683
434,443
Other liabilities
35,982
33,835
Shareholders’ equity
392,466
369,314
Total liabilities and shareholders’ equity
$
4,517,697
$
4,107,738
Net interest income
$
139,322
$
141,777
$
18,316
$
(20,771
)
$
(2,455
)
(1.73
%)
Net interest margin (4)
3.30
%
3.70
%
Net interest spread (5)
2.97
%
3.62
%
(1)Yields on loans and total earning assets include the impact of State income tax credits related to incentive loans at below market rates and tax exempt loans to municipalities of $2.7 million and $3.0 million for the years ended December 31, 2023 and 2022, respectively.
(2)Loan fees of $12.0 million are included in interest income in 2023. Loan fees of $12.9 million are included in interest income in 2022, inclusive of $139,000 in SBA fees related to PPP loans.
(3)The tax equivalent adjustments have been computed using a 21% Federal tax rate.
(4)Net interest income on a tax equivalent basis divided by average interest-earning assets.
(5)Average interest rate on interest-earning assets less average interest rate on interest-bearing liabilities.
The components of our loan yield, a key driver to our net interest margin for the years ended December 31, 2024, 2023 and 2022 were as follows:
December 31, 2024
December 31, 2023
December 31, 2022
Interest Income
Average Yield
Interest Income
Average Yield
Interest Income
Average Yield
Loan yield components:
Contractual interest rates
235,056
6.19
%
186,754
5.50
%
125,281
4.48
%
Origination and other fee income
15,217
0.40
%
11,985
0.35
%
12,741
0.46
%
PPP loan fee income
-
-
%
-
-
%
0.00
%
Loan tax credits and tax-exempt loan interest
2,720
0.07
%
2,677
0.08
%
2,953
0.11
%
Total
$
252,993
6.66
%
$
201,416
5.93
%
$
141,114
5.05
%
Net interest income represents the amount by which interest earned on various earning assets exceeds interest paid on deposits and other interest-bearing liabilities and is the most significant component of the Company’s earnings. Total interest income in 2024 was $284,116,000, up 27.64% when compared with $222,583,000 in 2023, which was up 41.29% when compared to $157,540,000 in 2022, in each case excluding tax exempt adjustments relating to tax exempt securities and loans. The increase in total interest income in 2024 when compared to 2023 was primarily attributable to an increase in interest earned on loans, an increase in interest and dividends earned on securities, and an increase in interest earned on interest bearing deposits. The increase in interest earned on loans resulted from an overall increase in average loan balances and an increase in the average yield earned on loans as new loans were originated at higher contractual interest rates and a portion of the Bank's variable loan portfolio repriced to current market rates. Approximately 84% of the
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
loans in our loan portfolio are variable rate loans, primarily indexed to the Federal Reserve prime rate. Fees earned on loans totaled $15,217,000, $11,985,000 and $12,880,000 for the years ended 2024, 2023 and 2022, respectively. The increase in fees earned on loans for the year ended 2024 when compared to the year ended 2023 was attributable to an increase in the volume of new loan originations. The total amount of state income tax credits and tax-exempt loan interest included in our loan yields were $2,720,000, $2,677,000 and $2,953,000 for the years ended December 31, 2024, 2023 and 2022, respectively. The increase in interest and dividends earned on securities in 2024 when compared to 2023 resulted from higher yields earned on the securities purchased in December 2023 and throughout 2024 as management invested liquid funds into the securities portfolio, as well as management's decision to restructure a portion of the securities portfolio and invest the proceeds in higher yielding securities in 2024. The increase in interest earned on interest bearing deposits over the same period resulted from an increase in average balances and the yield earned as a result of the Federal Reserve raising rates throughout 2023.
The ratio of average earning assets to total average assets was 95.9%, 95.3% and 95.3% for each of the years ended December 31, 2024, 2023 and 2022, respectively. Average earning assets increased $549,268,000 from $4,304,842,000 at December 31, 2023 to $4,854,110,000 at December 31, 2024. For the year ended December 31, 2022, average earning assets were $3,915,674,000. The average rate earned on earning assets for 2024 was 5.92%, compared with 5.24% in 2023 and 4.11% in 2022. The increase in average earning assets was largely due to an increase in the average balance of loans due to loan growth, an increase in the average balance of interest bearing deposits and an increase in the average balance of securities. The increase in the average rate earned on earning assets is primarily due to an increase in the average yield earned on loans as new loans were originated at higher contractual interest rates and a portion of the Bank's variable loan portfolio repriced to current market rates as mentioned previously.
Total interest expense for 2024 was $126,809,000, an increase of $43,130,000, or 51.54%, compared to total interest expense of $83,679,000 in 2023. For 2022, total interest expense totaled $16,133,000. Average interest-bearing deposits increased to $4,165,427,000 for 2024 compared to $3,686,696,000 for 2023. The average rate paid on interest-bearing deposits was 3.04% for 2024 compared to 2.27% for 2023. The increase in total interest expense in 2024 resulted from an increase in the volume and rate paid on average interest bearing deposits. Competitive pressures in the elevated short-term interest rate environment required the Bank to raise, and then subsequently maintain rates paid on deposits at higher levels while the Bank's customers shifting deposits from lower rate earning or non-interest bearing accounts to higher rate earning accounts and the increase in Certificate of Deposit Account Registry Service and Insured Cash Sweep products also negatively impacted interest expense. As competitive pressures began to ease in the second half of 2024 and the 100 basis points in rate cuts by the Federal Reserve took effect, we began lowering interest rates on some of our deposit products. However, if the competitive pressures begin to rise once again, the Federal Reserve does not cut the federal funds rate any further or loan growth outpaces deposit growth, the Bank may have to once again raise the rates it pays on deposits. We expect interest expense to continue to increase due to an increase in overall deposit balances.
Net interest income for 2024 totaled $157,307,000 as compared to $138,904,000 and $141,407,000 in 2023 and 2022, respectively. The net interest spread, defined as the effective yield on earning assets less the effective cost of deposits and borrowed funds (calculated on a fully taxable equivalent basis), decreased to 2.88% in 2024 from 2.97% in 2023. The net interest spread was 3.62% in 2022. Net interest margin did not change and was 3.30% in 2024 and 2023. The net interest margin was 3.70% in 2022. Net interest margin remained the same in 2024 as it was in 2023 as a result of the growth in net interest income and the level of average earning assets off-setting the increases in cost of funds and the level of our average interest bearing liabilities. Changes in interest rates paid on products such as interest checking, savings, and money market accounts will generally increase or decrease in a manner that is consistent with changes in the short-term environment, but those rates are also impacted by competitive market conditions.
The direction and speed with which short-term interest rates move has an impact on our net interest income. The Federal Reserve influences the general market rates of interest, including the deposit and loan rates offered by many financial institutions. Our loan portfolio is significantly affected by changes in the prime interest rate. The prime interest rate decreased by 100 basis points from September 18, 2024 through December 31, 2024 as the Federal Reserve cut the target rate for the federal funds rate by 100 basis points. The Company believes that short-term interest rates will remain at or near their current levels throughout 2025, and in such rate environment, expansion of the Company's net interest margin will be dependent upon, in part, whether the Company is forced to maintain deposit rates at their current levels or further increase them for the reasons noted above. However, if short-term interest rates decline further the Company's net interest margin and earnings could be negatively impacted if the yields on loans decrease faster than the Company is able to lower deposit rates, including as a result of loan growth outpacing our ability to add lower cost core deposits or competitive pressures in our markets limiting our ability to reduce the rates we pay on deposits, particularly given that 84% of the loans in our loan portfolio are variable rate loans. Alternatively, if the Company is able to reprice its deposits more quickly than it reprices the rates it earns on loans in such a falling rate environment, the Company expects its net interest margin would expand.
Provision for Credit Losses
On January 1, 2022, we adopted FASB ASU 2016-13, which introduces the current expected credit losses (CECL) methodology and requires us to estimate all expected credit losses over the remaining life of our loan portfolio. The provision for credit losses represents a charge to earnings necessary to establish an allowance for credit losses that, in management's evaluation is adequate to provide coverage
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
for all expected credit losses. The determination of the amount of the allowance is complex and involves a high degree of judgment and subjectivity. Refer to Note 1, "Summary of Significant Accounting Policies" in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on 10-K for a detailed discussion regarding ACL methodology.
The provision for credit losses-loans in 2024, 2023 and 2022 was $5,192,000, $6,300,000 and $8,656,000, respectively. The benefit for the allowance for credit losses on off-balance sheet exposures in 2024, 2023 and 2022 was $592,000, $2,989,000 and $1,014,000, respectively.
The decrease in the provision for credit losses-loans for the year ended December 31, 2024 when compared to the year ended December 31, 2023 was primarily attributable to an improvement in the macroeconomic forecast in our CECL modeling despite the increase in the volume of loans originated during the period. The decrease in the provision for credit losses-loans for the year ended December 31, 2023 when compared to the year ended December 31, 2022 was primarily attributable to a decrease in the volume of loans originated during the period, partially offset by the macroeconomic forecast in our CECL model reflecting the potential for a recession.
As discussed below under Financial Condition-Loans, loan growth was higher for the twelve months ended December 31, 2024 compared to the same period in 2023. Gross loan growth totaled $496,992,000, $440,839,000 and $671,824,000 for the years ended December 31, 2024, 2023 and 2022, respectively.
For the year ended December 31, 2024, an increase in off-balance sheet credit exposures was more than offset by an increase in our unconditionally cancellable commitments as a percentage of our off-balance sheet commitments, which are excluded from the calculation of the allowance of credit losses on off-balance sheet credit exposures under ASC 326, resulting in a benefit for the year.
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following detail provides a breakdown of the provision for credit loss-loans expense and net (charge-offs) recoveries at and for the twelve months ended December 31, 2024, 2023 and 2022:
In Thousands, Except Percentages
Provision for Credit Loss - Loans Expense (Benefit)
Net (Charge-Offs) Recoveries
Average Loans
Ratio of Net (Charge-offs) Recoveries to Average Loans
December 31, 2024
Residential 1-4 family real estate
$
$
1,030,428
-
%
Commercial and multi-family real estate
2,781
-
1,406,746
-
Construction, land development and farmland
907,036
-
Commercial, industrial and agricultural
(20
)
134,036
(0.01
)
1-4 family equity lines of credit
-
215,603
-
Consumer and other
(558
)
103,678
(0.54
)
Total
$
5,192
$
(543
)
$
3,797,527
(0.01
)%
December 31, 2023
Residential 1-4 family real estate
$
1,435
$
$
909,742
-
%
Commercial and multi-family real estate
2,123
-
1,192,260
-
Construction, land development and farmland
893,030
-
Commercial, industrial and agricultural
(29
)
126,499
(0.02
)
1-4 family equity lines of credit
-
177,398
-
Consumer and other
1,276
(1,276
)
99,141
(1.29
)
Total
$
6,300
$
(1,265
)
$
3,398,070
(0.04
)%
December 31, 2022
Residential 1-4 family real estate
$
1,353
$
$
762,580
0.01
%
Commercial and multi-family real estate
1,886
-
974,101
-
Construction, land development and farmland
3,795
736,728
-
Commercial, industrial and agricultural
(117
)
119,855
0.01
1-4 family equity lines of credit
-
120,104
-
Consumer and other
1,343
(1,044
)
82,933
(1.26
)
Total
$
8,656
$
(911
)
$
2,796,301
(0.03
)%
Following our adoption of CECL, the provision for credit losses - loans charged to operating expense requires us to estimate all expected credit losses over the remaining life of our loan portfolio. Other factors which, in management’s judgment, deserve current recognition in estimating expected credit losses - loans include growth and composition of the loan portfolio, review of specific problem loans, the relationship of the allowance for credit losses - loans to outstanding loans, relevant information that may affect our borrowers' ability to repay, the estimated value of any underlying collateral and current economic conditions that may affect our borrowers' ability to pay.
There was no provision for credit losses on available-for-sale securities for the twelve months ended December 31, 2024, 2023, or 2022.
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Non-Interest Income
The Company's non-interest income is composed of several components, some of which vary significantly between periods. Service charges on deposit accounts and other non-interest income generally reflect the Company’s growth, while fees for origination of mortgage loans and brokerage fees and commissions will often reflect home mortgage market and stock market conditions and fluctuate more widely from period to period.
The following is a summary of our non-interest income for the years ended December 31, 2024, 2023 and 2022 (in thousands):
Twelve Months Ended December 31,
Twelve Months Ended December 31,
$ Increase (Decrease)
% Increase (Decrease)
$ Increase (Decrease)
% Increase (Decrease)
Service charges on deposits
$
8,198
$
7,890
$
3.90
$
7,890
$
7,382
$
6.88
%
Brokerage income
8,562
7,184
1,378
19.18
7,184
6,929
3.68
Debit and credit card interchange income, net
8,627
8,490
1.61
8,490
8,416
0.88
Other fees and commissions
1,590
1,408
12.93
1,408
1,653
(245
)
(14.82
)
BOLI and annuity earnings
1,817
1,667
9.00
1,667
1,346
23.85
Loss on sale of securities, net
(2,742
)
(1,009
)
(1,733
)
(171.75
)
(1,009
)
(1,620
)
37.72
Fees and gains on sales of mortgage loans
3,068
2,635
16.43
2,635
2,973
(338
)
(11.37
)
Mortgage servicing income (loss), net
(1
)
(10
)
(111.11
)
(28
)
132.14
Gain (loss) on the sale of fixed assets, net
(303
)
(55
)
(248
)
(450.91
)
(55
)
(346
)
(118.90
)
Gain (loss) on sale of other assets, net
(8
)
(10
)
20.00
(10
)
(18
)
(225.00
)
Other income (loss)
82.50
(69
)
215.94
Total non-interest income
$
28,954
$
28,289
$
2.35
%
$
28,289
$
27,281
$
1,008
3.69
%
2024 v. 2023
The increase in non-interest income for the year ended December 31, 2024 when compared to the year ended December 31, 2023 is primarily attributable to increases in brokerage income, service charges on deposits, other fees and commissions, and fees and gains on sales of mortgage loans, partially offset by an increase in the loss on sale of securities and an increase in the loss on sale of fixed assets.
The increase in brokerage income is primarily due to multiple client acquisitions resulting in an increase of overall market share, the completion of estate planning and corporate benefit cases, and the overall positive performance of financial markets.
The increase in service charges on deposits was due to an increase in overdraft fees as a result of an increase in transaction volume and an increase in the number of business deposit customers utilizing treasury management services.
The increase in other fees and commissions is primarily due to an increase in fees related to safe deposit box rentals and cashier checks, as well as an increase in rental income. Beginning in November 2023, the Company entered into a lease agreement with a third party for use of the Company's unoccupied office building.
The increase in fees and gains on sale of mortgage loans was due to the mortgage interest rate environment positively impacting the fair value of our hedging instruments, while the mortgage interest rate environment experienced in 2023 negatively impacted the fair value of our interest hedging instruments.
The loss on sale of securities for 2024 was due to management's decision in the second half of 2024 to restructure a portion of the securities portfolio in multiple transactions that resulted in the sale of securities in a loss position in an attempt to improve the Bank's positioning relative to interest rate risk, including the sale of approximately $86.5 million of available-for-sale securities that resulted in a net loss of $1.4 million in the third quarter of 2024.
The increased loss on sale of fixed assets in 2024 was primarily due to write-offs associated with the closure of a leased branch location that we closed on January 13, 2024 and the write-off of fixed assets that are no longer in use. The loss on sale of fixed assets in 2023 was primarily due to the sale of a company vehicle.
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
2023 v. 2022
The increase in non-interest income for the year ended December 31, 2023 when compared to the year ended December 31, 2022 was primarily attributable to increases in service charges on deposits, brokerage income, BOLI and annuity earnings, and a decrease in the realized loss on the sale of securities, partially offset by a decrease in fees and gains on sale of mortgage loans and a decrease in the gain on the sale of fixed assets.
The increase in service charges on deposits was primarily due to an increase in non-sufficient funds due to an increase in the number of customers and the more challenging economic environment in 2023.
The increase in brokerage income was primarily due to a strong fourth quarter of 2023, driven by multiple client acquisitions and an increase of overall market share in our market areas as well as the positive performance of financial markets during such quarter.
The increase in BOLI and annuity earnings was primarily attributable to an increase in rates in the market.
The loss on sale of securities for 2023 and 2022 was due to the Company selling securities in order to restructure the securities portfolio into higher yielding securities offsetting securities pricing in future periods. In 2023, the Company was able to take advantage of the improvement in underlying market conditions to limit the amount of realized losses.
The decrease in fees and gains on sale of mortgage loans was due to the higher interest rate environment which contributed to weakened demand for purchase money mortgage loans and refinancing transactions. The volume of mortgage loans originated for 2023 was $73,984,000 compared to $106,601,000 for 2022.
The loss on sale of fixed assets in 2023 is primarily due to the sale of a company vehicle. The gain on sale of fixed assets in 2022 was attributable to the sale of a lot which was originally purchased for a future branch location.
Non-Interest Expenses
Non-interest expenses consist primarily of employee costs, FDIC premiums, occupancy expenses, furniture and equipment expenses, advertising and public relations expenses, data processing expenses, directors’ fees, audit, legal and consulting fees, and other operating expenses.
The following is a summary of the Company's non-interest expense for the years ended December 31, 2024, 2023 and 2022 (in thousands):
Twelve Months Ended December 31,
Twelve Months Ended December 31,
$ Increase (Decrease)
% Increase (Decrease)
$ Increase (Decrease)
% Increase (Decrease)
Employee salaries and benefits
$
67,342
$
59,501
$
7,841
13.18
%
$
59,501
$
56,707
$
2,794
4.93
%
Equity-based compensation
1,567
1,528
2.55
1,528
1,864
(336
)
(18.03
)
Occupancy expenses
5,733
6,532
(799
)
(12.23
)
6,532
5,563
17.42
Furniture and equipment expenses
3,038
3,225
(187
)
(5.80
)
3,225
3,400
(175
)
(5.15
)
Data processing expenses
9,477
8,797
7.73
8,797
7,337
1,460
19.90
Advertising & public relations expenses
3,512
3,714
(202
)
(5.44
)
3,714
3,455
7.50
Accounting, legal & consulting expenses
1,550
1,789
(239
)
(13.36
)
1,789
1,409
26.97
FDIC insurance
3,129
3,120
0.29
3,120
1,527
1,593
104.32
Directors’ fees
14.45
9.69
Other operating expenses
12,257
12,032
1.87
12,032
11,058
8.81
Total non-interest expense
$
108,421
$
100,951
$
7,470
7.40
%
$
100,951
$
92,970
$
7,981
8.58
%
2024 v. 2023
The increase in non-interest expenses for the year ended December 31, 2024 when compared to the year ended December 31, 2023 was primarily attributable to an increase in salaries and employee benefits, data processing expenses, and other operating expenses, partially offset by a decrease in occupancy expenses, furniture and equipment expenses, advertising & public relations expenses, and accounting, legal and consulting expenses.
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Employee salaries and benefits increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in the number of employees necessary to support the Company’s growth in operations, an increase in incentives and commissions paid due to the increase in loan volume and an increase in clients and production growth within the investment department.
Data processing expense increased principally due to implementation of a small business online solution and an increase in the overall number of customers using digital services. The Company anticipates that data processing expenses will continue to increase as the Company's operations grow, the demand for digital products and services from customers increases, and the cyber threat environment grows.
The increase in other operating expenses was primarily due to costs associated with a new employee development program, including engagement activities, and mailing costs associated with account change notices. Also contributing to the increase was an increase in fees related to ICS and CDARS accounts as a result of an increase in these types of accounts.
The decrease in occupancy expense was primarily due to the closure of a leased branch office location that we closed on January 13, 2024.
The decrease in furniture and equipment expenses for the year ended December 31, 2024 was primarily due to a decrease in depreciation expense which resulted from the full depreciation of the equipment in the Company's operations building.
The decrease in advertising and public relations expenses was primarily due to the competitive rate environment experienced in 2023, which caused the Bank to increase marketing efforts focused on driving deposit growth in 2023.
The decrease in accounting, legal and consulting expenses was primarily associated with the timing and payment of invoices received at year-end.
The efficiency ratio is a common and comparable KPI used in the banking industry. The Company uses this metric to monitor how effective management is at using our internal resources. It is calculated by taking our non-interest expense divided by our net-interest income plus non-interest income. Our efficiency ratio for the years ended 2024, 2023 and 2022 was 58.21%, 60.38% and 55.11%, respectively. The improvement in the efficiency ratio in 2024 when compared to 2023 was due to the increases in net interest income and non-interest income outpacing the increase in non-interest expense.
The Company expects non-interest expense will continue to increase in 2025, including as a result of increased salary and benefits expense and increased occupancy costs associated with our continued growth.
2023 v. 2022
The increase in non-interest expenses for the year ended December 31, 2023 when compared to the year ended December 31, 2022 was primarily attributable to an increase in salaries and employee benefits, occupancy expenses, data processing expenses, FDIC insurance, other operating expenses, and advertising expenses.
Salaries and employee benefits increased for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to an increase in the number of employees necessary to support the Company’s growth in operations and branch count.
The increase in occupancy expense was primarily due to multiple branch renovations, repairs, ongoing branch maintenance, and costs associated with the termination of a lease associated with the branch closed in January 2024.
Data processing expenses increased due to an increase in computer maintenance, consumer and business online banking, and computer hardware/license expenses. The computer maintenance expenses increased as a result of, among other items, expenses associated with additional software applications and the number of open accounts. Enhanced business digital solutions, improved digital security for consumers, and an increase in the number of customers using digital services accounted for other increases.
FDIC assessment expense increased due to the Company's growth in 2022 as well as an increase in the assessment rate administered by the FDIC.
The increase in other operating expenses was primarily due to an increase in employee engagement and development, ATM servicing costs, and write-offs on customer deposit accounts resulting from fraudulent transactions.
The increase in advertising expenses was primarily attributable to an increase in customer acquisition costs, marketing expenses associated with the opening of two new branches, the advertising of new products, as well as an overall increase in the cost of marketing resources.
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Income Taxes
The Company’s income tax expense was $16,576,000 for 2024, an increase of $2,637,000 from $13,939,000 for 2023, which was a decrease of $1,117,000 from the 2022 total of $15,056,000. The percentage of income tax expense to earnings before taxes was 22.6% in 2024, 22.1% in 2023 and 22.1% in 2022. The increase in income tax expense in 2024 from 2023 was due to an increase in earnings before income taxes, and the decrease in 2023 from 2022 was due to a decrease in earnings before income taxes. Our effective tax rate represents our blended statutory federal and state rate of 26.135% affected by the impact of anticipated favorable permanent differences between our book and taxable income such as earnings on bank-owned life insurance, income earned on tax-exempt securities and loans, and certain federal and state tax credits.
Our income tax expense, deferred tax assets and liabilities reflect management’s best assessment of estimated future taxes to be paid. We are subject to income taxes at both the federal and state level. Significant judgments and estimates are required in determining the consolidated income tax expense.
Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In projecting future taxable income, we begin with historical results adjusted for changes in accounting policies and incorporate assumptions including the amount of future state and federal pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income. Changes in current tax laws and rates could also affect recorded deferred tax assets and liabilities in the future as was the case with the passage of the Tax Cuts and Jobs Act in 2017.
Financial Accounting Standards Board (“FASB”) ASC Topic 740, Income Taxes (“ASC 740”) provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. ASC Topic 740 also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
We recognize tax liabilities in accordance with ASC Topic 740, and we adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined.
Financial Condition
Balance Sheet Summary
The Company’s total assets increased in 2024 by $512,183,000, or 10.57%, to $5,358,659,000 at December 31, 2024, after increasing 13.09% in 2023 to $4,846,476,000 at December 31, 2023. Loans, net of allowance for credit losses, totaled $4,042,392,000 at December 31, 2024, a $491,717,000, or 13.85%, increase compared to December 31, 2023. In 2024, management targeted owner-occupied commercial real estate, residential real estate lending and small business lending as areas of focus. The increase in loans in 2024 resulted from the continued population growth and corporate relocations in the Bank's primary market areas, the continuing impact of opening of new branches, and increased marketing efforts. The Company continued to grow loans in 2024 at a rate similar to 2023. The Company expects to experience slower loan growth in 2025 as elevated interest rates are expected to slow loan demand, particularly if a recessionary economic environment develops. In addition, we expect to continue to moderate the extent of our lending in 2025 to ensure adequate liquidity. At year-end 2024, securities totaled $827,893,000, an increase of 2.07% from $811,081,000 at December 31, 2023, primarily due to the purchase of new securities, partially offset by the run-off of declining balance securities and the sale of securities. As a result of loan growth that outpaced deposit growth, interest bearing deposits at other financial institutions decreased by $2,430,000, to $211,271,000 at December 31, 2024. Deferred income taxes totaled $46,048,000 at December 31, 2024, a $575,000, or 1.26%, increase compared to December 31, 2023.
Total liabilities increased by $461,885,000, or 10.46%, to $4,878,956,000 at December 31, 2024 compared to $4,417,071,000 at December 31, 2023. This increase was composed primarily of the $462,928,000 increase in total deposits to $4,830,034,000, a 10.60% increase from December 31, 2023. The increase in total deposits since December 31, 2023 was primarily attributable to growth in market share, branching and concerted marketing efforts, including deposit promotions, to drive deposit growth which resulted in the opening of new deposit accounts. Accrued interest and other liabilities decreased to $48,922,000 from $49,965,000 at respective year ends 2024 and
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
2023. The decrease in accrued interest and other liabilities was due to a decrease in reserve for income taxes, a decrease in escrow payable, and a decrease in off-balance sheet commitments, partially offset by an increase in interest payable on deposits.
Shareholders’ equity increased $50,298,000, or 11.71%, in 2024, due to net earnings, the issuance of common stock pursuant to the Company’s Dividend Reinvestment Plan and the exercise of stock options. This increase in equity was partially offset by dividends paid on the Company’s common stock. A more detailed discussion of assets, liabilities and capital follows.
Loans
The following schedule details the loans and percentage of loans in each category of the Company at December 31, 2024 and 2023 (dollars in thousands):
December 31, 2024
December 31, 2023
AMOUNT
%
AMOUNT
%
Residential 1-4 family real estate
$
1,133,966
27.6
%
$
959,218
26.6
%
Commercial and multi-family real estate
1,544,340
37.7
1,313,284
36.4
Construction, land development and farmland
941,193
22.9
901,336
25.0
Commercial, industrial and agricultural
144,619
3.5
127,659
3.5
1-4 family equity lines of credit
235,240
5.7
202,731
5.6
Consumer and other
106,235
2.6
104,373
2.9
Total loans before net deferred loan fees
4,105,593
100.0
%
3,608,601
100.0
%
Net deferred loan fees
(13,704
)
(13,078
)
Total loans
4,091,889
3,595,523
Less: Allowance for credit losses
(49,497
)
(44,848
)
Net loans
$
4,042,392
$
3,550,675
Loans are the largest component of the Company’s assets and are its primary source of income. The Company’s loan portfolio, net of allowance for credit losses, increased 13.85% at year-end 2024 when compared to year-end 2023. Overall, the Bank's loan demand and related new loan production remained steady in 2024, with the portfolio growing at a similar rate as it did in 2023. The net loan growth from December 31, 2023 reflects increased marketing efforts focused on growing the portfolio, and continued population growth and corporate relocations in our primary market areas. The table above sets forth the loan categories and the percentage of such loans in the portfolio as of December 31, 2024 and 2023.
As represented in the above table, Wilson Bank experienced loan growth for the year ended December 31, 2024 in all loan categories. Residential 1-4 family real estate loans increased 18.2% in 2024 and comprised 27.6% of the total loan portfolio at December 31, 2024, compared to 26.6% at December 31, 2023. The increase in residential 1-4 family real estate loans is attributable to the Bank successfully growing its residential portfolio through enhanced marketing efforts directed at homebuilders in the Company's market areas, and the increase the Company experienced in the investor sector of 1-4 family. Commercial and multi-family real estate loans increased 17.6% in 2024 and comprised 37.7% of the total loan portfolio at December 31, 2024, compared to 36.4% at December 31, 2023. Construction, land development and farmland loans increased 4.4% in 2024 and comprised 22.9% of the total loan portfolio at December 31, 2024, compared to 25.0% at December 31, 2023. 1-4 family equity lines of credit loans increased 16.0% in 2024 and comprised 5.7% of the total loan portfolio at December 31, 2024, compared to 5.6% at December 31, 2023. The increase in commercial and multi-family real estate, construction, land development and farmland loans, and 1-4 family equity lines of credit is primarily attributable to continued economic growth and expansion in the Bank's primary market areas. As noted above, the Company expects loan growth to slightly slow in 2025 as a result of the elevated interest rate environment, particularly if a recessionary economic environment develops.
Because construction loans remain a meaningful portion of our portfolio, the Bank has implemented an additional layer of monitoring as it seeks to avoid advancing funds that exceed the present value of the collateral securing the loan. The responsibility for monitoring percentage of completion and distribution of funds tied to these completion percentages is now monitored and administered by a Credit Administration Department independent of the lending function. The Bank continues to seek to diversify its real estate portfolio as it seeks to lessen concentrations in any one type of loan.
Banking regulators define highly leveraged transactions to include leveraged buy-outs, acquisition loans and recapitalization loans of an existing business. Under the regulatory definition, at December 31, 2024, the Company had no highly leveraged transactions, and there
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
were no foreign loans outstanding during any of the reporting periods. As of December 31, 2024, the Company had not underwritten any loans in connection with capital leases.
The following table classifies the Company's fixed and variable rate loans at December 31, 2024 according to contractual maturities of: (1) one year or less, (2) after one year through five years, (3) after five years through fifteen years, and (4) after fifteen years (dollars in thousands):
December 31, 2024
One Year or Less
After One Year Through Five Years
After Five Years Through Fifteen Years
After Fifteen Years
Total
Residential 1-4 family real estate
$
51,742
$
13,860
$
128,274
$
940,090
$
1,133,966
Commercial and multi-family real estate
69,703
63,530
249,495
1,161,612
1,544,340
Construction, land development and farmland
286,791
190,232
134,367
329,803
941,193
Commercial, industrial and agricultural
17,859
49,250
45,535
31,975
144,619
1-4 family equity lines of credit
23,819
34,714
171,302
5,405
235,240
Consumer and other
19,170
55,937
7,240
23,888
106,235
Total
$
469,084
$
407,523
$
736,213
$
2,492,773
$
4,105,593
Loans with fixed interest rates:
Residential 1-4 family real estate
$
50,677
$
3,549
$
14,755
$
139,664
$
208,645
Commercial and multi-family real estate
44,278
23,241
16,056
4,548
88,123
Construction, land development and farmland
137,317
37,931
15,490
31,750
222,488
Commercial, industrial and agricultural
8,700
29,611
5,971
44,294
1-4 family equity lines of credit
2,058
-
2,976
Consumer and other
12,170
47,214
6,585
6,145
72,114
Total
$
255,200
$
142,449
$
58,872
$
182,119
$
638,640
Loans with variable interest rates:
Residential 1-4 family real estate
$
1,065
$
10,311
$
113,519
$
800,426
$
925,321
Commercial and multi-family real estate
25,425
40,289
233,439
1,157,064
1,456,217
Construction, land development and farmland
149,474
152,301
118,877
298,053
718,705
Commercial, industrial and agricultural
9,159
19,639
39,564
31,963
100,325
1-4 family equity lines of credit
21,761
33,811
171,287
5,405
232,264
Consumer and other
7,000
8,723
17,743
34,121
Total
$
213,884
$
265,074
$
677,341
$
2,310,654
$
3,466,953
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following table details selected information as to non-accrual loans of the Company at December 31, 2024, 2023 and 2022:
In Thousands, Except Percentages
December 31, 2024
December 31, 2023
December 31, 2022
Non-Accrual Loans
Non-Accrual Loans
Non-Accrual Loans
Total Loans
Amount
Percent of Loans in Category
Total Loans
Amount
Percent of Loans in Category
Total Loans
Amount
Percent of Loans in Category
Residential 1-4 family real estate
$
1,133,966
$
0.04
%
$
959,218
$
-
-
%
$
854,970
$
-
-
%
Commercial and multi-family real estate
1,544,340
3,616
0.23
1,313,284
-
-
1,064,297
-
-
Construction, land development and farmland
941,193
-
-
901,336
-
-
879,528
-
-
Commercial, industrial and agricultural
144,619
-
-
127,659
-
-
124,603
-
-
1-4 family equity lines of credit
235,240
0.32
202,731
-
-
151,032
-
-
Consumer and other
106,235
-
-
104,373
-
-
93,332
-
-
Total
$
4,105,593
$
4,818
$
3,608,601
$
-
$
3,167,762
$
-
Allowance for credit losses on loans
$
49,497
$
44,848
$
39,813
Ratio of non-accrual loans to total loans outstanding
0.12
%
-
%
-
%
Ratio of allowance for credit losses on loans to non-accrual loans
1,027.33
%
-
%
-
%
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 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 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 $4,818,000 at December 31, 2024. There were no non-accrual loans at December 31, 2023 or 2022. For the year ended December 31, 2024, the amount of interest income on non-accrual loans that would have been recognized if loans were on accruing status was insignificant.
At December 31, 2024, there were five outstanding loan modifications made to borrowers experiencing financial difficulty, with outstanding balances totaling $25,599,000, all of which were on accrual status. At December 31, 2023, there were four outstanding loan modifications made to borrowers experiencing financial difficulty, with outstanding balances totaling $3,446,000, all of which were on accrual status.
At December 31, 2024, and December 31, 2023, there was no other real estate owned outstanding.
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following table sets forth for the reported periods loans that were at least 30 days but less than 60 days past due, 60 days but less than 90 days past due and nonaccrual loans and those loans past due greater than 89 days:
(In thousands)
30-59 Days Past Due
60-89 Days Past Due
Nonaccrual and Greater Than 89 Days Past Due
Total Nonaccrual and Past Due
Current
Total Loans
Loans Greater Than 89 Days Past Due and Accruing Interest
December 31, 2024
Residential 1-4 family real estate
$
5,854
1,462
8,082
1,125,884
1,133,966
$
Commercial and multi-family real estate
-
3,616
3,618
1,540,722
1,544,340
-
Construction, land development and farmland
-
940,289
941,193
Commercial, industrial and agricultural
143,760
144,619
1-4 family equity lines of credit
2,381
232,859
235,240
Consumer and other
105,478
106,235
Total
$
8,308
2,744
5,549
16,601
4,088,992
4,105,593
$
December 31, 2023
Residential 1-4 family real estate
$
1,544
1,178
3,274
955,944
959,218
$
1,178
Commercial and multi-family real estate
5,846
-
-
5,846
1,307,438
1,313,284
-
Construction, land development and farmland
2,959
-
2,960
898,376
901,336
-
Commercial, industrial and agricultural
-
127,600
127,659
1-4 family equity lines of credit
201,845
202,731
Consumer and other
103,827
104,373
Total
$
11,322
1,409
13,571
3,595,030
3,608,601
$
1,409
Past due loans, which include nonaccrual loans and loans greater than 89 days past due, totaled $16,601,000 at December 31, 2024, an increase from $13,571,000 at December 31, 2023. The increase in nonaccrual and greater than 89 days past due loans during the year ended December 31, 2024 of $4,140,000, from $1,409,000 to $5,549,000, was due primarily to the addition of one large residential 1-4 family real estate loan relationship, one large 1-4 family equity line of credit loan relationship, and one large commercial and multi-family real estate relationship, all of which were on non-accruing status. The increase in 60-89 days past due loans during the year ended December 31, 2024 of $1,904,000 was primarily due to the addition of three commercial, industrial and agricultural loan relationships, two 1-4 family equity lines of credit loan relationships and three residential 1-4 family real estate loan relationships. Management believes that it is probable that it will incur losses on nonaccrual and greater than 89 days past due loans but believes that these losses should not exceed the amount in the allowance for credit losses already allocated to these loans, unless there is a severe deterioration of local real estate values.
The net non-performing asset ratio (NPA) is used as a measure of the overall quality of the Company's assets. Our NPA ratio is calculated by dividing the total of our loans greater than 89 days past due and accruing interest, non-accrual loans, and other real estate owned by our total assets outstanding. Our NPA ratios for the periods ended December 31, 2024 and December 31, 2023 were 0.10% and 0.03%, respectively. The increase in our NPA ratio was the result of increases in nonaccrual loans and loans greater than 89 days past due and accruing interest as described above.
Loans may be classified as collateral dependent when the current net worth and financial capacity of the borrower or of the collateral pledged, if any, is viewed as inadequate and it is probable that the Company will be unable to collect the scheduled payments of principal and interest due under the contractual terms of the loan agreement. Such loans generally have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt, and if such deficiencies are not corrected, there is a probability that the Company will sustain some loss. In such cases, interest income continues to accrue as long as the loan does not meet the Company’s criteria for nonaccrual status. Collateral dependent loans are measured at the fair value of the collateral less estimated selling costs. If the fair value of the collateral dependent loan less estimated selling costs is less than the recorded investment in the loan, the Company shall recognize impairment by creating a valuation allowance with a corresponding charge to the provision for credit losses or by adjusting an existing valuation allowance for the collateral dependent loan with a corresponding charge or credit to the provision for credit losses.
At December 31, 2024, the Company had a recorded investment in collateral dependent loans totaling $37,453,000, an increase from a recorded investment in collateral dependent loans totaling $4,838,000 at December 31, 2023. The increase during the year ended
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
December 31, 2024 as compared to December 31, 2023 is primarily due to the deterioration in payment performance and downgrade of a few large borrowers for which we believe the majority of the loans to be well-collateralized. Management has developed and continues to execute performance improvement plans on these relationships and is working to mitigate the credit risk of the loans in order to reduce our potential exposure to credit losses. As of December 31, 2024 a $408,000 valuation allowance was recorded on collateral dependent loans due to one loan relationship. As of December 31, 2023, no valuation allowance was recorded on collateral dependent loans. The allowance for credit losses for loans related to collateral dependent loans was measured based upon the estimated fair value of related collateral less estimated selling costs.
The internally classified loans as a percentage of the allowance for credit losses were 97.0% and 13.2%, respectively, at December 31, 2024 and 2023. At December 31, 2024, loans totaling $48,005,000 were included in the Company’s internal classified loan list compared to $5,900,000 at December 31, 2023. The increase in internally classified loans was due to the downgrade of a few large borrowers mentioned above. Of the internally classified loans, $47,215,000 are real estate secured and $790,000 are secured by various other types of collateral. 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. Management continues to develop and execute performance improvement plans with these select few borrowers and continues to believe these loans are well collateralized. If economic uncertainty remains in the market, or management's performance improvement plan proves to be unsuccessful, our classified loan balances could increase further.
The allowance for credit losses is discussed under “Critical Accounting Estimates”, “Provision for Credit Losses”, and "Summary of Significant Accounting Policies." The Company maintains its allowance for credit losses at an amount believed by management to be adequate to absorb expected credit losses inherent in the loan portfolio as of December 31, 2024.
Substantially all of the Company’s loans are from Wilson, DeKalb, Smith, Putnam, Trousdale, Davidson, Rutherford, Sumner, Williamson, Hamilton and adjacent counties. Although the majority of the Company's loans are in the real estate market, the Company seeks to exercise prudent risk management in lending through the diversification by loan category within the real estate segment, including residential 1-4 family real estate, commercial and multi-family real estate, construction, land development and farmland, and 1-4 family equity lines of credit.
The Company will target owner-occupied commercial real estate, residential real estate lending and consumer lending as areas of emphasis in 2025. At December 31, 2024, the Company’s total loans equaled 84.7% of its total deposits as compared to 82.3% at December 31, 2023. The Company may sell portions of the loans it generates to other financial institutions for cash in order to improve the liquidity of the Company’s loan portfolio or extend its lending capacity.
Allowance for Credit Losses
On January 1, 2022, we adopted FASB ASU 2016-13, which introduces the current expected credit losses (CECL) methodology and requires us to estimate all expected credit losses over the remaining life of our financial instrument portfolios. The provision for credit losses represents a charge to earnings necessary to establish an allowance for credit losses that, in management’s evaluation, is adequate to provide coverage for all expected credit losses.
The allowance for credit losses for loans represents the portion of the loan's amortized cost basis that we do not expect to collect due to credit losses over the loan's life, considering past events, current conditions, and reasonable and supportable forecasts of future economic conditions considering macroeconomic forecasts. Loan losses are charged against the allowance when we believe the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for credit losses for loans is based on the loan's amortized cost basis, excluding accrued interest receivable, as we promptly charge off accrued interest receivable determined to be uncollectible. We determine the appropriateness of the allowance through quarterly discounted cash flow modeling of the loan portfolio which considers lending-related commitments and other relevant factors, including macroeconomic forecasts and historical loss rates. In future quarters, we may update information and forecasts that may cause significant changes in the estimate in those future quarters.
Our allowance for credit losses for loans at December 31, 2024 reflects an amount deemed appropriate to adequately cover all expected future losses as of the date the allowance is determined based on our allowance for credit losses for loans assessment methodology. Provision for credit losses for loans in 2024 resulted in an increase of the allowance for credit losses for loans (net of charge-offs and recoveries) to $49,497,000 at December 31, 2024 from $44,848,000 at December 31, 2023 and $39,813,000 at December 31, 2022. The allowance for credit losses for loans increased 10.37% from December 31, 2023 to December 31, 2024 as compared to the 13.81% increase in total loans over the same period. The allowance for credit losses for loans was 1.21% of total loans outstanding at December 31, 2024 compared to 1.25% at December 31, 2023. The allowance for loan losses was 1.26% at December 31, 2022.
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following schedule provides an allocation of the year-end allowance for credit losses for loans by portfolio segment for the Company as of and for the fiscal years ended December 31, 2024 and 2023:
In Thousands, Except Percentages
Amount of Allowance Allocated
Percent of Loans in Each Category to Total Loans
Total Loans
Ratio of Allowance Allocated to Loans in Each Category
December 31, 2024
Residential 1-4 family real estate
$
9,708
27.6
%
$
1,133,966
0.86
%
Commercial and multi-family real estate
20,203
37.7
1,544,340
1.31
Construction, land development and farmland
14,663
22.9
941,193
1.56
Commercial, industrial and agricultural
1,702
3.5
144,619
1.18
1-4 family equity lines of credit
1,890
5.7
235,240
0.80
Consumer and other
1,331
2.6
106,235
1.25
Total
$
49,497
100.0
%
4,105,593
1.21
Net deferred loan fees
(13,704
)
$
4,091,889
1.21
%
December 31, 2023
Residential 1-4 family real estate
$
8,765
26.6
%
$
959,218
0.91
%
Commercial and multi-family real estate
17,422
36.4
1,313,284
1.33
Construction, land development and farmland
14,027
25.0
901,336
1.56
Commercial, industrial and agricultural
1,533
3.5
127,659
1.20
1-4 family equity lines of credit
1,809
5.6
202,731
0.89
Consumer and other
1,292
2.9
104,373
1.24
Total
$
44,848
100.0
%
3,608,601
1.24
Net deferred loan fees
(13,078
)
$
3,595,523
1.25
%
The allowance for credit losses for loans is an amount that management believes will be adequate to absorb expected losses on existing loans that may become uncollectible. The allowance for credit losses for loans as a percentage of total loans outstanding at December 31, 2024, net of deferred fees, decreased slightly from the year ended December 31, 2023. This decrease was mainly due to a more favorable macroeconomic forecast, which is discussed below in more detail, combined with portfolio composition changes towards loans with lower reserve rates.
We measure expected credit losses over the life of each loan utilizing two models. For residential 1-4 family, commercial and multi-family real estate, construction and land development, commercial and industrial, 1-4 family equity lines of credit, municipal, and certain other loan types, we use discounted cash flow models which measure probability of default and loss given default. For farmland, agricultural, credit cards, auto, and other consumer loans we use the remaining life method to estimate credit losses. The measurement of expected credit losses for loan segments utilizing discounted cash flow is impacted by certain macroeconomic variables. Models are adjusted to reflect the current impact of certain macroeconomic variables as well as their expected changes over a reasonable and supportable forecast period.
In estimating expected credit losses as of December 31, 2024, we utilized the Moody’s Analytics December 2024 Baseline Scenario (the “Baseline Scenario”) to forecast the macroeconomic variables used in our models. The Baseline Scenario was based on the review of a variety of forecasts of the U.S. economy. The Baseline Scenario projections through the end of the forecast period in the fourth quarter of 2026 included, (i) a U.S. Gross Domestic Product (“GDP”) annualized quarterly growth rate in the range of approximately 1.5% to 2.7%; (ii) a U.S. unemployment rate in the range of approximately 4.0% to 4.1%; and (iii) a Home Price Index annualized quarterly growth rate in the range of approximately 1.1% to 2.4%.
We adjust model results using qualitative factor ("Q-factor") adjustments. Q-Factor adjustments are based upon management's judgment and current assessment as to the impact of risks related to changes in lending policies and procedures; economic and business conditions; loan portfolio attributes and credit concentrations; and external factors, among other things, that are not already captured within the
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
modeling inputs, assumptions and other processes. Management assesses the potential impact of such items within a range of "major risk" to "improvement" and adjusts the modeled expected credit loss by an aggregate adjustment percentage based upon the assessment.
Our charge-off policy for collateral dependent loans is similar to our charge-off policy for all loans in that loans are charged-off in the month when a determination is made that the loan is uncollectible. Net charge-offs decreased to $543,000 in 2024 from net charge-offs of $1,265,000 in 2023 and net charge-offs of $911,000 in 2022. The ratio of net charge-offs to average total outstanding loans was 0.01% in 2024, 0.04% in 2023 and 0.03% in 2022. Overall, the Bank experienced minimal charge-offs during 2024. It is expected that charge-offs will be modest for 2025; however, a deterioration in local economic conditions may negatively impact charge-offs in the future.
We also maintain an allowance for credit losses on off-balance sheet exposures, which decreased $592,000 from $3,147,000 at December 31, 2023 to $2,555,000 at December 31, 2024 as a result of an increase in our unconditionally cancellable commitments as a percentage of our off-balance sheet commitments, which are excluded from the calculation of the allowance for credit losses on off-balance sheet credit exposure under ASC 326. Off-balance sheet exposures are recognized on the balance sheet within accrued interest and other liabilities.
The level of the allowance and the amount of the provision for credit losses involve evaluation of uncertainties and matters of judgment. The Company maintains an allowance for credit losses - loans which management believes is adequate to absorb losses in the loan portfolio. A formal calculation of the allowance for credit losses - loans is prepared quarterly by the Company's Chief Financial Officer and provided to the Board of Directors. The calculation includes an evaluation of historical default and loss experience, current and forecasted economic conditions, an evaluation of qualitative factors, industry and peer bank loan quality indicators and other factors. See the discussion above under “Application of Critical Accounting Policies and Accounting Estimates” for more information. Management believes the allowance for credit losses at December 31, 2024 to be adequate, but if forecasted economic conditions do not meet management’s current expectations, the allowance for credit losses may require an increase through additional provision for credit loss expense which would negatively impact earnings.
For a detailed discussion regarding our allowance for credit losses, see "Provision for Credit Losses" and Note 2 "Loans and Allowance for Credit Losses" elsewhere in this Annual Report on Form 10-K.
Securities
Securities increased 2.07% to $827,893,000 at December 31, 2024 from $811,081,000 at December 31, 2023, and comprised the second largest and other primary component of the Company’s earning assets. Securities increased due to the purchase of new securities, partially offset by run-off of our declining balance securities in 2024 and the sales of securities in connection with management's decision to restructure a portion of the portfolio as discussed above. The average yield, including tax equivalent adjustment, of the securities portfolio at December 31, 2024 was 2.50% with a weighted average life of 7.00 years, as compared to an average yield of 2.33% and a weighted average life of 8.25 years at December 31, 2023. The weighted average lives on mortgage-backed securities reflect the repayment rate used for book value calculations.
Certain debt securities that management has the positive intent and ability to hold to maturity are classified as "held-to-maturity" and recorded at amortized cost. Trading securities are recorded at fair value with changes in fair value included in earnings. Securities not classified as held to maturity or trading, including equity securities with readily determinable fair values, are classified as “available-for-sale” and recorded at fair value, with unrealized gains and losses on our available-for-sale securities excluded from earnings and reported in other comprehensive income. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.
Upon and subsequent to adoption of CECL, for available-for-sale debt securities in an unrealized loss position, we evaluate the securities at each measurement date to determine whether the decline in the fair value below the amortized cost basis is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized through the allowance for credit losses on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings via provision for credit loss. At December 31, 2024 and December 31, 2023, we determined that the decline we experienced in fair value of available-for-sale securities below the amortized cost basis of the securities was driven by changes in interest rates and not due to credit-related factors. Therefore, there was no provision for credit loss recognized during the twelve months ended December 31, 2024 with respect to our available-for-sale securities, nor was there an allowance for credit losses on available-for-sale securities.
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
No securities have been classified as trading securities or held-to-maturity at December 31, 2024, December 31, 2023, or December 31, 2022.
Investment securities at December 31, 2024 and December 31, 2023 consisted of the following:
December 31, 2024
Securities Available-For-Sale
(In Thousands)
Gross
Gross
Estimated
Amortized
Unrealized
Unrealized
Market
Cost
Gains
Losses
Value
U.S. Treasury and other U.S. government agencies
$
4,927
-
4,538
U.S. Government-sponsored enterprises (GSEs)
183,912
21,947
161,973
Mortgage-backed securities
520,729
66,588
454,196
Asset-backed securities
51,110
50,817
Corporate bonds
2,500
-
2,396
Obligations of states and political subdivisions
184,163
-
30,190
153,973
$
947,341
119,619
827,893
December 31, 2023
Securities Available-For-Sale
(In Thousands)
Gross
Gross
Estimated
Amortized
Unrealized
Unrealized
Market
Cost
Gains
Losses
Value
U.S. Treasury and other U.S. government agencies
$
4,901
-
4,429
U.S. Government-sponsored enterprises (GSEs)
167,738
-
23,570
144,168
Mortgage-backed securities
480,759
63,959
417,030
Asset-backed securities
51,183
1,403
49,973
Corporate bonds
2,500
-
2,423
Obligations of states and political subdivisions
223,358
30,697
193,058
$
930,439
120,178
811,081
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following table details the contractual maturities and weighted average yields of investment securities of the Company as of December 31, 2024. Actual maturities may differ from contractual maturities of mortgage and asset-backed securities because the mortgages or other assets underlying such 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, 2024:
December 31, 2024
Available-For-Sale Securities
Estimated Market Value
Weighted Average Yields
(In Thousands, Except Yields)
Mortgage and asset-backed securities
One year or less
$
0.88
%
After one year through five years
24,318
1.26
After five years through ten years
88,116
3.40
After ten years
391,587
2.77
Total Mortgage and asset backed securities
505,013
2.80
U.S. Treasury and other U.S. government agencies:
One year or less
-
-
After one year through five years
4,538
1.11
After five years through ten years
-
-
After ten years
-
-
Total U.S. Treasury and other U.S. government agencies:
4,538
1.11
U.S. Government-sponsored enterprises (GSEs):
One year or less
2,006
0.86
After one year through five years
60,356
1.04
After five years through ten years
86,477
2.20
After ten years
13,134
2.43
Total U.S. Government-sponsored enterprises (GSEs)
161,973
1.78
Obligations of states and political subdivisions*:
One year or less
-
-
After one year through five years
25,172
1.72
After five years through ten years
68,353
2.02
After ten years
60,448
2.85
Total obligations of states and political subdivisions
153,973
2.31
Corporate bonds:
One year or less
2,396
4.25
After one year through five years
-
-
After five years through ten years
-
-
After ten years
-
-
Total corporate bonds
2,396
4.25
Total available-for-sale securities
$
827,893
2.50
%
* Weighted average yield on tax-exempt obligations is stated on a tax-equivalent basis, assuming a weighted average Federal income tax rate of 21%.
We computed weighted average yields using coupon interest, adding discount accretion or subtracting premium amortization, as appropriate, on a ratable basis over the life of each security. We computed the weighted average yield for each maturity range using the fair value of each security in that range.
Premises and Equipment, net
Premises and equipment decreased $849,000, or 1.36%, from December 31, 2023 to December 31, 2024. The primary reason for the decrease was due to current year depreciation and amortization of $4,133,000 and write-offs due to the closure of a leased branch office
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
location, partially offset by the purchase of equipment and furniture and fixtures (primarily in connection with the remodeling of the Company's main office), and the remodeling of several branches.
The Company has entered into various operating and financing lease arrangements. Future undiscounted payments under such arrangements as of December 31, 2024 were as follows:
In Thousands
Operating
Finance
Less than 1 year
$
$
1-3 years
1,138
3-5 years
More than 5 years
3,424
Bank Owned Life Insurance
Bank owned life insurance increased $2,303,000, or 3.86%, from December 31, 2023 to December 31, 2024. This increase was due to the purchase of a policy totaling $515,000 and an increase in the overall cash surrender value of our existing policies of $1,788,000.
Deposits
The increases in assets in 2024 and 2023 were funded primarily by increases in deposits and the Company’s earnings. Total deposits, which are the principal source of funds for the Company, totaled $4,830,034,000 at December 31, 2024 compared to $4,367,106,000 at December 31, 2023, an increase of 10.60%. There were no brokered deposits at December 31, 2024, compared to $69,135,000 at December 31, 2023. The decrease in brokered deposits from December 31, 2023 to December 31, 2024 was the result of management's decision to not renew any brokered deposits when they matured, as the Company has been able to grow lower cost core deposits. The increase in total deposits since December 31, 2023 was primarily attributable to growth in market share and concerted marketing efforts to drive deposit growth, including a strategic focus on growing customers by utilizing deposit promotions, which resulted in the opening of new deposit accounts. The Company has targeted consumers, professionals, small businesses, and municipalities as its central clientele; therefore, deposit instruments in the form of demand deposits, savings accounts, money market demand accounts, certificates of deposits and individual retirement accounts are offered to customers. Management believes the markets in which it operates are attractive economic markets offering growth opportunities for the Company; however, the Company competes with several larger banks and community banks that have offices in these areas which may negatively impact market growth or maintenance of current market share. Even though the Company is in a very competitive market, though such competition lessened somewhat in 2024, management currently believes that its deposit market share can be maintained or expanded, though, as discussed below, such competition may, particularly if it reintensifies, force the Company to further increase the rates it pays on deposits or seek alternative funding sources as needed to support loan growth.
The $462,928,000, or 10.60%, growth in deposits in 2024 was due to a $236,187,000, or 15.84%, increase in certificates of deposits, a $169,019,000, or 14.61%, increase in money market accounts, a $33,489,000, or 3.58%, increase in negotiable order of withdrawal (NOW) accounts, a $23,593,000, or 7.37%, increase in savings accounts, and a $7,197,000, or 9.59%, increase in individual retirement accounts. This was partially offset by a $6,557,000, or 1.68%, decrease in demand deposit accounts. The increase in time deposits and money markets is due to the Bank increasing rates in the first half of 2024 and maintaining these elevated rates to remain competitive in our market areas and customers shifting to these products from lower earning and non-interest earning accounts to take advantage of higher rates. The increase in NOW accounts was primarily attributable to the Bank's strategic initiative to grow business deposits. The increase in savings accounts was primarily attributable to targeted marketing campaigns to acquire consumer savings deposits. The average rate paid on average total interest-bearing deposits was 3.04% for 2024 compared to 2.27% for 2023. The average rate paid in 2022 was 0.49%. As mentioned above, if the competitive pressures begin to rise once again, the Federal Reserve does not cut the federal funds rate any further or loan growth outpaces deposit growth, the Bank may have to once again raise deposit rates, or may be limited in its ability to lower deposit rates should short-term interest rates fall. If either of these scenarios were to happen, our net interest margin would experience compression and our results of operations would be negatively impacted.
As noted above, we raised rates on deposits to maintain liquidity levels and offer competitive rates in our markets. The ratio of average loans to average deposits was 83.3% in 2024, 83.2% in 2023, and 75.5% in 2022.
The average amounts and average interest rates for deposits for 2024 and 2023 are detailed in the following schedule:
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Average
Average
Balance
Balance
In
Average
In
Average
Thousands
Rate
Thousands
Rate
Non-interest bearing deposits
$
391,942
-
%
$
399,683
-
%
Interest-bearing deposits:
Negotiable order of withdrawal accounts
927,902
0.86
976,154
0.60
Money market demand accounts
1,237,236
2.79
1,123,482
2.03
Time deposits
1,671,006
4.70
1,264,602
3.98
Other savings
329,283
1.73
322,458
1.43
Total interest-bearing deposits
4,165,427
3.04
%
3,686,696
2.27
%
Total deposits
$
4,557,369
2.78
%
$
4,086,379
2.05
%
At December 31, 2024, we estimate that we had approximately $1.4 billion in uninsured deposits, which are the portion of deposit amounts that exceed the FDIC insurance limit, compared to $1.2 billion at December 31, 2023. Approximately 30% of our total deposits exceeded the FDIC deposit insurance limits at December 31, 2024 while approximately 28% exceeded the FDIC deposit insurance limits at December 31, 2023. However, we offer large depositors access to the Certificate of Deposit Account Registry Service (“CDARS”) and the Insured Cash Sweep (“ICS Product”), which allows us to divide customers' deposits that exceed the FDIC insurance limits into smaller amounts, below the FDIC insurance limits, and place those excess deposits in other participating FDIC insured institutions with the convenience of managing all deposit accounts through our Bank. Our total deposits in CDARS and the ICS Products increased to $200,650,000, or 4.15% of total deposits, at December 31, 2024, compared to $104,204,000, or 2.39% of total deposits, at December 31, 2023.
The following schedule details the maturities of estimated uninsured time deposits greater than $250,000 at December 31, 2024:
In Thousands
Time deposits otherwise uninsured with a maturity of:
Three months or less
$
82,238
Over three through six months
180,901
Over six through twelve months
109,920
Over twelve months
66,863
Portion of U.S. time deposits in excess of insurance limit
$
439,922
Off Balance Sheet Arrangements
At December 31, 2024, the Company had unfunded lines of credit of $1.2 billion and outstanding standby letters of credit of $129 million, compared to unfunded lines of credit of $1.0 billion and outstanding standby letters of credit of $106 million at December 31, 2023. Since many of the commitments are expected to be drawn upon, the total commitment amounts generally represent future cash requirements. If needed to fund these outstanding commitments, the Bank has the ability to access interest-bearing deposits in other financial institutions, liquidate Federal funds sold or securities available-for-sale or on a short-term basis to borrow and purchase Federal funds from other financial institutions. Additionally, the Bank could sell participations in these or other loans to correspondent banks. Liquidation of securities available-for-sale could trigger recognition of losses by the Bank if those securities sold to meet these commitments were in a loss position when sold. As mentioned below, Wilson Bank has been able to fund its ongoing liquidity needs through its stable core deposit base, brokered deposits, loan repayments, its investment security maturities, and short-term borrowings.
Quantitative and Qualitative Disclosures About Market Risk
The Company’s primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on a large portion of the Company’s assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those which possess a short term to maturity. Based upon the nature of the Company’s operations, the Company is not subject to foreign currency exchange or commodity price risk.
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Interest rate risk (sensitivity) management focuses on the earnings risk associated with changing interest rates. Management seeks to maintain profitability in both short term and long term earnings through funds management/interest rate risk management. The Company’s rate sensitivity position has an important impact on earnings. Senior management of the Company meets monthly to analyze the rate sensitivity position. These meetings focus on the spread between the cost of funds and interest yields generated primarily through loans and investments.
Liquidity and Asset Liability Management
Liquidity
The Company’s management seeks to maximize net interest income by managing the Company’s assets and liabilities within appropriate constraints on capital, liquidity and interest rate risk. Liquidity is a measure of our ability to meet our cash flow requirements, including inflows and outflows of cash for depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs. Several factors influence our liquidity needs, including depositor and borrower activity, interest rate trends, changes in the economy, maturities, re-pricing and interest rate sensitivity of our debt securities, loan portfolio and deposits. We strive to maintain appropriate levels of liquidity. We calculate our liquidity ratio by taking cash and due from banks, interest bearing deposits, federal funds sold, and available-for-sale debt securities not pledged as collateral and dividing by total assets. Our total liquidity ratios were 10.80% at December 31, 2024 and 13.09% at December 31, 2023. The decrease in our liquidity ratio is primarily attributable to a decrease in liquid assets as a result of an increase in the dollar amount of our available-for-sale securities that we have pledged to secure certain of our customers' deposits.
The Company’s primary source of liquidity is a stable core deposit base. In addition, federal funds purchased, advances from the Federal Home Loan Bank of Cincinnati, and brokered deposits provide a secondary source. These sources of liquidity are generally short-term in nature and are used to fund asset growth and meet other short-term liquidity needs. Liquidity needs can also be met from loan payments and investment security sales or maturities. While maturities and scheduled amortization of loans and debt securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and competition. At December 31, 2024, the Company’s liquid assets totaled approximately $578.7 million, a decrease from $634.0 million at December 31, 2023. A portion of these liquid assets include unpledged available-for-sale securities that are in an unrealized loss position at December 31, 2024. If the Company was required to sell any of these securities, including to meet liquidity needs, while they are in an unrealized loss position the Company would be required to recognize the loss on those securities through the income statement when they are sold. Recognition of these losses would negatively impact the Bank's and the Company's earnings and regulatory capital levels. Additionally, as of December 31, 2024, the Company had available approximately $119.3 million in unused federal funds lines of credit with regional banks and, subject to certain restrictions and collateral requirements, approximately $546.7 million of borrowing capacity with the Federal Home Loan Bank of Cincinnati to meet short term funding needs. The Company maintains a formal asset and liability management process in an effort to quantify, monitor and control interest rate risk, and to assist management as management seeks to maintain stability in the net interest margin under varying interest rate environments. The Company accomplishes this process through the development and implementation of lending, funding and pricing strategies designed to maximize net interest income under varying interest rate environments subject to specific liquidity and interest rate risk guidelines and competitive market conditions.
The Company’s securities portfolio consists of earning assets that provide interest income. Securities classified as available-for-sale include securities intended to be used as part of the Company’s asset/liability strategy and/or securities that may be sold in response to changes in interest rates, prepayment risk, or the need to fund loan demand or other liquidity needs. At December 31, 2024, securities totaling approximately $54.3 million mature or will be subject to rate adjustments within the next twelve months.
A secondary source of liquidity is the Company’s loan portfolio. At December 31, 2024, loans totaling approximately $469.1 million will become due within twelve months from that date.
As for liabilities, at December 31, 2024, certificates of deposit and individual retirement accounts of $250,000 or greater totaling approximately $675.7 million will become due or reprice during the next twelve months. Historically, there has been no significant reduction in immediately withdrawable accounts such as negotiable order of withdrawal accounts, money market demand accounts, demand deposit accounts and regular savings accounts. Management does not anticipate that there will be significant withdrawals from these accounts in the next twelve months.
Management believes that with present maturities, borrowing capacity in unused federal funds lines of credit and with the Federal Home Loan Bank of Cincinnati and the efforts of management in its asset/liability management program, the Company has adequate liquidity to meet all known contractual obligations, unfunded commitments and reasonable requirements of borrowers and depositors over the next twelve months as well over a longer term.
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
At December 31, 2024, the Company had no individually significant commitments for capital expenditures. But, the Company believes the number of its locations, including non-branch locations, will increase over an extended period of time across its footprint, and that certain of its locations will be in need of required renovations. In future periods, these expansions and renovation projects may lead to additional equipment and occupancy expenses as well as related increases in salaries and benefits expense. Additionally, the Company expects it will continue to incur costs associated with planned technology improvements to enhance its infrastructure.
Asset Liability Management
Analysis of rate sensitivity and rate gap analysis are the primary tools used to assess the direction and magnitude of changes in net interest income resulting from changes in interest rates. Included in the analysis are cash flows and maturities of financial instruments held for purposes other than trading, changes in market conditions, loan volumes and pricing and deposit volume and mix. These assumptions are inherently uncertain, and, as a result, net interest income cannot be precisely estimated nor can the impact of higher or lower interest rates on net interest income be precisely predicted. Actual results will differ due to timing, magnitude and frequency of interest rate changes and changes in market conditions and management’s strategies, among other factors.
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Interest Rate Sensitivity Gaps
The following schedule details the Company's interest rate sensitivity gaps for different time periods at December 31, 2024:
Repricing Within
(In Thousands)
Total
0-30 Days
31-90 Days
91-180 Days
181-365 Days
Over 1 Year
Earning assets:
Loans, net of deferred fees
$
4,091,889
690,372
107,006
159,691
372,420
2,762,400
Securities
827,893
48,293
5,203
773,628
Loans held for sale
2,529
-
-
-
-
2,529
Interest bearing deposits
211,271
211,271
-
-
-
-
Federal funds sold
9,791
9,791
-
-
-
-
Restricted equity securities
3,876
3,876
-
-
-
-
Total earning assets
5,147,249
963,603
107,388
160,078
377,623
3,538,557
Interest-bearing liabilities:
Negotiable order of withdrawal accounts
968,198
968,198
-
-
-
-
Money market demand accounts
1,325,713
1,325,713
-
-
-
-
Individual retirement accounts
82,259
4,063
10,316
13,734
26,039
28,107
Other savings
343,894
343,894
-
-
-
-
Certificates of deposit
1,726,802
106,720
273,422
534,250
532,355
280,055
Finance leases
3,076
-
-
-
-
3,076
4,449,942
2,748,588
283,738
547,984
558,394
311,238
Interest-sensitivity gap
$
697,307
(1,784,985
)
(176,350
)
(387,906
)
(180,771
)
3,227,319
Cumulative gap
(1,784,985
)
(1,961,335
)
(2,349,241
)
(2,530,012
)
697,307
Interest-sensitivity gap as % of total assets
(33.3
)%
(3.3
)%
(7.2
)%
(3.4
)%
60.2
%
Cumulative gap as % of total assets
(33.3
)%
(36.6
)%
(43.8
)%
(47.2
)%
13.0
%
As detailed in the chart, as of December 31, 2024, the Company is forecasted to maintain a liability sensitive position over the next twelve months, meaning that its liabilities should reprice faster than its assets in a changing interest rate environment. However, management expects that liabilities of a demand nature will renew and that it will not be necessary to replace them with significantly higher cost of funds.
The Company also uses simulation modeling to evaluate both the level of interest rate sensitivity as well as potential balance sheet strategies. The Company's Asset Liability Committee ("ALCO") meets quarterly to analyze the interest rate shock simulation. The interest rate shock simulation model is based on a number of assumptions. The assumptions include, but are not limited to, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment and replacement of asset and liability cash flows and balance sheet management strategies. We model instantaneous change in interest rates using a growth in the balance sheet as well as a flat balance sheet to understand the impact to earnings and capital. Based on the Company's IRR simulation, the Company had a slightly liability sensitive interest-rate risk position as of December 31, 2024, though the Company’s net interest margin and earnings could be negatively impacted if the Company's ability to lower deposit rates (in a falling rate environment) or limit the increases to deposit rates (in a rising rate environment), is limited by other factors including as a result of competitive pressures re-intensifying or loan growth outpacing our ability to add lower cost core deposits. The Company also uses Economic Value of Equity (“EVE”) sensitivity analysis to understand the impact of changes in interest rates on long-term cash flows, income and capital. EVE is calculated by discounting the cash flows for all balance sheet instruments under different interest rate scenarios. The EVE is a longer term view of interest rate risk because it measures the present value of the future cash flows. Presented below is the estimated impact on the Bank’s net interest income and EVE as of December 31, 2024, assuming an immediate shift in interest rates:
% Change from Base Case for Immediate Parallel Changes in Rates
-300 BP
-200 BP
-100 BP
+100 BP
+200 BP
+300 BP
Net interest income
0.33
%
(1.57
)%
(1.24
)%
(2.11
)%
(4.48
)%
(7.04
)%
EVE
(8.57
)%
(3.14
)%
(0.36
)%
(2.43
)%
(5.56
)%
(9.28
)%
While an instantaneous and severe shift in interest rates was used in this analysis to provide an estimate of exposure under these scenarios, we believe that a gradual shift in interest rates would have a more modest impact. Further, the earnings simulation model does not take into account factors such as future balance sheet growth, changes in product mix, changes in yield curve relationships, and changing
WILSON BANK HOLDING COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
product spreads that could mitigate any potential adverse impact of changes in interest rates. Moreover, since EVE measures the discounted present value of cash flows over the estimated lives of instruments, the change in EVE does not directly correlate to the degree that earnings would be impacted over a shorter time horizon (i.e., the current year). Further, EVE does not take into account factors such as future balance sheet growth, changes in product mix, changes in yield curve relationships, hedging strategies that we may institute, and changing product spreads that could mitigate any potential adverse impact of changes in interest rates.
Interest rate risk (sensitivity) management focuses on the earnings risk associated with changing interest rates. Management seeks to maintain profitability in both immediate and long-term earnings through funds management/interest rate risk management. The Company’s rate sensitivity position has an important impact on earnings. Senior management of the Company analyzes the rate sensitivity position quarterly. Management focuses on the spread between the Company’s cost of funds and interest yields generated primarily through loans and investments.
In addition to the ALCO, the Audit Committee and the Risk Oversight Committee, as well as the Chief Risk Officer are all responsible for the “risk management framework” of the Company. The ALCO meets monthly and the Audit and Risk Oversight Committees meet quarterly, with the authority to convene additional meetings as circumstances require.
Impact of Inflation
Although interest rates are significantly affected by inflation, for the fiscal years ended December 31, 2024, 2023 and 2022, the inflation rate is believed to have had an immaterial impact on the Company's results of operations outside of its indirect impact on interest rates. Outside of its potential impact on our customers and their ability to make loan payments, we do not expect such inflation to have a material impact on our operations in 2025 other than any effect it may have on interest rates, though continued elevated levels of inflation could also negatively impact our non-interest expense.
Capital Resources, Capital Position and Dividends
At December 31, 2024, total shareholders’ equity was $479,703,000, or 8.95% of total assets, which compares with $429,405,000, or 8.86% of total assets, at December 31, 2023, and $360,452,000 or 8.41% of total assets, at December 31, 2022. The dollar increase in shareholders’ equity during 2024 is the result of the net effect of $1,128,000 related to stock option compensation, restricted share awards, restricted share units, and performance share units, the Company’s net earnings of $56,530,000, proceeds from the issuance of common stock related to exercise of stock options of $575,000 and a decrease of $68,000 in unrealized losses on investment securities (described elsewhere in this Annual Report on Form 10-K), net of applicable income taxes of $22,000. Also included was $134,000 of net earnings for the year ended December 31, 2024 attributable to the noncontrolling members of Encompass. The increase in total shareholders' equity was partially offset by cash dividends declared of $20,552,000, net of $14,732,000 reinvested in shares of the Company's common stock under the Company’s dividend reinvestment plan, and the $2,181,000 repurchase of common stock that occurred in the second quarter of 2024.
For a discussion of the Company's and Wilson Bank's capital levels and required minimum levels of capital each is required to maintain under applicable regulatory requirements see Note 17, Regulatory Matters and Restrictions on Dividends in the notes to the Company's consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Information required by this item is included in Item 7. under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations - Quantitative and Qualitative Disclosures About Market Risk" and is incorporated herein by reference.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
WILSON BANK HOLDING COMPANY
Consolidated Financial Statements
December 31, 2024 and 2023
(With Independent Auditor’s Report Thereon)
Report of Independent Registered Public Accounting Firm - Financial Statements
Report of Independent Registered Public Accounting Firm - Internal Control over Financial Reporting
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Earnings
Consolidated Statements of Comprehensive Earnings
Consolidated Statements of Changes in Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Stephen M. Maggart, CPA, ABV, CFF
J. Mark Allen, CPA
Chris Conro, CPA
Michael T. Holland, CPA, ABV, CFF
M. Todd Maggart, CPA, ABV, CFF
P. Jason Ricciardi, CPA, CGMA
David B. von Dohlen, CPA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Wilson Bank Holding Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Wilson Bank Holding Company (the Company) as of December 31, 2024 and 2023, and the related consolidated statements of earnings, comprehensive earnings, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standard require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosure in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
1201 DEMONBREUN STREET • SUITE 1220 • NASHVILLE, TENNESSEE 37203-3140 • (615) 252-6100 • Fax • (615) 252-6105
www.maggartpc.com
To the Shareholders and the Board of Directors of
Wilson Bank Holding Company
Page Two
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.
Allowance for Credit Losses on Loans - Reasonable and Supportable Forecasts and Qualitative Adjustments
The Company’s allowance for credit losses on loans (“ACL”) was $49.5 million as of December 31, 2024 and the provision for credit losses on loans was $5.2 million for the year ended December 31, 2024. Loans were $4.1 billion at December 31, 2024. The Company disclosed information regarding the Company’s financial assets and allowance for credit losses in Note 1 Summary of Significant accounting Policies and Note 2 Loans and Allowance for Credit Losses to the consolidated financial statements.
The Company primarily used a discounted cash flow (DCF) model to calculate its ACL. DCF calculates the present value of the future expected cash flows for all loans included in the analysis at the loan’s effective interest rate. The analysis was performed using a bottom-up approach with the loan-level data. The loan-level calculations were rolled up to the pool level to get the total amortized cost of cash flow loans by each pool. The amortized cost is then discounted back to the present value. The total dollar reserve applied to the pool is the total amortized cost net present value.
Within its DCF model, the Company primarily employed a probability of default (“PD”) and loss given default (“LGD”) modeling approach. The PD assumption of the Company’s ACL model utilized historical correlations between default experience and certain macroeconomic factors as determined through a statistical regression analysis. Losses are forecasted over a period of time determined to be reasonable and supportable, and then reverted to long term historical averages. The Company adjusted it overall ACL with qualitative adjustment that are not inherently considered in the quantitative component of the methodology.
While the qualitative categories and the measurements utilized to quantify the risks associated with each of the qualitative adjustments are built primarily upon objective measurements where applicable, they are subjectively developed and interpreted by management.
The audit procedures over the reasonable and supportable forecast scenarios and qualitative adjustments utilized in management's methodology involved challenging and subjective auditor judgment. Therefore, we identified auditing the reasonable and supportable forecast scenarios and qualitative adjustments applied as a critical audit matter.
To the Shareholders and the Board of Directors of
Wilson Bank Holding Company
Page Three
The primary audit procedures we performed to address this critical audit matter included the following:
•Tested the operating effectiveness of controls specific to:
oDetermining the reasonableness of the forecasted macroeconomic scenarios used in the model.
oThe identification and application of qualitative adjustments to the ACL model.
oThe relevance and reliability of data used by the Company’s third-party vendor to develop forecast scenarios.
oThe Company’s allowance committee’s oversight and review of the overall ACL.
•Performed substantive testing over the qualitative adjustments including:
oEvaluated the reasonableness and appropriateness of the policies and methodologies employed including, but not limited to, evaluating their conceptual soundness and inspecting and testing significant assumptions and judgments.
oEvaluated management’s judgments in the selection and application of the forecasted macroeconomic scenarios.
oEvaluated management's rationale for determining qualitative adjustments were relevant and warranted for each loan segment and assessed the measurement of qualitative factor adjustments applied by management.
oAssessed changes in qualitative factors year-over-year against overall trends in credit quality within the Company and broader trends within the industry and local and national economies to evaluate reasonableness of management’s qualitative factor adjustments.
/s/ MAGGART & ASSOCIATES, P.C.
We have served as the Company’s auditor since 1987.
Nashville, Tennessee (PCAOB 763)
February 28, 2025
Stephen M. Maggart, CPA, ABV, CFF
J. Mark Allen, CPA
Chris Conro, CPA
Michael T. Holland, CPA, ABV, CFF
M. Todd Maggart, CPA, ABV, CFF
P. Jason Ricciardi, CPA, CGMA
David B. von Dohlen, CPA
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
Wilson Bank Holding Company
Opinion on Internal Control over Financial Reporting
We have audited Wilson Bank Holding Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Wilson Bank Holding Company (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, and the related consolidated statements of earnings, comprehensive earnings, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and our report dated February 28, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
1201 DEMONBREUN STREET • SUITE 1220 • NASHVILLE, TENNESSEE 37203-3140 • (615) 252-6100 • Fax • (615) 252-6105
www.maggartpc.com
To the Shareholders and the Board of Directors of
Wilson Bank Holding Company
Page Two
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ MAGGART & ASSOCIATES, P.C.
Nashville, Tennessee (PCAOB 763)
February 28, 2025
WILSON BANK HOLDING COMPANY
Consolidated Balance Sheets
December 31, 2024 and 2023
Dollars in thousands
ASSETS
Loans, net of allowance for credit losses of $49,497 and $44,848, respectively
$
4,042,392
3,550,675
Available-for-sale securities, at market (amortized cost $947,341 and $930,439, respectively)
827,893
811,081
Loans held for sale
2,529
2,294
Interest bearing deposits
211,271
213,701
Federal funds sold
9,791
10,159
Restricted equity securities, at cost
3,876
3,436
Total earning assets
5,097,752
4,591,346
Cash and due from banks
26,527
28,775
Premises and equipment, net
61,549
62,398
Accrued interest receivable
16,914
15,197
Deferred income taxes
46,048
45,473
Bank owned life insurance
61,948
59,645
Goodwill
4,805
4,805
Other assets
43,116
38,837
Total assets
$
5,358,659
4,846,476
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing
$
383,168
389,725
Interest bearing
4,446,866
3,977,381
Total deposits
4,830,034
4,367,106
Accrued interest and other liabilities
48,922
49,965
Total liabilities
4,878,956
4,417,071
Shareholders’ equity:
Common stock, par value $2.00 per share, authorized 50,000,000 shares, 11,876,770 and 11,686,363 shares issued and outstanding, respectively
23,754
23,373
Additional paid-in capital
150,739
136,866
Retained earnings
393,238
357,260
Noncontrolling interest in consolidated subsidiary
Accumulated other comprehensive losses, net of taxes of $31,217 and $31,195, respectively
(88,231
)
(88,163
)
Total shareholders’ equity
479,703
429,405
Total liabilities and shareholders’ equity
$
5,358,659
4,846,476
See accompanying notes to consolidated financial statements.
WILSON BANK HOLDING COMPANY
Consolidated Statements of Earnings
Three Years Ended December 31, 2024
Dollars In Thousands (except per share data)
Interest income:
Interest and fees on loans
$
250,273
198,739
138,161
Interest and dividends on securities:
Taxable securities
21,569
17,597
15,902
Exempt from Federal income taxes
1,488
1,574
1,392
Interest on loans held for sale
Interest on Federal funds sold
Interest on interest bearing deposits
9,753
3,697
1,522
Interest and dividends on restricted equity securities
Total interest income
284,116
222,583
157,540
Interest expense:
Interest on negotiable order of withdrawal accounts
8,014
5,847
2,546
Interest on money market accounts and other savings accounts
40,238
27,394
7,021
Interest on certificates of deposit and individual retirement accounts
78,491
50,341
6,486
Interest on Federal funds purchased
Interest on Federal Home Loan Bank advances
-
-
Interest on finance leases
Total interest expense
126,809
83,679
16,133
Net interest income before provision for credit losses
157,307
138,904
141,407
Provision for credit losses - loans
5,192
6,300
8,656
Provision for credit losses - off-balance sheet exposures
(592
)
(2,989
)
(1,014
)
Net interest income after provision for credit losses
152,707
135,593
133,765
Non-interest income
28,954
28,289
27,281
Non-interest expense
108,421
100,951
92,970
Earnings before income taxes
73,240
62,931
68,076
Income taxes
16,576
13,939
15,056
Net earnings
56,664
48,992
53,020
Net loss (gain) attributable to noncontrolling interest
(134
)
(54
)
Net earnings attributable to Wilson Bank Holding Company
$
56,530
48,938
53,042
Basic earnings per common share
$
4.79
4.21
4.66
Diluted earnings per common share
$
4.78
4.20
4.65
Weighted average common shares outstanding:
Basic
11,806,822
11,611,690
11,377,617
Diluted
11,838,589
11,641,366
11,408,924
See accompanying notes to consolidated financial statements.
WILSON BANK HOLDING COMPANY
Consolidated Statements of Comprehensive Earnings
Three Years Ended December 31, 2024
Dollars In Thousands
Net earnings
$
56,664
48,992
53,020
Other comprehensive earnings (losses):
Unrealized gains (losses) on available-for-sale securities
(2,832
)
29,136
(142,573
)
Reclassification adjustment for net losses (gains) included in net earnings
2,742
1,009
1,620
Tax effect
(7,878
)
36,838
Other comprehensive earnings (losses)
(68
)
22,267
(104,115
)
Comprehensive earnings (losses)
56,596
71,259
(51,095
)
Comprehensive earnings (losses) attributable to noncontrolling interest
(134
)
(54
)
Comprehensive earnings (losses) attributable to Wilson Bank Holding Company
$
56,462
71,205
(51,073
)
See accompanying notes to consolidated financial statements.
WILSON BANK HOLDING COMPANY
Consolidated Statements of Changes in Shareholders’ Equity
Three Years Ended December 31, 2024
Dollars In Thousands
Common Stock
Additional Paid In Capital
Retained Earnings
Noncontrolling Interest
Accumulated Other Comprehensive Earnings (Loss)
Total
Balance January 1, 2022
$
22,403
105,177
292,452
-
(6,315
)
413,717
Cash dividends declared, $1.85 per share
-
-
(20,880
)
-
-
(20,880
)
Issuance of 250,365 shares of common stock pursuant to dividend reinvestment plan
15,616
-
-
-
16,117
Issuance of 19,687 shares of common stock pursuant to exercise of stock options
-
-
-
Vesting of 625 restricted share awards
(1
)
-
-
-
-
Share based compensation expense
-
-
-
-
Net change in fair value of available-for-sale securities during the year, net of taxes of $36,838
-
-
-
-
(104,115
)
(104,115
)
Cumulative effect of change in accounting principle from the adoption of ASC 326
-
-
1,011
-
-
1,011
Noncontrolling interest contribution
-
-
-
-
Net earnings for the year
-
-
53,042
(22
)
-
53,020
Balance December 31, 2022
22,944
122,298
325,625
(110,430
)
360,452
Cash dividends declared, $1.50 per share
-
-
(17,303
)
-
-
(17,303
)
Issuance of 189,471 shares of common stock pursuant to dividend reinvestment plan
12,600
-
-
-
12,979
Issuance of 24,711 shares of common stock pursuant to exercise of stock options
-
-
-
1,044
Share based compensation expense
-
-
-
-
Net change in fair value of available-for-sale securities during the year, net of taxes of $(7,878)
-
-
-
-
22,267
22,267
Net earnings for the year
-
-
48,938
-
48,992
Balance December 31, 2023
23,373
136,866
357,260
(88,163
)
429,405
Cash dividends declared, $1.75 per share
-
-
(20,552
)
-
-
(20,552
)
Issuance of 203,489 shares of common stock pursuant to dividend reinvestment plan
14,325
-
-
-
14,732
Issuance of 14,011 shares of common stock pursuant to exercise of stock options
-
-
-
Vesting of 369 performance stock units
(1
)
-
-
-
-
Vesting of 2,725 restricted stock units
(5
)
-
-
-
-
Repurchase of 30,187 common shares
(60
)
(2,121
)
-
-
-
(2,181
)
Share based compensation expense
-
1,128
-
-
-
1,128
Net change in fair value of available-for-sale securities during the year, net of taxes of $22
-
-
-
-
(68
)
(68
)
Net earnings for the year
-
-
56,530
-
56,664
Balance December 31, 2024
$
23,754
150,739
393,238
(88,231
)
479,703
See accompanying notes to consolidated financial statements.
WILSON BANK HOLDING COMPANY
Consolidated Statements of Cash Flows
Three Years Ended December 31, 2024
Increase (Decrease) in Cash and Cash Equivalents
Dollars In Thousands
OPERATING ACTIVITIES
Consolidated net income
$
56,664
48,992
53,020
Adjustments to reconcile consolidated net income to net cash provided by
operating activities
Provision for credit losses
4,600
3,311
7,642
Deferred income taxes provision
(551
)
(2,029
)
(2,051
)
Depreciation and amortization of premises and equipment
4,133
4,313
4,462
Loss (gain) on sale of fixed assets
(291
)
Net amortization of securities
1,699
2,879
4,003
Net realized losses on sales of securities
2,742
1,009
1,620
Gains on mortgage loans sold, net
(3,068
)
(2,635
)
(2,973
)
Stock-based compensation expense
1,567
1,948
1,864
Loss (gain) on sale of other assets
(8
)
Increase in value of life insurance and annuity contracts
(1,817
)
(1,667
)
(1,345
)
Mortgage loans originated for resale
(52,549
)
(73,984
)
(106,601
)
Proceeds from sale of mortgage loans
55,382
77,680
118,062
Gain on lease modification
-
(1,463
)
-
Right of use asset amortization
Amortization of mortgage servicing rights
Change in
Accrued interest receivable
(1,717
)
(3,800
)
(3,756
)
Other assets
(6,315
)
9,146
(284
)
Accrued interest payable
1,525
21,055
1,516
Other liabilities
(1,375
)
1,028
(2,602
)
TOTAL ADJUSTMENTS
5,317
37,112
20,187
NET CASH PROVIDED BY OPERATING ACTIVITIES
61,981
86,104
73,207
INVESTING ACTIVITIES
Activities in available for sale securities
Purchases
(169,439
)
(51,116
)
(200,075
)
Sales
86,248
32,740
42,728
Maturities, prepayments and calls
61,848
56,364
85,544
Redemptions (purchases) of restricted equity securities
(440
)
Net increase in loans
(495,811
)
(442,452
)
(673,871
)
Purchase of buildings, leasehold improvements, and equipment
(3,494
)
(4,643
)
(5,022
)
Proceeds from sale of premises and equipment
-
-
1,758
Proceeds from sale of other assets
Purchase of life insurance and annuity contracts
(710
)
-
(10,978
)
Redemption of annuity contracts
NET CASH USED IN INVESTING ACTIVITIES
(521,210
)
(407,718
)
(758,902
)
FINANCING ACTIVITIES
Net change in deposits - non-maturing
219,543
(324,417
)
163,933
Net change in deposits - time
243,385
798,818
173,701
Change in escrow balances
(1,285
)
(1,631
)
3,549
Repayment of finance lease obligation
(34
)
(30
)
(26
)
Noncontrolling interest contributions
-
-
Issuance of common stock related to exercise of stock options
1,044
Issuance of common stock pursuant to dividend reinvestment plan
14,732
12,979
16,117
Repurchase of common stock
(2,181
)
-
-
Cash dividends paid on common stock
(20,552
)
(17,303
)
(20,880
)
NET CASH PROVIDED BY FINANCING ACTIVITIES
454,183
469,460
337,066
NET CHANGE IN CASH AND CASH EQUIVALENTS
(5,046
)
147,846
(348,629
)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR
252,635
104,789
453,418
CASH AND CASH EQUIVALENTS - END OF YEAR
$
247,589
252,635
104,789
See accompanying notes to consolidated financial statements.
WILSON BANK HOLDING COMPANY
Consolidated Statements of Cash Flows, Continued
Three Years Ended December 31, 2024
Increase (Decrease) in Cash and Cash Equivalents
Dollars In Thousands
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest
$
125,284
$
62,624
$
14,617
Taxes
$
18,844
$
16,511
$
19,446
Non-cash investing and financing activities:
Change in fair value of securities available-for-sale, net of taxes of $22 in 2024,
$(7,878) in 2023, and $36,838 in 2022,
$
(68
)
$
22,267
$
(104,115
)
Non-cash transfers from loans to other real estate
$
-
$
-
$
-
Non-cash transfers from other real estate to loans
$
-
$
-
$
-
Non-cash transfers from loans to other assets
$
$
-
$
-
See accompanying notes to consolidated financial statements.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements
December 31, 2024, 2023 and 2022
(1)Summary of Significant Accounting Policies
The accounting and reporting policies of Wilson Bank Holding Company (“the Company”) and its wholly owned subsidiary, Wilson Bank & Trust (“Wilson Bank” or "the Bank"), are in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and conform to general practices within the banking industry. The following is a brief summary of the significant policies.
(a)Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, Wilson Bank, and Wilson Bank's 51% owned subsidiary, Encompass Home Lending, LLC ("Encompass"). On June 1, 2022, the Bank began operations with a newly-formed joint venture, Encompass Home Lending, LLC. Encompass offers residential mortgage banking services to customers of certain home builders in the Company's markets. All significant intercompany accounts and transactions have been eliminated in consolidation.
(b)Nature of Operations
Wilson Bank operates under a state bank charter and provides full banking services. As a Tennessee state-chartered bank that is not a member of the Federal Reserve, Wilson Bank is subject to regulations of the Tennessee Department of Financial Institutions and the Federal Deposit Insurance Corporation (“FDIC”). The primary areas served by Wilson Bank include Wilson County, DeKalb County, Rutherford County, Smith County, Trousdale County, Putnam County, Sumner County, Hamilton County, Davidson County and Williamson County, Tennessee and surrounding counties in Middle Tennessee. As of December 31, 2024, services were provided at the main office, twenty-nine branch locations and one loan production office.
(c)Use of Estimates
In preparing consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses - loans and off-balance sheet credit exposures, the valuation of deferred tax assets, determination of any impairment of goodwill or other intangibles, the valuation of other real estate (if any), and the fair value of financial instruments.
(d)Significant Group Concentrations of Risk
Most of the Company’s activities are with customers located within Middle Tennessee. The types of securities in which the Company invests are described in note 3. The types of lending in which the Company engages are described in note 2. The Company does not have any significant concentrations to any one industry or customer other than as disclosed in note 2.
(e)Loans
The Company grants mortgage, commercial and consumer loans to customers. A substantial portion of the loan portfolio is represented by mortgage loans throughout Middle Tennessee. The ability of the Company’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in this area.
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for unearned income, the allowance for credit losses, and any unamortized deferred fees or costs on originated loans, and premiums or discounts on purchased loans. Interest income is accrued on the unpaid principal balance.
Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized on a straight line basis over the respective term of the loan.
As part of its routine credit monitoring process, the Company performs regular credit reviews of the loan portfolio and loans receive risk ratings by the assigned credit officer, which are subject to validation by the Company's independent loan review department. Risk ratings are categorized as pass, special mention, substandard or doubtful. The Company believes that its categories follow those outlined by the FDIC, Wilson Bank's primary federal regulator.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
Generally the accrual of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Generally, credit card loans and other personal loans are typically charged off no later than when they become 90 days past due. Past due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.
All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
(f)Allowance for Credit Losses- Loans
On January 1, 2022, the Company adopted Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” as subsequently updated for certain clarifications, targeted relief and codification improvements. Accounting Standards Codification (“ASC”) Topic 326 (“ASC 326”) replaces the previous “incurred loss” model for measuring credit losses, which encompassed allowances for current known and inherent losses within the portfolio, with an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. The current expected credit loss (“CECL”) model requires the measurement of all expected credit losses for financial assets measured at amortized cost and certain off-balance-sheet credit exposures based on historical experience, current conditions, and reasonable and supportable forecasts. ASC 326 also requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, ASC 326 includes certain changes to the accounting for available-for-sale securities including the requirement to present credit losses as an allowance rather than as a direct write-down for available-for-sale securities management does not intend to sell or believes that it is more likely than not they will not be required to sell.
Effective January 1, 2022, the Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off- balance-sheet credit exposures. Upon adoption, the Company recognized an after-tax cumulative effect increase to retained earnings totaling $1.0 million.
In connection with the adoption of ASC 326, the Company revised certain accounting policies and implemented certain accounting policy elections. Further information regarding our policies and methodology used to estimate the allowance for credit losses on loans is presented in Note 2 - Loans and Allowance for Credit Losses.
(g)Allowance for Credit Losses-Off-Balance Sheet Credit Exposures
The allowance for credit losses on off-balance sheet credit exposures is a liability account, calculated in accordance with ASC 326, representing expected credit losses over the contractual period for which the Company is exposed to credit risk resulting from a contractual obligation to extend credit. No allowance is recognized if the Company has the unconditional right to cancel the obligation. Off-balance sheet credit exposures primarily consist of amounts available under outstanding lines of credit and letters of credit. For the period of exposure, the estimate of expected credit losses considers both the likelihood that funding will occur and the amount expected to be funded over the estimated remaining life of the commitment or other off-balance sheet exposure. The likelihood and expected amount of funding are based on historical utilization rates. The amount of the allowance represents management's best estimate of expected credit losses on commitments expected to be funded over the contractual life of the commitment. The allowance is reported as a component of accrued interest and other liabilities in the Company's consolidated balance sheets. Adjustments to the allowance are reported in the Company's income statement as a component of provision for credit losses - off-balance sheet exposures.
Estimating credit losses on amounts expected to be funded uses the same methodology as described for loans above in paragraph (f) of this Note 1 - Summary of Significant Accounting Policies, as if such commitments were funded.
(h)Debt Securities
Certain debt securities that management has the positive intent and ability to hold to maturity are classified as “held-to-maturity” and recorded at amortized cost. Trading securities are recorded at fair value with changes in fair value included in earnings. Securities not classified as held-to-maturity or trading, including equity securities with readily determinable fair values, are classified as “available-for-sale” and recorded at fair value based on available market prices, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss) on an after-tax basis. Securities classified as “available- for-sale” are held for indefinite periods of time and may be sold in response to movements in market interest rates, changes in the maturity or mix of Company assets and liabilities or demand for liquidity. Purchase premiums and discounts are recognized in interest income using the interest method
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.
A debt security is placed on nonaccrual status at the time any principal and interest payments become 90 days delinquent. Interest accrued but not received for a security placed on nonaccrual is reversed against interest income.
No securities have been classified as trading securities or held-to-maturity securities at December 31, 2024 or 2023.
(i)Allowance for Credit Losses - Securities Available-for-Sale
For any securities classified as available-for-sale that are in an unrealized loss position at the balance sheet date, the Company assesses whether or not it intends to sell the security, or more likely than not will be required to sell the security, before recovery of its amortized cost basis. If either criteria is met, the security's amortized cost basis is written down to fair value through net earnings. If the Company intends to hold the securities and it is more likely than not that the Company will not be required to sell before impairment recovery, the securities will be evaluated for credit and non-credit related impairment. Securities with one or more of the following characteristics will be deemed to have only non-credit related impairment and will be excluded from further evaluation from credit impairment: Guaranteed by the U.S. government, insured by the FDIC, a review of market price discount to principal face value, risk weighting under the FDIC’s Simplified Supervisory Formula Approach, and average credit rating. Securities that are not excluded by the aforementioned characteristics are further evaluated for credit deterioration. If it is determined a credit impairment has occurred, the portion of the impairment that is determined to be credit related will be recorded as an allowance for credit losses with an offsetting entry to net earnings. Non-credit related impairment is recognized in other comprehensive income.
(j)Equity Securities
Equity securities are carried at fair value, with changes in fair value reported in net income. Equity securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment.
(k)Transfers of Financial Assets
Transfers of financial assets are accounted for as sales when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.
(l)Federal Home Loan Bank (FHLB) Stock
The Company is a member of the FHLB system. Members are required to own a certain amount of stock in the FHLB based on the level of borrowings and other factors and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.
(m)Loans Held for Sale
Mortgage loans held for sale are carried at fair value. The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.
(n)Premises and Equipment
Premises and equipment are stated at cost. Depreciation is computed primarily by the straight-line method over the estimated useful lives of the related assets ranging from 3 to 40 years. Gains or losses realized on items retired and otherwise disposed of are credited or charged to operations and cost and related accumulated depreciation are removed from the asset and accumulated depreciation accounts.
Expenditures for major renovations and improvements of premises and equipment are capitalized and those for maintenance and repairs are charged to earnings as incurred.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
(o)Foreclosed Assets
Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less the estimated cost to sell at the date the Company acquires the property, establishing a new cost basis. Subsequent to their acquisition by the Company, valuations of these assets are periodically performed by management, and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance [i.e. any direct write-downs] are included within non-interest expense.
(p)Goodwill and Other Intangible Assets
Goodwill arises from business combinations and is determined as the excess of fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exists that indicate that a goodwill impairment test should be performed. The Company has selected September 30th as the date to perform the annual impairment test. No impairment was determined as a result of the test performed by the Company on September 30, 2024. Intangible assets with finite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on the Company's balance sheet.
(q)Leases
Leases are classified as operating or finance leases at the lease commencement date. The Company leases certain locations and equipment. The Company records leases on the balance sheet in the form of a lease liability for the present value of future minimum payments under the lease terms and right-of-use asset equal to the lease liability adjusted for items such as deferred or prepaid rent, lease incentives, and any impairment of the right-of-use asset. The discount rate used in determining the lease liability is based upon incremental borrowing rates the Company could obtain for similar loans as of the date of commencement or renewal. The Company does not record leases on the consolidated balance sheets that are classified as short term (less than one year).
At lease inception, the Company determines the lease term by considering the minimum lease term and all optional renewal periods that the Company is reasonably certain to renew. The lease term is also used to calculate straight-line rent expense. The depreciable life of leasehold improvements is limited by the estimated lease term, including renewals if they are reasonably certain to be renewed. The Company’s leases do not contain residual value guarantees or material variable lease payments that will impact the Company’s ability to pay dividends or cause the Company to incur additional expenses.
Operating lease expense consists of a single lease cost allocated over the remaining lease term on a straight-line bases, variable lease payments not included in the lease liability, and any impairment of the right-of-use asset. Rent expense and variable lease expense are included in occupancy and equipment expense on the Company’s consolidated statements of earnings. The Company’s variable lease expense include rent escalators that are based on market conditions and include items such as common area maintenance, utilities, parking, property taxes, insurance and other costs associated with the lease. The amortization of the right-of- use asset arising from finance leases is expensed through occupancy and equipment expense and the interest on the related lease liability is expenses through interest expense on borrowings on the Company’s consolidated statements of earnings.
(r)Mortgage Servicing Rights
When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.
Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If the Company later determines that all or a portion of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income. Changes in valuation allowances are reported within non-interest income on the income statement. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
Servicing fee income, which is reported on the income statement as mortgage servicing income, is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal; or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against servicing fee income. Servicing fees totaled $(1,000), $9,000, and $(28,000) for the years ended December 31, 2024, 2023 and 2022. Late fees and ancillary fees related to loan servicing are not significant.
(s)Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, interest-bearing deposits with maturities fewer than 90 days, amounts due from banks and Federal funds sold. Generally, Federal funds sold are purchased and sold for one day periods. Management makes deposits only with financial institutions it believes to be financially sound.
(t)Long-Term Assets
Premises and equipment, intangible assets, and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.
(u)Bank Owned Life Insurance
The Bank has purchased life insurance policies on certain current and former key executives. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.
(v)Income Taxes
The Company accounts for income taxes in accordance with income tax accounting guidance (FASB ASC 740, Income Taxes). The Company follows accounting guidance related to accounting for uncertainty in income taxes, which sets out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions.
The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.
Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term "more-likely-than-not" means a likelihood of more than 50 percent. The terms "examined" and "upon examination" also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more-likely-than-not that some portion or all of a deferred tax asset will not be realized.
The Company recognizes interest and penalties on income taxes as a component of income tax expense.
(w)Derivatives
Mortgage Banking Derivatives
Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives. The fair value of the interest rate lock is recorded at the time the commitment to fund the mortgage loan is executed and is adjusted for the expected exercise of the commitment before the loan is funded. Fair values of these mortgage derivatives are estimated based on changes in mortgage interest rates from the date the interest rate on the loan is locked. The Company enters into forward commitments for the future delivery of mortgage loans when interest rate locks are entered into, in order to hedge the change in interest rates resulting from its commitments to fund the loans. Changes in the fair values of these derivatives are included in net gains on sale of mortgage loans.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
Fair Value Hedges
For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged asset or liability attributable to the hedged risk are recognized in current earnings. The gain or loss on the derivative instrument is presented on the same income statement line item as the earnings effect of the hedged item. The Company utilizes interest rate swaps designated as fair value hedges to mitigate the effect of changing interest rates on the fair values of fixed rate loans. The hedging strategy on loans converts the fixed interest rates to SOFR-based variable interest rates. These derivatives are designated as partial term hedges of selected cash flows covering specified periods of time prior to the maturity dates of the hedged loans.
(x)Stock-Based Compensation
Stock compensation accounting guidance (FASB ASC 718, “Compensation-Stock Compensation”) requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the grant date fair value of the equity or liability instruments issued. The stock compensation accounting guidance covers a wide range of share-based compensation arrangements including stock options, restricted share awards, restricted share unit awards, performance-based awards, cash-settled stock appreciation rights (SARs), and employee share purchase plans. Because cash-settled SARs do not give the grantee the choice of receiving stock, all cash-settled SARs are accounted for as liabilities, not equity, as expense is accrued over the requisite service period.
The stock compensation accounting guidance requires that compensation cost for all stock awards be calculated and recognized over the employees’ service period, generally defined as the vesting period. For awards with graded-vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. The Company uses the Black-Scholes option pricing model to estimate the grant date fair value of stock options and cash-settled SARs, and utilizes the price at which the Company's common stock was last traded and of which the Company was aware on the date closest, but prior to, the date of grant to determine the grant date fair value of restricted share unit awards and restricted share awards.
(y)Retirement Plans
Employee 401(k) and profit sharing plan expense is the amount of matching contributions and profit sharing contributions. Deferred compensation and supplemental retirement plan expense allocates the benefits over years of service.
(z) Advertising Costs
Advertising costs are expensed as incurred by the Company and totaled $3,512,000, $3,714,000 and $3,455,000 for 2024, 2023 and 2022, respectively.
(aa) Earnings Per Share
Basic earnings per share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects additional potential common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding stock options, restricted share units, and performance share units and are determined using the treasury stock method.
(bb) Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available for sale, net of taxes, which are also recognized as separate components of equity.
(cc) Loss Contingencies
Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are such matters that will have a material effect on the financial statements.
(dd) Restrictions on Cash
Cash on hand or on deposit with the Federal Reserve Bank was required to meet regulatory reserve and clearing requirements.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
(ee) Segment Reporting
Management analyzes the operations of the Company assuming one operating segment, banking.
(ff) Fair Value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 22 - Disclosures About Fair Value of Financial Instruments below. Fair value estimates involve uncertainties and matters of significant judgment. Changes in assumptions or in market conditions could significantly affect the estimates.
(gg) Reclassification
Certain reclassifications have been made to the 2023 and 2022 figures to conform to the presentation for 2024.
(hh) Off-Balance-Sheet Financial Instruments
In the ordinary course of business, Wilson Bank has entered into off-balance-sheet financial instruments consisting of commitments to extend credit, commitments under credit card arrangements, commercial letters of credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they are funded or related fees are incurred or received.
(ii) Subsequent Events
The Company has evaluated subsequent events for recognition and disclosure through February 28, 2025, which is the date the financial statements were available to be issued.
Subsequent to December 31, 2024, Wilson Bank committed to expand the Chattanooga loan production office to a full service branch. As a part of this expansion the Bank entered into a lease for the location for the new full service branch and is currently remodeling the space. The costs associated with this expansion, including construction, equipment and lease expenses, are not expected to be significant.
(jj) Accounting Standard Updates
ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. As noted above, effective January 1, 2022 the Company adopted ASU 2016-13, which resulted in a $7.6 million decrease to the allowance for credit losses and a $6.2 million increase to the reserve for off-balance sheet exposures, resulting in a $1.0 million increase in retained earnings (net of taxes). See Note 2 - Loans and Allowance for Credit Losses for additional information.
ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” In March 2020, the FASB issued this ASU and has issued subsequent amendments thereto, which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance was effective for all entities as of March 12, 2020 through December 31, 2022. In December 2022, the FASB issued an update to Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting with Accounting Standards Update 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which updated the effective date to be March 12, 2020 through December 31, 2024. The Company implemented a transition plan to identify and modify its loans and other financial instruments, including certain indebtedness, with attributes that are either directly or indirectly influenced by LIBOR. The Company has moved all of its LIBOR-based loans to its preferred replacement index, a Secured Overnight Financing Rate ("SOFR") based index.
ASU 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method.” ASU 2022-01 was issued to expand the scope of assets eligible for portfolio layer method hedging to include all financial assets. The update also expands the current last-of-layer method that permits only one hedged layer to allow multiple hedged layers of a single closed portfolio. The last-of-layer method is renamed the portfolio layer method, because more than the last layer of a portfolio could be hedged. The guidance
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The adoption of ASU 2022-01 did not have a significant impact on our financial statements.
ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” ASU 2022-02 was issued to respond to feedback received from post-implementation review of Topic 326. The amendments eliminate the troubled debt restructuring (TDR) recognition and measurement guidance and now require that an entity evaluate whether the modification represents a new loan or a continuation of an existing loan. The amendments enhance existing disclosures and include new disclosure requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. To improve consistency for vintage disclosures, the ASU requires that public business entities disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. The adoption of ASU-2022-02 did not have a significant impact on the Company's financial statements.
ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, in June 2022, the FASB issued this pronouncement which clarifies the guidance in ASC 820 when measuring the fair value of equity securities subject to contractual restrictions that prohibit the sale of an equity security. This update also requires specific disclosures related to these types of securities. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The adoption of ASU 2022-03 did not have a significant impact on our financial statements.
ASU 2023-01, Leases (Topic 842): Common Control Arrangements, in March 2023, the FASB issued this pronouncement which require entities to amortize leasehold improvements associated with common control leases over the useful life to the common control group. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The adoption of ASU 2023-01 did not have a significant impact on our financial statements.
ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, in November 2023, the FASB issued this pronouncement which requires public entities to provide disclosures of significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment's profit or loss and assets that are currently required annually. The ASU requires a public entity to disclose, for each reportable segment, the significant expense categories and amounts that are regularly provided to the chief operating decision-maker (CODM) and included in each reported measure of a segment's profit or loss. ASU 2023-07 also requires disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. Early adoption is permitted. The guidance is applied retrospectively to all periods presented in the financial statements unless it is impracticable. The adoption of ASU 2023-07 did not have a significant impact on the Company's financial statements. See Note 23, Segment Information, for additional information.
ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, in December 2023, the FASB issued this pronouncement which amends the guidance for income tax disclosures to include certain required disclosures related to tax rate reconciliations, including certain categories of expense requiring disclosure, income taxes paid, including disclosure of taxes paid disaggregated by nation, state, and foreign taxes, and other disclosures for disaggregation of income before income tax expense (or benefit) and income tax expense (or benefit) by domestic and foreign allocation. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2024. Early adoption is permitted. An entity should apply ASU 2023-09 on a prospective basis once adopted with retrospective application permitted. The Company is assessing ASU 2023-09 and its potential impact on its accounting and disclosures.
ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), in November 2024, the FASB issued this pronouncement which requires public entities to disclose additional information about specific expense categories in the notes to the financial statements. The guidance (as further clarified through ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)) is effective for public business entities for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is assessing ASU 2024-03 and its impact on its consolidated financial statements and accompanying notes.
Other than those previously discussed, there were no other recently issued accounting pronouncements that are expected to materially impact the Company.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
(2)Loans and Allowance for Credit Losses
Loans are reported at their outstanding principal balances adjusted for unearned income, deferred fees net of related costs on originated loans, and the allowance for credit losses. Interest income on loans is accrued based on the principal balance outstanding. Loan origination fees, net of certain loan origination costs, are deferred and recognized as an adjustment to the related loan yield using a method which approximates the interest method.
For financial reporting purposes, the Company classifies its loan portfolio based on the underlying collateral utilized to secure each loan. This classification is consistent with that utilized in the Quarterly Report of Condition and Income filed by the Bank with the FDIC.
The classification of loans at December 31, 2024 and 2023 is as follows:
In Thousands
Residential 1-4 family real estate
$
1,133,966
$
959,218
Commercial and multi-family real estate
1,544,340
1,313,284
Construction, land development and farmland
941,193
901,336
Commercial, industrial and agricultural
144,619
127,659
1-4 family equity lines of credit
235,240
202,731
Consumer and other
106,235
104,373
Total loans before net deferred loan fees
4,105,593
3,608,601
Net deferred loan fees
(13,704
)
(13,078
)
Total loans
4,091,889
3,595,523
Less: Allowance for credit losses
(49,497
)
(44,848
)
Net loans
$
4,042,392
3,550,675
At December 31, 2024, variable rate and fixed rate loans totaled $3,466,953,000 and $638,640,000, respectively. At December 31, 2023, variable rate and fixed rate loans totaled $2,977,918,000 and $630,683,000, respectively.
Risk characteristics relevant to each portfolio segment are as follows:
Construction, land development and farmland: Loans for non-owner-occupied real estate construction or land development are generally repaid through cash flow related to the operation, sale or refinance of the property. The Company also finances construction loans for owner-occupied properties. A portion of the Company’s construction and land portfolio segment is comprised of loans secured by residential product types (residential land and single-family construction). With respect to construction loans to developers and builders that are secured by non-owner occupied properties that the Company may originate from time to time, the Company generally requires the borrower to have had an existing relationship with the Company and have a proven record of success. Construction and land development loans are underwritten utilizing independent appraisal reviews, sensitivity analysis of absorption and lease rates, market sales activity, and financial analysis of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the complete project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.
Residential 1-4 family real estate: Residential real estate loans represent loans to consumers or investors to finance a residence. These loans are typically financed on 15 to 30 year amortization terms, but generally with shorter maturities of 5 to 15 years. Many of these loans are extended to borrowers to finance their primary or secondary residence. Loans to an investor secured by a 1-4 family residence will be repaid from either the rental income from the property or from the sale of the property. This loan segment also includes closed-end home equity loans that are secured by a first or second mortgage on the borrower’s residence. This allows customers to borrow against the equity in their home. Loans in this portfolio segment are underwritten and approved based on a number of credit quality criteria including limits on maximum Loan-to-Value (LTV), minimum credit scores, and maximum debt to income. Real estate market
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
values as of the time the loan is made directly affect the amount of credit extended and, in addition, changes in these residential property values impact the depth of potential losses in this portfolio segment.
1-4 family equity lines of credit: This loan segment includes open-end home equity loans that are secured by a first or second mortgage on the borrower’s residence. This allows customers to borrow against the equity in their home utilizing a revolving line of credit. These loans are underwritten and approved based on a number of credit quality criteria including limits on maximum LTV, minimum credit scores, and maximum debt to income. Real estate market values as of the time the loan is made directly affect the amount of credit extended and, in addition, changes in these residential property values impact the depth of potential losses in this portfolio segment. Because of the revolving nature of these loans, as well as the fact that many represent second mortgages, this portfolio segment can contain more risk than the amortizing 1-4 family residential real estate loans.
Commercial and multi-family real estate: Commercial and multi-family real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans (which are discussed below), in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate.
Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type. This diversity helps reduce the Company’s exposure to adverse economic events that affect any single market or industry. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. The Company also utilizes third-party experts to provide insight and guidance about economic conditions and trends affecting the market areas it serves. In addition, management tracks the level of owner- occupied commercial real estate loans versus non-owner occupied loans. Non-owner occupied commercial real estate loans are loans secured by multifamily and commercial properties where the primary source of repayment is derived from rental income associated with the property (that is, loans for which 50 percent or more of the source of repayment comes from third party, nonaffiliated rental income) or the proceeds of the sale, refinancing, or permanent financing of the property. These loans are made to finance income-producing properties such as apartment buildings, office and industrial buildings, and retail properties. Owner-occupied commercial real estate loans are loans where the primary source of repayment is the cash flow from the ongoing operations and business activities conducted by the party, or affiliate of the party, who owns the property.
Commercial and industrial: The commercial and industrial loan portfolio segment includes commercial and industrial loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases or other expansion projects. Collection risk in this portfolio is driven by the creditworthiness of underlying borrowers, particularly cash flow from customers’ business operations. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral, if any, provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans, if any, may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and usually incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.
Consumer: The consumer loan portfolio segment includes non-real estate secured direct loans to consumers for household, family, and other personal expenditures. Consumer loans may be secured or unsecured and are usually structured with short or medium term maturities. These loans are underwritten and approved based on a number of consumer credit quality criteria including limits on maximum LTV on secured consumer loans, minimum credit scores, and maximum debt to income levels. Many traditional forms of consumer installment credit have standard monthly payments and fixed repayment schedules of one to five years. These loans are made with either fixed or variable interest rates that are based on specific indices. Installment loans fill a variety of needs, such as financing the purchase of an automobile, a boat, a recreational vehicle or other large personal items, or for consolidating debt. These loans may be unsecured or secured by an assignment of title, as in an automobile loan, or by money in a bank account. In addition to consumer installment loans, this portfolio segment also includes secured and unsecured personal lines of credit as well as overdraft protection lines. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
The following tables present the Company’s nonaccrual loans, certain credit quality indicators and past due loans as of December 31, 2024 and 2023.
Loans on Nonaccrual Status
In Thousands
Residential 1-4 family real estate
$
$
-
Commercial and multi-family real estate
3,616
-
Construction, land development and farmland
-
-
Commercial, industrial and agricultural
-
-
1-4 family equity lines of credit
-
Consumer and other
-
-
Total
$
4,818
$
-
Loans are placed on nonaccrual status when there is a significant deterioration in the financial condition of the borrower, which often is determined when the principal or interest on the loan is more than 90 days past due, unless the loan is both well-secured and in the process of collection. Generally, all interest accrued but not collected for loans that are placed on nonaccrual status, is reversed against current income. Interest income is subsequently recognized only to the extent cash payments are received while the loan is classified as nonaccrual, but interest income recognition is reviewed on a case-by-case basis. A nonaccrual loan is returned to accruing status once the loan has been brought current and collection is reasonably assured or the loan has been “well-secured” through other techniques. Past due status is determined based on the contractual due date per the underlying loan agreement.
At December 31, 2024, the Company had two collateral dependent loans totaling $4,366,000 that were on non-accruing interest status. In each case, at the date such loans were placed on nonaccrual status, the Company reversed all previously accrued interest income. The impact on net interest income for these loans was not material to the Company's results of operations for the year ended December 31, 2024. At December 31, 2023 the Company had no collateral dependent loans that were on non-accruing interest status. Accordingly, there was no impact on net interest income given the lack of these types of loans for the years ended December 31, 2023, and December 31, 2022.
Potential problem loans, which include nonperforming loans, amounted to approximately $48.0 million, or 1.17% of total loans, at December 31, 2024 compared to $5.9 million, or 0.16% of total loans, at December 31, 2023. Potential problem loans represent those loans with a well-defined weakness and where information about possible credit problems of borrowers has caused management to have serious doubts about the borrower’s ability to comply with present repayment terms. This definition is believed to be substantially consistent with the standards established by the FDIC, Wilson Bank’s primary federal regulator, for loans classified as special mention, substandard, or doubtful, excluding the impact of nonperforming loans.
The following table presents our loan balances by primary loan classification and the amount classified within each risk rating category. Pass rated loans include all credits other than those included in special mention, substandard and doubtful which are defined as follows:
•Special mention loans have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.
•Substandard loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize liquidation of the debt. Substandard loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
•Doubtful loans have all the characteristics of substandard loans with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The Company considers all doubtful loans to be collateral dependent and places the loans on nonaccrual status.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
Credit Quality Indicators
The following table presents loan balances classified within each risk rating category by primary loan type and based on year of origination as well as current period gross charge-offs by primary loan type and based on year of origination as of December 31, 2024.
In Thousands
Revolving
Prior
Loans
Total
December 31, 2024
Residential 1-4 family real estate:
Pass
$
281,651
136,736
278,556
220,533
76,275
118,960
12,941
1,125,652
Special mention
1,817
1,607
-
2,528
7,499
Substandard
-
-
-
-
Total Residential 1-4 family real estate
$
282,601
138,553
280,163
221,105
76,275
121,853
13,416
1,133,966
Residential 1-4 family real estate:
Current-period gross charge-offs
$
-
-
-
-
-
-
Commercial and multi-family real estate:
Pass
$
285,939
119,202
311,740
347,484
130,226
255,968
61,885
1,512,444
Special mention
-
3,615
23,228
-
4,275
-
31,823
Substandard
-
-
-
-
-
-
Total Commercial and multi-family real estate
$
285,939
122,817
334,968
347,484
130,931
260,316
61,885
1,544,340
Commercial and multi-family real estate:
Current-period gross charge-offs
$
-
-
-
-
-
-
-
-
Construction, land development and farmland:
Pass
$
283,747
199,987
153,429
58,913
13,992
12,486
215,394
937,948
Special mention
-
2,533
3,116
Substandard
-
-
-
-
-
-
Total Construction, land development and farmland
$
283,774
200,243
153,693
59,033
13,992
12,531
217,927
941,193
Construction, land development and farmland:
Current-period gross charge-offs
$
-
-
-
-
-
-
-
-
Commercial, industrial and agricultural:
Pass
$
26,697
12,781
29,634
4,071
9,610
22,762
38,586
144,141
Special mention
-
-
Substandard
-
-
-
-
-
-
Total Commercial, industrial and agricultural
$
26,844
12,912
29,707
4,081
9,621
22,762
38,692
144,619
Commercial, industrial and agricultural:
Current-period gross charge-offs
$
-
-
-
-
1-4 family equity lines of credit:
Pass
$
-
-
-
-
-
-
231,480
231,480
Special mention
-
-
-
-
-
-
2,754
2,754
Substandard
-
-
-
-
-
-
1,006
1,006
Total 1-4 family equity lines of credit
$
-
-
-
-
-
-
235,240
235,240
1-4 family equity lines of credit:
Current-period gross charge-offs
$
-
-
-
-
-
-
-
-
Consumer and other:
Pass
$
28,133
16,632
7,509
2,525
12,316
9,204
29,604
105,923
Special mention
Substandard
-
-
-
Total Consumer and other
$
28,142
16,715
7,650
2,560
12,345
9,218
29,605
106,235
Consumer and other:
Current-period gross charge-offs
$
-
-
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
The following table presents loan balances classified within each risk rating category based on year of origination as of December 31, 2024.
In Thousands
Prior
Revolving Loans
Total
December 31, 2024
Pass
$
906,167
485,338
780,868
633,526
242,419
419,380
589,890
4,057,588
Special mention
1,127
5,881
25,147
6,862
5,795
45,899
Substandard
1,080
2,106
Total
$
907,300
491,240
806,181
634,263
243,164
426,680
596,765
4,105,593
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
The following table presents loan balances classified within each risk rating category by primary loan type and based on year of origination as well as current period gross charge-offs by primary loan type and based on year of origination as of December 31, 2023.
In Thousands
Prior
Revolving Loans
Total
December 31, 2023
Residential 1-4 family real estate:
Pass
$
165,655
297,535
239,035
89,563
56,092
90,119
16,585
954,584
Special mention
1,558
-
3,731
Substandard
-
-
-
-
-
Total Residential 1-4 family real
estate
$
165,731
298,394
239,260
90,439
56,357
92,452
16,585
959,218
Residential 1-4 family real estate:
Current-period gross charge-offs
$
-
-
-
-
-
-
-
-
Commercial and multi-family real
estate:
Pass
$
103,050
321,767
378,418
143,178
91,640
217,645
57,320
1,313,018
Special mention
-
-
-
-
-
Substandard
-
-
-
-
-
-
Total Commercial and multi-
family real estate
$
103,050
321,767
378,573
143,178
91,640
217,756
57,320
1,313,284
Commercial and multi-family real
estate:
Current-period gross charge-offs
$
-
-
-
-
-
-
-
-
Construction, land development
and farmland:
Pass
$
231,337
306,056
99,456
26,710
7,586
10,141
219,999
901,285
Special mention
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
Total Construction, land
development and farmland
$
231,337
306,056
99,456
26,710
7,586
10,192
219,999
901,336
Construction, land development
and farmland:
Current-period gross charge-offs
$
-
-
-
-
-
-
-
-
Commercial, industrial and
agricultural:
Pass
$
16,811
34,507
7,460
12,272
17,066
7,593
31,832
127,541
Special mention
-
-
-
Substandard
-
-
-
-
-
-
-
-
Total Commercial, industrial and
agricultural
$
16,904
34,514
7,466
12,272
17,066
7,593
31,844
127,659
Commercial, industrial and
agricultural:
Current-period gross charge-offs
$
-
-
-
-
-
-
1-4 family equity lines of credit:
Pass
$
-
-
-
-
-
-
202,189
202,189
Special mention
-
-
-
-
-
-
Substandard
-
-
-
-
-
-
Total 1-4 family equity lines of
credit
$
-
-
-
-
-
-
202,731
202,731
1-4 family equity lines of credit:
Current-period gross charge-offs
$
-
-
-
-
-
-
-
-
Consumer and other:
Pass
$
27,998
15,511
5,331
14,497
4,728
6,381
29,638
104,084
Special mention
-
-
-
Substandard
-
-
-
Total Consumer and other
$
28,053
15,669
5,388
14,515
4,728
6,382
29,638
104,373
Consumer and other:
Current-period gross charge-offs
$
-
1,891
2,328
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
The following table presents loan balances classified within each risk rating category based on year of origination as of December 31, 2023.
In Thousands
Prior
Revolving
Loans
Total
December 31, 2023
Pass
$
544,851
975,376
729,700
286,220
177,112
331,879
557,563
3,602,701
Special mention
1,640
4,610
Substandard
-
1,290
Total
$
545,075
976,400
730,143
287,114
177,377
334,375
558,117
3,608,601
Age Analysis of Past Due Loans
In Thousands
30-59 Days Past Due
60-89 Days Past Due
Nonaccrual and Greater Than 89 Days
Total Nonaccrual and Past Due
Current
Total Loans
Recorded Investment Greater Than 89 Days and Accruing
December 31, 2024
Residential 1-4 family real estate
$
5,854
1,462
8,082
1,125,884
1,133,966
$
Commercial and multi-family real estate
-
3,616
3,618
1,540,722
1,544,340
-
Construction, land development and farmland
-
940,289
941,193
Commercial, industrial and agricultural
143,760
144,619
1-4 family equity lines of credit
2,381
232,859
235,240
Consumer and other
105,478
106,235
Total
$
8,308
2,744
5,549
16,601
4,088,992
4,105,593
$
December 31, 2023
Residential 1-4 family real estate
$
1,544
1,178
3,274
955,944
959,218
$
1,178
Commercial and multi-family real estate
5,846
-
-
5,846
1,307,438
1,313,284
-
Construction, land development and farmland
2,959
-
2,960
898,376
901,336
-
Commercial, industrial and agricultural
-
127,600
127,659
1-4 family equity lines of credit
201,845
202,731
Consumer and other
103,827
104,373
Total
$
11,322
1,409
13,571
3,595,030
3,608,601
$
1,409
Allowance for Credit Losses ("ACL") - Loans
The allowance for credit losses on loans is a contra-asset valuation account, calculated in accordance with ASC 326 that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. The amount of the allowance represents management's best estimate of current expected credit losses on loans considering available information from internal and external sources, relevant to assessing collectability over the loans' contractual terms, adjusted for expected prepayments when appropriate. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts. While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant factors. The allowance for credit losses is measured on a collective basis for portfolios of loans when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Expected credit losses for collateral dependent loans, including loans where the borrower is experiencing financial difficulty but foreclosure is not probable, are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.
The Company’s discounted cash flow methodology incorporates a probability of default and loss given default model, as well as expectations of future economic conditions, using reasonable and supportable forecasts. Together, the probability of default and loss given default models with the use of reasonable and supportable forecasts generate estimates for cash flows expected and not expected to be collected over the estimated life of a loan. Estimates of future expected cash flows ultimately reflect assumptions made concerning net credit losses over the life of a loan. The use of reasonable and supportable forecasts requires significant judgment.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
Management leverages economic projections from reputable and independent third parties to inform and provide its reasonable and supportable economic forecasts. The Company’s model reverts to a straight line basis for purposes of estimating cash flows beyond a period deemed reasonable and supportable. The Company forecasts probability of default and loss given default based on economic forecast scenarios over an eight quarter time period before reverting to a straight line basis for a four quarter time period. The duration of the forecast horizon, the period over which forecasts revert to a straight line basis, the economic forecasts that management utilizes, as well as additional internal and external indicators of economic forecasts that management considers, may change over time depending on the nature and composition of our loan portfolio. Changes in economic forecasts, in conjunction with changes in loan specific attributes, impact a loan’s probability of default and loss given default, which can drive changes in the determination of the ACL. Expectations of future cash flows are discounted at the loan’s effective interest rate. The resulting ACL represents the amount by which the loan’s amortized cost exceeds the net present value of a loan’s discounted cash flows expected to be collected. The ACL is recorded through a charge to provision for credit losses and is reduced by charge-offs, net of recoveries on loans previously charged-off. It is the Company’s policy to charge-off loan balances at the time they have been deemed uncollectible.
For segments where the discounted cash flow methodology is not used, a remaining life methodology is utilized. The remaining life method uses an average annual charge-off rate applied to the contractual term, further adjusted for estimated prepayments to determine the unadjusted historical charge-off rate for the remaining balance of assets.
The estimated credit losses for all loan segments are adjusted for changes in qualitative factors not inherently considered in the quantitative analyses. The qualitative categories and the measurements used to quantify the risks within each of these categories are subjectively selected by management. The data for each measurement may be obtained from internal or external sources. The current period measurements are evaluated and assigned a factor commensurate with the current level of risk relative to past measurements over time. The resulting qualitative adjustments are applied to the relevant collectively evaluated loan portfolios. These adjustments are based upon the following:
1.Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses.
2.Changes in international, national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments.
3.Changes in the nature and volume of the portfolio and in the terms of loans.
4.Changes in the experience, ability, and depth of lending management and other relevant staff.
5.Changes in the volume and severity of past-due loans, the volume of non-accrual loans, and the volume and severity of adversely classified or graded loans.
6.Changes in the quality of the Company's loan review system.
7.Changes in the value of underlying collateral for collateral-dependent loans.
8.The existence and effect of any concentrations of credit, and changes in the level of such concentrations.
9.The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the Company’s existing portfolio.
The qualitative allowance allocation, as determined by the processes noted above, is increased or decreased for each loan segment based on the assessment of these various qualitative factors.
Loans that do not share similar risk characteristics with the collectively evaluated pools are evaluated on an individual basis and are excluded from the collectively evaluated pools. Individual evaluations are generally performed for loans greater than $500,000 which have experienced significant credit deterioration. Such loans are evaluated for credit losses based on either discounted cash flows or the fair value of collateral. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral, less selling costs. For loans for which foreclosure is not probable, but for which repayment is expected to be provided substantially through the operation or sale of the collateral, the Company has elected the practical expedient under ASC 326 to estimate expected credit losses based on the fair value of collateral, with selling costs considered in the event sale of the collateral is expected.
In assessing the adequacy of the allowance for credit losses, the Company considers the results of the Company's ongoing independent loan review process. The Company undertakes this process both to ascertain those loans in the portfolio with elevated credit risk and
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
to assist in its overall evaluation of the risk characteristics of the entire loan portfolio. Its loan review process includes the judgment of management, independent internal loan reviewers and reviews that may have been conducted by third-party reviewers including regulatory examiners. The Company incorporates relevant loan review results in the allowance.
In accordance with CECL, losses are estimated over the remaining contractual terms of loans, adjusted for prepayments and curtailment. The contractual term excludes expected extensions, renewals and modifications.
Credit losses are estimated on the amortized cost basis of loans, which includes the principal balance outstanding and deferred loan fees and costs.
While management utilizes its best judgment and information available, the ultimate appropriateness of the allowance is dependent upon a variety of factors beyond management's control, including the performance of the loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities toward loan classifications.
Loans are charged off when management believes that the full collectability of the loan is unlikely. As such, a loan may be partially charged-off after a “confirming event” has occurred which serves to validate that full repayment pursuant to the terms of the loan is unlikely.
Transactions in the allowance for credit losses for the years ended December 31, 2024, 2023 and 2022 are summarized as follows:
In Thousands
Residential 1-4 Family Real Estate
Commercial and Multi-family Real Estate
Construction, Land Development and Farmland
Commercial, Industrial and Agricultural
1-4 family Equity Lines of Credit
Consumer and Other
Total
December 31, 2024
Allowance for credit losses - loans:
Beginning balance
$
8,765
17,422
14,027
1,533
1,809
1,292
44,848
Provision
2,781
5,192
Charge-offs
(24
)
-
-
(42
)
-
(956
)
(1,022
)
Recoveries
-
-
Ending balance
$
9,708
20,203
14,663
1,702
1,890
1,331
49,497
In Thousands
Residential 1-4 Family Real Estate
Commercial and Multi-family Real Estate
Construction, Land Development and Farmland
Commercial, Industrial and Agricultural
1-4 family Equity Lines of Credit
Consumer and Other
Total
December 31, 2023
Allowance for credit losses - loans:
Beginning balance
$
7,310
15,299
13,305
1,437
1,170
1,292
39,813
Provision
1,435
2,123
1,276
6,300
Charge-offs
-
-
-
(30
)
-
(2,328
)
(2,358
)
Recoveries
-
-
1,052
1,093
Ending balance
$
8,765
17,422
14,027
1,533
1,809
1,292
44,848
In Thousands
Residential 1-4 Family Real Estate
Commercial and Multi-family Real Estate
Construction, Land Development and Farmland
Commercial, Industrial and Agricultural
1-4 family Equity Lines of Credit
Consumer and Other
Total
December 31, 2022
Allowance for credit losses - loans:
Beginning balance
$
9,242
16,846
9,757
1,329
1,098
1,360
39,632
Impact of adopting ASC 326
(3,393
)
(3,433
)
(266
)
(324
)
(367
)
(7,564
)
Provision
1,353
1,886
3,795
(117
)
1,343
8,656
Charge-offs
(8
)
-
(1
)
(21
)
-
(1,527
)
(1,557
)
Recoveries
-
-
Ending balance
$
7,310
15,299
13,305
1,437
1,170
1,292
39,813
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
The following tables present the amortized cost basis of collateral dependent loans at December 31, 2024 and December 31, 2023 which are individually evaluated to determine expected credit losses:
In Thousands
Real Estate
Other
Total
December 31, 2024
Residential 1-4 family real estate
$
1,485
-
1,485
Commercial and multi-family real estate
31,273
-
31,273
Construction, land development and farmland
2,521
-
2,521
Commercial, industrial and agricultural
-
-
-
1-4 family equity lines of credit
2,009
-
2,009
Consumer and other
-
-
-
$
37,288
-
37,288
In Thousands
Real Estate
Other
Total
December 31, 2023
Residential 1-4 family real estate
$
1,949
-
1,949
Commercial and multi-family real estate
2,889
-
2,889
Construction, land development and farmland
-
-
-
Commercial, industrial and agricultural
-
-
-
1-4 family equity lines of credit
-
-
-
Consumer and other
-
-
-
$
4,838
-
4,838
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
Loan Modifications to Borrowers Experiencing Financial Difficulty
Effective January 1, 2023, the Company adopted ASU 2022-02 which eliminated the accounting guidance for TDRs and requires disclosures for certain loan modifications when a borrower is experiencing financial difficulty.
Occasionally, the Company modifies loans to borrowers in financial distress by providing, principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.
In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. For the loans included in the "combination" columns below, multiple types of modifications have been made on the same loan within the current reporting period. The combination is at least two of the following: a term extension, principal forgiveness, an other-than-insignificant payment delay and/or an interest rate reduction.
The following table presents the amortized cost basis of loans at December 31, 2024 and December 31, 2023 that were both experiencing financial difficulty and modified during the twelve months ended December 31, 2024 or twelve months ended December 31, 2023, by class and type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below.
(In Thousands)
Twelve Months Ended December 31, 2024
Principal
Forgiveness
Payment
Delay
Term
Extension
Interest Rate
Reduction
Combination
Term
Extension and
Principal
Forgiveness
Combination Term Extension and Interest Rate Reduction
Total Class of Financing Receivable
Residential 1-4 family real estate
$
-
$
$
1,485
$
-
$
-
$
-
0.17
%
Commercial and multi-family real estate
-
-
23,604
-
-
-
1.53
%
Construction, land development and farmland
-
-
-
-
-
-
-
%
Commercial, industrial and agricultural
-
-
-
-
-
-
-
%
1-4 family equity lines of credit
-
-
-
-
-
-
-
%
Consumer and other
-
-
-
-
-
-
-
%
Total
$
-
$
$
25,089
$
-
$
-
$
-
0.62
%
As of December 31, 2024, the Company has not committed to lend additional amounts to the borrowers included in the previous table.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
(In Thousands)
Twelve Months Ended December 31, 2023
Principal Forgiveness
Payment Delay
Term Extension
Interest Rate Reduction
Combination Term Extension and Principal Forgiveness
Combination Term Extension and Interest Rate Reduction
Total Class of Financing Receivable
Residential 1-4 family real estate
$
-
$
$
-
$
-
$
-
$
-
0.10
%
Commercial and multi-family real estate
-
2,406
-
-
-
-
0.18
%
Construction, land development and farmland
-
-
-
-
-
-
-
%
Commercial, industrial and agricultural
-
-
-
-
-
0.07
%
1-4 family equity lines of credit
-
-
-
-
-
-
-
%
Consumer and other
-
-
-
-
-
-
-
%
Total
$
-
$
3,353
$
$
-
$
-
$
-
0.10
%
As of December 31, 2023 the Company had not committed to lend additional amounts to the borrowers included in the previous table.
The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.
The following table presents the performance of such loans that have been modified within the last twelve months as of December 31, 2024:
In Thousands
December 31, 2024
30-59 Days Past Due
60-89 Days Past Due
Greater Than 89 Days Past Due
Total Past Due
Residential 1-4 family real estate
$
-
$
-
$
-
$
-
Commercial and multi-family real estate
-
-
-
-
Construction, land development and farmland
-
-
-
-
Commercial, industrial and agricultural
-
-
-
-
1-4 family equity lines of credit
-
-
-
-
Consumer and other
-
-
-
-
Total
$
-
$
-
$
-
$
-
As evidenced above, no loans that were modified within the 12 months prior to December 31, 2024 were thirty (30) days or more past due at December 31, 2024.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
The following table presents the performance of such loans that have been modified for the 12 months ended December 31, 2023:
In Thousands
December 31, 2023
30-59 Days Past Due
60-89 Days Past Due
Greater Than 89 Days Past Due
Total Past Due
Residential 1-4 family real estate
$
-
$
-
$
-
$
-
Commercial and multi-family real estate
-
-
-
-
Construction, land development and farmland
-
-
-
-
Commercial, industrial and agricultural
-
-
-
-
1-4 family equity lines of credit
-
-
-
-
Consumer and other
-
-
-
-
Total
$
-
$
-
$
-
$
-
As evidenced above, no loans that were modified within the twelve months prior to December 31, 2023 were thirty (30) days or more past due at December 31, 2023.
The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the twelve months ended December 31, 2024 (dollars in thousands):
Twelve Months Ended December 31, 2024
Principal
Forgiveness
Weighted-Average
Interest Rate Reduction
Weighted-Average Months of Term Extension
Weighted-Average Months of Payment Delay
Residential 1-4 family real estate
$
-
-
%
Commercial and multi-family real estate
-
-
-
Construction, land development and farmland
-
-
-
-
Commercial, industrial and agricultural
-
-
-
-
1-4 family equity lines of credit
-
-
-
-
Consumer and other
-
-
-
-
Total
$
-
-
%
The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the twelve months ended December 31, 2023 (dollars in thousands):
Twelve Months Ended December 31, 2023
Principal Forgiveness
Weighted-Average
Interest Rate
Reduction
Weighted-Average
Months of Term
Extension
Weighted-Average Months of Payment Delay
Residential 1-4 family real estate
$
-
-
%
-
Commercial and multi-family real estate
-
-
-
Construction, land development and farmland
-
-
-
-
Commercial, industrial and agricultural
-
-
-
1-4 family equity lines of credit
-
-
-
-
Consumer and other
-
-
-
-
Total
$
-
-
%
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
The following table presents the amortized cost basis of loans that had a payment default during the twelve months ended December 31, 2024 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.
In Thousands
Twelve Months Ended December 31, 2024
Principal Forgiveness
Payment Delay
Term Extension
Interest Rate Reduction
Residential 1-4 family real estate
$
-
$
-
$
-
$
-
Commercial and multi-family real estate
-
-
-
-
Construction, land development and farmland
-
-
-
-
Commercial, industrial and agricultural
-
-
-
-
1-4 family equity lines of credit
-
-
-
-
Consumer and other
-
-
-
-
Total
$
-
$
-
$
-
$
-
There were no payment defaults during the twelve months ended December 31, 2024 on loans that had been modified in the twelve months prior to December 31, 2024.
The following table presents the amortized cost basis of loans that had a payment default during the twelve months ended December 31, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.
In Thousands
Twelve Months Ended December 31, 2023
Principal Forgiveness
Payment Delay
Term Extension
Interest Rate Reduction
Residential 1-4 family real estate
$
-
$
-
$
-
$
-
Commercial and multi-family real estate
-
-
-
-
Construction, land development and farmland
-
-
-
-
Commercial, industrial and agricultural
-
-
-
-
1-4 family equity lines of credit
-
-
-
-
Consumer and other
-
-
-
-
Total
$
-
$
-
$
-
$
-
There were no payment defaults during the twelve months ended December 31, 2023 on loans that had been modified in the twelve months prior to December 31, 2023.
Upon the Company's determination that a modified loan (or a portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off. Therefore, the amortized costs basis of the loan is reduced by the amount deemed uncollectible and the allowance for credit losses is adjusted by the same amount.
TDR Disclosures Prior to Adoption of ASU 2022-02
Prior to the adoption of ASU 2022-02 the restructuring of a loan was considered a TDR if both (i) the borrower was experiencing financial difficulties and (ii) the creditor had granted a concession. Concessions may have included interest rate reductions or below market interest rates, principal forgiveness, extension of terms and other actions intended to minimize potential losses.
The Company did not modify any loan that was considered a TDR during the twelve months ended December 31, 2022.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
The following table outlines the amount of each TDR categorized by loan classification for the year ended December 31, 2022 (dollars in thousands):
December 31, 2022
Number of Loans
Pre Modification Outstanding Recorded Investment
Post Modification Outstanding Recorded Investment, Net of Related Allowance
Residential 1-4 family real estate
-
$
-
$
-
Commercial and multi-family real estate
-
-
-
Construction, land development and farmland
-
-
-
Commercial, industrial and agricultural
-
-
-
1-4 family equity lines of credit
-
-
-
Consumer and other
-
-
-
Total
-
$
-
$
-
As of December 31, 2022 the Company did not have any loan previously classified as a TDR default within twelve months of the restructuring. A default is defined as an occurrence which violates the terms of the receivable’s contract.
As of December 31, 2024 the Bank had $1,073,000 of consumer mortgage loans in the process of foreclosure. At December 31, 2023 the Bank had no consumer mortgage loans in the process of foreclosure.
The Company’s principal customers are primarily in Middle Tennessee. Credit is extended to businesses and individuals and is evidenced by promissory notes. The terms and conditions of the loans including collateral vary depending upon the purpose of the credit and the borrower’s financial condition. In the normal course of business, Wilson Bank has made loans at prevailing interest rates and terms to directors and executive officers of the Company and to their affiliates. The aggregate amount of these loans was $9,388,000 and $7,768,000 at December 31, 2024 and 2023, respectively. None of these loans were restructured, charged-off or involved more than the normal risk of collectibility or presented other unfavorable features during the three years ended December 31, 2024.
An analysis of the activity with respect to such loans to related parties is as follows:
In Thousands
December 31,
Balance, January 1
$
7,768
$
6,859
New loans and renewals during the year
13,562
9,860
Repayments (including loans paid by renewal) during the year
(11,942
)
(8,951
)
Balance, December 31
$
9,388
$
7,768
In 2024, 2023 and 2022, Wilson Bank originated mortgage loans for sale into the secondary market of $52,549,000, $73,984,000 and $106,601,000, respectively. The fees and gain on sale of these loans totaled $3,068,000, $2,635,000 and $2,973,000 in 2024, 2023 and 2022, respectively.
In some instances, Wilson Bank sells loans that contain provisions which permit the buyer to seek recourse against Wilson Bank in certain circumstances. At December 31, 2024 and 2023, total mortgage loans sold with recourse in the secondary market aggregated $56,896,000 and $69,308,000, respectively. At December 31, 2024, Wilson Bank has not been required to repurchase a significant amount of the mortgage loans originated by Wilson Bank and sold in the secondary market. Management expects no significant losses to result from these recourse provisions.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
(3)Debt Securities
Debt securities have been classified in the consolidated balance sheet according to management’s intent. Debt securities at December 31, 2024 consist of the following:
Securities Available-For-Sale
In Thousands
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
U.S. Treasury and other U.S. government agencies
$
4,927
-
4,538
U.S. Government-sponsored enterprises (GSEs)
183,912
21,947
161,973
Mortgage-backed securities
520,729
66,588
454,196
Asset-backed securities
51,110
50,817
Corporate bonds
2,500
-
2,396
Obligations of states and political subdivisions
184,163
-
30,190
153,973
$
947,341
119,619
827,893
The Company’s classification of securities at December 31, 2023 was as follows:
Securities Available-For-Sale
In Thousands
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
U.S. Treasury and other U.S. government agencies
$
4,901
-
4,429
U.S. Government-sponsored enterprises (GSEs)
167,738
-
23,570
144,168
Mortgage-backed securities
480,759
63,959
417,030
Asset-backed securities
51,183
1,403
49,973
Corporate bonds
2,500
-
2,423
Obligations of states and political subdivisions
223,358
30,697
193,058
$
930,439
120,178
811,081
As of December 31, 2024 and December 31, 2023, there was no allowance for credit losses on available-for-sale securities.
Included in mortgage-backed securities are collateralized mortgage obligations totaling $146,369,000 (fair value of $126,426,000) and $145,179,000 (fair value of $124,005,000) at December 31, 2024 and 2023, respectively.
The amortized cost and estimated market value of debt securities at December 31, 2024, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities of mortgage and asset-backed securities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
In Thousands
Securities Available-For-Sale
Amortized Cost
Fair Value
Due in one year or less
$
5,566
5,394
Due after one year through five years
126,543
114,384
Due after five years through ten years
277,680
242,946
Due after ten years
537,552
465,169
$
947,341
827,893
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
Results from sales of debt securities are as follows:
In Thousands
Gross proceeds
$
86,248
32,740
42,728
Gross realized gains
$
4,587
-
Gross realized losses
(7,329
)
(1,026
)
(1,620
)
Net realized gains (losses)
$
(2,742
)
(1,009
)
(1,620
)
Securities carried on the balance sheet of approximately $581,017,000 (approximate market value of $499,585,000) and $500,046,000 (approximate market value of $429,705,000) were pledged to secure public deposits and for other purposes as required or permitted by law at December 31, 2024 and 2023, respectively.
At December 31, 2024, there were no holdings of securities of any one issuer, other than U.S. Government and its agencies, in an amount greater than 10% of shareholders' equity.
Included in the securities above are $104,000,000 (approximate market value of $87,000,000) and $116,000,000 (approximate market value of $99,000,000) at December 31, 2024 and 2023, respectively, in obligations of political subdivisions located within the states of Tennessee, Alabama, and Texas.
The following table shows the gross unrealized losses and fair value of the Company’s available-for-sale securities with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2024 and 2023.
In Thousands, Except Number of Securities
Less than 12 Months
12 Months or More
Total
Fair
Value
Unrealized
Losses
Number of
Securities
Included
Fair
Value
Unrealized
Losses
Number of
Securities
Included
Fair
Value
Unrealized
Losses
Available-for-Sale Securities:
Debt securities:
U.S. Treasury and other U.S. government agencies
$
-
$
-
-
$
4,538
$
$
4,538
$
U.S. Government-sponsored enterprises (GSEs)
12,226
147,828
21,689
160,054
21,947
Mortgage-backed securities
90,776
2,043
348,035
64,545
438,811
66,588
Asset-backed securities
14,103
17,170
31,273
Corporate bonds
-
-
-
2,396
2,396
Obligations of states and political subdivisions
5,108
148,865
30,113
153,973
30,190
$
122,213
$
2,453
$
668,832
$
117,166
$
791,045
$
119,619
In Thousands, Except Number of Securities
Less than 12 Months
12 Months or More
Total
Fair
Value
Unrealized
Losses
Number of
Securities
Included
Fair
Value
Unrealized
Losses
Number of
Securities
Included
Fair
Value
Unrealized
Losses
Available-for-Sale Securities:
Debt securities:
U.S. Treasury and other U.S. government agencies
$
-
$
-
-
$
4,429
$
$
4,429
$
U.S. Government-sponsored enterprises (GSEs)
-
-
-
144,169
23,569
144,169
23,569
Mortgage-backed securities
8,889
390,557
63,897
399,446
63,960
Asset-backed securities
2,500
30,666
1,359
33,166
1,403
Corporate bonds
-
-
-
2,423
2,423
Obligations of states and political subdivisions
5,375
171,157
30,683
176,532
30,697
$
16,764
$
$
743,401
$
120,057
$
760,165
$
120,178
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
The applicable date for determining when securities are in an unrealized loss position is December 31, 2024 and 2023. As such, it is possible that a security had a market value less than its amortized cost on other days during the twelve-month periods ended December 31, 2024 and 2023, but is not in the "Investments with an Unrealized Loss of less than 12 months" category above.
As shown in the tables above, at December 31, 2024 and 2023, the Company had unrealized losses of $119.6 million and $120.2 million on $791.0 million and $760.2 million, respectively, of securities in an unrealized loss position at those dates. As described in Note 1. Summary of Significant Accounting Policies, for any security classified as available-for-sale that is in an unrealized loss position at the balance sheet date, the Company assesses whether or not it intends to sell the security, or more-likely-than-not will be required to sell the security, before recovery of its amortized cost basis which would require a write-down to fair value through net income. Because the Company currently does not intend to sell those securities that have an unrealized loss at December 31, 2024, and it is not more-likely-than-not that the Company will be required to sell the securities before recovery of their amortized cost bases, which may be maturity, the Company has determined that no write-down is necessary. These securities must then be evaluated for credit and non-credit related impairment. Securities with one or more of the following characteristics will be deemed to have only non-credit related impairment and will be excluded from further evaluation from credit impairment: Guaranteed by the U.S. government, insured by the FDIC, a review of market price discount to principal face value does not indicate the market's expectation of imminent principal loss, risk weighting under the FDIC’s Simplified Supervisory Formula Approach, and average credit rating. Securities that are not excluded by the aforementioned characteristics are further evaluated for credit deterioration, which would require the recognition of an allowance for credit losses. The unrealized losses associated with securities at December 31, 2024 are driven by changes in interest rates and not due to the credit quality of the securities, and accordingly, no allowance for credit losses is considered necessary related to available-for-sale securities at December 31, 2024. These securities will continue to be monitored as a part of the Company's ongoing evaluation of credit quality.
Mortgage-Backed Securities
At December 31, 2024, approximately 98% of the mortgage-backed securities held by the Company were issued by U.S. government-sponsored entities and agencies. Because the decline in fair value of these securities is primarily attributable to interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is not more-likely-than-not that it will be required to sell the securities before their anticipated recovery, the Company has determined no allowance for credit losses is necessary at December 31, 2024.
The Company's mortgage-backed securities portfolio includes non-agency collateralized mortgage obligations with a fair value of $10.8 million which had unrealized losses of approximately $1.5 million at December 31, 2024. These non-agency mortgage-backed securities were rated A or higher at December 31, 2024. The Company monitors to ensure it has adequate credit support and does not have the intent to sell these securities and it is not more-likely-than-not that it will be required to sell the securities before their anticipated recovery. The issuers continue to make timely principal and interest payments on the bonds.
Obligations of States and Political Subdivisions
Unrealized losses on municipal bonds have not been recognized into income because the issuers' bonds are of high credit quality (rated A or higher) or the bonds have been refunded. Management does not intend to sell the securities and it is not more-likely-than-not that management will be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payments on the bonds. The fair value is expected to recover as the bonds approach maturity.
Asset-Backed Securities
The Company's asset-backed securities portfolio includes agency and non-agency asset backed and other amortizing debt securities with a fair value of $50.8 million which had unrealized losses of approximately $0.4 million at December 31, 2024. The Company monitors these securities to ensure it has adequate credit support and does not have the intent to sell these securities and it is not more-likely-than-not that it will be required to sell the securities before their anticipated recovery. The issuers continue to make timely principal and interest payments on the bonds.
Corporate Bonds
The Company's lone corporate debt security with a fair value of $2.4 million had an unrealized loss of approximately $0.1 million at December 31, 2024. The Company monitors this security to ensure it has adequate credit support and does not have the intent to sell this security and it is not more-likely-than-not that it will be required to sell the security before its anticipated recovery. The issuer continues to make timely principal and interest payments on the bond.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
(4)Restricted Equity Securities
Restricted equity securities consists of stock of the FHLB of Cincinnati amounting to $3,876,000 and $3,436,000 at December 31, 2024 and 2023, respectively. The stock can be sold back only at par or a value as determined by the issuing institution and only to the respective financial institution or to another member institution. These securities are recorded at cost.
(5)Premises and Equipment
The detail of premises and equipment at December 31, 2024 and 2023 is as follows:
In Thousands
Land
$
20,762
$
20,822
Buildings
52,664
49,784
Leasehold improvements
1,934
1,710
Furniture and equipment
19,097
16,524
Automobiles
Construction-in-progress
2,469
95,268
91,654
Less accumulated depreciation
(33,719
)
(29,256
)
$
61,549
$
62,398
During 2024, 2023 and 2022, payments of $1,100,000, $1,442,000 and $379,000, respectively, were made to an entity owned by a director for the construction of buildings utilized by Wilson Bank and repair work on existing buildings utilized by Wilson Bank.
Depreciation expense was $4,040,000, $4,221,000 and $4,370,000 for the years ended December 31, 2024, 2023 and 2022, respectively.
(6)Goodwill
The Company's intangible assets result from the excess of purchase price over the applicable book value of the net assets acquired related to outside ownership of two previously 50% owned subsidiaries that the Company acquired 100% of in 2005.
In Thousands
Goodwill:
Balance at January 1,
$
4,805
4,805
Goodwill acquired during year
-
-
Impairment loss
-
-
Balance at December 31,
$
4,805
4,805
(7)Leases
Lessee Accounting
The majority of leases in which the Company is the lessee are comprised of real estate property for branches and office space and are recorded as operating leases with terms extending beyond 2029. The Company has two finance leases, which were entered into in 2022 and 2024, with lease terms through 2038 and 2046. These leases are classified as operating or finance leases at commencement. Right-of-use assets representing the right to use the underlying asset and lease liabilities representing the obligation to make future lease payments are recognized on the balance sheet. These assets and liabilities are estimated based on the present value of future lease payments discounted using the Company's incremental secured borrowing rates as of the commencement date of the lease. Certain lease agreements contain renewal options which are considered in the determination of the lease term if they are deemed reasonably certain to be exercised. The Company has elected not to recognize leases with an original term of less than 12 months on the balance sheet.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
The following table represents lease assets and lease liabilities as of December 31, 2024 and 2023 (in thousands).
Lease right-of-use assets
Classification
December 31, 2024
December 31, 2023
Operating lease right-of-use assets
Other Assets
$
2,556
3,542
Finance lease right-of-use assets
Other Assets
2,889
2,123
Lease liabilities
Classification
December 31, 2024
December 31, 2023
Operating lease liabilities
Other Liabilities
$
2,750
3,736
Finance lease liabilities
Other Liabilities
3,076
2,251
The total lease cost related to operating leases and short term leases is recognized on a straight-line basis over the lease term. For finance leases, right-of-use assets are amortized on a straight-line basis over the lease term and interest imputed on the lease liability is recognized using the effective interest method. The components of the Bank's total lease cost were as follows for the years ended December 31, 2024 and 2023.
In Thousands
Operating lease cost
$
Finance lease cost:
Right-of-use asset amortization
Interest expense
Short-term lease cost
-
-
-
Net lease cost
$
The weighted average remaining lease term and weighted average discount rate for operating leases at December 31, 2024 and 2023 were as follows:
Operating Leases
Weighted average remaining lease term (in years)
7.95
10.10
Weighted average discount rate
4.08
%
4.31
%
The weighted average remaining lease term and weighted average discount rate for finance leases at December 31, 2024 and 2023 were as follows:
Finance Leases
Weighted average remaining lease term (in years)
20.05
23.34
Weighted average discount rate
3.47
%
2.90
%
Cash flows related to operating and finance leases during the year ended December 31, 2024 and 2023 were as follows:
In Thousands
Operating cash flows related to operating leases
$
Operating cash flows related to finance leases
Financing cash flows related to finance leases
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
Future undiscounted lease payments for operating leases with initial terms of more than 12 months at December 31, 2024 and 2023 were as follows:
In Thousands
Operating Leases
$
Thereafter
1,854
Total undiscounted lease payments
3,223
4,658
Less: imputed interest
(473
)
(922
)
Net lease liabilities
$
2,750
$
3,736
Future undiscounted lease payments for finance leases with initial terms of more than 12 months at December 31, 2024 and 2023 were as follows:
In Thousands
Finance Leases
$
$
Thereafter
3,424
2,676
Total undiscounted lease payments
4,326
3,199
Less: imputed interest
(1,250
)
(948
)
Net lease liabilities
$
3,076
$
2,251
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
(8)Mortgage Servicing Rights
The Company sells residential mortgage loans in the secondary market and typically retains the rights to service the loans. Mortgage loans serviced for others are not reported as assets. Mortgage servicing rights are recognized on the balance sheet within other assets. The principal balances of these loans as of December 31, 2024 and December 31, 2023 are as follows:
In Thousands
December 31, 2024
December 31, 2023
Mortgage loan portfolios serviced for:
FHLMC
$
114,771
99,441
For the years ended December 31, 2024 and 2023, the change in carrying value of the Company's mortgage servicing rights accounted for under the amortization method was as follows:
In Thousands
December 31, 2024
December 31, 2023
Balance at beginning of period
$
1,083
1,065
Servicing rights retained from loans sold
Amortization
(343
)
(227
)
Valuation Allowance Provision
-
-
Balance at end of period
$
1,139
1,083
Fair value, end of period
$
1,654
1,398
The key data and assumptions used in estimating the fair value of the Company's mortgage servicing rights as of December 31, 2024 and 2023 were as follows:
December 31, 2024
December 31, 2023
Prepayment speed
8.08
%
7.92
%
Weighted-average life (in years)
8.42
8.55
Weighted-average note rate
5.11
%
4.73
%
Weighted-average discount rate
9.00
%
9.00
%
(9)Deposits
Deposits at December 31, 2024 and 2023 are summarized as follows:
In Thousands
Demand deposits
$
383,168
389,725
Savings accounts
343,894
320,301
Negotiable order of withdrawal accounts
968,198
934,709
Money market demand accounts
1,325,713
1,156,694
Certificates of deposit $250,000 or greater
772,678
548,269
Other certificates of deposit
954,124
942,346
Individual retirement accounts $250,000 or greater
15,543
11,018
Other individual retirement accounts
66,716
64,044
Total
$
4,830,034
4,367,106
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
Principal maturities of certificates of deposit and individual retirement accounts at December 31, 2024 are as follows:
(In Thousands)
Maturity
Total
$
1,500,899
223,841
63,366
15,961
4,994
$
1,809,061
The aggregate amount of overdrafts reclassified as loans receivable was $1,147,000 and $858,000 at December 31, 2024 and 2023, respectively. The aggregate balances of related party deposits at December 31, 2024 and 2023 were $14,668,000 and $15,640,000, respectively.
As of December 31, 2024 and 2023, Wilson Bank was not required to maintain a cash balance with the Federal Reserve.
(10)Non-Interest Income and Non-Interest Expense
The significant components of non-interest income and non-interest expense for the years ended December 31, 2024, 2023 and 2022 are presented below:
In Thousands
Non-interest income:
Service charges on deposits
$
8,198
7,890
7,382
Brokerage income
8,562
7,184
6,929
Debit and credit card interchange income, net
8,627
8,490
8,416
Other fees and commissions
1,590
1,408
1,653
BOLI and annuity earnings
1,817
1,667
1,346
Loss on sale of securities, net
(2,742
)
(1,009
)
(1,620
)
Fees and gains on sales of mortgage loans
3,068
2,635
2,973
Mortgage servicing income (loss), net
(1
)
(28
)
Gain (loss) on sale of fixed assets, net
(303
)
(55
)
Gain (loss) on sale of other assets, net
(8
)
(10
)
Other income (loss)
(69
)
$
28,954
28,289
27,281
In Thousands
Non-interest expense:
Employee salaries and benefits
$
67,342
59,501
56,707
Equity-based compensation
1,567
1,528
1,864
Occupancy expenses
5,733
6,532
5,563
Furniture and equipment expenses
3,038
3,225
3,400
Data processing expenses
9,477
8,797
7,337
Advertising & public relations expenses
3,512
3,714
3,455
Accounting, legal & consulting expenses
1,550
1,789
1,409
FDIC insurance
3,129
3,120
1,527
Directors’ fees
Other operating expenses
12,257
12,032
11,058
$
108,421
100,951
92,970
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
(11)Income Taxes
The components of the net deferred tax asset at December 31, 2024 and 2023 were as follows:
In Thousands
Deferred tax asset:
Federal
$
36,851
36,034
State
11,950
11,641
48,801
47,675
Deferred tax liability:
Federal
(2,068
)
(1,654
)
State
(685
)
(548
)
(2,753
)
(2,202
)
Net deferred tax asset
$
46,048
45,473
The tax effects of each type of significant item that gave rise to deferred tax assets (liabilities) at December 31, 2024 and 2023 were:
In Thousands
Financial statement allowance for credit losses in excess of tax allowance
$
12,752
11,509
Excess of depreciation deducted for tax purposes over the amounts deducted in the financial statements
(2,093
)
(1,546
)
Financial statement deduction for deferred compensation in excess of deduction for tax purposes
1,607
1,487
Financial statement income on FHLB stock dividends not recognized for tax purposes
(327
)
(327
)
Financial statement off-balance sheet exposure allowance for credit losses in excess of tax allowance
Unrealized loss on securities available-for-sale
31,217
31,195
Equity based compensation
1,526
1,355
Other items, net
Net deferred tax asset
$
46,048
45,473
The components of income tax expense (benefit) at December 31, 2024, 2023 and 2022 are summarized as follows:
In Thousands
Federal
State
Total
Current
$
14,919
2,208
17,127
Deferred
(386
)
(165
)
(551
)
Total
$
14,533
2,043
16,576
Current
$
14,023
1,945
15,968
Deferred
(1,458
)
(571
)
(2,029
)
Total
$
12,565
1,374
13,939
Current
$
15,096
2,011
17,107
Deferred
(1,565
)
(486
)
(2,051
)
Total
$
13,531
1,525
15,056
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
A reconciliation of actual income tax expense of $16,576,000, $13,939,000 and $15,056,000 for the years ended December 31, 2024, 2023 and 2022, respectively, to the “expected” tax expense (computed by applying the Federal statutory rate of 21% for 2024, 2023 and 2022 to earnings before income taxes) is as follows:
In Thousands
Computed “expected” tax expense
$
15,352
13,204
14,301
State income taxes, net of Federal income tax benefit
1,659
1,120
1,117
Tax exempt interest, net of interest expense exclusion
(180
)
(190
)
(274
)
Earnings on cash surrender value of life insurance
(376
)
(344
)
(273
)
Expenses not deductible for tax purposes
Equity based compensation
(23
)
(46
)
(55
)
Other
$
16,576
13,939
15,056
Total income tax expense (benefit) for 2024, 2023 and 2022, includes $(717,000), $(264,000) and $(423,000) of expense (benefit) related to the realized gain and loss on sale of securities, respectively.
As of December 31, 2024, 2023 and 2022 the Company has not accrued or recognized interest or penalties related to uncertain tax positions. It is the Company’s policy to recognize interest and/or penalties related to income tax matters in income tax expense.
No valuation allowance for deferred tax assets was recorded at December 31, 2024 and 2023 as management believes it is more likely than not that all of the deferred tax assets will be realized against deferred tax liabilities and projected future taxable income. There were no unrecognized tax benefits during any of the reported periods.
The Company and Wilson Bank file income tax returns in the United States (“U.S.”), as well as in the State of Tennessee. The Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years before 2021.
(12)Commitments and Contingent Liabilities
From time to time the Company is party to litigation and claims arising in the normal course of business. Management, after consultation with legal counsel, believes that the liabilities, if any, arising from such litigation and claims will not be material to the Company's consolidated financial position.
At December 31, 2024 and 2023, respectively, the Company had lines of credit with other correspondent banks totaling $95,386,000 and $102,485,000. At December 31, 2024 and 2023, respectively, there was no balance outstanding under these lines of credit.
The Company also has a Cash Management Advance ("CMA") Line of Credit agreement. The CMA is a component of the Company's Blanket Agreement for advances with the FHLB of Cincinnati. The purpose of the CMA is to assist with short-term liquidity management. Under the terms of the CMA, the Company may borrow a maximum of $23,875,000, selecting a variable rate of interest for up to 90 days or a fixed rate for a maximum of 30 days. There were no borrowings outstanding under the CMA at December 31, 2024 or December 31, 2023.
On November 12, 2024, Wilson Bank entered in a purchase and assumption agreement pursuant to which it has agreed to acquire certain assets, including certain loans, and assume certain liabilities, including certain deposits, of a branch office in Cookeville, Tennessee that is currently operated by another bank. Total assets to be acquired are estimated to be approximately $17 million as of the date hereof, while total deposits and other liabilities to be assumed are estimated to be approximately $30 million as of the date hereof. The Company expects the transaction to close in the first half of 2025. The acquisition is not expected to significantly impact the Bank's operations.
Subsequent to December 31, 2024, Wilson Bank committed to expand the Chattanooga loan production office to a full service branch. As a part of this expansion the Bank entered into a lease for the location for the new full service branch and is currently remodeling the space. The costs associated with this expansion, including construction, equipment and lease expenses, are not expected to be significant.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
(13)Financial Instruments with Off-Balance-Sheet Risk
The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist primarily of commitments to extend credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
In Thousands
Contract or Notional Amount
Financial instruments whose contract amounts represent credit risk:
Unused commitments to extend credit
$
1,172,339
1,010,899
Standby letters of credit
128,728
106,420
Total
$
1,301,067
1,117,319
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to be drawn upon, the total commitment amounts generally represent future cash requirements. The Company evaluates each customer's credit-worthiness on a case-by-case basis. The amount of collateral, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the counterparty. Collateral normally consists of real property.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. Most guarantees extend from one to two years. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The fair value of standby letters of credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the likelihood of the counterparties drawing on such financial instruments and the present creditworthiness of such counterparties. Such commitments have been made on terms which are competitive in the markets in which the Company operates; thus, the fair value of standby letters of credit equals the carrying value for the purposes of this disclosure. The maximum potential amount of future payments that the Company could be required to make under the guarantees totaled $128,728,000 at December 31, 2024.
Allowance For Credit Losses - Off-Balance-Sheet Credit Exposures. The allowance for credit losses on off-balance-sheet credit exposures is a liability account, calculated in accordance with ASC 326, representing expected credit losses over the contractual period for which we are exposed to credit risk resulting from a contractual obligation to extend credit. No allowance is recognized if we have the unconditional right to cancel the obligation. Off-balance-sheet credit exposures primarily consist of amounts available under outstanding lines of credit and letters of credit detailed in the table above. For the period of exposure, the estimate of expected credit losses considers both the likelihood that funding will occur and the amount expected to be funded over the estimated remaining life of the commitment or other off-balance-sheet exposure. The likelihood and expected amount of funding are based on historical utilization rates. The amount of the allowance represents management's best estimate of expected credit losses on commitments expected to be funded over the contractual life of the commitment.
Estimating credit losses on amounts expected to be funded uses the same methodology as described for loans in Note 2 - Loans and Allowance for Credit Losses as if such commitments were funded.
Off-balance-sheet credit exposures are recognized on the balance sheet within accrued interest and other liabilities. The following table details activity in the allowance for credit losses on off-balance-sheet credit exposures for the years ended December 31, 2024, 2023 and 2022.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
(In Thousands)
Beginning balance, January 1
$
3,147
6,136
Impact of adopting ASC 326
-
-
6,195
Credit loss expense (benefit)
(592
)
(2,989
)
(1,014
)
Ending balance, December 31,
$
2,555
3,147
6,136
The Bank originates residential mortgage loans, sells them to third-party purchasers, and may or may not retain the servicing rights. These loans are originated internally and are primarily to borrowers in the Company’s geographic market footprint. These sales are typically to investors that follow guidelines of conventional government sponsored entities ("GSE") and the Department of Housing and Urban Development/U.S. Department of Veterans Affairs ("HUD/VA"). Generally, loans held for sale are underwritten by the Company, including HUD/VA loans. The Bank participates in a mandatory delivery program that requires the Bank to deliver a particular volume of mortgage loans by agreed upon dates. A majority of the Bank’s secondary mortgage volume is delivered to the secondary market via mandatory delivery with the remainder done on a best efforts basis. The Bank does not realize any exposure delivery penalties as the mortgage department only bids loans post-closing to ensure that 100% of the loans are deliverable to the investors.
Each purchaser has specific guidelines and criteria for sellers of loans, and the risk of credit loss with regard to the principal amount of the loans sold is generally transferred to the purchasers upon sale. While the loans are sold without recourse, the purchase agreements require the Bank to make certain representations and warranties regarding the existence and sufficiency of file documentation and the absence of fraud by borrowers or other third parties such as appraisers in connection with obtaining the loan. If it is determined that the loans sold were in breach of these representations or warranties or the loan had an early payoff or payment default, the Bank has obligations to either repurchase the loan for the unpaid principal balance and related investor fees or make the purchaser whole for the economic benefits of the loan.
To date, repurchase activity pursuant to the terms of these representations and warranties or due to early payoffs or payment defaults has been insignificant and has resulted in insignificant losses to the Company.
Based on information currently available, management believes that the Bank does not have significant exposure to contingent losses that may arise relating to the representations and warranties that it has made in connection with its mortgage loan sales or for early payoffs or payment defaults of such mortgage loans.
(14)Concentration of Credit Risk
Practically all of the Company’s loans, commitments, and commercial and standby letters of credit have been granted to customers in the Company’s market area, which is primarily located in Middle Tennessee. Practically all such customers are depositors of Wilson Bank. The concentrations of credit by type of loan are set forth in Note 2 - Loans and Allowance for Credit Losses.
Interest bearing deposits totaling $76,597,000 were deposited with five commercial banks at December 31, 2024. In addition, the Bank has funds deposited with the FHLB of Cincinnati in the amount of $845,000. Funds deposited with the FHLB of Cincinnati are not insured by the FDIC.
Federal funds sold in the amount of $9,791,000 were deposited with one commercial bank at December 31, 2024.
(15)Employee Benefit Plan
Wilson Bank has in effect a 401(k) plan (the “401(k) Plan”) which covers eligible employees. To be eligible an employee must have obtained the age of 18. The provisions of the 401(k) Plan provide for both employee and employer contributions. For the years ended December 31, 2024, 2023 and 2022, Wilson Bank contributed $4,073,000, $3,662,000, and $3,309,000, respectively, to the 401(k) Plan.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
(16)Dividend Reinvestment Plan
Under the terms of the Company’s dividend reinvestment plan (the “DRIP”) holders of common stock may elect to automatically reinvest cash dividends in additional shares of the Company's common stock. The Company may elect to sell original issue shares or to purchase shares in the open market for the account of participants in the DRIP. Original issue shares of 203,489 in 2024, 189,471 in 2023 and 250,365 in 2022 were sold to participants under the terms of the DRIP.
(17)Regulatory Matters and Restrictions on Dividends
Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. Management believes as of December 31, 2024, the Bank and the Company met all capital adequacy requirements to which they were subject.
Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If an institution is classified as adequately capitalized or lower, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is growth and expansion, and capital restoration plans are required. As of December 31, 2024 and 2023, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.
The Company's and Wilson Bank's actual capital amounts and ratios as of December 31, 2024 and 2023 are presented in the following tables. The capital conservation buffer of 2.5% is not included in the required minimum ratios of the tables presented below.
Actual
Minimum Capital Adequacy
For Classification as Well Capitalized (1) (2)
Amount
Ratio
Amount
Ratio
Amount
Ratio
(dollars in thousands)
December 31, 2024
Total capital to risk weighted assets:
Consolidated
$
615,180
14.5
%
$
338,916
8.0
%
$
423,646
10.0
%
Wilson Bank
609,568
14.4
338,788
8.0
423,485
10.0
Tier 1 capital to risk weighted assets:
Consolidated
563,128
13.3
254,188
6.0
254,188
6.0
Wilson Bank
557,516
13.2
254,090
6.0
338,787
8.0
Common equity Tier 1 capital to risk weighted assets:
Consolidated
562,925
13.3
190,641
4.5
N/A
N/A
Wilson Bank
557,313
13.2
190,568
4.5
275,264
6.5
Tier 1 capital to average assets:
Consolidated
563,128
10.4
216,949
4.0
N/A
N/A
Wilson Bank
557,516
10.3
216,873
4.0
271,092
5.0
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
Actual
Minimum Capital Adequacy
For Classification as Well Capitalized (1) (2)
Amount
Ratio
Amount
Ratio
Amount
Ratio
(dollars in thousands)
December 31, 2023
Total capital to risk weighted assets:
Consolidated
$
560,757
14.5
%
$
308,449
8.0
%
$
385,562
10.0
%
Wilson Bank
559,224
14.5
308,333
8.0
385,417
10.0
Tier 1 capital to risk weighted assets:
Consolidated
512,762
13.3
231,337
6.0
231,337
6.0
Wilson Bank
511,229
13.3
231,250
6.0
308,334
8.0
Common equity Tier 1 capital to risk weighted assets:
Consolidated
512,693
13.3
173,503
4.5
N/A
N/A
Wilson Bank
511,160
13.3
173,438
4.5
250,521
6.5
Tier 1 capital to average assets:
Consolidated
512,762
10.6
193,564
4.0
N/A
N/A
Wilson Bank
511,229
10.6
193,492
4.0
241,865
5.0
1.Ratios for Wilson Bank are those under applicable FDIC regulations for prompt corrective action.
2.Well-capitalized minimum Common equity Tier 1 capital to risk weighted assets and Tier 1 capital to average assets are not formally defined under applicable regulations for bank holding companies.
Dividend Restrictions
The Company and the Bank are subject to dividend restrictions set forth by the Tennessee Department of Financial Institutions and federal banking agencies, as applicable. Generally, the board of directors may not declare dividends in excess of current year earnings plus the retained net income of the preceding two years without prior approval of the commissioner of the Tennessee Department of Financial Institutions. Additional restrictions may be imposed by the Tennessee Department of Financial Institutions and federal banking agencies under the powers granted to them by law.
(18)Salary Deferral Plans
The Company provides some of its officers non-qualified pension benefits through an Executive Salary Continuation Plan ("the Plan") and Supplemental Executive Retirement Plan (SERP) Agreements ("SERP Agreements"). The Plan and SERP Agreements were established by the Board of Directors to reward executive management for past performance and to provide additional incentive to retain the service of executive management. The Plan and SERP Agreements generally provide current and former executives party thereto with benefits of a portion of their salary beginning at retirement through life. As a result, the Company has accrued a liability for future obligations under the Plan and SERP Agreements. At December 31, 2024 and 2023, the liability related to the Plan totaled $1,362,000 and $1,475,000, respectively. At December 31, 2024 and 2023 the liability related to the SERP Agreements totaled $4,785,000 and $4,219,000, respectively. The expense incurred for these plans totaled $1,008,000, $547,000 and $789,000 for the year ended December 31, 2024, 2023 and 2022, respectively.
The Company has purchased life insurance policies to provide the benefits related to the Plan, which at December 31, 2024 and 2023 had an aggregate cash surrender value of $7,156,000 and $6,462,000, respectively, and an aggregate face value of insurance policies in force of $17,376,000 and $16,407,000 respectively. The life insurance policies remain the sole property of the Company and are payable to the Company.
The Company has also purchased bank owned life insurance policies on some of its current and former officers. The insurance policies remain the sole property of the Company and are payable to the Company. The cash surrender value of the life insurance contracts totaled $54,792,000 and $53,183,000 and the face amount of the insurance policies in force approximated $122,630,000 and $122,010,000 at December 31, 2024 and 2023, respectively.
The Company has also purchased Flexible Premium Indexed Deferred Annuity Contracts (“Annuity Contracts”) to fund a portion of the benefits related to the SERP Agreements. The Annuity Contracts remain the sole property of the Company and are payable to the Company. Included in other assets at December 31, 2024 and 2023 are the Annuity Contracts with an aggregate value of $23,446,000 and $23,745,000, respectively.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
(19)Equity Incentive Plan
In April 2009, the Company’s shareholders approved the Wilson Bank Holding Company 2009 Stock Option Plan (the “2009 Stock Option Plan”). The 2009 Stock Option Plan was effective as of April 14, 2009. Under the 2009 Stock Option Plan, awards could be in the form of options to acquire common stock of the Company. Subject to adjustment as provided by the terms of the 2009 Stock Option Plan, the maximum number of shares of common stock with respect to which awards could be granted under the 2009 Stock Option Plan was 100,000 shares. The 2009 Stock Option Plan terminated on April 13, 2019, and no additional awards may be issued under the 2009 Stock Option Plan. The awards granted under the 2009 Stock Option Plan prior to the Plan's expiration will remain outstanding until exercised or otherwise terminated. As of December 31, 2024, the Company had outstanding 1,767 options under the 2009 Stock Option Plan with a weighted average exercise price of $36.47.
During the second quarter of 2016, the Company’s shareholders approved the Wilson Bank Holding Company 2016 Equity Incentive Plan, which authorizes awards of up to 750,000 shares of common stock. The 2016 Equity Incentive Plan was approved by the Board of Directors and effective as of January 25, 2016 and approved by the Company’s shareholders on April 12, 2016. On September 26, 2016, the Board of Directors approved an amendment and restatement of the 2016 Equity Incentive Plan (as amended and restated the “2016 Equity Incentive Plan”) to make clear that directors who are not also employees of the Company may be awarded stock appreciation rights. The primary purpose of the 2016 Equity Incentive Plan is to promote the interest of the Company and its shareholders by, among other things, (i) attracting and retaining key officers, employees and directors of, and consultants to, the Company and its subsidiaries and affiliates, (ii) motivating those individuals by means of performance-related incentives to achieve long-range performance goals, (iii) enabling such individuals to participate in the long-term growth and financial success of the Company, (iv) encouraging ownership of stock in the Company by such individuals, and (v) linking their compensation to the long-term interests of the Company and its shareholders. Except for certain limitations, awards can be in the form of stock options (both incentive stock options and non-qualified stock options), stock appreciation rights, restricted shares and restricted share units, performance awards and other stock-based awards. As of December 31, 2024, the Company had 166,362 shares remaining available for issuance under the 2016 Equity Incentive Plan. As of December 31, 2024, the Company had outstanding under the 2016 Equity Incentive Plan 191,628 stock options with a weighted average exercise price of $57.85, 142,785 cash-settled stock appreciation rights with a weighted average exercise price of $55.03, 153 restricted share awards, 24,482 restricted share unit awards, and 738 performance share unit awards.
Stock Options and Stock Appreciation Rights
As of December 31, 2024, the Company had outstanding 193,395 stock options with a weighted average exercise price of $57.66 and 142,785 cash-settled stock appreciation rights with a weighted average exercise price of $55.03. Included in other liabilities at December 31, 2024 and 2023 were $3,521,000 and $3,297,000 in accrued cash-settled stock appreciation rights, respectively.
The fair value of each stock option and cash-settled SAR grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 2024, 2023 and 2022:
Expected dividends
2.41
%
2.38
%
1.85
%
Expected term (in years)
6.93
8.25
7.78
Expected stock price volatility
%
%
%
Risk-free rate
4.30
%
3.54
%
3.03
%
The expected stock price volatility is based on historical volatility adjusted for consideration of other relevant factors. The risk-free interest rates for periods within the contractual life of the awards are based on the U.S. Treasury yield curve in effect at the time of the grant. The dividend yield and forfeiture rate assumptions are based on the Company’s history and expectation of dividend payouts and forfeitures.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
A summary of the stock option and cash-settled SAR activity for 2024, 2023 and 2022 is as follows:
Weighted Average
Weighted Average
Weighted Average
Shares
Exercise Price
Shares
Exercise Price
Shares
Exercise Price
Outstanding at beginning of year
371,994
$
56.15
414,778
$
55.13
357,254
$
50.18
Granted
1,667
71.50
5,000
69.00
117,665
64.13
Exercised
(31,748
)
52.28
(42,617
)
47.23
(58,841
)
43.27
Forfeited or expired
(5,733
)
59.12
(5,167
)
60.35
(1,300
)
45.50
Outstanding at end of year
336,180
$
56.54
371,994
$
56.15
414,778
$
55.13
Options and cash-settled SARs exercisable at year end
218,749
$
53.23
186,431
$
50.22
167,918
$
46.09
The weighted average fair value at the grant date of options and cash-settled SARs granted during the years 2024, 2023 and 2022 was $22.87, $24.76 and $22.64, respectively. The total intrinsic value of options and cash-settled SARs exercised during the years 2024, 2023 and 2022 was $677,000, $959,000 and $1,310,000 respectively.
The following table summarizes information about outstanding and exercisable stock options and cash-settled SARs at December 31, 2024:
Options and Cash-Settled SARs Outstanding
Options and Cash-Settled SARs Exercisable
Range of Exercise Prices
Number Outstanding at 12/31/24
Weighted Average Exercise Price
Weighted Average Remaining Contractual Term (In Years)
Number Exercisable at 12/31/24
Weighted Average Exercise Price
Weighted Average Remaining Contractual Term (In Years)
$35.81 - $54.75
97,245
$
42.15
2.20
96,578
$
42.13
2.20
$55.75 - $71.50
238,935
$
62.40
6.35
122,171
$
62.00
5.77
336,180
218,749
Aggregate intrinsic value (in thousands)
$
6,239
$
4,784
As of December 31, 2024, there was $2,092,000 of total unrecognized cost related to non-vested stock options and cash-settled SARs granted under the Company’s equity incentive plans. The cost is expected to be recognized over a weighted-average period of 2.05 years.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
Time-Based Vesting Restricted Shares and Restricted Share Units
A summary of time-based vesting restricted share awards activity for the twelve months ended December 31, 2024, 2023 and 2022 is as follows:
Shares
Weighted Average Cost
Shares
Weighted Average Cost
Shares
Weighted Average Cost
Outstanding at beginning of year
$
66.70
1,075
$
64.03
1,250
$
62.10
Granted
-
-
-
-
66.70
Vested
(148
)
66.70
(774
)
62.99
(625
)
62.10
Forfeited
-
-
-
-
-
-
Outstanding at December 31,
$
66.70
$
66.70
1,075
$
64.03
A summary of time-based vesting restricted share unit awards activity for the twelve months ended December 31, 2024 and 2023 is as follows:
Shares
Weighted Average Cost
Shares
Weighted Average Cost
Outstanding at beginning of year
14,458
$
69.00
-
$
-
Granted
13,957
71.59
14,833
69.00
Vested
(2,725
)
69.00
-
-
Forfeited
(1,208
)
69.78
(375
)
69.00
Outstanding at December 31,
24,482
$
70.44
14,458
$
69.00
The restricted shares and restricted share units vest based on continued service over various time periods. As of December 31, 2024, there was $9,000 of unrecognized compensation cost related to non-vested restricted share awards. The cost is expected to be expensed over a weighted-average period of 0.88 years. As of December 31, 2024, the fair value of restricted share awards vested totaled $11,000. As of December 31, 2024, there was $1,342,000 of unrecognized compensation cost related to non-vested restricted share units. The cost is expected to be expensed over a weighted-average period of 3.66 years. As of December 31, 2024, the fair value of restricted share units vested totaled $197,000.
Performance-Based Vesting Restricted Stock Units ("PSUs")
The Company periodically awards performance-based restricted stock units to employees of the Bank. Under the terms of the awards, the number of units that will be earned and thereafter settled in shares of the Company's common stock will be based on the employee's performance against certain performance metrics over a fixed three-year performance period. Compensation expense for PSUs is estimated each period based on the fair value of the Company's common stock at the grant date and the most probable outcome of the performance condition, adjusted for the passage of time within the performance period of the awards.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
A summary of the PSUs activity for the twelve months ended December 31, 2024 and 2023 is as follows:
Shares
Weighted Average Cost
Shares
Weighted Average Cost
Outstanding at beginning of year
1,107
$
67.85
-
$
-
Granted
-
-
1,107
67.85
Vested
(369
)
67.85
-
-
Forfeited or expired
-
-
-
-
Outstanding at December 31,
$
67.85
1,107
$
67.85
Grant Year
Grant Price
Applicable Performance Period
Period in which units to be settled
PSUs Outstanding
$
67.85
2023-2025
2024-2026
As of December 31, 2024, there was $28,000 of total unrecognized compensation cost related to non-vested performance based restricted share units. The cost is expected to be expensed over a weighted-average period of 1.08 years. As of December 31, 2024, the fair value of performance based restricted share units vested totaled $26,000.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
(20)Earnings Per Share
The computation of basic earnings per share is based on the weighted average number of common shares outstanding during the period. The computation of diluted earnings per share for the Company begins with the basic earnings per share plus the effect of common shares contingently issuable from stock options, restricted share units and performance share units.
The following is a summary of the components comprising basic and diluted earnings per share (“EPS”):
Years Ended December 31,
Basic EPS Computation:
Numerator - Earnings available to common shareholders
$
56,530
48,938
53,042
Denominator - Weighted average number of common shares outstanding
11,806,822
11,611,690
11,377,617
Basic earnings per common share
$
4.79
4.21
4.66
Diluted EPS Computation:
Numerator - Earnings available to common shareholders
$
56,530
48,938
53,042
Denominator - Weighted average number of common shares outstanding
11,806,822
11,611,690
11,377,617
Dilutive effect of stock options, RSUs and PSUs
31,767
29,676
31,307
Weighted average diluted common shares outstanding
11,838,589
11,641,366
11,408,924
Diluted earnings per common share
$
4.78
4.20
4.65
(21)Derivatives
Derivatives Designated as Fair Value Hedges
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, the sources and duration of certain balance sheet assets and liabilities. In the normal course of business, the Company also uses derivative financial instruments to add stability to interest income or expense and to manage its exposure to movements in interest rates. The Company does not use derivatives for trading or speculative purposes and only enters into transactions that have a qualifying hedge relationship. The Company's hedging strategies involving interest rate derivatives that are classified as either cash flow hedges or fair value hedges, depending upon the rate characteristic of the hedged item.
The Company had previously utilized an interest rate swap designated as a fair value hedge to mitigate the effect of changing interest rates on the fair values of fixed rate loans. The hedging strategy on loans converted the fixed interest rates to variable interest rates tied to the applicable reference rate.
During the fourth quarter of 2023 the Company voluntarily terminated the interest rate swap with a notional amount of $30.0 million, as the market indicated that rates had peaked, further rate increases were unlikely, and the Company’s balance sheet could support the market’s current demand for fixed rate loans without the interest rate swap. The termination of the fair value hedge resulted in an unrealized gain totaling $3,747,000 which is being reclassified to increase interest income over the original term of the swap contract.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
The following table presents the net effects of derivative hedging instruments on the Company's consolidated statements of income for the twelve months ended December 31, 2024, 2023 and 2022. The effects are presented as an increase to income before taxes in the relevant caption of the Company's consolidated statements of income.
In Thousands
Location in the Consolidated Statements of Income
Interest income: Interest and fees on loans
$
1,158
Net increase to income before taxes
$
1,158
The above effects are presented within the change in other assets line in the operating activities section of the Company's consolidated statements of cash flows.
Mortgage Banking Derivatives
Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives. It is the Company's practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. At December 31, 2024 and December 31, 2023, the Company had approximately $1,680,000 and $2,265,000, respectively, of interest rate lock commitments and approximately $3,250,000 and $2,500,000, respectively, of forward commitments for the future delivery of residential mortgage loans. The fair value of these mortgage banking derivatives was reflected by derivative assets of $34,000 and $65,000 and a derivative asset of $27,000 and derivative liability of $13,000, respectively, at December 31, 2024 and December 31, 2023. Changes in the fair values of these mortgage-banking derivatives are included in net gains on sale of loans.
The net gains (losses) relating to free-standing derivative instruments used for risk management is summarized below:
In Thousands
Interest rate contracts for customers
$
(31
)
(58
)
Forward contracts related to mortgage loans held for sale and interest rate contracts
(75
)
The following table reflects the amount and fair value of mortgage banking derivatives included in the consolidated balance sheet as of December 31, 2024 and December 31, 2023:
In Thousands
Notional Amount
Fair Value
Notional Amount
Fair Value
Included in other assets (liabilities):
Interest rate contracts for customers
$
1,680
2,265
Forward contracts related to mortgage loans held-for-sale
3,250
2,500
(13
)
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
(22)Disclosures About Fair Value of Financial Instruments
Fair Value of Financial Instruments
FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value, establishes a framework for measuring fair value in U.S. GAAP and expands disclosures about fair value measurements. The definition of fair value focuses on the exit price, i.e., the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, not the entry price, i.e., the price that would be paid to acquire the asset or received to assume the liability at the measurement date. The statement emphasizes that fair value is a market-based measurement; not an entity-specific measurement. Therefore, the fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability.
Valuation Hierarchy
FASB ASC 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:
•Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets
•Level 2 - inputs to the valuation methodology include all prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
•Level 3 - inputs to the valuation methodology that are unobservable and significant to the fair value measurement.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Following is a description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.
Asset
Securities available-for-sale - Where quoted prices are available for identical securities in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government securities and certain other financial products. If quoted market prices are not available, then fair values are estimated by using pricing models that use observable inputs or quoted prices of securities with similar characteristics and are classified within Level 2 of the valuation hierarchy. In certain cases where there is limited activity or less transparency around inputs to the valuation and more complex pricing models or discounted cash flows are used, securities are classified within Level 3 of the valuation hierarchy. Quarterly, the Company will validate prices supplied by its third party vendor by comparison to prices obtained from third parties.
Hedged loans - The fair value of the Company's hedged loan portfolio is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction.
Collateral dependent loans - Collateral dependent loans are measured at the fair value of the collateral securing the loan less estimated selling costs. The fair value of real estate collateral is determined based on real estate appraisals which are generally based on recent sales of comparable properties which are then adjusted for property specific factors. Non-real estate collateral is valued based on various sources, including third party asset valuations and internally determined values based on cost adjusted for depreciation and other judgmentally determined discount factors. Collateral dependent loans are classified within Level 3 of the valuation hierarchy due to the unobservable inputs used in determining their fair value such as collateral values and the borrower's underlying financial condition.
Other real estate owned - Other real estate owned (“OREO”) represents real estate foreclosed upon by the Company through loan defaults by customers or acquired in lieu of foreclosure. Upon acquisition, the property is recorded at the lower of cost or fair value, based on appraised value, less selling costs estimated as of the date acquired with any loss recognized as a charge-off through the allowance for credit losses. Additional OREO losses for subsequent valuation downward adjustments are determined on a specific property basis and are included as a component of noninterest expense along with holding costs. Any gains or losses realized at the time of disposal are also reflected in noninterest income. OREO is included in Level 3 of the valuation hierarchy due to the lack of
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
observable market inputs into the determination of fair value. Appraisal values are property-specific and sensitive to the changes in the overall economic environment.
Mortgage loans held for sale - Mortgage loans held for sale are carried at fair value, and are classified within Level 2 of the valuation hierarchy. The fair value of mortgage loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan.
Derivative instruments - The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2).
Other investments - Included in other investments are investments recorded at fair value primarily in certain nonpublic investments and funds. The valuation of these nonpublic investments requires management judgment due to the absence of observable quoted market prices, inherent lack of liquidity and the long-term nature of such assets. These investments are valued initially based upon transaction price. The carrying values of other investments are adjusted either upwards or downwards from the transaction price to reflect expected exit values as evidenced by financing and sale transactions with third parties. These investments are included in Level 3 of the valuation hierarchy if the entities and funds are not widely traded and the underlying investments are in privately-held and/or start-up companies for which market values are not readily available.The following tables present the financial instruments carried at fair value as of December 31, 2024 and December 31, 2023, by caption on the consolidated balance sheet and by FASB ASC 820 valuation hierarchy (as described above) (in thousands):
Measured on a Recurring Basis
Total Carrying Value in the Consolidated Balance Sheet
Quoted Market Prices in an Active Market (Level 1)
Models with Significant Observable Market Parameters (Level 2)
Models with Significant Unobservable Market Parameters (Level 3)
December 31, 2024
Investment securities available-for-sale:
U.S. Treasury and other U.S. government agencies
$
4,538
4,538
-
-
U.S. Government sponsored enterprises
161,973
-
161,973
-
Mortgage-backed securities
454,196
-
454,196
-
Asset-backed securities
50,817
-
50,817
-
Corporate bonds
2,396
-
2,396
-
State and municipal securities
153,973
-
153,973
-
Total investment securities available-for-sale
827,893
4,538
823,355
-
Mortgage loans held for sale
2,529
-
2,529
-
Derivative instruments
-
-
Other investments
2,191
-
-
2,191
Total assets
$
832,674
4,538
825,945
2,191
Derivative instruments
$
-
-
-
-
Total liabilities
$
-
-
-
-
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
Measured on a Recurring Basis
Total Carrying Value in the Consolidated Balance Sheet
Quoted Market Prices in an Active Market (Level 1)
Models with Significant Observable Market Parameters (Level 2)
Models with Significant Unobservable Market Parameters (Level 3)
December 31, 2023
Investment securities available-for-sale:
U.S. Treasury and other U.S. government agencies
$
4,429
4,429
-
-
U.S. Government sponsored enterprises
144,168
-
144,168
-
Mortgage-backed securities
417,030
-
417,030
-
Asset-backed securities
49,973
-
49,973
-
Corporate bonds
2,423
-
2,423
-
State and municipal securities
193,058
-
193,058
-
Total investment securities available-for-sale
811,081
4,429
806,652
-
Mortgage loans held for sale
2,294
-
2,294
-
Derivative instruments
-
-
Other investments
2,045
-
-
2,045
Total assets
$
815,485
4,429
809,011
2,045
Derivative instruments
$
-
-
-
Total liabilities
$
-
-
-
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
Measured on a Non-Recurring Basis
Total Carrying Value in the Consolidated Balance Sheet
Quoted Market Prices in an Active Market (Level 1)
Models with Significant Observable Market Parameters (Level 2)
Models with Significant Unobservable Market Parameters (Level 3)
December 31, 2024
Other real estate owned
$
-
-
-
-
Collateral dependent loans (¹)
37,045
-
-
37,045
Total
$
37,045
-
-
37,045
December 31, 2023
Other real estate owned
$
-
-
-
-
Collateral dependent loans (¹)
4,838
-
-
4,838
Total
$
4,838
-
-
4,838
1.The carrying value of collateral dependent loans at December 31, 2024 is net of a valuation allowance of $408,000. As of December 31, 2023 no reserve was recorded on collateral dependent loans.
The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value at December 31, 2024 and 2023:
Valuation Techniques (1)
Significant Unobservable Inputs
Range (Weighted Average)
Collateral dependent loans
Appraisal
Estimated costs to sell
10%
Other real estate owned
Appraisal
Estimated costs to sell
10%
1.The fair value is generally determined through independent appraisals of the underlying collateral, which may include Level 3 inputs that are not identifiable, or by using the discounted cash flow method if the loan is not collateral dependent.
In the case of its investment securities portfolio, the Company monitors the valuation technique utilized by various pricing agencies to ascertain when transfers between levels have been affected. The nature of the remaining assets and liabilities is such that transfers in and out of any level are expected to be rare. For the twelve months ended December 31, 2024, there were no transfers between Levels 1, 2 or 3.
The table below includes a rollforward of the balance sheet amounts for the year ended December 31, 2024 and 2023 (including the change in fair value) for financial instruments classified by the Company within Level 3 of the valuation hierarchy for assets and liabilities measured at fair value on a recurring basis. When a determination is made to classify a financial instrument within Level 3 of the valuation hierarchy, the determination is based upon the significance of the unobservable factors to the overall fair value measurement. However, since Level 3 financial instruments typically include, in addition to the unobservable or Level 3 components, observable components (that is, components that are actively quoted and can be validated to external sources), the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology (in thousands):
For the Year Ended December 31,
Other Assets
Other Assets
Fair value, January 1
$
2,045
$
1,965
Total realized gains included in income
Change in unrealized gains/losses included in other comprehensive income for assets and liabilities still held at December 31
-
-
Purchases, issuances and settlements, net
-
-
Transfers out of Level 3
-
-
Fair value, December 31
$
2,191
$
2,045
Total realized gains included in income related to financial assets and liabilities still on the consolidated balance sheet at December 31
$
$
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments that are not measured at fair value. In cases where quoted market prices are not available, fair values are based on estimates using discounted cash flow models. Those models are significantly affected by the assumptions used, including the discount rates, estimates of future cash flows and borrower creditworthiness. The fair value estimates presented herein are based on pertinent information available to management as of December 31, 2024 and December 31, 2023. Such amounts have not been revalued for purposes of these consolidated financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.
Cash and cash equivalents - The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1.
Loans - The fair value of the Company's loan portfolio includes a credit risk factor in the determination of the fair value of its loans. This credit risk assumption is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The Company's loan portfolio is initially fair valued using a segmented approach. The Company divides its loan portfolio into the following categories: variable rate loans, collateral dependent loans and all other loans. The results are then adjusted to account for credit risk.
For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values approximate carrying values. Fair values for collateral dependent loans are estimated using discounted cash flow models or based on the fair value of the underlying collateral. For other loans, fair values are estimated using discounted cash flow models, using current market interest rates offered for loans with similar terms to borrowers of similar credit quality. The values derived from the discounted cash flow approach for each of the above portfolios are then further discounted to incorporate credit risk to determine the exit price.
Mortgage servicing rights - The fair value of servicing rights is based on the present value of estimated future cash flows of mortgages sold, stratified by rate and maturity date. Assumptions that are incorporated in the valuation of servicing rights include assumptions about prepayment speeds on mortgages and the cost to service loans.
Deposits and Federal Home Loan Bank advances - Fair values for deposits and Federal Home Loan Bank advances are estimated using discounted cash flow models, using current market interest rates offered on deposits with similar remaining maturities.
Off-balance sheet instruments - The fair values of the Company’s off-balance-sheet financial instruments are based on fees charged to enter into similar agreements. However, commitments to extend credit do not represent a significant value to the Company until such commitments are funded.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
The following table presents the carrying amounts, estimated fair value and placement in the fair value hierarchy of the Company’s financial instruments at December 31, 2024 and December 31, 2023. This table excludes financial instruments for which the carrying amount approximates fair value. For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization.
(in Thousands)
Carrying/Notional
Amount
Estimated Fair
Value (¹)
Quoted Market Prices in an Active Market
(Level 1)
Models with Significant Observable Market Parameters
(Level 2)
Models with Significant Unobservable Market Parameters
(Level 3)
December 31, 2024
Financial assets:
Cash and cash equivalents
$
247,589
247,589
247,589
-
-
Loans, net
4,042,392
3,986,187
-
-
3,986,187
Mortgage servicing rights
1,139
1,654
-
1,654
-
Financial liabilities:
Deposits
4,830,034
4,253,072
-
-
4,253,072
December 31, 2023
Financial assets:
Cash and cash equivalents
$
252,635
252,635
252,635
-
-
Loans, net
3,550,675
3,372,166
-
-
3,372,666
Mortgage servicing rights
1,083
1,398
-
1,398
-
Financial liabilities:
Deposits
4,367,106
3,885,724
-
-
3,885,724
(1)Estimated fair values are consistent with an exit-price concept. The assumptions used to estimate the fair values are intended to approximate those that a market- participant would realize in a hypothetical orderly transaction.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
(23)Segment Information
Wilson Bank & Trust is a full-service bank operating throughout middle Tennessee which conducts business as a single operating segment, banking. The Bank offers a wide range of banking services, including checking, savings and money market deposit accounts, certificates of deposit, loans for consumer, commercial and real estate purposes, and investment advisory services through a third-party registered broker-dealer investment adviser. Management views the product offerings as an integrated banking service which is the basis for identifying the single banking segment. Substantially all revenues are derived from the Company's geographical area identified in paragraph (b) Note 1, Summary of Significant Accounting Policies. The accounting policies of the banking segment are the same as those described in Note 1.
The Company’s Chief Operating Decision Maker (“CODM”) is made up of the Chief Executive Officer, Chief Financial Officer, President, Chief Administration Officer, Chief Credit Officer, Chief Risk Officer, Chief Operating Officer, Chief Experience Officer, and Chief Information Officer. The key measure of banking segment profit or loss that the CODM uses to allocate resources and assess performance is the Company’s consolidated net earnings, as reported on the Company's Consolidated Statements of Earnings. The measure of banking segment assets is reported on the Company’s Consolidated Balance Sheets as total assets.
The CODM uses consolidated net earnings to evaluate income generated from banking segment assets (return on assets) in deciding whether to reinvest profits into the operations or into other parts of the entity, such as to pay dividends.
Net income is used to monitor budgeted versus actual results. The monitoring of budgeted versus actual results is used in assessing performance of the banking segment.
All expense categories on the Consolidated Statements of Earnings are significant and there are no other significant segment expenses that would require disclosure. Assets provided to the CODM are consistent with those reported on the Consolidated Balance Sheets with particular emphasis on the Company’s available liquidity, including its cash and due from banks, federal funds sold, and interest-bearing deposits, capital and regulatory capital requirements.
There are no intra-entity sales or transfers and no significant expense categories regularly provided to the CODM beyond those disclosed in the Consolidated Statements of Earnings. The CODM manages the business using consolidated expense information, as well as regularly provided budgeted or forecasted expense information for the single operating segment.
The banking segment derives revenues from customers through fees and interest charged on lending, deposits, and investment products. The banking segment also derives revenue from various investments as permitted under sound banking practices. The majority of revenues are derived from fees and interest on loans.
Although the Company has a significant amount of long-term customers, there is no reliance or concentration related to any one customer.
There have been no significant asset investments by the banking segment outside of any items included in the consolidated financial statements.
The following table reflects consolidated financial data of the Company’s reportable segment for the years ended December 31, 2024, 2023 and 2022.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
Banking Segment
Dollars In Thousands
Interest income
$
284,116
222,583
157,540
Reconciliation of revenue
Other revenues
28,954
28,289
27,281
Total consolidated revenues
$
313,070
250,872
184,821
Less:
Interest expense
126,809
83,679
16,133
Segment net interest income and noninterest income
$
186,261
167,193
168,688
Less:
Provision for credit losses - loans
5,192
6,300
8,656
Provision for credit losses - off-balance sheet exposures
(592
)
(2,989
)
(1,014
)
Employee salaries and benefits
67,342
59,501
56,707
Data processing expenses
9,477
8,797
7,337
Occupancy expenses
5,733
6,532
5,563
Advertising & public relations expenses
3,512
3,714
3,455
Furniture and equipment expenses
3,038
3,225
3,400
FDIC insurance
3,129
3,120
1,527
Other segment items(a)
16,190
16,062
14,981
Income tax expense
16,576
13,939
15,056
Segment net earnings/consolidated net earnings
$
56,664
48,992
53,020
Net loss (gain) attributable to noncontrolling interest
(134
)
(54
)
Net earnings attributable to Wilson Bank Holding Company
$
56,530
48,938
53,042
Banking Segment
Dollars in Thousands
Reconciliation of net earnings
Net earnings for reportable segment
$
56,530
48,938
53,042
Other earnings
-
-
-
Net earnings attributable to Wilson Bank Holding Company
$
56,530
48,938
53,042
Banking Segment
Dollars in Thousands
Reconciliation of assets
Total assets for reportable segment
$
5,358,659
4,846,476
Other assets
-
-
Total consolidated assets
$
5,358,659
4,846,476
(a) Other segment items includes equity-based compensation, accounting, legal & consulting expenses, directors' fees, fees and licenses, telephone expenses, franchise tax, and other overhead expenses.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
(24)Wilson Bank Holding Company -
Parent Company Financial Information
WILSON BANK HOLDING COMPANY
(Parent Company Only)
Balance Sheets
December 31, 2024 and 2023
Dollars In Thousands
ASSETS
Cash
$
7,352
*
3,134
*
Investment in wholly-owned commercial bank subsidiary
474,092
*
427,872
*
Deferred income taxes
1,526
1,356
Refundable income taxes
Total assets
$
483,413
432,847
LIABILITIES AND SHAREHOLDERS’ EQUITY
Other liabilities
$
3,710
3,442
Total liabilities
3,710
3,442
Shareholders’ equity:
Common stock, par value $2.00 per share, authorized 50,000,000 shares, 11,876,770 and 11,686,363 shares issued and outstanding, respectively
23,754
23,373
Additional paid-in capital
150,739
136,866
Retained earnings
393,238
357,260
Noncontrolling interest in consolidated subsidiary
Accumulated other comprehensive losses, net of taxes of $31,217 and $31,195, respectively
(88,231
)
(88,163
)
Total shareholders’ equity
479,703
429,405
Total liabilities and shareholders’ equity
$
483,413
432,847
* Eliminated in consolidation.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
WILSON BANK HOLDING COMPANY
(Parent Company Only)
Statements of Earnings
Three Years Ended December 31, 2024
Dollars In Thousands
Income:
Dividends from Wilson Bank (commercial bank subsidiary)
$
12,000
*
2,500
*
4,200
*
Other income
-
-
-
12,000
2,500
4,200
Expenses:
Directors’ fees
Other
1,817
1,747
2,187
2,236
2,134
2,542
Income before Federal income tax benefits and equity in undistributed earnings of Wilson Bank
9,764
1,658
Federal income tax benefits
10,377
2,391
Equity in undistributed earnings of Wilson Bank
46,153
*
47,955
*
50,651
*
Net earnings
$
56,530
48,938
53,042
* Eliminated in consolidation.
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
WILSON BANK HOLDING COMPANY
(Parent Company Only)
Statements of Cash Flows
Three Years Ended December 31, 2024
Increase (Decrease) in Cash and Cash Equivalents
Dollars In Thousands
Cash flows from operating activities:
Net earnings
$
56,530
48,938
53,042
Adjustments to reconcile net earnings to net cash used in operating activities:
Equity in earnings of commercial bank subsidiary
(58,153
)
(50,455
)
(54,851
)
Decrease (increase) in refundable income taxes
(176
)
Increase in deferred taxes
(170
)
(133
)
(195
)
Share based compensation expense
1,567
1,528
1,866
Increase in other liabilities
Total adjustments
(56,670
)
(48,988
)
(53,342
)
Net cash used in operating activities
(140
)
(50
)
(300
)
Cash flows from investing activities:
Dividends received from commercial bank subsidiary
12,000
2,500
4,200
Net cash provided by investing activities
12,000
2,500
4,200
Cash flows from financing activities:
Payments made to stock appreciation rights holders
(216
)
(277
)
(644
)
Dividends paid
(20,552
)
(17,303
)
(20,880
)
Repurchase of common stock
(2,181
)
-
-
Proceeds from sale of stock pursuant to dividend reinvestment plan
14,732
12,979
16,117
Proceeds from exercise of stock options
1,044
Net cash used in financing activities
(7,642
)
(3,557
)
(4,772
)
Net increase (decrease) in cash and cash equivalents
4,218
(1,107
)
(872
)
Cash and cash equivalents at beginning of year
3,134
4,241
5,113
Cash and cash equivalents at end of year
$
7,352
3,134
4,241
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
(25)Quarterly Financial Data (Unaudited)
Selected quarterly results of operations for the four quarters ended December 31 are as follows:
(In Thousands, except per share data)
Fourth
Third
Second
First
Fourth
Third
Second
First
Fourth
Third
Second
First
Quarter
Quarter
Quarter
Quarter
Quarter
Quarter
Quarter
Quarter
Quarter
Quarter
Quarter
Quarter
Interest income
$
76,415
73,814
68,945
64,942
$
61,809
57,857
53,987
48,930
$
44,920
42,024
37,097
33,499
Interest expense
34,144
32,799
30,485
29,381
26,548
23,697
19,934
13,500
7,855
3,894
2,240
2,144
Net interest income
42,271
41,015
38,460
35,561
35,261
34,160
34,053
35,430
37,065
38,130
34,857
31,355
Provision for credit losses - loans
1,629
3,563
-
-
1,641
2,078
1,962
2,596
2,543
1,625
1,892
Earnings before income taxes
19,515
16,376
20,683
16,666
14,220
14,745
16,039
17,927
15,342
19,706
18,484
14,544
Net earnings attributable to Wilson Bank Holding Company
14,939
12,686
16,137
12,768
11,222
11,486
12,389
13,841
12,340
15,190
14,139
11,373
Basic earnings per common share
1.26
1.07
1.37
1.09
0.96
0.99
1.07
1.20
1.08
1.33
1.25
1.01
Diluted earnings per common share
1.26
1.07
1.37
1.08
0.95
0.98
1.07
1.20
1.07
1.33
1.24
1.00
WILSON BANK HOLDING COMPANY
Notes to Consolidated Financial Statements, Continued
December 31, 2024, 2023 and 2022
(26)Revenue from Contracts with Customers
All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income. The following table presents the Company’s sources of non-interest income for the periods presented. Items outside the scope of ASC Topic 606 are noted as such.
Years ended December 31,
(dollars in thousands)
Fees and gains on sales of mortgage loans(1)
$
3,068
$
2,635
$
2,973
Service charges on deposits
8,198
7,890
7,382
Debit and credit card interchange income, net
8,627
8,490
8,416
Brokerage income
8,562
7,184
6,929
BOLI and annuity earnings(1)
1,817
1,667
1,346
Loss on sale of securities, net(1)
(2,742
)
(1,009
)
(1,620
)
Other non-interest income
1,424
1,432
1,855
Total non-interest income
$
28,954
$
28,289
$
27,281
1.Not within the scope of ASC Topic 606.
A description of the Company's revenue streams accounted for under ASC Topic 606 follows:
Service charges on deposit accounts - The Company earns fees on its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM usage fees, stop payment charges, statement rendering, and ACH fees are recognized at the time the transaction is executed and the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Account maintenance fees are recognized in the same month the Company earns and satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.
Debit and credit card interchange income, net - The Company earns interchange fees from debit and credit cardholder transactions conducted through the Mastercard payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Certain expenses directly associated with the debit and credit cards are recorded on a net basis with the interchange income.
Brokerage income - The Company earns fees from investment brokerage services provided to its customers by a third-party service provider. The Company receives commissions from the third-party service provider on a bi-monthly basis based upon customer activity for the month. The fees are recognized monthly when the Company satisfies the performance obligation. Because the Company (1) acts as an agent in arranging the relationship between the customer and third-party service provider and (2) does not control the services rendered to the customer, investment brokerage fees are presented net of related servicing and administration costs.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Exchange Act, that are designed to ensure that information required to be disclosed by it in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by this report. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.
Management Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013).
Based on that assessment, management concluded that, as of December 31, 2024, the Company’s internal control over financial reporting was effective based on those criteria.
The Company’s independent registered public accounting firm has issued an attestation report on the Company’s internal control over financial reporting, which report is included herein in Item 8 of this Annual Report on Form 10-K.
Changes in Internal Controls
No changes were made to the Company’s internal control over financial reporting during the quarter ended December 31, 2024 that have materially affected, or that are reasonably likely to materially affect, the Company’s internal control over financial reporting.

---

ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
During the quarter ended December 31, 2024, no officer or director of the Company adopted or terminated any "Rule 10b5-1 trading arrangement" or "non-rule 10b5-1 trading arrangement" as such terms are defined in Item 408(a) and (c) of Regulation S-K. In addition, during the quarter ended December 31, 2024, the Company did not adopt or terminate any "Rule 10b5-1 trading arrangement" or "non-rule 10b5-1 trading arrangement" as such terms are defined in Item 408(a) and (c) of Regulation S-K.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item with respect to directors is incorporated herein by reference to the sections entitled “Item-1 Election of Directors-Information Concerning Nominees” and “Item-1 Election of Directors-Director Qualifications” in the Company’s definitive proxy statement to be filed in connection with the 2025 Annual Meeting of Shareholders, which is expected to be filed no later than 120 days after the end of our fiscal year ended December 31, 2024 (the “Proxy Statement”). The information required by this item with respect to executive officers is set forth in Part I of this report under the caption “Information about our Executive Officers.”
The information required by this item with respect to Section 16(a) of the Exchange Act is incorporated herein by reference to the section entitled “Item-1 Election of Directors - Delinquent Section 16(a) Reports” in the Proxy Statement.
Insider Trading Policy
The information required by this item with respect to the Company's insider trading policies is incorporated by reference to the section entitled "Insider Trading Policy" in the Proxy Statement.

---

ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
Information required by this item is incorporated herein by reference to the information under the principal heading entitled “Executive Compensation,” including but not limited to the subheading entitled “Personnel Committee Report on Executive Compensation” but excluding the information under the subheading entitled “Pay Versus Performance,” and the principal heading entitled “Director Compensation,” including but not limited to the subheading entitled “Personnel Committee Interlocks and Insider Participation,” in the Proxy Statement.

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information required by this item is incorporated herein by reference to the sections entitled “Stock Ownership” and "Proposal 3 - Approval of the Company's 2025 Equity Incentive Plan" in the Proxy Statement.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information required by this item with respect to certain relationships and related transactions is incorporated herein by reference to the section entitled “Certain Relationships and Related Transactions” in the Proxy Statement.
Information required by this item with respect to director independence is incorporated herein by reference to the section entitled “Item-1 Election of Directors - Director Independence” in the Proxy Statement.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
Information required by this item is incorporated herein by reference to the section entitled “Item-2 Ratification of the Appointment of the Independent Registered Public Accounting Firm” in the Proxy Statement.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
(a)(1) Financial Statements. See Item 8.
(a)(2) Financial Statement Schedules. Not Applicable.
(a)(3) Exhibits
3.1
Charter of Wilson Bank Holding Company, as amended (restated for SEC electronic filling purposes only) (incorporated herein by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 filed with the SEC on August 9, 2016).
3.2
Bylaws of Wilson Bank Holding Company, as amended (restated for SEC electronic filling purposes only) (incorporated herein by reference to Exhibit 3.2 of the Company’s Quarterly Report on form 10-Q for the quarter ended March 31, 2016 filed with the SEC on May 10, 2016).
4.1
Specimen Common Stock Certificate. (incorporated herein by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-4 (Registration No. 333-121943)).
4.2
Description of the Company's securities (incorporated by reference to Exhibit 4.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 12, 2021).
10.1
Wilson Bank Holding Company 2009 Stock Option Plan (incorporated herein by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-8 (Registration No. 333-158621)).*
10.2
Amendment, dated December 30, 2008, to Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and J. Randall Clemons (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2009 (File No. 000-20402)).*
10.3
Amendment, dated December 30, 2008, to Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Elmer Richerson (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2009 (File No. 000-20402)).*
10.4
Amendment, dated December 30, 2008, to Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Lisa T. Pominski (incorporated by reference to Exhibit 10.3 the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2009 (File No. 000-20402)).*
10.5
Amendment, dated December 30, 2008, to Executive Salary Continuation Agreement dated as of January 1, 2006, by and between Wilson Bank and Trust and John C. McDearman III (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2009 (File No. 000-20402)).*
10.6
Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and J. Randall Clemons (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2009 (File No. 000-20402)).*
10.7
Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Elmer Richerson (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2009 (File No. 000-20402)).*
10.8
Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Lisa T. Pominski (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2009 (File No. 000-20402)).*
10.9
Executive Salary Continuation Agreement dated as of July 28, 2006, by and between Wilson Bank and Trust and John C. McDearman III (incorporated by reference to Exhibit 10.12 of the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2009 (File No. 000-20402)).*
10.10
Amendment, dated November 23, 2012, to Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and J. Randall Clemons (incorporated by
reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.11
Amendment, dated November 23, 2012, to Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Elmer Richerson (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.12
Amendment, dated November 23, 2012, to Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Lisa T. Pominski (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.13
Amendment, dated November 23, 2012, to Executive Salary Continuation Agreement dated as of January 1, 2006, by and between Wilson Bank and Trust and John C. McDearman III (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.14
Second Amendment, dated November 23, 2012 to Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002 by and between Wilson Bank and Trust and J. Randall Clemons (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.15
Second Amendment, dated November 23, 2012 to Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002 by and between Wilson Bank and Trust and Elmer Richerson (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.16
Second Amendment, dated November 23, 2012 to Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002 by and between Wilson Bank and Trust and Lisa T. Pominski (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.17
Amendment, dated November 23, 2012 to Wilson Bank and Trust Life Insurance Endorsement Method Split Dollar Plan Agreement dated as of July 28, 2006 by and between Wilson Bank and John C. McDearman III (incorporated by reference to Exhibit 10.10 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.18
Supplemental Executive Retirement Plan Agreement, dated November 23, 2012, by and between Wilson Bank and Trust and J. Randall Clemons (incorporated by reference to Exhibit 10.11 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.19
Supplemental Executive Retirement Plan Agreement, dated November 23, 2012, by and between Wilson Bank and Trust and Elmer Richerson (incorporated by reference to Exhibit 10.12 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.20
Supplemental Executive Retirement Plan Agreement, dated November 23, 2012, by and between Wilson Bank and Trust and Lisa T. Pominski (incorporated by reference to Exhibit 10.13 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.21
Supplemental Executive Retirement Plan Agreement, dated November 23, 2012, by and between Wilson Bank and Trust and John C. McDearman III (incorporated by reference to Exhibit 10.15 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.22
Amendment, dated August 21, 2003 to Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002, by and between Wilson Bank and Trust and J. Randall Clemons (incorporated by reference to Exhibit 10.16 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.23
Amendment, dated August 21, 2003 to Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002, by and between Wilson Bank and Trust and Elmer Richerson (incorporated by reference to Exhibit 10.17 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.24
Amendment, dated August 21, 2003 to Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002, by and between Wilson Bank and
Trust and Lisa T. Pominski (incorporated by reference to Exhibit 10.18 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.25
Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002, by and between Wilson Bank and Trust and J. Randall Clemons (incorporated by reference to Exhibit 10.20 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.26
Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002, by and between Wilson Bank and Trust and Elmer Richerson (incorporated by reference to Exhibit 10.21 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.27
Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002, by and between Wilson Bank and Trust and Lisa T. Pominski (incorporated by reference to Exhibit 10.22 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.28
Wilson Bank and Trust Life Insurance Endorsement Method Split Dollar Plan Agreement dated July 28, 2006, by and between Wilson Bank and Trust and John C. McDearman III (incorporated by reference to Exhibit 10.24 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*
10.29
Executive Survivor Income Agreement, dated April 14, 2014, by and between the Bank and Lisa Pominski (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on April 18, 2014).
10.30
Executive Survivor Income Agreement, dated April 14, 2014, by and between the Bank and John C. McDearman, III (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on April 18, 2014).
10.31
Director Survivor Income Agreement, dated April 14, 2014, by and between the Bank and J. Randall Clemons (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on April 18, 2014).
10.32
Director Survivor Income Agreement, dated April 14, 2014, by and between the Bank and H. Elmer Richerson (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on April 18, 2014).
10.33
Director Survivor Income Agreement, dated April 14, 2014, by and between the Bank and Jack Bell (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on April 18, 2014).
10.34
Director Survivor Income Agreement, dated April 14, 2014, by and between the Bank and James Comer (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed with the SEC on April 18, 2014).
10.35
Director Survivor Income Agreement, dated April 14, 2014, by and between the Bank and James Patton (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K filed with the SEC on April 18, 2014).
10.36
Director Survivor Income Agreement, dated April 6, 2015, by and between the Bank and William Jordan (incorporated by reference to Exhibit 10.46 of the Company's Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on March 14, 2016).
10.37
Supplemental Executive Retirement Plan Agreement, dated May 22, 2015, by and between Wilson Bank and Trust and J. Randall Clemons (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on May 29, 2015).*
10.38
Supplemental Executive Retirement Plan Agreement, dated May 22, 2015, by and between Wilson Bank and Trust and Elmer Richerson (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on May 29, 2015).*
10.39
Supplemental Executive Retirement Plan Agreement, dated May 22, 2015, by and between Wilson Bank and Trust and Lisa T. Pominski (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on May 29, 2015).*
10.40
Supplemental Executive Retirement Plan Agreement, dated May 22, 2015, by and between Wilson Bank and Trust and John C. McDearman III (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on May 29, 2015).*
10.41
Second Amendment to the Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and J. Randall Clemons (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*
10.42
Second Amendment to the Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Elmer Richerson (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*
10.43
Second Amendment to the Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Lisa T. Pominski (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*
10.44
Second Amendment to the Executive Salary Continuation Agreement dated as of January 1, 2006, by and between Wilson Bank and Trust and John C. McDearman III (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*
10.45
Wilson Bank Holding Company Amended and Restated 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*
10.46
Form of Stock Appreciation Rights Agreement for employees under the Wilson Bank Holding Company Amended and Restated 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*
10.47
Form of Non-qualified Stock Option Agreement for employees under the Wilson Bank Holding Company Amended and Restated 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*
10.48
Form of Stock Appreciation Rights Agreement for employee directors under the Wilson Bank Holding Company Amended and Restated 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*
10.49
Form of Non-qualified Stock Option Agreement for employee directors under the Wilson Bank Holding Company Amended and Restated 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.10 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*
10.50
Form of Stock Appreciation Rights Agreement for directors under the Wilson Bank Holding Company Amended and Restated 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.11 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*
10.51
Form of Non-qualified Stock Option Agreement for directors under the Wilson Bank Holding Company Amended and Restated 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.12 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*
10.52
Form of Restricted Share Unit Award Agreement for Employees under the Wilson Bank Holding Company Amended and Restated 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q filed with the SEC on May 9, 2024).*
10.53
Wilson Bank and Trust Life Insurance Endorsement Method Split Dollar Plan Agreement dated November 23, 2012, by and between Wilson Bank and Trust and Clark Oakley (incorporated by reference to Exhibit 10.64 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on March 8, 2019).*
10.54
Supplemental Executive Retirement Plan Agreement, dated November 23, 2012, by and between Wilson Bank and Trust and Clark Oakley (incorporated by reference to Exhibit 10.65 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on March 8, 2019).*
10.55
First Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement as of September 26, 2016, by and between Wilson Bank and Trust and Clark Oakley (incorporated by reference to Exhibit 10.66 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on March 8, 2019).*
10.56
Supplemental Executive Retirement Plan Agreement, dated May 22, 2015, by and between Wilson Bank and Trust and Clark Oakley (incorporated by reference to Exhibit 10.67 of the Company's Annual Report of Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC on March 8, 2019).*
10.57
First Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement Implemented May 22, 2015 by and between Wilson Bank and Trust and Clark Oakley (incorporated by reference to Exhibit 10.68 of the Company's Annual Report of Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC on March 8, 2019).*
10.58
Supplemental Executive Retirement Plan Agreement, dated May 22, 2015, by and between Wilson Bank and Trust and John Foster (incorporated by reference to Exhibit 10.68 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 12, 2020).*
10.59
Wilson Bank and Trust Life Insurance Endorsement Method Split Dollar Plan Agreement dated May 22, 2015, by and between Wilson Bank and Trust and John Foster (incorporated by reference to Exhibit 10.69 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 12, 2020).*
10.60
First Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated October 26, 2020, by and between Wilson Bank and Trust and John McDearman (incorporated herein by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 9, 2020).*
10.61
Second Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated October 26, 2020, by and between Wilson Bank and Trust and Clark Oakley (incorporated herein by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 9, 2020).*
10.62
First Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated October 26, 2020, by and between Wilson Bank and Trust and Lisa Pominski (incorporated herein by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 9, 2020).*
10.63
First Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated October 26, 2020, by and between Wilson Bank and Trust and John Foster (incorporated herein by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 9, 2020).*
10.64
First Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated October 26, 2020, by and between Wilson Bank and Trust and John McDearman (incorporated herein by reference to Exhibit 10.6 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 9, 2020).*
10.65
Second Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated October 26, 2020, by and between Wilson Bank and Trust and Clark Oakley (incorporated herein by reference to Exhibit 10.7 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 9, 2020).*
10.66
First Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated October 26, 2020, by and between Wilson Bank and Trust and Lisa Pominski (incorporated herein by reference to Exhibit 10.8 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 9, 2020).*
10.67
Second Amendment to the Wilson Bank & Trust Supplemental Executive Retirement Plan Agreement Implemented May 22, 2015, by and between Wilson Bank and Trust and John C. McDearman (incorporated herein by reference to Exhibit 10.79 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 12, 2021).*
10.68
Second Amendment to the Wilson Bank & Trust Supplemental Executive Retirement Plan Agreement Implemented May 22, 2015, by and between Wilson Bank and Trust and John Foster (incorporated herein by reference to Exhibit 10.80 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 12, 2021).*
10.69
Second Amendment to the Wilson Bank & Trust Supplemental Executive Retirement Plan Agreement Implemented May 22, 2015, by and between Wilson Bank and Trust and Lisa Pominski (incorporated herein
by reference to Exhibit 10.81 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 12, 2021).*
10.70
Third Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated as of November 29, 2021 (incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on November 30, 2021).*
10.71
Supplemental Executive Retirement Plan Agreement dated November 26, 2018, by and between Wilson Bank and Trust and Taylor Walker (incorporated by reference to Exhibit 10.84 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 28, 2024).*
10.72
Wilson Bank and Trust Life Insurance Endorsement Method Split Dollar Plan Agreement dated as of November 26, 2018 by and between Wilson Bank and Taylor Walker (incorporated by reference to Exhibit 10.85 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 28, 2024).*
10.73
Executive Survivor Income Agreement, dated April 14, 2014, by and between Wilson Bank and Trust and Clark Oakley (incorporated by reference to Exhibit 10.86 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 28, 2024).*
10.74
Executive Survivor Income Agreement, dated June 1, 2020, by and between Wilson Bank and Trust and Taylor Walker (incorporated by reference to Exhibit 10.87 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 28, 2024).*
10.75
First Amendment to the Executive Survivor Income Agreement dated September 14, 2021, by and between Wilson Bank and Trust and Taylor Walker (incorporated by reference to Exhibit 10.88 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 28, 2024).*
10.76
Executive Survivor Income Agreement, dated June 1, 2020, by and between Wilson Bank and Trust and Kayla Hawkins.*+
10.77
First Amendment to the Executive Survivor Income Agreement dated September 14, 2021, by and between Wilson Bank and Trust and Kayla Hawkins.*+
19.1
Wilson Bank Holding Company Insider Trading Policy.+
21.1
Subsidiaries of the Company.+
23.1
Consent of Independent Registered Public Accounting Firm.+
31.1
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+
31.2
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+
32.1
Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+
32.2
Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+
101.INS
Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Management compensatory plan or contract
+ Filed herewith