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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 30,
2025
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to ___________
Commission File Number
0-20402
WILSON BANK HOLDING CO
MPANY
(Exact name of registrant as specified in its charter)
Tennessee
62-1497076
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
623 West Main Street
Lebanon
TN
37087
(Address of principal executive offices)
(Zip Code)
(
615
)
444-2265
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
None
N/A
N/A
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Change in fair value of securities available-for-sale, net of tax expense of $(
6,629
) and a tax benefit of $
1,933
for the six months ended June 30, 2025 and 2024, respectively
$
18,737
$
(
5,467
)
Non-cash transfers from loans to other assets
$
54
$
44
See accompanying notes to consolidated financial statements (unaudited)
Note 1. Summary of Significant Accounting Policies
Nature of Business
— Wilson Bank Holding Company (the “Company”) is a bank holding company whose primary business is conducted by its wholly-owned subsidiary, Wilson Bank & Trust (the “Bank”). The Bank is a commercial bank headquartered in Lebanon, Tennessee. The Bank provides a full range of banking services in its primary market areas of Wilson, Davidson, Rutherford, Trousdale, Sumner, Dekalb, Putnam, Smith, Hamilton, and Williamson Counties, Tennessee.
The Bank was previously invested in Encompass Home Lending LLC ("Encompass"), a joint venture of which the Bank owned
51
% of the outstanding membership interests. Effective June 1, 2025, the Bank sold its
51
% membership interest in Encompass to Encompass Home Lending Investors, LLC, which owned
49
% of the outstanding membership interests in Encompass prior to the sale. Encompass offers residential mortgage banking services to customers of certain home builders in the Bank's markets as well as other mortgage customers.
Basis of Presentation
— The accompanying unaudited, consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles. All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods covered by the report have been included. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company’s consolidated audited financial statements and related notes appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (the "SEC") on February 28, 2025 (the "2024 Form 10-K").
These unaudited consolidated financial statements include the accounts of the Company, the Bank, and through the period of the Company's investment, Encompass. Significant intercompany transactions and accounts are eliminated in consolidation.
Use of Estimates
— The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term include the determination of the allowance for credit losses, 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. These financial statements should be read in conjunction with the 2024 Form 10-K. There have been no significant changes to the Company’s significant accounting policies as disclosed in the 2024
Form 10-K.
Newly Issued Not Yet Effective Accounting Standards
Information about certain recently issued accounting standards updates is presented below. Also refer to Note 1 - Accounting Standards Updates in the 2024 Form 10-K for additional information related to previously issued accounting standards updates.
Accounting Standards Update ("ASU") 2024-03,
Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40)
, in November 2024, the Financial Accounting Standards Board ("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.
Recently Adopted Accounting Standards
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 pronouncement 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 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 as of June 30, 2025.
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. 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.
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. The Company has
adopted
ASU 2023-09 and does
no
t expect any major impact on reporting.
Other than those previously discussed, there were no other recently issued accounting pronouncements that are expected to materially impact the Company.
Note 2. Loans and Allowance for Credit Losses
Loans —
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 Federal Deposit Insurance Corporation (“FDIC”).
The following schedule details the loans of the Company
at June 30, 2025 and December 31, 2024:
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). 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 generally rely on estimates of project costs and the anticipated value of the completed project, while the Company strives to ensure the accuracy of these estimates, it is possible for these estimates to be inaccurate. Construction loans often involve the disbursement of substantial funds with repayments 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, the value of the completed project, 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") ratios, minimum credit scores, and maximum debt to income ratios. 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.
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 ratios, minimum credit scores, and maximum debt to income ratios. 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:
Multi-family and commercial real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans, 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 commercial real estate 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, industrial, and agricultural:
The commercial, industrial, and agricultural loan portfolio segment includes commercial, industrial, and agricultural 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, industrial, and agricultural loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower, if any. The cash flows of borrowers, however, may not be as expected and any collateral securing these loans may fluctuate in value. Most commercial, industrial, and agricultural loans are secured by the assets being financed or other business assets such as accounts receivable, inventory, crops, or livestock 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 and other:
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 ratios on secured consumer loans, minimum credit scores, and maximum debt to income ratios. 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.
Allowance For Credit Losses ("ACL") - Loans.
The allowance for credit losses on loans is a contra-asset valuation account, calculated in accordance with Accounting Standards Codification ("ASC") Topic 326 ("ASC 326") Financial Instruments-Credit Losses, 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 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 model 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. 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 a six quarter time period before reverting to a straight line basis based on absolute historical quarterly changes in the economic variables utilized. 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 a 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 or management's assessment of portfolio risk. 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 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.
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 value of underlying collateral.
7.
The existence and effect of concentrations of credit, and changes in the level of such concentrations.
8.
Additional segment specific risks when aggregated portfolios were required for reliable quantitative assessments.
The qualitative allowance allocation, as determined by the processes noted above, is applied to loan segments 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 and that are deemed to be collateral dependent. Such loans are evaluated for credit losses based on 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 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 calculating the allowance for credit losses.
In accordance with Current Expected Credit Losses ("CECL"), losses are estimated over the remaining contractual terms of loans, adjusted for prepayments and curtailment. The contractual term excludes extensions, renewals and modification assumptions.
Credit losses are estimated on the amortized cost basis of loans, which includes the principal balance outstanding, deferred loan fees and costs, and premiums and discounts when applicable.
While management utilizes its best judgment and information available, the ultimate appropriateness of the allowance is dependent upon a variety of factors beyond our control, including the performance of our loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities toward loan classifications. The ACL process is continually reviewed and updated as needed based on quarterly reviews, new data, and/or calculation improvements with material impacts disclosed as appropriate.
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
three months ended June 30, 2025 and 2024 are summarized as follows:
Transactions in the allowance for credit losses for the
six months ended June 30, 2025 and 2024
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
June 30, 2025
Allowance for credit losses - loans:
Beginning balance January 1,
$
9,708
20,203
14,663
1,702
1,890
1,331
49,497
Provision for credit losses
3,910
(
3,539
)
2,397
1,666
(
405
)
711
4,740
Charge-offs
—
—
—
(
149
)
—
(
544
)
(
693
)
Recoveries
17
—
6
41
—
246
310
Ending balance
$
13,635
16,664
17,066
3,260
1,485
1,744
53,854
(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
June 30, 2024
Allowance for credit losses - loans:
Beginning balance January 1,
$
8,765
17,422
14,027
1,533
1,809
1,292
44,848
Provision
46
218
(
459
)
(
100
)
68
227
—
Charge-offs
—
—
—
(
14
)
—
(
461
)
(
475
)
Recoveries
26
—
6
13
—
243
288
Ending balance
$
8,837
17,640
13,574
1,432
1,877
1,301
44,661
The following table prese
nts the amortized cost basis of collateral dependent loans at
June 30, 2025
and December 31, 2024 which are individually evaluated to determine expected credit losses:
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 90 days or more 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.
The following tables present the Company’s nonaccrual loans and past due loans as of June 30, 2025 and December 31, 2024.
Recorded
Investment in Loans
Greater Than
89 Days Past
Due and
Accruing
June 30, 2025
Residential 1-4 family real estate
$
1,606
3,461
6,949
12,016
1,190,626
1,202,642
$
1,284
Commercial and multi-family real estate
23,199
—
2,492
25,691
1,599,274
1,624,965
—
Construction, land development and
farmland
15,718
460
709
16,887
939,984
956,871
709
Commercial, industrial and agricultural
293
—
141
434
149,697
150,131
—
1-4 family equity lines of credit
2,126
—
131
2,257
246,167
248,424
131
Consumer and other
832
109
73
1,014
117,094
118,108
73
Total
$
43,774
4,030
10,495
58,299
4,242,842
4,301,141
$
2,197
December 31, 2024
Residential 1-4 family real estate
$
5,854
1,462
766
8,082
1,125,884
1,133,966
$
314
Commercial and multi-family real estate
—
2
3,616
3,618
1,540,722
1,544,340
—
Construction, land development and
farmland
742
—
162
904
940,289
941,193
162
Commercial, industrial and agricultural
184
562
113
859
143,760
144,619
113
1-4 family equity lines of credit
960
581
840
2,381
232,859
235,240
90
Consumer and other
568
137
52
757
105,478
106,235
52
Total
$
8,308
2,744
5,549
16,601
4,088,992
4,105,593
$
731
Loan Modifications to Borrowers 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 tables present the amortized cost basis of loans at June 30, 2025 and June 30, 2024 that were both experiencing financial difficulty and modified during the
six months ended June 30, 2025
or six months ended June 30, 2024, 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 each class of financing receivable is also presented below.
(In Thousands)
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
Six Months Ended June 30, 2025
Residential 1-4 family real estate
$
—
$
1,139
$
946
$
—
$
—
$
360
0.20
%
Commercial and multi-family real estate
—
—
3,270
—
—
—
0.20
%
Construction, land development and
farmland
—
—
—
—
—
—
—
%
Commercial, industrial and agricultural
—
—
242
—
—
—
0.16
%
1-4 family equity lines of credit
—
—
—
—
—
—
—
%
Consumer and other
—
—
—
—
—
—
—
%
Total
$
—
$
1,139
$
4,458
$
—
$
—
$
360
0.14
%
As of June 30, 2025, the Company has not committed to lend additional amounts to the borrowers included in the previous table.
(In Thousands)
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
Six Months Ended June 30, 2024
Residential 1-4 family real estate
$
—
$
—
$
950
$
—
$
—
$
—
0.09
%
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
$
—
$
—
$
950
$
—
$
—
$
—
0.03
%
As of June 30, 2024, the Company has not committed to lend additional amounts to the borrowers included in the previous table.
The following tables present the amortized cost basis of loans at June 30, 2025 and June 30, 2024 that were both experiencing financial difficulty and modified during the three months ended June 30, 2025 or three months ended June 30, 2024, 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 each class of financing receivable is also presented below.
(In Thousands)
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
Three Months Ended June 30, 2025
Residential 1-4 family real estate
$
—
$
1,139
$
946
$
—
$
—
$
360
0.20
%
Commercial and multi-family real estate
—
—
—
—
—
—
—
%
Construction, land development and
farmland
—
—
—
—
—
—
—
%
Commercial, industrial and agricultural
—
—
141
—
—
—
0.09
%
1-4 family equity lines of credit
—
—
—
—
—
—
—
%
Consumer and other
—
—
—
—
—
—
—
%
Total
$
—
$
1,139
$
1,087
$
—
$
—
$
360
0.06
%
As of June 30, 2025, the Company has not committed to lend additional amounts to the borrowers included in the previous table.
(In Thousands)
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
Three Months Ended June 30, 2024
Residential 1-4 family real estate
$
—
$
—
$
950
$
—
$
—
$
—
0.09
%
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
$
—
$
—
$
950
$
—
$
—
$
—
0.03
%
As of June 30, 2024
, 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 June 30, 2025:
In Thousands
30-59 Days Past Due
60-89 Days Past Due
Greater Than 89 Days Past Due
Current
Total Modified Loans
June 30, 2025
Residential 1-4 family real estate
$
—
$
—
$
407
$
2,980
$
3,387
Commercial and multi-family real estate
22,430
—
—
3,270
25,700
Construction, land development and
farmland
—
—
—
—
—
Commercial, industrial and agricultural
101
—
—
141
242
1-4 family equity lines of credit
—
—
—
—
—
Consumer and other
—
—
—
—
—
Total
$
22,531
$
—
$
407
$
6,391
$
29,329
As evidenced in the table above, $
22,938,000
of loans that were modified within the twelve months prior to June 30, 2025 were thirty (30) days or more past due at June 30, 2025.
The following table presents the performance of such loans that had been modified within the last twelve months as of June 30, 2024:
In Thousands
30-59 Days Past Due
60-89 Days Past Due
Greater Than 89 Days Past Due
Current
Total Modified Loans
June 30, 2024
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 June 30, 2024 were thirty (30) days or more past due at June 30, 2024.
The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial diffic
ulty for the six months ended June 30, 2025 and 2024 (dollars in thousands):
Six Months Ended June 30, 2025
Six Months Ended June 30, 2024
Principal
Forgiveness
Weighted-Average
Interest Rate Reduction
Weighted-Average Months of Term Extension
Weighted-Average Months of Payment Delay
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
$
—
0.67
%
13
6
$
—
—
%
6
—
Commercial and multi-family real estate
—
—
6
—
—
—
—
—
Construction, land development and farmland
—
—
—
—
—
—
—
—
Commercial, industrial and agricultural
—
—
22
—
—
—
—
—
1-4 family equity lines of credit
—
—
—
—
—
—
—
—
Consumer and other
—
—
—
—
—
—
—
—
Total
$
—
0.67
%
8
6
$
—
—
%
6
—
The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three months ended June 30, 2025 and 2024 (dollars in thousands):
The following table presents the amortized cost basis of loans that had a payment default during the three and six months ended June 30, 2025 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty (dollars in thousands):
Three Months Ended June 30, 2025
Six Months Ended June 30, 2025
Principal Forgiveness
Payment Delay
Term Extension
Interest Rate Reduction
Principal Forgiveness
Payment Delay
Term Extension
Interest Rate Reduction
Residential 1-4 family real estate
$
—
$
407
$
1,481
$
—
$
—
$
407
$
1,481
$
—
Commercial and multi-family real estate
—
—
22,430
—
—
—
22,430
—
Construction, land development and
farmland
—
—
—
—
—
—
—
—
Commercial, industrial and agricultural
—
—
101
—
—
—
101
—
1-4 family equity lines of credit
—
—
—
—
—
—
—
—
Consumer and other
—
—
—
—
—
—
—
—
Total
$
—
$
407
$
24,012
$
—
$
—
$
407
$
24,012
$
—
The following table presents the amortized cost basis of loans that had a payment default during the three and six months ended June 30, 2024 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty (dollars in thousands):
Three Months Ended June 30, 2024
Six Months Ended June 30, 2024
Principal Forgiveness
Payment Delay
Term Extension
Interest Rate Reduction
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 three or six months ended
June 30, 2024 on loans that had been modified in the twelve months prior to June 30, 2024.
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.
As of June 30, 2025 and December 31, 2024 the Bank had
$
2,189,000
and
$
1,073,000
in consumer mortgage loans in process of foreclosure, respectively.
Potential problem loans, which include nonperforming loans, amounted to approximately
$
54.8
million at June 30, 2025 and
$
48.0
million at December 31, 2024. Potential problem loans represent those loans with a well-defined weakness and where information about possible credit problems of borrowers has caused management to have serious doubts about the borrower’s ability to comply with
present repayment terms. This definition is believed to be substantially consistent with the standards established by the FDIC, the Bank’s primary federal regulator, for loans classified as special mention, substandard, or doubtful.
The following summary presents the Bank's 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 Bank’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 Bank will sustain some loss if the deficiencies are not corrected.
•
Doubtful loans have all the characteristics of substandard loans with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The Bank considers all doubtful loans to be collateral dependent and places such loans on nonaccrual status.
The table below presents loan balances classified within each risk rating category by primary loan type and based on year of origination as of
June 30, 2025:
In Thousands
2025
2024
2023
2022
2021
Prior
Revolving Loans
Total
June 30, 2025
Residential 1-4 family real estate
Pass
$
122,433
266,771
133,821
262,303
211,947
178,293
10,807
1,186,375
Special mention
—
1,283
1,114
2,290
586
5,014
30
10,317
Substandard
—
2,378
1,060
1,630
195
284
403
5,950
Total Residential 1-4 family real estate
$
122,433
270,432
135,995
266,223
212,728
183,591
11,240
1,202,642
Residential 1-4 family real estate:
Current-period gross charge-offs
$
—
—
—
—
—
—
—
—
Commercial and multi-family real estate
Pass
$
70,078
283,953
170,535
304,965
355,957
342,398
67,984
1,595,870
Special mention
—
—
—
22,527
—
4,077
—
26,604
Substandard
—
—
2,059
—
—
432
—
2,491
Total Commercial and multi-family real estate
$
70,078
283,953
172,594
327,492
355,957
346,907
67,984
1,624,965
Commercial and multi-family real estate:
Current-period gross charge-offs
$
—
—
—
—
—
—
—
—
Construction, land development and
farmland
Pass
$
132,048
322,237
87,034
120,668
36,772
25,211
228,728
952,698
Special mention
—
661
1,191
447
910
57
884
4,150
Substandard
—
23
—
—
—
—
—
23
Total Construction, land development
and farmland
$
132,048
322,921
88,225
121,115
37,682
25,268
229,612
956,871
Construction, land development and
farmland:
Current-period gross charge-offs
$
—
—
—
—
—
—
—
—
Commercial, industrial and agricultural
Pass
$
17,299
26,052
9,889
27,423
3,413
28,263
37,007
149,346
Special mention
102
—
105
—
6
304
106
623
Substandard
141
—
1
11
—
9
—
162
Total Commercial, industrial and
agricultural
$
17,542
26,052
9,995
27,434
3,419
28,576
37,113
150,131
Commercial, industrial and agricultural:
Current-period gross charge-offs
$
—
86
57
6
—
—
—
149
1-4 family equity lines of credit
Pass
$
—
—
—
—
—
—
244,261
244,261
Special mention
—
—
—
—
—
—
4,163
4,163
Substandard
—
—
—
—
—
—
—
—
Total 1-4 family equity lines of credit
$
—
—
—
—
—
—
248,424
248,424
1-4 family equity lines of credit:
Current-period gross charge-offs
$
—
—
—
—
—
—
—
—
Consumer and other
Pass
$
26,975
21,389
12,646
5,087
1,648
20,444
29,570
117,759
Special mention
20
9
90
98
17
27
—
261
Substandard
—
12
38
31
7
—
—
88
Total Consumer and other
$
26,995
21,410
12,774
5,216
1,672
20,471
29,570
118,108
Consumer and other:
Current-period gross charge-offs
$
—
31
90
49
1
—
373
544
The table below presents loan balances classified within each risk rating category based on year of origination as of June 30, 2025:
The table below presents loan balances classified within each risk rating category by primary loan type and based on year of origination as of December 31, 2024:
In Thousands
Revolving
2024
2023
2022
2021
2020
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
950
1,817
1,607
196
—
2,528
401
7,499
Substandard
—
—
—
376
—
365
74
815
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
$
—
—
—
—
—
24
—
24
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
—
705
4,275
—
31,823
Substandard
—
—
—
—
—
73
—
73
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
27
256
135
120
—
45
2,533
3,116
Substandard
—
—
129
—
—
—
—
129
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
147
131
73
10
—
—
106
467
Substandard
—
—
—
—
11
—
—
11
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
$
—
—
30
4
—
—
8
42
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
3
62
104
27
29
14
1
240
Substandard
6
21
37
8
—
—
—
72
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
$
24
147
141
10
—
—
634
956
The table below presents loan balances classified within each risk rating category based on year of origination as of December 31, 2024:
Debt securities have been classified in the consolidated balance sheet according to management’s intent.
Debt securities at
June 30, 2025 and December 31, 2024 are summarized as follows:
June 30, 2025
Securities Available-For-Sale
In Thousands
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Market
Value
U.S. Treasury and other U.S. government
agencies
$
4,941
—
266
4,675
U.S. Government-sponsored enterprises
(GSEs)
175,934
229
15,746
160,417
Mortgage-backed securities
577,896
1,105
52,935
526,066
Asset-backed securities
49,451
74
617
48,908
Obligations of states and political
subdivisions
179,553
—
25,926
153,627
$
987,775
1,408
95,490
893,693
December 31, 2024
Securities Available-For-Sale
In Thousands
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Market
Value
U.S. Treasury and other U.S. government
agencies
$
4,927
—
389
4,538
U.S. Government-sponsored enterprises
(GSEs)
183,912
8
21,947
161,973
Mortgage-backed securities
520,729
55
66,588
454,196
Asset-backed securities
51,110
108
401
50,817
Corporate bonds
2,500
—
104
2,396
Obligations of states and political
subdivisions
184,163
—
30,190
153,973
$
947,341
171
119,619
827,893
As of June 30, 2025 and December 31, 2024
, there was
no
allowance for credit losses on available-for-sale securities.
Included in mortgage-backed securities are collateralized mortgage obligations totaling
$
164,867,000
(fair value of
$
148,582,000
) and
$
146,369,000
(fair value of
$
126,426,000
) at June 30, 2025 and December 31, 2024, respectively.
Securities carried on the balance sheet of approximately
$
654,205,000
(approximate market value of
$
586,907,000
) and
$
581,017,000
(approximate market value of
$
499,585,000
) were pledged to secure public deposits and for other purposes as required by law at June 30, 2025 and December 31, 2024, respectively.
At June 30, 2025
, 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.
The amortized cost and estimated market value of debt securities at
June 30, 2025
by contractual maturity are shown below.
Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Available-For-Sale
In Thousands
Amortized
Cost
Estimated
Market Value
Due in one year or less
$
3,884
$
3,851
Due after one year through five years
115,108
106,231
Due after five years through ten years
289,952
262,873
Due after ten years
578,831
520,738
$
987,775
$
893,693
The following tables show the gross unrealized losses and fair value of the Company’s investments with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at
June 30, 2025 and December 31, 2024.
In Thousands, Except Number of Securities
Less than 12 Months
12 Months or More
Total
June 30, 2025
Fair
Value
Unrealized
Losses
Number of
Securities
Included
Fair
Value
Unrealized
Losses
Number of
Securities
Included
Fair
Value
Unrealized
Losses
Available-for-Sale Securities:
U.S. Treasury and other
U.S. government agencies
$
—
$
—
—
$
4,675
$
266
2
$
4,675
$
266
U.S. Government-sponsored
enterprises (GSEs)
2,632
40
2
145,933
15,706
63
148,565
15,746
Mortgage-backed securities
85,336
766
17
336,394
52,169
212
421,730
52,935
Asset-backed securities
20,861
105
8
16,584
512
7
37,445
617
Obligations of states and
political subdivisions
4,878
338
3
148,749
25,588
160
153,627
25,926
$
113,707
$
1,249
30
$
652,335
$
94,241
444
$
766,042
$
95,490
In Thousands, Except Number of Securities
Less than 12 Months
12 Months or More
Total
December 31, 2024
Fair
Value
Unrealized
Losses
Number of
Securities
Included
Fair
Value
Unrealized
Losses
Number of
Securities
Included
Fair
Value
Unrealized
Losses
Available-for-Sale Securities:
U.S. Treasury and other
U.S. government agencies
$
—
$
—
—
$
4,538
$
389
2
$
4,538
$
389
U.S. Government-sponsored
enterprises (GSEs)
12,226
258
3
147,828
21,689
67
160,054
21,947
Mortgage-backed securities
90,776
2,043
24
348,035
64,545
216
438,811
66,588
Asset-backed securities
14,103
75
5
17,170
326
7
31,273
401
Corporate bonds
—
—
—
2,396
104
1
2,396
104
Obligations of states and
political subdivisions
5,108
77
3
148,865
30,113
168
153,973
30,190
$
122,213
$
2,453
35
$
668,832
$
117,166
461
$
791,045
$
119,619
The applicable date for determining when securities are in an unrealized loss position is June 30, 2025 and December 31, 2024. As such, it is possible that a security had a market value less than its amortized cost on other days during the
six months ended June 30, 2025
and the twelve-month period ended December 31, 2024, but is not in the "Investments with an Unrealized Loss of less than 12 months" category above.
As shown in the tables above, at June 30, 2025 and December 31, 2024, the Company had unrealized losses of
$
95.5
million and
$
119.6
million on
$
766.0
million and
$
791.0
million, respectively, of securities in an unrealized loss position at those dates. As described in Note 1, Summary of Significant Accounting Policies to the consolidated financial statements of the Company included in the 2024 Form 10-K, 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 June 30, 2025, 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 June 30, 2025
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
June 30, 2025. These securities will continue to be monitored as a part of the Company's ongoing evaluation of credit quality.
Mortgage-Backed Securities
At June 30, 2025, 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
June 30, 2025.
The Company's mortgage-backed securities portfolio includes non-agency collateralized mortgage obligations with a fair value of
$
10.7
million which had unrealized losses of approximately
$
1.3
million at June 30, 2025. These non-agency mortgage-backed securities were rated AAA at June 30, 2025. 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 securities.
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
$
48.9
million which had unrealized losses of approximately
$
0.6
million at June 30, 2025
. 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 securities.
Note 4. 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 through June 30, 2030, the original term of the swap contract.
The following table presents the net effects of derivative hedging instruments on the Company's consolidated statements of income for the
three and six months ended June 30, 2025 and 2024. 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
Three Months Ended
Six Months Ended
June 30, 2025
June 30, 2024
June 30, 2025
June 30, 2024
Location in the Consolidated Statements of Income
Interest income:
Interest and fees on loans
$
224
271
$
460
652
Net increase to income before taxes
$
224
271
$
460
652
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 under the Bank's mandatory delivery program 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 an effort to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. At June 30, 2025 and December 31, 2024, the Company had approximately
$
4,079,000
and
$
1,680,000
, respectively, of interest rate lock commitments. The fair value of these mortgage banking derivatives was reflected by a derivative asset of
$
97,000
and
$
34,000
at June 30, 2025 and December 31, 2024, respectively. At June 30, 2025 and December 31, 2024, the Company had approximately
$
7,500,000
and
$
3,250,000
, respectively, of forward commitments for the future delivery of residential mortgage loans. The fair value of these mortgage banking derivatives was reflected by a derivative
liability
of
$
35,000
and derivative asset of
$
27,000
at June 30, 2025 and December 31, 2024, respectively. 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):
In Thousands
June 30, 2025
June 30, 2024
Interest rate contracts for customers
$
63
$
(
16
)
Forward contracts related to mortgage loans held for sale
and interest rate contracts
The following table reflects the amount and fair value of mortgage banking derivatives included in the consolidated balance sheet as of
June 30, 2025 and December 31, 2024 (in thousands):
In Thousands
June 30, 2025
December 31, 2024
Notional
Amount
Fair
Value
Notional
Amount
Fair
Value
Included in other assets (liabilities):
Interest rate contracts for customers
$
4,079
97
$
1,680
34
Forward contracts related to mortgage loans
held-for-sale
$
7,500
(
35
)
$
3,250
27
Note 5. 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 June 30, 2025 and December 31, 2024 are as follows:
In Thousands
June 30, 2025
December 31, 2024
Mortgage loan portfolios serviced for:
FHLMC
$
130,443
$
114,771
For the six months ended June 30, 2025 and 2024, the change in carrying value of the Company's mortgage servicing rights accounted for under the amortization method was as follows:
In Thousands
June 30, 2025
June 30, 2024
Balance at beginning of period
$
1,139
$
1,083
Servicing rights retained from loans sold
329
86
Amortization
(
213
)
(
121
)
Valuation Allowance Provision
—
—
Balance at end of period
$
1,255
$
1,048
Fair value, end of period
$
1,722
$
1,496
The key data and assumptions used in estimating the fair value of the Company's mortgage servicing rights as of June 30, 2025 and December 31, 2024 were as follows:
June 30, 2025
December 31, 2024
Prepayment speed
9.47
%
8.08
%
Weighted-average life (in years)
7.72
8.42
Weighted-average note rate
5.38
%
5.11
%
Weighted-average discount rate
9.00
%
9.00
%
Note 6. Equity Incentive Plans
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 granted 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 granted 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
June 30, 2025, the Company had outstanding
300
options under the 2009 Stock Option Plan with a weighted average exercise price of
$
37.31
.
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”).
Except for certain limitations, awards could be granted 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. The 2016 Equity Incentive Plan terminated on April 24, 2025, and
no
additional awards may be granted under the 2016 Equity Incentive Plan. As of
June 30, 2025, the Company had outstanding
178,962
options with a weighted average exercise price of
$
57.95
,
131,627
cash-settled stock appreciation rights with a weighted average exercise price of
$
55.43
,
153
restricted share awards,
19,181
restricted share unit awards, and
369
performance share unit awards under the 2016 Equity Incentive Plan.
On April 24, 2025, the Company's shareholders approved the Wilson Bank Holding Company 2025 Equity Incentive Plan (the "2025 Equity Incentive Plan"), which has initially authorized awards of up to
675,000
shares of Common Stock including
508,388
newly reserved shares and
166,612
shares of Common Stock initially reserved for issuance under the Company’s 2016 Equity Incentive Plan that remained available for issuance under the 2016 Equity Incentive Plan as of April 24, 2025. The 2025 Equity Incentive Plan was approved by the Board of Directors on February 28, 2025 and on April 24, 2025 it was approved by
the Company’s shareholders and became effective as of such date.
In addition to the
675,000
shares reserved for issuance under the 2025 Equity Incentive Plan, if any of the awards under the 2016 Equity Incentive Plan that were outstanding as of February 28, 2025 after that date terminate, expire unexercised, are settled for cash, forfeited or cancelled without delivery of shares of the Company’s Common Stock under the terms of the 2016 Equity Incentive Plan, the Company may issue awards with respect to those awards under the 2025 Equity Incentive Plan.
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 June 30, 2025, the Company had
659,501
shares remaining available for issuance under the 2025 Equity Incentive Plan. As of June 30, 2025, the Company had outstanding
6,666
options with a weighted average exercise price of
$
76.30
,
7,000
cash-settled stock appreciation rights with a weighted average exercise price of
$
76.30
, and
1,458
restricted share unit awards under the 2025 Equity Incentive Plan.
Stock Options
As of June 30, 2025, the Company had outstanding
185,928
stock options with a weighted average exercise price of
$
58.58
.
The following table summarizes information about stock options activity for the
six months ended June 30, 2025 and 2024
:
June 30, 2025
June 30, 2024
Shares
Weighted Average Exercise Price
Shares
Weighted Average Exercise Price
Options outstanding at beginning of period
193,395
$
57.66
214,974
$
57.08
Granted
6,666
76.30
850
71.50
Exercised
(
13,316
)
54.81
(
5,557
)
51.50
Forfeited or expired
(
817
)
46.13
(
133
)
35.81
Outstanding at end of period
185,928
$
58.58
210,134
$
57.30
Options exercisable at June 30
125,983
$
55.61
121,745
$
53.51
As of June 30, 2025, there was
$
1,011,000
of total unrecognized cost related to non-vested stock options granted under the Company's equity incentive plans. The cost is expected to be recognized over a weighted-average period of
2.12
years.
Stock Appreciation Rights
As of June 30, 2025, the Company had outstanding
138,627
cash-settled stock appreciation rights with a weighted average exercise price of
$
56.49
.
The following table summarizes information about cash-settled SARS activity for the
six months ended June 30, 2025 and 2024:
June 30, 2025
June 30, 2024
Shares
Weighted Average Exercise Price
Shares
Weighted Average Exercise Price
SARs outstanding at beginning of period
142,785
$
55.03
157,020
$
54.88
Granted
7,000
76.30
817
71.50
Exercised
(
11,158
)
50.34
(
4,335
)
53.67
Forfeited or expired
—
—
(
2,000
)
62.10
Outstanding at end of period
138,627
$
56.49
151,502
$
54.90
SARS exercisable at June 30
102,041
$
53.18
101,692
$
51.00
As of June 30, 2025, there was
$
780,000
of total unrecognized cost related to non-vested SARs granted under the Company's equity incentive plans. The cost is expected to be recognized over a weighted-average period of
2.18
years.
Time-based Vesting Restricted Shares and Restricted Share Units
A summary of restricted share awards activity for the
six months ended June 30, 2025 and 2024 is as follows:
June 30, 2025
June 30, 2024
Shares
Weighted Average Cost
Shares
Weighted Average Cost
Outstanding at beginning of period
153
$
66.70
301
$
66.70
Granted
—
—
—
—
Vested
—
—
—
—
Forfeited
—
—
—
—
Outstanding at June 30, 2025
153
$
66.70
301
$
66.70
A summary of restricted share unit ("RSU") awards activity for the six months ended June 30, 2025 and 2024 is as follows:
June 30, 2025
June 30, 2024
Shares
Weighted Average Cost
Shares
Weighted Average Cost
Outstanding at beginning of period
24,482
$
70.44
14,458
$
69.00
Granted
1,833
76.30
13,957
71.59
Vested
(
5,676
)
70.38
(
2,725
)
69.00
Forfeited
—
—
(
833
)
69.00
Outstanding at June 30, 2025
20,639
$
70.98
24,857
$
70.46
The restricted shares and RSUs vest over various time periods. As of June 30, 2025, there was
$
5,000
of total unrecognized compensation cost related to non-vested restricted share awards. The cost is expected to be expensed over a weighted-average period of
0.39
years. As of June 30, 2025, there was
$
1,204,000
of total unrecognized compensation cost related to non-vested RSUs. The cost is expected to be expensed over a weighted-average period of
3.30
years.
Performance-Based Vesting Restricted Stock Units ("PSUs")
The Company awards PSUs to officers and 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.
A summary of the PSUs activity for the
six months ended June 30, 2025 and 2024 is as follows:
June 30, 2025
June 30, 2024
Shares
Weighted Average Cost
Shares
Weighted Average Cost
Outstanding at beginning of period
738
$
67.85
1,107
$
67.85
Granted
—
—
—
—
Vested
(
369
)
67.85
(
369
)
67.85
Forfeited
—
—
—
—
Outstanding at June 30, 2025
369
$
67.85
738
$
67.85
Grant Year
Grant Price
Applicable Performance Period
Period in which units to be settled
PSUs Outstanding
2023
$
67.85
2023-2025
2024-2026
369
As of June 30, 2025, there was
$
15,000
of total unrecognized compensation cost related to non-vested PSUs. The cost is expected to be expensed over a weighted-average period of
0.59
years.
Note 7. Regulatory Capital
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 June 30, 2025, the Bank and the Company meet all capital adequacy requirements to which they are 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 June 30, 2025 and
December 31, 2024
, 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 Bank's category.
The Company’s and the Bank’s actual capital amounts and ratios as of
June 30, 2025 and
December 31, 2024
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)
June 30, 2025
Total capital to risk weighted assets:
Consolidated
$
649,277
14.7
%
$
352,552
8.0
%
$
440,690
10.0
%
Wilson Bank
641,536
14.6
352,427
8.0
440,534
10.0
Tier 1 capital to risk weighted assets:
Consolidated
594,178
13.5
264,414
6.0
264,414
6.0
Wilson Bank
586,456
13.3
264,320
6.0
352,427
8.0
Common equity Tier 1 capital to risk weighted assets:
Consolidated
594,178
13.5
198,311
4.5
N/A
N/A
Wilson Bank
586,456
13.3
198,240
4.5
286,347
6.5
Tier 1 capital to average assets:
Consolidated
594,178
10.5
226,541
4.0
N/A
N/A
Wilson Bank
586,456
10.4
226,470
4.0
283,088
5.0
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
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.
Note 8. Fair Value Measurements
FASB ASC 820,
Fair Value Measurements and Disclosures
, 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 quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
•
Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Following is a description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.
Assets
Securities available-for-sale —
Where quoted prices are available 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.
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. Substantially all of these amounts relate to construction and land development loans, other loans secured by land, and commercial real estate loans for which the Company believes it has adequate collateral. Upon foreclosure, 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 expense, as applicable. OREO is included in Level 3 of the valuation hierarchy due to the lack of 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
June 30, 2025 and December 31, 2024, by caption on the consolidated balance sheet and by FASB ASC 820 valuation hierarchy (as described above):
Assets and Liabilities Measured at Fair Value on a Recurring Basis
(In Thousands)
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)
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
(In Thousands)
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)
June 30, 2025
Other real estate owned
$
—
$
—
$
—
$
—
Collateral dependent loans (¹)
4,275
—
—
4,275
Total
$
4,275
$
—
$
—
$
4,275
December 31, 2024
Other real estate owned
$
—
$
—
$
—
$
—
Collateral dependent loans (¹)
37,045
—
—
37,045
Total
$
37,045
$
—
$
—
$
37,045
(1)
Th
e carrying value of collateral dependent loans at June 30, 2025 and December 31, 2024 is net of a valuation allowance of
$
418,000
an
d $
408,000
, respectively.
The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which we have utilized Level 3 inputs to determine fair value at
June 30, 2025 and December 31, 2024:
Valuation
Techniques (1)
Significant Unobservable Inputs
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
six months ended June 30, 2025
, there were
no
transfers between Levels 1, 2 or 3.
The tables below includes a rollforward of the balance sheet amounts for the
three and six months ended June 30, 2025 and 2024
(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 Three Months Ended June 30,
2025
2024
Other Assets
Other Liabilities
Other Assets
Other Liabilities
Fair value, April 1
$
2,207
—
$
2,080
—
Total realized gains included in income
2
—
21
—
Change in unrealized gains/losses included in other comprehensive income for assets and liabilities still held at June 30
—
—
—
—
Purchases, issuances and settlements, net
—
—
—
—
Transfers out of Level 3
—
—
—
—
Fair value, June 30
$
2,209
—
$
2,101
—
Total realized gains included in income related to financial assets and liabilities still on the consolidated balance sheet at June 30
$
2
—
$
21
—
For the Six Months Ended June 30,
2025
2024
Other Assets
Other Liabilities
Other Assets
Other Liabilities
Fair value, January 1
$
2,191
—
$
2,045
—
Total realized gains included in income
18
—
56
—
Change in unrealized gains/losses included in other comprehensive income for assets and liabilities still held at June 30
—
—
—
—
Purchases, issuances and settlements, net
—
—
—
—
Transfers out of Level 3
—
—
—
—
Fair value, June 30
$
2,209
—
$
2,101
—
Total realized gains included in income related to financial assets and liabilities still on the consolidated balance sheet at June 30
$
18
—
$
56
—
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 or observable components 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 June 30, 2025 and December 31, 2024. 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 our loan portfolio includes a credit risk factor in the determination of the fair value of our loans. This credit risk assumption is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. Our loan portfolio is initially fair valued using a segmented approach. We divide our 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 borrowings
— Fair values for deposits and Federal Home Loan Bank borrowings 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.
The following table presents the carrying amounts, estimated fair value and placement in the fair valuation hierarchy of the Company’s financial instruments at
June 30, 2025 and December 31, 2024
.
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.
Carrying/ Notional
Estimated
Quoted Market Prices in an Active Market
Models with Significant Observable Market Parameters
Models with Significant Unobservable Market Parameters
(in Thousands)
Amount
Fair Value(¹)
(Level 1)
(Level 2)
(Level 3)
June 30, 2025
Financial assets:
Cash and cash equivalents
$
245,313
245,313
245,313
—
—
Loans, net
4,234,091
4,166,792
—
—
4,166,792
Mortgage servicing rights
1,255
1,722
—
1,722
—
Financial liabilities:
Deposits
5,039,737
4,481,579
—
—
4,481,579
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
(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.
Note 9. Income Taxes
ASC 740,
Income Taxes
, defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. This section also provides guidance on the derecognition, measurement and classification of income tax uncertainties, along with any related interest and penalties, and includes guidance concerning accounting for income tax uncertainties in interim periods. As of June 30, 2025
, the Company had
no
unrecognized tax benefits related to Federal or state income tax matters and does not anticipate any material increase or decrease in unrecognized tax benefits relative to any tax positions taken prior to
June 30, 2025.
The Company's effective tax rate for the
three and six months ended June 30, 2025
was
23.24
%
and
23.60
%
, respectively, compared to
21.71
%
and
22.43
%
, respectively, for the same periods in
2024.
The difference between the effective tax rate and the federal and state income tax statutory rate of
26.14
% at
June 30, 2025 and 2024
is primarily due to investments in bank qualified municipal securities, participation in the Tennessee Community Investment Tax Credit program, and tax benefits associated with share-based compensation and bank-owned life insurance, offset in part by the limitation on deductibility of meals and entertainment expense and non-deductible executive compensation.
As of and for the six months ended June 30, 2025
, the Company has
no
t accrued or recognized interest or penalties related to uncertain tax positions. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.
The Company and the Bank file consolidated U.S. Federal and State of Tennessee income tax returns. The Company is currently open to audit under the statute of limitations by the State of Tennessee for the years ended December 31,
2021 through 2024
and the IRS for the years ended December 31, 2022 through 2024.
Note 10. Earnings Per Share
The computation of basic earnings per share is based on the weighted average number of common shares outstanding during the period, adjusted for stock splits. The computation of diluted earnings per share for the Company begins with the basic earnings per share and includes the effect of common shares contingently issuable from stock options, RSUs and PSUs.
The following is a summary of components comprising basic and diluted earnings per share (“EPS”) for the
three and six months ended June 30, 2025 and 2024
:
Three Months Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
(Dollars in Thousands Except
Share and Per Share Amounts)
(Dollars in Thousands Except
Share and Per Share Amounts)
Basic EPS Computation:
Numerator – Earnings available to common shareholders
$
19,115
$
16,137
$
35,507
$
28,905
Denominator – Weighted average number of common
shares outstanding
11,996,239
11,769,300
11,979,603
11,760,683
Basic earnings per common share
$
1.59
$
1.37
$
2.96
$
2.46
Diluted EPS Computation:
Numerator – Earnings available to common shareholders
$
19,115
$
16,137
$
35,507
$
28,905
Denominator – Weighted average number of common
shares outstanding
11,996,239
11,769,300
11,979,603
11,760,683
Dilutive effect of stock options, RSUs and PSUs
38,715
30,936
38,038
30,338
Weighted average diluted common shares outstanding
12,034,954
11,800,236
12,017,641
11,791,021
Diluted earnings per common share
$
1.59
$
1.37
$
2.95
$
2.45
Note 11. Commitments and Contingent Liabilities
In the normal course of business, the Bank has entered into off-balance sheet financial instruments which include commitments to extend credit (i.e., including unfunded lines of credit) and standby letters of credit. Commitments to extend credit are usually the result of lines of credit granted to existing borrowers under agreements that the total outstanding indebtedness will not exceed a specific amount during the term of the indebtedness. Typical borrowers are commercial concerns that use lines of credit to supplement their treasury management functions, thus their total outstanding indebtedness may fluctuate during any time period based on the seasonality of their business and the resultant timing of their cash flows. Other typical lines of credit are related to home equity loans granted to consumers. Commitments to extend credit generally have fixed expiration dates or other termination clauses and may require payment of a fee.
Standby letters of credit are generally issued on behalf of an applicant (the Bank's customer) to a specifically named beneficiary and are the result of a particular business arrangement that exists between the applicant and the beneficiary. Standby letters of credit have fixed expiration dates and are usually for terms of
two years
or less unless terminated sooner due to criteria specified in the standby letter of credit. A typical arrangement involves the applicant routinely being indebted to the beneficiary for such items as inventory purchases, insurance, utilities, lease guarantees or other third party commercial transactions. The standby letter of credit would permit the beneficiary to obtain payment from the Bank under certain prescribed circumstances. Subsequently, the Bank would then seek reimbursement from the applicant pursuant to the terms of the standby letter of credit.
The Bank follows the same credit policies and underwriting practices when making these commitments as it does for on-balance sheet instruments. Each customer’s creditworthiness is evaluated on a case-by-case basis, and the amount of collateral obtained, if any, is based on management’s credit evaluation of the customer. Collateral held varies but may include cash and cash equivalents, real estate and improvements, marketable securities, accounts receivable, inventory, equipment, and personal property.
The contractual amounts of these commitments are not reflected in the consolidated financial statements and would only be reflected if drawn upon. Since many of the commitments are expected to expire without being drawn upon, the contractual amounts do
not necessarily represent future cash requirements. However, should the commitments be drawn upon and should our customers default on their resulting obligation to us, the Company’s maximum exposure to credit loss, without consideration of collateral, is represented by the contractual amount of those instruments.
A summary of the Company’s total contractual amount for all off-balance sheet commitments at
June 30, 2025 is as follows:
Commitments to extend credit
$
1,197,137,000
Standby letters of credit
$
134,368,000
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 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 ending rates 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
six months ended June 30, 2025 and 2024.
(In Thousands)
2025
2024
Beginning balance, January 1
$
2,555
3,147
Credit loss expense (benefit)
(
270
)
—
Ending balance, June 30
$
2,285
3,147
The following table details activity in the allowance for credit losses on off-balance-sheet credit exposures for the three months ended June 30, 2025 and 2024.
(In Thousands)
2025
2024
Beginning balance, April 1
$
2,162
3,147
Credit loss expense (benefit)
123
—
Ending balance, June 30
$
2,285
3,147
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 Bank’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 Bank, including HUD/VA loans. In the fourth quarter of 2018, the Bank began to participate 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 to delivery penalties as the Bank's 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 Bank.
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.
On May 16, 2025 Moody's Investors Services downgraded the United States credit rating to Aa1 from Aaa primarily over concerns of the increased Federal debt, continuing deficits, the resulting increase in interest costs and the potential inability of the government to respond to future economic events.
The downgrade could potentially lead to higher interest rates which would likely impact financial market stability and volatility. Management will continue to evaluate the impact of the change in the rating and incorporate the information into its current risk management and financial analysis.
In July 2025, the Bank opened a loan production office in Nolensville, Tennessee. The Bank entered into a lease for the location for the new loan production office. The costs associated with this expansion, including lease expenses, are not expected to be significant.
Note 12. Branch Acquisition
Effective April 25, 2025, the Bank consummated its acquisition of certain assets and assumption of certain liabilities related to a branch office of another bank in Cookeville, Tennessee. As part of the acquisition, the bank acquired approximately $
14.1
million in loans and assumed approximately $
25.3
million in deposits. The credit and interest rate marks related to the loans and deposits were not significant. The Company recorded approximately $
1.1
million in goodwill and $
429,000
in core deposit intangibles in connection with the transaction. The core deposit intangible will be amortized over
10
years ranging from $
35,000
to $
49,000
per year and is included in other assets in the Company’s consolidated financial statements. At June 30, 2025, the balance of the core deposit intangible was
$
395,000
. The acquisition did not qualify as significant under the SEC's regulations.
Note 13. Segment Information
The Bank 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 Note 1, Summary of Significant Accounting Policies of this Quarterly Report on Form 10-Q. The accounting policies of the banking segment are the same as those described in Note 1 of our 2024 Form 10-K.
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, Chief Human Resources 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 tables reflects consolidated financial data of the Company’s reportable segment for the
three and six months ended June 30, 2025 and 2024:
Banking Segment
Dollars In Thousands
Three Months Ended
Six Months Ended
June 30,
June 30,
2025
2024
2025
2024
Interest income
$
81,094
68,945
$
157,596
133,887
Reconciliation of revenue
Other revenues
8,942
8,655
17,039
15,873
Total consolidated revenues
$
90,036
77,600
$
174,635
149,760
Less:
Interest expense
32,156
30,485
64,079
59,866
Segment net interest income and noninterest income
$
57,880
47,115
$
110,556
89,894
Less:
Provision for credit losses - loans
2,507
—
4,740
—
Provision for credit losses - off-balance sheet exposures
123
—
(
270
)
—
Salaries and employee benefits
18,511
16,910
36,383
33,455
Data processing expense
2,852
2,370
5,445
4,722
Occupancy expenses, net
1,542
1,473
3,001
2,757
Advertising & public relations expense
1,103
832
1,900
1,581
Furniture and equipment expense
749
756
1,512
1,502
FDIC insurance
1,025
721
2,156
1,628
Other segment items (a)
4,540
3,370
9,183
6,900
Income tax expense
5,793
4,490
10,974
8,377
Segment net earnings/consolidated net earnings
$
19,135
16,193
$
35,532
28,972
Net earnings attributable to noncontrolling interest
(
20
)
(
56
)
(
25
)
(
67
)
Net earnings attributable to Wilson Bank Holding Company
Net earnings attributable to Wilson Bank Holding Company
$
19,115
16,137
$
35,507
28,905
Banking Segment
Dollars in Thousands
June 30, 2025
December 31, 2024
Reconciliation of assets
Total assets for reportable segment
$
5,631,784
5,358,659
Other assets
—
—
Total consolidated assets
$
5,631,784
5,358,659
(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.
Note 14. Subsequent Events
ASC 855, Subsequent Events, establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The Company evaluated all events or transactions that occurred after June 30, 2025, through the date of the issued financial statements.
In July 2025, the Bank opened a loan production office in Nolensville, Tennessee. The Bank entered into a lease for the location for the new loan production office. The costs associated with this expansion, including lease expenses, are not expected to be significant.
Item 2. Management’s Discussion an
d Analysis of Financial Condition and Results of Operations
The purpose of this discussion is to provide insight into the financial condition and results of operations of Wilson Bank Holding Company (the "Company", "our" or "we") and its bank subsidiary, Wilson Bank & Trust (the "Bank"). Encompass Home Lending LLC ("Encompass"), a company offering mortgage banking services, was 51% owned by the Bank. Effective June 1, 2025 the Bank sold its 51% membership interest to Encompass Home Lending Investors, LLC, the other member of Encompass. The results of Encompass through the date of sale are consolidated in the Company's financial statements included elsewhere in this Quarterly Report on Form 10-Q. This discussion should be read in conjunction with the Company's consolidated financial statements appearing elsewhere in this report. Reference should also be made to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (the "SEC") on February 28, 2025 (the "2024 Form 10-K") for a more complete discussion of factors that impact the Company's liquidity, capital and results of operations.
Forward-Looking Statements
This Form 10-Q contains certain forward-looking statements within 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 (the "Exchange Act") 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 the 2024 Form 10-K, 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 U.S. and global economic conditions, trade policies and tensions, including changes in, or the imposition of, tariffs and/or trade barriers and the economic impacts, volatility and uncertainty resulting therefrom, and geopolitical instability, (iv) 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, (v) 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, political uncertainty, inflationary pressures and the elevated rate environment, supply chain disruptions and labor shortages on our customers and on their businesses, (vi) the sale of investment securities in a loss position before their value recovers, including as a result of asset liability management strategies or in response to liquidity needs, (vii) 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, (viii) the ability to grow and retain low-cost core deposits, (ix) the impact of changes in interest rates on the value of the Company's mortgage servicing rights, (x) significant downturns in the business of one or more large customers, (xi) 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, (xii) 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, (xiii) changes in capital levels and loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments, (xiv) an inadequate allowance for credit losses, (xv) the effectiveness of the Company’s activities in improving, resolving or liquidating lower quality assets, (xvi) results of regulatory examinations, (xvii) 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, (xviii) the possibility of additional increases to compliance costs or other operational expenses as a result of increased regulatory oversight, (xix) loss of key personnel, (xx) 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, and (xxi) the impact of changes in corporate tax rates. 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.
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. 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. The ACL process is continually reviewed and updated as needed based on quarterly reviews, new data, and/or calculation improvements with material impacts disclosed as appropriate. 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 Quarterly Report.
Non-GAAP Financial Measures
This Quarterly 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. 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 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 Quarterly Report include “pre-tax pre-provision income,” “pre-tax pre-provision basic earnings per share,” “pre-tax pre-provision annualized return on average shareholders' equity,” and “pre-tax pre-provision annualized 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 KPIs that management has determined to be important in making decisions for the Bank:
As of or For the Three Months Ended June 30,
As of or For the Six Months Ended June 30,
2025
2024
2025 - 2024 Percent Increase (Decrease)
2025
2024
2025 - 2024 Percent Increase (Decrease)
PER SHARE DATA:
Basic earnings per common share (GAAP)
$
1.59
$
1.37
16.06
%
$
2.96
$
2.46
20.33
%
Pre-tax pre-provision basic earnings per share (1)
$
2.30
$
1.75
31.43
%
$
4.25
$
3.17
34.07
%
Diluted earnings per common share (GAAP)
$
1.59
$
1.37
16.06
%
$
2.95
$
2.45
20.41
%
Cash dividends per common share
$
—
$
—
0.00
%
$
1.00
$
0.75
33.33
%
Dividends declared per common share as a percentage of basic
earnings per common share
—
%
—
%
0.00
%
33.78
%
30.49
%
10.79
%
(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.
Annualized return on average shareholders' equity (GAAP) (1)
14.69%
14.84%
(1.01)%
14.04%
13.39%
4.85%
Pre-tax pre-provision annualized return on average shareholders'
equity (2)
21.16%
18.97%
11.54%
20.15%
17.27%
16.68%
Annualized return on average assets (GAAP) (3)
1.38%
1.31%
5.34%
1.31%
1.19%
10.08%
Pre-tax pre-provision annualized return on average assets (2)
1.98%
1.68%
17.86%
1.87%
1.53%
22.22%
Efficiency ratio (GAAP) (4)
52.39%
56.10%
(6.61)%
53.89%
58.45%
(7.80)%
(1)
Annualized return on average shareholders' equity is the result of net income for the reported period on an annualized basis, divided by average shareholders' equity for the period.
(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)
Annualized return on average assets is the result of net income for the reported period on an annualized basis, divided by average assets for the period.
(4)
Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and non-interest income.
June 30, 2025
December 31, 2024
2025 - 2024 Percent Increase (Decrease)
CONSOLIDATED BALANCE SHEET RATIOS:
Total capital to assets ratio
9.43
%
8.95
%
5.36
%
Equity to assets ratio (Average equity divided by average total assets)
Net earnings of the Company for the three months ended June 30, 2025 were $19,115,000 an increase of $2,978,000, or 18.45%, from net earnings of $16,137,000 for the three months ended June 30, 2024. Net earnings of the Company increased
$6,602,000
, or
22.84%
, to
$35,507,000
for the
six months ended June 30, 2025
, from
$28,905,000
in the
f
irst half of 2024. The increase in net earnings for the three and six months ended June 30, 2025 was primarily due to an increase in net interest income and non-interest income, partially offset by increases in non-interest expense and provision for credit losses.
The increase in net interest income for the three and six months ended June 30, 2025 when compared to the comparable periods in 2024 was primarily due to an increase in average interest earning asset balances, an increase in the average yield earned on earning assets, and a decrease in the cost of funds, partially offset by an increase in average interest bearing deposit balances.
The changes in non-interest income and non-interest expenses are discussed in more detail below in the sections of this report titled, "Non-Interest Income" and "Non-Interest Expense". The changes in provision for credit losses is discussed in more detail below in the section of this report titled "Provision For Credit Losses".
Return on average assets ("ROA") and return on average shareholders' equity ("ROE") are common benchmarks for bank profitability and in the case of the Company are calculated by taking our annualized net earnings for the relevant period and dividing that amount by our average assets and average equity for the relevant periods, respectively. ROA and ROE measure a company’s return on investment in a format that is easily comparable to other financial institutions. ROA is particularly important to the Company as it serves as the basis for certain employee bonuses. The ROA for the three and six months ended June 30, 2025 was 1.38% and 1.31%, respectively, while the ROA for the three and six months ended June 30, 2024 was 1.31% and 1.19%, respectively. The ROE for the three and six months ended June 30, 2025 was 14.69% and 14.04%, respectively, while the ROE for the three and six months ended June 30, 2024 was 14.84% and 13.39%, respectively. The increase in ROA for the three and six months ended June 30, 2025 and the increase in ROE for the six months ended June 30, 2025 was primarily due to an increase in net interest income resulting from an increase in earning assets, partially offset by increases in non-interest expense and provision for credit losses. While net earnings and shareholder's equity both increased for the second quarter of 2025 when compared to the same period of 2024, the decrease in ROE is due to the growth in shareholder's equity outpacing the growth in net earnings in such quarter.
Effective April 25, 2025, the Bank consummated its acquisition of certain assets and assumption of certain liabilities related to a branch office of another bank in Cookeville, Tennessee. As part of the acquisition, the bank acquired approximately $14.1 million in loans and assumed approximately $25.3 million in deposits. The credit and interest rate marks related to the loans and deposits were not significant. The Company recorded approximately $1.1 million in goodwill and $429,000 in core deposit intangibles in connection with the transaction. The core deposit intangible will be amortized over 10 years ranging from $35,000 to $49,000 per year and is included in other assets in the Company’s consolidated financial statements. At June 30, 2025, the balance of the core deposit intangible was $395,000. The acquisition did not qualify as significant under the SEC's regulations.
In July 2025, the Bank opened a loan production office in Nolensville, Tennessee. The Bank entered into a lease for the location for the new loan production office. The costs associated with this expansion, including lease expenses, are not expected to be significant.
The average balances, interest, and average rates of our assets and liabilities for the
three and six months ended June 30, 2025 and 2024
are presented in the following table (dollars in thousands):
Three Months Ended
Three Months Ended
Net Change Three Months Ended
June 30, 2025
June 30, 2024
June 30, 2025 versus June 30, 2024
Average Balance
Interest Rate
Income/ Expense
Average Balance
Interest Rate
Income/
Expense
Due to Volume
Due to Rate
Net Change
Percent Change
Loans, net of unearned interest (1)
$
4,232,313
6.81
%
$
71,863
$
3,665,564
6.62
%
$
60,262
$
9,799
$
1,802
$
11,601
State income tax credits (2)
—
0.07
756
—
0.07
675
22
59
81
Total loans, net of unearned interest
4,232,313
6.88
72,619
3,665,564
6.69
60,937
9,821
1,861
11,682
Investment securities—taxable
815,343
2.94
5,980
788,905
2.87
5,634
201
145
346
Investment securities—tax exempt
39,373
2.82
277
64,195
2.63
419
(330
)
188
(142
)
Taxable equivalent adjustment (3)
—
0.75
74
—
0.70
111
(93
)
56
(37
)
Total tax-exempt investment securities
39,373
3.58
351
64,195
3.32
530
(423
)
244
(179
)
Total investment securities
854,716
2.97
6,331
853,100
2.91
6,164
(222
)
389
167
Loans held for sale
4,381
4.12
45
3,090
7.16
55
88
(98
)
(10
)
Federal funds sold
9,867
4.35
107
9,399
5.65
132
38
(63
)
(25
)
Accounts with depository institutions
250,689
4.38
2,739
190,952
4.98
2,366
1,926
(1,553
)
373
Restricted equity securities
4,230
7.87
83
3,765
8.23
77
24
(18
)
6
Total earning assets
5,356,196
6.13
81,924
4,725,870
5.93
69,731
11,675
518
12,193
17.49
%
Cash and due from banks
25,694
24,903
Allowance for credit losses
(51,529
)
(44,694
)
Bank premises and equipment
62,069
62,235
Other assets
174,409
167,644
Total assets
$
5,566,839
$
4,935,958
Three Months Ended
Three Months Ended
Net Change Three Months Ended
June 30, 2025
June 30, 2024
June 30, 2025 versus June 30, 2024
Average Balance
Interest Rate
Income/ Expense
Average Balance
Interest Rate
Income/ Expense
Due to Volume
Due to Rate
Net Change
Percent Change
Deposits:
Negotiable order of withdrawal accounts
$
952,158
0.83
%
$
1,971
$
916,321
0.84
%
$
1,904
$
143
$
(76
)
$
67
Money market demand accounts
1,421,808
2.56
9,062
1,228,575
2.78
8,477
3,970
(3,385
)
585
Time deposits
1,831,659
4.20
19,162
1,591,107
4.72
18,677
9,906
(9,421
)
485
Other savings
396,779
1.94
1,920
330,521
1.72
1,410
308
202
510
Total interest-bearing deposits
4,602,404
2.80
32,115
4,066,524
3.01
30,468
14,327
(12,680
)
1,647
Finance leases
4,209
3.91
41
2,239
2.88
16
18
7
25
Fed funds purchased
1
—
—
54
6.29
1
—
(1
)
(1
)
Total interest-bearing liabilities
4,606,614
2.80
32,156
4,068,817
3.01
30,485
14,345
(12,674
)
1,671
5.48
%
Non-interest bearing deposits
393,384
387,658
Other liabilities
44,963
42,236
Shareholders’ equity
521,878
437,247
Total liabilities and shareholders’
equity
$
5,566,839
$
4,935,958
Net interest income, on a tax equivalent basis
$
49,768
$
39,246
$
(2,670
)
$
13,192
$
10,522
26.81
%
Net interest margin (4)
3.73
%
3.34
%
Net interest spread (5)
3.33
%
2.92
%
Notes:
(1)
Loan fees of $4,163,000 are included in interest income for the period ended June 30, 2025. Loan fees of $4,309,000 are included in interest income for the period ended June 30, 2024.
(2)
State income tax credits related to incentive loans at below market rates and tax exempt loans to municipalities.
(3)
The tax equivalent adjustment has been computed using a 21% Federal tax rate.
(4)
Annualized 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.
Loan fees of $7,737,000 are included in interest income for the period ended June 30, 2025. Loan fees of $6,901,000 are included in interest income for the period ended June 30, 2024.
(2)
State income tax credits related to incentive loans at below market rates and tax exempt loans to municipalities.
(3)
The tax equivalent adjustment has been computed using a 21% Federal tax rate.
(4)
Annualized 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
three and six months ended June 30, 2025 and 2024
, were as follows:
Three Months Ended June 30,
2025
2024
Interest Income
Average Yield
Interest Income
Average Yield
Loan yield components:
Contractual interest rates
67,700
6.42
%
55,953
6.15
%
Origination and other fee income
4,163
0.39
%
4,309
0.47
%
Loan state income tax credits
756
0.07
%
675
0.07
%
Total
$
72,619
6.88
%
$
60,937
6.69
%
Six Months Ended June 30,
2025
2024
Interest Income
Average Yield
Interest Income
Average Yield
Loan yield components:
Contractual interest rates
132,239
6.38
%
109,778
6.08
%
Origination and other fee income
7,737
0.37
%
6,901
0.38
%
Loan state income tax credits
1,399
0.07
%
1,350
0.07
%
Total
$
141,375
6.82
%
$
118,029
6.53
%
Net interest margin for the three months ended June 30, 2025 and 2024 was 3.73% and 3.34%, respectively. Net interest margin for the six months ended June 30, 2025 and 2024 was
3.63%
and
3.24%
, respectively. The increase in net interest margin for the first half of 2025 was primarily due to the increase in average interest earning asset balances, an increase in the yield earned on loans and securities, and a decrease in cost of funds, partially offset by increased deposit balances and a decrease in the yield earned on accounts with depository institutions and federal funds sold. The yield on loans increased during the three and six months ended June 30, 2025 when compared to the comparable periods in 2024 due to the origination of loans at a higher rate than the previous portfolio rate. The net interest spread was 3.33% and 2.92% for the three months ended June 30, 2025 and 2024.
The net interest spread was 3.24% and 2.82% for the six months ended June 30, 2025 and 2024, respectively.
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. Net interest income, excluding tax equivalent adjustments relating to tax exempt securities and loans, for the three and six months ended June 30, 2025 totaled
$48,938,000
and $93,517,000, respectively. Net interest income, excluding tax equivalent adjustments relating to tax exempt securities and loans, for the three and six months ended June 30, 2024 totaled $38,460,000 and $74,021,000, respectively.
The increase in net interest income for the three and six months ended June 30, 2025 compared to the comparable periods in 2024 was primarily due to an increase in the volume of average interest-earning assets, which along with an increase in the average yield on loans and securities, contributed to an increase in interest income on loans, and an increase in interest and dividends earned on securities, partially offset by an increase in interest expense resulting from an increase in the volume of average interest-bearing deposits.
The ratio of average interest-earning assets to total average assets for the
three and six months ended June 30, 2025
was 96.2%, compared to 95.7% for the three and six months ended June 30, 2024.
Interest expense increased in the three and six months ended June 30, 2025 when compared to the comparable periods in 2024 due to an increase in the volume of average interest-bearing deposits offset in part by a reduction in the average interest rate we are paying on deposit accounts. Though we have been able to lower the rates we pay on deposits as the Federal Reserve began cutting rates in September 2024, if competitive pressures increase, the Federal Reserve does not cut the federal funds rate any further or loan growth outpaces deposit growth, we may have to once again raise the rates we pay on deposits which would negatively impact our net interest margin. Even if rates remain at current levels or the Federal Reserve begins to cut rates again, we expect interest expense to continue to increase due to an increase in overall deposit balances.
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 has decreased by 100 basis points since September 18, 2024 as the Federal Reserve cut the target rate for the federal funds rate by 100 basis points between September 18,
2024 and December 18, 2024. 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 our loan portfolio primarily consists of 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, then the Company expects its net interest margin would expand.
Provision for Credit Losses
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 determination of the amount of the allowance for credit losses ("ACL") 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 Quarterly Report on Form 10-Q for a detailed discussion regarding ACL methodology.
The provision for credit losses-loans of $2,507,000 for the three months ended June 30, 2025 was primarily driven by our branch acquisition, deterioration in the national and local economic outlook, and loan growth. There was no provision for the three months ended June 30, 2024 primarily due to an improved economic outlook offsetting loan growth reserve requirements.
The provision for credit losses-loans of $4,740,000 for the six months ended June 30, 2025 was primarily driven by loan growth and deterioration in the national and local economic outlook. There was no provision for the six months ended June 30, 2024 primarily due to an improved national economic outlook offset marginally by increased local property type specific risk.
As discussed below under
Financial Condition-Loans
, loan growth was higher for the six months ended June 30, 2025 compared to the same period for 2024. Loan growth for the six months ended June 30, 2025 was $196,056,000, while loan growth for the six months ended June 30, 2024 was $161,883,000.
There was a provision for credit losses-off balance sheet exposures of $123,000 for the three months ended June 30, 2025 related to increased loan commitments. A net benefit to the provision for credit losses-off balance sheet exposures of $270,000 for the six months ended June 30, 2025, was primarily due to an updated expected line utilization and an increase in our unconditionally cancellable commitments. There was no provision or benefit for the credit losses-off balance sheet exposures for the three and six months ended June 30, 2024.
The following detail provides a breakdown of the provision for credit loss-loans expense and net (charge-offs) recoveries as of and for the six months ended June 30, 2025 and 2024:
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
June 30, 2025
Residential 1-4 family real estate
$
3,910
$
17
$
1,162,327
—
%
Commercial and multi-family real estate
(3,539
)
—
1,576,544
—
Construction, land development and farmland
2,397
6
944,176
—
Commercial, industrial and agricultural
1,666
(108
)
146,621
(0.07
)
1-4 family equity lines of credit
(405
)
—
240,595
—
Consumer and other
711
(298
)
111,598
(0.27
)
Total
$
4,740
$
(383
)
$
4,181,861
(0.01
)%
June 30, 2024
Residential 1-4 family real estate
$
46
$
26
980,184
—
%
Commercial and multi-family real estate
218
—
1,326,433
—
Construction, land development and farmland
(459
)
6
884,896
—
Commercial, industrial and agricultural
(100
)
(1
)
123,076
—
1-4 family equity lines of credit
68
—
212,648
—
Consumer and other
227
(218
)
105,119
(0.21
)
Total
$
—
$
(187
)
$
3,632,356
(0.01
)%
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 include growth and composition of the loan portfolio, review of specific problem loans, the relationship of the allowance for credit losses to outstanding loans, adverse situations and/or current economic conditions that may affect our borrowers' ability to repay and the estimated value of any underlying collateral.
There was no provision for credit losses on available-for-sale securities for the three and six months ended June 30, 2025 and 2024, respectively.
Our non-interest income is composed of several components, some of which vary significantly between quarterly and annual periods. The following is a summary of our non-interest income for the three and six months ended June 30, 2025 and 2024 (in thousands):
Three Months Ended June 30,
Six Months Ended June 30,
2025
2024
$ Increase (Decrease)
% Increase (Decrease)
2025
2024
$ Increase (Decrease)
% Increase (Decrease)
Service charges on deposit accounts
$
2,193
$
2,015
$
178
8.83
%
$
4,253
$
3,986
$
267
6.70
%
Brokerage income
2,456
2,457
(1
)
(0.04
)
4,868
4,318
550
12.74
Debit and credit card interchange income, net
2,491
2,700
(209
)
(7.74
)
4,358
4,608
(250
)
(5.43
)
Other fees and commissions
396
400
(4
)
(1.00
)
796
784
12
1.53
Income on BOLI and annuity contracts
594
546
48
8.79
1,197
1,017
180
17.70
Gain on sale of loans
831
837
(6
)
(0.72
)
1,562
1,625
(63
)
(3.88
)
Mortgage servicing income (loss), net
(5
)
1
(6
)
(600.00
)
(6
)
3
(9
)
(300.00
)
Loss on sale of fixed assets
(6
)
(2
)
(4
)
(200.00
)
(12
)
(203
)
191
94.09
Gain (loss) on sale of securities, net
(2
)
(318
)
316
99.37
11
(318
)
329
(103.46
)
Loss on sale of other assets
(4
)
(2
)
(2
)
(100.00
)
(2
)
(3
)
1
33.33
Loss on sale of investment in joint venture
(4
)
—
(4
)
(100.00
)
(4
)
—
(4
)
(100.00
)
Other income
2
21
(19
)
(90.48
)
18
56
(38
)
(67.86
)
Total non-interest income
$
8,942
$
8,655
$
287
3.32
%
$
17,039
$
15,873
$
1,166
7.35
%
The increase in non-interest income for the three months ended June 30, 2025 when compared to the comparable period in 2024 is primarily attributable to a decrease in loss on sale of securities and increased service charges on deposit accounts, partially offset by decreases in gain on sale of loans and debit and credit card interchange income. The increase in non-interest income for the six months ended June 30, 2025 when compared to the comparable period in 2024 is primarily attributable to increases in brokerage income, gain on sale of securities, and service charges on deposit accounts, partially offset by decreases in gain on sale of loans and debit and credit card interchange income.
The improvement in gain (loss) on sale of securities for the three and six months ended June 30, 2025 was primarily due to the realized loss on a security that was redeemed by the issuer in the second quarter of 2024.
The increase in service charges on deposit accounts for the three and six months ended June 30, 2025 was primarily due to increases in overdraft and insufficient funds charges, ATM transaction volume, and treasury service charges.
The increase in brokerage income for the six months ended June 30, 2025 was primarily due to multiple client acquisitions and estate planning cases resulting in an increase of overall production and market share, the successful addition of new advisor relationships, and the positive performance of financial markets in a variety of diversified areas.
The decrease in gain on sale of loans for the three and six months ended June 30, 2025 was primarily driven by the Company’s decision to retain servicing rights on loans sold in 2025. In contrast, servicing rights were not retained on loans sold in the first half of 2024. Additionally, the decline was impacted by rising mortgage interest rates experienced in the second quarter of 2025.
The decrease in net debit and credit card interchange income for the three and six months ended June 30, 2025 was primarily due to an increase in the pricing structure from our core processor.
Non-Interest Expense
Non-interest expense consists primarily of employee costs, occupancy expenses, furniture and equipment expenses, advertising and public relations expenses, data processing expenses, director’s fees, audit, legal and consulting fees, FDIC insurance and other
operating expenses. The following is a summary of our non-interest expense for the three and six months ended June 30, 2025 and 2024 (in thousands):
Three Months Ended June 30,
Six Months Ended June 30,
2025
2024
$ Increase (Decrease)
% Increase (Decrease)
2025
2024
$ Increase (Decrease)
% Increase (Decrease)
Salaries and employee benefits
$
18,511
$
16,910
$
1,601
9.47
%
$
36,383
$
33,455
$
2,928
8.75
%
Occupancy expenses, net
1,542
1,473
69
4.68
3,001
2,757
244
8.85
Advertising & public relations expense
1,103
832
271
32.57
1,900
1,581
319
20.18
Furniture and equipment expense
749
756
(7
)
(0.93
)
1,512
1,502
10
0.67
Data processing expense
2,852
2,370
482
20.34
5,445
4,722
723
15.31
Directors’ fees
186
187
(1
)
(0.53
)
339
365
(26
)
(7.12
)
FDIC insurance
1,025
721
304
42.16
2,156
1,628
528
32.43
Audit, legal & consulting expenses
574
329
245
74.47
1,474
705
769
109.08
Other operating expenses
3,780
2,854
926
32.45
7,370
5,830
1,540
26.42
Total non-interest expense
$
30,322
$
26,432
$
3,890
14.72
%
$
59,580
$
52,545
$
7,035
13.39
%
The increase in non-interest expense for the three and six months ended June 30, 2025 when compared to the comparable periods in 2024 is primarily attributable to increases in salaries and employee benefits, other operating expenses, data processing expense, audit, legal and consulting expenses, FDIC insurance, and advertising and public relations expense.
The increase in salaries and benefits for the three and six months ended June 30, 2025 was primarily driven by several factors tied to the Company’s continued operational expansion, including an increase in the number of employees necessary to support higher business volumes and strategic initiatives reflecting the Company's operational growth. Also contributing to the increase was higher incentive compensation expenses, attributable to increased loan production and a higher accrual for annual bonuses based on performance metrics and projected year-end payouts.
The increase in other operating expenses in the three and six months ended June 30, 2025 was primarily due to an increase in credit card expense, an increase in expenses related to employee recruitment, and an increase in expenses related to employee education.
The increase in data processing expense in the three and six months ended June 30, 2025 primarily due to implementation of additional information security solutions, replacement of technology equipment, and an increase in the overall number of customers. 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 audit, legal and consulting expenses in the three and six months ended June 30, 2025 was primarily due to the timing and payment of invoices related to our annual audit. Also contributing to the increase in the second quarter was increased legal costs and consulting costs related to a new loan origination platform and other strategic initiatives.
The increase in FDIC insurance in the three and six months ended June 30, 2025 was primarily due to the bank's growth throughout 2024.
The increase in advertising and public relations expense in the three and six months ended June 30, 2025 was primarily due to the opening of new branches in the second half of 2024 and the first six months of 2025, including the branch office we acquired in Cookeville, Tennessee on April 25, 2025, and the associated advertising costs.
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 dividing our non-interest expense by our net interest income plus non-interest income. The efficiency ratio for the six months ended June 30, 2025 and 2024 was 53.89% and 58.45%, respectively. The efficiency ratio for the three months ended June 30, 2025 and 2024 was 52.39% and 56.10%, respectively. The improvement in the efficiency ratio for the three and six months ended June 30, 2025 compared to the comparable periods in 2024 was primarily due to increases in net interest income, outpacing the increases in non-interest expense.
Income Taxes
The Company's income tax expense for the three months ended June 2025 was $5,793,000, an increase of $1,303,000 from $4,490,000 for the three months ended June 2024. The Company’s income tax expense was $10,974,000 for the six months ended June 30, 2025, an increase of $2,597,000 from $8,377,000 for the comparable period in 2024. The percentage of income tax expense to net income before taxes was 23.24% and 21.71% for the three months ended June 30, 2025 and 2024, respectively. The percentage of
income tax expense to net income before taxes was 23.60% and 22.43% for the six months ended June 30, 2025 and 2024, respectively. Our effective tax rate represents our blended federal and state rate of 26.14% affected by the impact of anticipated favorable permanent differences between our book and taxable income such as share-based compensation, bank-owned life insurance, income earned on tax-exempt securities and loans, and certain federal and state tax credits, offset in part by the limitation on deductibility of meals and entertainment expense and non-deductible executive compensation.
Financial Condition
Balance Sheet Summary
The Company’s total assets increased $273,125,000, or 5.10%, to $5,631,784,000 at June 30, 2025 from $5,358,659,000 at December 31, 2024. Loans, net of allowance for credit losses, totaled $4,234,091,000 at June 30, 2025, a 4.74% increase compared to $4,042,392,000 at December 31, 2024. In 2025, management is targeting owner-occupied commercial real estate, residential real estate lending and consumer lending as areas of focus. Total liabilities increased by 4.55% to $5,100,828,000 at June 30, 2025 compared to $4,878,956,000 at December 31, 2024.
Loans
The following details the loans of the Company at June 30, 2025 and December 31, 2024:
June 30, 2025
December 31, 2024
Balance
% of Portfolio
Balance
% of Portfolio
Balance $ Increase (Decrease)
Balance % Increase (Decrease)
Residential 1-4 family real estate
$
1,202,642
28.0
%
$
1,133,966
27.6
%
$
68,676
6.06
%
Commercial and multi-family real estate
1,624,965
37.8
1,544,340
37.7
80,625
5.22
Construction, land development and farmland
956,871
22.2
941,193
22.9
15,678
1.67
Commercial, industrial and agricultural
150,131
3.5
144,619
3.5
5,512
3.81
1-4 family equity lines of credit
248,424
5.8
235,240
5.7
13,184
5.60
Consumer and other
118,108
2.7
106,235
2.6
11,873
11.18
Total loans before net deferred loan fees
$
4,301,141
100.0
%
$
4,105,593
100.0
%
$
195,548
4.76
%
Overall, the Bank's loan demand and related new loan production remained steady throughout the Bank's markets in the first half of 2025, yielding a year-to-date total loan growth net of deferred loan fees of 4.79%. Total loan growth net of deferred loan fees for the first half of 2025 was $196,056,000. Contributing to the Company's loan growth in the first half of 2025 were the continued population growth and corporate relocations in the Bank's primary market areas and increased marketing efforts. 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 Bank's market areas, and the increase the Company is seeing in the investor sector of 1-4 family. The increase in commercial and multi-family real estate and 1-4 family equity lines of credit is primarily attributable to continued economic growth and expansion in the Bank's primary market areas. The Company anticipates that loan growth will be steady throughout the rest of 2025.
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.
Allowance for Credit Losses
The current expected credit losses (CECL) methodology requires us to estimate all expected credit losses over the remaining life of our loan portfolio when calculating our allowance for credit losses for loans. The provision for credit losses for loans 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 on loans.
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 un-collectibility of a loan balance is reasonably assured. 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 receivables, 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 June 30, 2025 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. The allowance for credit losses for loans (net of charge-offs and recoveries) increased to $53,854,000 at June 30, 2025 from $49,497,000 at December 31, 2024, primarily due to a worsening economic outlook and loan growth. The allowance for credit losses for loans was 1.26% of total loans outstanding at June 30, 2025 compared to 1.21% at December 31, 2024. The internally classified loans as a percentage of the allowance for credit losses for loans were 101.8% and 97.0% respectively, at June 30, 2025 and December 31, 2024. The increase was primarily a result of deteriorating credits in the residential 1-4 family real estate segment.
The following schedule provides an allocation of the allowance for credit losses for loans by portfolio segment for the Company as of June 30, 2025 and December 31, 2024:
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
June 30, 2025
Residential 1-4 family real estate
$
13,635
28.0
%
$
1,202,642
1.13
%
Commercial and multi-family real estate
16,664
37.8
1,624,965
1.03
Construction, land development and farmland
17,066
22.2
956,871
1.78
Commercial, industrial and agricultural
3,260
3.5
150,131
2.17
1-4 family equity lines of credit
1,485
5.8
248,424
0.60
Consumer and other
1,744
2.7
118,108
1.48
Total
$
53,854
100.0
%
4,301,141
1.25
Net deferred loan fees
(13,196
)
$
4,287,945
1.26
%
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
%
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 as of the measurement date. The allowance for credit losses for loans as a percentage of total loans outstanding at June 30, 2025, net of deferred fees, increased from the year ended December 31, 2024. The increase was primarily driven by a deteriorating economic factor outlook utilized within our allowance models.
We measure expected credit losses over the life of each loan utilizing two methods. For credit cards, we use the remaining life method to estimate credit losses. For all other portfolios, we use discounted cash flow models which measure probability of default and loss given default. 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 June 30, 2025, we utilized then available forecasts of macroeconomic variables over our reasonable and supportable horizon based on the review of a variety of forecasts of the U.S. economy provided by Moody's Analytics. Key economic variables as forecasted and utilized in our models include: (i) U.S. Gross Domestic Product ("GDP") with annual growth rates in the range of 0.9% to 1.5%; (ii) a U.S. unemployment rate in the range of approximately 4.3% to 4.8%; (iii) a Home Price Index annual growth rates in the range of approximately 0.7% to 2.4%; (iv) a CRE Price Index annual growth rates in the range of approximately -5.8% to -0.6%; and (v) Gross Private Investment annual growth rates in the range of approximately -4.8% and 2.2%.
We adjust model results using qualitative factor ("Q-Factor") adjustments. Q-Factor adjustments are based upon management guidance, 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 modeling inputs, assumptions and other processes. Management reviews and assesses the potential impact of such items 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 for the three months ended June 30, 2025 were $133,000 compared to net charge-offs of $81,000 for the three months ended June 30, 2024, an increase of $52,000. Net charge-offs increased by $196,000 to $383,000 for the six months ended June 30, 2025, compared to net charge-offs of $187,000 for the six months ended June 30, 2024. The ratio of net charge-offs to average total outstanding loans was 0.01% for the six months ended June 30, 2025 and six months ended June 30, 2024. Overall, the Bank experienced minimal charge-offs during the three and six months ended June 30, 2025 and it is expected that charge-offs will continue to be modest for the remainder of 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 $270,000 from $2,555,000 at December 31, 2024 to $2,285,000 at June 30, 2025 as a result of an updated expected line utilization and an increase in our unconditionally cancellable commitments.
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 for loans which management believes is adequate to absorb losses in the loan portfolio. A formal calculation is prepared quarterly by the Company's Chief Financial Officer to determine the adequacy of the allowance for credit losses 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 June 30, 2025 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 Allowance for Credit Losses”
above.
Securities
Securities increased $65,800,000, or 7.95%, to $893,693,000 at June 30, 2025 from $827,893,000 at December 31, 2024. The increase is primarily due to the purchase of new securities and the decrease in the unrealized loss position of our securities portfolio, partially offset by the sale of securities and the run-off of our declining balance securities. The average yield, excluding tax equivalent adjustment, of the securities portfolio at June 30, 2025 was 2.72% with a weighted average life of 7.05 years, as compared to an average yield of 2.47% and a weighted average life of 7.00 years at December 31, 2024. The weighted average lives on mortgage-backed securities reflect the repayment rate used for book value calculations.
Premises and Equipment
Premises and equipment increased $1,441,000, or 2.34%, from December 31, 2024 to June 30, 2025. The primary reason for the increase was due to the purchase of the Cookeville branch and the purchase of computer equipment and software, partially offset by current year depreciation of $2,073,000.
Deposits and Other Liabilities
Deposits increased by $209,703,000, or 4.34%, in the first half of 2025, primarily due to growth in market share and concerted marketing efforts to drive deposit growth which resulted in the opening of new deposit accounts. Additionally, the Bank opened new branches in December of 2024 and March of 2025, and purchased a branch in April of 2025, effectively expanding the customer base. The Company had no brokered deposits at June 30, 2025 or December 31, 2024.
The average balance and weighted average interest rate paid for deposit types for the quarters ended June 30, 2025, December 31, 2024 and June 30, 2024 are detailed in the following schedule:
June 30, 2025
December 31, 2024
June 30, 2024
Average
Average
Average
Balance
Balance
Balance
In
Average
In
Average
In
Average
Thousands
Rate
Thousands
Rate
Thousands
Rate
Non-interest bearing deposits
$
393,384
—
%
$
397,606
—
%
$
387,658
—
%
Interest-bearing deposits:
Negotiable order of withdrawal accounts
952,158
0.83
950,912
0.92
916,321
0.84
Money market demand accounts
1,421,808
2.56
1,309,650
2.87
1,228,575
2.78
Time deposits
1,831,659
4.20
1,795,281
4.65
1,591,107
4.72
Other savings
396,779
1.94
334,719
1.80
330,521
1.72
Total interest-bearing deposits
4,602,404
2.80
%
4,390,562
3.09
%
4,066,524
3.01
%
Total deposits
$
4,995,788
2.58
%
$
4,788,168
2.84
%
$
4,454,182
2.75
%
At June 30, 2025 and December 31, 2024, we estimate that we had approximately $1.5 billion and $1.4 billion in uninsured deposits, which are the portion of deposit amounts that exceed the FDIC insurance limit. Approximately 29% of our total deposits exceeded the FDIC deposit insurance limits at June 30, 2025. 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 $257,145,000, or 5.10% of total deposits, at June 30, 2025, compared to $200,650,000, or 4.15% of total deposits, at December 31, 2024.
Principal maturities of certificates of deposit and individual retirement accounts at June 30, 2025 are as follows:
In Thousands
Maturity
2025
$
736,905
2026
814,262
2027
172,946
2028
97,504
2029
5,527
Thereafter
499
$
1,827,643
The increase in total liabilities since December 31, 2024 was composed of a $209,703,000, or 4.34%, increase in total deposits and a $12,169,000, or 24.87%, increase in accrued interest and other liabilities. The increase in accrued interest and other liabilities since December 31, 2024 was primarily attributable to an increase in employee bonus payable, an increase in escrow payable, and an increase in finance lease payable due to the opening of the Chattanooga full service branch.
Non-Performing Assets
Non-performing loans, which included nonaccrual loans and loans 90 days past due, at June 30, 2025 totaled $10,495,000, an increase of $4,946,000 from $5,549,000 at December 31, 2024. The increase in non-performing loans is primarily due to an increase in residential 1-4 family real estate. Management believes that it is possible that it could incur losses on its non-performing loans but believes that these losses should not exceed the amount in the allowance for credit losses for loans already allocated to these loans, unless there is unanticipated 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 taking the total of our loans that are 90 days or more past due and accruing interest, nonaccrual loans and other real estate owned and dividing that sum by our total assets outstanding. Our NPA ratio for the periods ended June 30, 2025 and December 31, 2024 was 0.19% and 0.10%, respectively.
Other 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 June 30, 2025 the Company had a recorded investment in collateral dependent loans totaling $4,693,000, a decrease of $32,760,000 from a recorded investment in collateral dependent loans totaling $37,453,000 at December 31, 2024. The decrease during the six months ended June 30, 2025 as compared to December 31, 2024 is primarily due to a change in the criteria used to classify loans as collateral dependent loans. Management periodically evaluates the criteria for classifying collateral dependent loans based on the risk rating and the dollar amount of the loan. Management adjusted the criteria in the first quarter of 2025. As of June 30, 2025, a $418,000 valuation allowance was recorded on collateral dependent loans due to one loan relationship compared to a valuation allowance of $408,000 as of December 31, 2024. 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.
Total past due and nonaccrual loans at June 30, 2025 were $58,299,000, an increase of $41,698,000 from $16,601,000 at December 31, 2024, primarily due to one large land development loan relationship and one large commercial real estate loan relationship in the 30-59 days past due category. The increase in nonaccrual loans was largely due to the credit deterioration experienced in several 1-4 family real estate loans. The increase in past due loans that have been modified within the last 12 months was primarily due to the commercial real estate loan mentioned above.
At June 30, 2025, as a result of the downgrade of a few large borrowers in the 1-4 family real estate segment, our internally classified loans increased $6,827,000, or 14.22%, to $54,832,000 from $48,005,000 at December 31, 2024. Loans are listed as classified when information obtained about possible credit problems of the borrower has prompted management to question the ability of the borrower to comply with the repayment terms of the loan agreement. Management continues to develop and execute performance improvement plans with these 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 and non-performing assets could increase further.
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 9.90% at June 30, 2025 and 10.80% at December 31, 2024. The decrease in our liquidity ratio is primarily attributable to a decrease in liquid assets primarily due to 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, Federal Home Loan Bank advances, and brokered deposits provide a secondary source of liquidity. 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 June 30, 2025, the Company’s liquid assets totaled $557.4 million, a decrease from $578.7 million at December 31, 2024, though a portion of these liquid assets include available-for-sale securities that are in an unrealized loss position at June 30, 2025. 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 regulatory capital levels. Additionally, as of June 30, 2025, the Company had available approximately $118.5 million in unused federal funds lines of credit with regional banks and, subject to certain restrictions and collateral requirements, approximately $570.8 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 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.
Securities classified as available-for-sale include securities intended to be used as part of the Company’s asset/liability strategy and/or securities that may be sold in response to changes in interest rate, prepayment risk, or the need to fund loan demand or other liquidity needs. At June 30, 2025, securities totaling approximately $69.0 million mature or will be subject to rate adjustments within the next twelve months.
A secondary source of liquidity is the Company’s loan portfolio. At June 30, 2025, loans totaling approximately $488.2 million will become due within twelve months from that date.
As for liabilities, at June 30, 2025, certificates of deposit of $250,000 or greater totaling approximately $555.5 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 future.
Management believes that with present maturities, borrowing capacity with the Federal Home Loan Bank of Cincinnati and the efforts of management in its asset/liability management program, the Company should be able to meet its liquidity needs in the near term future.
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.
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 ("IRR") 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 neutral interest-rate risk position as of June 30, 2025, 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 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 June 30, 2025, 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
(2.99
)%
(3.56
)%
(1.93
)%
(1.05
)%
(2.30
)%
(3.79
)%
EVE
(12.14
)%
(5.65
)%
(1.73
)%
(1.46
)%
(3.65
)%
(6.55
)%
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 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.
Off Balance Sheet Arrangements
At June 30, 2025, we had unfunded loan commitments outstanding of $1,197,137,000 and outstanding standby letters of credit of $134,368,000, compared to $1,172,339,000 and $128,728,000, respectively, at December 31, 2024. Because these commitments generally have fixed expiration dates and many will expire without being drawn upon, the total commitment level does not necessarily represent future cash requirements. If needed to fund these outstanding commitments, the Bank has the ability to 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. As mentioned above, the Bank has historically been able to fund its ongoing liquidity needs through its stable core deposit base, loan payments, investment security maturities and short-term borrowings.
Capital Position and Dividends
At June 30, 2025, total shareholders’ equity was $530,956,000, or 9.43% of total assets, which compares with $479,703,000, or 8.95% of total assets, at December 31, 2024. The increase in shareholders’ equity during the six months ended June 30, 2025 is the result of the net effect of $566,000 related to stock option compensation, restricted share awards, RSUs, and PSUs, the Company’s net earnings of $35,507,000, proceeds from the issuance of common stock related to exercise of stock options of $82,000, and a decrease of $18,737,000 in unrealized losses on investment securities, net of applicable income taxes of $6,629,000. Also included was $25,000 of net earnings attributable to the noncontrolling members of Encompass. The increase in shareholders' equity was partially offset by cash dividends declared of $11,902,000, net of $8,466,000 reinvested under the Company’s dividend reinvestment plan and the sale of the Bank's interest in Encompass.
Share Repurchase Program
On January 27, 2025, the Company's Board of Directors authorized an $8.0 million share repurchase program that commenced upon expiration of the previous program, which expired on March 31, 2025. This authorization is to remain in effect through March 31, 2026. Share repurchases under the authorized program may be made from time to time in privately negotiated transactions, at the discretion of the management of the Company. The approved share repurchase program does not obligate the Company to repurchase any dollar amount or number of shares, and the program 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 its share repurchase program.
Item 3. Quantitative and Qualitative D
isclosures About Market Risk
The Company’s primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on a large portion of the Company’s assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those which possess a short term to maturity. Based upon the nature of the Company’s operations, the Company is not subject to foreign currency exchange or commodity price risk.
Interest rate risk (sensitivity) management focuses on the earnings risk associated with changing interest rates. Management seeks to maintain profitability in both 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.
There have been no material changes in reported market risks during the six months ended June 30, 2025.
Item 4. Controls a
nd 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 the Company 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 SEC’s rules and forms and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and its 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, its Chief Executive Officer and its Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.
Overall, there were no changes in the Company’s internal control over financial reporting during the Company’s fiscal quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
There were no material changes to the Company’s risk factors as previously disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Item 2. UNREGISTERED SA
LES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a)
None
(b)
Not applicable.
(c)
The following table discloses shares of our common stock repurchased during the three months ended June 30, 2025.
Period
Total Number of Shares Repurchased(1)
Average Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)
Maximum Number (or Approximate Dollar Value) of Shares That May Yet be Purchased Under the Plans or Programs
April 1, 2025 - April 30, 2025
—
$
—
—
$
8,000,000
May 1, 2025 - May 31, 2025
—
$
—
—
$
8,000,000
June 1, 2025 - June 30, 2025
—
$
—
—
$
8,000,000
_______________
(1)
On January 27, 2025, the Company’s Board of Directors authorized an $8.0 million share repurchase program that commenced upon expiration of the share repurchase program that the Board of Directors had authorized on October 28, 2024 and which expired on March 31, 2025. This authorization is to remain in effect through March 31, 2026. Share repurchases under the authorized program may be made from time to time in privately negotiated transactions, at the discretion of management of the Company. The approved share repurchase program does not obligate the Company to repurchase any dollar amount or number of shares, and the program may be extended, modified, suspended or discontinued at any time. The timing of these repurchases will depend on market conditions and other requirements. The Company did not repurchase any shares of its Common Stock under its current share repurchase program during the three months ended June 30, 2025.
Item 3. DEFAULTS UPO
N SENIOR SECURITIES
(a)
None
(b)
Not applicable.
Item 4. MINE SAFET
Y DISCLOSURES
Not applicable
Item 5. OTHER IN
FORMATION
Rule 10b5-1 Trading Plan Disclosure
During the quarter ended June 30, 2025
, 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
June 30, 2025, 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.
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).
The Company is aware that from time to time a small number of transactions involving its common stock are reported in the over-the-counter market, but the Company has no information about the settlement of these transactions or whether the shares of common stock purported to have been transferred were delivered to the purported purchaser. The Bank, in its capacity as the Company’s transfer agent, has received no information from the parties to these purported transactions that would allow the Bank, acting as the Company’s transfer agent, to record these transfers on the books of the Company. These purported trades have historically been infrequent and typically involved a small number of shares of the Company’s common stock. During the quarter ended June 30, 2025, two trades were reported on the over-the-counter market at prices ranging from $150 to $175 per share. The most recent price at which the Company’s common stock has traded and been recorded as settled in the Company’s transfer records was $77.60 per share.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
WILSON BANK HOLDING COMPANY
(Registrant)
DATE: August 8, 2025
/s/ John C. McDearman III
John C. McDearman III
President and Chief Executive Officer
(Principal Executive Officer)
DATE: August 8, 2025
/s/ Kayla Hawkins
Kayla Hawkins
Executive Vice President & Chief Financial Officer
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