<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
Commission file number: 0-25442
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO
__________
WILMINGTON TRUST CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 51-0328154
_______________________________ ____________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Rodney Square North, Wilmington, Delaware 19890
___________________________________________________
(Address of principal executive offices)(Zip Code)
(302) 651-1000
_____________________________________________________
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $1.00 Par Value
______________________________
(Title of class)
Name of Exchange on which Registered: N/A
<PAGE> 2
Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of February 28, 1998, the aggregate market value of voting and
non-voting stock held by non-affiliates* of the registrant was $ 2,021,307,812.
Indicate the number of shares outstanding of the registrant's class of common
stock, as of the latest practicable date.
Class Outstanding at February 28, 1998
___________________________ __________________________________
Common Stock, $1 Par Value 33,525,374
Documents Incorporated Part of Form 10-K in which
by Reference Incorporated
___________________________ __________________________________
(1) Portions of Proxy Statement for 1998 Part III
Annual Stockholders' Meeting
of Wilmington Trust Corporation
(2) Portions of Annual Report to Parts I, II
Stockholders for fiscal year ended and IV
December 31, 1997
* For purposes of this calculation, directors and executive officers are deemed
to be "affiliates."
<PAGE> 3
TABLE OF CONTENTS
PART I
Item 1 Business.............................................................1
Item 2 Properties..........................................................31
Item 3 Legal Proceedings...................................................31
Item 4 Submission of Matters to a Vote of Security Holders.................31
PART II
Item 5 Market for Registrant's Common Stock and Related
Stockholder Matters.................................................32
Item 6 Selected Financial Data.............................................33
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operation..................................34
Item 7A Qualitative and Quantitative Disclosure About Market Risk...........34
Item 8 Financial Statements and Supplementary Data.........................34
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................................35
PART III
Item 10 Directors and Executive Officers of the Registrant..................35
Item 11 Executive Compensation..............................................35
Item 12 Security Ownership of Certain Beneficial Owners and
Management..........................................................35
Item 13 Certain Relationships and Related Transactions......................35
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports
on Form 8-K.........................................................35
<PAGE> 4
PART I
ITEM 1 - BUSINESS
Wilmington Trust Corporation, a Delaware corporation (the
"Corporation"), was incorporated under the laws of Delaware in 1985, but
remained inactive until 1990. On August 22, 1991, the Corporation became the
parent holding company of Wilmington Trust Company, a Delaware-chartered bank
and trust company and the Corporation's principal subsidiary (the "Bank"). The
Corporation's principal place of business is located at Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890, and its telephone number
is (302) 651-1000.
The Corporation was organized primarily to become the holding company
of the Bank. As such, the Corporation's principal role at present is to
supervise and coordinate the Bank's activities and provide it with capital and
services. Virtually all of the Corporation's income historically has been from
dividends received from the Bank. The Corporation's current staff principally
consists of its management, who are executive officers generally serving in
similar capacities for the Bank. The Corporation from time to time utilizes the
Bank's support staff.
The Bank was originally incorporated by an Act of the General Assembly
of the State of Delaware, entitled "An Act to Incorporate the Delaware Guarantee
and Trust Company," on March 2, 1901. On March 12, 1903, an amendment was filed
with the office of the Secretary of State to change the Bank's name to
Wilmington Trust Company. Delaware's favorable business and legal environment
have contributed to the Bank's operating results. See "Bank Regulation -- Other
Laws and Regulations."
In October 1993, the Corporation acquired Freedom Valley Bank, a
Pennsylvania-chartered commercial bank with four branches in Chester and
Delaware Counties, Pennsylvania. In January 1994, Freedom Valley Bank acquired
trust powers and, in February 1994, its name was changed to Wilmington Trust of
Pennsylvania. It now has six branch offices. The Corporation supervises and
coordinates the activities of Wilmington Trust of Pennsylvania.
In June 1994, the Corporation formed Wilmington Trust FSB, a
Federally-chartered savings bank with trust powers, headquartered in Salisbury,
Maryland. During 1994, Wilmington Trust FSB acquired one branch of the former
John Hanson Federal Savings Bank and two branch locations of the former Second
National Federal Savings Bank from the Resolution Trust Corporation. In November
1995, Wilmington Trust FSB merged with Wilmington Trust of Florida, National
Association, a national association with trust powers headquartered in Florida,
which previously was a separate subsidiary of the Bank. As a result of that
transaction, Wilmington Trust FSB now also has three branch locations in
Florida. In addition, it operates trust agency offices in Easton, Maryland and
Las Vegas, Nevada. The Bank, Wilmington Trust of Pennsylvania and Wilmington
Trust FSB sometimes are hereinafter collectively referred to as the "Banks."
As of December 31, 1997, the Corporation had total assets of $6.12
billion and total stockholders' equity of $503.0 million. On that date,
33,478,113 shares of the Corporation's
-1-
<PAGE> 5
common stock were issued and outstanding, which were held by 10,164 shareholders
of record. At December 31, 1997, total loans outstanding were approximately $4.0
billion.
Lending Activities
The Bank historically has concentrated its banking activities within
Delaware. Wilmington Trust of Pennsylvania concentrates its banking activities
in Pennsylvania. Wilmington Trust FSB concentrates its banking activities in
Maryland and Florida. The banking operations and the assets and liabilities of
the Bank are significantly more extensive than those of Wilmington Trust of
Pennsylvania or Wilmington Trust FSB.
Residential Mortgage Loans
The Banks directly originate or purchase residential first mortgage
loans. These loans are secured principally by properties located in Delaware,
Pennsylvania, Maryland and Florida. A third-party servicer generally services
residential mortgage loans which are not subsequently resold on behalf of the
Bank.
Management believes that the Banks maintain excellent relationships
with correspondent lenders in their market areas from which they purchase
residential mortgage loans. In addition, the Banks foster public awareness of
their residential mortgage loan products through television and newspaper
advertising and direct mail.
The Banks offer both fixed and adjustable rates of interest on
residential mortgage loans, with terms ranging up to 30 years. Adjustable rate
mortgage ("ARM") loans increase the responsiveness of the Banks' loan portfolios
to changes in market interest rates. However, ARM loans generally carry lower
initial interest rates than fixed-rate loans with comparable maturities. In
light of their sensitivity to changes in interest rates, the terms of ARM loans
may increase the possibility of delinquencies in periods of high interest rates.
The majority of residential mortgage loans the Banks have originated or
purchased in recent periods have been fixed-rate loans.
Commercial Loans
The Banks also originate loans secured by mortgages on commercial real
estate and multi-family residential real estate. Such loans generally involve
greater risks than one-to-four family residential mortgage loans. Commercial and
multi-family real estate loans usually are larger than one-to-four family
residential mortgage loans. Since repayment of loans secured by commercial and
multi-family residential properties often is dependent on the successful
operation and management of those properties, repayment of these loans may be
subject to a greater extent to adverse conditions in the real estate market or
the economy generally than loans secured by one-to-four family residential
properties. In addition, the commercial real estate business is cyclical and
subject to downturns, overbuilding and local economic conditions. The Banks seek
to minimize these risks in a number of ways, including: (1) limiting the size of
their individual commercial and multi-family real estate loans; (2) monitoring
the aggregate size of their commercial and multi-family housing loan portfolios;
(3) generally requiring equity in the property
-2-
<PAGE> 6
securing the loan equal to a certain percentage of the appraised value or
selling price; (4) requiring in most instances that the financed project
generates cash flow adequate to meet required debt service payments; and (5)
requiring that the Banks have recourse to the borrower and guarantees from the
borrower's principals in most instances.
The Banks also make other types of commercial loans to businesses
located in their market areas. Lines of credit, term loans and demand loans are
offered to finance, among other things, working capital, accounts receivable,
inventory and equipment purchases. Typically, such commercial loans have terms
not exceeding seven years, and bear interest either at fixed rates or at rates
fluctuating with a designated interest rate. These loans frequently are secured
by the borrower's assets and, in many cases, are further collateralized by
guarantees of the borrower's owners and/or their principal officers.
Construction Loans
The Banks make loans and participate in financing for the construction
of residences and commercial buildings. The Banks also originate loans for the
purchase of unimproved property to be used for residential and commercial
purposes. In such cases, the Banks frequently provide the construction funds to
improve the properties.
The Banks' residential and commercial construction loans generally have
terms of 24 months or less, and interest rates which adjust from time to time in
accordance with changes in a designated interest rate. Loan proceeds are
disbursed in increments as construction progresses and as inspections warrant.
The Banks finance the construction of individual, owner-occupied houses only if
qualified professional contractors are involved and only on the basis of the
Banks' underwriting and construction loan management guidelines. Construction
loans may be underwritten and structured to convert to permanent loans at the
end of the construction period.
Residential and commercial construction loans afford the Banks the
opportunity to increase the interest rate sensitivity of their loan portfolios
and to receive yields higher than those obtainable on permanent residential
mortgage loans. These higher yields correspond to the higher risks associated
with construction lending. Construction lending risks include those associated
generally with loans on the type of property securing the loan, as well as other
risks. The Banks sometimes agree to fund the interest on a construction loan by
including the interest as part of the total construction loan. A high degree of
skill is required to evaluate accurately the total funds required to complete a
commercial construction project and the post-completion value of the project. As
a result, commercial construction lending often involves the disbursement of
substantial funds with repayment dependent largely on the success of the
ultimate project rather than the ability of the borrower or guarantor to repay
principal and interest. In light of these factors, the analysis of prospective
construction loan projects requires greater expertise than that required for
residential mortgage lending on completed structures. For these reasons, the
Banks engage several individuals experienced in underwriting in connection with
their construction lending.
-3-
<PAGE> 7
Loans to Individuals
The Banks offer both secured and unsecured personal lines of credit,
installment loans, home improvement loans, direct and indirect automobile loans,
student loans and credit card facilities. The Banks view such consumer lending
as a basic part of their program to provide a wide range of financial services
to their customers. The Banks develop public awareness of their consumer loan
products primarily through newspaper advertising and direct mail. Consumer loans
generally have shorter terms and higher interest rates than residential first
mortgage loans. Through their consumer lending, the Banks attempt to enhance the
spread between their average loan yields and their cost of funds, as well as
their matching of assets and liabilities expected to mature or reprice in the
same periods.
The Banks generally receive fees for originating loans and for taking
applications and committing to originate loans. In addition, they receive fees
for issuing letters of credit, as well as late charges and other fees in
connection with their lending activities.
Underwriting Standards
In determining whether or not to originate or purchase a mortgage loan,
the Banks assess both the borrower's ability to repay the loan and the adequacy
of the proposed security for the loan. The Banks generally obtain an appraisal
of real property securing a loan and information concerning the applicant's
income, financial condition, employment and credit history. The Banks require
title insurance insuring the priority of their liens on most loans secured by
first mortgages on real estate and on certain home equity loans, as well as fire
and extended coverage casualty insurance protecting the mortgaged properties.
Under the Banks' underwriting policies, loans must be approved by various levels
of management depending on the amount of the loan.
The Banks' underwriting standards with respect to commercial real
estate and multi-family residential loans are designed to ensure that the
property securing the loan will generate sufficient cash flow to cover operating
expenses and debt service requirements. The Banks review the property's
operating history and projections, comparable properties and the borrower's
financial condition and reputation. The Banks' general underwriting standards
with respect to these loans include: (1) inspecting each property before issuing
a loan commitment and before each disbursement; (2) requiring recourse to the
borrower; (3) requiring the personal guaranty of the borrower's principal(s);
and (4) requiring an appraisal of the property. The Banks monitor the
performance of these loans by inspecting the property securing each such loan.
The Banks limit real estate secured commercial loans to individuals and
organizations with a demonstrated capacity to generate cash flow sufficient to
repay indebtedness under varied economic conditions. The borrower's cash flow is
a critical component of the underwriting process for these loans. The Banks
monitor the performance of these loans by reviewing each such loan at least
annually.
The Banks seek to minimize risks of construction lending in a number of
ways, including: (1) generally requiring the borrower, and in most instances
their principal(s), to guarantee
-4-
<PAGE> 8
personally all or a portion of the loan; (2) controlling the aggregate size of
their construction loan portfolios; and (3) generally requiring a certain level
of equity in the property securing the loan. Construction loans generally are
made to borrowers who are experienced in the type of construction for which the
loan is made.
The Banks require first or junior mortgages to secure home equity
loans. Although this security influences the Banks' underwriting decisions, the
Banks' primary focus in underwriting these loans, as well as their other loans
to individuals, is on the applicant's financial ability to repay the loan. In
the underwriting process for these loans, the Banks obtain credit bureau reports
and verify employment and credit information provided by the borrower. On home
equity loans above a certain level, the Banks require an appraisal of the
property securing the loan and, in certain instances, title insurance insuring
the priority of their liens.
Deposit Activities
Deposit accounts represent the most important source of the Banks'
funds for use in lending and investment activities, and for general business
purposes. The Banks also derive funds from, among other sources, borrowings, the
amortization and repayment of outstanding loans, earnings and maturities of
investment securities.
The Banks' deposit accounts include demand checking accounts, term
certificates of deposit, money market deposit accounts, NOW accounts and regular
savings and club accounts. Retirement plan accounts (including individual
retirement accounts, Keogh accounts and simplified employee pension plans) for
investment in the Banks' various deposit accounts also are offered. Consumer
deposits are attracted principally from the Banks' primary market areas. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity" in the Corporation's Annual Report to Stockholders for
the year ended December 31, 1997.
Personal Trust Activities
The Corporation is one of the nation's largest personal trust
institutions, serving a client base that is national in scope. The Corporation
offers trust administration, investment management, private banking, custody,
estate and financial planning and estate settlement services for its personal
trust clients. A staff of attorneys is available to review wills, trusts, powers
of attorney, living wills and other estate planning documents for the
Corporation's trust clients. The Corporation's offices in Delaware,
Pennsylvania, Maryland and Florida provide convenient access to customers in
these key markets.
Corporate Trust Activities
The Corporation is a major provider of trust and administrative
services for customers who benefit from Delaware's favorable tax and legal
environment. These customers include passive investment companies, business
trusts, limited liability companies and limited partnerships. The Corporation
serves as the owner or indenture trustee for a variety of corporate, municipal
-5-
<PAGE> 9
and derivative securities, including those secured by mortgage-backed
collateral, residential and commercial mortgage loans, leases, credit card
receivables, franchises, timeshares and many other assets that have been
included in innovative financing structures. The Corporation participates as
owner or indenture trustee for equipment leasing trusts involving, among other
things, aircraft, power generating facilities, communication lines, satellites
and vessels. The Corporation also serves as collateral or liquidating trustee in
corporate debt restructurings, reorganizations and merger transactions. These
afford the opportunity to cross-sell custody and asset management services. The
Corporation's office in Nevada also provides these corporate trust services. In
addition, the Corporation provides trust and custody services for a variety of
tax-qualified employee benefit plans, including defined benefit plans, 401(k)
plans and executive compensation arrangements.
Asset Management
The Corporation provides institutional investment advisory services for
clients across the country, including tax-qualified defined benefit and defined
contribution pension plans, endowment and foundation funds and taxable and
tax-exempt cash portfolios. The Corporation also offers the proprietary family
of Rodney Square Mutual Funds. Through its personal investment centers, the
Corporation offers investment services throughout the Banks' branch offices.
As of December 31, 1997, the Corporation in the aggregate had
discretionary trust assets totaling approximately $39 billion and
non-discretionary trust assets totaling approximately $76 billion, for a
combined total of $115 billion. Approximately $20 billion of these were personal
trust assets, of which more than $15.5 billion were discretionary, and more than
$28 billion were ERISA assets, of which approximately $19 billion were
discretionary.
Other Activities
Interest and dividends on investments provide the Banks with a
significant source of revenue. At December 31, 1997, the Banks' investment
securities, including securities purchased under agreements to resell, totaled
$1.70 billion, or 27.7% of their total assets. The Banks' investment securities
are used to meet Federal liquidity requirements, among other purposes.
Investment decisions are made by designated members of the Bank's management.
The Banks have established limits on the types and amounts of investments they
may make.
Subsidiaries
The Bank has 19 wholly-owned subsidiaries, formed for various purposes.
Those subsidiaries' results of operations are consolidated with those of the
Corporation for financial reporting purposes. These subsidiaries provide
additional services to the Corporation's customers. Among those subsidiaries are
the following:
-6-
<PAGE> 10
1. Brandywine Insurance Agency, Inc., a licensed insurance agent and
broker for life, casualty and property insurance;
2. Brandywine Finance Corporation, a finance company;
3. Brandywine Life Insurance Company, Inc., a reinsurer of credit
life insurance written in connection with closed-end consumer
loans made by the Bank;
4. Delaware Corporate Management, Inc., which maintains and provides
custodial and other services for Delaware holding companies
holding intangible assets in Delaware;
5. Rodney Square Distributors, Inc., a registered broker-dealer;
6. Rodney Square Management Corporation, a registered investment
adviser which performs mutual fund investment advisory services
for certain of the mutual funds described below;
7. WTC Corporate Services, Inc., a sales production company for
corporate trust customers;
8. Wilmington Brokerage Services Company, a registered broker-dealer
and a registered investment adviser; and
9. WT Investments, Inc., which holds investments in two asset
management firms and warrants in a broker-dealer.
In addition, Rodney Square Distributors, Inc. serves as the distributor for the
following mutual funds:
1. The Rodney Square Fund, a fund consisting of a money market
portfolio and a United States government securities portfolio;
2. The Rodney Square Tax-Exempt Fund, a fund investing in short-term
municipal obligations whose interest income is principally exempt
from Federal income tax;
3. The Rodney Square Strategic Fixed-Income Fund, a fund consisting
of the Diversified Income Portfolio, which invests primarily in
investment grade, fixed-income securities, and the Municipal
Income Portfolio, which invests primarily in municipal securities
exempt from Federal taxation; and
4. The Rodney Square Multi-Manager Fund, a fund consisting of a
growth portfolio.
In January 1998, a subsidiary of the Corporation acquired a 24%
ownership interest in Cramer Rosenthal McGlynn, LLC, an investment management
firm with $3.8 billion of discretionary assets under management at December 31,
1997. Cramer Rosenthal McGlynn, LLC
-7-
<PAGE> 11
specializes in small- and middle-capitalization companies and has offices in
White Plains and New York City.
Competition
The Corporation believes that the banking market in Delaware is
different from that in most states, in that the deposit and asset sizes of all
of Delaware's banking institutions do not disclose the true nature of
competition within the state. In the 1980s, Delaware's legislature enacted
several banking laws which invited out-of-state bank holding companies to
organize banks located in Delaware, as long as the holding companies did not
operate those banks in ways that competed to the substantial detriment of
indigenous Delaware institutions such as the Bank. During the nonbank phenomena
of the 1980s, five of Delaware's indigenous banks were acquired by entities
which were not bank holding companies. The Corporation, with assets of $6.1
billion at December 31, 1997, is the largest bank holding company in Delaware
providing a full range of commercial and personal banking services.
The Banks have substantial competition for both deposits and loans.
Many of the Banks' competitors are substantially larger and have substantially
greater financial resources than the Corporation and the Banks. The most direct
competition for deposits historically has come from savings banks, savings and
loan associations and commercial banks located in the Banks' principal market
areas. Currently, additional competition for deposits is encountered from
dealers in government securities and deposit brokers serving out-of-area banks.
The Banks compete for deposits by focusing on customer service and offering a
variety of deposit accounts at rates generally competitive with those of other
financial institutions. In 1997, the Bank commenced selling certificates of
deposit in the national deposit markets.
Competition for loans comes principally from savings banks, savings and
loan associations, commercial banks, mortgage banking companies, insurance
companies and other institutional lenders. The Banks compete for loans
principally by the services they provide to borrowers and through the interest
rates and loan fees they charge. See also "Regulation and Supervision of the
Corporation and the Banks." Competition for trust and asset management business
comes principally from banks, trust companies, investment advisors, mutual fund
companies and insurance companies.
Asset Quality
Nonperforming assets, including nonaccruing loans and other real estate
owned, can result in credit losses and require the Corporation to establish
provisions for loan losses. Slow economic conditions or deterioration in
commercial and real estate markets may impair the ability of certain borrowers
to repay their loans in full on a timely basis. In that event, the Corporation
would expect increased levels of nonperforming assets, credit losses and the
need to increase provisions for loan losses.
-8-
<PAGE> 12
To minimize the likelihood and impact of these conditions, the
Corporation regularly monitors the entire loan portfolio to identify potential
problem loans and avoid disproportionately high concentrations of loans to
individual borrowers and industries. An integral part of this process is a
regular analysis of all past due loans and the establishment of provisions for
loan losses. The Corporation's determination of the adequacy of its reserves is
based upon an evaluation of classified loans and other assets, past loss
experience, current economic and real estate market conditions, diversification
of the loan portfolio, detailed loan reviews, the financial and managerial
strength of its borrowers, the adequacy of underlying collateral and any
regulatory recommendations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Asset Quality and Loan Loss
Provision" in the Corporation's Annual Report to Stockholders for the year ended
December 31, 1997.
Staff Members
On December 31, 1997, the Corporation and its wholly-owned subsidiaries
had 2,428 full-time equivalent employees. The Corporation considers its and its
subsidiaries' relationships with these employees to be good. The Corporation and
the Banks provide a variety of benefit programs for these employees, including
pension, profit-sharing, incentive compensation, thrift savings, stock purchase,
group life, health and accident plans.
-9-
<PAGE> 13
Industry Guide 3 Tables
The following table presents a rate/volume analysis of net interest income:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
1997/1996 1996/1995
Increase (Decrease) Increase (Decrease)
due to change in due to change in
----------------------------------------------------------------------------
(in thousands) Volume(1) Rate(2) Total Volume(1) Rate(2) Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Time deposits in other banks $ -- $ -- $ -- $ -- $ -- $ --
Federal funds sold and securities
purchased under agreements to resell (228) 33 (195) 528 (89) 439
- -----------------------------------------------------------------------------------------------------------------------------
Total short-term investments (228) 33 (195) 528 (89) 439
----------------------------------------------------------------------------
U.S. Treasury and government agencies 3,165 903 4,068 13,599 730 14,329
State and municipal * (606) -- (606) (491) 243 (248)
Preferred stock * (299) 147 (152) (1,381) 1,574 193
Asset-backed securities 762 1,656 2,418 (1,739) 956 (783)
Other * (590) 347 (243) (52) (222) (274)
- -----------------------------------------------------------------------------------------------------------------------------
Total investment securities 2,432 3,053 5,485 9,936 3,281 13,217
----------------------------------------------------------------------------
Commercial, financial and agricultural * 4,511 (1,884) 2,627 7,941 (4,009) 3,932
Real estate-construction 1,643 187 1,830 1,222 (811) 411
Mortgage - commercial * 9,388 (1,999) 7,389 5,413 (1,786) 3,627
Mortgage - residential 6,362 (1,519) 4,843 3,910 (703) 3,207
Installment loans to individuals 7,050 (2,038) 5,012 961 (1,161) (200)
- -----------------------------------------------------------------------------------------------------------------------------
Total loans 28,954 (7,253) 21,701 19,447 (8,470) 10,977
- -----------------------------------------------------------------------------------------------------------------------------
Total interest income $ 31,158 $(4,167) $ 26,991 $ 29,911 $(5,278) $ 24,633
============================================================================
Interest expense:
Savings $ 98 $ (64) $ 34 $ (12) $ (260) $ (272)
Interest-bearing demand 1,833 (402) 1,431 704 (995) (291)
Certificates under $100,000 47 (2,425) (2,378) 9,160 1,395 10,555
Certificates $100,000 and over 12,363 771 13,134 6,547 112 6,659
- -----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 14,341 (2,120) 12,221 16,399 252 16,651
----------------------------------------------------------------------------
Federal funds purchased and securities
sold under agreements to repurchase (1,060) 754 (306) (2,511) (6,238) (8,749)
U.S. Treasury demand 612 72 684 (107) (274) (381)
- -----------------------------------------------------------------------------------------------------------------------------
Total short-term borrowings (448) 826 378 (2,618) (6,512) (9,130)
----------------------------------------------------------------------------
Long-term debt 578 (1,183) (605) 1,192 (61) 1,131
- -----------------------------------------------------------------------------------------------------------------------------
Total interest expense $ 14,471 $(2,477) $ 11,994 $ 14,973 $(6,321) $ 8,652
============================================================================
Changes in net interest income $ 14,997 $ 15,981
========= =========
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Variances are calculated on a fully tax-equivalent basis, which includes the
effects of any disallowed interest expense deduction.
1
Changes attributable to volume are defined as a change in average balance
multiplied by the prior year's rate.
2
Changes attributable to rate are defined as a change in rate multiplied by
the average balance in the applicable period for the prior year. A change in
rate/volume (change in rate multiplied by change in volume) has been
allocated to the change in rate.
-10-
<PAGE> 14
The maturity distribution of the Corporation's investment securities held to
maturity follows:
<TABLE>
<CAPTION>
---------------------------------------
Market Amortized Weighted
December 31, 1997 (in thousands) value Cost average yield
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury and government agencies:
After 1 but within 5 years $212,078 $211,924 6.52%
After 10 years 7,088 7,212 7.01
- -------------------------------------------------------------------------------------------------------------------
Total (amortized cost of $267,502 in 1996 and $236,444 in 1995) 219,166 219,136 6.53
- -------------------------------------------------------------------------------------------------------------------
State and municipals:
Within 1 year 1,005 1,000 5.35
After 1 but within 5 years 2,374 2,272 5.86
After 5 but within 10 years 3,932 3,830 6.03
After 10 years 5,884 5,641 6.07
- -------------------------------------------------------------------------------------------------------------------
Total (amortized cost of $19,121 in 1996 and $20,822 in 1995) 13,195 12,743 5.96
- -------------------------------------------------------------------------------------------------------------------
Asset-backed securities:
Within 1 year 124 125 3.34
After 1 but within 5 years 6,663 6,704 5.55
After 5 but within 10 years 25,737 25,637 6.39
After 10 years 68,927 68,662 6.74
- -------------------------------------------------------------------------------------------------------------------
Total (amortized cost of $181,009 in 1996 and $193,269 in 1995) 101,451 101,128 6.59
- -------------------------------------------------------------------------------------------------------------------
Total investment securities held to maturity (amortized cost of
$467,632 in 1996 and $450,535 in 1995) $333,812 $333,007 6.52%
===================================================================================================================
</TABLE>
Note: Weighted average yields are not on a tax-equivalent basis.
-11-
<PAGE> 15
The maturity distribution of the Corporation's investment securities available
for sale follows:
<TABLE>
<CAPTION>
------------------------------------------
Market Amortized Weighted
December 31, 1997 (in thousands) value Cost average yield
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury and government agencies:
Within 1 year $ 96,701 $ 96,600 5.49%
After 1 but within 5 years 498,889 494,403 6.33
After 5 but within 10 years 185,574 184,135 6.71
After 10 years 9,355 9,080 7.18
- ----------------------------------------------------------------------------------------------------------------------
Total (amortized cost of $545,330 in 1996 and $530,804 in 1995) 790,519 784,218 6.33
- ----------------------------------------------------------------------------------------------------------------------
State and municipals:
Within 1 year 674 668 4.90
After 1 but within 5 years 5,493 5,471 4.14
After 5 but within 10 years 540 520 7.68
After 10 years 1,300 1,299 2.46
- ----------------------------------------------------------------------------------------------------------------------
Total (amortized cost of $13,176 in 1996 and $18,533 in 1995) 8,007 7,958 4.16
- ----------------------------------------------------------------------------------------------------------------------
Preferred stock:
Within 1 year 93,464 93,030 5.57
After 1 but within 5 years 31,133 31,485 9.04
After 5 but within 10 years 34,469 30,812 8.75
- ----------------------------------------------------------------------------------------------------------------------
Total (amortized cost of $139,186 in 1996 and $153,894 in 1995) 159,066 155,327 6.93
- ----------------------------------------------------------------------------------------------------------------------
Asset-backed securities:
After 1 but within 5 years 4,898 4,862 6.78
After 5 but within 10 years 46,876 46,348 6.79
After 10 years 226,863 226,314 6.77
- ----------------------------------------------------------------------------------------------------------------------
Total (amortized cost of $16,096 in 1996 and $107,852 in 1995) 278,637 277,524 6.77
- ----------------------------------------------------------------------------------------------------------------------
Other:
Within 1 year 64,239 63,889 5.60
After 1 but within 5 years 15,421 15,263 6.34
After 5 but within 10 years 514 500 7.49
- ----------------------------------------------------------------------------------------------------------------------
Total (amortized cost of $83,161 in 1996 and $92,317 in 1995) 80,174 79,652 5.75
- ----------------------------------------------------------------------------------------------------------------------
Total investment securities available for sale (amortized cost
of $796,949 in 1996 and $903,400 in 1995) $1,316,403 $1,304,679 6.43%
======================================================================================================================
</TABLE>
Note: Weighted average yields are not on a tax-equivalent basis.
-12-
<PAGE> 16
The following is a summary of period-end loan balances by loan category:
<TABLE>
<CAPTION>
December 31 (in thousands) 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 1,207,930 $ 1,237,061 $ 1,159,434 $ 1,006,630 $ 924,886
Real estate-construction 145,097 123,111 104,871 110,587 122,329
Mortgage-commercial 884,146 862,974 770,304 733,154 654,241
Mortgage-residential 813,116 678,800 669,658 618,211 609,108
Installment loans to
individuals 954,486 881,994 823,381 818,599 734,943
- ---------------------------------------------------------------------------------------------------------------
Total loans, gross 4,004,775 3,783,940 3,527,648 3,287,181 3,045,507
Less: unearned income (10,840) (12,456) (5,733) (2,948) (2,214)
- ---------------------------------------------------------------------------------------------------------------
Total loans $ 3,993,935 $ 3,771,484 $ 3,521,915 $ 3,284,233 $ 3,043,293
===============================================================================================================
</TABLE>
-13-
<PAGE> 17
The following table sets forth the allocation of the Corporation's reserve for
loan losses for the past five years:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------------- ----------------- ---------------- ---------------- ----------------
% of loans % of loans % of loans % of loans % of loans
in each in each in each in each in each
category of category of category of category of category of
December 31 (in thousands) Amount net loans Amount net loans Amount net loans Amount net loans Amount net loans
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $27,023 30% $22,770 33% $21,209 33% $21,777 31% $20,804 30%
Real estate-construction 1,977 4 2,000 3 1,697 3 3,696 3 3,979 4
Mortgage-commercial 12,645 22 15,126 23 13,949 22 10,643 22 8,933 22
Mortgage-residential 710 20 700 18 668 19 608 19 605 20
Installment loans to
individuals 12,440 24 12,283 23 11,245 23 9,234 25 8,125 24
Unallocated 9,010 -- 1,482 -- 1,099 -- 2,711 -- 8,917 --
- ----------------------------------------------------------------------------------------------------------------------------------
Total $63,805 100% $54,361 100% $49,867 100% $48,669 100% $51,363 100%
==================================================================================================================================
</TABLE>
-14-
<PAGE> 18
An analysis of loan maturities and interest rate sensitivity of the
Corporation's commercial and real estate construction loan portfolios follows:
<TABLE>
<CAPTION>
----------------------------------------------------
Less than One through Over Total
December 31, 1997 (in thousands) one year five years five years gross loans
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $724,587 $285,279 $198,064 $1,207,930
Real estate-construction 42,338 88,258 14,501 145,097
- ----------------------------------------------------------------------------------------------
Total $766,925 $373,537 $212,565 $1,353,027
==============================================================================================
Loans with predetermined rate $ 86,168 $101,372 $ 72,721 $ 260,261
Loans with variable rate 680,757 272,165 139,844 1,092,766
- ----------------------------------------------------------------------------------------------
Total $766,925 $373,537 $212,565 $1,353,027
==============================================================================================
</TABLE>
The following table presents a comparative analysis of the risk elements
contained in the Corporation's loan portfolio at year-end(1):
<TABLE>
<CAPTION>
-----------------------------------------------------------
December 31 (in thousands) 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccruing $28,669 $40,735 $33,576 $28,851 $21,983
Past due 90 days or more 15,523 20,440 19,346 21,027 14,153
- --------------------------------------------------------------------------------------------------
Total $44,192 $61,175 $52,922 $49,878 $36,136
==================================================================================================
Percent of total loans at year-end 1.11% 1.62% 1.50% 1.52% 1.30%
- --------------------------------------------------------------------------------------------------
Other real estate owned $ 3,738 $ 5,131 $14,288 $17,601 $20,167
==================================================================================================
</TABLE>
- -------------------
1 The Corporation's policy for placing loans in nonaccrual status is
discussed in footnote 1 to the Consolidated Financial Statements contained
in the Corporation's Annual Report to Stockholders for the fiscal year
ended December 31, 1997, which is incorporated by reference herein.
-15-
<PAGE> 19
The following table sets forth an analysis of the Corporation's provision for
loan losses, together with chargeoffs and reserves for the five major portfolio
classifications included in the Corporation's statement of condition(1):
<TABLE>
<CAPTION>
-----------------------------------------------------------
For the year ended December 31 (in thousands) 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reserve for loan losses at beginning of period $54,361 $49,867 $48,669 $51,363 $46,962
- ---------------------------------------------------------------------------------------------------------------
Reserve for loan losses of acquired company -- -- -- -- 3,054
- ---------------------------------------------------------------------------------------------------------------
Loans charged off:
Commercial, financial and agricultural 6,105 3,811 4,333 5,878 2,960
Real estate-construction 184 94 444 46 55
Mortgage - commercial 187 2,475 2,484 934 1,547
Mortgage - residential 236 285 32 182 77
Installment loans to individuals 9,475 7,990 6,989 5,725 5,920
- ---------------------------------------------------------------------------------------------------------------
Total loans charged off 16,187 14,655 14,282 12,765 10,559
-----------------------------------------------------------
Recoveries on amounts previously charged off:
Commercial, financial and agricultural 891 1,160 992 3,126 471
Real estate-construction 1 4 1 -- --
Mortgage-commercial 948 17 25 161 16
Mortgage-residential 1 1 1 3 3
Installment loans to individuals 2,290 1,967 2,181 2,231 1,916
- ---------------------------------------------------------------------------------------------------------------
Total recoveries 4,131 3,149 3,200 5,521 2,406
-----------------------------------------------------------
Net loans charged off 12,056 11,506 11,082 7,244 8,153
- ---------------------------------------------------------------------------------------------------------------
Current year's provision for loan losses 21,500 16,000 12,280 4,550 9,500
- ---------------------------------------------------------------------------------------------------------------
Reserve for loan losses at end of period $63,805 $54,361 $49,867 $48,669 $51,363
===============================================================================================================
Ratio of net loans charged off to average loans 0.31% 0.32% 0.33% 0.23% 0.28%
</TABLE>
- -----------------
1 The factors the Corporation considers in determining the amount of
additions to its allowance for loan losses are discussed on pages 21
and 22 of its Annual Report to Stockholders for the fiscal year ended
December 31, 1997, which are incorporated by reference herein.
-16-
<PAGE> 20
The following table presents a summary of the Corporation's deposits based on
average daily balances over the last three years:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Average Average Average Average Average Average
For the year ended December 31 (in thousands) amount rate amount rate amount rate
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand $ 678,683 -- $ 633,066 -- $ 580,928 --
Interest-bearing deposits:
Savings 360,689 2.35% 356,542 2.36% 357,048 2.44%
Interest-bearing demand 1,078,685 2.54 1,007,652 2.58 981,379 2.68
Certificates under $100,000 1,246,240 5.59 1,245,436 5.79 1,084,165 5.68
Certificates $100,000 and over 506,089 5.65 281,314 5.50 161,403 5.46
- ------------------------------------------------------------------------------------------------------------------------------
Total $3,870,386 $3,524,010 $3,164,923
==============================================================================================================================
</TABLE>
The maturity of the Corporation's time deposits of $100,000 or more is as
follows:
<TABLE>
<CAPTION>
-----------------------------------
Certificates All other interest-
December 31, 1997 of deposit bearing deposits
- --------------------------------------------------------------------
<S> <C> <C>
Three months or less $ 378,562 $ 364,755
Over three through six months 192,172 --
Over six through twelve 44,186 --
months
Over twelve months 21,291 --
- --------------------------------------------------------------------
Total $ 636,211 $ 364,755
====================================================================
</TABLE>
-17-
<PAGE> 21
An analysis of the Corporation's rate-sensitive assets and liabilities follows:
<TABLE>
<CAPTION>
Repricing or Maturity(1)
-------------------------------------------------------------------------------------
1-30 31-90 91-180 181-365
December 31, 1997 (in thousands) Total days days days days
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rate-sensitive assets:
Loans and leases $ 3,993,935 $ 1,679,475 $ 151,259 $ 212,382 $ 224,158
Money market assets 50,000 50,000 -- -- --
Investments 1,649,410 118,093 122,698 163,095 122,095
- ------------------------------------------------------------------------------------------------------------------------------
Total rate-sensitive assets $ 5,693,345 $ 1,847,568 $ 273,957 $ 375,477 $ 346,253
-------------------------------------------------------------------------------------
Rate-sensitive liabilities:
Savings and interest-bearing
demand $ 1,493,004 $ 1,493,004 $ -- $ -- $ --
Certificates under $100,000 1,247,302 168,612 146,895 204,748 358,236
Certificates $100,000 and over 636,211 96,026 282,536 192,172 44,186
Short-term borrowings 1,307,577 771,577 461,000 75,000 --
Other interest-bearing liabilities 43,000 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total rate-sensitive liabilities $ 4,727,094 $ 2,529,219 $ 890,431 $ 471,920 $ 402,422
-------------------------------------------------------------------------------------
Interest-rate swaps (2) $ 275,000 $ 225,000 $ 50,000 $ -- $ --
Interest-rate floors (2) 325,000 50,000 275,000 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Rate-sensitive gap $ (956,651) $ (941,474) $ (96,443) $ (56,169)
===================================================================
Cumulative gap $ (956,651) $(1,898,125) $(1,994,568) $(2,050,737)
===================================================================
Cumulative gap as a percentage
of rate-sensitive assets (16.8)% (33.3)% (35.0)% (36.0)%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Repricing or Maturity(1)
-----------------------------------------------
Total
1 year 1 - 5 Over 5
December 31, 1997 (in thousands) or less years years
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rate-sensitive assets:
Loans and leases $ 2,267,274 $ 777,764 $ 948,897
Money market assets 50,000 -- --
Investments 525,981 974,586 148,843
- ----------------------------------------------------------------------------------------
Total rate-sensitive assets $ 2,843,255 $1,752,350 $1,097,740
-----------------------------------------------
Rate-sensitive liabilities:
Savings and interest-bearing
demand $ 1,493,004 $ -- $ --
Certificates under $100,000 878,491 331,845 36,966
Certificates $100,000 and over 614,920 20,722 569
Short-term borrowings 1,307,577 -- --
Other interest-bearing liabilities -- -- 43,000
- ----------------------------------------------------------------------------------------
Total rate-sensitive liabilities $ 4,293,992 $ 352,567 $ 80,535
-----------------------------------------------
Interest-rate swaps (2) $ 275,000 $ -- $ --
Interest-rate floors (2) 325,000 -- --
- ----------------------------------------------------------------------------------------
Rate-sensitive gap $(2,050,737) $1,399,783 $1,017,205
===============================================
Cumulative gap $ (650,954) $ 366,251
===============================================
Cumulative gap as a percentage
of rate-sensitive assets (11.4)% 6.4%
- ----------------------------------------------------------------------------------------
</TABLE>
1 Certain assumptions are made in assigning assets and liabilities to
specific periods, including use of estimated prepayments for
mortgage-backed securities, the exclusion of seasonal balances, and
adjustment of selected deposit accounts in which inflows and outflows
have not historically been affected by changes in interest rates.
2 Interest rate swaps and floors are used to hedge selected pools of
assets and have a weighted average remaining maturity of approximately
1.1 and 2.5 years, respectively.
-18-
<PAGE> 22
A summary of short-term borrowings at December 31, is as follows (in thousands):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Securities sold U.S. Treasury
Federal funds under agreements demand
purchased to repurchase notes
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1997
Balance at December 31 $1,041,511 $204,776 $61,290
Weighted average interest rate at balance sheet date 5.9% 4.8% 5.2%
Maximum amount outstanding at any month-end $1,041,511 $253,111 $95,000
Approximate average amount outstanding during the period $ 946,161 $195,945 $46,108
Weighted average interest rate for average amounts
outstanding during the period 5.7% 4.8% 5.3%
- -------------------------------------------------------------------------------------------------------------
1996
Balance at December 31 $ 781,900 $201,117 $53,526
Weighted average interest rate at balance sheet date 5.5% 5.2% 5.3%
Maximum amount outstanding at any month-end $1,043,525 $230,906 $95,002
Approximate average amount outstanding during the period $ 977,288 $184,233 $34,241
Weighted average interest rate for average amounts
outstanding during the period 5.6% 4.9% 5.2%
- -------------------------------------------------------------------------------------------------------------
1995
Balance at December 31 $1,006,012 $160,151 $29,389
Weighted average interest rate at balance sheet date 5.8% 5.1% 4.8%
Maximum amount outstanding at any month-end $1,201,675 $230,427 $94,987
Approximate average amount outstanding during the period $1,051,944 $151,428 $36,044
Weighted average interest rate for average amounts
outstanding during the period 6.1% 5.1% 6.0%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Federal funds purchased and securities sold under agreements to repurchase
generally mature within 75 days. U.S. Treasury demand notes mature overnight.
-19-
<PAGE> 23
The following table presents the percentage of the Corporation's funding sources
by deposit type:
<TABLE>
<CAPTION>
---------------------------------
(based on daily average balances) 1997 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Savings 7.13% 7.55% 8.11%
Interest-bearing demand 21.32 21.35 22.28
Certificates of deposit 34.64 32.35 28.28
Short-term borrowings 23.49 25.34 28.14
Demand deposits 13.42 13.41 13.19
- --------------------------------------------------------------------------
Total 100.00% 100.00% 100.00%
==========================================================================
</TABLE>
The following table presents an analysis of the Corporation's return on assets
and return on equity over the last three years:
<TABLE>
<CAPTION>
---------------------------------
1997 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Return on assets 1.87% 1.83% 1.83%
Return on stockholders' equity 22.15 21.38 20.70
Dividend payout 44.76 45.58 45.70
Equity to asset 8.43 8.57 8.82
========================================================================
</TABLE>
-20-
<PAGE> 24
REGULATION AND SUPERVISION OF THE CORPORATION AND THE BANKS
The discussion in this section is a brief summary which does not
purport to be complete, and is qualified in its entirety by reference to
applicable laws, rules and regulations that impact on the business of the
Corporation and the Banks. Those laws, rules and regulations are subject to
change from time to time.
REGULATION OF THE CORPORATION
The Corporation is a bank holding company and a thrift holding company,
and therefore is subject to, among other things, the provisions of the Federal
Bank Holding Company Act (the "BHCA"), the regulations of the Federal Reserve
Board (the "FRB") and the Office of Thrift Supervision (the "OTS") and
Delaware's Banking Code.
FEDERAL LAW
Under the BHCA, the FRB's approval is required before a holding company
may acquire "control" of a bank. The BHCA defines "control" of a bank to include
ownership or the power to vote 25% or more of any class of voting stock of a
bank, the ability to otherwise control the election of a majority of a bank's
directors or the power to exercise, directly or indirectly, a controlling
influence over a bank's management or policies. A bank holding company must
register with the FRB as a bank holding company, and must thereafter file with
the FRB annual and periodic reports and other information which the FRB requires
from time to time. A bank holding company and its subsidiaries also are subject
to continuing regulation, supervision and examination by the FRB under the BHCA
and regulations promulgated thereunder.
Under the BHCA, the following transactions require the FRB's prior
approval: (1) any action which causes a bank or other company to become a bank
holding company; (2) any action which causes a bank to become a subsidiary of a
bank holding company; (3) the acquisition by a bank holding company of direct or
indirect ownership or control of any voting securities of a bank or bank holding
company if the acquisition results in the acquiring bank holding company's
control of more than five percent of the outstanding shares of any class of
voting securities of the target bank or bank holding company; (4) the
acquisition by a bank holding company or one of its subsidiaries, other than a
bank, of all or substantially all of a bank's assets; and (5) the merger or
consolidation of bank holding companies, including a merger through a purchase
of assets and assumption of liabilities.
A bank holding company and its subsidiaries generally may not, with
certain exceptions, engage in, acquire or control, directly or indirectly,
voting securities or assets of a company engaged in any activity other than (1)
banking or managing or controlling banks and other subsidiaries authorized under
the BHCA and (2) any BHCA activity which the FRB determines to be so closely
related to banking or managing or controlling banks as to be a proper incident
thereto. These include any incidental activities which are necessary to carry on
such activities, provided the bank holding company has obtained the FRB's prior
approval for the activity. Under the FRB's regulations, bank holding companies
and their subsidiaries generally are permitted to
-21-
<PAGE> 25
engage in such non-banking activities as: (1) making, acquiring and servicing
loans and other extensions of credit (including factoring, issuing letters of
credit and accepting drafts); (2) performing functions which may be performed by
a trust company; (3) acting as an investment or financial advisor; (4) leasing
personal and real property and acting as agent, broker or advisor in leasing
that property; (5) making equity and debt investments in corporations and
projects designed primarily to promote community welfare; (6) providing to
others certain data processing and data transmission services, facilities, data
bases and access to those services, facilities and data bases; (7) performing
certain insurance agency and underwriting activities directly related to
extensions of credit by the holding company or its subsidiaries and engaging in
insurance agency activities in towns of 5,000 or less; (8) owning, controlling
or operating a savings association which engages only in deposit-taking
activities and lending and other activities permitted for bank holding
companies; (9) providing management consulting advice to certain nonaffiliated
bank and nonbank depository institutions; (10) issuing and selling, at retail,
money orders and similar consumer-type payment instruments, selling United
States savings bonds and issuing and selling travelers' checks; (11) performing
appraisals of real estate and tangible and intangible personal property,
including securities; (12) acting as an intermediary for the financing of
commercial and industrial income-producing real estate; (13) providing certain
securities brokerage services; (14) underwriting and dealing in government
obligations and money market instruments; (15) providing tax planning and
preparation services; and (16) providing check guaranty services to subscribing
merchants. A bank holding company also may file an application for the FRB's
approval to engage, directly or through subsidiaries, in other non-bank
activities which are so closely related to banking as to be a proper incident
thereto. The Corporation has not determined which, if any, of the activities
described above it might seek to engage in other than those in which the Banks
and the Bank's subsidiaries presently engage. There is no assurance that the
Corporation will seek to, or acquire any subsidiaries which, engage in any of
such other activities or that, if the Corporation does so, its efforts will be
successful.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 (the "Interstate Banking Act"), adequately capitalized and managed bank
holding companies are permitted, subject to obtaining regulatory approval and
regardless of certain state law restrictions such as reciprocity requirements
and regional compacts, to acquire a bank in any state. In general, no such
acquisition will be permitted which would result in the acquiring bank holding
company owning 10% or more of insured deposits nationwide or 30% or more of
insured deposits in any state. Certain state law restrictions, such as minimum
age-of-existence requirements of up to five years for target institutions,
continue to apply. States cannot "opt out" of these interstate acquisition
provisions.
In addition, under the Interstate Banking Act, bank holding companies
are permitted, subject to obtaining regulatory approval, to merge banks
operating in different states. States could "opt out" of these provisions before
June 1, 1997, and could "opt in" earlier. If a state "opted out" of these
provisions, out-of-state banks generally cannot merge with banks in that state,
and banks headquartered in that state generally cannot merge with banks in other
states. The Interstate Banking Act does not affect certain state laws setting
minimum age-of-existence requirements for banks to be merged of up to five
years. In addition, in general, no such interstate
-22-
<PAGE> 26
merger will be permitted which would result in the acquiring bank holding
company owning 10% or more of insured deposits nationwide or 30% or more of
insured deposits in any state.
Under the Interstate Banking Act, states may, by express legislation,
permit de novo branching of or acquisitions of existing branches by out-of-state
banks within their borders. In 1995, Delaware opted in to the provisions of the
Interstate Banking Act permitting banks operating in different states to be
merged, but opted out of de novo branching.
Except as otherwise pre-empted by Federal law, the Interstate Banking
Act provides that the laws of the host state generally apply with respect to
interstate branching, community reinvestment, consumer protection or fair
lending, unless the Comptroller of the Currency determines that those laws give
state-chartered banks an unfair advantage over national banks.
As a bank holding company, the Corporation is required to conduct its
operations in a safe and sound manner. If the FRB believes that an activity of a
bank holding company or control of a nonbank subsidiary, other than a nonbank
subsidiary of a bank, constitutes a serious risk to the financial safety,
soundness or stability of a subsidiary bank of the bank holding company and is
inconsistent with sound banking practices or the purposes of the BHCA or certain
other Federal banking statutes, the FRB may require the bank holding company to
terminate the activity or the holding company's control of the subsidiary.
As wholly-owned subsidiaries of the Corporation, the Banks are subject
to Section 106 of the Bank Holding Company Act Amendments of 1970 ("Section
106") relating to tying arrangements. Section 106 and the Federal Reserve
Board's regulations provide generally that a bank may not extend credit, lease
or sell property, furnish any service or fix or vary the consideration for any
of the foregoing on the condition or requirement that (1) the customer obtain
some additional credit, property or service from the bank or one of its
affiliates other than a loan, discount, deposit or trust service; (2) the
customer obtain some additional credit, property or service from the bank or one
of its affiliates; (3) the customer provide some additional credit, property or
service to the bank or one of its affiliates other than those related to and
usually provided in connection with a loan, discount, deposit or trust service;
or (4) the customer not obtain some other credit, property or service from a
competitor of the bank or one of its affiliates other than a condition or
requirement the bank reasonably can impose in a credit transaction to assure the
soundness of the credit. However, a bank may vary the consideration for any
product or package of products based on a customer's maintaining a combined
minimum balance in certain eligible products specified by the bank if: (a) the
bank offers deposits, and all such deposits are eligible products; and (b)
balances in deposits count at least as much as nondeposit products toward the
minimum balance. Certain arrangements otherwise permitted by the Federal Reserve
Board's regulations will terminate if the Federal Reserve Board determines that
the arrangement results in anti-competitive practices.
Sections 23A and 23B of the Federal Reserve Act, applicable to the
Banks, establish standards for the terms of, limit the amount of and establish
collateral requirements with respect to, any loans or extensions of credit to
and investments in affiliates by the Banks. The Banks are "affiliates" of the
Corporation and each other for purposes of the Federal Reserve Act. In
-23-
<PAGE> 27
addition, the Federal Reserve Act and the FRB's regulations limit the amounts
of, and establish required procedures and credit standards with respect to,
loans and other extensions of credit to directors, officers and principal
shareholders of the Corporation and its subsidiaries, as well as to related
interests of those persons.
The FRB has adopted "risk-based" capital standards to assist in
assessing the capital adequacy of bank holding companies and banks under its
jurisdiction. Those risk-based capital standards include both a definition of
capital and a framework for calculating "risk-weighted" assets by assigning
assets and off-balance-sheet items to broad, risk-weighted categories. An
institution's risk-based capital ratio is calculated by dividing its qualifying
capital by its risk-weighted assets. At least one-half of risk-based capital
must consist of Tier 1 capital, as defined below. Additional, supplementary
capital includes, among other things, allowances for loan losses, subject to
certain limits, cumulative perpetual and long-term preferred stock, hybrid
capital instruments such as mandatory convertible debt and limited amounts of
term subordinated debt and intermediate-term preferred stock. The Corporation
and Wilmington Trust of Pennsylvania are subject to the FRB's risk-based capital
standards. At December 31, 1997, the Corporation's and Wilmington Trust of
Pennsylvania's risk-based capital levels were $541.0 million and $18.1 million,
respectively, or 12.38% and 11.13%, respectively, of risk-weighted assets, well
in excess of the level of 10% required for well-capitalized institutions, and
89.89% and 88.65% of such risked-based capital, respectively, consisted of Tier
1 capital.
The FRB also has adopted a minimum ratio of "Tier 1" leverage capital
to total assets to assist in assessing the capital adequacy of bank holding
companies and banks under its jurisdiction. These Tier 1 leverage capital
guidelines are used in the regulatory inspection and supervisory processes, as
well as in the FRB's analysis of applications it receives. Tier 1 leverage
capital includes, among other things, common stockholders' equity, qualifying
cumulative and noncumulative perpetual preferred stock and minority interests in
consolidated subsidiaries. At December 31, 1997, the Corporation's and
Wilmington Trust of Pennsylvania's Tier 1 leverage capital levels were $486.3
million and $16.1 million, respectively, or 8.58% and 7.92%, respectively, of
total assets, well in excess of the level of 5% required for well-capitalized
institutions.
The Corporation's status as a registered holding company under the BHCA
does not exempt it from certain Federal and state laws and regulations
applicable to corporations generally. These include, without limitation, certain
provisions of the Federal securities laws discussed below.
BANK REGULATION
The Bank is a bank and trust company chartered under Delaware law;
Wilmington Trust of Pennsylvania is a bank and trust company chartered under
Pennsylvania law; and Wilmington Trust FSB is a Federally-chartered savings bank
with its headquarters in Maryland and with additional branches in Maryland and
Florida and trust agency offices in Maryland and Nevada. The Banks' deposits are
insured by the FDIC up to applicable limits. The Banks derive lending and
investment authorities primarily from their charters, Delaware's and
Pennsylvania's Banking
-24-
<PAGE> 28
Code, the Federal Home Owners' Loan Act ("HOLA") and applicable laws and
regulations promulgated by Delaware's Bank Commission, Pennsylvania's Department
of Banking and the OTS, as applicable. Each of the Banks has both banking and
trust powers. The Banks are subject to regulation, examination and supervision
by Delaware's Bank Commission and the FDIC, in the case of the Bank, the FRB and
Pennsylvania's Department of Banking, in the case of Wilmington Trust of
Pennsylvania, and the OTS, in the case of Wilmington Trust FSB. Each of those
agencies promulgates regulations and requires that reports be filed describing
the activities and financial condition of banks under its jurisdiction. Each
agency also conducts periodic examinations to determine compliance with various
regulatory requirements and generally supervises the operations of those banks.
The Corporation also is subject to supervision and examination by the OTS and
Delaware's Bank Commission.
FDIC INSURANCE AND REGULATION
Deposits in the Banks are insured by the FDIC up to applicable limits.
Neither the Bank nor Wilmington Trust of Pennsylvania currently pays for FDIC
insurance. The annual premium Wilmington Trust FSB pays for FDIC insurance
currently is $.23 per $100 of insured deposits.
The FDIC's regulations require insured state non-member banks, such as
the Bank, to maintain a minimum Tier 1 leverage capital ratio of at least 4% of
total assets to constitute an adequately-capitalized institution, and 5% of
total assets to constitute a well-capitalized institution. For FDIC-insured
institutions, Tier 1 leverage capital includes, among other things, common
stockholders' equity, qualifying cumulative and noncumulative perpetual
preferred stock and minority interests in consolidated subsidiaries. As of
December 31, 1997, the Bank's Tier 1 leverage capital ratio was 7.78%.
In addition to the FDIC's minimum "core," or Tier 1, leverage capital
requirements, the FDIC has adopted a Statement of Policy on Risk-Based Capital
(the "Statement of Policy"). Under the Statement of Policy, the Bank generally
is required to maintain a minimum risk-based capital ratio of qualifying total
capital to risk-weighted assets of at least 8% of risk-weighted assets to
constitute an adequately-capitalized institution and 10% of risk-weighted assets
to constitute a well-capitalized institution. At least one-half of that capital
must consist of Tier 1 capital. Additional, supplementary capital includes,
among other things, allowances for loan losses, subject to certain limits,
cumulative perpetual and long-term preferred stock, hybrid capital instruments
such as mandatory convertible debt, and limited amounts of term subordinated
debt and intermediate-term preferred stock. Similar to the FRB's risk-based
capital standards, the Statement of Policy defines risk-based capital and
provides a system for calculating risk-weighted assets by assigning assets and
off-balance-sheet items to broad risk categories. The Statement of Policy
applies to, among other institutions, all FDIC-insured, state-chartered banks
which are not members of the Federal Reserve System, and to all circumstances in
which the FDIC must evaluate the capital of a banking organization. The
Statement of Policy is used in the regulatory examination and supervisory
process, as well as in the analysis of applications upon which the FDIC must
act. In light of these and other considerations, banks generally are required to
operate above the minimum risk-based capital levels. Banks contemplating
significant expansion plans, as well as institutions with high or inordinate
levels of risk, are expected to have capital
-25-
<PAGE> 29
commensurate with the level and nature of those risks. As of December 31, 1997,
the Bank's risk-based capital ratio was 11.76% and its Tier 1 capital was
89.36% of its risk-based capital.
The FDIC may impose sanctions on any insured bank which does not
operate in accordance with the FDIC's regulations, policies or directives.
Cease-and-desist proceedings may be instituted against an insured bank or bank
holding company which is believed to be engaged in unsafe and unsound practices,
including violations of laws and regulations. The FDIC also has the authority to
terminate deposit insurance coverage, after notice and hearing, if it determines
that the insured institution is or has engaged in an unsafe or unsound practice
which has not been corrected, is in an unsafe or unsound condition to continue
operation or has violated any law, regulation, rule or order of, or condition
imposed by, the FDIC. The Corporation is not aware of any past or current
practice, condition or violation which might lead to termination of the deposit
insurance coverage of any of the Banks or to any proceeding against any of the
Banks or any of their respective directors, officers or staff members.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"Improvement Act"), among other things, requires annual on-site examinations of
insured depository institutions, and authorizes the Federal examining agency to
take prompt corrective action to resolve an institution's problems. The nature
and extent of the corrective action depends primarily on the institution's
capital level. Such actions could include requiring recapitalization of or a
capital restoration plan from the institution, restricting transactions between
the institution and its affiliates, restricting interest rates, asset growth,
activities and investments in the institution's subsidiaries, ordering a new
election of directors, dismissing directors or senior executive officers and
requiring the employment of qualified senior executive officers. The holding
company of a depository institution may be required to guarantee compliance with
an institution's capital restoration plan and provide assurance of performance
under such a plan. The Improvement Act also: (1) prohibits insured depository
institutions from making capital distributions (including dividends) if, after
the distribution, the institution would be undercapitalized; (2) directs the
Federal banking agencies to monitor closely the condition, plans, restrictions
and requirements of or applicable to undercapitalized institutions and restricts
such institutions' asset growth, branching and new lines of business; and (3)
expands the grounds for appointment of a conservator or receiver for an insured
institution. The Improvement Act generally requires that a receiver be appointed
if the institution does not have tangible equity of at least 2% of its total
assets.
FEDERAL RESERVE BOARD REGULATION
Wilmington Trust of Pennsylvania is a member of the Federal Reserve
System. In addition, although neither the Bank nor Wilmington Trust FSB is a
member of the Federal Reserve System, as FDIC-insured depository institutions,
each of the Banks is subject to Section 19 of the Federal Reserve Act and the
FRB's regulations promulgated thereunder. These require that the Banks maintain
certain reserves against their transaction accounts (primarily checking and NOW
accounts), money market deposit accounts and non-personal time deposits. Since
reserves
-26-
<PAGE> 30
generally must be maintained in cash or in non-interest-bearing accounts, the
effect of these reserve requirements is to increase the Banks' cost of funds.
OFFICE OF THRIFT SUPERVISION REGULATION
The OTS requires thrifts such as Wilmington Trust FSB to maintain a
minimum Tier 1 leverage capital ratio of at least 4% of total assets to
constitute an adequately-capitalized institution and 5% of total assets to
constitute a well-capitalized institution. For OTS-regulated institutions, Tier
1 leverage capital includes, among other things, common stockholders' equity,
qualifying cumulative and noncumulative perpetual preferred stock and minority
interests in consolidated subsidiaries. As of December 31, 1997, Wilmington
Trust FSB's Tier 1 leverage capital ratio was 10.97%.
In addition to the OTS's minimum "core," or Tier 1, leverage capital
requirements, Wilmington Trust FSB generally is required to maintain a minimum
risk-based capital ratio of qualifying total capital to risk-weighted assets of
at least 8% of risk-weighted assets to constitute an adequately-capitalized
institution and 10% of risk-weighted assets to constitute a well-capitalized
institution. For adequately-capitalized institutions, at least 4% of such
capital must be Tier 1 capital, while for well-capitalized institutions at least
6% of such capital must be Tier 1 capital. Additional, supplementary capital
includes, among other things, allowances for loan losses, subject to certain
limits, cumulative perpetual and long-term preferred stock, hybrid capital
instruments such as mandatory convertible debt, and limited amounts of term
subordinated debt and intermediate-term preferred stock. Similar to the FRB's
risk-based capital standards, the OTS defines risk-based capital and provides a
system for calculating risk-weighted assets by assigning assets and
off-balance-sheet items to broad risk categories. Thrifts generally are required
to operate above the minimum risk-based capital levels. Thrifts contemplating
significant expansion plans, as well as institutions with high or inordinate
levels of risk, are expected to have capital commensurate with the level and
nature of those risks. As of December 31, 1997, Wilmington Trust FSB's
risk-based capital ratio was 20.68%, and 93.94% of its capital was Tier 1
capital.
The Home Owners' Loan Act ("HOLA") and the OTS's regulations require
all savings institutions to satisfy one of two Qualified Thrift Lender ("QTL")
tests. To qualify as a QTL, a savings institution must either (1) be deemed a
"domestic building and loan association" under the Internal Revenue Code by
maintaining at least 60% of its total assets in specified types of assets,
including cash, certain government securities, loans secured by and other assets
related to residential real property, educational loans and investments in the
institution's premises or (2) satisfy HOLA's QTL test by maintaining at least
65% of "portfolio assets" in certain "Qualified Thrift Investments." For
purposes of HOLA's QTL test, portfolio assets are total assets less intangibles,
property used by the institution in its business and liquidity investments in an
amount not exceeding 20% of assets. Qualified Thrift Investments are (a) loans
or securities related to domestic residential housing or manufactured housing,
(b) loans to small businesses, student loans and credit card loans and (c)
subject to a limitation equal to 20% of portfolio assets, 50% of the dollar
amount of residential mortgage loans subject to sale under certain conditions,
100% of consumer loans other than those described above and certain other
assets, 200% of the institution's investments in loans to finance "starter
homes" with purchase prices not exceeding
-27-
<PAGE> 31
60% of median value and loans to construct, develop or improve housing and
community service facilities or to finance small business in "credit needy"
areas.
A thrift's aggregate investment in commercial loans, leases and letters
of credit is limited to 10% of its assets, while its aggregate investment in
consumer loans is limited to 30% of its assets.
CHANGE-IN-CONTROL REGULATION
Before obtaining "control" of the Corporation, a potential acquirer
would need to obtain the FRB's prior approval under either Section 3 of the BHCA
or the FRB's regulations promulgated under the Federal Bank Control Act in the
case of an individual acquirer. "Control" of the Corporation for purposes of
Section 3 of the BHCA means (1) ownership, control or the power to vote,
directly or indirectly, 25% or more of any class of the Corporation's voting
stock; (2) control in any manner over the election of a majority of the
Corporation's Board of Directors; (3) the power to exercise, directly or
indirectly, a controlling influence over the management or policies of the
Corporation; or (4) conditioning the transfer of 25% or more of any class of the
Corporation's voting securities upon the transfer of 25% or more of the
outstanding shares of any class of voting securities of another company. With
holdings or control of less than five percent, there is a presumption that there
is no controlling influence over a target's management or policies. As part of
an acquisition by a nonbank holding company, the acquiring company would become
a bank holding company. Its business activities thereby would be limited to
activities which the FRB determines to be so closely related to banking as to be
a proper incident thereto. As part of an acquisition of the Corporation by
another bank holding company, the FRB's approval would be required for the
acquisition of more than five percent of any class of the Corporation's voting
securities.
For acquisitions under the Federal Bank Control Act, the FRB's
regulations provide that any person acting directly or indirectly, or through or
in concert with one or more persons, would need to provide the FRB at least 60
days' written notice before acquiring control of the Corporation, unless certain
exemptions, including acquisitions of the Corporation's voting securities
subject to the FRB's approval under Section 3 of the BHCA discussed above,
apply. The following transactions would constitute, or would be presumed to
constitute, the acquisition of control of the Corporation triggering the 60-day
notice requirement discussed in the preceding sentence: the acquisition of any
voting securities of the Corporation if, after the acquisition, the acquiring
person or persons acting in concert (1) owns, controls or holds the power to
vote 25% or more of any class of the Corporation's voting securities or (2)
owns, controls or holds the power to vote 10% or more, but less than 25%, of any
class of the Corporation's voting securities at a time that the Corporation has
securities registered under Section 12 of the Exchange Act or if no other person
will own a greater percentage of that class of voting securities immediately
after the acquisition.
-28-
<PAGE> 32
DIVIDEND LIMITATIONS
The FRB's "Policy Statement on the Payment of Cash Dividends by State
Member Banks and Bank Holding Companies" sets forth guidelines the FRB believes
a bank or bank holding company should follow in establishing dividend policy.
The FRB's policy generally is that banks and bank holding companies should not
pay dividends except from current earnings and provided the institution's
prospective rate of earnings retention is consistent with the institution's
capital needs, asset quality and overall financial condition at the time of
consideration. FRB policy also is that bank holding companies should be a source
of managerial and financial strength to their subsidiary banks. Accordingly, the
FRB believes that such subsidiary banks should not be compromised by a level of
cash dividends which places undue pressure on their capital or which is funded
through borrowings that weaken the holding company system.
The FDIC can prohibit a bank from paying dividends if, in its opinion,
the payment of dividends would constitute an unsafe or unsound practice. Federal
law also prohibits payment of dividends that would result in a bank failing to
meet its applicable capital requirements. Delaware law restricts the Bank from
declaring a dividend which would impair its stated capital.
OTS regulations limit capital distributions by a savings institution. A
savings institution must give notice to the OTS at least 30 days before a
proposed capital distribution. A savings institution that has capital in excess
of all of its regulatory capital requirements before and after a proposed
capital distribution and that is not otherwise restricted in making capital
distributions may, after such prior notice but without the OTS's approval, make
capital distributions during a calendar year equal to the greater of (1) 100% of
its net income to date during the calendar year plus the amount that would
reduce by one-half its "surplus capital ratio" (the excess capital over its
capital requirements) at the beginning of the calendar year, or (2) 75% of its
net income for the previous four quarters. Any additional capital distributions
would require prior OTS approval.
SECURITIES LAWS
The sale of the Corporation's securities is subject to the registration
requirements of the Securities Act of 1933 and a number of state securities
laws, unless an exemption therefrom is available. In general, those statutes
regulate the sale of securities by issuers and by persons deemed to be in
control of an issuer. In addition, the Corporation's common stock is registered
with the Securities and Exchange Commission, and is subject to the requirements
of the Securities Exchange Act of 1934 (the "Exchange Act") and the regulations
promulgated thereunder regarding periodic reporting to stockholders, proxy
solicitation and other matters. Any tender offer to acquire the Corporation's
securities would be subject to the Exchange Act's limitations and disclosure
requirements.
-29-
<PAGE> 33
OTHER LAWS AND REGULATIONS
The lending and deposit-taking activities of the Corporation's
subsidiaries are subject to a variety of Federal and state consumer protection
laws, including the Equal Credit Opportunity Act (which prohibits discrimination
in all aspects of credit-granting), the Truth-in-Lending Act (which principally
mandates certain disclosures in connection with loans made for personal, family
or household purposes and imposes substantive restrictions with respect to home
equity lines of credit), the Truth-in-Savings Act (which principally mandates
certain disclosures in connection with deposit-taking activities), the Fair
Credit Reporting Act (which, among other things, requires a lender to disclose
the name and address of the credit bureau from whom a lender obtains a report
that resulted in a denial of credit), the Real Estate Settlement Procedures Act
(which, among other things, requires residential mortgage lenders to provide
loan applicants with closing cost information shortly after the time of
application and prohibits referral fees in connection with real estate
settlement services), the Electronic Funds Transfer Act (which, among other
things, requires certain disclosures in connection with electronic funds
transactions) and the Expedited Funds Availability Act (which, among other
things, requires that deposited funds be made available for withdrawal in
accordance with a prescribed schedule and that that schedule be disclosed to
customers).
Under the Community Reinvestment Act (the "CRA") and the Fair Housing
Act, depository institutions are prohibited from certain discriminatory
practices which limit or withhold services to individuals residing in
economically depressed areas. In addition, the CRA imposes certain affirmative
obligations to provide lending and other financial services to such individuals.
CRA performance is considered by all of the Federal regulatory agencies in
connection with reviewing applications to relocate an office, mergers and
acquisitions of financial institutions and establishing new branch or deposit
facilities.
Federal legislation has permanently pre-empted all state usury laws on
residential first mortgage loans made by insured depository institutions in any
state which did not override that preemption. Although some states overrode the
preemption, Delaware, Florida, Maryland and Pennsylvania did not. Accordingly,
there is currently no limit on the interest rate which the Banks can charge on
those loans. In addition, the usury limitations of the Banks' respective home
states apply to all other loans the Banks offer. In today's interest rate
environment, those usury laws do not materially affect the Banks' lending
programs.
The remedies available to a lender upon a default or delinquency with
respect to certain mortgage loans secured by residential real property, and the
procedures by which those remedies may be exercised, also are subject to
limitations imposed by the laws of the states where the real property is
located.
Delaware's business and legal environments historically have
contributed to the Bank's operating results. A substantial percentage of large
pharmaceutical and chemical companies and other Fortune 500 companies are
headquartered in Delaware. Delaware's Court of Chancery is well recognized for
its interpretations of corporate law.
-30-
<PAGE> 34
In addition, Delaware law affords several advantages for trust
administration which have helped contribute to the Corporation's operating
results. In general, a trust governed by Delaware law can be administered more
economically, for a longer period of time and with a more flexible investment
philosophy than in many other jurisdictions. In addition, although some
jurisdictions have attempted to impose taxes on Delaware trusts with
beneficiaries resident in those jurisdictions, Delaware imposes no tax on those
trusts.
ITEM 2 - PROPERTIES
The Corporation, through the Banks and its other subsidiaries, owns
and/or leases buildings which are used in the normal course of their businesses.
The main office of the Corporation as well as of the Bank is located at Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890. The
Corporation and most of its subsidiaries occupy 265,000 square feet of space at
this location, known as the Wilmington Trust Center. This facility is owned by
Rodney Square Investors, L.P., in which the Bank, through one of its
subsidiaries, has a 50% ownership interest. The mortgage for this facility is
carried by the Bank, and had an outstanding balance at December 31, 1997 of
$30,411,953.
A separate, unencumbered, 300,000-square foot operations facility known
as the Wilmington Trust Plaza is owned by a subsidiary of the Bank, and is
located at 301 West Eleventh Street, Wilmington, Delaware 19801.
As of March 20, 1998, the Banks had 65 full-service branch locations.
Twenty-six are in New Castle County, six are in Kent County and 21 are in Sussex
County, Delaware, three are in Chester County and one is in each of Delaware,
Montgomery and Philadelphia Counties, Pennsylvania, one is in Wicomico County
and two are in Worcester County, Maryland, and one is in Martin County, one is
in Palm Beach County and one is in Indian River County, Florida.
Certain of the Corporation's subsidiaries own a total of four
additional locations which are utilized for storage. Other subsidiaries lease
and occupy an additional ten locations.
ITEM 3 - LEGAL PROCEEDINGS
The Corporation and its subsidiaries in the ordinary course of business
are involved in various legal proceedings. While it is not feasible to predict
the outcome of all pending suits and claims, management does not believe that
the ultimate resolution of any of these matters will have a material adverse
effect on the consolidated financial condition of the Corporation.
The Bank is a defendant in a class action lawsuit relating to fees
charged to certain personal trust customer accounts during the period from
August 1983 through May 1987. This suit was brought in Delaware's Court of
Chancery, and was certified as a class action during the fourth quarter of 1997.
The plaintiff is seeking monetary damages equal to the disputed fees of
approximately $8.5 million plus accrued prejudgment interest which approximated
$14 million at October 31, 1997. The Bank is contesting all claims set forth in
this suit and is defending itself vigorously.
-31-
<PAGE> 35
The Bank had not accrued any expenses associated with the outcome of
these various legal proceedings as of December 31, 1997.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders by solicitation
of proxies or otherwise during the fourth quarter of 1997.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Information required by this item is contained on page 23 of the
Management's Discussion and Analysis portion of the Corporation's Annual Report
to Stockholders, which is incorporated herein by reference. See also "Item 1 -
Business."
-32-
<PAGE> 36
ITEM 6 - SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the last five years:
(in thousands, except per share information)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Interest income $ 430,639 $ 402,850 $ 377,341 $ 307,882 $ 290,972
Net interest income 230,016 214,221 197,364 184,330 174,747
Provision for loan
losses 21,500 16,000 12,280 4,550 9,500
Net income 106,044 97,278 90,031 85,169 82,761
Per share data:
Net income-basic 3.15 2.83 2.56 2.37 2.24
Net income-diluted 3.08 2.79 2.53 2.35 2.21
Cash dividends
declared 1.41 1.29 1.17 1.06 0.975
Balance sheet at year end:
Assets $6,122,351 $5,564,409 $5,372,198 $4,742,359 $4,637,756
Long-term debt 43,000 43,000 28,000 -- --
===============================================================================================================
</TABLE>
-33-
<PAGE> 37
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The information required by this item is contained on pages 13 through
29 of the Corporation's Annual Report to Stockholders, which are incorporated
herein by reference.
ITEM 7A - QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
The information required by this item is contained on pages 19 through
21 of the Corporation's Annual Report to Stockholders, which are incorporated
herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information required by this item is contained on the
respective pages indicated of the Corporation's Annual Report to Stockholders
for the year ended December 31, 1997, which are incorporated herein by
reference.
Annual Report
to Stockholders
Page Number
Consolidated Statements of Condition as
of December 31, 1997 and 1996 30
Consolidated Statements of Income
for the years ended December 31,
1997, 1996 and 1995 31
Consolidated Statements of Changes in Stock-
holders' Equity for the years ended
December 31, 1997, 1996 and 1995 32
Consolidated Statements of Cash Flows
for the years ended December 31,
1997, 1996 and 1995 33
Notes to Consolidated Financial
Statements - December 31,
1997, 1996 and 1995 34-50
Report of Independent Auditors 51
Unaudited Selected Quarterly Financial Data 49
-34-
<PAGE> 38
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in or disagreements with accountants.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 401 of Regulation S-K is contained on
pages 3 through 10 of the Corporation's proxy statement for its Annual
Stockholders' Meeting to be held on May 21, 1998 (the "Proxy Statement"), which
are incorporated herein by reference.
Information required by Rule 405 of Regulation S-K is contained on
pages 20 and 21 of the Proxy Statement, which are incorporated herein by
reference.
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this item is contained on pages 11 through
20 of the Proxy Statement, which are incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is contained on pages 2 through 8
of the Proxy Statement, which are incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is contained on page 21 of the
Proxy Statement, which is incorporated herein by reference.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a. The following documents are filed as part of this report:
1. FINANCIAL STATEMENTS. The following Consolidated Financial
Statements and Report of Independent Auditors of Wilmington Trust
Corporation are incorporated by reference in Item 8 above:
-35-
<PAGE> 39
Annual Report
to Stockholders
Page Number
Consolidated Statements of Condition as
of December 31, 1997 and 1996 30
Consolidated Statements of Income for
each of the years in the three-year period
ended December 31, 1997 31
Consolidated Statements of Changes in
Stockholders' Equity for each of the years
in the three-year period ended December 31, 1997 32
Consolidated Statements of Cash Flows for
each of the years in the three-year period
ended December 31, 1997 33
Notes to Consolidated Financial Statements 34-50
Report of Independent Auditors 51
2. FINANCIAL STATEMENT SCHEDULES. No financial statement schedules are
required to be filed as part of this report.
3. FINANCIAL STATEMENT EXHIBITS. The exhibits listed below have been
filed or are being filed as part of this report. Any exhibit will be
made available to any shareholder upon receipt of a written request
therefore, together with payment of $.20 per page for duplicating
costs.
-36-
<PAGE> 40
EXHIBIT
NUMBER EXHIBIT
3.1 Amended and Restated Certificate
of the Corporation(8)
3.2 Amended and Restated Bylaws of the Corporation(8)
4.1 1991 Employee Stock Purchase Plan(1)
4.2 1996 Employee Stock Purchase Plan(8)
4.3 1983 Employee Stock Option Plan(1)
4.4 1988 Long-Term Incentive Stock Option Plan(1)
4.5 1991 Long-Term Incentive Stock Option Plan(1)
4.6 1996 Long-Term Incentive Plan(8)
4.7 Thrift Savings Plan(1)
4.8 Employee Stock Ownership Plan(1)
4.9 Senior Executive Incentive Compensation Plan(6)
10.1 Purchase and Assumption Agreement dated June 18, 1991 by and
between Wilmington Trust Company and Wilmington Savings Fund
Society(2)
10.2 Agreement of Reorganization and Merger dated as of April 8, 1991 by
and among Wilmington Trust Company, Wilmington Trust Corporation
and The Sussex Trust Company(3)
10.3 Deposit Insurance and Transfer and Asset Purchase Agreement among
the Federal Deposit Insurance Corporation in its capacity as
receiver for The Bank of the Brandywine Valley, the Federal Deposit
Insurance Corporation and Wilmington Trust Company dated as of
February 21, 1992(4)
10.4 Agreement of Reorganization and Merger dated as of March 18, 1993
between Wilmington Trust Corporation and Freedom Valley Bank(5)
10.5 Rights Agreement dated as of January 19, 1996 between Wilmington
Trust Corporation and Harris Trust and Savings Bank(7)
10.6 Supplemental Executive Retirement Plan(8)
10.7 Severance Agreement dated as of February 29, 1996 between
Wilmington Trust Company and Ted T. Cecala(8)
10.8 Severance Agreement dated as of February 29, 1996 between
Wilmington Trust Company and Robert J. Christian(8)
10.9 Severance Agreement dated as of February 29, 1996 between
Wilmington Trust Company and Howard K. Cohen(8)
10.10 Severance Agreement dated as of February 29, 1996 between
Wilmington Trust Company and William J. Farrell, II(8)
10.11 Severance Agreement dated as of February 29, 1996 between
Wilmington Trust Company and David R. Gibson(8)
10.12 Severance Agreement dated as of February 29, 1996 between
Wilmington Trust Company and Robert V.A. Harra, Jr.(8)
10.13 Severance Agreement dated as of February 29, 1996 between
Wilmington Trust Company and George W. Helme, IV(8)
-37-
<PAGE> 41
10.14 Severance Agreement dated as of February 29, 1996 between
Wilmington Trust Company and Joseph M. Jacobs, Jr.(8)
10.15 Severance Agreement dated as of February 29, 1996 between
Wilmington Trust Company and John H. Kipp(8)
10.16 Severance Agreement dated as of February 29, 1996 between
Wilmington Trust Company and Hugh D. Leahy, Jr.(8)
10.17 Severance Agreement dated as of February 29, 1996 between
Wilmington Trust Company and Robert A. Matarese(8)
10.18 Severance Agreement dated as of July 18, 1996 between Wilmington
Trust Company and Rita C. Turner(9)
11 Statement re computation of per share earnings(10)
13 1997 Annual Report to Stockholders of Wilmington Trust
Corporation(10)
21 Subsidiaries of Wilmington Trust Corporation(10)
23 Consent of independent auditor(10)
27 Financial data schedule(10)
- ----------
(1) Incorporated by reference to the corresponding exhibit to Amendment No.
1 to the Report on Form S-8 of Wilmington Trust Corporation filed on
October 31, 1991.
(2) Incorporated by reference to the exhibit to the Current Report on Form
8-K of Wilmington Trust Corporation filed on January 2, 1992.
(3) Incorporated by reference to the exhibit to the Current Report on Form
8-K of Wilmington Trust Corporation filed on February 3, 1992.
(4) Incorporated by reference to the exhibit to the Current Report on Form
8-K of Wilmington Trust Corporation filed on February 25, 1992.
(5) Incorporated by reference to the corresponding exhibit to the Annual
Report on Form 10-K of Wilmington Trust Corporation filed on March 23,
1993.
(6) Incorporated by reference to the corresponding exhibit to the Annual
Report on Form 10-K of Wilmington Trust Corporation filed on March 31,
1993.
(7) Incorporated by reference to the exhibit to the Report on Form 8-A of
Wilmington Trust Corporation filed on January 31, 1995.
(8) Incorporated by reference to the corresponding exhibit to the Annual
Report on Form 10-K of Wilmington Trust Corporation filed on March 30,
1996.
(9) Incorporated by reference to the corresponding exhibit to the Annual
Report on Form 10-K of Wilmington Trust Corporation filed on
March 28, 1997.
(10) Filed herewith.
b. The Corporation filed a report on Form 8-K on October 31, 1997
reporting certain developments under Item 5.
-38-
<PAGE> 42
Pursuant to the requirements of Sections 13 and 15(d) of the Securities
Exchange Act of 1934, this Form has been signed by the following persons in the
capacities and on the dates indicated.
/s/ Ted T. Cecala
--------------------------------------
Ted T. Cecala
Director, Chairman of the Board
and Chief Executive Officer
(Date) March 19, 1998
/s/ Robert V.A. Harra, Jr.
--------------------------------------
Robert V.A. Harra, Jr.
Director, President
and Chief Operating Officer
(Date) March 19, 1998
/s/ David R. Gibson
--------------------------------------
David R. Gibson,
Senior Vice President and
Chief Financial Officer
(Date) March 19, 1998
/s/ Robert H. Bolling, Jr.
--------------------------------------
Robert H. Bolling, Jr.
Director
(Date) March 19, 1998
/s/ Carolyn S. Burger
--------------------------------------
Carolyn S. Burger
Director
(Date) March 19, 1998
-39-
<PAGE> 43
/s/ Richard R. Collins
--------------------------------------
Richard R. Collins
Director
(Date) March 19, 1998
/s/ Charles S. Crompton, Jr.
--------------------------------------
Charles S. Crompton, Jr.
Director
(Date) March 19, 1998
/s/ H. Stewart Dunn, Jr.
--------------------------------------
H. Stewart Dunn, Jr.
Director
(Date) March 19, 1998
/s/ Edward B. duPont
--------------------------------------
Edward B. duPont
Director
(Date) March 19, 1998
/s/ R. Keith Elliott
--------------------------------------
R. Keith Elliott
Director
(Date) March 19, 1998
--------------------------------------
Robert C. Forney
Director
(Date) March 19, 1998
-40-
<PAGE> 44
/s/ Andrew B. Kirkpatrick, Jr.
--------------------------------------
Andrew B. Kirkpatrick, Jr.
Director
(Date) March 19, 1998
/s/ Rex L. Mears
--------------------------------------
Rex L. Mears
Director
(Date) March 19, 1998
/s/ Hugh E. Miller
--------------------------------------
Hugh E. Miller
Director
(Date) March 19, 1998
/s/ Stacey J. Mobley
--------------------------------------
Stacey J. Mobley
Director
(Date) March 19, 1998
/s/ Leonard W. Quill
--------------------------------------
Leonard W. Quill
Director
(Date) March 19, 1998
/s/ David P. Roselle
--------------------------------------
David P. Roselle
Director
(Date) March 19, 1998
-41-
<PAGE> 45
/s/ H. Rodney Sharp, III
--------------------------------------
H. Rodney Sharp, III
Director
(Date) March 19, 1998
/s/ Thomas P. Sweeney
--------------------------------------
Thomas P. Sweeney
Director
(Date) March 19, 1998
/s/ Bernard J. Taylor, II
--------------------------------------
Bernard J. Taylor, II
Director
(Date) March 19, 1998
/s/ Mary Jornlin Theisen
--------------------------------------
Mary Jornlin Theisen
Director
(Date) March 19, 1998
/s/ Robert W. Tunnell, Jr.
--------------------------------------
Robert W. Tunnell, Jr.
Director
(Date) March 19, 1998
-42-
<PAGE> 1
EXHIBIT 11
Earnings per share of $3.15 for 1997 were computed by dividing net
income of $106,043,816 by the weighted average number of shares of common stock
outstanding during 1997 of 33,697,258.
<PAGE> 1
Wilmington Trust Corporation
1997 Annual Report
A Vision for the Future, a Strategy for Growth
[WILMINGTON TRUST LOGO]
<PAGE>
TABLE OF CONTENTS
[PORTION OF GRAPH.] The Year in Brief .......................... 1
[PICTURE OF TED T. CECALA.] Letter to
Stockholders ............................. 2
[COMPUTER SCREEN.] Shared Values .............................. 6
[WILMINGTON TRUST LOGO.] Helping Customers Succeed .................. 7
Management's Discussion
and Analysis ............................. 13
Consolidated Financial
Statements ............................... 28
Notes to Consolidated
Financial Statements ..................... 34
Organizational Listings .................... 53
Stockholder Information .................... 57
<PAGE>
THE YEAR IN BRIEF
WILMINGTON TRUST CORPORATION AND SUBSIDIARIES
FOR THE YEAR (in thousands) 1997 1996 Increase
- --------------------------------------------------------------------------------
Net interest income $ 230,016 $ 214,221 7.4%
Provision for loan losses 21,500 16,000 34.4
Other income 157,542 138,237 14.0
Net interest and other income 366,058 336,458 8.8
Other expense 207,671 192,339 8.0
Income before income taxes 158,387 144,119 9.9
Applicable income taxes 52,343 46,841 11.7
Net income 106,044 97,278 9.0
PER SHARE*
- --------------------------------------------------------------------------------
Net income--basic $ 3.15 $ 2.83 11.3%
Net income--diluted 3.08 2.79 10.4
Dividends paid 1.41 1.29 9.3
Book value at December 31 15.02 13.71 9.6
AT YEAR-END (in thousands)
- --------------------------------------------------------------------------------
Assets $6,122,351 $5,564,409 10.0%
Loans 3,993,935 3,771,484 5.9
Reserve for loan losses 63,805 54,361 17.4
Investment securities 1,649,410 1,266,151 30.3
Deposits 4,169,030 3,913,698 6.5
Stockholders' equity 503,007 464,717 8.2
*All per share amounts throughout this report have been adjusted to reflect the
four 100% stock dividends (2-for-1 splits) effected since 1983. Note: Prior
period amounts throughout this report have been restated to reflect the
acquisitions in 1992 of The Sussex Trust Company and in 1990 of Wilmington
Capital Management, Inc. and The Peoples Bank of Harrington under the pooling of
interests method.
<TABLE>
<CAPTION>
<S> <C> <C>
[GRAPH OF RETURN ON ASSETS [GRAPH OF RETURN ON [GRAPH OF NET INCOME FOR
(NET INCOME AS A PERCENTAGE STOCKHOLDERS' EQUITY EACH YEAR FROM 1987 TO
OF AVERAGE ASSETS) FOR EACH (NET INCOME AS A PERCENTAGE 1997, WITH THE FOLLOWING
YEAR FROM 1987 TO 1997, WITH OF AVERAGE STOCKHOLDERS' PLOT POINTS, IN MILLIONS:
THE FOLLOWING PLOT POINTS: EQUITY) FOR EACH YEAR FROM
1987 TO 1997, WITH THE 1987 - $46.72
1987 - 1.50% FOLLOWING PLOT POINTS: 1988 - $55.61
1988 - 1.73% 1989 - $61.19
1989 - 1.70% 1987 - 21.92% 1990 - $68.53
1990 - 1.72% 1988 - 23.38% 1991 - $72.76
1991 - 1.75% 1989 - 22.08% 1992 - $64.01 AFTER CHANGE
1992 - 1.55% AFTER CHANGE 1990 - 22.67% IN ACCOUNTING
IN ACCOUNTING 1991 - 21.09% PRINCIPLE
PRINCIPLE 1992 - 17.44% AFTER CHANGE 1992A - $78.76 BEFORE CHANGE
1992A - 1.90% BEFORE CHANGE IN ACCOUNTING IN ACCOUNTING
IN ACCOUNTING PRINCIPLE PRINCIPLE
PRINCIPLE 1992A - 20.62% BEFORE CHANGE 1993 - $82.76
1993 - 1.96% IN ACCOUNTING 1994 - $85.17
1994 - 1.88% PRINCIPLE 1995 - $90.03
1995 - 1.83% 1993 - 21.12% 1996 - $97.28
1996 - 1.83% 1994 - 20.84% 1997 - $106.04.]
1997 - 1.87%.] 1995 - 20.70%
1996 - 21.38%
1997 - 22.15%.]
</TABLE>
1
<PAGE>
TO OUR STOCKHOLDERS
[PICTURE]
[TED T. CECALA, CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
IN HIS OFFICE IN THE WILMINGTON TRUST CENTER.]
The new strategic direction we put in place for our company a year ago has begun
to produce the anticipated results. In 1997, we achieved new records in
virtually every aspect of our business, while making significant investments
that form the foundation for even stronger growth in the future.
Earnings per share for 1997 were $3.15, up 11% from the $2.83 reported for the
previous year. Net income reached a record $106.0 million, up 9% from the $97.3
million reported for 1996.
Total revenues for the year were $387.6 million, up 10% from the $352.5 million
in 1996. These higher revenues resulted from a 7% increase in net interest
income, up to $230.0 million from the $214.2 million reported last year,
combined with a 14% increase in total other income, up to $157.5 million from
the $138.2 million reported last year. Total assets at year-end were $6.1
billion, total deposits were $4.2 billion, and stockholders' equity reached
$503.0 million.
Return on average stockholders' equity was 22.15% and return on average assets
for the year was 1.87%, compared to 21.38% and 1.83%, respectively, reported a
year ago. We have now recorded our 13th consecutive year that return on equity
2
<PAGE>
has exceeded 20%, our 16th consecutive year of record performance and increased
dividends.
This performance once again earned Wilmington Trust a place on the Keefe,
Bruyette & Woods "Honor Roll," which recognizes banking institutions whose
earnings per share have increased for at least ten consecutive years. We were
among 11 banks named to the Honor Roll last year, marking our sixth consecutive
appearance.
FOCUSED ON GROWTH
Amidst the fierce competition in the financial services landscape, Wilmington
Trust has focused on building on our strong reputation as a fiduciary and
investment manager in new markets. We are expanding our presence in areas of the
country that offer the greatest potential, such as New York, California,
Florida, and regions in Maryland and Pennsylvania that are contiguous to
Delaware. This expansion allows us to offer our unique combination of
experience, knowledge, capabilities and Delaware advantages to a much larger
number of customers.
<TABLE>
<CAPTION>
<S> <C>
Our strategies for growth also call for selected investments in other firms that [GRAPH OF NET INCOME
complement our company's strengths. A recent step in this strategy was our PER SHARE FOR EACH
investment in Cramer Rosenthal McGlynn, an investment advisory firm located in YEAR FROM 1987 TO
New York. They bring a proven, value-oriented investment approach specializing 1997, WITH THE
in small- and medium-capitalization companies that provide long-term growth FOLLOWING PLOT POINTS:
potential. Their investment approach is an excellent addition to our investment
services, and their commitment to building lasting relationships with their 1987 - $1.21
clients meshes well with our culture and approach to marketing our services. In 1988 - $1.45
conjunction with this new alliance, we have selected a location adjacent to 1989 - $1.59
Cramer Rosenthal McGlynn at 520 Madison Avenue in New York City to house a 1990 - $1.81
fiduciary and private banking group. Combined, these provide us with an 1991 - $1.92
excellent foothold in the nation's financial capital. 1992 - $1.70 AFTER CHANGE
IN ACCOUNTING
Our growth plans require a disciplined approach that focuses our efforts on PRINCIPLE
businesses where we believe we can compete successfully and bring superior value 1992A - $2.09 BEFORE CHANGE
to our customers. In 1997, we spent considerable time evaluating our mix of IN ACCOUNTING
PRINCIPLE
1993 - $2.24
1994 - $2.37
1995 - $2.56
1996 - $2.83
1997 - $3.15.]
</TABLE>
3
<PAGE>
businesses, and decided to exit several businesses that were not strategically
important to us, such as shareholder services, precious metals and mutual fund
processing. At the same time, we increased investments to build our fiduciary,
investment management and private banking services significantly. This process
of evaluating our business mix and finding more efficient ways to operate is a
continuing one at Wilmington Trust.
[PICTURE]
[ROBERT V. A. HARRA, JR., PRESIDENT AND CHIEF OPERATING OFFICER,
OUTSIDE THE RECENTLY COMPLETED WILMINGTON TRUST PLAZA.]
PEOPLE BEHIND
THE PERFORMANCE
Many people believe that it is location or technology that makes a company
successful. I do not. Our greatest asset is the people who work at our company
each and every day. I would like to recognize the Wilmington Trust team, whose
exceptional efforts have produced this past year's accomplishments and will
contribute to our company's success in the years ahead. Our people have
enthusiastically embraced the challenges before them and have demonstrated
tremendous innovation and teamwork in meeting these challenges.
I would also like to express sincere appreciation to the entire Board of
Directors and especially to two Board members who will retire from the Board in
early 1998: Robert H. Bolling, Jr., and Bernard J. Taylor, II.
4
<PAGE>
Mr. Bolling will retire as the longest-term current Board member, having
joined the Board in 1971. He has served on our Board with distinction and has
participated in the reshaping of our company.
Mr. Taylor served as Chief Executive Officer from 1979, and as Chairman from
1980, until his retirement in 1992. During that period, Wilmington Trust's
market capitalization increased from $65 million to over $1.1 billion. He has
been a pivotal figure in the history of Wilmington Trust and set our
organization on its current path toward growth during his highly successful
tenure. This extraordinary record is a tribute to his outstanding leadership.
We will miss the seasoned guidance of these two leaders and offer our thanks for
their many contributions.
I am also pleased to announce that H. Rodney Sharp, III, has been elected to the
Wilmington Trust Board of Directors. Mr. Sharp currently serves as a director of
E. I. du Pont de Nemours and Company, and brings valuable experience and insight
that will help guide the continued growth of our organization. We are delighted
to have him on our Board.
BUILDING ON MOMENTUM
I am very optimistic about the future of our company. Without a doubt, 1998 will
be a challenging year in the financial services arena, but I believe we have set
our course in a direction that offers significant opportunities well matched to
our company's strengths. We have the momentum that enables us to meet the
challenges in our rapidly changing industry. With our talented, dedicated team
committed to helping our customers succeed, we can continue our exceptional
record of success in the future.
On behalf of the entire Wilmington Trust organization, I thank you for your
continued confidence and look forward to sharing this exciting future with you.
Ted T. Cecala
Chairman and Chief Executive Officer
5
<PAGE>
SHARED VALUES
[PICTURE]
[AT CRAMER ROSENTHAL MCGLYNN'S NEW YORK OFFICES (L-R):
RONALD H. MCGLYNN, PRESIDENT AND CHIEF EXECUTIVE OFFICER; TED T. CECALA;
ROBERT V. A. HARRA, JR.; AND GERALD B. CRAMER, CHAIRMAN.]
[PICTURE]
[IN THE TRADING ROOM OF CRAMER ROSENTHAL MCGLYNN (L-R):
EUGENE A. TRAINOR, III, SENIOR VICE PRESIDENT, CRAMER ROSENTHAL MCGLYNN;
ROBERT J. CHRISTIAN, SENIOR VICE PRESIDENT AND CHIEF INVESTMENT OFFICER,
WILMINGTON TRUST; AND ARTHUR J. PERGAMENT, SENIOR VICE PRESIDENT, CRAMER
ROSENTHAL MCGLYNN.]
WILMINGTON TRUST
AND CRAMER ROSENTHAL
MCGLYNN
When Wilmington Trust acquired a 24% stake in New York's Cramer Rosenthal
McGlynn, LLC, it gained a partner whose philosophy, values and clientele are
very much like its own.
Cramer Rosenthal McGlynn has established a long track record of excellence in
serving the special needs of high net worth clients, as well as foundations,
endowments and pension plans. It has also built a reputation for discretion and
confidentiality as it quietly helps clients pursue their long-term goals.
The firm is known for personalized service, tailoring its equity, fixed income
and private investment portfolios to the needs of each client, and maintains
close relationships that are based on continuous communication.
In the words of Gerald B. Cramer, who founded the firm in 1973 with Edward J.
Rosenthal and Ronald H. McGlynn, "Our partnership with Wilmington Trust will
provide our clients with preferred access to the fiduciary services of one of
America's oldest and most highly regarded trust companies. It represents an
outstanding opportunity for both organizations and exciting new possibilities
for our clients."
6
<PAGE>
HELPING CUSTOMERS SUCCEED
The mission of Wilmington Trust is to help our customers succeed. It is a goal
we meet by providing superior banking, trust and investment services, along with
a level of personalized service that few institutions offer today. In the pages
ahead, we profile a few examples of how our efforts are making a real difference
in the lives of individuals and companies we serve.
REGIONAL BANKING SERVICES
Wilmington Trust continues to be the most prominent independent banking
institution in its region, offering a full range of financial solutions that
include loans, deposit accounts and transaction accounts. We also meet the
growing demand for stocks, bonds, mutual funds, annuities and insurance programs
through our Wilmington Brokerage Services Company and the Personal Investment
Centers located in several Wilmington Trust branch offices.
[THOMAS DRAPER (L) AND DAVID BURTON
IN MILFORD, DELAWARE.]
[PICTURE]
INVESTING
IN A COMMUNITY'S
RENAISSANCE
RESTORING A CITY
Wilmington Trust's unique relationship with its home state is exemplified by our
role in the restoration of historic Milford, Delaware. The project was conceived
by two local businessmen: David Burton, owner of the Milford automotive
dealership I.G. Burton; and Thomas Draper, president of Draper Communications,
Inc., the owner of WBOC-TV, Salisbury, Maryland.
Under the leadership of these energetic entrepreneurs, the city of Milford has
experienced an impressive revival. Older buildings have been transformed into
modern office centers. "Pocket parks" have been created and entire city blocks
have been brought back to life.
7
<PAGE>
Wilmington Trust has provided the financing for much of this project, which
David Burton emphasizes is "very conservative" from a financial standpoint.
"We're businessmen," he explains, "so we have always insisted that any
renovations must be absolutely sound financially. But once that criterion has
been met, our interest is to leave something behind here in Milford that allows
our town to live."
A SHARED VISION
"Wilmington Trust shares our vision," Mr. Burton adds. "While they have been
a prudent financial partner, I think they are also acting upon the larger
concept of what their investment means to the community."
Tom Draper agrees. "This is an investment of the heart, as well as the
pocketbook," he says. "Restoring an urban area can be difficult, but with the
bank's help, we've been able to make it work. For us, and for the city of
Milford, the relationship with Wilmington Trust has been a very rewarding
one."
GEOGRAPHIC EXPANSION
Wilmington Trust has been expanding its service model to other states with high
concentrations of successful individuals and businesses.
This strategy has taken us across our immediate borders into Pennsylvania, where
we now operate four banking offices in Delaware and Chester counties as well as
two Financial Management Centers in Philadelphia and the Main Line suburb of
Haverford. We have also expanded in nearby Maryland, where we recently opened a
fourth office, in the growing community of Easton. We offer the services of
relationship banking teams, which coordinate a full range of private banking,
commercial banking and personal trust services.
BEYOND OUR REGION
Wilmington Trust has established a presence in New York, Nevada and Florida and
expects to open an office in California, a leading region of personal wealth.
8
<PAGE>
CELEBRATING
THE GROWTH OF
THEIR COMPANY
[PICTURE]
[AT THE DEDICATION OF VERTEX'S NEWEST BUILDING (FRONT ROW, L-R): STEFANIE LUCAS,
RAY WESTPHAL, ANTOINETTE WESTPHAL, AMANDA RADCLIFFE AND JEFF WESTPHAL.]
The nation's single-richest metropolitan market is New York City, one of the
world's financial centers. Wilmington Trust made a commitment to this market by
creating an alliance with Cramer Rosenthal McGlynn and will soon open an office
adjacent to Cramer Rosenthal McGlynn's Madison Avenue location, offering
personal and corporate trust services.
AN ENTREPRENEURIAL FOCUS
Wilmington Trust is focused on serving the needs of closely held companies and
their owners, who represent the fastest-growing portion of the affluent market.
A prime example is the Westphal family of southeastern Pennsylvania, whose
company, Vertex Inc., is a leading provider of tax compliance software solutions
used by many of America's largest corporations. Founded in the 1970s by chairman
Ray Westphal, the company has tripled in size since 1990 and currently employs
260 people. Today, Ray's son Jeff serves as the company's president, while wife
Antoinette and daughters Amanda Radcliffe and Stefanie Lucas serve as directors.
Wilmington Trust has been instrumental in helping the Westphal family coordinate
its closely intertwined corporate banking, personal banking and trust
relationships. Services we provide include personal banking accounts, personal
trust and estate planning, commercial lending, and residential mortgages. The
9
<PAGE>
bank has also provided construction financing for the company's newest building,
which was recently completed.
STRATEGIC IMPORTANCE
"As a closely held private business," Ray Westphal says, "our primary banking
relationship has strategic importance to our company. Wilmington Trust has
demonstrated insight into our unique needs, which is why we recommend the bank
highly to others with similar financial management challenges."
The Westphal family also values Wilmington Trust's personal approach which,
Stefanie Lucas points out, extends all the way to senior management. "We feel
that all levels of the bank truly know us and know Vertex," she says.
Jeff Westphal adds, "Wilmington Trust's ability to manage our personal and
corporate banking through a single point of contact has been a great asset to
our family and our company."
PERSONAL TRUST AND PRIVATE BANKING SERVICES
Wilmington Trust was founded in 1903 to serve the financial needs of some of
America's wealthiest families. We currently rank as one of the largest personal
trust institutions in the nation, with $20 billion in personal trust assets.
Our personal trust and private banking services are truly international in
scope, with clients in all 50 states and several foreign countries.
The services we provide--trust administration, investment management, private
banking, custody services, tax planning, financial planning and estate
settlement--help clients maximize their holdings through generations, while
minimizing the effects of taxes.
SERVING FOUR GENERATIONS
That these products and services make a real difference in people's lives is
evident from the Broll family, whose patriarch, Charles Broll, is the former
co-owner of a successful bottling company.
Mr. Broll first selected Wilmington Trust to assist with his parents' financial
affairs, having conducted a rigorous process of "due diligence" on regional
banking and trust institutions. It is a decision that has now extended across
four generations.
10
<PAGE>
"I was so happy with the bank's performance for my parents," Mr. Broll explains,
"that I later chose them to handle the trusts that I have established for my
children and grandchildren."
While he values the ongoing performance and personalized service that Wilmington
Trust provides, Mr. Broll places an equally high value on the bank's tradition
of independence and integrity. "The word trust," he says, "is both a noun and a
verb. I've found both in Wilmington Trust."
[THE BROLL FAMILY AT THEIR ARIZONA HOME. STANDING, L-R:
JEFF LYTLE, PRIDE COTTEN, CHARLES BROLL, JR.,
CHARLES BROLL AND TURNER BROLL.
SEATED: MEREDITH LYTLE WITH LUCY, LANE AND SAM.]
[PICTURE]
PERFORMANCE
AND SERVICE FOR
FOUR GENERATIONS
CORPORATE FINANCIAL SERVICES
Companies across America turn to Wilmington Trust for a variety of advanced
corporate financial services and for unparalleled expertise in navigating
Delaware's unique tax and regulatory environment.
Wilmington Trust is a recognized leader in the establishment and administration
of investment holding companies, business trusts, limited liability companies
and limited partnerships.
We are also a leader in providing asset management services to corporations,
municipalities, endowments and institutional investors nationwide. This business
sector requires a disciplined investment approach, along with impeccable
attention to detail, both of which are strengths of the Wilmington Trust team.
Other corporate trust services include assistance in the leasing or financing of
major capital equipment, such as aircraft, ships, railcars, power plants and
communications equipment.
11
<PAGE>
EMPLOYEE BENEFIT PROGRAMS
One of Wilmington Trust's most rapidly growing corporate trust areas is that of
employee benefit trusts, in which we provide fiduciary services for a variety of
company-sponsored retirement plans.
Volvo Cars of North America, the New Jersey-based subsidiary of Sweden's leading
automobile manufacturer, is a satisfied client of these specialized services.
HELPING EMPLOYEES
PLAN FOR THE FUTURE
[PICTURE]
[AT VOLVO CARS OF NORTH AMERICA (L-R): MICHAEL THOMAS,
DEPUTY GENERAL COUNSEL; ANTHONY CICCAGLIONE,
MANAGER OF CORPORATE
ACCOUNTING AND REPORTING; CHARISSE RODGERS,
FINANCIAL SERVICES OFFICER,
WILMINGTON TRUST;
JOSEPH AVALLONE,
FINANCIAL REPORTING
MANAGER.]
A STRONG REPUTATION
According to Joe Avallone, the company's Financial Reporting Manager, "We chose
Wilmington Trust based on its strong reputation in the industry and have been
very glad we did."
"Our account can be fairly complicated to administer," he explains. "For
example, it is based on the American Depository Receipts of a preferred stock
that is issued in Sweden. In addition, there have been numerous changes in our
stock over the years due to divestitures, warrants and other factors. Through it
all, Wilmington Trust's people have been very responsive to our needs and very
knowledgeable as to how to deal with these special issues."
CREATING VALUE
As these examples show, a financial institution is more than just a business. It
is a partner in realizing hopes and ambitions, both personal and corporate.
Wilmington Trust never loses sight of its role, and continually seeks new ways
to fulfill it more effectively.
By focusing on our customers and helping them succeed, we in turn increase the
success of our organization, and enhance shareholder value. In the years ahead,
we will continue to build on our strategy of putting the customer first, in
order to create even greater value in the future.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
WILMINGTON TRUST CORPORATION AND SUBSIDIARIES
SUMMARY
1997 marked the sixteenth consecutive year in which the Corporation has posted
record earnings.(1) Net income for 1997 reached a record $106.0 million, or
$3.15 per share. This was a 9% increase over the $97.3 million, or $2.83 per
share, reported for 1996.
These improvements were attributable to growth in both of the major components
of the Corporation's income. Net interest income increased 7% to $230.0 million,
an increase of $15.8 million over the $214.2 million reported for 1996.
Noninterest revenues increased 14% to $157.5 million, an increase of $19.3
million over the $138.2 million reported for 1996.
The provision for loan losses for 1997 was $21.5 million, an increase of $5.5
million, or 34%, over the $16.0 million provision for 1996.
Operating expenses for 1997 were $207.7 million. This was an increase of $15.4
million, or 8%, over the $192.3 million reported for 1996. The provision for
income taxes was $52.3 million, an increase of $5.5 million, or 12%, over the
$46.8 million reported for 1996. These results produced a return on average
stockholders' equity of 22.15%, above the 21.38% reported for last year, and
marked the thirteenth consecutive year that return on equity has exceeded
20%.(1) The return on average assets for 1997 was 1.87%, up slightly over the
1.83% for a year ago.
The Corporation maintained its high level of productivity during 1997. The net
profit margin (measured by net income as a percentage of the sum of net interest
and noninterest income) for 1997 was 27.4%, down slightly from the 27.6%
reported for 1996. Productivity for 1997, as measured by net income per staff
member, was $44,000, up from the $40,000 reported for 1996.
Statistical disclosures required of bank holding companies by Industry Guide 3
are included in the Corporation's Annual Report on Form 10-K for 1997.
The following table presents comparative five-year average balance sheets and
income statements, as well as interest income and expense and respective yields
and costs of funds for those years.
- ---------------------------
(1)Based upon income before cumulative effect of change in accounting principle.
[GRAPH OF NET INCOME [GRAPH OF NET PROFIT
PER STAFF MEMBER FOR MARGIN (NET INCOME AS
EACH YEAR FROM 1987 A PERCENTAGE OF OPERATING
TO 1997, WITH THE REVENUES) FOR EACH YEAR
FOLLOWING PLOT POINTS, FROM 1987 TO 1997, WITH
IN THOUSANDS: THE FOLLOWING PLOT POINTS:
1987 - $23.38 1987 - 26.13%
1988 - $25.45 1988 - 28.72%
1989 - $28.16 1989 - 28.53%
1990 - $31.45 1990 - 29.34%
1991 - $32.88 1991 - 28.51%
1992 - $29.26 AFTER CHANGE 1992 - 23.24% AFTER CHANGE
IN ACCOUNTING IN ACCOUNTING
PRINCIPLE PRINCIPLE
1992A - $36.00 BEFORE CHANGE 1992A - 28.59% BEFORE CHANGE
IN ACCOUNTING IN ACCOUNTING
PRINCIPLE PRINCIPLE
1993 - $36.72 1993 - 28.69%
1994 - $36.98 1994 - 28.64%
1995 - $38.61 1995 - 27.70%
1996 - $40.23 1996 - 27.60%
1997 - $43.68.] 1997 - 27.36%.]
13
<PAGE>
<TABLE>
<CAPTION>
1997 1996
------------------------------------ ------------------------------------
Average Income/ Average Average Income/ Average
(in thousands; rates on tax-equivalent basis) balance expense rate balance expense rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Time deposits in other banks $ -- $ -- --% $ -- $ -- --%
Federal funds sold and securities
purchased under agreements to resell 22,369 1,280 5.72 26,459 1,475 5.57
- ------------------------------------------------------------------------------ ------------------------
Total short-term investments 22,369 1,280 5.72 26,459 1,475 5.57
----------------------------------------------------------------------------
U.S. Treasury and government agencies 868,296 55,579 6.41 818,585 51,511 6.30
State and municipal(1) 27,918 2,223 7.99 35,473 2,829 8.00
Preferred stock(1) 131,693 9,906 7.63 133,322 10,058 7.51
Asset-backed securities 272,527 17,581 6.46 259,071 15,163 5.85
Other(1) 85,865 5,078 5.93 96,556 5,321 5.53
- ------------------------------------------------------------------------------ ------------------------
Total investment securities 1,386,299 90,367 6.53 1,343,007 84,882 6.33
----------------------------------------------------------------------------
Commercial, financial and agricultural 1,211,703 105,758 8.73 1,160,899 103,131 8.88
Real estate--construction 131,745 12,980 9.85 114,827 11,150 9.71
Mortgage--commercial 904,063 85,260 9.43 806,782 77,871 9.65
Mortgage--residential 764,246 58,406 7.64 683,095 53,563 7.84
Installment loans to individuals 909,736 85,953 9.45 836,827 80,941 9.67
- ------------------------------------------------------------------------------ ------------------------
Total loans(1)(2) 3,921,493 348,357 8.88 3,602,430 326,656 9.07
----------------------------------------------------------------------------
Total earning assets 5,330,161 440,004 8.26 4,971,896 413,013 8.31
Other assets 349,826 335,467
- ------------------------------------------------------------------ -----------
Total assets $ 5,679,987 $ 5,307,363
============================================================================
Savings $ 360,689 8,465 2.35 $ 356,542 8,431 2.36
Interest-bearing demand 1,078,685 27,393 2.54 1,007,652 25,962 2.58
Certificates under $100,000 1,246,240 69,717 5.59 1,245,436 72,095 5.79
Certificates $100,000 and over 506,089 28,601 5.65 281,314 15,467 5.50
- ------------------------------------------------------------------------------ ------------------------
Total interest-bearing deposits 3,191,703 134,176 4.20 2,890,944 121,955 4.22
----------------------------------------------------------------------------
Federal funds purchased and securities
sold under agreements to repurchase 1,142,106 63,123 5.53 1,161,521 63,429 5.46
U.S. Treasury demand 46,108 2,450 5.31 34,241 1,766 5.16
- ------------------------------------------------------------------------------ ------------------------
Total short-term borrowings 1,188,214 65,573 5.52 1,195,762 65,195 5.45
----------------------------------------------------------------------------
Long-term debt 43,000 874 2.03 30,910 1,479 4.78
- ------------------------------------------------------------------------------ ------------------------
Total interest-bearing liabilities 4,422,917 200,623 4.54 4,117,616 188,629 4.58
Demand deposits 678,683 633,066
Other noninterest funds 228,561 221,214
- ------------------------------------------------------------------------------------------------------------------------------------
Total funds used to support earning assets 5,330,161 200,623 3.77 4,971,896 188,629 3.80
Stockholders' equity 478,814 454,917
Equity used to support earning assets (228,561) (221,214)
Other liabilities 99,573 101,764
- ------------------------------------------------------------------ -----------
Total liabilities and stockholders' equity $ 5,679,987 $ 5,307,363
============================================================================
14
<PAGE>
Net interest income/yield 239,381 4.49 224,384 4.51
Tax-equivalent adjustment (9,365) (10,163)
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income 230,016 214,221
Provision for loan losses (21,500) (16,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 208,516 198,221
- ------------------------------------------------------------------------------------------------------------------------------------
Other income
Trust and asset management fees 114,501 98,247
Service charges on deposit accounts 20,964 19,038
Other operating income 22,050 19,764
Securities gains/(losses) 27 1,188
- ------------------------------------------------------------------------------------------------------------------------------------
Total other income 157,542 138,237
---------------------------------------------------------------
Net interest and other income 366,058 336,458
---------------------------------------------------------------
Other expense
Salaries and employment benefits 129,816 119,574
Net occupancy 11,763 11,111
Furniture and equipment 16,361 14,413
Other operating expense 49,731 47,241
- ------------------------------------------------------------------------------------------------------------------------------------
Total other expense 207,671 192,339
---------------------------------------------------------------
Income before income taxes 158,387 144,119
Applicable income taxes 52,343 46,841
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 106,044 $ 97,278
===============================================================
Net income per share--basic $ 3.15 $ 2.83
===============================================================
Net income per share--diluted $ 3.08 $ 2.79
===============================================================
</TABLE>
(1) Tax-advantaged income has been adjusted to a tax-equivalent basis using a
combined statutory federal and state income tax rate of 38.2% for all
years.
(2) Loan balances include nonaccrual loans. Amortization of deferred loan fees
has been included in interest income.
14a
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------- ------------------------------------- --------------------------------------
Average Income/ Average Average Income/ Average Average Income/ Average
balance expense rate balance expense rate balance expense rate
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ -- $ -- --% $ 152 $ 7 3.95 $ 1,856 $ 83 4.47%
17,522 1,036 5.91 26,273 1,155 4.40 19,392 645 3.33
----------------------------- ------------------------- -------------------------
17,522 1,036 5.91 26,425 1,162 4.40 21,248 728 3.43
- ---------------------------------------------------------------------------------------------------------------------------------
598,501 37,182 6.21 457,961 26,263 5.73 427,900 27,433 6.41
42,099 3,077 7.31 53,335 3,921 7.35 82,036 6,851 8.35
155,632 9,865 6.34 235,773 11,006 4.67 302,032 11,168 3.70
290,779 15,946 5.48 227,415 11,199 4.92 75,729 3,929 5.19
96,991 5,595 5.76 85,531 4,050 4.74 58,355 1,777 3.05
----------------------------- ------------------------- -------------------------
1,184,002 71,665 6.05 1,060,015 56,439 5.33 946,052 51,158 5.41
- ---------------------------------------------------------------------------------------------------------------------------------
1,074,860 99,199 9.23 947,544 77,565 8.19 854,720 72,887 8.53
103,104 10,739 10.42 120,067 10,687 8.90 124,438 9,293 7.47
751,937 74,244 9.87 686,307 55,530 8.09 641,554 46,943 7.32
633,852 50,356 7.94 605,971 47,604 7.86 623,738 55,495 8.90
827,029 81,141 9.81 754,495 69,429 9.20 705,459 65,734 9.32
----------------------------- ------------------------- -------------------------
3,390,782 315,679 9.31 3,114,384 260,815 8.37 2,949,909 250,352 8.49
- ---------------------------------------------------------------------------------------------------------------------------------
4,592,306 388,380 8.46 4,200,824 318,416 7.58 3,917,209 302,238 7.72
340,560 321,221 304,603
----------- ----------- -----------
$ 4,932,866 $ 4,522,045 $ 4,221,812
=================================================================================================================================
$ 357,048 8,703 2.44 $ 380,543 8,712 2.29 333,423 8,727 2.62
981,379 26,253 2.68 1,101,916 24,962 2.27 1,069,309 25,501 2.38
1,084,165 61,540 5.68 1,047,090 49,908 4.77 1,114,884 56,317 5.05
161,403 8,808 5.46 175,187 6,895 3.94 201,269 8,249 4.10
----------------------------- ------------------------- -------------------------
2,583,995 105,304 4.08 2,704,736 90,477 3.35 2,718,885 98,794 3.63
- ---------------------------------------------------------------------------------------------------------------------------------
1,203,372 72,178 6.00 722,377 31,154 4.31 480,575 15,516 3.23
36,044 2,147 5.96 52,925 1,921 3.63 64,437 1,815 2.82
----------------------------- ------------------------- -------------------------
1,239,416 74,325 6.00 775,302 33,075 4.27 545,012 17,331 3.18
- ---------------------------------------------------------------------------------------------------------------------------------
6,981 348 4.98 -- -- -- -- -- --
----------------------------- ------------------------- -------------------------
3,830,392 179,977 4.70 3,480,038 123,552 3.55 3,263,897 116,125 3.56
580,928 559,574 500,396
180,986 161,212 152,916
- ---------------------------------------------------------------------------------------------------------------------------------
4,592,306 179,977 3.92 4,200,824 123,552 2.94 3,917,209 116,125 2.97
434,843 408,647 391,782
(180,986) (161,212) (152,916)
86,703 73,786 65,737
----------- ----------- -----------
$ 4,932,866 $ 4,522,045 $ 4,221,812
=================================================================================================================================
15
<PAGE>
208,403 4.54 194,864 4.64 186,113 4.75
(11,039) (10,534) (11,266)
- ---------------------------------------------------------------------------------------------------------------------------------
197,364 184,330 174,847
(12,280) (4,550) (9,500)
- ---------------------------------------------------------------------------------------------------------------------------------
185,084 179,780 165,347
- ---------------------------------------------------------------------------------------------------------------------------------
87,982 82,542 78,313
17,497 16,648 16,424
19,894 16,048 18,662
2,267 (2,157) 268
- ---------------------------------------------------------------------------------------------------------------------------------
127,640 113,081 113,667
- ---------------------------------------------------------------------------------------------------------------------------------
312,724 292,861 279,014
- ---------------------------------------------------------------------------------------------------------------------------------
110,670 101,813 95,849
10,706 10,232 9,317
14,067 12,302 11,380
45,561 47,680 45,240
- ---------------------------------------------------------------------------------------------------------------------------------
181,004 172,027 161,786
- ---------------------------------------------------------------------------------------------------------------------------------
131,720 120,834 117,228
41,689 35,665 34,467
- ---------------------------------------------------------------------------------------------------------------------------------
$ 90,031 $ 85,169 $ 82,761
=================================================================================================================================
$ 2.56 $ 2.37 $ 2.24
=================================================================================================================================
$ 2.53 $ 2.35 $ 2.21
=================================================================================================================================
</TABLE>
Note: Average rates are calculated using average balances based on
historical cost and do not reflect the market valuation adjustment
required by Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities,"
effective January 1, 1994.
15a
<PAGE>
STATEMENT OF CONDITION
Total assets for 1997 increased, on average, $372.6 million, or 7%, to $5.68
billion. A $358.3 million, or 7%, increase in the average level of earning
assets was primarily responsible for this increase.
Average total earning assets for 1997 were $5.33 billion. This was a $358.3
million, or 7%, increase over the $4.97 billion reported for 1996. Growth in the
level of loans outstanding was responsible for 88% of this increase, while
growth in the investment portfolio was responsible for 12% of this increase. The
loan portfolio grew $319.1 million, or 9%, to $3.9 billion. Contributing to this
increase were a $54.8 million, or 5%, increase in commercial loans, a $97.3
million, or 12%, increase in commercial mortgage loans, an $81.2 million, or
12%, increase in residential mortgage loans, a $16.9 million, or 15%, increase
in real estate construction loans, and a $72.9 million, or 9%, increase in
consumer loans. Approximately 35% of this 1997 loan growth was a direct result
of the Corporation's marketing and sales efforts in its expansion markets in
southeastern Pennsylvania, Maryland and Florida.
The average level of investment securities for 1997 increased $43.3 million, or
3%. Contributing to this increase were higher levels of U.S. Treasury and
government agency securities, which increased $49.7 million, or 6%, to $868.3
million. This increase was offset, in part, by lower levels of asset-backed
securities, preferred stocks and municipal bonds which paid down, were sold or
matured during the year.
Total liabilities increased $348.7 million, or 7%, on average in 1997. A $346.4
million increase in total deposits and a $12.1 million increase in long-term
debt were offset, in part, by a $7.5 million, or 1%, decrease in short-term
borrowings. The average level of total deposits for 1997 reached $3.87 billion,
an increase of $346.4 million, or 10%, over the $3.52 billion reported for 1996.
The growth in deposits was primarily due to the Corporation's entry into the
national certificate of deposit markets, as the average level of certificates of
deposit $100,000 and over increased $224.8 million, or 80%, over their 1996
average level of $281.3 million. Also contributing to the growth in deposits
were a $45.6 million, or 7%, increase in average demand deposits and a $71.0
million, or 7%, increase in average interest-bearing demand account balances.
Average short-term borrowings remained relatively unchanged from 1996, declining
$7.5 million, or 1%, to $1.19 billion. Average long-term debt increased $12.1
million, as the Corporation completed its funding from the Federal Home Loan
Bank of Pittsburgh to construct its new operations center in Wilmington,
Delaware. If further funding needs arise that exceed funding provided by retail
deposits, the Corporation anticipates that it would be able to meet those
funding needs in a timely and cost-effective manner. See "Liquidity."
Average total stockholders' equity during 1997 increased $23.9 million, or 5%,
to $478.8 million. Additions to equity from earnings for the year were offset in
part by higher dividend payments and the Corporation's ongoing stock
repurchases. See "Capital Resources."
[CHART OF LOAN PORTFOLIOS, WITH THE FOLLOWING PLOT POINTS:
CONSUMER LOANS
PERSONAL - 19.1%
RESIDENTIAL MORTGAGE-FIXED RATE - 12.8%
RESIDENTIAL MORTGAGE-FLOATING RATE - 7.5%
HOME EQUITY - 3.5%
CREDIT CARDS - 1.7%
LEASES - 2.2%
TOTAL CONSUMER LOANS - 46.8%
COMMERCIAL LOANS
PERMANENT MORTGAGE - 12.5%
REAL ESTATE DEVELOPMENT - 5.3%
REAL ESTATE INTERIM PROJECTS - 1.8%
BUSINESS - 33.6%
TOTAL COMMERCIAL LOANS - 53.2%.]
16
<PAGE>
NET INTEREST INCOME
The Corporation's net interest income for 1997, on a fully tax-equivalent
("FTE") basis, was $239.4 million, an increase of $15.0 million, or 7%, over the
$224.4 million reported for 1996. This was a result of a $27.0 million increase
in interest revenues offset, in part, by a $12.0 million increase in interest
expense. The Corporation's net interest margin for 1997 declined two basis
points, to 4.49% from 4.51% reported for 1996.
<TABLE>
<CAPTION>
<S> <C>
Interest income (FTE) for 1997 totaled $440.0 million, an increase of $27.0 [GRAPH OF NET INTEREST
million, or 7%, over the $413.0 million reported for 1996. Interest revenues MARGIN FOR EACH YEAR
increased $31.1 million due to a $358.3 million increase in the average level of FROM 1987 TO 1997, WITH
earning assets. This increase was offset, in part, by a $4.1 million decrease in THE FOLLOWING PLOT POINTS:
interest revenues as a result of the lower interest rate environment. The
average interest rate earned on the Corporation's assets for 1997 was 8.26%, a 1987 - 4.30%
five-basis-point decrease from the 8.31% earned for 1996. This decrease in 1988 - 4.41%
interest income attributable to the declining rate environment was partially 1989 - 4.46%
offset by the Corporation's investment in interest rate swap and interest rate 1990 - 4.23%
floor contracts. Swap contracts of $318.0 million, on average, on which the 1991 - 4.37%
Corporation is making variable-rate payments and is receiving fixed-rate 1992 - 4.62%
payments, increased interest income $621,000 during 1997. This compares with 1993 - 4.76%
$425.0 million, on average, of interest rate swap contracts outstanding during 1994 - 4.64%
1996, which increased interest income $2.2 million. Interest rate floors of 1995 - 4.54%
$289.0 million, on average, on which the Corporation receives payments when the 1996 - 4.51%
floating rate index is below the strike price, contributed $825,000 to interest 1997 - 4.49%.]
revenues during 1997, compared with an average level of $224.0 million of floors
during 1996, which contributed $955,000 to interest revenues. These numbers were
offset, in part, by amortized acquisition costs related to these contracts of
$550,000 and $320,000 in 1997 and 1996, respectively. During the second quarter
of 1995, the sale of $200 million of floors resulted in a $4.3 million gain,
which is being deferred and accreted into income over the remaining lives of the
floors sold. The accreted gain for 1997 was $1.2 million, unchanged from 1996.
The net result of the swaps and floors was an increase of four basis points in
the Corporation's net interest margin during 1997, compared to an
eight-basis-point increase in the Corporation's net interest margin for 1996.
</TABLE>
Interest expense for 1997 was $200.6 million, an increase of $12.0 million, or
6%, over the $188.6 million reported for 1996. Interest expense increased $14.5
million due to a $305.3 million increase in interest-bearing liabilities.
Offsetting this increase, in part, was a $2.5 million decrease in interest
expense due to the lower interest rate environment. The average interest rate
paid on the Corporation's liabilities for 1997 was 3.77%, a three-basis-point
decrease from the 3.80% paid during 1996. The Corporation's prime lending rate
(the rate at which banks lend to their most creditworthy customers) increased
during the year. The average prime rate for 1997 was 8.44%, up over the 8.27%
average prime lending rate for 1996. The average discount rate (the rate at
which the Federal Reserve Banks lend money to their member banks) was 5.00%,
compared with a corresponding average rate for 1996 of 5.02%.
17
<PAGE>
NONINTEREST REVENUES AND OPERATING EXPENSES
Revenues from noninterest sources for 1997 were $157.5 million, an increase of
$19.3 million, or 14%, over the $138.2 million reported for 1996.
Trust and asset management fees during 1997 increased $16.3 million, or 17%, to
$114.5 million. All three components--personal trust fees, corporate financial
services fees and asset management fees--reflected double-digit increases over
1996. These results continue to be attributable, in part, to the establishment
of a highly competitive incentive-based compensation program and expanded sales
efforts. Contribution of these fees to net income was approximately the same as
the percentage of trust and asset management fees to total operating revenues.
Personal trust fees in 1997 were $55.4 million, or 14% of operating revenues.
This was a $7.9 million, or 17%, increase over the $47.5 million reported for
1996. These fees are primarily earned from principal, income and distribution
commissions on assets held in personal trust accounts. Estate settlement,
private banking and personal tax return preparation also contributed to these
fees. During 1997, higher levels of fee income were reported from all components
of this business line.
Corporate financial services fees for 1997 were $32.7 million, or 8% of
operating revenues. This was a $4.6 million, or 16%, increase over the $28.1
million reported for 1996. These fees are generated by providing trust and
custody services to corporate clients and financial intermediaries. The
Corporation also acts as trustee for leased capital equipment, collateralized
securities, bond financings, corporate restructurings and bankruptcy
liquidations and provides fiduciary services for all types of employee benefit
trusts. Corporate custodian services include all aspects of establishing and
administering Delaware investment holding companies. During 1997, income from
each of these fee sources improved over 1996 levels.
Asset management fees for 1997 were $26.4 million, or 7% of operating revenues.
This was a $3.7 million, or 16%, increase over the $22.7 million reported for
1996. The Corporation offers a broad range of institutional portfolio management
services, including to domestic and foreign entities, fixed-income investments
and short-term cash management, and manages a variety of mutual funds. In
addition, the Corporation provides discount brokerage services through
Wilmington Brokerage Services Company, a subsidiary of Wilmington Trust Company,
the Corporation's principal banking subsidiary (the "Bank"), providing
convenience and efficiency to both customers and correspondent banks. During
1997, income from each of these fee sources improved over 1996 levels.
Service charges on deposit accounts for 1997 were $21.0 million, an increase of
$2.0 million, or 10%, over the $19.0 million reported for 1996. This increase
was due to higher returned item and overdraft fees, automated teller machine
fees, checkbook fees and checking account balance fees. Other operating income
for 1997 was $22.0 million, a $2.2 million, or 11%, increase over the $19.8
million reported for 1996. Higher credit card fees, loan origination fees and
gains on the sale of the Corporation's former operations center contributed to
this increase.
Securities gains of $27,000 were recognized in 1997, compared to $1.2 million in
1996.
Noninterest (operating) expenses for 1997 were $207.7 million, an increase of
$15.4 million, or 8%, over the $192.3 million reported for 1996. Personnel
expenses for 1997 were $129.8 million, a $10.2 million, or 9%, increase over the
$119.6 million reported for 1996. Higher salaries, bonuses, incentives, payroll
[GRAPH OF TRUST AND
ASSET MANAGEMENT FEES
FOR EACH YEAR FROM
1987 TO 1997, WITH
THE FOLLOWING PLOT
POINTS, IN MILLIONS:
<TABLE>
<CAPTION>
TOTAL TRUST AND ASSET
PERSONAL TRUST FEES CORPORATE TRUST FEES ASSET MANAGEMENT FEES MANAGEMENT FEES
<C> <C> <C> <C> <C> <C> <C> <C>
1987 - $20.8 1987 - $16.8 1987 - $13.9 1987 - $51.5
1988 - $21.5 1988 - $19.7 1988 - $13.9 1988 - $55.1
1989 - $25.3 1989 - $19.3 1989 - $14.2 1989 - $58.8
1990 - $32.0 1990 - $21.9 1990 - $14.6 1990 - $68.5
1991 - $33.4 1991 - $22.8 1991 - $16.5 1991 - $72.7
1992 - $35.3 1992 - $23.7 1992 - $18.0 1992 - $77.0
1993 - $36.0 1993 - $23.9 1993 - $18.4 1993 - $78.3
1994 - $37.5 1994 - $25.8 1994 - $19.2 1994 - $82.5
1995 - $41.4 1995 - $27.1 1995 - $19.5 1995 - $88.0
1996 - $47.4 1996 - $28.1 1996 - $22.4 1996 - $98.2
1997 - $55.4 1997 - $32.7 1997 - $26.4 1997 - $114.5.]
</TABLE>
18
<PAGE>
tax expense and health insurance costs were partially offset by lower pension
expense, which declined due to investment performance within the insurance
contracts funding the Corporation's supplemental executive retirement plan.
Salaries and wages were $89.1 million, an increase of $6.9 million, or 8%, over
the $82.2 million reported for 1996. To incent its employees and pay for
performance, the Corporation offers its employees highly competitive sales
incentives and a profit-sharing bonus. Bonuses and incentives earned in 1997
were $20.4 million, an increase of $2.8 million, or 16%, over the $17.6 million
earned in 1996. Health insurance costs in 1997 were $11.4 million, an increase
of $1.2 million, or 12%, over the $10.2 million reported in 1996.
Net occupancy and furniture and equipment expenses during 1997 increased
modestly due, in part, to higher depreciation and maintenance expense on
computer equipment. Other operating expenses in 1997 were $44.8 million, a $3.5
million, or 9%, increase over the $41.3 million reported for 1996. Increased
services and consulting fees and advertising expense were primarily responsible
for this increase. Service and consulting fees were $6.0 million, a $1.7
million, or 40%, increase over the $4.3 million reported for 1996. The
Corporation outsourced its residential mortgage loan servicing to a third-party
provider during 1997, which contributed to this increase. In addition, the
Corporation continued its commitment to growth in its expansion markets, deposit
generation and enhancing its recognition as one of the nation's premier trust
companies by increasing its advertising expenditures $1.1 million, or 20%, to
$6.5 million during 1997.
The provision for income taxes for 1997 was $52.3 million, a $5.5 million, or
12%, increase over the $46.8 million reported for 1996. The Corporation's
effective tax rate for the year was 33.0%, compared with 32.5% in 1996.
[GRAPH OF EFFICIENCY RATIO [TOTAL OTHER EXPENSES AS A PERCENTAGE OF
OPERATING REVENUES ON A TAX-EQUIVALENT BASIS] FOR EACH YEAR FROM 1987 TO
1997, WITH THE FOLLOWING PLOT POINTS:
1987 - 53.23%
1988 - 53.69%
1989 - 53.60%
1990 - 53.21%
1991 - 52.71%
1992 - 53.47%
1993 - 53.97%
1994 - 55.86%
1995 - 53.86%
1996 - 53.04%
1997 - 52.32%.]
INTEREST RATE SENSITIVITY
Net interest income is an important determinant of the Corporation's financial
performance. Through interest rate sensitivity management, the Corporation seeks
to maximize the growth of net interest income on a consistent basis by
minimizing the effects of fluctuations associated with changing market interest
rates.
The composition of assets, liabilities and off-balance-sheet instruments and
their respective repricing and maturity characteristics are evaluated in
assessing the Corporation's exposure to changes in interest rates. Gap analysis,
used to measure the difference between volumes of rate-sensitive assets and
liabilities, examines the Corporation's balance sheet at one point in time, but
does not capture any balance sheet dynamics that may be present. Instead, it
assumes that all rate-sensitive balances reprice at the same time and to the
same extent. Because of these inherent limitations, the Corporation also employs
simulation models to measure the effect on net interest income of dynamic
changes in rate-sensitive assets, liabilities and off-balance-sheet instruments
caused by variations in interest rates.
The Corporation's interest rate sensitivity, as measured by gap analysis, was
liability-sensitive at the end of 1997. Liability sensitivity indicates that
liabilities reprice faster than assets and, therefore, if interest rates
decline, net interest income would rise, assuming all other variables remained
constant. Conversely, if interest rates rise, net interest income would decline.
The Corporation's one-year gap as a percentage of total rate-sensitive assets as
of December 31, 1997 was (36.0%), up from (20.3%) reported at year-end 1996. A
significant portion of the Corporation's current liability sensitivity is
19
<PAGE>
attributable to the repricing characteristics of certain liability products,
including savings, interest-bearing demand and money market accounts, which
typically do not reprice to the same extent as market interest rates.
Contributing to the increased interest rate sensitivity has been an increase in
the proportion of fixed-rate loans compared to the proportion of floating-rate
loans. In addition, the growth of the investment portfolio, which has been
concentrated in fixed-rate instruments, has been funded with floating-rate
liabilities, further increasing the negative gap position.
A simulation model is used to project net interest income over a two-year period
using multiple interest rate scenarios. The results are compared to net interest
income projected for the same time period based on stable interest rates. The
Corporation's model employs interest rate scenarios in which interest rates
gradually move up or down 250 basis points. The negative one-year gap estimate
above indicates that, were interest rates to increase, net interest income would
decline. The simulation results support that conclusion, projecting that a
250-basis-point increase in market interest rates would reduce net interest
income by 2.5% in the first year and 7.1% in the second year. However, the
simulation model also projects that, if interest rates were to decrease
gradually by 250 basis points, net interest income would increase 0.2% in the
first year but decrease 3.8% in the second year. The Corporation's policy limits
the anticipated reduction in net interest income to 10% in the first one-year
period assuming a change in interest rates of 250 basis points.
The preceding paragraph contains certain forward-looking statements within the
meaning of and made pursuant to the safe harbor provisions of the Private
Litigation Securities Reform Act of 1995 regarding the anticipated effects on
the Corporation's net interest income resulting from hypothetical changes in
market interest rates.
The assumptions the Corporation uses regarding the effect of changes in interest
rates on the adjustment of retail deposit rates and the balances of residential
mortgages, asset-backed securities and collateralized mortgage obligations
(CMOs) play a significant role in the results the simulation model projects. The
adjustment paths are not assumed to be symmetrical.
The Corporation's model employs assumptions that reflect the historical
adjustment paths of the Corporation's retail deposit rates to changes in the
level of market interest rates. In addition, some of the Corporation's retail
deposit rates reach historic lows within the 250-basis-point decline scenario.
The Corporation's model freezes the rates for these deposit products when they
equal their historic lows. These model assumptions (asymmetrical adjustments and
rate floors based on historic lows) limit the extent to which deposit rates are
expected to adjust in a declining rate scenario and contribute to the results
the simulation model projects.
Changes in the balances of residential mortgages, CMOs and asset-backed
securities are driven by contractual obligations and prepayments. While
contractual obligations are not typically influenced by changes in interest
rates, prepayment activity (including refinancing) can shift dramatically with
changes in interest rates. The Corporation's prepayment assumptions are based on
industry estimates for loans with similar coupons and remaining maturities. A
250-basis-point decline in interest rates can cause a significant increase in
prepayments when available reinvestment opportunities of similar risk carry
lower returns. Conversely, should interest rates rise 250 basis points, the same
balances are not likely to prepay at the same rate, but instead are likely to
lengthen in effective maturity as debtors elect not to prepay and to retain
these now below-market credit terms as long as possible. Holders of mortgages,
asset-backed securities and CMOs are left with returns below those prevailing in
the current environment. This prepayment-driven effect also contributes to the
results the simulation model projects.
[GRAPH OF OPERATING REVENUES (NET INTEREST INCOME BEFORE PROVISION FOR
LOAN LOSSES PLUS NONINTEREST INCOME) FOR EACH YEAR FROM 1987 TO 1997,
WITH THE FOLLOWING PLOT POINTS, IN MILLIONS:
NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES NONINTEREST INCOME TOTAL OPERATING REVENUES
1987 - $ 99.40 1987 - $ 79.36 1987 - $178.76
1988 - $112.10 1988 - $ 81.53 1988 - $193.63
1989 - $128.03 1989 - $ 88.43 1989 - $214.46
1990 - $137.57 1990 - $ 95.97 1990 - $233.54
1991 - $152.89 1991 - $102.31 1991 - $255.20
1992 - $165.21 1992 - $110.27 1992 - $275.48
1993 - $174.85 1993 - $113.67 1993 - $288.52
1994 - $184.33 1994 - $113.08 1994 - $297.41
1995 - $197.36 1995 - $127.64 1995 - $325.00
1996 - $214.22 1996 - $138.24 1996 - $352.46
1997 - $230.22 1997 - $157.54 1997 - $387.56.]
20
<PAGE>
During 1997, the Corporation sold certain fixed-rate residential mortgage loans
into the secondary market. The primary goal of this program was to eliminate the
risk that the average lives of these fixed-rate residential mortgage loans would
extend beyond their anticipated durations, as frequently occurs during periods
of rising interest rates. Total mortgage loans sold during 1997 were $60.4
million.
Management reviews the Corporation's rate sensitivity regularly, and uses a
variety of strategies as needed to adjust that sensitivity. These include
changing the relative proportions of fixed-rate and floating-rate assets and
liabilities, as well as utilizing off-balance-sheet measures such as interest
rate swaps and interest rate floors.
At December 31, 1997, the Corporation was committed to interest rate swaps with
a total notional amount of $275 million, down from the $400 million at year-end
1996. The swaps have remaining maturities of between 3 and 28 months, with a
weighted average maturity of 13 months. At December 31, 1997, the Corporation
was committed to interest rate floors with a total notional amount of $325
million, compared to $250 million at year-end 1996. The floors have remaining
maturities of between 19 and 54 months, with a weighted average maturity of 30
months. The net interest differential, and the amortization of the initial fees
associated with the purchase of the floors and any gains recorded on sale are
reported under the caption "Interest and fees on loans" and are recognized over
the lives of the respective instruments. See "Net Interest Income."
LIQUIDITY
A financial institution's liquidity represents its ability to meet, in a timely
manner, cash flow requirements that may arise from increases in demand for loans
and other assets or from decreases in deposits or other funding sources.
Liquidity management, therefore, contains both asset and liability components.
Liquidity of the asset side of the balance sheet is provided by the maturity and
marketability of loans and investments. In addition, all time deposits at other
banks, federal funds sold and securities purchased under agreements to resell
are considered liquid.
Liquidity of the liability side of the balance sheet is usually provided
primarily through a stable, growing base of core deposits. The stability of core
deposits limits the amount of liquidity required to satisfy the demand for loans
and short-term and intermediate-term customer withdrawals. Additional funding
sources include the Corporation's internally generated capital, large
certificates of deposit, federal funds purchased and securities sold under
agreements to repurchase.
The changing market for deposits has shifted the mix of the Corporation's
funding sources. In 1997, the proportion of funding provided by certificates of
deposit increased, which allowed the Corporation to reduce its reliance on
federal funds purchased and securities sold under agreements to repurchase. The
Corporation believes that its acceptance in the national markets will permit it
to obtain additional funding if the need arises in the future. The Corporation
anticipates issuing debt securities in 1998 to assist in funding its operations.
In addition, the Bank is a member of the Federal Home Loan Bank of Pittsburgh,
which provides an additional source of funds.
Management monitors the Corporation's existing and projected liquidity
requirements on an ongoing basis and implements appropriate strategies when
deemed necessary.
21
<PAGE>
ASSET QUALITY
AND LOAN LOSS
PROVISION
Net chargeoffs for 1997 were $12.1 million, an increase of $550,000, or 5%, over
the $11.5 million reported for 1996. The Corporation's provision for loan losses
for 1997 was $21.5 million. This was $5.5 million, or 34%, higher than the $16.0
million provision for 1996. The reserve for loan losses at December 31, 1997 was
$63.8 million, a 17% increase over the $54.4 million at December 31, 1996. The
reserve at year-end, as a percentage of loans outstanding, was 1.60%, an
increase over the 1.44% reported at year-end 1996. Loans past due 90 days or
more, nonaccruing loans and restructured loans at December 31, 1997 totaled
$44.2 million. This represented a decrease of $17.0 million, or 28%, from the
$61.2 million reported at year-end 1996. Loans past due 90 days or more at
December 31, 1997 totaled $15.5 million, a $4.9 million, or 24%, decrease from
the $20.4 million reported at year-end 1996. Nonaccruing loans at year-end 1997
were $28.7 million, a $12.0 million, or 30%, decrease from the $40.7 million
reported at year-end 1996. No loans were classified as restructured at either
year-end.
Other real estate owned ("OREO") at December 31, 1997 was $3.7 million, a $1.4
million, or 27%, decrease from the $5.1 million reported at year-end 1996. Net
activity within the OREO portfolio during 1997 included the addition of $5.7
million of properties securing nonperforming loans. Loans and real estate
totaling $7.1 million were removed from the portfolio through chargeoffs and
sales. Chargeoffs within the portfolio during 1997 were $500,000. The balance
was liquidated through sales, which resulted in net gains of $116,000. Expenses
incurred to carry this portfolio during 1997 were $1.0 million. This compares
with chargeoffs of $1.1 million, net losses on dispositions of $386,000 and
portfolio expenses of $500,000 during 1996.
The overall level of nonperforming loans decreased during 1997. Slow economic
conditions or any deterioration in markets the Corporation serves may further
impair the ability of some borrowers to repay their loans in full on a timely
basis. In that event, management would expect increased levels of nonperforming
assets, credit losses and provisions for loan losses. To minimize the likelihood
and impact of such conditions, management continually monitors the entire loan
portfolio to identify potential problem loans and avoid disproportionately high
concentrations of loans to individual borrowers and industries. An integral part
of this process is a regular analysis of all past-due loans. At December 31,
1997, an analysis of loans 90 days or more past due, which totaled $15.5
million, indicated approximately 57% of those loans were in the Corporation's
commercial loan portfolio, 16% in the residential mortgage loan portfolio and
27% in the consumer loan portfolio. This compares with corresponding levels of
60%, 22% and 18%, respectively, at December 31, 1996. The Corporation's analysis
of these loans indicates that the businesses and/or incomes supporting their
repayment are well-diversified.
As a result of the Corporation's ongoing monitoring of its loan portfolios, at
December 31, 1997, approximately $7.6 million of loans were identified that are
either currently performing in accordance with their terms or are less than 90
days past due but for which, in management's opinion, serious doubt exists as to
the borrowers' ability to continue to repay their loans on a timely basis. In
light of the current levels of past-due, nonaccruing and potential problem
loans, management believes that the Corporation's reserve for loan losses is
adequate based upon currently available information. The Corporation's
determination of the adequacy of its reserve is based upon an evaluation of
classified loans and other assets, past loss experience, current economic
conditions, real estate market conditions and regulatory recommendations. The
total amount and allocation of the loan loss reserve among the various loan
portfolios is based primarily on an evaluation of the loss potential of
individual credits and previous credit loss experience, considering management's
assessment of current and future economic conditions. It is not necessarily
indicative of the actual loss amounts by loan category that may ultimately
occur. See also Note 9 to the Corporation's Consolidated Financial Statements
for 1997.
[GRAPH OF RESERVE FOR LOAN LOSSES AND NONACCRUING LOANS FOR EACH YEAR
FROM 1987 TO 1997, WITH THE FOLLOWING PLOT POINTS, IN MILLIONS:
RESERVE FOR LOAN LOSSES NONACCRUING LOANS
1987 - $28.389 1987 - $ 9.872
1988 - $34.282 1988 - $11.687
1989 - $38.595 1989 - $12.248
1990 - $42.405 1990 - $13.932
1991 - $44.996 1991 - $53.962
1992 - $46.962 1992 - $29.674
1993 - $51.363 1993 - $21.983
1994 - $48.669 1994 - $28.851
1995 - $49.867 1995 - $33.576
1996 - $54.361 1996 - $40.375
1997 - $63.805 1997 - $28.669.]
22
<PAGE>
CAPITAL RESOURCES
A strong capital position provides a margin of safety for depositors and
stockholders and enables a financial institution to take advantage of profitable
opportunities and provide for future growth. The Corporation's capital increased
in 1997 over 1996, due primarily to increases in earnings, reflected by the
12.59% rate of capital generation in 1997, over the rate of 11.51% in 1996. The
Corporation's capital increased despite an increase in cash dividends paid of
$3.1 million and the Corporation's ongoing common stock repurchase program, in
which $35.9 million was used to purchase the Corporation's common stock on the
open market. These factors resulted in a $38.3 million, or 8%, increase in total
stockholders' equity to $503.0 million at year-end, compared with $464.7 million
at year-end 1996.
The Federal Reserve Board's risk-based capital guidelines establish the minimum
levels of capital a bank holding company must hold. The guidelines are intended
to reflect the varying degrees of risk associated with different balance-sheet
and off-balance-sheet items. The Corporation has reviewed its balance-sheet and
off-balance-sheet items and calculated its capital position under the risk-based
capital guidelines. As of December 31, 1997, the Corporation's total risk-based
capital ratio was 12.38%, over the 12.01% reported at the corresponding date a
year ago. The Corporation's Tier 1 risk-based capital ratio at that date was
11.13%, over the 10.76% reported at year-end 1996, and its Tier 1 leverage
capital ratio was 8.58%, down slightly from the 8.59% reported a year ago. Each
of these ratios exceeded the minimum levels required for adequately capitalized
institutions of 8%, 4% and 4%, respectively, and exceeded the levels required
for well-capitalized institutions of 10%, 6% and 5%, respectively.
In April 1997, the Corporation's Board of Directors increased the quarterly
dividend to $.36 per share. This marked the sixteenth consecutive year of
increased cash dividends. Dividends paid for 1997 totaled $1.41 per share, a 9%
increase over the $1.29 per share paid in 1996. The Corporation's dividend
payout ratio for 1997 was 44.8%, down slightly from the 45.6% payout for 1996.
In April 1996, the Corporation's Board of Directors authorized the buyback of
four million additional shares of the Corporation's common stock. This program
commenced in May 1996 upon the completion of the three million-share buyback
program that began in October 1993. At December 31, 1996, 814,367 shares had
been bought under the current program at a cost of $28.6 million. During 1997,
an additional 737,729 shares were purchased at a cost of $35.9 million, bringing
the total number of shares repurchased under the current program to 1,552,096.
Management will continue to review the Corporation's capital position, and will
make adjustments as needed to assure that the Corporation's capital base will be
sufficient to satisfy existing and impending regulatory requirements, as well as
meet appropriate standards of safety and provide for future growth.
The Corporation's common stock is traded over-the-counter under the symbol
"WILM" and is listed on the Nasdaq National Market System. The table below
summarizes the price ranges of the Corporation's common stock and its quarterly
dividends.
[GRAPH OF EQUITY TO ASSET RATIO FOR EACH YEAR FROM 1987 TO 1997, WITH
THE FOLLOWING PLOT POINTS:
1987 - 6.86%
1988 - 7.39%
1989 - 7.71%
1990 - 7.58%
1991 - 8.30%
1992 - 8.88%
1993 - 9.28%
1994 - 9.04%
1995 - 8.82%
1996 - 8.57%
1997 - 8.43%.]
COMMON STOCK PRICE RANGE AND DIVIDEND RATE BY QUARTER
- --------------------------------------------------------------------------------
1997 1996
---------------------------- -------------------------------
Quarter High Low Dividend High Low Dividend
- --------------------------------------------------------------------------------
1 $47.00 $39.25 $0.33 $35.00 $30.25 $0.30
2 $47.75 $41.75 $0.36 $34.25 $31.25 $0.33
3 $58.22 $45.38 $0.36 $36.25 $30.75 $0.33
4 $66.00 $54.25 $0.36 $41.75 $35.25 $0.33
=================================================================
23
<PAGE>
INFLATION
The Corporation's asset and liability structure is substantially different from
that of an industrial company, since virtually all assets and liabilities of a
financial institution are monetary in nature. Accordingly, changes in interest
rates may have a significant impact on a bank's performance. Interest rates do
not necessarily move in the same direction or in the same magnitude as the
prices of goods and services. Therefore, the impact of inflation on a bank's
financial performance is indeterminable.
FINANCIAL ANALYSIS 1996/1995
Net income for 1996 was $97.3 million, or $2.83 per share. This was an 8%
increase over the $90.0 million, or $2.56 per share, reported for 1995.
Earning assets in 1996 increased, on average, $379.6 million, or 8%, to $4.97
billion. This increase was primarily attributable to a $211.6 million, or 6%,
increase in the average level of the loan portfolio and a $159.0 million, or
13%, increase in the investment portfolio. Contributing to the increase in the
loan portfolio was an $86.0 million, or 8%, increase in commercial loans, a
$54.8 million, or 7%, increase in commercial mortgage loans, a $49.2 million, or
8%, increase in residential mortgage loans, an $11.7 million, or 11%, increase
in real estate construction loans and a $9.8 million, or 1%, increase in
consumer loans. Contributing to the increase in the average level of investment
securities during 1996 were U.S. Treasury and government agency securities,
which increased $220.1 million, or 37%, to $818.6 million. This increase was
offset, in part, by lower levels of asset-backed securities, preferred stocks
and municipal bonds, which paid down during 1996.
Interest-bearing liabilities in 1996 increased, on average, $287.2 million, or
7%, to $4.12 billion. Contributing to this increase was a rise in average
interest-bearing deposits which was offset, in part, by a decrease in average
short-term borrowings. The average level of total deposits increased $359.1
million, or 11%, to $3.52 billion as a result of the Corporation's marketing
efforts in Delaware and its expansion markets of Pennsylvania and Maryland.
Noninterest-bearing demand balances increased $52.1 million, or 9%, to $633.1
million. Interest-bearing demand accounts increased, on average, $26.3 million,
or 3%, to $1.08 billion. Certificates of deposit under $100,000 increased $161.3
million, or 15%, to $1.25 billion, and certificates of deposit $100,000 and over
increased $120.0 million, or 74%, to $281.3 million. As a result of this deposit
growth, short-term borrowings decreased $43.7 million, or 4%, to $1.20 billion.
The average balance of long-term debt increased $23.9 million, as additional
funds were drawn to fund construction of the Corporation's new operations
center. Stockholders' equity during 1996 increased, on average, $20.1 million,
or 5%, to $454.9 million on the strength of $97.3 million in earnings for the
year, offset in part by higher levels of dividend payments and the Corporation's
ongoing stock repurchases.
Net interest income (FTE) in 1996 increased $16.0 million, or 8%, to $224.4
million from $208.4 million in 1995. A $24.6 million increase in interest
revenues was offset, in part, by an $8.7 million increase in interest expense.
The increase in average earning assets was responsible for $29.9 million of this
increase, which was offset, in part, by a $5.3 million decrease in interest
revenues due to the lower interest rate environment. The average rate earned on
the Corporation's assets for 1996 was 8.31%, a 15-basis-point decrease from the
8.46% earned for 1995. This increase in interest income was also attributable in
part to the Corporation's investment in swaps and floors. The $400 million of
swaps increased interest income during 1996 by $2.2 million, while the $450
million of swaps outstanding during 1995 reduced interest revenues $1.2 million.
[GRAPH OF DIVIDENDS PER SHARE PAID FOR EACH YEAR FROM 1987 TO 1997, WITH
THE FOLLOWING PLOT POINTS:
1987 - $0.39
1988 - $0.46
1989 - $0.59
1990 - $0.72
1991 - $0.80
1992 - $0.88
1993 - $0.98
1994 - $1.06
1995 - $1.17
1996 - $1.29
1997 - $1.41.]
24
<PAGE>
The $250 million of floors contributed $955,000 to interest revenues during
1996. This was partially offset by $320,000 of amortized acquisition expense for
the original $400 million of floors. During 1995, $200 million of those
contracts were sold, resulting in a $4.3 million gain which is being deferred
and accreted into income over the remaining lives of the contracts sold. The
gain accreted during 1996 and 1995 was $1.2 million and $892,000, respectively.
The swaps and floors increased the Corporation's net interest margin eight basis
points in 1996, compared with a one-basis-point decrease in 1995.
Interest expense for 1996 increased $8.7 million, or 5%, to $188.6 million from
$180.0 million for 1995. Virtually all of this increase was attributable to the
increase in the average level of interest-bearing liabilities, which caused
interest expense to increase $15.0 million. Offsetting this increase, in part,
was a $6.3 million decrease in interest expense associated with the lower
interest rate environment. The average interest rate paid on the Corporation's
liabilities during 1996 was 3.80%, a 12-basis-point decrease from the 3.92% paid
during 1995.
The provision for loan losses for 1996 was $16.0 million. This was $3.7 million
higher than the $12.3 million provision for 1995. The reserve for loan losses at
December 31, 1996 was $54.4 million, or 1.44% of loans outstanding. This
compares with corresponding levels of $49.9 million, or 1.42% of loans
outstanding, reported at year-end 1995. Loans past due 90 days or more,
nonaccruing loans and restructured loans at December 31, 1996 totaled $61.2
million. This was an $8.3 million, or 16%, increase over the corresponding $52.9
million reported at December 31, 1995. Nonaccruing loans at year-end 1996 were
$40.7 million, a $7.2 million, or 21%, increase over the $33.6 million reported
at year-end 1995. No loans were classified as restructured at either year-end.
The OREO portfolio at December 31, 1996 totaled $5.1 million, a decrease of $9.2
million, or 64%, from the $14.3 million reported at year-end 1995. Approximately
$7.3 million of properties securing nonperforming loans were added to this
portfolio during 1996, while $16.5 million were removed through chargeoffs and
sales. Chargeoffs in this portfolio during 1996 were $1.1 million. The remainder
were liquidated through sales, which resulted in net losses of $386,000.
Expenses of $500,000 were incurred to carry this portfolio during 1996.
Revenues from noninterest sources in 1996 increased $10.6 million, or 8%, to
$138.2 million, over the $127.6 million reported for 1995. Trust and asset
management fees increased $10.3 million, or 12%, to $98.2 million. All three
components of this revenue source contributed to this increase. Personal trust
fees were $47.5 million, or 13% of operating revenues. This was a $6.1 million,
or 15%, increase over the $41.4 million reported for 1995. Corporate financial
service fees for 1996 were $28.1 million, or 8% of operating revenues. This was
a $946,000, or 3%, increase over the $27.1 million reported for 1995. Asset
management fees in 1996 were $22.7 million, or 6% of operating revenues. This
was a $3.3 million, or 17%, increase over the $19.5 million reported for 1995.
Service charges on deposit accounts in 1996 were $19.0 million, an increase of
$1.5 million, or 9%, over the $17.5 million reported for 1995, due primarily to
higher returned item and overdraft fees, automated teller machine fees,
checkbook fees and checking account balance fees, all of which benefited from a
mid-year pricing increase. Other operating income decreased $130,000, or 1%, to
$19.8 million as higher credit card fees and loan fees were offset by lower
precious metals fees and gains on residential mortgage loan sales and the
disposition of other real estate owned. Securities gains of $1.2 million were
recognized in 1996, compared with $2.3 million in 1995.
25
<PAGE>
Operating expenses for 1996 increased $11.3 million, or 6%, to $192.3 million.
Personnel expenses increased $8.9 million, or 8%, to $119.6 million due to
higher levels of salaries, bonuses, incentives, payroll taxes and health
insurance costs. No salary or benefit costs associated with the development of
the Corporation's new trust system were capitalized in 1996, compared with
$845,000 of such costs in 1995. Net occupancy and furniture and equipment
expenses during 1996 increased $405,000, or 4%, and $346,000, or 2%,
respectively, over their 1995 levels. Other operating expense in 1996 declined
$1.6 million, or 4%, due primarily to higher levels of advertising, telephone,
legal and travel expenses which were offset, in part, by lower FDIC deposit
insurance premiums.
The provision for income taxes for 1996 increased $5.2 million, or 12%, to $46.8
million. Higher levels of pre-tax income were primarily responsible for this
increase. The Corporation's effective tax rate for 1996 was 32.5%, compared with
31.6% for 1995.
OTHER MATTERS
YEAR 2000 ISSUE
The Corporation has established a company-wide task force which reviewed all
computer-based systems and applications and developed a company-wide action plan
for the year 2000 date change. The Corporation presently believes that, with
modifications to existing software and/or the acquisition of new software, the
year 2000 issue will not pose significant operational problems for its computer
systems. The Corporation could possibly be affected by the year 2000 issue to
the extent other entities not affiliated with it are unsuccessful in addressing
this issue. The Corporation has initiated formal communications with its
significant vendors and customers to determine the extent to which those
entities could impact the Corporation by failing to remediate their own year
2000 issues. There can be no guaranty that the operating systems of other
companies will be converted in a timely manner or that remediation costs or
difficulties would not have an adverse effect on the Corporation.
The Corporation anticipates primarily utilizing internal resources to reprogram
and test its software for required year 2000 modifications. The Corporation
anticipates completing these system modifications by December 31, 1998. The
total cost for the year 2000 project, including costs and time associated with
the impact of third-party year 2000 issues, has not been finalized. These costs,
which will be expensed as incurred, are to be funded through operating cash
flows.
The preceding two paragraphs contain certain forward-looking and cautionary
statements within the meaning of and pursuant to the safe harbor provisions of
the Private Litigation Securities Reform Act of 1995.
26
<PAGE>
ACCOUNTING
PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," which
provides standards for distinguishing transfers of financial assets that are
sales from transfers that are secured borrowings. The statement also extends the
treatment of mortgage servicing rights to all servicing assets. The provisions
of SFAS No. 125 were adopted by the Corporation prospectively as of January 1997
for the following types of transactions: securitizations, recognition of
servicing assets and liabilities, transfers of receivables with recourse, loan
participations and extinguishments of liabilities.
Certain provisions of SFAS No. 125 relating to repurchase agreements, securities
lending and other similar transactions and pledged collateral were deferred for
one year by SFAS No. 127, and were adopted prospectively as of January 1998. The
adoption of these statements did not have a material impact on the Corporation's
financial position or results of operations.
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income," which establishes rules for reporting and displaying "comprehensive
income" and its components in financial statements. Comprehensive income
includes net income and other items of comprehensive income, such as unrealized
gains and losses on available-for-sale securities and minimum pension liability
adjustments, which are excluded from net income. This statement is effective for
periods beginning after December 15, 1997 and requires the restatement of all
prior periods presented. This statement will result in additional financial
statement disclosures.
In June 1997, the FASB issued Statement No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which requires financial disclosures and
descriptive information about reportable operating segments in annual financial
statements and requires selected information about operating segments in interim
financial reports. This statement is effective for periods beginning after
December 15, 1997 and requires the restatement of all prior periods presented.
However, it is not required to be applied for interim reporting in the initial
year of application. Upon adoption, this statement will result in additional
financial statement disclosure.
Sale of Mutual Fund Servicing
In November 1997, Rodney Square Management Corporation, a wholly-owned
subsidiary of the Bank ("RSMC"), entered into an agreement with PFPC Inc., an
indirect subsidiary of PNC Bank, N.A. ("PFPC"), pursuant to which RSMC will
transfer to PFPC its interest in certain agreements under which RSMC provided
accounting, administrative, custody, distribution and transfer agency services
to mutual funds. Closing is subject to the satisfaction of several customary
conditions, and is anticipated to take place in the first quarter of 1998.
27
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED ELEVEN-YEAR SUMMARY OF SELECTED FINANCIAL DATA
WILMINGTON TRUST CORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE STATEMENTS OF CONDITION
<S> <C> <C> <C> <C>
(in thousands) 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
Assets:
Cash and due from banks $ 190,243 $ 187,473 $ 194,224 $ 202,777
Short-term investments 22,369 26,459 17,522 26,425
Investment securities 1,386,299 1,343,007 1,184,002 1,060,015
Loans 3,921,493 3,602,430 3,390,782 3,114,384
Reserve for loan losses (56,747) (50,768) (47,895) (50,258)
-------------------------------------------------------------------------------------------------------------------------
Net loans 3,864,746 3,551,662 3,342,887 3,064,126
----------------------------------------------------------------
Other 216,330 198,762 194,231 168,702
- ----------------------------------------------------------------------------------------------------------------------------
Total $5,679,987 $5,307,363 $4,932,866 $4,522,045
================================================================
Liabilities and stockholders' equity:
Demand deposits (noninterest-bearing) $ 678,683 $ 633,066 $ 580,928 $ 559,574
Deposits (interest-bearing) 3,191,703 2,890,944 2,583,995 2,704,736
Short-term borrowings 1,188,214 1,195,762 1,239,416 775,302
Other 99,573 101,764 86,703 73,786
Long-term debt 43,000 30,910 6,981 --
- ----------------------------------------------------------------------------------------------------------------------------
Total 5,201,173 4,852,446 4,498,023 4,113,398
Stockholders' equity 478,814 454,917 434,843 408,647
- ----------------------------------------------------------------------------------------------------------------------------
Total $5,679,987 $5,307,363 $4,932,866 $4,522,045
================================================================
CONSOLIDATED STATEMENTS OF INCOME
Net interest income $ 230,016 $ 214,221 $ 197,364 $ 184,330
- ----------------------------------------------------------------------------------------------------------------------------
Trust and asset management fees 114,501 98,247 87,982 82,542
Other noninterest revenues 43,014 38,802 37,391 32,696
Securities gains/(losses) 27 1,188 2,267 (2,157)
- ----------------------------------------------------------------------------------------------------------------------------
Total noninterest income 157,542 138,237 127,640 113,081
----------------------------------------------------------------
Operating revenues 387,558 352,458 325,004 297,411
----------------------------------------------------------------
Provision for loan losses (21,500) (16,000) (12,280) (4,550)
----------------------------------------------------------------
Salaries and employment benefits 129,816 119,574 110,670 101,813
Other operating expenses 77,855 72,765 70,334 70,214
- ----------------------------------------------------------------------------------------------------------------------------
Total other expense 207,671 192,339 181,004 172,027
----------------------------------------------------------------
Income before income taxes and cumulative
effect of change in accounting principle 158,387 144,119 131,720 120,834
Applicable income taxes 52,343 46,841 41,689 35,665
- ----------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of
change in accounting principle 106,044 97,278 90,031 85,169
Cumulative effect of change in accounting principle
(net of income tax benefit of $8,296)* -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Net income $ 106,044 $ 97,278 $ 90,031 $ 85,169
================================================================
28
<PAGE>
Per share data:
Income before cumulative effect of
change in accounting principle
Basic* $ 3.15 $ 2.83 $ 2.56 $ 2.37
---------------------------------------------------------------------------------------------------------------------
Diluted* $ 3.08 $ 2.79 $ 2.53 $ 2.35
---------------------------------------------------------------------------------------------------------------------
Percentage change from prior year
Basic 11% 11% 8% 6%
SELECTED FINANCIAL RATIOS AND STATISTICS
Net income as a percentage of:
Average stockholders' equity3 22.15% 21.38% 20.70% 20.84%
Average total assets3 1.87 1.83 1.83 1.88
- ----------------------------------------------------------------------------------------------------------------------------
Loan quality:
Percentage of average total loans:
Net charge-offs 0.31% 0.32% 0.33% 0.23%
Nonaccruing loans 0.73 1.13 0.99 0.93
Percentage of total loans:
Reserve for loan losses** 1.60 1.44 1.42 1.48
- ----------------------------------------------------------------------------------------------------------------------------
Selected per share data:
Dividends paid $ 1.41 $ 1.29 $ 1.17 $ 1.06
Book value** 15.02 13.71 13.09 11.80
Stock price** 62.38 39.50 30.88 22.75
- ----------------------------------------------------------------------------------------------------------------------------
Staff members (full-time equivalents)** 2,428 2,418 2,332 2,303
Stockholders** 10,164 10,241 9,000 9,097
- ----------------------------------------------------------------------------------------------------------------------------
Net income per staff member3 $ 43,675 $ 40,231 $ 38,607 $ 36,982
Overhead ratio1 52.32% 53.04% 53.86% 55.86%
Capital generation rate2,3 12.59% 11.51% 11.68% 11.88%
Risk-based capital ratio** 12.38% 12.01% 12.06% 12.51%
Price/earnings multiple** 19.80 13.96 12.06 9.60
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Effective January 1, 1992, SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Persons," was adopted. Basic and diluted
earnings per share after the cumulative effect of change in accounting
principle were $1.70 and $1.68, respectively.
28A
<PAGE>
<TABLE>
<CAPTION>
Compound Growth Rates
---------------------------
1993 1992 1991 1990 1989 1988 1987 1987 to 1997 1992 to 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 194,808 $ 180,747 $ 167,438 $ 183,859 $ 181,126 $ 183,921 $ 178,185 0.66% 1.03%
21,248 72,787 73,258 79,830 102,531 151,387 320,669 (23.38) (21.02)
946,052 803,936 901,273 874,955 698,246 600,629 510,253 10.51 11.51
2,949,909 2,979,576 2,932,963 2,768,890 2,531,576 2,204,212 2,029,865 6.81 5.65
(48,619) (45,615) (43,724) (41,045) (36,959) (31,668) (28,052) 7.30 4.46
- --------------------------------------------------------------------------------------------------------------------------------
2,901,290 2,933,961 2,889,239 2,727,845 2,494,617 2,172,544 2,001,813 6.80 5.67
- --------------------------------------------------------------------------------------------------------------------------------
158,414 144,364 126,486 124,370 117,951 112,029 96,615 8.39 8.43
- --------------------------------------------------------------------------------------------------------------------------------
$4,221,812 $4,135,795 $4,157,694 $3,990,859 $3,594,471 $3,220,510 $3,107,535 6.22 6.55
================================================================================================================================
$ 500,396 $ 443,205 $ 393,260 $ 399,668 $ 421,994 $ 422,441 $ 482,499 3.47 8.90
2,718,885 2,778,768 2,858,595 2,593,897 2,319,031 2,185,029 2,080,553 4.37 2.81
545,012 479,577 499,083 629,995 514,418 315,999 270,662 15.94 19.90
65,737 67,101 61,705 64,971 61,830 59,195 60,693 5.08 8.21
-- -- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
3,830,030 3,768,651 3,812,643 3,688,531 3,317,273 2,982,664 2,894,407 6.04 6.66
391,782 367,144 345,051 302,328 277,198 237,846 213,128 8.43 5.45
- --------------------------------------------------------------------------------------------------------------------------------
$4,221,812 $4,135,795 $4,157,694 $3,990,859 $3,594,471 $3,220,510 $3,107,535 6.22 6.55
================================================================================================================================
$ 174,847 $ 165,214 $ 152,891 $ 137,569 $ 128,033 $ 112,101 $ 99,403 8.75 6.84
- --------------------------------------------------------------------------------------------------------------------------------
78,313 77,002 72,605 68,527 58,714 55,131 51,507 8.32 8.26
35,086 31,006 29,132 26,644 24,812 23,632 25,218 5.48 6.77
268 2,259 574 802 2,904 2,768 2,633 (36.75) (58.74)
- --------------------------------------------------------------------------------------------------------------------------------
113,667 110,267 102,311 95,973 86,430 81,531 79,358 7.10 7.40
- --------------------------------------------------------------------------------------------------------------------------------
288,514 275,481 255,202 233,542 214,463 193,632 178,761 8.05 7.07
- --------------------------------------------------------------------------------------------------------------------------------
(9,500) (13,000) (15,702) (12,487) (13,644) (11,569) (12,650) 5.45 10.59
- --------------------------------------------------------------------------------------------------------------------------------
95,849 90,419 85,204 80,214 76,462 67,611 62,746 7.54 7.50
65,937 63,362 58,380 54,639 49,539 46,120 44,951 5.65 4.21
- --------------------------------------------------------------------------------------------------------------------------------
161,786 153,781 143,584 134,853 126,001 113,731 107,697 6.79 6.19
- --------------------------------------------------------------------------------------------------------------------------------
117,228 108,700 95,916 86,202 74,818 68,332 58,414 10.49 7.82
34,467 29,938 23,155 17,673 13,624 12,718 11,695 16.17 11.82
- --------------------------------------------------------------------------------------------------------------------------------
82,761 78,762 72,761 68,529 61,194 55,614 46,719 8.54 6.13
-- (14,749) -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
$ 82,761 $ 64,013 $ 72,761 $ 68,529 $ 61,194 $ 55,614 $ 46,719 8.54 10.62
================================================================================================================================
29
<PAGE>
$ 2.24 $ 2.09 $ 1.92 $ 1.81 $ 1.59 $ 1.45 $ 1.21 10.04 8.55
- --------------------------------------------------------------------------------------------------------------------------------
$ 2.21 $ 2.06 $ 1.89 $ 1.79 $ 1.57 $ 1.43 $ 1.17 10.16 8.38
- --------------------------------------------------------------------------------------------------------------------------------
7% 9% 6% 14% 10% 20% 19%
................................................................................................................................
21.12% 20.62% 21.09% 22.67% 22.08% 23.38% 21.92%
1.96 1.90 1.75 1.72 1.70 1.73 1.50
- --------------------------------------------------------------------------------------------------------------------------------
0.28% 0.37% 0.45% 0.31% 0.37% 0.26% 0.57%
0.75 1.00 1.84 0.50 0.48 0.53 0.49
1.69 1.56 1.48 1.46 1.42 1.43 1.36
- --------------------------------------------------------------------------------------------------------------------------------
$ 0.975 $ 0.88 $ 0.80 $ 0.72 $ 0.59 $ 0.46 $ 0.39
10.87 10.12 9.79 8.58 7.61 6.76 5.84
26.25 26.50 29.00 20.00 18.88 13.63 13.00
- --------------------------------------------------------------------------------------------------------------------------------
2,254 2,188 2,213 2,179 2,173 2,185 1,998
8,880 8,261 7,477 7,444 7,332 7,209 7,268
- --------------------------------------------------------------------------------------------------------------------------------
$ 36,717 $ 35,997 $ 32,879 $ 31,450 $ 28,161 $ 25,453 $ 23,383
53.97% 53.47% 52.71% 53.21% 53.60% 53.69% 53.23%
12.35% 12.18% 13.43% 14.53% 15.07% 16.99% 16.03%
12.36% 12.36% 12.13% 11.52% 11.19% -- --
11.72 15.59 15.10 11.05 11.87 9.40 10.74
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
** At year-end
1 Total other expenses as a percentage of operating revenue
2 Net income less dividends paid as a percentage of prior year-end
stockholders' equity
3 Based upon income before the cumulative effect of change in accounting
principle
29A
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CONDITION
WILMINGTON TRUST CORPORATION AND SUBSIDIARIES
ASSETS
- -----------------------------------------------------------------------------------------------------------------
December 31 (in thousands) 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $ 239,392 $ 231,233
---------------------------------
Federal funds sold and securities purchased under agreements to resell 50,000 134,190
---------------------------------
Investment securities available for sale 1,316,403 798,519
---------------------------------
Investment securities held to maturity (market value of $333,812 in 1997
and $466,763 in 1996) 333,007 467,632
---------------------------------
Loans:
Commercial, financial and agricultural 1,207,930 1,237,061
Real estate -- construction 145,097 123,111
Mortgage -- commercial 884,146 862,974
Mortgage -- residential 813,116 678,800
Installment loans to individuals 954,486 881,994
Unearned income (10,840) (12,456)
- -----------------------------------------------------------------------------------------------------------------
Total loans net of unearned income 3,993,935 3,771,484
Reserve for loan losses (63,805) (54,361)
- -----------------------------------------------------------------------------------------------------------------
Net loans 3,930,130 3,717,123
---------------------------------
Premises and equipment, net 135,129 94,387
Other assets 118,290 121,325
- -----------------------------------------------------------------------------------------------------------------
Total assets $6,122,351 $5,564,409
==============================
.................................................................................................................
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 792,513 $ 840,987
Interest-bearing:
Savings 358,008 352,431
Interest-bearing demand 1,134,996 1,062,917
Certificates under $100,000 1,247,302 1,269,206
Certificates $100,000 and over 636,211 388,157
- -----------------------------------------------------------------------------------------------------------------
Total deposits 4,169,030 3,913,698
---------------------------------
Short-term borrowings:
Federal funds purchased and securities sold under agreements
to repurchase 1,246,287 983,017
U.S. Treasury demand 61,290 53,526
- -----------------------------------------------------------------------------------------------------------------
Total short-term borrowings 1,307,577 1,036,543
---------------------------------
Other liabilities 99,737 106,451
Long-term debt 43,000 43,000
- -----------------------------------------------------------------------------------------------------------------
Total liabilities 5,619,344 5,099,692
---------------------------------
Stockholders' equity:
Common stock: $1.00 par value; authorized 150,000,000 shares; issued
39,191,848 shares in 1997 and 39,107,462 shares in 1996 39,192 39,107
Capital surplus 62,511 59,463
Retained earnings 573,570 515,072
Net unrealized gain on investment securities available for sale, net of taxes 7,504 1,004
- -----------------------------------------------------------------------------------------------------------------
Total contributed capital and retained earnings 682,777 614,646
Less: Treasury stock; 5,713,735 shares in 1997 and 5,214,158 shares
in 1996, at cost (179,770) (149,929)
- -----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 503,007 464,717
---------------------------------
Total liabilities and stockholders' equity $6,122,351 $5,564,409
=================================
See notes to consolidated financial statements.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
WILMINGTON TRUST CORPORATION AND SUBSIDIARIES
- ---------------------------------------------------------------------------------------------------------------------
For the year ended December 31 (in thousands) 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $342,831 $320,499 $308,487
Interest and dividends on investment securities:
Taxable interest 76,838 70,728 57,473
Tax-exempt interest 1,430 1,826 2,042
Dividends 8,260 8,322 8,303
Interest on federal funds sold and securities purchased
under agreements to resell 1,280 1,475 1,036
- ---------------------------------------------------------------------------------------------------------------------
Total interest income 430,639 402,850 377,341
----------------------------------
Interest on deposits 134,176 121,955 105,304
Interest on short-term borrowings 65,573 65,195 74,325
Interest on long-term debt 874 1,479 348
- ---------------------------------------------------------------------------------------------------------------------
Total interest expense 200,623 188,629 179,977
----------------------------------
Net interest income 230,016 214,221 197,364
Provision for loan losses (21,500) (16,000) (12,280)
- ---------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 208,516 198,221 185,084
----------------------------------
.....................................................................................................................
OTHER INCOME
Trust and asset management fees:
Personal trust 55,403 47,468 41,395
Corporate financial services 32,689 28,059 27,113
Asset management 26,409 22,720 19,474
- ---------------------------------------------------------------------------------------------------------------------
Total trust and asset management fees 114,501 98,247 87,982
----------------------------------
Service charges on deposit accounts 20,964 19,038 17,497
Other operating income 22,050 19,764 19,894
Securities gains 27 1,188 2,267
- ---------------------------------------------------------------------------------------------------------------------
Total other income 157,542 138,237 127,640
----------------------------------
Net interest and other income 366,058 336,458 312,724
----------------------------------
.....................................................................................................................
OTHER EXPENSE
Salaries and employment benefits 129,816 119,574 110,670
Net occupancy 11,763 11,111 10,706
Furniture and equipment 16,361 14,413 14,067
Stationery and supplies 4,951 5,985 5,907
Other operating expense 44,780 41,256 39,654
- ---------------------------------------------------------------------------------------------------------------------
Total other expense 207,671 192,339 181,004
----------------------------------
.....................................................................................................................
NET INCOME
Income before income taxes 158,387 144,119 131,720
Applicable income taxes 52,343 46,841 41,689
- ---------------------------------------------------------------------------------------------------------------------
Net income $106,044 $ 97,278 $ 90,031
==================================
Net income per share:
basic $ 3.15 $ 2.83 $ 2.56
==================================
diluted $ 3.08 $ 2.79 $ 2.53
==================================
Weighted average shares outstanding:
basic 33,697 34,399 35,213
diluted 34,466 34,874 35,540
See notes to consolidated financial statements.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
WILMINGTON TRUST CORPORATION AND SUBSIDIARIES
- ----------------------------------------------------------------------------------------------------------------------
Common Capital Retained Valuation Treasury
(in thousands) stock surplus earnings reserve stock Total
- ----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
1995
Balance, January 1 $38,921 $58,117 $413,375 $ (295) $ 91,896 $418,222
Net income -- -- 90,031 -- -- 90,031
Cash dividends paid - $1.17 per share -- -- (41,191) -- -- (41,191)
Common stock issued under employment
benefit plans 92 (6) -- -- 8,044 8,130
Acquisition of treasury stock -- -- -- -- (20,495) (20,495)
Adjustments to net unrealized gain/(loss)
on investment securities available for
sale, net of income taxes of $2,629 -- -- -- 4,674 -- 4,674
- ----------------------------------------------------------------------------------------------------------------------
Balance, December 31 39,013 58,111 462,215 4,379 (104,347) 459,371
-------------------------------------------------------------------
......................................................................................................................
1996
Net income -- -- 97,278 -- -- 97,278
Cash dividends paid - $1.29 per share -- -- (44,421) -- -- (44,421)
Common stock issued under employment
benefit plans 94 1,352 -- -- 6,204 7,650
Acquisition of treasury stock -- -- -- -- (51,786) (51,786)
Adjustments to net unrealized gain/(loss)
on investment securities available for
sale, net of income taxes of $1,898 -- -- -- (3,375) -- (3,375)
- ----------------------------------------------------------------------------------------------------------------------
Balance, December 31 39,107 59,463 515,072 1,004 (149,929) 464,717
-------------------------------------------------------------------
......................................................................................................................
1997
Net income -- -- 106,044 -- -- 106,044
Cash dividends paid - $1.41 per share -- -- (47,546) -- -- (47,546)
Common stock issued under employment
benefit plans 85 3,048 -- -- 6,070 9,203
Acquisition of treasury stock -- -- -- -- (35,911) (35,911)
Adjustments to net unrealized gain/(loss)
on investment securities available for
sale, net of income taxes of $3,655 -- -- -- 6,500 -- 6,500
- ----------------------------------------------------------------------------------------------------------------------
Balance, December 31 $39,192 $62,511 $573,570 $7,504 $(179,770) $503,007
===================================================================
See notes to consolidated financial statements.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
WILMINGTON TRUST CORPORATION AND SUBSIDIARIES
- ----------------------------------------------------------------------------------------------------------------------
For the year ended December 31 (in thousands) 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $106,044 $ 97,278 $ 90,031
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 21,500 16,000 12,280
Provision for depreciation 10,507 10,218 9,850
Amortization of investment securities available
for sale discounts and premiums 2,634 3,032 332
(Accretion)/amortization of investment securities held to maturity
discounts and premiums (203) (32) 3,432
Deferred income taxes (571) 2,605 497
Securities gains (27) (1,188) (2,267)
Losses/(gains) on sales of loans 327 43 (868)
Decrease/(increase) in other assets 3,035 6,616 (12,988)
(Decrease)/increase in other liabilities (9,798) 4,054 17,984
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 133,448 138,626 118,283
-------------------------------------------
......................................................................................................................
INVESTING ACTIVITIES
Proceeds from sales of investment securities available for sale 21,869 270,246 107,964
Proceeds from maturities of investment securities available for sale 650,253 951,787 1,265,103
Proceeds from maturities of investment securities held to maturity 134,839 101,321 246,061
Purchases of investment securities available for sale (1,182,469) (1,151,119) (1,386,526)
Purchases of investment securities held to maturity -- (84,693) (602,393)
Gross proceeds from sales of loans 60,392 57,262 29,274
Purchases of loans (67,543) -- --
Net increase in loans (227,683) (318,380) (277,170)
Net increase in premises and equipment (51,249) (24,871) (18,806)
- ----------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (661,591) (198,447) (636,493)
-------------------------------------------
......................................................................................................................
FINANCING ACTIVITIES
Net increase/(decrease) in demand, savings and interest-bearing
demand deposits 29,182 187,345 (71,384)
Net increase in certificates of deposit 226,150 138,768 350,219
Net increase/(decrease) in federal funds purchased and securities
sold under agreements to repurchase 263,270 (183,146) 268,664
Net increase/(decrease) in U.S. Treasury demand 7,764 24,137 (7,919)
Proceeds from issuance of long-term debt -- 15,000 28,000
Cash dividends (47,546) (44,421) (41,191)
Proceeds from common stock issued under employment benefit plans 9,203 7,650 8,130
Payments for common stock acquired through buybacks (35,911) (51,786) (20,495)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 452,112 93,547 514,024
-------------------------------------------
(Decrease)/increase in cash and cash equivalents (76,031) 33,726 (4,186)
Cash and cash equivalents at beginning of year 365,423 331,697 335,883
- ----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $289,392 $365,423 $331,697
===========================================
....................................................................................................................................
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $219,624 $186,701 $170,906
Taxes $47,376 $47,221 $ 35,999
Loans transferred during the year:
To other real estate owned $5,665 $16,148 $ 9,037
From other real estate owned 7,058 25,305 12,350
See notes to consolidated financial statements.
</TABLE>
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
WILMINGTON TRUST CORPORATION AND SUBSIDIARIES
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Wilmington Trust Corporation (the "Corporation") is a bank and thrift holding
company organized under the General Corporation Law of Delaware. It holds all of
the outstanding capital stock of Wilmington Trust Company, a Delaware-chartered
bank and trust company engaged in commercial and trust banking activities since
1903 ("WTC"). WTC is the largest full-service bank in Delaware, with 52 branch
offices and nine principal operating subsidiaries through which it engages in
various lines of business.
The Corporation also owns two other financial institutions, Wilmington Trust of
Pennsylvania, a Pennsylvania-chartered bank and trust company acquired in 1993
("WTPA"), and Wilmington Trust FSB, a Federally-chartered savings bank organized
in 1994 ("WTFSB").
Through its subsidiaries, the Corporation engages in residential, commercial and
construction lending, deposit-taking, insurance and investment advisory and
broker-dealer services.
The Corporation presently conducts its banking activities principally in
Delaware, Pennsylvania, Maryland and Florida. The Corporation and its
subsidiaries are subject to competition from other financial institutions. They
also are subject to the regulations of certain federal and state regulatory
agencies and undergo periodic examination by those authorities.
During 1997, WTC agreed to form an affiliation with Cramer Rosenthal McGlynn,
LLC, an investment advisory firm specializing in equity investments in small- to
middle-capitalization stocks, with offices in New York City and White Plains,
New York. The transaction was completed on January 2, 1998 and allowed WTC to
acquire a 24% ownership interest in the firm, with the option to acquire
additional ownership in the future. The investment will be accounted for under
the equity method of accounting and will be carried in the "other assets" line
of the Corporation's Consolidated Statements of Condition.
Basis of Financial Statement Presentation
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles and include, after
elimination of material intercompany balances and transactions, the accounts of
the Corporation, WTC, WTPA, WTFSB and WTC's subsidiaries. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from these estimates. Estimates that are particularly susceptible to change in
the near term relate to the determination of the reserve for loan losses.
Cash Flows
The Corporation has defined cash and cash equivalents as those amounts included
in the balance sheet captions "Cash and due from banks" and "Federal funds sold
and securities purchased under agreements to resell."
Investment Securities
Debt securities that the Corporation has the intent and ability to hold until
maturity are classified as "held to maturity" and are carried at historical
cost, adjusted for any amortization of premium or accretion of discount.
Marketable equity securities and debt securities that are not classified as held
to maturity are classified as "available for sale" and are carried at fair
value, with the unrealized gains and losses, net of tax, reported as a separate
component of stockholders' equity.
Realized gains and losses and declines in value judged to be other than
temporary are included in earnings. The specific identification method is
utilized in determining the cost of a security that has been sold. Premiums and
discounts are amortized and accreted, respectively, as an adjustment of the
securities' yield using the interest method, adjusted for the effects of
prepayments on the underlying collateral.
34
<PAGE>
Loans
Loans are generally stated at their outstanding unpaid principal balance net of
any deferred fees or costs on originated loans, and net of any unamortized
premiums or discounts on purchased loans. Interest income is accrued and
recognized as income based upon the principal amount outstanding. Loan
origination and commitment fees net of certain direct origination costs are
being deferred, and the net amounts are being amortized over the contractual
life of the loans as adjustments of the yield.
The accrual of interest income is discontinued when a reasonable doubt exists as
to the collectibility of interest or principal. A loan is determined to be
impaired when it is probable that a borrower will be unable to pay all amounts
due according to the contractual terms of the loan agreement. Loans, including
those determined impaired under SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," are generally placed on nonaccrual status after they have
become 90 days past due. For installment and revolving consumer loans, the
accrual of interest income continues until the loan is charged off, which is
generally 120 days past due for installment loans and 180 days past due for
revolving consumer loans. A nonaccrual loan is not necessarily deemed to be
uncollectible.
Reserve for Loan Losses
The reserve for loan losses has been established through provisions for loan
losses charged against income. Loans deemed to be uncollectible are charged
against the reserve and subsequent recoveries, if any, are credited to the
reserve. The Corporation accounts for certain loans under SFAS No. 114 and SFAS
No. 118, "Accounting by Creditors for Impairment of a Loan--Income Recognition
and Disclosures." Under the new standards, the reserve for loan losses related
to loans that are identified for evaluation in accordance with SFAS No. 114 is
based on discounted cash flows using the loan's effective interest rate at the
date the loan is determined to be impaired or the fair value of the collateral
for collateral-dependent loans. For collateral-dependent loans, management
obtains appraisals for all significant properties. The reserve is maintained at
a level considered adequate to provide for potential loan losses. In making this
determination, management takes into consideration the results of internal
review procedures, prior loan loss experience, an assessment of the effect of
current and anticipated future economic conditions on the loan portfolio, the
financial condition of the borrower and such other factors that, in management's
judgment, deserve consideration. The determination of the adequacy of the
reserve is inherently subjective, as it requires material estimates including
the amounts and timing of future cash flows expected to be received on impaired
loans that may be susceptible to significant change.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation expense is computed on the straight-line basis over the estimated
useful life of the asset. Improvements are capitalized and depreciated over
their useful lives. Gains or losses on dispositions of property and equipment
are included in income as realized.
Income Taxes
The Corporation accounts for income taxes using the liability method under which
deferred tax assets and liabilities are determined based upon the differences
between financial statement carrying amounts and the tax bases of existing
assets and liabilities. These temporary differences are measured at prevailing
enacted tax rates that will be in effect when the differences are settled or
realized.
The Corporation and its subsidiaries, except for Brandywine Life Insurance
Company and Rodney Square Investors, L.P., a 50%-owned partnership, file a
consolidated federal income tax return. Brandywine Life Insurance Company and
Rodney Square Investors, L.P. file separate returns.
35
<PAGE>
Trust and Asset Management Fees
Trust income is recognized on an accrual basis, except for certain amounts that
are collected and recorded on a cash basis. Recording income on a cash basis
does not have a material effect on net income.
Per-Share Data
In 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings
per Share." SFAS No. 128 replaced the calculation of primary and fully diluted
net income per share. Basic net income per share is based on the weighted
average number of shares outstanding during each year. Diluted net income per
share is similar to basic net income per share, but includes the dilutive effect
of shares issuable under stock option plans. All prior period net income per
share data has been restated to conform to SFAS No. 128 requirements.
Derivative Interest Rate Contracts
The Corporation enters into interest rate swap and interest rate floor contracts
in managing interest rate risk in order to reduce the impact of fluctuations in
interest rates of identifiable asset categories, principally floating rate
commercial loans and commercial mortgage loans.
Swaps are contracts to exchange, at specified intervals, the difference between
fixed and floating interest amounts computed on contractual notional principal
amounts. The Corporation has entered into swaps in which it receives a fixed
rate and pays a floating rate. The net interest differential is reported in
"Interest and fees on loans" in the Consolidated Statements of Income and is
recognized over the lives of the contracts. No fees were received or paid. There
have been no swap terminations.
Floors are contracts which generate interest payments to the Corporation based
on the difference between the floating rate index and a pre-determined strike
rate of the specific floor when the index is below the strike rate. When the
index is equal to or above the strike rate, no payments are received by the
Corporation. The net interest differential, the amortization of the initial fees
associated with the purchase of the floors and any gains recorded on the sale of
the floors are reported in "Interest and fees on loans" in the Consolidated
Statements of Income and are recognized over the lives of the contracts. During
1995, floors with a total notional value of $200 million were sold at a gain of
$4.3 million. The gain is being deferred and accreted to income over the lives
of the original floors sold.
The Corporation does not hold or issue derivative financial instruments for
trading purposes.
Other Real Estate Owned
Other real estate owned, which is reported as a component of other assets in the
Consolidated Statements of Condition, consists of assets that have been acquired
through foreclosure or acceptance of a deed in lieu of foreclosure and loans for
which the Corporation has taken possession of the collateral. These assets are
recorded on the books of the Corporation at the lower of their cost or estimated
fair value less cost to sell, adjusted periodically based upon current
appraisals.
- --------------------------------------------------------------------------------
NOTE 2:
RESTRICTIONS ON CASH
AND DUE FROM BANKS
The Federal Reserve Board requires banks to maintain cash reserves against
certain categories of average deposit liabilities. Such reserves averaged
$20,145,087 during the year ended December 31, 1997.
- --------------------------------------------------------------------------------
36
<PAGE>
NOTE 3:
INVESTMENT SECURITIES
<TABLE>
<CAPTION>
The amortized cost and estimated market value of securities are as follows:
- ------------------------------------------------------------------------------------------------------------------------------
Amortized Cost Gross Gross Estimated Market Value
----------------------- unrealized unrealized -----------------------
Balance, December 31, 1996 (in thousands) Debt Equity gains losses Debt Equity
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment securities available for sale:
U.S. Treasury and government agencies $ 545,330 $ -- $ 1,951 $ (1,509) $ 545,772 $ --
Obligations of state and political subdivisions 13,176 -- 253 (52) 13,377 --
Other securities:
Preferred stock -- 139,186 756 (87) -- 139,855
Asset-backed securities 16,096 -- 63 (23) 16,136 --
Other debt securities 21,665 -- 192 (79) 21,778 --
Other marketable equity securities -- 61,496 105 -- -- 61,601
- ------------------------------------------------------------------------------------------------------------------------------
Total $ 596,267 $ 200,682 $ 3,320 $ (1,750) $ 597,063 $ 201,456
============================================================================
Investment securities held to maturity:
U.S. Treasury and government agencies $ 267,502 $ -- $ 784 (1,764) $ 266,522 $ --
Obligations of state and political subdivisions 19,121 -- 209 (13) 19,317 --
Other securities:
Asset-backed securities 181,009 -- 1,054 (1,139) 180,924 --
- ------------------------------------------------------------------------------------------------------------------------------
Total $ 467,632 $ -- $ 2,047 $ (2,916) $ 466,763 $ --
============================================================================
Balance, December 31, 1997 (in thousands)
- ------------------------------------------------------------------------------------------------------------------------------
Investment securities available for sale:
U.S. Treasury and government agencies $ 784,218 $ -- $ 6,641 $ (340) $ 790,519 $ --
Obligations of state and political subdivisions 7,958 -- 55 (6) 8,007 --
Other securities:
Preferred stock -- 155,327 3,739 -- -- 159,066
Asset-backed securities 277,524 -- 1,547 (434) 278,637 --
Other debt securities 16,002 -- 205 (31) 16,176 --
Other marketable equity securities -- 63,650 348 -- -- 63,998
- ------------------------------------------------------------------------------------------------------------------------------
Total $1,085,702 $ 218,977 $ 12,535 $ (811) $1,093,339 $ 223,064
============================================================================
Investment securities held to maturity:
U.S. Treasury and government agencies $ 219,136 $ -- $ 460 (430) $ 219,166 $ --
Obligations of state and political subdivisions 12,743 -- 452 -- 13,195 --
Other securities:
Asset-backed securities 101,128 -- 624 (301) 101,451 --
- ------------------------------------------------------------------------------------------------------------------------------
Total $ 333,007 $ -- $ 1,536 $ (731) $ 333,812 $ --
============================================================================
</TABLE>
The amortized cost and estimated market value of debt securities at December 31,
1997 by contractual maturity are shown below (in thousands). Expected maturities
will differ from contractual maturities because the issuers may have the right
to call or prepay obligations without penalties.
<TABLE>
<CAPTION>
Debt securities available for sale Debt securities held to maturity
---------------------------------- --------------------------------
Amortized cost Market value Amortized cost Market value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $ 97,518 $ 97,628 $ 1,125 $ 1,129
Due after one year through five years 520,488 525,203 220,900 221,115
Due after five years through ten years 231,003 232,990 29,467 29,669
Due after ten years 236,693 237,518 81,515 81,899
- ----------------------------------------------------------------------------------------------------------------
$1,085,702 $1,093,339 $ 333,007 $ 333,812
==================================================================
</TABLE>
Proceeds from the sales of investment securities available for sale during 1997,
1996 and 1995 were $21,869,484, $270,246,485 and $107,964,359, respectively.
Gross gains of $24,070, $1,100,858 and $2,066,312 in 1997, 1996 and 1995,
respectively, were realized on those sales with no offsetting losses. Securities
with an aggregate book value of $826,676,769 at December 31, 1997 were pledged
to secure deposits and other commitments.
37
<PAGE>
The Corporation's preferred stock portfolio consists of auction-rate, cumulative
and non-cumulative preferred stocks. Auction-rate preferred stock is preferred
stock with a floating-rate dividend that is paid and reset every 49 days through
an auction process in which investors determine the yield through bidding. This
pricing mechanism should help assure that the stock will trade at or near par.
At December 31, 1997, the Corporation's asset-backed securities portfolio
consisted primarily of collateralized mortgage obligations ("CMOs"). The
portfolio has an approximate average life of 2.82 years. The portfolio's
aggregate average yield-to-maturity was 6.74%.
At December 31, 1997, the Corporation did not hold state and municipal
securities for any one state in excess of 10% of stockholders' equity.
During 1995, the Financial Accounting Standards Board granted companies a
one-time opportunity to restructure their investment portfolios without calling
into question their intent to hold other debt securities to maturity. The
Corporation restructured its investment portfolio to provide a more evenly
distributed series of future cash flows and to allow greater flexibility in
asset/liability and investment management. The amortized cost of securities held
to maturity that were transferred to the available-for-sale portfolio was
$708,098,186, with a net unrealized gain of $8,732,941.
- --------------------------------------------------------------------------------
NOTE 4:
CONCENTRATIONS
OF LOANS
The Corporation's lending activity is primarily focused within Delaware,
Pennsylvania, Maryland and Florida. The Corporation makes no foreign loans. At
December 31, 1997, approximately 4% of the Corporation's total loan portfolio
consisted of real estate construction loans, while approximately 30% represented
commercial loans, 22% represented commercial mortgage loans, which were secured
by income-producing properties, and approximately 20% and 24%, respectively,
represented residential mortgage loans and installment loans to individuals.
Each of these ratios was virtually unchanged from those reported at December 31,
1996.
In addition to these loans outstanding, at December 31, 1997 and 1996, unfunded
commitments to lend in the real estate sector were approximately $318,937,000
and $219,194,000, respectively. The Corporation generally requires collateral on
all real estate exposure and a loan-to-value ratio of no greater than 80% when
underwritten. Management believes the Corporation's mortgage portfolio is well
diversified when measured by industry classification statistics.
- --------------------------------------------------------------------------------
NOTE 5:
RESERVE FOR LOAN LOSSES
<TABLE>
<CAPTION>
The following is an analysis of the reserve for loan losses:
- -------------------------------------------------------------------------------------------
(in thousands) 1997 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, January 1 $ 54,361 $ 49,867 $ 48,669
-------------------------------------------------
Chargeoffs (16,187) (14,655) (14,282)
Recoveries 4,131 3,149 3,200
- -------------------------------------------------------------------------------------------
Net chargeoffs (12,056) (11,506) (11,082)
Provision charged to operations 21,500 16,000 12,280
- -------------------------------------------------------------------------------------------
Balance, December 31 $ 63,805 $ 54,361 $ 49,867
=================================================
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Information with respect to loans that are considered to be impaired under SFAS #114 for the years ended
December 31 is as follows:
- ----------------------------------------------------------------------------------------------------------------
(in thousands) 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Average recorded investment in impaired loans $39,946 $36,139
-------------------------
Recorded investment in impaired loans at year-end subject to a reserve
for loan losses (1997 reserve--$8,042; 1996 reserve--$10,058) $31,731 $39,002
Recorded investment in impaired loans at year-end requiring no reserve
for loan losses 524 2,801
-------------------------
Recorded investment in impaired loans at year-end $32,255 $41,803
=========================
Recorded investment in impaired loans at year-end classified as nonaccruing $27,007 $39,976
-------------------------
Interest income recognized $ 2,649 $ 1,906
Interest income recognized using the cash basis method of income recognition 2,162 1,718
</TABLE>
<TABLE>
<CAPTION>
The following is an analysis of interest on nonaccruing loans:
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands) 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nonaccruing loans at December 31 $28,669 $40,735 $33,576
-------------------------------------------
Interest income which would have been recognized under original terms $ 2,766 $ 2,757 $ 3,511
Interest accrued or received 2,207 1,736 1,741
</TABLE>
- --------------------------------------------------------------------------------
NOTE 6:
PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31 is as follows:
- --------------------------------------------------------------------------------
(in thousands) 1997 1996
- --------------------------------------------------------------------------------
Land $ 11,558 $ 12,491
Buildings and improvements 109,139 87,045
Furniture and equipment 102,977 78,312
- --------------------------------------------------------------------------------
223,674 177,848
Accumulated depreciation (88,545) (83,461)
- --------------------------------------------------------------------------------
Premises and equipment, net $ 135,129 $ 94,387
=======================================
- --------------------------------------------------------------------------------
NOTE 7:
SHORT-TERM BORROWINGS
A summary of securities sold under agreements to repurchase at December 31 is as
follows:
- --------------------------------------------------------------------------------
(in thousands) 1997 1996
- --------------------------------------------------------------------------------
Maximum amount outstanding at any month-end $253,111 $230,906
Daily average amount outstanding during the period 195,945 184,233
The securities underlying the agreements are under the Corporation's control.
- --------------------------------------------------------------------------------
NOTE 8:
LONG-TERM DEBT
WTC has obtained advances from the Federal Home Loan Bank of Pittsburgh to
finance the Wilmington Trust Operations Center. Monthly interest payments are
due on the first of each month at a fixed interest rate, with the principal due
on the maturity date. Any payment of the principal prior to the originally
scheduled maturity date is subject to a prepayment fee. Information with respect
to the advances is as follows:
- --------------------------------------------------------------------------------
Principal Amount Term Fixed
(in thousands) (years) Interest Rate Maturity Date
- --------------------------------------------------------------------------------
$28,000 15 6.55% October 4, 2010
7,500 10 6.41 November 6, 2006
7,500 5 6.20 October 9, 2001
39
<PAGE>
- --------------------------------------------------------------------------------
NOTE 9:
CONTINGENT LIABILITIES
The Corporation and its subsidiaries, in the ordinary course of business, are
involved in various legal proceedings. While it is not feasible to predict the
outcome of all pending suits and claims, management does not believe the
ultimate resolution of any of these matters will have a material adverse effect
on the consolidated financial condition of the Corporation.
The Company is a defendant in a class action lawsuit relating to fees charged to
certain personal trust customer accounts during the period from August 1983
through May 1987. This suit was brought in Delaware's Court of Chancery, and was
certified as a class during the fourth quarter, 1997. The plaintiff is seeking
monetary damages equal to the disputed fees of approximately $8.5 million plus
accrued pre-judgment interest approximating $14 million calculated to October
31, 1997. The Company contests all claims set forth in this suit and is
vigorously defending itself.
Management has not accrued any expenses associated with the outcome of these
various legal proceedings as of December 31, 1997.
- --------------------------------------------------------------------------------
NOTE 10:
FAIR VALUE OF
FINANCIAL INSTRUMENTS
The following discloses the fair value of financial instruments held by the
Corporation as of December 31, 1997 and 1996, whether or not recognized in the
Consolidated Statements of Condition. In cases in which quoted market prices
were not available, fair values were based upon estimates using present value or
other valuation techniques. These techniques were significantly affected by the
assumptions used, including the discount rate and estimates of cash flows.
Consequently, these fair values cannot be substantiated by comparisons with
independent markets and, in many cases, may not be realized upon the immediate
sale of the instrument. Since generally accepted accounting principles exclude
certain financial instruments and all nonfinancial instruments from this
presentation, the aggregated fair value amounts do not represent the underlying
value of the Corporation.
Cash and Short-Term Investments
The carrying amounts reported for "Cash and due from banks" and "Federal funds
sold and securities purchased under agreements to resell" approximate the fair
value of those assets.
Investment Securities
The fair values of investment securities are based upon quoted market prices
when available. If quoted market prices are not available, fair values are based
upon quoted market prices of comparable instruments.
Loans
The fair values of fixed-rate and variable-rate loans that reprice within one
year with no significant credit risk are based upon their carrying amounts. The
fair values of all other loans are estimated using discounted cash flow
analysis, which utilizes interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality. The reserve for loan
losses is allocated to the various components of the loan portfolio in
determining the fair values of those loans. The carrying amount of accrued
interest receivable approximates its fair value. The fair values of outstanding
letters of credit and loan commitments approximate the fees charged for
providing such services.
Deposits and Short-Term Borrowings
The fair values for demand deposits are, by definition, equal to the amount
payable on demand at the reporting date. The carrying amounts for variable-rate
deposits approximate their fair values at the reporting date. Fair values for
fixed-rate certificates of deposit are estimated using discounted cash flow
analysis that applies interest rates currently being offered on certificates.
The carrying amounts of federal funds purchased and securities sold under
agreements to repurchase and other short-term borrowings approximate their fair
values.
40
<PAGE>
Long-Term Debt
The fair value of long-term debt is based on the borrowing rate currently
available to WTC for debt with similar terms and remaining maturities.
Derivative Interest Rate Contracts
The fair values of swaps and floors are based upon pricing models using current
assumptions.
The carrying values and estimated fair values of the Corporation's financial
assets, liabilities and off-balance-sheet financial instruments as of December
31 are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
1997 1996
--------------------------- ----------------------------
Carrying Fair Carrying Fair
(in thousands) Value Value Value Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks $ 239,392 $ 239,392 $ 231,233 $ 231,233
Short-term investments 50,000 50,000 134,190 134,190
Investment securities (see note 3) 1,649,410 1,650,215 1,266,151 1,265,282
Loans, net of reserves 3,930,130 3,938,668 3,717,123 3,712,701
Accrued interest receivable 41,555 41,555 37,382 37,382
Financial liabilities:
Deposits 4,169,030 4,179,419 3,913,698 3,913,185
Short-term borrowings 1,307,577 1,307,577 1,036,543 1,036,543
Accrued interest payable 45,771 45,771 64,771 64,771
Long-term debt 43,000 43,187 43,000 43,246
Contractual Fair Contractual Fair
(in thousands) Amount Value Amount Value
- --------------------------------------------------------------------------------------------------------------------
Off-balance-sheet financial instruments:
Unfunded commitments to extend credit $1,486,557 $ (3,716) $1,255,959 $ (3,140)
Standby and commercial letters of credit 54,774 (822) 58,631 (879)
Interest rate swap contracts 275,000 363 400,000 787
Interest rate floor contracts 325,000 3,268 250,000 3,632
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTE 11:
OFF-BALANCE-SHEET FINANCIAL AGREEMENTS
In the normal course of business, the Corporation engages in off-balance-sheet
financial agreements in order to meet the needs of its customers and to reduce
its own exposure to fluctuations in interest rates. A summary of
off-balance-sheet financial agreements at December 31 is as follows:
- --------------------------------------------------------------------------------
(in thousands) 1997 1996
- --------------------------------------------------------------------------------
Commitments to extend credit (contractual amount) $1,486,557 $1,255,959
Letters of credit (contractual amount) 54,774 58,631
Interest rate swaps (notional value) 275,000 400,000
Interest rate floors (notional value) 325,000 250,000
The Corporation's exposure to credit risk is represented by the contractual
amount of both the commitments to extend credit and letters of credit, while the
notional amount of the swaps and floors far exceeds any credit risk exposure.
Commitments to extend credit are agreements to lend to a customer. Generally,
they have fixed expiration dates or termination clauses and may require payment
of a fee. Many commitments expire without ever having been drawn upon. Letters
of credit are conditional commitments issued by the Corporation to guarantee the
performance of a customer to a third party. Maturities normally are for terms
shorter than five years. Many letters of credit expire unfunded. The credit risk
for both of these instruments is essentially the same as that involved in
extending loans. The Corporation evaluates each customer's creditworthiness on a
case-by-case basis. Collateral (i.e., securities, receivables, inventory,
41
<PAGE>
equipment and residential and commercial properties) is obtained depending on
management's credit assessment of the customer.
Swaps represent an exchange of interest payments computed on contractual
notional principal amounts. Swaps subject the Corporation to market risk
associated with changes in interest rates, as well as the risk that the
counterparty may fail to perform. At December 31, 1997, swaps with a total
notional principal of $275 million were in effect. This compares with $400
million at December 31, 1996. The weighted average variable interest rate that
the Corporation paid was 5.55% and 5.54% on December 31, 1997 and 1996,
respectively, while the weighted average fixed interest rate that the
Corporation received was 5.83% and 6.12% on December 31, 1997 and 1996,
respectively. The swaps have a weighted average original and remaining term to
maturity of approximately 3.4 and 1.1 years, respectively.
Floors reduce the risk associated with a declining interest rate environment and
result in receipts only if current interest rates fall below a predetermined
strike rate. Floors subject the Corporation to the risk that the counterparty
may fail to perform. At December 31, 1997, floors with a total notional
principal of $325 million were in effect. This compares with $250 million at
December 31, 1996. The weighted average strike rate was 6% on December 31, 1997
and 1996. The floors have a weighted average original and remaining term to
maturity of approximately 4.7 and 2.5 years, respectively.
- --------------------------------------------------------------------------------
NOTE 12:
CAPITAL REQUIREMENTS
The Corporation is subject to various regulatory capital requirements by the
federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory--and possibly additional discretionary--actions by
regulators that, if undertaken, could have a direct material effect on the
Corporation's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Corporation must meet
specific capital guidelines that involve quantitative measures of the
Corporation's assets, liabilities and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Corporation's capital
amounts and classification also are subject to qualitative judgments by the
regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Corporation to maintain minimum amounts and ratios (set forth in the
following table) of total and tier 1 capital to risk-weighted assets, and tier 1
capital to average assets. Management believes that, as of December 31, 1997 and
1996, the Corporation meets all capital adequacy requirements to which it is
subject.
As of the most recent notification from the federal regulators, the Corporation
and each of its subsidiaries were categorized as well-capitalized under the
regulatory framework for prompt corrective action. There are no conditions or
events since that notification that management believes could change the
Corporation's category.
A summary of the Corporation's risk-based capital ratios and the levels to be
categorized as adequately and well-capitalized as of December 31 is as follows:
42
<PAGE>
<TABLE>
<CAPTION>
To be well-
capitalized under
For capital prompt corrective
adequacy purposes action provisions
------------------- --------------------
Actual Amount Ratio Amount Ratio
--------------------- GREATER GREATER GREATER GREATER
THAN OR THAN OR THAN OR THAN OR
(in thousands) Amount Ratio EQUAL TO EQUAL TO EQUAL TO EQUAL TO
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997:
Total capital (to risk-weighted assets):
Wilmington Trust Corporation $540,979 12.38%
Wilmington Trust Company 495,885 11.76 $337,280 8.0% $421,600 10.0%
Tier 1 capital (to risk-weighted assets):
Wilmington Trust Corporation 486,265 11.13
Wilmington Trust Company 443,103 10.51 168,640 4.0 252,960 6.0
Tier 1 capital (to average assets):
Wilmington Trust Corporation 486,265 8.58
Wilmington Trust Company 443,103 7.78 227,838 4.0 284,798 5.0
As of December 31, 1996:
Total capital (to risk-weighted assets):
Wilmington Trust Corporation 507,863 12.01
Wilmington Trust Company 477,459 11.65 327,903 8.0 409,879 10.0
Tier 1 capital (to risk-weighted assets):
Wilmington Trust Corporation 455,013 10.76
Wilmington Trust Company 426,224 10.40 163,952 4.0 245,927 6.0
Tier 1 capital (to average assets):
Wilmington Trust Corporation 455,013 8.59
Wilmington Trust Company 426,224 8.24 206,983 4.0 258,728 5.0
</TABLE>
The primary source of funds for payment of dividends by the Corporation
historically has been dividends received from WTC. The ability to pay dividends
is limited by Delaware law, which requires capital surplus at least equal to the
par value of outstanding common stock.
In October 1993, the Corporation, after obtaining approval of its Board of
Directors, announced a plan to buy back 3,000,000 shares of its stock. The
repurchased shares are held as treasury stock. During the years ended December
31, 1996 and 1995, 722,707 shares and 762,772 shares, respectively, were
acquired, completing this program. The total cost was $83,337,792.
In April 1996, the Corporation, after obtaining approval of its Board of
Directors, announced a plan to buy back an additional 4,000,000 shares of its
stock. During the years ended December 31, 1997 and 1996, 737,729 shares and
814,367 shares, respectively, were acquired under this program at a cost of
$64,521,773.
- --------------------------------------------------------------------------------
NOTE 13:
RELATED PARTY TRANSACTIONS
In the ordinary course of banking business, loans are made to officers and
directors of the Corporation and its affiliates as well as to their associates.
In the opinion of management, these loans are consistent with sound banking
practices and do not involve more than the normal risk of collectibility. At
December 31, 1997 and 1996, loans to executive officers and directors of the
Corporation and its principal affiliates, including loans to their associates,
totaled $32,107,717 and $31,419,050, respectively. During 1997, loan additions
were $15,912,462, loan repayments were $15,901,620 and other changes were
$677,825. Other changes represent the loan activity of newly elected executive
officers and directors.
43
<PAGE>
- --------------------------------------------------------------------------------
NOTE 14:
EMPLOYMENT
BENEFIT PLANS
STOCK-BASED COMPENSATION PLANS
At December 31, 1997, the Corporation had two types of stock-based compensation
plans, which are described below. The Corporation applies Accounting Principles
Board Opinion ("APB") No. 25 and related Interpretations in accounting for these
plans. No compensation cost has been recognized in the accompanying Consolidated
Financial Statements for those plans. If compensation cost for the Corporation's
two types of stock-based compensation plans had been determined based on the
fair value at the grant dates for awards under those plans consistent with the
methods outlined in SFAS No. 123, "Accounting for Stock-Based Compensation," the
Corporation's net income would have been as follows:
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
Net income
As reported $106,044 $ 97,278 $ 90,031
Pro forma 102,650 95,614 88,945
1996 LONG-TERM INCENTIVE PLAN
Under the 1996 Long-Term Incentive Plan, the Corporation may grant incentive
stock options, non-statutory stock options and other stock-based awards to
officers and other key staff members for up to 1,200,000 shares of common stock.
Under the plan, the exercise price of each option equals the last sale price of
the Corporation's stock on the date of grant and an option's maximum term is 10
years. Information with respect to that plan and the Corporation's prior stock
option plans is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
------------------------- ------------------------- --------------------------
Weighted Weighted Weighted
average average average
Options exercise Options exercise Options exercise
outstanding price outstanding price outstanding price
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1 1,543,312 $25.89 1,449,901 $23.52 1,573,521 $22.26
Options granted 419,086 42.32 337,281 31.69 208,850 25.25
Options exercised (234,912) 24.75 (241,920) 19.74 (311,420) 18.10
Options forfeited (11,400) 28.38 (1,950) 31.50 (21,050) 26.25
- ------------------------------------------------------------------------------------------------------------------------------
Balance, December 31 1,716,086 $30.04 1,543,312 $25.89 1,449,901 $23.52
======================================================================================
Options exercisable, December 31 1,297,000 1,207,981 1,252,201
======================================================================================
Weighted average fair value of
options granted during the year $ 7.65 $ 5.10 $ 4.07
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model. The following weighted average assumptions
were used:
- ------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
Dividend yields 2.29% 3.72% 3.72%
Expected volatility 17.79-18.03 17.64-19.65 17.64-19.65
Risk-free interest rate 5.36-5.38 5.80-5.95 5.80-5.95
Expected option life (years) 3-5 3-5 3-5
</TABLE>
44
<PAGE>
A summary of the stock options outstanding at December 31, 1997 is as follows:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
----------------------------------------------- -------------------------
Weighted
average Weighted Weighted
remaining average average
Range of Options contractual exercise Options exercise
exercise prices outstanding life (years) price exercisable price
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$14.00-24.75 414,968 2.7 $20.65 414,968 $20.65
25.00-35.00 882,032 6.6 28.63 882,032 28.63
36.00-46.00 419,086 5.9 42.32 -- --
- --------------------------------------------------------------------------------------------------
$14.00-46.00 1,716,086 5.5 $30.04 1,297,000 $26.07
==================================================================================================
</TABLE>
44A
<PAGE>
1996 EMPLOYEE STOCK PURCHASE PLAN
Under the Corporation's 1996 Employee Stock Purchase Plan, substantially all
staff members may elect to participate in purchasing the Corporation's common
stock at the beginning of the plan year through payroll deductions of up to the
lesser of 10% of their annual base pay or $21,250, and may terminate
participation at any time. The price per share is the lower of 85% of fair
market value at time of election to participate or at the end of the plan year,
which is May 31. Information with respect to that plan and the Corporation's
prior employee stock purchase plans is as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Shares reserved
for future Subscriptions Price
subscriptions outstanding per share
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1, 1995 495,500 94,810
----------------------------
Subscriptions entered into on June 1, 1995 (98,205) 98,205 $ 22.10
Forfeitures 4,391 (4,391) 21.89-22.10
Shares issued -- (92,169) 21.89
- -----------------------------------------------------------------------------------------------------
Balance, December 31, 1995 401,686 96,455
----------------------------
Subscriptions entered into on June 1, 1996 (88,412) 88,412 28.05
Forfeitures 3,995 (3,995) 22.10-28.05
Shares issued -- (94,550) 22.10
- -----------------------------------------------------------------------------------------------------
Balance, December 31, 1996 317,269 86,322
----------------------------
Subscriptions entered into on June 1, 1997 (76,796) 76,796 38.14
Forfeitures 3,631 (3,631) 28.05-38.14
Shares issued -- (84,386) 28.05
- -----------------------------------------------------------------------------------------------------
Balance, December 31, 1997 244,104 75,101
============================
</TABLE>
PENSION PLAN
The Wilmington Trust Pension Plan is a non-contributory, defined benefit plan
for substantially all staff members of the Corporation and its subsidiaries, and
provides for retirement and death benefits. The Corporation has agreed to
contribute such amounts as are necessary to provide assets sufficient to meet
the benefits to be paid to the plan's members. Annual contributions are designed
to fund the plan's current service costs and past service costs plus interest
over 10 years.
Costs of the plan are determined actuarially by the projected unit credit
method. Plan benefits are based on years of service and a modified career
average formula. The plan's assets are invested primarily in collective trust
funds managed by WTC. Participation in the collective trust funds of WTC was
$103,085,348 and $91,217,213 at December 31, 1997 and 1996, respectively.
A table of the plan's funded status and amounts recognized in the Consolidated
Statements of Condition at December 31 is as follows:
45
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
(in thousands) 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefits obligations:
Accumulated benefit obligation:
Vested $ (74,207) $ (65,749)
Nonvested (3,386) (3,011)
- -------------------------------------------------------------------------------------------
$ (77,593) $ (68,760)
============================
Projected benefit obligation $ (82,943) $ (72,602)
Plan assets at fair value 103,880 87,859
----------------------------
Excess of plan assets over projected benefit obligation 20,937 15,257
Unrecognized prior service cost 7,923 8,717
Unrecognized net (gain)/loss (25,839) (19,691)
Unrecognized net transition cost (5,888) (6,729)
- -------------------------------------------------------------------------------------------
Accrued pension costs recognized in the consolidated
statements of condition $ (2,867) $ (2,446)
============================
</TABLE>
<TABLE>
<CAPTION>
Net pension cost includes the following components:
- -------------------------------------------------------------------------------------------------
(in thousands) 1997 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 2,292 $ 1,983 $ 1,515
Interest cost on projected benefit obligation 5,888 5,372 5,115
Actual return on plan assets (19,346) (8,527) (13,212)
Net amortization and deferral 11,587 1,614 6,798
- -------------------------------------------------------------------------------------------------
Net periodic pension cost $ 421 $ 442 $ 216
===========================================
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assumptions used in determining the projected benefit
obligation were as follows:
Discount rate 7.50% 7.75%
Average rate of compensation increase 4.50 4.50
Assumptions used in determining net pension cost were as follows:
Long-term rate of return on plan assets 9.50% 9.50% 9.50%
Discount rate 7.75 7.50 8.50
Average rate of compensation increase 4.50 4.50 5.50
</TABLE>
POST-EMPLOYMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
In addition to providing pension benefits, the Corporation makes available
certain health care and life insurance benefits for substantially all retired
staff members. Staff members who retire from the Corporation are eligible to
receive up to $7,000 each year toward the premium for medical coverage if they
are under age 65 and up to $4,000 toward the premium if they are age 65 or over.
Staff members who retire also are eligible for $7,500 of life insurance
coverage. In accordance with SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," and SFAS No. 112, "Employers'
Accounting for Postemployment Benefits," the cost of providing those benefits is
being recognized on an accrual basis.
46
<PAGE>
The components of the net periodic post-employment benefit costs for the years
ended December 31 were as follows:
- --------------------------------------------------------------------------------
(in thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
Service cost $ 524 $ 509 $ 369
Interest cost 1,928 1,712 1,807
Net amortization and deferral -- -- (73)
- --------------------------------------------------------------------------------
Net post-employment benefit cost $ 2,452 $ 2,221 $ 2,103
========================================
A table of the plan's funded status and amounts recognized in the Consolidated
Statements of Condition at December 31 is as follows:
- --------------------------------------------------------------------------------
(in thousands) 1997 1996
- --------------------------------------------------------------------------------
Accumulated post-employment benefit obligation:
Retirees $(17,769) $(15,411)
Active employees (8,889) (8,292)
- --------------------------------------------------------------------------------
(26,658) (23,703)
Plan assets at fair value -- --
--------------------------------
Funded status (26,658) (23,703)
Unrecognized prior service cost -- --
Unrecognized net (gain)/loss $ (12) (2,464)
Unrecognized transition obligation -- --
- --------------------------------------------------------------------------------
Accrued post-employment benefit cost $(26,670) $(26,167)
================================
The following assumptions were utilized in the calculation of the accumulated
post-employment benefit obligation:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
1997 1996 1995
Claims Claims Claims
- -------------------------------------------------------------------------------------------------------
Significant actuarial assumptions used for other
post-employment benefits were as follows:
<S> <C> <C> <C>
Discount rate 7.50% 7.75% 7.50%
Health care cost trend rate, current year 5.00 6.70 7.60
Health care cost trend rate, ultimate year 4.00 4.25 4.00
Trend rate decreases to the ultimate rate in the year 2001 2000 2000
Effect of a 1% increase in the trend rate (in thousands):
Increase in accumulated post-employment benefit
obligation $ 1,263 $ 1,199 $ 1,289
Increase in net periodic post-employment benefit cost 103 95 97
- -------------------------------------------------------------------------------------------------------
</TABLE>
THRIFT SAVINGS PLAN
The Wilmington Trust Thrift Savings Plan covers all full-time staff members who
elect to participate in the plan. Eligible staff members may contribute from 1%
to 15% of their annual base pay. The first 6% of each staff member's pay is
eligible for matching contributions from the Corporation of $.50 on each $1.00.
The amounts contributed by the Corporation to this plan were $2,193,149,
$1,945,386 and $1,583,027 in 1997, 1996 and 1995, respectively.
47
<PAGE>
- --------------------------------------------------------------------------------
NOTE 15:
INCOME TAXES
A reconciliation of the statutory income tax to the income tax expense included
in the Consolidated Statements of Income for each of the three years ended
December 31, is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
(in thousands) 1997 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before taxes and cumulative effect of change
in accounting principle $ 158,387 $ 144,119 $ 131,720
======================================
Income tax at statutory rate of 35% $ 55,435 $ 50,442 $ 46,102
Tax effect of tax-exempt income (4,289) (4,804) (5,578)
Tax effect of dividend income (1,763) (1,790) (1,800)
State taxes, net of federal tax benefit 2,662 2,534 2,373
Other 298 459 592
- ---------------------------------------------------------------------------------------------
Total income taxes $ 52,343 $ 46,841 $ 41,689
======================================
Taxes currently payable:
Federal $ 48,819 $ 40,337 $ 37,542
State 4,095 3,899 3,650
Deferred taxes (benefit):
Federal (571) 2,605 497
- ---------------------------------------------------------------------------------------------
Total income taxes $ 52,343 $ 46,841 $ 41,689
======================================
Taxes from securities gains/(losses) $ 9 $ 416 $ 794
</TABLE>
The significant components of the deferred tax liabilities and assets at
December 31 are as follows:
- ----------------------------------------------------------------------------
(in thousands) 1997 1996
- ----------------------------------------------------------------------------
Deferred tax liabilities:
Tax depreciation $ 2,265 $ 2,112
Prepaid VEBA costs 7,088 6,073
Automobile and equipment leases 11,691 7,432
System development costs 2,099 2,129
Market valuation on investment securities 4,221 565
Other 4,985 5,225
- ----------------------------------------------------------------------------
Total deferred tax liabilities 32,349 23,536
---------------------
Deferred tax assets:
Loan loss provision 22,339 19,035
OPEB obligation 9,334 9,158
Loan fees 4,224 2,745
Other 3,830 3,061
- ----------------------------------------------------------------------------
Total deferred tax assets 39,727 33,999
---------------------
Net deferred tax assets $ 7,378 $10,463
======================
No valuation allowance was recognized for the deferred tax assets at December
31, 1997 and 1996.
48
<PAGE>
- --------------------------------------------------------------------------------
NOTE 16:
NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net income
per share:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
(in thousands) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator:
Net income $106,044 $ 97,278 $ 90,031
- ------------------------------------------------------------------------------------------------------------------------
Denominator:
Denominator for basic net income per share--weighted-average shares 33,697 34,399 35,213
- ------------------------------------------------------------------------------------------------------------------------
Effect of dilutive securities:
Employee stock options 769 475 327
----------------------------------------
Denominator for diluted net income per share--
adjusted weighted-average shares and assumed conversions 34,466 34,874 35,540
- ------------------------------------------------------------------------------------------------------------------------
Basic net income per share $ 3.15 $ 2.83 $ 2.56
========================================
Diluted net income per share $ 3.08 $ 2.79 $ 2.53
========================================
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
48a
<PAGE>
- --------------------------------------------------------------------------------
NOTE 17:
CONSOLIDATED QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
A summary of the unaudited quarterly results of operations for the years ended
December 31 is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996
------------------------------------------------- ------------------------------------------------
(in thousands) Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31 Sept. 30 June 30 Mar. 31
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $ 112,835 $ 110,026 $ 106,133 $ 101,645 $ 103,483 $ 101,442 $ 99,162 $ 98,763
Interest expense 53,273 52,236 49,127 45,987 47,281 47,122 46,698 47,528
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income 59,562 57,790 57,006 55,658 56,202 54,320 52,464 51,235
Provision for loan losses (7,000) (5,000) (5,000) (4,500) (5,000) (4,000) (3,500) (3,500)
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 52,562 52,790 52,006 51,158 51,202 50,320 48,964 47,735
Other income 43,902 40,247 37,810 35,556 37,077 33,453 34,086 32,433
Securities gains/(losses) 14 1 11 1 682 519 (10) (3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest and other income 96,478 93,038 89,827 86,715 88,961 84,292 83,040 80,165
Other expense 54,648 52,523 50,802 49,698 51,598 47,313 47,319 46,109
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 41,830 40,515 39,025 37,017 37,363 36,979 35,721 34,056
Applicable income taxes 14,254 13,252 12,741 12,096 12,083 12,117 11,604 11,037
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 27,576 $ 27,263 $ 26,284 $ 24,921 $ 25,280 $ 24,862 $ 24,117 $ 23,019
====================================================================================================
Net income per share-basic $ 0.82 $ 0.81 $ 0.78 $ 0.74 $ 0.74 $ 0.73 $ 0.70 $ 0.66
====================================================================================================
Net income per share-diluted $ 0.80 $ 0.79 $ 0.77 $ 0.72 $ 0.73 $ 0.72 $ 0.69 $ 0.65
====================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
NOTE 18:
PARENT COMPANY ONLY FINANCIAL STATEMENTS
The Statements of Condition, Income and Cash Flows for the parent company are as
follows:
STATEMENTS OF CONDITION
- --------------------------------------------------------------------------------
December 31 (in thousands) 1997 1996
- --------------------------------------------------------------------------------
Assets
Cash and due from banks $ 26 $ 17
Investment in subsidiaries 485,987 457,839
Investment securities available for sale 17,251 6,278
Other assets 339 1,039
- --------------------------------------------------------------------------------
Total assets $503,603 $465,173
======================
Liabilities and stockholders' equity
Liabilities $ 596 $ 456
Stockholders' equity 503,007 464,717
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity $503,603 $465,173
======================
49
<PAGE>
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
For the year ended December 31 (in thousands) 1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income
Dividend from subsidiary $ 86,989 $ 78,743 $ 72,230
Management fees from subsidiary 113 28 --
Interest 275 261 289
- ------------------------------------------------------------------------------------------
Total income 87,377 79,032 72,519
------------------------------------
Expense
Salaries and employment benefits 197 60 105
Net occupancy 6 4 5
Stationery and supplies 1 -- 1
Other operating expense 1,055 1,084 1,088
- ------------------------------------------------------------------------------------------
Total expense 1,259 1,148 1,199
------------------------------------
Income before income tax benefit and equity in
undistributed income of subsidiaries 86,118 77,884 71,320
Applicable income tax benefit (278) (289) (311)
Equity in undistributed income of subsidiaries 19,648 19,105 18,400
- ------------------------------------------------------------------------------------------
Net income $ 106,044 $ 97,278 $ 90,031
====================================
</TABLE>
49a
<PAGE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
For the year ended December 31 (in thousands) 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 106,044 $ 97,278 $ 90,031
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed income of subsidiaries (19,648) (19,105) (18,400)
Decrease/(increase) in other assets 700 (40) (363)
Increase/(decrease) in other liabilities 140 84 (378)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 87,236 78,217 70,890
------------------------------------
Investing activities
Proceeds from sales of investment securities available for sale 16,868 34,745 18,242
Proceeds from maturity of investment securities
held to maturity -- -- 1,290
Purchases of investment securities available for sale (27,841) (24,389) (34,876)
Capital contribution to subsidiaries (2,000) -- (2,000)
- -----------------------------------------------------------------------------------------------------------
Net cash (used for)/provided by investing activities (12,973) 10,356 (17,344)
------------------------------------
Financing activities
Cash dividends (47,546) (44,421) (41,191)
Proceeds from common stock issued under
employment benefit plans 9,203 7,650 8,130
Payments for common stock acquired through buybacks (35,911) (51,786) (20,495)
- -----------------------------------------------------------------------------------------------------------
Net cash used for financing activities (74,254) (88,557) (53,556)
------------------------------------
Increase/(decrease) in cash and cash equivalents 9 16 (10)
Cash and cash equivalents at beginning of year 17 1 11
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 26 $ 17 $ 1
====================================
</TABLE>
50
<PAGE>
WILMINGTON TRUST CORPORATION
To the Board of Directors and Stockholders: REPORT OF
INDEPENDENT AUDITORS
We have audited the accompanying consolidated statements of condition of
Wilmington Trust Corporation and subsidiaries as of December 31, 1997 and 1996,
and the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Wilmington Trust
Corporation and subsidiaries at December 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
January 23, 1998
51
<PAGE>
WILMINGTON TRUST CORPORATION
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Wilmington Trust Corporation is responsible for the financial
statements and the other financial information included in this Annual Report.
The financial statements have been prepared in accordance with generally
accepted accounting principles and include amounts based upon management's best
judgment where necessary.
Management maintains a system of internal controls and procedures designed to
provide reasonable assurance as to the integrity and reliability of financial
records and the protection of assets. The system of internal control is
continually reviewed for its effectiveness and is revised, when appropriate, due
to changing circumstances and requirements.
Independent auditors are appointed by the Board of Directors and ratified by the
Corporation's stockholders to audit the financial statements in accordance with
generally accepted auditing standards and to independently assess the fair
presentation of the Corporation's financial position, results of operations and
cash flows. Their report appears in this Annual Report.
The Audit Committee of the Board of Directors, composed exclusively of outside
directors, is responsible for reviewing and monitoring the Corporation's
accounting and reporting practices. The Audit Committee meets periodically with
management, internal auditors and the independent auditors to discuss specific
accounting, financial reporting and internal control matters. Both the internal
auditors and the independent auditors have direct access to the Audit Committee.
/s/ Ted T. Cecala /s/ Robert V. A. Harra, Jr. /s/ David R. Gibson
Ted T. Cecala Robert V. A. Harra, Jr. David R. Gibson
Chairman and President and Chief Senior Vice President
Chief Executive Officer Operating Officer and Chief Financial
Officer
52
<PAGE>
WILMINGTON TRUST CORPORATION
<TABLE>
<CAPTION>
BOARD OF DIRECTORS
<S> <C>
Robert H. Bolling, Jr.** Andrew B. Kirkpatrick, Jr.
Retired Consulting Electrical Engineer Attorney, Counsel,
Law Firm of Morris, Nichols, Arsht and Tunnell
Carolyn S. Burger
Principal, CB Associates, Inc.; Rex L. Mears
Director, BetzDearborn Inc. President, Ray L. Mears and Sons, Inc.
Ted T. Cecala Walter D. Mertz*
Chairman and Chief Executive Officer Retired Senior Vice President
Richard R. Collins Hugh E. Miller
Retired President and Retired Vice Chairman,
Chief Operating Officer, ICI Americas Incorporated;
American Life Insurance Company Director, MGI PHARMA, Inc.
Charles S. Crompton, Jr. Stacey J. Mobley
Attorney, Partner, Senior Vice President, Communications,
Law Firm of Potter, Anderson and Corroon E. I. du Pont de Nemours and Company
H. Stewart Dunn, Jr. G. Burton Pearson, Jr.*
Attorney, Partner, Retired Senior Vice President
Law Firm of Ivins, Phillips and Barker
Leonard W. Quill
Edward B. du Pont Retired Chairman of the Board
Private Investor;
Director, E. I. du Pont de Nemours and Company David P. Roselle
President, University of Delaware
R. Keith Elliott
Director, Chairman, President and Chief H. Rodney Sharp, III***
Executive Officer, Hercules Retired Manager, E. I. du Pont de Nemours
Incorporated; Director, PECO Energy and Company; Director, E. I. du Pont de
Nemours and Company
Endsley P. Fairman*
Retired Senior Vice President Thomas P. Sweeney
Attorney, Member,
Robert C. Forney Law Firm of Richards, Layton and Finger, P.A.
Retired Executive Vice President and Director,
E. I. du Pont de Nemours and Company; Bernard J. Taylor, II**
Director, UGI, Inc.; Retired Chairman of the Board
Director, Amerigas Propane, Inc.
Mary Jornlin Theisen
Robert V. A. Harra, Jr. Former New Castle County Executive
President, Chief Operating Officer and Treasurer
Robert W. Tunnell, Jr.
Managing Partner, Tunnell Companies, L.P.
</TABLE>
*Associate Director
**Retiring from the Board on 5/21/1998
***Elected to the Board on 1/15/1998
53
<PAGE>
WILMINGTON TRUST CORPORATION
OFFICERS
Ted T. Cecala David R. Gibson
Chairman and Senior Vice President
Chief Executive Officer and Chief Financial Officer
Robert V. A. Harra, Jr. Thomas P. Collins
President, Chief Operating Officer Vice President, Legal, and Secretary
and Treasurer
Ronald K. Pendleton
Auditor
- --------------------------------------------------------------------------------
STANDING COMMITTEES
EXECUTIVE COMMITTEE TRUST COMMITTEE
Ted T. Cecala, Chairman (Wilmington Trust Company)
Carolyn S. Burger Robert V. A. Harra, Jr., Chairman
Robert C. Forney George W. Helme, IV, Vice Chairman
Robert V. A. Harra, Jr. Robert H. Bolling, Jr.
Hugh E. Miller Robert J. Christian
Thomas P. Sweeney Howard K. Cohen
H. Stewart Dunn, Jr.
AUDIT COMMITTEE Edward B. du Pont
Charles S. Crompton, Jr., Chairman Endsley P. Fairman
Richard R. Collins Walter D. Mertz
David P. Roselle G. Burton Pearson, Jr.
Mary Jornlin Theisen
Robert W. Tunnell, Jr.
COMPENSATION COMMITTEE
Robert C. Forney, Chairman
Richard R. Collins
Charles S. Crompton, Jr.
Hugh E. Miller
Stacey J. Mobley
- --------------------------------------------------------------------------------
OPERATING SUBSIDIARIES
WILMINGTON TRUST COMPANY
Brandywine Finance Corporation
Brandywine Insurance Agency, Inc.
Brandywine Life Insurance Company, Inc.
Delaware Corporate Management, Inc.
Rodney Square Distributors, Inc.
Rodney Square Management Corporation
Wilmington Brokerage Services Company
W. T. Investments, Inc.
WTC Corporate Services, Inc.
WILMINGTON TRUST OF PENNSYLVANIA
WILMINGTON TRUST FSB
54
<PAGE>
WILMINGTON TRUST COMPANY
PRINCIPAL OFFICERS
Ted. T. Cecala Joseph M. Jacobs, Jr.
Chairman and Senior Vice President,
Chief Executive Officer Administration
Robert V. A. Harra, Jr. John H. Kipp
President, Chief Operating Officer Senior Vice President,
and Treasurer Information Technology
Robert J. Christian Hugh D. Leahy, Jr.
Senior Vice President, Asset Management Senior Vice President,
Personal Banking
Howard K. Cohen
Senior Vice President, Robert A. Matarese
Corporate Financial Services Senior Vice President,
Commercial Banking
William J. Farrell, II
Senior Vice President, Rita C. Turner
Trust Operations and Systems Development Senior Vice President,
Marketing
David R. Gibson
Senior Vice President, Finance, Thomas P. Collins
and Chief Financial Officer Vice President, Legal,
and Secretary
George W. Helme, IV
Senior Vice President, Ronald K. Pendleton
Personal Trust and Private Banking Auditor
<TABLE>
<CAPTION>
DELAWARE ADVISORY BOARD
<S> <C> <C>
John E. Burris, Chairman Robert H. George John M. Short
John L. Allen, Sr. Jackie Hickman Charles P. Spicer
Joseph R. Bateman John Janosik J. Edward Taylor
Leland Berry John W. Jardine, Jr. Harry K. F. Terry
Alfred G. Best Claude E. Lester Robert L. Thompson
A. Dean Betts T. William Lingo W. Pierce Thompson
W. Cecil Carpenter Ernest E. Megee, Jr. Ebe Stephen Townsend, Jr.
Crawford J. Carroll Marion W. Moore Robert W. Tunnell
W. Pierce Ellis R. Byron Palmer William W. Vanderwende
Robert N. Emory William J. Paskey, Jr. James C. White
Ralph G. Faries, Jr. R. James Quillen, Jr. John E. Willey, Jr.
James A. Flood, Sr. William C. Robertson, Jr. W. Robert Williams
R. Clay Foltz
</TABLE>
55
<PAGE>
WILMINGTON TRUST OF PENNSYLVANIA
BOARD OF DIRECTORS
Ted T. Cecala, Chairman Robert V.A. Harra, Jr.
Gerard A. Chamberlain Hugh E. Miller
Robert C. Forney Leonard W. Quill
PRINCIPAL OFFICERS
Ted T. Cecala Robert A. Matarese
Chairman Senior Vice President
Robert V.A. Harra, Jr. Gerard A. Chamberlain
President Secretary
George W. Helme, IV Martin B. McDonough, Jr.
Senior Vice President Treasurer
Hugh D. Leahy, Jr. Ronald K. Pendleton
Senior Vice President Auditor
WILMINGTON TRUST FSB
BOARD OF DIRECTORS
George W. Helme, IV, Chairman Robert V.A. Harra, Jr.
Michael K. Bloxham Bernard B. Isaacson
Werner C. Brown Hugh D. Leahy, Jr.
Ted T. Cecala Curtis L. Lyman
Thomas P. Collins Walter F. Williams
Edward B. du Pont
Thomas L. du Pont
PRINCIPAL OFFICERS
George W. Helme, IV Hugh D. Leahy, Jr.
Chairman and Chief Executive Officer Senior Vice President and Treasurer
Michael K. Bloxham Robert A. Matarese
President, Maryland Senior Vice President
Curtis L. Lyman Thomas P. Collins
President, Florida Vice President and Secretary
David R. Gibson Ronald K. Pendleton
Senior Vice President, Finance, Auditor
and Chief Financial Officer
56
<PAGE>
WILMINGTON TRUST CORPORATION
<TABLE>
<CAPTION>
STOCKHOLDER INFORMATION
<S> <C>
CORPORATE HEADQUARTERS DIVIDEND REINVESTMENT AND VOLUNTARY STOCK PURCHASE PLAN
Wilmington Trust Center The Corporation offers a plan under which par-
Rodney Square North ticipating stockholders can purchase additional
1100 North Market Street shares of the Corporation's common stock
Wilmington, DE 19890-0001 through automatic reinvestment of their regular
(302) 651-1000 quarterly cash dividends and/or voluntary cash
(800) 441-7120 payments. All commissions and fees connected
with the purchase and safekeeping of the shares
COMMON STOCK are paid by the Corporation. For details of the
plan, contact the stock transfer agent.
Wilmington Trust Corporation common stock
is traded under the symbol WILM and is listed DUPLICATE MAILINGS
on the Nasdaq National Market System.
You may receive more than one copy of the
DIVIDENDS Annual Report due to multiple accounts within
your household. The Corporation is required
Dividends usually are declared in the first month to mail an Annual Report to each name on our
of each quarter to stockholders of record as of the stockholder list unless the stockholder requests
first business day in February, May, August and that duplicate mailings be eliminated. To elimi-
November. Dividend payment dates usually are nate duplicate mailings, please send a written
two weeks later. Wilmington Trust has paid cash request to the stock transfer agent.
dividends on its common stock since 1914.
ANNUAL MEETING
STOCK TRANSFER AGENT, DIVIDEND
REINVESTMENT AGENT AND REGISTRAR OF STOCK The annual meeting of the Corporation's stock-
holders will be held in the Wilmington Trust Plaza,
Inquiries relating to stockholder records, stock 301 West 11th Street, Wilmington, Delaware, at
transfers, changes of ownership, changes of 11:00 a.m. on Thursday, May 21, 1998.
address, duplicate mailings, dividend payments
and the dividend reinvestment plan should be INFORMATION REQUESTS
directed to the stock transfer agent:
Analysts, investors, news media representatives
NORWEST BANK MINNESOTA, N.A. and others seeking financial information, includ-
SHAREOWNER SERVICES ing requests for the Annual Report on Form
10-K filed with the Securities and Exchange
Telephone: Commission, should contact Charles W. King,
(800) 999-9867 Vice President, (302) 651-8069.
</TABLE>
Mailing Address:
P.O. Box 64854
St. Paul, MN 55164-0854
Street Address:
161 North Concord Exchange
South St. Paul, MN 55075
This annual report was designed by Reese, Tomases & Ellick, Inc. and printed
by Cedar Tree Press.
Photography by Ed Eckstein.
Pages 13 through 56 were printed on recycled paper utilizing 50% recycled fibers
and 20% post-consumer waste.
57
<PAGE> 1
EXHIBIT 21
Wilmington Trust Corporation has only three direct subsidiaries,
Wilmington Trust Company, a Delaware-chartered bank and trust company,
Wilmington Trust of Pennsylvania, a Pennsylvania-chartered bank and trust
company, and Wilmington Trust FSB, a Federally-chartered savings bank
headquartered in Maryland. Wilmington Trust Company has the following
subsidiaries.
Name Jurisdiction
---- ------------
1. Brandywine Insurance Agency, Inc. Delaware
2. Brandywine Finance Corporation Delaware
3. Brandywine Life Insurance Company, Inc. Delaware
4. Compton Realty Corporation Delaware
5. Drew-I, Ltd. Delaware
6. Drew-VIII, Ltd. Delaware
7. Delaware Corporate Management, Inc. Delaware
8. 100 West Tenth Street Corporation Delaware
9. Rockland Corporation Delaware
10. Rodney Square Distributors, Inc. Delaware
11. Rodney Square Management Corporation Delaware
12. Siobain VI, Ltd. Delaware
13. WTC Corporate Services, Inc. Delaware
14. WT Investments, Inc. Delaware
15. Wilmington Brokerage Services Company Delaware
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITOR
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Wilmington Trust Corporation of our report dated January 23, 1998, included
in the 1997 Annual Report to Shareholders of Wilmington Trust Corporation.
Philadelphia, Pennsylvania
March 27, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CORPORATION'S FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 204,362
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 107,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 895,811
<INVESTMENTS-CARRYING> 538,932
<INVESTMENTS-MARKET> 536,221
<LOANS> 3,508,547
<ALLOWANCE> 50,524
<TOTAL-ASSETS> 5,423,335
<DEPOSITS> 3,594,871
<SHORT-TERM> 1,235,002
<LIABILITIES-OTHER> 112,157
<LONG-TERM> 28,000
0
0
<COMMON> 39,013
<OTHER-SE> 414,292
<TOTAL-LIABILITIES-AND-EQUITY> 5,423,335
<INTEREST-LOAN> 77,958
<INTEREST-INVEST> 20,419
<INTEREST-OTHER> 386
<INTEREST-TOTAL> 98,763
<INTEREST-DEPOSIT> 31,517
<INTEREST-EXPENSE> 47,528
<INTEREST-INCOME-NET> 51,235
<LOAN-LOSSES> 3,500
<SECURITIES-GAINS> (3)
<EXPENSE-OTHER> 46,109
<INCOME-PRETAX> 34,056
<INCOME-PRE-EXTRAORDINARY> 23,019
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,019
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.65
<YIELD-ACTUAL> 4.36
<LOANS-NON> 27,531
<LOANS-PAST> 19,673
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 16,740
<ALLOWANCE-OPEN> 49,867
<CHARGE-OFFS> 3,557
<RECOVERIES> 714
<ALLOWANCE-CLOSE> 50,524
<ALLOWANCE-DOMESTIC> 50,524
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CORPORATION'S FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 204,696
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 59,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 876,556
<INVESTMENTS-CARRYING> 497,828
<INVESTMENTS-MARKET> 489,457
<LOANS> 3,596,032
<ALLOWANCE> 51,423
<TOTAL-ASSETS> 5,387,076
<DEPOSITS> 3,529,688
<SHORT-TERM> 1,288,474
<LIABILITIES-OTHER> 93,361
<LONG-TERM> 28,000
0
0
<COMMON> 39,107
<OTHER-SE> 408,446
<TOTAL-LIABILITIES-AND-EQUITY> 5,387,076
<INTEREST-LOAN> 156,237
<INTEREST-INVEST> 41,055
<INTEREST-OTHER> 633
<INTEREST-TOTAL> 197,925
<INTEREST-DEPOSIT> 61,432
<INTEREST-EXPENSE> 94,226
<INTEREST-INCOME-NET> 103,699
<LOAN-LOSSES> 7,000
<SECURITIES-GAINS> (13)
<EXPENSE-OTHER> 93,428
<INCOME-PRETAX> 69,777
<INCOME-PRE-EXTRAORDINARY> 47,136
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,136
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.34
<YIELD-ACTUAL> 4.39
<LOANS-NON> 26,131
<LOANS-PAST> 22,787
<LOANS-TROUBLED> 1,317
<LOANS-PROBLEM> 15,902
<ALLOWANCE-OPEN> 49,867
<CHARGE-OFFS> 6,944
<RECOVERIES> 1,500
<ALLOWANCE-CLOSE> 51,423
<ALLOWANCE-DOMESTIC> 51,423
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CORPORATION'S FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 209,779
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 52,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 812,243
<INVESTMENTS-CARRYING> 491,405
<INVESTMENTS-MARKET> 487,768
<LOANS> 3,719,241
<ALLOWANCE> 52,506
<TOTAL-ASSETS> 5,430,700
<DEPOSITS> 3,564,960
<SHORT-TERM> 1,279,610
<LIABILITIES-OTHER> 101,130
<LONG-TERM> 28,000
0
0
<COMMON> 39,107
<OTHER-SE> 417,893
<TOTAL-LIABILITIES-AND-EQUITY> 5,430,700
<INTEREST-LOAN> 237,015
<INTEREST-INVEST> 61,311
<INTEREST-OTHER> 1,041
<INTEREST-TOTAL> 299,367
<INTEREST-DEPOSIT> 90,830
<INTEREST-EXPENSE> 141,348
<INTEREST-INCOME-NET> 158,019
<LOAN-LOSSES> 11,000
<SECURITIES-GAINS> 506
<EXPENSE-OTHER> 140,741
<INCOME-PRETAX> 106,756
<INCOME-PRE-EXTRAORDINARY> 71,998
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71,998
<EPS-PRIMARY> 2.09
<EPS-DILUTED> 2.06
<YIELD-ACTUAL> 4.42
<LOANS-NON> 38,056
<LOANS-PAST> 23,585
<LOANS-TROUBLED> 1,305
<LOANS-PROBLEM> 11,989
<ALLOWANCE-OPEN> 49,867
<CHARGE-OFFS> 10,475
<RECOVERIES> 2,114
<ALLOWANCE-CLOSE> 52,506
<ALLOWANCE-DOMESTIC> 52,506
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CORPORATION'S FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 231,233
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 134,190
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 798,519
<INVESTMENTS-CARRYING> 467,632
<INVESTMENTS-MARKET> 466,763
<LOANS> 3,771,484
<ALLOWANCE> 54,361
<TOTAL-ASSETS> 5,564,409
<DEPOSITS> 3,913,698
<SHORT-TERM> 1,036,543
<LIABILITIES-OTHER> 106,451
<LONG-TERM> 43,000
0
0
<COMMON> 39,107
<OTHER-SE> 425,610
<TOTAL-LIABILITIES-AND-EQUITY> 5,564,409
<INTEREST-LOAN> 320,499
<INTEREST-INVEST> 80,876
<INTEREST-OTHER> 1,475
<INTEREST-TOTAL> 402,850
<INTEREST-DEPOSIT> 121,955
<INTEREST-EXPENSE> 188,629
<INTEREST-INCOME-NET> 214,221
<LOAN-LOSSES> 16,000
<SECURITIES-GAINS> 1,188
<EXPENSE-OTHER> 192,339
<INCOME-PRETAX> 144,119
<INCOME-PRE-EXTRAORDINARY> 97,278
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 97,278
<EPS-PRIMARY> 2.83
<EPS-DILUTED> 2.79
<YIELD-ACTUAL> 4.51
<LOANS-NON> 39,520
<LOANS-PAST> 20,440
<LOANS-TROUBLED> 1,215
<LOANS-PROBLEM> 11,997
<ALLOWANCE-OPEN> 49,867
<CHARGE-OFFS> 14,655
<RECOVERIES> 3,149
<ALLOWANCE-CLOSE> 54,361
<ALLOWANCE-DOMESTIC> 54,361
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CORPORATION'S FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 190,294
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 71,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 811,589
<INVESTMENTS-CARRYING> 447,602
<INVESTMENTS-MARKET> 441,993
<LOANS> 3,826,583
<ALLOWANCE> 55,375
<TOTAL-ASSETS> 5,515,399
<DEPOSITS> 3,774,603
<SHORT-TERM> 1,129,675
<LIABILITIES-OTHER> 100,834
<LONG-TERM> 43,000
0
0
<COMMON> 39,107
<OTHER-SE> 428,180
<TOTAL-LIABILITIES-AND-EQUITY> 5,515,399
<INTEREST-LOAN> 82,107
<INTEREST-INVEST> 19,195
<INTEREST-OTHER> 343
<INTEREST-TOTAL> 101,645
<INTEREST-DEPOSIT> 30,945
<INTEREST-EXPENSE> 45,987
<INTEREST-INCOME-NET> 55,658
<LOAN-LOSSES> 4,500
<SECURITIES-GAINS> 1
<EXPENSE-OTHER> 49,698
<INCOME-PRETAX> 37,017
<INCOME-PRE-EXTRAORDINARY> 24,921
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,921
<EPS-PRIMARY> 0.74
<EPS-DILUTED> 0.72
<YIELD-ACTUAL> 4.57
<LOANS-NON> 36,622
<LOANS-PAST> 18,720
<LOANS-TROUBLED> 1,189
<LOANS-PROBLEM> 10,958
<ALLOWANCE-OPEN> 54,361
<CHARGE-OFFS> 4,257
<RECOVERIES> 771
<ALLOWANCE-CLOSE> 55,375
<ALLOWANCE-DOMESTIC> 55,375
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CORPORATION'S FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 215,303
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 111,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 947,543
<INVESTMENTS-CARRYING> 405,180
<INVESTMENTS-MARKET> 404,368
<LOANS> 3,976,193
<ALLOWANCE> 58,107
<TOTAL-ASSETS> 5,809,941
<DEPOSITS> 3,972,043
<SHORT-TERM> 1,215,249
<LIABILITIES-OTHER> 96,876
<LONG-TERM> 43,000
0
0
<COMMON> 39,192
<OTHER-SE> 443,581
<TOTAL-LIABILITIES-AND-EQUITY> 5,809,941
<INTEREST-LOAN> 167,999
<INTEREST-INVEST> 39,067
<INTEREST-OTHER> 712
<INTEREST-TOTAL> 207,778
<INTEREST-DEPOSIT> 62,657
<INTEREST-EXPENSE> 95,114
<INTEREST-INCOME-NET> 112,664
<LOAN-LOSSES> 9,500
<SECURITIES-GAINS> 12
<EXPENSE-OTHER> 100,500
<INCOME-PRETAX> 76,042
<INCOME-PRE-EXTRAORDINARY> 51,205
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,205
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 1.49
<YIELD-ACTUAL> 4.53
<LOANS-NON> 37,361
<LOANS-PAST> 20,117
<LOANS-TROUBLED> 846
<LOANS-PROBLEM> 12,442
<ALLOWANCE-OPEN> 54,361
<CHARGE-OFFS> 7,388
<RECOVERIES> 1,634
<ALLOWANCE-CLOSE> 58,107
<ALLOWANCE-DOMESTIC> 58,107
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CORPORATION'S FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED
IN IT ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 215,567
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 51,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,086,443
<INVESTMENTS-CARRYING> 366,208
<INVESTMENTS-MARKET> 366,913
<LOANS> 4,022,589
<ALLOWANCE> 60,008
<TOTAL-ASSETS> 5,906,492
<DEPOSITS> 4,130,767
<SHORT-TERM> 1,140,008
<LIABILITIES-OTHER> 95,562
<LONG-TERM> 43,000
0
0
<COMMON> 39,192
<OTHER-SE> 457,963
<TOTAL-LIABILITIES-AND-EQUITY> 5,906,492
<INTEREST-LOAN> 255,182
<INTEREST-INVEST> 61,661
<INTEREST-OTHER> 961
<INTEREST-TOTAL> 317,804
<INTEREST-DEPOSIT> 97,681
<INTEREST-EXPENSE> 147,350
<INTEREST-INCOME-NET> 170,454
<LOAN-LOSSES> 14,500
<SECURITIES-GAINS> 13
<EXPENSE-OTHER> 153,023
<INCOME-PRETAX> 116,557
<INCOME-PRE-EXTRAORDINARY> 78,468
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,468
<EPS-PRIMARY> 2.33
<EPS-DILUTED> 2.28
<YIELD-ACTUAL> 4.47
<LOANS-NON> 39,483
<LOANS-PAST> 15,183
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 7,917
<ALLOWANCE-OPEN> 54,361
<CHARGE-OFFS> 11,778
<RECOVERIES> 2,925
<ALLOWANCE-CLOSE> 60,008
<ALLOWANCE-DOMESTIC> 60,008
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CORPORATION'S FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 239,392
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 50,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,316,403
<INVESTMENTS-CARRYING> 333,007
<INVESTMENTS-MARKET> 333,812
<LOANS> 3,993,935
<ALLOWANCE> 63,805
<TOTAL-ASSETS> 6,122,351
<DEPOSITS> 4,169,030
<SHORT-TERM> 1,307,577
<LIABILITIES-OTHER> 99,737
<LONG-TERM> 43,000
0
0
<COMMON> 39,192
<OTHER-SE> 463,815
<TOTAL-LIABILITIES-AND-EQUITY> 6,122,351
<INTEREST-LOAN> 342,831
<INTEREST-INVEST> 86,528
<INTEREST-OTHER> 1,280
<INTEREST-TOTAL> 430,639
<INTEREST-DEPOSIT> 134,176
<INTEREST-EXPENSE> 200,623
<INTEREST-INCOME-NET> 230,016
<LOAN-LOSSES> 21,500
<SECURITIES-GAINS> 27
<EXPENSE-OTHER> 207,671
<INCOME-PRETAX> 158,387
<INCOME-PRE-EXTRAORDINARY> 106,044
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 106,044
<EPS-PRIMARY> 3.15
<EPS-DILUTED> 3.08
<YIELD-ACTUAL> 4.49
<LOANS-NON> 28,669
<LOANS-PAST> 15,523
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 7,587
<ALLOWANCE-OPEN> 54,361
<CHARGE-OFFS> 16,187
<RECOVERIES> 4,131
<ALLOWANCE-CLOSE> 63,805
<ALLOWANCE-DOMESTIC> 54,795
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 9,010
</TABLE>
