WILSON BANK HOLDING CO (Form: 10-K, Received: 03/15/2022 10:03:07)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-K

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(Mark One)



☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021



☐	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

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WILSON BANK HOLDING COMPANY

(Exact name of registrant as specified in its charter)

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Tennessee	62-1497076
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

623 West Main Street
Lebanon, Tennessee	37087
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:

(615) 444-2265

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $2.00 par value per share

(Title of class)

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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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. Yes ☐ No ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the voting stock held by non-affiliates of the registrant on June 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $640,889,006.20. For purposes of this calculation, “affiliates” are considered to be the directors and executive officers of the registrant. The market value calculation was determined using $60.95 per share.

Shares of common stock, $2.00 par value per share, outstanding on March 15, 2022 were 11,307,595.

DOCUMENTS INCORPORATED BY REFERENCE



Part of Form 10-K		Documents from which portions are incorporated by reference
Part II		Portions of the Registrant’s Annual Report to Shareholders for the fiscal year ended December 31, 2021 are incorporated by reference into Items 1, 5, 7, 7A and 8.

Part III		Portions of the Registrant’s Proxy Statement to be filed relating to the Registrant’s Annual Meeting of Shareholders to be held on April 28, 2022 are incorporated by reference into Items 10, 11, 12, 13 and 14.

PART I

Item 1. Business.

General

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

All of the Company’s banking business is conducted through the Bank, a state chartered bank organized under the laws of the State of Tennessee. The Bank, on January 21, 2022, had the following full service banking offices located in the following counties:

Tennessee County	Number of Full Service Banking Offices
Davidson	3
DeKalb	2
Putnam	1
Rutherford	5
Smith	2
Sumner	3
Trousdale	1
Williamson	1
Wilson	11
Total	29

Management believes that Wilson County, Trousdale County, Davidson County, Rutherford County, DeKalb County, Smith County, Sumner County, Putnam County and Williamson County offer an environment for continued banking growth in the Company’s target market, which consists of local consumers, professionals and small businesses. The Bank offers a wide range of banking services, including checking, savings, and money market deposit accounts, certificates of deposit and loans for consumer, commercial and real estate purposes. The Bank also offers custodial, trust and through a relationship with a third-party investment advisory form, discount brokerage services to its customers. The Bank does not have a concentration of deposits obtained from a single person or entity or a small group of persons or entities, the loss of which would have a material adverse effect on the business of the Bank.

The Bank was organized in 1987 to provide Wilson County with a locally-owned, locally-managed commercial bank. Since its opening, the Bank has experienced a steady growth in deposits and loans, while expanding into other counties in and around middle Tennessee as a result of providing personal, service-oriented banking services to its targeted market. For the year ended December 31, 2021, the Company reported net earnings of approximately $49.426 million and at December 31, 2021 it had total assets of approximately $3.990 billion.

COVID-19 Pandemic

The COVID-19 pandemic and related measures taken by governments, businesses and individuals as a result of the pandemic continue to cause uncertainty, volatility and disruption in the economy, including the economies of the markets that the Bank serves. Throughout 2020 and continuing into 2021 in response to the pandemic, the Company and the Bank adjusted their business practices, including restricting employee travel, encouraging employees to work from home where possible, offering drive-thru only service at certain of the Bank’s locations with specific needs facilitated by appointment, implementing social distancing guidelines within the Bank’s offices, and continuing to hold regular meetings of the Company’s COVID-19 response team. Certain of these measures remain in place due to the continued prevalence of the virus, though, as of December 31, 2021, all of the Bank’s customer locations are now open and the majority of the Bank’s employees have returned to the office.

The Company continues to believe its response to the pandemic has allowed and continues to allow it to appropriately support the Bank’s employees and clients and their communities. Though the Company believes the impact of COVID-19 appears to be lessening, it continues to monitor COVID-19’s impact and the effect new variants or mutations may have, the administration, efficacy and public acceptance of COVID-19 vaccines and boosters, the effects of the CARES Act, Coronavirus Relief Act, American Relief Act and the prospects for additional fiscal stimulus programs closely. The Company’s ability and the ability of the Bank’s customers to recover from the pandemic continues to be subject to uncertainty and will depend on continued decline in the severity of COVID-19 and emergence of other variants of the virus in the Bank’s markets and government responses thereto, as well as continued improvement in economic conditions in those markets.

For more information regarding the impact of the COVID-19 pandemic on the Company’s financial condition and results of operations as of and for the fiscal year ended December 31, 2021 see “Risk Factors – COVID-19 Risks” elsewhere in this report and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Impact of COVID-19” contained in the Company’s Annual Report to Shareholders for the year ended December 31, 2021, filed as Exhibit 13.1 to this Form 10-K (the “2021 Annual Report”).

Financial and Statistical Information

The Company’s audited consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the 2021 Annual Report, are incorporated herein by reference.

Regulation and Supervision

The banking industry is generally subject to extensive regulatory oversight. Both the Company and the Bank are subject to extensive state and federal banking laws and regulations that impose restrictions on and provide for general regulatory oversight of the Company’s and the Bank’s operations. These laws and regulations are generally intended to protect depositors and borrowers, and may not necessarily protect shareholders. Many of these laws and regulations have undergone significant change in recent years.

In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law. The Dodd-Frank Act and the regulations promulgated thereunder implements far-reaching reforms of major elements of the financial landscape, particularly for larger financial institutions. Many of its most far-reaching provisions do not directly apply to community-based institutions like the Company or the Bank. For instance, provisions that regulate derivative transactions and limit derivatives trading activity of federally-insured institutions, enhance supervision of “systemically significant” institutions, impose new regulatory authority over hedge funds, limit proprietary trading by banks, and phase-out the eligibility of trust preferred securities for Tier 1 capital for institutions with greater than $15.0 billion in total assets are among the provisions that do not directly impact the Company or the Bank either because of exemptions for institutions below a certain asset size or because of the nature their operations.

Failure by the Company or the Bank to comply with the requirements of the applicable state and federal banking regulations would negatively impact the Company’s results of operations and financial condition and could limit its growth or expansion activities. While the Company cannot predict what effect any presently contemplated or future changes in the laws or regulations or their interpretations would have on it or the Bank, such changes could be materially adverse to the Company’s investors.

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

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

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

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

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

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

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

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

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Factoring accounts receivable;

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Acquiring or servicing loans;

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Leasing personal property;

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Conducting discount securities brokerage activities;

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Performing selected data processing services;

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

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

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

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

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

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

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

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A bank’s investment in affiliates;

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

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

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

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

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

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

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

The FRB has the power to prohibit dividends by bank holding companies if their actions constitute unsafe or unsound practices. The FRB has issued a policy statement expressing its view that a bank holding company should pay cash dividends only to the extent that the company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the company’s capital needs, asset quality, and overall financial condition. As noted below, FRB regulations limit dividends, stock repurchases and discretionary bonuses to executive officers if a bank holding company’s capital is below the level of regulatory minimums plus the applicable capital conservation buffer. FRB policy also provides that a bank holding company should inform the FRB reasonably in advance of declaring or paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in a material adverse change to the bank holding company's capital structure.

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

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

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

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

Both the Company and the Bank are required to comply with the capital adequacy standards established by the FRB, in the Company’s case, and the FDIC, in the case of the Bank. The FRB has established a risk-based and a leverage measure of capital adequacy for bank holding companies, like the Company. The Bank is also subject to risk-based and leverage capital requirements adopted by the FDIC, which are substantially similar to those adopted by the FRB for bank holding companies. In addition, the FDIC and TDFI may require state banks that are not members of the FRB, like the Bank, to maintain capital at levels higher than those required by general regulatory requirements. Tennessee state banks are required to have the capital structure that the TDFI deems adequate, and the Commissioner of the TDFI as well as federal regulators may require a state bank (or its holding company in the case of federal regulators) to increase its capital levels to the point deemed adequate by the Commissioner or such other federal regulator before granting approval of a branch application, merger application or charter amendment.

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

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

Under these rules, the leverage and risk-based capital ratios of bank holding companies may not be lower than the leverage and risk-based capital ratios for insured depository institutions. The final capital rules implementing Basel III, among other things, included new minimum risk-based capital and leverage ratios for banks and their holding companies. Moreover, these rules refined the definition of what constitutes “capital” for purposes of calculating those ratios, including the definitions of Tier 1 capital and Tier 2 capital. Total capital consists of two components, Tier 1 capital and Tier 2 capital. Tier 1 capital generally consists of common stock (plus related surplus) and retained earnings, limited amounts of minority interest in the form of additional Tier 1 capital instruments, and non-cumulative preferred stock and related surplus, subject to certain eligibility standards, less goodwill and other specified intangible assets and other regulatory deductions. Cumulative preferred stock and trust preferred securities issued after May 19, 2010 no longer qualify as Tier 1 capital, but such securities issued prior to May 19, 2010, including in the case of bank holding companies with less than $15.0 billion in total assets as of December 31, 2009, trust preferred securities issued prior to that date, continue to count as Tier 1 capital subject to certain limitations. Tier 2 capital generally consists of perpetual preferred stock and related surplus not meeting the Tier 1 capital definition, qualifying subordinated debt, qualifying mandatorily convertible debt securities, and a limited amount of loan loss reserves, or following the Company's adoption of CECL, as described below, the allowance for credit losses.

The minimum capital level requirements applicable to bank holding companies and banks subject to the rules are: (i) a Tier 1 common equity (“CET1”) capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6%; (iii) a total capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4% for all institutions. The rules also established a “capital conservation buffer” of 2.5% (consisting of CET1 capital) above the regulatory minimum capital ratios, and have resulted in the following minimum ratios: (i) a CET1 capital ratio of 7%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. An institution will be subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if capital levels fall below minimum levels plus the buffer amounts. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions.

Under the Basel III capital rules, CET1 capital consists of common stock and paid in capital and retained earnings. CET1 capital is reduced by goodwill, certain intangible assets, net of associated deferred tax liabilities, deferred tax assets that arise from tax credit and net operating loss carryforwards, net of any valuation allowance, and certain other items specified in the Basel III capital rules. The Basel III capital rules also provide for a number of deductions from and adjustments to CET1 capital. These include, for example, the requirement that mortgage servicing rights, deferred tax assets arising from temporary differences that could not be realized through net operating loss carrybacks and investments in non-consolidated financial institutions be deducted from CET1 capital to the extent that any one such category exceeds 25% of CET1 capital.

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

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

	CET1 capital ratio	Total risk-based capital ratio	Tier 1 risk-based capital ratio	Tier 1 leverage ratio
Well capitalized	6.5%	10%	8%	5%
Adequately capitalized	4.5%	8%	6%	4%
Undercapitalized	< 4.5%	< 8%	< 6%	< 4%
Significantly undercapitalized	< 3%	< 6%	< 4%	< 3%
Critically undercapitalized	Tangible Equity/Total Assets ≤ 2%

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

A state regulated bank which is not a member of the Federal Reserve, like the Bank, is required to be “well-capitalized” under PCA in order to take advantage of expedited procedures on certain applications, such as branches and mergers, and to accept and renew brokered deposits without further regulatory approval.

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

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applying a 150% risk weight instead of a 100% risk weight for certain high volatility commercial real estate acquisition, development and construction loans;

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assigning a 150% risk weight to the unsecured portion of non-residential mortgage loans that are 90 days past due or otherwise on nonaccrual status;

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providing for a 20% credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable (previously set at 0%);

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providing for a risk weight, generally not less than 20% with certain exceptions, for securities lending transactions based on the risk weight category of the underlying collateral securing the transaction; and

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eliminating the 50% cap on the risk weight for OTC derivatives.

In December 2017, the Basel Committee on Banking Supervision published the last version of the Basel III accord, generally referred to as “Basel IV.” The Basel Committee stated that a key objective of the revisions incorporated into the framework is to reduce excessive variability of risk-weighted assets (“RWA”), which will be accomplished by enhancing the robustness and risk sensitivity of the standardized approaches for credit risk and operational risk, which will facilitate the comparability of banks’ capital ratios; constraining the use of internally modeled approaches; and complementing the risk-weighted capital ratio with a finalized leverage ratio and a revised and robust capital floor. Under the Basel framework, these standards are expected to generally be effective on January 1, 2023, with an aggregate output floor phasing in through January 1, 2028. Under the current U.S. capital rules, operational risk capital requirements and a capital floor apply only to advanced approaches institutions, and not to the Company or the Bank. The impact of Basel IV on the Company and the Bank will depend on the manner in which it is implemented by the federal bank regulators to institutions of the size and risk profile of the Company and the Bank.

In 2018, the U.S. Congress passed, and the President signed into law, the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (the “Growth Act”). The Growth Act, among other things, required the federal banking agencies to issue regulations allowing community bank organizations with total assets of less than $10.0 billion and limited amounts of certain assets and off-balance sheet exposures to access a simpler capital regime focused on a bank’s Tier 1 leverage capital levels rather than risk-based capital levels that are the focus of the capital rules issued under the Dodd-Frank Act implementing Basel III.

In October 2019, the federal banking agencies approved final rules that, under the Growth Act, exempt from the risk-based and leverage capital requirements of the capital rules issued under the Dodd-Frank Act any qualifying community bank and its holding company that have leverage ratios, calculated as Tier 1 capital over average total consolidated assets (the “Community Bank Leverage Ratio”), of greater than 9 percent and hold 25% or less of total assets in off-balance sheet exposures and 5% or less of total assets in trading assets and liabilities. Tier 1 capital for purposes of calculating the Community Bank Leverage Ratio is defined as total equity less accumulated other comprehensive income, less goodwill, less all other intangible assets, less deferred tax assets that arise from net operating loss and tax carryforwards, net of any related valuation allowances. Off-balance sheet exposures include, among other items, unused portions of commitments, securities lent or borrowed, credit enhancement and financial standby letters of credit. A qualifying community banking organization and its holding company that have chosen the proposed framework are no longer required to calculate the generally applicable risk-based and leverage capital requirements. Such a bank is also considered to have met the capital ratio requirements to be well capitalized for the agencies’ PCA rules provided it has a Community Bank Leverage Ratio greater than 9 percent. The final rules also established a grace period of two fiscal quarters during which a qualifying financial institution that temporarily failed to meet any of the qualifying criteria for use of the Community Bank Leverage Ratio would nonetheless be considered well capitalized so long as the institution maintained a Community Bank Leverage Ratio of greater than 7%.

Pursuant to the CARES Act, the required Community Bank Leverage Ratio was lowered to 8% until the earlier of December 31, 2020 and 60 days following the end of the national emergency declared with respect to COVID-19. The federal regulators when establishing the Community Bank Leverage Ratio, also established a grace period of two fiscal quarters during which a qualifying financial institution that temporarily failed to meet any of the qualifying criteria for use of the Community Bank Leverage Ratio would nontheless be considered well capitalized so long as the institution maintained a Community Bank Leverage Ratio of greater than 7.0%. Effective November 9, 2020, the federal banking regulatory agencies approved rules raising the Community Bank Leverage Ratio to 8.5% for 2021 and 9% thereafter. The regulatory agencies also modified the two-quarter grace period to require a Community Bank Leverage Ratio of 7.5% or greater in 2021 and 8% thereafter.

The Company and the Bank each opted to take advantage of this rule effective January 1, 2020. During the year ended December 31, 2021, the Company determined its total off balance sheet exposures, calculated in accordance with applicable regulations, exceeded 25% of its total consolidated assets during the period of time it had opted to utilize the Community Bank Leverage Ratio, and as a result, neither the Company nor the Bank was able to take advantage of the Community Bank Leverage Ratio rules, including as of December 31, 2021, in each case, applying the Basel III capital guidelines that were applicable to it as a result of its not qualifying for the Community Bank Leverage Ratio.

Pursuant to the CARES Act, lenders, like the Bank, were given the option to defer the implementation of ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“CECL”) until 60 days after the declaration of the end of the public health emergency related to the COVID19 pandemic or December 31, 2020, whichever came first. The Coronavirus Relief Act subsequently gave lenders the option to further defer the implementation of CECL until January 1, 2022. In addition, the Securities and Exchange Commission (“SEC”) staff has stated that opting to delay the implementation of CECL shall be considered to be in accordance with generally accepted accounting principles. As a result, the Bank elected to delay implementation of CECL until January 1, 2022.

In February 2019, the federal bank regulatory agencies issued a final rule (the “2019 CECL Rule”) that revised certain capital regulations to account for changes to credit loss accounting under U.S. generally accepted accounting principles (“GAAP”). The 2019 CECL Rule included a transition option that allows banking organizations to phase in, over a three-year period, the day-one adverse effects of adopting a new accounting standard related to the measurement of CECL on their regulatory capital ratios (three-year transition option). In March 2020, the federal bank regulatory agencies issued an interim final rule that maintains the three-year transition option of the 2019 CECL Rule following the adoption of CECL. If adopted, the cumulative amount of transition adjustments will become fixed at the start of the three-year period, and will be phased out of the regulatory capital calculations evenly over such period, with 75% recognized in year one, 50% recognized in year two, and 25% recognized in year three. The Company does not intend to take advantage of this option.

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

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

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

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

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

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

The Bank’s loan operations are also subject to federal laws, rules and regulations applicable to credit transactions, such as the:

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

The Bank’s deposit operations are subject to the:

•

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

•

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

•

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

•

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

•

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

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

Pursuant to the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”), as amended, financial institutions are subject to prohibitions against specified financial transactions and account relationships as well as enhanced due diligence and “know your customer” standards in their dealings with foreign financial institutions and foreign customers.

A major focus of governmental policy on financial institutions has been aimed at combating money laundering and terrorist financing. The Bank Secrecy Act (the "BSA") and its implementing regulations and parallel requirements of the federal banking regulators require the Bank to maintain a risk-based anti-money laundering (“AML”) program reasonably designed to prevent and detect money laundering and terrorist financing and to comply with the recordkeeping and reporting requirements of the BSA, including the requirement to report suspicious activity. The Patriot Act substantially broadened the scope of AML laws and regulations by imposing significant new compliance and due diligence obligations on financial institutions, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States. Financial institutions, including banks, are required under final rules implementing Section 326 of the Patriot Act to establish procedures for collecting standard information from customers opening new accounts and verifying the identity of these new account holders within a reasonable period of time. Financial institutions are also prohibited from entering into specified financial transactions and account relationships and must take certain steps to assist government agencies in detecting and preventing money laundering and to report certain types of suspicious transactions. In May 2016, Treasury’s Financial Crimes Enforcement Network issued rules under the BSA requiring financial institutions to identify the beneficial owners who own or control certain legal entity customers at the time an account is opened and to update their AML compliance programs to include risk-based procedures for conducting ongoing customer due diligence. In January 2021, the Anti-Money Laundering Act of 2020 (“AMLA”), which amends the BSA, was enacted as part of the National Defense Authorization Act for Fiscal Year 2021. Among other things, the AMLA codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the development of standards for evaluating technology and internal processes for BSA compliance; and expands enforcement and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower incentives and protections. The Bank currently has policies and procedures in place designed to comply with the Patriot Act, the BSA and the other regulations targeting terrorism and money laundering, and it will modify these policies and procedures as necessary to comply with the changes reflected in the AMLA and its future implementing regulations.

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

In December 2019, the FDIC and the Office of the Comptroller of the Currency (“OCC”) jointly proposed rules that would have significantly changed existing CRA regulations. In May 2020, the OCC issued its final CRA rule, effective October 1, 2020, however in December 2021, the OCC revoked the newly issued rule and largely reverted to its prior CRA rule. The FDIC and the FRB have yet to publish any new final CRA rules and it remains uncertain whether either agency will do so in light of the OCC's revocation of its new rule. As such, the Company will continue to evaluate the impact of any changes to the regulations implementing the CRA and their impact to its financial condition, results of operations, and/or liquidity, which cannot be predicted at this time.

The Bank is also subject to fair lending requirements and reporting obligations involving its home mortgage lending operations. Fair lending laws prohibit discrimination in the provision of banking services, and bank regulators have increasingly focused on the enforcement of these laws. Fair lending laws include the Equal Credit Opportunity Act of 1974 and the Fair Housing Act of 1968, which prohibit discrimination in credit and residential real estate transactions on the basis of prohibited factors including, among others, race, color, national origin, gender and religion. The Bank may be liable, either through administrative enforcement or private civil actions, for policies that result in a disparate treatment of or have a disparate impact on a protected class of applicants or borrowers. If a pattern or practice of lending discrimination is alleged by a regulator, then that agency may refer the matter to the U.S. Department of Justice (“DOJ”) for investigation. Pursuant to a Memorandum of Understanding, the DOJ and (“ the CFPB”) have agreed to share information, coordinate investigations and generally commit to strengthen their coordination efforts. The Bank is required to have a fair lending program that is of sufficient scope to monitor the inherent fair lending risk of the institution and that appropriately remediates issues which are identified.

State and federal banking regulators have issued various policy statements and, in some cases, regulations, emphasizing the importance of technology risk management and supervision. On November 18, 2021, the federal banking agencies issued a joint final rule that requires a banking organization to notify their primary federal regulator within 36 hours of becoming aware that a significant “computer-security incident” has ocurred. In general, a banking organization must notify its primarily federal regulator for incidents that have materially disrupted, degraded or impaired – or are reasonably likely to materially disrupt, degrade or impair – (i) the ability of such banking organization to carry out banking operations and activities or deliver banking products and services, (ii) such banking organization’s results of operations, or (iii) the financial stability of the financial sector. The final rule also requires a bank service provider to notify each of its affected customers as soon as possible when it determines that it has experienced a computer-security incident that has caused, or is reasonably likely to cause, a material service disruption for four or more hours. Compliance with the final rule is required by May 1, 2022. This new rule and the earlier such policy statements and regulations indicate that financial institutions should design multiple layers of security controls to establish lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing internet-based services of the financial institution. A financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the institution’s operations after a cyber-attack involving destructive malware. A financial institution is expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type of cyber-attack.

Federal statutes and regulations, including the GLB Act and the Right to Financial Privacy Act of 1978, limit the Company’s and the Bank’s ability to disclose non-public information about consumers, customers and employees to nonaffiliated third parties. Specifically, the GLB Act requires disclosure of the Company’s privacy policies and practices relating to sharing non-public information and enables retail customers to opt out of the institution’s ability to share information with unaffiliated third parties under certain circumstances. The GLB Act also requires the Company and the Bank to implement a comprehensive information security program that includes administrative, technical and physical safeguards to ensure the security and confidentiality of customer records and information and, if applicable state law is more protective of customer privacy than the GLB Act, financial institutions, including the Bank, will be required to comply with such state law. An increasing number of state laws and regulations have been enacted in recent years to implement privacy and cybersecurity standards and regulations, including data breach notification and data privacy requirements. This trend of state-level activity is expected to continue to expand, requiring continual monitoring of developments in the states in which the Company's customers are located and ongoing investments in the Company's information systems and compliance capabilities.

Other laws and regulations impact the Company’s and the Bank’s ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes. These regulations affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. In connection with the regulations governing the privacy of consumer financial information, the federal banking agencies, including the FDIC, have adopted guidelines for establishing information security standards and programs to protect such information. In addition, the Bank has established a privacy policy that it believes promotes compliance with the federal requirements.

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

The Company’s securities are registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As such, the Company is subject to the information, proxy solicitation, insider trading, corporate governance, and other requirements and restrictions of the Exchange Act. As a public company, the Company is also subject to the accounting oversight and corporate governance requirements of the Sarbanes-Oxley Act of 2002, including, among other things, required executive certification of financial presentations, increased requirements for board audit committees and their members, and enhanced requirements relating to disclosure controls and procedures and internal control over financial reporting.

New regulations and statutes are regularly proposed that contain wide-ranging provisions for altering the structures, regulations and competitive relationships of the nation’s financial institutions. The Company cannot predict whether or in what form any proposed regulation or statute will be adopted or the extent to which the Company’s business may be affected by any new regulation or statute or change in applicable rules or regulations. Even if modifications are enacted to existing or proposed regulations, including raising certain assets thresholds above those currently in place, the Company may continue to face enhanced scrutiny from its regulators who may expect it to continue to comply with the current, more stringent requirements as part of their safety and soundness and compliance examinations and general oversight of the Company’s operations.

Competition

The banking business is highly competitive. The Company’s primary market areas consist of Wilson, Trousdale, Davidson, Rutherford, DeKalb, Smith, Sumner, Putnam and Williamson Counties in Tennessee. The Company competes with numerous commercial banks and savings institutions with offices in these market areas. In addition to these competitors, the Company competes for loans with insurance companies, regulated small loan companies, credit unions, and certain government agencies. The Company also competes with numerous companies and financial institutions engaged in similar lines of business, such as mortgage banking companies, brokerage companies and non-bank lending companies. Also, technology has lowered barriers to entry and made it possible for nonbanks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of the Company's non-bank competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than the Bank can. Continued consolidation in the financial services industry, due in part to the regulatory changes made under the Growth Act, including the increased asset threshold for required stress testing, has contributed to increases in the number of large competitors the Company faces in its markets. Some of the Company’s competitors have significantly greater financial resources and offer a greater number of branch locations. To offset this advantage of its larger competitors, the Company believes it can attract customers by providing loan and management decisions at the local level and by being more responsive to customers than some of its larger competitors. The Company does not experience significant seasonal trends in its operations.

Monetary Policies

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

Human Capital

As of March 12, 2022, the Company and the Bank collectively employed 542 full-time equivalent employees. As an independent, community-based bank, the Bank strives to provide friendly, professional, personal service from a caring staff, while offering an extensive assortment of financial services to its customers. As such, the Bank’s employees are central to the successful execution of its business strategy.

The Bank strives to recruit, attract and retain employees and future leaders whose skills and experience advance the mission of the Bank. The Bank's Human Resources Department works closely with its Training Department, managers and mentors to ensure a positive start for new employees. With regard to talent development, the Bank works to identify future leaders within the Bank to develop the skills necessary for career growth. The Bank is committed to professional development for all of its employees through internal and external training programs, mentorships and dedicated leadership workshops. In 2021, an employee engagement survey was conducted with a response rate of 92%. The survey resulted in an employee engagement score of 82% and an employee satisfaction rate of 89%. Although these are considered strong scores by industry observers, the Bank continually works to improve its relations with its employee and those employees’ experiences. In 2021, the Bank's retention rate was 83%.

The Bank strives to hire, train and develop a diverse workforce because it believes doing so allows it to better meet the financial needs of the diverse members of the communities the Bank serves. The Bank believes that all employees should feel a sense of belonging where they work and that collaboration among employees of diverse backgrounds improves the day-to-day experience of all of its employees.

The health and safety of the Bank’s employees has been and continues to be a top priority. Throughout the COVID-19 pandemic, the Bank has been intentional about ensuring compliance with all federal, state, and local recommendations related to the pandemic, in addition to taking further precautionary measures. In early March 2020, the Bank created a COVID-19 team consisting of executive management, facilities, technology and human resources. The COVID-19 team continues to closely monitor infection rates nationwide, statewide and within the Bank’s market areas in order to respond appropriately to changes in the virus situation. Throughout the pandemic the Bank has sought to nimbly respond to changes in the transmission rates of the virus in its communities, including in connection with the surge in cases experienced within the Bank’s market areas in early 2022 as a result of the Omicron variant. At times during the pandemic, the Bank has lifted or reinstated mask requirements and allowed employees to work from home, opened and closed physical locations and enhanced cleaning and other safety procedures.

In addition to the substantial investments in employee professional development and safety, the Bank’s benefits and compensation programs are designed to ensure it recruits and retains top talent. The Bank offers employees a comprehensive health benefits package, provides a 401(k) match of $0.50 on the dollar up to 8% of an employee's contributions to encourage retirement savings, and structures its bonus program for officers to create meaningful performance-based incentives. The Bank believes that these programs, combined with an intentional focus to create a positive, values-based culture will help to ensure that the Bank retains its status as a leading community bank in the markets that it serves.

Serving the needs of all of the members of the Company’s communities also remains a vital part of the Bank’s and the Company’s mission. Besides continuing its annual donations, fundraising and sponsorships in 2021, the Bank’s departments and employees were able to support local nonprofit organizations of their choosing through the We Believe Together giving program – including hundreds of hands-on volunteer hours with the recipient organizations that could permit them. The Bank created the We Believe Together Program in 2017 as a way for employees to contribute work hours and earn matching contribution funds from the Bank for local charities. The Bank also actively participates in the School Bank Program which allows elementary students to become familiar with banking at a young age. The Company also sponsors popular community events in its market areas, including the annual Southern Home & Garden Expo and the Wilson County Fair.

Environmental Matters

There is an increasing concern among individuals and governments over the risks of climate change and related environmental sustainability and the Company’s management and board is continuing to monitor developments in this area and evaluate those things that the Company can do to aid in addressing these concerns. To date, the Company has taken steps to reduce the amount of paper it uses by encouraging clients to receive digital statements. The use of e-signatures by clients has also increased in recent years, further reducing the amount of paper that the Company utilizes in its operations. Expansion of online and digital banking tools in recent years has allowed the Bank to further reduce the number of trips that customers have to make in person to branch locations. These digital and online offerings include remote deposit and mobile banking applications that allow customers to deposit checks without the need for physical delivery to the Bank’s branches.

Information about our Executive Officers

The following information regarding the Company’s executive officers is included in Part I of this report in lieu of being included in the Company’s definitive proxy materials to be filed in connection with the Company’s 2022 Annual Meeting of Shareholders (the “2022 Annual Meeting of Shareholders”).

John McDearman (52) – Mr. McDearman is President and Chief Executive Officer of the Company and Chief Executive Officer of the Bank. Mr. McDearman joined the Bank in November of 1998. He has held positions in branch administration and commercial lending. From November 2002 to January 2009, he held the position of Senior Vice President-Central Division of the Bank. From January 2009 to January 2018, he served as Executive Vice President of the Bank and from January 2018 to January 1, 2020, he served as President of the Bank. Prior to joining the Bank in 1998, he was Assistant Vice President, Banking Center Manager for NationsBank, Chattanooga, Tennessee, a position he held from 1994 to 1998. Mr. McDearman also serves on the Boards of Directors of the Company and the Bank, including as the Chairman of the Bank’s Board of Directors.

John Foster (49) – Mr. Foster joined the Bank in January 1998. He has held positions in branch administration and consumer lending. From August 2017 to July 2018, Mr. Foster served as Senior Vice President/Head of Consumer Lending for the Bank, after having served as a Senior Vice President of the Bank from January 2013 to August 2017. From July 2018 to April 2019, he served as Executive Vice President/Small Business & Consumer Lending for the Bank. From April 2019 to January 1, 2020, he served as the Bank’s Executive Vice President/Chief Consumer/Commercial Banking Officer. Currently, he serves as President of the Bank, a position he has held since January 1, 2020.

Gary Whitaker (64) – Mr. Whitaker joined the Bank in May 1996. Prior to that time Mr. Whitaker was employed with NationsBank of Tennessee, N.A. in Nashville (and its predecessors) from 1979. He has held positions at the Bank in collections, as branch manager, in construction lending, retail marketing, automobile lending, loan administration, operations analyst, as Vice President, Senior Vice President and most recently as Executive Vice President and Chief Credit Officer since 2002. His principal duties include overseeing the Bank’s lending function and loan operations.

Lisa Pominski (57) – Ms. Pominski is Executive Vice President and the Chief Financial Officer of the Bank and the Company, positions she has held since January 2017 and September 1997, respectively, and is the Company’s principal financial and accounting officer. Ms. Pominski has held several positions with the Bank including Asst. Cashier, Asst. Vice President and Senior Vice President since the Bank’s formation in May of 1987. Prior to 1987 Ms. Pominski was employed by People’s Bank, Lebanon, Tennessee.

Clark Oakley (52) – Mr. Oakley joined the Bank in October of 1995. He has held positions in mortgage origination and branch administration. From 2008 to 2016 he held the position of Senior Vice President- Eastern Division of the Bank, and from January 1, 2017 until December 31, 2017, he served as Executive Vice President and Chief Operating Officer of the Bank. Currently he serves as Executive Vice President and Chief Operating Officer of the Bank. Prior to joining the Bank, Mr. Oakley was most recently employed at Union Planters Bank in Alexandria, Tennessee. His primary duties include overseeing the operations of the Company and the Bank, including information technology and electronic banking.

Available Information

The Company’s Internet website is http://www.wilsonbank.com. Please note that the Company’s website address is provided as an inactive textual reference only. The Company makes available free of charge on its website the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after it files or furnishes such materials to the SEC. The information provided on the Company’s website is not part of this report, and is therefore not incorporated by reference herein unless such information is otherwise specifically referenced elsewhere in this report.

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Item 1A. Risk Factors.

Investing in the Company’s common stock involves various risks which are particular to the Company, its industry and its market areas. Several risk factors regarding investing in the Company’s common stock are discussed below. If any of the following risks were to occur, the Company may not be able to conduct its business as currently planned and its financial condition or operating results could be materially and negatively impacted. These matters could cause the value of the Company’s common stock to decline in future periods.

Summary Risk Factors

The Company’s business is subject to a number of risks, including risks that may prevent the Company from achieving its business objectives or may adversely affect its business, financial condition, results of operations, cash flows, and prospects. These risks are discussed more fully below and include, but are not limited to, risks related to:

COVID-19 Risks

●

The COVID-19 pandemic is continuing and the Company’s businesses and the businesses and lives of some of its customers continue to feel challenges.

Interest Rate Risks

●

The Company’s net interest margin, and consequently its net earnings, are significantly affected by interest rate levels and movements in short-term rates as well as competitive pressures the Company faces.

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The Company’s hedging strategy may not be effective, including in the event that interest rates move in unanticipated manners.

●

The performance of the Company’s investment securities portfolio is subject to fluctuation due to changes in interest rates and market conditions, including credit deterioration of the issuers of individual securities.

Credit and Lending Risks

●

The Company’s loan portfolio includes a significant amount of real estate loans, including construction and development loans, which loans have a greater credit risk than residential mortgage loans.

●

The Company has significant credit exposure to borrowers that are homebuilders and land developers and the Company also targets small businesses.

●

Changes in financial accounting and reporting standards, or the interpretation of those standards, like the new CECL standard effective for the Company on January 1, 2022, could affect the way the Company accounts for its operations and these changes could have a material adverse effect on the Company’s financial condition and results of operations.

●

An inadequate allowance for credit losses would negatively impact the Company’s results of operations and financial condition.

●

The Company’s accounting estimates and risk management processes rely on analytical and forecasting models and tools.

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The Company could sustain losses if its asset quality declines.

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Environmental liability associated with commercial lending could result in losses.

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The Company depends on the accuracy and completeness of information about customers.

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The Company may be subject to claims and litigation asserting lender liability.

Liquidity and Capital Risks

	●	Liquidity risk could impair the Company’s ability to fund its operations and jeopardize its financial condition.
	●	Excess levels of liquidity could negatively impact the Company’s earnings.

●

The ability to maintain required capital levels and adequate sources of funding and liquidity could be impacted by changes in the capital markets and deteriorating economic and market conditions.

Operational and Market Risks

●

Negative developments in the U.S. and local economies in the Company’s market areas may adversely impact the Company’s results in the future.

●

The Company is geographically concentrated in Wilson County, Tennessee and its surrounding counties and changes in local economic conditions could impact its profitability.

●

The Company has sought to expand its franchise by developing new markets or expanding its operations in existing markets and may continue to do so in future years.

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The Company is dependent on its information technology and telecommunications systems and third-party servicers, and systems failures, interruptions or breaches of security could have an adverse effect on its financial condition.

●

Competition from financial institutions and other financial service providers may adversely affect the Company’s profitability.

●

The Company’s key management personnel may leave at any time.

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An ineffective risk management framework could have a material adverse effect on the Company’s strategic planning and its ability to mitigate risks and/or losses and could have adverse regulatory consequences.

●

The Company’s selection of accounting policies and methods may affect its reported financial results.

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The Company currently invests in bank owned life insurance and may continue to do so in the future.

	●	The Company’s business reputation and relationships are important and any damage to them could have a material adverse effect on its business.
	●	The Company’s business is dependent on technology, and an inability to invest in technological improvements may adversely affect the Company’s results of operations and financial condition.

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The Company is subject to regulatory oversight and certain litigation, and its expenses related to this regulatory oversight and litigation may adversely affect its results.

●

The soundness of other financial institutions, including those with whom the Company has engaged in transactions, could adversely affect the Company.

●

Natural disasters and the effects of a changing climate may adversely affect the Company and its customers.

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The Company’s asset valuations may include methodologies, estimations and assumptions which are subject to differing interpretations and could result in changes to asset valuations that may materially and adversely affect its results of operations or financial condition.

●

If the Company fails to maintain an effective system of internal control over financial reporting, it may not be able to accurately report its financial results.

Regulatory and Compliance Risks

●

Federal or state legislation or regulation may increase the Company’s expenses and reduce earnings.

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The Company, as well as the Bank, operates in an increasingly highly regulated environment and each is supervised and examined by various federal and state regulatory agencies who may adversely affect their ability to conduct business.

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The Company and the Bank must maintain adequate regulatory capital to support their business objectives.

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The Company is required to act as a source of financial and managerial strength for the Bank in times of stress.

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Non-compliance with the USA Patriot Act, the Bank Secrecy Act or other laws and regulations could result in fines or sanctions against the Company or the Bank.

Risks Relating to the Company’s Securities

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The Company’s common stock is thinly traded, and recent prices may not reflect the prices at which the stock would trade in an active trading market.

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The Company’s ability to declare and pay dividends is limited.

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An investment in the Company’s common stock is not an insured deposit.

COVID-19 Risks

The COVID-19 pandemic is continuing and the Company’s businesses and the businesses of some of its customers continue to face challenges.

The spread of COVID-19 has created a global public health crisis that has periodically resulted in uncertainty, volatility and deterioration in financial markets and in governmental, commercial and consumer activity including in the United States, where the Bank conducts substantially all of its activity. At various times since the beginning of the COVID-19 pandemic, the Company’s businesses and the businesses of some of its customers have been disrupted and adversely impacted.

While the current wave of COVID-19 related to the Omicron variant has begun to subside in the United States, and government restrictions have been allowed to lapse and commercial and consumer activity has largely resumed, the pandemic is continuing and to the extent cases were to once again surge, government restrictions could be reinstated, which, along with independent actions of individuals and businesses aimed at slowing a new surge, may again negatively impact economic activity and disrupt the Company’s and the Company’s customers’ businesses. Further, if new strains or variants of COVID-19 develop or boosters of the COVID-19 vaccines or other treatments are not widely administered or available for a significant period of time or otherwise prove ineffective, the adverse impact of COVID-19 on the economy, and, in turn, the Company’s financial condition, liquidity, and results of operations could be material.

Interest Rate Risks

The Company’s profitability is dependent to a large extent on net interest income, which is the difference between interest income earned on loans and investment securities and other interest-earning assets and interest expense paid on deposits and other borrowings. The absolute level of interest rates as well as changes in interest rates or that affect the yield curve may affect the Company’s level of interest income, the primary component of its gross revenue, as well as the level of its interest expense. Interest rate fluctuations are caused by many factors which, for the most part, are not under the Company’s direct control. For example, national monetary policy plays a significant role in the determination of interest rates. Additionally, competitor pricing and the resulting negotiations that occur with the Company’s customers also impact the rates the Company collects on loans and the rates it pays on deposits. In addition, changes in the method of determining or the elimination of the London Interbank Offered Rate (LIBOR) or other reference rates, or uncertainty related to such potential changes, may adversely affect the value of reference rate-linked debt securities that the Company holds or issues or its variable pricing loans, which could further impact the Company’s interest rate spread.

Changes in the level of interest rates also may negatively affect the Company’s ability to originate real estate loans, the value of its assets and its ability to realize gains from the sale of its assets, all of which could ultimately affect the Company’s results of operations and financial condition. A decline in the market value of the Company’s assets may limit the Company’s ability to borrow funds. As a result, the Company could be required to sell some of its loans and investments under adverse market conditions, upon terms that are not favorable to the Company, in order to maintain its liquidity. If those sales are made at prices lower than the amortized costs of the investments, the Company will incur losses. Following changes in the general level of interest rates, the Company’s ability to maintain a positive net interest spread and to increase its net interest margin is dependent on its ability to increase (in a rising rate environment) or maintain or minimize the decline in (in a falling rate environment) its loan offering rates, minimize increases on its deposit rates in a rising rate environment or promptly reduce the rates it pays on deposits in a falling rate environment, and maintain an acceptable level and mix of funding. Although the Company has implemented strategies it believes will reduce the potential effects of changes in interest rates on its net interest income, these strategies may not always be successful. Accordingly, changes in levels of market interest rates could materially and adversely affect the Company’s net interest income and net interest margin, asset quality, loan origination volume, liquidity, and overall profitability. The Company cannot assure you that it can minimize its interest rate risk.

As interest rates change, the Company expects that it will periodically experience “gaps” in the interest rate sensitivities of its assets and liabilities, meaning that either its interest-bearing liabilities (usually deposits and borrowings) will be more sensitive to changes in market interest rates than its interest-earning assets (usually loans and investment securities), or vice versa. In either event, if market interest rates should move contrary to the Company’s position, this “gap” may work against the Company, and its results of operations and financial condition may be negatively affected. The Company attempts to manage its risk from changes in market interest rates by adjusting the rates, maturity, repricing characteristics, and balances of the different types of interest-earning assets and interest-bearing liabilities. Interest rate risk management techniques are not exact. The Company employs the use of models and modeling techniques to quantify the levels of risk to net interest income, which inherently involve the use of assumptions, judgments, and estimates. While the Company strives to ensure the accuracy of its modeled interest rate risk profile, there are inherent limitations and imprecisions in this determination and actual results may differ.

Short-term interest rates are expected to rise in 2022 and in a rising rate environment the Bank’s ability to increase the rates it charges on loans faster than the rates it pays on deposits will be critical to maintaining or expanding the Company’s net interest margin. In addition, many of the Bank’s variable rate loans have loan floors that will limit its ability to capture the full benefit of initial increases in short-term rates.

The Company attempts to manage its risk from changes in market interest rates by adjusting the rates, maturity, repricing characteristics, and balances of the different types of its interest-earning assets and interest-bearing liabilities and by utilizing hedging strategies to reduce the impact of changes in rates. Interest rate risk management techniques are not exact. From time to time the Company has repositioned a portion of its investment securities portfolio in an effort to better position its balance sheet for potential changes in short-term rates. The Company employs the use of models and modeling techniques to quantify the levels of risks to net interest income, which inherently involve the use of assumptions, judgments, and estimates. While the Company strives to ensure the accuracy of its modeled interest rate risk profile, there are inherent limitations and imprecisions in this determination and actual results may differ.

The Company’s hedging strategy may not be effective, including in the event that interest rates move in unanticipated manners.

The Company has entered into certain hedging transactions including interest rate swaps, which are designed to lessen elements of its interest rate exposure. This hedging strategy converts the fixed interest rates on certain of the Bank’s outstanding loans to LIBOR-based variable interest rates. In the event short-term that interest rates do not change in the manner that the Company anticipates at the times it institutes its hedging strategies or at the pace that the Company anticipated, such transactions may materially and adversely affect its results of operations.

Hedging creates certain risks for the Company, including the risk that the other party to the hedge transaction will fail to perform (counterparty risk, which is a type of credit risk), and the risk that the hedge will not fully protect the Company from loss as intended (hedge failure risk). Unexpected counterparty failure or hedge failure could have a significant adverse effect on the Company’s liquidity and earnings.

Changes in interest rates can negatively affect the performance of most of the Company’s investment securities. Interest rate volatility can reduce unrealized gains or increase unrealized losses in the Company’s portfolio. Interest rates are highly sensitive to many factors including monetary policies, domestic and international economic, social and political issues, including trade disputes and global health pandemics, and other factors beyond the Company’s control. Fluctuations in interest rates can materially affect both the returns on and market value of the Company’s investment securities. Additionally, actual investment income and cash flows from investment securities that carry prepayment risk, such as mortgage-backed securities and callable securities, may materially differ from those anticipated at the time of investment or subsequently as a result of changes in interest rates and market conditions.

The Company’s investment securities portfolio consists of several securities whose trading markets are “not active.” As a result, the Company utilizes alternative methodologies for pricing these securities that include various estimates and assumptions. There can be no assurance that the Company can sell these investment securities at the price derived by these methodologies, or that it can sell these investment securities at all, which could have an adverse effect on the Company’s financial condition, results of operations and liquidity.

The Company monitors the financial position of the various issuers of investment securities in its portfolio, including each of the state and local governments and other political subdivisions where it has exposure. To the extent the Company has securities in its portfolio from issuers who have experienced a deterioration of financial condition, or who may experience future deterioration of financial condition, the value of such securities may decline and could result in an other-than-temporary impairment charge, which could have an adverse effect on the Company’s financial condition, results of operations and liquidity.

In addition, from time to time the Company may restructure portions of its investment securities portfolio as part of its asset liability management strategies, and may incur loses, which may be material, in connection with any such restructuring.

Credit and Lending Risks

The Company’s loan portfolio includes a significant amount of real estate loans, including construction and development loans, which loans have a greater credit risk than residential mortgage loans.

As of December 31, 2021, approximately 92% of the Company’s loans held for investment were secured by real estate. Of this amount, approximately 38% were commercial real estate loans, 34% were residential real estate loans, 26% were construction and development loans and 2% were other real estate loans. In total these loans made up approximately 94% of the Company’s non-performing loans at December 31, 2021. Construction and development lending is generally considered to have relatively high credit risks because the principal is concentrated in a limited number of loans with repayment dependent on the successful completion and operation of the related real estate project. Real estate industry pricing dynamics in the geographical markets in which the Company operates can vary from year to year, and with respect to construction, can vary between project funding and project completion. Asset values to which the Company underwrites loans can fluctuate from year to year and impact collateral values and the ability of its borrowers to repay their loans.

Weakness in residential real estate market prices as well as demand could result in price reductions in home and land values adversely affecting the value of collateral securing some of the construction and development loans that the Company holds. Should the Company experience the return of adverse economic and real estate market conditions similar to those it experienced from 2008 through 2010, the Company may again experience increases in non-performing loans and other real estate owned, increased losses and expenses from the management and disposition of non-performing assets, increased charge-offs from the disposition of non-performing assets, increases in provision for credit losses, and increases in operating expenses as a result of the allocation of management time and resources to the collection and work out of these loans, all of which would negatively impact the Company’s financial condition and results of operations.

The Company has significant credit exposure to borrowers that are homebuilders and land developers and the Company also targets small businesses.

At December 31, 2021, the Company had significant credit exposures to borrowers in certain businesses, including new home builders and land subdividers. If the challenging economic conditions currently being experienced as a result of inflation and supply-chain disruption extends deep into 2022 or beyond and begins to negatively impact real estate conditions in the Company’s markets more than has been the case thus far, these industry or other concentrations could result in higher than normal deterioration in credit quality, past dues, loan charge-offs and collateral value declines, all of which would negatively impact the Company’s financial condition and results of operations. Furthermore, any of the Company’s large credit exposures that deteriorate unexpectedly could cause the Company to have to make significant additional loan loss provisions, negatively impacting the Company’s financial condition and results of operations.

A substantial focus of the Company’s marketing and business strategy is to serve small businesses in its market areas. As a result, a relatively high percentage of the Company’s loan portfolio consists of commercial loans primarily to small businesses. During periods of lower economic growth or challenging economic periods like those resulting from the current inflationary environment, small businesses may be impacted more severely and more quickly than larger businesses. Consequently, the ability of such businesses to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact the Company’s results of operations and financial condition.

Changes in financial accounting amd reporting standards, or the interpretation of those standards, like the new CECL standard effective for the Company on January 1, 2022, could affect the way the Company accounts for its operations and these changes could have a material adverse effect on the Company’s financial condition and results of operations.

The Financial Accounting Standards Board and the SEC may change the financial accounting and reporting standards, or the interpretation of those standards, that govern the preparation of the Company’s external financial statements from time to time. The impact of these changes or the application thereof on the Company’s financial condition and operations can be difficult to predict. For example, the Financial Accounting Standards Board adopted a new accounting standard that became effective for the Company on January 1, 2022. This standard, referred to as current expected credit loss, or CECL, requires financial institutions to determine periodic estimates of lifetime expected credit losses on financial assets, including loans, and recognize the expected credit losses through provision for credit losses. CECL replaced the previous method of provisioning for credit losses that are probable, and, now that it is fully adopted by the Company, it may require the Company to increase its allowance for credit losses slightly in the first quarter of 2022, and has increased the types of data the Company needs to collect and review to determine the appropriate level of its allowance for credit losses. In addition, the adoption of CECL may result in more volatility in the level of the Company’s allowance for credit losses. An increase, to the extent material, in the Company’s allowance for credit losses or expenses incurred to determine the appropriate level of the allowance for credit losses could have a material adverse effect on the Company’s capital levels, financial condition and results of operations. A reduction in the Company’s or the Bank’s capital levels could subject it to a variety of enforcement remedies available to the federal regulatory authorities and would negatively impact the Company’s ability to pursue expansion opportunities if it is unable to satisfactorily raise additional capital.

An inadequate allowance for credit losses would negatively impact the Company’s results of operations and financial condition.

Beginning on January 1, 2022, the Company became required, under CECL, to maintain an allowance for credit losses on loans, securities and off-balance sheet exposures. The risk of credit losses on loans varies with, among other things, general economic conditions, the type of loan being made, the creditworthiness of the borrower over the term of the loan and, in the case of a collateralized loan, the value and marketability of the collateral for the loan. The Company’s management makes various assumptions and judgments about the expected losses in the Company’s loan portfolio, including the credit worthiness of the Company’s borrowers and the collateral securing the loans. Utilizing objective and subjective factors, the Company now maintains, as of January 1, 2022, an allowance for credit losses, established through a provision for credit losses charged to expense, to cover its estimate of the current expected credit losses in its loan and securities portfolios. In determining the size of this allowance, the Company utilizes estimates based on analyses of volume and types of loans, internal loan classifications, trends in classifications, volume and trends in delinquencies, nonaccruals and charge-offs, loss experience of various loan categories, national and local economic conditions, including unemployment statistics, industry and peer bank loan quality indications, and other pertinent factors and information. Actual losses are difficult to forecast, especially if those losses stem from factors beyond the Company’s historical experience or are otherwise inconsistent with the its credit quality assessments. If the Company’s assumptions are inaccurate, its current allowance may not be sufficient to cover potential credit losses, and additional provisions may be necessary which would negatively impact its results of operations and financial condition.

In addition, federal and state regulators periodically review the Company’s loan portfolio and may require it to increase its allowance for credit losses or recognize loan charge-offs. Their conclusions about the quality of the Company’s loan portfolio may be different than the Company’s. Any increase in the Company’s allowance for credit losses or loan charge-offs as required by these regulatory agencies could have a negative effect on the Company’s results of operations or financial condition. Moreover, additions to the allowance may be necessary based on changes in economic and real estate market conditions and forecasted conditions, new information regarding existing loans or borrowers, identification of additional problem loans and other factors, both within and outside of the Company’s management’s control. These additions may require increased provision expense which would negatively impact the Company’s results of operations.

The Company’s accounting estimates and risk management processes rely on analytical and forecasting models and tools.

The processes the Company uses to estimate expected credit losses, calculate its allowance for credit losses and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates and other measures of the Company’s financial condition and results of operations, depend upon the use of analytical and forecasting models and tools. These models and tools reflect assumptions that may not be accurate, particularly in times of market stress or other unforeseen circumstances. Even if these assumptions are accurate, the models and tools may prove to be inadequate or inaccurate because of other flaws in their design or their implementation. Any such failure in the Company’s analytical or forecasting models and tools could have a material adverse effect on its business, financial condition and results of operations.

The Company could sustain losses if its asset quality declines.

The Company’s earnings are significantly affected by its ability to properly originate, underwrite and service loans. The Company could sustain losses if it incorrectly assesses the creditworthiness of its borrowers or fails to detect or respond to deterioration in asset quality in a timely manner. Problems with asset quality, particularly within the commercial real estate segment of the Company’s loan portfolio, could cause the Company’s interest income and net interest margin to decrease and its provisions for credit losses and non-interest expenses to increase, which could adversely affect its results of operations and financial condition.

Environmental liability associated with commercial lending could result in losses.

In the course of business, the Bank may acquire, through foreclosure, properties securing loans it has originated or purchased which are in default. Particularly in commercial real estate lending, there is a risk that hazardous substances could be discovered on these properties. In this event, the Company, or the Bank, might be required to remove these substances from the affected properties at the Company’s sole cost and expense. The cost of this removal could substantially exceed the value of affected properties. The Company and the Bank may not have adequate remedies against the prior owner or other responsible parties and could find it difficult or impossible to sell the affected properties. These events could have a material adverse effect on the Company’s business, results of operations and financial condition.

The Company has acquired a number of retail banking facilities and other real properties, any of which may contain hazardous or toxic substances. If hazardous or toxic substances are found, the Company may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require the Company to incur substantial expenses and may materially reduce the affected property’s value or limit the Company’s ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase the Company’s exposure to environmental liability.

The Company depends on the accuracy and completeness of information about customers.

In deciding whether to extend credit or enter into certain transactions, the Company relies on information furnished by or on behalf of customers and other counterparties, including financial statements, credit reports, tax returns and other financial information. The Company may also rely on representations of those customers or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading personal information, financial statements, credit reports, tax returns or other financial information, including information falsely provided as a result of identity theft, could have an adverse effect on the Company’s business, financial condition and results of operations.

The Company may be subject to claims and litigation asserting lender liability.

From time to time, and particularly during periods of economic stress, customers, including real estate developers and consumer borrowers, may make claims or otherwise take legal action pertaining to performance of the Company’s responsibilities. These claims are often referred to as “lender liability” claims and are sometimes brought in an effort to produce or increase leverage against the Company in workout negotiations or debt collection proceedings. Lender liability claims frequently assert one or more of the following allegations: breach of fiduciary duties, fraud, economic duress, breach of contract, breach of the implied covenant of good faith and fair dealing, and similar claims. Whether customer claims and legal action related to the performance of the Company’s responsibilities are founded or unfounded, if such claims and legal actions are not resolved in a favorable manner, they may result in significant financial liability and/or adversely affect the Company’s market reputation, products and services, as well as potentially affecting customer demand for those products and services. Any financial liability or reputation damage could have a material adverse effect on the Company’s business, which, in turn, could have a material adverse effect on its financial condition, results of operations and liquidity.

Liquidity and Capital Risks

Liquidity risk could impair the Company’s ability to fund its operations and jeopardize its financial condition.

Liquidity represents an institution’s ability to provide funds to satisfy demands from depositors, borrowers and other creditors by either converting assets into cash or accessing new or existing sources of incremental funds. Liquidity risk arises from the possibility that the Company may be unable to satisfy current or future funding requirements and needs.

The objective of managing liquidity risk is to ensure that the Company’s cash flow requirements resulting from depositor, borrower and other creditor demands are met, as well as the Company’s operating cash needs, and that the Company’s cost of funding such requirements and needs is reasonable. The Company maintains an asset/liability and interest rate risk policy and a liquidity and funds management policy, including a contingency funding plan that, among other things, include procedures for managing and monitoring liquidity risk. Generally the Company relies on deposits, repayments of loans and cash flows from its investment securities as its primary sources of funds. The Company’s principal deposit sources include consumer, commercial and public funds customers in the Company’s markets. The Company has used these funds, together with wholesale deposit sources such as federal funds purchased and other sources of short-term and long-term borrowings, including advances from the Federal Home Loan Bank of Cincinnati (“FHLB Cincinnati”), to make loans, acquire investment securities and other assets and to fund continuing operations.

An inability to maintain or raise funds in amounts necessary to meet the Company’s liquidity needs could have a substantial negative effect, individually or collectively, on the Company’s and the Bank’s liquidity. The Company’s access to funding sources in amounts adequate to finance its activities, or on terms attractive to it, could be impaired by factors that affect the Company specifically or the financial services industry in general. For example, factors that could detrimentally impact the Company’s access to liquidity sources include a decrease in the level of its business activity due to a market downturn or adverse regulatory action against it or the Bank, a reduction in any then-published credit rating, any damage to its reputation or any other decrease in depositor or investor confidence in the Company’s creditworthiness and business. The Company’s access to liquidity could also be impaired by factors that are not specific to it, such as severe volatility or disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole. Any such event or failure to manage the Company’s liquidity effectively could affect its competitive position, increase its borrowing costs and the interest rates it pays on deposits, limit its access to the capital markets, cause its regulators to criticize its operations and have a material adverse effect on its financial condition or results of operations.

Deposit levels may be affected by a number of factors, including demands by customers, rates paid by competitors, general interest rate levels, returns available to customers on alternative investments, general economic and market conditions and other factors. Loan repayments are a relatively stable source of funds but are subject to the borrowers’ ability to repay loans, which can be adversely affected by a number of factors including changes in general economic conditions, adverse trends or events affecting business industry groups or specific businesses, declines in real estate values or markets, business closings or lay-offs, inclement weather, natural disasters, prolonged government shutdowns and other factors. Furthermore, loans generally are not readily convertible to cash. Accordingly, the Company may be required from time to time to rely on secondary sources of liquidity to meet growth in loans, deposit withdrawal demands or otherwise fund operations. Such secondary sources include advances from the FHLB Cincinnati, brokered deposits, secured and unsecured federal funds lines of credit from correspondent banks, FRB borrowings and/or accessing the equity or debt capital markets.

The Company anticipates it will continue to rely primarily on deposits, loan repayments, interest-bearing deposits in other banks and cash flows from its investment securities to provide liquidity. Additionally, where necessary, the secondary sources of borrowed funds described above, like advances from the FHLB Cincinnati, which the Bank has accessed from time to time, will be used to augment the Company’s primary funding sources. If the Company is unable to access any of these secondary funding sources when needed, it might be unable to meet its customers’ or creditors’ needs, which would adversely affect its financial condition, results of operations, and liquidity.

The Company’s and the Bank’s ability to maintain required capital levels and adequate sources of funding and liquidity could be impacted by changes in the capital markets and deteriorating economic and market conditions.

Federal and state bank regulators require the Company and the Bank to maintain adequate levels of capital to support operations. At December 31, 2021, the Company’s and the Bank’s regulatory capital ratios were at “well-capitalized” levels under regulatory guidelines. Growth in assets (either organically (as the Company has experienced since the onset of the COVID-19 pandemic) or as a result of acquisitions) at rates in excess of the rate at which the Bank’s capital is increased through retained earnings will reduce its capital ratios unless it continues to increase capital. Failure by the Bank to meet applicable capital guidelines or to satisfy certain other regulatory requirements could subject the Bank and the Company to a variety of enforcement remedies available to the federal regulatory authorities and would negatively impact the Company’s ability to pursue expansion opportunities.

The Company may need to raise additional capital (including through the issuance of common stock or additional Tier 2 capital instruments) in the future to provide the Company and the Bank with sufficient capital resources and liquidity to meet their commitments and business needs or in connection with growth or as a result of deterioration in asset quality. The Company’s and the Bank’s ability to maintain capital levels, sources of funding and liquidity could be impacted by negative perceptions of their businesses or prospects, changes in the capital markets and deteriorating economic and market conditions. The Bank is required to obtain regulatory approval in order to pay dividends to the Company unless the amount of such dividends does not exceed its net income for that calendar year plus retained net income for the preceding two years. Any restriction on the ability of the Bank to pay dividends to the Company could impact the Company’s ability to continue to pay dividends on its common stock or its ability to pay interest on its indebtedness.

In addition, the Company receives additional capital from the issuance of common stock under its dividend reinvestment plan. Any unexpected termination or suspension of the Company’s dividend reinvestment plan, or the related payment of its historical biannual cash dividend, could materially and adversely affect the Company’s capital levels.

Operational and Market Risks

Negative developments in the U.S. and local economies in the Company’s markets may adversely impact the Company’s results in the future.

The Company’s financial performance is highly dependent on the business environment in the markets where it operates and in the U.S. as a whole. Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity, investor or business confidence, consumer sentiment, limitations on the availability or increases in the cost of credit and capital, increases in inflation or interest rates, natural disasters, international trade disputes and retaliatory tariffs, supply-chain disruptions, terrorist attacks, global pandemics, acts of war, or a combination of these or other factors. Economic conditions in certain industries in the markets in which the Company operates deteriorated rapidly in 2020 as a result of the COVID-19 pandemic. These challenges manifested themselves primarily within the restaurant, retail, commercial real estate, travel and entertainment industries and contributed to increased levels of provisions for loan losses. In addition, inflation rose sharply at the end of 2021 and has continued at heightened levels so far in 2022, and is currently expected to remain elevated throughour much of 2022. A worsening of business and economic conditions, or persistent inflationary pressures or supply chain disruptions, generally or specifically in the principal markets in which the Company conducts business could have adverse effects, including the following:

	●	a decrease in deposit balances or the demand for loans and other products and services the Company offers;
	●	an increase in the number of borrowers who become delinquent, file for protection under bankruptcy laws or default on their loans or other obligations to the Company, which could lead to higher levels of nonperforming assets, net charge-offs and provisions for credit losses;

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a decrease in the value of loans and other assets secured by real estate;

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a decrease in net interest income from the Company’s lending and deposit gathering activities; and

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an increase in competition resulting from financial services companies.

Although economic conditions have improved in most of the Company’s markets when compared to the first and second quarters of 2020, the Company believes that it is possible it will continue to experience an uncertain and volatile economic environment during 2021, including as a result of issues of national security, COVID-19 and other health crises around the world, inflation and supply-chain disruptions. There can be no assurance that these conditions will improve in the near term or that conditions will not worsen. Such conditions could adversely affect the Company’s business, financial condition, and results of operations.

In addition, over the last several years, including from December 22, 2018 until January 25, 2019, the federal government has shut down several times, in some cases for prolonged periods. It is possible that the federal government may shut down again in the future, particularly in light of the evenly divided United States Senate. If a prolonged government shutdown occurs, it could significantly impact business and economic conditions generally or specifically in the Company’s markets, which could have a material adverse effect on the Company’s results of operations and financial condition.

The Company is geographically concentrated in Wilson County, Tennessee and its surrounding counties and changes in local economic conditions could impact its profitability.

The Company operates primarily in Wilson, DeKalb, Smith, Rutherford, Putnam, Davidson, Williamson and Sumner counties in Tennessee and certain of the surrounding counties and substantially all of its loan customers and most of its deposit and other customers live or have operations in this same geographic area. Accordingly, the Company’s success significantly depends upon the growth in population, income levels, and deposits in these areas, along with the continued attraction of business ventures to the area and the area’s economic stability and strength of the housing market, and its profitability is impacted by the changes in general economic conditions in these markets. The Company cannot assure investors that economic conditions in its markets will not remain challenged during 2022 or thereafter, and continued volatile economic conditions in the Company’s markets could cause the Company to constrict its growth rate, affect the ability of its customers to repay their loans and negatively impact the Company’s financial condition and results of operations.

The Company is less able than a larger institution to spread the risks of unfavorable local economic conditions across a large number of diversified economies. Moreover, the Company cannot give any assurance that it will benefit from any market growth or return of more favorable economic conditions in its primary market areas if they do occur.

The Company has sought to expand its franchise by developing new markets or expanding its operations in existing markets and may continue to do so in future years.

Since 2014, the Company has opened branch locations in Putnam County, Rutherford County, Sumner County, Davidson County and Williamson County as it sought to expand its footprint beyond its historical markets. Expansion, whether by opening new branches or acquiring existing branches or whole banks, involves various risks, including:

Management of Growth. The Company may be unable to successfully:

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maintain loan quality in the context of significant loan growth;

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identify and expand into suitable markets;

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obtain regulatory and other approvals;

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identify and acquire suitable sites for new banking offices;

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attract sufficient deposits and capital to fund anticipated loan growth;

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avoid diversion or disruption of its existing operations or management as well as those of an acquired institution;

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maintain adequate management personnel and systems to oversee and support such growth;

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maintain adequate internal audit, loan review and compliance functions; and

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implement additional policies, procedures and operating systems required to support such growth.

Results of Operations. There is no assurance that existing offices or future offices will maintain or achieve deposit levels, loan balances or other operating results necessary to avoid losses or produce profits. Execution on a growth strategy could lead to increases in overhead expenses if the Company were to add new offices and staff. The Company’s historical results may not be indicative of future results or results that may be achieved if it were to increase the number and concentration of its branch offices in its existing or new markets.

Development of Offices. There are considerable costs involved in opening branches, and new branches generally do not generate sufficient revenues to offset their costs until they have been in operation for at least a year or more. Accordingly, any new branches the Company establishes can be expected to negatively impact the Company’s earnings for some period of time until they reach certain economies of scale. The same is true for the Company’s efforts to expand in these markets with the hiring of additional seasoned professionals with significant experience in that market. The Company’s expenses could be further increased if it encounters delays in opening any of its new branches, including as a result of supply-chain disruption and labor challenges currently affecting the construction industry. The Company may be unable to accomplish future branch expansion plans due to a lack of available satisfactory sites, difficulties in acquiring such sites, failure to receive any required regulatory approvals, on a timely basis or at all, increased expenses or loss of potential sites due to complexities associated with zoning and permitting processes, higher than anticipated construction costs or other factors. Finally, any branch may not meet the Company’s long-term profitability expectations or otherwise be successful even after it has been established or acquired, as the case may be.

Regulatory and Economic Factors. Growth of banks like the Bank may be adversely affected by a number of regulatory and economic developments or other events. Failure to obtain required regulatory approvals, changes in laws and regulations or other regulatory developments and changes in prevailing economic conditions, such as those that occurred as a result of the COVID-19 pandemic, or other unanticipated events may prevent or adversely affect the Company’s growth and expansion. Such factors may cause the Company to alter its growth and expansion plans or slow or halt the growth and expansion process, which may prevent the Company from entering into or expanding in its targeted markets or allow competitors to gain or retain market share in the Company’s existing markets.

Failure to successfully address these and other issues related to the Company’s expansion could have a material adverse effect on its financial condition and results of operations, and could adversely affect its ability to successfully implement its business strategy.

The Company is dependent upon information technologies, computer systems and networks, including those the Company maintains and those maintained and provided to the Company by third parties, to conduct operations and is reliant on technology to help increase efficiency in its business. These systems could become unavailable or impaired due to a variety of causes, including storms and other natural disasters, terrorist attacks, fires, utility outages, internal or external theft or fraud, design defects, human error, misconduct or complications or failures encountered as existing systems are maintained, replaced or upgraded. For example, the Company’s financial, accounting, data processing, or other operating or security systems or infrastructure or those of third parties upon which it relies may fail to operate properly or become disabled or damaged, which could adversely affect the Company’s ability to process transactions or provide services. In the event that backup systems are utilized, they may not process data as quickly as the Company’s primary systems and the Company may experience data losses in the course of such recovery. The Company continuously updates the systems on which it relies to support its operations and growth and to remain compliant with all applicable laws, rules and regulations globally. This updating entails significant costs and creates risks associated with implementing new systems and integrating them with existing ones, including business interruptions that may occur in the course of such implementation challenges. The Company maintains a system of internal controls and security to mitigate the risks of many of these occurrences and maintains insurance coverage for certain risks; however, should an event occur that is not prevented or detected by the Company’s internal controls, causes an interruption, degradation or outage in service, or is uninsured against or in excess of applicable insurance limits, such occurrence could have an adverse effect on the Company’s business and its reputation, which, in turn, could have a material adverse effect on its financial condition, results of operations and liquidity.

The Company’s operations rely on the secure processing, storage and transmission of confidential, proprietary, personal and other information in its computer systems and networks. Although the Company takes protective measures and endeavors to modify these systems as circumstances warrant, the security of its computer systems, software and networks may be vulnerable to breaches, unauthorized access, misuse, computer viruses, ransomware or other malicious code and other events that could have a security impact. The Company provides its customers the ability to bank remotely, including over the Internet or through their mobile device. The secure transmission of confidential information is a critical element of remote and mobile banking. The Company’s network, and the systems of parties with whom it contracts or on which it relies, as well as those of its customers and regulators, could be vulnerable to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches. Sources of attacks vary and may include hackers, disgruntled employees or vendors, organized crime, terrorists, foreign governments, corporate espionage and activists. In recent periods, there continues to be a rise in electronic fraudulent activity, security breaches and cyber-attacks within the financial services industry, especially in the commercial banking sector due to cyber criminals targeting commercial bank accounts.

Cybersecurity risks for banking organizations have significantly increased in recent years in part because of the proliferation of new technologies, and the use of the Internet and telecommunications technologies to conduct financial transactions. For example, cybersecurity risks may increase in the future as the Company continues to increase its mobile-payment and other Internet-based product offerings and expand its internal use of web-based products and applications. Even the most advanced internal control environment may be vulnerable to compromise. Targeted social engineering attacks are becoming more prevalent and sophisticated, and are extremely difficult to prevent. The techniques used by bad actors change frequently, may not be recognized until launched and may not be recognized until well after a breach has occurred. Additionally, the existence of cyber-attacks or security breaches at third parties with access to the Company’s data, such as vendors, may not be disclosed to the Company in a timely manner. Consistent with industry trends, the Company remains at risk for attempted electronic fraudulent activity, as well as attempts at security breaches and cybersecurity-related incidents. The Company may be required to spend significant capital and other resources to protect against the threat of security breaches and computer viruses, or to alleviate problems caused by security breaches or viruses. To the extent that the Company’s activities or the activities of its vendors, regulators or customers involve the storage and transmission of confidential information, security breaches (including breaches of security of customer, vendor or regulatory systems and networks) and viruses could expose the Company to claims, litigation and other possible liabilities, which may be significant. Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in the Company’s systems and could adversely affect its reputation, results of operations and ability to attract and retain customers and businesses. Further, a security breach could also subject the Company to additional regulatory scrutiny, expose it to civil litigation and possible financial liability and cause reputational damage.

The Company contracts with third-party vendors to provide software or services for many of its major systems, such as data processing, loan servicing and deposit processing system. The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based as a result of cyber-attacks or otherwise, could interrupt the Company’s operations. Because the Company’s information technology and telecommunications systems interface with and depend on third-party systems, the Company could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions. If sustained or repeated, a system failure or service denial could result in a deterioration of the Company’s ability to process new and renewal loans, gather deposits and provide customer service, compromise its ability to operate effectively, damage its reputation, result in a loss of customer business and/or subject it to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on the Company’s financial condition and results of operations.

The Company also faces the risk of operational disruption, failure, termination, or capacity constraints of any of the third parties that facilitate its business activities, including vendors, exchanges, and other financial intermediaries. Such parties could also be the source or cause of an attack on, or breach of, the Company’s operational systems, data or infrastructure, and could disclose such attack or breach to the Company in a delayed manner or not at all. In addition, the Company may be at risk of an operational failure with respect to its customers’ systems. The Company’s risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats and the continued uncertain global economic environment.

As cyber threats continue to evolve, the Company may be required to expend significant additional resources to continue to modify or enhance its protective measures, investigate and remediate any information security vulnerabilities, or respond to any changes to state or federal regulations, policy statements or laws concerning information systems or security. Any failure to maintain adequate security over its information systems, its technology-driven products and services or its customers’ personal and transactional information could negatively affect its business and its reputation and result in fines, penalties, or other costs, including litigation expense and/or additional compliance costs, all of which could have a material adverse effect on its financial condition, results of operations and liquidity. Furthermore, the public perception that a cyber-attack on the Company’s systems has been successful, whether or not this perception is correct, may damage the Company’s reputation with customers and third parties with whom it does business. A successful penetration or circumvention of system security could cause the Company negative consequences, including loss of customers and business opportunities, disruption to the Company’s operations and business, misappropriation or destruction of the Company’s confidential information and/or that of its customers, or damage to its customers’ and/or third parties’ computers or systems, and could result in a violation of applicable privacy laws and other laws, litigation exposure, regulatory fines, penalties or intervention, loss of confidence in the Company’s security measures, reputational damage, reimbursement or other compensatory costs, additional compliance costs, and could adversely impact the Company’s results of operations, liquidity and financial condition.

Competition from financial institutions and other financial service providers may adversely affect the Company’s profitability.

The banking business is highly competitive and the Company experiences competition in each of its markets from many other financial and non-financial institutions. The Company competes with commercial banks, credit unions, savings and loan associations, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market funds, and other mutual funds, mobile payment platforms, as well as other community banks and super-regional and national financial institutions that operate offices in the Company’s primary market areas and elsewhere. Many of the Company’s competitors are well-established, larger financial institutions that have greater resources and lending limits and a lower cost of funds than the Company has.

Additionally, the Company faces competition from similarly sized and smaller community banks and credit unions, including those with senior management who were previously affiliated with other local or regional banks or credit unions or those controlled by investor groups with strong local business and community ties. These community banks may offer higher deposit rates or lower cost loans in an effort to attract the Company’s customers, and may attempt to hire the Company’s management and employees.

Some of the Company’s competitors, including credit unions, are not subject to certain regulatory constraints, such as the CRA, which requires the Company to, among other things, implement procedures to make and monitor loans throughout the communities it serves. Credit unions also have federal tax exemptions that may allow them to offer lower rates on loans and higher rates on deposits than taxpaying financial institutions such as commercial banks. In addition, non-depository institution competitors are generally not subject to the extensive regulation applicable to institutions, like the Bank, that offer federally insured deposits, which affords them the advantage of operating with greater flexibility and lower cost structures. Other institutions may have other competitive advantages in particular markets or may be willing to accept lower profit margins on certain products.

The Company competes with these other financial and non-financial institutions both in attracting deposits and in making loans. In addition, the Company has to attract its customer base from other existing financial institutions and from new residents. This competition at times has made it more difficult for the Company to make new loans and at times has forced the Company to offer higher deposit rates or utilize secondary sources of liquidity. Price competition for loans and deposits might result in the Company earning less interest on its loans and paying more interest on its deposits, which reduces the Company’s net interest income. The Company’s profitability depends upon its continued ability to successfully compete with an array of financial and non-financial institutions in its market areas.

The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as mobile payment and other automatic transfer and payment systems, and for banks that do not have a physical presence in the Company’s markets to compete for deposits. The absence of regulatory requirements may give non-bank financial companies a competitive advantage over the Company.

The Company’s key management personnel may leave at any time.

The Company’s future success depends to a significant extent on the continued service of its key management personnel, especially John McDearman, III, its president and chief executive officer, and John Foster, the president of the Bank. While the Company does not have employment agreements with any of its personnel and can provide no assurance that it will be able to retain any of its key officers and employees, particularly in times of intense competition for talent, as the Bank is currently experiencing, or attract and retain qualified personnel in the future, it has entered into non-competition agreements with such persons which would prevent them, in most circumstances, from competing with the Bank for one year following their termination. In addition, these persons are parties to certain deferred compensation, supplemental retirement and equity incentive plans, the benefits of which would cease to accrue upon the termination of the person’s employment with the Company or the Bank or the person competing with the Bank after the termination of their employment.

The Company has implemented a risk management framework to identify and manage its risk exposure. This framework is comprised of various processes, systems and strategies, and is designed to manage the types of risk to which it is subject, including, among others, credit, market, liquidity, fraud, operational, capital, compliance, strategic and reputational risks. The Company’s framework also includes financial, analytical, forecasting, or other modeling methodologies, which involves management assumptions and judgment. However, there is no assurance that the Company’s risk management framework will be effective under all circumstances or that it will adequately identify, manage or mitigate any risk or loss to it. If the Company’s risk management framework is not effective, it could suffer unexpected losses and become subject to regulatory consequences, as a result of which its business, financial condition, results of operations or prospects could be materially adversely affected.

The Company’s selection of accounting policies and methods may affect its reported financial results.

The Company’s accounting policies and methods are fundamental to how the Company records and reports its financial condition and results of operations. The Company’s management must exercise judgment in selecting and applying many of these accounting policies and methods so they comply with GAAP and reflect management’s judgment of the most appropriate manner to report its financial condition and results of operations. In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which may be reasonable under the circumstances, yet which may result in the Company reporting materially different results than would have been reported under a different alternative.

Certain accounting policies are critical to presenting the Company’s financial condition and results of operations. They require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates. Because of the uncertainty of estimates involved in these matters, the Company may be required to do one or more of the following: significantly increase the allowance for credit losses or sustain loan losses that are significantly higher than the reserve provided; reduce the carrying value of an asset measured at fair value; recognize an other-than-temporary impairment of securities; or significantly increase the Company’s accrued tax liability. Any of these could have a material adverse effect on the Company’s business, financial condition or results of operations. For a discussion of the Company’s critical accounting policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” contained in the 2021 Annual Report.

The Company currently invests in bank owned life insurance (“BOLI”) and may continue to do so in the future.

The Company had approximately $46.2 million in general, hybrid and separate account BOLI contracts at December 31, 2021. BOLI is an illiquid long-term asset that provides tax savings because cash value growth and life insurance proceeds are not taxable, subject to certain exceptions. However, if the Company needed additional liquidity and converted the BOLI to cash, such transaction would be subject to ordinary income tax and applicable penalties. The Company is also exposed to the credit risk of the underlying securities in the investment portfolio and to the insurance carrier’s credit risk (in a general account contract). If BOLI was exchanged to another carrier, additional fees would be incurred and a tax-free exchange could only be done for insureds that were still actively employed by the Company at that time. There is interest rate risk relating to the market value of the underlying investment securities associated with the BOLI in that there is no assurance that the market value of these securities will not decline. Investing in BOLI exposes the Company to liquidity, credit and interest rate risk, which could adversely affect the Company’s results of operations, financial condition and liquidity.

The Company’s business reputation and relationships are important and any damage to them could have a material adverse effect on its business.

The Company’s reputation is very important in sustaining its business and it relies on its relationships with its current, former and potential clients and shareholders and other actors in the industries that it serves. Any damage to the Company’s reputation, whether arising from regulatory, supervisory or enforcement actions, matters affecting the Company’s financial reporting or compliance with SEC requirements, negative publicity, the way in which the Company conducts its business or otherwise could strain its existing relationships and make it difficult for the Company to develop new relationships. Any such damage to the Company’s reputation and relationships could in turn lead to a material adverse effect on its business.

The Company’s business is dependent on technology, and an inability to invest in technological improvements may adversely affect the Company’s results of operations and financial condition.

The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven solutions, and as customer preferences and expectations continue to evolve, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems, as well as nontraditional alternatives like crowdfunding and digital wallets. In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. The importance of technology has been sharpened as a result of COVID-19, and appears likely to remain increasingly important as the pandemic fades. The Company has made significant investments in data processing, management information systems and internet banking accessibility. The Company’s future success will depend in part upon its ability to create additional efficiencies in its operations through the use of technology. Many of the Company’s competitors have substantially greater resources to invest in technological improvements. The Company cannot make assurances that its technological improvements will increase its operational efficiency or that it will be able to effectively implement new technology-driven solutions or be successful in marketing these products and services to its customers.

The Company is subject to regulatory oversight and certain litigation, and its expenses related to this regulatory oversight and litigation may adversely affect its results.

The Company is from time to time subject to certain litigation in the ordinary course of its business. The Company may also be subject to claims related to its loan servicing programs, particularly those involving servicing of commercial real estate loans. These and other claims and legal actions, as well as supervisory and enforcement actions by the Company’s regulators, including those with oversight of its loan servicing programs, could involve large monetary claims, capital directives, agreements with federal regulators, cease and desist penalties and orders and significant defense costs. The outcome of any such cases or actions is uncertain. Substantial legal liability or significant regulatory action against the Company could have material adverse financial effects or cause significant reputational harm to the Company, which in turn could seriously harm its business prospects.

In accordance with GAAP, for matters where a loss is not probable or the amount of the loss cannot be estimated, no accrual is established. For matters where it is probable the Company will incur a loss and the amount can be reasonably estimated, the Company establishes an accrual for the loss. Once established, the accrual is adjusted periodically to reflect any relevant developments. The actual cost of any outstanding legal proceedings or threatened claims, however, may turn out to be substantially higher than the amount accrued. Further, the Company’s insurance may not cover all litigation, other proceedings or claims, or the costs of defense. Future developments could result in an unfavorable outcome for any existing or new lawsuits or investigations in which the Company is, or may become, involved, which may have a material adverse effect on its business and its results of operations.

The soundness of other financial institutions, including those with whom the Company has engaged in transactions, could adversely affect the Company.

The Company’s ability to engage in routine funding transactions could be adversely affected by the actions and financial stability of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. The Company has exposure to various counterparties, including brokers and dealers, commercial and correspondent banks, and others. As a result, defaults by, or rumors or questions about, one or more financial services institutions, or the financial services industry generally, may result in market-wide liquidity problems and could lead to losses or defaults by such other institutions. Such occurrences could expose the Company to credit risk in the event of default of one or more counterparties and could have a material adverse effect on the Company’s financial position, results of operations and liquidity.

Natural disasters and the effects of a changing climate may adversely affect the Company and its customers.

The Company’s operations and customer base are located in markets where natural disasters, including tornadoes, severe storms, fires and floods often occur. Such natural disasters, like the tornado that struck the Company’s markets in March 2020, could significantly impact the local population and economies and the Company’s business, and could pose physical risks to its properties. Although the Company maintains insurance coverages for such events, a significant natural disaster in or near one or more of the Company’s markets could have a material adverse effect on its financial condition, results of operations or liquidity.

In addition to natural disasters, the impact of climate change, such as rising average global temperatures and rising sea levels, and the increasing frequency and severity of extreme weather events and natural disasters such as droughts, floods, wildfires and hurricanes could negatively impact the Company’s operations including its ability to provide financial products and services to its customers. Climate change also has the potential to negatively affect the collateral the Company takes to secure loans that it makes, the valuations of home prices or commercial real estate or the Company’s customers’ (particularly those that are engaged in industries that could be negatively affected by a shift to a low-carbon economy) ability and/or willingness to pay fees, repay outstanding loans or afford new products. Climate change could also cause insurability risk and/or increased insurance costs for the Company or its customers.

The Company’s asset valuation may include methodologies, estimations and assumptions which are subject to differing interpretations and could result in changes to asset valuations that may materially adversely affect its results of operations or financial condition.

The Company uses estimates, assumptions, and judgments when financial assets and liabilities are measured and reported at fair value. Assets and liabilities carried at fair value inherently result in a higher degree of financial statement volatility. Fair values and the information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices and/or other observable inputs provided by independent third-party sources, when available. When such third-party information is not available, fair value is estimated primarily by using cash flow and other financial modeling techniques utilizing assumptions such as credit quality, liquidity, interest rates and other relevant inputs. Changes in underlying factors, assumptions, or estimates in any of these areas could materially impact the Company’s future financial condition and results of operations.

During periods of market disruption, including periods of significantly rising or high interest rates, rapidly widening credit spreads or illiquidity, it may be difficult to value certain assets if trading becomes less frequent and/or market data becomes less observable. There may be certain asset classes that were in active markets with significant observable data that become illiquid due to the current financial environment. In such cases, certain asset valuations may require more subjectivity and management judgment. As such, valuations may include inputs and assumptions that are less observable or require greater estimation. Further, rapidly changing and unprecedented credit and equity market conditions could materially impact the valuation of assets as reported within the Company’s consolidated financial statements and the period-to-period changes in value could vary significantly. Decreases in value may have a material adverse effect on results of operations or financial condition.

Valuation methodologies which are particularly susceptible to the conditions mentioned above include those used to value certain securities in the Company’s available for sale investment portfolio such as non-agency mortgage and asset-backed securities, in addition to loans held for sale and intangible assets.

If the Company fails to maintain an effective system of internal control over financial reporting, it may not be able to accurately report its financial results. As a result, current and potential holders of the Company’s common stock could lose confidence in the Company’s financial reporting, which would harm the Company’s business and the trading price of its securities.

Maintaining and adapting the Company’s internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, is expensive and requires significant management attention. Moreover, as the Company continues to grow, its internal controls may become more complex and require additional resources to ensure they remain effective amid dynamic regulatory and other guidance. Failure to maintain effective controls or implement required new or improved controls or difficulties encountered in the process may harm the Company’s results of operations and financial condition or cause it to fail to meet its reporting obligations. If the Company or its independent registered public accounting firm identify material weaknesses in the Company’s internal control over financial reporting or the Company is required to restate the its financial statements, the Company could be required to implement expensive and time-consuming remedial measures and could lose investor confidence in the accuracy and completeness of its financial reports. The Company may also face regulatory enforcement or other actions. This could have an adverse effect on the Company’s business, financial condition or results of operations, as well as the trading price of the Company’s securities, and could potentially subject the Company to litigation.

Regulatory and Compliance Risks

Federal or state legislation or regulation may increase the Company’s expenses and reduce earnings.

Federal bank regulators continue to closely scrutinize financial institutions, and additional restrictions (including those originating from the Dodd-Frank Act) have been proposed or adopted by regulators and by Congress. Changes in tax law, federal legislation, regulation or policies, such as bankruptcy laws, deposit insurance, consumer protection laws, and capital requirements, among others, can result in significant increases in the Company’s expenses and/or charge-offs, which may adversely affect its results of operations and financial condition. Changes in state or federal tax laws or regulations can have a similar impact. State and municipal governments, including the State of Tennessee, could seek to increase their tax revenues through increased tax levies which could have a meaningful impact on the Company’s results of operations. Furthermore, financial institution regulatory agencies may continue to be aggressive in responding to concerns and trends identified in examinations, including the continued issuance of additional formal or informal enforcement or supervisory actions. These actions, whether formal or informal, could result in the Company’s or the Bank’s agreeing to limitations or monetary penalties or to take actions that limit its operational flexibility, restrict its growth, increase its operating expenses or increase its capital or liquidity levels, any of which could materially and adversely affect the Company’s results of operations and financial condition. Failure to comply with any formal or informal regulatory actions or restrictions, including informal supervisory actions, could lead to further regulatory enforcement actions. Negative developments in the financial services industry and the impact of recently enacted or new legislation in response to those developments could negatively impact the Company’s operations by restricting its business operations, including its ability to originate or sell loans, and adversely impact its financial performance. In addition, industry, legislative or regulatory developments may cause the Company to materially change its existing strategic direction, capital strategies, compensation or operating plans.

Additionally, the Company is subject to laws regarding its handling, disclosure and processing of personal and confidential information of certain parties, such as its employees, customers, suppliers, counterparties and other third parties. The GLB Act requires the Company to periodically disclose its privacy policies and practices relating to sharing such information and enables retail customers to opt out of the Company’s ability to share information with unaffiliated third parties, under certain circumstances. Other laws and regulations impact the Company’s ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes, or to contact customers with marketing offers. The Company is subject to laws that require it to implement a comprehensive information security program that includes administrative, technical and physical safeguards to provide the security and confidentiality of customer records and information. Additionally, other legislative and regulatory activity continue to lend uncertainty to privacy compliance requirements that impact the Company’s business. The Company also expects that there will continue to be new laws, regulations and industry standards concerning privacy, data protection and information security proposed and enacted in various jurisdictions. The potential effects of pending legislation are far-reaching and may require the Company to modify its data processing practices and policies and to incur substantial costs and expenses in an effort to comply.

The Company, as well as the Bank, operate in an increasingly highly regulated environment and are supervised and examined by various federal and state regulatory agencies who may adversely affect the Company’s ability to conduct business.

The TDFI and the FRB supervise and examine the Bank and the Company, respectively. Because the Bank’s deposits are federally insured, the FDIC also regulates its activities. These and other regulatory agencies impose certain regulations and restrictions on the Bank, including:

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explicit standards as to capital and financial condition;

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limitations on the permissible types, amounts and extensions of credit and investments;

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restrictions on permissible non-banking activities; and

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restrictions on dividend payments.

Federal and state regulatory agencies have extensive discretion and power to prevent or remedy unsafe or unsound practices or violations of law by banks and bank holding companies. As a result, the Company must expend significant time and expense to assure that it is in compliance with regulatory requirements and agency practices.

The Company, as well as the Bank, also undergoes periodic examinations by one or more regulatory agencies. Following such examinations, the Company or the Bank may be required, among other things, to make additional provisions to its allowance for credit loss, to restrict its operations or to increase its capital levels. These actions would result from the regulators’ judgments based on information available to them at the time of their examination. The Bank’s operations are also governed by a wide variety of state and federal consumer protection laws and regulations. These federal and state regulatory restrictions limit the manner in which the Company and the Bank may conduct business and obtain financing. These laws and regulations can and do change significantly from time to time, and any such changes could adversely affect the Company’s results of operations.

The Company expects that the current Presidential administration will continue to implement a regulatory reform agenda that is significantly different than that of the prior administration. This reform agenda could include an increased level of attention and focus on consumer protection, fair lending, the regulation of loan portfolios and credit concentrations to borrowers impacted by climate change or that operate in industries that would not be favored in a low-carbon economy and heightened scrutiny of BSA and AML requirements among other areas. The Company cannot predict the effects of these changes on its business and profitability. Because government regulation greatly affects the business and financial results of commercial banks and bank holding companies, the Company’s cost of compliance could adversely affect its ability to operate profitably.

The Company and the Bank must maintain adequate regulatory capital to support the Company’s business objectives.

Under regulatory capital adequacy guidelines and other regulatory requirements, the Company and the Bank must satisfy capital requirements based upon quantitative measures of assets, liabilities and certain off-balance sheet items. The satisfaction of these requirements by the Company and the Bank is subject to qualitative judgments by regulators that may differ materially from management’s and that are subject to being determined retroactively for prior periods. Additionally, regulators can make subjective assessments about the adequacy of capital levels, even if the Bank’s reported capital exceeds the “well-capitalized” requirements.

Failure to meet regulatory capital standards could have a material adverse effect on the Company’s business, including damaging the confidence of customers in the Company, and adversely impacting its reputation and competitive position and retention of key personnel. Any of these developments could limit the Company’s access to: brokered deposits; the FRB discount window; advances from the FHLB; capital markets transactions; and development of new financial services.

Failure to meet regulatory capital standards may also result in higher FDIC assessments. If the Bank falls below guidelines for being deemed “adequately capitalized” the FDIC or FRB could impose restrictions on the Company’s activities and a broad range of regulatory requirements in order to effect “prompt corrective action.” The capital requirements applicable to the Company and the Bank are in a process of continuous evaluation and revision in connection with actions of the Basel Committee and the Company’s and the Bank’s regulators. The Company cannot predict the final form, or the effects, of these regulations on its business, but among the possible effects are requirements that the Company slow its rate of growth or obtain additional capital which could reduce the Company’s earnings or dilute its existing shareholders.

The Company is required to act as a source of financial and managerial strength for the Bank in times of stress.

Under federal law, the Company is required to act as a source of financial and managerial strength to the Bank, and to commit resources to support the Bank if necessary. The Company may be required to commit additional resources to the Bank, or guarantee the Bank’s compliance with a capital plan developed by the Bank to raise capital, at times when the Company may not be in a financial position to provide such resources or guarantee or when it may not be in the Company’s, or its shareholders’ or its creditors’ best interests to do so. Providing such support is more likely during times of financial stress for the Company and the Bank, which may make any capital the Company is required to raise to provide such support more expensive than it might otherwise be. In addition, any capital loans the Company makes to the Bank are subordinate in right of payment to depositors and to certain other indebtedness of the Bank. In the event of the Company’s bankruptcy, any commitment by it to a federal banking regulator to maintain the capital of the Bank will be assumed by the bankruptcy trustee and entitled to priority of payment.

Non-compliance with the Patriot Act, the BSA or other laws and regulations could result in fines or sanctions against the Company.

The BSA, as amended by the Patriot Act, requires financial institutions to design and implement programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the Treasury’s Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures and maintain staffing levels that are sufficient for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions, including restrictions on conducting acquisitions or establishing new branches, as well as additional operating expenses to add staff and/or technological enhancements to the Company’s systems to better comply.

Risks Relating to the Company’s Securities

The Company’s common stock is thinly traded, and recent prices may not reflect the prices at which the stock would trade in an active trading market.

The Company’s common stock is not traded through an organized exchange, but rather is traded in individually-arranged transactions between buyers and sellers. Therefore, recent prices at which the stock has traded may not necessarily reflect the actual value of the Company’s common stock. A shareholder’s ability to sell the shares of Company common stock in a timely manner may be substantially limited by the lack of a trading market for the common stock.

The Company’s ability to declare and pay dividends is limited.

While the Company has historically paid a biannual cash dividend on its common stock, there can be no assurance of whether or when it may pay dividends on its common stock in the future. Future dividends, if any, will be declared and paid at the discretion of the Company’s board of directors and will depend on a number of factors, including the Company’s and the Bank’s capital levels. The Company’s principal source of funds used to pay cash dividends on its common stock will be dividends that it receives from the Bank. Although the Bank’s asset quality, earnings performance, liquidity and capital requirements will be taken into account before the Company declares or pays any future dividends on its common stock, the Company’s board of directors will also consider its liquidity and capital requirements and its board of directors could determine to declare and pay dividends without relying on dividend payments from the Bank.

Federal and state banking laws and regulations and state corporate laws restrict the amount of dividends the Company may declare and pay and that the Bank may declare and pay to the Company. For example, FRB regulations implementing the capital rules required under Basel III do not permit dividends unless capital levels exceed those minimum levels required to be adequately capitalized plus those amounts required by the capital conservation buffers. In addition, the FRB has issued supervisory guidance advising bank holding companies to eliminate, defer or reduce dividends paid on common stock and other forms of Tier 1 capital where the company’s net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends, the company’s prospective rate of earnings retention is not consistent with the company’s capital needs and overall current and prospective financial condition or the company will not meet, or is in danger of not meeting, minimum regulatory capital adequacy ratios. Recent supplements to this guidance reiterate the need for bank holding companies to inform their applicable reserve bank sufficiently in advance of the proposed payment of a dividend in certain circumstances.

An investment in the Company’s common stock is not an insured deposit.

The Company’s common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other public or private entity. Investment in the Company’s common stock is inherently risky for the reasons described in this “Risk Factors” section and elsewhere in this report and is subject to the equity market forces like other common stock. As a result, if you acquire the Company’s stock, you could lose some or all of your investment.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties

The Company’s main office is owned by the Company and consists of approximately four acres at 623 West Main Street, Lebanon, Tennessee. The building is a two story, brick building, with approximately 35,000 square feet. The lot has approximately 350 feet of road frontage on West Main Street. The Bank's 67,000 square foot operations center is located at 105 North Castle Heights Avenue, Lebanon, Tennessee, which is adjacent to the 623 West Main Street office. In addition thereto, the Bank has twenty-nine branch locations located at the following locations: 1436 West Main Street, Lebanon, Tennessee; 1444 Baddour Parkway, Lebanon, Tennessee; 200 Tennessee Boulevard, Lebanon, Tennessee; 8875 Stewart’s Ferry Pike, Gladeville, Tennessee; 402 Public Square, Watertown, Tennessee; 1476 North Mt. Juliet Road, Mt. Juliet, Tennessee; 11835 Highway 70, Mount Juliet, Tennessee; 1130 Castle Heights Avenue North, Lebanon, Tennessee; 127 McMurry Blvd., Hartsville, Tennessee; the Wal-Mart Supercenter, Lebanon, Tennessee; 440 Highway 109 North, Lebanon, Tennessee; 4736 Andrew Jackson Parkway in Hermitage, Tennessee; 3110 Memorial Blvd in Murfreesboro, Tennessee; 210 Commerce Drive in Smyrna, Tennessee; 2640 South Church Street, Murfreesboro, Tennessee; 217 Donelson Pike, Nashville, Tennessee; 2930 West End Avenue, Nashville, Tennessee; 710 NW Broad in Murfreesboro, Tennessee; 4195 Franklin Road, Murfreesboro, Tennessee; 576 West Broad Street in Smithville, Tennessee; 306 Brush Creek Road in Alexandria, Tennessee; 1300 Main Street North in Carthage, Tennessee; 7 New Middleton Highway in Gordonsville, Tennessee; 709 South Mt. Juliet Road, Mt. Juliet, Tennessee; 455 West Main Street, Gallatin, Tennessee; 175 East Main Street, Hendersonville, Tennessee; 1630 Nashville Pike, Suite 100, Gallatin, Tennessee; 320 South Jefferson Avenue, Cookeville, Tennessee; and 9200 Carothers Parkway, Suite 108, Franklin, Tennessee.

The Mt. Juliet office contains approximately 16,000 square feet of space; the Castle Heights Office contains 2,400 square feet of space; the Hartsville Office contains 8,000 square feet of space; the Leeville-109 branch contains approximately 4,000 square feet. The Hermitage branch opened in the fall of 1999 and contains 8,000 square feet of space. The Gladeville branch contains approximately 3,400 square feet of space. The Lebanon facility at Tennessee Boulevard was expanded in 1997 to 2,200 square feet of space. The Mt. Juliet facility on Highway 70 was completed in July 2004 and contains approximately 3,450 square feet of space and the Providence facility which was opened in 2011 contains approximately 4,450 square feet of space. The NorthWest Broad Street facility was relocated from a leased office to an office owned by the Bank in 2011 and contains approximately 6,300 square feet of space. The Smyrna office opened in September of 2006 and contains approximately 3,600 square feet of space. The Memorial Blvd office in Murfreesboro opened in October of 2006 and contains approximately 7,800 square feet of space. The Highway 96 office in Murfreesboro opened in January 2017 and contains approximately 4,700 square feet of space. The South Church Street office in Murfreesboro opened in January 2008 and contains approximately 7,800 square feet of space. The West End office in Nashville opened in August 2017 and contains approximately 7,062 square feet of space. The Cool Springs office in Franklin opened in December 2018 and contains approximately 5,940 square feet of space. The Greenlea office in Gallatin opened in January 2022 and contains approximately 3,200 square feet of space. Each of the branch facilities of the Bank not otherwise described above contains approximately 1,000 square feet of space.

The Bank also has a facility at 576 West Broad Street in Smithville, Tennessee which was expanded in 2001 and now contains approximately 10,300 square feet of space and a facility at 306 Brush Creek Road in Alexandria, Tennessee which occupies approximately 2,400 square feet of space. The Bank owns both facilities. The Bank also owns a building at 1300 Main Street North, Carthage, Tennessee, which was expanded in 2005 and now contains approximately 11,000 square feet and a second facility in Gordonsville, Tennessee at 7 New Middleton Highway, Gordonsville, Tennessee. The Bank owns a building at 455 West Main Street in Gallatin, Tennessee which occupies approximately 4,800 square feet of space and a building at 175 East Main Street in Hendersonville, Tennessee which occupies approximately 6,300 square feet of space. The Bank owns a building at 217 Donelson Pike, Donelson, Tennessee which occupies approximately 8,000 square feet of space and a building at 320 South Jefferson Avenue, Cookeville, Tennessee, which occupies approximately 6,300 square feet of space. The Bank owns all of its branch facilities except for the Lebanon facility at Tennessee Boulevard, its space in the Wal-Mart Supercenter, its West End office in Nashville and its Cool Springs office in Franklin. The Bank also leases space at six locations within Wilson County, DeKalb County, Rutherford County, Davidson County and Smith County where it maintains and operates automatic teller machines.

Item 3. Legal Proceedings

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

Item 4. Mine Safety Disclosures

Not Applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchasers of Equity Securities

Information required by this item is contained under the heading “Holding Company & Stock Information” on page 23 of the Company’s 2021Annual Report and is incorporated herein by reference.

The Company did not repurchase any shares of its common stock during the quarter ended December 31, 2021.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Information required by this item is contained under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as set forth on pages 1 through 24 of the financial information included with the Company’s 2021Annual Report and is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Information required by this item is contained under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Quantitative and Qualitative Disclosures About Market Risk” as set forth on page 21 of the financial information included with the Company’s 2021Annual Report and is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

The consolidated financial statements and the independent auditor’s report of Maggart & Associates, P.C. required by this item are contained in pages 27 through 78 of the financial information included with the Company’s 2021 Annual Report and are incorporated herein by reference.

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by it in the reports that if files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by this report. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

Management Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).

Based on that assessment, management concluded that, as of December 31, 2021, the Company’s internal control over financial reporting was effective based on those criteria.

The Company’s independent registered public accounting firm has issued an attestation report on the Company’s internal control over financial reporting, which report is contained on pages 30 through 31 of the financial information included with the Company’s 2021 Annual Report and is incorporated herein by reference.

Changes in Internal Controls

No changes were made to the Company’s internal control over financial reporting during the quarter ended December 31, 2021 that have materially affected, or that are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this item with respect to directors is incorporated herein by reference to the sections entitled “Item-1 Election of Directors-Information Concerning Nominees” and “Item-1 Election of Directors-Director Qualifications” in the Company’s definitive proxy materials filed in connection with the 2022 Annual Meeting of Shareholders. The information required by this item with respect to executive officers is set forth in Part I of this report under the caption “Information about our Executive Officers.”

All officers serve at the pleasure of the Board of Directors. No officers are involved in any legal proceedings which are material to an evaluation of their ability and integrity.

The Company has adopted a code of conduct for its senior executive and financial officers (the “Code of Conduct”), a copy of which will be provided to any person, without charge, upon request to the Company at 623 West Main Street, Lebanon, Tennessee 37087, Attention: Corporate Secretary. The Company will make any legally required disclosures regarding amendments to, or waivers of, provisions of its Code of Conduct either in a Current Report on Form 8-K or on its website, in each case in accordance with the rules and regulations of the SEC.

The information required by this item with respect to the Company’s audit committee and any “audit committee financial expert” is incorporated herein by reference to the section entitled “Item-1 Election of Directors - Description of the Board and Committees of the Board” in the Company’s definitive proxy materials to be filed in connection with the 2022 Annual Meeting of Shareholders.

The information required by this item with respect to Section 16(a) of the Exchange Act is incorporated herein by reference to the section entitled “Item-1 Election of Directors - Delinquent Section 16(a) Reports” in the Company’s definitive proxy materials to be filed in connection with the 2022 Annual Meeting of Shareholders.

Item 11. Executive Compensation

Information required by this item is incorporated herein by reference to the information under the principal heading entitled “Executive Compensation,” including but not limited to the subheading entitled “Personnel Committee Report on Executive Compensation,” and the principal heading entitled “Director Compensation,” including but not limited to the subheading entitled “Personnel Committee Interlocks and Insider Participation,” in the Company’s definitive proxy materials to be filed in connection with the 2022 Annual Meeting of Shareholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information required by this item is incorporated herein by reference to the section entitled “Stock Ownership” in the Company’s definitive proxy materials to be filed in connection with the 2022 Annual Meeting of Shareholders.

The following table summarizes information concerning the Company’s equity compensation plans at December 31, 2021:

	Number of securities to be issued	Weighted average exercise price of	Number of securities remaining available for future
	upon exercise of outstanding options,	outstanding options, warrants and	issuance under equity compensation plans (excluding
Plan Category	warrants and rights	rights	securities reflected in first column)
Equity compensation plans approved by shareholders	203,632	50.94	362,096
Equity compensation plans not approved by shareholders	—	—	—
Total	203,632	50.94	362,096

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information required by this item with respect to certain relationships and related transactions is incorporated herein by reference to the section entitled “Certain Relationships and Related Transactions” in the Company’s definitive proxy materials to be filed in connection with the 2022 Annual Meeting of Shareholders.

Information required by this item with respect to director independence is incorporated herein by reference to the section entitled “Item-1 Election of Directors - Director Independence” in the Company’s definitive proxy materials to be filed in connection with the 2022 Annual Meeting of Shareholders.

Item 14. Principal Accountant Fees and Services

Information required by this item is incorporated herein by reference to the section entitled “Item-2 Ratification of the Appointment of the Independent Registered Public Accounting Firm” in the Company’s definitive proxy materials to be filed in connection with the 2022 Annual Meeting of Shareholders.

Item 15. Exhibits, Financial Statement Schedules

(a)(1) Financial Statements. See Item 8.

(a)(2) Financial Statement Schedules. Not Applicable.

(a)(3) Exhibits. See Index to Exhibits.

Item 16. Form 10K Summary

None.

INDEX TO EXHIBITS

3.1			Charter of Wilson Bank Holding Company, as amended (restated for SEC electronic filling purposes only) (incorporated herein by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 filed with the SEC on August 9, 2016).

3.2			Bylaws of Wilson Bank Holding Company, as amended (restated for SEC electronic filling purposes only) (incorporated herein by reference to Exhibit 3.2 of the Company’s Quarterly Report on form 10-Q for the quarter ended March 31, 2016 filed with the SEC on May 10, 2016).

4.1			Specimen Common Stock Certificate. (incorporated herein by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-4 (Registration No. 333-121943)).

4.2			Description of the Company's securities (incorporated by reference to Exhibit 4.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 12, 2021).

10.1			Wilson Bank Holding Company 2009 Stock Option Plan (incorporated herein by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-8 (Registration No. 333-158621)).*

10.2			Amendment, dated December 30, 2008, to Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and J. Randall Clemons (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2009 (File No. 000-20402)).*

10.3			Amendment, dated December 30, 2008, to Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Elmer Richerson (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2009 (File No. 000-20402)).*

10.4			Amendment, dated December 30, 2008, to Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Lisa T. Pominski (incorporated by reference to Exhibit 10.3 the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2009 (File No. 000-20402)).*

10.5			Amendment, dated December 30, 2008, to Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Gary Whitaker (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2009 (File No. 000-20402)).*

10.6			Amendment, dated December 30, 2008, to Executive Salary Continuation Agreement dated as of January 1, 2006, by and between Wilson Bank and Trust and John C. McDearman III (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2009 (File No. 000-20402)).*

10.7			Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and J. Randall Clemons (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2009 (File No. 000-20402)).*

10.8			Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Elmer Richerson (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2009 (File No. 000-20402)).*

10.9			Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Lisa T. Pominski (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2009 (File No. 000-20402)).*

10.10			Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Gary Whitaker (incorporated by reference to Exhibit 10.11 of the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2009 (File No. 000-20402)).*

10.11			Executive Salary Continuation Agreement dated as of July 28, 2006, by and between Wilson Bank and Trust and John C. McDearman III (incorporated by reference to Exhibit 10.12 of the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2009 (File No. 000-20402)).*

10.12			Amendment, dated November 23, 2012, to Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and J. Randall Clemons (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.13			Amendment, dated November 23, 2012, to Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Elmer Richerson (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.14			Amendment, dated November 23, 2012, to Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Lisa T. Pominski (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*


10.15			Amendment, dated November 23, 2012, to Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Gary Whitaker (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*


10.16			Amendment, dated November 23, 2012, to Executive Salary Continuation Agreement dated as of January 1, 2006, by and between Wilson Bank and Trust and John C. McDearman III (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.17			Second Amendment, dated November 23, 2012 to Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002 by and between Wilson Bank and Trust and J. Randall Clemons (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.18			Second Amendment, dated November 23, 2012 to Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002 by and between Wilson Bank and Trust and Elmer Richerson (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.19			Second Amendment, dated November 23, 2012 to Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002 by and between Wilson Bank and Trust and Lisa T. Pominski (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.20			Second Amendment, dated November 23, 2012 to Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002 by and between Wilson Bank and Trust and Gary Whitaker (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.21			Amendment, dated November 23, 2012 to Wilson Bank and Trust Life Insurance Endorsement Method Split Dollar Plan Agreement dated as of July 28, 2006 by and between Wilson Bank and John C. McDearman III (incorporated by reference to Exhibit 10.10 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.22			Supplemental Executive Retirement Plan Agreement, dated November 23, 2012, by and between Wilson Bank and Trust and J. Randall Clemons (incorporated by reference to Exhibit 10.11 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.23			Supplemental Executive Retirement Plan Agreement, dated November 23, 2012, by and between Wilson Bank and Trust and Elmer Richerson (incorporated by reference to Exhibit 10.12 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.24			Supplemental Executive Retirement Plan Agreement, dated November 23, 2012, by and between Wilson Bank and Trust and Lisa T. Pominski (incorporated by reference to Exhibit 10.13 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.25			Supplemental Executive Retirement Plan Agreement, dated November 23, 2012, by and between Wilson Bank and Trust and Gary Whitaker (incorporated by reference to Exhibit 10.14 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.26			Supplemental Executive Retirement Plan Agreement, dated November 23, 2012, by and between Wilson Bank and Trust and John C. McDearman III (incorporated by reference to Exhibit 10.15 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.27			Amendment, dated August 21, 2003 to Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002, by and between Wilson Bank and Trust and J. Randall Clemons (incorporated by reference to Exhibit 10.16 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.28			Amendment, dated August 21, 2003 to Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002, by and between Wilson Bank and Trust and Elmer Richerson (incorporated by reference to Exhibit 10.17 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.29			Amendment, dated August 21, 2003 to Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002, by and between Wilson Bank and Trust and Lisa T. Pominski (incorporated by reference to Exhibit 10.18 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.30			Amendment, dated August 21, 2003 to Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002, by and between Wilson Bank and Trust and Gary Whitaker (incorporated by reference to Exhibit 10.19 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.31			Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002, by and between Wilson Bank and Trust and J. Randall Clemons (incorporated by reference to Exhibit 10.20 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.32			Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002, by and between Wilson Bank and Trust and Elmer Richerson (incorporated by reference to Exhibit 10.21 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*


10.33			Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002, by and between Wilson Bank and Trust and Lisa T. Pominski (incorporated by reference to Exhibit 10.22 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.34			Wilson Bank and Trust Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement dated October 7, 2002, by and between Wilson Bank and Trust and Gary Whitaker (incorporated by reference to Exhibit 10.23 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*


10.35			Wilson Bank and Trust Life Insurance Endorsement Method Split Dollar Plan Agreement dated July 28, 2006, by and between Wilson Bank and Trust and John C. McDearman III (incorporated by reference to Exhibit 10.24 of the Company’s Current Report on Form 8-K filed with the SEC on November 29, 2012).*

10.36			Executive Survivor Income Agreement, dated April 14, 2014, by and between the Bank and Lisa Pominski (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on April 18, 2014).

10.37			Executive Survivor Income Agreement, dated April 14, 2014, by and between the Bank and Gary Whitaker (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on April 18, 2014).

10.38			Executive Survivor Income Agreement, dated April 14, 2014, by and between the Bank and John C. McDearman, III (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on April 18, 2014).

10.39			Director Survivor Income Agreement, dated April 14, 2014, by and between the Bank and J. Randall Clemons (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on April 18, 2014).

10.40			Director Survivor Income Agreement, dated April 14, 2014, by and between the Bank and H. Elmer Richerson (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on April 18, 2014).

10.41			Director Survivor Income Agreement, dated April 14, 2014, by and between the Bank and Jack Bell (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on April 18, 2014).

10.42			Director Survivor Income Agreement, dated April 14, 2014, by and between the Bank and James Comer (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed with the SEC on April 18, 2014).

10.43			Director Survivor Income Agreement, dated April 14, 2014, by and between the Bank and James Patton (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K filed with the SEC on April 18, 2014).

10.44			Director Survivor Income Agreement, dated April 6, 2015, by and between the Bank and William Jordan (incorporated by reference to Exhibit 10.46 of the Company's Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on March 14, 2016).

10.45			Supplemental Executive Retirement Plan Agreement, dated May 22, 2015, by and between Wilson Bank and Trust and J. Randall Clemons (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on May 29, 2015).*

10.46			Supplemental Executive Retirement Plan Agreement, dated May 22, 2015, by and between Wilson Bank and Trust and Elmer Richerson (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on May 29, 2015).*

10.47			Supplemental Executive Retirement Plan Agreement, dated May 22, 2015, by and between Wilson Bank and Trust and Lisa T. Pominski (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on May 29, 2015).*

10.48			Supplemental Executive Retirement Plan Agreement, dated May 22, 2015, by and between Wilson Bank and Trust and Gary Whitaker (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on May 29, 2015).*

10.49			Supplemental Executive Retirement Plan Agreement, dated May 22, 2015, by and between Wilson Bank and Trust and John C. McDearman III (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on May 29, 2015).*

10.50			Second Amendment to the Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and J. Randall Clemons (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*

10.51			Second Amendment to the Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Elmer Richerson (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*

10.52			Second Amendment to the Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Lisa T. Pominski (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*

10.53			Second Amendment to the Amended and Restated Executive Salary Continuation Agreement dated as of October 7, 2002, by and between Wilson Bank and Trust and Gary Whitaker (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*

10.54			Second Amendment to the Executive Salary Continuation Agreement dated as of January 1, 2006, by and between Wilson Bank and Trust and John C. McDearman III (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*


10.55			Wilson Bank Holding Company Amended and Restated 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*

10.56

Form of Stock Appreciation Rights Agreement for employees under the Wilson Bank Holding Company Amended and Restated 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*


10.57			Form of Non-qualified Stock Option Agreement for employees under the Wilson Bank Holding Company Amended and Restated 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*

10.58			Form of Stock Appreciation Rights Agreement for employee directors under the Wilson Bank Holding Company Amended and Restated 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*

10.59			Form of Non-qualified Stock Option Agreement for employee directors under the Wilson Bank Holding Company Amended and Restated 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.10 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*

10.60			Form of Stock Appreciation Rights Agreement for directors under the Wilson Bank Holding Company Amended and Restated 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.11 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*

10.61			Form of Non-qualified Stock Option Agreement for directors under the Wilson Bank Holding Company Amended and Restated 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.12 of the Company’s Current Report on Form 8-K filed with the SEC on September 30, 2016).*

10.62			Wilson Bank and Trust Life Insurance Endorsement Method Split Dollar Plan Agreement dated November 23, 2012, by and between Wilson Bank and Trust and Clark Oakley (incorporated by reference to Exhibit 10.64 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on March 8, 2019).*

10.63			Supplemental Executive Retirement Plan Agreement, dated November 23, 2012, by and between Wilson Bank and Trust and Clark Oakley (incorporated by reference to Exhibit 10.65 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on March 8, 2019).*

10.64			First Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement as of September 26, 2016, by and between Wilson Bank and Trust and Clark Oakley (incorporated by reference to Exhibit 10.66 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on March 8, 2019).*

10.65			Supplemental Executive Retirement Plan Agreement, dated May 22, 2015, by and between Wilson Bank and Trust and Clark Oakley (incorporated by reference to Exhibit 10.67 of the Company's Annual Report of Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC on March 8, 2019).*

10.66			First Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement Implemented May 22, 2015 by and between Wilson Bank and Trust and Clark Oakley (incorporated by reference to Exhibit 10.68 of the Company's Annual Report of Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC on March 8, 2019).*

10.67			Supplemental Executive Retirement Plan Agreement, dated May 22, 2015, by and between Wilson Bank and Trust and John Foster (incorporated by reference to Exhibit 10.68 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 12, 2020).*

10.68			Wilson Bank and Trust Life Insurance Endorsement Method Split Dollar Plan Agreement dated May 22, 2015, by and between Wilson Bank and Trust and John Foster (incorporated by reference to Exhibit 10.69 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 12, 2020).*

10.69			First Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated October 26, 2020, by and between Wilson Bank and Trust and John McDearman (incorporated herein by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 9, 2020).*

10.70			Second Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated October 26, 2020, by and between Wilson Bank and Trust and Clark Oakley (incorporated herein by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 9, 2020).*

10.71			First Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated October 26, 2020, by and between Wilson Bank and Trust and Lisa Pominski (incorporated herein by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 9, 2020).*

10.72			First Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated October 26, 2020, by and between Wilson Bank and Trust and Gary Whitaker (incorporated herein by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 9, 2020).*

10.73			First Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated October 26, 2020, by and between Wilson Bank and Trust and John Foster (incorporated herein by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 9, 2020).*


10.74			First Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated October 26, 2020, by and between Wilson Bank and Trust and John McDearman (incorporated herein by reference to Exhibit 10.6 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 9, 2020).*

10.75			Second Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated October 26, 2020, by and between Wilson Bank and Trust and Clark Oakley (incorporated herein by reference to Exhibit 10.7 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 9, 2020).*


10.76			First Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated October 26, 2020, by and between Wilson Bank and Trust and Lisa Pominski (incorporated herein by reference to Exhibit 10.8 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 9, 2020).*

10.77			First Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated October 26, 2020, by and between Wilson Bank and Trust and Gary Whitaker (incorporated herein by reference to Exhibit 10.9 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 9, 2020).*

10.78			Second Amendment to the Wilson Bank & Trust Supplemental Executive Retirement Plan Agreement Implemented May 22, 2015, by and between Wilson Bank and Trust and John C. McDearman (incorporated herein by reference to Exhibit 10.79 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 12, 2021).*

10.79			Second Amendment to the Wilson Bank & Trust Supplemental Executive Retirement Plan Agreement Implemented May 22, 2015, by and between Wilson Bank and Trust and John Foster (incorporated herein by reference to Exhibit 10.80 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 12, 2021).*

10.80			Second Amendment to the Wilson Bank & Trust Supplemental Executive Retirement Plan Agreement Implemented May 22, 2015, by and between Wilson Bank and Trust and Lisa Pominski (incorporated herein by reference to Exhibit 10.81 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 12, 2021).*

10.81			Third Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated as of November 29, 2021 (incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on orm 8-K filed with the SEC on November 30, 2021).*

10.82			Second Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement dated February 28, 2022, by and between Wilson Bank and Trust and Gary Whitaker.*+

13.1			Selected Portions of the Wilson Bank Holding Company Annual Report to Shareholders for the year ended December 31, 2021 incorporated by reference into items 1, 5, 7, 7A and 8.+

21.1			Subsidiaries of the Company.+

23.1			Consent of Independent Registered Public Accounting Firm.+

31.1			Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+

31.2			Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+

32.1			Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+

32.2

Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+


101.INS			Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH			Inline XBRL Taxonomy Extension Schema Document.

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Management compensatory plan or contract

+ Filed herewith

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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
By:		/s/ John C. McDearman, III
		John C. McDearman, III
Title:		President and Chief Executive Officer
Date:		March 15, 2022

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



Signature	Title	Date

/s/ John C. McDearman, III John C. McDearman, III	President, Chief Executive Officer and Director (Principal Executive Officer)	March 15, 2022

/s/ Lisa Pominski Lisa Pominski	Chief Financial Officer (Principal Financial and Accounting Officer)	March 15, 2022

/s/ Jack W. Bell Jack W. Bell	Director	March 15, 2022

/s/ James F. Comer James F. Comer	Director	March 15, 2022

/s/ William P. Jordan William P. Jordan	Director	March 15, 2022

/s/ James Anthony Patton James Anthony Patton	Director	March 15, 2022

/s/ J. Randall Clemons J Randall Clemons	Director	March 15, 2022

/s/ Michael G. Maynard Michael G. Maynard	Director	March 15, 2022

/s/ Clinton M. Swain Clinton M. Swain	Director	March 15, 2022

/s/ H. Elmer Richerson H. Elmer Richerson	Director	March 15, 2022

/s/ Deborah Varallo Deborah Varallo	Director	March 15, 2022

Exhibit 4.2

DESCRIPTION OF REGISTRANT’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE

SECURITIES EXCHANGE ACT OF 1934

The following description sets forth certain material terms and provisions of Wilson Bank Holding Company’s securities that are registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As of the date of the Annual Report on Form 10-K of which this exhibit is a part, the registrant has one class of securities registered under Section 12 of the Exchange Act: Wilson Bank Holding Company’s common stock, par value $2.00 per share.

DESCRIPTION OF COMMON STOCK

Wilson Bank Holding Company has the authority to issue 50,000,000 shares of common stock. As of March 15, 2022, 11,307,595 shares of Wilson Bank Holding Company common stock were outstanding.

The following summary of the common stock of Wilson Bank Holding Company and certain provisions of Wilson Bank Holding Company’s charter, as amended, and bylaws, as amended, and certain provisions of applicable law, does not purport to be complete and is qualified by applicable law and by the provisions of Wilson Bank Holding Company’s charter, as amended, and bylaws, as amended, which are incorporated by reference as exhibits to the Annual Report on Form 10-K, of which this exhibit is a part.

Common Stock

The holders of Wilson Bank Holding Company’s common stock are entitled to one vote per share on all matters to be voted on by shareholders, including the election of directors. Holders of common stock have no preemptive rights, and there are no conversion rights or redemption or sinking fund provisions with respect to shares of Wilson Bank Holding Company’s common stock.

Anti-Takeover Effect of Wilson Bank Holding Company’s Charter and Bylaw Provisions

Wilson Bank Holding Company’s charter and bylaws contain provisions that could make it more difficult to consummate an acquisition of Wilson Bank Holding Company by means of a tender offer, a proxy contest or otherwise.

Board of Directors. Wilson Bank Holding Company’s bylaws provide that the number of directors shall be no fewer than five nor more than 15. The Wilson Bank Holding Company charter and bylaws provide that the directors will be classified into three classes, as nearly equal in number as possible with each class to serve for staggered three year terms. Under the Wilson Bank Holding Company bylaws, the shareholders may remove one or more directors with or without cause. If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove him without cause. The Wilson Bank Holding Company bylaws provides that if so provided in the Wilson Bank Holding Company charter, any of the directors may be removed for cause by the affirmative vote of a majority of the entire board of directors; however, such a method of removal is not provided for in the Wilson Bank Holding Company charter. A director may be removed by the shareholders or directors only at a meeting called for the purpose of removing him, and the meeting notice must state the purpose, or one of the purposes, of the meeting is the removal of directors. Directors may be removed without cause only by vote of a majority of the shareholders entitled to vote at a regular or special meeting. The Wilson Bank Holding Company charter provides that any vacancy on the board of directors, including a vacancy that results from an increase in the number of directors or a vacancy that results from the removal of a director with cause, may be filled only by the board of directors. Any director elected to fill a vacancy shall hold office until the next annual meeting following his or her election to the board of directors at which time such person will be subject to election and classification. Under the Wilson Bank Holding Company bylaws, if the directors remaining in office constitute fewer than a quorum of the board of directors, they may fill such vacancies by the affirmative vote of a majority of all the directors remaining in office.

Charter Provisions. The Wilson Bank Holding Company charter provides that the affirmative vote of holders of two-thirds of the voting power of the shares entitled to vote at an election of directors shall be required to amend, alter, change or repeal, or to adopt any provision as part of the charter or as part of Wilson Bank Holding Company’s bylaws inconsistent with the purpose and intent of Article 8 of the charter, which creates staggered terms for the board of directors.

Tennessee’s Anti-takeover Provisions

Provisions in Tennessee law could make it harder for someone to acquire Wilson Bank Holding Company through a tender offer, proxy contest or otherwise.

Tennessee Business Combination Act. The Tennessee Business Combination Act provides that a party owning shares equal to 10% or more of the voting power of any class or series of the then outstanding voting stock of a “resident domestic corporation” is an “interested shareholder.” An interested shareholder also includes a party that is an affiliate or associate, as defined in the Tennessee Business Combination Act, of a “resident domestic corporation.” Wilson Bank Holding Company is currently a resident domestic corporation within the meaning of this act. An interested shareholder cannot engage in a business combination with the resident domestic corporation unless the combination:

	•	takes place at least five years after the interested shareholder first acquired 10% or more of the voting power of any class or series of the then outstanding voting stock of the resident domestic corporation; and

	•	either is approved by at least two-thirds of the non-interested voting shares of the resident domestic corporation or satisfies fairness conditions specified in the Tennessee Business Combination Act.

These provisions apply unless one of the following exemptions is available:

	•	a business combination with an entity can proceed without delay when approved by the target corporation’s board of directors before that entity becomes an interested shareholder;

	•	a business combination is exempt, if in its original charter or original bylaws, the resident domestic corporation elects not to be governed by the Tennessee Business Combination Act;


	•	unless the charter of the resident domestic corporation provides otherwise, the Tennessee Business Combination Act does not apply to a business combination of a resident domestic corporation with, or proposed by or on behalf of, an interested shareholder if the resident domestic corporation did not have, on such interested shareholder’s share acquisition date, a class of voting stock registered or traded on a national securities exchange or registered with the securities and exchange commission pursuant to Section 12(g) of the Exchange Act; or

	•	the resident corporation may enact a charter or bylaw amendment to remove itself entirely from the Tennessee Business Combination Act that must be approved by a majority of the shareholders who have held shares for more than one year before the vote and which cannot become operative until two years after the vote.

Wilson Bank Holding Company has not adopted a charter amendment or bylaw to remove it from the Tennessee Business Combination Act.

Tennessee Greenmail Act. The Tennessee Greenmail Act prohibits Wilson Bank Holding Company from purchasing or agreeing to purchase any of its securities, at a price higher than fair market value, from a holder of 3% or more of any class of its securities who has beneficially owned the securities for less than two years. Wilson Bank Holding Company can, however, make this purchase if the majority of the outstanding shares of each class of voting stock issued by it approves the purchase or if it makes an offer of at least equal value per share to all holders of shares of the same class of securities as those held by the prospective seller.

Tennessee Control Share Acquisition Act. The Tennessee Control Share Acquisition Act strips a purchaser’s shares of voting rights any time an acquisition of shares in a Tennessee corporation which has elected to be covered by the Tennessee Control Share Acquisition Act (which Wilson Bank Holding Company at this time has not) brings the purchaser’s voting power to one-fifth, one-third or a majority of all voting power. The purchaser’s voting rights can be restored only by a majority vote of the other shareholders. The purchaser may demand a meeting of shareholders to conduct such a vote. The purchaser can demand a meeting for this purpose before acquiring shares in excess of the thresholds described above, which we refer to as a control share acquisition, only if it holds at least 10% of the outstanding shares and announces a good faith intention to make the acquisition of shares having voting power in excess of the thresholds stated above. If a target corporation so elects prior to the date on which a purchaser makes a control share acquisition, a target corporation may redeem the purchaser’s shares if the shares are not granted voting rights.

The effect of these provisions may make a change of control of Wilson Bank Holding Company harder by delaying, deferring or preventing a tender offer or takeover attempt that you might consider to be in your best interest, including those attempts that might result in the payment of a premium over the market price for Wilson Bank Holding Company’s shares. They may also promote the continuity of Wilson Bank Holding Company’s management by making it harder for you to remove or change the incumbent members of the board of directors.

Limitations on Liability and Indemnification of Directors and Officers. The Tennessee Business Corporation Act provides that a corporation may indemnify any of its directors and officers against liability incurred in connection with a proceeding if:

	•	the director or officer acted in good faith;

	•	in the case of conduct in his or her official capacity with the corporation, the director or officer reasonably believed such conduct was in the corporation’s best interest;

	•	in all other cases, the director or officer reasonably believed that his or her conduct was not opposed to the best interest of the corporation; and

	•	in connection with any criminal proceeding, the director or officer had no reasonable cause to believe that his or her conduct was unlawful.

In actions brought by or in the right of the corporation, however, the Tennessee Business Corporation Act provides that no indemnification may be made if the director or officer was adjudged to be liable to the corporation. In cases where the director or officer is wholly successful, on the merits or otherwise, in the defense of any proceeding instituted because of his or her status as an officer or director of a corporation, the Tennessee Business Corporation Act mandates that the corporation indemnify the director or officer against reasonable expenses incurred in the proceeding. The Tennessee Business Corporation Act also provides that in connection with any proceeding charging improper personal benefit to an officer or director, no indemnification may be made if the officer or director is adjudged liable on the basis that personal benefit was improperly received. Notwithstanding the foregoing, the Tennessee Business Corporation Act provides that a court of competent jurisdiction, upon application, may order that an officer or director be indemnified for reasonable expenses if, in consideration of all relevant circumstances, the court determines that the individual is fairly and reasonably entitled to indemnification, notwithstanding the fact that:

	•	the officer or director was adjudged liable to the corporation in a proceeding by or in the right of the corporation;

	•	the officer or director was adjudged liable on the basis that personal benefit was improperly received by him or her; or

	•	the officer or director breached his or her duty of care to the corporation.

Wilson Bank Holding Company’s charter provides that to the extent permitted by the Tennessee Business Corporation Act, the company may indemnify every officer, director or employee, his heirs, executors and administrators, against judgments resulting from the expenses reasonably incurred by him in connection with any action to which he may be made a party by reason of his being an officer, director or employee of the company, including any action based upon any alleged act or omission on his part as an officer, director or employee of the company, except in relation to matters as to which he shall be finally adjudged in such action to be liable for negligence or misconduct. Under the Tennessee Business Corporation Act, this provision relieves Wilson Bank Holding Company’s directors from personal liability to it or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability arising from a judgment or other final adjudication establishing:

	•	any breach of the director’s duty of loyalty;

	•	acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; or

	•	any unlawful distributions.

SECOND AMENDMENT TO THE

WILSON BANK AND TRUST

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

IMPLEMENTED MAY 22, 2015

WHEREAS, Wilson Bank and Trust (the “Bank”) and Gary Whitaker (the “Executive”) previously entered into the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement (the “Agreement”), originally effective as of May 22^nd, 2015; and

WHEREAS, the Bank and the Executive previously executed the First Amendment to the Agreement effective as of October 26, 2020; and

WHEREAS, the Agreement and any Amendments are designed to provide retirement benefits to the Executive upon certain enumerated events, payable out of the Bank’s general assets; and

WHEREAS, the Bank and the Executive have agreed to amend the Agreement to provide for an additional Annuity Contract, as provided and defined in the Agreement.

NOW THEREFORE, effective February 28, 2022, the Bank and the Executive hereby amend the Agreement as follows:

Paragraph 1.2 is hereby deleted in its entirety and replaced with the following:

1.2 “Annuity Contract” means the following annuity contracts purchased and solely owned by the Bank: a Flexible Premium Indexed Deferred Annuity Contract issued by Great American Life Insurance Company, contract #1195070863, and issued by Nationwide Life Insurance Company, contract # 071342963, or such other annuity contract as the Bank may purchase from time to time.

The Agreement is otherwise ratified and confirmed in all respects.

IN WITNESS WHEREOF, both parties hereto acknowledge that each has carefully read and considered this Amendment and consent to the changes contained herein. Both parties have caused this Second Amendment to the Wilson Bank and Trust Supplemental Executive Retirement Plan Agreement to be executed this 28^th day of February, 2022, effective February 28, 2022.

WILSON BANK AND TRUST EXECUTIVE

By: /s/ John C. McDearman /s/ Gary Whitaker

Its: CEO

39,632 38,539 906,135 570,842 2.00 2.00 50,000,000 50,000,000 11,201,504 11,201,504 10,993,404 10,993,404 2,235 2,536 1.10 179,199 21,764 2,971 31,774 1.20 180,424 19,981 2,291 1.35 186,583 21,517 4,771 4,771 2,291 2,971 27 0 0 0 0 0 0 1 5 2 0 0 0 0 213,483,000 47,991 135 47,991 135 175,383 1,121 7,465 53 182,848 1,174 5,089,000 571,000 0 0 21 21 231,000 0 0 0 0 0 2018 2019 2020 2021 0 0 0 0 1 2 5 1 1 1,742,000 5,547,000 463,000 31.31 47.25 51.00 63.25 3 29,842 630,573 208 208 0 2.00 2.00 50,000,000 50,000,000 11,201,504 11,201,504 10,993,404 10,993,404 2,235 2,536 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. Eliminated in consolidation. Not within the scope of ASC Topic 606. 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. 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Exhibit 13.1

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Forward-Looking Statements

This report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, regarding, among other things, the anticipated financial and operating results of the Company. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly release any modifications or revisions to these forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.

The Company cautions investors that future financial and operating results may differ materially from those projected in forward-looking statements made by, or on behalf of, the Company. The words “expect,” “intend,” “should,” “may,” “could,” “believe,” “suspect,” “anticipate,” “seek,” “plan,” “estimate” and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical fact may also be considered forward-looking. Such forward-looking statements involve known and unknown risks and uncertainties, including, but not limited to those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and also include, without limitation, (i) deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for these losses, (ii) the effects of new outbreaks of COVID-19, including actions taken by governmental officials to curb the spread of the virus, and the resulting impact on general economic and financial market conditions and on the Company's and its customers' business, results of operations, asset quality and financial condition; (iii) further public acceptance of the booster shots of the vaccines that were developed against the virus as well as the decisions of governmental agencies with respect to vaccines including recommendations related to booster shots and requirements that seek to mandate that individuals receive or employers require that their employees receive the vaccine, (iv) those vaccines' efficacy in reducing the severity of outcomes for individuals contracting the virus, including new variants, (v) fluctuations or differences in interest rates on earning assets and interest bearing liabilities from those that the Company is modeling or anticipating, including as a result of the Bank's inability to maintain deposit rates at current levels in a rising rate environment or overcome the impact of loan floors embedded in variable rate loans as quickly as deposit costs increase, or that affect the yield curve, (vi) the effect on our allowance for loan losses and provisioning expense as a result of our decision to defer the implementation of CECL, (vii) deterioration in the real estate market conditions in the Company’s market areas, (viii) 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, (ix) deterioration of the economy in the Company’s market areas, (x) the ability to grow and retain low-cost core deposits, (xi) significant downturns in the business of one or more large customers, (xii) 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, (xiii) 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, including implementation of the new regulations implemented by federal regulatory agencies who are experiencing changes in senior leadership, (xiv) changes in capital levels and loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments, (xv) inadequate allowance for credit losses, (xvi) the effectiveness of the Company’s activities in improving, resolving or liquidating lower quality assets, (xvii) the Company's adoption as of January 1, 2022 of ASU 2016-13, the current expected credit losses standard applicable to the Company's allowance for credit losses, (xviii) results of regulatory examinations, (xix) 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, spam attacks, human error, natural disasters, power loss, and other security breaches, (xx) the possibility of additional increases to compliance costs or other operational expenses as a result of increased regulatory oversight, (xxi) loss of key personnel and increased costs of human capital resulting from the competitive labor market in the Company's market areas, and (xxii) 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, including as a result of the Company's participation in and execution of government progress related to the COVID-19 pandemic. 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.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Impact of COVID-19

The outbreak and spread of the novel Coronavirus Disease 2019 (“COVID-19”) in 2020 created a global public health crisis that has periodically contributed to uncertainty, volatility and deterioration in financial markets and in governmental, commercial and consumer activity including in the United States, where we conduct substantially all of our activity. Though progress has been made in responding to the pandemic, the emergence of new variants of the virus and public reaction thereto has continued to cause disruption to our operations and the economies in the markets where we operate.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES") Act was signed into law. It contained substantial tax and spending provisions intended to address the impact of the COVID-19 pandemic. The CARES Act included the Paycheck Protection Program ("PPP"), a nearly $659 billion program designed to aid small and medium-sized businesses and sole proprietors through federally guaranteed loans distributed through banks. These loans were intended to guarantee eight weeks of payroll and other costs to help those businesses remain viable and allow their workers to pay their bills. On December 21, 2020, the Coronavirus Response and Relief Supplemental Appropriations Act ("Coronavirus Relief Act") was signed into law. The Coronavirus Relief Act earmarked an additional $284 billion for a new round of PPP loans. The Company funded $125.2 million of PPP loans to our small business and other eligible customers, $5.0 million of which remained outstanding as of December 31, 2021.

In response to the COVID-19 pandemic and its economic impact to our customers, we proactively began providing relief to our customers in the middle of March 2020 through a 90 day interest only payment option or a full 90 day payment deferral option. Following the passage of the CARES Act we expanded this program to provide a six-month interest only payment option in an effort to provide flexibility to our customers as they sought to navigate the uncertainty caused by the pandemic. Pursuant to interagency regulatory guidance and the CARES Act, we could elect to not classify loans for which these deferrals are granted between March 1, 2020 and the earlier of (i) January 1, 2022 or (ii) 60 days after the end of the COVID-19 national emergency as troubled debt restructurings.

As of December 31, 2021, the Bank had no loans for which principal or both principal and interest were being deferred. As of December 31, 2020, the Bank had 13 loans, totaling $36.4 million in aggregate principal amount for which principal or both principal and interest were being deferred. Under the applicable guidance, none of these deferrals required a troubled debt restructuring designation as of December 31, 2021 and December 31, 2020.

In connection with our initial response to COVID-19, we took deliberate actions to try to ensure that we had the balance sheet strength to serve our clients and communities, including maintaining increased liquidity and reserves supported by a strong capital position. We currently expect our levels of liquidity and reserves to remain above historical levels through 2022.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

General

The Company is a registered bank holding company that owns 100% of the common stock of Wilson Bank and Trust (“Wilson Bank”), a Tennessee state-chartered bank headquartered in Lebanon, Tennessee. The Company was formed in 1992. Wilson Bank commenced operations in 1987.

Wilson Bank is a community bank headquartered in Lebanon, Tennessee, serving Wilson County, DeKalb County, Smith County, Trousdale County, Rutherford County, Davidson County, Putnam County, Sumner County, and Williamson County, Tennessee as its primary market areas. Generally, this market is the Nashville-Davidson-Murfreesboro-Franklin, Tennessee metropolitan statistical area. At December 31, 2021, Wilson Bank had twenty-eight locations in Wilson, Davidson, DeKalb, Smith, Sumner, Rutherford, Putnam, Trousdale and Williamson Counties. Management believes that these counties offer an environment for continued growth, and the Company’s target market is local consumers, professionals and small businesses. Wilson Bank offers a wide range of banking services, including checking, savings and money market deposit accounts, certificates of deposit and loans for consumer, commercial and real estate purposes. The Company also offers an investment center which offers a full line of investment services to its customers.

The following discussion and analysis is designed to assist readers in their analysis of the Company’s consolidated financial statements and should be read in conjunction with such consolidated financial statements and the notes thereto.

Critical Accounting Estimates

The accounting principles we follow and our methods of applying these principles conform with U.S. generally accepted accounting principles and with general practices within the banking industry. In connection with the application of those principles, we have made judgments and estimates which, in the case of the determination of our allowance for loan losses have been critical to the determination of our financial position and results of operations. Additional information regarding significant accounting policies is described in Note 1 to the Company's consolidated financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K.

Allowance for Loan Losses (“allowance”)-Our management assesses the adequacy of the allowance prior to the end of each calendar quarter. This assessment includes procedures to estimate the allowance and test the adequacy and appropriateness of the resulting balance. The level of the allowance is based upon management’s evaluation of the loan portfolio, past loan loss experience, current asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay (including the timing of future payment), the estimated value of any underlying collateral, composition of the loan portfolio, economic conditions, industry and peer bank loan quality indicators and other pertinent factors, including regulatory recommendations. This evaluation is inherently subjective as it requires material estimates, including the amounts and timing of future cash flows expected to be received on impaired loans, that may be susceptible to significant change. Loan losses are charged off when management believes that the full collectability of the loan is unlikely. 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. Allocation of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, is deemed to be uncollectible.

A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Collection of all amounts due according to the contractual terms means that both the interest and principal payments of a loan will be collected as scheduled in the loan agreement.

An impairment allowance is recognized if the fair value of the loan is less than the recorded investment in the loan (recorded investment in the loan is the principal balance plus any accrued interest, net of deferred loan fees or costs and unamortized premium or discount). The impairment is recognized through the allowance. Loans that are impaired are recorded at the present value of expected future cash flows discounted at the loan’s effective interest rate, or if the loan is collateral dependent, impairment measurement is based on the fair value of the collateral, less estimated disposal costs. If the measure of the impaired loan is less than the recorded investment in the loan, the Company recognizes an impairment by creating a valuation allowance with a corresponding charge to the provision for loan losses or by adjusting an existing valuation allowance for the impaired loan with a corresponding charge or credit to the provision for loan losses. Management believes it follows appropriate accounting and regulatory guidance in determining impairment and accrual status of impaired loans.

The level of allowance maintained is believed by management to be adequate to absorb probable losses inherent in the portfolio at the balance sheet date. The allowance is increased by provisions charged to expense and decreased by charge-offs, net of recoveries of amounts previously charged-off.

In assessing the adequacy of the allowance, we also consider the results of our ongoing loan review process. We undertake this process both to ascertain whether there are loans in the portfolio whose credit quality has weakened over time and to assist in our overall evaluation of the risk characteristics of the entire loan portfolio. Our loan review process includes the judgment of management, the input from our independent loan reviewers, and reviews that may have been conducted by bank regulatory agencies as part of their usual examination process. We incorporate loan review results in the determination of whether or not it is probable that we will be able to collect all amounts due according to the contractual terms of a loan.

As part of management’s quarterly assessment of the allowance, management divides the loan portfolio into twelve segments based on bank call reporting requirements. Each segment is then analyzed such that an allocation of the allowance is estimated for each loan segment.

The allowance allocation begins with a process of estimating the loan losses in each of the twelve loan segments. The estimates for these loans are based on our historical loss data for that category over the last twenty quarters.

The estimated loan loss allocation for all twelve loan portfolio segments is then adjusted for several qualitative factors. The allocation for qualitative factors is particularly subjective and does not lend itself to exact mathematical calculation. This amount represents estimated inherent credit losses which exist, but have not yet been identified, as of the balance sheet date, and are based upon quarterly trend assessments in delinquent and nonaccrual loans, unanticipated charge-offs, credit concentration changes, prevailing economic conditions, changes in lending personnel experience, changes in lending policies or procedures, changes in interest rate, and other influencing factors. These qualitative factors are considered for each of the twelve loan segments, and the allowance allocation, as determined by the processes noted above for each component, is increased or decreased based on the incremental assessment of these various qualitative factors.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

We then test the resulting allowance by comparing the balance in the allowance to industry and peer information. Our management then evaluates the result of the procedures performed, including the result of our testing, and concludes on the appropriateness of the balance of the allowance in its entirety. The board of directors reviews and approves the assessment prior to the filing of quarterly and annual financial information.

ASU 2016-13, which is known as the Current Expected Credit Losses (CECL) standard, had an effective date of January 1, 2020. Pursuant to the CARES Act, lenders, like us, were given the option to defer the implementation of ASU 2016-13 until 60 days after the declaration of the end of the public health emergency related to the COVID-19 pandemic or December 31, 2020, whichever came first. On December 27, 2020, President Trump signed into law the Coronavirus Response and Relief Supplemental Appropriations Act. The law contained a provision that allowed lenders, including us, the option to further defer the implementation of ASU 2016-13 until the fiscal year beginning after January 1, 2022. In addition, the Securities and Exchange Commission (SEC) staff has stated that opting to delay the implementation of CECL shall be considered to be in accordance with generally accepted accounting principles. As a result, we elected to delay implementation of CECL until January 1, 2022. Our implementation of CECL as of January 1, 2022 will modify the accounting for the allowance for loan losses from an incurred loss model to an expected loss model. See Note 1. Recently Issued Accounting Pronouncements in the Notes to our Consolidated Financial Statements elsewhere in this Form 10-K for further information regarding our implementation of CECL.

Other-than-temporary Impairment - Impaired securities are assessed quarterly for the presence of other-than-temporary impairment (“OTTI”). A decline in the fair value of any available-for-sale or held-to-maturity security below cost that is deemed to be other-than-temporary results in a reduction in the carrying amount of the security. To determine whether OTTI has occurred, management considers factors such as (1) length of time and extent that fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, and (3) the Company’s ability and intent to hold the security for a period sufficient to allow for an anticipated recovery in fair value. If management deems a security to be OTTI, management reviews the present value of the future cash flows associated with the security. A shortfall of the present value of the cash flows expected to be collected in relation to the amortized cost basis is referred to as a credit loss. If a credit loss is identified, the credit loss is recognized in that period as a charge to earnings and a new cost basis for the security is established. If management concludes that no credit loss exists and it is not more-likely-than-not that the Company will be required to sell the security before the recovery of the security’s cost basis, then the security is not deemed OTTI and the shortfall is recorded as a component of equity.

Fair Value of Financial Instruments - Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 22 to the Company's consolidated financial statements for the year ended December 31, 2021 included in the Company's Annual Report on Form 10-K. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

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. The following table represents the KPIs that management has determined to be important in making decisions for the Bank, in each case as of and for the year ended December 31, 2021, 2020 and 2019:

	2021			2020			2019
Return on average assets (Net income divided by average total assets)		1.35	%		1.24	%		1.34	%
Return on average stockholders' equity (Net income divided by average stockholders' equity)		12.45	%		10.65	%		11.31	%
Dividend payout ratio (Dividends declared per share divided by net income per share)		30.41	%		34.09	%		32.74	%
Equity to asset ratio (Average equity divided by average total assets)		10.86	%		11.68	%		11.88	%
Leverage capital ratio (Equity excluding the net unrealized gain (loss) on available-for-sale securities and intangible assets divided by average total assets)		10.77	%		11.16	%		12.44	%
Efficiency ratio (Non-interest expense divided by net-interest income plus non-interest income)		58.22	%		58.33	%		60.29	%
Non-performing asset ratio (Loans greater than 90 days past due and accruing interest, non-accrual loans, other real estate owned, and nonperforming TDRs divided by total assets)		0.01	%		0.08	%		0.22	%

Results of Operations

Net earnings for the year ended December 31, 2021 were $49,426,000, an increase of $10,934,000, or 28.41%, compared to net earnings of $38,492,000 for the year ended December 31, 2020. Our 2020 net earnings were 6.79%, or $2,448,000, above our net earnings of $36,044,000 for 2019. Basic earnings per share were $4.44 in 2021, compared with $3.52 in 2020 and $3.36 in 2019. Diluted earnings per share were $4.43 in 2021, compared to $3.51 in 2020 and $3.35 in 2019. The increase in net earnings and diluted and basic earnings per share during the year ended December 31, 2021 as compared to the year ended December 31, 2020 was primarily due to an increase in net interest income, an increase in non-interest income and a reduction in provision expense, partially offset by an increase in non-interest expense. The increase in net interest income was due to an increase in average interest earning asset balances between the relevant periods, an increase in SBA fees earned on PPP loans and a decrease in cost of funds, partially offset by decreased net interest margin. Net interest margin for the year ended December 31, 2021 was 3.47%, compared to 3.63% and 3.81% for the years ended December 31, 2020 and December 31, 2019, respectively. Net interest spread for the year ended December 31, 2021 was 3.39%, compared to 3.48% and 3.60% for the years ended December 31, 2020 and December 31, 2019, respectively. The increase in non-interest expense resulted from the Company's continued growth as well as rising costs of employees' salaries and benefits as a result of competition we are experiencing for human capital in our market areas. See below for further discussion regarding variances related to net interest income, net interest margin, provision for loan losses, non-interest income, non-interest expense and income taxes.

The increase in Return on Average Assets (ROA) for the year ended December 31, 2021 when compared to December 31, 2020 and December 31, 2019 as set forth in the table above was primarily attributable to an increase in net interest income, an increase in debit and credit card interchange income, an increase in brokerage income, and a decrease in provision expense when compared to the year ended December 31, 2020, in which we had an increased level of provision expense driven by the COVID-19 pandemic, offset in part by an increase in employee salaries and benefits. Also negatively impacting our ROA was an increase in average deposits of $544,464,000 and a decline in our average loan to deposit ratio of 9.49% in each case from the levels at December 31, 2020.

Net Interest Income

The schedule which follows indicates the average balances for each major balance sheet item, an analysis of net interest income and net interest expense and the change in interest income and interest expense attributable to changes in volume and changes in rates.

The difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities is net interest income, which is the Company's gross margin. Analysis of net interest income is more meaningful when income from tax-exempt earning assets is adjusted to a tax equivalent basis. Accordingly, the following schedule includes a tax equivalent adjustment of tax-exempt earning assets, assuming a weighted average Federal income tax rate of 21% for 2021, 2020 and 2019.

In this schedule, "change due to volume" is the change in volume multiplied by the interest rate for the prior year. "Change due to rate" is the change in interest rate multiplied by the volume for the prior year. Changes in interest income and expense not due solely to volume or rate changes have been allocated to the “change due to volume” and “change due to rate” in proportion to the relationship of the absolute dollar amounts of the change in each category.

Non-accrual loans have been included in the loan category.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

	*Dollars In Thousands*
	2021								2020								2021/2020 Change
	Average						Income/		Average						Income/		Due to			Due to						Percent
	Balance			Rates/Yields			Expense		Balance			Rates/Yields			Expense		Volume			Rate			Total			Change
Loans, net of unearned interest (2) (3)	$	2,382,262			5.07	%		118,676	$	2,236,815			5.16	%		113,224	$	7,484			(2,032	)		5,452
Investment securities—taxable		645,513			1.38			8,922		430,349			1.69			7,272		3,151			(1,501	)		1,650
Investment securities—tax exempt		79,096			1.55			1,229		67,333			1.64			1,102		185			(58	)		127
Taxable equivalent adjustment (1)		—			0.41			327		—			0.44			293		49			(15	)		34
Total tax-exempt investment securities		79,096			1.97			1,556		67,333			2.08			1,395		234			(73	)		161
Total investment securities		724,609			1.45			10,478		497,682			1.74			8,667		3,385			(1,574	)		1,811
Loans held for sale		16,478			2.66			438		22,432			2.75			616		(159	)		(19	)		(178	)
Federal funds sold		31,083			0.04			13		7,183			0.78			56		49			(92	)		(43	)
Interest bearing deposits		349,000			0.13			445		206,281			0.28			582		280			(417	)		(137	)
Restricted equity securities		5,089			2.32			118		4,939			2.35			116		3			(1	)		2
Total earning assets		3,508,521			3.77			130,168		2,975,332			4.22			123,261		11,042			(4,135	)		6,907			5.60	%
Cash and due from banks		31,225								19,145
Allowance for loan losses		(39,194	)							(32,360	)
Bank premises and equipment		59,772								59,353
Other assets		93,204								74,114
Total assets	$	3,653,528							$	3,095,584

	*Dollars In Thousands*
	2021							2020							2021/2020 Change
	Average					Income/		Average					Income/		Due to			Due to						Percent
	Balance		Rates/Yields			Expense		Balance		Rates/Yields			Expense		Volume			Rate			Total			Change
Deposits:
Negotiable order of withdrawal accounts	$	852,110		0.10	%		878	$	669,224		0.20	%		1,314	$	297			(733	)		(436	)
Money market demand accounts		1,079,002		0.14			1,547		881,669		0.40			3,496		653			(2,602	)		(1,949	)
Time deposits		605,162		1.26			7,610		619,387		1.77			10,939		(246	)		(3,083	)		(3,329	)
Other savings deposits		253,265		0.19			480		171,849		0.39			667		238			(425	)		(187	)
Total interest-bearing deposits		2,789,539		0.38			10,515		2,342,129		0.70			16,416		942			(6,843	)		(5,901	)
Federal Home Loan Bank advances		858		15.50			133		18,858		5.13			967		581			(1,415	)		(834	)
Total interest-bearing liabilities		2,790,397		0.38			10,648		2,360,987		0.74			17,383		1,523			(8,258	)		(6,735	)		(38.74	)%
Demand deposits		445,731							348,677
Other liabilities		20,521							24,376
Stockholders’ equity		396,879							361,544
Total liabilities and stockholders’ equity	$	3,653,528						$	3,095,584
Net interest income						$	119,520						$	105,878	$	9,519		$	4,123		$	13,642			12.88	%
Net interest margin (4)				3.47	%						3.63	%
Net interest spread (5)				3.39	%						3.48	%

	(1)	The tax equivalent adjustment for 2021 and 2020 have been computed using a 21% Federal tax rate.
	(2)	Yields on loans and total earning assets include the impact of State income tax credits related incentive loans at below market rates and tax exempt loans to municipalities of $2.1 million and $2.2 million for the years ended December 31, 2021 and 2020.
	(3)	Loan fees of $16.1 million are included in interest income in 2021, inclusive of $3.6 million in SBA fees related to PPP loans. Loan fees of $12.0 million are included in interest income in 2020, inclusive of $3.2 million in SBA fees related to PPP loans.
	(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.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

	*Dollars In Thousands*
	2020								2019								2020/2019 Change
	Average						Income/		Average						Income/		Due to			Due to						Percent
	Balance			Rates/Yields			Expense		Balance			Rates/Yields			Expense		Volume			Rate			Total			Change
Loans, net of unearned interest (2) (3)	$	2,236,815			5.16	%		113,224	$	2,030,861			5.31	%		105,783	$	10,685			(3,244	)		7,441
Investment securities—taxable		430,349			1.69			7,272		347,873			2.46			8,559		1,755			(3,042	)		(1,287	)
Investment securities—tax exempt		67,333			1.64			1,102		38,859			1.99			773		485			(156	)		329
Taxable equivalent adjustment (1)		—			0.44			293		—			0.53			205		130			(42	)		88
Total tax-exempt investment securities		67,333			2.08			1,395		38,859			2.52			978		615			(198	)		417
Total investment securities		497,682			1.74			8,667		386,732			2.47			9,537		2,370			(3,240	)		(870	)
Loans held for sale		22,432			2.75			616		9,613			3.38			325		362			(71	)		291
Federal funds sold		7,183			0.78			56		14,645			1.88			275		(102	)		(117	)		(219	)
Interest bearing deposits		206,281			0.28			582		121,399			1.78			2,164		935			(2,517	)		(1,582	)
Restricted equity securities		4,939			2.35			116		4,241			4.67			198		29			(111	)		(82	)
Total earning assets		2,975,332			4.22			123,261		2,567,491			4.69			118,282		14,279			(9,300	)		4,979			4.21	%
Cash and due from banks		19,145								10,480
Allowance for loan losses		(32,360	)							(28,073	)
Bank premises and equipment		59,353								58,545
Other assets		74,114								72,487
Total assets	$	3,095,584							$	2,680,930

	*Dollars In Thousands*
	2020							2019							2020/2019 Change
	Average					Income/		Average					Income/		Due to			Due to						Percent
	Balance		Rates/Yields			Expense		Balance		Rates/Yields			Expense		Volume			Rate			Total			Change
Deposits:
Negotiable order of withdrawal accounts	$	669,224		0.20	%		1,314	$	526,026		0.44	%		2,311	$	514			(1,511	)		(997	)
Money market demand accounts		881,669		0.40			3,496		749,366		0.80			6,030		926			(3,460	)		(2,534	)
Time deposits		619,387		1.77			10,939		642,513		2.01			12,896		(451	)		(1,506	)		(1,957	)
Other savings deposits		171,849		0.39			667		136,912		0.60			825		180			(338	)		(158	)
Total interest-bearing deposits		2,342,129		0.70			16,416		2,054,817		1.07			22,062		1,169			(6,815	)		(5,646	)
Federal Home Loan Bank advances		18,858		5.13			967		21,712		2.68			581		581			(195	)		386
Federal funds purchased		—		—			—		597		0.67			4		(4	)		—			(4	)
Total interest-bearing liabilities		2,360,987		0.74			17,383		2,077,126		1.09			22,647		1,746			(7,010	)		(5,264	)		(23.24	)%
Demand deposits		348,677							270,136
Other liabilities		24,376							14,994
Stockholders’ equity		361,544							318,674
Total liabilities and stockholders’ equity	$	3,095,584						$	2,680,930
Net interest income						$	105,878						$	95,635	$	12,533		$	(2,290	)	$	10,243			10.71	%
Net interest margin (4)				3.63	%						3.81	%
Net interest spread (5)				3.48	%						3.60	%

	(1)	The tax equivalent adjustment for 2020 and 2019 have been computed using a 21% Federal tax rate.
	(2)	Yields on loans and total earning assets include the impact of State income tax credits related incentive loans at below market rates and tax exempt loans to municipalities of $2.2 million and $2.2 million for the years ended December 31, 2020 and 2019.
	(3)	Loan fees of $12.0 million and $7.8 million are included in interest income in 2020 and 2019, respectively, inclusive, in 2020, of approximately $3.2 million in SBA fees related to PPP loans.
	(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.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Net interest income represents the amount by which interest earned on various earning assets exceeds interest paid on deposits and other interest-bearing liabilities and is the most significant component of the Company’s earnings. Total interest income in 2021 was $129,841,000, up 5.59% when compared with $122,968,000 in 2020, which was up 4.14% when compared to $118,077,000 in 2019, in each case excluding tax exempt adjustments relating to tax exempt securities and loans. The increase in total interest income in 2021 when compared to 2020 was primarily attributable to an increase in interest and fees earned on loans as well as an increase in interest and dividends earned on securities. The increase in interest and fees earned on loans resulted from an overall increase in average loans, a resulting increase in origination fees earned on loans, an increase in SBA fees earned on PPP loans from loans originated in 2020 and 2021, and an increase in prepayment fees earned from the early payoff of loans. The increase in interest and dividends earned on securities resulted from an overall increase in the average balance of securities, due to management's decision to purchase additional securities to utilize a portion of the Company's excess liquidity. 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, which is the rate offered on loans to borrowers with strong credit. The prime interest rate did not change during 2021, decreased 150 basis points during 2020, and decreased 75 basis points in 2019 as a result of corresponding changes in the federal funds rate by the Federal Reserve. The direction and speed with which short-term interest rates move has an impact on our net interest income. In the fourth quarter of 2021, the Federal Reserve announced it expected to raise rates three times in 2022; however, the exact number, magnitude and timing of any rate increases remains uncertain. If short-term interest rates are increased and we remain liability-sensitive at that time, those increases could put pressure on our net interest margin and net interest spread, and consequently our net interest income, if we are unable to raise rates on our loans faster than we are required to raise rates on our deposits, including as a result of competitive pricing pressures in our markets. Similarly, in a rising rate environment, loan floors that we have embedded in our floating rate loans may cause a lag in our ability to capture the benefit of rising rates on our loan products. The yield on loans decreased in 2021 from 2020 due to the declining rate environment discussed above, which was partially offset by an increase in loan volume, an increase in fees earned on PPP loans from loans originated in 2020 and 2021, an increase in origination fees on loans, and prepayment fees earned from the early payoff of loans. Fees earned on loans totaled $16,085,000, $12,043,000 and $7,751,000 for the years ended 2021, 2020 and 2019, respectively. The total amount of state income tax credits included in our loan yields were $2,092,000, $2,191,000 and $2,154,000 for the years ended 2021, 2020 and 2019, respectively. The yield on securities decreased due to the declining rate environment discussed above, in which higher yielding securities were called by issuers and were replaced with securities yielding lower market rates. In addition, excess liquidity on the Company's balance sheet led to additional investment purchases that had lower yields due to the current rate environment.

The ratio of average earning assets to total average assets was 96.0%, 96.1% and 95.8% for each of the years ended December 31, 2021, 2020 and 2019, respectively. Average earning assets increased $533,189,000 from December 31, 2020 toDecember 31, 2021. The average rate earned on earning assets for 2021 was 3.77%, compared with 4.22% in 2020 and 4.69% in 2019. The increase in average earning assets was largely due to an increase in the average balance of investment securities, interest bearing deposits, and federal funds sold, which resulted from increased liquidity due to increased deposit balances during the pandemic. This increase was also attributable to an increase in the average balance of loans due to loan growth. The decrease in the average rate earned on earning assets resulted from the historically low interest rate environment we experienced in 2021 and the deployment of some of our excess liquidity in lower yielding assets as compared to loans.

Total interest expense for 2021 was $10,648,000, a decrease of $6,735,000, or 38.74%, compared to total interest expense of $17,383,000 in 2020. Average interest-bearing deposits increased to $2,789,539,000 for 2021 compared to $2,342,129,000 for 2020. The average rate paid on interest-bearing deposits was 0.38% for 2021 compared to 0.70% for 2020. Total interest expense decreased from $22,647,000 in 2019 to $17,383,000 in 2020, a decrease of $5,264,000, or 23.24%. The decrease in total interest expense in 2021 resulted primarily from a decrease in the rates on average interest bearing deposits, reflecting the declining rate environment that we have experienced since the first quarter of 2020, partially offset by an overall increase in the volume of average interest-bearing deposits and a pre-payment penalty related to the early payoff of our FHLB advances. The decrease in total interest expense in 2020 resulted primarily from a decrease in the rates on interest bearing deposits, as we decreased the rates on several of our deposit products in response to decreases in short-term rates throughout 2019 and the first quarter of 2020, partially offset by an overall increase in the volume of average interest-bearing deposits.

Net interest income for 2021 totaled $119,193,000 as compared to $105,585,000 and $95,430,000 in 2020 and 2019, respectively. The net interest spread, defined as the effective yield on earning assets less the effective cost of deposits and borrowed funds (calculated on a fully taxable equivalent basis), decreased to 3.39% in 2021 from 3.48% in 2020. The net interest spread was 3.60% in 2019. Net interest margin decreased to 3.47% in 2021 from 3.63% in 2020. The net interest margin was 3.81% in 2019. The decrease in net interest margin was due to a decrease in the yield earned on all earning assets that outpaced the decrease in rates paid on our interest-bearing liabilities, in each case for the reasons discussed above. Changes in interest rates paid on products such as interest checking, savings, and money market accounts will generally increase or decrease in a manner that is consistent with changes in the short-term environment, but are also impacted by competitive market conditions. The Company’s liabilities are positioned to re-price faster than its assets such that a short-term declining rate environment could have a positive impact on the Company’s earnings as its interest expense decreases faster than interest income. Conversely, a rising rate environment (like the one currently contemplated) could have a short-term negative impact on margins, as deposits would likely re-price faster than assets. Management regularly monitors the deposit rates of the Company’s competitors and these rates continue to put pressure on the Company’s deposit pricing, just as loan pricing pressure from competition within our markets continues to negatively impact loan yields. This pressure could negatively impact the Company’s net interest margin and earnings in 2022 if short-term rates begin to rise. Elevated levels of on-balance sheet liquidity resulting from government stimulus programs will also likely continue to negatively impact our net interest margin in 2022.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Provision for Loan Losses

The provision for loan losses represents a charge to earnings necessary to establish an allowance for loan losses that, in management’s evaluation, is adequate to provide coverage for estimated losses on outstanding loans and to provide for uncertainties in the economy. The 2021 provision for loan losses was $1,143,000, a decrease of $8,553,000 from the provision of $9,696,000 in 2020, which was $7,656,000 higher than the provision in 2019. The decrease in the provision for the year ended December 31, 2021 was attributable to returning to a more normalized level in 2021, as the economic impacts of the COVID-19 pandemic waned, after an extraordinary increased provision in 2020 due to the COVID-19 pandemic and its economic impact. The provision for loan losses recorded during 2021 was primarily the result of loan growth. The increased levels in the provision for loan losses for the year ended December 31, 2020 can be primarily attributed to the pandemic and the impact it had on the local and national economy. While the local and national economic outlooks improved in 2021, we believe the ultimate impact of the pandemic remains uncertain due to the lingering effects of COVID-19, and challenges affecting supply chains globally and labor shortages that are impacting our clients. In addition, inflation remains a risk to the economic recovery. Loan loss provisions recorded during the twelve months ended December 31, 2021, were largely the result of our loan portfolio growth. Gross loan growth totaled $165,338,000 ($5,020,000 of which was attributable to PPP loans), $237,558,000 ($62,437,000 of which was attributable to PPP loans) and $42,843,000 for the years ended 2021, 2020 and 2019, respectively. Management continues to fund the allowance for loan losses through provisions based on management’s calculation of the allowance for loan losses. The provision for loan losses is based on past loan experience and other factors which, in management’s judgment, deserve current recognition in estimating loan losses. Such factors include growth and composition of the loan portfolio, review of specific problem loans, past due and nonperforming loans, change in lending staff, the recommendations of the Company’s regulators, and current economic conditions that may affect the borrowers’ ability to repay. Beginning in 2022, the Company will recalculate its allowance for loan losses under ASU 2016-13, which is known as the Current Expected Credit Losses (CECL) model.

Wilson Bank’s charge-off policy for impaired loans is similar to its charge-off policy for all loans in that loans are charged-off in the month when a determination is made that the loan is uncollectible. Net charge-offs increased to $50,000 in 2021 from net recoveries of $117,000 in 2020. Net charge-offs in 2019 totaled $488,000. The ratio of net charge-offs to average total outstanding loans was 0.00% in 2021, (0.01%) in 2020 and 0.02% in 2019. Overall, the Bank experienced minimal charge-offs during 2021.

Provision for loan losses in 2021 resulted in an increase of the allowance for loan losses (net of charge-offs and recoveries) to $39,632,000 at December 31, 2021 from $38,539,000 at December 31, 2020 and $28,726,000 at December 31, 2019. The allowance for loan losses increased 2.84% between December 31, 2020 and December 31, 2021 as compared to the 7.01% increase in total loans (including PPP loans) over the same period. The allowance for loan losses was 1.60% of total loans outstanding at December 31, 2021 compared to 1.66% at December 31, 2020 and 1.38% at December 31, 2019. As a percentage of nonperforming loans at December 31, 2021, 2020 and 2019, the allowance for loan losses represented 7,154%, 1,482% and 359%, respectively. The internally classified loans as a percentage of the allowance for loan losses were 19.4% and 21.4%, respectively, at December 31, 2021 and 2020. We believe the overall allowance for credit losses will increase slightly upon the adoption of CECL in order to provide for expected credit losses over the life of the loan portfolio. This is primarily resulting from the impact of adjusting from the incurred loss model to the expected loss model. Once finalized, the cumulative effect adjustment of our adoption of CECL will be recorded, net of tax, as an adjustment to retained earnings effective January 1, 2022. This estimate is subject to change as key assumptions are refined and model validations are finalized.

The level of the allowance and the amount of the provision involve evaluation of uncertainties and matters of judgment. The Company maintains an allowance for loan losses which management believes is adequate to absorb losses inherent in the loan portfolio. A formal review is prepared quarterly by the Chief Financial Officer and Chief Credit Officer and is provided to the Board of Directors to assess the risk in the portfolio and to determine the adequacy of the allowance for loan losses. The review includes analysis of historical performance, the level of non-performing and adversely rated loans, specific analysis of certain problem loans, loan activity since the previous assessment, reports prepared by the Company's independent Loan Review Department, consideration of current economic conditions and other pertinent information. The level of the allowance to net loans outstanding will vary depending on the overall results of this quarterly assessment. See the discussion above under “Critical Accounting Estimates” for more information. Management believes the allowance for loan losses at December 31, 2021 to be adequate, but if economic conditions deteriorate beyond management’s current expectations and additional charge-offs are incurred, the allowance for loan losses may require an increase through additional provision for loan losses expense which would negatively impact earnings.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Non-Interest Income

The Company's non-interest income is composed of several components, some of which vary significantly between periods. Service charges on deposit accounts and other non-interest income generally reflect the Company’s growth, while fees for origination of mortgage loans and brokerage fees and commissions will often reflect home mortgage market and stock market conditions and fluctuate more widely from period to period.

The following is a summary of our non-interest income for the years ended December 31, 2021, 2020 and 2019 (in thousands):

	Twelve Months Ended December 31,												Twelve Months Ended December 31,
	2021			2020			$ Increase (Decrease)			% Increase (Decrease)			2020			2019			$ Increase (Decrease)			% Increase (Decrease)
Service charges on deposits	$	6,137		$	5,659		$	478			8.45	%	$	5,659		$	6,952		$	(1,293	)		(18.60	%)
Brokerage income		6,368			4,837			1,531			31.65			4,837			4,411			426			9.66
Debit and credit card interchange income		12,029			9,187			2,842			30.94			9,187			8,301			886			10.67
Other fees and commissions		1,446			1,404			42			2.99			1,404			1,608			(204	)		(12.69	)
BOLI and annuity earnings		1,109			959			150			15.64			959			723			236			32.64
Security gain (losses), net		28			882			(854	)		(96.83	)		882			(268	)		1,150			(429.10	)
Fees and gains on sales of mortgage loans		9,997			9,560			437			4.57			9,560			6,802			2,758			40.55
Gain (loss) on sale of other real estate, net		(15	)		658			(673	)		(102.28	)		658			(48	)		706			(1,470.83	)
Loss on the sale of fixed assets, net		(43	)		(63	)		20			(31.75	)		(63	)		(128	)		65			(50.78	)
Gain (loss) on sale of other assets, net		6			(4	)		10			(250.00	)		(4	)		(4	)		—			0.00
Other income		34			61			(27	)		(44.26	)		61			—			61			100.00
Total non-interest income	$	37,096		$	33,140		$	3,956			11.94	%	$	33,140		$	28,349		$	4,791			16.90	%

2021 v. 2020

The increase in non-interest income for the year ended December 31, 2021 when compared to the year ended December 31, 2020 is primarily attributable to an increase in debit and credit card interchange income, an increase in brokerage income, an increase in service charges on deposits, and an increase in fees and gains on sales of mortgage loans, offset in part by a decrease in gain on sale of securities and an increase in loss on sale of other real estate.

Debit and credit card interchange income primarily increased due to an increase in the number and volume of debit card and credit card holders and transactions. The increase in the volume of transactions was partially attributable to an increase in economic activity as many businesses reopened and mitigation efforts were relaxed, which resulted in increased consumer spending.

Brokerage income primarily increased due to the opening of new investment accounts, which was aided by the hiring of new investment managers and an increase in estate planning and trust asset accounts. Brokerage income was also aided by the continued strong recovery in the stock market from the lows of the first quarter of 2020 resulting from the COVID-19 pandemic.

Service charges on deposit accounts primarily increased due to an increase in service charges earned on overdraft fees, fees for paper statements, analysis charges, and fees from ATM transactions. The increase in service charges earned on overdraft fees and ATM transactions resulted from increased consumer spending resulting from the increase in economic activity. The increase in analysis charges resulted from an increase in monthly maintenance fees resulting from an increase in business customers.

The fees and gains on sales of mortgage loans primarily increased due to the continued influx of refinance volume as a result of continued low interest rates due to ongoing pandemic stimulus efforts. Rates have started their expected upward climb as a result of inflationary pressure and tapering of the Federal Reserve's purchase of mortgage backed securities from quantitative easing which may reduce growth on fees and gains on sale of mortgage loans in 2022.

The decrease in the gain on sale of securities for the year ended December 31, 2021 when compared to December 31, 2020 was due to management's opportunistic trading in 2020 to recognize additional income and management's strategy to sell securities in the fourth quarter of 2020 and use the gain to pay down Federal Home Loan Bank advances.

2020 v. 2019

The increase in non-interest income for the year ended December 31, 2020 when compared to the year ended December 31, 2019 is primarily attributable to an increase in fees and gains on sales of mortgage loans, an increase in the gain on the sale of securities, an increase in debit and credit card interchange income, an increase in a gain on the sale of other real estate, and an increase in brokerage income, offset in part by a decrease in service charges on deposits.

The fees and gains on sales of mortgage loans primarily increased due to an increase in the overall volume from the sale of loans of $64,720,000, as a result of our mortgage group experiencing heightened demand in 2020. This increased demand was due to mortgage rates hitting all-time lows as a result of quantitative easing and the government's purchase of mortgage backed securities, as well as strong demand and related housing starts in Wilson County and the surrounding counties in which we serve.

Gain on sale of securities primarily increased from a loss on sale of securities in 2019 due to management's opportunistic trading to recognize additional income and management's strategy to sell securities in the fourth quarter of 2020 and use the gain to pay down Federal Home Loan Bank advances. The loss on sale of securities in 2019 was due to management's decision to sell securities for a loss and reinvest the proceeds in higher yielding assets.

Debit and credit card interchange income primarily increased due to an increase in the number and volume of debit card and credit card holders and transactions. The increase in the volume of transactions was partially attributable to an increase in online shopping as consumers sought to purchase more goods and services remotely due to COVID-19.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Brokerage income primarily increased due to client acquisition and the opening of new investment accounts. Brokerage income was also aided by the continued strong recovery in the stock market from first quarter 2020 lows resulting from the COVID-19 pandemic, with the market ending 2020 at then all-time highs.

Service charges on deposit accounts primarily decreased due to a decrease in service charges earned on insufficient income that resulted from the economic stimulus payments received by our customers and corresponding increases in deposit account balances and less consumer spending as a result of COVID-19.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Non-Interest Expenses

Non-interest expenses consist primarily of employee costs, FDIC premiums, occupancy expenses, furniture and equipment expenses, advertising and public relations expenses, data processing expenses, ATM & interchange expenses, directors’ fees, audit, legal and consulting fees, and other operating expenses.

The following is a summary of the Company's non-interest expense for the years ended December 31, 2021, 2020 and 2019 (in thousands):

	Twelve Months Ended December 31,										Twelve Months Ended December 31,
	2021		2020		$ Increase (Decrease)			% Increase (Decrease)			2020		2019		$ Increase (Decrease)			% Increase (Decrease)
Employee salaries and benefits	$	52,722	$	45,661	$	7,061			15.46	%	$	45,661	$	42,541	$	3,120			7.33	%
Equity-based compensation		1,428		1,180		248			21.02			1,180		786		394			50.13
Occupancy expenses		5,473		5,216		257			4.93			5,216		4,789		427			8.92
Furniture and equipment expenses		3,323		3,267		56			1.71			3,267		3,110		157			5.05
Data processing expenses		6,079		5,101		978			19.17			5,101		4,495		606			13.48
Advertising expenses		2,736		2,487		249			10.01			2,487		2,498		(11	)		(0.44	)
ATM & interchange fees		4,783		3,880		903			23.27			3,880		3,439		441			12.82
Accounting, legal & consulting expenses		988		909		79			8.69			909		1,382		(473	)		(34.23	)
FDIC insurance		1,130		598		532			88.96			598		373		225			60.32
Directors’ fees		686		634		52			8.20			634		586		48			8.19
Other operating expenses		11,640		11,986		(346	)		(2.89	)		11,986		10,629		1,357			12.77
Total non-interest expense	$	90,988	$	80,919	$	10,069			12.44	%	$	80,919	$	74,628	$	6,291			8.43	%

2021 v. 2020

The increase in non-interest expenses for the year ended December 31, 2021 when compared to the year ended December 31, 2020 is primarily attributable to a year-over-year increase in salaries and employee benefits, equity-based compensation, occupancy expenses, data processing expenses, ATM and interchange fees, FDIC insurance, and advertising expenses, partially offset by a decrease in other operating expenses.

The increase in salaries and employee benefits for the year ended December 31, 2021 when compared to the year ended December 31, 2020 is primarily attributable to an increase in the number of employees necessary to support the Company’s growth in operations as well as an increase in salaries for employees including as a result of increased levels of competition for talent in our market areas. The increase was also due to increases in incentives and commissions, due to an increase in the volume of booked mortgage loans and the success of new additional investment advisor personnel. This increase also resulted from the payment of a $812,000, in the aggregate, mid-year bonus paid to employees in the second quarter of 2021 to acknowledge their hard work and perseverance throughout the pandemic and implementation of PPP. The increase in equity-based compensation is due to equity awards granted to certain of our directors, senior executive officers and other officers, in connection with their assumption of additional responsibilities and an increase in the weighted average grant date value of those awards. The increase in occupancy expense is primarily attributable to an increase in maintenance and repairs on buildings, an increase in property taxes, an increase in depreciation expense on buildings resulting from improvements, an increase in lease expense due to an increase in leased branches, and an increase in utility expense due to a transition back to the office by employees. The Company anticipates that salaries and employee benefits expense and occupancy expense will continue to increase as the Company's operations grow particularly if competition for talent remains strong in our markets and if inflationary pressures continue to impact our markets.

The increase in data processing expenses is primarily attributable to an increase in computer maintenance and computer licenses. These expenses included upgrades of our current systems as well as additional investments in computer software, an increase in I.T. consulting expense and an increase in information security expenses. The Company anticipates that data processing expenses will continue to increase as the Company's operations grow and the focus on the acceleration of digital product offerings and on data security increases.

The increase in ATM and interchange fees is primarily attributable to an increase in debit card interchange fee expense due to the volume of transactions, and the increase in economic activity.

The increase in FDIC insurance is primarily attributable an increase in deposit account balances resulting from economic growth and stimulus programs.

The increase in advertising expenses is primarily attributable to targeted marketing efforts in order to increase our market share in existing markets.

The decrease in other operating expenses is primarily attributable to a decrease in professional fees on loans and a decrease in state bank assessment fees, partially offset by an increase in telephone expense, cash back expense, and fees and licenses expense. The decrease in professional fees on loans resulted from the investment in required software to facilitate participation in PPP lending that occurred in June 2020. The increase in telephone expense resulted from a one-time setup fee resulting from a conversion to a new vendor. The increase in cash back expense resulted from growth in market share that resulted in the opening of new deposit accounts.

2020 v. 2019

The increase in non-interest expenses for the year ended December 31, 2020 when compared to the year ended December 31, 2019 is primarily attributable to a year-over-year increase in salaries and employee benefits, equity-based compensation, occupancy expenses, other operating expenses, data processing expenses, ATM and interchange fees, and FDIC insurance, partially offset by a decrease in accounting, legal and consulting fees.

The increase in salaries and employee benefits for the year ended December 31, 2020 when compared to the year ended December 31, 2019 is primarily attributable to an increase in the number of employees necessary to support the Company’s growth in operations and branch expansion. The increase in equity-based compensation is due to equity awards granted to certain of our directors, senior executive officers and other officers, including in connection with their assumption of additional responsibilities. The increase in occupancy expense is primarily attributable to an increase in maintenance and repairs on buildings, an increase in depreciation expense on buildings resulting from improvements, an increase in lease expense due to an increase in leased branches, and an increase in sanitation supplies and protective facial masks related to COVID-19.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The increase in other operating expenses is primarily attributable to an increase of $896,000 in professional fees on loans. This increase was largely attributable to expenses relating to the origination of PPP loans.

The increase in data processing expenses is primarily attributable to an increase in computer maintenance and computer licenses. These expenses included upgrades of our current systems as well as additional investments in computer software, an increase in I.T. consulting expense and an increase in information security expenses. COVID-19 related expenses contributed to this increase with more reliance on virtual meetings and remote work.

The increase in ATM and interchange fees is primarily attributable to an increase in debit card interchange fee expense due to the volume of transactions, which resulted in part from increased online shopping due to COVID-19, as well as an increase in ATM expenses resulting from the purchase of new ATMs for all existing locations.

The increase in FDIC insurance is primarily attributable an increase in deposit accounts resulting from the government issued economic stimulus relief attributable to COVID-19, the result of PPP loan proceeds being deposited in the Bank pending use of the funds by the borrower, and reduced consumer spending as a result of the pandemic.

The decrease in accounting, legal and consulting fees is primarily attributable to a decrease in legal and professional fees associated with the Company's general operations.

The efficiency ratio is a common and comparable KPI used in the banking industry. The Company uses this metric to monitor how effective management is at using our internal resources. It is calculated by taking our non-interest expense divided by our net-interest income plus non-interest income. Our efficiency ratio for the years ended 2021, 2020 and 2019 was 58.22%, 58.33% and 60.29%, respectively.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Income Taxes

The Company’s income tax expense was $14,732,000 for 2021, an increase of $5,114,000 from $9,618,000 for 2020, which was down by $1,449,000 from the 2019 total of $11,067,000. The percentage of income tax expense to earnings before taxes was 23.0% in 2021, 20.0% in 2020 and 23.5% in 2019. The increase in income tax expense in 2021 from 2020 was due to an increase in earnings before income taxes and the decrease in 2020 from 2019 was due to additional state tax credits that lowered our effective tax rate. Our effective tax rate represents our blended federal and state rate of 26.135% affected by the impact of anticipated favorable permanent differences between our book and taxable income such as bank-owned life insurance, income earned on tax-exempt securities and certain federal and state tax credits.

Our income tax expense, deferred tax assets and liabilities reflect management’s best assessment of estimated future taxes to be paid. We are subject to income taxes at both the federal and state level. Significant judgments and estimates are required in determining the consolidated income tax expense.

Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating our ability to recover our deferred tax assets we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In projecting future taxable income, we begin with historical results adjusted for changes in accounting policies and incorporate assumptions including the amount of future state and federal pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income. Changes in current tax laws and rates could also affect recorded deferred tax assets and liabilities in the future as was the case with the passage of the Tax Cuts and Jobs Act in 2017.

Financial Accounting Standards Board (“FASB”) ASC Topic 740, Income Taxes (“ASC 740”) provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. ASC Topic 740 also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

We recognize tax liabilities in accordance with ASC Topic 740 and we adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Financial Condition

Balance Sheet Summary

The Company’s total assets increased in 2021 by $619,992,000 or 18.40%, to $3,989,596,000 at December 31, 2021, after increasing 20.59% in 2020 to $3,369,604,000 at December 31, 2020. Loans, net of allowance for loan losses, totaled $2,444,282,000 at December 31, 2021, a $161,516,000, or 7.08%, increase compared to December 31, 2020. In 2020, management focused on growing all segments of our loan portfolio as we managed through the COVID-19 pandemic. In 2021, management targeted owner-occupied commercial real estate, residential real estate lending and consumer lending as areas of focus. The increase in loans in 2021 resulted from an overall increase in loan demand in the housing market, as well as other sectors in which we lend money, along with continued demand during the first part of 2021 for PPP loans by small businesses and individuals as a result of the COVID-19 pandemic. At year end 2021, securities totaled $897,585,000, an increase of54.61% from $580,543,000 at December 31, 2020, primarily as a result of management's decision to invest excess liquidity. The current rate environment also caused the fair market value on the securities portfolio to decrease. As a result of deposit growth that outpaced loan growth, interest bearing deposits at other financial institutions increased by $96,190,000, to $400,940,000 at December 31, 2021. Deferred income taxes totaled $12,792,000 at December 31, 2021, a $5,703,000, or 80.45%, increase compared to December 31, 2020. The increase in deferred income taxes was largely attributable to a decline in the unrealized gains on our available-for-sale securities of $18,251,000.

Total liabilities increased by $586,396,000, or 19.62%, to $3,575,879,000 at December 31, 2021 compared to $2,989,483,000 at December 31, 2020. This increase was composed primarily of the $594,476,000 increase in total deposits to $3,555,071,000, a 20.08% increase from December 31, 2020. The increase in total deposits since December 31, 2020 was primarily attributable to growth in market share that resulted in the opening of new accounts, increased economic activity and economic stimulus programs. Federal Home Loan Bank advances decreased to $0 from $3,638,000 at respective year ends 2021 and 2020. The decrease in Federal Home Loan Bank advances was due to management's strategic decision to utilize excess liquidity to pay off these advances and a lack of need for such advances in 2021 due to increased liquidity/deposit balances.

Stockholders’ equity increased $33,596,000, or 8.84%, in 2021, due to net earnings, the issuance of stock pursuant to the Company’s Dividend Reinvestment Plan, and the exercise of stock options, offset by dividends paid on the Company’s common stock and a decrease in the fair value of available-for-sale securities. The change in stockholders’ equity includes a $13,480,000 decrease in net unrealized gains on available-for-sale securities, net of taxes during the period. A more detailed discussion of assets, liabilities and capital follows.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Loans

The following schedule details the loans and percentage of loans in each category of the Company at December 31, 2021 and 2020 (dollars in thousands):

	December 31, 2021						December 31, 2020
	AMOUNT			%			AMOUNT			%
Mortgage loans on real estate:
Residential 1-4 family	$	679,536			27.2	%	$	535,994			23.0	%
Multifamily		29,300			1.2			111,646			4.8
Commercial real estate		879,373			35.2			837,766			35.9
Construction and land development		603,292			24.2			488,626			21.0
Farmland		9,367			0.4			15,429			0.7
Second mortgages		10,043			0.4			8,433			0.4
Equity lines of credit		92,229			3.7			78,889			3.4
Total mortgage loans on real estate		2,303,140			92.3			2,076,783			89.1

Commercial loans		116,717			4.7			172,811			7.4

Agricultural loans		1,438			0.1			1,206			0.1

Consumer installment loans:
Personal		59,513			2.4			66,193			2.8
Credit cards		5,281			0.2			4,324			0.2
Total consumer installment loans		64,794			2.6			70,517			3.0

Other loans		9,849			0.4			9,283			0.4
		2,495,938			100.0	%		2,330,600			100.0	%

Net deferred loan fees		(12,024	)					(9,295	)

Total loans		2,483,914						2,321,305

Less: Allowance for loan losses		(39,632	)					(38,539	)

Net loans	$	2,444,282					$	2,282,766

Loans are the largest component of the Company’s assets and are its primary source of income. The Company’s loan portfolio, net of allowance for loan losses, increased 7.1% at year end 2021 when compared to year end 2020. The table above sets forth the loan categories and the percentage of such loans in the portfolio as of December 31, 2021 and 2020.

As represented in the table, Wilson Bank experienced loan growth for the year ended December 31, 2021 in residential 1-4 family loans and construction and land development loans; partially offset by a decrease in multifamily loans and commercial loans. Residential 1-4 family loans increased 26.8% in 2021 and comprised 27.2% of the total loan portfolio at December 31, 2021, compared to 23.0% at December 31, 2020. Management believes the increase in residential 1-4 family loans was primarily due to an increase in demand for such loans due to, among other things, favorable interest rates resulting from the declining rate environment that started in the third and fourth quarters of 2019 and throughout much of 2020, as well as the completion of some construction projects which transitioned to permanent financing and continued increased population growth in some of our markets. Construction and land development loans increased 23.5% in 2021 and comprised 24.2% of the total loan portfolio at December 31, 2021, compared to 21.0% at December 31, 2020. The increase in construction and land development loans reflected the overall increase in demand for such loans in the overall economy and our markets. Because the construction portfolio remains a meaningful portion of our portfolio, Wilson Bank actively monitors these loans 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 are monitored and administered by a credit administration department independent of the lending function. Multifamily loans decreased 73.8% in 2021 and comprised 1.2% of the portfolio at December 31, 2021, compared to 4.8% at December 31, 2020. The decrease in multifamily loans was largely due to the payoff of several large loan relationships. Commercial loans decreased 32.5% in 2021 and comprised 4.7% of the total loan portfolio at December 31, 2021, compared to 7.4% at December 31, 2020. The decrease in commercial loans is largely attributable to the forgiveness or repayment of PPP loans we previously made to small businesses and individuals as a result of the COVID-19 pandemic and the payoff of several other large loan relationships. In total, we funded $125.2 million of PPP loans, $5.0 million of which remained outstanding as of December 31, 2021. Wilson Bank continues to seek to diversify its real estate portfolio as it seeks to lessen concentrations in any one type of loan.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Banking regulators define highly leveraged transactions to include leveraged buy-outs, acquisition loans and recapitalization loans of an existing business. Under the regulatory definition, at December 31, 2021, the Company had no highly leveraged transactions, and there were no foreign loans outstanding during any of the reporting periods. As of December 31, 2021, the Company had not underwritten any loans in connection with capital leases.

The following table classifies the Company's fixed and variable rate loans at December 31, 2021 according to contractual maturities of: (1) one year or less, (2) after one year through five years, (3) after five years through fifteen years, and (4) after fifteen years (dollars in thousands):

	December 31, 2021
	One Year or Less		After One Year Through Five Years		After Five Years Through Fifteen Years		After Fifteen Years		Total
Residential 1-4 family	$	29,662	$	78,645	$	108,828	$	462,401	$	679,536
Multifamily		491		842		6,856		21,111		29,300
Commercial real estate		12,833		95,967		203,674		566,899		879,373
Construction and land development		181,343		179,259		49,269		193,421		603,292
Farmland		1,858		2,056		4,376		1,077		9,367
Second mortgages		304		5,281		3,548		910		10,043
Equity lines of credit		4,520		797		86,912		—		92,229
Commercial loans		12,061		44,254		32,185		28,217		116,717
Agriculture, installment and other		18,384		42,322		8,752		—		76,081
Total	$	261,456	$	449,423	$	504,400	$	1,280,659	$	2,495,938
Loans with fixed interest rates:
Residential 1-4 family	$	25,714	$	55,267	$	24,405	$	27,350	$	132,736
Multifamily		36		—		—		—		36
Commercial real estate		4,310		70,391		12,529		5,439		92,669
Construction and land development		124,102		89,240		317		20,859		234,518
Farmland		1,137		995		—		—		2,132
Second mortgages		133		581		110		—		824
Equity lines of credit		2,556		—		—		—		2,556
Commercial loans		8,271		37,444		8,524		—		54,239
Agriculture, installment and other		8,216		41,441		8,748		863		59,268
Total	$	174,475	$	295,359	$	54,633	$	54,511	$	578,978
Loans with variable interest rates:
Residential 1-4 family	$	3,948	$	23,378	$	84,423	$	435,051	$	546,800
Multifamily		455		842		6,856		21,111		29,264
Commercial real estate		8,523		25,576		191,145		561,460		786,704
Construction and land development		57,241		90,019		48,952		172,562		368,774
Farmland		721		1,061		4,376		1,077		7,235
Second mortgages		171		4,700		3,438		910		9,219
Equity lines of credit		1,964		797		86,912		—		89,673
Commercial loans		3,790		6,810		23,661		28,217		62,478
Agriculture, installment and other		10,168		881		4		5,760		16,813
Total	$	86,981	$	154,064	$	449,767	$	1,226,148	$	1,916,960

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The following schedule provides an allocation of the year-end allowance for loan losses on loans by portfolio segment for the Company as of and for the fiscal years ended December 31, 2021 and 2020:

	*In Thousands, Except Percentages*
	Amount of Allowance Allocated		Percent of Loans in Each Category to Total Loans			Total Loans			Ratio of Allowance Allocated to Loans in Each Category
December 31, 2021
Mortgage Loans on real estate
Residential 1-4 family	$	9,124		27.2	%	$	679,536			1.34	%
Multifamily		396		1.2			29,300			1.35
Commercial real estate		16,450		35.2			879,373			1.87
Construction and land development		9,663		24.2			603,292			1.60
Farmland		94		0.4			9,367			1.00
Second mortgage		118		0.4			10,043			1.17
Equity lines of credit		1,098		3.7			92,229			1.19
Total mortgage loans on real estate		36,943		92.3			2,303,140			1.60

Commercial loans		1,314		4.7			116,717			1.13

Agriculture, installment and other		1,375		3.0			76,081			1.81
	$	39,632		100.0	%		2,495,938			1.59
Net deferred loan fees							(12,024	)
						$	2,483,914			1.60	%
December 31, 2020
Mortgage Loans on real estate
Residential 1-4 family	$	8,098		23.0	%	$	535,994			1.51	%
Multifamily		1,541		4.8			111,646			1.38
Commercial real estate		16,802		35.9			837,766			2.01
Construction and land development		7,936		21.0			488,626			1.62
Farmland		154		0.7			15,429			1.00
Second mortgage		105		0.4			8,433			1.25
Equity lines of credit		997		3.4			78,889			1.26
Total mortgage loans on real estate		35,633		89.1			2,076,783			1.72

Commercial loans		1,378		7.4			172,811			0.80

Agriculture, installment and other		1,528		3.5			81,006			1.89
	$	38,539		100.0	%		2,330,600			1.65
Net deferred loan fees							(9,295	)
						$	2,321,305			1.66	%

The allowance for loan losses is an amount that management believes will be adequate to absorb possible losses on existing loans that may become uncollectible. The allowance for loan losses as a percentage of total loans outstanding at December 31, 2021 , net of deferred fees, decreased from the year ended December 31, 2020 . This decrease was largely due to decreased provision expense when compared to the year ended December 31, 2020, that was driven by the COVID-19 pandemic, as well as (i) the small amount of charge-offs, (ii) a decrease in non-performing loans, internally classified loans and impaired loans, (iii) loan growth, and (iv) management's evaluation of the overall credit quality of the loan portfolio.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The following detail provides a breakdown of the provision for loan loss expense and net (charge-offs) recoveries at December 31, 2021, 2020 and 2019 :

	*In Thousands, Except Percentages*
	Provision for Loan Loss Expense (Benefit)			Net (Charge-Offs) Recoveries			Average Loans		Ratio of Net (Charge-offs) Recoveries to Average Loans

December 31, 2021
Residential 1-4 family	$	958		$	68		$	599,956		0.01	%
Multifamily		(1,145	)		—			69,568		—
Commercial real estate		(352	)		—			847,538		—
Construction and land development		1,356			371			538,944		0.07
Farmland		(60	)		—			12,239		—
Second mortgage		13			—			9,119		—
Equity lines of credit		101			—			84,460		—
Commercial loans		(37	)		(27	)		142,904		(0.02	)
Agriculture, installment and other		309			(462	)		77,534		(0.60	)
Total	$	1,143		$	(50	)	$	2,382,262		0.00	%
December 31, 2020
Residential 1-4 family	$	920		$	34		$	529,539		0.01	%
Multifamily		424			—			105,554		—
Commercial real estate		5,388			300			824,789		0.04
Construction and land development		1,766			173			462,068		0.04
Farmland		(33	)		—			17,544		0.00
Second mortgage		(37	)		19			9,705		0.20
Equity lines of credit		74			34			76,489		0.04
Commercial loans		343			(9	)		137,070		(0.01	)
Agriculture, installment and other		851			(434	)		74,057		(0.59	)
Total	$	9,696		$	117		$	2,236,815		0.01	%
December 31, 2019
Residential 1-4 family	$	838		$	9		$	476,409		—	%
Multifamily		(364	)		—			113,579		—
Commercial real estate		1,484			(123	)		732,515		(0.02	)
Construction and land development		(1,510	)		423			462,434		0.09
Farmland		(34	)		—			21,243		—
Second mortgage		5			—			10,763		—
Equity lines of credit		158			—			65,874		—
Commercial loans		422			—			86,519		—
Agriculture, installment and other		1,041			(797	)		61,525		(1.30	)
Total	$	2,040		$	(488	)	$	2,030,861		(0.02	%)

The provision for loan losses charged to operating expense is based on past loan loss experience and other factors which, in management’s judgment, deserve current recognition in estimating possible loan losses. Such other factors considered by management include growth and composition of the loan portfolio, review of specific problem loans, the relationship of the allowance for loan losses to outstanding loans, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral and current economic conditions that may affect the borrower’s ability to pay.

Management conducts a continuous review of all loans that are delinquent, previously charged down or which are determined to be potentially uncollectible. Loan classifications are reviewed periodically by a person independent of the lending function. The Board of Directors of the Company periodically reviews the adequacy of the allowance for loan losses.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The following table details selected information as to non-accrual loans of the Company at December 31, 2021, 2020 and 2019:

	*In Thousands, Except Percentages*
	December 31, 2021								December 31, 2020								December 31, 2019
			Non-Accrual Loans								Non-Accrual Loans								Non-Accrual Loans
	Total Loans		Amount			Percent of Loans in Category			Total Loans		Amount			Percent of Loans in Category			Total Loans		Amount			Percent of Loans in Category

Residential 1-4 family	$	679,536	$	—			—	%	$	535,994	$	1,022			0.19	%	$	511,250	$	949			0.19	%
Multifamily		29,300		—			—			111,646		—			—			97,104		—			—
Commercial real estate		879,373		—			—			837,766		311			0.04			793,379		1,661			0.21
Construction and land development		603,292		—			—			488,626		—			—			425,185		—			—
Farmland		9,367		—			—			15,429		—			—			19,268		—			—
Second mortgage		10,043		—			—			8,433		—			—			10,760		—			—
Equity lines of credit		92,229		—			—			78,889		—			—			72,379		—			—
Commercial loans		116,717		—			—			172,811		—			—			98,265		—			—
Agriculture, installment and other		76,081		—			—			81,006		—			—			65,452		—			—
Total	$	2,495,938	$	—					$	2,330,600	$	1,333					$	2,093,042	$	2,610
Allowance for loan losses on loans			$	39,632							$	38,539							$	28,726
Ratio of non-accrual loans to total loans outstanding							—	%							0.06	%							0.12	%
Ratio of allowance for credit losses on loans to non-accrual loans				—	%							2,891.15	%							1,100.61	%

The accrual of interest income is discontinued when it is determined that collection of interest is less than probable or the collection of any amount of principal is doubtful. The decision to place a loan on a non-accrual status is based on an evaluation of the borrower’s financial condition, collateral liquidation value, economic and business conditions and other factors that affect the borrower’s ability to pay. At the time a loan is placed on a non-accrual status, the accrued but unpaid interest is also evaluated as to collectability. If collectability is doubtful, the unpaid interest is charged off. Thereafter, interest on non-accrual loans is recognized only as received. There were no non-accrual loans at December 31, 2021. Non-accrual loans totaled $1,333,000 at December 31, 2020. For the years ended December 31, 2021 and 2020, the amount of interest income on non-accrual loans that would have been recognized if loans were on accruing status was insignificant. The amount of interest and fee income recognized on total loans during 2021 totaled $118,676,000 as compared to $113,224,000 in 2020.

The Company’s loan portfolio includes certain loans that have been modified in a troubled debt restructuring (TDR), where economic, or other, concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. The concessions typically result from the Company’s loss mitigation activities and could include reduction in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months. Nonperforming TDRs as of December 31, 2021 decreased $364,000 to $165,000 at December 31, 2021 when compared to December 31, 2020 due to the payoff of two TDR loan relationships and the pay down of one TDR loan relationship that were non-performing at December 31, 2020, partially offset by one TDR loan relationship that was performing at December 31, 2020 that is now classified as non-performing at December 31, 2021. Total TDRs decreased $1,635,000 to $1,041,000 from December 31, 2020 to December 31, 2021 due the payoff of 4 loan relationships that were classified as TDRs in 2020.

The CARES Act and interagency guidance provided financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs through January 1, 2022 to account for those loans which have been granted deferrals due to the effects of COVID-19. For more information regarding the deferrals we offered to our customers, see "Impact of COVID-19" above.

At December 31, 2021, real estate construction and mortgage loans made up 24.2% and 68.1%, respectively, of the Company’s loan portfolio.

At December 31, 2021, and December 31, 2020, there was no other real estate owned outstanding.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The following table sets forth for the reported periods loans that were at least 30 days but less than 60 days past due, 60 days but less than 90 days past due and nonaccrual loans and those loans past due greater than 90 days:

	*(In thousands)*
	30-59 Days Past Due		60-89 Days Past Due		Nonaccrual and Greater Than 90 Days Past Due		Past Due		Current		Total Loans		Loans Greater Than 90 Days Past Due and Accruing Interest
December 31, 2021
Residential 1-4 family	$	1,951		169		357		2,477		677,059		679,536	$	357
Multifamily		—		—		—		—		29,300		29,300		—
Commercial real estate		—		—		—		—		879,373		879,373		—
Construction		1,154		215		—		1,369		601,923		603,292		—
Farmland		—		—		—		—		9,367		9,367		—
Second mortgages		121		—		—		121		9,922		10,043		—
Equity lines of credit		170		—		9		179		92,050		92,229		9
Commercial		58		81		—		139		116,578		116,717		—
Agricultural, installment and other		288		99		23		410		75,671		76,081		23
Total	$	3,742		564		389		4,695		2,491,243		2,495,938	$	389
December 31, 2020
Residential 1-4 family	$	2,634		511		1,818		4,963		531,031		535,994	$	796
Multifamily		—		—		—		—		111,646		111,646		—
Commercial real estate		—		—		460		460		837,306		837,766		149
Construction		768		—		44		812		487,814		488,626		44
Farmland		—		—		—		—		15,429		15,429		—
Second mortgages		265		—		—		265		8,168		8,433		—
Equity lines of credit		31		302		—		333		78,556		78,889		—
Commercial		114		104		—		218		172,593		172,811		—
Agricultural, installment and other		363		81		60		504		80,502		81,006		60
Total	$	4,175		998		2,382		7,555		2,323,045		2,330,600	$	1,049

Past due loans, which include nonaccrual loans and loans 90 days past due, totaled $389,000 at December 31, 2021, a decrease from $2,382,000 at December 31, 2020, resulting from a $1,333,000, or 100.00%, decrease in nonaccrual loans and a $660,000, or 62.92%, decrease in 90 day past due and accruing loans. The decrease in nonaccrual and greater than 90 days past due loans during the year ended December 31, 2021 of $1,993,000 was due primarily to the removal of one large residential 1-4 family real estate nonaccrual loan that was upgraded due to payment performance, the payoff of one large commercial real estate loan relationship that was on nonaccrual status, and the payoff of two large residential 1-4 family real estate loan relationships; partially offset by the addition of one large residential 1-4 family real estate loan relationship that was greater than 90 days past due. Management believes that it is probable that it will incur losses on nonaccrual and greater than 90 days past due loans but believes that these losses should not exceed the amount in the allowance for loan losses already allocated to these loans, unless there is a 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 greater than 90 days past due and accruing interest, non-accrual loans, nonperforming TDRs, and other real estate owned divided by our total assets outstanding. Our NPA ratios for the periods ended December 31, 2021 and December 31, 2020 were 0.01% and 0.08%, respectively. The NPA ratio was favorably impacted by decreases in loans greater than 90 days past due and accruing interest, non-accrual loans, and nonperforming TDRs, as well as an increase in our total assets, including as a result of loan growth (including from the PPP) and the increase in deposits associated with the pandemic.

The internally classified loans as a percentage of the allowance for loan losses were 19.4% and 21.4%, respectively, at December 31, 2021 and 2020. At December 31, 2021, loans totaling $7,686,000 were included in the Company’s internal classified loan list. Of these loans $7,459,000 are real estate secured and $227,000 are secured by various other types of collateral. The value collateralizing these loans is estimated by management to be approximately $21,833,000 ($21,437,000 related to real property securing real estate loans and $396,000 related to the various other types of loans). Such loans are listed as classified when information obtained about possible credit problems of the borrowers has prompted management to question the ability of the borrower to comply with the repayment terms of the loan agreement. The loan classifications do not represent or result from trends or uncertainties which management expects will materially impact future operating results, liquidity or capital resources.

The allowance for loan losses is discussed under “Critical Accounting Estimates” and “Provision for Loan Losses.” The Company maintains its allowance for loan losses at an amount believed by management to be adequate to absorb probable loan losses inherent in the loan portfolio as of December 31, 2021.

Substantially all of the Company’s loans are from Wilson, DeKalb, Smith, Putnam, Trousdale, Davidson, Rutherford, Williamson and adjacent counties. Although the majority of the Company's loans are in the real estate market, the Company seeks to exercise prudent risk management in lending through the diversification by loan category within the real estate segment, including 1-4 family residential real estate, commercial real estate, multifamily, construction, second mortgages, farmland, and equity lines of credit.

The Company’s management believes there is an opportunity to increase the loan portfolio in 2022 as economic conditions in the Company's primary market areas continue to perform well. The Company will target owner-occupied commercial real estate, residential real estate lending and consumer lending as areas of emphasis in 2022. At December 31, 2021, the Company’s total loans equaled 69.9% of its total deposits. As a practice, the Company generally generates its own loans and does not buy participations from other institutions. The Company may sell portions of the loans it generates to other financial institutions for cash in order to improve the liquidity of the Company’s loan portfolio or extend its lending capacity.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Securities

Securities increased 54.61% to $897,585,000 at December 31, 2021 from $580,543,000 at December 31, 2020, and comprised the second largest and other primary component of the Company’s earning assets. Securities increased as the result of deposit growth that outpaced loan growth and management's decision to invest increased liquidity resulting from the pandemic. The average yield, excluding tax equivalent adjustment, of the securities portfolio at December 31, 2021 was 1.59% with a weighted average life of 8.17 years, as compared to an average yield of 1.63% and a weighted average life of 8.00 years at December 31, 2020. The weighted average lives on mortgage-backed securities reflect the repayment rate used for book value calculations.

Certain debt securities that management has the positive intent and ability to hold to maturity are classified as "held-to-maturity" and recorded at amortized cost. Trading securities are recorded at fair value with changes in fair value included in earnings. Securities not classified as held to maturity or trading, including equity securities with readily determinable fair values, are classified as “available-for-sale” and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

No securities have been classified as trading securities or held-to-maturity at December 31, 2021, December 31, 2020, or December 31, 2019.

Investment securities at December 31, 2021 and December 31, 2020 consisted of the following:

	December 31, 2021
	Securities Available-For-Sale
	*(In Thousands)*
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
U.S. Treasury and other U.S. government agencies	$	7,320		—		99		7,221
U.S. Government-sponsored enterprises (GSEs)		163,700		20		4,490		159,230
Mortgage-backed securities		465,588		2,726		6,537		461,777
Asset-backed securities		46,583		213		83		46,713
Corporate bonds		2,500		75		—		2,575
Obligations of states and political subdivisions		220,444		2,611		2,986		220,069
	$	906,135		5,645		14,195		897,585

	December 31, 2020
	Securities Available-For-Sale
	*(In Thousands)*
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
U.S. Government-sponsored enterprises (GSEs)	$	125,712		328		135		125,905
Mortgage-backed securities		258,774		5,636		620		263,790
Asset-backed securities		36,394		582		19		36,957
Corporate bonds		2,500		100		—		2,600
Obligations of states and political subdivisions		147,462		4,229		400		151,291
	$	570,842		10,875		1,174		580,543

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The following table details the contractual maturities and weighted average yields of investment securities of the Company. Actual maturities may differ from contractual maturities of mortgage and asset-backed securities because the mortgages or other assets underlying such securities may be called or prepaid with or without penalty. Therefore, these securities are not included in the maturity categories noted below as of December 31, 2021:

	December 31, 2021
Available-For-Sale Securities	Estimated Market Value		Weighted Average Yields
	*(In Thousands, Except Yields)*
Mortgage and asset-backed securities
One year or less		22		1.50
After one year through five years		25,489		1.97
After five years through ten years		62,167		1.51
After ten years		420,812		1.46
Total Mortgage and asset backed securities	$	508,490		1.49	%
U.S. Treasury and other U.S. government agencies:
One year or less		—		—
After one year through five years		2,429		0.77
After five years through ten years		4,792		1.12
After ten years		—		—
Total U.S. Treasury and other U.S. government agencies:		7,221		1.00
U.S. Government-sponsored enterprises (GSEs):
One year or less		—		—
After one year through five years		16,131		0.58
After five years through ten years		117,887		1.16
After ten years		25,212		1.34
Total U.S. Government-sponsored enterprises (GSEs)		159,230		1.13
Obligations of states and political subdivisions*:
One year or less		—		—
After one year through five years		10,817		2.15
After five years through ten years		51,037		1.80
After ten years		158,215		2.30
Total obligations of states and political subdivisions		220,069		2.18
Corporate bonds:
One year or less		—		—
After one year through five years		2,575		4.25
After five years through ten years		—		—
After ten years		—		—
Total corporate bonds		2,575		4.25
Total available-for-sale securities	$	897,585		1.60	%

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

We computed weighted average yields using coupon interest, adding discount accretion or subtracting premium amortization, as appropriate, on a ratable basis over the life of each security. We computed the weighted average yield for each maturity range using the fair value of each security in that range.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Deposits

The increases in assets in 2021 and 2020 were funded primarily by increases in deposits and the Company’s earnings. Total deposits, which are the principal source of funds for the Company, totaled $3,555,071,000 at December 31, 2021 compared to $2,960,595,000 at December 31, 2020, an increase of 20.08%. The Company has targeted local consumers, professionals and small businesses as its central clientele; therefore, deposit instruments in the form of demand deposits, savings accounts, money market demand accounts, certificates of deposits and individual retirement accounts are offered to customers. Management believes the Wilson County, Davidson County, DeKalb County, Putnam County, Smith County, Sumner County, Rutherford County, Trousdale County and Williamson County areas are attractive economic markets offering growth opportunities for the Company; however, the Company competes with several larger banks and community banks that have bank offices in these counties which may negatively impact market growth or maintenance of current market share. Even though the Company is in a very competitive market, management currently believes that its market share can be maintained or expanded.

The $594,476,000, or 20.08%, growth in deposits in 2021 was due to a $216,558,000, or 21.99%, increase in money market accounts, a $114,898,000, or 29.36%, increase in demand deposit accounts, a $186,790,000, or 24.22%, increase in NOW accounts, and a $94,450,000, or 46.76%, increase in savings accounts, partially offset by a decrease in certificates of deposits of $14,848,000, or 2.76%, and a decrease in individual retirement accounts of $3,372,000, or 4.60%. The decrease in certificates of deposits and the decrease in individual retirement accounts reflect the reduction in short-term interest rates and a shift in deposits to lower paying transaction and money market accounts. The average rate paid on average total interest-bearing deposits was 0.38% for 2021 compared to 0.70% for 2020. The average rate paid in 2019 was 1.07%. The increase in total deposits since December 31, 2020 is primarily attributable to the government issued economic stimulus relief programs associated with COVID-19 as well as growth in market share which resulted in the opening of new accounts. Deposit growth was also the result of PPP loan proceeds being deposited in the Bank pending use of the funds by the borrower, advance child tax credit payments, and other government stimulus programs. Competitive pressure from other banks in our market area relating to deposit pricing could adversely affect the rates paid on deposit accounts as it limits our ability to lower deposit rates as short-term interest rates fall. It’s these same competitive pressures that may cause our deposit rates to rise more quickly than we are able to increase the rates we earn on loans in a rising rate environment. If either of these scenarios were to happen, our net interest margin would experience compression and our results of operations would be negatively impacted. The ratio of average loans to average deposits was 73.6% in 2021, 83.1% in 2020, and 87.4% in 2019.

The average amounts and average interest rates for deposits for 2021 and 2020 are detailed in the following schedule:

	2021					2020
	*Average*					*Average*
	*Balance*					*Balance*
	In		Average			In		Average
	*Thousands*		Rate			*Thousands*		Rate
Non-interest bearing deposits	$	445,731		—	%	$	348,677		—	%
Interest-bearing deposits:
Negotiable order of withdrawal accounts		852,110		0.10			669,224		0.20
Money market demand accounts		1,079,002		0.14			881,669		0.40
Time deposits		605,162		1.26			619,387		1.77
Other savings		253,265		0.19			171,849		0.39
Total interest-bearing deposits		2,789,539		0.38	%		2,342,129		0.70	%
Total deposits	$	3,235,270		0.33	%	$	2,690,806		0.61	%

At December 31, 2021 and 2020, we estimate that we had approximately $1.084 million and $804.6 million, respectively, in uninsured deposits, which are the portion of deposit amounts that exceed the FDIC insurance limit.

The following schedule details the maturities of uninsured time deposits greater than $250,000 at December 31, 2021:

	*In Thousands*
Time deposits otherwise uninsured with a maturity of:
Three months or less	$	29,811
Over three through six months		19,345
Over six through twelve months		41,969
Over twelve months		42,343
Portion of U.S. time deposits in excess of insurance limit	$	133,468

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Off Balance Sheet Arrangements

At December 31, 2021, the Company had unfunded lines of credit of $1,148 million and outstanding standby letters of credit of $91 million. Since many of the commitments are expected to be drawn upon, the total commitment amounts generally represent future cash requirements. If needed to fund these outstanding commitments, the Company’s bank subsidiary has the ability to access interest-bearing deposits in other financial institutions, liquidate Federal funds sold or securities available-for-sale or on a short-term basis to borrow and purchase Federal funds from other financial institutions. Additionally, the Company’s bank subsidiary could sell participations in these or other loans to correspondent banks. As mentioned below, Wilson Bank has been able to fund its ongoing liquidity needs through its stable core deposit base, loan payments, its investment security maturities, and short-term borrowings.

Quantitative and Qualitative Disclosures About Market Risk

The Company’s primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on a large portion of the Company’s assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those which possess a short term to maturity. Based upon the nature of the Company’s operations, the Company is not subject to foreign currency exchange or commodity price risk.

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 quarterly 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.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Liquidity and Asset Management

The Company’s management seeks to maximize net interest income by managing the Company’s assets and liabilities within appropriate constraints on capital, liquidity and interest rate risk. Liquidity is the ability to maintain sufficient cash levels necessary to fund operations, meet the requirements of depositors and borrowers and fund attractive investment opportunities. Higher levels of liquidity, like those we built up in response to the COVID-19 pandemic, bear corresponding costs, measured in terms of lower yields on short-term, more liquid earning assets and higher interest expense involved in extending liability maturities. Liquid assets include cash, due from banks, interest bearing deposits in other financial institutions and unpledged investment securities. At December 31, 2021, the Company’s liquid assets totaled approximately $985.9 million. Additionally, as of December 31, 2021, the Company had available approximately $99.8 million in unused federal funds lines of credit and, subject to certain restrictions and collateral requirements, approximately $426.3 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 to quantify, monitor and control interest rate risk, and to assist management in maintaining stability in the net interest margin under varying interest rate environments. The Company accomplishes this process through the development and implementation of lending, funding and pricing strategies designed to maximize net interest income under varying interest rate environments subject to specific liquidity and interest rate risk guidelines and competitive market conditions.

Analysis of rate sensitivity and rate gap analysis are the primary tools used to assess the direction and magnitude of changes in net interest income resulting from changes in interest rates. Included in the analysis are cash flows and maturities of financial instruments held for purposes other than trading, changes in market conditions, loan volumes and pricing and deposit volume and mix. These assumptions are inherently uncertain, and, as a result, net interest income can not be precisely estimated nor can the impact of higher or lower interest rates on net interest income be precisely predicted. Actual results will differ due to timing, magnitude and frequency of interest rate changes and changes in market conditions and management’s strategies, among other factors.

The Company’s primary source of liquidity is a stable core deposit base. In addition, short-term borrowings, loan payments and investment security maturities provide a secondary source. At December 31, 2021, the Company had a liability sensitive position (a negative gap). Liability sensitivity means that more of the Company’s liabilities are capable of re-pricing over certain time frames than its assets. The interest rates associated with these liabilities may not actually change over this period but are capable of changing. Liability sensitivity generally should lead to an expansion in net interest margin in a declining rate environment, but for that to occur the Bank will need to reprice its deposits more quickly than it reprices rates it earns on loans. Conversely, a rising rate environment could have a short-term negative impact on net interest margin, as deposits would likely re-price faster than assets and rates would need to rise above those loan floors that we have included in certain of our variable rate loans before we begin to see the benefit of rising rates on those loans. Management regularly monitors the deposit rates of the Company’s competitors and these rates continue to put pressure on the Company’s deposit pricing, just as loan pricing pressure from competition within our markets continues to negatively impact loan yields. This pressure could continue to negatively impact the Company’s net interest margin and earnings if short-term rates begin to rise as we anticipate will be the case in 2022 or these competitive pressures limit the Company's ability to lower deposit rates in a declining rate environment. As discussed elsewhere herein, the Bank anticipates that its net interest margin is likely to contract during 2022 because of such competitive pressures in its markets, continued excess on-balance sheet liquidity and the expected short-term impact of the anticipated increases in federal funds rate due to the Company's liability sensitive position.

The Company’s securities portfolio consists of earning assets that provide interest income. Securities classified as available-for-sale include securities intended to be used as part of the Company’s asset/liability strategy and/or securities that may be sold in response to changes in interest rates, prepayment risk, the need or desire to increase capital and similar economic factors. At December 31, 2021, securities totaling approx imately $39.6 million mature or will be subject to rate adjustments within the next twelve months.

A secondary source of liquidity is the Company’s loan portfolio. At December 31, 2021, loans totaling app roximately $784.5 million either will become due or will be subject to rate adjustments within twelve months from that date. Continued emphasis will be placed on structuring adjustable rate loans.

As for liabilities, certificates of deposit and individual retirement accounts of $250,000 or greater totaling approximately $98.9 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 anticipates that there will be no significant withdrawals from these accounts in the future.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Interest Rate Sensitivity Gaps

The following schedule details the Company's interest rate sensitivity gaps for different time periods at December 31, 2021:

	Repricing Within
*(In Thousands)*	Total		0-30 Days			31-90 Days			91-180 Days			181-365 Days			Over 1 Year
Earning assets:
Loans, net of deferred fees	$	2,483,914		372,071			59,171			106,170			247,057			1,699,445
Securities		897,585		26,113			2,507			6,055			4,878			858,032
Loans held for sale		11,843		—			—			—			—			11,843
Interest bearing deposits		400,940		400,940			—			—			—			—
Federal funds sold		27,055		27,055			—			—			—			—
Restricted equity securities		5,089		5,089			—			—			—			—
Total earning assets		3,826,426		831,268			61,678			112,225			251,935			2,569,320
Interest-bearing liabilities:
Negotiable order of withdrawal accounts		957,985		957,985			—			—			—			—
Money market demand accounts		1,201,235		1,201,235			—			—			—			—
Individual retirement accounts		70,012		4,274			8,861			9,423			15,818			31,636
Other savings		296,434		296,434			—			—			—			—
Certificates of deposit		523,147		33,312			63,411			76,402			127,591			222,431
		3,048,813		2,493,240			72,272			85,825			143,409			254,067
Interest-sensitivity gap	$	777,613		(1,661,972	)		(10,594	)		26,400			108,526			2,315,253
Cumulative gap				(1,661,972	)		(1,672,566	)		(1,646,166	)		(1,537,640	)		777,613
Interest-sensitivity gap as % of total assets				(41.7	)%		(0.3	)%		0.7	%		2.7	%		58.1	%
Cumulative gap as % of total assets				(41.7	)%		(42.0	)%		(41.3	)%		(38.6	)%		19.5	%

As detailed in the chart, as of December 31, 2021, the Company is forecasted to maintain a liability sensitive position over the next twelve months. However, management expects that liabilities of a demand nature will renew and that it will not be necessary to replace them with significantly higher cost funds.

WILSON BANK HOLDING COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The Company also uses simulation modeling to evaluate both the level of interest rate sensitivity as well as potential balance sheet strategies. The Asset Liability Committee meets quarterly to analyze the interest rate shock simulation. The interest rate simulation model is based on a number of assumptions. The assumptions relate primarily to loan and deposit growth, asset and liability prepayments, the call features of investment securities, interest rates and balance sheet management strategies. 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 Wilson Bank’s net interest income and EVE as of December 31, 2021, assuming an immediate shift in interest rates:

	% Change from Base Case for Immediate Parallel Changes in Rates
	-200 BP(1)			-100 BP(1)			+100 BP			+200 BP			+300 BP
Net interest income		(7.62	)%		(4.07	)%		0.67	%		1.96	%		3.14	%
EVE		(18.26	)		(8.79	)		0.63			0.33			(1.06	)

(1) Currently, some short term interest rates are below the standard down rate scenarios (100, 200 bps). The asset liability model does not calculate negative interest rates and will floor any index at 0.

Each of the above analyses may not, on its own, be an accurate indicator of how our net interest income or EVE will be affected by changes in interest rates. Income associated with interest-earning assets and costs associated with interest-bearing liabilities may not be affected uniformly by changes in interest rates. In addition, the magnitude and duration of changes in interest rates may have a significant impact on net interest income. For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates. Interest rates on certain types of assets and liabilities fluctuate in advance of changes in general market rates, while interest rates on other types may lag behind changes in general market rates. In addition, certain assets, such as adjustable rate mortgage loans, have features (generally referred to as interest rate caps and floors) which limit changes in interest rates. Prepayment and early withdrawal levels also could deviate significantly from those assumed in calculating the maturity of certain instruments. The ability of many borrowers to service their debts also may decrease during periods of rising interest rates. We review each of the above interest rate sensitivity analyses along with several different interest rate scenarios as part of our responsibility to seek to provide a satisfactory, consistent level of profitability within the framework of established liquidity, loan, investment, borrowing, and capital policies.

Management believes that with present maturities, the anticipated growth in deposit base, and the efforts of management in its asset/liability management program, liquidity will not pose a problem in the near term future.

Impact of Inflation

Although interest rates are significantly affected by inflation, for the fiscal years ended December 31, 2021, 2020, and 2019, the inflation rate is believed to have had an immaterial impact on the Company’s results of operations. While inflation has increased to date in 2022 and is forecasted to remain at elevated levels through the rest of the year, outside of its potential impact on our customers, we do not expect such increased inflation to have a material impact on our operations in 2022 other than any effect it may have on interest rates. Continued elevated levels of inflation could also negatively impact our non-interest expense.

Capital Resources, Capital Position and Dividends

At December 31, 2021, total stockholders’ equity was $413,717,000, or 10.37% of total assets, which compares with $380,121,000, or 11.28% of total assets, at December 31, 2020, and $336,984,000, or 12.06% of total assets, at December 31, 2019. The dollar increase in the Company’s stockholders’ equity during 2021 reflects (i) net income of $49,426,000 less cash dividends of $1.35 per share totaling $14,909,000, (ii) the issuance of 186,583 shares of common stock for $11,188,000, as reinvestment of cash dividends, (iii) the issuance of 21,517 shares of common stock pursuant to exercise of stock options for $862,000, (iv) the net change in unrealized loss on available-for-sale securities of $13,480,000, and (v) a stock-based compensation expense of $509,000.

For a discussion of the Company's and Wilson Bank's capital levels and required minimum levels of capital each is required to maintain under applicable regulatory requirements see Note 17, Regulatory Matters and Restrictions on Dividends in the notes to the Company's consolidated financial statements appearing elsewhere in this report.

Holding Company & Stock Information

Wilson Bank Holding Company Directors

James Anthony Patton; James F. Comer; J. Randall Clemons; Jack W. Bell; William P. Jordan, Chairman; John C. McDearman III; H. Elmer Richerson; Clinton M. Swain; Michael G. Maynard; and Deborah Varallo.

Common Stock Market Information

The common stock of Wilson Bank Holding Company is not traded on an exchange nor is there a known active trading market. The number of stockholders of record at February 24, 2022 was 4,563. Based solely on information made available to the Company from limited numbers of buyers and sellers, the Company believes that the following table sets forth the quarterly range of sale prices for the Company’s common stock during the years 2020 and 2021.

On January 2, 2020, a $.60 per share cash dividend was declared and on July 1, 2020, a $.60 per share cash dividend was declared and paid to shareholders of record on those dates. On January 1, 2021, a $.60 per share cash dividend was declared and on July 1, 2021, a $.75 per share cash dividend was declared and paid to shareholders of record on those dates. Future dividends will be dependent upon the Company’s profitability, its capital needs, overall financial condition and economic and regulatory considerations.

Stock Prices

2020	High			Low
First Quarter	$	55.75		$	54.75
Second Quarter	$	56.75		$	54.75
Third Quarter	$	60.00	*	$	56.75
Fourth Quarter	$	58.75		$	56.75

2021	High		Low
First Quarter	$	59.80	$	58.75
Second Quarter	$	60.95	$	59.80
Third Quarter	$	62.10	$	60.95
Fourth Quarter	$	63.25	$	62.10

*Represents one transaction of 377 shares during the third quarter of 2020 of which the Company is aware where the sale price were at least $2.25 higher than any other trade during the quarter. The volume weighted average stock price during the third quarter of 2020 was $56.83.

Annual Meeting and Information Contacts

The Annual Meeting of Shareholders of Wilson Bank Holding Company will be held on Thursday, April 28, 2022 at 6:00 p.m. (CDT) at the Clemons-Richerson Operations Center, located at 105 North Castle Heights Avenue, Lebanon, TN 37087.

For further information concerning Wilson Bank Holding Company or Wilson Bank & Trust, or to obtain a copy of the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission, which is available without charge to shareholders, please contact Lisa Pominski, CFO, Wilson Bank & Trust, P.O. Box 768, Lebanon, Tennessee 37088-0768, phone (615) 443-6612.

WILSON BANK HOLDING COMPANY FINANCIAL HIGHLIGHTS (UNAUDITED)

	*In Thousands, Except Per Share Information*
	*As Of December 31,*
	2021		2020		2019		2018		2017
CONSOLIDATED BALANCE SHEETS:
Total assets end of year	$	3,989,596		3,369,604		2,794,209		2,543,682		2,317,033
Loans, net	$	2,444,282		2,282,766		2,057,175		2,016,005		1,727,253
Securities	$	897,585		580,543		421,145		285,252		365,196
Deposits	$	3,555,071		2,960,595		2,417,605		2,235,655		2,037,745
Stockholders’ equity	$	413,717		380,121		336,984		295,667		267,730

	*Years Ended December 31,*
	2021			2020		2019		2018		2017
CONSOLIDATED STATEMENTS OF EARNINGS:
Interest income	$	129,841			122,968		118,077		103,525		91,020
Interest expense		10,648			17,383		22,647		14,018		8,889
Net interest income		119,193			105,585		95,430		89,507		82,131
Provision for loan losses		1,143			9,696		2,040		4,298		1,681
Net interest income after provision for loan losses		118,050			95,889		93,390		85,209		80,450
Non-interest income		37,096			33,140		28,349		25,248		22,821
Non-interest expense		90,988			80,919		74,628		69,080		60,391
Earnings before income taxes		64,158			48,110		47,111		41,377		42,880
Income taxes		14,732			9,618		11,067		8,783		19,354
Net earnings	$	49,426			38,492		36,044		32,594		23,526
Cash dividends declared	$	14,909			13,013		11,725		9,447		6,729
PER SHARE DATA:
Basic earnings per common share	$	4.44			3.52		3.36		3.09		2.26
Diluted earnings per common share	$	4.43			3.51		3.35		3.08		2.26
Cash dividends	$	1.35			1.20		1.10		0.90		0.65
Book value	$	36.93			34.58		31.24		27.83		25.62
RATIOS:
Return on average stockholders’ equity		12.45	%		10.65		11.31		11.70		9.06
Return on average assets		1.35	%		1.24		1.34		1.35		1.04
Total capital to assets		10.37	%		11.28		12.06		11.62		11.55
Dividends declared per share as a percentage of basic earnings per share		30.41	%		34.09		32.74		29.13		28.76

WILSON BANK HOLDING COMPANY

Consolidated Financial Statements

December 31, 2021 and 2020

(With Independent Auditor’s Report Thereon)

		Stephen M. Maggart, CPA, ABV, CFF
		J. Mark Allen, CPA
		Joshua K. Cundiff, CPA
		Michael T. Holland, CPA, ABV, CFF
		M. Todd Maggart, CPA, ABV, CFF
		James M. Moorehead, CPA
		P. Jason Ricciardi, CPA, CGMA
		David B. von Dohlen, CPA
		T. Keith Wilson, CPA, CITP

To the Shareholders and the Board of Directors of

Wilson Bank Holding Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Wilson Bank Holding Company (the Company) as of December 31, 2021 and 2020, and the related consolidated statements of earnings, comprehensive earnings, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 4, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

1201 DEMONBREUN STREET ▪ SUITE 1220 ▪ NASHVILLE, TENNESSEE 37203-3140 ▪ (615) 252-6100 ▪ Fax ▪ (615) 252-6105

www.maggartpc.com

To the Shareholders and the Board of Directors of

Wilson Bank Holding Company

Page Two

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.

Allowance for Loan Losses

Description of the Matter

The Company’s loan portfolio totaled $2.5 billion as of December 31, 2021 and the associated allowance for loan losses (ALL) was $39.6 million. As discussed in Notes 1 and 2 to the consolidated financial statements, the ALL is established to absorb inherent losses that have been incurred within the existing portfolio of loans. Management’s estimate of inherent losses within the loan portfolio is established using quantitative, as well as qualitative, considerations. The Company’s methodology to determine the ALL considers quantitative calculations including: specific valuation allowances determined in accordance with ASC Topic 310 based on probable losses on specific loans, historical valuation allowances determined in accordance with ASC Topic 450 based on historical loan loss experience for similar loans with similar characteristics and trends, adjusted, as necessary, to reflect the impact of current conditions, and general valuation allowances determined in accordance with ASC Topic 450 based on various risk factors that are internal to the Company. The Company’s ALL methodology also includes qualitative amounts that include valuation allowances based on general economic conditions and other risk factors to the Company.

Management’s estimate of the ALL involves significant estimates and subjective assumptions, which require a high degree of judgment. The level of the allowance is based upon management's evaluation of the loan portfolio, loan loss experience, asset quality trends, known and inherent risks in the loan portfolio, adverse situations that may affect the borrowers' ability to repay the loan (including the timing of future payment), the estimated value of any underlying collateral, composition of the loan portfolio, economic conditions, industry and peer bank loan quality indications and other pertinent factors, including regulatory recommendations. Changes in these assumptions could have a material effect on the Company’s financial results.

How We Addressed the Matter in Our Audit

We obtained an understanding of the Company’s process for establishing the ALL, including the qualitative valuation allowances of the ALL. We evaluated the design and tested the operating effectiveness of related controls over the reliability and accuracy of data used to calculate and estimate the various components of the ALL, the accuracy of the calculation of the ALL, management’s review and approval of methodologies used to establish the ALL, analysis of changes in various components of the ALL relative to changes in the Company’s loan portfolio and economy and evaluation of the overall reasonableness and appropriateness of the ALL. In doing so, we tested the operating effectiveness of review and approval controls in the Company’s governance process designed to identify and assess the qualitative valuation allowances which is meant to measure inherent loan losses associated with factors not captured fully in the other components of the ALL.

To the Shareholders and the Board of Directors of

Wilson Bank Holding Company

Page Three

To test the reasonableness of the qualitative valuation allowances, we performed audit procedures that included, among others testing the appropriateness of the methodologies used by the Company to estimate the ALL, testing the completeness and accuracy of data and information used by the Company in estimating the components of the ALL, evaluating the appropriateness of assumptions used in estimating the qualitative valuation allowances, analyzing the changes in assumptions and various components of the ALL relative to changes in the Company’s loan portfolio and the economy and evaluating the appropriateness and level of the qualitative valuation allowances. For example, specific to the qualitative valuation allowances, we 1) analyzed the changes, assumptions and adjustments made to the qualitative valuation allowances; and 2) evaluated the appropriateness and completeness of risk factors used in determining the amount of the qualitative valuation allowances. We also evaluated the data and information utilized by management to estimate the qualitative valuation allowances by independently obtaining internal and external data and information to assess the appropriateness of the data and information used by management. In addition, we evaluated the overall ALL amount, inclusive of the adjustments for the qualitative valuation allowances, and whether the amount appropriately reflects losses incurred in the loan portfolio as of the consolidated balance sheet date by comparing the overall ALL to those established by similar banking institutions with similar loan portfolios. We also reviewed subsequent events and transactions and considered whether they corroborate or contradict the Company’s conclusion.

/s/ MAGGART & ASSOCIATES, P.C.

We have served as the Company’s auditor since 1987.

Nashville, Tennessee (PCAOB 763)

March 4, 2022

		Stephen M. Maggart, CPA, ABV, CFF
		J. Mark Allen, CPA
		Joshua K. Cundiff, CPA
		Michael T. Holland, CPA, ABV, CFF
		M. Todd Maggart, CPA, ABV, CFF
		James M. Moorehead, CPA
		P. Jason Ricciardi, CPA, CGMA
		David B. von Dohlen, CPA
		T. Keith Wilson, CPA, CITP

To the Shareholders and the Board of Directors of

Wilson Bank Holding Company

Opinion on Internal Control over Financial Reporting

We have audited Wilson Bank Holding Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Wilson Bank Holding Company (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, and the related consolidated statements of earnings, comprehensive earnings, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated March 4, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

1201 DEMONBREUN STREET ▪ SUITE 1220 ▪ NASHVILLE, TENNESSEE 37203-3140 ▪ (615) 252-6100 ▪ Fax ▪ (615) 252-6105

www.maggartpc.com

To the Shareholders and the Board of Directors of

Wilson Bank Holding Company

Page Two

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ MAGGART & ASSOCIATES, P.C.

Nashville, Tennessee (PCAOB 763)

March 4, 2022

WILSON BANK HOLDING COMPANY

Consolidated Balance Sheets

December 31, 2021 and 2020

	*Dollars in thousands*
	*2021*			*2020*
ASSETS

Loans, net of allowance for loan losses of $39,632 and $38,539, respectively	$	2,444,282			2,282,766
Available-for-sale securities, at market (amortized cost $906,135 and $570,842, respectively)		897,585			580,543
Loans held for sale		11,843			19,474
Interest bearing deposits		400,940			304,750
Federal funds sold		27,055			675
Restricted equity securities, at cost		5,089			5,089
Total earning assets		3,786,794			3,193,297
Cash and due from banks		25,423			33,431
Premises and equipment, net		62,846			58,202
Accrued interest receivable		7,641			7,516
Deferred income taxes		12,792			7,089
Bank owned life insurance		46,206			35,197
Goodwill		4,805			4,805
Other assets		43,089			30,067
Total assets	$	3,989,596			3,369,604
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	3,555,071			2,960,595
Federal Home Loan Bank advances		—			3,638
Accrued interest and other liabilities		20,808			25,250
Total liabilities		3,575,879			2,989,483
Stockholders’ equity:
Common stock, par value $2.00 per share, authorized 50,000,000 shares, 11,201,504 and 10,993,404 shares issued and outstanding, respectively		22,403			21,987
Additional paid-in capital		105,177			93,034
Retained earnings		292,452			257,935
Net unrealized gains (losses) on available-for-sale securities, net of taxes of $2,235 and $2,536, respectively		(6,315	)		7,165
Total stockholders’ equity		413,717			380,121
Total liabilities and stockholders’ equity	$	3,989,596			3,369,604

See accompanying notes to consolidated financial statements.

WILSON BANK HOLDING COMPANY

Consolidated Statements of Earnings

Three Years Ended December 31, 2021

	*Dollars In Thousands (except per share data)*
	*2021*		*2020*		*2019*
Interest income:
Interest and fees on loans	$	118,676		113,224		105,783
Interest and dividends on securities:
Taxable securities		8,922		7,272		8,559
Exempt from Federal income taxes		1,229		1,102		773
Interest on loans held for sale		438		616		325
Interest on Federal funds sold		13		56		275
Interest on interest bearing deposits		445		582		2,164
Interest and dividends on restricted equity securities		118		116		198
Total interest income		129,841		122,968		118,077
Interest expense:
Interest on negotiable order of withdrawal accounts		878		1,314		2,311
Interest on money market accounts and other savings accounts		2,027		4,163		6,855
Interest on certificates of deposit and individual retirement accounts		7,610		10,939		12,896
Interest on Federal funds purchased		—		—		4
Interest on Federal Home Loan Bank advances		133		967		581
Total interest expense		10,648		17,383		22,647
Net interest income before provision for loan losses		119,193		105,585		95,430
Provision for loan losses		1,143		9,696		2,040
Net interest income after provision for loan losses		118,050		95,889		93,390
Non-interest income		37,096		33,140		28,349
Non-interest expense		90,988		80,919		74,628
Earnings before income taxes		64,158		48,110		47,111
Income taxes		14,732		9,618		11,067
Net earnings	$	49,426		38,492		36,044
Basic earnings per common share	$	4.44		3.52		3.36
Diluted earnings per common share	$	4.43		3.51		3.35
Weighted average common shares outstanding:
Basic		11,131,897		10,927,065		10,743,269
Diluted		11,162,956		10,953,746		10,761,467

See accompanying notes to consolidated financial statements.

WILSON BANK HOLDING COMPANY

Consolidated Statements of Comprehensive Earnings

Three Years Ended December 31, 2021

	*Dollars In Thousands*
	*2021*			*2020*			*2019*
Net earnings	$	49,426			38,492			36,044
Other comprehensive earnings (losses):
Unrealized gains (losses) on available-for-sale securities		(18,223	)		9,645			11,101
Reclassification adjustment for net losses (gains) included in net earnings		(28	)		(882	)		268
Tax effect		4,771			(2,291	)		(2,971	)
Other comprehensive earnings (losses)		(13,480	)		6,472			8,398
Comprehensive earnings	$	35,946			44,964			44,442

See accompanying notes to consolidated financial statements.

WILSON BANK HOLDING COMPANY

Consolidated Statements of Changes in Stockholders’ Equity

Three Years Ended December 31, 2021

	*Dollars In Thousands*
	*Common Stock*			*Additional Paid In Capital*			*Retained Earnings*			*Net Unrealized Gain (Loss) On Available For Sale Securities*			*Total*
Balance December 31, 2018	$	21,248			73,960			208,164			(7,705	)		295,667
Cash dividends declared, $1.10 per share		—			—			(11,725	)		—			(11,725	)
Issuance of 179,199 shares of common stock pursuant to dividend reinvestment plan		358			8,776			—			—			9,134
Issuance of 21,764 shares of common stock pursuant to exercise of stock options		44			731			—			—			775
Share based compensation expense		—			347			—			—			347
Net change in fair value of available-for-sale securities during the year, net of taxes of $(2,971)		—			—			—			8,398			8,398
Reclassification adjustment for the adoption of lease standard		—			—			(27	)		—			(27	)
Repurchase of 31,774 common shares		(64	)		(1,565	)		—			—			(1,629	)
Net earnings for the year		—			—			36,044			—			36,044
Balance December 31, 2019		21,586			82,249			232,456			693			336,984
Cash dividends declared, $1.20 per share		—			—			(13,013	)		—			(13,013	)
Issuance of 180,424 shares of common stock pursuant to dividend reinvestment plan		361			9,695			—			—			10,056
Issuance of 19,981 shares of common stock pursuant to exercise of stock options		40			678			—			—			718
Share based compensation expense		—			412			—			—			412
Net change in fair value of available-for-sale securities during the year, net of taxes of $(2,291)		—			—			—			6,472			6,472
Net earnings for the year		—			—			38,492			—			38,492
Balance December 31, 2020		21,987			93,034			257,935			7,165			380,121
Cash dividends declared, $1.35 per share		—			—			(14,909	)		—			(14,909	)
Issuance of 186,583 shares of common stock pursuant to dividend reinvestment plan		373			10,815			—			—			11,188
Issuance of 21,517 shares of common stock pursuant to exercise of stock options		43			819			—			—			862
Share based compensation expense		—			509			—			—			509
Net change in fair value of available-for-sale securities during the year, net of taxes of $4,771		—			—			—			(13,480	)		(13,480	)
Net earnings for the year		—			—			49,426			—			49,426
Balance December 31, 2021	$	22,403			105,177			292,452			(6,315	)		413,717

See accompanying notes to consolidated financial statements.

WILSON BANK HOLDING COMPANY

Consolidated Statements of Cash Flows

Three Years Ended December 31, 2021

Increase (Decrease) in Cash and Cash Equivalents

	*Dollars In Thousands*
	*2021*			*2020*			*2019*
OPERATING ACTIVITIES
Consolidated net income	$	49,426		$	38,492		$	36,044
Adjustments to reconcile consolidated net income to net cash provided by operating activities
Provision for loan losses		1,143			9,696			2,040
Deferred income taxes provision		(932	)		(3,304	)		(478	)
Depreciation and amortization of premises and equipment		4,235			4,250			3,984
Loss on disposal of premises and equipment		43			63			128
Net amortization of securities		5,377			4,588			2,510
Net realized losses (gains) on sales of securities		(28	)		(882	)		268
Gains on mortgage loans sold, net		(9,997	)		(9,560	)		(6,802	)
Stock-based compensation expense		1,428			1,180			786
Loss (gain) on other real estate		15			(658	)		48
Loss (gain) on sale of repossessed assets		(6	)		4			4
Increase in value of life insurance and annuity contracts		(1,109	)		(959	)		(723	)
Mortgage loans originated for resale		(215,813	)		(213,483	)		(160,921	)
Proceeds from sale of mortgage loans		233,441			221,748			157,028
Gain on lease modification		—			(29	)		—
Right of use asset amortization		387			376			268
Change in
Accrued interest receivable		(125	)		(1,571	)		779
Other assets		(4,458	)		(805	)		258
Accrued interest payable		(1,458	)		(763	)		682
Other liabilities		(121	)		1,855			443
TOTAL ADJUSTMENTS		12,022			11,746			302
NET CASH PROVIDED BY OPERATING ACTIVITIES		61,448			50,238			36,346
INVESTING ACTIVITIES
Activities in available for sale securities
Purchases		(530,155	)		(409,996	)		(255,432	)
Sales		39,652			54,870			37,325
Maturities, prepayments and calls		149,861			200,785			90,805
Purchase of restricted equity securities		—			(409	)		(1,668	)
Net increase in loans		(164,095	)		(236,411	)		(43,568	)
Purchase of buildings, leasehold improvements, and equipment		(8,922	)		(2,220	)		(6,044	)
Proceeds from sale of other assets		109			9			14
Proceeds from sale of other real estate		167			2,307			952
Purchase of life insurance and annuity contracts		(15,079	)		(6,687	)		—
Increase in other investments		(2,000	)		—			—
NET CASH USED IN INVESTING ACTIVITIES		(530,462	)		(397,752	)		(177,616	)
FINANCING ACTIVITIES
Net change in deposits - non-maturing		612,696			563,605			163,721
Net change in deposits - time		(18,220	)		(20,615	)		18,229
Net change in Federal Home Loan Bank Advances		(3,638	)		(19,975	)		23,613
Change in escrow balances		(4,403	)		5,824			(269	)
Issuance of common stock related to exercise of stock options		862			718			775
Issuance of common stock pursuant to dividend reinvestment plan		11,188			10,056			9,134
Repurchase of common stock		—			—			(1,629	)
Cash dividends paid on common stock		(14,909	)		(13,013	)		(11,725	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		583,576			526,600			201,849
NET CHANGE IN CASH AND CASH EQUIVALENTS		114,562			179,086			60,579
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR		338,856			159,770			99,191
CASH AND CASH EQUIVALENTS - END OF YEAR	$	453,418		$	338,856		$	159,770

See accompanying notes to consolidated financial statements.

WILSON BANK HOLDING COMPANY

Consolidated Statements of Cash Flows, Continued

Three Years Ended December 31, 2021

Increase (Decrease) in Cash and Cash Equivalents

	*Dollars In Thousands*
	*2021*			*2020*		*2019*
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	12,106		$	18,146	$	21,965
Taxes	$	16,827		$	13,156	$	11,731
Non-cash investing and financing activities:
Change in fair value of securities available-for-sale, net of taxes of $4,771 in 2021, $(2,291) in 2020, and $(2,971) in 2019	$	(13,480	)	$	6,472	$	8,398
Non-cash transfers from loans to other real estate	$	182		$	992	$	884
Non-cash transfers from other real estate to loans	$	-		$	40	$	544
Non-cash transfers from loans to other assets	$	129		$	14	$	18

See accompanying notes to consolidated financial statements.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements

December 31, 2021, 2020 and 2019

(1)

Summary of Significant Accounting Policies

The accounting and reporting policies of Wilson Bank Holding Company (“the Company”) and its wholly owned subsidiary, Wilson Bank & Trust (“Wilson Bank” or "the Bank"), are in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and conform to general practices within the banking industry. The following is a brief summary of the significant policies.

(a)

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary Wilson Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.

(b)

Nature of Operations

Wilson Bank operates under a state bank charter and provides full banking services. As a Tennessee state-chartered bank that is not a member of the Federal Reserve, Wilson Bank is subject to regulations of the Tennessee Department of Financial Institutions and the Federal Deposit Insurance Corporation (“FDIC”). The areas served by Wilson Bank include Wilson County, DeKalb County, Rutherford County, Smith County, Trousdale County, Putnam County, Sumner County, Davidson County and Williamson County, Tennessee and surrounding counties in Middle Tennessee. Services are provided at the main office and twenty-seven branch locations.

(c)

Use of Estimates

In preparing consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of deferred tax assets and other real estate, other-than-temporary impairments of securities, and the fair value of financial instruments.

(d)

Significant Group Concentrations of Credit Risk

Most of the Company’s activities are with customers located within Middle Tennessee. The types of securities in which the Company invests are described in note 3. The types of lending in which the Company engages are described in note 2. The Company does not have any significant concentrations to any one industry or customer other than as disclosed in note 2.

Residential 1-4 family, commercial real estate and construction mortgage loans, represented 27%, 35% and 24% and 23%, 36% and 21% of the loan portfolio at December 31, 2021 and 2020, respectively.

(e)

Loans

The Company grants mortgage, commercial and consumer loans to customers. A substantial portion of the loan portfolio is represented by mortgage loans throughout Middle Tennessee. The ability of the Company’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in this area.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for unearned income, the allowance for loan losses, and any unamortized deferred fees or costs on originated loans, and premiums or discounts on purchased loans. Interest income is accrued on the unpaid principal balance.

Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized on a straight line basis over the respective term of the loan.

As part of its routine credit monitoring process, the Company performs regular credit reviews of the loan portfolio and loans receive risk ratings by the assigned credit officer, which are subject to validation by the Company's independent loan review department. Risk ratings are categorized as pass, special mention, substandard or doubtful. The Company believes that its categories follow those outlined by the FDIC, Wilson Bank's primary federal regulator.

Generally the accrual of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Credit card loans and other personal loans are typically charged off no later than when they become 180 days past due. Past due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements

December 31, 2021, 2020 and 2019

(f)

Allowance for Loan Losses

Management provides for loan losses by establishing an allowance. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a quarterly basis by management and is based upon management’s quarterly review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

In assessing the adequacy of the allowance, we also consider the results of our ongoing independent loan review process. We undertake this process both to ascertain whether there are loans in the portfolio whose credit quality has weakened over time and to assist in our overall evaluation of the risk characteristics of the entire loan portfolio. Our loan review process includes the judgment of management, independent loan reviewers, and reviews that may have been conducted by third-party reviewers. We incorporate relevant loan review results in the loan impairment determination. In addition, regulatory agencies, as an integral part of their examination process, will periodically review the Company’s allowance for loan losses and may require the Company to record adjustments to the allowance based on their judgment about information available to them at the time of their examinations.

In addition to the independent loan review process, the aforementioned risk ratings are subject to continual review by loan officers to determine that the appropriate risk ratings are being utilized in our allowance for loan loss process. Each risk rating is also subject to review by our independent loan review department. Currently, our independent loan review department targets reviews of 100% of existing loan relationships with aggregate debt of $2.0 million and greater and new loans with aggregate debt of $500,000 and greater. In addition, our independent loan review department periodically targets particular portfolio segments, loans assigned to a particular lending officer, past due loans, and loans with four or more renewals.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are individually classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is based on historical charge-off experience, historical loan loss factors, loss experience of various loan segments, and other adjustments based on management’s assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial, mortgage and agricultural loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer loans for impairment disclosures, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower. All other loans and troubled debt restructurings over $500,000 and $100,000, respectively are individually evaluated for impairment.

Troubled debt restructurings greater than $100,000 are individually evaluated for impairment and included in the separately identified impairment disclosures. TDRs are measured at the present value of estimated future cash flows using the loan's effective rate at inception. If a TDR is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For TDRs that subsequently default, the Company determines the amount of the allowance on that loan in accordance with the accounting policy for the allowance for loan losses on loans individually identified as impaired. The Company incorporates recent historical experience related to TDRs, including the performance of TDRs that subsequently default, into the calculation of the allowance by loan portfolio segment.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(g)

Debt and Equity Securities

Certain debt securities that management has the positive intent and ability to hold to maturity are classified as “held-to-maturity” and recorded at amortized cost. Trading securities are recorded at fair value with changes in fair value included in earnings. Securities not classified as held-to-maturity or trading, including equity securities with readily determinable fair values, are classified as “available-for-sale” and recorded at fair value based on available market prices, with unrealized gains and losses excluded from earnings and reported in other comprehensive income on an after-tax basis. Securities classified as “available-for-sale” are held for indefinite periods of time and may be sold in response to movements in market interest rates, changes in the maturity or mix of Company assets and liabilities or demand for liquidity. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Other-than-temporary Impairment—Impaired securities are assessed quarterly for the presence of other-than-temporary impairment (“OTTI”). A decline in the fair value of any available-for-sale or held-to-maturity security below cost that is deemed to be other-than-temporary results in a reduction in the carrying amount of the security. To determine whether OTTI has occurred, management considers factors such as (1) length of time and extent that fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, and (3) Wilson Bank’s ability and intent to hold the security for a period sufficient to allow for any anticipated recovery in fair value. If management deems a security to be OTTI, management reviews the present value of the future cash flows associated with the security. A shortfall of the present value of the cash flows expected to be collected in relation to the amortized cost basis is referred to as a credit loss. If a credit loss is identified, the credit loss is recognized as a charge to earnings and a new cost basis for the security is established. If management concludes that no credit loss exists and it is not “more-likely-than-not” that the Company will be required to sell the security before the recovery of the security’s cost basis, then the security is not deemed OTTI and the shortfall is recorded as a component of equity.

No securities have been classified as trading securities or held-to-maturity securities at December 31, 2021 or 2020.

(h)

Equity Securities

Equity securities are carried at fair value, with changes in fair value reported in net income. Equity securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment.

(i)

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

(j)

Federal Home Loan Bank Stock

The Company, as a member of the Federal Home Loan Bank (“FHLB”) Cincinnati system, is required to maintain an investment in capital stock of the FHLB. Based on redemption provisions of the FHLB, the stock has no quoted market value and is carried at par value, which approximates its fair value. Management reviews the investment for impairment based on the ultimate recoverability of the cost basis in the FHLB stock. As of December 31, 2021, this minimum required investment was valued at approximately $3.4 million. Stock redemptions are at the discretion of the FHLB.

(k)

Loans Held for Sale

Mortgage loans held for sale are carried at fair value. The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

(l)

Premises and Equipment

Premises and equipment are stated at cost. Depreciation is computed primarily by the straight-line method over the estimated useful lives of the related assets ranging from 3 to 40 years. Gains or losses realized on items retired and otherwise disposed of are credited or charged to operations and cost and related accumulated depreciation are removed from the asset and accumulated depreciation accounts.

Expenditures for major renovations and improvements of premises and equipment are capitalized and those for maintenance and repairs are charged to earnings as incurred.

(m)

Foreclosed Assets

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less the estimated cost to sell at the date the Company acquires the property, establishing a new cost basis. Subsequent to their acquisition by the Company, valuations of these assets are periodically performed by management, and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance [i.e. any direct write-downs] are included within non-interest expense.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(n)

Goodwill and Intangible Assets

The Financial Accounting Standards Board “FASB” Accounting Standards Codification “ASC” 350, Goodwill and Other Intangible Assets requires that management determine the allocation of intangible assets into identifiable groups at the date of acquisition and that appropriate amortization periods be established. Under the provisions of FASB ASC 350, goodwill is not to be amortized; rather, it is to be monitored for impairment and written down to the impairment value at the time impairment occurs. The Company determined that no impairment loss needed to be recognized related to its goodwill at December 31, 2021 and December 31, 2020.

(o)

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, interest-bearing deposits with maturities fewer than 90 days, amounts due from banks and Federal funds sold. Generally, Federal funds sold are purchased and sold for one day periods. Management makes deposits only with financial institutions it considers to be financially sound.

(p)

Long-Term Assets

Premises and equipment, intangible assets, and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

(q)

Bank Owned Life Insurance

The Bank has purchased life insurance policies on certain key executives. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

(r)

Income Taxes

The Company accounts for Income Taxes in accordance with income tax accounting guidance (FASB ASC 740, Income Taxes). The Company follows accounting guidance related to accounting for uncertainty in income taxes, which sets out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions.

The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term "more-likely-than-not" means a likelihood of more than 50 percent. The terms "examined" and "upon examination" also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more-likely-than-not that some portion or all of a deferred tax asset will not be realized.

The Company recognizes interest and penalties on income taxes as a component of income tax expense.

(s)

Derivatives

Mortgage Banking Derivatives

Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives. The fair value of the interest rate lock is recorded at the time the commitment to fund the mortgage loan is executed and is adjusted for the expected exercise of the commitment before the loan is funded. Fair values of these mortgage derivatives are estimated based on changes in mortgage interest rates from the date the interest rate on the loan is locked. The Company enters into forward commitments for the future delivery of mortgage loans when interest rate locks are entered into, in order to hedge the change in interest rates resulting from its commitments to fund the loans. Changes in the fair values of these derivatives are included in net gains on sale of mortgage loans.

Fair Value Hedges

For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged asset or liability attributable to the hedged risk are recognized in current earnings. The gain or loss on the derivative instrument is presented on the same income statement line item as the earnings effect of the hedged item. The Company utilizes interest rate swaps designated as fair value hedges to mitigate the effect of changing interest rates on the fair values of fixed rate loans. The hedging strategy on loans converts the fixed interest rates to LIBOR-based variable interest rates. These derivatives are designated as partial term hedges of selected cash flows covering specified periods of time prior to the maturity dates of the hedged loans.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(t)

Equity-Based Incentives

Stock compensation accounting guidance (FASB ASC 718, “Compensation—Stock Compensation”) requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the grant date fair value of the equity or liability instruments issued. The stock compensation accounting guidance covers a wide range of share-based compensation arrangements including stock options, restricted share plans, performance-based awards, cash-settled stock appreciation rights (SARs), and employee share purchase plans. Because cash-settled SARs do not give the grantee the choice of receiving stock, all cash-settled SARs are accounted for as liabilities, not equity, as compensation is accrued over the requisite service period.

The stock compensation accounting guidance requires that compensation cost for all stock awards be calculated and recognized over the employees’ service period, generally defined as the vesting period. For awards with graded-vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options and cash-settled SARs.

(u)

Retirement Plans

Employee 401(k) and profit sharing plan expense is the amount of matching contributions. Deferred compensation and supplemental retirement plan expense allocates the benefits over years of service.

(v)

Advertising Costs

Advertising costs are expensed as incurred by the Company and totaled $2,736,000, $2,487,000 and $2,498,000 for 2021, 2020 and 2019, respectively.

(w)

Earnings Per Share

Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects additional potential common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method.

(x)

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available for sale, net of taxes, which are also recognized as separate components of equity.

(y)

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.

(z)

Restrictions on Cash

Cash on hand or on deposit with the Federal Reserve Bank was required to meet regulatory reserve and clearing requirements.

(aa)

Segment Reporting

Management analyzes the operations of the Company assuming one operating segment, community lending services.

(bb)

Fair Value of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 22 - Disclosures About Fair Value of Financial Instruments of the consolidated financial statements. Fair value estimates involve uncertainties and matters of significant judgment. Changes in assumptions or in market conditions could significantly affect the estimates.

(cc)

Reclassification

Certain reclassifications have been made to the 2020 and 2019 figures to conform to the presentation for 2021.

(dd)

Off-Balance-Sheet Financial Instruments

In the ordinary course of business, Wilson Bank has entered into off-balance-sheet financial instruments consisting of commitments to extend credit, commitments under credit card arrangements, commercial letters of credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they are funded or related fees are incurred or received.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(ee)

Accounting Standard Updates

ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 along with several other subsequent codification updates related to accounting for credit losses, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, ASU 2016- 13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

ASU 2016-13 was originally to become effective for the Company on January 1, 2020. On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security ("CARES") Act. The law contains several provisions applicable to companies like the Company. Among others, it gives lenders, including the Company, the option to defer the implementation of ASU 2016-13, which is known as the Current Expected Credit Losses (CECL) standard, until 60 days after the declaration of the end of the public health emergency related to the COVID-19 pandemic or December 31, 2020, whichever comes first. On December 27, 2020, President Trump signed into law the Coronavirus Response and Relief Supplemental Appropriations Act. The law contains several provisions applicable to companies like the Company. Among them, it gives lenders, including the Company, the option to further defer the implementation of ASU 2016-13, until the fiscal year beginning after January 1, 2022. In addition, the Securities and Exchange Commission (SEC) staff has stated that opting to delay the implementation of CECL shall be considered to be in accordance with U.S. GAAP. As a result, the Company has elected to delay implementation of CECL until January 1, 2022.

We currently believe the adoption of ASU 2016-13 would have resulted in an approximately 2 - 6% increase in our allowance for loan losses as of January 1, 2020. That estimated increase is a result of changing from an “incurred loss” model, which encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. As of December 31, 2021, we currently believe the adoption of ASU 2016-13 would have resulted in a slight increase in our allowance for loan losses over the level recorded at December 31, 2021.

Prior to the CARES Act being signed and the Company’s decision to delay the implementation of CECL, the Company was completing its CECL implementation plan with a cross-functional working group, under the direction of the Chief Credit Officer along with our Chief Financial Officer. The working group also included individuals from various functional areas including credit, risk management, accounting and information technology, among others. The Company’s implementation plan included assessment and documentation of processes, internal controls and data sources; model development, documentation and validation; and system configuration, among other things. The Company contracted with a third-party vendor to assist it in the implementation of CECL. Implementation efforts have been finalized and controls and processes are in place. The ultimate impact of the adoption of ASU 2016-13 could differ from our current expectation. Furthermore, ASU 2016- 13 will necessitate that we establish an allowance for expected credit losses for available-for-sale securities and other financial assets and it also applies to off-balance sheet credit exposure like loan commitments and other investments; however, we do not expect these allowances to be significant. Pursuant to an interim final rule issued on March 27, 2020 by the federal banking regulatory agencies, the Company has the option to phase in over a three-year period the transition adjustments to capital resulting from the adoption of CECL for regulatory capital purposes. If adopted, the cumulative amount of the transition adjustments will become fixed at the start of the three-year period, and will be phased out of the regulatory capital calculations evenly over such period, with 75% recognized in year one, 50% recognized in year two, and 25% recognized in year three. The Company will not need to take advantage of this option. The adoption of ASU 2016-13 is not expected to have a significant impact on our regulatory capital ratios.

ASU 2020-4, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-4 provides optional expedients and exceptions for accounting related to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform and do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. ASU 2020-4 was effective upon issuance and generally can be applied through December 31, 2022. The adoption of ASU 2020- 4 did not significantly impact our financial statements.

ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs.” ASU 2020-08 clarifies the accounting for the amortization of purchase premiums for callable debt securities with multiple call dates. ASU 2020-8 was effective for us on January 1, 2021 and did not have a significant impact on our financial statements.

ASU 2021-01, “Reference Rate Reform (Topic 848): Scope.” ASU 2021-01 clarifies that certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU 2021-01 also amends the expedients and exceptions in ASC 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. ASU 2021-01 was effective upon issuance and generally can be applied through December 31, 2022. The adoption of ASU 2021-01 did not significantly impact our financial statements.

Other than those previously discussed, there were no other recently issued accounting pronouncements that are expected to materially impact the Company.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(2)

Loans and Allowance for Loan Losses

The classification of loans at December 31, 2021 and 2020 is as follows:

	*In Thousands*
	*2021*			*2020*
Mortgage loans on real estate:
Residential 1-4 family	$	679,536			535,994
Multifamily		29,300			111,646
Commercial		879,373			837,766
Construction		603,292			488,626
Farmland		9,367			15,429
Second mortgages		10,043			8,433
Equity lines of credit		92,229			78,889
Total mortgage loans on real estate		2,303,140			2,076,783
Commercial loans		116,717			172,811
Agricultural loans		1,438			1,206
Consumer installment loans:
Personal		59,513			66,193
Credit cards		5,281			4,324
Total consumer installment loans		64,794			70,517
Other loans		9,849			9,283
		2,495,938			2,330,600
Net deferred loan fees		(12,024	)		(9,295	)
Total loans		2,483,914			2,321,305
Less: Allowance for loan losses		(39,632	)		(38,539	)
Loans, net	$	2,444,282			2,282,766

At December 31, 2021, variable rate and fixed rate loans totaled $1,916,960,000 and $578,978,000, respectively. At December 31, 2020, variable rate and fixed rate loans totaled $1,777,303,000 and $553,297,000, respectively.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

Risk characteristics relevant to each portfolio segment are as follows:

Construction and land development: Loans for non-owner-occupied real estate construction or land development are generally repaid through cash flow related to the operation, sale or refinance of the property. The Company also finances construction loans for owner-occupied properties. A portion of the Company’s construction and land portfolio segment is comprised of loans secured by residential product types (residential land and single-family construction). With respect to construction loans to developers and builders that are secured by non-owner occupied properties that the Company may originate from time to time, the Company generally requires the borrower to have had an existing relationship with the Company and have a proven record of success. Construction and land development loans are underwritten utilizing independent appraisal reviews, sensitivity analysis of absorption and lease rates, market sales activity, and financial analysis of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the complete project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

1-4 family residential real estate: Residential real estate loans represent loans to consumers or investors to finance a residence. These loans are typically financed on 15 to 30 year amortization terms, but generally with shorter maturities of 5 to 15 years. Many of these loans are extended to borrowers to finance their primary or secondary residence. Loans to an investor secured by a 1-4 family residence will be repaid from either the rental income from the property or from the sale of the property. This loan segment also includes closed-end home equity loans that are secured by a first or second mortgage on the borrower’s residence. This allows customers to borrow against the equity in their home. Loans in this portfolio segment are underwritten and approved based on a number of credit quality criteria including limits on maximum Loan-to-Value (LTV), minimum credit scores, and maximum debt to income. Real estate market 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 HELOC: This loan segment includes open-end home equity loans that are secured by a first or second mortgage on the borrower’s residence. This allows customers to borrow against the equity in their home utilizing a revolving line of credit. These loans are underwritten and approved based on a number of credit quality criteria including limits on maximum LTV, minimum credit scores, and maximum debt to income. Real estate market values as of the time the loan is made directly affect the amount of credit extended and, in addition, changes in these residential property values impact the depth of potential losses in this portfolio segment. Because of the revolving nature of these loans, as well as the fact that many represent second mortgages, this portfolio segment can contain more risk than the amortizing 1-4 family residential real estate loans.

Multi-family and commercial real estate: Multi-family and commercial real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans (which are discussed below), in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate.

Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type. This diversity helps reduce the Company’s exposure to adverse economic events that affect any single market or industry. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. The Company also utilizes third-party experts to provide insight and guidance about economic conditions and trends affecting the market areas it serves. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans. Non-owner occupied commercial real estate loans are loans secured by multifamily and commercial properties where the primary source of repayment is derived from rental income associated with the property (that is, loans for which 50 percent or more of the source of repayment comes from third party, nonaffiliated rental income) or the proceeds of the sale, refinancing, or permanent financing of the property. These loans are made to finance income-producing properties such as apartment buildings, office and industrial buildings, and retail properties. Owner-occupied commercial real estate loans are loans where the primary source of repayment is the cash flow from the ongoing operations and business activities conducted by the party, or affiliate of the party, who owns the property.

Commercial and industrial: The commercial and industrial loan portfolio segment includes commercial and industrial loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases or other expansion projects. Also included in this category are PPP loans guaranteed by the SBA, which totaled $5.0 million at December 31, 2021. Collection risk in this portfolio is driven by the creditworthiness of underlying borrowers, particularly cash flow from customers’ business operations. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and usually incorporates a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Consumer: The consumer loan portfolio segment includes non-real estate secured direct loans to consumers for household, family, and other personal expenditures. Consumer loans may be secured or unsecured and are usually structured with short or medium term maturities. These loans are underwritten and approved based on a number of consumer credit quality criteria including limits on maximum LTV on secured consumer loans, minimum credit scores, and maximum debt to income. Many traditional forms of consumer installment credit have standard monthly payments and fixed repayment schedules of one to five years. These loans are made with either fixed or variable interest rates that are based on specific indices. Installment loans fill a variety of needs, such as financing the purchase of an automobile, a boat, a recreational vehicle or other large personal items, or for consolidating debt. These loans may be unsecured or secured by an assignment of title, as in an automobile loan, or by money in a bank account. In addition to consumer installment loans, this portfolio segment also includes secured and unsecured personal lines of credit as well as overdraft protection lines. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

The following tables present the Company’s nonaccrual loans, credit quality indicators and past due loans as of December 31, 2021 and 2020.

Loans on Nonaccrual Status

	In Thousands
	2021		2020
Residential 1-4 family	$	—		1,022
Multifamily		—		—
Commercial real estate		—		311
Construction		—		—
Farmland		—		—
Second mortgages		—		—
Equity lines of credit		—		—
Commercial		—		—
Agricultural, installment and other		—		—
Total	$	—		1,333

At December 31, 2021, the Company had no impaired loans on non-accruing interest status. At December 31, 2020, the Company had two impaired loans totaling $1,333,000 that were on non-accruing interest status. In each case, at the date such loans were placed on nonaccrual status, the Company reversed all previously accrued interest income.

The impact on net interest income for these loans was not material to the Company’s results of operations for the years ended December 31, 2021, 2020 and 2019.

Potential problem loans, which include nonperforming loans, amounted to approximately $7.7 million at December 31, 2021 compared to $8.2 million at December 31, 2020. 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 Company’s primary federal regulator, for loans classified as special mention, substandard, or doubtful, excluding the impact of nonperforming loans.

The following table presents our loan balances by primary loan classification and the amount classified within each risk rating category. Pass rated loans include all credits other than those included in special mention, substandard and doubtful which are defined as follows:

•

Special mention loans have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.


	•	Substandard loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize liquidation of the debt. Substandard loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.


	•	Doubtful loans have all the characteristics of substandard loans with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The Company considers all doubtful loans to be impaired and places the loans on nonaccrual status.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

Credit Quality Indicators

The following table presents loan balances classified within each risk rating category by primary loan type as of December 31, 2021 and December 31, 2020.

	*In Thousands*
																	*Agricultural,*
	*Residential 1-4*				*Commercial*						*Second*		*Equity Lines*				*Installment and*
	*Family*		*Multifamily*		*Real Estate*		*Construction*		*Farmland*		*Mortgages*		*of Credit*		*Commercial*		*Other*		*Total*
Credit Risk Profile by Internally Assigned Grade
December 31, 2021
Pass	$	672,676		29,300		879,109		603,267		9,270		9,851		92,208		116,668		75,903		2,488,252
Special mention		5,405		—		—		25		68		161		11		49		136		5,855
Substandard		1,455		—		264		—		29		31		10		—		42		1,831
Total	$	679,536		29,300		879,373		603,292		9,367		10,043		92,229		116,717		76,081		2,495,938
December 31, 2020
Pass	$	529,546		111,646		837,028		488,571		15,301		8,148		78,565		172,779		80,770		2,322,354
Special mention		2,745		—		149		27		79		169		314		—		156		3,639
Substandard		3,703		—		589		28		49		116		10		32		80		4,607
Total	$	535,994		111,646		837,766		488,626		15,429		8,433		78,889		172,811		81,006		2,330,600

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

Age Analysis of Past Due Loans

	*In Thousands*
	*30-59 Days Past Due*		*60-89 Days Past Due*		*Nonaccrual and Greater Than 90 Days*		*Total Nonaccrual and Past Due*		*Current*		*Total Loans*		*Recorded Investment Greater Than 90 Days and Accruing*
December 31, 2021
Residential 1-4 family	$	1,951		169		357		2,477		677,059		679,536	$	357
Multifamily		—		—		—		—		29,300		29,300		—
Commercial real estate		—		—		—		—		879,373		879,373		—
Construction		1,154		215		—		1,369		601,923		603,292		—
Farmland		—		—		—		—		9,367		9,367		—
Second mortgages		121		—		—		121		9,922		10,043		—
Equity lines of credit		170		—		9		179		92,050		92,229		9
Commercial		58		81		—		139		116,578		116,717		—
Agricultural, installment and other		288		99		23		410		75,671		76,081		23
Total	$	3,742		564		389		4,695		2,491,243		2,495,938	$	389
December 31, 2020
Residential 1-4 family	$	2,634		511		1,818		4,963		531,031		535,994	$	796
Multifamily		—		—		—		—		111,646		111,646		—
Commercial real estate		—		—		460		460		837,306		837,766		149
Construction		768		—		44		812		487,814		488,626		44
Farmland		—		—		—		—		15,429		15,429		—
Second mortgages		265		—		—		265		8,168		8,433		—
Equity lines of credit		31		302		—		333		78,556		78,889		—
Commercial		114		104		—		218		172,593		172,811		—
Agricultural, installment and other		363		81		60		504		80,502		81,006		60
Total	$	4,175		998		2,382		7,555		2,323,045		2,330,600	$	1,049

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

Transactions in the allowance for loan losses for the years ended December 31, 2021 and 2020 are summarized as follows:

	*In Thousands*
																						*Agricultural,*
	*Residential 1-4*					*Commercial*									*Second*		*Equity Lines*					*Installment and*
	*Family*		*Multifamily*			*Real Estate*			*Construction*			*Farmland*			*Mortgages*		*of Credit*		*Commercial*			*Other*			*Total*
December 31, 2021
Allowance for loan losses:
Beginning balance	$	8,098		1,541			16,802			7,936			154			105		997		1,378			1,528			38,539
Provision		958		(1,145	)		(352	)		1,356			(60	)		13		101		(37	)		309			1,143
Charge-offs		—		—			—			(23	)		—			—		—		(33	)		(992	)		(1,048	)
Recoveries		68		—			—			394			—			—		—		6			530			998
Ending balance	$	9,124		396			16,450			9,663			94			118		1,098		1,314			1,375			39,632
Ending balance individually evaluated for impairment	$	—		—			—			—			—			—		—		—			—			—
Ending balance collectively evaluated for impairment	$	9,124		396			16,450			9,663			94			118		1,098		1,314			1,375			39,632
Loans:
Ending balance	$	679,536		29,300			879,373			603,292			9,367			10,043		92,229		116,717			76,081			2,495,938
Ending balance individually evaluated for impairment	$	134		—			531			—			—			—		—		—			—			665
Ending balance collectively evaluated for impairment	$	679,402		29,300			878,842			603,292			9,367			10,043		92,229		116,717			76,081			2,495,273

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

	*In Thousands*
																					*Agricultural,*
	*Residential 1-4*				*Commercial*							*Second*			*Equity Lines*						*Installment and*
	*Family*		*Multifamily*		*Real Estate*		*Construction*		*Farmland*			*Mortgages*			*of Credit*			*Commercial*			*Other*			*Total*
December 31, 2020
Allowance for loan losses:
Beginning balance	$	7,144		1,117		11,114		5,997		187			123			889			1,044			1,111			28,726
Provision		920		424		5,388		1,766		(33	)		(37	)		74			343			851			9,696
Charge-offs		—		—		—		—		—			—			(7	)		(9	)		(898	)		(914	)
Recoveries		34		—		300		173		—			19			41			—			464			1,031
Ending balance	$	8,098		1,541		16,802		7,936		154			105			997			1,378			1,528			38,539
Ending balance individually evaluated for impairment	$	594		—		148		—		—			—			—			—			—			742
Ending balance collectively evaluated for impairment	$	7,504		1,541		16,654		7,936		154			105			997			1,378			1,528			37,797
Loans:
Ending balance	$	535,994		111,646		837,766		488,626		15,429			8,433			78,889			172,811			81,006			2,330,600
Ending balance individually evaluated for impairment	$	2,399		—		970		—		—			—			—			—			—			3,369
Ending balance collectively evaluated for impairment	$	533,595		111,646		836,796		488,626		15,429			8,433			78,889			172,811			81,006			2,327,231

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

The following tables present the Company’s impaired loans (including loans on nonaccrual status and loans past due 90 days or more) at December 31, 2021 and 2020:

	*In Thousands*
	*Recorded Investment*		*Unpaid Principal Balance*		*Related Allowance*		*Average Recorded Investment*		*Interest Income Recognized*
December 31, 2021
With no related allowance recorded:
Residential 1-4 family	$	136		134		—		614		7
Multifamily		—		—		—		—		—
Commercial real estate		532		531		—		303		25
Construction		—		—		—		—		—
Farmland		—		—		—		—		—
Second mortgages		—		—		—		—		—
Equity lines of credit		—		—		—		—		—
Commercial		—		—		—		—		—
Agricultural, installment and other		—		—		—		—		—
	$	668		665		—		917		32
With allowance recorded:
Residential 1-4 family	$	—		—		—		602		—
Multifamily		—		—		—		—		—
Commercial real estate		—		—		—		342		—
Construction		—		—		—		—		—
Farmland		—		—		—		—		—
Second mortgages		—		—		—		—		—
Equity lines of credit		—		—		—		—		—
Commercial		—		—		—		—		—
Agricultural, installment and other		—		—		—		—		—
	$	—		—		—		944		—
Total:
Residential 1-4 family	$	136		134		—		1,216		7
Multifamily		—		—		—		—		—
Commercial real estate		532		531		—		645		25
Construction		—		—		—		—		—
Farmland		—		—		—		—		—
Second mortgages		—		—		—		—		—
Equity lines of credit		—		—		—		—		—
Commercial		—		—		—		—		—
Agricultural, installment and other		—		—		—		—		—
	$	668		665		—		1,861		32

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

	*In Thousands*
	*Recorded Investment*		*Unpaid Principal Balance*		*Related Allowance*		*Average Recorded Investment*		*Interest Income Recognized*
December 31, 2020
With no related allowance recorded:
Residential 1-4 family	$	1,162		1,507		—		395		26
Multifamily		—		—		—		—		—
Commercial real estate		311		311		—		311		—
Construction		—		—		—		—		—
Farmland		—		—		—		—		—
Second mortgages		—		—		—		—		—
Equity lines of credit		—		—		—		—		—
Commercial		—		—		—		—		—
Agricultural, installment and other		—		—		—		—		—
	$	1,473		1,818		—		706		26
With allowance recorded:
Residential 1-4 family	$	1,242		1,240		594		1,273		66
Multifamily		—		—		—		—		—
Commercial real estate		662		659		148		676		22
Construction		—		—		—		—		—
Farmland		—		—		—		—		—
Second mortgages		—		—		—		—		—
Equity lines of credit		—		—		—		—		—
Commercial		—		—		—		—		—
Agricultural, installment and other		—		—		—		—		—
	$	1,904		1,899		742		1,949		88
Total:
Residential 1-4 family	$	2,404		2,747		594		1,668		92
Multifamily		—		—		—		—		—
Commercial real estate		973		970		148		987		22
Construction		—		—		—		—		—
Farmland		—		—		—		—		—
Second mortgages		—		—		—		—		—
Equity lines of credit		—		—		—		—		—
Commercial		—		—		—		—		—
Agricultural, installment and other		—		—		—		—		—
	$	3,377		3,717		742		2,655		114

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

The Company’s loan portfolio includes certain loans that have been modified in a troubled debt restructuring (TDR), where economic or other concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. The concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.

The following table summarizes the carrying balances of TDRs at December 31, 2021 and December 31, 2020 (dollars in thousands):

	*2021*		*2020*
Performing TDRs	$	876		2,147
Nonperforming TDRs		165		529
Total TDRs	$	1,041		2,676

The following table outlines the amount of each TDR categorized by loan classification for the years ended December 31, 2021, 2020 and 2019 (dollars in thousands):

	*December 31, 2021*						*December 31, 2020*
	*Number of Contracts*		*Pre Modification Outstanding Recorded Investment*		*Post Modification Outstanding Recorded Investment, Net of Related Allowance*		*Number of Contracts*		*Pre Modification Outstanding Recorded Investment*		*Post Modification Outstanding Recorded Investment, Net of Related Allowance*
Residential 1-4 family		—	$	—	$	—		—	$	—	$	—
Multifamily		—		—		—		—		—		—
Commercial real estate		—		—		—		1		111		132
Construction		—		—		—		—		—		—
Farmland		—		—		—		—		—		—
Second mortgages		—		—		—		—		—		—
Equity lines of credit		—		—		—		—		—		—
Commercial		—		—		—		—		—		—
Agricultural, installment and other		—		—		—		—		—		—
Total		—	$	—	$	—		1	$	111	$	132

	December 31, 2019
	Number of Contracts		Pre Modification Outstanding Recorded Investment		Post Modification Outstanding Recorded Investment, Net of Related Allowance
Residential 1-4 family		1	$	1,338	$	619
Multifamily		—		—		—
Commercial real estate		4		2,677		2,399
Construction		—		—		—
Farmland		—		—		—
Second mortgages		—		—		—
Equity lines of credit		—		—		—
Commercial		—		—		—
Agricultural, installment and other		—		—		—
Total		5	$	4,015	$	3,018

As of December 31, 2021, 2020 and 2019 the Company did not have any loan previously classified as a TDR default within twelve months of the restructuring. A default is defined as an occurrence which violates the terms of the receivable’s contract.

In response to the COVID-19 pandemic and its economic impact to the Bank’s customers, the Bank proactively began providing relief to its customers in the middle of March 2020 through a 90-day interest-only payment option or a full 90-day payment deferral option. Following the passage of the CARES Act, the Bank expanded this program to provide a six-month interest only payment option in an effort to provide flexibility to its customers as they navigated uncertainties resulting from the pandemic. Pursuant to interagency regulatory guidance and the CARES Act, the Bank may elect to not classify loans as troubled debt restructurings for which these deferrals are granted between March 1, 2020 and the earlier of (i) January 1, 2022 or (ii) 60 days after the end of the COVID-19 national emergency. As of December 31, 2021, the Bank had no loans for which principal or both principal and interest were being deferred.

As of December 31, 2021 the Bank had $262,000 of consumer mortgage loans in the process of foreclosure. As of December 31, 2020 the Bank had $301,000 of consumer mortgage loans in the process of foreclosure.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

The Company’s principal customers are primarily in Middle Tennessee. Credit is extended to businesses and individuals and is evidenced by promissory notes. The terms and conditions of the loans including collateral vary depending upon the purpose of the credit and the borrower’s financial condition.

In the normal course of business, Wilson Bank has made loans at prevailing interest rates and terms to directors and executive officers of the Company and to their affiliates. The aggregate amount of these loans was $5,725,000 and $7,675,000 at December 31, 2021 and 2020, respectively. None of these loans were restructured, charged-off or involved more than the normal risk of collectibility or presented other unfavorable features during the three years ended December 31, 2021.

An analysis of the activity with respect to such loans to related parties is as follows:

	*In Thousands*
	*December 31,*
	*2021*			*2020*
Balance, January 1	$	7,675			12,878
New loans and renewals during the year		11,009			11,153
Repayments (including loans paid by renewal) during the year		(12,959	)		(16,356	)
Balance, December 31	$	5,725			7,675

In 2021, 2020 and 2019, Wilson Bank originated mortgage loans for sale into the secondary market of $215,813,000, $213,483,000 and $160,921,000, respectively. The fees and gain on sale of these loans totaled $9,997,000, $9,560,000 and $6,802,000 in 2021, 2020 and 2019, respectively. All of these loan sales transfer servicing rights to the buyer.

In some instances, Wilson Bank sells loans that contain provisions which permit the buyer to seek recourse against Wilson Bank in certain circumstances. At December 31, 2021 and 2020, total mortgage loans sold with recourse in the secondary market aggregated $165,061,000 and $181,700,000, respectively. At December 31, 2021, Wilson Bank has not been required to repurchase a significant amount of the mortgage loans originated by Wilson Bank and sold in the secondary market. Management expects no material losses to result from these recourse provisions.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(3)

Debt and Equity Securities

Debt and equity securities have been classified in the consolidated balance sheet according to management’s intent. Debt and equity securities at December 31, 2021 consist of the following:

	*Securities Available-For-Sale*
	*In Thousands*
			*Gross Unrealized*		*Gross Unrealized*		*Estimated Market*
	*Amortized Cost*		*Gains*		*Losses*		*Value*
U.S. Treasury and other U.S. government agencies	$	7,320		—		99		7,221
U.S. Government-sponsored enterprises (GSEs)		163,700		20		4,490		159,230
Mortgage-backed securities		465,588		2,726		6,537		461,777
Asset-backed securities		46,583		213		83		46,713
Corporate bonds		2,500		75		—		2,575
Obligations of states and political subdivisions		220,444		2,611		2,986		220,069
	$	906,135		5,645		14,195		897,585

The Company’s classification of securities at December 31, 2020 was as follows:

	*Securities Available-For-Sale*
	*In Thousands*
			*Gross Unrealized*		*Gross Unrealized*		*Estimated Market*
	*Amortized Cost*		*Gains*		*Losses*		*Value*
U.S. Government-sponsored enterprises (GSEs)	$	125,712		328		135		125,905
Mortgage-backed securities		258,774		5,636		620		263,790
Asset-backed securities		36,394		582		19		36,957
Corporate bonds		2,500		100		—		2,600
Obligations of states and political subdivisions		147,462		4,229		400		151,291
	$	570,842		10,875		1,174		580,543

Included in mortgage-backed securities are collateralized mortgage obligations totaling $130,594,000 (fair value of $128,281,000) and $88,472,000 (fair value of $89,116,000) at December 31, 2021 and 2020, respectively.

The amortized cost and estimated market value of debt securities at December 31, 2021, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities of mortgage and asset-backed securities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	*In Thousands*
Securities Available-For-Sale	*Amortized Cost*		*Estimated Market Value*
Due in one year or less	$	22		22
Due after one year through five years		57,492		57,441
Due after five years through ten years		240,922		235,883
Due after ten years		607,699		604,239
	$	906,135		897,585

Results from sales of debt and equity securities are as follows:

	*In Thousands*
	*2021*			*2020*			*2019*
Gross proceeds	$	39,652			54,870			37,325
Gross realized gains	$	137			901			75
Gross realized losses		(109	)		(19	)		(343	)
Net realized gains (losses)	$	28			882			(268	)

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

Securities carried on the balance sheet of approximately $368,718,000 (approximate market value of $364,893,000) and $282,028,000 (approximate market value of $288,013,000) were pledged to secure public deposits and for other purposes as required or permitted by law at December 31, 2021 and 2020, respectively.

Included in the securities above are $111,103,000 (approximate market value of $110,384,000) and $78,931,000 (approximate market value of $80,713,000) at December 31, 2021 and 2020, respectively, in obligations of political subdivisions located within the states of Tennessee, Alabama, and Texas.

Securities that have rates that adjust prior to maturity totaled $102,590,000 (approximate market value of $101,315,000) and $48,215,000 (approximate market value of $48,439,000) at December 31, 2021 and 2020, respectively.

Temporarily Impaired Securities

The following table shows the gross unrealized losses and fair value of the Company’s available-for-sale securities with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2021 and 2020.

	*In Thousands, Except Number of Securities*
	*Less than 12 Months*						*12 Months or More*						*Total*
					*Number of*						*Number of*
			*Unrealized*		*Securities*				*Unrealized*		*Securities*				*Unrealized*
2021	*Fair Value*		*Losses*		*Included*		*Fair Value*		*Losses*		*Included*		*Fair Value*		*Losses*
Available-for-Sale Securities:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	7,221	$	99		3	$	—	$	—		—	$	7,221	$	99
U.S. Government-sponsored enterprises (GSEs)		110,981		2,466		33		45,725		2,024		19		156,706		4,490
Mortgage-backed securities		317,211		4,644		96		54,692		1,893		33		371,903		6,537
Asset-backed securities		17,945		67		9		484		16		1		18,429		83
Corporate bonds		—		—		—		—		—		—		—		—
Obligations of states and political subdivisions		83,510		1,460		74		36,225		1,526		32		119,735		2,986
	$	536,868	$	8,736		215	$	137,126	$	5,459		85	$	673,994	$	14,195

	*In Thousands, Except Number of Securities*
	*Less than 12 Months*						*12 Months or More*						*Total*
					*Number of*						*Number of*
			*Unrealized*		*Securities*				*Unrealized*		*Securities*				*Unrealized*
2020	*Fair Value*		*Losses*		*Included*		*Fair Value*		*Losses*		*Included*		*Fair Value*		*Losses*
Available-for-Sale Securities:
Debt securities:
U.S. Government-sponsored enterprises (GSEs)		$ 47,991		$ 135		18		$ —		$ —		—		$ 47,991		$ 135
Mortgage-backed securities		78,381		573		29		6,776		47		12		85,157		620
Asset-backed securities		4,950		19		3		—		—		—		4,950		19
Corporate bonds		—		—		—		—		—		—		—		—
Obligations of states and political subdivisions		44,061		394		33		689		6		1		44,750		400
		$ 175,383		$ 1,121		83		$ 7,465		$ 53		13		$ 182,848		$ 1,174

As of December 31, 2021, management does not have the intent to sell any of the securities classified as available-for-sale in the table above and believes that it is more likely than not the Company will not have to sell any such securities before a recovery of cost. Any unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. Accordingly, as of December 31, 2021, management believes the impairments detailed in the table above are temporary and no impairment loss has been realized in our consolidated statement of earnings.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(4)

Leases

Lessee Accounting

The majority of leases in which the Company is the lessee are comprised of real estate property for branches and office space and are recorded as operating leases with terms extending beyond 2026. These leases are classified as operating leases at commencement. Right-of-use assets representing the right to use the underlying asset and lease liabilities representing the obligation to make future lease payments are recognized on the balance sheet. These assets and liabilities are estimated based on the present value of future lease payments discounted using the Company's incremental secured borrowing rates as of the commencement date of the lease. Certain lease agreements contain renewal options which are considered in the determination of the lease term if they are deemed reasonably certain to be exercised. The Company has elected not to recognize leases with an original term of less than 12 months on the balance sheet.

The following table represents lease assets and lease liabilities as of December 31, 2021 and December 31, 2020 (in thousands).

Lease right-of-use assets	Classification		December 31, 2021				December 31, 2020
Operating lease right-of-use assets	Other Assets		$	4,110				3,825

Lease liabilities	Classification		December 31, 2021				December 31, 2020
Operating lease liabilities	Other Liabilities		$	4,247				3,947

The total lease cost related to operating leases and short term leases is recognized on a straight-line basis over the lease term. The components of the Bank's total least cost were as follows for the year ended December 31, 2021 and 2020.

	*In Thousands*
	*2021*		*2020*
Operating lease cost	$	550		535
Short-term lease cost		40		4
Net lease cost	$	590		539

The weighted average remaining lease term and weighted average discount rate for operating leases at December 31, 2021 and 2020 were as follows:

	*2021*			*2020*
Operating Leases
Weighted average remaining lease term (in years)		10.42			11.31
Weighted average discount rate		4.00	%		4.00	%

Cash flows related to operating leases during the year ended December 31, 2021 and 2020 were as follows:

	*In Thousands*
	*2021*		*2020*
Operating cash flows related to operating leases	$	535		426

Future undiscounted lease payments for operating leases with initial terms of more than 12 months at December 31, 2021 and 2020 were as follows:

	*In Thousands*
	*2021*
2022	$	544
2023		553
2024		566
2025		571
2026		576
Thereafter		2,392
Total undiscounted lease payments		5,202
Less: imputed interest		(955	)
Net lease liabilities	$	4,247

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(5)

Restricted Equity Securities

Restricted equity securities consists of stock of the FHLB of Cincinnati amounting to $5,089,000 at December 31, 2021 and 2020, respectively. The stock can be sold back only at par or a value as determined by the issuing institution and only to the respective financial institution or to another member institution. These securities are recorded at cost.

(6)

Premises and Equipment

The detail of premises and equipment at December 31, 2021 and 2020 is as follows:

	*In Thousands*
	*2021*			*2020*
Land	$	20,156			17,093
Buildings		46,112			46,584
Leasehold improvements		1,155			573
Furniture and equipment		14,705			13,861
Automobiles		241			175
Construction-in-progress		3,335			317
		85,704			78,603
Less accumulated depreciation		(22,858	)		(20,401	)
	$	62,846			58,202

During 2021, 2020 and 2019, payments of $1,227,000, $571,000 and $2,207,000, respectively, were made to an entity owned by a director for the construction of buildings and repair work on existing buildings.

Depreciation expense was $4,235,000, $4,250,000 and $3,984,000 for the years ended December 31, 2021, 2020 and 2019, respectively.

(7)

Goodwill

The Company's intangible assets result from the excess of purchase price over the applicable book value of the net assets acquired related to outside ownership of two previously 50% owned subsidiaries that the Company acquired 100% of in 2005.

	*In Thousands*
	*2021*		*2020*
Goodwill:
Balance at January 1,	$	4,805		4,805
Goodwill acquired during year		—		—
Impairment loss		—		—
Balance at December 31,	$	4,805		4,805

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(8)

Deposits

Deposits at December 31, 2021 and 2020 are summarized as follows:

	*In Thousands*
	*2021*		*2020*
Demand deposits	$	506,258		391,360
Savings accounts		296,434		201,984
Negotiable order of withdrawal accounts		957,985		771,195
Money market demand accounts		1,201,235		984,677
Certificates of deposit $250,000 or greater		123,297		112,696
Other certificates of deposit		399,850		425,299
Individual retirement accounts $250,000 or greater		8,618		10,323
Other individual retirement accounts		61,394		63,061
	$	3,555,071		2,960,595

Principal maturities of certificates of deposit and individual retirement accounts at December 31, 2021 are as follows:

	*(In Thousands)*
Maturity	*Total*
2022	$	339,093
2023		137,141
2024		71,616
2025		21,398
2026		23,898
Thereafter		13
	$	593,159

The aggregate amount of overdrafts reclassified as loans receivable was $529,000 and $284,000 at December 31, 2021 and 2020, respectively.

The aggregate balances of related party deposits at December 31, 2021 and 2020 were $5,806,000 and $3,786,000, respectively.

As of December 31, 2021 and 2020, Wilson Bank was not required to maintain a cash balance with the Federal Reserve.

(9)

Federal Home Loan Bank Advances

At December 31, 2021 the Company had no outstanding advances from the FHLB of Cincinnati, compared to $3,638,000 in outstanding advances from the FHLB of Cincinnati at December 31, 2020. During the year ended December 31, 2021, management made a strategic decision to utilize excess liquidity to pay off these advances. The weighted average rate of the total borrowings at December 31, 2020 was 2.68%. Advances from the FHLB of Cincinnati are collateralized by a blanket security agreement which includes Wilson Bank's 1-4 family loans. The Company’s additional borrowing capacity from the FHLB of Cincinnati was $426,347,000 at December 31, 2021.

Required future principal payments on Federal Home Loan Bank borrowings for the year ended December 31, 2020 were as follows:

	*(In Thousands)*
Maturity	Total
2021	$	1,350
2022		1,350
2023		788
2024		150
2025		—
Thereafter		—
Total	$	3,638

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(10)

Non-Interest Income and Non-Interest Expense

The significant components of non-interest income and non-interest expense for the years ended December 31, 2021, 2020 and 2019 are presented below:

	*In Thousands*
	*2021*			*2020*			*2019*
Non-interest income:
Service charges on deposits	$	6,137			5,659			6,952
Brokerage income		6,368			4,837			4,411
Debit and credit card interchange income		12,029			9,187			8,301
Other fees and commissions		1,446			1,404			1,608
BOLI and annuity earnings		1,109			959			723
Security gain (loss), net		28			882			(268	)
Fees and gains on sales of mortgage loans		9,997			9,560			6,802
Gain (loss) on sale of other real estate, net		(15	)		658			(48	)
Loss on sale of fixed assets, net		(43	)		(63	)		(128	)
Gain (loss) on sale of other assets, net		6			(4	)		(4	)
Other income		34			61			—
	$	37,096			33,140			28,349

	*In Thousands*
	*2021*		*2020*		*2019*
Non-interest expense:
Employee salaries and benefits	$	52,722		45,661		42,541
Equity-based compensation		1,428		1,180		786
Occupancy expenses		5,473		5,216		4,789
Furniture and equipment expenses		3,323		3,267		3,110
Data processing expenses		6,079		5,101		4,495
Advertising expenses		2,736		2,487		2,498
ATM & interchange fees		4,783		3,880		3,439
Accounting, legal & consulting expenses		988		909		1,382
FDIC insurance		1,130		598		373
Directors’ fees		686		634		586
Other operating expenses		11,640		11,986		10,629
	$	90,988		80,919		74,628

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(11)

Income Taxes

The components of the net deferred tax asset at December 31, 2021 and 2020 were as follows:

	*In Thousands*
	*2021*			*2020*
Deferred tax asset:
Federal	$	11,604			9,500
State		3,613			2,913
		15,217			12,413
Deferred tax liability:
Federal		(1,822	)		(4,000	)
State		(603	)		(1,324	)
		(2,425	)		(5,324	)
Net deferred tax asset	$	12,792			7,089

The tax effects of each type of significant item that gave rise to deferred tax assets (liabilities) at December 31, 2021 and 2020 were:

	*In Thousands*
	*2021*			*2020*
Financial statement allowance for loan losses in excess of tax allowance	$	10,129			9,840
Excess of depreciation deducted for tax purposes over the amounts deducted in the financial statements		(2,098	)		(2,461	)
Financial statement deduction for deferred compensation in excess of deduction for tax purposes		1,347			1,253
Writedown of other real estate not deductible for income tax purposes until sold		—			—
Financial statement income on FHLB stock dividends not recognized for tax purposes		(327	)		(327	)
Unrealized loss (gain) on securities available-for-sale		2,235			(2,535	)
Equity based compensation		1,028			854
Other items, net		478			465
Net deferred tax asset	$	12,792			7,089

The components of income tax expense (benefit) at December 31, 2021, 2020 and 2019 are summarized as follows:

	*In Thousands*
	*Federal*			*State*			*Total*
2021
Current	$	13,580			2,084			15,664
Deferred		(698	)		(234	)		(932	)
Total	$	12,882			1,850			14,732
2020
Current	$	11,383			1,539			12,922
Deferred		(2,503	)		(801	)		(3,304	)
Total	$	8,880			738			9,618
2019
Current	$	10,134			1,411			11,545
Deferred		(335	)		(143	)		(478	)
Total	$	9,799			1,268			11,067

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

A reconciliation of actual income tax expense of $14,732,000, $9,618,000 and $11,067,000 for the years ended December 31, 2021, 2020 and 2019, respectively, to the “expected” tax expense (computed by applying the statutory rate of 21% for 2021, 2020 and 2019 to earnings before income taxes) is as follows:

	*In Thousands*
	*2021*			*2020*			*2019*
Computed “expected” tax expense	$	13,473			10,103			9,893
State income taxes, net of Federal income tax benefit		1,584			552			1,056
Tax exempt interest, net of interest expense exclusion		(237	)		(245	)		(186	)
Earnings on cash surrender value of life insurance		(205	)		(173	)		(170	)
Expenses not deductible for tax purposes		12			14			37
Equity based compensation		(28	)		(6	)		15
Other		133			(627	)		422
	$	14,732			9,618			11,067

Total income tax expense for 2021, 2020 and 2019, includes $7,000, $231,000 and $(70,000) of expense (benefit) related to the realized gain and loss on sale of securities, respectively.

As of December 31, 2021, 2020 and 2019 the Company has not accrued or recognized interest or penalties related to uncertain tax positions. It is the Company’s policy to recognize interest and/or penalties related to income tax matters in income tax expense.

No valuation allowance for deferred tax assets was recorded at December 31, 2021 and 2020 as management believes it is more likely than not that all of the deferred tax assets will be realized against deferred tax liabilities and projected future taxable income. There were no unrecognized tax benefits during any of the reported periods.

The Company and Wilson Bank file income tax returns in the United States (“U.S.”), as well as in the State of Tennessee. The Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years before 2018. The Company’s Federal tax returns have been audited through December 31, 2005 with no changes.

(12)

Commitments and Contingent Liabilities

The Company is party to litigation and claims arising in the normal course of business. Management, after consultation with legal counsel, believes that the liabilities, if any, arising from such litigation and claims will not be material to the Company's consolidated financial position.

At December 31, 2021 and 2020, respectively, the Company has lines of credit with other correspondent banks totaling $74,817,000 and $70,488,000. At December 31, 2021 and 2020, respectively, there was no balance outstanding under these lines of credit.

The Company also has a Cash Management Advance ("CMA") Line of Credit agreement. The CMA is a component of the Company's Blanket Agreement for advances with the FHLB of Cincinnati. The purpose of the CMA is to assist with short-term liquidity management. Under the terms of the CMA, the Company may borrow a maximum of $25,000,000, selecting a variable rate of interest for up to 90 days or a fixed rate for a maximum of 30 days. There were no borrowings outstanding under the CMA at December 31, 2021 or December 31, 2020.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(13)

Financial Instruments with Off-Balance-Sheet Risk

The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist primarily of commitments to extend credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

	*In Thousands*
	*Contract or Notional Amount*
	*2021*		*2020*
Financial instruments whose contract amounts represent credit risk:
Unused commitments to extend credit	$	1,147,654		851,196
Standby letters of credit		90,929		81,952
Total	$	1,238,583		933,148

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to be drawn upon, the total commitment amounts generally represent future cash requirements. The Company evaluates each customer's credit-worthiness on a case-by-case basis. The amount of collateral, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the counterparty. Collateral normally consists of real property.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. Most guarantees extend from one to two years. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The fair value of standby letters of credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the likelihood of the counterparties drawing on such financial instruments and the present creditworthiness of such counterparties. Such commitments have been made on terms which are competitive in the markets in which the Company operates; thus, the fair value of standby letters of credit equals the carrying value for the purposes of this disclosure. The maximum potential amount of future payments that the Company could be required to make under the guarantees totaled $90,929,000 at December 31, 2021.

(14)

Concentration of Credit Risk

Practically all of the Company’s loans, commitments, and commercial and standby letters of credit have been granted to customers in the Company’s market area. Practically all such customers are depositors of Wilson Bank. The concentrations of credit by type of loan are set forth in note 2 - Loans and Allowance for Loan Losses.

Interest bearing deposits totaling $164,587,000 were deposited with five commercial banks at December 31, 2021. Included in interest bearing deposits is $1,200,000 of collateral deposits related to our fixed rate loan hedging program deposited with one commercial bank. In addition, the Bank has funds deposited with the FHLB of Cincinnati in the amount of $414,000. Funds deposited with the FHLB of Cincinnati are not insured by the FDIC.

Federal funds sold in the amount of $27,055,000 were deposited with one commercial bank at December 31, 2021.

(15)

Employee Benefit Plan

Wilson Bank has in effect a 401(k) plan (the “401(k) Plan”) which covers eligible employees. To be eligible an employee must have obtained the age of 18. The provisions of the 401(k) Plan provide for both employee and employer contributions. For the years ended December 31, 2021, 2020 and 2019, Wilson Bank contributed $3,120,000, $2,926,000 and $2,540,000, respectively, to the 401(k) Plan.

(16)

Dividend Reinvestment Plan

Under the terms of the Company’s dividend reinvestment plan (the “DRIP”) holders of common stock may elect to automatically reinvest cash dividends in additional shares of common stock. The Company may elect to sell original issue shares or to purchase shares in the open market for the account of participants. Original issue shares of 186,583 in 2021, 180,424 in 2020 and 179,199 in 2019 were sold to participants under the terms of the DRIP.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(17)

Regulatory Matters and Restrictions on Dividends

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. Management believes as of December 31, 2021, 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 December 31, 2021, and 2020, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

In October 2019, the federal banking agencies approved final rules under the Growth Act that exempt a qualifying community bank and its holding company that have Community Bank Leverage Ratios, calculated as Tier 1 capital over average total consolidated assets (the "Community Bank Leverage Ratio"), of greater than 9 percent from the risk-based capital requirements of the capital rules issued under the Dodd-Frank Act. A qualifying community banking organization and its holding company that have chosen the proposed framework are not required to calculate the existing risk-based and leverage capital requirements. Such a bank would also be considered to have met the capital ratio requirements to be well capitalized for the agencies' prompt corrective action rules provided it has a Community Bank Leverage Ratio greater than 9 percent. Tier 1 capital for purposes of calculating the Community Bank Leverage Ratio is defined as total equity less accumulated other comprehensive income, less goodwill, less all other intangible assets, less deferred tax assets that arise from net operating loss and tax carryforwards, net of any related valuation allowances. Institutions seeking to utilize the Community Bank Leverage Ratio must not have total off-balance sheet exposures equal to 25% or more of total consolidated assets. For purposes of this test, off-balance sheet exposures include, among other items, unused portions of commitments, securities lent or borrowed, credit enhancements and financial standby letters of credit. The federal regulators when establishing the Community Bank Leverage Ratio also established a grace period of two fiscal quarters during which a qualifying financial institution that temporarily failed to meet any of the qualifying criteria for use of the Community Bank Leverage Ratio would nonetheless be considered well capitalized so long as the institution maintained a Community Bank Leverage Ratio of greater than 7%.

The Company and the Bank each opted to take advantage of this rule effective January 1, 2020. During the year ended December 31, 2021, the Company determined its total off balance sheet exposures, calculated in accordance with applicable regulations, exceeded 25% of its total consolidated assets during the period of time it had opted to utilize the Community Bank Leverage Ratio, and as a result, neither the Company nor the Bank was able to take advantage of the Community Bank Leverage Ratio rules. The Company has reported its and the Bank's December 31, 2020 capital ratios herein as if they had not elected the Community Bank Leverage Ratio rule for comparative purposes. The Company and the Bank have been well-capitalized under all applicable capital regulations as of the period ends for each relevant period since January 1, 2020, including as of December 31, 2021, in each case, applying the Basel III capital guidelines that were applicable to it as a result of its not qualifying for the Community Bank Leverage Ratio.

The Company's and Wilson Bank's actual capital amounts and ratios as of December 31, 2021 and December 31, 2020 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.

											*For Classification Under*
						*Minimum*					*Corrective Action Plan*
	*Actual*					*Capital Adequacy*					*as Well Capitalized*
	*Amount*		*Ratio*			*Amount*		*Ratio*			*Amount*		*Ratio*
	*(dollars in thousands)*
December 31, 2021
Total capital to risk weighted assets:
Consolidated	$	455,813		13.9	%	$	261,404		8.0	%	$	326,755		10.0	%
Wilson Bank		452,130		13.8			261,317		8.0			326,646		10.0
Tier 1 capital to risk weighted assets:
Consolidated		415,226		12.7			196,052		6.0			261,403		8.0
Wilson Bank		411,543		12.6			195,987		6.0			261,316		8.0
Common equity Tier 1 capital to risk weighted assets:
Consolidated		415,226		12.7			147,039		4.5			N/A		N/A
Wilson Bank		411,543		12.6			146,990		4.5			212,319		6.5
Tier 1 capital to average assets:
Consolidated		415,226		10.8			154,280		4.0			N/A		N/A
Wilson Bank		411,543		10.7			154,230		4.0			192,787		5.0

											*For Classification Under*
	*Actual*					*Minimum*					*Corrective Action Plan*
						*Capital Adequacy*					*as Well Capitalized*
	*Amount*		*Ratio*			*Amount*		*Ratio*			*Amount*		*Ratio*
	*(dollars in thousands)*
December 31, 2020
Total capital to risk weighted assets:
Consolidated	$	403,419		14.3	%	$	225,405		8.0	%	$	281,757		10.0	%
Wilson Bank		400,235		14.2			225,337		8.0			281,671		10.0
Tier 1 capital to risk weighted assets:
Consolidated		368,150		13.1			169,055		6.0			225,406		8.0
Wilson Bank		364,976		13.0			169,003		6.0			225,337		8.0
Common equity Tier 1 capital to risk weighted assets:
Consolidated		368,150		13.1			126,791		4.5			N/A		N/A
Wilson Bank		364,976		13.0			126,752		4.5			183,087		6.5
Tier 1 capital to average assets:
Consolidated		368,150		11.2			131,996		4.0			N/A		N/A
Wilson Bank		364,976		11.1			131,959		4.0			164,949		5.0

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. Additional restrictions may be imposed by the Tennessee Department of Financial Institutions and federal banking agencies under the powers granted to them by law.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(18)

Salary Deferral Plans

The Company provides some of its officers non-qualified pension benefits through an Executive Salary Continuation Plan ("the Plan") and Supplemental Executive Retirement Plan (SERP) Agreements ("SERP Agreements"). The Plan and SERP Agreements were established by the Board of Directors to reward executive management for past performance and to provide additional incentive to retain the service of executive management. The Plan and SERP Agreements generally provide executives with benefits of a portion of their salary beginning at retirement through life. As a result, the Company has accrued a liability for future obligations under the Plan and SERP Agreements. At December 31, 2021 and 2020, the liability related to the Plan totaled $1,660,000 and $1,742,000, respectively. At December 31, 2021 and 2020 the liability related to the SERP Agreements totaled $3,496,000 and $3,052,000, respectively. The expense incurred for these plans totaled $705,000, $575,000 and $438,000 for the year ended December 31, 2021, 2020 and 2019, respectively.

The Company has purchased life insurance policies to provide the benefits related to the Plan, which at December 31, 2021 and 2020 had an aggregate cash surrender value of $5,669,000 and $5,$5,547,000, respectively, and an aggregate face value of insurance policies in force of $15,497,000 and $15,499,000, respectively. The life insurance policies remain the sole property of the Company and are payable to the Company.

The Company has also purchased bank owned life insurance policies on some of its officers. The insurance policies remain the sole property of the Company and are payable to the Company. The cash surrender value of the life insurance contracts totaled $40,536,000 and $29,650,000 and the face amount of the insurance policies in force approximated $98,879,000 and $68,827,000 at December 31, 2021 and 2020, respectively.

The Company has also purchased Flexible Premium Indexed Deferred Annuity Contracts (“Annuity Contracts”) to provide benefits related to the SERP Agreements. The Annuity Contracts remain the sole property of the Company and are payable to the Company. Included in other assets at December 31, 2021 and 2020 are the Annuity Contracts with an aggregate value of $23,861,000 and $18,682,000, respectively.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(19)

Equity Incentive Plan

In April 2009, the Company’s shareholders approved the Wilson Bank Holding Company 2009 Stock Option Plan (the “2009 Stock Option Plan”). The 2009 Stock Option Plan was effective as of April 14, 2009. Under the 2009 Stock Option Plan, awards could be in the form of options to acquire common stock of the Company. Subject to adjustment as provided by the terms of the 2009 Stock Option Plan, the maximum number of shares of common stock with respect to which awards could be granted under the 2009 Stock Option Plan was 100,000 shares. The 2009 Stock Option Plan terminated on April 13, 2019, and no additional awards may be issued under the 2009 Stock Option Plan. The awards granted under the 2009 Stock Option Plan prior to the Plan's expiration will remain outstanding until exercised or otherwise terminated. As of December 31, 2021, the Company had outstanding 8,475 options under the 2009 Stock Option Plan with a weighted average exercise price of $35.00.

During the second quarter of 2016, the Company’s shareholders approved the Wilson Bank Holding Company 2016 Equity Incentive Plan, which authorizes awards of up to 750,000 shares of common stock. The 2016 Equity Incentive Plan was approved by the Board of Directors and effective as of January 25, 2016 and approved by the Company’s shareholders on April 12, 2016. On September 26, 2016, the Board of Directors approved an amendment and restatement of the 2016 Equity Incentive Plan (as amended and restated the “2016 Equity Incentive Plan”) to make clear that directors who are not also employees of the Company may be awarded stock appreciation rights. The primary purpose of the 2016 Equity Incentive Plan is to promote the interest of the Company and its shareholders by, among other things, (i) attracting and retaining key officers, employees and directors of, and consultants to, the Company and its subsidiaries and affiliates, (ii) motivating those individuals by means of performance-related incentives to achieve long-range performance goals, (iii) enabling such individuals to participate in the long-term growth and financial success of the Company, (iv) encouraging ownership of stock in the Company by such individuals, and (v) linking their compensation to the long-term interests of the Company and its shareholders. Except for certain limitations, awards can be in the form of stock options (both incentive stock options and non-qualified stock options), stock appreciation rights, restricted shares and restricted share units, performance awards and other stock-based awards. As of December 31, 2021, the Company had 362,096 shares remaining available for issuance under the 2016 Equity Incentive Plan. As of December 31, 2021, the Company had outstanding under the 2016 Equity Incentive Plan 195,157 stock options with a weighted average exercise price of $51.63 and 153,622 cash-settled stock appreciation rights with a weighted average exercise price of $49.17.

As of December 31, 2021, under all of its equity incentive plans, the Company had outstanding 203,632 stock options with a weighted average exercise price of $50.94 and 153,622 cash-settled stock appreciation rights with a weighted average exercise price of $49.17. Included in other liabilities at December 31, 2021 and 2020 were $2,708,000 and $2,303,000 in accrued stock appreciation rights, respectively.

The fair value of each stock option and cash-settled SAR grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 2021, 2020 and 2019:

	*2021*			*2020*			*2019*
Expected dividends		1.53	%		1.56	%		1.60	%
Expected term (in years)		9.13			7.38			7.14
Expected stock price volatility		36	%		31	%		25	%
Risk-free rate		1.45	%		0.52	%		1.90	%

The expected stock price volatility is based on historical volatility adjusted for consideration of other relevant factors. The risk-free interest rates for periods within the contractual life of the awards are based on the U.S. Treasury yield curve in effect at the time of the grant. The dividend yield and forfeiture rate assumptions are based on the Company’s history and expectation of dividend payouts and forfeitures.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

A summary of the stock option and cash-settled SAR activity for 2021, 2020 and 2019 is as follows:

	*2021*					*2020*					*2019*
				*Weighted Average*					*Weighted Average*					*Weighted Average*
	*Shares*			*Exercise Price*		*Shares*			*Exercise Price*		*Shares*			*Exercise Price*
Outstanding at beginning of year		284,591		$	43.71		273,039		$	41.19		277,820		$	40.11
Granted		121,830			61.48		43,833			55.72		17,833			51.16
Exercised		(48,867	)		40.76		(24,881	)		37.84		(22,614	)		35.78
Forfeited or expired		(300	)		37.60		(7,400	)		41.70		—			—
Outstanding at end of year		357,254		$	50.18		284,591		$	43.71		273,039		$	41.19
Options and cash-settled SARs exercisable at year end		159,560		$	41.93		151,695		$	40.89		122,932		$	40.19

The weighted average fair value at the grant date of options and cash-settled SARs granted during the years 2021, 2020 and 2019 was $22.10, $14.92 and $13.43, respectively. The total intrinsic value of options and cash-settled SARs exercised during the years 2021, 2020 and 2019 was $962,000, $463,000 and $369,000, respectively.

The following table summarizes information about outstanding and exercisable stock options and cash-settled SARs at December 31, 2021:

	Options and Cash-Settled SARs Outstanding						Options and Cash-Settled SARs Exercisable
Range of Exercise Prices	Number Outstanding at 12/31/21		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In Years)		Number Outstanding at 12/31/21		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In Years)
$31.31 - $47.25		178,380	$	41.09		4.86		147,782	$	40.98		4.81
$51.00 - $63.25		178,874	$	59.24		9.15		11,778	$	53.55		7.88
		357,254						159,560
Aggregate intrinsic value (in thousands)	$	4,670					$	3,406

As of December 31, 2021, there was $3,358,000 of total unrecognized cost related to non-vested share-based compensation arrangements granted under the Company’s equity incentive plans. The cost is expected to be recognized over a weighted-average period of 4.22 years.

A summary of restricted stock shares activity is as follows:

	*Restricted Stock Shares*
	*Shares*		*Weighted Average Grant-Date Fair Value*
Outstanding at December 31, 2020		—	$	—
Granted		1,250		62.10
Vested		—		—
Forfeited		—		—
Outstanding at December 31, 2021		1,250	$	62.10

The shares vest over three years. As of December 31, 2021, there was $64,000 of unrecognized compensation cost related to non-vested restricted share awards. The cost is expected to be charged over a weighted-average period of 1.82 years for the restricted stock share awards.

(20)

Earnings Per Share

The computation of basic earnings per share is based on the weighted average number of common shares outstanding during the period. The computation of diluted earnings per share for the Company begins with the basic earnings per share plus the effect of common shares contingently issuable from stock options.

The following is a summary of the components comprising basic and diluted earnings per share (“EPS”):

	*Years Ended December 31,*
	*2021*		*2020*		*2019*
Basic EPS Computation:
Numerator – Earnings available to common stockholders	$	49,426		38,492		36,044
Denominator – Weighted average number of common shares outstanding		11,131,897		10,927,065		10,743,269
Basic earnings per common share	$	4.44		3.52		3.36
Diluted EPS Computation:
Numerator – Earnings available to common stockholders	$	49,426		38,492		36,044
Denominator – Weighted average number of common shares outstanding		11,131,897		10,927,065		10,743,269
Dilutive effect of stock options and restricted stock shares		31,059		26,681		18,198
		11,162,956		10,953,746		10,761,467
Diluted earnings per common share	$	4.43		3.51		3.35

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(21)

Derivatives

Derivatives Designated as Fair Value Hedges

During the second quarter of 2020, the Company entered into one swap transaction with a notional amount of $30,000,000 pursuant to which the Company pays the counter-party a fixed interest rate and receives a floating rate equal to 1 month LIBOR. The derivative transaction is designated as a fair value hedge.

A summary of the Company's fair value hedge relationships as of December 31, 2021 and December 31, 2020 are as follows (in thousands):

December 31, 2021

Balance Sheet Location

Weighted Average Remaining Maturity (In Years)

Weighted Average Pay Rate

Receive Rate

Notional Amount

Estimated Fair Value

Interest rate swap agreements - loans

Other assets

8.42

0.65

1 month LIBOR

30,000

1,192

December 31, 2020

Balance Sheet Location

Weighted Average Remaining Maturity (In Years)

Weighted Average Pay Rate

Receive Rate

Notional Amount

Estimated Fair Value

Interest rate swap agreements - loans

Other liabilities

9.42

0.65

1 month LIBOR

30,000

(51

)

The effects of fair value hedge relationships reported in interest income on loans on the consolidated statements of income for the twelve months ended December 31, 2021 and 2020 were as follows (in thousands):

	*Twelve Months Ended December 31,*
Gain (loss) on fair value hedging relationship	*2021*			*2020*
Interest rate swap agreements - loans:
Hedged items	$	(1,125	)		(158	)
Derivative designated as hedging instruments		1,243			(51	)

The following amounts were recorded on the balance sheet related to cumulative basis adjustments for fair value hedges at December 31, 2021 and December 31, 2020 (in thousands):

	*Carrying Amount of the Hedged Assets*				*Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets*
Line item on the balance sheet	*December 31, 2021*		*December 31, 2020*		*December 31, 2021*			*December 31, 2020*
Loans	$	28,875		29,842		(1,283	)		(158	)

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

Mortgage Banking Derivatives

Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives. It is the Company's practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. At December 31, 2021 and December 31, 2020, the Company had approximately $20,340,000 and $20,981,000, respectively, of interest rate lock commitments and approximately $20,500,000 and $21,250,000, respectively, of forward commitments for the future delivery of residential mortgage loans. The fair value of these mortgage banking derivatives was reflected by derivative assets of $657,000 and $714,000 and derivative assets of $6,000 and derivative liabilities of $157,000, respectively, at December 31, 2021 and December 31, 2020. 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*
	*2021*			*2020*
Interest rate contracts for customers	$	(57	)		386
Forward contracts related to mortgage loans held for sale and interest rate contracts		163			(134	)

The following table reflects the amount and fair value of mortgage banking derivatives included in the consolidated balance sheet as of December 31, 2021 and December 31, 2020 (in thousands):

	*In Thousands*
	*2021*				*2020*
	*Notional Amount*		*Fair Value*		*Notional Amount*		*Fair Value*
Included in other assets (liabilities):
Interest rate contracts for customers	$	20,340		657		20,981		714
Forward contracts related to mortgage loans held-for-sale		20,500		6		21,250		(157	)

(22)

Disclosures About Fair Value of Financial Instruments

Fair Value of Financial Instruments

FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value, establishes a framework for measuring fair value in U.S. GAAP and expands disclosures about fair value measurements. The definition of fair value focuses on the exit price, i.e., the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, not the entry price, i.e., the price that would be paid to acquire the asset or received to assume the liability at the measurement date. The statement emphasizes that fair value is a market-based measurement; not an entity-specific measurement. Therefore, the fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability.

Valuation Hierarchy

FASB ASC 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

•

Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets


	•	Level 2 - inputs to the valuation methodology include all prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•

Level 3 - inputs to the valuation methodology that are unobservable and significant to the fair value measurement.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Following is a description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

Asset

Securities available-for-sale - Where quoted prices are available for identical securities in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government securities and certain other financial products. If quoted market prices are not available, then fair values are estimated by using pricing models that use observable inputs or quoted prices of securities with similar characteristics and are classified within Level 2 of the valuation hierarchy. In certain cases where there is limited activity or less transparency around inputs to the valuation and more complex pricing models or discounted cash flows are used, securities are classified within Level 3 of the valuation hierarchy. Quarterly we will validate prices supplied by our third party vendor by comparison to prices obtained from third parties.

Hedged Loans - The fair value of our hedged loan portfolio is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction.

Impaired loans - A loan is considered to be impaired when it is probable the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement. Impaired loans are measured based on the present value of expected payments using the loan’s original effective rate as the discount rate, the loan’s observable market price, or the fair value of the collateral less selling costs if the loan is collateral dependent. If the recorded investment in the impaired loan exceeds the measure of fair value, a valuation allowance may be established as a component of the allowance for loan losses or the expense is recognized as a charge-off. Impaired loans are classified within Level 3 of the hierarchy due to the unobservable inputs used in determining their fair value such as collateral values and the borrower’s underlying financial condition.

Other real estate owned - Other real estate owned (“OREO”) represents real estate foreclosed upon by the Company through loan defaults by customers or acquired in lieu of foreclosure. Upon acquisition, the property is recorded at the lower of cost or fair value, based on appraised value, less selling costs estimated as of the date acquired with any loss recognized as a charge-off through the allowance for loan losses. Additional OREO losses for subsequent valuation downward adjustments are determined on a specific property basis and are included as a component of noninterest expense along with holding costs. Any gains or losses realized at the time of disposal are also reflected in noninterest income. OREO is included in Level 3 of the valuation hierarchy due to the lack of 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. The fair value of mortgage loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan and mortgage loans held for sale are included in Level 2 of the valuation hierarchy.

Derivatives - 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.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

The following tables present the financial instruments carried at fair value as of December 31, 2021 and December 31, 2020, by caption on the consolidated balance sheet and by FASB ASC 820 valuation hierarchy (as described above) (in thousands):

	*Measured on a Recurring Basis*
	*Total Carrying Value in the Consolidated Balance Sheet*		*Quoted Market Prices in an Active Market (Level 1)*		*Models with Significant Observable Market Parameters (Level 2)*		*Models with Significant Unobservable Market Parameters (Level 3)*
December 31, 2021
Hedged Loans	$	28,875		—		28,875		—
Investment securities available-for-sale:
U.S. Treasury and other U.S. government agencies		7,221		7,221		—		—
U.S. Government sponsored enterprises		159,230		—		159,230		—
Mortgage-backed securities		461,777		—		461,777		—
Asset-backed securities		46,713		—		46,713		—
Corporate bonds		2,575		—		2,575		—
State and municipal securities		220,069		—		220,069		—
Total investment securities available-for-sale		897,585		7,221		890,364		—
Mortgage loans held for sale		11,843		—		11,843		—
Derivatives		1,855		—		1,855		—
Other investments		2,034		—		—		2,034
Total assets	$	942,192		7,221		932,937		2,034

Derivatives	$	—		—		—		—
Total liabilities	$	—		—		—		—

	Measured on a Recurring Basis
	Total Carrying Value in the Consolidated Balance Sheet		Quoted Market Prices in an Active Market (Level 1)		Models with Significant Observable Market Parameters (Level 2)		Models with Significant Unobservable Market Parameters (Level 3)
December 31, 2020
Hedged Loans	$	29,842		—		29,842		—
Investment securities available-for-sale:
U.S. Government sponsored enterprises		125,905		—		125,905		—
Mortgage-backed securities		263,790		—		263,790		—
Asset-backed securities		36,957		—		36,957		—
Corporate bonds		2,600		—		2,600		—
State and municipal securities		151,291		—		151,291		—
Total investment securities available-for-sale		580,543		—		580,543		—
Mortgage loans held for sale		19,474		—		19,474		—
Derivatives		714		—		714		—
Total assets	$	630,573		—		630,573		—

Derivatives	$	208		—		208		—
Total liabilities	$	208		—		208		—

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

	*Measured on a Non-Recurring Basis*
	*Total Carrying Value in the Consolidated Balance Sheet*		*Quoted Market Prices in an Active Market (Level 1)*		*Models with Significant Observable Market Parameters (Level 2)*		*Models with Significant Unobservable Market Parameters (Level 3)*
December 31, 2021
Other real estate owned	$	—		—		—		—
Impaired loans, net (¹)		668		—		—		668
Total	$	668		—		—		668
December 31, 2020
Other real estate owned	$	—		—		—		—
Impaired loans, net (¹)		2,635		—		—		2,635
Total	$	2,635		—		—		2,635

(1)

As of December 31, 2021 no valuation allowance was recorded. Amount is net of a valuation allowance of $742,000 at December 31, 2020 as required by ASC 310, “Receivables.”

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 December 31, 2021 and 2020:

	Valuation Techniques ⁽²⁾	Significant Unobservable Inputs	Range (Weighted Average)
Impaired loans	Appraisal	Estimated costs to sell		10	%
Other real estate owned	Appraisal	Estimated costs to sell		10	%

(2) The fair value is generally determined through independent appraisals of the underlying collateral, which may include Level 3 inputs that are not identifiable, or by using the discounted cash flow method if the loan is not collateral dependent.

In the case of its investment securities portfolio, the Company monitors the valuation technique utilized by various pricing agencies to ascertain when transfers between levels have been affected. The nature of the remaining assets and liabilities is such that transfers in and out of any level are expected to be rare. For the twelve months ended December 31, 2021, there were no transfers between Levels 1, 2 or 3.

The table below includes a rollforward of the balance sheet amounts for the year ended December 31, 2021 and 2020 (including the change in fair value) for financial instruments classified by the Company within Level 3 of the valuation hierarchy for assets and liabilities measured at fair value on a recurring basis. When a determination is made to classify a financial instrument within Level 3 of the valuation hierarchy, the determination is based upon the significance of the unobservable factors to the overall fair value measurement. However, since Level 3 financial instruments typically include, in addition to the unobservable or Level 3 components, observable components (that is, components that are actively quoted and can be validated to external sources), the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology (in thousands):

	*For the Year Ended December 31,*
	*2021*		*2020*
	*Other Assets*		*Other Assets*
Fair value, January 1	$	—	$	—
Total realized gains included in income		34		—
Change in unrealized gains/losses included in other comprehensive income for assets and liabilities still held at December 31		—		—
Purchases, issuances and settlements, net		2,000		—
Transfers out of Level 3		—		—
Fair value, December 31	$	2,034	$	—
Total realized gains included in income related to financial assets and liabilities still on the consolidated balance sheet at December 31	$	34	$	—

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments that are not measured at fair value. In cases where quoted market prices are not available, fair values are based on estimates using discounted cash flow models. Those models are significantly affected by the assumptions used, including the discount rates, estimates of future cash flows and borrower creditworthiness. The fair value estimates presented herein are based on pertinent information available to management as of December 31, 2021 and December 31, 2020. 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, impaired 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 impaired 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.

Deposits and Federal Home Loan Bank advances - Fair values for deposits are estimated using discounted cash flow models, using current market interest rates offered on deposits with similar remaining maturities.

Restricted equity securities - It is not practical to determine the fair value of Federal Home Loan Bank or Federal Reserve Bank stock due to restrictions placed on its transferability.

Off-balance sheet instruments - The fair values of the Company’s off-balance-sheet financial instruments are based on fees charged to enter into similar agreements. However, commitments to extend credit do not represent a significant value to the Company until such commitments are funded.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

The following table presents the carrying amounts, estimated fair value and placement in the fair value hierarchy of the Company’s financial instruments at December 31, 2021 and December 31, 2020. This table excludes financial instruments for which the carrying amount approximates fair value. For short-term financial assets such as cash and cash equivalents, the carrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization.

(in Thousands)	*Carrying/Notional Amount*		*Estimated Fair Value (¹)*		*Quoted Market Prices in an Active Market (Level 1)*		*Models with Significant Observable Market Parameters (Level 2)*		*Models with Significant Unobservable Market Parameters (Level 3)*
December 31, 2021
Financial assets:
Cash and cash equivalents	$	453,418		453,418		453,418		—		—
Loans, net		2,444,282		2,439,539		—		—		2,439,539
Restricted equity securities		5,089	NA		NA		NA		NA
Financial liabilities:
Deposits		3,555,071		3,227,520		—		—		3,227,520

December 31, 2020
Financial assets:
Cash and cash equivalents	$	338,856		338,856		338,856		—		—
Loans, net		2,282,766		2,302,530		—		—		2,302,530
Restricted equity securities		5,089	NA		NA		NA		NA
Financial liabilities:
Deposits		2,960,595		2,796,339		—		—		2,796,339
Federal Home Loan Bank borrowings		3,638		3,755		—		—		3,755

(1)	Estimated fair values are consistent with an exit-price concept. The assumptions used to estimate the fair values are intended to approximate those that a market-participant would realize in a hypothetical orderly transaction.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(23)

Wilson Bank Holding Company -

Parent Company Financial Information

WILSON BANK HOLDING COMPANY

(Parent Company Only)

Balance Sheets

December 31, 2021 and 2020

	Dollars In Thousands
	2021				2020
ASSETS
Cash	$	5,113		*		4,381	*
Investment in wholly-owned commercial bank subsidiary		410,034				376,947
Deferred income taxes		1,028				854
Refundable income taxes		362				242
Total assets	$	416,537				382,424
LIABILITIES AND STOCKHOLDERS’ EQUITY
Other liabilities	$	2,820				2,303
Total liabilities		2,820				2,303

Stockholders’ equity:
Common stock, par value $2.00 per share, authorized 50,000,000 shares, 11,201,504 and 10,993,404 shares issued and outstanding, respectively		22,403				21,987
Additional paid-in capital		105,177				93,034
Retained earnings		292,452				257,935
Net unrealized gains on available-for-sale securities, net of income taxes of $2,235 and $2,536, respectively		(6,315	)			7,165
Total stockholders’ equity		413,717				380,121
Total liabilities and stockholders’ equity	$	416,537				382,424

*	Eliminated in consolidation.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

WILSON BANK HOLDING COMPANY

(Parent Company Only)

Statements of Earnings

Three Years Ended December 31, 2021

	Dollars In Thousands
	*2021*			*2020*			*2019*
Income:
Dividends from commercial bank subsidiary	$	4,300			5,000			2,800
Other income		—			61			—
		4,300			5,061			2,800
Expenses:
Directors’ fees		341			335			283
Other		1,575			1,264			885
		1,916			1,599			1,168
Income before Federal income tax benefits and equity in undistributed earnings of commercial bank subsidiary		2,384			3,462			1,632
Federal income tax benefits		475			471			287
		2,859			3,933			1,919
Equity in undistributed earnings of commercial bank subsidiary		46,567	*		34,559	*		34,125	*
Net earnings	$	49,426			38,492			36,044

*	Eliminated in consolidation.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

WILSON BANK HOLDING COMPANY

(Parent Company Only)

Statements of Cash Flows

Three Years Ended December 31, 2021

Increase (Decrease) in Cash and Cash Equivalents

	Dollars In Thousands
	*2021*			*2020*			*2019*
Cash flows from operating activities:
Net earnings	$	49,426			38,492			36,044
Adjustments to reconcile net earnings to net cash used in operating activities:
Equity in earnings of commercial bank subsidiary		(50,867	)		(39,559	)		(36,925	)
Decrease (increase) in refundable income taxes		(120	)		(110	)		45
Increase in deferred taxes		(174	)		(229	)		(156	)
Share based compensation expense		1,428			1,180			786
Increase in other liabilities		113			—			—
Total adjustments		(49,620	)		(38,718	)		(36,250	)
Net cash used in operating activities		(194	)		(226	)		(206	)
Cash flows from investing activities:
Dividends received from commercial bank subsidiary		4,300			5,000			2,800
Net cash provided by investing activities		4,300			5,000			2,800
Cash flows from financing activities:
Payments made to stock appreciation rights holders		(515	)		(53	)		(9	)
Dividends paid		(14,909	)		(13,013	)		(11,725	)
Proceeds from sale of stock pursuant to dividend reinvestment plan		11,188			10,056			9,134
Proceeds from exercise of stock options		862			718			775
Repurchase of stock options		—			—			(1,629	)
Net cash used in financing activities		(3,374	)		(2,292	)		(3,454	)
Net increase (decrease) in cash and cash equivalents		732			2,482			(860	)
Cash and cash equivalents at beginning of year		4,381			1,899			2,759
Cash and cash equivalents at end of year	$	5,113			4,381			1,899

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(24)

Quarterly Financial Data (Unaudited)

Selected quarterly results of operations for the four quarters ended December 31 are as follows:

	*(In Thousands, except per share data)*
	*2021*								*2020*								*2019*
	*Fourth*		*Third*		*Second*		*First*		*Fourth*		*Third*		*Second*		*First*		*Fourth*		*Third*		*Second*		*First*
	*Quarter*		*Quarter*		*Quarter*		*Quarter*		*Quarter*		*Quarter*		*Quarter*		*Quarter*		*Quarter*		*Quarter*		*Quarter*		*Quarter*
Interest income	$	33,810		33,719		31,570		30,742	$	30,351		30,961		31,569		30,087	$	29,897		30,329		29,567		28,284
Interest expense		2,249		2,586		2,780		3,033		3,969		4,112		4,308		4,994		5,522		5,991		5,923		5,211
Net interest income		31,561		31,133		28,790		27,709		26,382		26,849		27,261		25,093		24,375		24,338		23,644		23,073
Provision for loan losses		131		130		55		827		3,065		1,038		4,124		1,469		686		167		154		1,033
Earnings before income taxes		17,512		17,405		14,449		14,792		10,771		14,669		11,313		11,357		10,222		13,556		12,451		10,882
Net earnings		13,801		13,342		11,139		11,144		8,902		11,532		9,027		9,031		7,972		10,266		9,516		8,290
Basic earnings per common share		1.23		1.19		1.00		1.01		0.81		1.05		0.83		0.83		0.74		0.95		0.89		0.77
Diluted earnings per common share		1.23		1.19		1.00		1.00		0.81		1.05		0.83		0.83		0.74		0.95		0.89		0.77

(25)

Revenue from Contracts with Customers

All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within noninterest income. The following table presents the Company’s sources of non-interest income for the periods presented. Items outside the scope of ASC Topic 606 are noted as such.

	*Years ended December 31,*
	*2021*		*2020*		*2019*
	(dollars in thousands)

Fees and gains on sales of mortgage loans⁽¹⁾	$	9,997	$	9,560	$	6,802
Service charges on deposits		6,137		5,659		6,952
Debit and credit card interchange income		12,029		9,187		8,301
Brokerage income		6,368		4,837		4,411
BOLI and annuity earnings⁽¹⁾		1,109		959		723
Security gain (loss), net⁽¹⁾		28		882		(268	)
Other non-interest income		1,428		2,056		1,428
Total non-interest income	$	37,096	$	33,140	$	28,349

⁽¹⁾Not within the scope of ASC Topic 606.

A description of the Company's revenue streams accounted for under ASC Topic 606 follows:

Service charges on deposit accounts - The Company earns fees on its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM usage fees, stop payment charges, statement rendering, and ACH fees are recognized at the time the transaction is executed and the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Account maintenance fees are recognized in the same month the Company earns and satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.

Debit and credit card interchange income - The Company earns interchange fees from debit and credit cardholder transactions conducted through the Mastercard payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.

Brokerage income - The Company earns fees from investment brokerage services provided to its customers by a third-party service provider. The Company receives commissions from the third-party service provider on a bi-monthly basis based upon customer activity for the month. The fees are recognized monthly when the Company satisfies the performance obligation. Because the Company (1) acts as an agent in arranging the relationship between the customer and third-party service provider and (2) does not control the services rendered to the customer, investment brokerage fees are presented net of related servicing and administration costs.

WILSON BANK HOLDING COMPANY

Notes to Consolidated Financial Statements, Continued

December 31, 2021, 2020 and 2019

(26)

Subsequent Events

ASC Topic 855, Subsequent Events, as amended by ASU No. 2010-90, 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 December 31, 2021, through the date of the issued financial statements. During this period there were no material recognizable subsequent events that required recognition in the disclosures to the Company's December 31, 2021 financial statements.

EXHIBIT 21.1

SUBSIDIARIES OF THE ISSUER

The Company has a wholly-owned subsidiary, Wilson Bank and Trust, a state chartered bank incorporated under the laws of the State of Tennessee and doing business under the same name.

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our reports, dated March 4, 2022, with respect to the consolidated financial statements included in the Annual Report of Wilson Bank Holding Company on Form 10-K for the year ended December 31, 2021. We consent to the incorporation by reference of said reports in the following Registration Statements of Wilson Bank Holding Company:

	●	Registration Statement (Form S-8, No. 333-158621) pertaining to the Wilson Bank Holding Company 2009 Stock Option Plan
	●	Registration Statement (Form S-8, No. 333-210927) pertaining to the Wilson Bank Holding Company 2016 Equity Incentive Plan

●

Registration Statement (Form S-3, No. 333-235739) pertaining to the Amended and Restated Wilson Bank Holding Company Dividend Reinvestment Plan

/s/ Maggart & Associates, P.C.

Maggart & Associates, P.C.

Nashville, Tennessee

March 4, 2022

EXHIBIT 31.1

CERTIFICATIONS



I, John C. McDearman III, certify that:

1.	I have reviewed this annual report on Form 10-K of Wilson Bank Holding Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
	(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2022
		By:/s/ John C. McDearman III
		Name: John C. McDearman
		President and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATIONS



I, Lisa Pominski , certify that:

1.	I have reviewed this annual report on Form 10-K of Wilson Bank Holding Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
	(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2022
		By:/s/ Lisa Pominski
		Name: Lisa Pominski
		Executive Vice President and Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Wilson Bank Holding Company (the “Company”) on Form 10-K for the period ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John C. McDearman, III, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



	/s/ John C. McDearman III
	John C McDearman III
	President and Chief Executive Officer

	Date: March 15, 2022

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Wilson Bank Holding Company (the “Company”) on Form 10-K for the period ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lisa Pominski, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



	/s/ Lisa Pominski
	Lisa Pominski, Executive Vice President and Chief
	Financial Officer

	Date: March 15, 2022