UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
September 30, 2008
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission File
Number: 1-14659
WILMINGTON TRUST
CORPORATION
(Exact name of registrant as
specified in its charter)
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Delaware
(State or other jurisdiction
of
incorporation or organization)
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51-0328154
(I.R.S. Employer
Identification No.)
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Rodney Square North, 1100 North Market Street,
Wilmington, Delaware
(Address of principal
executive offices)
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19890
(Zip Code)
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(302) 651-1000
(Registrants telephone
number, including area code)
None
(Former name, former address and
former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Sections 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
þ
No
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
o
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes
o
No
þ
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12,
13, or 15(d) of the Securities Exchange Act of 1934 subsequent
to the distribution of securities under a plan confirmed by a
court. Yes
o
No
o
APPLICABLE
ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest
practicable date.
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Class
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Outstanding as of September 30, 2008
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Common stock Par Value $1.00
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68,083,647
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WILMINGTON
TRUST CORPORATION AND SUBSIDIARIES
Form 10-Q
for the three and nine months ended September 30,
2008
TABLE OF
CONTENTS
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Page
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1
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1
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3
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5
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9
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35
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35
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37
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46
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56
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64
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64
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67
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69
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71
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73
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74
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77
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80
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89
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92
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93
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93
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93
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94
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94
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94
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94
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Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
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Item 1.
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Financial
Statements
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CONSOLIDATED
STATEMENTS OF CONDITION
Wilmington Trust Corporation and subsidiaries
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September 30,
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December 31,
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2008
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2007
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(In millions, except
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share amounts)
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(Unaudited)
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ASSETS
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Cash and due from banks
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$
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231.1
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$
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260.5
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Interest-bearing deposits in other banks
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80.1
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4.4
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Federal funds sold and securities purchased under agreements to
resell
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129.6
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Investment securities available for sale:
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U.S. Treasury
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91.2
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60.2
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Government agencies
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453.0
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647.0
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Obligations of state and political subdivisions
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6.3
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16.9
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Mortgage-backed securities
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673.4
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730.4
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Other securities
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43.7
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390.2
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Total investment securities available for sale
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1,267.6
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1,844.7
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Investment securities held to maturity:
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Government agencies
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0.5
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Obligations of state and political subdivisions
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0.7
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0.9
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Other securities
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191.2
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1.2
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Total investment securities held to maturity
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192.4
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2.1
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FHLB and FRB stock, at cost
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16.4
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22.4
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Loans:
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Commercial, financial, and agricultural
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2,965.2
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2,594.9
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Real estate construction
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1,908.7
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1,780.4
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Mortgage commercial
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1,800.7
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1,463.4
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Total commercial loans
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6,674.6
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5,838.7
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Mortgage residential
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562.9
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562.0
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Consumer loans
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1,782.9
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1,571.6
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Loans secured with liquid collateral
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564.6
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503.5
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Total retail loans
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2,910.4
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2,637.1
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Total loans, net of unearned income of $5.4 in 2008 and $5.4 in
2007
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9,585.0
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8,475.8
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Reserve for loan losses
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(122.2
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(101.1
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Net loans
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9,462.8
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8,374.7
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Premises and equipment, net
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152.1
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152.1
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Goodwill, net of accumulated amortization of $29.8 in 2008 and
2007
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343.3
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330.0
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Other intangible assets, net of accumulated amortization of
$37.8 in 2008 and $31.6 in 2007
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47.3
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38.3
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Accrued interest receivable
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83.6
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80.0
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Other assets
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257.4
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246.9
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Total assets
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$
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12,134.1
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$
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11,485.7
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1
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
CONSOLIDATED STATEMENTS OF
CONDITION (Continued)
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September 30,
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December 31,
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2008
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2007
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(In millions, except
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share amounts)
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(Unaudited)
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LIABILITIES AND STOCKHOLDERS EQUITY
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Deposits:
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Noninterest-bearing demand
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$
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879.6
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$
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966.2
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Interest-bearing:
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Savings
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799.6
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659.8
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Interest-bearing demand
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2,594.4
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2,471.8
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Certificates under $100,000
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998.1
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1,011.4
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Local certificates $100,000 and over
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267.8
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356.3
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Total core deposits
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5,539.5
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5,465.5
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National certificates $100,000 and over
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3,101.7
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2,392.0
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Total deposits
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8,641.2
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7,857.5
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Short-term borrowings:
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Federal funds purchased and securities sold under agreements to
repurchase
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1,745.4
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1,775.3
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U.S. Treasury demand deposits
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7.5
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77.3
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Line of credit and other debt
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20.0
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139.5
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Total short-term borrowings
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1,772.9
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1,992.1
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Accrued interest payable
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79.7
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78.8
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Other liabilities
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109.7
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169.1
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Long-term debt
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468.3
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267.8
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Total liabilities
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11,071.8
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10,365.3
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Minority interest
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0.2
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0.1
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Stockholders equity:
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Common stock: $1.00 par value, authorized
150,000,000 shares, issued 78,528,346 shares
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78.5
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78.5
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Capital surplus
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204.2
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188.1
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Retained earnings
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1,197.0
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1,221.1
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Accumulated other comprehensive loss
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(94.2
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(28.4
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Total contributed capital and retained earnings
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1,385.5
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1,459.3
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Less: treasury stock: 10,444,699 shares in 2008 and
11,441,800 shares in 2007, at cost
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(323.4
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(339.0
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Total stockholders equity
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1,062.1
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1,120.3
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Total liabilities and stockholders equity
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$
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12,134.1
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$
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11,485.7
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See Notes to Consolidated Financial Statements
2
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Wilmington Trust Corporation and subsidiaries
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For the Three Months
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For the Nine Months
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Ended September 30,
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Ended September 30,
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2008
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2007
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2008
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2007
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(In millions, except share amounts)
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(Unaudited)
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NET INTEREST INCOME
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Interest and fees on loans
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$
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133.1
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$
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160.7
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$
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403.5
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$
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473.1
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Interest and dividends on investment securities:
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Taxable interest
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17.5
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21.0
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56.1
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65.4
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Tax-exempt interest
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0.1
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0.1
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0.3
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0.4
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Dividends
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0.5
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1.0
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2.1
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3.4
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Interest on deposits in other banks
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0.5
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0.1
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0.9
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0.2
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Interest on federal funds sold and securities purchased under
agreements to resell
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0.2
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0.4
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0.7
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1.4
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Dividends on FHLB and FRB stock
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0.2
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0.1
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0.7
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0.3
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Total interest income
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152.1
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183.4
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464.3
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544.2
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Interest on deposits
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43.2
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66.0
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143.4
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198.3
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Interest on short-term borrowings
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9.5
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19.2
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36.9
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52.7
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Interest on long-term debt
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8.3
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4.1
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20.9
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15.5
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Total interest expense
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61.0
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89.3
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201.2
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266.5
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Net interest income
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91.1
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94.1
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263.1
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277.7
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Provision for loan losses
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(19.6
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(8.9
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(48.0
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(19.0
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Net interest income after provision for loan losses
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71.5
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85.2
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215.1
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258.7
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NONINTEREST INCOME
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Advisory fees:
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Wealth Advisory Services:
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Trust and investment advisory fees
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39.3
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40.5
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118.7
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115.8
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Mutual fund fees
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6.8
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5.3
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19.6
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15.4
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Planning and other services
|
|
|
11.2
|
|
|
|
10.3
|
|
|
|
32.5
|
|
|
|
29.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Wealth Advisory Services
|
|
|
57.3
|
|
|
|
56.1
|
|
|
|
170.8
|
|
|
|
161.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Client Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital markets services
|
|
|
11.9
|
|
|
|
10.2
|
|
|
|
35.6
|
|
|
|
31.5
|
|
Entity management services
|
|
|
7.7
|
|
|
|
7.4
|
|
|
|
24.2
|
|
|
|
21.9
|
|
Retirement services
|
|
|
11.3
|
|
|
|
3.0
|
|
|
|
22.0
|
|
|
|
9.6
|
|
Investment/cash management services
|
|
|
3.5
|
|
|
|
3.0
|
|
|
|
10.3
|
|
|
|
9.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Corporate Client Services
|
|
|
34.4
|
|
|
|
23.6
|
|
|
|
92.1
|
|
|
|
72.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cramer Rosenthal McGlynn
|
|
|
3.8
|
|
|
|
4.2
|
|
|
|
13.3
|
|
|
|
15.2
|
|
Roxbury Capital Management
|
|
|
0.4
|
|
|
|
0.4
|
|
|
|
(0.4
|
)
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total advisory fees
|
|
|
95.9
|
|
|
|
84.3
|
|
|
|
275.8
|
|
|
|
249.3
|
|
Amortization of affiliate intangibles
|
|
|
(2.2
|
)
|
|
|
(1.2
|
)
|
|
|
(5.4
|
)
|
|
|
(3.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total advisory fees after amortization of affiliate intangibles
|
|
|
93.7
|
|
|
|
83.1
|
|
|
|
270.4
|
|
|
|
245.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts
|
|
|
7.7
|
|
|
|
7.2
|
|
|
|
22.7
|
|
|
|
21.0
|
|
Loan fees and late charges
|
|
|
2.1
|
|
|
|
2.1
|
|
|
|
6.6
|
|
|
|
6.2
|
|
Card fees
|
|
|
2.7
|
|
|
|
2.0
|
|
|
|
7.2
|
|
|
|
5.9
|
|
Other noninterest income
|
|
|
1.3
|
|
|
|
0.6
|
|
|
|
9.0
|
|
|
|
4.3
|
|
Securities losses
|
|
|
(19.7
|
)
|
|
|
(0.2
|
)
|
|
|
(32.2
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
87.8
|
|
|
|
94.8
|
|
|
|
283.7
|
|
|
|
283.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest and noninterest income
|
|
$
|
159.3
|
|
|
$
|
180.0
|
|
|
$
|
498.8
|
|
|
$
|
541.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
CONSOLIDATED STATEMENTS OF
INCOME (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
|
|
|
For the Nine Months
|
|
|
|
Ended September 30,
|
|
|
Ended September 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions, except share amounts)
|
|
|
|
(Unaudited)
|
|
|
NONINTEREST EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and wages
|
|
$
|
50.6
|
|
|
$
|
44.1
|
|
|
$
|
144.6
|
|
|
$
|
127.7
|
|
Incentives and bonuses
|
|
|
11.8
|
|
|
|
10.0
|
|
|
|
39.5
|
|
|
|
35.4
|
|
Employment benefits
|
|
|
12.8
|
|
|
|
12.7
|
|
|
|
39.5
|
|
|
|
38.9
|
|
Net occupancy
|
|
|
7.9
|
|
|
|
7.3
|
|
|
|
23.5
|
|
|
|
20.9
|
|
Furniture, equipment, and supplies
|
|
|
11.7
|
|
|
|
10.0
|
|
|
|
31.6
|
|
|
|
29.5
|
|
Advertising and contributions
|
|
|
2.6
|
|
|
|
2.0
|
|
|
|
7.7
|
|
|
|
7.5
|
|
Servicing and consulting fees
|
|
|
2.9
|
|
|
|
2.6
|
|
|
|
8.7
|
|
|
|
7.8
|
|
Subadvisor expense
|
|
|
4.7
|
|
|
|
2.7
|
|
|
|
10.8
|
|
|
|
7.7
|
|
Travel, entertainment, and training
|
|
|
3.2
|
|
|
|
2.8
|
|
|
|
8.5
|
|
|
|
7.4
|
|
Originating and processing fees
|
|
|
2.8
|
|
|
|
2.8
|
|
|
|
7.8
|
|
|
|
8.0
|
|
Legal and auditing fees
|
|
|
1.8
|
|
|
|
2.2
|
|
|
|
6.7
|
|
|
|
6.4
|
|
Other noninterest expense
|
|
|
11.1
|
|
|
|
11.6
|
|
|
|
32.1
|
|
|
|
30.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense before impairment
|
|
|
123.9
|
|
|
|
110.8
|
|
|
|
361.0
|
|
|
|
327.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment write-down
|
|
|
|
|
|
|
|
|
|
|
66.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
123.9
|
|
|
|
110.8
|
|
|
|
427.9
|
|
|
|
327.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and minority interest
|
|
|
35.4
|
|
|
|
69.2
|
|
|
|
70.9
|
|
|
|
214.7
|
|
Income tax expense
|
|
|
12.3
|
|
|
|
22.9
|
|
|
|
25.5
|
|
|
|
75.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before minority interest
|
|
|
23.1
|
|
|
|
46.3
|
|
|
|
45.4
|
|
|
|
138.8
|
|
Minority interest
|
|
|
0.2
|
|
|
|
0.1
|
|
|
|
0.5
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
22.9
|
|
|
$
|
46.2
|
|
|
$
|
44.9
|
|
|
$
|
138.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.34
|
|
|
$
|
0.68
|
|
|
$
|
0.67
|
|
|
$
|
2.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.34
|
|
|
$
|
0.67
|
|
|
$
|
0.67
|
|
|
$
|
1.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
67,231
|
|
|
|
67,698
|
|
|
|
67,155
|
|
|
|
68,206
|
|
Diluted
|
|
|
67,269
|
|
|
|
68,582
|
|
|
|
67,349
|
|
|
|
69,222
|
|
See Notes to Consolidated Financial Statements
4
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Wilmington Trust Corporation and subsidiaries
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months
|
|
|
|
Ended September 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
|
(Unaudited)
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
44.9
|
|
|
$
|
138.0
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
48.0
|
|
|
|
19.0
|
|
Provision for depreciation and other amortization
|
|
|
16.9
|
|
|
|
17.0
|
|
Amortization of other intangible assets
|
|
|
6.2
|
|
|
|
4.3
|
|
Minority interest in net income
|
|
|
0.5
|
|
|
|
0.8
|
|
Amortization/(accretion) of discounts and premiums on investment
securities available for sale
|
|
|
0.4
|
|
|
|
(0.7
|
)
|
Goodwill impairment write-down
|
|
|
66.9
|
|
|
|
|
|
Deferred income taxes
|
|
|
(49.8
|
)
|
|
|
1.6
|
|
Employer pension contribution
|
|
|
(6.5
|
)
|
|
|
(10.0
|
)
|
Originations of residential mortgages available for sale
|
|
|
(76.6
|
)
|
|
|
(78.5
|
)
|
Gross proceeds from sales of residential mortgages
|
|
|
77.5
|
|
|
|
79.3
|
|
Gains on sales of residential mortgages
|
|
|
(0.9
|
)
|
|
|
(0.8
|
)
|
Securities (gains)/losses:
|
|
|
|
|
|
|
|
|
Other-than-temporary impairment
|
|
|
32.3
|
|
|
|
|
|
Other
|
|
|
(0.1
|
)
|
|
|
0.1
|
|
Reclassification from accumulated other comprehensive income
into earnings of discontinued cash flow hedges
|
|
|
(8.7
|
)
|
|
|
|
|
Stock-based compensation expense
|
|
|
6.2
|
|
|
|
6.2
|
|
Tax expense/(benefit) realized on employee exercise of stock
options
|
|
|
0.1
|
|
|
|
(1.2
|
)
|
Decrease/(increase) in other assets
|
|
|
17.7
|
|
|
|
(27.1
|
)
|
(Decrease)/increase in other liabilities
|
|
|
(19.5
|
)
|
|
|
17.6
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
155.5
|
|
|
$
|
165.6
|
|
|
|
|
|
|
|
|
|
|
5
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
CONSOLIDATED STATEMENTS OF CASH
FLOWS (Continued)
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months
|
|
|
|
Ended September 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
|
(Unaudited)
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from sales of investment securities available for sale
|
|
$
|
11.9
|
|
|
$
|
43.6
|
|
Proceeds from sales of FHLB & FRB stock, at cost
|
|
|
12.9
|
|
|
|
|
|
Proceeds from maturities of investment securities available for
sale
|
|
|
922.5
|
|
|
|
934.0
|
|
Proceeds from maturities of investment securities held to
maturity
|
|
|
0.4
|
|
|
|
0.4
|
|
Purchases of investment securities available for sale
|
|
|
(689.6
|
)
|
|
|
(715.7
|
)
|
Purchases of investment securities held to maturity
|
|
|
(0.6
|
)
|
|
|
(0.9
|
)
|
Purchases of FHLB & FRB stock, at cost
|
|
|
(6.9
|
)
|
|
|
|
|
Cash paid for acquisitions
|
|
|
(93.6
|
)
|
|
|
(27.9
|
)
|
Investment in affiliates
|
|
|
(14.3
|
)
|
|
|
(17.9
|
)
|
Sale of affiliate interest
|
|
|
0.3
|
|
|
|
|
|
Purchases of residential mortgages
|
|
|
|
|
|
|
(7.0
|
)
|
Net increase in loans
|
|
|
(1,136.1
|
)
|
|
|
(246.2
|
)
|
Purchases of premises and equipment
|
|
|
(16.1
|
)
|
|
|
(12.8
|
)
|
Dispositions of premises and equipment
|
|
|
1.2
|
|
|
|
0.2
|
|
Proceeds from sales of interest rate floors
|
|
|
55.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used for investing activities
|
|
$
|
(952.9
|
)
|
|
$
|
(50.2
|
)
|
|
|
|
|
|
|
|
|
|
6
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
CONSOLIDATED STATEMENTS OF CASH
FLOWS (Continued)
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months
|
|
|
|
Ended September 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
|
(Unaudited)
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in demand, savings, and interest-bearing
demand deposits
|
|
$
|
175.8
|
|
|
$
|
(33.4
|
)
|
Net increase/(decrease) in certificates of deposit
|
|
|
607.9
|
|
|
|
(796.0
|
)
|
Net (decrease)/increase in federal funds purchased and
securities sold under agreements to repurchase
|
|
|
(29.9
|
)
|
|
|
784.7
|
|
Net (decrease)/increase in U.S. Treasury demand deposits
|
|
|
(69.8
|
)
|
|
|
27.9
|
|
Proceeds from issuance of long-term debt
|
|
|
198.7
|
|
|
|
|
|
Maturity of other debt
|
|
|
(125.0
|
)
|
|
|
|
|
Net increase/(decrease) in line of credit
|
|
|
5.0
|
|
|
|
(5.0
|
)
|
Cash dividends
|
|
|
(69.0
|
)
|
|
|
(67.4
|
)
|
Distributions to minority shareholders
|
|
|
(0.4
|
)
|
|
|
(0.7
|
)
|
Proceeds from common stock issued under employment benefit plans
|
|
|
5.6
|
|
|
|
15.9
|
|
Proceeds from reissuance of treasury stock
|
|
|
16.2
|
|
|
|
|
|
Tax (expense)/benefit realized on employee exercise of stock
options
|
|
|
(0.1
|
)
|
|
|
1.2
|
|
Acquisition of treasury stock
|
|
|
(0.1
|
)
|
|
|
(58.6
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by/(used for) financing activities
|
|
$
|
714.9
|
|
|
$
|
(131.4
|
)
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency translation on cash
|
|
|
(0.8
|
)
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents
|
|
|
(83.3
|
)
|
|
|
(15.8
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
394.5
|
|
|
|
318.6
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
311.2
|
|
|
$
|
302.8
|
|
|
|
|
|
|
|
|
|
|
7
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
CONSOLIDATED STATEMENTS OF CASH
FLOWS (Continued)
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
Cash Paid During the Nine Months Ended September 30
|
|
2008
|
|
|
2007
|
|
|
|
(In millions) (Unaudited)
|
|
|
Interest
|
|
$
|
200.3
|
|
|
$
|
261.2
|
|
Taxes
|
|
|
71.8
|
|
|
|
70.2
|
|
Liabilities were assumed in connection with our interests in
Cramer Rosenthal McGlynn, LLC; Roxbury Capital Management, LLC;
and Camden Partners Holdings, LLC; and with our acquisitions of
AST Capital Trust Company; Bingham Legg Advisers, LLC;
Grant Tani Barash & Altman, LLC; and Amaco
(Luxembourg) S.A., as follows:
|
|
|
|
|
|
|
|
|
Liabilities Assumed During the Nine Months Ended September
30
|
|
2008
|
|
|
2007
|
|
|
|
(In millions) (Unaudited)
|
|
|
Fair value of assets acquired
|
|
$
|
112.3
|
|
|
$
|
4.6
|
|
Goodwill and other intangible assets from acquisitions
|
|
|
97.0
|
|
|
|
43.7
|
|
Cash paid
|
|
|
(107.6
|
)
|
|
|
(45.8
|
)
|
|
|
|
|
|
|
|
|
|
Liabilities assumed
|
|
$
|
101.7
|
|
|
$
|
2.5
|
|
|
|
|
|
|
|
|
|
|
Non-Cash Items During the Nine Months Ended September 30
|
|
2008
|
|
|
2007
|
|
|
|
(In millions) (Unaudited)
|
|
|
Net unrealized losses on securities, net of tax of $(51.1) and
$(0.9), respectively
|
|
$
|
(90.7
|
)
|
|
$
|
(1.6
|
)
|
Net unrealized gains on equity method investment, net of tax of
$0.3 and $0.0, respectively
|
|
|
0.5
|
|
|
|
|
|
Transfer of investment securities from available-for-sale to
held-to-maturity
|
|
|
189.1
|
|
|
|
|
|
Net unrealized holding gains on derivatives used for cash flow
hedges, net of tax of $4.9 and $2.1, respectively
|
|
|
8.8
|
|
|
|
3.8
|
|
Reclassification from accumulated other comprehensive income
into earnings of discontinued cash flow hedges, net of tax of
$(3.0) and $0.0, respectively
|
|
|
(5.7
|
)
|
|
|
|
|
Foreign currency translation adjustment, net of tax of $0.0 and
$0.3, respectively
|
|
|
|
|
|
|
0.6
|
|
Adoption of FASB Interpretation No. 48
|
|
|
|
|
|
|
(1.6
|
)
|
Reclassification adjustment of derivative costs, net of tax of
$0.0 and $0.4, respectively
|
|
|
0.2
|
|
|
|
0.9
|
|
Postretirement benefits liability adjustment, net of tax of $0.0
and $(0.1), respectively
|
|
|
0.1
|
|
|
|
(0.3
|
)
|
Minimum pension liability adjustment, net of tax of $0.2 and
$0.7, respectively
|
|
|
0.1
|
|
|
|
1.3
|
|
SERP
1
liability adjustment, net of tax of $0.2 and $0.2, respectively
|
|
|
0.3
|
|
|
|
0.2
|
|
Reissue of treasury stock
|
|
|
3.9
|
|
|
|
|
|
|
|
|
1
|
|
Supplemental Executive Retirement Plan
|
See Notes to Consolidated Financial Statements
8
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
|
|
Note 1
|
Accounting
and reporting policies
|
We maintain our accounting records and prepare our financial
statements in accordance with U.S. generally accepted
accounting principles (GAAP) and reporting practices prescribed
for the banking industry. Using these principles, we make
subjective judgments about uncertainties and trends and we make
estimates and assumptions about the amounts we report in our
financial statements and notes, including amounts for revenue
recognition, the reserve for loan losses, stock-based employee
compensation, investment securities valuations, goodwill
impairment, loan origination fees, income taxes, and other
items. We evaluate these estimates on an ongoing basis.
The precision of these estimates and the likelihood of future
changes depend on a number of underlying variables and a range
of possible outcomes. Circumstances that differ significantly
from our judgments and estimates could cause our actual
financial results to differ from our expectations. Our financial
results could be affected adversely by, among other things,
changes in national or regional economic conditions; changes in
market interest rates; fluctuations in equity or fixed income
markets; significant changes in banking laws or regulations; the
effects of accounting pronouncements; increased competition for
business; higher-than-expected credit losses; the effects of
acquisitions; the effects of integrating acquired entities; a
substantial and permanent loss of either client accounts
and/or
assets under management at Wilmington Trust
and/or
our
affiliate money managers, Cramer Rosenthal McGlynn (CRM)
and Roxbury Capital Management (RCM); unanticipated changes in
the regulatory, judicial, legislative, or tax treatment of
business transactions; and uncertainty created by unrest in
other parts of the world.
Our consolidated financial statements include the accounts of
Wilmington Trust Corporation, our wholly owned
subsidiaries, and the subsidiaries in which we are majority
owner. We eliminate intercompany balances and transactions in
consolidation. For more information about our accounting
policies, read Note 2, Summary of significant
accounting policies, in our
2007 Annual Report to
Shareholders.
Although we are majority owner of CRM, we do not consolidate its
results because CRM owners retain control over certain
governance matters. We do not consolidate the results of RCM
because we are not majority owner and RCM owners retain control
over certain governance matters. For information on how we
account for CRM, RCM, and other subsidiaries and affiliates,
read Note 4, Affiliates and acquisitions, in
our
2007 Annual Report to Shareholders
.
We have applied our critical accounting policies and estimation
methods consistently in all periods presented in this report and
we have discussed these policies with our Audit Committee. The
information in this report has not been audited. It includes all
adjustments of a normal recurring nature that we believe are
necessary for fair presentation. We have reclassified certain
prior-year amounts to conform to the current-year presentation.
The consolidated financial statements in this report should be
read in conjunction with the Consolidated Financial
Statements and the Notes to Consolidated Financial
Statements in our
2007 Annual Report to
Shareholders
.
9
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We may use the following abbreviations throughout this report:
|
|
|
APB
|
|
Accounting Principles Board
|
ARB
|
|
Accounting Research Bulletin
|
EITF
|
|
Emerging Issues Task Force
|
FASB
|
|
The Financial Accounting Standards Board
|
FHLB
|
|
Federal Home Loan Bank
|
FIN
|
|
FASB Interpretation (Number)
|
FRB
|
|
Federal Reserve Board
|
FSP
|
|
FASB Staff Position
|
GAAP
|
|
U.S. generally accepted accounting principles
|
IRS
|
|
Internal Revenue Service
|
NYSE
|
|
New York Stock Exchange
|
SAB
|
|
Staff Accounting Bulletin
|
SEC
|
|
Securities and Exchange Commission
|
SFAS
|
|
Statement of Financial Accounting Standards
|
|
|
Note 2
|
Stock-based
compensation plans
|
We offer four types of stock-based compensation plans: long-term
stock-based incentive plans, an executive incentive plan, an
employee stock purchase plan, and a directors deferred fee
plan. The Compensation Committee and the Select Committee of our
Board of Directors administer these plans. We account for these
plans in accordance with SFAS No. 123(revised),
Share-Based Payment. For more information about
these plans and how we determine valuations of stock-based
awards, read Note 19, Stock-based compensation
plans, in our
2007 Annual Report to Shareholders.
At September 30, 2008, we held approximately
10.4 million shares of our stock in our treasury. This is
more than adequate to meet the share requirements of our current
stock-based compensation plans.
No stock options were awarded during the third quarter of 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
Effects of Stock-Based Compensation
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
$
|
1.3
|
|
|
$
|
1.3
|
|
|
$
|
4.0
|
|
|
$
|
3.8
|
|
Restricted stock
|
|
|
0.4
|
|
|
|
0.2
|
|
|
|
2.3
|
|
|
|
1.9
|
|
Employee stock purchase plan
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
(0.1
|
)
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total compensation expense
|
|
$
|
1.8
|
|
|
$
|
1.6
|
|
|
$
|
6.2
|
|
|
$
|
6.2
|
|
Tax benefit
|
|
|
0.6
|
|
|
|
0.4
|
|
|
|
2.2
|
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income effect
|
|
$
|
1.2
|
|
|
$
|
1.2
|
|
|
$
|
4.0
|
|
|
$
|
4.0
|
|
10
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
For the Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
Stock Option Valuation Assumptions
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Risk-free interest rate
|
|
|
|
4.28% - 4.60%
|
|
2.49% - 3.64%
|
|
4.28% - 4.84%
|
Volatility of Corporations stock
|
|
|
|
13.53% - 13.88%
|
|
13.71% -17.86%
|
|
13.53% - 18.25%
|
Expected dividend yield
|
|
|
|
3.32% - 3.32%
|
|
3.85% - 4.34%
|
|
2.88% - 3.32%
|
Expected life of options
|
|
|
|
4.5 to 8.2 years
|
|
4.7 to 8.2 years
|
|
4.5 to 8.2 years
|
In the table above:
|
|
|
|
|
We used the Black-Scholes valuation method.
|
|
|
|
The risk-free interest rate is the U.S. Treasury rate
commensurate with the expected life of options on the date of
each grant.
|
|
|
|
We based the volatility of our stock on historical volatility
over a span of time equal to the expected life of options.
|
|
|
|
We based the expected life of stock option awards on historical
experience. Expected life is the period of time we estimate that
stock options granted will remain outstanding.
|
Long-term
stock-based incentive plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
|
|
|
For the Nine Months
|
|
|
|
Ended September 30,
|
|
|
Ended September 30,
|
|
Options Exercised
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in millions)
|
|
|
Number of options exercised
|
|
|
20,858
|
|
|
|
188,607
|
|
|
|
217,269
|
|
|
|
627,294
|
|
Total intrinsic value of options exercised
|
|
$
|
0.2
|
|
|
$
|
1.8
|
|
|
$
|
0.6
|
|
|
$
|
7.4
|
|
Cash received from options exercised
|
|
$
|
0.6
|
|
|
$
|
1.3
|
|
|
$
|
5.1
|
|
|
$
|
12.5
|
|
Tax benefit realized from tax deductions for options exercised
|
|
$
|
0.1
|
|
|
$
|
0.7
|
|
|
$
|
0.2
|
|
|
$
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
|
|
Stock Option Activity for the
|
|
Stock
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Aggregate
|
|
Nine Months Ended September 30, 2008
|
|
Options
|
|
|
Price
|
|
|
Term
|
|
|
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
Outstanding at January 1, 2008
|
|
|
6,313,109
|
|
|
$
|
35.21
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,100,156
|
|
|
$
|
33.06
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(217,269
|
)
|
|
$
|
30.34
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(84,239
|
)
|
|
$
|
34.08
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(80,187
|
)
|
|
$
|
40.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2008
|
|
|
7,031,570
|
|
|
$
|
34.98
|
|
|
|
3.4 years
|
|
|
$
|
2.2
|
|
Exercisable at September 30, 2008
|
|
|
4,134,295
|
|
|
$
|
31.82
|
|
|
|
2.2 years
|
|
|
$
|
2.2
|
|
Unvested
stock options
At September 30, 2008, total unrecognized compensation cost
related to unvested options was $6.1 million. We expect to
record that expense over a weighted average period of
1.6 years.
11
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Restricted
stock grants
We amortize the value of restricted stock grants into
stock-based compensation expense on a straight-line basis over
the requisite service period for the entire award. At
September 30, 2008, total unrecognized compensation cost
related to restricted stock grants was $2.8 million. We
expect to record that expense over a weighted average period of
1.4 years.
Under our incentive plans, the vesting period for restricted
stock awards is accelerated upon retirement and in certain other
circumstances. When we award restricted stock to people from
whom we may not receive services in the future, such as those
who are eligible for retirement, we recognize the expense of
restricted stock grants when we make the award instead of
amortizing the expense over the vesting period of the award. In
the 2008 third quarter, we recorded $0.4 million of expense
for restricted stock grants.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
Restricted Stock Activity for
|
|
|
|
|
Fair Value at Grant
|
|
the Nine Months Ended September 30, 2008
|
|
Restricted Shares
|
|
|
Date
|
|
|
Outstanding at January 1, 2008
|
|
|
86,131
|
|
|
$
|
42.77
|
|
Granted
|
|
|
118,865
|
|
|
$
|
31.26
|
|
Vested
|
|
|
(22,412
|
)
|
|
$
|
41.13
|
|
Forfeited
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2008
|
|
|
182,584
|
|
|
$
|
35.48
|
|
Employee
stock purchase plan (ESPP)
For the ESPP, we record stock-based compensation expense that
represents the fair value of plan participants options to
purchase shares, amortized over the plans fiscal year. Due
to forfeitures in the plan, we recorded net credits in
compensation cost during the 2008 second quarter. For the three
months ended September 30, 2008, total recognized
compensation cost related to the ESPP was $0.1 million and
total unrecognized compensation cost related to this plan was
$0.3 million. For the nine months ended September 30,
2008, total recognized compensation cost related to the employee
stock purchase plan was $(0.1) million and total
unrecognized compensation cost related to this plan was
$0.3 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Reserved
|
|
|
Subscriptions
|
|
|
|
|
Employee Stock Purchase Plan
|
|
for Future Subscriptions
|
|
|
Outstanding
|
|
|
Price per Share
|
|
|
Balance at January 1, 2007
|
|
|
500,777
|
|
|
|
94,001
|
|
|
|
|
|
Subscriptions entered into on June 1, 2007
|
|
|
(106,012
|
)
|
|
|
106,012
|
|
|
$
|
36.64
|
|
Forfeitures
|
|
|
14,110
|
|
|
|
(14,110
|
)
|
|
$
|
36.64 - 37.06
|
|
Shares issued
|
|
|
|
|
|
|
(91,911
|
)
|
|
$
|
37.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2008
|
|
|
408,875
|
|
|
|
93,992
|
|
|
|
|
|
New plan appropriation
|
|
|
800,000
|
|
|
|
|
|
|
|
|
|
Forfeitures
|
|
|
78,849
|
|
|
|
(78,849
|
)
|
|
$
|
36.64
|
|
Shares issued
|
|
|
|
|
|
|
(15,143
|
)
|
|
$
|
36.64
|
|
Expiration of 2004 ESPP
|
|
|
(487,724
|
)
|
|
|
|
|
|
|
|
|
Subscriptions entered into on June 1, 2008
|
|
|
(118,473
|
)
|
|
|
118,473
|
|
|
$
|
27.67
|
|
Forfeitures
|
|
|
17,330
|
|
|
|
(17,330
|
)
|
|
$
|
27.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2008
|
|
|
698,857
|
|
|
|
101,143
|
|
|
|
|
|
12
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 3
|
Comprehensive
(loss)/income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
Comprehensive (Loss)/Income
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Net income
|
|
$
|
22.9
|
|
|
$
|
46.2
|
|
|
$
|
44.9
|
|
|
$
|
138.0
|
|
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized (losses)/gains on securities, net of income taxes
of $(20.5), $3.0, $(51.1), and $(0.9)
|
|
|
(36.4
|
)
|
|
|
5.2
|
|
|
|
(90.7
|
)
|
|
|
(1.6
|
)
|
Net unrealized gain on equity method investment, net of income
taxes of $0.0, $0.0, $0.3, and $0.0
|
|
|
|
|
|
|
|
|
|
|
0.5
|
|
|
|
|
|
Reclassification adjustment for securities losses included in
net income, net of income taxes of $7.1, $0.1, $11.6, and $0.0
|
|
|
12.6
|
|
|
|
0.1
|
|
|
|
20.6
|
|
|
|
0.1
|
|
Net unrealized holding gains arising during the period on
derivatives used for cash flow hedges, net of income taxes of
$0.0, $4.7, $4.9, and $2.1
|
|
|
|
|
|
|
8.8
|
|
|
|
8.8
|
|
|
|
3.8
|
|
Reclassification from accumulated other comprehensive income
into earnings of discontinued cash flow hedges, net of taxes of
$(1.3), $0.0, $(3.0), and $0.0
|
|
|
(2.5
|
)
|
|
|
|
|
|
|
(5.7
|
)
|
|
|
|
|
Reclassification adjustment of derivative costs, net of income
taxes of $0.0, $0.2, $0.0, and $0.4
|
|
|
|
|
|
|
0.4
|
|
|
|
0.2
|
|
|
|
0.9
|
|
Foreign currency translation adjustments, net of income taxes of
$(0.2), $0.2, $0.0, and $0.3
|
|
|
(0.3
|
)
|
|
|
0.3
|
|
|
|
|
|
|
|
0.6
|
|
SERP
1
liability adjustment, net of income taxes of $0.1, $0.0, $0.2,
and $0.2
|
|
|
0.1
|
|
|
|
|
|
|
|
0.3
|
|
|
|
0.2
|
|
Postretirement benefits liability adjustment, net of income
taxes of $0.0, $(0.1), $0.0, and $(0.1)
|
|
|
|
|
|
|
0.3
|
|
|
|
0.1
|
|
|
|
(0.3
|
)
|
Minimum pension liability adjustment, net of income taxes of
$0.0, $0.2, $0.2, and $0.7
|
|
|
|
|
|
|
0.5
|
|
|
|
0.1
|
|
|
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive (loss)/income
|
|
$
|
(3.6
|
)
|
|
$
|
61.8
|
|
|
$
|
(20.9
|
)
|
|
$
|
143.0
|
|
|
|
|
1
|
|
Supplemental Executive Retirement Plan
|
13
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 4
|
Earnings
per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
Computation of Basic and Diluted Earnings per Share
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions, except per-share amounts)
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
22.9
|
|
|
$
|
46.2
|
|
|
$
|
44.9
|
|
|
$
|
138.0
|
|
Denominator for basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
|
|
|
67.2
|
|
|
|
67.7
|
|
|
|
67.2
|
|
|
|
68.2
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock options, nonvested restricted stock, and
ESPP
1
subscriptions
|
|
|
0.1
|
|
|
|
0.9
|
|
|
|
0.1
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted weighted-average shares and assumed conversions
|
|
|
67.3
|
|
|
|
68.6
|
|
|
|
67.3
|
|
|
|
69.2
|
|
Basic earnings per share
|
|
$
|
0.34
|
|
|
$
|
0.68
|
|
|
$
|
0.67
|
|
|
$
|
2.02
|
|
Diluted earnings per share
|
|
$
|
0.34
|
|
|
$
|
0.67
|
|
|
$
|
0.67
|
|
|
$
|
1.99
|
|
Cash dividends declared per share
|
|
$
|
0.345
|
|
|
$
|
0.335
|
|
|
$
|
1.025
|
|
|
$
|
0.985
|
|
Anti-dilutive stock options excluded
|
|
|
6.4
|
|
|
|
0.2
|
|
|
|
5.2
|
|
|
|
0.2
|
|
|
|
|
1
|
|
Employee Stock Purchase Plan
|
|
|
Note 5
|
Fair
value measurement of assets and liabilities
|
On January 1, 2008, we adopted SFAS No. 157,
Fair Value Measurements. SFAS No. 157
defines fair value, establishes a framework for measuring fair
value in accordance with GAAP, and expands disclosures about
fair value measurements. The definitions, framework, and
disclosures required by SFAS No. 157 apply to other
accounting pronouncements that require or permit fair value
measurement. SFAS No. 157 does not require any new
fair value measurements of reported balances. The adoption of
SFAS No. 157 had no material effect on our financial
statements.
In conjunction with the adoption of SFAS No. 157, we
adopted FSP
SFAS No. 157-2,
which amends SFAS No. 157 to allow companies to delay
the application of this statement until January 1, 2009,
for certain nonfinancial assets and liabilities, such as items
that are recognized or disclosed at fair value in the financial
statements on a nonrecurring basis.
SFAS No. 157 establishes a three-level hierarchy that
prioritizes the factors (inputs) used to calculate the fair
value of assets and liabilities:
|
|
|
|
|
Level 1.
Level 1 inputs are
unadjusted quoted prices, such as a New York Stock Exchange
closing price, in active markets for identical assets.
Level 1 is the highest priority in the hierarchy.
|
|
|
|
Level 2.
Level 2 inputs may
include quoted prices for similar assets and liabilities in
active markets, as well as other significant inputs that are
observable at commonly quoted intervals, such as interest rates,
foreign exchange rates, and yield curves.
|
|
|
|
Level 3.
Level 3 inputs are
unobservable inputs. Typically, our own assumptions determine
these inputs, since there is little, if any, observable market
information. Level 3 is the lowest priority in the
hierarchy.
|
14
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
If we use multiple input levels to calculate the fair value of
an asset or liability, then the lowest-level significant input
determines the level for the entire fair value measurement of
that asset or liability. Our assessment of the significance of a
particular input to the fair value measurement in its entirety
requires judgment, and it considers factors specific to the
asset or liability.
We determine the fair values and inputs to fair value
calculations for investment securities, interest rate swap
contracts, and loans as follows:
|
|
|
|
|
Investment securities.
For most of our
investment securities, we use prices provided by a third-party
vendor who is a global provider of financial market data,
analytics, and related services to financial institutions and
other market participants. This vendor evaluates a wide range of
securities and draws parallels from the trades and quotes of
securities with similar features. If the vendor is unable to
provide prices, we base fair value on the market prices of
comparable instruments as quoted by broker-dealers, with
adjustments for maturity dates, underlying assets, credit
ratings, and other items, if necessary.
|
In the 2008 third quarter, due to illiquidity in the market for
pooled trust-preferred securities (TRuPS), we began to place a
greater emphasis on using a cash flow methodology to estimate
the fair value of the pooled TRuPS in our portfolio. The base
cash flow for the calculation is the remaining expected future
cash flows, based on the contractual terms of the security and
adjusted for current and potential future defaults. We adjust
our default assumptions each quarter based on, among other
factors, the current environment in the financial sector;
developments related to the financial institutions whose
securities comprise a pooled TruP; and general market conditions
that could affect the default rate, estimated loss severity, and
overcollateralization of the security. We also adjust the
discount rate for appropriate risk premiums, including liquidity
risk and credit risk. Based on changes in certain yield curves
related to the financial sector, and other factors, we estimate
the associated risk premium for each individual security and
adjust the discount rate accordingly.
While estimating fair values and the inputs to fair value
calculations in illiquid markets is inherently uncertain, we
believe our methodology applies assumptions that market
participants would find relevant, and provides the best estimate
of fair value at this time.
|
|
|
|
|
Interest rate swap contracts.
To
determine the fair values of our interest rate swaps, we obtain
data from an independent third-party advisor on interest rate
and foreign exchange risk management. We use this data to
determine the fair values of our interest rate swaps by using
the market standard methodology of netting the discounted future
fixed cash receipts (or payments) and the discounted expected
variable cash payments (or receipts). We base the variable cash
payments (or receipts) on an expectation of future interest
rates (forward curves) derived from observable market interest
rate curves.
|
To comply with SFAS No. 157, the advisor incorporates
credit valuation adjustments to reflect both our nonperformance
risk and the respective counterpartys nonperformance risk.
In adjusting the fair value of our derivative contracts for the
effect of nonperformance risk, the advisor considers the impact
of netting and any applicable credit enhancements, such as
collateral postings, thresholds, mutual puts, and guarantees.
Most of the inputs we use to value our swap contracts fall
within Level 2 of the fair value hierarchy. For the credit
valuation adjustments we consider, we use Level 3 inputs,
such as estimates of current credit spreads, to evaluate the
likelihood of default by us and our counterparties.
|
|
|
|
|
Loans.
We do not record loans at fair
value on a recurring basis. We record fair value adjustments to
loans on a nonrecurring basis to reflect full and partial
charge-offs due to impairment. For impaired loans, we use a
variety of techniques to measure fair value, such as using the
current appraised value of the collateral, discounting the
contractual cash flows, and analyzing market data that we may
adjust due to the specific characteristics of the loan or
collateral.
|
15
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In accordance with GAAP, we may be required to measure certain
assets and liabilities at fair value on a nonrecurring basis.
These adjustments typically relate to lower-of-cost or fair
value accounting, or write-downs of individual assets due to
impairment.
Fair
value measurements as of and for the three and nine months ended
September 30, 2008
As of September 30, 2008:
|
|
|
|
|
To determine the fair value of our investment securities, we
used Level 1, Level 2, and Level 3 inputs. In the
first quarter of 2008, as illiquidity in the market for pooled
TruPS made it increasingly difficult to identify observable
inputs for determining their fair value, we transferred the
valuation of the pooled TruPS in our portfolio from Level 1
to Level 2. In the 2008 second quarter, market prices of
comparable instruments became harder to identify, which required
us to adjust the observable prices we obtained to compensate for
maturity dates, credit ratings, and other items, as well as for
market liquidity and volatility. As of June 30, we were
using more Level 3 inputs of greater significance, which
required us to move the valuation of these securities from
Level 2 to Level 3. In the 2008 third quarter, due to
further deterioration in the market for pooled TruPS, we placed
greater emphasis on the cash flow methodology described earlier
to estimate the fair value of these securities.
|
|
|
|
For our swap contracts, the credit valuation adjustments were
not significant to the overall valuation, and we used
Level 2 inputs to determine our valuations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
Fair Value of Assets and Liabilities
|
|
in Active Markets
|
|
|
Other Observable
|
|
|
Unobservable
|
|
|
|
|
Measured on a Recurring Basis as of
|
|
for Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
|
September 30, 2008
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available for sale
|
|
$
|
15.4
|
|
|
$
|
1,252.2
|
|
|
$
|
|
|
|
$
|
1,267.6
|
|
Interest rate swap contracts
|
|
|
|
|
|
|
18.9
|
|
|
|
|
|
|
|
18.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
15.4
|
|
|
$
|
1,271.1
|
|
|
$
|
|
|
|
$
|
1,286.5
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contracts
|
|
$
|
|
|
|
$
|
19.1
|
|
|
$
|
|
|
|
$
|
19.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
|
|
|
$
|
19.1
|
|
|
$
|
|
|
|
$
|
19.1
|
|
In the 2008 third quarter, we reclassified our TruPS from
available-for-sale (AFS) to held-to-maturity (HTM). This means
we no longer have assets or liabilities for which fair values
are measured on a recurring basis using Level 3 inputs,
because HTM securities are not marked-to-market on the balance
sheet unless they are other-than-temporarily impaired (OTTI).
Accordingly, we have omitted the disclosures specific to
recurring Level 3 fair value measurements from this report.
16
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At September 30, 2008, all of our HTM investment securities
with fair value measured on a nonrecurring basis were TruPS, and
none were OTTI. For more information about this, read
Note 10, Investment securities, in this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
in Active Markets
|
|
|
Other Observable
|
|
|
Unobservable
|
|
|
|
|
Fair Value of Assets and Liabilities
|
|
for Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
|
Measured on a Nonrecurring Basis as of September 30,
2008
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Loans
|
|
$
|
|
|
|
$
|
6.2
|
|
|
$
|
|
|
|
$
|
6.2
|
|
Other real estate owned
|
|
$
|
|
|
|
$
|
14.5
|
|
|
$
|
|
|
|
$
|
14.5
|
|
Investment securities held to maturity
|
|
$
|
|
|
|
$
|
52.4
|
|
|
$
|
155.5
|
|
|
$
|
207.9
|
|
Loan amounts in the table above do not include charged-off
loans, because we carry fully charged-off loans at zero on our
balance sheet. Also, according to SFAS No. 157,
measurements for impaired loans that are determined using a
present value technique are not considered fair value
measurements under the standard and, therefore, are not included
in the table above.
|
|
Note 6
|
Derivative
and hedging activities
|
We use derivative financial instruments, primarily interest rate
swaps and floors, to manage the effects of fluctuating interest
rates on net interest income. We also use interest rate swap
contracts to help commercial loan clients manage their interest
rate risk. We do not hold or issue derivative financial
instruments for trading purposes.
When we enter into an interest rate swap contract with a
commercial loan client, we simultaneously enter into a
mirror swap contract in the same amount with a third
party, which exchanges the clients fixed rate loan
payments for floating rate loan payments. In these transactions,
we retain the associated credit risk.
As of September 30, 2008, we had:
|
|
|
|
|
Client swap contracts of $1,561.2 million and an equal
amount of swap contracts with third-party financial
institutions, for a total notional amount of
$3,122.4 million in swaps associated with loans to clients.
|
|
|
|
No interest rate floor contracts.
|
At year-end 2007, we had interest rate floor contracts with a
notional amount of $1.00 billion. We sold these contracts
in January 2008. We realized a gain on this sale of
$35.5 million, which we are reclassifying from accumulated
other comprehensive income to interest and fees on loans. These
monthly reclassifications began in February 2008 and will
continue until July 2014. For amortizing the gain on this sale
into earnings, we use the method described by the Derivatives
Implementation Group in DIG Issue G20 of SFAS No. 133,
Accounting for Derivative Instruments and Hedging
Activities, as amended.
Between October 1, 2008, and September 30, 2009, we
expect to reclassify approximately $13.3 million of pretax
net gains, or approximately $8.5 million after tax, on
discontinued cash flow hedges reported in accumulated other
comprehensive income. These estimates could differ from the
amounts we actually recognize if we add other hedges. During the
first nine months of 2008, we classified $8.7 million into
income.
For more information about our derivative and hedging
activities, read Note 15, Derivative and hedging
activities, in our
2007 Annual Report to
Shareholders.
17
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 7
|
Reserve
for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
Changes in the Reserve for Loan Losses
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Reserve for loan losses at beginning of period
|
|
$
|
113.1
|
|
|
$
|
97.5
|
|
|
$
|
101.1
|
|
|
$
|
94.2
|
|
Charge-offs
|
|
|
(11.7
|
)
|
|
|
(6.8
|
)
|
|
|
(32.2
|
)
|
|
|
(17.9
|
)
|
Recoveries
|
|
|
1.2
|
|
|
|
2.0
|
|
|
|
5.3
|
|
|
|
6.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs
|
|
|
(10.5
|
)
|
|
|
(4.8
|
)
|
|
|
(26.9
|
)
|
|
|
(11.6
|
)
|
Provision charged to operations
|
|
|
19.6
|
|
|
|
8.9
|
|
|
|
48.0
|
|
|
|
19.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for loan losses at end of period
|
|
$
|
122.2
|
|
|
$
|
101.6
|
|
|
$
|
122.2
|
|
|
$
|
101.6
|
|
|
|
Note 8
|
Goodwill
and other intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2008
|
|
|
At December 31, 2007
|
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
Goodwill and Other Intangible Assets
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
|
(In millions)
|
|
|
Goodwill (nonamortizing)
|
|
$
|
373.1
|
|
|
$
|
29.8
|
|
|
$
|
343.3
|
|
|
$
|
359.8
|
|
|
$
|
29.8
|
|
|
$
|
330.0
|
|
Other intangibles (amortizing):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
$
|
9.7
|
|
|
$
|
7.9
|
|
|
$
|
1.8
|
|
|
$
|
9.1
|
|
|
$
|
7.3
|
|
|
$
|
1.8
|
|
Client lists
|
|
|
71.8
|
|
|
|
26.8
|
|
|
|
45.0
|
|
|
|
57.2
|
|
|
|
21.3
|
|
|
|
35.9
|
|
Acquisition costs
|
|
|
1.7
|
|
|
|
1.7
|
|
|
|
|
|
|
|
1.7
|
|
|
|
1.7
|
|
|
|
|
|
Other intangibles
|
|
|
1.9
|
|
|
|
1.4
|
|
|
|
0.5
|
|
|
|
1.9
|
|
|
|
1.3
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other intangibles
|
|
$
|
85.1
|
|
|
$
|
37.8
|
|
|
$
|
47.3
|
|
|
$
|
69.9
|
|
|
$
|
31.6
|
|
|
$
|
38.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
Amortization Expense of Other Intangible Assets
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Amortization expense of other intangible assets
|
|
$
|
2.4
|
|
|
$
|
1.5
|
|
|
$
|
6.2
|
|
|
$
|
4.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future Amortization Expense of Other Intangible Assets for
the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
|
(In millions)
|
|
|
Estimated annual amortization expense of other intangibles
|
|
$
|
8.8
|
|
|
$
|
7.5
|
|
|
$
|
6.3
|
|
|
$
|
5.2
|
|
|
$
|
4.1
|
|
18
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth
|
|
|
Corporate
|
|
|
Affiliate
|
|
|
|
|
Changes in Carrying Amount of Goodwill by
|
|
Regional
|
|
|
Advisory
|
|
|
Client
|
|
|
Money
|
|
|
|
|
Business Segment
|
|
Banking
|
|
|
Services
|
|
|
Services
|
|
|
Managers
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Balance as of January 1, 2008
|
|
$
|
3.8
|
|
|
$
|
107.7
|
|
|
$
|
25.2
|
|
|
$
|
193.3
|
|
|
$
|
330.0
|
|
Goodwill acquired
|
|
|
|
|
|
|
18.0
|
|
|
|
50.2
|
|
|
|
14.3
|
|
|
|
82.5
|
|
Impairment write-down
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(66.9
|
)
|
|
|
(66.9
|
)
|
Sale of affiliate interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.3
|
)
|
|
|
(0.3
|
)
|
Decrease in carrying value due to foreign currency translation
adjustments
|
|
|
|
|
|
|
|
|
|
|
(2.0
|
)
|
|
|
|
|
|
|
(2.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2008
|
|
$
|
3.8
|
|
|
$
|
125.7
|
|
|
$
|
73.4
|
|
|
$
|
140.4
|
|
|
$
|
343.3
|
|
The goodwill from acquisitions recorded for 2008 consists of:
|
|
|
|
|
$13.3 million recorded under Wealth Advisory Services in
connection with the acquisition of AST Capital
Trust Company.
|
|
|
|
A $3.6 million contingent payment recorded under Wealth
Advisory Services in connection with the acquisition of Grant
Tani Barash & Altman, LLC.
|
|
|
|
A $1.1 million contingent payment recorded under Wealth
Advisory Services in connection with the June 2007 acquisition
of Bingham Legg Advisers, LLC.
|
|
|
|
$50.2 million recorded under Corporate Client Services in
connection with the acquisition of AST Capital
Trust Company.
|
|
|
|
$14.3 million recorded under Affiliate Money Managers in
connection with the purchase of a portion of the Class B
interests from principals of the Portland, Oregon, office of
Roxbury Capital Management.
|
In the 2008 second quarter, business conditions at affiliate
money manager Roxbury Capital Management (RCM) triggered a
goodwill impairment test. As a result of this test, we
determined that the value of our investment in RCM had declined
by $66.9 million. This amount, which was recorded as a
non-cash impairment expense, reduced net income by
$43.5 million, or $0.64 per share (on a diluted basis).
The $0.3 million reduction in the carrying amount of
goodwill recorded under Affiliate Money Managers reflected
Camden Partners repurchase of interests previously sold to
us. For more information about our interest in Camden Partners,
read Note 4, Affiliates and acquisitions, in
our
2007 Annual Report to Shareholders
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
Changes in Other Intangible Assets for the
|
|
Amount
|
|
|
Residual
|
|
|
Amortization
|
|
|
Amount
|
|
|
Residual
|
|
|
Amortization
|
|
Nine Months Ended September 30
|
|
Assigned
|
|
|
Value
|
|
|
Period
|
|
|
Assigned
|
|
|
Value
|
|
|
Period
|
|
|
|
(In millions)
|
|
|
Mortgage servicing rights
|
|
$
|
0.6
|
|
|
$
|
|
|
|
|
8 years
|
|
|
$
|
0.4
|
|
|
$
|
|
|
|
|
8 years
|
|
Client lists
|
|
|
14.8
|
|
|
|
|
|
|
|
7 years
|
|
|
|
7.0
|
|
|
|
|
|
|
|
16 years
|
|
(Decrease)/increase in carrying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
value of client lists due to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustments
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
Other intangibles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
9 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in other intangible assets
|
|
$
|
15.2
|
|
|
$
|
|
|
|
|
|
|
|
$
|
7.6
|
|
|
$
|
|
|
|
|
|
|
19
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The amount recorded for client lists in 2008 consists of:
|
|
|
|
|
$10.6 million recorded under Corporate Client Services in
connection with the acquisition of AST Capital
Trust Company.
|
|
|
|
$2.8 million recorded under Wealth Advisory Services in
connection with the acquisition of AST Capital
Trust Company.
|
|
|
|
$1.4 million recorded under Wealth Advisory Services for
subsequent adjustments in connection with the June 2007
acquisition of Bingham Legg Advisers, LLC.
|
For more information about goodwill and other intangible assets,
read Note 2, Summary of significant accounting
policies, and Note 10, Goodwill and other
intangible assets, in our
2007 Annual Report to
Shareholders.
|
|
Note 9
|
Components
of net periodic benefit cost
|
We offer a pension plan, a supplemental executive retirement
plan (SERP), and a postretirement benefit plan for which we
record net periodic benefit costs. For more information about
these plans, read Note 18, Pension and other
postretirement benefits, in our
2007 Annual Report to
Shareholders
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement
|
|
Components of Net Periodic Benefit Cost for the
|
|
Pension Benefits
|
|
|
SERP Benefits
|
|
|
Benefits
|
|
Three Months Ended September 30
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Service cost
|
|
$
|
2.4
|
|
|
$
|
2.3
|
|
|
$
|
0.2
|
|
|
$
|
0.2
|
|
|
$
|
0.3
|
|
|
$
|
0.3
|
|
Interest cost
|
|
|
3.1
|
|
|
|
2.8
|
|
|
|
0.4
|
|
|
|
0.3
|
|
|
|
0.6
|
|
|
|
0.6
|
|
Expected return on plan assets
|
|
|
(4.5
|
)
|
|
|
(4.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost
|
|
|
|
|
|
|
0.2
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
(0.1
|
)
|
|
|
(0.1
|
)
|
Recognized actuarial losses
|
|
|
0.1
|
|
|
|
0.4
|
|
|
|
0.1
|
|
|
|
|
|
|
|
0.2
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
1.1
|
|
|
$
|
1.7
|
|
|
$
|
0.8
|
|
|
$
|
0.6
|
|
|
$
|
1.0
|
|
|
$
|
1.0
|
|
Employer contributions
|
|
$
|
6.5
|
|
|
$
|
10.0
|
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
$
|
0.6
|
|
|
$
|
1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement
|
|
Components of Net Periodic Benefit Cost for the
|
|
Pension Benefits
|
|
|
SERP Benefits
|
|
|
Benefits
|
|
Nine Months Ended September 30
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Service cost
|
|
$
|
7.3
|
|
|
$
|
6.8
|
|
|
$
|
0.6
|
|
|
$
|
0.5
|
|
|
$
|
1.0
|
|
|
$
|
1.0
|
|
Interest cost
|
|
|
9.2
|
|
|
|
8.4
|
|
|
|
1.2
|
|
|
|
1.0
|
|
|
|
1.9
|
|
|
|
1.8
|
|
Expected return on plan assets
|
|
|
(13.5
|
)
|
|
|
(12.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost
|
|
|
|
|
|
|
0.6
|
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
(0.4
|
)
|
|
|
(0.4
|
)
|
Recognized actuarial losses
|
|
|
0.4
|
|
|
|
1.3
|
|
|
|
0.3
|
|
|
|
0.1
|
|
|
|
0.5
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
3.4
|
|
|
$
|
5.1
|
|
|
$
|
2.4
|
|
|
$
|
1.9
|
|
|
$
|
3.0
|
|
|
$
|
3.0
|
|
Employer contributions
|
|
$
|
6.5
|
|
|
$
|
10.0
|
|
|
$
|
0.4
|
|
|
$
|
0.4
|
|
|
$
|
1.8
|
|
|
$
|
4.1
|
|
Expected annual contribution
|
|
$
|
6.5
|
|
|
|
|
|
|
$
|
0.6
|
|
|
|
|
|
|
$
|
2.4
|
|
|
|
|
|
20
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 10
|
Investment
securities
|
Our investment securities portfolio consists primarily of fixed
income instruments, including mortgage-backed instruments,
U.S. Treasury and government agency bonds, and
corporate bonds. It also includes a small amount of cumulative
and noncumulative preferred stocks, municipal bonds, and other
instruments. We maintain this portfolio to generate cash flow,
to help manage interest rate risk, and to provide collateral for
deposits and other liabilities. We do not invest in securities
for trading purposes.
We classify investment securities in one of two categories:
1.
Available-for-sale
(AFS).
This means we have the ability to
hold the security, but we may elect to sell it, depending on our
needs.
2.
Held-to-maturity
(HTM).
This means we have not only the
ability, but also the intent, to retain the security on our
books until it matures.
HTM securities are carried at their amortized cost. AFS
securities are carried at their estimated fair value. Numerous
factors affect the valuations at which we record these
securities on our balance sheet, including market interest
rates, credit spreads, and investor perceptions. We review the
securities in our investment portfolio at least quarterly in
order to determine their fair value, which can be equal to, more
than, or less than their book value (amortized cost). To
determine a securitys fair value, we use a variety of
techniques and consult with third-party valuation experts. For
more information about the key determinants of a securitys
fair value, read Note 5, Fair value measurement of
assets and liabilities, in this report and Note 6,
Investment securities, in our
2007 Annual Report
to Shareholders
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008
|
|
|
December 31, 2007
|
|
|
|
Amortized
|
|
|
|
|
|
Amortized
|
|
|
|
|
Book Values (Amortized Cost) and Fair Values
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
|
|
(In millions)
|
|
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
91.0
|
|
|
$
|
91.2
|
|
|
$
|
60.0
|
|
|
$
|
60.2
|
|
Government agency securities
|
|
|
448.8
|
|
|
|
453.0
|
|
|
|
640.1
|
|
|
|
647.0
|
|
Obligations of state and political subdivisions
|
|
|
6.3
|
|
|
|
6.3
|
|
|
|
16.7
|
|
|
|
16.9
|
|
Mortgage-backed debt securities
|
|
|
679.9
|
|
|
|
673.4
|
|
|
|
743.1
|
|
|
|
730.4
|
|
Corporate debt securities
|
|
|
|
|
|
|
|
|
|
|
336.2
|
|
|
|
317.7
|
|
Preferred stock
|
|
|
21.9
|
|
|
|
19.4
|
|
|
|
54.2
|
|
|
|
44.9
|
|
Other marketable equity securities
|
|
|
26.1
|
|
|
|
24.3
|
|
|
|
27.5
|
|
|
|
27.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,274.0
|
|
|
$
|
1,267.6
|
|
|
$
|
1,877.8
|
|
|
$
|
1,844.7
|
|
Investment securities held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government agency securities
|
|
$
|
0.5
|
|
|
$
|
0.5
|
|
|
$
|
|
|
|
$
|
|
|
Obligations of state and political subdivisions
|
|
|
0.7
|
|
|
|
0.7
|
|
|
|
0.9
|
|
|
|
0.9
|
|
Mortgage-backed debt securities
|
|
|
0.2
|
|
|
|
0.2
|
|
|
|
0.2
|
|
|
|
0.2
|
|
Corporate debt securities
|
|
|
190.0
|
|
|
|
207.9
|
|
|
|
|
|
|
|
|
|
Foreign debt securities
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
Other debt securities
|
|
|
1.0
|
|
|
|
1.0
|
|
|
|
1.0
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
192.4
|
|
|
$
|
210.3
|
|
|
$
|
2.1
|
|
|
$
|
2.1
|
|
21
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
When the fair value of an AFS security exceeds its book value,
we record an unrealized gain as a change in stockholders
equity through accumulated other comprehensive income. This
increases stockholders equity. It does not affect earnings.
When the fair value of an HTM security exceeds its book value,
we report the amount of its increase in value in a footnote
disclosure, not as a change in stockholders equity. There
is no effect to our financial statements or earnings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
Unrealized Gains/(Losses)
|
|
Gains
|
|
|
Losses
|
|
|
Gains
|
|
|
Losses
|
|
|
|
(In millions)
|
|
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
$
|
0.2
|
|
|
$
|
|
|
|
$
|
0.2
|
|
|
$
|
|
|
Government agency securities
|
|
|
4.6
|
|
|
|
(0.4
|
)
|
|
|
7.0
|
|
|
|
(0.1
|
)
|
Obligations of state and political subdivisions
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
Mortgage-backed debt securities
|
|
|
1.3
|
|
|
|
(7.8
|
)
|
|
|
0.6
|
|
|
|
(13.3
|
)
|
Corporate debt securities
|
|
|
|
|
|
|
|
|
|
|
0.3
|
|
|
|
(18.8
|
)
|
Preferred stock
|
|
|
0.2
|
|
|
|
(2.7
|
)
|
|
|
|
|
|
|
(9.3
|
)
|
Other marketable equity securities
|
|
|
|
|
|
|
(1.8
|
)
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6.3
|
|
|
$
|
(12.7
|
)
|
|
$
|
8.4
|
|
|
$
|
(41.5
|
)
|
Investment securities held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of state and political subdivisions
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Mortgage-backed debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
29.0
|
|
|
|
(11.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
29.0
|
|
|
$
|
(11.1
|
)
|
|
$
|
|
|
|
$
|
|
|
When a securitys fair value falls below its book value,
the security is considered impaired, and we must account for it
in one of two ways:
1.
Temporarily impaired.
This
means we believe the securitys valuation decline
(impairment) is a function of short-term market forces, not any
underlying credit problems. When a security is determined to be
temporarily impaired and there is an associated unrealized loss,
its accounting treatment depends on whether it is classified as
AFS or HTM.
For temporarily impaired AFS securities, we are required to:
|
|
|
|
|
Report the amount of the impairment as an unrealized loss.
|
|
|
|
Record the unrealized loss as a change in stockholders
equity through accumulated other comprehensive income. This
reduces stockholders equity. It does not affect earnings.
|
For temporarily impaired HTM securities, we are required to:
|
|
|
|
|
Disclose the amount of the decline in fair value.
|
|
|
|
Make that disclosure in a footnote, not as a change in
stockholders equity. There is no effect to our financial
statements or earnings.
|
22
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
2.
Other-than-temporarily impaired
(OTTI).
This means we believe the
securitys impairment is due to factors that could include
its inability to pay interest or dividends, its potential for
default,
and/or
other
factors. When an AFS or HTM security becomes OTTI, we have to
record the amount of its impairment as a realized securities
loss in our income statement. This reduces stockholders
equity and earnings. When an HTM security becomes OTTI, its
value at the time of impairment becomes its new amortized cost
basis.
To determine whether a securitys impairment is temporary
or other-than-temporary, we consider factors that include:
|
|
|
|
|
The causes of the decline in fair value, such as credit
problems, interest rate fluctuations, or market volatility.
|
|
|
|
The severity and duration of the decline.
|
|
|
|
Our ability and intent to hold these investments until they
recover in value, mature, or are called.
|
For debt securities, the primary consideration in determining
whether an impairment is temporary or other-than-temporary is
whether or not contractual cash flows have been impaired.
Temporarily
impaired securities
During the first nine months of 2008, uncertainty and volatility
in the financial markets caused fair value estimates for the
temporarily impaired securities in our investment portfolio to
decrease, and the associated estimated unrealized losses to
increase. We believe these changes were due mainly to liquidity
problems in the financial markets, not deterioration in the
creditworthiness of the securities issuers.
At September 30, 2008, there were 183 transactions in our
investment securities portfolio with temporary impairments; at
year-end 2007, there were 168. The largest concentration of
temporary impairments at September 30, 2008, was in
mortgage-backed securities and TruPS, which we record as
corporate debt securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fewer Than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
Temporarily Impaired Securities at
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
September 30, 2008
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
|
(In millions)
|
|
|
U.S. Treasury securities
|
|
$
|
61.9
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
61.9
|
|
|
$
|
|
|
Government agency securities
|
|
|
43.0
|
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
43.0
|
|
|
|
(0.4
|
)
|
Obligations of state and political subdivisions
|
|
|
5.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.6
|
|
|
|
|
|
Mortgage-backed securities
|
|
|
290.2
|
|
|
|
(2.9
|
)
|
|
|
218.7
|
|
|
|
(4.9
|
)
|
|
|
508.9
|
|
|
|
(7.8
|
)
|
Corporate debt securities
|
|
|
35.7
|
|
|
|
(11.1
|
)
|
|
|
|
|
|
|
|
|
|
|
35.7
|
|
|
|
(11.1
|
)
|
Preferred stock
|
|
|
11.3
|
|
|
|
(2.7
|
)
|
|
|
|
|
|
|
|
|
|
|
11.3
|
|
|
|
(2.7
|
)
|
Other marketable equity securities
|
|
|
15.2
|
|
|
|
(1.8
|
)
|
|
|
|
|
|
|
|
|
|
|
15.2
|
|
|
|
(1.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities
|
|
$
|
462.9
|
|
|
$
|
(18.9
|
)
|
|
$
|
218.7
|
|
|
$
|
(4.9
|
)
|
|
$
|
681.6
|
|
|
$
|
(23.8
|
)
|
23
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fewer Than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
Temporarily Impaired Securities at
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
December 31, 2007
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
|
(In millions)
|
|
|
U.S. Treasury securities
|
|
$
|
20.0
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
20.0
|
|
|
$
|
|
|
Government agency securities
|
|
|
116.1
|
|
|
|
|
|
|
|
82.9
|
|
|
|
(0.1
|
)
|
|
|
199.0
|
|
|
|
(0.1
|
)
|
Mortgage-backed securities
|
|
|
68.3
|
|
|
|
(0.5
|
)
|
|
|
500.2
|
|
|
|
(12.8
|
)
|
|
|
568.5
|
|
|
|
(13.3
|
)
|
Corporate debt securities
|
|
|
189.3
|
|
|
|
(14.4
|
)
|
|
|
67.3
|
|
|
|
(4.4
|
)
|
|
|
256.6
|
|
|
|
(18.8
|
)
|
Preferred stock
|
|
|
29.6
|
|
|
|
(6.6
|
)
|
|
|
12.3
|
|
|
|
(2.7
|
)
|
|
|
41.9
|
|
|
|
(9.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities
|
|
$
|
423.3
|
|
|
$
|
(21.5
|
)
|
|
$
|
662.7
|
|
|
$
|
(20.0
|
)
|
|
$
|
1,086.0
|
|
|
$
|
(41.5
|
)
|
We retain temporarily impaired securities because we know when
they will mature, they have no credit delinquencies, they
generate strong cash flows, and because we have the ability and
intent to hold them until they recover in value or mature, at
which point their fair values equal their book values. While we
have determined these unrealized losses to be temporary, a
sustained and prolonged downturn in the financial markets could
cause us to reassess our determination. For more information
about our temporarily impaired investment securities, read
Note 6, Investment securities, in our
2007
Annual Report to Shareholders
.
Trust-preferred
Securities (TruPS)
Our TruPS portfolio consists of 38 pooled issues and 9
single-issue securities.
|
|
|
|
|
All of our TruPS investments are in investment-grade tranches.
|
|
|
|
All of our TruPS are structured as
payment-in-kind
securities. This means that, should an issuer defer a scheduled
interest payment, the principal held by the investor increases
by the amount of the deferred payment.
|
|
|
|
The single issues are from money center and large regional banks.
|
|
|
|
The pooled instruments consist of securities issued by banks,
insurance companies, and other financial institutions.
|
|
|
|
At the time of its initial issue, each pooled security held 5%
or less of any single institution.
|
|
|
|
The pooled TruPS in our portfolio are generally secured by
over-collateralization or default protection provided by
subordinated tranches.
|
During the first half of 2008, the market for TruPS became
increasingly illiquid due to negative perceptions about the
health of the financial sector in general, and about the
financial stability of the underlying issuers in particular.
This environment made it difficult to determine a fair value for
these securities and to determine if they had become
other-than-temporarily impaired.
Using the valuation techniques we describe in this report in
Note 5, Fair value measurement of assets and
liabilities, we determined that the estimated fair value
of the TruPS in our portfolio had declined to
$227.2 million as of June 30, 2008. Pooled TruPS
accounted for $170.2 million of this amount. The remainder
was for single-issue TruPS.
24
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We also determined that their impairment was temporary. We based
this conclusion on a number of factors, including:
|
|
|
|
|
Our belief that the decline in their fair value is due primarily
to the absence of transactions involving them and the ensuing
market illiquidity.
|
|
|
|
An assessment of cash flow projections for individual securities
within the pooled TruPS. We found no adverse changes in
estimated cash flows associated with these securities as of
June 30, 2008.
|
As of July 31, 2008, the amortized cost of the TruPS in our
portfolio was $326.2 million, and their estimated fair
value was $189.1 million. Since initially acquiring these
TruPS, our unrealized losses on them have totaled
$138.4 million, and this amount has been reflected in
accumulated other comprehensive income. Of this amount,
$38.1 million was added during the 2008 third quarter.
In conjunction with determining the estimated fair value of our
TruPS as of July 31, 2008, we reclassified our entire TruPS
portfolio from AFS to HTM. We did this because:
|
|
|
|
|
We have the ability and intent to hold these securities until
they mature.
|
|
|
|
These securities have attractive cash flows, and they have
continued to meet their contractual cash flow obligations. We
wanted to reduce our exposure to the volatility associated with
recording unrealized gains and losses on these securities in
other comprehensive income.
|
Reclassifying the TruPS to HTM will reduce the volatility and
future negative effect on our capital ratios, because HTM
securities are not marked-to-market through other comprehensive
income, but carried at their amortized cost basis. The amortized
cost basis of our TruPS was $189.1 million at July 31,
2008, the date of their reclassification. The difference between
their original amortized cost basis of $326.2 million and
their new amortized cost basis will be treated like a discount
and accreted into interest income over the remaining life of the
security. The unrealized loss on these securities, which is in
accumulated other comprehensive income, will be amortized as an
adjustment of yield in a manner consistent with the discount,
thus offsetting or mitigating the effect on interest income of
the amortization of the discount.
On September 30, 2008, the SEC and FASB jointly clarified
their guidance on how to measure fair values when relevant
market evidence does not exist. Using this guidance and the cash
flow methodology described in this report in Note 5,
Fair value measurement of assets and liabilities, we
determined that the estimated fair value of the TruPS in our
portfolio was $207.9 million as of September 30, 2008,
and that there were no other-than-temporary impairments among
the securities in this portfolio. No further adjustments for
changes in the fair value of TruPS were reflected on our balance
sheet, since the TruPS are recorded as HTM securities.
Under GAAP, we are required to assess HTM securities for
impairment consistent with the manner for AFS securities. The
evaluation for OTTI is a quantitative and qualitative process,
which is subject to various risks and uncertainties.
The valuation of the TruPS portfolio requires substantial
judgment and estimation of factors that are not currently
observable in the market, given the illiquidity of these
securities. Since September 30, 2008, general market
conditions and economic uncertainties have caused the estimated
fair value of our TruPS investments to decline further. Because
of these and other factors, it is possible that we could deem
these securities to be other-than-temporarily impaired in future
reporting periods. Such a determination would require us to
write down the value of these securities.
Perpetual
Preferred Stocks (including Fannie Mae and Freddie Mac
Stocks)
The perpetual preferred stocks in our investment portfolio
consist of securities issued by the Federal National Mortgage
Association (Fannie Mae), the Federal Home Loan Mortgage
Corporation (Freddie Mac), two money
25
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
center banks, and one other company. Sharp declines in the
market valuations, coupled with uncertainty about future market
conditions, led us to determine that the fair value of these
securities had decreased by $12.6 million as of
June 30, 2008. Under GAAP, we determined that this decline
was other-than-temporary, and we recorded the $12.6 million
decline in value as a securities loss for the 2008 second
quarter.
At June 30, 2008, the fair value of the perpetual preferred
stocks in our portfolio was $41.7 million. Perpetual
preferred stock issued by Fannie Mae and Freddie Mac accounted
for $21.1 million of this amount.
On September 7, 2008, the U.S. government placed
Fannie Mae and Freddie Mac into conservatorship. As of
September 10, we determined that the value of our Fannie
Mae and Freddie Mac perpetual preferred stock had declined from
$21.1 million to $1.4 million, and that this
impairment was other-than-temporary. We recorded this
$19.7 million decrease as a securities loss for the 2008
third quarter.
Sale
and Write-down of Investment Securities Available for
Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
|
For the Nine Months Ended September 30,
|
|
Sale and Write-down of AFS investment securities
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Proceeds
|
|
$
|
|
|
|
$
|
39.5
|
|
|
$
|
11.9
|
|
|
$
|
43.6
|
|
Gross gains realized
|
|
$
|
|
|
|
$
|
|
|
|
$
|
0.1
|
|
|
$
|
|
|
Gross losses realized
|
|
$
|
(19.7
|
)
|
|
$
|
(0.2
|
)
|
|
$
|
(32.3
|
)
|
|
$
|
(0.2
|
)
|
Called
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
Called Securities
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Gross gains realized
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
0.1
|
|
Gross losses realized
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Pledged
Securities
At September 30, 2008, securities with an aggregate book
value of $1,180.1 million were pledged to secure public
deposits, short-term borrowings, demand notes issued to the
U.S. Treasury, Federal Home Loan Bank borrowings,
repurchase agreements, and interest rate swap agreements, and
for other purposes required by law.
We had investments in the securities of regulatory authorities
that totaled $16.4 million at September 30, 2008, and
$22.4 million at December 31, 2007. These securities
are carried at cost.
The long-term debt of $468.3 million on our balance sheet
at September 30, 2008, included $28.0 million in FHLB
advances, $(8.3) million of unamortized losses related to
terminated interest rate swaps on our long-term debt,
$(0.3) million of unamortized discounts on
$250.0 million of subordinated long-term debt that matures
on April 15, 2013, and $(1.1) million of unamortized
discounts on $200.0 million of subordinated long-term debt
that matures on April 2, 2018.
26
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
On April 1, 2008, we issued $200 million of
subordinated long-term debt in
10-year,
8.50% notes. These notes will mature on April 2, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated Long-Term Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
|
|
|
|
|
|
|
Amount Issued
|
|
|
|
|
|
Semiannual
|
|
|
Payment
|
|
|
|
|
Issue Date
|
|
and Outstanding
|
|
|
Term
|
|
|
Payment Dates
|
|
|
Rates
|
|
|
Maturity
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 4, 2003
|
|
$
|
250.0
|
|
|
|
10 years
|
|
|
|
April 15 and October 15
|
|
|
|
4.875
|
%
|
|
|
April 15, 2013
|
|
April 1, 2008
|
|
$
|
200.0
|
|
|
|
10 years
|
|
|
|
April 1 and October 1
|
|
|
|
8.50
|
%
|
|
|
April 2, 2018
|
|
None of our long-term debt is redeemable prior to maturity or
subject to any sinking fund. For more information about our
borrowings, read Note 12, Borrowings, in our
2007 Annual Report to Shareholders
.
We maintain lines of credit with two major unaffiliated
U.S. financial institutions. The combined balance of these
two lines was $20 million at September 30, 2008. Our
credit agreements contain covenants that require us to maintain
certain financial ratios. As of September 30, 2008, our
nonperforming asset ratio and our return on assets ratio did not
meet the limits these covenants specify. We obtained waivers
from both financial institutions for the third quarter ended
September 30, 2008, for these ratio specifications.
Income tax expense was lower for the 2008 third quarter than for
the year-ago third quarter due to the tax benefit associated
with the write-down of Fannie Mae and Freddie Mac preferred
stock investments. The effective tax rate was higher because a
larger percentage of our revenue was generated in states with
tax rates that are higher than those of other jurisdictions in
which we conduct business.
On a year-to-date basis, the non-cash write-down of our
investment in RCM and the associated tax benefits net of a
valuation allowance were the main cause of the reduction in
income tax expense. The year-to-date effective tax rate was
higher due to the amount of revenue generated in states with
higher tax rates, as well as the valuation allowance recorded
for the RCM write-down.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes and Tax Rate
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
|
(Dollars in millions)
|
|
|
Pre-tax income
|
|
$
|
35.4
|
|
|
$
|
69.2
|
|
|
$
|
70.9
|
|
|
$
|
214.7
|
|
Income tax expense
|
|
$
|
12.3
|
|
|
$
|
22.9
|
|
|
$
|
25.5
|
|
|
$
|
75.9
|
|
Effective tax rate
|
|
|
34.75
|
%
|
|
|
33.09
|
%
|
|
|
35.97
|
%
|
|
|
35.35
|
%
|
We have reviewed and, where necessary, accrued for tax
liabilities for open periods, and we have applied our
FIN 48 methodology consistently. Under FIN 48,
Accounting for Uncertainty in Income Taxes an
interpretation of FASB Statement No. 109, we classify
interest expense and penalties related to uncertain tax
positions as income tax expense.
We file income tax returns in more than 30 tax jurisdictions. In
some of these jurisdictions, we file returns for multiple legal
entities. Generally, our income tax returns are subject to
scrutiny by tax auditors in these jurisdictions for a period of
three to six years (open tax years). As of September 30,
2008, there were no material changes regarding uncertain tax
positions. No open statutes of limitations have been extended
materially in any of our significant locations. We currently are
under IRS examination for the tax year 2006. The tax years 2005
and 2007 remain open to examination by the IRS. We periodically
are under examination by various state and local tax authorities.
27
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Note 13
|
Segment
reporting
|
We report business segment results for four segments. There is a
segment for each of our three businesses: Regional Banking,
Wealth Advisory Services, and Corporate Client Services. The
fourth segment combines the results from our affiliate money
managers, Cramer Rosenthal McGlynn (CRM) and Roxbury Capital
Management (RCM).
We report segment assets on an average-balance basis, because we:
|
|
|
|
|
Believe average balances offer a more relevant measure of
business trends than period-end balances;
|
|
|
|
Maintain and review all internal segment data on an
average-balance basis; and
|
|
|
|
Base some expense allocations on an average-balance basis.
|
Our business segment accounting policies are the same as those
described in Note 2, Summary of significant
accounting policies, in our
2007 Annual Report to
Shareholders
. We have adjusted segment data for prior
periods, due to changes in reporting methodology
and/or
organizational structure. For more information about our
business segments, read Note 1, Nature of
business, and Note 23, Segment reporting,
in our
2007 Annual Report to Shareholders
.
We are presenting segment data on an operating basis consistent
with our consolidated information. We believe that operating
results those that exclude the effects of impairment
write-downs present a more relevant measure of
ongoing business trends and offer a better basis of comparison
with prior periods. For information about the write-downs we
incurred during the first nine months of 2008, read Note 9,
Goodwill and other intangible assets, and
Note 11, Investment securities, in this report.
During the 2008 first quarter, we recorded a gain of
$3.5 million in noninterest income from the redemption of
81 shares related to Visa Inc.s initial public
offering (IPO). In addition, we reversed $1.4 million from
other liabilities in connection with the IPO and recorded the
release in noninterest income. Both items were recorded in the
Regional Banking segment.
28
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth
|
|
|
Corporate
|
|
|
Affiliate
|
|
|
|
|
|
|
Regional
|
|
|
Advisory
|
|
|
Client
|
|
|
Money
|
|
|
|
|
For the Three Months Ended September 30, 2008
|
|
Banking
|
|
|
Services
|
|
|
Services
|
|
|
Managers
|
|
|
Totals
|
|
|
|
(In millions)
|
|
|
Net interest income/(loss)
|
|
$
|
85.6
|
|
|
$
|
4.9
|
|
|
$
|
2.4
|
|
|
$
|
(1.8
|
)
|
|
$
|
91.1
|
|
Provision for loan losses
|
|
|
(18.0
|
)
|
|
|
(1.6
|
)
|
|
|
|
|
|
|
|
|
|
|
(19.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/(loss) after provision
|
|
|
67.6
|
|
|
|
3.3
|
|
|
|
2.4
|
|
|
|
(1.8
|
)
|
|
|
71.5
|
|
Advisory fees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth Advisory Services
|
|
|
0.6
|
|
|
|
54.4
|
|
|
|
2.3
|
|
|
|
|
|
|
|
57.3
|
|
Corporate Client Services
|
|
|
0.4
|
|
|
|
|
|
|
|
34.0
|
|
|
|
|
|
|
|
34.4
|
|
Affiliate Money Managers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.2
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total advisory fees
|
|
|
1.0
|
|
|
|
54.4
|
|
|
|
36.3
|
|
|
|
4.2
|
|
|
|
95.9
|
|
Amortization of affiliate intangibles
|
|
|
|
|
|
|
(1.1
|
)
|
|
|
(0.9
|
)
|
|
|
(0.2
|
)
|
|
|
(2.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total advisory fees after amortization of affiliate intangibles
|
|
|
1.0
|
|
|
|
53.3
|
|
|
|
35.4
|
|
|
|
4.0
|
|
|
|
93.7
|
|
Other noninterest income
|
|
|
13.0
|
|
|
|
0.5
|
|
|
|
0.3
|
|
|
|
|
|
|
|
13.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest and noninterest income
|
|
|
81.6
|
|
|
|
57.1
|
|
|
|
38.1
|
|
|
|
2.2
|
|
|
|
179.0
|
|
Noninterest expense
|
|
|
(42.9
|
)
|
|
|
(50.5
|
)
|
|
|
(30.5
|
)
|
|
|
|
|
|
|
(123.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit before income taxes
|
|
|
38.7
|
|
|
|
6.6
|
|
|
|
7.6
|
|
|
|
2.2
|
|
|
|
55.1
|
|
Applicable income taxes and minority interest
|
|
|
13.8
|
|
|
|
2.4
|
|
|
|
2.5
|
|
|
|
1.0
|
|
|
|
19.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income
|
|
$
|
24.9
|
|
|
$
|
4.2
|
|
|
$
|
5.1
|
|
|
$
|
1.2
|
|
|
$
|
35.4
|
|
Investment securities impairment charge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19.7
|
)
|
Applicable income taxes for impairment charge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
3.2
|
|
|
$
|
2.7
|
|
|
$
|
2.3
|
|
|
$
|
0.2
|
|
|
$
|
8.4
|
|
29
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth
|
|
|
Corporate
|
|
|
Affiliate
|
|
|
|
|
|
|
Regional
|
|
|
Advisory
|
|
|
Client
|
|
|
Money
|
|
|
|
|
For the Three Months Ended September 30, 2007
|
|
Banking
|
|
|
Services
|
|
|
Services
|
|
|
Managers
|
|
|
Totals
|
|
|
|
(In millions)
|
|
|
Net interest income/(loss)
|
|
$
|
87.6
|
|
|
$
|
6.3
|
|
|
$
|
3.2
|
|
|
$
|
(3.0
|
)
|
|
$
|
94.1
|
|
Provision for loan losses
|
|
|
(7.8
|
)
|
|
|
(1.1
|
)
|
|
|
|
|
|
|
|
|
|
|
(8.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/(loss) after provision
|
|
|
79.8
|
|
|
|
5.2
|
|
|
|
3.2
|
|
|
|
(3.0
|
)
|
|
|
85.2
|
|
Advisory fees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth Advisory Services
|
|
|
0.7
|
|
|
|
53.6
|
|
|
|
1.8
|
|
|
|
|
|
|
|
56.1
|
|
Corporate Client Services
|
|
|
0.3
|
|
|
|
|
|
|
|
23.3
|
|
|
|
|
|
|
|
23.6
|
|
Affiliate Money Managers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.6
|
|
|
|
4.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total advisory fees
|
|
|
1.0
|
|
|
|
53.6
|
|
|
|
25.1
|
|
|
|
4.6
|
|
|
|
84.3
|
|
Amortization of affiliate intangibles
|
|
|
|
|
|
|
(0.8
|
)
|
|
|
(0.2
|
)
|
|
|
(0.2
|
)
|
|
|
(1.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total advisory fees after amortization of affiliate intangibles
|
|
|
1.0
|
|
|
|
52.8
|
|
|
|
24.9
|
|
|
|
4.4
|
|
|
|
83.1
|
|
Other noninterest income
|
|
|
11.3
|
|
|
|
0.4
|
|
|
|
0.2
|
|
|
|
|
|
|
|
11.9
|
|
Securities losses
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest and noninterest income
|
|
|
91.9
|
|
|
|
58.4
|
|
|
|
28.3
|
|
|
|
1.4
|
|
|
|
180.0
|
|
Noninterest expense
|
|
|
(42.6
|
)
|
|
|
(46.5
|
)
|
|
|
(21.7
|
)
|
|
|
|
|
|
|
(110.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit before income taxes
|
|
|
49.3
|
|
|
|
11.9
|
|
|
|
6.6
|
|
|
|
1.4
|
|
|
|
69.2
|
|
Applicable income taxes and minority interest
|
|
|
16.4
|
|
|
|
4.0
|
|
|
|
2.1
|
|
|
|
0.5
|
|
|
|
23.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported net income
|
|
$
|
32.9
|
|
|
$
|
7.9
|
|
|
$
|
4.5
|
|
|
$
|
0.9
|
|
|
$
|
46.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
3.2
|
|
|
$
|
2.2
|
|
|
$
|
1.2
|
|
|
$
|
0.2
|
|
|
$
|
6.8
|
|
30
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth
|
|
|
Corporate
|
|
|
Affiliate
|
|
|
|
|
|
|
Regional
|
|
|
Advisory
|
|
|
Client
|
|
|
Money
|
|
|
|
|
For the Nine Months Ended September 30, 2008
|
|
Banking
|
|
|
Services
|
|
|
Services
|
|
|
Managers
|
|
|
Totals
|
|
|
|
(In millions)
|
|
|
Net interest income/(loss)
|
|
$
|
246.5
|
|
|
$
|
16.1
|
|
|
$
|
7.2
|
|
|
$
|
(6.7
|
)
|
|
$
|
263.1
|
|
Provision for loan losses
|
|
|
(44.4
|
)
|
|
|
(3.6
|
)
|
|
|
|
|
|
|
|
|
|
|
(48.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/(loss) after provision
|
|
|
202.1
|
|
|
|
12.5
|
|
|
|
7.2
|
|
|
|
(6.7
|
)
|
|
|
215.1
|
|
Advisory fees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth Advisory Services
|
|
|
1.9
|
|
|
|
162.6
|
|
|
|
6.3
|
|
|
|
|
|
|
|
170.8
|
|
Corporate Client Services
|
|
|
1.1
|
|
|
|
|
|
|
|
91.0
|
|
|
|
|
|
|
|
92.1
|
|
Affiliate Money Managers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.9
|
|
|
|
12.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total advisory fees
|
|
|
3.0
|
|
|
|
162.6
|
|
|
|
97.3
|
|
|
|
12.9
|
|
|
|
275.8
|
|
Amortization of affiliate intangibles
|
|
|
|
|
|
|
(3.0
|
)
|
|
|
(1.7
|
)
|
|
|
(0.7
|
)
|
|
|
(5.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total advisory fees after amortization of affiliate intangibles
|
|
|
3.0
|
|
|
|
159.6
|
|
|
|
95.6
|
|
|
|
12.2
|
|
|
|
270.4
|
|
Other noninterest income
|
|
|
42.7
|
|
|
|
1.7
|
|
|
|
1.1
|
|
|
|
|
|
|
|
45.5
|
|
Securities gains
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest and noninterest income
|
|
|
247.9
|
|
|
|
173.8
|
|
|
|
103.9
|
|
|
|
5.5
|
|
|
|
531.1
|
|
Noninterest expense
|
|
|
(126.2
|
)
|
|
|
(152.2
|
)
|
|
|
(82.6
|
)
|
|
|
|
|
|
|
(361.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit before income taxes
|
|
|
121.7
|
|
|
|
21.6
|
|
|
|
21.3
|
|
|
|
5.5
|
|
|
|
170.1
|
|
Applicable income taxes and minority interest
|
|
|
43.8
|
|
|
|
8.1
|
|
|
|
7.0
|
|
|
|
2.4
|
|
|
|
61.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income
|
|
$
|
77.9
|
|
|
$
|
13.5
|
|
|
$
|
14.3
|
|
|
$
|
3.1
|
|
|
$
|
108.8
|
|
Investment securities impairment charge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32.3
|
)
|
Roxbury Capital Management impairment charge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(66.9
|
)
|
Applicable income taxes for impairment charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
44.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
9.7
|
|
|
$
|
7.7
|
|
|
$
|
5.4
|
|
|
$
|
0.7
|
|
|
$
|
23.5
|
|
Investment in equity method investees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
159.6
|
|
|
|
159.6
|
|
Segment average assets
|
|
|
9,714.7
|
|
|
|
1,503.1
|
|
|
|
327.6
|
|
|
|
199.7
|
|
|
|
11,745.1
|
|
31
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth
|
|
|
Corporate
|
|
|
Affiliate
|
|
|
|
|
|
|
Regional
|
|
|
Advisory
|
|
|
Client
|
|
|
Money
|
|
|
|
|
For the Nine Months Ended September 30, 2007
|
|
Banking
|
|
|
Services
|
|
|
Services
|
|
|
Managers
|
|
|
Totals
|
|
|
|
(In millions)
|
|
|
Net interest income/(loss)
|
|
$
|
257.8
|
|
|
$
|
18.7
|
|
|
$
|
10.4
|
|
|
$
|
(9.2
|
)
|
|
$
|
277.7
|
|
Provision for loan losses
|
|
|
(17.5
|
)
|
|
|
(1.5
|
)
|
|
|
|
|
|
|
|
|
|
|
(19.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/(loss) after provision
|
|
|
240.3
|
|
|
|
17.2
|
|
|
|
10.4
|
|
|
|
(9.2
|
)
|
|
|
258.7
|
|
Advisory fees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth Advisory Services
|
|
|
2.0
|
|
|
|
154.4
|
|
|
|
4.6
|
|
|
|
|
|
|
|
161.0
|
|
Corporate Client Services
|
|
|
0.9
|
|
|
|
|
|
|
|
71.5
|
|
|
|
|
|
|
|
72.4
|
|
Affiliate Money Managers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15.9
|
|
|
|
15.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total advisory fees
|
|
|
2.9
|
|
|
|
154.4
|
|
|
|
76.1
|
|
|
|
15.9
|
|
|
|
249.3
|
|
Amortization of affiliate intangibles
|
|
|
|
|
|
|
(2.2
|
)
|
|
|
(0.5
|
)
|
|
|
(0.7
|
)
|
|
|
(3.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total advisory fees after amortization of affiliate intangibles
|
|
|
2.9
|
|
|
|
152.2
|
|
|
|
75.6
|
|
|
|
15.2
|
|
|
|
245.9
|
|
Other noninterest income
|
|
|
35.4
|
|
|
|
1.3
|
|
|
|
0.7
|
|
|
|
|
|
|
|
37.4
|
|
Securities losses
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest and noninterest income
|
|
|
278.5
|
|
|
|
170.7
|
|
|
|
86.7
|
|
|
|
6.0
|
|
|
|
541.9
|
|
Noninterest expense
|
|
|
(124.6
|
)
|
|
|
(139.3
|
)
|
|
|
(63.3
|
)
|
|
|
|
|
|
|
(327.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit before income taxes
|
|
|
153.9
|
|
|
|
31.4
|
|
|
|
23.4
|
|
|
|
6.0
|
|
|
|
214.7
|
|
Applicable income taxes and minority interest
|
|
|
54.5
|
|
|
|
11.3
|
|
|
|
8.4
|
|
|
|
2.5
|
|
|
|
76.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported net income
|
|
$
|
99.4
|
|
|
$
|
20.1
|
|
|
$
|
15.0
|
|
|
$
|
3.5
|
|
|
$
|
138.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
9.7
|
|
|
$
|
6.7
|
|
|
$
|
3.5
|
|
|
$
|
0.7
|
|
|
$
|
20.6
|
|
Investment in equity method investees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
215.3
|
|
|
|
215.3
|
|
Segment average assets
|
|
|
9,137.5
|
|
|
|
1,406.6
|
|
|
|
201.3
|
|
|
|
208.6
|
|
|
|
10,954.0
|
|
|
|
Note 14
|
Accounting
pronouncements
|
The following recent accounting pronouncements may affect our
financial condition and results of operations.
SFAS No. 158.
In September 2006,
FASB issued SFAS No. 158, Employers
Accounting for Defined Benefit Pension and Other Postretirement
Plans an amendment of FASB Statements No. 87,
88, 106, and 132(revised). SFAS No. 158 requires
employers to recognize a plans over-funded status as an
asset, or a plans under-funded status as a liability, on
its balance sheet. SFAS No. 158 also requires
employers to measure, as of the end of the employers
fiscal year, the assets and obligations that determine the
plans funded status, and to recognize changes in the
funded status of a defined benefit postretirement plan as other
comprehensive income in the year in which the changes occur.
The requirement to recognize the funded status of plans was
effective for us as of the fiscal year that ended
December 31, 2006. For information about how the adoption
of this requirement affected our financial statements, read
Note 18, Pension and other postretirement
benefits, in our
2007 Annual Report to
Shareholders
. The requirement to measure plan assets and
benefit obligations as of the end of our fiscal year will be
effective for us for the fiscal year ending December 31,
2008. We do not expect the adoption of the measurement date
provision to have a material effect on our financial statements.
32
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
SFAS No. 160.
In December 2007, FASB
issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements an amendment of
ARB No. 51. SFAS No. 160 amends ARB
No. 51 and establishes the accounting and reporting
standards for a noncontrolling interest in a subsidiary and for
the deconsolidation of a subsidiary. SFAS No. 160
requires a noncontrolling interest, sometimes called a minority
interest, in a subsidiary to be reported as a component of
equity in the consolidated financial statements.
SFAS No. 160 also changes the income statement
presentation of noncontrolling interests, establishes a single
method of accounting for a change in a parents ownership
percentage in a subsidiary that does not result in
deconsolidation, requires a parent to recognize a gain or loss
in net income when a subsidiary is deconsolidated, and requires
various other disclosures. SFAS No. 160 will be
effective for us with the fiscal year that begins on
January 1, 2009. It will change the presentation and
accounting treatment of affiliates in which we have
noncontrolling interests, and of our subsidiaries in which
others hold noncontrolling interests.
SFAS No. 141(revised 2007).
In
December 2007, FASB issued SFAS No. 141(revised 2007),
Business Combinations.
SFAS No. 141(revised 2007) retains the
fundamental requirement of SFAS No. 141 that the
acquisition method of accounting be used for all business
combinations. However, SFAS No. 141(revised
2007) does make significant changes to the accounting for a
business combination achieved in stages, the treatment of
contingent consideration, transaction and restructuring costs,
and other aspects of business combination accounting.
SFAS No. 141(revised 2007) will be effective for
us with the fiscal year that begins on January 1, 2009, and
will change our accounting treatment for business combinations
on a prospective basis.
SFAS No. 161.
In March 2008, FASB
issued SFAS No. 161, Disclosures about
Derivative Instruments and Hedging Activities an
amendment of FASB Statement No. 133.
SFAS No. 161 amends SFAS No. 133 and its
related guidance by requiring expanded disclosures about
derivative instruments and hedging activities. This Statement
will require us to provide additional disclosure about
a) how and why we use derivative instruments; b) how
we account for derivative instruments and related hedged items
under SFAS No. 133 and its related interpretations;
and c) how derivative instruments and related hedged items
affect our financial condition, financial performance, and cash
flows. SFAS No. 161 does not change the accounting for
derivatives under SFAS No. 133. SFAS No. 161
will be effective for us with the fiscal year and interim
periods beginning January 1, 2009, with early adoption
encouraged.
SFAS No. 162.
In May 2008, FASB
issued SFAS No. 162, The Hierarchy of Generally
Accepted Accounting Principles. SFAS No. 162 is
intended to correct flaws in the GAAP hierarchy which, up to
now, had been defined in the U.S. auditing literature. The
purpose of the new standard is to improve financial reporting by
providing a consistent framework for determining what accounting
principles should be used when preparing U.S. GAAP
financial statements. SFAS No. 162 will be effective
for us 60 days following the SECs approval of the
PCAOB amendments to Audit Section 411, The Meaning of
Present Fairly in Conformity with Generally Accepted Accounting
Principles. The adoption of SFAS No. 162 will
not have a material effect on our financial statements.
FSP
EITF 03-6-1.
In
June 2008, FASB issued FSP
EITF 03-6-1,
Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities. FSP
EITF 03-6-1
holds that all outstanding unvested share-based payment awards
that contain rights to nonforfeitable dividends are considered
participating securities. Because the awards are considered
participating securities, the issuing entity is required to
apply the two-class method of computing basic and diluted
earnings per share. FSP
EITF 03-6-1
will be effective for us with the fiscal year that begins on
January 1, 2009. We do not expect the adoption of FSP
EITF 03-6-1
to have a material effect on our financial statements.
FSP
FAS No. 157-3.
In
October 2008, FASB issued FSP
FAS No. 157-3,
Determining the Fair Value of a Financial Asset When the
Market for that Asset Is Not Active. FSP
FAS 157-3
clarifies the application of SFAS No. 157 in an
inactive market and provides an example of how to determine the
fair value of a financial asset when the market for that asset
is inactive. Specifically, FSP
FAS 157-3 states
that management may use estimates that incorporate current
market participant expectations of future cash flows and include
appropriate risk premiums
33
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
to determine the fair value of a security when there is not an
active market for that security. This FSP also indicates that,
in some cases, using unobservable inputs might be more
appropriate than using observable inputs to determine the fair
value of a security in an inactive market. FSP
FAS 157-3
was effective upon issuance and applies to our
September 30, 2008, financial statements. The adoption of
FSP
FAS 157-3
did not affect our financial statements, but it clarified
existing guidance about valuation techniques used in illiquid
markets. For more information about this, read Note 5,
Fair value measurement of assets and liabilities, in
this report.
FSP
FAS No. 133-1
and
FIN 45-4.
In
September 2008, FASB issued FSP
FAS No. 133-1
and
FIN 45-4,
Disclosures about Credit Derivatives and Certain
Guarantees: An Amendment of FASB Statement No. 133 and FASB
Interpretation No. 45; and Clarification of the Effective
Date of FASB Statement No. 161. FSP
FAS No. 133-1
and
FIN 45-4
amends SFAS 133 to require sellers of credit derivatives to
provide certain disclosures for credit derivatives. FSP
FAS No. 133-1
and
FIN 45-4
also amends FIN 45 to require guarantors to disclose the
current status of the payment/performance risk of each
guarantee. Although we do not sell credit derivatives, the
amendments to FIN 45 may apply to some of our guarantee
arrangements. FSP
FAS No. 133-1
and
FIN 45-4
will be effective for us beginning with the fiscal year ending
December 31, 2008. We do not expect the adoption of FSP
FAS No. 133-1
and
FIN 45-4
to affect our financial statements, but its adoption may affect
our disclosures for certain guarantee arrangements.
|
|
Note 15
|
Subsequent
event
|
On October 10, 2008, we completed the acquisition of UBS
Fiduciary Trust Company (UBSFTC) from financial services
company UBS Americas Inc. UBSFTC is a New Jersey-based provider
of trust, investment management, fund accounting, and benefit
payment services offered through financial advisors for
retirement and employee benefit plans. Full terms of this
all-cash transaction were not disclosed.
34
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
|
|
Item 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations.
|
COMPANY
OVERVIEW
Wilmington Trust Corporation is (we are) a Delaware
corporation and a financial holding company under the Bank
Holding Company Act. Our primary wholly owned subsidiary,
Wilmington Trust Company, was founded in 1903.
We are a relationship management company that helps clients
increase and preserve their wealth. We do this through a variety
of deposit-taking, lending, fiduciary, trustee, financial
planning, investment consulting, asset management, insurance,
broker-dealer, and administrative services.
Our mission is to help our clients succeed. Our driving force is
sustainable earnings growth and consistent profitability with
low volatility. Our strategy is to deliver consistent results by
investing in businesses that have the most potential for
long-term growth or high operating profit margins; being the
market leader in each of our businesses; and increasing
profitability without compromising our overall risk profile.
We deliver our services through three businesses: Regional
Banking, Corporate Client Services, and Wealth Advisory
Services. Separately, each of these businesses provides
different kinds of services, has a different geographic scope,
and targets specific kinds of clients. Collectively, these three
businesses generate a diversified mix of revenue that helps us
produce consistent results across changing economic cycles.
Regional
Banking
Our Regional Banking activities are concentrated in the
mid-Atlantic region of the United States.
Commercial banking services
. We offer a
variety of commercial, commercial construction, and commercial
mortgage loans, as well as cash management and other banking
services. Most of our commercial loans have floating rates, are
secured by the borrowers assets, and are supported by
personal guarantees.
We target our commercial banking activities to middle-market
clients throughout the mid-Atlantic region who have family-owned
or closely held businesses with annual sales of up to
$250 million. We define this region as the state of
Delaware and the parts of Maryland, New Jersey, and Pennsylvania
that are contiguous to Delaware, including those along the I-95
corridor from Princeton, New Jersey, to Baltimore, Maryland. We
serve clients in this region with teams of commercial lenders
and wealth advisors.
Consumer and other retail banking services.
These services include a variety of deposit
services, loans to individuals, and residential mortgage loans.
On our balance sheet, loans secured with liquid collateral are
recorded under retail loans, but these loans are mainly
associated with Wealth Advisory Services clients. We focus our
retail branch banking, residential mortgage lending, and core
deposit-gathering activities in the state of Delaware. At
September 30, 2008, we had 48 branch offices in Delaware.
We prefer to originate loans ourselves, rather than purchase
loans from brokers or other banks. This helps ensure that our
underwriting standards are applied consistently throughout the
portfolio. In general, we do not pursue syndicated lending
opportunities.
We consider average loan and deposit balances, rather than
period-end balances, to be a better indicator of trends in the
Regional Banking business, because average balances represent
client activity over the longer term. This is especially true of
core deposit balances, which can be affected by large short-term
deposits made at month-ends by Corporate Client Services clients.
Most of the income from Regional Banking is net interest income.
Regional Banking also generates noninterest income in the form
of fees charged for loan and deposit services.
35
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Corporate
Client Services
The Corporate Client Services (CCS) business provides a variety
of trustee, agency, asset management, and administrative
services for institutional clients who:
|
|
|
|
|
Use capital markets financing structures. For these clients, we
provide owner trustee, indenture trustee, and other specialized
services for securitizations, capital equipment financing, and
other types of capital markets transactions. We also provide
indenture, successor, collateral, or liquidating trustee
services in corporate debt issuances, reorganizations, debt
restructurings, mergers, and bankruptcies. In addition, we
provide indenture trustee, administrative, and analytical
services for collateralized debt obligations.
|
|
|
|
Seek to establish and maintain legal residency (nexus) for
special purpose entities and captive insurance companies in
preferred jurisdictions. We provide office space, independent
directors, and corporate governance and administrative services
for these entities.
|
|
|
|
Use independent trustees to hold retirement plan assets. Our
clients are plan sponsors who prefer to use different providers
for each of the investment management, record keeping, and
trustee aspects of administering retirement and other employee
benefit plans.
|
|
|
|
Need investment and cash management services.
|
CCS has offices in Arizona, Delaware, Minnesota, Nevada, New
York, South Carolina, Vermont, Grand Cayman, the Channel Islands
(Jersey), Amsterdam (The Netherlands), Dublin (Ireland), London
(England), Frankfurt (Germany), and Luxembourg. At the end of
2007, CCS had clients in 86 countries.
Wealth
Advisory Services
The Wealth Advisory Services (WAS) business helps individuals
and families who have substantial wealth preserve and protect
their wealth, minimize taxes, transfer wealth to future
generations, support charitable endeavors, and manage their
business affairs. We target clients who have liquid assets of
$10 million or more.
WAS services include:
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|
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|
|
Asset management services. For our clients, managing
investment risk is as important as increasing investment return.
We help clients meet both objectives by emphasizing
diversification, forward-looking asset allocation, tactical
rebalancing, and a blend of active and passive funds. We provide
objective advice by using a combination of third-party and
in-house investment managers. We can structure investments in
everything from limited partnerships to mutual funds, which
means that all clients, regardless of account size, have access
to our best thinking.
|
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|
Family office services that help clients identify, review,
consolidate, and execute financial and life-style management
needs. These services include family governance planning,
investment consulting, real estate acquisition and disposition,
cash flow management and budgeting, tax planning and compliance,
risk assessment, insurance oversight, family security, bill
payment and payroll management services, among others. Family
office clients may or may not also use our asset management
services.
|
We specialize in four areas: legal structures for
family offices; considerations for clients with inherited
wealth; compensation strategies for corporate executives; and
the needs of clients in the entertainment and sports industries.
|
|
|
|
|
Fiduciary services. These services include trust,
administrative, tax, philanthropic, and estate settlement
services. We also provide financial planning, private banking,
and custom lending services.
|
WAS has offices in California, Connecticut, Delaware, Florida,
Georgia, Maryland, Massachusetts, New Jersey, New York, and
Pennsylvania. At the end of 2007, WAS had clients in all
50 states and 35 other countries.
36
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Affiliate
money managers
We have ownership positions in two investment management firms:
Cramer Rosenthal McGlynn, LLC (CRM) and Roxbury Capital
Management, LLC (RCM). CRM and RCM are not part of our WAS
business, and their managers and staff are not Wilmington Trust
employees. Revenue reported on our income statement from CRM and
RCM is recorded net of their expenses and is based on our
ownership position in each. For the purposes of business
profitability and segment reporting, we combine results from CRM
and RCM into one segment called Affiliate Money
Managers. For more information about CRM and RCM, read
Note 4, Affiliates and acquisitions, in our
2007 Annual Report to Shareholders
. For more information
about segment reporting, read Note 13, Segment
reporting, in this report.
Legal
entities and subsidiaries
We provide our services through various legal entities and
subsidiaries that we own wholly or in part. For more information
about these entities and subsidiaries, the services they
provide, and the regulations to which they are subject, read
Note 1, Nature of business, in our
2007
Annual Report to Shareholders
.
On April 30, 2008, Wilmington Trust FSB, our federally
chartered savings bank subsidiary, acquired AST Capital
Trust Company of Delaware (AST). In August 2008, we
rebranded AST as Wilmington Trust Retirement and
Institutional Services Company.
On October 10, 2008, AST acquired UBS Fiduciary
Trust Company (UBSFTC) and rebranded it as Wilmington
Trust Fiduciary Services Company.
There have been no other changes to our legal entities or
subsidiaries since December 31, 2007.
RESULTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
2008
This report discusses:
|
|
|
|
|
Changes in our financial condition (balance sheet) since
December 31, 2007. All balances cited are period-end
balances unless otherwise noted. In some cases, we present
amounts as of September 30, 2007, for historical reference.
|
|
|
|
The results of our operations (income statement) for the three
and nine months ended September 30, 2008 (year-to-date
results), compared with the corresponding periods in 2007. In
some cases, we provide amounts for other periods to provide
historical context.
|
EXECUTIVE
SUMMARY
In the face of extraordinary market conditions, we continued to
focus on our clients, our business plan, and opportunities for
growth, and these efforts were evident in all three of our
businesses. Compared to the year-ago third quarter, advisory
revenue was up 14%, and loan balances were 15% higher, on
average. In addition, the net interest margin stabilized, and
credit quality remained in line with our historical experience.
These achievements were offset by a write-down in the carrying
value of our investments in perpetual preferred stocks issued by
the Federal National Mortgage Association (Fannie Mae) and the
Federal Home Loan Mortgage Corporation (Freddie Mac). On an
after-tax basis, this charge reduced third quarter net income by
$12.5 million, or $0.19 per share (on a diluted basis). We
initially disclosed this loss in a filing with the Securities
and Exchange Commission on September 11, 2008.
This brought net income for the 2008 third quarter to
$22.9 million, or $0.34 per share (on a diluted basis).
On an operating basis (excluding the securities loss), net
income for the 2008 third quarter was $35.4 million, or
$0.53 per share (on a diluted basis). We believe that operating
results present a more relevant measure of ongoing
37
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
business trends and offer a better basis of comparison with
prior periods. The Results of operations discussion
in this report includes a reconciliation of GAAP (reported)
results with operating results.
Significant
factors in third quarter 2008 operating
results
|
|
|
|
|
On average, we added $373.1 million of loans during the
2008 third quarter. Loan balances were $9.46 billion, on
average, and $9.59 billion at period-end.
|
|
|
|
The net interest margin stabilized, and net interest income was
7% higher than for the 2008 second quarter.
|
|
|
|
The combination of loan growth and higher levels of
nonperforming assets led us to increase the reserve and
provision for loan losses.
|
|
|
|
The net charge-off ratio remained in line with our historical
experience.
|
|
|
|
Corporate Client Services (CCS) revenue was 46% higher than for
the year-ago third quarter, with all components of the business
contributing to the growth.
|
|
|
|
Total Wealth Advisory Services (WAS) revenue was 2% higher than
for the year-ago third quarter, even though financial market
volatility reduced trust and investment advisory revenue.
|
|
|
|
Affiliate money manager Roxbury Capital Management (RCM)
returned to profitability.
|
|
|
|
Operating expenses and the number of staff members were higher
than for the year-ago third quarter, mainly because the year-ago
figures did not reflect the acquisition of AST Capital
Trust Company (AST), which has approximately 179 staff
members in Phoenix, Arizona, and Wilmington, Delaware.
|
|
|
|
Operating expenses also reflected the additions of:
|
|
|
|
|
|
WAS staff in the family office practice and Boston office.
|
|
|
|
CCS capital markets and retirement services staff.
|
|
|
|
Regional Banking staff in the Maryland, New Jersey, and
Pennsylvania markets.
|
|
|
|
|
|
All regulatory capital ratios continued to exceed the amounts
required by the Federal Reserve Board to be considered a
well-capitalized institution.
|
Significant
factors in results for the first nine months of
2008
In the first nine months of 2008, unsettled market conditions
overshadowed very strong commercial and consumer loan growth,
higher revenue from CCS and WAS, and other positive aspects of
our ongoing operations.
Net income for the first nine months of 2008 was
$44.9 million, or $0.67 per share (on a diluted basis).
This was considerably lower than for the first nine months of
2007, mainly because we recorded losses of $99.2 million,
or $0.95 per share (on a diluted basis), in three write-downs:
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|
|
|
|
In the 2008 second quarter, we recorded a $66.9 million
write-down against the value of our investment in RCM. This
reduced second quarter net income by $43.5 million, or
$0.64 per share (on a diluted basis).
|
|
|
|
Also in the 2008 second quarter, we wrote down the carrying
value of perpetual preferred stocks in the investment securities
portfolio by $12.6 million. Stocks issued by Fannie Mae and
Freddie Mac accounted for most, but not all, of this decrease.
This decrease reduced second quarter net income by
$8.0 million, or $0.12 per share (on a diluted basis).
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|
|
|
In the 2008 third quarter, we wrote down the value of the Fannie
Mae and Freddie Mac perpetual preferred stocks in our portfolio
by $19.7 million. This reduced third quarter net income by
$12.5 million, or $0.19 per share (on a diluted
basis).
|
38
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
On an operating basis (excluding the RCM impairment charge and
securities losses), net income for the first nine months of 2008
was $108.8 million, or $1.62 per share (on a diluted
basis). Our diversified sources of revenue and mix of businesses
continued to help us withstand the effects of market conditions,
as the detailed discussions in the following pages show.
On October 16, 2008, our Board of Directors declared a
regular quarterly cash dividend of $0.345 per share. This amount
reflects the 3% increase the Board approved in April 2008, which
marked the 27th consecutive year that we have raised our
cash dividend. The quarterly dividend will be paid on
November 17, 2008, to stockholders of record on
November 3, 2008.
Expansion
initiatives
We are able to invest consistently in our companys future
because our capital management practices are sound. In the first
nine months of 2008, amid the wake of negative speculation about
the strength and stability of many financial institutions, we
completed two expansion initiatives in the CCS business and
announced a third.
The first initiative was the acquisition of AST, which doubled
the capacity of the CCS retirement services business. The second
was the addition of a team of 14 seasoned capital markets
experts. The third was the acquisition of UBSFTC, which we
completed in October. UBSFTC is a New Jersey-based provider of
trust, investment management, fund accounting, and benefit
payment services offered through financial advisors for
retirement and employee benefit plans. These initiatives are
described in greater detail in the CCS section of this report.
The AST transaction also included a personal trust component,
which we integrated into the WAS business.
The AST and UBSFTC transactions will be non-dilutive to earnings
in 2008. We expect the AST transaction to add approximately
$18 million of revenue in 2008 (approximately
$27 million on an annualized basis). We expect the UBSFTC
acquisition to add approximately $38 million of revenue and
approximately $36 million of subadvisor expense on an
annualized basis. Most of the AST revenue is, and all of the
UBSFTC revenue will be, recorded as CCS retirement services
revenue. The remainder of the AST revenue is recorded in WAS
trust and investment advisory revenue.
Other
items
On September 22, 2008, we initiated an at-the-market
offering of our common stock. This offering is described in a
base prospectus and prospectus supplement filed with the
Securities and Exchange Commission on September 22, 2008.
These documents are available at www.wilmingtontrust.com under
Investor Relations/SEC Filings/September 22, 2008. We
discuss this offering in more detail in the capital resources
section of this report.
On April 1, 2008, we issued $200 million of
subordinated long-term debt in
10-year,
8.50% notes. For more information about this debt issue,
read the liquidity and funding discussion and Note 11,
Borrowings, in this report.
CHANGES
IN FINANCIAL CONDITION FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2008
The primary changes in our financial condition were:
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An increase in loan balances.
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A decrease in the investment securities portfolio.
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A reduction in stockholders equity.
|
We discuss these changes in more detail on the following pages.
39
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Assets
Loan growth, which we discuss in more detail in the Regional
Banking section of this report, was the main cause of the
increase in total assets.
|
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|
Assets
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
Loan balances
|
|
$
|
9,585.0
|
|
|
$
|
8,475.8
|
|
|
$
|
8,336.5
|
|
Loans as a percentage of total assets
|
|
|
79
|
%
|
|
|
74
|
%
|
|
|
75
|
%
|
Investment securities portfolio balances
|
|
$
|
1,460.0
|
|
|
$
|
1,846.8
|
|
|
$
|
1,831.3
|
|
Investment securities as a percentage of total assets
|
|
|
12
|
%
|
|
|
16
|
%
|
|
|
16
|
%
|
Total assets
|
|
$
|
12,134.1
|
|
|
$
|
11,485.7
|
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|
$
|
11,187.1
|
|
|
|
|
|
|
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|
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|
|
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|
Earning
Assets
1
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
Total earning assets
|
|
$
|
11,141.5
|
|
|
$
|
10,479.0
|
|
|
$
|
10,204.4
|
|
Percentage in loans
|
|
|
86
|
%
|
|
|
81
|
%
|
|
|
82
|
%
|
Percentage in investment securities
|
|
|
13
|
%
|
|
|
18
|
%
|
|
|
18
|
%
|
As a percentage of total assets
|
|
|
92
|
%
|
|
|
91
|
%
|
|
|
91
|
%
|
|
|
|
1
|
|
Includes loans, investment securities, FHLB and FRB stock,
interest-bearing deposits in other banks, and federal funds sold
and securities purchased under agreements to resell. Excludes
the reserve for loan
losses.
|
Investment
securities portfolio
We maintain an investment securities portfolio for our own
account to generate cash flow, to help manage interest rate
risk, and to provide collateral for deposits and other
liabilities. We do not hold investment securities for trading
purposes. There are no client funds in this portfolio. Our
policy is to invest in securities with an investment grade of
A or better, as assigned by Standard &
Poors or Moodys Investors Service, at the time of
purchase.
In the first nine months of 2008, this portfolio decreased 21%,
mainly because:
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|
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|
We recorded higher unrealized losses on securities with
temporary impairments.
|
|
|
|
We recorded write-downs of $32.3 million on
other-than-temporarily impaired securities.
|
|
|
|
As holdings matured, and as capital markets tightened, we found
fewer reinvestment opportunities that satisfied our credit and
duration risk preferences.
|
|
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|
We had less need for securities to collateralize client accounts
that use short-term cash sweeps.
|
On a percentage basis, changes in the composition of the
investment securities portfolio from year-end 2007 reflected:
|
|
|
|
|
A decrease in U.S. government agency securities due to the
volume of calls and maturities in the first three months of 2008.
|
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|
|
A decline in the estimated fair value of trust-preferred
securities.
|
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|
A decline in the value of preferred stock, mainly due to the
Fannie Mae and Freddie Mac write-downs.
|
40
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
At September 30, 2008, 85% of the portfolio was invested in
fixed rate instruments, up from 82% at year-end 2007.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
|
Dollar
|
|
|
As a % of
|
|
|
Dollar
|
|
|
As a % of
|
|
Composition of Investment Securities Portfolio
|
|
Amount
|
|
|
Portfolio
|
|
|
Amount
|
|
|
Portfolio
|
|
|
|
(Dollars in millions)
|
|
|
Collateralized mortgage obligations
|
|
$
|
197.3
|
|
|
|
14
|
%
|
|
$
|
234.2
|
|
|
|
13
|
%
|
Mortgage-backed securities
|
|
|
476.2
|
|
|
|
33
|
%
|
|
|
496.4
|
|
|
|
27
|
%
|
Corporate
securities
1
|
|
|
191.0
|
|
|
|
13
|
%
|
|
|
317.7
|
|
|
|
17
|
%
|
Government agency securities
|
|
|
453.5
|
|
|
|
31
|
%
|
|
|
647.0
|
|
|
|
35
|
%
|
U.S. Treasury securities
|
|
|
91.2
|
|
|
|
6
|
%
|
|
|
60.2
|
|
|
|
3
|
%
|
Preferred stock
|
|
|
19.4
|
|
|
|
1
|
%
|
|
|
44.9
|
|
|
|
2
|
%
|
Municipal bonds
|
|
|
7.0
|
|
|
|
|
%
|
|
|
17.8
|
|
|
|
1
|
%
|
Other
|
|
|
24.4
|
|
|
|
2
|
%
|
|
|
28.6
|
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,460.0
|
|
|
|
100
|
%
|
|
$
|
1,846.8
|
|
|
|
100
|
%
|
|
|
|
1
|
|
All of the securities recorded as corporate securities are
trust-preferred securities.
|
Balances of mortgage-related instruments reflect our desire to
manage mortgage-related risk in the investment securities
portfolio rather than in the loan portfolio. We believe we can
manage the duration and interest rate risk associated with
mortgage-related instruments more efficiently in the investment
securities portfolio than by retaining residential mortgages in
our loan portfolio, since most residential mortgages have terms
of 15 to 30 years. As a result, balances of
mortgage-related securities generally exceed balances of
residential mortgage loans. More details about our interest rate
risk management strategies are in this report in the discussion
of quantitative and qualitative disclosures about market risk.
Of the mortgage-backed securities in the portfolio at
September 30, 2008:
|
|
|
|
|
All were issued by U.S. government-sponsored enterprises
(GSEs). Because these securities are issued by U.S. GSEs,
they carry an implied rating of AAA.
|
|
|
|
All had residential mortgages as the underlying collateral.
|
|
|
|
Almost all were invested in fixed rate instruments with terms of
15 years or less.
|
|
|
|
There were no subprime mortgages in this underlying collateral.
|
The attrition in the portfolio over the first nine months of
2008 caused its average life and duration to change.
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Life in the Investment Securities Portfolio
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(In years)
|
|
|
Mortgage-backed instruments
|
|
|
3.36
|
|
|
|
3.48
|
|
|
|
3.58
|
|
Total portfolio
|
|
|
6.13
|
|
|
|
4.45
|
|
|
|
4.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Duration in the Investment Securities Portfolio
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(In years)
|
|
|
Mortgage-backed instruments
|
|
|
3.12
|
|
|
|
3.20
|
|
|
|
3.30
|
|
Total portfolio
|
|
|
1.84
|
|
|
|
1.97
|
|
|
|
1.85
|
|
41
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Investment
securities impairments
When the estimated fair value of a security falls below its book
value, GAAP requires us to determine whether its valuation
decline (impairment) is temporary or other-than-temporary. These
determinations can reduce income, stockholders equity, and
earnings, depending on whether we record an impaired security as
available-for-sale (AFS) or held-to-maturity (HTM). For more
information about these classifications, how we make our
determinations, and other details about our investment
securities portfolio, read Note 10, Investment
securities, in this report, and Note 6,
Investment securities, in our
2007 Annual Report
to Shareholders
.
Temporarily
impaired securities
At September 30, 2008, the largest concentration in our
portfolio of securities with temporary impairments was in
mortgage-backed securities and trust-preferred securities
(TruPS). We believe the impairments of these securities are
temporary because they have been caused mainly by problems in
the residential mortgage industry and liquidity problems in the
financial markets, not by deterioration in the creditworthiness
of the issuers.
Our TruPS portfolio consists of:
|
|
|
|
|
38 pooled issues, which consist of securities issued by banks,
insurance companies, and other financial institutions.
|
|
|
|
9 single-issuer securities. The single issuers are money center
and large regional banks.
|
Throughout the first nine months of 2008, the market for TruPS
became increasingly illiquid due to negative perceptions about
the health of the financial sector in general, and about the
financial stability of the issuers of securities in pooled TruPS
in particular. This illiquidity reduced the market valuations of
our TruPS.
Using the valuation techniques we describe in this report in
Note 5, Fair value measurement of assets and
liabilities, we determined that the estimated fair value
of the TruPS in our portfolio had declined to
$227.2 million as of June 30, 2008, and that these
impairments were temporary.
On July 31, 2008, we reclassified all of our TruPS from AFS
to HTM. We did this because these securities have attractive
cash flows, and we intend to hold them to maturity. In addition,
there is less financial statement volatility associated with
temporarily impaired securities that are classified as HTM,
because temporary impairments on HTM securities are reported in
footnote disclosures, not as reductions to stockholders
equity.
Before we transferred our TruPS to HTM on July 31, 2008,
their amortized cost was $326.2 million, and their
estimated fair value was $189.1 million. Since initially
acquiring these TruPS, our unrealized losses on them have
totaled $138.4 million, and this amount has been reflected
in stockholders equity through accumulated other
comprehensive income. Of this amount, $38.1 million was
added during the 2008 third quarter.
In the 2008 third quarter, the SEC and FASB jointly clarified
their guidance on how to measure fair values when relevant
market evidence does not exist. As a result, we began to place a
greater emphasis on using the cash flow methodology described in
Note 5 to estimate the fair value of our TruPS.
As of September 30, 2008, we determined that the fair value
of our TruPS portfolio was $207.9 million, and that their
impairments continued to be temporary. No further adjustments
for changes in the fair value of TruPS were reflected on our
balance sheet, because the TruPS are recorded as HTM securities.
Moving the TruPS to HTM did not eliminate impairment testing
under GAAP, which requires us to assess HTM securities in a
manner that is consistent with the way we assess AFS securities.
Illiquid and volatile market conditions could cause us to
determine that some or all of the TruPS in our portfolio are
other-than-temporarily impaired (OTTI). In the future, if any or
all of our TruPS are deemed to be OTTI, we will be required to
write down their value and realize a securities loss.
42
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Other-than-temporarily
impaired securities (OTTI)
All of our OTTI securities at September 30, 2008, were in
the perpetual preferred stock portfolio. This portfolio consists
of perpetual preferred stocks issued by Fannie Mae, Freddie Mac,
two money center banks, and one other company. All of the
securities in this portfolio are held as AFS, since, by
definition, they have no maturity date.
During the first nine months of 2008, we recorded a total of
$32.3 million of losses on these securities in two
write-downs, one in the second quarter and one in the third.
Most of these losses were associated with perpetual preferred
stock issued by Fannie Mae and Freddie Mac. For more information
about these write-downs, read Note 10, Investment
securities, in this report.
Liabilities
Total liabilities during the first nine months of 2008 reflected
an increase in national certificates of deposit (national CDs)
and short-term borrowings (STBs), which we use to augment core
deposits to fund loan growth. On a percentage basis, the mix of
core deposits and national funding was in line with that of
prior periods.
For more information about core deposit balances, read the
Regional Banking discussion in this report. For more information
about national funding, read the funding discussion in this
report.
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
Core deposits
|
|
$
|
5,539.5
|
|
|
$
|
5,465.5
|
|
|
$
|
5,146.6
|
|
Core deposits as a percentage of total liabilities
|
|
|
50
|
%
|
|
|
53
|
%
|
|
|
51
|
%
|
National CDs and STBs
|
|
$
|
4,874.6
|
|
|
$
|
4,384.1
|
|
|
$
|
4,443.5
|
|
National CDs and STBs as a percentage of total liabilities
|
|
|
44
|
%
|
|
|
42
|
%
|
|
|
44
|
%
|
Total liabilities
|
|
$
|
11,071.8
|
|
|
$
|
10,365.3
|
|
|
$
|
10,089.0
|
|
Stockholders
equity
All of our regulatory capital ratios continued to exceed the
amounts required by the Federal Reserve Board to be considered a
well-capitalized institution.
On a GAAP basis, the returns on average stockholders
equity and assets declined from their year-ago levels. This was
due to a combination of:
|
|
|
|
|
The $66.9 million write-down on the value of our investment
in RCM, which we recorded in the second quarter.
|
|
|
|
The $32.3 million of securities write-downs.
|
|
|
|
Compression in the net interest margin in the first half of the
year, which reduced net interest income.
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
Annualized Returns for the Nine Months Ended
|
|
2008
|
|
|
2007
|
|
|
Return on average stockholders equity
|
|
|
5.51
|
%
|
|
|
16.93
|
%
|
Return on average assets
|
|
|
0.51
|
%
|
|
|
1.68
|
%
|
43
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
On an operating basis, the declines in the returns on
stockholders equity and assets were much less severe, but
the lower levels of net income still reduced these ratios from
prior periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
Year Ended
|
|
|
Nine Months Ended
|
|
Annualized Returns (operating basis)
|
|
9/30/08
|
|
|
12/31/07
|
|
|
9/30/07
|
|
|
Return on average stockholders equity
|
|
|
13.15
|
%
|
|
|
16.68
|
%
|
|
|
16.93
|
%
|
Return on average assets
|
|
|
1.23
|
%
|
|
|
1.65
|
%
|
|
|
1.68
|
%
|
On September 22, 2008, we initiated an at-the-market
offering of our common stock. This offering is described in a
base prospectus and prospectus supplement filed with the SEC and
available at www.wilmingtontrust.com under Investor
Relations/SEC Filings/September 22, 2008.
For more information about our capital ratios,
stockholders equity, and the common equity offering, read
the capital resources discussion in this report.
RESULTS
OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2008
The Regional Banking, CCS, and WAS businesses prevailed against
challenging market conditions in the third quarter, and each
achieved growth. For the 2008 third quarter, loan balances were
15% higher than for the year-ago third quarter, on average, and
advisory revenue was up 14%. In addition, the net interest
margin stabilized, and credit quality remained in line with our
historical experience. We discuss each of these items in greater
detail elsewhere in this report.
The positive aspects of our 2008 third quarter results were
diminished by a $19.7 million decline in the carrying value
of perpetual preferred stocks issued by Fannie Mae and Freddie
Mac. This decline, which we recorded as a securities loss,
reduced net income by $12.5 million, or $0.19 per share (on
a diluted basis).
This brought net income for the 2008 third quarter to
$22.9 million, or $0.34 per share (on a diluted basis).
For the first nine months of 2008, net income was
$44.9 million, or $0.67 per share (on a diluted basis).
Loan balances at September 30, 2008, were 13% higher than
at year-end 2007, and both CCS and WAS recorded solid growth,
but year-to-date results were affected negatively by:
|
|
|
|
|
The 2008 third quarter write-down of Fannie Mae and Freddie Mac
perpetual preferred stocks discussed above.
|
|
|
|
A $66.9 million decline in the value of our investment in
affiliate money manager RCM. This decline, which we recorded as
a non-cash impairment expense in the 2008 second quarter,
reduced net income by $43.5 million.
|
|
|
|
A $12.6 million decline in the carrying value of perpetual
preferred stocks in the investment securities portfolio in the
2008 second quarter. This decline, which was recorded as a
securities loss, reduced second quarter net income by
$8.0 million. Stocks issued by Fannie Mae and Freddie Mac
accounted for most, but not all, of this decrease.
|
For more information about the RCM impairment charge, read the
RCM section and Note 9, Goodwill and other intangible
assets, in this report. For more information about the
securities write-downs, read Note 10, Investment
securities, and the investment securities portfolio
discussion in this report.
44
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Results for the third quarter and first nine months of 2008 were
much more positive on an operating basis. We believe that
operating results present a more relevant measure of ongoing
business trends and offer a better basis of comparison with
prior periods. The following table reconciles our operating
results with our GAAP (reported) results.
Comparison
of results with and without the RCM and investment securities
impairment write-downs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2008
|
|
|
2008
|
|
|
|
With
|
|
|
Without
|
|
|
|
|
|
With
|
|
|
Without
|
|
|
|
|
|
|
impairment
|
|
|
impairment
|
|
|
Impairment
|
|
|
impairment
|
|
|
impairment
|
|
|
Impairment
|
|
|
|
(Dollars in millions, except per-share amounts)
|
|
|
OPERATING RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
91.1
|
|
|
$
|
91.1
|
|
|
$
|
|
|
|
$
|
263.1
|
|
|
$
|
263.1
|
|
|
$
|
|
|
Provision for loan losses
|
|
|
(19.6
|
)
|
|
|
(19.6
|
)
|
|
|
|
|
|
|
(48.0
|
)
|
|
|
(48.0
|
)
|
|
|
|
|
Noninterest income
|
|
|
87.8
|
|
|
|
107.5
|
|
|
|
(19.7
|
)
|
|
|
283.7
|
|
|
|
316.0
|
|
|
|
(32.3
|
)
|
Noninterest expense
|
|
|
123.9
|
|
|
|
123.9
|
|
|
|
|
|
|
|
427.9
|
|
|
|
361.0
|
|
|
|
66.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes and minority interest
|
|
|
35.4
|
|
|
|
55.1
|
|
|
|
(19.7
|
)
|
|
|
70.9
|
|
|
|
170.1
|
|
|
|
(99.2
|
)
|
Applicable income taxes
|
|
|
12.3
|
|
|
|
19.5
|
|
|
|
(7.2
|
)
|
|
|
25.5
|
|
|
|
60.8
|
|
|
|
(35.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before minority interest
|
|
|
23.1
|
|
|
|
35.6
|
|
|
|
(12.5
|
)
|
|
|
45.4
|
|
|
|
109.3
|
|
|
|
(63.9
|
)
|
Minority interest
|
|
|
0.2
|
|
|
|
0.2
|
|
|
|
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
22.9
|
|
|
$
|
35.4
|
|
|
$
|
(12.5
|
)
|
|
$
|
44.9
|
|
|
$
|
108.8
|
|
|
$
|
(63.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER-SHARE DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares outstanding (in millions)
|
|
|
67.3
|
|
|
|
67.3
|
|
|
|
|
|
|
|
67.3
|
|
|
|
67.3
|
|
|
|
|
|
Per-share earnings
|
|
$
|
0.34
|
|
|
$
|
0.53
|
|
|
$
|
(0.19
|
)
|
|
$
|
0.67
|
|
|
$
|
1.62
|
|
|
$
|
(0.95
|
)
|
STATISTICS AND RATIOS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets, on average
|
|
$
|
12,043.5
|
|
|
$
|
12,104.5
|
|
|
$
|
(61.0
|
)
|
|
$
|
11,745.1
|
|
|
$
|
11,768.5
|
|
|
$
|
(23.4
|
)
|
Stockholders equity, on average
|
|
|
1,021.3
|
|
|
|
1,064.6
|
|
|
|
(43.3
|
)
|
|
|
1,088.5
|
|
|
|
1,104.9
|
|
|
|
(16.4
|
)
|
Return on average assets
|
|
|
0.76
|
%
|
|
|
1.16
|
%
|
|
|
(0.40
|
)%
|
|
|
0.51
|
%
|
|
|
1.23
|
%
|
|
|
(0.72
|
)%
|
Return on equity
|
|
|
8.92
|
%
|
|
|
13.23
|
%
|
|
|
(4.31
|
)%
|
|
|
5.51
|
%
|
|
|
13.15
|
%
|
|
|
(7.64
|
)%
|
Net interest income before provision and noninterest income
|
|
$
|
178.9
|
|
|
$
|
198.6
|
|
|
$
|
(19.7
|
)
|
|
$
|
546.8
|
|
|
$
|
579.1
|
|
|
$
|
(32.3
|
)
|
Tax equivalent interest income
|
|
|
0.6
|
|
|
|
0.6
|
|
|
|
|
|
|
|
2.2
|
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
179.5
|
|
|
$
|
199.2
|
|
|
$
|
(19.7
|
)
|
|
$
|
549.0
|
|
|
$
|
581.3
|
|
|
$
|
(32.3
|
)
|
Noninterest expense
|
|
$
|
123.9
|
|
|
$
|
123.9
|
|
|
$
|
|
|
|
$
|
427.9
|
|
|
$
|
361.0
|
|
|
$
|
66.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency ratio
|
|
|
69.03
|
%
|
|
|
62.20
|
%
|
|
|
6.83
|
%
|
|
|
77.94
|
%
|
|
|
62.10
|
%
|
|
|
15.84
|
%
|
Operating
results
On an operating basis, net income for the 2008 third quarter was
$35.4 million, or $0.53 per share (on a diluted basis). For
the first nine months of 2008, operating net income was
$108.8 million, or $1.62 per share (on a diluted basis).
These amounts were lower than for the corresponding periods in
2007 mainly because:
|
|
|
|
|
Although we had record-high loan growth, the market interest
rate environment compressed the net interest margin, which
reduced net interest income and prevented the benefits of loan
growth from reaching the bottom line.
|
45
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
|
|
|
|
|
Loan growth, as well as higher levels of nonperforming assets,
prompted an increase in the provision for loan losses.
|
|
|
|
Revenue from the two affiliate money managers was lower, as
equity market volatility reduced assets under management at both
firms, and contributed to an operating loss for the 2008 second
quarter at RCM.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Results
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
|
(Dollars in millions, except per-share amounts)
|
|
|
Net interest income
|
|
$
|
91.1
|
|
|
$
|
94.1
|
|
|
$
|
263.1
|
|
|
$
|
277.7
|
|
Provision for loan losses
|
|
|
(19.6
|
)
|
|
|
(8.9
|
)
|
|
|
(48.0
|
)
|
|
|
(19.0
|
)
|
Noninterest income
|
|
|
107.5
|
|
|
|
94.8
|
|
|
|
316.0
|
|
|
|
283.2
|
|
Operating expense
|
|
|
123.9
|
|
|
|
110.8
|
|
|
|
361.0
|
|
|
|
327.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating net income
|
|
$
|
35.4
|
|
|
$
|
46.2
|
|
|
$
|
108.8
|
|
|
$
|
138.0
|
|
Operating earnings per share (diluted)
|
|
$
|
0.53
|
|
|
$
|
0.67
|
|
|
$
|
1.62
|
|
|
$
|
1.99
|
|
Average shares outstanding (diluted, in thousands)
|
|
|
67,269
|
|
|
|
68,582
|
|
|
|
67,349
|
|
|
|
69,222
|
|
Shares outstanding, on average, were lower than for the year-ago
periods mainly because of our 2007 share repurchase
activity. We repurchased a total of 2 million shares in
2007; more than 600,000 of these shares were repurchased during
the fourth quarter.
As margin compression reduced net interest income for the third
quarter and first nine months of 2008, CCS and WAS revenue
continued to increase. As a result, noninterest income increased
as a percentage of total net interest and noninterest income. We
expect this trend to continue, because the CCS and WAS
businesses have a broader geographic scope, and more
opportunities to grow revenue at a faster pace, than the
Regional Banking business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percentage of Total Operating Net Interest and
Noninterest Income
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
Net interest
income
1
|
|
|
40
|
%
|
|
|
47
|
%
|
|
|
41
|
%
|
|
|
48
|
%
|
Noninterest
income
2
|
|
|
60
|
%
|
|
|
53
|
%
|
|
|
59
|
%
|
|
|
52
|
%
|
|
|
|
1
|
|
After the provision for loan losses.
|
|
2
|
|
After amortization.
|
Profitability was lower than for the third quarter and first
nine months of 2007 (on an operating basis). Contributing to
this decrease were the pressure on the net interest margin and
the increase in the provision for loan losses, which reduced
revenue. In addition, prior periods did not reflect the staffing
and related costs associated with the expansion activities we
completed in the fourth quarter of 2007 and the first nine
months of 2008. The largest of these initiatives was the
acquisition of AST, which we completed on April 30, 2008.
AST has 179 staff members.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency and Profitability Ratios (Operating Basis)
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
Efficiency
ratio
1
|
|
|
62.20
|
%
|
|
|
58.35
|
%
|
|
|
62.10
|
%
|
|
|
58.02
|
%
|
Profit margin
|
|
|
37.80
|
%
|
|
|
41.65
|
%
|
|
|
37.90
|
%
|
|
|
41.98
|
%
|
|
|
|
1
|
|
The efficiency ratio is the inverse of the profit margin.
|
We discuss each of our businesses and other factors in our
financial performance in greater detail in the following pages
of this report.
THE
REGIONAL BANKING BUSINESS
The Regional Banking business continued to benefit from the
well-diversified economy in the mid-Atlantic region, which has
not experienced the level of economic downturn seen in some
other parts of the United States.
|
|
|
|
|
Loan balances reached a record high of $9.59 billion.
|
|
|
|
Core deposits increased modestly from year-end 2007 and reached
$5.54 billion.
|
46
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
|
|
|
|
|
Nonperforming assets and the provision for loan losses
increased, but the net charge-off ratio remained in line with
what we have experienced historically. We discuss credit quality
in greater detail in a separate section of this report.
|
Loans
Total loans were $9.59 billion at September 30, 2008,
which was 13% higher than at year-end 2007. Two milestones were
achieved during the first nine months of 2008:
|
|
|
|
|
Loan balances exceeded $9 billion on both a period-end and
average-balance basis for the first time.
|
|
|
|
The $1.11 billion of loans we added during the first nine
months of 2008 marked the largest nine-month increase on record.
|
Most of the growth in the first nine months of 2008 came from,
in order of
dollar-amount
contribution, the Pennsylvania market, the Delaware market, and
the New Jersey market. The growth in loans from the Pennsylvania
and New Jersey markets reflected the significant commercial
banking expansion we have undertaken in those markets in recent
years.
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-End Loan Balances
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(In millions)
|
|
|
Commercial loans
|
|
$
|
6,674.6
|
|
|
$
|
5,838.7
|
|
|
$
|
5,677.7
|
|
Retail loans
|
|
|
2,910.4
|
|
|
|
2,637.1
|
|
|
|
2,658.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans outstanding
|
|
$
|
9,585.0
|
|
|
$
|
8,475.8
|
|
|
$
|
8,336.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-End Loan Balances
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
Delaware market loans
|
|
$
|
5,080.0
|
|
|
$
|
4,831.2
|
|
|
$
|
5,001.9
|
|
Delaware market loans as a % of total loans
|
|
|
53
|
%
|
|
|
57
|
%
|
|
|
60
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-End Loan Balances
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
Pennsylvania market loans
|
|
$
|
2,300.4
|
|
|
$
|
1,949.4
|
|
|
$
|
1,750.7
|
|
Pennsylvania market loans as a % of total loans
|
|
|
24
|
%
|
|
|
23
|
%
|
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-End Loan Balances
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
Maryland market loans
|
|
$
|
958.5
|
|
|
$
|
847.6
|
|
|
$
|
500.1
|
|
Maryland market loans as a % of total loans
|
|
|
10
|
%
|
|
|
10
|
%
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-End Loan Balances
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
New Jersey market loans
|
|
$
|
671.0
|
|
|
$
|
423.8
|
|
|
$
|
333.5
|
|
New Jersey market loans as a % of total loans
|
|
|
7
|
%
|
|
|
5
|
%
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-End Loan Balances
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
Other market loans
|
|
$
|
575.1
|
|
|
$
|
423.8
|
|
|
$
|
750.3
|
|
Other market loans as a % of total loans
|
|
|
6
|
%
|
|
|
5
|
%
|
|
|
9
|
%
|
47
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
On an average-balance basis, total loan balances increased for
the 22nd consecutive quarter, and were 15% higher than for
the year-ago third quarter. For more detail on average balances,
see the quarterly analysis of net interest income in this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Balances, on Average
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Total loans outstanding
|
|
$
|
9,459.0
|
|
|
$
|
8,260.3
|
|
|
$
|
9,062.0
|
|
|
$
|
8,163.6
|
|
On a percentage basis, the composition of the loan portfolio at
period-end remained relatively unchanged from prior periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Portfolio Composition
|
|
9/30/08
|
|
|
12/31/07
|
|
|
9/30/07
|
|
|
Commercial, financial, and agricultural (C&I) loans
|
|
|
31
|
%
|
|
|
31
|
%
|
|
|
30
|
%
|
Commercial real estate construction loans
|
|
|
20
|
%
|
|
|
21
|
%
|
|
|
21
|
%
|
Commercial mortgage loans
|
|
|
19
|
%
|
|
|
17
|
%
|
|
|
17
|
%
|
Residential mortgage loans
|
|
|
6
|
%
|
|
|
6
|
%
|
|
|
7
|
%
|
Consumer loans
|
|
|
18
|
%
|
|
|
19
|
%
|
|
|
18
|
%
|
Loans secured with liquid collateral
|
|
|
6
|
%
|
|
|
6
|
%
|
|
|
7
|
%
|
Loans secured with liquid collateral are associated mainly with
WAS clients. We do not consider changes in the balances of these
loans to be indicative of trends in the Regional Banking
business.
Economic
conditions in the mid-Atlantic region
The mid-Atlantic economy is broadly diversified among the life
sciences, financial services, pharmaceutical, health care,
education, construction, manufacturing, retail, agriculture, and
tourism industry sectors. Historically, this diversification has
provided a degree of economic stability and helped the region
withstand the effect of a downturn in any single sector.
As of September 2008, unemployment rates in the region remained
below the U.S. average. Delawares unemployment rate
has been lower than the U.S. average since 2001.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 2008
|
|
September 2007
|
|
|
Employment
|
|
Unemployment
|
|
Unemployment
|
Employment Indicators
|
|
Growth*
|
|
Rate
|
|
Rate
|
|
Delaware
|
|
|
0.3
|
%
|
|
|
4.8
|
%
|
|
|
3.0
|
%
|
New Jersey
|
|
|
(0.2
|
)%
|
|
|
5.8
|
%
|
|
|
4.3
|
%
|
Pennsylvania
|
|
|
(0.1
|
)%
|
|
|
5.7
|
%
|
|
|
4.5
|
%
|
United States
|
|
|
(0.4
|
)%
|
|
|
6.1
|
%
|
|
|
4.7
|
%
|
|
|
|
*
|
|
Year-over-year percent change
|
Sources: U.S. Bureau of Labor Statistics and Federal
Reserve Bank of Philadelphia
As of the 2008 second quarter (the most recent data available),
home prices in Delaware and Pennsylvania had not experienced the
level of deterioration or volatility seen in other parts of the
United States, as changes in the U.S. House Price Index
show. The first table shows that, on a linked-quarter basis,
home prices in Delaware and Pennsylvania have fluctuated 1% or
less each quarter since the 2007 second quarter.
48
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
The second table compares home price index changes over four
12-month
periods. This comparison also shows that home prices in Delaware
and Pennsylvania have been affected far less negatively than
home prices in states with troubled housing markets, like
California, Florida, and Nevada.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent Change in House Price Index
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(quarter-to-quarter)
|
|
2007 Q2
|
|
|
2007 Q3
|
|
|
2007 Q4
|
|
|
2008 Q1
|
|
|
2008 Q2
|
|
|
Delaware
|
|
|
1.3
|
%
|
|
|
0.0
|
%
|
|
|
0.4
|
%
|
|
|
(0.7
|
)%
|
|
|
(1.0
|
)%
|
Pennsylvania
|
|
|
0.7
|
%
|
|
|
0.7
|
%
|
|
|
0.4
|
%
|
|
|
0.7
|
%
|
|
|
(0.4
|
)%
|
United States
|
|
|
0.1
|
%
|
|
|
(0.4
|
)%
|
|
|
0.1
|
%
|
|
|
(0.2
|
)%
|
|
|
(1.4
|
)%
|
California
|
|
|
(1.2
|
)%
|
|
|
(1.8
|
)%
|
|
|
(3.1
|
)%
|
|
|
(4.4
|
)%
|
|
|
(6.9
|
)%
|
Florida
|
|
|
(0.8
|
)%
|
|
|
(2.1
|
)%
|
|
|
(1.7
|
)%
|
|
|
(3.3
|
)%
|
|
|
(5.3
|
)%
|
Nevada
|
|
|
(1.6
|
)%
|
|
|
(0.7
|
)%
|
|
|
(3.0
|
)%
|
|
|
(5.0
|
)%
|
|
|
(5.6
|
)%
|
Source: Office of Federal Housing Enterprise Oversight
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent Change in House Price Index
|
|
|
|
|
|
|
|
|
(four quarter change)
|
|
2006 Q3 to 2007 Q3
|
|
2006 Q4 to 2007 Q4
|
|
2007 Q1 to 2008 Q1
|
|
2007 Q2 to 2008 Q2
|
|
Delaware
|
|
|
3.7
|
%
|
|
|
1.9
|
%
|
|
|
1.0
|
%
|
|
|
(1.2
|
)%
|
Pennsylvania
|
|
|
4.1
|
%
|
|
|
2.8
|
%
|
|
|
2.4
|
%
|
|
|
1.4
|
%
|
United States
|
|
|
1.8
|
%
|
|
|
0.8
|
%
|
|
|
0.0
|
%
|
|
|
(1.7
|
)%
|
California
|
|
|
(3.6
|
)%
|
|
|
(6.7
|
)%
|
|
|
(10.6
|
)%
|
|
|
(15.8
|
)%
|
Florida
|
|
|
(2.1
|
)%
|
|
|
(4.7
|
)%
|
|
|
(8.2
|
)%
|
|
|
(12.4
|
)%
|
Nevada
|
|
|
(2.4
|
)%
|
|
|
(5.9
|
)%
|
|
|
(10.3
|
)%
|
|
|
(14.1
|
)%
|
Source: Office of Federal Housing Enterprise Oversight
National Association of
REALTORS
®
data on median home sales prices as of the 2008 second quarter
(the most recent data available) also show how home price
changes in key parts of the Regional Banking footprint compare
favorably with those in other parts of the United States.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
Median Sales Price of Existing Single-Family Homes
|
|
2007 Q3
|
|
2007 Q4
|
|
2008 Q1
|
|
2008 Q2
|
|
2008 Q2 vs. Q1
|
|
|
(Dollars in thousands)
|
|
Philadelphia, PA/Camden, NJ/Wilmington, DE MSA
|
|
$
|
243.0
|
|
|
$
|
226.8
|
|
|
$
|
220.9
|
|
|
$
|
235.7
|
|
|
|
7
|
%
|
Dover, DE MSA
|
|
$
|
219.8
|
|
|
$
|
199.6
|
|
|
$
|
199.1
|
|
|
$
|
202.6
|
|
|
|
2
|
%
|
United States
|
|
$
|
220.3
|
|
|
$
|
205.7
|
|
|
$
|
196.1
|
|
|
$
|
206.5
|
|
|
|
5
|
%
|
Phoenix/Mesa/Scottsdale, AZ MSA
|
|
$
|
255.5
|
|
|
$
|
241.7
|
|
|
$
|
222.2
|
|
|
$
|
205.1
|
|
|
|
(8
|
)%
|
Las Vegas/Paradise, NV MSA
|
|
$
|
295.5
|
|
|
$
|
273.5
|
|
|
$
|
247.6
|
|
|
$
|
235.3
|
|
|
|
(5
|
)%
|
Source: National Association of
REALTORS
®
MSA = metropolitan statistical area
According to the U.S. Census Bureau, Delaware was the
14th fastest-growing state in the United States for the
12 months ended July 2007 (the most recent data available).
Delawares tax climate, among other attributes, continued
to attract new residents and create demand for housing and other
services. Delaware has no sales tax, and its property taxes are
among the lowest in the United States. Delaware is one of
13 states that impose no state-wide property tax levy.
Taxes are assessed at the county level and consist primarily of
school district taxes. In addition, there is no recurring
assessment of home values.
49
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Commercial
Loans
We added $835.9 million of commercial loans during the
first nine months of 2008, an increase of 14% from year-end
2007. Commercial loan balances, which exceeded $6 billion
for the first time in the 2008 first quarter, were
$6.67 billion at September 30, 2008. C&I loans
accounted for 44% of the year-to-date growth in total commercial
loans, commercial mortgage loans accounted for 40%, and
commercial construction loans accounted for 16%. All of our
mid-Atlantic markets contributed to the commercial loan growth.
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-End Commercial Loans
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(In millions)
|
|
|
Commercial, financial, and agricultural (C&I) loans
|
|
$
|
2,965.2
|
|
|
$
|
2,594.9
|
|
|
$
|
2,529.0
|
|
Commercial real estate construction loans
|
|
|
1,908.7
|
|
|
|
1,780.4
|
|
|
|
1,759.9
|
|
Commercial mortgage loans
|
|
|
1,800.7
|
|
|
|
1,463.4
|
|
|
|
1,388.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans
|
|
$
|
6,674.6
|
|
|
$
|
5,838.7
|
|
|
$
|
5,677.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-End Commercial Loans
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
Delaware market commercial loans
|
|
$
|
3,671.0
|
|
|
$
|
3,386.4
|
|
|
$
|
3,349.8
|
|
Delaware market commercial loans as a % of total
commercial loans
|
|
|
55
|
%
|
|
|
58
|
%
|
|
|
59
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-End Commercial Loans
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
Pennsylvania market commercial loans
|
|
$
|
1,802.1
|
|
|
$
|
1,576.5
|
|
|
$
|
1,476.2
|
|
Pennsylvania market commercial loans as a % of total
commercial loans
|
|
|
27
|
%
|
|
|
27
|
%
|
|
|
26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-End Commercial Loans
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
Maryland market commercial loans
|
|
$
|
600.7
|
|
|
$
|
525.5
|
|
|
$
|
454.2
|
|
Maryland market commercial loans as a % of total
commercial loans
|
|
|
9
|
%
|
|
|
9
|
%
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-End Commercial Loans
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
New Jersey market commercial loans
|
|
$
|
400.5
|
|
|
$
|
291.9
|
|
|
$
|
283.9
|
|
New Jersey market commercial loans as a % of total
commercial loans
|
|
|
6
|
%
|
|
|
5
|
%
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-End Commercial Loans
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
Other market commercial loans
|
|
$
|
200.3
|
|
|
$
|
58.4
|
|
|
$
|
113.6
|
|
Other market commercial loans as a % of total
commercial loans
|
|
|
3
|
%
|
|
|
1
|
%
|
|
|
2
|
%
|
50
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
On an individual basis, commercial loan amounts reflect the fact
that our commercial banking clients are owners of closely held
businesses. At September 30, 2008:
|
|
|
|
|
Approximately 72% of total commercial loans were for amounts of
$10 million or less.
|
|
|
|
The mix of loan sizes was relatively unchanged from prior
periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Loans by Size
|
|
At 9/30/08
|
|
At 12/31/07
|
|
At 9/30/07
|
|
More than $20 million
|
|
|
9
|
%
|
|
|
6
|
%
|
|
|
6
|
%
|
$10 million to $20 million
|
|
|
19
|
%
|
|
|
18
|
%
|
|
|
19
|
%
|
$5 million to $10 million
|
|
|
23
|
%
|
|
|
25
|
%
|
|
|
24
|
%
|
$1 million to $5 million
|
|
|
36
|
%
|
|
|
37
|
%
|
|
|
37
|
%
|
$250,000 to $1 million
|
|
|
10
|
%
|
|
|
11
|
%
|
|
|
11
|
%
|
Less than $250,000
|
|
|
3
|
%
|
|
|
3
|
%
|
|
|
3
|
%
|
C&I
loans
C&I loan balances increased 14% in the first nine months of
2008. The C&I loans added during this period were:
|
|
|
|
|
To clients in a variety of businesses, including light
manufacturing, service, and retail businesses.
|
|
|
|
For a variety of working capital, equipment purchase, inventory,
and other needs.
|
|
|
|
Spread geographically throughout the mid-Atlantic region.
|
Commercial
mortgage loans
Commercial mortgage balances rose 23% in the first nine months
of 2008. This growth reflected changes in the mortgage financing
market. Until the availability of mortgage financing tightened
in the latter half of 2007, our commercial mortgage terms were
generally less favorable than what borrowers could obtain from
specialty mortgage companies. We did not alter our terms, but
changes in the market made our terms more comparable with those
offered by the specialty lenders. That, plus less liquidity in
the credit markets, prompted many of our existing clients to
remain with us for their permanent financing. Most of the
commercial mortgage loans added during the first nine months of
2008 were for owner-occupied properties, including auto
dealerships, schools, and manufacturing and industrial
properties. These properties were primarily in Delaware,
southeastern Pennsylvania, and Maryland.
51
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Commercial
construction loans
The pace of growth in commercial construction loans slowed
throughout the first nine months of 2008, as housing markets
softened from their levels in 2006 and the first half of 2007.
At $1.91 billion, commercial construction balances were 7%
higher than at year-end 2007, and accounted for 20% of the total
loan portfolio (commercial and retail loans combined). Most of
our commercial construction loans continued to be for
residential construction projects, primarily for single-family
homes, in Delaware.
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Construction Loan Portfolio
|
|
At 9/30/08
|
|
At 12/31/07
|
|
At 9/30/07
|
|
Project type:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate construction
|
|
|
52
|
%
|
|
|
52
|
%
|
|
|
54
|
%
|
Land development
|
|
|
22
|
%
|
|
|
21
|
%
|
|
|
19
|
%
|
Retail and office
|
|
|
14
|
%
|
|
|
14
|
%
|
|
|
13
|
%
|
Owner-occupied
|
|
|
3
|
%
|
|
|
5
|
%
|
|
|
6
|
%
|
Multi-family
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
2
|
%
|
Other
|
|
|
7
|
%
|
|
|
6
|
%
|
|
|
6
|
%
|
Geographic location:
|
|
|
|
|
|
|
|
|
|
|
|
|
Delaware
|
|
|
61
|
%
|
|
|
61
|
%
|
|
|
59
|
%
|
Pennsylvania
|
|
|
23
|
%
|
|
|
25
|
%
|
|
|
27
|
%
|
Maryland
|
|
|
6
|
%
|
|
|
7
|
%
|
|
|
7
|
%
|
New Jersey
|
|
|
7
|
%
|
|
|
4
|
%
|
|
|
4
|
%
|
Other
|
|
|
3
|
%
|
|
|
3
|
%
|
|
|
3
|
%
|
We have a high degree of confidence in our commercial
construction portfolio and its integrity, because:
|
|
|
|
|
We focus on clients with privately held or family-owned
businesses that are well established and successful. We do not
lend to large, national homebuilders.
|
|
|
|
The geographic scope of our commercial lending activity is
concentrated in the mid-Atlantic region. This region has not
experienced the volume of speculative over-building seen in
other parts of the United States. Generally, projects we fund
are within a
two-hour
drive from our headquarters in Wilmington, Delaware.
|
|
|
|
Most of the construction loans in our portfolio are for
single-family homes in residential tract developments.
Population growth is driving the demand for this type of housing
and related services.
|
|
|
|
We apply our underwriting standards consistently.
|
Commercial
construction loan underwriting standards
|
|
|
Maximum term:
|
|
Two years on unimproved land
Three years on land development
|
Target loan size:
|
|
$1 million to $10 million
|
Maximum loan-to-value requirements
|
|
65% on unimproved land
|
|
|
75% on land development
|
|
|
80% on residential construction and income-producing properties
|
Construction limits on residential projects:
|
|
Pre-sold inventory plus a maximum of:
|
|
|
6 unsold single-family homes or
|
|
|
10 unsold townhomes
|
52
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Consistent with industry practice, we generally fund the
interest reserve on construction loans by including it in the
loan-to-value calculation and as part of the total loan amount.
Consumer
loans
We added $211.3 million of consumer loans during the first
nine months of 2008, an increase of 13% from year-end 2007.
Consumer loan balances, which exceeded $1.7 billion for the
first time in the 2008 second quarter, were $1.78 billion
at September 30, 2008. Most of our consumer loans continued
to come from the Delaware market, where we focus our retail and
branch banking business.
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-End Consumer Loans
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(In millions)
|
|
|
Home equity lines of credit
|
|
$
|
360.8
|
|
|
$
|
302.8
|
|
|
$
|
295.3
|
|
Indirect loans
|
|
|
942.9
|
|
|
|
748.1
|
|
|
|
740.8
|
|
Credit card loans
|
|
|
67.0
|
|
|
|
69.1
|
|
|
|
65.0
|
|
Other consumer
loans
1
|
|
|
412.2
|
|
|
|
451.6
|
|
|
|
444.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer loans
|
|
$
|
1,782.9
|
|
|
$
|
1,571.6
|
|
|
$
|
1,546.0
|
|
|
|
|
1
|
|
Includes home equity loans, installment loans, and other types
of loans to individuals.
|
|
|
|
|
|
|
|
|
|
|
|
At September 30,
|
|
At December 31,
|
Period-End Consumer Loans by Market
|
|
2008
|
|
2007
|
|
Percent from Delaware market
|
|
|
53
|
%
|
|
|
58
|
%
|
Percent from Maryland market
|
|
|
16
|
%
|
|
|
15
|
%
|
Percent from New Jersey market
|
|
|
8
|
%
|
|
|
6
|
%
|
Percent from Pennsylvania market
|
|
|
17
|
%
|
|
|
14
|
%
|
Percent from other markets
|
|
|
6
|
%
|
|
|
7
|
%
|
Indirect lending accounted for most of the growth in consumer
loan balances during the first nine months of 2008. Most of this
growth was split evenly between loans for new cars and loans for
late-model used cars. We make the majority of our indirect loans
through automobile dealers, as an extension of the commercial
banking relationships we have with dealers throughout the
mid-Atlantic region.
|
|
|
|
|
|
|
|
|
|
|
|
|
Indirect loans booked during the quarter by market
|
|
2008 Q3
|
|
2008 Q2
|
|
2008 Q1
|
|
Delaware
|
|
|
41
|
%
|
|
|
39
|
%
|
|
|
35
|
%
|
Pennsylvania
|
|
|
19
|
%
|
|
|
23
|
%
|
|
|
25
|
%
|
Maryland
|
|
|
25
|
%
|
|
|
23
|
%
|
|
|
24
|
%
|
New Jersey
|
|
|
15
|
%
|
|
|
15
|
%
|
|
|
16
|
%
|
Residential
mortgage loans
We are among the leading residential mortgage originators in
Delaware, but changes in our origination volumes may not
correspond directly with changes in residential mortgage
balances. This is because, except for a portion of the Community
Reinvestment Act mortgages we originate, we sell most newly
originated fixed rate residential mortgages into the secondary
market instead of retaining them in our loan portfolio. This
ongoing
53
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
practice is part of our interest rate risk management strategy,
which we cover in more detail in this report in the discussion
of quantitative and qualitative disclosures about market risk.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgage Activity
|
|
At 9/30/08
|
|
|
At 6/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
Residential mortgage balances (at period-end)
|
|
$
|
562.9
|
|
|
$
|
561.1
|
|
|
$
|
562.0
|
|
|
$
|
566.3
|
|
Percent of residential mortgages at fixed rates
|
|
|
77
|
%
|
|
|
77
|
%
|
|
|
74
|
%
|
|
|
78
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgage Originations
|
|
2008 Q3
|
|
|
2008 Q2
|
|
|
2007 Q4
|
|
|
2007 Q3
|
|
|
|
(Dollars in millions)
|
|
|
Residential mortgage originations (dollar amount)
|
|
$
|
39.2
|
|
|
$
|
43.8
|
|
|
$
|
46.3
|
|
|
$
|
46.3
|
|
Residential mortgage originations (number of loans)
|
|
|
168
|
|
|
|
208
|
|
|
|
187
|
|
|
|
213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Mortgage Delinquency Rates
|
|
At 9/30/08
|
|
|
At 6/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
Wilmington Trust
|
|
|
4.46
|
%
|
|
|
3.55
|
%
|
|
|
3.45
|
%
|
|
|
3.12
|
%
|
We do not engage in subprime residential mortgage lending and,
as of September 30, 2008, there were no subprime loans in
our residential mortgage portfolio.
Deposits
We record two types of deposits:
|
|
|
|
|
Core deposits, which are deposits from our clients.
|
|
|
|
National CDs in amounts of $100,000 or more. We purchase these
deposits on a wholesale or brokered basis. They are not
associated with client activity.
|
We augment core deposits with national CDs because:
|
|
|
|
|
In our Regional Banking business model, there is an inherent
disparity between loan growth and core deposit growth. We
conduct our commercial banking activities throughout a
four-state footprint, but we concentrate our core
deposit-gathering activities in Delaware, where we focus our
consumer and other retail banking activities.
|
|
|
|
They are a cost-effective way to add deposits without adding the
expenses associated with a large-scale expansion of our branch
office network outside of Delaware.
|
|
|
|
They help us manage interest rate risk. We can match the
repricing characteristics of our floating rate loans more easily
with national CDs than with client deposits. Most of our
national CDs have terms of 90 to 120 days.
|
For more information about our use of national CDs, read the net
interest margin, liquidity and funding, and interest rate risk
management discussions in this report.
54
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Core
deposits
Core deposit balances increased modestly during the first nine
months of 2008. Growth in savings and interest-bearing demand
deposits was offset by declines in noninterest-bearing demand
and CD balances.
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-End Core Deposits
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
Noninterest-bearing demand deposits
|
|
$
|
879.6
|
|
|
$
|
966.2
|
|
|
$
|
827.8
|
|
Savings deposits
|
|
|
799.6
|
|
|
|
659.8
|
|
|
|
580.1
|
|
Interest-bearing demand deposits
|
|
|
2,594.4
|
|
|
|
2,471.8
|
|
|
|
2,346.7
|
|
CDs < $100,000
|
|
|
998.1
|
|
|
|
1,011.4
|
|
|
|
1,002.4
|
|
Local CDs
³
$100,000
|
|
|
267.8
|
|
|
|
356.3
|
|
|
|
389.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total core deposits
|
|
$
|
5,539.5
|
|
|
$
|
5,465.5
|
|
|
$
|
5,146.6
|
|
Percentage from Delaware clients
|
|
|
85
|
%
|
|
|
87
|
%
|
|
|
88
|
%
|
Percentage from Pennsylvania clients
|
|
|
4
|
%
|
|
|
5
|
%
|
|
|
4
|
%
|
Percentage from clients in other markets
|
|
|
11
|
%
|
|
|
8
|
%
|
|
|
8
|
%
|
WTDirect, our Internet-only delivery channel, accounted for most
of the year-to-date growth in savings deposits. Launched at the
end of November 2006, WTDirect balances at September 30,
2008, were approximately $525 million. WTDirect currently
features a high-interest savings account for depositors who
maintain average daily balances of at least $10,000. We target
WTDirect to the mass-affluent consumer market, and we have
WTDirect depositors from all 50 states.
We include balances of local CDs in amounts of $100,000 or more
(local CDs) in core deposits because these CDs reflect client
deposits, not wholesale or brokered deposits. Most local CDs are
from clients in the Delaware Valley region, including commercial
banking clients and local municipalities, which frequently use
these CDs to generate returns on their excess cash.
|
|
|
|
|
|
|
|
|
|
|
|
|
Local CDs
³
$100,000 by
|
|
|
|
|
|
|
Client Category
|
|
|
|
|
|
|
(Average Balances)
|
|
2008 Q3
|
|
2007 Q4
|
|
2007 Q3
|
|
Consumer banking clients
|
|
|
53
|
%
|
|
|
54
|
%
|
|
|
59
|
%
|
DE commercial banking clients
|
|
|
10
|
%
|
|
|
9
|
%
|
|
|
9
|
%
|
PA commercial banking clients
|
|
|
9
|
%
|
|
|
10
|
%
|
|
|
10
|
%
|
Wealth Advisory Services clients
|
|
|
9
|
%
|
|
|
15
|
%
|
|
|
13
|
%
|
Other clients
|
|
|
19
|
%
|
|
|
12
|
%
|
|
|
9
|
%
|
Generally, we consider core deposit balances on average to be a
better indicator of trends in the Regional Banking business than
period-end core deposits. This is because CCS clients may
deposit large sums of cash near the ends of financial reporting
periods. These deposits typically are noninterest-bearing demand
deposits.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Deposits, on Average
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
|
(In millions)
|
|
|
Noninterest-bearing demand deposits
|
|
$
|
838.8
|
|
|
$
|
714.9
|
|
|
$
|
811.9
|
|
|
$
|
722.0
|
|
Total core deposits
|
|
$
|
5,430.0
|
|
|
$
|
5,045.5
|
|
|
$
|
5,323.1
|
|
|
$
|
5,029.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Deposits at Period End
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(In millions)
|
|
|
Noninterest-bearing demand deposits
|
|
$
|
879.6
|
|
|
$
|
966.2
|
|
|
$
|
827.8
|
|
Total core deposits
|
|
$
|
5,539.5
|
|
|
$
|
5,465.5
|
|
|
$
|
5,146.6
|
|
55
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Other
Regional Banking information
|
|
|
|
|
|
|
|
|
|
|
|
|
ATMs
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
Number of ATMs in Delaware
|
|
|
213
|
|
|
|
208
|
|
|
|
203
|
|
Total number of ATMs
|
|
|
257
|
|
|
|
255
|
|
|
|
251
|
|
Regional
Banking profitability
Regional Bankings profitability declined slightly from
prior periods, mainly because:
|
|
|
|
|
Compression in the net interest margin during the first half of
2008 reduced net interest income, even though loan balances rose
at a record pace.
|
|
|
|
The provision for loan losses was higher than for prior periods.
For more information about this, read the credit quality
discussion in this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regional Banking Profitability
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
Segment operating net income (in millions)
|
|
$
|
24.9
|
|
|
$
|
32.9
|
|
|
$
|
77.9
|
|
|
$
|
99.4
|
|
Efficiency
ratio
1
|
|
|
42.86
|
%
|
|
|
42.35
|
%
|
|
|
42.88
|
%
|
|
|
41.71
|
%
|
Profit margin
|
|
|
57.14
|
%
|
|
|
57.65
|
%
|
|
|
57.12
|
%
|
|
|
58.29
|
%
|
|
|
|
1
|
|
The efficiency ratio is the inverse of the profit margin.
|
The favorable efficiency ratio of the Regional Banking business
reflects how our funding strategy reduces the operating expenses
associated with building and maintaining a large-scale branch
office network outside of Delaware. For more information about
this, read the discussions of deposits and funding in this
report.
NET
INTEREST INCOME
Although loan balances reached a record high, net interest
income was lower for the third quarter and first nine months of
2008 than for the corresponding year-ago periods because:
|
|
|
|
|
Reductions in short-term market interest rates compressed our
net interest margin during the first half of 2008.
|
|
|
|
The provision for loan losses increased. For more information
about this, read the credit quality discussion in this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
|
(Dollars in millions)
|
|
|
Interest income
|
|
$
|
152.1
|
|
|
$
|
183.4
|
|
|
$
|
464.3
|
|
|
$
|
544.2
|
|
Interest expense
|
|
|
61.0
|
|
|
|
89.3
|
|
|
|
201.2
|
|
|
|
266.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
91.1
|
|
|
$
|
94.1
|
|
|
$
|
263.1
|
|
|
$
|
277.7
|
|
Provision for loan losses
|
|
|
(19.6
|
)
|
|
|
(8.9
|
)
|
|
|
(48.0
|
)
|
|
|
(19.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (after provision)
|
|
$
|
71.5
|
|
|
$
|
85.2
|
|
|
$
|
215.1
|
|
|
$
|
258.7
|
|
Portion generated by Regional
Banking
1
|
|
|
94
|
%
|
|
|
93
|
%
|
|
|
94
|
%
|
|
|
93
|
%
|
|
|
|
1
|
|
Before the provision for loan losses.
|
56
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
We generate net interest income mainly through banking and
funding activities. We attribute portions of net interest income
to the WAS and CCS businesses, because these businesses have
clients who use our banking services. For more information about
how we allocate net interest income among our businesses, refer
to Note 14, Segment reporting, in this report.
NET
INTEREST MARGIN
The margin for the third quarter of 2008 was 10 basis
points higher than for the second quarter, but 46 basis
points lower than for the year-ago third quarter. These changes
reflected our asset sensitivity and the market interest rate
environment.
Between late September 2007 and May 2008, the Federal Open
Market Committee (FOMC) reduced rates seven times for a total of
325 basis points. Most of our floating rate loans reprice
within 30 days of a rate change, and loan yields began to
reflect the downward pricing adjustments in the 2007 fourth
quarter. This continued in the first half of 2008.
Most of the corresponding decreases in funding costs, however,
did not begin until the 2008 first quarter, as our funding costs
typically take 90 to 120 days to reprice. Funding costs
continued to lag loan repricing for most of the second quarter.
In the third quarter, as market interest rates remained stable,
the disparity between the repricing of loans and the repricing
of funding costs narrowed substantially.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Margin
|
|
2008 Q3
|
|
|
2008 Q2
|
|
|
2008 Q1
|
|
|
2007 Q4
|
|
|
2007 Q3
|
|
|
Quarterly net interest margin
|
|
|
3.27
|
%
|
|
|
3.17
|
%
|
|
|
3.37
|
%
|
|
|
3.56
|
%
|
|
|
3.73
|
%
|
|
|
|
|
|
|
|
|
|
Net Interest Margin
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
Year-to-date net interest margin
|
|
|
3.27
|
%
|
|
|
3.71
|
%
|
Changes in the disparity between the basis-point declines in
earning asset yields and the cost of funds show the effects of
market rate stability in the third quarter.
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Yields and Rates (In Basis Points)
|
|
2008 Q3 vs. 2008 Q2
|
|
2008 Q3 vs. 2007 Q4
|
|
2008 Q3 vs. 2007 Q3
|
|
Change in yield on total earning assets
|
|
|
(12
|
) bps
|
|
|
(148
|
) bps
|
|
|
(179
|
) bps
|
Change in rate on total funds to support earning assets
|
|
|
(22
|
) bps
|
|
|
(119
|
) bps
|
|
|
(133
|
) bps
|
Our prime lending rate serves as a point of reference for a
substantial number of our commercial floating rate loans. The
table below shows our prime lending rate at period-end and on
average, as of September 30, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
Wilmington Trust Prime Lending Rate
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
Prime lending rate (period end)
|
|
|
5.00
|
%
|
|
|
7.25
|
%
|
|
|
7.75
|
%
|
Prime lending rate (on average)
|
|
|
5.00
|
%
|
|
|
7.58
|
%
|
|
|
8.18
|
%
|
On October 8, 2008, the FOMC cut short-term rates by
50 basis points, and we reduced our prime lending rate to
4.50% on October 14, 2008. On October 30, 2008, the
FOMC cut rates by another 50 basis points, and we reduced
our prime lending rate to 4.00% on November 3, 2008.
We estimate that each 25-basis-point drop in short-term rates
causes a decrease in our net interest margin of approximately
3 basis points, and a decrease of approximately
$3 million in net interest income, over a
12-month
period. The pressure on the margin is more dramatic immediately
following a rate change, and then it moderates as liability
rates reset.
57
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
The FOMCs two 50-basis-point rate reductions in October
2008 will compress the margin. It is difficult to forecast
accurately how other aspects of current dislocation within the
credit markets, especially the disparity between the federal
funds target rate and the
30-day
London interbank offered rate (Libor), also might affect the
margin. At September 30, 2008, the federal funds target
rate was 2.00%, while the
30-day
Libor
was 3.93%.
The pricing on approximately 40% of our commercial loans is tied
to the
30-day
Libor. In the near term, upward repricing of these loans will
offset some of the margin compression that will be caused by the
October 2008 FOMC rate reductions. Eventually, however, higher
Libor rates will be a factor in funding costs, which will cause
the margin to narrow. The exact path and speed with which Libor
adjusts will affect the extent and timing of the effect on the
margin.
Should term Libor rates return to their historic relationship
with federal fund rates, we expect approximately 7 basis
points of margin compression over a
12-month
period after all loan and funding repricing has occurred. A
rising interest rate environment could improve the margin. For
more information about this, read the disclosures in this report
about quantitative and qualitative market risk.
58
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
QUARTERLY
ANALYSIS OF NET INTEREST INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Third Quarter
|
|
|
2007 Third Quarter
|
|
|
|
Average
|
|
|
Income/
|
|
|
Average
|
|
|
Average
|
|
|
Income/
|
|
|
Average
|
|
|
|
balance
|
|
|
expense
|
|
|
rate
|
|
|
balance
|
|
|
expense
|
|
|
rate
|
|
|
|
(Dollars in millions; rates on a tax-equivalent basis)
|
|
|
Earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits in other banks
|
|
$
|
101.7
|
|
|
$
|
0.5
|
|
|
|
1.93
|
%
|
|
$
|
4.1
|
|
|
$
|
0.1
|
|
|
|
4.95
|
%
|
Federal funds sold and securities purchased under agreements to
resell
|
|
|
32.9
|
|
|
|
0.2
|
|
|
|
2.57
|
|
|
|
23.2
|
|
|
|
0.3
|
|
|
|
6.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term investments
|
|
|
134.6
|
|
|
|
0.7
|
|
|
|
2.09
|
|
|
|
27.3
|
|
|
|
0.4
|
|
|
|
6.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
|
50.2
|
|
|
|
0.4
|
|
|
|
3.13
|
|
|
|
104.0
|
|
|
|
0.9
|
|
|
|
3.40
|
|
Government agencies
|
|
|
454.5
|
|
|
|
5.6
|
|
|
|
4.90
|
|
|
|
635.2
|
|
|
|
7.6
|
|
|
|
4.76
|
|
Obligations of state and political subdivisions
|
|
|
7.0
|
|
|
|
0.2
|
|
|
|
8.67
|
|
|
|
18.6
|
|
|
|
0.3
|
|
|
|
6.96
|
|
Preferred stock
|
|
|
37.1
|
|
|
|
0.6
|
|
|
|
6.16
|
|
|
|
65.7
|
|
|
|
1.3
|
|
|
|
7.82
|
|
Mortgage-backed securities
|
|
|
694.0
|
|
|
|
7.8
|
|
|
|
4.50
|
|
|
|
616.5
|
|
|
|
6.6
|
|
|
|
4.20
|
|
Other securities
|
|
|
309.0
|
|
|
|
3.8
|
|
|
|
4.85
|
|
|
|
375.8
|
|
|
|
6.0
|
|
|
|
6.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities
|
|
|
1,551.8
|
|
|
|
18.4
|
|
|
|
4.70
|
|
|
|
1,815.8
|
|
|
|
22.7
|
|
|
|
4.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB and FRB stock, at cost
|
|
|
20.7
|
|
|
|
0.2
|
|
|
|
3.74
|
|
|
|
10.5
|
|
|
|
0.1
|
|
|
|
3.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, and agricultural
|
|
|
2,915.8
|
|
|
|
41.7
|
|
|
|
5.69
|
|
|
|
2,454.9
|
|
|
|
48.9
|
|
|
|
7.91
|
|
Real estate construction
|
|
|
1,877.8
|
|
|
|
24.8
|
|
|
|
5.26
|
|
|
|
1,769.2
|
|
|
|
37.5
|
|
|
|
8.41
|
|
Mortgage commercial
|
|
|
1,757.9
|
|
|
|
25.2
|
|
|
|
5.71
|
|
|
|
1,387.3
|
|
|
|
28.1
|
|
|
|
8.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans
|
|
|
6,551.5
|
|
|
|
91.7
|
|
|
|
5.57
|
|
|
|
5,611.4
|
|
|
|
114.5
|
|
|
|
8.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage residential
|
|
|
560.9
|
|
|
|
7.9
|
|
|
|
5.64
|
|
|
|
564.4
|
|
|
|
8.2
|
|
|
|
5.74
|
|
Consumer loans
|
|
|
1,780.3
|
|
|
|
28.1
|
|
|
|
6.28
|
|
|
|
1,533.0
|
|
|
|
28.9
|
|
|
|
7.48
|
|
Loans secured with liquid collateral
|
|
|
566.3
|
|
|
|
5.7
|
|
|
|
4.00
|
|
|
|
551.5
|
|
|
|
9.6
|
|
|
|
6.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retail loans
|
|
|
2,907.5
|
|
|
|
41.7
|
|
|
|
5.71
|
|
|
|
2,648.9
|
|
|
|
46.7
|
|
|
|
6.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans net of unearned income
|
|
|
9,459.0
|
|
|
|
133.4
|
|
|
|
5.61
|
|
|
|
8,260.3
|
|
|
|
161.2
|
|
|
|
7.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets at historical cost
|
|
$
|
11,166.1
|
|
|
$
|
152.7
|
|
|
|
5.44
|
%
|
|
$
|
10,113.9
|
|
|
$
|
184.4
|
|
|
|
7.23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustment on investment securities available for sale
|
|
|
(90.1
|
)
|
|
|
|
|
|
|
|
|
|
|
(38.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets
|
|
$
|
11,076.0
|
|
|
|
|
|
|
|
|
|
|
$
|
10,075.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Third Quarter
|
|
|
2007 Third Quarter
|
|
|
|
Average
|
|
|
Income/
|
|
|
Average
|
|
|
Average
|
|
|
Income/
|
|
|
Average
|
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
|
|
(Dollars in millions; rates on a tax-equivalent basis)
|
|
|
Funds supporting earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
$
|
807.8
|
|
|
$
|
4.5
|
|
|
|
2.21
|
%
|
|
$
|
540.9
|
|
|
$
|
3.6
|
|
|
|
2.63
|
%
|
Interest-bearing demand
|
|
|
2,511.7
|
|
|
|
4.4
|
|
|
|
0.70
|
|
|
|
2,405.8
|
|
|
|
8.8
|
|
|
|
1.45
|
|
Certificates under $100,000
|
|
|
979.8
|
|
|
|
7.6
|
|
|
|
3.08
|
|
|
|
1,007.7
|
|
|
|
10.7
|
|
|
|
4.23
|
|
Local certificates $100,000 and over
|
|
|
291.9
|
|
|
|
2.2
|
|
|
|
3.08
|
|
|
|
376.2
|
|
|
|
4.5
|
|
|
|
4.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total core interest-bearing deposits
|
|
|
4,591.2
|
|
|
|
18.7
|
|
|
|
1.62
|
|
|
|
4,330.6
|
|
|
|
27.6
|
|
|
|
2.54
|
|
National certificates $100,000 and over
|
|
|
3,197.1
|
|
|
|
24.5
|
|
|
|
3.05
|
|
|
|
2,817.9
|
|
|
|
38.4
|
|
|
|
5.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
7,788.3
|
|
|
|
43.2
|
|
|
|
2.21
|
|
|
|
7,148.5
|
|
|
|
66.0
|
|
|
|
3.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased and securities sold under agreements to
repurchase
|
|
|
1,686.1
|
|
|
|
9.4
|
|
|
|
2.21
|
|
|
|
1,370.4
|
|
|
|
16.3
|
|
|
|
4.72
|
|
U.S. Treasury demand deposits
|
|
|
7.6
|
|
|
|
|
|
|
|
1.74
|
|
|
|
11.0
|
|
|
|
0.1
|
|
|
|
4.87
|
|
Line of credit and other debt
|
|
|
11.9
|
|
|
|
0.1
|
|
|
|
3.34
|
|
|
|
139.9
|
|
|
|
2.8
|
|
|
|
7.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term borrowings
|
|
|
1,705.6
|
|
|
|
9.5
|
|
|
|
2.21
|
|
|
|
1,521.3
|
|
|
|
19.2
|
|
|
|
5.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
468.0
|
|
|
|
8.3
|
|
|
|
7.07
|
|
|
|
267.2
|
|
|
|
4.1
|
|
|
|
6.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
9,961.9
|
|
|
|
61.0
|
|
|
|
2.44
|
|
|
|
8,937.0
|
|
|
|
89.3
|
|
|
|
3.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other noninterest funds
|
|
|
1,204.2
|
|
|
|
|
|
|
|
|
|
|
|
1,176.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total funds used to support earning assets
|
|
$
|
11,166.1
|
|
|
$
|
61.0
|
|
|
|
2.17
|
%
|
|
$
|
10,113.9
|
|
|
$
|
89.3
|
|
|
|
3.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/margin
|
|
|
|
|
|
|
91.7
|
|
|
|
3.27
|
%
|
|
|
|
|
|
|
95.1
|
|
|
|
3.73
|
%
|
Tax-equivalent adjustment
|
|
|
|
|
|
|
(0.6
|
)
|
|
|
|
|
|
|
|
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
91.1
|
|
|
|
|
|
|
|
|
|
|
$
|
94.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In order to ensure the comparability of yields and rates and
their impact on net interest income, average rates are
calculated using average balances based on historical cost and
do not reflect the market valuation adjustment required by
SFAS No. 115, Accounting for Certain Investments
in Debt and Equity Securities.
60
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
YEAR-TO-DATE
ANALYSIS OF NET INTEREST INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-Date 2008
|
|
|
Year-to-Date 2007
|
|
|
|
Average
|
|
|
Income/
|
|
|
Average
|
|
|
Average
|
|
|
Income/
|
|
|
Average
|
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
|
|
(Dollars in millions; rates on a tax-equivalent basis)
|
|
|
Earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits in other banks
|
|
$
|
56.2
|
|
|
$
|
0.9
|
|
|
|
2.08
|
%
|
|
$
|
4.6
|
|
|
$
|
0.2
|
|
|
|
6.64
|
%
|
Federal funds sold and securities purchased under agreements to
resell
|
|
|
35.3
|
|
|
|
0.7
|
|
|
|
2.56
|
|
|
|
36.0
|
|
|
|
1.4
|
|
|
|
5.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term investments
|
|
|
91.5
|
|
|
|
1.6
|
|
|
|
2.26
|
|
|
|
40.6
|
|
|
|
1.6
|
|
|
|
5.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
|
53.6
|
|
|
|
1.5
|
|
|
|
3.68
|
|
|
|
111.6
|
|
|
|
3.2
|
|
|
|
3.82
|
|
Government agencies
|
|
|
494.8
|
|
|
|
18.1
|
|
|
|
4.89
|
|
|
|
674.2
|
|
|
|
23.8
|
|
|
|
4.73
|
|
Obligations of state and political subdivisions
|
|
|
9.4
|
|
|
|
0.5
|
|
|
|
7.96
|
|
|
|
13.3
|
|
|
|
0.8
|
|
|
|
7.67
|
|
Preferred stock
|
|
|
48.4
|
|
|
|
2.7
|
|
|
|
7.44
|
|
|
|
73.0
|
|
|
|
4.2
|
|
|
|
7.76
|
|
Mortgage-backed securities
|
|
|
719.5
|
|
|
|
24.2
|
|
|
|
4.49
|
|
|
|
654.0
|
|
|
|
20.7
|
|
|
|
4.22
|
|
Other securities
|
|
|
342.3
|
|
|
|
12.7
|
|
|
|
4.95
|
|
|
|
381.3
|
|
|
|
18.0
|
|
|
|
6.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities
|
|
|
1,668.0
|
|
|
|
59.7
|
|
|
|
4.78
|
|
|
|
1,907.4
|
|
|
|
70.7
|
|
|
|
4.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB and FRB stock, at cost
|
|
|
23.2
|
|
|
|
0.7
|
|
|
|
3.98
|
|
|
|
8.2
|
|
|
|
0.3
|
|
|
|
5.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, and agricultural
|
|
|
2,761.5
|
|
|
|
125.5
|
|
|
|
6.07
|
|
|
|
2,473.9
|
|
|
|
147.1
|
|
|
|
7.95
|
|
Real estate construction
|
|
|
1,840.1
|
|
|
|
78.6
|
|
|
|
5.71
|
|
|
|
1,712.2
|
|
|
|
109.1
|
|
|
|
8.52
|
|
Mortgage commercial
|
|
|
1,647.2
|
|
|
|
74.9
|
|
|
|
6.07
|
|
|
|
1,368.2
|
|
|
|
82.2
|
|
|
|
8.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans
|
|
|
6,248.8
|
|
|
|
279.0
|
|
|
|
5.97
|
|
|
|
5,554.3
|
|
|
|
338.4
|
|
|
|
8.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage residential
|
|
|
561.4
|
|
|
|
24.2
|
|
|
|
5.76
|
|
|
|
553.5
|
|
|
|
24.2
|
|
|
|
5.85
|
|
Consumer loans
|
|
|
1,721.3
|
|
|
|
83.8
|
|
|
|
6.50
|
|
|
|
1,516.5
|
|
|
|
84.4
|
|
|
|
7.44
|
|
Loans secured with liquid collateral
|
|
|
530.5
|
|
|
|
17.5
|
|
|
|
4.42
|
|
|
|
539.3
|
|
|
|
27.6
|
|
|
|
6.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retail loans
|
|
|
2,813.2
|
|
|
|
125.5
|
|
|
|
5.96
|
|
|
|
2,609.3
|
|
|
|
136.2
|
|
|
|
6.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans net of unearned income
|
|
|
9,062.0
|
|
|
|
404.5
|
|
|
|
5.96
|
|
|
|
8,163.6
|
|
|
|
474.6
|
|
|
|
7.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets at historical cost
|
|
$
|
10,844.7
|
|
|
$
|
466.5
|
|
|
|
5.75
|
%
|
|
$
|
10,119.8
|
|
|
$
|
547.2
|
|
|
|
7.23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustment on investment securities available for sale
|
|
|
(66.5
|
)
|
|
|
|
|
|
|
|
|
|
|
(29.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets
|
|
$
|
10,778.2
|
|
|
|
|
|
|
|
|
|
|
$
|
10,089.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-Date 2008
|
|
|
Year-to-Date 2007
|
|
|
|
Average
|
|
|
Income/
|
|
|
Average
|
|
|
Average
|
|
|
Income/
|
|
|
Average
|
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
|
|
(Dollars in millions; rates on a tax-equivalent basis)
|
|
|
Funds supporting earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
$
|
772.7
|
|
|
$
|
13.4
|
|
|
|
2.33
|
%
|
|
$
|
457.2
|
|
|
$
|
7.1
|
|
|
|
2.09
|
%
|
Interest-bearing demand
|
|
|
2,432.6
|
|
|
|
15.1
|
|
|
|
0.83
|
|
|
|
2,418.0
|
|
|
|
26.3
|
|
|
|
1.45
|
|
Certificates under $100,000
|
|
|
994.6
|
|
|
|
27.1
|
|
|
|
3.64
|
|
|
|
1,011.7
|
|
|
|
32.9
|
|
|
|
4.34
|
|
Local certificates $100,000 and over
|
|
|
311.3
|
|
|
|
8.8
|
|
|
|
3.81
|
|
|
|
420.1
|
|
|
|
15.0
|
|
|
|
4.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total core interest-bearing deposits
|
|
|
4,511.2
|
|
|
|
64.4
|
|
|
|
1.91
|
|
|
|
4,307.0
|
|
|
|
81.3
|
|
|
|
2.52
|
|
National certificates $100,000 and over
|
|
|
2,896.7
|
|
|
|
79.0
|
|
|
|
3.64
|
|
|
|
2,887.3
|
|
|
|
117.0
|
|
|
|
5.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
7,407.9
|
|
|
|
143.4
|
|
|
|
2.59
|
|
|
|
7,194.3
|
|
|
|
198.3
|
|
|
|
3.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased and securities sold under agreements to
repurchase
|
|
|
1,719.8
|
|
|
|
33.3
|
|
|
|
2.58
|
|
|
|
1,316.0
|
|
|
|
47.6
|
|
|
|
4.84
|
|
U.S. Treasury demand deposits
|
|
|
10.6
|
|
|
|
0.2
|
|
|
|
2.33
|
|
|
|
9.0
|
|
|
|
0.3
|
|
|
|
4.99
|
|
Line of credit and other debt
|
|
|
65.9
|
|
|
|
3.4
|
|
|
|
6.86
|
|
|
|
78.7
|
|
|
|
4.8
|
|
|
|
8.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term borrowings
|
|
|
1,796.3
|
|
|
|
36.9
|
|
|
|
2.74
|
|
|
|
1,403.7
|
|
|
|
52.7
|
|
|
|
5.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
401.5
|
|
|
|
20.9
|
|
|
|
6.97
|
|
|
|
320.7
|
|
|
|
15.5
|
|
|
|
6.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
9,605.7
|
|
|
|
201.2
|
|
|
|
2.80
|
|
|
|
8,918.7
|
|
|
|
266.5
|
|
|
|
3.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other noninterest funds
|
|
|
1,239.0
|
|
|
|
|
|
|
|
|
|
|
|
1,201.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total funds used to support earning assets
|
|
$
|
10,844.7
|
|
|
$
|
201.2
|
|
|
|
2.48
|
%
|
|
$
|
10,119.8
|
|
|
$
|
266.5
|
|
|
|
3.52
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/margin
|
|
|
|
|
|
|
265.3
|
|
|
|
3.27
|
%
|
|
|
|
|
|
|
280.7
|
|
|
|
3.71
|
%
|
Tax-equivalent adjustment
|
|
|
|
|
|
|
(2.2
|
)
|
|
|
|
|
|
|
|
|
|
|
(3.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
263.1
|
|
|
|
|
|
|
|
|
|
|
$
|
277.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In order to ensure the comparability of yields and rates and
their impact on net interest income, average rates are
calculated using average balances based on historical cost and
do not reflect the market valuation adjustment required by
SFAS No. 115, Accounting for Certain Investments
in Debt and Equity Securities.
62
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
ANALYSIS
OF CHANGES IN INTEREST INCOME AND EXPENSE DUE TO VOLUME AND
RATE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended
|
|
|
|
For the Three Months Ended
|
|
|
September 30,
|
|
|
|
September 30,
|
|
|
2008/2007
|
|
|
|
2008/2007
|
|
|
Increase/(Decrease) Due to
|
|
|
|
Increase/(Decrease) Due to Change in
|
|
|
Change in
|
|
|
|
Volume
1
|
|
|
Rate
2
|
|
|
Total
|
|
|
Volume
1
|
|
|
Rate
2
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits in other banks
|
|
$
|
1.2
|
|
|
$
|
(0.8
|
)
|
|
$
|
0.4
|
|
|
$
|
2.6
|
|
|
$
|
(1.9
|
)
|
|
$
|
0.7
|
|
Federal funds sold and securities purchased under agreements to
resell
|
|
|
0.2
|
|
|
|
(0.3
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
(0.7
|
)
|
|
|
(0.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term investments
|
|
|
1.4
|
|
|
|
(1.1
|
)
|
|
|
0.3
|
|
|
|
2.6
|
|
|
|
(2.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
(0.5
|
)
|
|
|
(1.7
|
)
|
|
|
|
|
|
|
(1.7
|
)
|
Government agencies
|
|
|
(2.2
|
)
|
|
|
0.2
|
|
|
|
(2.0
|
)
|
|
|
(6.4
|
)
|
|
|
0.7
|
|
|
|
(5.7
|
)
|
Obligations of state and political subdivisions*
|
|
|
(0.2
|
)
|
|
|
0.1
|
|
|
|
(0.1
|
)
|
|
|
(0.2
|
)
|
|
|
(0.1
|
)
|
|
|
(0.3
|
)
|
Preferred stock*
|
|
|
(0.6
|
)
|
|
|
(0.1
|
)
|
|
|
(0.7
|
)
|
|
|
(1.4
|
)
|
|
|
(0.1
|
)
|
|
|
(1.5
|
)
|
Mortgage-backed securities
|
|
|
0.8
|
|
|
|
0.4
|
|
|
|
1.2
|
|
|
|
2.1
|
|
|
|
1.4
|
|
|
|
3.5
|
|
Other securities*
|
|
|
(1.1
|
)
|
|
|
(1.1
|
)
|
|
|
(2.2
|
)
|
|
|
(1.8
|
)
|
|
|
(3.5
|
)
|
|
|
(5.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities
|
|
|
(3.8
|
)
|
|
|
(0.5
|
)
|
|
|
(4.3
|
)
|
|
|
(9.4
|
)
|
|
|
(1.6
|
)
|
|
|
(11.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB & FRB stock, at cost
|
|
|
0.1
|
|
|
|
|
|
|
|
0.1
|
|
|
|
0.6
|
|
|
|
(0.2
|
)
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, and agricultural*
|
|
|
9.2
|
|
|
|
(16.4
|
)
|
|
|
(7.2
|
)
|
|
|
17.1
|
|
|
|
(38.7
|
)
|
|
|
(21.6
|
)
|
Real estate construction
|
|
|
2.3
|
|
|
|
(15.0
|
)
|
|
|
(12.7
|
)
|
|
|
8.2
|
|
|
|
(38.7
|
)
|
|
|
(30.5
|
)
|
Mortgage commercial*
|
|
|
7.5
|
|
|
|
(10.4
|
)
|
|
|
(2.9
|
)
|
|
|
16.8
|
|
|
|
(24.1
|
)
|
|
|
(7.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans
|
|
|
19.0
|
|
|
|
(41.8
|
)
|
|
|
(22.8
|
)
|
|
|
42.1
|
|
|
|
(101.5
|
)
|
|
|
(59.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage residential
|
|
|
(0.1
|
)
|
|
|
(0.2
|
)
|
|
|
(0.3
|
)
|
|
|
0.3
|
|
|
|
(0.3
|
)
|
|
|
|
|
Consumer loans
|
|
|
4.6
|
|
|
|
(5.4
|
)
|
|
|
(0.8
|
)
|
|
|
11.4
|
|
|
|
(12.0
|
)
|
|
|
(0.6
|
)
|
Loans secured with liquid collateral
|
|
|
0.3
|
|
|
|
(4.2
|
)
|
|
|
(3.9
|
)
|
|
|
(0.5
|
)
|
|
|
(9.6
|
)
|
|
|
(10.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retail loans
|
|
|
4.8
|
|
|
|
(9.8
|
)
|
|
|
(5.0
|
)
|
|
|
11.2
|
|
|
|
(21.9
|
)
|
|
|
(10.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans net of unearned income
|
|
|
23.8
|
|
|
|
(51.6
|
)
|
|
|
(27.8
|
)
|
|
|
53.3
|
|
|
|
(123.4
|
)
|
|
|
(70.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
$
|
21.5
|
|
|
$
|
(53.2
|
)
|
|
$
|
(31.7
|
)
|
|
$
|
47.1
|
|
|
$
|
(127.8
|
)
|
|
$
|
(80.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings
|
|
$
|
1.8
|
|
|
$
|
(0.9
|
)
|
|
$
|
0.9
|
|
|
$
|
4.9
|
|
|
$
|
1.4
|
|
|
$
|
6.3
|
|
Interest-bearing demand
|
|
|
0.4
|
|
|
|
(4.8
|
)
|
|
|
(4.4
|
)
|
|
|
0.2
|
|
|
|
(11.4
|
)
|
|
|
(11.2
|
)
|
Certificates under $100,000
|
|
|
(0.3
|
)
|
|
|
(2.8
|
)
|
|
|
(3.1
|
)
|
|
|
(0.6
|
)
|
|
|
(5.2
|
)
|
|
|
(5.8
|
)
|
Local certificates $100,000 and over
|
|
|
(1.0
|
)
|
|
|
(1.3
|
)
|
|
|
(2.3
|
)
|
|
|
(3.9
|
)
|
|
|
(2.3
|
)
|
|
|
(6.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total core interest-bearing deposits
|
|
|
0.9
|
|
|
|
(9.8
|
)
|
|
|
(8.9
|
)
|
|
|
0.6
|
|
|
|
(17.5
|
)
|
|
|
(16.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
National certificates $100,000 and over
|
|
|
5.2
|
|
|
|
(19.1
|
)
|
|
|
(13.9
|
)
|
|
|
0.4
|
|
|
|
(38.4
|
)
|
|
|
(38.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
6.1
|
|
|
|
(28.9
|
)
|
|
|
(22.8
|
)
|
|
|
1.0
|
|
|
|
(55.9
|
)
|
|
|
(54.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased and securities sold under agreements to
repurchase
|
|
|
3.7
|
|
|
|
(10.6
|
)
|
|
|
(6.9
|
)
|
|
|
14.6
|
|
|
|
(28.9
|
)
|
|
|
(14.3
|
)
|
U.S. Treasury demand deposits
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
(0.1
|
)
|
|
|
0.1
|
|
|
|
(0.2
|
)
|
|
|
(0.1
|
)
|
Line of credit and other debt
|
|
|
(2.5
|
)
|
|
|
(0.2
|
)
|
|
|
(2.7
|
)
|
|
|
(0.8
|
)
|
|
|
(0.6
|
)
|
|
|
(1.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total short-term borrowings
|
|
|
1.2
|
|
|
|
(10.9
|
)
|
|
|
(9.7
|
)
|
|
|
13.9
|
|
|
|
(29.7
|
)
|
|
|
(15.8
|
)
|
Long-term debt
|
|
|
3.0
|
|
|
|
1.2
|
|
|
|
4.2
|
|
|
|
3.9
|
|
|
|
1.5
|
|
|
|
5.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
$
|
10.3
|
|
|
$
|
(38.6
|
)
|
|
$
|
(28.3
|
)
|
|
$
|
18.8
|
|
|
$
|
(84.1
|
)
|
|
$
|
(65.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in net interest income
|
|
$
|
11.2
|
|
|
$
|
(14.6
|
)
|
|
$
|
(3.4
|
)
|
|
$
|
28.3
|
|
|
$
|
(43.7
|
)
|
|
$
|
(15.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
We calculate variances on a fully tax-equivalent basis, which
includes the effects of any disallowed interest expense.
|
|
1
|
|
We define changes attributable to volume as a change in average
balance multiplied by the prior years rate.
|
|
2
|
|
We define changes attributable to rate as a change in rate
multiplied by the average balance in the applicable period of
the prior year. A change in rate/volume (change in rate
multiplied by change in volume) has been allocated to the change
in rate.
|
63
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
NONINTEREST
INCOME
The CCS and WAS businesses continued to account for the majority
of noninterest income, and noninterest income continued to
increase as a percentage of total operating net interest and
noninterest income. This was mainly because:
|
|
|
|
|
In the first half of 2008, compression in the net interest
margin reduced net interest income.
|
|
|
|
The CCS and WAS businesses have a broader geographic scope, and
more opportunities to grow revenue at a faster pace, than the
Regional Banking business.
|
For the 2008 third quarter, noninterest income was lower than
for the year-ago third quarter mainly because growth in CCS and
WAS revenue was offset by the $19.7 million write-down on
perpetual preferred stocks issued by Fannie Mae and Freddie Mac.
For the first nine months of 2008, noninterest income was
slightly higher than for the corresponding period in 2007. While
CCS and WAS recorded higher amounts of revenue, these increases
were offset by:
|
|
|
|
|
A total of $32.3 million in securities write-downs.
|
|
|
|
Lower revenue from CRM, as market volatility reduced performance
fees and the valuations of assets under management.
|
|
|
|
The 2008 second quarter loss of $1.1 million in revenue
from RCM.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Income
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Advisory revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WAS revenue
|
|
$
|
57.3
|
|
|
$
|
56.1
|
|
|
$
|
170.8
|
|
|
$
|
161.0
|
|
CCS revenue
|
|
|
34.4
|
|
|
|
23.6
|
|
|
|
92.1
|
|
|
|
72.4
|
|
Affiliate money manager revenue
|
|
|
4.2
|
|
|
|
4.6
|
|
|
|
12.9
|
|
|
|
15.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total advisory revenue
|
|
|
95.9
|
|
|
|
84.3
|
|
|
|
275.8
|
|
|
|
249.3
|
|
Amortization of affiliate intangibles
|
|
|
(2.2
|
)
|
|
|
(1.2
|
)
|
|
|
(5.4
|
)
|
|
|
(3.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total advisory revenue after amortization of affiliate
intangibles
|
|
|
93.7
|
|
|
|
83.1
|
|
|
|
270.4
|
|
|
|
245.9
|
|
Service charges on deposit accounts
|
|
|
7.7
|
|
|
|
7.2
|
|
|
|
22.7
|
|
|
|
21.0
|
|
Other noninterest income
|
|
|
6.1
|
|
|
|
4.7
|
|
|
|
22.8
|
|
|
|
16.4
|
|
Securities losses
|
|
|
(19.7
|
)
|
|
|
(0.2
|
)
|
|
|
(32.2
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
$
|
87.8
|
|
|
$
|
94.8
|
|
|
$
|
283.7
|
|
|
$
|
283.2
|
|
The 2008 third quarter was the first full quarter to reflect
revenue from the AST acquisition, which we completed on
April 30, 2008. We record most of the revenue from this
acquisition as CCS retirement services revenue. We record the
remainder as WAS trust and investment advisory revenue.
THE
CORPORATE CLIENT SERVICES BUSINESS
We report Corporate Client Services (CCS) revenue in four
categories:
1. Capital markets revenue. These fees are
based on the complexity of trust and administrative services we
provide, not on asset valuations.We perform most of these
services under multiyear contracts.
64
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
2. Entity management revenue. These fees are
based on the complexity of corporate governance and
administrative services we provide for special purpose entities
in preferred jurisdictions. These fees are not tied to asset
valuations.
3. Retirement services revenue. A portion of
this revenue is based on the market valuations of retirement
plan assets for which we serve as trustee. The remainder is
based on the level of service we provide.
4. Institutional investment and cash management
fees. These fees reflect investment and cash
management services we perform for retirement services and
capital markets clients who have residual cash management needs.
Some of these fees are based on money market fund balances and
some are based on the valuations of investment-grade fixed
income instruments.
We do not:
|
|
|
|
|
Have credit risk exposure to large capital markets transactions.
|
|
|
Own the assets or entities for which we serve as trustee or
administrator.
|
|
|
Record these assets on our balance sheet.
|
|
|
Consolidate these entities.
|
|
|
Issue, underwrite, set pricing, or establish valuations for the
financing structures we support.
|
CCS
in the third quarter and first nine months of
2008
The CCS business completed two expansion initiatives during the
first nine months of 2008:
|
|
|
|
|
The first was the acquisition of AST, which we completed on
April 30, 2008. This transaction doubled the capacity of
the retirement services business, and enhanced our position as
one of the largest U.S. providers of trust, accounting,
custody, and benefit payment services for unbundled retirement
plans. AST is an
Arizona-based
provider of directed trustee, trust administration, and
back-office services offered through financial advisors to
retirement plans,
high-net-worth
individuals and families, and institutional investors.
|
|
|
|
The second was the addition of a team of 14 seasoned capital
markets experts between June and September 2008. This team
specializes in the types of capital markets transactions for
which we see tremendous growth potential: high-yield debt
issuance, loan administration, distressed debt, and corporate
restructuring, among others. Most of these new staff members are
based in Minneapolis. The rest are based in New York City and
New Haven, Connecticut.
|
CCS further enhanced its retirement services business by
completing the acquisition of UBSFTC from financial services
company UBS Americas Inc. on October 10, 2008. UBSFTC is a
New Jersey-based provider of trust, investment management, fund
accounting, and benefit payment services offered through
financial advisors for retirement and employee benefit plans.
AST had been providing back-office services for UBSFTC since
2007 under an outsourcing agreement, so the effect of the UBSFTC
transaction on staffing was minimal. We added six UBSFTC staff
to support the marketing efforts that will continue through UBS
financial advisors, as well as through other market partners and
influencers.
Full terms of this all-cash transaction were not disclosed. On
an annualized basis, we expect the UBSFTC acquisition to add
approximately $38 million of CCS retirement services
revenue, and to add approximately $36 million of subadvisor
expense. This transaction should be non-dilutive to earnings in
2008.
As a result of the AST and UBSFTC acquisitions, we now serve
more than 3,800 retirement and employee benefit plans, and we
act as custodian for more than $47 billion in retirement
plan assets.
65
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
CCS continued to record revenue growth in the third quarter and
first nine months of 2008, even though market conditions were
especially challenging. CCS revenue was 46% higher for the 2008
third quarter, and 27% higher year-to-date, than for the
corresponding periods in 2007. All components of CCS recorded
revenue increases, as:
|
|
|
|
|
Product diversity in capital markets services helped offset
general weakness in the structured finance market.
|
|
|
|
Business activity in Europe generated higher entity management
revenue.
|
|
|
|
The AST acquisition boosted retirement services revenue.
|
|
|
|
We continued to develop more institutional investment and cash
management business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Client Services Revenue
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Capital markets services
|
|
$
|
11.9
|
|
|
$
|
10.2
|
|
|
$
|
35.6
|
|
|
$
|
31.5
|
|
Entity management services
|
|
|
7.7
|
|
|
|
7.4
|
|
|
|
24.2
|
|
|
|
21.9
|
|
Retirement services
|
|
|
11.3
|
|
|
|
3.0
|
|
|
|
22.0
|
|
|
|
9.6
|
|
Institutional investment/cash management services
|
|
|
3.5
|
|
|
|
3.0
|
|
|
|
10.3
|
|
|
|
9.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Corporate Client Services revenue
|
|
$
|
34.4
|
|
|
$
|
23.6
|
|
|
$
|
92.1
|
|
|
$
|
72.4
|
|
Revenue from capital markets services rose 17% for the quarter
and 13% year-to-date, even though the overall volume of market
activity was significantly lower than in 2007 and prior years.
We were able to grow capital markets revenue because:
|
|
|
|
|
We offer a diversified mix of products.
|
|
|
|
There is a degree of counter-cyclicality in the capital markets
services we offer, which include trust and administrative
services for defaults, restructurings, and bankruptcies.
|
For the third quarter and first nine months of 2008, the major
drivers of capital markets revenue growth were services that
support tender option bonds, repackaged municipal and corporate
debt, defaults and bankruptcies, and escrow administration.
Some of the capital markets transactions for which CCS provides
trust and administrative services are asset-backed
securitizations (ABS) that hold a blend of prime and subprime
residential mortgages. For the third quarter and first nine
months of 2008, fees for these services amounted to
approximately $1.1 million and $3.6 million,
respectively, or approximately 3% and 4%, respectively, of total
CCS revenue. As a service provider, our involvement in these
transactions is defined contractually. We do not underwrite or
issue these instruments, nor do we have any associated balance
sheet or credit risk.
In the entity management component, the revenue increases
reflected business development in Europe and the Luxembourg
acquisition we completed in June 2007. In addition, in May 2008,
we strengthened our presence in Europe and gained jurisdictional
capabilities in The Netherlands by forming an alliance with
ANT-Trust, an independent, Amsterdam-based supplier of corporate
trust and administrative services.
In the retirement services component, most of the growth in
revenue came from AST. The portion of retirement services fees
based on market valuations was 78% for the third quarter of
2008, and 76% for the first nine months of 2008.
Institutional investment and cash management revenue growth
reflected the additional emphasis we have placed on marketing
our capabilities in this area. Most of the investment and cash
management services CCS provides are for short-term investments,
and revenue from these services can fluctuate from period to
period. Fees tied to U.S. investment-grade fixed income
securities accounted for approximately 35% of this revenue for
the 2008 third quarter, and approximately 34% for the first nine
months of 2008. The remainder was based on money market fund
balances.
66
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Corporate
Client Services profitability
CCS profitability was lower than for prior periods because 2007
results did not reflect:
|
|
|
|
|
Expenses associated with the AST acquisition, which added
approximately 140 CCS staff members.
|
|
|
|
Expenses associated with the Luxembourg acquisition until the
third quarter of 2007.
|
|
|
|
Expenses associated with the addition over the summer of 2008 of
14 capital markets specialists.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Client Services Profitability
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
Segment operating net income (in millions)
|
|
$
|
5.1
|
|
|
$
|
4.5
|
|
|
$
|
14.3
|
|
|
$
|
15.0
|
|
Efficiency
ratio
1
|
|
|
79.84
|
%
|
|
|
76.68
|
%
|
|
|
79.42
|
%
|
|
|
72.93
|
%
|
Profit margin
|
|
|
20.16
|
%
|
|
|
23.32
|
%
|
|
|
20.58
|
%
|
|
|
27.07
|
%
|
|
|
|
1
|
|
The efficiency ratio is the inverse of the profit margin.
|
THE
WEALTH ADVISORY SERVICES BUSINESS
We report Wealth Advisory Services (WAS) revenue in three
categories:
1. Trust and investment advisory revenue. This is the
portion of WAS revenue that is generated by our core asset
management, asset allocation, and trust management services.
Trust and investment advisory fees are based on the market
valuations of client assets we manage, direct, or hold in
custody, and the valuations are tied to movements in the
financial markets.
Assets we manage for clients include equities, fixed income
instruments, cash and cash equivalents, and other assets. Most
of these assets are held in trust accounts. Depending on the mix
of assets in client accounts, changes in trust and investment
advisory revenue may or may not correspond with changes in
market indices such as the Dow Jones Industrial Average, the
Standard & Poors 500 (S&P 500), or NASDAQ.
We use the S&P 500 as a benchmark for comparison because
its composition mirrors, to a large extent, the mix of equities
in our clients portfolios. For more information, read the
assets under management section of this report.
2. Planning and other services revenue. This revenue is
from family office, financial planning, estate settlement, tax,
and other services. Fees for these services are based on the
level and complexity of the services we provide, not on the
valuations of the assets we manage or hold in custody. In some
cases, these fees are based on the clients annual income.
These fees can vary widely in amount, and portions may be
nonrecurring. Because these fees reflect client demand at any
given point in time, it is not unusual for them to fluctuate up
or down from period to period.
3. Mutual fund revenue. This revenue is tied primarily to
money market mutual fund and cash balances and, therefore, does
not reflect equity market movements.
67
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
WAS
in the third quarter and first nine months of
2008
Volatility in the financial markets masked the effects of new
business development and slowed the pace of growth in WAS
revenue. For the first nine months of 2008, WAS revenue was 6%
higher than for the corresponding year-ago period, but 2008
third quarter revenue was only 2% higher than for the
corresponding year-ago period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth Advisory Services Revenue
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Trust and investment advisory fees
|
|
$
|
39.3
|
|
|
$
|
40.5
|
|
|
$
|
118.7
|
|
|
$
|
115.8
|
|
Planning and other services fees
|
|
|
11.2
|
|
|
|
10.3
|
|
|
|
32.5
|
|
|
|
29.8
|
|
Mutual fund fees
|
|
|
6.8
|
|
|
|
5.3
|
|
|
|
19.6
|
|
|
|
15.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Wealth Advisory Services revenue
|
|
$
|
57.3
|
|
|
$
|
56.1
|
|
|
$
|
170.8
|
|
|
$
|
161.0
|
|
Expansion in New England, which began in June 2007 when we
established an office in Boston, added trust and investment
advisory revenue throughout the first nine months of 2008. In
the 2008 third quarter, trust and investment advisory revenue
was bolstered further by the addition of personal trust business
from AST. These additions were more than offset by the effects
of equity market declines, particularly in the S&P 500.
|
|
|
|
|
WAS Trust and Investment Advisory Revenue vs. S&P 500
|
|
|
|
|
Change in S&P 500 September 30, 2008 vs.
September 30, 2007
|
|
|
(24
|
)%
|
Change in WAS trust and investment advisory revenue 2008 Q3 vs.
2007 Q3
|
|
|
(3
|
)%
|
Change in WAS trust and investment advisory revenue 2008 YTD vs.
2007 YTD
|
|
|
3
|
%
|
Revenue from planning and other services was 9% higher, on both
a year-ago third quarter and year-to-date basis. Most of this
growth came from the family office practice.
Mutual fund fees were 28% higher than for the year-ago third
quarter, and 27% higher on a year-to-date basis. This resulted
mainly from asset inflows into the Wilmington
U.S. Government Money Market Fund and the Wilmington
Tax-Exempt Money Market Fund, as some clients opted to place
funds in less volatile instruments than equities.
On October 21, 2008, three of our money market
funds the Wilmington Prime Money Market Fund, the
Wilmington U.S. Government Money Market Fund, and the
Wilmington Tax-Exempt Money Market Fund were
approved for participation in the new insurance protection
available under the U.S. Treasury Departments Money
Market Funds Guarantee Program. These three funds are managed to
maintain a stable $1.00 share price. While none has ever
slipped from that level, our participation in the voluntary
Treasury Department program is designed to offer mutual fund
shareholders additional assurance in light of the extraordinary
market conditions that prompted the creation of the program.
More information about this is available at
www.wilmingtontrust.com under Media/Press
Releases/October 3.
WAS sales (new business, annualized) were relatively unchanged
from year-ago periods, mainly because we recorded several very
large family office fees early in 2007. Fees for family office
services can vary widely, and some fees may be nonrecurring,
which causes revenue from these services to fluctuate from
period to period.
The percentage of new business from markets outside the
mid-Atlantic region was higher than for prior periods. This
reflected the inroads we are making in the markets in which we
have been expanding and adding staff in recent years.
68
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total WAS
Sales
1
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
Percentage from family wealth
services
2
|
|
|
34
|
%
|
|
|
51
|
%
|
|
|
43
|
%
|
|
|
51
|
%
|
Percentage from mid-Atlantic market
clients
3
|
|
|
28
|
%
|
|
|
21
|
%
|
|
|
24
|
%
|
|
|
23
|
%
|
Percentage from national market
clients
4
|
|
|
34
|
%
|
|
|
28
|
%
|
|
|
32
|
%
|
|
|
26
|
%
|
Advisory Trust Company of
Delaware
5
|
|
|
4
|
%
|
|
|
|
%
|
|
|
1
|
%
|
|
|
|
%
|
Total WAS sales (in millions)
|
|
$
|
5.5
|
|
|
$
|
5.5
|
|
|
$
|
17.2
|
|
|
$
|
17.9
|
|
|
|
|
1
|
|
New business, annualized.
|
2
|
|
Includes clients through the United States with liquid assets of
$100 million or more.
|
3
|
|
Includes clients in Delaware, Maryland, New Jersey, and
Pennsylvania.
|
4
|
|
Includes clients in California, Florida, Georgia, Massachusetts,
and New York, and clients from throughout the United States
whose accounts are located in and serviced from Delaware. These
clients choose to establish accounts in Delaware to benefit from
Delawares trust, tax, and legal advantages, many of which
are not available for trusts governed by the laws of other
states.
|
5
|
|
Personal trust business from the AST
acquisition.
|
Wealth
Advisory Services profitability
WAS profitability decreased from prior periods mainly because:
|
|
|
|
|
The provision for loan losses attributed to WAS increased,
mainly because of one WAS loan that was transferred to
nonaccruing status in the 2008 third quarter.
|
|
|
|
Staff additions in the Boston office and family office practice
increased expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth Advisory Services Profitability
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
Segment net income (in millions)
|
|
$
|
4.2
|
|
|
$
|
7.9
|
|
|
$
|
13.5
|
|
|
$
|
20.1
|
|
Efficiency
ratio
1
|
|
|
86.03
|
%
|
|
|
78.02
|
%
|
|
|
85.75
|
%
|
|
|
80.80
|
%
|
Profit margin
|
|
|
13.97
|
%
|
|
|
21.98
|
%
|
|
|
14.25
|
%
|
|
|
19.20
|
%
|
|
|
|
1
|
|
The efficiency ratio is the inverse of the profit
margin.
|
ASSETS
UNDER MANAGEMENT AND ADMINISTRATION AT WILMINGTON
TRUST
We report two types of client assets:
1. Assets under management (AUM). These are assets for
which we make investment decisions on behalf of clients. Most of
the clients who use our asset management services are WAS
clients.
2. Assets under administration (AUA). These are assets we
hold in custody or for which we serve as fiduciary on behalf of
clients. Most of these assets are from CCS retirement services
clients.
Changes in AUM or AUA levels do not necessarily indicate that we
have gained or lost business. Most of the assets we manage or
administer are held in trusts. Assets held in trusts are
affected by fund distributions as well as changes in market
valuations. Fund distributions typically are made for tax
payments, philanthropic obligations, discretionary spending,
trust terminations, and other purposes. Asset levels also are
affected by the duration of trust agreements, which can range
from a few months to 99 years or more.
69
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
We believe that changes in revenue, rather than changes in AUM
or AUA, are better indicators of trends in the WAS and CCS
businesses because:
|
|
|
|
|
Asset management is only one of the wealth management services
we offer, and only a portion of WAS revenue trust
and investment advisory revenue is based on asset
valuations.
|
|
|
|
WAS and CCS revenue may include fees for direction trust
services, but direction trust assets are not included in our AUM
or AUA amounts. Direction trusts, which are permitted in
Delaware, allow clients to have their assets and fiduciary
matters managed separately by different providers. Trust laws in
many other states do not permit direction trusts.
|
|
|
|
In the CCS business, except for revenue from institutional
investment and cash management services, the majority of revenue
is generated on a fee-for-service basis regardless of the value
of any associated asset.
|
|
|
|
Monetary assets we manage or administer for CCS clients can
fluctuate by hundreds of millions of dollars from one reporting
period to the next, depending on the cash management needs of
these clients.
|
For more information about the portion of our revenue that is
based on financial market valuations, read the financial market
risk discussion in this report.
As of September 30, 2008, most of the changes in AUM from
prior periods came from the CCS business, as we continued to
leverage client and influencer relationships to capture more
institutional investment and cash management opportunities. CCS
AUM more than doubled from the year-ago and year-end 2007 levels.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
Assets Under Management by Business
Line
1
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
(In billions)
|
|
|
|
|
|
|
|
|
Wealth Advisory Services
|
|
$
|
30.2
|
|
|
|
81
|
%
|
|
$
|
32.9
|
|
|
|
92
|
%
|
|
$
|
31.4
|
|
|
|
91
|
%
|
Corporate Client Services
|
|
|
6.9
|
|
|
|
19
|
%
|
|
|
3.0
|
|
|
|
8
|
%
|
|
|
3.1
|
|
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Wilmington Trust assets under management
|
|
$
|
37.1
|
|
|
|
|
|
|
$
|
35.9
|
|
|
|
|
|
|
$
|
34.5
|
|
|
|
|
|
|
|
|
1
|
|
Excludes Cramer Rosenthal McGlynn and Roxbury Capital
Management. Includes estimates of asset values that are not
readily available, such as those held in limited
partnerships.
|
Changes from prior periods in total AUM and AUA at Wilmington
Trust were primarily the result of volatility in the financial
markets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Client Assets at Wilmington
Trust
1
|
|
At 9/30/08
|
|
|
At 6/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
|
|
|
(In billions)
|
|
|
|
|
|
Assets under management
|
|
$
|
37.1
|
|
|
$
|
38.4
|
|
|
$
|
35.9
|
|
|
$
|
34.5
|
|
Assets under administration
|
|
|
102.8
|
|
|
|
108.2
|
|
|
|
88.4
|
|
|
|
87.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total client assets at Wilmington Trust
|
|
$
|
139.9
|
|
|
$
|
146.6
|
|
|
$
|
124.3
|
|
|
$
|
121.6
|
|
|
|
|
1
|
|
Excludes Cramer Rosenthal McGlynn and Roxbury Capital
Management. Includes estimates of asset values that are not
readily available, such as those held in limited
partnerships.
|
70
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
On a percentage basis, the investment mix of managed assets at
Wilmington Trust (excluding CRM and RCM) remained relatively
unchanged.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Mix of Wilmington Trust Managed
Assets
1
|
|
At 9/30/08
|
|
At 6/30/08
|
|
At 12/31/07
|
|
At 9/30/07
|
|
Equities
|
|
|
41
|
%
|
|
|
44
|
%
|
|
|
47
|
%
|
|
|
49
|
%
|
Fixed income
|
|
|
26
|
%
|
|
|
24
|
%
|
|
|
23
|
%
|
|
|
23
|
%
|
Cash and cash equivalents
|
|
|
19
|
%
|
|
|
18
|
%
|
|
|
15
|
%
|
|
|
16
|
%
|
Other assets
|
|
|
14
|
%
|
|
|
14
|
%
|
|
|
15
|
%
|
|
|
12
|
%
|
|
|
|
1
|
|
Excludes Cramer Rosenthal McGlynn and Roxbury Capital
Management.
|
AFFILIATE
MONEY MANAGERS
We have ownership positions in two money management firms:
|
|
|
|
|
Cramer Rosenthal McGlynn (CRM), a value-style manager based in
New York; and
|
|
|
|
Roxbury Capital Management (RCM), a growth-style manager based
in Santa Monica, California.
|
CRM and RCM are not part of our WAS business. We affiliated with
CRM and RCM in 1998 to gain expertise in stylized investment
management, and to help us establish offices in New York and
southern California. We subsequently adopted an investment
consulting process that uses a variety of independent,
third-party money managers. Although we no longer rely as
heavily on CRM and RCM for investment management services, we
value their contributions to our revenue.
The revenue we record from CRM and RCM is net of their expenses
and based on our ownership position in each. We do not
consolidate CRMs or RCMs results in our financial
statements because the principals of these firms retain
management controls, including veto powers, over a variety of
matters.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliate Money Manager Revenue
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Total revenue from affiliate money managers (net of expenses)
|
|
$
|
4.2
|
|
|
$
|
4.6
|
|
|
$
|
12.9
|
|
|
$
|
15.9
|
|
For more information about our investments in CRM and RCM, read
the rest of this affiliate money managers discussion and
Notes 4, 10, and 23 in our
2007 Annual Report to
Shareholders
.
Cramer
Rosenthal McGlynn (CRM)
Revenue from CRM was lower on a third quarter and year-to-date
basis, mainly because:
|
|
|
|
|
Business inflows remained solid, but equity market volatility
reduced the market valuations of client assets and caused AUM to
decline.
|
|
|
|
Market conditions also reduced the performance fees CRM earned
on its real estate hedge fund investments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from Cramer Rosenthal McGlynn
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
Revenue (in millions, net of expenses)
|
|
$
|
3.8
|
|
|
$
|
4.2
|
|
|
$
|
13.3
|
|
|
$
|
15.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cramer Rosenthal McGlynn
|
|
At 9/30/08
|
|
|
At 6/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
Assets under management (in millions)
|
|
$
|
10,091.1
|
|
|
$
|
11,154.1
|
|
|
$
|
11,417.3
|
|
|
$
|
11,785.2
|
|
Wilmington Trusts ownership position
|
|
|
80.99
|
%
|
|
|
80.99
|
%
|
|
|
82.41
|
%
|
|
|
82.41
|
%
|
71
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Our ownership position in CRM was slightly lower than at
year-end 2007 because some CRM managers exercised their CRM
stock options during the 2008 second quarter.
Roxbury
Capital Management (RCM)
RCM returned to profitability in the 2008 third quarter and
contributed $0.4 million of revenue. For the first nine
months of 2008, revenue from RCM was $(0.4) million, due to
the $1.1 million loss we recorded for RCM for the 2008
second quarter.
Like most growth-style managers, RCM has faced a difficult
operating environment in recent years, due to the collapse of
the technology stock bubble and continued volatility in equity
markets. Amid this environment, RCM has developed and launched
several new products recently. The new products are attracting
assets, and early performance indicators are positive, but the
new products are not yet at a stage in their life cycles where
they are strong enough to offset asset declines in RCMs
mid-cap fund. This is why RCMs AUM were lower than at the
ends of prior periods.
As RCM continues to adapt to market changes, we remain confident
in the firms leadership and long-term prospects for
profitability.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from Roxbury Capital Management
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
Revenue (in millions, net of expenses)
|
|
$
|
0.4
|
|
|
$
|
0.4
|
|
|
$
|
(0.4
|
)
|
|
$
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roxbury Capital Management
|
|
At 9/30/08
|
|
|
At 6/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
Assets under management (in millions)
|
|
$
|
1,921.8
|
|
|
$
|
2,062.3
|
|
|
$
|
2,466.0
|
|
|
$
|
2,858.0
|
|
Wilmington Trusts ownership position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership of preferred profits
|
|
|
30
|
%
|
|
|
30
|
%
|
|
|
30
|
%
|
|
|
30
|
%
|
Ownership of common interests
|
|
|
41.23
|
%
|
|
|
41.23
|
%
|
|
|
41.23
|
%
|
|
|
41.23
|
%
|
Ownership of Class B stock
|
|
|
50
|
%
|
|
|
50
|
%
|
|
|
25
|
%
|
|
|
25
|
%
|
In the 2008 second quarter, the combination of RCMs asset
declines, lower-than-expected operating performance and
near-term projections, and the anticipated second quarter loss
triggered the need for goodwill impairment testing under GAAP.
We attributed the changes that led to the RCM impairment test to
continued volatility in the financial markets.
The results of this test, which was conducted by Berkshire
Capital Securities LLC, determined that the value of our
investment in RCM had declined from $89.1 million to
$22.2 million. We recorded this $66.9 million decrease
in valuation as a non-cash impairment charge (expense) for the
2008 second quarter. The impairment did not affect our capital
ratios or our ownership position in RCM.
Our agreement with RCM includes provisions that permit some of
the firms portfolio managers to put (relinquish) their
ownership of certain free cash flow interests (Class B
interests) to us. These Class B interests are in addition
to our equity ownership position in RCM. The exercises of these
puts add to the revenue we receive from RCM. On April 1,
2008, principals of RCMs office in Portland, Oregon, put
approximately $14.3 million of their Class B interests
to us. Since the revenue we receive from RCM increases when
these puts are exercised, the put activity in the second quarter
of 2008 helped offset the impact of RCMs second quarter
loss on its revenue contribution to us.
72
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Combined
AUM at Wilmington Trust and Affiliate Money
Managers
As noted earlier, changes in AUM at Wilmington Trust do not
necessarily reflect business inflows or outflows. In contrast,
at the affiliate money managers, managed asset levels reflect
business flows as well as financial market movements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets Under Management
|
|
At 9/30/08
|
|
|
At 6/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
|
|
|
(In billions)
|
|
|
|
|
|
Wilmington
Trust
1
|
|
$
|
37.1
|
|
|
$
|
38.4
|
|
|
$
|
35.9
|
|
|
$
|
34.5
|
|
Cramer Rosenthal McGlynn
|
|
|
10.1
|
|
|
|
11.2
|
|
|
|
11.4
|
|
|
|
11.8
|
|
Roxbury Capital Management
|
|
|
1.9
|
|
|
|
2.1
|
|
|
|
2.5
|
|
|
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets under management
|
|
$
|
49.1
|
|
|
$
|
51.7
|
|
|
$
|
49.8
|
|
|
$
|
49.1
|
|
|
|
|
1
|
|
Excludes Cramer Rosenthal McGlynn and Roxbury Capital
Management. Includes estimates of asset values that are not
readily available, such as those held in limited
partnerships.
|
NONINTEREST
EXPENSE
Expenses for the 2008 third quarter were 12% higher than for the
year-ago third quarter. On a GAAP basis, year-to-date expenses
were significantly higher because of the $66.9 million
impairment charge we recorded during the 2008 second quarter
against the valuation of our investment in RCM. On an operating
basis, year-to-date expenses were 10% higher.
These increases were due largely to expansion-related costs that
were not fully evident in the corresponding year-ago periods,
including:
|
|
|
|
|
The acquisitions in June 2007 in Boston and Luxembourg.
|
|
|
|
Regional Banking staff additions, primarily in the Baltimore
market, made toward the end of 2007.
|
|
|
|
The AST acquisition, which added 179 staff members.
|
These increases also reflected additions in the 2008 third
quarter of:
|
|
|
|
|
WAS staff in the family office practice and Boston office.
|
|
|
|
CCS capital markets and retirement services staff.
|
|
|
|
Regional Banking staff in the Maryland, New Jersey, and
Pennsylvania markets.
|
Staffing-related costs continued to constitute our single
largest concentration of expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expenses (operating basis)
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
Full-time-equivalent staff members
|
|
|
2,925
|
|
|
|
2,658
|
|
|
|
2,925
|
|
|
|
2,658
|
|
Salaries and wages expense
|
|
$
|
50.6
|
|
|
$
|
44.1
|
|
|
$
|
144.6
|
|
|
$
|
127.7
|
|
Incentives and bonuses expense
|
|
|
11.8
|
|
|
|
10.0
|
|
|
|
39.5
|
|
|
|
35.4
|
|
Employment benefits expense
|
|
|
12.8
|
|
|
|
12.7
|
|
|
|
39.5
|
|
|
|
38.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total staffing-related expense
|
|
$
|
75.2
|
|
|
$
|
66.8
|
|
|
$
|
223.6
|
|
|
$
|
202.0
|
|
Total noninterest operating expenses
|
|
$
|
123.9
|
|
|
$
|
110.8
|
|
|
$
|
361.0
|
|
|
$
|
327.2
|
|
Staffing-related expense as a percentage of total expenses
|
|
|
61
|
%
|
|
|
60
|
%
|
|
|
62
|
%
|
|
|
62
|
%
|
73
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
In other categories of noninterest expense:
|
|
|
|
|
Increases in servicing and consulting fees and subadvisor
expense were associated primarily with AST.
|
|
|
|
Increases in legal expense were associated with ongoing
litigation as well as commercial loan recovery and foreclosure
activities. For more information about these activities, read
the credit quality discussion in this report.
|
INCOME
TAXES
On an operating basis, our effective tax rate was 35.39% for the
third quarter of 2008 and 35.74% for the first nine months of
2008. For our income tax expense and effective tax rate on a
GAAP basis, read Note 12, Income taxes, in this
report.
CAPITAL
RESOURCES
Stockholders equity decreased from year-end 2007 mainly
due to the reductions in net income that were caused by:
|
|
|
|
|
The $66.9 million non-cash impairment charge (expense) we
recorded in the 2008 second quarter against the valuation of our
investment in RCM.
|
|
|
|
Compression in the net interest margin during the first half of
2008.
|
|
|
|
Investment securities losses of $32.3 million.
|
These factors also reduced the returns on stockholders
equity and assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
Year Ended
|
|
Nine Months Ended
|
Capital Strength
|
|
9/30/08
|
|
12/31/07
|
|
9/30/07
|
|
|
(Dollars in millions)
|
|
Stockholders equity (period end)
|
|
$
|
1,062.1
|
|
|
$
|
1,120.3
|
|
|
$
|
1,098.0
|
|
Stockholders equity (on average)
|
|
$
|
1,088.5
|
|
|
$
|
1,091.0
|
|
|
$
|
1,090.1
|
|
Return on average stockholders equity (annualized)
|
|
|
5.51
|
%
|
|
|
16.68
|
%
|
|
|
16.93
|
%
|
Return on average assets (annualized)
|
|
|
0.51
|
%
|
|
|
1.65
|
%
|
|
|
1.68
|
%
|
Capital generation ratio (annualized)
|
|
|
(2.86
|
)%
|
|
|
8.69
|
%
|
|
|
8.93
|
%
|
Dividend payout ratio (operating basis)
|
|
|
63.30
|
%
|
|
|
49.40
|
%
|
|
|
48.71
|
%
|
On an operating basis (excluding the RCM impairment charge and
securities losses), the declines in the returns on
stockholders equity and assets were much less severe, but
the lower levels of net income still reduced these ratios from
prior periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
Year Ended
|
|
Nine Months Ended
|
Annualized Returns (operating basis)
|
|
9/30/08
|
|
12/31/07
|
|
9/30/07
|
|
Return on average stockholders equity
|
|
|
13.15
|
%
|
|
|
16.68
|
%
|
|
|
16.93
|
%
|
Return on average assets
|
|
|
1.23
|
%
|
|
|
1.65
|
%
|
|
|
1.68
|
%
|
74
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
All of our regulatory capital ratios continued to exceed the
amounts required by the Federal Reserve Board to be considered a
well-capitalized institution, as the following table shows. The
Tier 1 risk-based capital ratio was lower than at year-end
2007 mainly because of the AST acquisition, which was an
all-cash transaction.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
At
|
|
Minimum to be
|
|
Minimum to be
|
Regulatory Capital Ratios
|
|
9/30/08
|
|
12/31/07
|
|
Adequately Capitalized
|
|
Well Capitalized
|
|
Total risk-based capital
|
|
|
11.24
|
%
|
|
|
11.21
|
%
|
|
|
8
|
%
|
|
|
10
|
%
|
Tier 1 risk-based capital
|
|
|
6.77
|
%
|
|
|
7.73
|
%
|
|
|
4
|
%
|
|
|
6
|
%
|
Tier 1 leverage capital
|
|
|
6.52
|
%
|
|
|
7.18
|
%
|
|
|
4
|
%
|
|
|
5
|
%
|
The Federal Reserves guidelines are intended to reflect
the varying degrees of risk associated with different on- and
off-balance sheet items. For more information about these
guidelines, read the capital resources discussion and
Note 16, Capital requirements, in our
2007
Annual Report to Shareholders
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
|
At
|
|
|
At
|
|
Regulatory Capital Amounts
|
|
9/30/08
|
|
|
12/31/07
|
|
|
9/30/07
|
|
|
|
(In millions)
|
|
|
Total risk-based capital
|
|
$
|
1,273.6
|
|
|
$
|
1,130.0
|
|
|
$
|
1,132.7
|
|
Tier 1 risk-based capital
|
|
$
|
767.6
|
|
|
$
|
779.2
|
|
|
$
|
781.5
|
|
Tier 1 leverage capital
|
|
$
|
767.6
|
|
|
$
|
779.2
|
|
|
$
|
781.5
|
|
Common
equity offering
On September 22, 2008, we initiated an at-the-market
offering of our common stock. This offering is described in a
base prospectus dated September 22, 2008, and prospectus
supplement dated September 22, 2008, which were filed with
the Securities and Exchange Commission on September 22,
2008. These documents are available at www.wilmingtontrust.com
under Investor Relations/SEC Filings/September 22, 2008.
Under this offering, we may issue shares having an aggregate
sales price of up to $150 million. The proceeds of this
offering will be used for general corporate purposes.
Sales of these shares will occur through ordinary brokers
transactions on the New York Stock Exchange or otherwise at
market prices prevailing at the time of the sale, at prices
related to the prevailing market prices, or at negotiated
prices, through Merrill Lynch as sales agent. We and Merrill
Lynch will determine jointly, as often as daily, how many shares
to sell under this offering and at what price to sell them.
Shares will be available for sale under this offering until the
aggregate sales price of $150 million is reached, or until
we or Merrill Lynch terminate it.
During the 2008 third quarter, 695,900 shares were issued
under this offering. Gross proceeds from these sales were
$20.8 million, with an average sale price of $29.95 per
share. After payment of commission and SEC filing fees, net
proceeds totaled $20.4 million, with an average net sale
price of $29.35 per share. Commission fees paid to Merrill Lynch
for the sale of these shares were $416,783.
Changes
to capital
During the first nine months of 2008, we added
$108.9 million to capital, which consisted of:
|
|
|
|
|
$44.9 million of net income.
|
|
|
|
A $20.6 million reclassification adjustment for security
losses included in net income, net of taxes.
|
|
|
|
$20.1 million from the reissuance of treasury shares.
|
|
|
|
$8.8 million of derivative gains included in other
comprehensive income, net of taxes.
|
75
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
|
|
|
|
|
$7.2 million from common stock issued under employment
benefit plans.
|
|
|
|
A credit to capital surplus of $6.1 million of stock-based
compensation expense, net of taxes.
|
|
|
|
$0.5 million in adjustments to minimum pension,
supplemental executive retirement plan, and postretirement
benefits plan liabilities, net of taxes.
|
|
|
|
$0.5 million of unrealized gain on equity method
investment, net of taxes.
|
|
|
|
A reclassification adjustment of $0.2 million in derivative
costs, net of taxes.
|
Offsetting these additions was a $167.1 million reduction
in capital, which consisted of:
|
|
|
|
|
$90.7 million in unrealized losses on securities, net of
taxes.
|
|
|
|
$69.0 million of dividends paid.
|
|
|
|
A $5.7 million reclassification from accumulated other
comprehensive income into earnings of discontinued cash flow
hedges, net of taxes.
|
|
|
|
$1.7 million for the acquisition of treasury shares related
to stock options and taxes on restricted stock.
|
We manage capital to meet or exceed appropriate standards of
financial safety and soundness, comply with existing and
impending regulatory requirements, and provide for future
growth. We review our capital position and make adjustments as
needed to ensure we can achieve these goals.
Our wholly owned bank subsidiaries are the main users of our
capital, and they are subject to regulatory capital
requirements. The advisory businesses are not as
capital-intensive, and they are not subject to regulatory
capital requirements, although some of our trust agreements
include specific capital requirements. For more information,
read the capital resources section of our
2007 Annual Report
to Shareholders
.
Share
repurchase program
Our current share repurchase plan, which was authorized by our
Board of Directors in April 2002, permits us to buy back up to
8 million shares of Wilmington Trust stock. Our share
repurchase activity reflects how we choose to deploy capital,
and is not driven solely by share price.
During the first nine months of 2008, we did not repurchase any
of our shares under this program, mainly because:
|
|
|
|
|
The May 1, 2008, maturity of an aggregate principal amount
of $125 million in subordinated long-term debt was
approaching.
|
|
|
|
The all-cash purchase of AST Capital Trust Company was
pending.
|
|
|
|
We opted to retain capital to fund loan growth, which was higher
than anticipated.
|
|
|
|
Our goal is to maintain capital ratios that exceed the federal
minimums for well-capitalized institutions.
|
76
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
It is unlikely that we will repurchase any shares during the
2008 fourth quarter. We are not permitted to repurchase any of
our common stock while our at-the-market offering of common
stock is underway. For more information about this offering,
read the Other items section of the Executive
Summary in this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of the
|
|
|
|
|
|
As of the
|
|
|
|
Three
|
|
|
As of the
|
|
|
Three
|
|
|
|
Months Ended
|
|
|
12 Months
|
|
|
Months Ended
|
|
Current 8-Million-Share Repurchase Plan Activity
|
|
9/30/08
|
|
|
Ended 12/31/07
|
|
|
9/30/07
|
|
|
Number of shares repurchased
|
|
|
|
|
|
|
2,000,000
|
|
|
|
400,000
|
|
Average price per share repurchased
|
|
$
|
|
|
|
$
|
39.60
|
|
|
$
|
38.86
|
|
Total cost of shares repurchased
|
|
$
|
|
|
|
$
|
79,208,056
|
|
|
$
|
15,543,136
|
|
Total shares purchased under current plan
|
|
|
3,043,796
|
|
|
|
3,043,796
|
|
|
|
2,443,796
|
|
Shares available for repurchase at period end
|
|
|
4,956,204
|
|
|
|
4,956,204
|
|
|
|
5,556,204
|
|
Figures in the table above do not match the figures reported
under Part II, Item 2, in this report, because that
report includes shares we use when recipients of stock-based
compensation exercise their options. We consider those share
acquisitions to be outside the parameters of our authorized
share repurchase plan, because those shares are not trading on
the open market when we acquire them.
LIQUIDITY
AND FUNDING
As a bank holding company, we need liquidity to support
operating and investing activities, comply with regulatory
requirements, and minimize the risk of having insufficient funds
to conduct business. We believe we have a strong liquidity
position because:
|
|
|
|
|
Our capital ratios demonstrate that we are well capitalized.
|
|
|
|
We have access to diverse sources of funding, which mitigates
our liquidity risk and gives us the ability to adjust the mix
and amount of funding as we deem appropriate.
|
|
|
|
Our long-term credit ratings are investment grade, and have been
since 1998, when the ratings were first issued.
|
To manage the risk of having insufficient liquidity, we follow
policies established by our Asset/Liability Committee (ALCO).
The ALCO policy categorizes various internal and external
scenarios into three levels of liquidity risk.
|
|
|
|
|
In a Level I scenario, the operating environment is normal
and there are no funding pressures.
|
|
|
|
A Level II scenario indicates that the potential for
funding difficulties exists.
|
|
|
|
A Level III scenario indicates that the composition of our
balance sheet has created excessive liquidity risk.
|
The ALCO policy specifies courses of action for Level II
and Level III scenarios. These are described in more detail
on page 36 of our
2007 Annual Report to Shareholders.
One of the factors we use to determine the level of liquidity
risk is a wholesale funding average ratio (formerly the
funds-at-risk
ratio). This ratio expresses liquid assets and other dedicated
funding sources as a percentage of wholesale liabilities in
three-month, six-month, and one-year time horizons.
Factors or conditions that could affect our liquidity include
changes in the types of assets and liabilities on our balance
sheet; our investment, loan, and deposit balances; our
reputation; and our credit ratings. A significant change in our
financial performance or credit ratings could reduce the
availability or increase the cost of funding. We monitor our
existing and projected liquidity requirements continually. We
believe our liquidity management practices give us the
flexibility to react to changes that might affect our liquidity
adversely.
77
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
For more information, read the discussion of liquidity and
funding in our
2007 Annual Report to Shareholders
.
Liquidity
in the first nine months of 2008
Through June 30, 2008, we were operating within
Level I parameters of liquidity risk. At September 30,
2008, the wholesale funding average ratio indicated we were at
the low end of a Level II scenario. Two factors caused this
change:
|
|
|
|
|
Record-high loan growth. Loan growth in the first
nine months of 2008 far exceeded our expectations.
|
|
|
|
Illiquidity in the capital markets. Current market
conditions have the potential to limit our ability to sell
investment securities
and/or
to
limit the range of capital-raising options available to us.
|
Our sources of liquidity remained
diversified. Although we were operating under a
Level II scenario, the amount of liquidity available to us
was 3% higher than at year-end 2007.
|
|
|
|
|
|
|
|
|
Sources of Liquidity
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
|
(In millions)
|
|
|
Core deposit balances
|
|
$
|
5,539.5
|
|
|
$
|
5,465.5
|
|
National CDs
³
$100,000
|
|
|
3,101.7
|
|
|
|
2,392.0
|
|
Short-term borrowings
|
|
|
1,772.9
|
|
|
|
1,992.1
|
|
Long-term debt
|
|
|
468.3
|
|
|
|
267.8
|
|
Stockholders equity
|
|
|
1,062.1
|
|
|
|
1,120.3
|
|
Investment securities
|
|
|
1,460.0
|
|
|
|
1,846.8
|
|
Borrowing capacity from lines of credit with U.S. financial
institutions
|
|
|
80.0
|
|
|
|
85.0
|
|
Borrowing capacity secured with collateral from the Federal Home
Loan Bank of Pittsburgh
(FHLB)
1
|
|
|
565.6
|
|
|
|
445.0
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
14,050.1
|
|
|
$
|
13,614.5
|
|
|
|
|
1
|
|
As of June 30, 2008, and December 31, 2007,
respectively. The FHLB adjusts our borrowing capacity quarterly,
but we do not receive the adjustment calculations until after
the filing dates of our quarterly and annual reports. Wilmington
Trust Company and Wilmington Trust FSB are FHLB members.
|
At September 30, 2008, our long-term debt included:
|
|
|
|
|
An aggregate principal amount of $250.0 million in
10-year,
4.875% subordinated notes that mature on April 15,
2013.
|
|
|
|
An aggregate principal amount of $200.0 million of
10-year,
8.50% subordinated notes that mature on April 2, 2018.
We issued these notes on April 1, 2008, under a
registration statement and prospectus initially filed with the
SEC on November 29, 2007, and under a prospectus supplement
filed with the SEC on March 28, 2008. This offering was
subscribed fully upon issue. We used part of the proceeds of
this offering to repay debt that matured on May 1, 2008,
and to fund, in part, our acquisition of AST Capital
Trust Company. We intend to use the remaining proceeds for
general corporate purposes.
|
For more information about our long-term debt, read
Note 11, Borrowings, in this report.
Among the risks to our liquidity is a partial guaranty of a line
of credit obligation for CRM. At September 30, 2008, this
line of credit was $3.0 million, the balance was zero, and
our guaranty was for 80.99%, an amount equal to our ownership
interest in CRM. This line of credit is scheduled to expire on
December 2, 2008.
78
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Credit
ratings
The credit ratings of Wilmington Trust Corporation and
Wilmington Trust Company remained favorable. Moodys
Investors Service last reaffirmed our ratings on
February 29, 2008. Fitch Ratings last reaffirmed our
ratings in August 2007. Standard & Poors
reaffirmed our ratings on September 3, 2008, but revised
our outlook from stable to negative. In a news release published
that day, Standard & Poors said this
action was the result of a broader review of U.S. regional
bank institutions, and published news reports quoted
Standard & Poors as saying the revision
reflected concerns around the ongoing deterioration in the
mortgage and housing sectors.
|
|
|
|
|
|
|
|
|
|
|
Moodys
|
|
|
|
|
Fitch
|
|
Investors
|
|
Standard &
|
Wilmington Trust Corporation
|
|
Ratings
1
|
|
Service
2
|
|
Poors
3
|
|
Outlook
|
|
Stable
|
|
Stable
|
|
Negative
|
Issuer rating (long-term/short-term)
|
|
A+/F1
|
|
A2/ *
|
|
A-/A-2
|
Subordinated debt
|
|
A
|
|
A3
|
|
BBB+
|
|
|
|
*
|
|
No rating in this category.
|
1
|
|
As of August 2007.
|
2
|
|
As of February 2008.
|
3
|
|
As of September 2008.
|
|
|
|
|
|
|
|
|
|
|
|
Moodys
|
|
|
|
|
Fitch
|
|
Investors
|
|
Standard &
|
Wilmington Trust Company
|
|
Ratings
1
|
|
Service
2
|
|
Poors
3
|
|
Outlook
|
|
Stable
|
|
Stable
|
|
Negative
|
Bank financial strength
|
|
A/B
|
|
B-
|
|
*
|
Issuer rating (long-term/short-term)
|
|
A+/F1
|
|
A1
|
|
A/A-1
|
Bank deposits (long-term/short-term)
|
|
AA-/*
|
|
A1/P-1
|
|
A/A-1
|
|
|
|
*
|
|
No rating in this category.
|
1
|
|
As of August 2007.
|
2
|
|
As of February 2008.
|
3
|
|
As of September 2008.
|
Managing
funding
We use a mix of core deposits and national funding to support
our Regional Banking business and to help us manage interest
rate risk. Our national funding consists of national CDs
³
$100,000 and short-term borrowings. We augment core deposits
with national funding because there is an inherent disparity in
the Regional Banking business model between loan growth and core
deposit growth. We make commercial loans in four states but we
gather core deposits mainly in Delaware. For us, national
funding:
|
|
|
|
|
Is a cost-effective way to add deposits without having to invest
capital in a large-scale expansion of our branch office network.
|
|
|
|
Helps us curb annual operating expense growth. On an absolute
basis, national funding rates tend to be higher than core
deposit rates, but using rates alone to compare funding costs
can be misleading, since core deposit rates do not include the
all-in expense of staffing and operating a branch office network.
|
|
|
|
Helps our Regional Banking business produce an efficiency ratio
that is better than our peer average. For more information about
this, see the Regional Banking discussion in this report.
|
79
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
|
|
|
|
|
Helps us manage interest rate risk, because we can match the
repricing characteristics of wholesale funds closely with the
repricing characteristics of floating rate loans. We adjust the
mix between national CDs and short-term borrowings, depending on
which has more favorable terms.
|
As we expand our commercial banking business throughout the
Delaware Valley region, we expect that loan growth will continue
to outpace core deposit growth, and we will continue to use a
blend of core deposits and national funding to support loan
growth.
For a comparison of core deposit and national funding rates and
more information on how we manage interest rate risk, see the
quarterly and year-to-date analyses of net interest income and
read the interest rate risk discussion in the Quantitative
and Qualitative Disclosures about Market Risk section of
this report.
Funding
in the first nine months of 2008
During the first nine months of 2008, core deposits (demand
deposits, interest-bearing demand deposits, time deposits, and
local CDs
³
$100,000) continued to be our primary source of funding.
|
|
|
|
|
|
|
|
|
Funding (On Average) for the Nine Months Ended September
30
|
|
2008
|
|
|
2007
|
|
|
Percentage from core deposits
|
|
|
53
|
%
|
|
|
54
|
%
|
Percentage from national funding
|
|
|
29
|
%
|
|
|
31
|
%
|
Percentage from short-term borrowings
|
|
|
18
|
%
|
|
|
15
|
%
|
Loan-to-deposit ratio
|
|
|
110
|
%
|
|
|
103
|
%
|
ASSET
QUALITY, LOAN LOSS RESERVE, AND LOAN LOSS
PROVISION
Most of the assets on our balance sheet are loans and investment
securities, which we discuss elsewhere in this report. The
goodwill on our balance sheet is associated primarily with
acquisitions we have made and our investments in CRM and RCM. In
the 2008 second quarter, we reduced the carrying value of our
investment in RCM, which reduced the amount of goodwill we
recorded for this asset. For more information about this, read
the affiliate managers discussion and Note 9,
Goodwill and other intangible assets, in this report.
At September 30, 2008, loans accounted for 79% of our
assets, and most of our asset quality remained tied to loan, or
credit, quality.
Credit
risk
Lending money is inherently risky. When we make a loan, we make
subjective judgments about the borrowers ability to repay
the loan. No matter how financially sound a client or lending
decision may seem, a borrowers ability to repay can be
affected adversely by economic changes and other external
factors. As part of our efforts to mitigate credit risk, we:
|
|
|
|
|
Employ rigorous loan underwriting standards.
|
|
|
|
Perform an internal risk rating analysis that classifies all
loans outstanding into one of four categories of risk. We
analyze migrations among these categories of risk.
|
We apply our loan underwriting standards and internal risk
rating classifications consistently. For a more complete
overview of the various risks we encounter in the normal course
of business, and for more details on the steps we take to
mitigate credit risk, read the risk discussion in our
2007
Annual Report to Shareholders
.
We regard net charge-offs as the primary indicator of credit
quality.
80
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Credit
quality in the third quarter and first nine months of
2008
Net charge-off and nonperforming asset levels for the third
quarter and first nine months of 2008 were higher than for the
corresponding year-ago periods, but the net charge-off ratio
remained in line with our historical experience. To a large
degree, the changes in net charge-offs, nonperforming assets,
and serious doubt loans reflected the movement among risk
categories of loans that had been experiencing problems since
the third quarter of 2007.
The percentage of loans with pass ratings in the internal risk
rating analysis remained at 96%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal Risk Rating Analysis
|
|
At 9/30/08
|
|
|
At 6/30/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
Pass
|
|
|
96.08
|
%
|
|
|
96.28
|
%
|
|
|
96.03
|
%
|
|
|
96.01
|
%
|
Watchlisted
|
|
|
2.25
|
%
|
|
|
2.29
|
%
|
|
|
2.69
|
%
|
|
|
2.62
|
%
|
Substandard
|
|
|
1.66
|
%
|
|
|
1.42
|
%
|
|
|
1.27
|
%
|
|
|
1.36
|
%
|
Doubtful
|
|
|
0.01
|
%
|
|
|
0.01
|
%
|
|
|
0.01
|
%
|
|
|
0.01
|
%
|
Nonperforming
assets
Nonperforming assets consist of nonaccruing loans, renegotiated
loans, and other real estate owned (OREO). The amount recorded
for OREO represents the net realizable value of the underlying
assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming Assets
|
|
At 9/30/08
|
|
|
At 6/30/08
|
|
|
At 3/31/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
Nonaccruing loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, and agricultural
|
|
$
|
28.4
|
|
|
$
|
27.0
|
|
|
$
|
25.6
|
|
|
$
|
23.8
|
|
|
$
|
12.1
|
|
Commercial real estate construction
|
|
|
41.0
|
|
|
|
22.6
|
|
|
|
9.9
|
|
|
|
9.9
|
|
|
|
21.2
|
|
Commercial mortgage
|
|
|
8.6
|
|
|
|
8.1
|
|
|
|
8.2
|
|
|
|
7.1
|
|
|
|
8.7
|
|
Consumer and other retail
|
|
|
22.1
|
|
|
|
13.9
|
|
|
|
9.7
|
|
|
|
7.0
|
|
|
|
12.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonaccruing loans
|
|
|
100.1
|
|
|
|
71.6
|
|
|
|
53.4
|
|
|
|
47.8
|
|
|
|
54.1
|
|
Renegotiated loans
|
|
|
0.1
|
|
|
|
0.2
|
|
|
|
24.1
|
|
|
|
23.7
|
|
|
|
19.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonaccruing and renegotiated loans
|
|
|
100.2
|
|
|
|
71.8
|
|
|
|
77.5
|
|
|
|
71.5
|
|
|
|
73.3
|
|
Other real estate owned (OREO)
|
|
|
14.5
|
|
|
|
16.7
|
|
|
|
0.2
|
|
|
|
9.1
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming assets
|
|
$
|
114.7
|
|
|
$
|
88.5
|
|
|
$
|
77.7
|
|
|
$
|
80.6
|
|
|
$
|
73.5
|
|
Nonperforming asset ratio
|
|
|
120 bps
|
|
|
|
95 bps
|
|
|
|
88 bps
|
|
|
|
95 bps
|
|
|
|
88 bps
|
|
Nonaccruing
loans
More than half of the year-to-date increase in nonaccruing loans
occurred in the 2008 third quarter, when $28.5 million was
added. Two client relationships accounted for most of this
increase. These relationships were with commercial real estate
construction clients with single-family housing projects in
central and southern Delaware.
Most of the rest of the year-to-date increase in nonaccruing
loans occurred in the 2008 second quarter, when we transferred
two large loans from renegotiated status.
|
|
|
|
|
One of these loans was a commercial construction loan for a
single family/townhome development in southern Delaware. In the
2008 second quarter, we transferred approximately
$16.0 million of this loan from renegotiated to nonaccruing
status, and we charged off approximately $3.6 million of
this loan.
|
|
|
|
The other was a retail loan to an individual.
|
81
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Other nonaccruing loans added during the 2008 second quarter
included three previously performing commercial loans, one of
which was to a textile manufacturer. We charged off
approximately $1.8 million of this loan in conjunction with
its transfer to nonaccruing status.
Other
real estate owned (OREO)
Several events accounted for the changes in OREO in the first
nine months of 2008.
In the 2008 first quarter, OREO decreased $8.9 million from
the year-end 2007 amount. This reflected the successful
disposition of two properties formerly owned by the
Pennsylvania-based Elliott Building Group, which filed for
bankruptcy in June 2007. At that time, we transferred the full
amount of our exposure to this client, $10.2 million, to
nonaccruing status. Our loans to this client were for two
housing developments under construction in southern New Jersey.
We foreclosed on both of these properties in the 2007 fourth
quarter, at which time we transferred $8.9 million to OREO
and charged off the remaining $1.4 million. In March 2008,
we sold each property to a different buyer. We did not finance
either buyers purchase of these properties. We have no
additional exposure to the Elliott Building Group or any of its
other properties.
In the 2008 second quarter, we foreclosed on two properties with
loans that had been nonaccruing since the third quarter of 2007:
|
|
|
|
|
An income-producing hotel and retail property in Ocean City,
Maryland, which accounted for approximately $9.2 million of
the second quarter increase in OREO.
|
|
|
|
A luxury home development in Montgomery County, Pennsylvania.
This project accounted for approximately $4.6 million of
the second quarter increase in OREO. In addition, we charged off
approximately $1.4 million associated with this loan.
|
Three smaller properties in the mid-Atlantic region accounted
for the remainder of the 2008 second quarter increase in OREO.
In the 2008 third quarter, we sold several of the properties in
the Montgomery County, Pennsylvania, development. This
disposition accounted for the $2.2 million decline in OREO
from June 30, 2008.
Although the market often views OREO negatively, we view moving
properties to OREO as a positive step in the loan work-out
process, because:
|
|
|
|
|
We gain control of the situation.
|
|
|
|
Negotiations with the borrower cease.
|
|
|
|
Legal expenses associated with collection efforts cease.
|
|
|
|
We gain the ability to facilitate disposition of these
properties, recover our cash, and return it to an earning basis.
|
Past-due
loans
Past-due loans at September 30, 2008, were split fairly
evenly between commercial and retail loans, and were higher than
for prior periods. Most of the increases in past-due loans
occurred in the 2008 second and third quarters.
Past-due loans increased $7.2 million in the 2008 second
quarter. Three loans a commercial loan to a chemical
manufacturer, a commercial construction loan to a tubing
manufacturer, and a commercial mortgage loan to a
retailer accounted for most of this increase.
82
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
During the 2008 third quarter, past-due loans increased
$6.9 million. Approximately $4.9 million of this
amount was for a commercial construction/real estate loan to a
Maryland-based client.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Past Due 90 Days or More
|
|
At 9/30/08
|
|
|
At 6/30/08
|
|
|
At 3/31/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
Commercial, financial, and agricultural
|
|
$
|
6.5
|
|
|
$
|
6.1
|
|
|
$
|
3.7
|
|
|
$
|
2.4
|
|
|
$
|
9.4
|
|
Commercial real estate construction
|
|
|
5.2
|
|
|
|
0.6
|
|
|
|
0.3
|
|
|
|
0.7
|
|
|
|
0.7
|
|
Commercial mortgage
|
|
|
2.1
|
|
|
|
1.3
|
|
|
|
|
|
|
|
1.3
|
|
|
|
1.1
|
|
Consumer and other retail
|
|
|
14.9
|
|
|
|
13.8
|
|
|
|
10.6
|
|
|
|
9.3
|
|
|
|
5.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans past due 90 days or more
|
|
$
|
28.7
|
|
|
$
|
21.8
|
|
|
$
|
14.6
|
|
|
$
|
13.7
|
|
|
$
|
17.0
|
|
Past-due loan ratio
|
|
|
30 bps
|
|
|
|
23 bps
|
|
|
|
17 bps
|
|
|
|
16 bps
|
|
|
|
20 bps
|
|
Net
charge-offs
Net charge-offs were higher than for the corresponding periods
in 2007, but the net charge-off ratio remained in line with our
historical experience. Year-to-date net charge-offs were split
fairly evenly between commercial and retail loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-Offs for the Three Months Ended
|
|
9/30/08
|
|
|
6/30/08
|
|
|
3/31/08
|
|
|
12/31/07
|
|
|
9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
Loans charged off:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, and agricultural
|
|
$
|
4.9
|
|
|
$
|
2.9
|
|
|
$
|
0.7
|
|
|
$
|
1.3
|
|
|
$
|
0.6
|
|
Commercial real estate construction
|
|
|
|
|
|
|
5.2
|
|
|
|
0.3
|
|
|
|
2.3
|
|
|
|
0.6
|
|
Commercial mortgage
|
|
|
1.0
|
|
|
|
0.1
|
|
|
|
|
|
|
|
1.2
|
|
|
|
0.1
|
|
Consumer and other retail
|
|
|
5.8
|
|
|
|
6.0
|
|
|
|
5.4
|
|
|
|
6.7
|
|
|
|
5.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans charged off
|
|
$
|
11.7
|
|
|
$
|
14.2
|
|
|
$
|
6.4
|
|
|
$
|
11.5
|
|
|
$
|
6.8
|
|
Recoveries on loans previously charged off:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, and agricultural
|
|
$
|
0.2
|
|
|
$
|
0.2
|
|
|
$
|
0.1
|
|
|
$
|
|
|
|
$
|
0.2
|
|
Commercial real estate construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage
|
|
|
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other retail
|
|
|
1.0
|
|
|
|
1.4
|
|
|
|
1.6
|
|
|
|
1.8
|
|
|
|
1.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recoveries
|
|
$
|
1.2
|
|
|
$
|
2.4
|
|
|
$
|
1.7
|
|
|
$
|
1.8
|
|
|
$
|
2.0
|
|
Net loans charged off:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial, and agricultural
|
|
$
|
4.7
|
|
|
$
|
2.7
|
|
|
$
|
0.6
|
|
|
$
|
1.3
|
|
|
$
|
0.4
|
|
Commercial real estate construction
|
|
|
|
|
|
|
5.2
|
|
|
|
0.3
|
|
|
|
2.3
|
|
|
|
0.6
|
|
Commercial mortgage
|
|
|
1.0
|
|
|
|
(0.7
|
)
|
|
|
|
|
|
|
1.2
|
|
|
|
0.1
|
|
Consumer and other retail
|
|
|
4.8
|
|
|
|
4.6
|
|
|
|
3.8
|
|
|
|
4.9
|
|
|
|
3.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net charge-offs
|
|
$
|
10.5
|
|
|
$
|
11.8
|
|
|
$
|
4.7
|
|
|
$
|
9.7
|
|
|
$
|
4.8
|
|
Net charge-off ratio for the quarter
|
|
|
11 bps
|
|
|
|
13 bps
|
|
|
|
5 bps
|
|
|
|
12 bps
|
|
|
|
6 bps
|
|
Total net charge-offs year to date
|
|
$
|
26.9
|
|
|
$
|
16.4
|
|
|
$
|
4.7
|
|
|
$
|
21.3
|
|
|
$
|
11.6
|
|
Year-to-date net charge-off ratio
|
|
|
30 bps
|
|
|
|
19 bps
|
|
|
|
5 bps
|
|
|
|
26 bps
|
|
|
|
14 bps
|
|
83
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
Most of the 2008 increase in net charge-offs occurred in the
second quarter. Three previously discussed loans accounted for
most of this increase:
|
|
|
|
|
A commercial construction loan for a single family/townhome
development in Sussex County, Delaware, accounted for
approximately $3.6 million of the increase. (The remainder
of this loan was transferred from renegotiated to nonaccruing
status.)
|
|
|
|
A commercial loan to a textile manufacturer accounted for
approximately $1.8 million of the increase. (The remainder
of this loan was transferred from performing to nonaccruing
status.)
|
|
|
|
A commercial construction loan for a luxury home development in
Montgomery County, Pennsylvania, accounted for approximately
$1.4 million of the increase. (The remainder of this loan
was transferred from renegotiated status to OREO.)
|
Net charge-offs for the 2008 third quarter were
$1.3 million lower than for the 2008 second quarter, mainly
because there were no commercial construction loan charge-offs.
There was a $2.0 million increase in commercial, financial,
and agricultural loan charge-offs. This increase was associated
mainly with one previously nonaccruing loan to a sports
equipment retailer.
In our experience, commercial loan charge-offs are very
unpredictable, because:
|
|
|
|
|
Negotiations with commercial borrowers can affect the timing and
extent of charge-offs, or avert them altogether.
|
|
|
|
Associated legal proceedings can also affect the timing and
extent of charge-offs.
|
Among consumer and other retail loans, most of the charge-offs
in the third quarter and first nine months of 2008 were indirect
auto loans. The increase in problem loans in the indirect
portfolio corresponds, to a degree, with the indirect lending
growth we have experienced in the last two years from the
Pennsylvania, Maryland, and New Jersey markets. In light of this
growth, we implemented new indirect auto pricing standards in
June 2007 to ensure we are attracting high-quality loans.
Serious-Doubt
Loans
Serious-doubt loans are loans that we do not think will be
repaid in full, even though they are performing in accordance
with their contractual terms or are fewer than 90 days past
due. Most of our serious-doubt loans are commercial loans to a
variety of clients with light manufacturing, service, and retail
businesses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Serious-Doubt Loans
|
|
At 9/30/08
|
|
|
At 6/30/08
|
|
|
At 3/31/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
|
(Dollars in millions)
|
|
|
Commercial, financial, and agricultural
|
|
$
|
24.2
|
|
|
$
|
16.4
|
|
|
$
|
37.7
|
|
|
$
|
11.6
|
|
|
$
|
12.3
|
|
Commercial real estate construction
|
|
|
3.7
|
|
|
|
|
|
|
|
5.7
|
|
|
|
|
|
|
|
|
|
Commercial mortgage
|
|
|
7.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other retail
|
|
|
|
|
|
|
4.3
|
|
|
|
4.5
|
|
|
|
|
|
|
|
|
|
Contingency allocation
|
|
|
3.0
|
|
|
|
3.0
|
|
|
|
3.0
|
|
|
|
3.0
|
|
|
|
3.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total serious-doubt loans
|
|
$
|
38.4
|
|
|
$
|
23.7
|
|
|
$
|
50.9
|
|
|
$
|
14.6
|
|
|
$
|
15.3
|
|
Ratio of serious-doubt loans to total loan balances
|
|
|
40 bps
|
|
|
|
26 bps
|
|
|
|
58 bps
|
|
|
|
17 bps
|
|
|
|
18 bps
|
|
Of the loans added to the serious-doubt list during the first
quarter of 2008, approximately 44% was for a Pennsylvania-based
tubing manufacturer.
84
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
In the 2008 second quarter, the amount of serious-doubt loans
decreased 53%, due to the reclassifications of loans discussed
earlier in this section into nonaccruing and past-due categories.
One commercial banking relationship with a concrete pipe
manufacturer accounted for almost all of the increase in
serious-doubt loans during the 2008 third quarter.
Loan
portfolio composition
On a percentage basis, the composition of the loan portfolio
remained relatively unchanged.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of the Loan Portfolio
|
|
At 9/30/08
|
|
|
At 6/30/08
|
|
|
At 3/31/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
Commercial, financial, and agricultural
|
|
|
31
|
%
|
|
|
30
|
%
|
|
|
30
|
%
|
|
|
31
|
%
|
|
|
30
|
%
|
Commercial real estate construction
|
|
|
20
|
%
|
|
|
20
|
%
|
|
|
21
|
%
|
|
|
21
|
%
|
|
|
21
|
%
|
Commercial mortgage
|
|
|
19
|
%
|
|
|
18
|
%
|
|
|
18
|
%
|
|
|
17
|
%
|
|
|
17
|
%
|
Residential mortgage
|
|
|
6
|
%
|
|
|
6
|
%
|
|
|
6
|
%
|
|
|
6
|
%
|
|
|
7
|
%
|
Home equity
|
|
|
3
|
%
|
|
|
4
|
%
|
|
|
3
|
%
|
|
|
4
|
%
|
|
|
3
|
%
|
Indirect loans
|
|
|
10
|
%
|
|
|
10
|
%
|
|
|
10
|
%
|
|
|
9
|
%
|
|
|
9
|
%
|
Credit card
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
Other consumer
|
|
|
4
|
%
|
|
|
5
|
%
|
|
|
5
|
%
|
|
|
5
|
%
|
|
|
5
|
%
|
Secured with liquid collateral
|
|
|
6
|
%
|
|
|
6
|
%
|
|
|
6
|
%
|
|
|
6
|
%
|
|
|
7
|
%
|
LOAN
LOSS RESERVE AND LOAN LOSS PROVISION
The provision and the reserve for loan losses rose due to the
substantial growth in loan balances, higher levels of
nonperforming assets, downgrades in the internal risk rating
analysis, and charge-offs. The provision for loan losses
increased from $18.5 million for the 2008 second quarter to
$19.6 million for the 2008 third quarter.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
Provision for loan losses (in millions)
|
|
$
|
19.6
|
|
|
$
|
8.9
|
|
|
$
|
48.0
|
|
|
$
|
19.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for Loan Losses
|
|
At 9/30/08
|
|
|
At 6/30/08
|
|
|
At 3/31/08
|
|
|
At 12/31/07
|
|
|
At 9/30/07
|
|
|
Reserve for loan losses (in millions)
|
|
$
|
122.2
|
|
|
$
|
113.1
|
|
|
$
|
106.4
|
|
|
$
|
101.1
|
|
|
$
|
101.6
|
|
Loan loss reserve ratio
|
|
|
1.27
|
%
|
|
|
1.22
|
%
|
|
|
1.21
|
%
|
|
|
1.19
|
%
|
|
|
1.22
|
%
|
We reserve an amount for loan losses that represents our best
estimate of known and inherent estimated losses and we make
subjective judgments about amounts we might be able to recover.
We also consider loan growth, the results of the internal risk
rating analysis, the levels of loan recoveries and repayments,
the stability of the mid-Atlantic regional economy, market
interest rates, and regulatory guidelines. For more information
about how we establish and account for the loan loss reserve,
read Note 2, Summary of significant accounting
policies, in our
2007 Annual Report to Shareholders
.
The reserve and provision for loan losses do not necessarily
increase in conjunction with loan growth, because newly added
loans do not automatically carry the same or a higher degree of
risk than loans already in the portfolio.
85
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
DERIVATIVES,
HEDGING INSTRUMENTS, OTHER OFF-BALANCE-SHEET ARRANGEMENTS, AND
OTHER CONTRACTUAL OBLIGATIONS
We use a variety of financial instruments and contracts to help
us manage capital, liquidity, interest rate risk, credit risk,
and other aspects of our day-to-day operations. As permissible
under regulatory guidelines, we include these instruments in our
calculations of regulatory risk-based capital ratios. For more
information about these instruments and contracts, read the
discussion that begins on page 58 of the
2007 Annual
Report to Shareholders
.
The derivative instruments we use are primarily interest rate
swap and interest rate floor contracts. These instruments help
us manage the effects of fluctuating interest rates on net
interest income. We also use interest rate swap contracts to
help commercial loan clients manage their interest rate risk. We
do not hold or issue derivative financial instruments for
trading purposes.
When we enter into an interest rate swap contract with a
commercial loan client, we simultaneously enter into a
mirror swap contract in the same amount with a third
party, which exchanges the clients fixed rate loan
payments for floating rate loan payments. In these transactions,
we retain the associated credit risk.
|
|
|
|
|
|
|
|
|
Notional Value of Derivative Financial Instruments
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
|
(In millions)
|
|
|
Client-related swaps:
|
|
|
|
|
|
|
|
|
Swap contracts with clients
|
|
$
|
1,561.2
|
|
|
$
|
425.0
|
|
Swaps that mirror swap contracts with clients
|
|
|
1,561.2
|
|
|
|
425.0
|
|
|
|
|
|
|
|
|
|
|
Total client-related swaps
|
|
$
|
3,122.4
|
|
|
$
|
850.0
|
|
Fair value hedge swaps associated with the subordinated
long-term debt that expired on May 1, 2008
|
|
$
|
|
|
|
$
|
125.0
|
|
Interest rate floor contracts
|
|
$
|
|
|
|
$
|
1,000.0
|
|
We sold all of our interest rate floor contracts in January
2008. For more information about this, read Note 6,
Derivatives and hedging activities, in this report.
|
|
|
|
|
|
|
|
|
Other Contractual Obligations
|
|
At 9/30/08
|
|
|
At 12/31/07
|
|
|
|
(In millions)
|
|
|
FHLB loan
1
|
|
$
|
28.0
|
|
|
$
|
28.0
|
|
Lease commitments for offices, net of sublease
arrangements
2
|
|
$
|
71.9
|
|
|
$
|
67.9
|
|
Guaranty on CRM $3.0 million line of
credit
3
|
|
$
|
2.4
|
|
|
$
|
2.5
|
|
Certificates of deposit
|
|
$
|
4,367.6
|
|
|
$
|
3,759.7
|
|
Letters of credit, unfunded loan commitments, and unadvanced
lines of credit
|
|
$
|
3,741.6
|
|
|
$
|
3,996.2
|
|
|
|
|
1
|
|
We used these funds to construct Wilmington Trust Plaza,
our operations center in downtown Wilmington, Delaware, which
was completed in 1998.
|
|
2
|
|
We lease many of our branch offices in Delaware. We lease all of
our branch and other offices outside of Delaware.
|
|
3
|
|
At December 31, 2007, the amount of this guaranty was
82.41%. At September 30, 2008, it was 80.99%. The
percentage amounts represent our ownership interest in CRM. For
more information about our ownership position in CRM, read the
CRM discussion in this report. At September 30, 2008, the
balance of this line of credit was zero and it was scheduled to
expire on December 2, 2008.
|
86
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Duration of Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due on Current Contractual
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
|
|
Total
|
|
|
Less Than 1 Year
|
|
|
1 to 3 Years
|
|
|
3 to 5 Years
|
|
|
More Than 5 Years
|
|
|
|
(In millions)
|
|
|
Certificates of deposit
|
|
$
|
4,367.6
|
|
|
$
|
4,092.9
|
|
|
$
|
178.6
|
|
|
$
|
91.1
|
|
|
$
|
5.0
|
|
Debt obligations
|
|
|
478.0
|
|
|
|
|
|
|
|
28.0
|
|
|
|
250.0
|
|
|
|
200.0
|
|
Interest on debt obligations
|
|
|
221.1
|
|
|
|
31.0
|
|
|
|
60.4
|
|
|
|
53.3
|
|
|
|
76.4
|
|
Operating lease obligations
|
|
|
71.9
|
|
|
|
13.0
|
|
|
|
21.3
|
|
|
|
14.6
|
|
|
|
23.0
|
|
Benefit plan obligations
|
|
|
0.8
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranty obligations
|
|
|
2.4
|
|
|
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,141.8
|
|
|
$
|
4,140.1
|
|
|
$
|
288.3
|
|
|
$
|
409.0
|
|
|
$
|
304.4
|
|
The debt obligations in the table above consist of:
|
|
|
|
|
$250.0 million of subordinated long-term debt that was
issued in 2003, was used for general liquidity purposes, and is
due in 2013.
|
|
|
|
$200.0 million of subordinated long-term debt that was
issued on April 1, 2008, and is due on April 2, 2018.
We used part of the proceeds of this issue to repay an aggregate
principal amount of $125.0 million in subordinated
long-term debt that expired on May 1, 2008, and to fund, in
part, the AST acquisition. We intend to use the remaining
proceeds for general corporate purposes.
|
|
|
|
FHLB advances of $28.0 million.
|
All of this debt is included in the amount of long-term debt
recorded on our balance sheet.
Our agreements with CRM, RCM, Grant Tani Barash &
Altman, and Wilmington Trust Conduit Services permit
principal members and designated key employees of each firm,
subject to certain restrictions, to put (relinquish) their
interests in their respective firms to our company. For more
information about these agreements, read Note 4,
Affiliates and acquisitions, which begins on
page 84 of our
2007 Annual Report to Shareholders
.
Our agreement with RCM includes provisions that permit some of
the firms portfolio managers to put (relinquish) their
ownership of certain free cash flow interests (Class B
interests) to us. These Class B interests are in addition
to our equity ownership position in RCM. The exercises of these
puts add to the revenue we receive from RCM. On April 1,
2008, principals of RCMs office in Portland, Oregon, put
approximately $14.3 million of their Class B interests
to us.
OTHER
INFORMATION
ACCOUNTING
PRONOUNCEMENTS
For a discussion of the effects of recent accounting
pronouncements on our financial condition and results of
operations, read Note 15, Accounting
pronouncements, in this report.
87
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
Our critical accounting policies conform with
U.S. generally accepted accounting principles (GAAP), and
with reporting practices prescribed for the banking industry. We
maintain our accounting records and prepare our financial
statements using the accrual basis of accounting. In applying
our critical accounting policies, we make estimates and
assumptions about revenue recognition, the reserve for loan
losses, stock-based employee compensation, investment securities
valuations, goodwill impairment, loan origination fees, income
taxes, and other items.
For more information about our critical accounting policies,
read:
|
|
|
|
|
Note 2, Summary of significant accounting
policies, which begins on page 79 of our
2007
Annual Report to Shareholders
;
|
|
|
|
Note 1, Accounting and reporting policies, in
this report; and
|
|
|
|
Note 15, Accounting pronouncements, in this
report.
|
CAUTIONARY
STATEMENT
This report contains estimates, predictions, opinions, or other
statements that might be construed as
forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These
statements include references to our financial goals, dividend
policy, financial and business trends, new business results and
outlook, business prospects, market positioning, pricing trends,
strategic initiatives, credit quality and the reserve for loan
losses, the effects of changes in market interest rates, the
effects of changes in securities valuations, the impact of
accounting pronouncements, and other internal and external
factors that could affect our financial performance.
These statements are based on a number of assumptions,
estimates, expectations, and assessments of potential
developments, and are subject to various risks and uncertainties
that could cause our actual results to differ from our
expectations. Our ability to achieve the results reflected in
these statements could be affected adversely by, among other
things, changes in national or regional economic conditions;
changes in market interest rates; fluctuations in equity or
fixed income markets; significant changes in banking laws or
regulations; the impact of accounting pronouncements; increased
competition for business; higher-than-expected credit losses;
the effects of acquisitions; the effects of integrating acquired
entities; a substantial and permanent loss of either client
accounts
and/or
assets under management at Wilmington Trust
and/or
our
affiliate money managers, Cramer Rosenthal McGlynn and Roxbury
Capital Management; unanticipated changes in the regulatory,
judicial, legislative, or tax treatment of business
transactions; and uncertainty created by unrest in other parts
of the world.
88
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures about Market Risk.
|
The normal course of business exposes us to a variety of
operational, reputational, legal, and regulatory risks. We
monitor these risks closely to safeguard our companys and
our clients assets. All of these risks could affect our
financial performance and condition adversely.
Our primary risks are:
|
|
|
|
|
The risk that borrowers will be unable to repay their loans. For
more information about this, read the credit quality discussion
in this report.
|
|
|
|
The effects on income of market interest rates.
|
|
|
|
The effects on income of volatility in the financial markets.
|
|
|
|
The risk that economic conditions will affect our ability to
conduct business.
|
Market interest rates present more risk to us than inflation. As
a financial institution, nearly all of our assets and
liabilities are monetary in nature. Declines in market interest
rates are more likely to erode their valuations than the effects
of inflation on currency valuations.
INTEREST
RATE RISK
Changes in market interest rates, and the pace at which they
occur, can affect the yields we earn on loans and investments
and the rates we pay on deposits and other borrowings. These
changes can affect our net interest margin and net interest
income, positively or negatively, and ultimately affect our
financial performance.
The main way we manage interest rate risk is to match, as
closely as possible, the pricing and maturity characteristics of
our assets with those of our liabilities. We do this by:
|
|
|
|
|
Maintaining a mix of assets and liabilities that gives us
flexibility in a dynamic market place.
|
|
|
|
Managing the relative proportion of fixed and floating rate
assets and liabilities, so that we can match the repricing
characteristics of assets and liabilities as closely as possible.
|
|
|
|
Using a blend of core deposits and national funding. For more
information about this, read the section on funding in this
report.
|
|
|
|
Managing the size of our investment securities portfolio and the
mix of instruments in it. For more information about this, read
the discussion of changes in financial condition in this report.
|
|
|
|
Selling most of our new fixed rate residential mortgage
production into the secondary market. By limiting the fixed rate
residential mortgages in our loan portfolio, we eliminate much
of the long-term risk inherent in fixed rate instruments that
typically have 15- to
30-year
maturities.
|
|
|
|
Using off-balance-sheet derivative instruments. For more
information about this, read Note 6, Derivative and
hedging activities, and the discussion of derivatives and
hedging instruments in this report.
|
Our interest rate risk management objective is to minimize the
negative effect on net interest income from changes in market
interest rates. To achieve this objective, we follow ALCO
guidelines. Under the current policy, our objective is to limit
any reduction in net interest income from changes in market
interest rates to less than 10% in any
12-month
period.
The primary tool we use to assess our exposure to interest rate
risk is a computer modeling technique that simulates the effects
on net interest income of gradual and sustained changes in
market interest rates. We perform simulations quarterly that
compare a stable interest rate environment to multiple
hypothetical interest rate scenarios. As a rule, our model
employs scenarios in which rates gradually move up or down
250 basis points over a period of 10 months.
89
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
For more information about our interest rate risk management
strategies, read the discussion that begins on page 51 of
our
2007 Annual Report to Shareholders
.
Interest
rate risk in the first nine months of 2008
We remained asset-sensitive, as our commercial floating rate
loans continued to reprice more quickly than deposits for most
of the first nine months of 2008. The rapid pace of reductions
in short-term market interest rates 225 basis
points in four moves between January and April 2008
exacerbated this timing mismatch and compressed our net interest
margin in the first half of 2008. Between April and September
2008, as market interest rates remained stable, the disparity
between asset and liability repricing narrowed substantially.
Our use of national funding helped offset the pricing mismatch
somewhat. As of September 30, 2008, approximately
$6.32 billion of commercial loans were repricing within 30
or fewer days, while approximately $4.65 billion of
national CDs and short-term borrowings were repricing in 90 or
fewer days.
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Percentage of Total Balances
|
|
At 9/30/08
|
|
At 12/31/07
|
|
At 9/30/07
|
|
Total loans outstanding with floating rates
|
|
|
73
|
%
|
|
|
71
|
%
|
|
|
71
|
%
|
Commercial loans with floating rates
|
|
|
88
|
%
|
|
|
85
|
%
|
|
|
86
|
%
|
Commercial loans tied to a prime rate
|
|
|
54
|
%
|
|
|
59
|
%
|
|
|
60
|
%
|
Commercial loans tied to the
30-day
LIBOR
|
|
|
40
|
%
|
|
|
36
|
%
|
|
|
35
|
%
|
National CDs and short-term borrowings maturing
in 90 days
|
|
|
95
|
%
|
|
|
78
|
%
1
|
|
|
78
|
%
|
|
|
|
1
|
|
Excluding debt maturing in 2008.
|
We customarily compare the results of our quarter-end interest
rate simulation with the projection as of the prior year-end. In
the first nine months of 2008, we added two projections to our
standard production cycles, mainly because the FOMC enacted
substantial rate reductions in January and October 2008, and we
wanted to assess how these post-quarter-end changes might affect
our interest rate risk position.
The first projection we added was as of January 31, 2008.
That month, the FOMC lowered rates 125 basis points, an
uncharacteristically large cut. In addition, we sold all of our
interest rate floors that month. The second projection we added
was as of October 31, 2008. The FOMC reduced rates a total
of 100 basis points in two downward moves that month.
The FOMC rate reductions also led us to change our gradual
decrease scenario twice. After the FOMC lowered the federal
funds target rate to 2.00% on April 30, 2008, we changed
the range of simulation for our gradual decrease scenario from
250 basis points to 200 basis points. We did this
because the scenario in which rates decline by 250 basis
points would have been unreasonable, since it would have created
negative interest rates within the model.
After the FOMCs rate reductions in October 2008 lowered
the federal funds target rate to 1.00%, we changed the range of
simulation for our gradual decrease scenario again. We changed
it from 200 basis points to 100 basis points, since a
200-basis-point decline would have created negative interest
rates within the model.
As a result of these changes, our downward simulation modeled a
gradual decrease until the federal funds target rate equaled
zero.
As of October 31, 2008, our interest rate risk simulation
model projected that:
|
|
|
|
|
If short-term rates were to increase gradually over a
10-month
period in a series of moves that totaled 250 basis points,
our net interest income would increase 5.54% over the
12 months beginning October 31, 2008.
|
90
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
|
|
|
|
|
If short-term rates were to decrease gradually over a
10-month
period in a series of moves that totaled 100 basis points,
our net interest income would decline by (5.36)% over the
12 months beginning October 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of Interest Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes on
|
|
For the 12 Months
|
|
|
For the 12 Months
|
|
|
For the 12 Months
|
|
|
For the 12 Months
|
|
Net Interest Income
|
|
Beginning 10/31/08
|
|
|
Beginning 9/30/08
|
|
|
Beginning 1/31/08
|
|
|
Beginning 12/31/07
|
|
|
Gradual increase of 250 basis points
|
|
|
5.54
|
%
|
|
|
5.26
|
%
|
|
|
5.47
|
%
|
|
|
4.22
|
%
|
Gradual decrease of 250 basis points
|
|
|
Not applicable
|
|
|
|
Not applicable
|
|
|
|
(11.05
|
)%
|
|
|
(6.67
|
)%
|
Gradual decrease of 200 basis points
|
|
|
Not applicable
|
|
|
|
(7.94
|
)%
|
|
|
Not applicable
|
|
|
|
Not applicable
|
|
Gradual decrease of 100 basis points
|
|
|
(5.36
|
)%
|
|
|
Not applicable
|
|
|
|
Not applicable
|
|
|
|
Not applicable
|
|
The October 2008 FOMC rate reductions, which totaled 100 basis
points, will compress our net interest margin.
We estimate that each 25-basis-point drop in short-term rates
compresses our net interest margin by approximately 3 basis
points and reduces net interest income by approximately
$3 million over a
12-month
period. The pressure on the margin is more dramatic immediately
following a rate change, and then it moderates as liability
rates reset. For more information about this, read the net
interest margin discussion in this report.
It is difficult to forecast accurately how our interest rate
risk position might be affected by other aspects of dislocation
within the credit markets, especially the disparity between the
federal funds target rate and the
30-day
London interbank offered rate (Libor). At September 30,
2008, the federal funds target rate was 2.00%, while the
30-day
Libor
was 3.93%.
This disparity affects us because the pricing on approximately
40% of our commercial loans is tied to the
30-day
Libor. In the near term, upward repricing of these loans will
offset some of the margin compression that will be caused by the
October 2008 FOMC rate reductions. Eventually, however, higher
Libor rates will be a factor in funding costs, which will cause
the margin to narrow. The exact path and speed with which Libor
adjusts will affect the extent and timing of the effect on the
margin.
Should term Libor rates return to their historic relationship
with federal fund rates, we expect approximately 7 basis
points of margin compression over a
12-month
period after all loan and funding repricing has occurred. A
rising interest rate environment would accelerate stabilization
of and potentially improve the margin. For more information
about this, read the disclosures in this report about
quantitative and qualitative market risk.
Our discussion of the interest rate risk simulation contains
forward-looking statements about the anticipated effects on net
interest income that may result from hypothetical changes in
market interest rates. Assumptions about retail deposit rates,
loan prepayments, asset-backed securities, and collateralized
mortgage obligations play a significant role in our interest
rate simulations. Our assumptions about rates and the pace of
changes in payments differ for assets and liabilities in rising
as well as declining rate environments. These assumptions are
inherently uncertain, and the simulations cannot predict
precisely how actual interest rate changes might affect our net
interest income.
FINANCIAL
MARKET RISK
Some of our CCS and WAS revenue, and all of the revenue we
receive from the affiliate money managers, is based on asset
valuations. As a result, the performance of one or more of the
financial markets can affect our noninterest income, positively
or negatively, and ultimately affect our financial results. For
more information about the portions of CCS and WAS revenue that
are based on asset valuations, read the respective discussions
of each business in this report.
Financial markets also determine the valuations of investments
in our securities portfolio, and can have positive or negative
effects on the amount of interest income the securities
portfolio generates. For more
91
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
information about income from the investment securities
portfolio, see the Quarterly analysis of net interest
income in this report.
Our exposure to financial market risk is mitigated by our
business mix, which produces a diversified stream of net
interest and noninterest income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Subject to Financial Market Risk
|
|
2008 Q3
|
|
|
2007 Q3
|
|
|
2008 YTD
|
|
|
2007 YTD
|
|
|
|
(Dollars in millions)
|
|
|
WAS trust and investment advisory revenue
|
|
$
|
39.3
|
|
|
$
|
40.5
|
|
|
$
|
118.7
|
|
|
$
|
115.8
|
|
CCS retirement services revenue
|
|
|
11.3
|
|
|
|
3.0
|
|
|
|
22.0
|
|
|
|
9.6
|
|
CCS investment/cash management revenue
|
|
|
3.5
|
|
|
|
3.0
|
|
|
|
10.3
|
|
|
|
9.4
|
|
Affiliate money manager revenue
|
|
|
4.2
|
|
|
|
4.6
|
|
|
|
12.9
|
|
|
|
15.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue subject to financial market risk
|
|
$
|
58.3
|
|
|
$
|
51.1
|
|
|
$
|
163.9
|
|
|
$
|
150.7
|
|
Total noninterest income (after amortization)
|
|
$
|
87.8
|
|
|
$
|
94.8
|
|
|
$
|
283.7
|
|
|
$
|
283.2
|
|
Percent of total subject to financial market risk
|
|
|
66
|
%
|
|
|
54
|
%
|
|
|
58
|
%
|
|
|
53
|
%
|
Total net interest and noninterest income
|
|
$
|
159.3
|
|
|
$
|
180.0
|
|
|
$
|
498.8
|
|
|
$
|
541.9
|
|
Percent of total subject to financial market risk
|
|
|
37
|
%
|
|
|
28
|
%
|
|
|
33
|
%
|
|
|
28
|
%
|
The percentage of revenue subject to financial market risk was
higher for the third quarter and first nine months of 2008 than
for the corresponding year-ago periods, mainly because:
|
|
|
|
|
The AST acquisition, which we completed on April 30, 2008,
added noninterest income.
|
|
|
|
Compression in the net interest margin reduced net interest
income, even though we recorded significant loan growth.
|
|
|
|
An increase in the provision for loan losses also reduced net
interest income.
|
ECONOMIC
RISK
Changes in economic conditions could change demand for the
services we provide and, ultimately, affect loan and deposit
balances, revenue, net income, and overall results, positively
or negatively.
Among our businesses, Regional Banking has the most exposure to
economic risk, and most of that risk is tied to economic
conditions within the Regional Banking geographic footprint. We
believe this exposure is mitigated by the regions
diversified economy, which provides a degree of economic
stability and helps the region withstand the effects of
downturns in any single sector. We discuss the regional economy
in more detail in the Regional Banking section of this report.
Beyond the mid-Atlantic region, changes in economic conditions
at the national and international level that eliminate or slow
demand for our services could affect all of our businesses, loan
and deposit balances, revenue, net income, and overall results.
OTHER
RISK
For more information about our operational, fiduciary,
regulatory, and legal risk, read the discussions that begin on
page 57 and page 118 of our
2007 Annual Report to
Shareholders
.
|
|
Item 4.
|
Controls
and Procedures.
|
Our chairman and chief executive officer, and our chief
financial officer, evaluated the effectiveness of our disclosure
controls and procedures as of September 30, 2008, pursuant
to Securities Exchange Act
Rule 13a-15(e).
Based on that evaluation, they concluded that our disclosure
controls and procedures were effective in alerting them on a
timely basis to any material information about our company
(including our consolidated subsidiaries) that we
92
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
are required to include in the periodic filings we make with the
Securities and Exchange Commission. There was no change in our
internal control over financial reporting during the third
quarter of 2008 that materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
PART II
OTHER INFORMATION
|
|
Item 1.
|
Legal
Proceedings.
|
We and our subsidiaries are subject to various legal proceedings
that arise from time to time in the ordinary course of business.
Some of these proceedings seek relief or damages in amounts that
may be substantial. Because of the complex nature of some of
these proceedings, it may be a number of years before they
ultimately are resolved. While it is not feasible to predict the
outcome of these proceedings, we do not believe the ultimate
resolution of any legal matters outstanding as of
September 30, 2008, will have a materially adverse effect
on our consolidated financial statements. Furthermore, some of
these proceedings involve claims that we believe may be covered
by insurance, and we have advised our insurance carriers
accordingly.
There were no changes in our risk factors from those disclosed
in our
Form 10-K
for 2007. We discuss these risk factors on pages
41-43
and
page 120 of our
2007 Annual Report to Shareholders.
|
|
Item 2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds.
|
We had no unregistered sales of equity securities in the 2008
third quarter.
ISSUER
PURCHASES OF EQUITY SECURITIES
We did not acquire or repurchase any of our shares during the
2008 third quarter. In April 2002, our Board of Directors
authorized our current
8-million-share
repurchase plan. At September 30, 2008, there were
4,956,204 shares available under this program. For more
information about this program, read the capital resources
discussion in this report.
In the table below, the data in column (d) include shares
available under all compensation plans, the Employee Stock
Purchase Plan, repurchase plans, and other activities that could
affect the maximum number of shares that we may purchase,
including stock grants and forfeitures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d) Maximum
|
|
|
|
|
|
|
|
|
|
(c) Total Number
|
|
|
Number
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
(or Approximate
|
|
|
|
|
|
|
(b)
|
|
|
(or Units)
|
|
|
Dollar Value) of
|
|
|
|
(a) Total
|
|
|
Average
|
|
|
Purchased as Part
|
|
|
Shares (or Units)
|
|
|
|
Number of
|
|
|
Price Paid
|
|
|
of Publicly
|
|
|
that May Yet Be
|
|
|
|
Shares (or Units)
|
|
|
per Share
|
|
|
Announced Plans or
|
|
|
Purchased Under the
|
|
Period
|
|
Purchased
|
|
|
(or Unit)
|
|
|
Programs
|
|
|
Plans or Programs
|
|
|
Month #1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1, 2008 July 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,180,438
|
|
Month #2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 1, 2008 August 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,174,038
|
|
Month #3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 1, 2008 September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,149,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,149,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93
Wilmington
Trust Corporation
Form 10-Q
for the three and nine months ended September 30, 2008
The Federal Reserve Boards policy is that bank holding
companies should not pay dividends unless the institutions
prospective earnings retention rate is consistent with its
capital needs, asset quality, and overall financial condition.
We believe our payment of dividends during the third quarter of
2008 was consistent with the Federal Reserve Boards policy.
|
|
Item 3.
|
Defaults
upon Senior Securities.
|
Not applicable.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders.
|
No matters were submitted to a vote of security holders during
the 2008 third quarter.
|
|
Item 5.
|
Other
Information.
|
We have no information to report in addition to what is
disclosed elsewhere in this report.
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit
|
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation of the
Corporation (Commission File
Number 1-14659)
1
|
|
3
|
.2
|
|
Amended Certificate of Designation of Series A Junior
Participating Preferred Stock of the Corporation (Commission
File Number
1-14659)
2
|
|
3
|
.3
|
|
Amended and Restated Bylaws of the Corporation (Commission File
Number
1-14659)
3
|
|
23
|
|
|
Consent of Berkshire Capital Securities
LLC
4
|
|
31
|
|
|
Rule 13a-14(a)/15d-14(a)
Certifications
4
|
|
32
|
|
|
Section 1350
Certifications
4
|
|
|
|
1
|
|
Incorporated by reference to Exhibit 3(a) to the Report on
Form S-8
of Wilmington Trust Corporation filed on October 31,
1991.
|
|
2
|
|
Incorporated by reference to Exhibit 3.2 to the Quarterly
Report on Form
10-Q
of
Wilmington Trust Corporation filed on May 9, 2005.
|
|
3
|
|
Incorporated by reference to Exhibit 1 to the Current
Report on
Form 8-K
of Wilmington Trust Corporation filed on December 22,
2004.
|
|
4
|
|
Filed herewith.
|
94
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
WILMINGTON TRUST CORPORATION
Name: Ted T. Cecala
|
|
|
|
Title:
|
Chairman of the Board and Chief Executive Officer
|
Date: November 10, 2008
Name: David R. Gibson
|
|
|
|
Title:
|
Executive Vice President and Chief Financial Officer
|
(Principal Financial Officer)
Date: November 10, 2008
95
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