Wilmington Trust Projects Provision Increase
January 07 2009 - 8:11AM
Business Wire
Wilmington Trust Corporation (NYSE:WL) said today that it expects
results for the 2008 fourth quarter to reflect an increase in the
provision for loan losses. In addition, the company may record a
non-cash charge for other-than-temporary impairments of
trust-preferred securities. Wilmington Trust plans to announce 2008
fourth quarter and full-year results on January 30, 2009. Ted T.
Cecala, Wilmington Trust chairman and chief executive officer,
said, �While the economy in the mid-Atlantic region is well
diversified and the downturn has been less severe in this area than
in other parts of the United States, economic conditions have
affected some of our clients negatively, which led us to increase
our provision and reserve for loan losses as we go through this
part of the economic cycle.� Increase in provision for loan losses
Wilmington Trust estimates the 2008 fourth quarter provision for
loan losses will be approximately $67 million. The expected
increase reflects changes in the status of loans in the commercial
and industrial, commercial real estate/construction, and consumer
loan portfolios. These changes were caused by a variety of factors,
most of which were not apparent until late in the fourth quarter.
These factors included rapid deterioration in the economic
environment, downgrades in internal risk ratings, reductions in
appraised values, higher levels of loan charge-offs, and an
increase in nonperforming loans. Of the estimated $67 million:
Approximately 31% is due to downgrades of commercial credits that
previously held pass ratings. Approximately 14% reflects increases
in reserves for past-rated commercial credits due to deteriorating
economic trends. Approximately 22% is associated with previously
identified substandard and watchlisted commercial credits that
deteriorated further in the 2008 fourth quarter. Approximately 33%
is associated with consumer credits. Management estimates net
charge-offs for the 2008 fourth quarter will be approximately $25
million, which would result in a quarterly net charge-off ratio of
approximately 26 basis points. For the 2008 full year, management
estimates net charge-offs will be approximately $52 million and the
net charge-off ratio will be approximately 56 basis points. For the
2008 full year, management estimates the provision for loan losses
will be approximately $115 million. Management expects the reserve
for loan losses at December 31, 2008, to be approximately $157
million, or approximately 1.6% of total loans outstanding.
Other-than-temporary impairment charge At September 30, 2008, the
company's portfolio of trust-preferred securities (TruPS) had an
original cost basis of $326 million and an estimated fair value of
$208 million. All were considered temporarily impaired as of that
date. During the 2008 fourth quarter, Moody�s Investors Service
downgraded certain TruPS in the portfolio to below investment
grade. Ratings by other rating services on these securities
remained above investment grade. As of September 30, 2008, the
downgraded securities had an original cost basis of approximately
$119 million and a market value of approximately $71 million. The
downgrades increase the potential for these securities to become
other-than-temporarily impaired (OTTI). Such a determination would
require the company to record a non-cash OTTI charge in an amount
that reflects any decrease in valuation. Management currently is
evaluating projected cash flows and other factors to estimate fair
market valuations for all of the TruPS in the investment portfolio,
and is unable at this time to estimate the amount of an OTTI charge
for the 2008 fourth quarter. Forward-looking statements This
release may contain forward-looking statements that reflect our
current expectations about our performance. These statements rely
on a number of assumptions and estimates and are subject to various
risks and uncertainties that could cause our actual results to
differ from our expectations. Factors that could affect our
financial results include, among other things, changes in national
or regional economic conditions; changes in market interest rates;
significant changes in banking laws or regulations; increased
competition in our businesses; 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; changes in the market values of securities in
our investment portfolio; unanticipated changes in regulatory,
judicial, or legislative tax treatment of business transactions;
and economic uncertainty created by unrest in other parts of the
world. About Wilmington Trust Wilmington Trust Corporation
(NYSE:WL) is a financial services holding company that provides
Regional Banking services throughout the mid-Atlantic region,
Wealth Advisory Services for high-net-worth clients in 36
countries, and Corporate Client Services for institutional clients
in 86 countries. Its wholly owned bank subsidiary, Wilmington Trust
Company, which was founded in 1903, is one of the largest personal
trust providers in the United States and the leading retail and
commercial bank in Delaware. Wilmington Trust Corporation and its
affiliates have offices in Arizona, California, Connecticut,
Delaware, Florida, Georgia, Maryland, Massachusetts, Minnesota,
Nevada, New Jersey, New York, Pennsylvania, South Carolina,
Vermont, the Cayman Islands, the Channel Islands, London, Dublin,
Frankfurt, Luxembourg, and Amsterdam. For more information, visit
www.wilmingtontrust.com.
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