Wilson Bank Holding Company’s Financial Performance

Overview

Wilson Bank Holding Company (the “Company”) is the parent company of Wilson Bank & Trust (the “Bank”) and Encompass Home Lending LLC (“Encompass”), a mortgage banking services company. The Company’s net earnings increased by 28.38% in the first quarter of 2025 compared to the same period in 2024, primarily due to an increase in net interest income and non-interest income, partially offset by increases in non-interest expense and provision for credit losses.

The Company’s return on average assets (ROA) and return on average shareholders’ equity (ROE) also improved in the first quarter of 2025 compared to the same period in 2024, reaching 1.23% and 13.35% respectively. This was mainly driven by the increase in net interest income and non-interest income.

Key Financial Highlights:

Metric	Q1 2025	Q1 2024	% Change
Net Earnings	$16,392,000	$12,768,000	28.38%
ROA	1.23%	1.05%	17.14%
ROE	13.35%	11.91%	12.09%
Efficiency Ratio	55.54%	61.04%	-9.01%

Revenue and Profit Trends

The increase in net earnings for the first quarter of 2025 was primarily driven by:

Net Interest Income:

• Increase in average interest earning asset balances
• Increase in the average yield earned on earning assets
• Decrease in the cost of funds, partially offset by an increase in average interest bearing deposit balances

Non-Interest Income:

• Increase in brokerage income, income on bank-owned life insurance (BOLI) and annuity contracts, and a decrease in loss on sale of fixed assets

These increases were partially offset by:

Non-Interest Expense:

• Increase in salaries and benefits, occupancy expenses, data processing expense, FDIC insurance, audit/legal/consulting expenses, and other operating expenses

Provision for Credit Losses:

• Increase in provision for loan losses due to loan growth and credit deterioration of a single commercial real estate borrower

The Company’s net interest margin improved to 3.53% in the first quarter of 2025 from 3.14% in the same period of 2024, primarily due to the increase in average interest earning asset balances and yields, as well as a decrease in the cost of funds.

Strengths and Weaknesses

Strengths:

• Stable core deposit base providing a primary source of liquidity
• Diversified loan portfolio with focus on commercial real estate, residential real estate, and consumer lending
• Improving efficiency ratio, down to 55.54% in Q1 2025 from 61.04% in Q1 2024
• Strong capital position with total capital to assets ratio of 9.15% as of March 31, 2025

Weaknesses:

• Exposure to interest rate risk, with the Company having a slightly liability sensitive position as of March 31, 2025
• Potential for increased credit losses if economic conditions deteriorate, as evidenced by the credit deterioration of a single commercial real estate borrower
• Reliance on non-interest income sources like brokerage and mortgage banking, which can be volatile

Outlook

The Company expects loan growth to remain steady in 2025, driven by continued population growth and corporate relocations in its primary market areas, as well as increased marketing efforts. However, the Company’s net interest margin and earnings could be negatively impacted if it is unable to lower deposit rates in a falling rate environment or limit increases to deposit rates in a rising rate environment, due to competitive pressures or loan growth outpacing the ability to add lower-cost core deposits.

The Company will continue to monitor its interest rate risk exposure and make adjustments to its asset-liability management strategies as needed. Additionally, the Company will focus on maintaining credit quality and managing its provision for credit losses, which could be impacted by changes in economic conditions.

Overall, the Company appears to be in a strong financial position, with opportunities for continued growth and profitability, but will need to carefully manage its interest rate risk and credit risk exposures going forward.