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, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission file number: 0-25442
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, 1100 North Market Street, Wilmington,
Delaware 19890
------------------------------------------------------------
(Address of principal executive offices)(Zip Code)
(302) 651-1000
------------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Name of each exchange on which registered:
Section 12(b) of the Act:
Title of each class
Common Stock, $1.00 Par Value New York Stock Exchange
- ------------------------------ -----------------------
(Title of class)
Securities registered pursuant to Section 12 (g) of the Act: None
<PAGE>
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 12, 1999, the aggregate market value of voting and
non-voting stock held by non-affiliates* of the registrant was $1,847,426,202.
Indicate the number of shares outstanding of the registrant's class of common
stock, as of the latest practicable date.
Class Outstanding at February 12, 1999
- -------------------------- --------------------------------
Common Stock, $1 Par Value 33,073,408
Documents Incorporated Part of Form 10-K in which
by Reference Incorporated
- ---------------------- ---------------------------
(1) Portions of Proxy Statement for 1998 Part III
Annual Shareholders' Meeting
of Wilmington Trust Corporation
(2) Portions of Annual Report to Parts I, II, and IV
Shareholders for fiscal year ended
December 31, 1998
*For purposes of this calculation, directors and executive officers are deemed
to be "affiliates."
<PAGE>
TABLE OF CONTENTS
-----------------
PART I
Item 1 Business......................................................1
Item 2 Properties...................................................23
Item 3 Legal Proceedings............................................24
Item 4 Submission of Matters to a Vote of Security Holders..........24
PART II
Item 5 Market for Registrant's Common Stock and Related
Stockholder Matters..........................................24
Item 6 Selected Financial Data......................................25
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operation...........................26
Item 7A Qualitative and Quantitative Disclosure About Market
Risk.........................................................26
Item 8 Financial Statements and Supplementary Data..................26
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..........................27
PART III
Item 10 Directors and Executive Officers of the Registrant...........27
Item 11 Executive Compensation.......................................27
Item 12 Security Ownership of Certain Beneficial Owners and
Management...................................................27
Item 13 Certain Relationships and Related Transactions...............27
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K..................................................27
<PAGE>
PART I
ITEM 1 - BUSINESS
General
-------
Wilmington Trust Corporation, a Delaware corporation ("Wilmington Trust"),
owns Wilmington Trust Company, a Delaware-chartered bank and trust company and
Wilmington Trust's principal subsidiary ("WTC"). WTC was formed in 1903 and is
the largest full-service bank in Delaware, with 52 offices. Wilmington Trust
also owns two other financial institutions, Wilmington Trust of Pennsylvania, a
Pennsylvania-chartered bank and trust company with seven branches ("WTPA"), and
Wilmington Trust FSB, a Federally-chartered savings bank with six branches in
Maryland and Florida and trust agency offices in New York, California, Maryland,
and Nevada ("WTFSB"). (WTC, WTPA, and WTFSB sometimes are referred to herein as
the "Banks"). Wilmington Trust also owns WT Investments, Inc., an investment
holding company with interests in three asset management firms ("WTI").
Wilmington Trust's principal place of business is Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890. Its telephone number is
(302) 651-1000. Its principal role is to supervise and coordinate the Banks' and
WTI's activities and provide them with capital and services. Virtually all of
Wilmington Trust's income historically has been from dividends from WTC.
Wilmington Trust's current staff principally consists of its management, who are
executive officers generally serving in similar capacities for WTC. Wilmington
Trust utilizes WTC's support staff.
As of December 31, 1998, Wilmington Trust had total assets of $6.3 billion
and total stockholders' equity of $546.2 million. On that date, 33,329,101
shares of Wilmington Trust's common stock were issued and outstanding, which
were held by 9,867 shareholders of record. Wilmington Trust's total loans
outstanding were approximately $4.3 billion on that date.
Personal Trust Activities
-------------------------
Wilmington Trust is one of the nation's largest personal trust
institutions, serving a client base that is national in scope. It 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 work with the advisors of those
clients. Wilmington Trust's offices in Delaware, Pennsylvania, Maryland,
Florida, New York, California, and Nevada provide convenient access to customers
in these key markets.
Corporate Trust Activities
--------------------------
Wilmington Trust 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. Wilmington Trust serves as the
owner or indenture trustee for a variety of corporate, municipal, 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. Wilmington Trust participates as owner or indenture
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trustee for equipment leasing trusts involving aircraft, power generating
facilities, communication lines, satellites, and vessels. It also serves as
collateral or liquidating trustee in corporate debt restructurings,
reorganizations, and mergers. These afford the opportunity to cross-sell
Wilmington Trust's custody and asset management services. Wilmington Trust's
Nevada office also provides these corporate trust services. In addition,
Wilmington Trust 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
----------------
Wilmington Trust provides institutional investment advisory services for
clients across the country, including tax-qualified defined benefit and defined
contribution plans, endowment and foundation funds, and taxable and tax-exempt
cash portfolios. It also offers the proprietary family of the following Rodney
Square mutual funds:
. The Rodney Square Fund, a fund consisting of a money market
portfolio and a United States government securities portfolio;
. The Rodney Square Tax-Exempt Fund, a fund investing in short-term
municipal obligations whose interest income is principally exempt
from Federal income tax;
. The Rodney Square Strategic Fixed-Income Fund, a fund consisting
of a short/intermediate-term bond portfolio and an intermediate-
term bond portfolio, which invests primarily in investment grade,
fixed-income securities; and a municipal bond portfolio, which
invests primarily in municipal securities exempt from Federal
taxation; and
. The Rodney Square Strategic Equity Fund, a fund consisting of a
large cap growth equity portfolio and a large cap value equity
portfolio, both of which invest primarily in U.S. equity
securities; a small cap equity portfolio, which invests in
potentially strong growth and undervalued U.S. equity securities;
and an international equity portfolio, which invests primarily in
equity securities of issuers located outside the United States.
In January 1998, WTI acquired a 24% interest in Cramer Rosenthal McGlynn,
LLC, an asset management firm with $4.5 billion under management and a value
orientation. Cramer's capabilities also include special equity, limited
partnerships, and high-yield investments. In July 1998, WTI acquired an interest
in California-based Roxbury Capital Management, LLC, an asset management firm
with a growth orientation and $6 billion under management.
Through its personal investment centers, Wilmington Trust offers
investment services throughout the Banks' branches.
As of December 31, 1998, Wilmington Trust in the aggregate had assets of
$123 billion under trust, custody, and administration. Of that total, Wilmington
Trust manages approximately $24 billion in discretionary assets and $99 billion
in non-discretionary assets. Personal trust assets totalled $26 billion.
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<PAGE>
Lending Activities
------------------
The Banks historically have concentrated the lending activities described
below in Delaware, Pennsylvania, Maryland, and Florida. 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.
Mortgage Loans
--------------
Commercial Loans
----------------
The Banks originate loans secured by mortgages on commercial real
estate and multi-family residential real estate. The Banks seek to minimize
risks of this lending in a number of ways, including:
. Limiting the size of their individual commercial and
multi-family real estate loans;
. Monitoring the aggregate size of their commercial and
multi-family housing loan portfolios;
. Generally requiring equity in the property securing the loan
equal to a certain percentage of the appraised value or selling
price;
. Requiring in most instances that the financed project generates
cash flow adequate to meet required debt service payments; and
. 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. The Banks offer lines of credit, term loans, and
demand loans to finance working capital, accounts receivable, inventory, and
equipment purchases. Typically, these loans have terms of up to 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. In
many cases, they also are collateralized by guarantees of the borrower's owners.
Residential Mortgage Loans
--------------------------
The Banks directly originate or purchase residential first mortgage
loans. A third-party servicer generally services residential mortgage loans
which are not resold.
The Banks maintain excellent relationships with correspondent lenders
in their market areas from which they purchase residential mortgage loans. The
Banks also foster public awareness of their residential mortgage loan products
through television and newspaper advertising and direct mail. The Banks offer
both fixed and adjustable interest rates on residential mortgage loans, with
terms ranging up to 30 years.
In determining whether to originate or purchase a residential mortgage
loan, the Banks assess both the borrower's ability to repay the loan and the
adequacy of the proposed security. The Banks generally obtain an appraisal of
real property securing a first mortgage 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, as well as fire and extended coverage
casualty insurance protecting the mortgaged properties. Loans are approved by
various levels of management depending on the amount of the loan.
Construction Loans
------------------
The Banks make loans and participate in financing to construct
residences and commercial buildings. The Banks also originate loans for the
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purchase of unimproved property for residential and commercial purposes. In
these cases, the Banks frequently provide the construction funds to improve the
properties.
The Banks' residential and commercial construction loans generally
have terms of up to 24 months, and interest rates that adjust from time to time
in accordance with changes in a designated interest rate. The Banks disburse
loan proceeds in increments as construction progresses and 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. The Banks may
underwrite and structure construction loans to convert to permanent loans at the
end of the construction period. Analyzing prospective construction loan projects
requires greater expertise than that required for residential mortgage lending
on completed structures. Accordingly, the Banks engage several individuals
experienced in underwriting in connection with their construction lending.
Residential and commercial construction loans afford the Banks the opportunity
to increase the interest rate sensitivity of their loan portfolios and receive
yields higher than those obtainable on permanent residential mortgage loans.
The Banks' underwriting standards relating 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. 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:
. Inspecting each property before issuing a loan commitment and
before each disbursement;
. Requiring recourse to the borrower;
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<PAGE>
. Requiring the personal guaranty of the borrower's
principal(s); and
. Requiring an appraisal of the property.
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.
Other 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 develop
public awareness of their consumer loan products primarily through television
and 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, and their matching of assets and
liabilities expected to mature or reprice in the same periods.
The Banks require first or junior mortgages to secure home equity
loans. Although this security influences the Banks' underwriting decisions,
their primary focus in underwriting these loans, as well as their other loans to
individuals, is on the applicant's financial ability to repay. In the
underwriting process, the Banks obtain credit bureau reports and verify the
borrower's employment and credit information. On home equity loans above a
certain level, the Banks require an appraisal of the property securing the loan.
Deposit Activities
------------------
Deposit accounts are the primary source of the Banks' funds for use in
lending and investment activities and general business purposes. The Banks also
obtain funds from borrowings, the amortization and repayment of outstanding
loans, earnings, and maturities of investment securities, among other sources.
The Banks' deposit accounts include demand checking accounts, term
certificates of deposit, money market deposit accounts, NOW accounts, and
regular savings and club accounts. The Banks also offer retirement plan accounts
(including individual retirement accounts, Keogh accounts, and simplified
employee pension plans) for investment in the Banks' various deposit accounts.
The Banks attract consumer deposits principally from their primary market areas.
Other Activities
----------------
Interest and dividends on investments provide the Banks with a significant
source of revenue. At December 31, 1998, the Banks' investment securities,
including securities purchased under agreements to resell, totaled $1.46
billion, or 23% of their total assets. The Banks' investment securities are used
to meet Federal liquidity requirements, among other purposes. Designated members
of the Bank's management make investment decisions. The Banks have established
limits on the types and amounts of investments they may make.
Financial information about Wilmington Trust's reporting segments is
contained in Note 18 to the Consolidated Financial Statements contained in
Wilmington Trust's Annual Report to Shareholders for 1998.
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<PAGE>
Subsidiaries
------------
WTC has 14 active wholly-owned subsidiaries, formed for various purposes.
Those subsidiaries' results of operations are consolidated with Wilmington Trust
for financial reporting purposes. They provide additional services to Wilmington
Trust's customers, and include:
. Brandywine Insurance Agency, Inc., a licensed insurance agent
and broker for life, casualty, and property insurance;
. Brandywine Finance Corporation, a finance company;
. Brandywine Life Insurance Company, Inc., a reinsurer of credit
life insurance written in connection with closed-end consumer
loans WTC makes;
. Delaware Corporate Management, Inc., which provides services
for special purpose entities using Delaware's and Nevada's
favorable tax and legal environment;
. Rodney Square Distributors, Inc., a registered broker-dealer;
. Rodney Square Management Corporation, a registered investment
adviser which performs investment advisory services for certain
of the mutual funds described below;
. WTC Corporate Services, Inc., a sales production company for
corporate trust customers; and
. Wilmington Brokerage Services Company, a registered
broker-dealer and a registered investment adviser.
Staff Members
-------------
On December 31, 1998, Wilmington Trust and its subsidiaries had 2,442
full-time equivalent employees. Wilmington Trust considers its and its
subsidiaries' relationships with these employees to be good. Wilmington Trust
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.
Risk Factors
------------
. Principal Lending Risks Associated with Consumer and Commercial
---------------------------------------------------------------
Lending.
--------
The Banks offer fixed and adjustable interest rates on residential
mortgage loans, with terms of up to 30 years. ARM loans generally carry lower
initial interest rates than fixed-rate loans. Accordingly, they may be less
profitable than fixed-rate loans during the initial interest rate period. Since
they are more responsive to changes in market interest rates than fixed-rate
loans, ARM loans can increase the possibility of delinquencies in periods of
high interest rates.
-6-
<PAGE>
Loans secured by mortgages on commercial real estate and multi-family
residential real estate that the Banks originate usually are larger than
one-to-four family residential mortgage loans, and generally involve greater
risks than those loans. In addition, since customers' ability to repay those
loans often is dependent on operating and managing those properties
successfully, adverse conditions in the real estate market or the economy
generally can impact repayment more severely than loans secured by one-to-four
family residential properties. Moreover, the commercial real estate business is
subject to downturns, overbuilding, and local economic conditions.
Construction loans for residences and commercial buildings, as well as on
unimproved property, that the Banks make carry greater risks than other types of
loans. Those include risks associated generally with loans on the type of
property securing the loan. The Banks sometimes fund the interest on a
construction loan by including the interest as part of the loan. Moreover,
commercial construction lending often involves disbursing substantial funds with
repayment dependent largely on the success of the ultimate project instead of
the borrower's or guarantor's ability to repay. Again, adverse conditions in the
real estate market or the economy generally can impact repayment more severely
than loans secured by one-to-four family residential properties.
. Increasing Competition for Deposits, Loans, and Assets Under
------------------------------------------------------------
Management.
-----------
The Banks compete for deposits, loans, and assets under management. Many
of the Banks' competitors are larger and have greater financial resources than
Wilmington Trust. These disparities have been accelerated with increasing
consolidation in the financial services industry. Savings banks, savings and
loan associations, and commercial banks located in the Banks' principal market
areas historically have provided the most direct competition for deposits.
Dealers in government securities and deposit brokers also provide competition
for deposits. Savings banks, savings and loan associations, commercial banks,
mortgage banking companies, insurance companies, and other institutional lenders
provide the principal competition for loans. This competition can increase the
rates their Banks pay to attract deposits and reduce the interest rates they can
charge on loans, as well as impact their ability to retain existing customers
and attract new customers.
Banks, trust companies, investment advisers, mutual fund companies, and
insurance companies provide the principal competition for trust and asset
management business.
. Impact of Slow Economic Conditions.
-----------------------------------
Slow economic conditions or deterioration in commercial or real estate
markets could impair our borrowers' ability to repay their loans. In that event,
Wilmington Trust would expect increased nonperforming assets, credit losses, and
provisions for loan losses.
. Regulatory Restrictions.
------------------------
Wilmington Trust and its subsidiaries are subject to a variety of
regulatory restrictions in conducting their business by Federal and state
authorities. These include restrictions imposed by the Bank Holding Company Act,
the Federal Deposit Insurance Act, the Federal Reserve Act, the Home Owners'
Loan Act and a variety of Federal and state consumer protection laws. See
"Regulatory Matters."
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<PAGE>
<TABLE>
<CAPTION>
Industry Guide 3 Tables
- -----------------------
The following table presents a rate/volume analysis of net interest income:
---------------------------------------------------------------------------------
1998/1997 1997/1996
Increase (Decrease) Increase (Decrease)
due to change in due to change in
---------------------------------------------------------------------------------
1 2 1 2
(in thousands) Volume Rate Total Volume Rate 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 498 (113) 385 (228) 33 (195)
- -----------------------------------------------------------------------------------------------------------
Total short-term investments 498 (113) 385 (228) 33 (195)
---------------------------------------------------------------
U.S. Treasury and government agencies 6,874 (1,826) 5,048 3,165 903 4,068
State and municipal* (901) (44) (945) (606) -- (606)
Preferred stock* 1,041 (101) 940 (299) 147 (152)
Asset-backed securities 5,470 698 6,168 762 1,656 2,418
Other* 1,067 (271) 796 (590) 347 (243)
- -----------------------------------------------------------------------------------------------------------
Total investment securities 13,551 (1,544) 12,007 2,432 3,053 5,485
---------------------------------------------------------------
Commercial,financial, and agricultural* 4,512 (3,231) 1,281 4,511 (1,884) 2,627
Real estate-construction 4,835 (862) 3,973 1,643 187 1,830
Mortgage - commercial* (1,291) (929) (2,220) 9,388 (1,999) 7,389
Mortgage - residential 5,575 1,214 6,789 6,362 (1,519) 4,843
Installment loans to individuals 7,074 (3,983) 3,091 7,050 (2,038) 5,012
- -----------------------------------------------------------------------------------------------------------
Total loans 20,705 (7,791) 12,914 28,954 (7,253) 21,701
- -----------------------------------------------------------------------------------------------------------
Total interest income $ 34,754 $(9,448) $ 25,306 $ 31,158 $(4,167) $ 26,991
===============================================================
Interest expense:
Savings $ 214 $ 462 $ 676 $ 98 $ (64) $ 34
Interest-bearing demand 3,662 (255) 3,407 1,833 (402) 1,431
Certificates under $100,000 (85) (3,587) (3,672) 47 (2,425) (2,378)
Certificates $100,000 and over 19,000 149 19,149 12,363 771 13,134
- -----------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 22,791 (3,231) 19,560 14,341 (2,120) 12,221
---------------------------------------------------------------
Federal funds purchased and securities
sold under agreements to repurchase (6,355) (1,185) (7,540) (1,060) 754 (306)
U.S. Treasury demand 172 (245) (73) 612 72 684
- -----------------------------------------------------------------------------------------------------------
Total short-term borrowings (6,183) (1,430) (7,613) (448) 826 378
---------------------------------------------------------------
Long-term debt 1,682 4,990 6,672 578 (1,183) (605)
- -----------------------------------------------------------------------------------------------------------
Total interest expense $ 18,290 $ 329 $ 18,619 $ 14,471 $(2,477) $ 11,994
===============================================================
Changes in net interest income $ 6,687 $ 14,997
===== ========
===========================================================================================================
* 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.
</TABLE>
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<TABLE>
<CAPTION>
The maturity distribution of Wilmington Trust's investment securities held to maturity follows:
----------------------------------------
Market Amortized Weighted
December 31, 1998 (in thousands) value Cost average yield
- -------------------------------------------------------------------------------------------------------------------
U.S. Treasury and government agencies:
<S> <C> <C> <C>
After 1 but within 5 years $ 25,510 $ 25,415 5.94%
After 10 years 3,684 3,683 4.56
- -------------------------------------------------------------------------------------------------------------------
Total (amortized cost of $219,136 in 1997 and $267,502 in 1996) 29,194 29,098 5.77
- -------------------------------------------------------------------------------------------------------------------
State and municipals:
Within 1 year 563 551 6.21
After 1 but within 5 years 1,793 1,722 5.76
After 5 but within 10 years 3,258 3,171 6.06
After 10 years 2,874 2,654 6.23
- -------------------------------------------------------------------------------------------------------------------
Total (amortized cost of $12,743 in 1997 and $19,121 in 1996) 8,488 8,098 6.06
- -------------------------------------------------------------------------------------------------------------------
Asset-backed securities:
Within 1 year 1,596 1,601 8.32
After 1 but within 5 years 463 450 8.74
After 5 but within 10 years 15,873 15,800 6.33
After 10 years 18,866 18,864 6.81
- -------------------------------------------------------------------------------------------------------------------
Total (amortized cost of $101,128 in 1997 and $181,009 in 1996) 36,798 36,715 6.69
- -------------------------------------------------------------------------------------------------------------------
Total investment securities held to maturity (amortized cost of
$333,007 in 1997 and $467,632 in 1996) $ 74,480 $ 73,911 6.26%
===================================================================================================================
Note: Weighted average yields are NOT on a tax-equivalent basis.
Time categories not shown above indicate that there are no investment securities maturing in that respective timeframe.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
The maturity distribution of Wilmington Trust's investment securities available for sale follows:
-----------------------------------------
Market Amortized Weighted
December 31, 1998 (in thousands) value Cost average yield
- --------------------------------------------------------------------------------------------------------------------
U.S. Treasury and government agencies:
<S> <C> <C> <C>
Within 1 year $ 62,465 $ 62,353 4.28%
After 1 but within 5 years 388,866 382,412 5.86
After 5 but within 10 years 91,855 92,261 6.21
After 10 years 253,479 254,430 5.60
- --------------------------------------------------------------------------------------------------------------------
Total (amortized cost of $784,218 in 1997 and $545,330 in 1996) 796,665 791,456 5.69
- --------------------------------------------------------------------------------------------------------------------
State and municipals:
Within 1 year 2,145 2,126 4.09
After 1 but within 5 years 3,352 3,316 4.17
After 5 but within 10 years 192 190 7.54
After 10 years 1,497 1,298 2.46
- --------------------------------------------------------------------------------------------------------------------
Total (amortized cost of $7,958 in 1997 and $13,176 in 1996) 7,186 6,930 3.92
- --------------------------------------------------------------------------------------------------------------------
Preferred stock:
Within 1 year 92,294 92,282 4.44
After 1 but within 5 years 34,288 33,275 8.12
After 5 but within 10 years 54,226 52,898 8.39
- --------------------------------------------------------------------------------------------------------------------
Total (amortized cost of $155,327 in 1997 and $139,186 in 1996) 180,808 178,455 6.36
- --------------------------------------------------------------------------------------------------------------------
Asset-backed securities:
Within 1 year 2,509 2,510 5.82
After 1 but within 5 years 3,367 3,369 6.75
After 5 but within 10 years 34,211 33,757 6.87
After 10 years 188,616 188,047 6.31
- --------------------------------------------------------------------------------------------------------------------
Total (amortized cost of $277,524 in 1997 and $16,096 in 1996) 228,703 227,683 6.39
- --------------------------------------------------------------------------------------------------------------------
Other:
Within 1 year 84,798 84,455 3.75
After 5 but within 10 years 581 500 7.49
- --------------------------------------------------------------------------------------------------------------------
Total (amortized cost of $79,652 in 1997 and $83,161 in 1996) 85,379 84,955 3.77
- --------------------------------------------------------------------------------------------------------------------
Total investment securities available for sale (amortized cost
of $1,304,679 in 1997 and $796,949 in 1996) $1,298,741 $1,289,479 5.48%
====================================================================================================================
Note: Weighted average yields are NOT on a tax-equivalent basis.
Time categories not shown above indicate that there are no investment securities maturing in that respective timeframe.
</TABLE>
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The following is a summary of period-end loan balances by loan category:
<TABLE>
<CAPTION>
December 31 (in thousands) 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, financial, and
agricultural $ 1,370,566 $ 1,207,930 $ 1,237,061 $ 1,159,434 $ 1,006,630
Real estate-construction 211,733 145,097 123,111 104,871 110,587
Mortgage-commercial 869,442 884,146 862,974 770,304 733,154
Mortgage-residential 857,626 813,116 678,800 669,658 618,211
Installment loans to
individuals 1,015,056 954,486 881,994 823,381 818,599
- ----------------------------------------------------------------------------------------------------------
Total loans, gross 4,324,423 4,004,775 3,783,940 3,527,648 3,287,181
Less: unearned income (4,790) (10,840) (12,456) (5,733) (2,948)
- ----------------------------------------------------------------------------------------------------------
Total loans $ 4,319,633 $ 3,993,935 $ 3,771,484 $ 3,521,915 $ 3,284,233
==========================================================================================================
</TABLE>
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<TABLE>
<CAPTION>
The following table sets forth the allocation of Wilmington Trust's reserve for loan losses for the past five years:
-----------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
---------------- ---------------- ----------------- ------------------ --------------------
% of % of % of % of % of
loans in loans in loans in loans in loans in
each each each each each
category category category category category
of net of net of net of net of net
December 31 (in thousands) Amount loans Amount loans Amount loans Amount loans Amount loans
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial,
and agricultural $27,083 32% $27,023 30% $22,770 33% $21,209 33% $21,777 31%
Real estate-construction 2,407 5 1,977 4 2,000 3 1,697 3 3,696 3
Mortgage-commercial 13,574 20 12,645 22 15,126 23 13,949 22 10,643 22
Mortgage-residential 1,141 20 710 20 700 18 668 19 608 19
Installment loans to
individuals 15,797 23 12,440 24 12,283 23 11,245 23 9,234 25
Unallocated 11,904 -- 9,010 -- 1,482 -- 1,099 -- 2,711 --
- ------------------------------------------------------------------------------------------------------------------------------
Total $71,906 100% $63,805 100% $54,361 100% $49,867 100% $48,669 100%
==============================================================================================================================
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
An analysis of loan maturities and interest rate sensitivity of Wilmington Trust's commercial and real estate
construction loan portfolios follows:
---------------------------------------------------------------------
Less than One through Over Total
December 31, 1998 (in thousands) one year five years five years gross loans
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial, and agricultural $ 803,028 $ 330,250 $ 237,288 $ 1,370,566
Real estate-construction 115,591 66,835 29,307 211,733
- ----------------------------------------------------------------------------------------------------------------
Total $ 918,619 $ 397,085 $ 266,595 $ 1,582,299
================================================================================================================
Loans with predetermined rate $ 152,940 $ 190,915 $ 157,524 $ 501,379
Loans with variable rate 765,679 206,170 109,071 1,080,920
- ----------------------------------------------------------------------------------------------------------------
Total $ 918,619 $ 397,085 $ 266,595 $ 1,582,299
================================================================================================================
The following table presents a comparative analysis of the risk elements contained in Wilmington
Trust's loan portfolio at year-end(1):
-------------------------------------------------------
December 31 (in thousands) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------
Nonaccruing $ 30,598 $ 28,669 $ 40,735 $ 33,576 $ 28,851
Past due 90 days or more 18,558 15,523 20,440 19,346 $ 21,027
- ---------------------------------------------------------------------------------------------------
Total $ 49,156 $ 44,192 $ 61,175 $ 52,922 $ 49,878
===================================================================================================
Percent of total loans at year-end 1.14% 1.11% 1.62% 1.50% 1.52%
===================================================================================================
Other real estate owned $ 1,532 $ 3,738 $ 5,131 $ 14,288 $ 17,601
===================================================================================================
(1) Wilmington Trust's policy for placing loans in nonaccrual status is discussed in footnote 1 to
the Consolidated Financial Statements contained in its Annual Report to Shareholders for 1998.
That footnote is incorporated by reference herein.
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
The following table sets forth an analysis of Wilmington Trust's provision for loan losses, together with chargeoffs and
reserves for the five major portfolio classifications included in its statement of condition(1):
-----------------------------------------------------------------------
For the year ended December 31 (in thousands) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reserve for loan losses at beginning of period $ 63,805 $ 54,361 $ 49,867 $ 48,669 $ 51,363
Loans charged off:
Commercial, financial, and agricultural 2,189 6,105 3,811 4,333 5,878
Real estate-construction -- 184 94 444 46
Mortgage-commercial 148 187 2,475 2,484 934
Mortgage-residential 166 236 285 32 182
Installment loans to individuals 13,427 9,475 7,990 6,989 5,725
- ---------------------------------------------------------------------------------------------------------------------------
Total loans charged off 15,930 16,187 14,655 14,282 12,765
----------------------------------------------------------------------
Recoveries on amounts previously charged off:
Commercial, financial, and agricultural 961 891 1,160 992 3,126
Real estate-construction 3 1 4 1 --
Mortgage-commercial 35 948 17 25 161
Mortgage-residential 3 1 1 1 3
Installment loans to individuals 3,029 2,290 1,967 2,181 2,231
- ---------------------------------------------------------------------------------------------------------------------------
Total recoveries 4,031 4,131 3,149 3,200 5,521
-----------------------------------------------------------------------
Net loans charged off 11,899 12,056 11,506 11,082 7,244
- ---------------------------------------------------------------------------------------------------------------------------
Current year's provision for loan losses 20,000 21,500 16,000 12,280 4,550
- ---------------------------------------------------------------------------------------------------------------------------
Reserve for loan losses at end of period $ 71,906 $ 63,805 $ 54,361 $ 49,867 $ 48,669
===========================================================================================================================
Ratio of net loans charged off to average loans 0.29% 0.31% 0.32% 0.33% 0.23%
(1) The factors Wilmington Trust considers in determining the amount of additions to its allowance for loan losses are
discussed on page 22 of its Annual Report to Shareholders for 1998. That discussion is incorporated by reference herein.
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
The following table presents a summary of Wilmington Trust's deposits based on average daily balances over the last three years:
-----------------------------------------------------------------
1998 1997 1996
------------------ ----------------- ------------------
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 $ 747,791 -- $ 678,683 -- $ 633,066 --
Interest-bearing deposits:
Savings 406,060 2.25% 397,179 2.41% 396,650 2.44%
Interest-bearing demand 1,222,866 2.52 1,078,685 2.54 1,007,652 2.58
Certificates under $100,000 1,208,244 5.47 1,209,750 5.67 1,205,328 5.88
Certificates $100,000 and over 842,368 5.67 506,089 5.65 281,314 5.50
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 4,427,329 $3,870,386 $3,524,010
===========================================================================================================================
The maturity of Wilmington Trust's time deposits of $100,000 or more is as follows:
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------
Certificates All other interest-
December 31, 1998 (in thousands) of deposit bearing deposits
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Three months or less $ 215,715 $ 489,162
Over three through six months 326,862 --
Over six through twelve months 48,902 --
Over twelve months 21,067 --
- -------------------------------------------------------------------------------------------
Total $ 612,546 $ 489,162
===========================================================================================
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
A summary of short-term borrowings at December 31 is as follows (in thousands):
- ---------------------------------------------------------------------------------------------------------------------------
Securities sold
Federal funds under agreements U.S. Treasury
purchased to repurchase demand notes
- ---------------------------------------------------------------------------------------------------------------------------
1998
<S> <C> <C> <C>
Balance at December 31 $ 668,200 $ 264,146 $ 18,944
Weighted average interest rate at balance sheet date 5.2% 4.1% 4.0%
Maximum amount outstanding at any month-end $ 1,121,850 $ 264,146 $ 99,350
Approximate average amount outstanding during the period $ 821,144 $ 206,040 $ 49,338
Weighted average interest rate for average amounts
outstanding during the period 5.6% 4.7% 4.8%
- ---------------------------------------------------------------------------------------------------------------------------
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%
- ----------------------------------------------------------------------------------------------------------------------------
Federal funds purchased and securities sold under agreements to repurchase generally mature within 45 days. U.S. Treasury
demand notes mature overnight.
-16-
</TABLE>
<PAGE>
The following table presents the percentage of Wilmington Trust's funding
sources by deposit type:
-----------------------------------------
(based on daily average balances) 1998 1997 1996
- ------------------------------------------------------------------------------
Savings 7.38% 7.85% 8.40%
Interest-bearing demand 22.22 21.32 21.35
Certificates of deposits 37.26 33.92 31.50
Short-term borrowings 19.56 23.49 25.34
Demand deposits 13.58 13.42 13.41
- ------------------------------------------------------------------------------
Total 100.00% 100.00% 100.00%
==============================================================================
The following table presents an analysis of Wilmington Trust's return on assets
and return on equity over the last three years:
-----------------------------------------
1998 1997 1996
- ------------------------------------------------------------------------------
Return on assets 1.83% 1.87% 1.83%
Return on stockholders' equity 21.70 22.15 21.38
Dividend payout 44.87 44.76 45.58
Equity to asset 8.42 8.43 8.57
==============================================================================
-17-
<PAGE>
Regulatory Matters
------------------
The following is a summary of laws and regulations applicable to
Wilmington Trust and the Banks. It does not purport to be complete, and is
qualified by reference to those laws and regulations.
General
-------
Wilmington Trust is a bank holding company and a thrift holding
company, and the Banks are depository institutions whose deposits are insured by
the Federal Deposit Insurance Corporation (the "FDIC"). Federal statutes
applicable to Wilmington Trust and the Banks include the Federal Reserve Act,
the Federal Deposit Insurance Act, and the Bank Holding Company Act (the
"BHCA"). Wilmington Trust and the Banks are regulated and supervised at the
Federal level by the Federal Reserve Board, the FDIC, and the Office of Thrift
Supervision (the "OTS"). In addition, Wilmington Trust, WTC, and WTPA are
subject to supervision and regulation by state authorities.
BHCA
----
Under the BHCA and the Federal Reserve Board's (the "FRB's")
regulations, 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 a bank's voting stock, the
ability to otherwise control the election of a majority of a bank's directors,
or the power to exercise a controlling influence over a bank's management or
policies. In addition, the FRB's prior approval is required for:
. Any action that causes a bank or other company to become a bank
holding company;
. Any action that causes a bank to become a subsidiary of a bank
holding company;
. The acquisition by a bank holding company of ownership or control
of any voting securities of a bank or bank holding company, if that
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;
. 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; or
. The merger or consolidation of bank holding companies, including a
merger through a purchase of assets and assumption of liabilities.
Accordingly, before obtaining "control" of Wilmington Trust, a potential
acquirer would need to obtain the FRB's prior approval under the BHCA or the
FRB's regulations under the Federal Bank Control Act.
-18-
<PAGE>
A bank holding company and its subsidiaries generally may not, with
certain exceptions, engage in, acquire, or control 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 the FRB determines to be so closely related to banking or managing
or controlling banks to be a proper incident thereto. These include any
incidental activities necessary to carry on those activities, as long as the
bank holding company has obtained the FRB's prior approval. The FRB has approved
a lengthy list of activities permissible for bank holding companies and their
non-banking subsidiaries. Those include:
. Making, acquiring, and servicing loans and other extensions of
credit;
. Performing functions a trust company may perform;
. Acting as an investment or financial advisor;
. 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;
. Performing appraisals of real estate and tangible and intangible
personal property;
. Acting as an intermediary for the financing of commercial and
industrial income-producing real estate;
. Providing certain securities brokerage services;
. Underwriting and dealing in government obligations and money
market instruments; and
. Providing tax planning and preparation services.
Interstate Banking Act
----------------------
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 to acquire a bank in any state, subject to
regulatory approval and certain limitations, and regardless of certain state law
restrictions such as reciprocity requirements and regional compacts. States
cannot "opt out" of these interstate acquisition provisions.
In addition, under the Interstate Banking Act, bank holding companies are
permitted to merge banks operating in different states, subject to regulatory
approval and certain limitations, as long as neither bank is headquartered in a
state that "opted out" of those provisions before June 1, 1997.
Under the Interstate Banking Act, states may permit DE NOVO branching 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.
Safety and Soundness Limitations
--------------------------------
As a bank holding company, Wilmington Trust 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
-19-
<PAGE>
nonbank subsidiary of a bank, presents 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.
Sections 23A and 23B of the Federal Reserve Act establish standards for
the terms of, limit the amount of, and establish collateral requirements with
respect to, loans and other extensions of credit to and investments in
affiliates by the Banks. The Banks are "affiliates" of Wilmington Trust and each
other for purposes of the Federal Reserve Act. In 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 Wilmington Trust
and its subsidiaries, and to related interests of those persons.
Capital Standards
-----------------
The FRB and the other Federal banking agencies have adopted
"risk-based" capital standards to assist in assessing the capital adequacy of
bank holding companies and banks under those agencies' 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 (generally including common stockholders' equity, qualifying
cumulative and noncumulative perpetual preferred stock, and minority interests
in consolidated subsidiaries). The FRB also adopted minimum leverage ratios of
"Tier 1" capital to total assets. At December 31, 1998, Wilmington Trust and the
Banks were all well-capitalized, with capital levels in excess of applicable
risk-based and leverage thresholds.
FDIC Insurance and Regulation
-----------------------------
The FDIC insures deposits in the Banks up to applicable limits.
Neither Wilmington Trust nor its subsidiaries are required to pay FDIC insurance
premiums.
`The FDIC may impose sanctions on any insured depository institution
that does not operate in accordance with the FDIC's regulations, policies, or
directives. The FDIC may institute cease-and-desist proceedings against an
insured institution or holding company it believes 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 an insured institution is or has engaged in an
unsafe or unsound practice that 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. Wilmington Trust is not
aware of any past or current practice, condition, or violation that might lead
to termination of the deposit insurance coverage of any of the Banks or 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") requires annual on-site examinations of insured
depository institutions, and authorizes the Federal examining agency to take
-20-
<PAGE>
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. Options available 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; and
. 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 the institution's capital restoration plan and provide
assurance of performance under such a plan.
Dividend Limitations
--------------------
The FRB's policy generally is that banks and bank holding companies
should not pay dividends except from current earnings and if the institution's
prospective earnings retention rate is consistent with the institution's capital
needs, asset quality, and overall financial condition. 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 those subsidiary
banks should not be compromised by a level of cash dividends that places undue
pressure on their capital.
The FDIC can prohibit a bank from paying dividends if it believes the
dividend payment 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 WTC from declaring
dividends that 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 that 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 an amount that would reduce
by one-half its "surplus capital ratio" (I.E., its 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
require prior OTS approval.
Other Laws and Regulations
--------------------------
The lending and deposit-taking activities of the Banks are subject
to a variety of Federal and state consumer protection laws, including:
-21-
<PAGE>
. 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 Equal Credit Opportunity Act (which prohibits discrimination
in all aspects of credit-granting);
. The Fair Credit Reporting Act (which requires a lender to disclose
the name and address of the credit bureau from whom the lender
obtained a report that resulted in a denial of credit);
. The Real Estate Settlement Procedures Act (which 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 Expedited Funds Availability Act (which requires that
deposited funds be made available for withdrawal in accordance
with a prescribed schedule and that that schedule be disclosed to
customers);
. The Electronic Funds Transfer Act (which requires certain
disclosures in connection with electronic funds transactions);
. The FTC Credit Practices Rule (which prohibits unfair or deceptive
practices in extending credit to consumers); and
. Federal flood insurance statutes (which principally mandate
certain disclosures and insurance requirements when improved
real estate or mobile homes located in flood hazard areas are
taken as collateral for loans).
Under the Community Reinvestment Act and the Fair Housing Act,
depository institutions are prohibited from certain discriminatory practices
that 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 those individuals. CRA
performance is considered by all of the Federal regulatory agencies in 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 that did not override that preemption. Although some states overrode
that preemption, Delaware, Florida, Maryland, and Pennsylvania did not.
Accordingly, there is currently no limit on the interest rate that 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 nationwide. In
today's interest rate environment, those usury laws do not materially affect the
Banks' lending programs.
Delaware Law
------------
Delaware's business and legal environments historically have
contributed to the Bank's operating results. A substantial percentage of large
-22-
<PAGE>
pharmaceutical and chemical companies and other Fortune 500 companies are
headquartered in Delaware. Delaware's Court of Chancery is widely recognized for
its interpretations of corporate law.
In addition, Delaware law affords several advantages for trust
administration that have helped contribute to Wilmington Trust'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 does not impose any tax
on those trusts.
ITEM 2 - PROPERTIES
Wilmington Trust owns and/or leases buildings that are used in the normal
course of business by the Banks and its other subsidiaries. The main office of
Wilmington Trust and WTC is located at Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890. Wilmington Trust and most of its
subsidiaries occupy 265,000 square feet of space at this location, known as the
Wilmington Trust Center. It is owned by Rodney Square Investors, L.P., in which
WTC has a 50% ownership interest through one of its subsidiaries. WTC carries
the mortgage for this facility, which had an outstanding balance of $30,059,888
at December 31, 1998.
A separate, unencumbered, 300,000-square foot operations facility known as
the Wilmington Trust Plaza is owned by a subsidiary of WTC. This facility is
located at 301 West Eleventh Street, Wilmington, Delaware 19801.
As of March 18, 1999, the Banks had 61 branches in the following
locations:
. Twenty-six are in New Castle County, eight are in Kent County, and
14 are in Sussex County, Delaware;
. Three are in Chester County, two are in Montgomery County, and one
is in each of Delaware and Philadelphia Counties, Pennsylvania;
. One is in Wicomico County and two are in Worcester County, Maryland;
and
. One is in each of Martin, Palm Beach, and Indian River Counties,
Florida.
WTFSB also operates trust agency offices in leased facilities in New York
City, New York, Easton, Maryland, Las Vegas, Nevada, and Santa Monica,
California.
All of Wilmington Trust's reporting segments operate at Wilmington Trust
Center. Wilmington Trust's fee and banking reporting segments primarily operate
its branches, and its fee reporting segment operates its trust agency offices.
-23-
<PAGE>
ITEM 3 - LEGAL PROCEEDINGS
Wilmington Trust and its subsidiaries are involved in various legal
proceedings in the ordinary course of business. 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 Wilmington Trust's consolidated financial condition.
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 1998.
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 Wilmington Trust's Annual Report
to Shareholders for 1998, which is incorporated by reference herein. See also
"Item 1 - Business."
On January 17, 1998, Wilmington Trust issued to a total of 15 individuals
not full-time Wilmington Trust employees non-statutory options to acquire a
total of 9,900 shares of its stock at an exercise price of $62.375 per share.
These options are first exercisable three years after grant and terminate ten
years after grant, and were issued under Wilmington Trust's 1996 Long-term
Incentive Plan in reliance on the exemption provided by Section 4(2) under the
Securities Act. The proceeds from the exercise of these options will be used for
general corporate purposes. The shares underlying the options will be registered
with the SEC on Form S-3.
-24-
<PAGE>
ITEM 6 - SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the last five years:
(in thousands, except per share information)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Interest income $ 456,939 $ 430,639 $ 402,850 $ 377,341 $ 307,882
Net interest
income 237,697 230,016 214,221 197,364 184,330
Provision
for loan 20,000 21,500 16,000 12,280 4,550
losses
Net income 114,325 106,044 97,278 90,031 85,169
Per share data:
Net income-
basic 3.41 3.15 2.83 2.56 2.37
Net income-
diluted 3.34 3.08 2.79 2.53 2.35
Cash dividends
declared 1.53 1.41 1.29 1.17 1.06
Balance sheet at
year-end:
Assets $6,300,565 $6,122,351 $5,564,409 $5,372,198 $4,742,359
Long-term debt 168,000 43,000 43,000 28,000 --
- -----------------------------------------------------------------------------
-25-
<PAGE>
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 to 31 of
Wilmington Trust's Annual Report to Shareholders for 1998, which are
incorporated by reference herein.
ITEM 7A - QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET
RISK
The information required by this item is contained on page 22 of
Wilmington Trust's Annual Report to Shareholders for 1998, which is incorporated
by reference herein.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information required by this item is contained on the
respective pages indicated of Wilmington Trust's Annual Report to Shareholders
for 1998. Those pages are incorporated by reference herein.
Annual Report
to Shareholders
Page Number
Consolidated Statements of Condition as
of December 31, 1998 and 1997 32
Consolidated Statements of Income
for the years ended December 31,
1998, 1997, and 1996 33
Consolidated Statements of Changes in Stock-
holders' Equity for the years ended
December 31, 1998, 1997, and 1996 34
Consolidated Statements of Cash Flows
for the years ended December 31,
1998, 1997, and 1996 35
Notes to Consolidated Financial
Statements - December 31,
1998, 1997, and 1996 36-56
Report of Independent Auditors 57
Unaudited Selected Quarterly Financial Data 52
-26-
<PAGE>
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 4 to 9 of Wilmington Trust's proxy statement for its Annual Shareholders'
Meeting to be held on May 20, 1999 (the "Proxy Statement"), which are
incorporated by reference herein.
Information required by Rule 405 of Regulation S-K is contained on page 20
of the Proxy Statement, which is incorporated by reference herein.
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this item is contained on pages 12 to 19 of
the Proxy Statement, which are incorporated by reference herein.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is contained on pages 10 and 11 of
the Proxy Statement, which are incorporated by reference herein.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is contained on page 20 of the Proxy
Statement, which is incorporated by reference herein.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
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 are incorporated by
reference in Item 8 above:
-27-
<PAGE>
Annual Report
to Shareholders
Page Number
Consolidated Statements of Condition as
of December 31, 1998 and 1997 32
Consolidated Statements of Income for
each of the years in the three-year period
ended December 31, 1998 33
Consolidated Statements of Changes
in Stockholders' Equity for each of the
years in the three-year period ended December 31, 1998 34
Consolidated Statements of Cash Flows for
each of the years in the three-year period
ended December 31, 1998 35
Notes to Consolidated Financial Statements 36-56
Report of Independent Auditors 57
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.
-28-
<PAGE>
Exhibit Exhibit
- ------- -------
Number
- ------
3.1 Amended and Restated Certificate of Incorporation
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 1999 Long-Term Incentive Plan(10)
4.8 Thrift Savings Plan(1)
4.9 Employee Stock Ownership Plan(1)
4.10 Senior Executive Incentive Compensation Plan(6)
4.11 Executive Incentive Plan(11)
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)
-29-
<PAGE>
10.12 Severance Agreement dated as of February 29, 1996
between Wilmington Trust Company and Robert V.A.
Harra, Jr.(8)
10.14 Severance Agreement dated as of February 29, 1996
between Wilmington Trust Company and Joseph M.
Jacobs, Jr.(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(12)
13 Annual Report to Shareholders of Wilmington
Trust Corporation for 1998(12)
21 Subsidiaries of Wilmington Trust Corporation(12)
23 Consent of independent auditors(12)
27 Financial data schedule(12)
- --------
(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)Incorporated by reference to Exhibit A to the proxy statement of Wilmington
Trust Corporation dated March 22, 1999 filed on March 31, 1999.
(11)Incorporated by reference to Exhibit B to the proxy statement of Wilmington
Trust dated March 22, 1999 filed on March 31, 1999.
(12)Filed herewith.
-30-
<PAGE>
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 18, 1999
/s/ Robert V. A. Harra, Jr.
_________________________________
Robert V. A. Harra, Jr.
Director, President,
and Chief Operating Officer
(Date) March 18, 1999
/s/ David R. Gibson
_________________________________
David R. Gibson,
Senior Vice President and
Chief Financial Officer
(Date) March 18, 1999
/s/ Carolyn S. Burger
_________________________________
Carolyn S. Burger
Director
(Date) March 18, 1999
_________________________________
Richard R. Collins
Director
(Date) March 18, 1999
-31-
<PAGE>
/s/ Charles S. Crompton, Jr.
_________________________________
Charles S. Crompton, Jr.
Director
(Date) March 18, 1999
/s/ H. Stewart Dunn, Jr.
_________________________________
H. Stewart Dunn, Jr.
Director
(Date) March 18, 1999
_________________________________
Edward B. du Pont
Director
(Date) March 18, 1999
/s/ R. Keith Elliott
_________________________________
R. Keith Elliott
Director
(Date) March 18, 1999
/s/ Robert C. Forney
_________________________________
Robert C. Forney
Director
(Date) March 18, 1999
/s/ Andrew B. Kirkpatrick, Jr.
_________________________________
Andrew B. Kirkpatrick, Jr.
Director
(Date) March 18, 1999
-32-
<PAGE>
/s/ Rex L. Mears
_________________________________
Rex L. Mears
Director
(Date) March 18, 1999
/s/ Hugh E. Miller
_________________________________
Hugh E. Miller
Director
(Date) March 18, 1999
/s/ Stacey J. Mobley
_________________________________
Stacey J. Mobley
Director
(Date) March 18, 1999
/s/ Leonard W. Quill
_________________________________
Leonard W. Quill
Director
(Date) March 18, 1999
/s/ David P. Roselle
_________________________________
David P. Roselle
Director
(Date) March 18, 1999
/s/ H. Rodney Sharp, III
_________________________________
H. Rodney Sharp, III
Director
(Date) March 18, 1999
/s/ Thomas P. Sweeney
_________________________________
Thomas P. Sweeney
Director
(Date) March 18, 1999
-33-
<PAGE>
/s/ Mary Jornlin Theisen
_________________________________
Mary Jornlin Theisen
Director
(Date) March 18, 1999
/s/ Robert W. Tunnell, Jr.
_________________________________
Robert W. Tunnell, Jr.
Director
(Date) March 18, 1999
-34-
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<PAGE>
Earnings per share of $3.41 for 1998 were computed by dividing net income
of $114,325,333 by the weighted average number of shares of common stock
outstanding during 1998 of 33,487,439.
WILMINGTON TRUST CORPORATION
----------
1998 ANNUAL REPORT
[WILMINGTON TRUST LOGO.]
A Vision for the Future
A Strategy for Growth
A Basis for Building Value
<PAGE>
A VISION FOR THE FUTURE, A STRATEGY FOR GROWTH, A BASIS FOR BUILDING VALUE
IN 1996, WILMINGTON TRUST EMBARKED ON A COURSE OF METAMORPHOSIS TOWARD
BECOMING THE PREMIER WEALTH MANAGEMENT COMPANY IN THE UNITED STATES. THE
FOLLOWING YEAR, AS WE WORKED TO BETTER ALIGN THE CAPABILITIES IN WHICH WE
EXCEL WITH THE NEEDS OF OUR CUSTOMERS, OUR VISION AND STRATEGY BECAME CLEARER.
IN THIS REPORT, OUR 1998 RESULTS REFLECT OUR PROGRESS AGAINST PLAN AND
HOW OUR FOCUS ON THE CREATION, GROWTH, AND PROTECTION OF WEALTH IS BUILDING
VALUE FOR CUSTOMERS AND SHAREHOLDERS ALIKE.
[WILMINGTON TRUST LOGO.]
Table of Contents
WILMINGTON TRUST AT A GLANCE .............................................. 1
THE YEAR IN BRIEF ......................................................... 2
LETTER TO STOCKHOLDERS .................................................... 3
A VISION FOR THE FUTURE,
A STRATEGY FOR GROWTH,
A BASIS FOR BUILDING VALUE ................................................ 6
MANAGEMENT'S DISCUSSION
AND ANALYSIS .............................................................. 13
CONSOLIDATED FINANCIAL
STATEMENTS ................................................................ 32
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS ...................................................... 36
ORGANIZATIONAL LISTINGS ................................................... 59
STOCKHOLDER INFORMATION ................................................... 63
<PAGE>
WILMINGTON TRUST AT A GLANCE
Wilmington Trust is a wealth management company that provides a full range of
financial services to customers throughout the United States and in more than 50
countries on six continents. Founded in 1903 as an asset management company,
Wilmington Trust is one of the leading personal trust and private banking
companies in the U.S., with responsibility for $123 billion in trust, custody,
and asset management relationships.
[PHOTO OF WILMINGTON TRUST CENTER AND STATUE OF CAESAR RODNEY
WILMINGTON, DELAWARE.]
We help individuals, families, privately held businesses, public corporations,
and institutions create, grow, and protect their wealth through a specialized
array of banking, lending, investment management, trust, and planning services.
Our extensive knowledge of and experience with the advantages afforded to trusts
and business entities by Delaware's favorable legal, judicial, and regulatory
climate remain a competitive distinction.
[PHOTO OF SKYLINE OF PALM BEACH, FLORIDA
PALM BEACH.]
The dominant financial company in the Delaware region, Wilmington Trust also has
offices in California, Florida, Maryland, Nevada, New York, and
Pennsylvania.
[PHOTO OF SKYLINE OF NEW YORK CITY
NEW YORK CITY.]
[PHOTO OF SKYLINE OF LOS ANGELES, CALIFORNIA
LOS ANGELES.]
================================================================================
Wilmington Trust has:
Reported record earnings every year since 1982
Paid increased dividends every year since 1982
Posted a return on equity of 20% or more every year since 1985
Been listed since 1991 on the Keefe, Bruyette & Woods Honor Roll of banking
institutions with earnings-per-share increases for at least 10 consecutive
years
Wilmington Trust is:
One of only 21 companies among the 9,000 that are publicly traded on U.S.
exchanges to post increased earnings per share every year for the past 15
years(1)
The 11th largest personal trust company in the U.S.(2)
The 12th best performing U.S. bank among those with assets greater than $1
billion (3)
One of the 15 best performers among banks with less than $25 billion in
assets(4)
One of AMERICAN BANKER's top 25 banking companies for assets under management(5)
Sources:
(1) FactSet Research Systems
(2) THOMSON-ABA DIRECTORY OF TRUST BANKING, Fifth Edition, 1997 rankings
(3) ABA BANKING JOURNAL, July 1998
(4) U.S. BANKER, May 1998
(5) AMERICAN BANKER 1997 rankings
1
================================================================================
<PAGE>
- --------------------------------------------------------------------------------
[GRAPH OF RETURN ON ASSETS (NET INCOME AS A PERCENTAGE OF AVERAGE ASSETS) FOR
EACH YEAR FROM 1988 TO 1998, WITH THE FOLLOWING PLOT POINTS.
1988 - 1.73%
1989 - 1.70%
1990 - 1.72%
1991 - 1.75%
1992 - 1.55% AFTER CHANGE IN ACCOUNTING PRINCIPLE
1992A - 1.90% BEFPRE CHANGE IN ACCOUNTING PRINCIPLE
1993 - 1.96%
1994 - 1.88%
1995 - 1.83%
1996 - 1.83%
1997 - 1.87%
1998 - 1.83%.]
[GRAPH OF RETURN ON STOCKHOLDERS' EQUITY (NET INCOME AS A PERCENTAGE OF AVERAGE
STOCKHOLDERS' EQUITY) FOR EACH YEAR FROM 1988 TO 1998, WITH THE FOLLOWING PLOT
POINTS:
1988 - 23.38%
1989 - 22.08%
1990 - 22.67%
1991 - 21.09%
1992 - 17.44% AFTER CHANGE IN ACCOUNTING PRINCIPLE
1992A - 20.62% BEFPRE CHANGE IN ACCOUNTING PRINCIPLE
1993 - 21.12%
1994 - 20.84%
1995 - 20.70%
1996 - 21.38%
1997 - 22.15%
1998 - 21.70%.]
[GRAPH OF DIVIDENDS PER SHARE PAID FOR EACH YEAR FROM 1988 TO 1998, WITH THE
FOLLOWING PLOT POINTS:
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
1998 - $1.53.]
- --------------------------------------------------------------------------------
[WILMINGTON TRUST LOGO.]
YEAR IN BRIEF
Increase
FOR THE YEAR (IN THOUSANDS) 1998 1997 (Decrease)
Net interest income $ 237,697 $ 230,016 3.3%
Provision for loan losses 20,000 21,500 (7.0)
Other income 183,917 157,542 16.7
Net interest and other income 401,614 366,058 9.7
Other expense 230,066 207,671 10.8
Income before income taxes 171,548 158,387 8.3
Applicable income taxes 57,223 52,343 9.3
Net income 114,325 106,044 7.8
PER SHARE*
- --------------------------------------------------------------------------------
Net income-basic $ 3.41 $ 3.15 8.3%
Net income-diluted 3.34 3.08 8.4
Dividends paid 1.53 1.41 8.5
Book value at December 31 16.39 15.02 9.1
AT YEAR-END (IN THOUSANDS)
- --------------------------------------------------------------------------------
Assets $6,300,565 $6,122,351 2.9%
Loans 4,319,633 3,993,935 8.2
Reserve for loan losses 71,906 63,805 12.7
Investment securities 1,372,652 1,649,410 (16.8)
Deposits 4,536,763 4,169,030 8.8
Stockholders' equity 546,209 503,007 8.6
* 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.
2
<PAGE>
[PHOTO OF TED T. CECALA
TED T. CECALA
CHAIRMAN AND CHIEF EXECUTIVE OFFICER.]
- --------------------------------------------------------------------------------
TO OUR STOCKHOLDERS
Strong results across the range of our wealth management capabilities
distinguished Wilmington Trust's performance in 1998. In the face of market
fluctuations, shifts in the competitive landscape, and expenses associated with
the expansion of our franchise beyond Delaware, we posted record earnings per
share, record net income, and record levels of growth in our trust and asset
management businesses.
Wilmington Trust has produced record earnings and paid increased dividends every
year since 1982. Our return on equity has been 20% or more every year since
1985. This is an enviable achievement that few publicly held companies--and
fewer still in our industry--can claim. In fact, of 9,000 companies traded on
U.S. exchanges, Wilmington Trust is one of only 21 to post increased earnings
over the past 15 years. This exemplifies the premium we place on building value
consistently over time.
We build value for customers by helping them create, grow, and preserve their
wealth. We build value for shareholders by consistently growing our business and
producing solid returns that exceed the cost of our capital.
- --------------------------------------------------------------------------------
Performance in brief
- --------------------------------------------------------------------------------
Earnings per share for 1998 were $3.34, up 8.4% from the $3.08 reported for
1997. Net income reached a record $114.3 million, 7.8% over the 1997 figure.
[GRAPH OF NET INCOME PER SHARE FOR EACH YEAR FROM 1988 TO 1998, WITH THE
FOLLOWING PLOT POINTS:
1988 - $1.45
1989 - $1.59
1990 - $1.81
1991 - $1.92
1992 - $1.70 AFTER CHANGE IN ACCOUNTING PRINCIPLE
1992A - $2.09 BEFPRE CHANGE IN ACCOUNTING PRINCIPLE
1993 - $2.24
1994 - $2.37
1995 - $2.56
1996 - $2.83
1997 - $3.15
1998 - $3.41.]
Total revenues for the year increased 8.8% to $421.6 million, largely on the
strength of the trust and asset management business, in which revenues grew
12.5% to $128.8 million. Asset management revenues grew to $25.6 million, a 12%
increase, reflecting investments and activity in our newer markets of
California, New York, and Florida. Demand for our specialty trust services drove
corporate financial services revenues to $43.7 million, a 15.4% increase.
Personal trust revenues rose 10.6% to $59.5 million.
Net interest income grew 3.3% as a result of expansion in the loan as well as
securities portfolios.
Costs related to the opening of new offices in California, Delaware, New York,
and Pennsylvania, along with Year 2000 preparations, led to expenses for the
year of $230 million, a 10.8% increase.
At year end, total banking assets were $6.3 billion, a 3% increase; loans
outstanding reached $4.3 billion, an 8.2% rise; deposits grew 8.8% to $4.5
billion; and stockholders' equity totaled $546.2 million, an 8.6% increase.
3
<PAGE>
- --------------------------------------------------------------------------------
Milestones
On January 15, 1998, we welcomed to our Board of Directors H. Rodney Sharp III,
a current director and retired manager of E. I. du Pont de Nemours and Company.
On May 21, 1998, two Directors, Robert H. Bolling Jr. and Bernard J. Taylor II,
retired from our Board. We deeply appreciate the wisdom, vision, and inspiration
they supplied as watchful stewards of our company.
Mr. Bolling, a retired consulting electrical engineer and pillar of the Delaware
community, served on our Board with unwavering dedication for 27 years--a tenure
longer than that of any current Director. A constant source of guidance, one of
Mr. Bolling's most notable contributions was helping to bring Mr. Taylor on
board as Chief Executive Officer in 1979.
A year later, Mr. Taylor was elected chairman, a post he held until 1992. The
extraordinary growth we experienced under his leadership catapulted Wilmington
Trust into national prominence, set a performance standard few publicly traded
companies have achieved, and established a level of financial strength that
underpins our independence.
- --------------------------------------------------------------------------------
[PHOTO OF ROBERT V.A. HARRA JR.
PRESIDENT AND CHIEF OPERATING OFFICER.]
Assets under management grew to $123 billion and were boosted in 1998 by our
acquisition of the $500 million Kiewit family of mutual funds.
Year-end results produced a return on average stockholders' equity of 21.70% and
a return on assets of 1.83%, versus 22.15% and 1.87% for 1997.
- --------------------------------------------------------------------------------
Helping customers succeed
- --------------------------------------------------------------------------------
The strategic repositioning we set in motion in mid-1996 is generating momentum
that is readily apparent. We continue to be the leading banking company in the
Delaware region--a position we intend to defend vigorously. We are extending our
Delaware market strengths into contiguous regions on Maryland's Eastern Shore
and in southeastern Pennsylvania, where the market potential is six times the
size of Delaware's. We are expanding our presence in centers of wealth like
Florida, New York, and California.
Over the past year, we enhanced our ability to serve customers through new
product offerings, additional offices, and technological advances.
We broadened our array of available investment products by affiliating with two
nationally known investment advisory firms, Cramer Rosenthal McGlynn and Roxbury
Capital Management. We opened trust and investment offices in New York and
California. In Villanova, Pennsylvania, and Georgetown, Delaware, we opened new
offices that simplify the way we help customers by combining banking, trust,
commercial lending, investment advisory, and financial planning services under
one roof.
We employed technology to make our services more convenient. We introduced
advanced-function ATMs that let customers cash checks to the penny. We launched
online banking through our Web site at www.wilmingtontrust.com, giving customers
round-the-clock access to their accounts and information about our capabilities
from anywhere in the world.
- --------------------------------------------------------------------------------
Prudent and principled management
- --------------------------------------------------------------------------------
Our focus on top-line revenue growth has not diminished our commitment to
careful expense management and judicious loan underwriting standards.
4
<PAGE>
The increased expenses we incurred in 1998 as a result of investments we are
making in our future were countered by productivity gains and initiatives that
give customers access to our services in new ways that decrease our reliance on
more expensive physical locations. For example, the costs associated with the
introduction of online banking were approximately $1 million--roughly the same
amount needed to open one branch office.
[SKETCH OF WILMINGTON TRUST PUBLICATIONS CAPTIONED "DOING BUSINESS" AND "ON-LINE
BANKING".]
Our well-diversified loan portfolio is located primarily in the Delaware region;
we have no Latin American, Asian, or Russian loans. While industry consolidation
and interest rate pressures in 1998 caused compression in loan pricing, we have
not relaxed our underwriting standards. The quality of our loan portfolio, as
measured by credit losses as a percentage of loans outstanding, is among the
best in the U.S.
- --------------------------------------------------------------------------------
A basis for building value
- --------------------------------------------------------------------------------
At the end of 1998, we announced our plans to list on the New York Stock
Exchange, effective January 12, 1999, under the new ticker symbol WL. We look
forward to the increased visibility that is expected to accrue from listing on
the world's largest and most dominant equity market.
In this rapidly changing industry, where financial supermarkets are
proliferating, I can't imagine a better time for Wilmington Trust to
differentiate itself as a specialty provider of wealth management services. Our
competitive advantages continue to be our accessibility, responsiveness,
attentiveness, ability to move quickly, and focus on customers as important
individuals. These attributes, combined with the superior talent,
professionalism, and dedication of our people, leave us positioned better than
ever to capitalize on market opportunities and build value for customers and
shareholders alike.
On behalf of the entire Wilmington Trust organization, I thank you for your
continued confidence in our ability to continue our exceptional record of
success well into the next century.
/s/ Ted T. Cecala
Ted T. Cecala
Chairman and Chief Executive Officer
- --------------------------------------------------------------------------------
Milestones
Sadly, the month of May 1998 also brought the tragic news of Endsley P.
Fairman's sudden death. Mr. Fairman devoted more than 62 years of his life to
our company, beginning in 1936 when he joined our trust department. He was
elected to our Board in 1968; a year later, he became senior vice president,
secretary, and head of the trust department. After his retirement from active
employment in 1973, he was named an Associate Director, a post he held until his
death. Few individuals held a more profound understanding of our company or left
such a legacy of principled leadership. His uncanny insight, advice, and counsel
are sorely missed.
5
- --------------------------------------------------------------------------------
<PAGE>
[PHOTO OF TED T. CECALA AND ROBERT V.A. HARRA JR. OF WILMINGTON TRUST AND HARRY
WILSON AND CLARE MCTERNAN OF ROXBURY CAPITAL MANAGEMENT SITTING AT A TABLE.]
Customers of both Wilmington Trust and Roxbury Capital Management benefit from
the two companies' 1998 affiliation, discussed here by (clockwise from top left)
Roxbury Senior Managing Director Harry Wilson; Wilmington Trust Chairman and
Chief Executive Officer Ted Cecala; Clare McTernan, Roxbury managing director;
and Robert V. A. Harra Jr., Wilmington Trust president and chief operating
officer.
- --------------------------------------------------------------------------------
A VISION FOR THE FUTURE, A STRATEGY FOR GROWTH, A BASIS FOR BUILDING VALUE
To build value for customers and shareholders, and to seize opportunities in
today's dynamic and competitive marketplace, Wilmington Trust--already the
leading financial company in Delaware--is extending its franchise into other key
centers of wealth. Our strategy calls for defending our dominance of the
Delaware market while concentrating on three core business capabilities--wealth
management, corporate trust, and commercial banking--as we build momentum in
southeastern Pennsylvania, Florida, California, and New York.
- --------------------------------------------------------------------------------
Wealth management: growing need, growing opportunities
- --------------------------------------------------------------------------------
Demographics and dollars are driving the market for wealth management services
to unprecedented levels of growth. Consider:
o During 1999, someone in the United States will turn 50 approximately once
every 10 seconds*--a pace census projections suggest will continue well
into the next century. These baby boomers--whose life expectancy extends to
age 85 and beyond--are moving into their prime saving and investment years
and giving more thought to retirement and estate planning.
*Source: U.S. Census, 1997 resident population by age
================================================================================
Wealth Management Market Potential
================================================================================
Number of
households
with annual Investable
income assets
>=$150,000 (in billions)
- --------------------------------------------------------------------------------
California
LOS ANGELES AND ORANGE COUNTRIES 159,604 $ 403
STATEWIDE 350,887 $ 1,000
- --------------------------------------------------------------------------------
Delaware 8,100 $ 27
- --------------------------------------------------------------------------------
Florida
PALM BEACH SIX-COUNTY
METROPOLITAN AREA 64,300 $ 174
- --------------------------------------------------------------------------------
Maryland
EASTERN SHORE 1,979 $ 8
- --------------------------------------------------------------------------------
New York City
12-COUNTY METROPOLITAN AREA 166,610 $ 400
- --------------------------------------------------------------------------------
Pennsylvania
BUCKS, CHESTER, DELAWARE,
MONTGOMERY, AND PHIDADELPHIA
COUNTIES 45,610 $ 132
- --------------------------------------------------------------------------------
Source: CACI SOURCEBOOK OF DEMOGRAPHICS, 1998
================================================================================
Wilmington Trust's expansion in California, Florida, and New York is a key part
of our increasing commitment to delivering exceptional wealth management
services.
6
<PAGE>
Wilmington Trust broadened its available array of investment styles by
affiliating with Roxbury Capital Management in 1998--and Roxbury's clients
gained access to Wilmington Trust's range of fiduciary services. Meeting at
Roxbury's Santa Monica trading desk are (standing, left to right) Roxbury Senior
Managing Directors Anthony Browne and Kevin Riley; Wilmington Trust President
and Chief Operating Officer Robert V. A. Harra Jr.; Harry Wilson, Roxbury senior
managing director; and Ted Cecala, Wilmington Trust chairman and chief executive
officer.
[PHOTO OF TED T. CECALA AND ROBERT V.A. HARRA JR. OF WILMINGTON TRUST AND
ANTHONY BROWN, KEVIN RILEY, AND HARRY WILSON OF ROXBURY CAPITAL MANAGEMENT AND
WILMINGTON TRUST LOGO.]
o The rapid rate at which new businesses are being started in the United
States is creating more entrepreneurs, executives, and, ultimately,
beneficiaries who need wealth planning and wealth preservation services.
o As the baby boomers' parents pass on their accumulated assets, the largest
generational transfer of wealth in the history of the world--a sum
estimated at $12 trillion--is under way.
Wilmington Trust is engaged in several key strategies to capture the
opportunities this environment presents. We are expanding geographically; we are
augmenting our investment management capabilities; and we are bringing our
century-old expertise and the legal and tax advantages of trusts created under
Delaware law to more customers than ever before.
Our geographic expansion is targeted at the largest centers of wealth in the
United States. In 1998 we opened trust offices in midtown Manhattan and Santa
Monica, California. We continued to strengthen our services in southeastern
Pennsylvania, where we now have seven offices, and in Florida, where we have had
a growing presence since 1982. In late spring 1999 we will move our Florida
headquarters to new premises on PGA Boulevard in North Palm Beach.
We are broadening our array of investment styles and options by affiliating with
high-quality advisory firms that complement our core equity product. In July
1998 we acquired a 30% interest in California-based Roxbury Capital Management,
a growth investor with $6 billion under management.
7
<PAGE>
The alliance with Roxbury, whose specialty products include a socially
responsible portfolio, followed our January 1998 acquisition of 24% of Cramer
Rosenthal McGlynn. With $4.5 billion under management, the New York-based Cramer
Rosenthal McGlynn is a value investor whose capabilities also include special
equity, limited partnerships, and high-yield vehicles.
These affiliations are expanding Wilmington Trust's investment offerings--and
our customer base--as Roxbury and Cramer Rosenthal McGlynn clients gain access
to our private banking, trust, and estate planning services. To capitalize on
the potential for mutually beneficial relationships, our Manhattan and Santa
Monica offices are located in the same buildings, respectively, as Cramer
Rosenthal McGlynn and Roxbury.
- --------------------------------------------------------------------------------
CORPORATE TRUST: CORNERING THE MARKET IN NICHE SERVICES
Wilmington Trust's corporate trust business is a combination of specialty
services that leverage the advantages of Delaware's tax structure and corporate
law. With a 30-year track record and clients in 46 countries on six continents,
Wilmington Trust is the preferred trustee for large capital market transactions
and an expert in structuring and
[PHOTO OF LEN SPILKA OF KING WORLD PRODUCTIONS AND HOWARD COHEN OF WILMINGTON
TRUST ON THE SET OF "INSIDE EDITION" AND WILMINGTON TRUST LOGO.]
Corporations in the energy, transportation, financial services, communications,
and entertainment industries around the world use Wilmington Trust's specialized
trust services. For King World Productions, Inc.--the leading supplier of
first-run syndicated television programming, including "Jeopardy," "Wheel of
Fortune," "The Oprah Winfrey Show," and "Hollywood Squares"--Wilmington Trust
has customized an array of trustee and asset management services that meets King
World's needs. Here, Len Spilka, King World vice president--finance and
treasurer (left), and Howard Cohen, head of corporate trust for Wilmington
Trust, visit the set of "Inside Edition," which King World produces and
distributes.
8
<PAGE>
[PHOTO OF NEW YORK STOCK EXCHANGE WITH WILMINGTON TRUST BANNERS.]
Banners on the New York Stock Exchange facade proclaimed Wilmington Trust's new
ticker symbol--WL--on January 12, 1999, our first day of trading on the world's
largest stock market.
administering special-purpose entities and vehicles--activities we market from
our offices in Delaware, Nevada, and New York.
We serve as trustee and manager for a wide variety of financings and
securitizations, including leveraged leases, asset-backed securities, municipal
tax liens, project financings, trust-preferred securities, high-yield bonds, and
corporate restructurings. This business has more than doubled in just three
years. In 1996 we participated in 600 transactions; in 1998 that number jumped
to l,600 and included structures for financing aircraft, ships, rolling stock,
power plants, and communications equipment.
- --------------------------------------------------------------------------------
The Delaware advantage
Progressive legal and tax advantages that feature security, flexibility, and
privacy make Delaware the premier jurisdiction in the United States for personal
trusts and corporations.
For personal trusts:
o Delaware's abolition of the Rule Against Perpetuities lets individuals
create personal property trusts that will last indefinitely.
o No Delaware income tax is imposed on income accumulated or capital gains
incurred for nonresident beneficiaries of a Delaware trust.
o Delaware's Prudent Investor Rule permits maximum investment flexibility in
trust asset management.
o Creators may choose investment advisors in addition to the trustee.
o Delaware trusts provide effective protection from creditor claims.
o Confidentiality is ensured because court accountings and filings are not
required.
For corporations:
o There is no Delaware income tax on activities in the state that are
confined to the maintenance and management of intangible assets.
o One person may hold all of a corporation's offices.
Another advantage--one that benefits individuals, families, and business
entities alike--is Delaware's internationally renowned Court of Chancery, which
has jurisdiction over the majority of corporate, partnership, trust, estate, and
other fiduciary matters.
For more detailed information, visit www.delawareadvantage.com.
[PHOTO OF WILMINGTON TRUST PUBLICATIONS CAPTIONED "THE DELAWARE ADVANTAGE,"
"ADVANTAGES FOR BUSINESSES," "WHY WILMINGTON TRUST?" AND "GOLD KEY SERVICES".]
9
- --------------------------------------------------------------------------------
<PAGE>
[PHOTO OF TIM JOHNSON OF WILMINGTON TRUST AT COMPUTER TERMINAL.]
Wilmington Trust's Tim Johnson monitors market movements in a constant search
for value in fixed-income investments for corporate trust and other customers.
A growing new business for us with exceptional potential is serving as direction
trustee for large 401(k) plans in which we have alliances with major participant
record keepers. From a base of only $400,000 in fees in 1995, this business
generated fee revenues of $4 million in 1998.
Delaware's tax and legal climate make it the situs of choice for special-purpose
entities and vehicles, including Delaware business trusts, limited liability
companies, limited partnerships, finance companies, and passive investment
companies, for which Wilmington Trust provides customized packages of fiduciary,
investment, and administrative services. We are trustee for some 2,000 Delaware
business trusts, roughly half the number on record in the state.
One niche market we are pursuing is servicing bankruptcy restructurings and
liquidations, a strong fee-based business in which we act on behalf of
creditors. Other opportunities lie offshore, where we are seeing increased
interest in euro-denominated securities.
- --------------------------------------------------------------------------------
COMMERCIAL BANKING: TARGETED EXPANSION PRODUCING RESULTS
Dominance in one market and disruption in another define Wilmington Trust's
competitive advantages in the commercial banking arena, where our target
customers are privately owned businesses with sales between $5 million and $150
million.
================================================================================
Commercial Banking Market Potential
================================================================================
Number of businesses
with annual sales
(in millions)
$5-$9.9 >=$10
- --------------------------------------------------------------------------------
Delaware
NEW CASTLE COUNTY 223 289
KENT AND SUSSEX COUNTIES 79 100
- --------------------------------------------------------------------------------
Pennsylvania
BUCKS, CHESTER, DELAWARE,
MONTGOMERY, AND PHILADELPHIA
COUNTIES 1,834 2,162
- --------------------------------------------------------------------------------
Source: CACI SOURCEBOOK OF COUNTY DEMOGRAPHICS, 1998
================================================================================
Already the dominant player in the Delaware market, Wilmington Trust's
commercial banking growth opportunities lie in areas like southeastern
Pennsylvania, where there are roughly six times as many potential business
customers as there are in Delaware.
10
<PAGE>
One example of Wilmington Trust's growing relationships in southeastern
Pennsylvania is the Berwind Property Group (BPG), a leading private real estate
investment company. For BPG, Wilmington Trust has assembled an array of banking,
trust, and corporate cash management services as well as credit facilities for
properties in Pennsylvania, New Jersey, and Florida, including the Berwind
Group's private hangar at Philadelphia International Airport. Shown there, left
to right, are Scott Williams, BPG senior vice president; Barry Howard, BPG vice
chairman; Mark Graham, head of Wilmington Trust's Pennsylvania division; K. C.
Barrett, Wilmington Trust's BPG relationship manager, and Daniel DiLella, BPG
president and chief executive officer.
[PHOTO OF SCOTT WILLIAMS, BARRY HOWARD, AND DANIEL DILELLA OF BERWIND FINANCIAL
GROUP AND MARK GRAHAM AND K.C. BARRETT OF WILMINGTON TRUST AT BERWIND'S HANGAR
AT PHILADELPHIA INTERNATIONAL AIRPORT AND WILMINGTON TRUST LOGO.]
Already the leading commercial bank in Delaware, a natural extension of our
market is the five-county metropolitan area in southeastern Pennsylvania that
surrounds Philadelphia and abuts Delaware's northern border. Industry
consolidation in this market, which is six times larger than Delaware's, has
unsettled the competitive landscape and opened opportunities for the kind of
relationship-oriented approach in which Wilmington Trust specializes.
In addition to needing a full range of commercial banking services, business
owners in this market typically are interested in private banking, asset
management, and, ultimately, trust and estate planning services. They are
looking for a high degree of personal service, access to decision makers, and
consistent credit policies--all hallmarks of Wilmington Trust.
In 1998 we established a base in Villanova, Pennsylvania, bringing to seven the
number of offices we have in the region. The Villanova office exemplifies our
plans for expansion in the southeastern Pennsylvania
11
<PAGE>
market: the development of commercial banking offices that serve as a base for
team-based customer service. Instead of asking business customers to conduct
their banking business at our branches, we go to them. For example, we service
these customers through regularly scheduled couriers with whom we contract.
Efforts in this market are producing solid results. In 1998 more than 60% of
Wilmington Trust's total new loan volume originated in southeastern
Pennsylvania--and roughly 50% of the trust revenues generated in this market
came from commercial banking referrals and team-based selling.
- --------------------------------------------------------------------------------
BUILDING VALUE: COMPETITIVE DISTINCTIONS
Wilmington Trust helps customers create, grow, and preserve their wealth with
competitive distinctions that include deep, long-lasting relationships;
extensive expertise; innovative solutions; high-performance execution; and ready
access to decision makers. As the market for our services continues to expand,
these distinctions--combined with superior performance--form Wilmington Trust's
basis for building value for customers and shareholders alike.
[PHOTO OF ERIC CHEUNG AND TONY ANZALONE OF WILMINGTON TRUST AT COMPUTER TERMINAL
AND WILMINGTON TRUST LOGO.]
Wilmington Trust's Eric Cheung (left), head of fixed-income management, confers
with colleague Tony Anzalone to design optimal asset allocation for investment
advisory customers.
12
<PAGE>
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
Wilmington Trust Corporation and Subsidiaries
SUMMARY
1998 marked the seventeenth consecutive year in which the Corporation has posted
record earnings.(1) Net income for 1998 reached a record $114.3 million, or
$3.41 per share. This was an 8% increase over the $106.0 million, or $3.15 per
share, reported for 1997. On a diluted basis, per share earnings were $3.34,
also an 8% increase over the $3.08 reported for 1997.
These improvements were attributable to growth in both of the major
components of the Corporation's income. Net interest income increased 3% to
$237.7 million, an increase of $7.7 million over the $230.0 million reported for
1997. Noninterest revenues increased 17% to $183.9 million, an increase of $26.4
million over the $157.5 million reported for 1997.
The provision for loan losses for 1998 was $20.0 million, a decrease of
$1.5 million, or 7%, from the $21.5 million provision for 1997.
Operating expenses for 1998 were $230.1 million. This was an increase of
$22.4 million, or 11%, over the $207.7 million reported for 1997. The provision
for income taxes was $57.2 million, an increase of $4.9 million, or 9%, over the
$52.3 million reported for 1997. These results produced a return on average
stockholders' equity of 21.70%, slightly below the 22.15% reported for last
year, and marked the fourteenth consecutive year that return on equity has
exceeded 20%.(1) The return on average assets for 1998 was 1.83%, down slightly
from the 1.87% for a year ago.
The Corporation maintained its high level of productivity during 1998. The
net profit margin (measured by net income as a percentage of the sum of net
interest and noninterest income) for 1998 was 27.1%, down slightly from the
27.4% reported for 1997. Productivity for 1998, as measured by net income per
staff member, was $47,000, up from the $44,000 reported for 1997.
Statistical disclosures required of bank holding companies by Industry
Guide 3 are included in the Corporation's Annual Report on Form 10-K for 1998.
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.
[GRAPH OF NET INCOME PER STAFF MEMBER FOR EACH YEAR FROM 1988 TO 1998, WITH THE
FOLLOWING PLOT POINTS, IN THOUSANDS:
1988 - $25.45
1989 - $28.16
1990 - $31.45
1991 - $32.88
1992 - $29.26 AFTER CHANGE IN ACCOUNTING PRINCIPLE
1992A - $36.00 BEFPRE CHANGE IN ACCOUNTING PRINCIPLE
1993 - $36.72
1994 - $36.98
1995 - $38.61
1996 - $40.23
1997 - $43.68
1998 - $46.82.]
[GRAPH OF NET PROFIT MARGIN (NET INCOME AS A PERCENTAGE OF OPERATING REVENUES)
FOR EACH YEAR FROM 1988 TO 1998, WITH THE FOLLOWING PLOT POINTS:
1988 - 28.72%
1989 - 28.53%
1990 - 29.34%
1991 - 28.51%
1992 - 23.24% AFTER CHANGE IN ACCOUNTING PRINCIPLE
1992A - 28.59% BEFPRE CHANGE IN ACCOUNTING PRINCIPLE
1993 - 28.69%
1994 - 28.64%
1995 - 27.70%
1996 - 27.60%
1997 - 27.36%
1998 - 27.12%]
(1) Based upon income before cumulative effect of change in accounting
principle.
13
<PAGE>
================================================================================
FIVE-YEAR ANALYSIS OF EARNINGS AND CONSOLIDATED STATEMENTS OF CONDITION
================================================================================
Wilmington Trust Corporation and Subsidiaries
<TABLE>
<CAPTION>
1998 1997
-------------------------------------- ----------------------------------
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 31,081 1,665 5.36 22,369 1,280 5.72
- ------------------------------------------------------------------------------------- --------------------------
Total short-term investments 31,081 1,665 5.36 22,369 1,280 5.72
--------------------------------------------------------------------------
U.S. Treasury and government agencies 983,276 60,627 6.22 868,296 55,579 6.41
State and municipal(1) 16,672 1,278 7.73 27,918 2,223 7.99
Preferred stock(1) 146,595 10,846 7.56 131,693 9,906 7.63
Asset-backed securities 358,929 23,749 6.66 272,527 17,581 6.46
Other(1) 104,123 5,874 5.67 85,865 5,078 5.93
- ------------------------------------------------------------------------------------- --------------------------
Total investment securities 1,609,595 102,374 6.42 1,386,299 90,367 6.53
--------------------------------------------------------------------------
Commercial, financial and agricultural 1,263,385 107,039 8.47 1,211,703 105,758 8.73
Real estate--construction 180,830 16,953 9.38 131,745 12,980 9.85
Mortgage--commercial 890,375 83,040 9.33 904,063 85,260 9.43
Mortgage--residential 837,218 65,195 7.79 764,246 58,406 7.64
Installment loans to individuals 984,590 89,044 9.04 909,736 85,953 9.45
- ------------------------------------------------------------------------------------- --------------------------
Total loans(1)(2) 4,156,398 361,271 8.69 3,921,493 348,357 8.88
--------------------------------------------------------------------------
Total earning assets 5,797,074 465,310 8.05 5,330,161 440,004 8.26
Other assets 455,365 349,826
- --------------------------------------------------------------------- -----------
Total assets $ 6,252,439 $ 5,679,987
==========================================================================
Savings $ 406,060 9,141 2.25 $ 397,179 9,561 2.41
Interest-bearing demand 1,222,866 30,800 2.52 1,078,685 27,393 2.54
Certificates under $100,000 1,208,244 66,045 5.47 1,209,750 68,621 5.67
Certificates $100,000 and over 842,368 47,750 5.67 506,089 28,601 5.65
- ------------------------------------------------------------------------------------- --------------------------
Total interest-bearing deposits 3,679,538 153,736 4.18 3,191,703 134,176 4.20
--------------------------------------------------------------------------
Federal funds purchased and securities
sold under agreements to repurchase 1,027,184 55,583 5.41 1,142,106 63,123 5.53
U.S. Treasury demand 49,338 2,377 4.82 46,108 2,450 5.31
- ------------------------------------------------------------------------------------- --------------------------
Total short-term borrowings 1,076,522 57,960 5.38 1,188,214 65,573 5.52
--------------------------------------------------------------------------
Long-term debt 125,877 7,546 5.99 43,000 874 2.03
- ------------------------------------------------------------------------------------- --------------------------
Total interest-bearing liabilities 4,881,937 219,242 4.49 4,422,917 200,623 4.54
Demand deposits 747,791 678,683
Other noninterest funds 167,346 228,561
- ------------------------------------------------------------------------------------------------------------------------------------
Total funds used to support earning assets 5,797,074 219,242 3.79 5,330,161 200,623 3.77
Stockholders' equity 526,742 478,814
Equity used to support earning assets (167,346) (228,561)
Other liabilities 95,969 99,573
- ---------------------------------------------------------------------- ---------
Total liabilities and stockholders' equity $ 6,252,439 $ 5,679,987
==========================================================================
Net interest income/yield 246,068 4.26 239,381 4.49
Tax-equivalent adjustment (8,371) (9,365)
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income 237,697 230,016
Provision for loan losses (20,000) (21,500)
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 217,697 208,516
- ------------------------------------------------------------------------------------------------------------------------------------
Other income
Trust and asset management fees 128,801 114,501
Service charges on deposit accounts 21,934 20,964
Other operating income 26,496 22,050
Securities gains/(losses) 6,686 27
- ------------------------------------------------------------------------------------------------------------------------------------
Total other income 183,917 157,542
--------------------------------------------------------
Net interest and other income 401,614 366,058
--------------------------------------------------------
Other expense
Salaries and employment benefits 137,917 129,816
Net occupancy 13,236 11,763
Furniture and equipment 19,024 16,361
Other operating expense 59,889 49,731
- ------------------------------------------------------------------------------------------------------------------------------------
Total other expense 230,066 207,671
--------------------------------------------------------
Income before income taxes 171,548 158,387
Applicable income taxes 57,223 52,343
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 114,325 $106,044
========================================================
Net income per share--basic $ 3.41 $ 3.15
========================================================
Net income per share--diluted $ 3.34 $ 3.08
========================================================
</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.
14
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------- ---------------------------------------- ----------------------------------------
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%
26,459 1,475 5.57 17,522 1,036 5.91 26,273 1,155 4.40
- -------------------------- ------------------------- -------------------------
26,459 1,475 5.57 17,522 1,036 5.91 26,425 1,162 4.40
- ------------------------------------------------------------------------------------------------------------------------------------
818,585 51,511 6.30 598,501 37,182 6.21 457,961 26,263 5.73
35,473 2,829 8.00 42,099 3,077 7.31 53,335 3,921 7.35
133,322 10,058 7.51 155,632 9,865 6.34 235,773 11,006 4.67
259,071 15,163 5.85 290,779 15,946 5.48 227,415 11,199 4.92
96,556 5,321 5.53 96,991 5,595 5.76 85,531 4,050 4.74
- -------------------------- ------------------------- -------------------------
1,343,007 84,882 6.33 1,184,002 71,665 6.05 1,060,015 56,439 5.33
- ------------------------------------------------------------------------------------------------------------------------------------
1,160,899 103,131 8.88 1,074,860 99,199 9.23 947,544 77,565 8.19
114,827 11,150 9.71 103,104 10,739 10.42 120,067 10,687 8.90
806,782 77,871 9.65 751,937 74,244 9.87 686,307 55,530 8.09
683,095 53,563 7.84 633,852 50,356 7.94 605,971 47,604 7.86
836,827 80,941 9.67 827,029 81,141 9.81 754,495 69,429 9.20
- -------------------------- ------------------------- -------------------------
3,602,430 326,656 9.07 3,390,782 315,679 9.31 3,114,384 260,815 8.37
- ------------------------------------------------------------------------------------------------------------------------------------
4,971,896 413,013 8.31 4,592,306 388,380 8.46 4,200,824 318,416 7.58
335,467 340,560 321,221
- ----------- ---------- -----------
$ 5,307,363 $ 4,932,866 $ 4,522,045
====================================================================================================================================
$ 396,650 9,671 2.44 $ 404,421 10,222 2.53 $ 441,396 10,246 2.32
1,007,652 25,962 2.58 981,379 26,253 2.68 1,101,916 24,962 2.27
1,205,328 70,855 5.88 1,036,792 60,021 5.79 986,237 48,374 4.90
281,314 15,467 5.50 161,403 8,808 5.46 175,187 6,895 3.94
- -------------------------- ------------------------- -------------------------
2,890,944 121,955 4.22 2,583,995 105,304 4.08 2,704,736 90,477 3.35
- ------------------------------------------------------------------------------------------------------------------------------------
1,161,521 63,429 5.46 1,203,372 72,178 6.00 722,377 31,154 4.31
34,241 1,766 5.16 36,044 2,147 5.96 52,925 1,921 3.63
- -------------------------- ------------------------- -------------------------
1,195,762 65,195 5.45 1,239,416 74,325 6.00 775,302 33,075 4.27
- ------------------------------------------------------------------------------------------------------------------------------------
30,910 1,479 4.78 6,981 348 4.98 -- -- --
- -------------------------- ------------------------- -------------------------
4,117,616 188,629 4.58 3,830,392 179,977 4.70 3,480,038 123,552 3.55
633,066 580,928 559,574
221,214 180,986 161,212
- ------------------------------------------------------------------------------------------------------------------------------------
4,971,896 188,629 3.80 4,592,306 179,977 3.92 4,200,824 123,552 2.94
454,917 434,843 408,647
(221,214) (180,986) (161,212)
101,764 86,703 73,786
- ----------- ----------- -----------
$ 5,307,363 $ 4,932,866 $ 4,522,045
====================================================================================================================================
224,384 4.51 208,403 4.54 194,864 4.64
(10,163) (11,039) (10,534)
- ------------------------------------------------------------------------------------------------------------------------------------
214,221 197,364 184,330
(16,000) (12,280) (4,550)
- ------------------------------------------------------------------------------------------------------------------------------------
198,221 185,084 179,780
- ------------------------------------------------------------------------------------------------------------------------------------
98,247 87,982 82,542
19,038 17,497 16,648
19,764 19,894 16,048
1,188 2,267 (2,157)
- ------------------------------------------------------------------------------------------------------------------------------------
138,237 127,640 113,081
- ------------------------------------------------------------------------------------------------------------------------------------
336,458 312,724 292,861
- ------------------------------------------------------------------------------------------------------------------------------------
119,574 110,670 101,813
11,111 10,706 10,232
14,413 14,067 12,302
47,241 45,561 47,680
- ------------------------------------------------------------------------------------------------------------------------------------
192,339 181,004 172,027
- ------------------------------------------------------------------------------------------------------------------------------------
144,119 131,720 120,834
46,841 41,689 35,665
- ------------------------------------------------------------------------------------------------------------------------------------
$ 97,278 $ 90,031 $ 85,169
====================================================================================================================================
$ 2.83 $ 2.56 $ 2.37
====================================================================================================================================
$ 2.79 $ 2.53 $ 2.35
====================================================================================================================================
</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.
15
<PAGE>
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
Wilmington Trust Corporation and Subsidiaries
STATEMENT OF CONDITION
Total assets for 1998 increased, on average, $572.5 million, or 10%, to $6.25
billion, due primarily to increased loans and investment securities.
Average total earning assets for 1998 were $5.80 billion. This was a $470.0
million, or 9%, increase over the $5.33 billion reported for 1997. Growth in
loans outstanding was responsible for 48% of this increase. The loan portfolio
grew $234.9 million, or 6%, to $4.16 billion. Contributing to this increase were
a $74.9 million, or 8%, increase in consumer loans, a $73.0 million, or 10%,
increase in residential mortgage loans, a $49.1 million, or 37%, increase in
real estate construction loans, and a $46.5 million, or 4%, increase in
commercial loans, offset in part by a $13.7 million, or 2%, decrease in
commercial mortgage loans. Approximately 63% of this 1998 net loan growth was a
direct result of the Corporation's marketing and sales efforts in its expansion
market in southeastern Pennsylvania.
The average level of investment securities for 1998 was $1.61 billion, an
increase of $223.3 million, or 16%. Contributing to this increase were higher
levels of U.S. Treasury and government agency securities, which increased $115.0
million, or 13%, to $983.3 million, and asset-backed securities, which increased
$86.4 million, or 32%, to $358.9 million.
Total liabilities increased $524.5 million, or 10%, on average in 1998.
Approximately 88% of this increase was due to higher levels of interest-bearing
liabilities. A $556.9 million increase in total deposits and an $82.9 million
increase in long-term debt were offset, in part, by a $111.7 million decrease in
short-term borrowings. The average level of total deposits for 1998 reached
$4.43 billion, an increase of $556.9 million, or 14%, over the $3.87 billion
reported for 1997. The growth in deposits was primarily due to the Corporation's
expansion in the national certificate of deposit markets, as the average level
of certificates of deposit $100,000 and over increased $336.3 million, or 66%,
over their 1997 average level of $506.1 million. Also contributing to the growth
in the deposits were a $144.2 million, or 13%, increase in interest-bearing
demand deposits to $1.22 billion and a $45.4 million, or 13%, increase in
savings account balances to $406.1 million. Noninterest-bearing demand account
balances increased $69.1 million, or 10%, to $747.8 million. Offsetting these
increases in part was a $38.0 million decrease in certificates of deposit less
than $100,000 to $1.21 billion. Average short-term borrowings decreased $111.7
million, or 9%, to $1.08 billion, as the Corporation reduced its level of term
federal funds purchased as a direct result of deposit growth. The Corporation's
issuance of $125.0 million in subordinated notes in the second quarter of 1998
increased the average level of long-term debt for the year by $82.9 million. The
addition of the subordinated notes to the $43 million of funds borrowed in 1997
from the Federal Home Loan Bank of Pittsburgh increased the year-end level of
long-term debt to $168.0 million. 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 1998 increased $47.9 million, or
10%, to $526.7 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."
- --------------------------------------------------------------------------------
SOURCES OF LOANS
[THE FOLLOWING TABLES WERE REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.
CONSUMER LOANS
PERSONAL 17.7% (A)
RESIDENTIAL MORTGAGE - FIXED RATE 12.5% (B)
RESIDENTIAL MORTGAGE - FLOATING RATE 7.3% (C)
HOME EQUITY 3.1% (D)
CREDIT CARDS 1.7% (E)
LEASES 1.5% (F)
====
TOTAL 43.8%
COMMERCIAL LOANS
(G) 12.7% PERMANENT MORTGAGE
(H) 5.8% REAL ESTATE DEVELOPMENT
(I) 3.2% REAL ESTATE INTERIM PROJECTS
(J) 34.5% BUSINESS
====
56.2% TOTAL.]
16
<PAGE>
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
Wilmington Trust Corporation and Subsidiaries
NET INTEREST INCOME
The Corporation's net interest income for 1998, on a fully tax-equivalent (FTE)
basis, was $246.1 million, an increase of $6.7 million, or 3%, over the $239.4
million reported for 1997. This was a result of a $25.3 million increase in
interest revenues offset, in part, by an $18.6 million increase in interest
expense.
Interest income (FTE) for 1998 totaled $465.3 million, an increase of $25.3
million, or 6%, over the $440.0 million reported for 1997. Interest revenues
increased $34.8 million due to a $466.9 million increase in the average level of
earning assets. This increase was offset, in part, by a $9.5 million decrease in
interest revenues as a result of the lower interest rate environment. The
average interest rate earned on the Corporation's assets for 1998 was 8.05%, a
21 basis point decrease from the 8.26% earned for 1997. This decrease in
interest income attributable to the declining rate environment was partially
offset by the Corporation's investment in interest rate swap and interest rate
floor contracts. Swap contracts of $153.0 million, on average, on which the
Corporation is making variable-rate payments and is receiving fixed-rate
payments, increased interest income $174,000 during 1998. This compares with
$318.0 million, on average, of interest rate swap contracts outstanding during
1997, which increased interest income $621,000. Interest rate floors of $325.0
million, on average, on which the Corporation receives payments when the
floating rate index is below the strike price, contributed $1.2 million to
interest revenues during 1998, compared with an average level of $289.0 million
of floors during 1997, which contributed $825,000 to interest revenues in that
year. These interest rate floors were offset, in part, by amortized acquisition
costs related to these contracts of $620,000 and $550,000 in 1998 and 1997,
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
1998 was $938,000, down from $1.2 million for 1997. The net result of the swaps
and floors was an increase of three basis points in the Corporation's net
interest margin during 1998, compared to a four basis point increase in the
Corporation's net interest margin for 1997.
Interest expense for 1998 was $219.2 million, an increase of $18.6 million,
or 9%, over the $200.6 million reported for 1997. Interest expense increased
$18.3 million, due to a $459.0 million increase in interest-bearing liabilities
and a $329,000 decrease due to the higher interest rate environment. The average
interest rate paid on the Corporation's liabilities for 1998 was 3.79%, a two
basis point increase from the 3.77% paid during 1997. The Corporation's prime
lending rate (the rate at which banks lend to their most creditworthy customers)
decreased during the year. The Corporation's average prime lending rate for 1998
was 8.35%, down from 8.44% for 1997. The average discount rate (the rate at
which the Federal Reserve Banks lend money to their member banks) was 4.92%,
compared with a corresponding average rate for 1997 of 5.00%. See "Quantitative
and Qualitative Disclosures About Market Risk." The Corporation's net interest
margin for 1998 was 4.26%, 23 basis points below the 4.49% reported for 1997.
The compression of the Corporation's net interest margin is likely to continue
and could increase even further over the near term. Contributing to this effect
were several one-time events, compounded by several broader trends. In the
second quarter of 1998, the Corporation issued $125 million of subordinated
debt, which has raised its cost of funds without a corresponding increase in
asset yields. The Corporation used these funds to acquire its interests in
Cramer Rosenthal McGlynn, LLC and Roxbury Capital Management, LLC, resulting in
additional fee income but no additional interest income. The current trend of
converting adjustable-rate commercial loans to fixed rates has further
contributed to a decline in asset yields. The flattening of the Treasury and
related yield curves has driven fixed-rate loan pricing lower without a
commensurate reduction in the Corporation's cost of funds. Reductions in the
prime lending rate the Corporation offers on certain loans, coupled with a core
deposit base that may be difficult to reprice in light of the proximity of
current deposit rates to historic lows, could lead to some additional
compression in the Corporation's net interest margin.
[GRAPH OF NET INTEREST MARGIN FOR EACH YEAR FROM 1988 TO 1998, WITH THE
FOLLOWING PLOT POINTS:
1988 - 4.41%
1989 - 4.46%
1990 - 4.23%
1991 - 4.37%
1992 - 4.62%
1993 - 4.76%
1994 - 4.64%
1995 - 4.54%
1996 - 4.51%
1997 - 4.49%
1998 - 4.26%.]
17
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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Wilmington Trust Corporation and Subsidiaries
NONINTEREST REVENUES AND OPERATING EXPENSES
[GRAPH OF TRUST AND ASSET MANAGEMENT FEES FOR EACH YEAR FROM 1988 TO 1998, WITH
THE FOLLOWING PLOT POINTS, IN MILLIONS:
PERSONAL TRUST FEES
1988 - $21.5
1989 - $25.3
1990 - $32.0
1991 - $33.4
1992 - $35.3
1993 - $36.0
1994 - $37.5
1995 - $41.4
1996 - $45.3
1997 - $53.8
1998 - $59.5
CORPORATE TRUST FEES
1988 - $19.7
1989 - $19.3
1990 - $21.9
1991 - $22.8
1992 - $23.7
1993 - $23.9
1994 - $25.8
1995 - $27.1
1996 - $32.8
1997 - $37.8
1998 - $43.7
ASSET MANAGEMENT FEES
1988 - $13.9
1989 - $14.2
1990 - $14.6
1991 - $16.5
1992 - $18.0
1993 - $18.4
1994 - $19.2
1995 - $19.5
1996 - $20.1
1997 - $22.9
1998 - $25.6
TOTAL TRUST AND ASSET MANAGEMENT FEES
1988 - $ 55.1
1989 - $ 58.8
1990 - $ 68.5
1991 - $ 72.7
1992 - $ 77.0
1993 - $ 78.3
1994 - $ 82.5
1995 - $ 88.0
1996 - $ 98.2
1997 - $114.5
1998 - $128.8.]
Revenues from noninterest sources for 1998 were $183.9 million, an increase of
$26.4 million, or 17%, over the $157.5 million reported for 1997. Improvement in
these fee businesses was due in part to our enhanced ability to assist customers
in growing and managing their wealth by broadening our array of available
investment products through affiliations with Roxbury Capital Management, LLC
and Cramer Rosenthal McGlynn, LLC and our being named as investment advisor to
the Kiewit family of mutual funds. Customer access was also improved through our
opening of offices in New York City and Santa Monica, California;
reconfiguration of our services in southeastern Pennsylvania and southern
Delaware; the launching of our Web site (www.wilmingtontrust.com); the
introduction of online banking; and the rollout of advanced-function automated
teller machines.
Trust and asset management fees during 1998 increased $14.3 million, or
12%, to $128.8 million. Excluding the mutual fund processing business we sold in
early 1998, trust and asset management fees increased $19.9 million, or 18%,
during 1998. All three components--personal trust fees, corporate financial
services fees, and asset management fees--reflected double-digit increases over
1997. These results continue to be attributable, in part, to the establishment
of a highly competitive incentive-based compensation program, expanded sales
efforts, and affiliations with investment management firms.
Personal trust fees in 1998 were $59.5 million, or 14% of operating
revenues. This was a $5.7 million, or 11%, increase over the $53.8 million
reported for 1997. 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 1998, higher fee income was reported from all
components of this business line.
Corporate financial services fees for 1998 were $43.7 million, or 10% of
operating revenues. This was a $5.8 million, or 15%, increase over the $37.8
million reported for 1997. These fees are generated by providing trust, custody,
and specialized administrative services to corporate clients and financial
intermediaries. The Corporation 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 custody services include all aspects of
establishing and administering Delaware investment holding companies. During
1998, income from most of these fee sources improved over 1997 levels.
Asset management fees for 1998 were $25.6 million, or 6% of operating
revenues. This was a $2.7 million, or 12%, increase over the $22.9 million
reported for 1997. In early 1998, Rodney Square Management Corporation (RSMC), a
wholly owned subsidiary of Wilmington Trust Company, the Corporation's principal
banking subsidiary (WTC), completed the sale of its interest in certain
agreements under which it provided accounting, administrative, custody,
distribution, and transfer agency services to mutual funds. Fees from this
mutual fund processing business contributed $975,000 and $6.6 million to revenue
in 1998 and 1997, respectively. Asset management fees in 1998, exclusive of this
mutual fund processing revenue, grew $7.5 million, or 43%. The Corporation's
affiliation with Cramer Rosenthal McGlynn, LLC and Roxbury Capital Management,
LLC contributed approximately half of this revenue growth. The Corporation
offers a broad range of institutional portfolio management services to domestic
and foreign entities, including 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 WTC, providing convenience and efficiency to both
customers and correspondent banks.
18
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MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
Wilmington Trust Corporation and Subsidiaries
Service charges on deposit accounts for 1998 were $21.9 million, an
increase of $970,000, or 5%, over the $21.0 million reported for 1997. This
increase was due to higher automated teller machine fees, which increased
$556,000, or 22%, to $3.1 million, and returned item and overdraft fees, which
increased $257,000, or 4%, to $7.2 million.
Other operating income for 1998 was $26.5 million, a $4.4 million, or 20%,
increase over the $22.0 million reported for 1997. A gain of $5.5 million was
recorded in 1998 for the sale of RSMC's mutual fund processing business.
Offsetting this gain in part was a decrease of $1.8 million in revenues
associated with the precious metals business the Corporation sold during the
year. That business' depository operations, retail precious metals business, and
refined investments programs were sold early in 1998. Also offsetting this gain
in part was a $5.5 million provision established in the first quarter in
connection with the anticipated settlement of litigation. Other items
contributing to the increase in other operating income were higher loan
origination and credit card fees and gains from the disposition of other real
estate owned (OREO).
Securities gains of $6.7 million were recognized in 1998, compared to
$27,000 in 1997, as the Corporation sold selective investments to reposition the
investment portfolio.
Noninterest (operating) expenses for 1998 were $230.1 million, an increase
of $22.4 million, or 11%, over the $207.7 million reported for 1997. Personnel
expenses for 1998 were $137.9 million, an $8.1 million, or 6%, increase over the
$129.8 million reported for 1997. Salaries and wages increased $5.2 million, or
6%, to $94.3 million. 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 1998 were $22.6 million,
an increase of $2.2 million, or 11%, over the $20.4 million earned in 1997.
Employee benefit expense increased $1.2 million, or 6%, to $22.9 million as
increased payroll taxes, recruiting, and thrift plan expenses were offset in
part by lower health care insurance costs.
Net occupancy and furniture and equipment expenses during 1998 increased
$4.1 million, or 15%, to $32.3 million. Higher depreciation and maintenance
expense on electronic data processing equipment and the Corporation's new
operations facility were primarily responsible for this increase.
Other operating expenses in 1998 were $54.4 million, a $9.7 million, or
22%, increase over the $44.8 million reported for 1997. Approximately $5.5
million, or 57%, of this increase was associated with the settlement of a class
action lawsuit which had been pending for more than six years. Absent this item,
other operating expenses for 1998 increased $4.2 million, or 9%. Increased
service and consulting fees were primarily responsible for this increase.
Service and consulting fees were $11.0 million, a $5.0 million, or 82%, increase
over the $6.0 million reported for 1997. The Corporation outsourced its
residential mortgage loan servicing to a third-party provider during 1997, which
contributed to this increase. Expenses incurred to remediate the Corporation's
Year 2000 issue were also recorded as servicing and consulting fees. See "Other
Matters--Year 2000 Issue" below.
The provision for income taxes for 1998 was $57.2 million, a $4.9 million,
or 9%, increase over the $52.3 million reported for 1997. Federal income tax
expense increased $4.6 million, or 10%, to $52.9 million, while state income tax
expense increased $261,000, or 6%, to $4.3 million. The Corporation's effective
tax rate for the year was 33.4%, compared with 33.0% in 1997.
[GRAPH OF EFFICIENCY RATIO [TOTAL OTHER EXPENSES AS A PERCENTAGE OF OPERATING
REVENUES ON A TAX-EQUIVALENT BASIS] FOR EACH YEAR FROM 1988 TO 1998, WITH THE
FOLLOWING PLOT POINTS:
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%
1998 - 53.51%.]
19
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MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
Wilmington Trust Corporation and Subsidiaries
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
[GRAPH OF OPERATING REVENUES [NET INTEREST INCOME BEFORE PROVISION FOR LOAN
LOSSES PLUS NONINTEREST INCOME] FOR EACH YEAR FROM 1988 TO 1998, WITH THE
FOLLOWING PLOT POINTS, IN MILLIONS:
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES
1988 - $112.10
1989 - $128.03
1990 - $137.57
1991 - $152.89
1992 - $165.21
1993 - $174.85
1994 - $184.33
1995 - $197.36
1996 - $214.22
1997 - $230.22
1998 - $237.70
NONINTEREST INCOME
1988 - $ 81.53
1989 - $ 86.43
1990 - $ 95.97
1991 - $102.31
1992 - $110.27
1993 - $113.67
1994 - $113.08
1995 - $127.64
1996 - $138.24
1997 - $157.54
1998 - $183.92
TOTAL OPERATING REVENUES
1988 - $193.63
1989 - $214.46
1990 - $233.54
1991 - $255.20
1992 - $275.48
1993 - $288.52
1994 - $297.41
1995 - $325.00
1996 - $352.46
1997 - $387.56
1998 - $421.62.]
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 Corporation employs simulation models to measure the effect of
variations in interest rates on net interest income. 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.
Net interest income is projected using multiple interest rate scenarios.
The results are compared to net interest income projected using stable interest
rates. The Corporation's model employs interest rate scenarios in which interest
rates gradually move up or down 250 basis points. The simulation model projects,
as of December 31, 1998, that a gradual 250 basis point increase in market
interest rates would reduce net interest income by 1.6% over a one-year period.
This figure compares to a projected decrease at December 31, 1997, of 2.6%. If
interest rates were to gradually decrease 250 basis points, the simulation model
projects, as of December 31, 1998, that net interest income would decrease 2.4%
over a one-year period. This figure compares to a projected increase at December
31, 1997, of 1.1%. The Corporation's policy limits the permitted reduction in
projected net interest income to 10% over a one-year period given a change in
interest rates.
The preceding paragraph contains certain forward-looking statements
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 effects 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 projected
simulation results.
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 lead to 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 for 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 projected simulation results.
During 1998, the Corporation sold certain fixed-rate residential mortgage
loans into the secondary market. The primary goal of this program is to reduce
the risk that the average duration of these fixed-rate residential mortgage
loans would
20
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MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
Wilmington Trust Corporation and Subsidiaries
extend well beyond the duration that was anticipated at origination, as
frequently occurs during periods of rising interest rates. Total mortgage loans
sold during 1998 were $121.3 million.
Management reviews the Corporation's rate sensitivity regularly, and may
employ 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, 1998, the Corporation was committed to interest rate swaps
with a total notional amount of $25 million, down from $275 million at year-end
1997. The swaps have a remaining maturity of two months. During the second
quarter of 1998, the Corporation sold interest rate swaps with a total notional
amount of $100 million. These swaps were sold as part of the Corporation's
management of its interest rate risk. Shifts in the mix of assets on the
Corporation's balance sheet eliminated the need for those interest rate swaps.
At December 31, 1998, the Corporation was committed to interest rate floors with
a total notional amount of $325 million, unchanged from year-end 1997. The
floors have remaining maturities of between 7 and 42 months, with a weighted
average maturity of 18 months. The net interest differential, 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 1998, an increased proportion of funding provided from
interest-bearing deposits, including money market deposit and savings accounts,
allowed the Corporation to reduce its reliance on federal funds purchased and
securities sold under agreements to repurchase. In addition, in May, the
Corporation issued $125 million of subordinated debt securities. This further
reduced the Corporation's 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. 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
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MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
Wilmington Trust Corporation and Subsidiaries
ASSET QUALITY AND LOAN LOSS PROVISION
[GRAPH OF RESERVE FOR LOAN LOSSES AND NONACCRUING LOANS FOR EACH YEAR FROM 1988
TO 1998, WITH THE FOLLOWING PLOT POINTS, IN MILLIONS:
RESERVE FOR LOAN LOSSES
1988 - $34.282
1989 - $38.595
1990 - $42.405
1991 - $44.996
1992 - $46,962
1993 - $51,363
1994 - $48.669
1995 - $49.867
1996 - $54.361
1997 - $63.805
1998 - $71.906
NONACCRUING LOANS
1988 - $11.687
1989 - $12.248
1990 - $13.932
1991 - $53.962
1992 - $29.674
1993 - $21.983
1994 - $28.851
1995 - $33.576
1996 - $40.735
1997 - $28.669
1998 - $30.598.]
Net chargeoffs for 1998 were $11.9 million, a decrease of $200,000, or 1%, from
the $12.1 million reported for 1997. The Corporation's provision for loan losses
for 1998 was $20.0 million. This was $1.5 million, or 7%, lower than the $21.5
million provision for 1997. The reserve for loan losses at December 31, 1998,
was $71.9 million, a 13% increase over the $63.8 million at December 31, 1997.
The reserve at year-end, as a percentage of loans outstanding, was 1.66%, an
increase over the 1.60% reported at year-end 1997. Loans past due 90 days or
more, nonaccruing loans, and restructured loans at December 31, 1998, totaled
$49.2 million. This represented an increase of $5.0 million, or 11%, over the
$44.2 million reported at year-end 1997. Loans past due 90 days or more at
December 31, 1998, totaled $18.6 million, or 4.3% of total loans, a $3.1
million, or 20%, increase over the $15.5 million reported at year-end 1997.
Nonaccruing loans at year-end 1998 were $30.6 million, or .71% of total loans, a
$1.9 million, or 7%, increase over the $28.7 million reported at year-end 1997.
No loans were classified as restructured at either year-end.
Other real estate owned (OREO) at December 31, 1998, was $1.5 million, a
$2.2 million, or 59%, decrease from the $3.7 million reported at year-end 1997.
Net activity within the OREO portfolio during 1998 included the addition of $2.7
million of properties securing nonperforming loans. Loans and real estate
totaling $4.9 million were removed from the portfolio through chargeoffs and
sales. Chargeoffs within the portfolio during 1998 were $792,000. The balance
was liquidated through sales, which resulted in net gains of $195,000. Expenses
incurred to carry this portfolio during 1998 were $260,000. This compares with
chargeoffs of $500,000, net gains on dispositions of $116,000 and portfolio
expenses of $1.0 million during 1997.
The overall level of nonperforming assets increased slightly during 1998.
Slow economic conditions or any further 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, 1998, an analysis of loans 90 days or more past
due, which totaled $18.6 million, indicated approximately 70% of those loans
were in the Corporation's commercial loan portfolio, 18% in the residential
mortgage loan portfolio, and 12% in the consumer loan portfolio. This compares
with corresponding levels of 57%, 16%, and 27%, respectively, at December 31,
1997. The Corporation's analysis of these loans indicates that the businesses
and/or the incomes supporting their repayment are well diversified.
As a result of the Corporation's ongoing monitoring of its loan portfolios,
at December 31, 1998, approximately $37.9 million in 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. As described in footnote
number one to the Consolidated Financial Statements, the Corporation has an
established methodology to determine the adequacy of the reserve for loan
losses. The methodology, which has been applied on a consistent basis for the
three years ended December 31, 1998, considers current micro- and macro-economic
factors, historical net loss experience, current delinquency trends, and
movement within the internally reported loan quality classifications. The total
amount and allocation of the reserve for loan loss among the various portfolios
is based primarily on management's evaluation of the results obtained through
application of this methodology. It is not necessarily indicative of the actual
loss amounts by loan category that may ultimately occur.
22
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MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
Wilmington Trust Corporation and Subsidiaries
CAPITAL RESOURCES
[GRAPH OF EQUITY TO ASSET RATIO FOR EACH YEAR FROM 1988 TO 1998, WITH THE
FOLLOWING PLOT POINTS:
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%
1998 - 8.42%.]
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 1998 over 1997 due primarily to increases in earnings,
reflected by the 12.54% rate of capital generation in 1998, down slightly from
the rate of 12.59% in 1997. The Corporation's capital increased despite an
increase in cash dividends paid of $3.7 million and the Corporation's ongoing
common stock repurchase program, in which $31.3 million was used to purchase the
Corporation's common stock on the open market. These factors resulted in a $43.2
million, or 9%, increase in total stockholders' equity to $546.2 million at
year-end, compared with $503.0 million at year-end 1997.
The Federal Reserve Board's risk-based capital guidelines establish the
minimum levels of capital a bank holding company must have. 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, 1998, the
Corporation's total risk-based capital ratio was 12.48%, above the 12.38%
reported at the corresponding date a year ago. The Corporation's Tier 1
risk-based capital ratio at that date was 8.55%, down from the 11.13% reported
at year-end 1997, and its Tier 1 leverage capital ratio was 6.61%, down from the
8.58% reported a year ago. The decline in the Tier 1 ratios during 1998 was the
direct result of goodwill associated with the Corporation's investments in
Cramer Rosenthal McGlynn, LLC and Roxbury Capital Management, LLC. A similar
decline was not evident in the total risk-based capital ratio as the effect of
that goodwill was offset by a corresponding increase in Tier 2 capital from the
issuance of subordinated debt. 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.
On April 17, 1998, the Corporation's Board of Directors increased the
quarterly dividend to $.39 per share. This marked the seventeenth consecutive
year of increased cash dividends. Dividends paid for 1998 totaled $1.53 per
share, a 9% increase over the $1.41 per share paid in 1997. The Corporation's
dividend payout ratio for 1998 was 44.9%, up slightly over the 44.8% payout for
1997.
On April 18, 1996, the Corporation's Board of Directors authorized the
buyback of 4,000,000 additional shares of the Corporation's common stock. This
program commenced in May 1996 upon completion of the 3,000,000 share buyback
program that began in October 1993. At December 31, 1997, 1,552,096 shares had
been bought under the current program at a cost of $64.5 million. During 1998,
an additional 546,220 shares were purchased at a cost of $31.4 million, which
brings the total number of shares repurchased under the current program to
2,098,316.
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 on the New York Stock Exchange
(NYSE) under the symbol WL. The listing was moved from Nasdaq to the NYSE
effective January 12, 1999, a key step in building both customer and investor
awareness. The table below summarizes the price ranges of the Corporation's
common stock and its quarterly dividends.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
COMMON STOCK PRICE RANGE AND DIVIDEND RATE BY QUARTER
- ------------------------------------------------------------------------------------------
1998 1997
-------------------------------- --------------------------------
Quarter High Low Dividend High Low Dividend
- ---------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $67.13 $57.00 $0.36 $47.00 $39.25 $0.33
2 $68.50 $56.25 $0.39 $47.75 $41.75 $0.36
3 $63.25 $46.38 $0.39 $58.22 $45.38 $0.36
4 $62.00 $46.38 $0.39 $66.00 $54.25 $0.36
======================================================================
</TABLE>
23
<PAGE>
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
Wilmington Trust Corporation and Subsidiaries
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
1997/1996
[GRAPH OF NET INCOME FOR EACH YEAR FROM 1988 TO 1998, WITH THE FOLLOWING PLOT
POINTS, IN MILLIONS:
1988 - $ 55.61
1989 - $ 61.19
1990 - $ 68.53
1991 - $ 72.76
1992 - $ 64.01 AFTER CHANGE IN ACCOUNTING PRINCIPLE
1992A - $ 78.76 BEFORE CHANGE IN ACCOUNTING PRINCIPLE
1993 - $ 82.76
1994 - $ 85.17
1995 - $ 90.03
1996 - $ 97.28
1997 - $106.04
1998 - $114.33.]
Net income for 1997 was $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. On a
diluted basis, per-share earnings were $3.08, a 10% increase over the $2.79
reported for 1996.
Earning assets in 1997 increased, on average, $358.3 million, or 7%, to
$5.33 billion. This increase was primarily attributable to a $319.1 million, or
9%, increase in the average level of the loan portfolio. Contributing to this
increase in the loan portfolio was 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.
Investment securities for 1997, on average, 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, matured, or were sold
during 1997.
Interest-bearing liabilities in 1997 increased, on average, $305.3 million,
or 7%, to $4.42 billion. Contributing to this increase was an increase in the
average level of both interest-bearing deposits and short-term borrowings. The
average level of total deposits increased $346.4 million, or 10%, to $3.87
billion as a result of 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. The average balance of long-term debt increased $12.1 million, as the
Corporation completed its funding from the Federal Home Loan Bank of Pittsburgh.
Stockholders' equity during 1997 increased, on average, $23.9 million, or
5%, to $478.8 million on the strength of $106.0 million in earnings for the
year, offset in part by higher dividend payments and the Corporation's ongoing
stock repurchases.
Net interest income (FTE) in 1997 increased $15.0 million, or 7%, to $239.4
million from the $224.4 million in 1996. A $27.0 million increase in interest
revenues was offset, in part, by a $12.0 million increase in interest expense.
The increase in the average level of earning assets was responsible for $31.1
million of this increase. This was offset, in part, by a $4.1 million decrease
in interest revenues attributable to the lower interest rate environment. The
average rate earned on the
24
<PAGE>
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
Wilmington Trust Corporation and Subsidiaries
Corporation's assets for 1997 was 8.26%, a five basis point decrease from the
8.31% earned for 1996. This decrease in interest income was partially offset by
the Corporation's investment in swaps and floors. The $318 million in swaps
increased interest income during 1997 by $621,000, while the $425 million of
swaps outstanding during 1996 increased interest income $2.2 million. The $289
million in floors contributed $825,000 to interest income during 1997, compared
with an average level of $224 million during 1996, which contributed $955,000 to
interest income that year. However, this was offset by $550,000 and $320,000 of
amortized acquisition costs in 1997 and 1996, respectively, 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
1997 was $1.2 million, unchanged from 1996. The swaps and floors increased the
Corporation's net interest margin four basis points in 1997, compared with an
eight basis point increase in 1996.
Interest expense for 1997 increased $12.0 million, or 6%, to $200.6 million
from $188.6 million for 1996. This increase was attributable to the increase in
the average level of interest-bearing liabilities, which caused interest expense
to increase $14.5 million. Offsetting this increase, in part, was a $2.5 million
decrease in interest expense associated with the lower interest rate
environment. The average rate of interest paid on the Corporation's liabilities
during 1997 was 3.77%, a three basis point decrease from the 3.80% paid during
1996.
The provision for loan losses for 1997 was $21.5 million. This was $5.5
million higher than the $16.0 million provision for 1996. The reserve for loan
losses at December 31, 1997, was $63.8 million, or 1.60% of loans outstanding.
This compares with corresponding levels of $54.4 million, and 1.44% of loans
outstanding, 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 was a $17.0 million, or 28%, decrease from the corresponding $61.2
million reported at December 31, 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.
The OREO portfolio at December 31, 1997, totaled $3.7 million, a decrease of
$1.4 million, or 27%, from the $5.1 million reported at year-end 1996.
Approximately $5.7 million of properties securing nonperforming loans were added
to this portfolio during 1997, while $7.1 million were removed through
chargeoffs and sales. Chargeoffs in this portfolio during 1997 were $500,000.
The remainder was liquidated through sales, which resulted in net gains of
$116,000. Expenses of $1.0 million were incurred to carry this portfolio during
1997.
Revenues from noninterest sources in 1997 increased $19.3 million, or 14%,
to $157.5 million, over the $138.2 million reported for 1996. Trust and asset
management fees increased $16.3 million, or 17%, to $114.5 million. All three
components of this revenue source contributed to this increase. Personal trust
fees 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. 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. Asset
management fees in 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.
Service charges on deposit accounts in 1997 were $21.0 million, an increase of
$2.0 million, or 10%, over the $19.0 million reported for 1996, due primarily to
higher returned item and overdraft fees, automated teller machine fees,
checkbook fees, and checking account balance fees. Other operating income
increased $2.2 million, or
25
<PAGE>
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
Wilmington Trust Corporation and Subsidiaries
11%, to $22.0 million, as higher credit card fees, loan origination fees, and a
gain recorded on the sale of the Corporation's former operations center
contributed to this increase. Securities gains of $27,000 were recognized in
1997, compared with $1.2 million in 1996.
Operating expenses for 1997 increased $15.4 million, or 8%, to $207.7
million. Personnel expenses increased $10.2 million, or 9%, to $129.8 million
due to higher levels of salaries, bonuses, incentives, payroll taxes, and health
insurance costs. These 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. 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 expense in 1997 increased $3.5 million, or 9%, due primarily to
increased advertising expense and service and consulting fees. Service and
consulting fees for 1997 were $6.0 million, a $1.7 million, or 40%, increase
over the $4.3 million reported for 1996. The Corporation's outsourcing of its
residential mortgage loan servicing to a third-party provider contributed to
this increase. 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 increased $5.5 million, or 12%, to
$52.3 million. Higher pretax income was primarily responsible for this increase.
The Corporation's effective tax rate for 1997 was 33.0%, compared with 32.5% for
1996.
- --------------------------------------------------------------------------------
OTHER MATTERS
YEAR 2000 ISSUE
The Corporation is working to help assure that date-sensitive systems and
hardware are prepared for orderly transition to the year 2000 without disrupting
our customer accounts and operations.
We began renovating business application systems in late 1995. The
Corporation established a Year 2000 Program Management Office (PMO) to manage
our Year 2000 project on an enterprise-wide basis. We conduct weekly project
reviews of our Year 2000 efforts with a management steering team, and quarterly
meetings with senior management and the Board of Directors.
THE PMO
The PMO comprises project leaders representing information technology and each
major business area, such as commercial banking, personal banking, personal
trust and private banking, and corporate financial services. This team
coordinates the major initiatives and strategies in each constituent's
respective area. The initiatives include business risk/impact analysis,
information technology, credit risk, vendor management, investment risk,
communications, and contingency planning.
The Corporation worked with an international consulting firm for
approximately six months to assist in our Year 2000 efforts. That firm assisted
in implementing an enterprise-wide PMO and strategies to help assure business
area readiness, vendor readiness, external communication, and contingency
planning.
THE PMO MASTER PLAN
The following is a description and status of each strategy in our Year 2000
program:
INFORMATION TECHNOLOGY
We are using a project approach the FDIC has endorsed to help assure continuity
and efficiency among all our project teams. The approach uses the following five
steps: awareness, assessment, renovation, testing, and implementation.
26
<PAGE>
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
Wilmington Trust Corporation and Subsidiaries
o RENOVATION: We have completed assessment and substantially completed
renovation of our core critical hardware and software systems. We budgeted
62,545 hours for those efforts in 1998 and used 58,873, or 94%. We
anticipate completing renovation and testing of some noncore systems during
the first half of 1999.
o TESTING: In 1998, we budgeted 29,600 hours for testing individual
applications and our infrastructure in accordance with guidelines published
by the Federal Financial Institutions Examination Council (FFIEC). This
included aging copies of our production data and running test simulations
for critical Year 2000 dates. We completed 20,230 hours, or 68% of the
testing that was budgeted. The majority of the remainder of those hours
will be utilized during the first quarter of 1999.
We have budgeted 71,000 internal hours for our Year 2000 efforts in
1999. We anticipate that a substantial portion of those will be used to
test our core applications and infrastructure in a "time machine"
environment, in which our mainframe and mid-range computers will actually
process in December 31, 1999, to January 3, 2000, and February 28 and 29 to
March 1, 2000, environments. We expect to have completed renovation and
testing of remaining critical hardware and software systems by June 30,
1999. In the remainder of the 71,000 hours we have budgeted for our Year
2000 efforts for 1999, we expect to plan for critical dates in the year
2000, assure that future modifications to our software applications do not
introduce new date-related problems, and provide any production support
that may be necessary.
o IMPLEMENTATION: As we have renovated applications we have implemented Year
2000 versions of software, which are running today.
In preparing for the year 2000, we have made technology investments
that will improve our ability to support our infrastructure and deliver
improved services to our customers. These include installing a standard NT
desktop PC throughout our company, which we anticipate will be completed by
the end of the third quarter of 1999; a new wire transfer system;
introduction of online banking; and improvements in infrastructure to
support around-the-clock customer access.
CREDIT RISK
Our credit risk strategy includes assessing risks for existing commercial loan
relationships over $1 million and assessing all new loan relationships over $1
million. We will continue to evaluate the need to establish additional loan loss
reserves, and are monitoring existing relationships for Year 2000 readiness.
INVESTMENT RISK
We have evaluated investment risk for trust accounts for which Wilmington Trust
has investment responsibility, as well as for the Corporation's own investment
portfolio. We have developed an investment risk strategy based on the different
types of holdings, such as equity, fixed-income, or mutual funds.
VENDOR MANAGEMENT
We have corresponded with providers of core services and products through
several mailings. We are continuing to assess key critical vendors, such as
power and telecommunication companies. We are reviewing their systems
renovation, testing, implementation, and contingency plans. We are monitoring
the status of critical vendors and will initiate contingency planning for
products where the potential for vendors to impact the delivery of services to
us is high. In addition, the Corporation is monitoring the status of regulatory
reviews of our major service providers. Where feasible, we are testing critical
vendor-supplied products, such as software and hardware, and environmental
systems such as air conditioning and elevator systems.
27
<PAGE>
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
Wilmington Trust Corporation and Subsidiaries
COSTS
The Corporation estimates that it spent $12.35 million through December 31,
1998, in internal and outside costs toward required modifications, upgrades, and
replacements of its internal systems and testing. We presently anticipate
incurring an additional $11.0 million in 1999 in internal and outside costs. In
the year 2000, we estimate we will spend $1.8 million in internal costs for
production support. We expect these costs to continue to be funded through
operating cash flows.
We devoted approximately 30% of our available application programming and
21% of our total internal information technology resources to the Year 2000
issue in 1998. We have deferred some other information technology projects
pending resolution of the Year 2000 issue, but do not believe those deferrals
will have a material adverse impact on our financial performance or results of
operations.
CONTINGENCY PLANNING
We are assessing the potential impact of Year 2000 failures on our core business
functions and are developing contingency plans where that impact presents a high
risk. The Corporation expects to finalize its contingency plans by June 30,
1999.
As part of our contingency planning, we are monitoring our liquidity needs
as the year 2000 approaches to assure that we have sufficient cash on hand to
support any changes in customer activity. In addition, we have supplemented our
normal contingency plans to ensure the temporary availability of power at our
processing facilities.
We believe we are addressing all key components necessary to resolve the
Year 2000 issue. Nevertheless, it is not possible to determine with complete
certainty that all Year 2000 issues affecting us or our vendors or customers are
identified and corrected, or the duration, severity, or final consequences of
any failure. The Corporation anticipates that it is possible that it may
experience certain operational inconsistencies and inefficiencies. This may
result in, among other things, temporary delays in processing customers' checks
and payments and other transactions, and could divert the Corporation's time and
attention and financial resources from ordinary business activities. We also
could experience the possible failure of certain systems, which may require
significant efforts to prevent or alleviate material business disruptions.
DISCLAIMER
The discussion above of the Corporation's efforts and expectations relating to
Year 2000 compliance are forward-looking statements. The Corporation's ability
to achieve Year 2000 compliance and the level of incremental costs associated
with that compliance could be adversely impacted by, among other things, the
availability and cost of programming and testing resources, vendors' and
customers' ability to modify proprietary software, and unanticipated problems
identified in the ongoing compliance review.
ADDITIONAL INFORMATION
Additional information about the Year 2000 issue is available at our Web site at
wilmingtontrust.com, or you can call us at (302) 651-1985. You also can send
your questions via fax to (302) 651-1990 or e-mail to
[email protected].
28
<PAGE>
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
Wilmington Trust Corporation and Subsidiaries
In addition, one of our regulators, the Federal Deposit Insurance
Corporation, has an informative site that addresses the year 2000 and financial
institutions for banking customers. You can reach their site at
fdic.gov/consumer/consnews/cnfall98/index.html.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 is required to be adopted in
all fiscal quarters of fiscal years beginning after June 15, 1999. The Statement
will require the Corporation to recognize all derivatives on its balance sheet
at their fair value. Derivatives which are not hedges must be adjusted to fair
value through income. If a derivative is a hedge, depending on the nature of the
hedge, changes in the fair value of the derivative will be offset either against
the change in fair value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be recognized in earnings immediately. The Corporation has
not yet determined what the effect of SFAS No. 133 will be on the Corporation's
earnings or financial position.
29
<PAGE>
================================================================================
Consolidated Eleven-Year Summary of Selected Financial Data
================================================================================
Wilmington Trust Corporation and Subsidiaries
<TABLE>
<CAPTION>
(in thousands) 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSOLIDATED AVERAGE STATEMENTS OF CONDITION
Assets:
Cash and due from banks $ 188,183 $ 190,243 $ 187,473 $ 194,224
Short-term investments 31,081 22,369 26,459 17,522
Investment securities 1,609,595 1,386,299 1,343,007 1,184,002
Loans 4,156,398 3,921,493 3,602,430 3,390,782
Reserve for loan losses (66,178) (56,747) (50,768) (47,895)
---------------------------------------------------------------------------------------------------------------------------------
Net loans 4,090,220 3,864,746 3,551,662 3,342,887
-------------------------------------------------------------------
Other 333,360 216,330 198,762 194,231
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 6,252,439 $ 5,679,987 $ 5,307,363 $ 4,932,866
===================================================================
Liabilities and stockholders' equity:
Demand deposits (noninterest-bearing) $ 747,791 $ 678,683 $ 633,066 $ 580,928
Deposits (interest-bearing) 3,679,538 3,191,703 2,890,944 2,583,995
Short-term borrowings 1,076,522 1,188,214 1,195,762 1,239,416
Other 95,969 99,573 101,764 86,703
Long-term debt 125,877 43,000 30,910 6,981
- ------------------------------------------------------------------------------------------------------------------------------------
Total 5,725,697 5,201,173 4,852,446 4,498,023
Stockholders' equity 526,742 478,814 454,917 434,843
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 6,252,439 $ 5,679,987 $ 5,307,363 $ 4,932,866
===================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
Net interest income $ 237,697 $ 230,016 $ 214,221 $ 197,364
- ------------------------------------------------------------------------------------------------------------------------------------
Trust and asset management fees 128,801 114,501 98,247 87,982
Other noninterest revenues 48,430 43,014 38,802 37,391
Securities gains/(losses) 6,686 27 1,188 2,267
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest income 183,917 157,542 138,237 127,640
-------------------------------------------------------------------
Operating revenues 421,614 387,558 352,458 325,004
-------------------------------------------------------------------
Provision for loan losses (20,000) (21,500) (16,000) (12,280)
-------------------------------------------------------------------
Salaries and employment benefits 137,917 129,816 119,574 110,670
Other operating expenses 92,149 77,855 72,765 70,334
- ------------------------------------------------------------------------------------------------------------------------------------
Total other expense 230,066 207,671 192,339 181,004
-------------------------------------------------------------------
Income before income taxes and cumulative
effect of change in accounting principle 171,548 158,387 144,119 131,720
Applicable income taxes 57,223 52,343 46,841 41,689
- ------------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of
change in accounting principle 114,325 106,044 97,278 90,031
Cumulative effect of change in accounting principle
(net of income tax benefit of $8,296)* -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 114,325 $ 106,044 $ 97,278 $ 90,031
===================================================================
Per share data:
Income before cumulative effect of
change in accounting principle
Basic* $ 3.41 $ 3.15 $ 2.83 $ 2.56
---------------------------------------------------------------------------------------------------------------------------------
Diluted* $ 3.34 $ 3.08 $ 2.79 $ 2.53
---------------------------------------------------------------------------------------------------------------------------------
Percentage change from prior year
Basic 8% 11% 11% 8%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SELECTED FINANCIAL RATIOS AND STATISTICS
Net income as a percentage of:
Average stockholders' equity(3) 21.70% 22.15% 21.38% 20.70%
Average total assets(3) 1.83 1.87 1.83 1.83
- ------------------------------------------------------------------------------------------------------------------------------------
Loan quality:
Percentage of average total loans:
Net charge-offs 0.29% 0.31% 0.32% 0.33%
Nonaccruing loans 0.74 0.73 1.13 0.99
Percentage of total loans:
Reserve for loan losses** 1.66 1.60 1.44 1.42
- ------------------------------------------------------------------------------------------------------------------------------------
Selected per share data:
Dividends paid $ 1.53 $ 1.41 $ 1.29 $ 1.17
Book value** 16.39 15.02 13.71 13.09
Stock price** 61.63 62.38 39.50 30.88
- ------------------------------------------------------------------------------------------------------------------------------------
Staff members (full-time equivalents)** 2,442 2,428 2,418 2,332
Stockholders** 9,868 10,164 10,241 9,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net income per staff member(3) $ 46,816 $ 43,675 $ 40,231 $ 38,607
Efficiency ratio(1) 53.51% 52.32% 53.04% 53.86%
Capital generation rate(2),(3) 12.54% 12.59% 11.51% 11.68%
Risk-based capital ratio** 12.47% 12.38% 12.01% 12.06%
Price/earnings multiple** 18.07 19.80 13.96 12.06
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* EFFECTIVE JANUARY 1, 1992, SFAS NO. 106, "EMPLOYERS' ACCOUNTING FOR
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS," WAS ADOPTED. BASIC AND
DILUTED EARNINGS PER SHARE AFTER THE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE WERE $1.70 AND $1.68, RESPECTIVELY.
30
<PAGE>
<TABLE>
<CAPTION>
Compound Growth Rates
---------------------
1988 to 1993 to
1994 1993 1992 1991 1990 1989 1988 1998 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 202,777 $ 194,808 $ 180,747 $ 167,438 $ 183,859 $ 181,126 $ 183,921 0.23% (0.69)%
26,425 21,248 72,787 73,258 79,830 102,531 151,387 (14.64) 7.90
1,060,015 946,052 803,936 901,273 874,955 698,246 600,629 10.36 11.21
3,114,384 2,949,909 2,979,576 2,932,963 2,768,890 2,531,576 2,204,212 6.55 7.10
(50,258) (48,619) (45,615) (43,724) (41,045) (36,959) (31,668) 7.65 6.36
- -----------------------------------------------------------------------------------------------------------------------------------
3,064,126 2,901,290 2,933,961 2,889,239 2,727,845 2,494,617 2,172,544 6.53 7.11
- -----------------------------------------------------------------------------------------------------------------------------------
168,702 158,414 144,364 126,486 124,370 117,951 112,029 11.52 16.04
- -----------------------------------------------------------------------------------------------------------------------------------
$ 4,522,045 $ 4,221,812 $ 4,135,795 $ 4,157,694 $ 3,990,859 $ 3,594,471 $ 3,220,510 6.86 8.17
===================================================================================================================================
$ 559,574 $ 500,396 $ 443,205 $ 393,260 $ 399,668 $ 421,994 $ 422,441 5.88 8.37
2,704,736 2,718,885 2,778,768 2,858,595 2,593,897 2,319,031 2,185,029 5.35 6.24
775,302 545,012 479,577 499,083 629,995 514,418 315,999 13.04 14.58
73,786 65,737 67,101 61,705 64,971 61,830 59,195 4.95 7.86
-- -- -- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
4,113,398 3,830,030 3,768,651 3,812,643 3,688,531 3,317,273 2,982,664 6.74 8.37
408,647 391,782 367,144 345,051 302,328 277,198 237,846 8.28 6.10
- -----------------------------------------------------------------------------------------------------------------------------------
$ 4,522,045 $ 4,221,812 $ 4,135,795 $ 4,157,694 $ 3,990,859 $ 3,594,471 $ 3,220,510 6.86 8.17
===================================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
$ 184,330 $ 174,847 $ 165,214 $ 152,891 $ 137,569 $ 128,033 $ 112,101 7.81 6.33
- -----------------------------------------------------------------------------------------------------------------------------------
82,542 78,313 77,002 72,605 68,527 58,714 55,131 8.86 10.46
32,696 35,086 31,006 29,132 26,644 24,812 23,632 7.44 6.66
(2,157) 268 2,259 574 802 2,904 2,768 9.22 90.29
- -----------------------------------------------------------------------------------------------------------------------------------
113,081 113,667 110,267 102,311 95,973 86,430 81,531 8.48 10.10
- -----------------------------------------------------------------------------------------------------------------------------------
297,411 288,514 275,481 255,202 233,542 214,463 193,632 8.09 7.88
- -----------------------------------------------------------------------------------------------------------------------------------
(4,550) (9,500) (13,000) (15,702) (12,487) (13,644) (11,569) 5.63 16.05
- -----------------------------------------------------------------------------------------------------------------------------------
101,813 95,849 90,419 85,204 80,214 76,462 67,611 7.39 7.55
70,214 65,937 63,362 58,380 54,639 49,539 46,120 7.17 6.92
- -----------------------------------------------------------------------------------------------------------------------------------
172,027 161,786 153,781 143,584 134,853 126,001 113,731 7.30 7.30
- -----------------------------------------------------------------------------------------------------------------------------------
120,834 117,228 108,700 95,916 86,202 74,818 68,332 9.64 7.91
35,665 34,467 29,938 23,155 17,673 13,624 12,718 16.23 10.67
- -----------------------------------------------------------------------------------------------------------------------------------
85,169 82,761 78,762 72,761 68,529 61,194 55,614 7.47 6.68
-- -- (14,749) -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
$ 85,169 $ 82,761 $ 64,013 $ 72,761 $ 68,529 $ 61,194 $ 55,614 7.47 6.68
===================================================================================================================================
$ 2.37 $ 2.24 $ 2.09 $ 1.92 $ 1.81 $ 1.59 $ 1.45 8.93 8.77
- -----------------------------------------------------------------------------------------------------------------------------------
$ 2.35 $ 2.21 $ 2.06 $ 1.89 $ 1.79 $ 1.57 $ 1.43 8.85 8.61
- -----------------------------------------------------------------------------------------------------------------------------------
6% 7% 9% 6% 14% 10% 20%
- -----------------------------------------------------------------------------------------------------------------------------------
20.84% 21.12% 20.62% 21.09% 22.67% 22.08% 23.38%
1.88 1.96 1.90 1.75 1.72 1.70 1.73
- -----------------------------------------------------------------------------------------------------------------------------------
0.23% 0.28% 0.37% 0.45% 0.31% 0.37% 0.26%
0.93 0.75 1.00 1.84 0.50 0.48 0.53
1.48 1.69 1.56 1.48 1.46 1.42 1.43
- -----------------------------------------------------------------------------------------------------------------------------------
$ 1.06 $ 0.975 $ 0.88 $ 0.80 $ 0.72 $ 0.59 $ 0.46
11.80 10.87 10.12 9.79 8.58 7.61 6.76
22.75 26.25 26.50 29.00 20.00 18.88 13.63
- -----------------------------------------------------------------------------------------------------------------------------------
2,303 2,254 2,188 2,213 2,179 2,173 2,185
9,097 8,880 8,261 7,477 7,444 7,332 7,209
- -----------------------------------------------------------------------------------------------------------------------------------
$ 36,982 $ 36,717 $ 35,997 $ 32,879 $ 31,450 $ 28,161 $ 25,453
55.86% 53.97% 53.47% 52.71% 53.21% 53.60% 53.69%
11.88% 12.35% 12.18% 13.43% 14.53% 15.07% 16.99%
12.51% 12.36% 12.36% 12.13% 11.52% 11.19% --
9.60 11.72 15.59 15.10 11.05 11.87 9.40
- -----------------------------------------------------------------------------------------------------------------------------------
</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
31
<PAGE>
================================================================================
CONSOLIDATED STATEMENTS OF CONDITION
================================================================================
Wilmington Trust Corporation and Subsidiaries
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
December 31 (in thousands) 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 204,579 $ 239,392
--------------------------
Interest-bearing time deposits in other banks -- --
--------------------------
Federal funds sold and securities purchased under agreements to resell 83,500 50,000
--------------------------
Investment securities available for sale 1,298,741 1,316,403
--------------------------
Investment securities held to maturity (market value of $74,480 in 1998
and $333,812 in 1997) 73,911 333,007
-------------------------
Loans:
Commercial, financial, and agricultural 1,370,566 1,207,930
Real estate-construction 211,733 145,097
Mortgage-commercial 869,442 884,146
Mortgage-residential 857,626 813,116
Installment loans to individuals 1,015,056 954,486
Unearned income (4,790) (10,840)
- -----------------------------------------------------------------------------------------------------
Total loans net of unearned income 4,319,633 3,993,935
Reserve for loan losses (71,906) (63,805)
- -----------------------------------------------------------------------------------------------------
Net loans 4,247,727 3,930,130
--------------------------
Premises and equipment, net 145,492 135,129
Other assets 246,615 118,290
- ----------------------------------------------------------------------------------------------------
Total assets $ 6,300,565 $ 6,122,351
==========================
- ----------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 912,066 $ 792,513
Interest-bearing:
Savings 404,015 393,539
Interest-bearing demand 1,425,953 1,134,996
Certificates under $100,000 1,182,183 1,211,771
Certificates $100,000 and over 612,546 636,211
- -----------------------------------------------------------------------------------------------------
Total deposits 4,536,763 4,169,030
---------------------------
Short-term borrowings:
Federal funds purchased and securities sold under agreements
to repurchase 932,346 1,246,287
U.S. Treasury demand 18,944 61,290
- -----------------------------------------------------------------------------------------------------
Total short-term borrowings 951,290 1,307,577
---------------------------
Other liabilities 98,303 99,737
Long-term debt 168,000 43,000
- -----------------------------------------------------------------------------------------------------
Total liabilities 5,754,356 5,619,344
---------------------------
Stockholders' equity:
Common stock: $1.00 par value; authorized 150,000,000 shares;
issued 39,264,173 shares in 1998 and 39,191,848 shares in 1997 39,264 39,192
Capital surplus 67,047 62,511
Retained earnings 636,662 573,570
Accumulated other comprehensive income 5,928 7,504
- -----------------------------------------------------------------------------------------------------
Total contributed capital and retained earnings 748,901 682,777
Less: Treasury stock; 5,935,072 shares in 1998
and 5,713,735 shares in 1997, at cost (202,692) (179,770)
- -----------------------------------------------------------------------------------------------------
Total stockholders' equity 546,209 503,007
---------------------------
Total liabilities and stockholders' equity $ 6,300,565 $ 6,122,351
===========================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
32
================================================================================
CONSOLIDATED STATEMENTS OF INCOME
================================================================================
Wilmington Trust Corporation and Subsidiaries
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
For the year ended December 31 (in thousands) 1998 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 356,668 $ 342,831 $ 320,499
Interest and dividends on investment securities:
Taxable interest 88,717 76,838 70,728
Tax-exempt interest 851 1,430 1,826
Dividends 9,038 8,260 8,322
Interest on time deposits in other banks -- -- --
Interest on federal funds sold and securities purchased
under agreements to resell 1,665 1,280 1,475
- ----------------------------------------------------------------------------------------------
Total interest income 456,939 430,639 402,850
-----------------------------------
Interest on deposits 153,736 134,176 121,955
Interest on short-term borrowings 57,960 65,573 65,195
Interest on long-term debt 7,546 874 1,479
- ----------------------------------------------------------------------------------------------
Total interest expense 219,242 200,623 188,629
-----------------------------------
Net interest income 237,697 230,016 214,221
Provision for loan losses (20,000) (21,500) (16,000)
- ----------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 217,697 208,516 198,221
-----------------------------------
- ----------------------------------------------------------------------------------------------
OTHER INCOME
Trust and asset management fees:
Personal trust 59,494 53,772 45,320
Corporate financial services 43,661 37,824 32,843
Asset management 25,646 22,905 20,084
- ----------------------------------------------------------------------------------------------
Total trust and asset management fees 128,801 114,501 98,247
-----------------------------------
Service charges on deposit accounts 21,934 20,964 19,038
Other operating income 26,496 22,050 19,764
Securities gains 6,686 27 1,188
- ----------------------------------------------------------------------------------------------
Total other income 183,917 157,542 138,237
-----------------------------------
Net interest and other income 401,614 366,058 336,458
-----------------------------------
- ----------------------------------------------------------------------------------------------
OTHER EXPENSES
Salaries and employment benefits 137,917 129,816 119,574
Net occupancy 13,236 11,763 11,111
Furniture and equipment 19,024 16,361 14,413
Servicing and consulting 10,967 6,034 4,320
Other operating expense 48,922 43,697 42,921
- ----------------------------------------------------------------------------------------------
Total other expense 230,066 207,671 192,339
-----------------------------------
- ----------------------------------------------------------------------------------------------
NET INCOME
Income before income taxes 171,548 158,387 144,119
Applicable income taxes 57,223 52,343 46,841
- ----------------------------------------------------------------------------------------------
Net income $ 114,325 $ 106,044 $ 97,278
===================================
Net income per share:
basic $ 3.41 $ 3.15 $ 2.83
===================================
diluted $ 3.34 $ 3.08 $ 2.79
===================================
Weighted average shares outstanding:
basic 33,487 33,697 34,399
diluted 34,275 34,466 34,874
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
33
<PAGE>
================================================================================
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
================================================================================
Wilmington Trust Corporation and Subsidiaries
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Accumulated
other
Common Capital Retained comprehensive Treasury
(in thousands) stock surplus earnings income stock Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996
Balance, January 1 $ 39,013 $ 58,111 $ 462,215 $ 4,379 $(104,347) $ 459,371
Comprehensive income:
Net income -- -- 97,278 -- -- 97,278
Other comprehensive income, net of tax
Unrealized loss on securities, net of
income tax benefit of $1,898 -- -- -- (3,375) -- (3,375)
----------
Comprehensive income 93,903
----------
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)
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31 39,107 59,463 515,072 1,004 (149,929) 464,717
---------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
1997
Comprehensive income:
Net income -- -- 106,044 -- -- 106,044
Other comprehensive income, net of tax
Unrealized gain on securities, net of
income taxes of $3,655 -- -- -- 6,500 -- 6,500
---------
Comprehensive income 112,544
---------
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)
- ------------------------------------------------------------------------------------------------------------------------
Balance, December 31 39,192 62,511 573,570 7,504 (179,770) 503,007
--------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
1998
Comprehensive income:
Net income -- -- 114,325 -- -- 114,325
Other comprehensive income, net of tax
Unrealized loss on securities, net of
income tax benefit of $886 -- -- -- (1,576) -- (1,576)
---------
Comprehensive income 112,749
---------
Cash dividends paid-$1.53 per share -- -- (51,233) -- -- (51,233)
Common stock issued under employment
benefit plans 72 4,536 -- -- 8,421 13,029
Acquisition of treasury stock -- -- -- -- (31,343) (31,343)
- ------------------------------------------------------------------------------------------------------------------------
Balance, December 31 $ 39,264 $ 67,047 $ 636,662 $ 5,928 $(202,692) $ 546,209
==========================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
34
<PAGE>
================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
Wilmington Trust Corporation and Subsidiaries
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
For the year ended December 31 (in thousands) 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 114,325 $ 106,044 $ 97,278
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 20,000 21,500 16,000
Provision for depreciation 14,021 10,507 10,218
(Accretion)/amortization of investment securities available
for sale discounts and premiums (1,439) 2,634 3,032
(Accretion)/amortization of investment securities held to maturity
discounts and premiums (270) (203) (32)
Deferred income taxes (1,817) (571) 2,605
Securities gains (6,686) (27) (1,188)
Decrease in other assets 2,865 3,035 6,616
Increase/(decrease) in other liabilities 1,269 (9,748) 4,054
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 142,268 133,121 138,583
------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sales of investment securities available for sale 1,041,818 965,559 1,234,575
Proceeds from maturities of investment securities available for sale 578,183 278,723 319,987
Proceeds from maturities of investment securities held to maturity 259,398 134,839 101,321
Purchases of investment securities available for sale (1,596,708) (1,754,629) (1,483,648)
Purchases of investment securities held to maturity -- -- (84,693)
Investments in affiliates (131,190) -- --
Gross proceeds from sales of loans 122,351 60,719 57,305
Purchases of loans (1,095) (67,543) --
Net increase in loans (458,853) (227,683) (318,380)
Net increase in premises and equipment (24,384) (51,249) (24,871)
- ------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (210,480) (661,264) (198,404)
------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase in demand, savings, and interest-bearing
demand deposits 420,986 24,953 185,333
Net (decrease)/increase in certificates of deposit (53,253) 230,379 140,780
Net (decrease)/increase in federal funds purchased and securities
sold under agreements to repurchase (313,941) 263,270 (183,146)
Net (decrease)/increase in U.S. Treasury demand (42,346) 7,764 24,137
Proceeds from issuance of long-term debt 125,000 -- 15,000
Cash dividends (51,233) (47,546) (44,421)
Proceeds from common stock issued under employment benefit plans 13,029 9,203 7,650
Payments for common stock acquired through buybacks (31,343) (35,911) (51,786)
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 66,899 452,112 93,547
------------------------------------------
(Decrease)/increase in cash and cash equivalents (1,313) (76,031) 33,726
Cash and cash equivalents at beginning of year 289,392 365,423 331,697
- ------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 288,079 $ 289,392 $ 365,423
==========================================
- ------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 220,460 $ 219,624 $ 186,701
Taxes 52,630 47,376 47,221
Loans transferred during the year:
To other real estate owned $ 2,706 $ 5,665 $ 16,148
From other real estate owned 4,912 7,058 25,305
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
35
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Wilmington Trust Corporation (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 (WTC), a
Delaware-chartered bank and trust company engaged in commercial and trust
banking activities since 1903. WTC is the largest full-service bank in Delaware,
with 52 branch offices and eight principal operating subsidiaries through which
it engages in various lines of business.
The Corporation also owns two other financial institutions, Wilmington
Trust of Pennsylvania (WTPA), a Pennsylvania-chartered bank and trust company
acquired in 1993 and Wilmington Trust FSB (WTFSB), a federally-chartered savings
bank organized in 1994, and an investment holding company, WT Investments, Inc.
(WTI).
Through its subsidiaries, the Corporation engages in residential,
commercial, and construction lending, deposit-taking, insurance, investment
advisory, and broker-dealer services.
The Corporation presently conducts activities through its subsidiaries in
Delaware, Pennsylvania, Maryland, Florida, Nevada, New York, and California. The
Corporation and its subsidiaries are subject to competition from other financial
institutions. They are also subject to the regulations of certain federal and
state regulatory agencies and undergo periodic examination by those authorities.
On January 2, 1998, WTI consummated a transaction 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. As a result of this transaction, WTI acquired a 24% equity
interest in the firm and will be able to acquire additional ownership in the
future. The investment is accounted for under the equity method of accounting
and is recorded in the "other assets" line of the Corporation's Consolidated
Statements of Condition.
On July 31, 1998, WTI consummated a transaction with Roxbury Capital
Management, LLC, an asset management firm headquartered in Santa Monica,
California, performing investment management services relating to
large-capitalization stocks for institutional and individual clients. As a
result of this transaction, WTI has a preferred profits interest equal to 30% of
revenues in the firm, and will be able to acquire additional ownership in the
future. The investment is accounted for under the equity method of accounting
and is carried in the "other assets" line of the Corporation's Consolidated
Statements of Condition. The excess of the carrying value over the underlying
equity resulting from these transactions is $125 million at December 31, 1998,
and is being amortized over 25 years.
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, WTI, 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. Certain prior year amounts have been reclassified to conform to current
year presentation.
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
36
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
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.
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.
It is the policy of the Corporation to maintain a reserve for loan losses
(reserve) which is sufficient to absorb estimated losses based on subjective
judgments regarding the collectibility of loans within the reported portfolio.
The adequacy of the reserve for loan losses is evaluated on a quarterly basis by
personnel independent of the various lending functions. In evaluating the
adequacy of the reserve, specific consideration is given to current micro- and
macro-economic factors, historical net loss experience, current delinquency
trends, and movement within the internally reported loan quality
classifications. The methodology employed to determine the necessary level of
reserve to maintain has been applied on a basis consistent with prior periods.
Reserve allocations for the commercial portfolios are maintained at various
levels. Impairment reserve allocations typically are established for
nonperforming commercial credits as identified for evaluation in accordance with
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," and are based
on the present value of anticipated cash flows discounted at 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. Specific reserve allocations are typically established for large
potential problem or problem credits not considered to be impaired. Specific
reserve allocations represent subjective estimates of loss potential and
consider potential collateral shortfalls not yet recognized as losses for
financial reporting purposes. All commercial credits and unfunded letters of
credit not subject to impairment or specific reserve allocations are allocated a
general allowance based on
37
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
their internal risk-rating classification. An eight-point risk-rating
classification system is maintained. The definitions and allowance allocation
percentages for all adverse classifications are consistent with current
regulatory guidelines.
Reserve allocations for the retail portfolios are determined statistically.
Specific allocations are established for identified problem credits which
typically represent loans nearing the policy guidelines for charge-off
recognition. General allocations are established for the remaining retail
portfolios by applying a ratio to the outstanding balances which considers the
net loss experience recognized over an historical period for the respective
product. Adjustments are made as information becomes known that adversely
affects the perceived quality of an individual retail portfolio. No material
adjustments were made to the calculated retail reserves during the two-year
period ended December 31, 1998.
A portion of the reserve is not specifically allocated to the commercial or
retail portfolios. This unallocated portion represents approximately 17% of the
total reserve for loan losses at December 31, 1998.
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.
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
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.
COMPREHENSIVE INCOME
Effective January 1, 1998, the Corporation adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes new rules for the reporting and
display of comprehensive income and its components. The statement requires,
among other things, unrealized gains or losses on the Corporation's
available-for-sale securities, which prior to adoption were reported separately
in shareholders' equity, to be included in comprehensive income. The adoption of
SFAS No. 130 had no impact on the Corporation's net income or shareholders'
equity.
SEGMENT INFORMATION
Effective December 31, 1998, the Corporation adopted SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information." SFAS No. 131 requires
certain descriptive information about the Corporation's reportable segments.
This information includes the factors that management uses to identify the
reportable segments, the types of products and services from which each
reportable segment derives its revenues, and how management
38
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
measures segment profit or loss and segment assets. The adoption of SFAS No. 131
resulted in additional financial statement disclosures and requires interim
reporting starting in 1999.
PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Effective December 31, 1998, the Corporation adopted SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits." SFAS 132
standardizes the disclosure requirements for pensions and other postretirement
benefits. The adoption of SFAS No. 132 had no effect on measurement or
recognition of pensions and other postretirement benefits, but changed the
format in which the information about these benefits is disclosed.
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.
Floors are contracts which generate interest payments to the Corporation
based on the difference between the floating-rate index and a predetermined
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 made or 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 recognized over the lives of the
contracts.
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
$24,142,723 during the year ended December 31, 1998.
39
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
NOTE 3:
INVESTMENT SECURITIES
The amortized cost and estimated market value of securities are as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amortized cost Gross Gross Estimated market value
----------------------- unrealized unrealized -----------------------
Balance, December 31, 1997 (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 $ 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 -- -- 159,006
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 $ --
============================================================================
Balance, December 31, 1998 (in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
Investment securities available for sale:
U.S. Treasury and government agencies $ 791,456 $ -- $ 8,210 $ (3,001) $ 796,665 $ --
Obligations of state and political subdivisions 6,930 -- 261 (5) 7,186 --
Other securities:
Preferred stock -- 178,455 2,353 -- -- 180,808
Asset-backed securities 227,683 -- 1,123 (103) 228,703 --
Other debt securities 10,500 -- 80 (62) 10,518 --
Other marketable equity securities -- 74,455 406 -- -- 74,861
- ------------------------------------------------------------------------------------------------------------------------------------
Total $1,036,569 $ 252,910 $ 12,433 $ (3,171) $1,043,072 $ 255,669
============================================================================
Investment securities held to maturity:
U.S. Treasury and government agencies $ 29,098 $ -- $ 96 $ -- $ 29,194 $ --
Obligations of state and political subdivisions 8,098 -- 390 -- 8,488 --
Other securities:
Asset-backed securities 36,715 -- 131 (48) 36,798 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 73,911 $ -- $ 617 $ (48) $ 74,480 $ --
============================================================================
</TABLE>
The amortized cost and estimated market value of debt securities at December 31,
1998, 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 $ 76,989 $ 77,056 $ 2,152 $ 2,159
Due after one year through five years 389,097 395,585 27,587 27,766
Due after five years through 10 years 126,708 126,839 18,971 19,131
Due after 10 years 443,775 443,592 25,201 25,424
- -------------------------------------------------------------------------------------------------------------------------------
$1,036,569 $1,043,072 $ 73,911 $ 74,480
=======================================================================
</TABLE>
40
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
Proceeds from the sales of investment securities available for sale during 1998,
1997, and 1996 were $1,041,818,319, $965,559,484, and $1,234,575,485,
respectively. Gross gains of $6,669,263, $24,070, and $1,100,858 in 1998, 1997,
and 1996, respectively, were realized on those sales, with an offsetting loss of
$15,072 in 1998. There were no offsetting losses in 1997 or 1996. Securities
with an aggregate book value of $742,575,665 at December 31, 1998, were pledged
to secure deposits and other commitments.
The Corporation's preferred stock portfolio consists of auction-rate,
cumulative, and noncumulative 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, 1998, the Corporation's asset-backed securities portfolio
consisted primarily of collateralized mortgage obligations. The portfolio has an
approximate average life of 4.71 years. The portfolio's aggregate average
yield-to-maturity was 6.44%.
At December 31, 1998, the Corporation did not hold state and municipal
securities for any one state in excess of 10% of stockholders' equity.
- --------------------------------------------------------------------------------
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, 1998, approximately 5% of the Corporation's total loan portfolio
consisted of real estate construction loans, while approximately 32% represented
commercial loans, 20% represented commercial mortgage loans, which were secured
by income-producing properties, and approximately 20% and 23%, respectively,
represented residential mortgage loans and installment loans to individuals.
Each of these ratios was virtually unchanged from those reported at December 31,
1997.
In addition to these loans outstanding, at December 31, 1998 and 1997,
unfunded commitments to lend in the real estate sector were approximately
$492,882,000 and $318,937,000, 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
The following is an analysis of the reserve for loan losses:
- --------------------------------------------------------------------------------
(in thousands) 1998 1997 1996
- --------------------------------------------------------------------------------
Balance, January 1 $ 63,805 $ 54,361 $ 49,867
-------------------------------------
Chargeoffs (15,930) (16,187) (14,655)
Recoveries 4,031 4,131 3,149
- --------------------------------------------------------------------------------
Net chargeoffs (11,899) (12,056) (11,506)
-------------------------------------
Provision charged to operations 20,000 21,500 16,000
- --------------------------------------------------------------------------------
Balance, December 31 $ 71,906 $ 63,805 $ 54,361
=====================================
41
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
NOTE 5:
RESERVE FOR LOAN LOSSES
(CONTINUED)
Information with respect to loans that are considered to be impaired under SFAS
#114 for the year ended December 31 is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands) 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Average recorded investment in impaired loans $33,053 $39,946 $36,139
-----------------------------------
Recorded investment in impaired loans at year-end subject to a reserve
for loan losses (1998 reserve--$7,184; 1997 reserve--$8,042;
1996 reserve--$10,058) $38,486 $31,731 $39,002
Recorded investment in impaired loans at year-end requiring no reserve
for loan losses 96 524 2,801
-----------------------------------
Recorded investment in impaired loans at year-end $38,582 $32,255 $41,803
===================================
Recorded investment in impaired loans at year-end classified as nonaccruing $27,835 $27,007 $39,976
-----------------------------------
Interest income recognized $ 3,078 $ 2,649 $ 1,906
Interest income recognized using the cash basis method of income recognition 2,302 2,162 1,718
</TABLE>
The following is an analysis of interest on nonaccruing loans:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands) 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccruing loans at December 31 $30,598 $28,669 $40,735
---------------------------------------
Interest income which would have been recognized under original terms $ 3,219 $ 2,766 $ 2,757
Interest accrued or received 2,408 2,207 1,736
- ---------------------------------------------------------------------------------------------------------------------------------
NOTE 6:
PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31 is as follows:
- -------------------------------------------------------------------------------------------------------------------
(in thousands) 1998 1997
- -------------------------------------------------------------------------------------------------------------------
Land $ 11,488 $ 11,558
Buildings and improvements 110,035 109,139
Furniture and equipment 124,701 102,977
- -------------------------------------------------------------------------------------------------------------------
246,224 223,674
Accumulated depreciation (100,732) (88,545)
- -------------------------------------------------------------------------------------------------------------------
Premises and equipment, net $ 145,492 $ 135,129
=======================
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 7:
SHORT-TERM BORROWINGS
A summary of securities sold under agreements to repurchase at December 31 is as
follows:
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
(in thousands) 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum amount outstanding at any month-end $264,146 $253,111
Daily average amount outstanding during the period 206,040 195,945
The securities underlying the agreements are under the Corporation's control.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 8:
LONG-TERM DEBT
WTC has obtained advances from the Federal Home Loan Bank of Pittsburgh to
finance the Wilmington Trust Plaza. 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
42
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
On May 4, 1998, the Corporation issued $125,000,000 in unsecured subordinated
notes due May 1, 2008. Semiannual interest payments are due on May 1 and
November 1 in each year at a fixed interest rate of 6.625%, with the principal
due on May 1, 2008. The notes are not redeemable prior to maturity and will not
be subject to any sinking fund.
Under a shelf registration statement filed on March 31, 1998, with the
Securities and Exchange Commission, the Corporation has registered but not
issued debt securities, which may be either senior or subordinated, of
$100,000,000 at December 31, 1998. The interest rate will be set at the time of
issue.
- --------------------------------------------------------------------------------
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 Corporation's consolidated financial condition.
- --------------------------------------------------------------------------------
NOTE 10:
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following discloses the fair value of financial instruments held by the
Corporation as of December 31, 1998 and 1997, 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 do not
require that certain financial instruments and all nonfinancial instruments be
included in 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," "Interest-bearing
time deposits in other 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- 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 value 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.
43
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
NOTE 10:
FAIR VALUE OF FINANCIAL INSTRUMENTS
(CONTINUED)
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>
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997
----------------------------- ------------------------------
Carrying Fair Carrying Fair
(in thousands) value value value value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks $ 204,579 $ 204,579 $ 239,392 $ 239,392
Short-term investments 83,500 83,500 50,000 50,000
Investment securities (see note 3) 1,372,652 1,373,221 1,649,410 1,650,215
Loans, net of reserves 4,247,727 4,302,115 3,930,130 3,938,668
Accrued interest receivable 38,266 38,266 41,555 41,555
Financial liabilities:
Deposits 4,536,763 4,529,414 4,169,030 4,179,419
Short-term borrowings 951,290 951,290 1,307,577 1,307,577
Accrued interest payable 44,553 44,553 45,771 45,771
Long-term debt 168,000 166,626 43,000 43,187
<CAPTION>
Contractual Fair Contractual Fair
(in thousands) amount value amount value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Off-balance-sheet financial instruments:
Unfunded commitments to extend credit $ 1,749,479 $ (4,374) $ 1,486,557 $ (3,716)
Standby and commercial letters of credit 70,050 (1,051) 54,774 (822)
Interest rate swap contracts 25,000 (9) 275,000 363
Interest rate floor contracts 325,000 5,450 325,000 3,268
- ------------------------------------------------------------------------------------------------------------------------------------
</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) 1998 1997
- --------------------------------------------------------------------------------
Commitments to extend credit (contractual amount) $1,749,479 $1,486,557
Letters of credit (contractual amount) 70,050 54,774
Interest rate swaps (notional value) 25,000 275,000
Interest rate floors (notional value) 325,000 325,000
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 (e.g., securities,
receivables, inventory, equipment,
44
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
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, 1998, swaps with a total
notional principal of $25 million were in effect. This compares with $275
million at December 31, 1997. The weighted average variable interest rate that
the Corporation paid was 5.40% and 5.55% on December 31, 1998 and 1997,
respectively, while the weighted average fixed interest rate that the
Corporation received was 5.17% and 5.83% on those dates, respectively. The swaps
have a weighted average original and remaining term to maturity of approximately
three years and two months, 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, 1998 and 1997, floors with a
total notional principal of $325 million were in effect. The weighted average
strike rate was 6% on December 31, 1998 and 1997. The floors have a weighted
average original and remaining term to maturity of approximately 4.7 and 1.5
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 are also 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, 1998 and
1997, 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 banking 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:
45
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
NOTE 12:
CAPITAL REQUIREMENTS
(CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
To be well
capitalized under
For capital prompt corrective
adequacy purposes action provisions
Actual -------------------- ---------------------
---------------------- Amount Ratio Amount Ratio
(in thousands) Amount Ratio >= >= >= >=
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998:
Total capital (to risk-weighted assets):
Wilmington Trust Corporation $589,103 12.48%
Wilmington Trust Company 521,853 11.34 $368,016 8.0% $460,019 10.0%
Tier 1 capital (to risk-weighted assets):
Wilmington Trust Corporation 403,804 8.55
Wilmington Trust Company 463,115 10.07 184,008 4.0 276,012 6.0
Tier 1 capital (to average assets):
Wilmington Trust Corporation 403,804 6.61
Wilmington Trust Company 463,115 7.99 231,968 4.0 289,960 5.0
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
</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 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, 1998, 1997, and 1996, 546,220 shares,
737,729 shares, and 814,367 shares, respectively, were acquired under this
program at a cost of $95,865,369.
- --------------------------------------------------------------------------------
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, 1998 and 1997, loans to executive officers and directors of the
Corporation and its principal affiliates, including loans to their associates,
totaled $52,819,798 and $32,107,717, respectively. During 1998, loan additions
were $56,481,495, loan repayments were $35,914,022, and other changes were
$144,608. Other changes represent the loan activity of newly elected executive
officers and directors.
46
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
NOTE 14:
EMPLOYMENT BENEFIT PLANS
STOCK-BASED COMPENSATION PLANS
At December 31, 1998, 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:
- --------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Net income:
As reported $114,325 $106,044 $97,278
Pro forma 111,530 102,650 95,614
Basic earnings per share:
As reported $ 3.41 $ 3.15 $ 2.83
Pro forma 3.33 3.05 2.78
Diluted earnings per share:
As reported $ 3.34 $ 3.08 $ 2.79
Pro forma 3.25 2.98 2.74
1996 LONG-TERM INCENTIVE PLAN
Under the 1996 Long-term Incentive Plan, the Corporation may grant incentive
stock options, nonstatutory 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>
- ---------------------------------------------------------------------------------------------------------------------
1998 1997 1996
---------------------- ---------------------- ----------------------
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>
Balance, January 1 1,716,086 $ 30.04 1,543,312 $ 25.89 1,449,901 $ 23.52
Options granted 260,577 62.23 419,086 42.32 337,281 31.69
Options exercised (322,121) 26.09 (234,912) 24.75 (241,920) 19.74
Options forfeited (37,700) 44.86 (11,400) 28.38 (1,950) 31.50
- ---------------------------------------------------------------------------------------------------------------------
Balance, December 31 1,616,842 $ 35.67 1,716,086 $ 30.04 1,543,312 $ 25.89
=======================================================================
Options exercisable, December 31 1,363,465 1,297,000 1,207,981
=======================================================================
Weighted average fair value of
options granted during the year $ 10.56 $ 7.65 $ 5.10
</TABLE>
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:
- --------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Dividend yields 2.77% 2.29% 3.72%
Expected volatility 19.77-21.18 17.79-18.03 17.64-19.65
Risk-free interest rate 4.54-4.57 5.36-5.38 5.80-5.95
Expected option life (years) 3-5 3-5 3-5
47
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
NOTE 14:
EMPLOYMENT BENEFIT PLANS
(CONTINUED)
A summary of stock options outstanding at December 31, 1998, 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>
$16.88-30.00 660,356 3.1 $23.91 660,356 $23.91
30.25-45.00 600,912 6.0 35.73 600,912 35.73
45.50-66.50 355,574 6.6 57.42 102,197 45.50
- ---------------------------------------------------------------------------------------------
$16.88-66.50 1,616,842 4.9 $35.67 1,363,465 $30.74
=============================================================================================
</TABLE>
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, 1996 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
-------------------------
Subscriptions entered into on June 1, 1998 (56,356) 56,356 51.53
Forfeitures 4,980 (4,980) 38.14-51.53
Shares issued -- (72,325) 38.14
- --------------------------------------------------------------------------------------------------
Balance, December 31, 1998 192,728 54,152
=========================
</TABLE>
48
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
PENSION PLAN
The Wilmington Trust Pension Plan is a noncontributory, 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 the Rodney Square
Strategic Equity and Fixed-Income Funds managed by Rodney Square Management
Corporation (RSMC), a subsidiary of WTC. Participation in the mutual funds of
RSMC was $107,976,832 at December 31, 1998. During 1998, the plan's assets,
which were held in collective trust funds managed by WTC, were transferred to
the RSMC mutual funds. Participation in the collective trust funds of WTC was
$103,085,348 at December 31, 1997.
- --------------------------------------------------------------------------------
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
In 1989, the Corporation adopted a Supplemental Executive Retirement Plan. The
plan, covering selected officers, is a nonqualified defined benefit plan.
Assumptions used in determining the net periodic pension costs are similar to
those used in determining the cost of the Corporation's pension plan. While the
plan is unfunded, the Corporation has invested in corporate-owned life insurance
contracts to meet its future obligations. The projected benefit obligation and
the accumulated benefit obligation exceeded the plan assets by $7,041,116 and
$5,129,116, respectively, at December 31, 1998, and $5,696,036 and $4,226,036,
respectively, at December 31, 1997.
- --------------------------------------------------------------------------------
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.
49
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
NOTE 14:
EMPLOYMENT BENEFIT PLANS
(CONTINUED)
Information with respect to the pension and post-employment benefit plans is as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Pension benefits Post-employment benefits
---------------------- ------------------------
(in thousands) 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Net benefit obligation at beginning of year $ 88,639 $ 77,613 $ 26,657 $ 23,704
Service cost 3,052 2,424 559 524
Interest cost 6,796 6,299 1,906 1,928
Plan participants' contributions -- -- 69 62
Actuarial (gain)/loss 12,023 6,016 2,993 2,451
Gross benefits paid (4,254) (3,713) (2,022) (2,011)
- ------------------------------------------------------------------------------------------------------------------------------------
Net benefit obligation at end of year $ 106,256 $ 88,639 $ 30,162 $ 26,658
=================================================
Change in plan assets:
Fair value of plan assets at beginning of year $ 103,880 $ 87,859 $ -- $ --
Actual return on plan assets 1,208 19,346 -- --
Employer contributions 388 388 1,953 1,949
Plan participants' contributions -- -- 69 62
Gross benefits paid (4,254) (3,713) (2,022) (2,011)
- ------------------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year $ 101,222 $ 103,880 $ -- $ --
=================================================
Funded status at end of year $ (5,034) $ 15,241 $ (30,162) $ (26,658)
Unrecognized net actuarial (gain)/loss (4,555) (23,902) 2,980 (12)
Unrecognized net transition obligation/(asset) (4,470) (5,051) -- --
Unrecognized prior service cost 7,469 8,131 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net amount recognized at end of year $ (6,590) $ (5,581) $ (27,182) $ (26,670)
=================================================
Amounts recognized in the Consolidated Statements of Condition consist of:
Accrued benefit cost $ (6,590) $ (5,581) $ (27,182) $ (26,670)
Accrued benefit liability (1,917) (1,519) -- --
Intangible asset 916 1,045 -- --
Accumulated other comprehensive income 1,001 474 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net amount recognized at end of year $ (6,590) $ (5,581) $ (27,182) $ (26,670)
=================================================
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Pension benefits Post-employment benefits
---------------------------------- --------------------------------
(in thousands, except percentages) 1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted-average assumptions used were as follows:
Discount rate 6.75% 7.50% 7.75% 6.75% 7.50% 7.75%
Expected return on plan assets 9.50 9.50 9.50
Rate of compensation increase 4.50 4.50 4.50
Components of net periodic benefit cost:
Service cost $ 2,879 $ 2,292 $ 1,983 $ 559 $ 524 $ 509
Interest cost 6,336 5,888 5,372 1,906 1,928 1,712
Expected return on plan assets (8,440) (7,557) (6,866) -- -- --
Amortization of transition obligation/(asset) (841) (841) (841) -- -- --
Amortization of prior service cost 794 794 794 -- -- --
Recognized actuarial (gain)/loss (219) (155) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net periodic benefit cost $ 509 $ 421 $ 442 $ 2,465 $ 2,452 $ 2,221
=======================================================================
</TABLE>
For measurement purposes, the assumed health care cost trend rate for 1999 is
4.50%. This rate is assumed to decrease gradually to 4.0% for 2001 and remain at
that level thereafter.
A one-percentage-point change in the assumed health care trend rate would have
the following effect:
1% 1%
(in thousands) increase decrease
- --------------------------------------------------------------------------------
Effect on total service and interest cost components of
net periodic post-employment health care benefit cost $ 93 $ (89)
Effect on accumulated post-employment benefit obligation
for health care benefits 1,069 (980)
50
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
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 $2,351,725,
$2,193,149, and $1,945,386 in 1998, 1997, and 1996, respectively.
- --------------------------------------------------------------------------------
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) 1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before taxes $ 171,548 $ 158,387 $ 144,119
========================================
Income tax at statutory rate of 35% $ 60,042 $ 55,435 $ 50,442
Tax effect of tax-exempt and dividend income (5,442) (6,052) (6,594)
State taxes, net of federal tax benefit 2,831 2,662 2,534
Other (208) 298 459
- -----------------------------------------------------------------------------------------
Total income taxes $ 57,223 $ 52,343 $ 46,841
========================================
Taxes currently payable:
Federal $ 54,684 $ 48,819 $ 40,337
State 4,356 4,095 3,899
Deferred taxes (benefit):
Federal (1,817) (571) 2,605
- -----------------------------------------------------------------------------------------
Total income taxes $ 57,223 $ 52,343 $ 46,841
========================================
Taxes from securities gains $ 2,340 $ 9 $ 416
</TABLE>
The significant components of the deferred tax liabilities and assets at
December 31 are as follows:
- --------------------------------------------------------------------------------
(in thousands) 1998 1997
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Tax depreciation $ 4,549 $ 2,265
Prepaid VEBA costs 6,475 7,088
Automobile and equipment leases 12,753 11,691
System development costs 2,088 2,099
Market valuation on investment securities 3,335 4,221
Other 4,510 4,985
- --------------------------------------------------------------------------------
Total deferred tax liabilities 33,710 32,349
--------------------
Deferred tax assets:
Loan loss provision 25,188 22,339
OPEB obligation 9,511 9,334
Unearned fees 5,606 4,224
Pension and SERP 2,205 1,847
Other 1,280 1,983
- --------------------------------------------------------------------------------
Total deferred tax assets 43,790 39,727
--------------------
Net deferred tax assets $10,080 $ 7,378
====================
No valuation allowance was recognized for the deferred tax assets at December
31, 1998 and 1997.
51
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
NOTE 16:
EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
(in thousands) 1998 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator:
Net income $114,325 $106,044 $ 97,278
- ----------------------------------------------------------------------------------------------------
Denominator:
Denominator for basic earnings per share--weighted-average shares 33,487 33,697 34,399
- ----------------------------------------------------------------------------------------------------
Effect of dilutive securities:
Employee stock options 788 769 475
------------------------------
Denominator for diluted earnings per share--
adjusted weighted-average shares and assumed conversions 34,275 34,466 34,874
- ----------------------------------------------------------------------------------------------------
Basic earnings per share $ 3.41 $ 3.15 $ 2.83
==============================
Diluted earnings per share $ 3.34 $ 3.08 $ 2.79
==============================
- ----------------------------------------------------------------------------------------------------
</TABLE>
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>
- -----------------------------------------------------------------------------------------------------------------------------
1998 1997
---------------------------------------------- --------------------------------------------
(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 $110,686 $115,611 $117,123 $113,519 $112,835 $110,026 $106,133 $101,645
Interest expense 51,538 56,693 56,906 54,105 53,273 52,236 49,127 45,987
- -----------------------------------------------------------------------------------------------------------------------------
Net interest income 59,148 58,918 60,217 59,414 59,562 57,790 57,006 55,658
Provision for loan losses (5,000) (5,000) (5,000) (5,000) (7,000) (5,000) (5,000) (4,500)
- -----------------------------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 54,148 53,918 55,217 54,414 52,562 52,790 52,006 51,158
Other income 46,078 42,569 42,999 45,585 43,902 40,247 37,810 35,556
Securities gains/(losses) 1,939 4,745 33 (31) 14 1 11 1
- -----------------------------------------------------------------------------------------------------------------------------
Net interest and other income 102,165 101,232 98,249 99,968 96,478 93,038 89,827 86,715
Other expense 57,397 57,209 55,990 59,470 54,648 52,523 50,802 49,698
- -----------------------------------------------------------------------------------------------------------------------------
Income before income taxes 44,768 44,023 42,259 40,498 41,830 40,515 39,025 37,017
Applicable income taxes 15,275 14,792 13,970 13,186 14,254 13,252 12,741 12,096
- -----------------------------------------------------------------------------------------------------------------------------
Net income $ 29,493 $ 29,231 $ 28,289 $ 27,312 $ 27,576 $ 27,263 $ 26,284 $ 24,921
=============================================================================================
Net income per share-basic $ 0.88 $ 0.87 $ 0.84 $ 0.82 $ 0.82 $ 0.81 $ 0.78 $ 0.74
=============================================================================================
Net income per share-diluted $ 0.87 $ 0.86 $ 0.82 $ 0.79 $ 0.80 $ 0.79 $ 0.77 $ 0.72
=============================================================================================
</TABLE>
52
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
NOTE 18:
SEGMENT REPORTING
For the purposes of reporting our results, we divide our business activities
into three segments: Banking, Fee-based, and Funds Management. Two
segments--Banking and Fee-based--comprise the services we provide to customers.
The other segment, Funds Management, comprises activities that are not directly
customer-related and that are undertaken primarily for the Corporation's general
purposes, including management of the investment portfolio, funding, and
interest rate risk management.
The Banking and Fee-based segments are managed separately but have
overlapping markets, customers, and systems. Because of the Corporation's
strategy to develop full relationships across a broad product array, these two
segments market separate products and services to a common base of customers.
The scope of the Banking segment includes lending, deposit taking, and
branch banking in our primary markets of Delaware, Pennsylvania, and Maryland,
along with institutional deposit taking on a national basis. Lending activities
include commercial loans, commercial and residential mortgages, and construction
and consumer loans. Deposit products include demand checking, certificates of
deposit, negotiable order of withdrawal accounts, and various savings and money
market accounts.
The scope of the Fee-based segment includes personal trust, asset
management, mutual fund, corporate trust, and employee benefit trust services to
individuals and corporations in the United States and some 50 other countries.
Personal trust activities include trust services, private banking, estate
settlement, and tax preparation. Asset management activities include a broad
range of portfolio management services, including fixed income, short-term cash
management, and contributions resulting from affiliations with Cramer Rosenthal
McGlynn, LLC and Roxbury Capital Management, LLC. Corporate trust activities
include custody services, trusteeships for capital leases, collateralized
securities, corporate restructurings, and bankruptcies. Results for 1998 include
expenses for opening new offices in New York and California.
The scope of the Funds Management sector encompasses revenues and expenses
not allocated to the two customer-related business segments and includes
intercompany eliminations not directly related to a segment; the Corporation's
investment portfolio activities; and nonrecurring income and expenses, which
include gains and losses on the sale of investment securities.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Corporation evaluates
performance based on profit or loss from operations before income taxes and not
including nonrecurring gains and losses. The Corporation generally accounts for
intersegment sales and transfers as if the sales or transfers were to third
parties e.g., at current market prices. Profit or loss from infrequent events
such as the sale of a business are reported separately for each segment.
53
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
NOTE 18:
SEGMENT REPORTING
(CONTINUED)
Financial data by segment for 1998 through 1996 is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Banking Fee-based Funds
YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS) business business management Totals
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income $ 205,543 $ 22,919 $ 11,162 $ 239,624
Provision for loan losses (19,769) (231) -- (20,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision 185,774 22,688 11,162 219,624
Trust and asset management fees:
Personal trust -- 59,676 -- 59,676
Corporate financial services -- 45,120 -- 45,120
Asset management -- 24,674 -- 24,674
Other operating income 37,591 2,646 3,141 43,378
Securities gains/(losses) 1 -- 6,685 6,686
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest and other income 223,366 154,804 20,988 399,158
Other expense (122,603) (96,311) (3,487) (222,401)
- ------------------------------------------------------------------------------------------------------------------------------------
Segment profit from operations 100,763 58,493 17,501 176,757
Segment loss from infrequent events -- (1,988) -- (1,988)
- ------------------------------------------------------------------------------------------------------------------------------------
Segment profit before income taxes $ 100,763 $ 56,505 $ 17,501 $ 174,769
====================================================================================================================================
Intersegment revenue $ 7,046 $ 4,712 $ 1,530 $ 13,288
Depreciation and amortization 8,819 6,077 234 15,130
Investment in equity method investees -- 132,826 -- 132,826
Segment average assets 3,868,716 577,413 2,964,571 7,410,700
YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income $ 192,565 $ 23,476 $ 15,876 $ 231,917
Provision for loan losses (21,410) (90) -- (21,500)
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision 171,155 23,386 15,876 210,417
Trust and asset management fees:
Personal trust -- 53,770 -- 53,770
Corporate financial services -- 40,958 -- 40,958
Asset management -- 16,472 -- 16,472
Other operating income 37,186 1,518 2,789 41,493
Securities gains/(losses) (4) -- 31 27
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest and other income 208,337 136,104 18,696 363,137
Other expense (114,159) (84,607) (2,467) (201,233)
- ------------------------------------------------------------------------------------------------------------------------------------
Segment profit from operations 94,178 51,497 16,229 161,904
Segment loss from infrequent events -- (281) -- (281)
- ------------------------------------------------------------------------------------------------------------------------------------
Segment profit before income taxes $ 94,178 $ 51,216 $ 16,229 $ 161,623
====================================================================================================================================
Intersegment revenue $ 4,651 $ 4,162 $ 1,029 $ 9,842
Depreciation and amortization 7,083 4,924 43 12,050
Segment average assets 3,724,242 435,373 2,364,622 6,524,237
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income $ 181,350 $ 20,658 $ 14,041 $ 216,049
Provision for loan losses (15,655) (345) -- (16,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision 165,695 20,313 14,041 200,049
Trust and asset management fees:
Personal trust -- 45,320 -- 45,320
Corporate financial services -- 35,507 -- 35,507
Asset management -- 15,341 -- 15,341
Other operating income 33,188 1,781 2,169 37,138
Securities gains/(losses) -- 74 1,114 1,188
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest and other income 198,883 118,336 17,324 334,543
Other expense (107,881) (75,879) (2,231) (185,991)
- ------------------------------------------------------------------------------------------------------------------------------------
Segment profit from operations 91,002 42,457 15,093 148,552
Segment loss from infrequent events -- (1,130) -- (1,130)
- ------------------------------------------------------------------------------------------------------------------------------------
Segment profit before income taxes $ 91,002 $ 41,327 $ 15,093 $ 147,422
====================================================================================================================================
Intersegment revenue $ 2,853 $ 3,781 $ 1,434 8,068
Depreciation and amortization 7,028 4,909 36 11,973
Segment average assets 3,445,259 397,915 2,102,909 5,946,083
</TABLE>
54
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
A reconciliation of reportable segment amounts to the consolidated balances is
as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Year ended December 31 (in thousands) 1998 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Total revenues for reportable segments $ 239,824 $ 232,164 $ 216,349
Other revenues 186,822 161,788 142,127
Elimination of intersegment revenues (5,032) (6,394) (6,018)
- --------------------------------------------------------------------------------------------
Total consolidated revenues before provision $ 421,614 $ 387,558 $ 352,458
==========================================
Profit or loss:
Total profit or loss for reportable segments $ 174,769 $ 161,623 $ 147,422
Elimination of intersegment profits (3,221) (3,236) (3,303)
- --------------------------------------------------------------------------------------------
$ 171,548 $ 158,387 $ 144,119
==========================================
Assets:
Total assets for reportable segments $ 7,410,700 $ 6,524,237 $ 5,946,083
Other assets 207,885 168,536 151,774
Elimination of intersegment assets (1,373,184) (1,021,855) (798,693)
Other assets not allocated to segments 7,038 9,069 8,199
- --------------------------------------------------------------------------------------------
Consolidated total average assets $ 6,252,439 $ 5,679,987 $ 5,307,363
==========================================
- --------------------------------------------------------------------------------------------
</TABLE>
NOTE 19:
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) 1998 1997
- --------------------------------------------------------------------------------
Assets
Cash and due from banks $ 23 $ 26
Investment in subsidiaries 567,063 485,987
Investment securities available for sale 24,063 17,251
Advance to subsidiary 79,682 --
Other assets 2,394 339
- --------------------------------------------------------------------------------
Total assets $673,225 $503,603
=====================
Liabilities and stockholders' equity
Liabilities $ 2,016 $ 596
Long-term debt 125,000 --
Stockholders' equity 546,209 503,007
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity $673,225 $503,603
=====================
55
<PAGE>
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Wilmington Trust Corporation and Subsidiaries
NOTE 19:
PARENT COMPANY ONLY FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
- -----------------------------------------------------------------------------------------------------------------
For the year ended December 31 (in thousands) 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income
Dividend from subsidiary $ 93,765 $ 86,989 $ 78,743
Management fees from subsidiary 19 113 28
Interest on advance to subsidiary 2,047 -- --
Interest 1,554 275 261
- -----------------------------------------------------------------------------------------------------------------
Total income 97,385 87,377 79,032
------------------------------------
Expense
Interest on long-term debt 5,452 -- --
Salaries and employment benefits 84 197 60
Net occupancy 1 6 4
Stationery and supplies -- 1 --
Other operating expense 1,114 1,055 1,084
- -----------------------------------------------------------------------------------------------------------------
Total expense 6,651 1,259 1,148
------------------------------------
Income before income tax benefit and equity in
undistributed income of subsidiaries 90,734 86,118 77,884
Applicable income tax benefit (1,039) (278) (289)
Equity in undistributed income of subsidiaries 22,552 19,648 19,105
- -----------------------------------------------------------------------------------------------------------------
Net income $ 114,325 $ 106,044 $ 97,278
====================================
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
- -----------------------------------------------------------------------------------------------------------------
For the year ended December 31 (in thousands) 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 114,325 $ 106,044 $ 97,278
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed income of subsidiaries (22,552) (19,648) (19,105)
Accretion of investment securities available for sale discounts (644) -- --
(Increase)/decrease in other assets (2,055) 700 (40)
Increase in other liabilities 1,420 140 84
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 90,494 87,236 78,217
------------------------------------
Investing activities
Proceeds from sales of investment securities available for sale 253,812 16,868 34,745
Purchases of investment securities available for sale (259,980) (27,841) (24,389)
Capital contribution to subsidiaries (5,000) (2,000) --
Advance to subsidiary (79,682) -- --
Purchase of indirect subsidiary (55,100) -- --
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by/(used for) investing activities (145,950) (12,973) 10,356
------------------------------------
Financing activities
Cash dividends (51,233) (47,546) (44,421)
Proceeds for issuance of long-term debt 125,000 -- --
Proceeds from common stock issued under
employment benefit plans 13,029 9,203 7,650
Payments for common stock acquired through buybacks (31,343) (35,911) (51,786)
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by/(used for) financing activities 55,453 (74,254) (88,557)
------------------------------------
(Decrease)/increase in cash and cash equivalents (3) 9 16
Cash and cash equivalents at beginning of year 26 17 1
- -----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 23 $ 26 $ 17
====================================
</TABLE>
56
<PAGE>
================================================================================
WILMINGTON TRUST CORPORATION
================================================================================
REPORT OF INDEPENDENT AUDITORS
To The Board of Directors and Stockholders:
We have audited the accompanying consolidated statements of condition of
Wilmington Trust Corporation and subsidiaries as of December 31, 1998 and 1997,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1998.
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, 1998 and 1997, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles.
/s/Ernst & Young LLP
Philadelphia, Pennsylvania
January 22, 1999
57
<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 Chief Financial
Chief Executive Officer Operating Officer Officer
58
<PAGE>
================================================================================
WILMINGTON TRUST CORPORATION
================================================================================
BOARD OF DIRECTORS
CAROLYN S. BURGER
Principal, CB Associates, Inc.;
Director, PJM Interconnection, L.L.C.
and Rodel, Inc.
TED T. CECALA
Chairman and Chief Executive Officer
Member, Board of Managers,
Cramer Rosenthal McGlynn, LLC
and Roxbury Capital Management, LLC
RICHARD R. COLLINS
Retired President and
Chief Operating Officer,
American Life Insurance Company
CHARLES S. CROMPTON JR.
Attorney, Partner,
Law Firm of Potter, Anderson and Corroon
H. STEWART DUNN JR.
Attorney, Partner,
Law Firm of Ivins, Phillips and Barker
EDWARD B. DU PONT
Private Investor;
Director, E. I. du Pont de Nemours and Company
R. KEITH ELLIOTT
Director, Chairman, President, and
Chief Executive Officer, Hercules Incorporated;
Director, PECO Energy and Computer
Task Group
ROBERT C. FORNEY*
Retired Executive Vice President and Director,
E. I. du Pont de Nemours and Company
ROBERT V. A. HARRA JR.
President, Chief Operating Officer, and Treasurer
ANDREW B. KIRKPATRICK JR.
Attorney, Counsel,
Law Firm of Morris, Nichols, Arsht and Tunnell
REX L. MEARS
President, Ray L. Mears and Sons, Inc.
WALTER D. MERTZ**
Retired Senior Vice President
HUGH E. MILLER
Retired Vice Chairman,
ICI Americas Incorporated;
Chairman and Director, MGI PHARMA, Inc.
STACEY J. MOBLEY
Senior Vice President, Communications,
E. I. du Pont de Nemours and Company
G. BURTON PEARSON JR.**
Retired Senior Vice President
LEONARD W. QUILL
Retired Chairman of the Board
DAVID P. ROSELLE
President, University of Delaware
H. RODNEY SHARP III
Retired Manager, E. I. du Pont de Nemours
and Company; Director, E. I. du Pont
de Nemours and Company
THOMAS P. SWEENEY
Attorney, Member,
Law Firm of Richards, Layton and Finger, P.A.
MARY JORNLIN THEISEN
Former New Castle County Executive
ROBERT W. TUNNELL JR.
Managing Partner, Tunnell Companies, L.P.
* RETIRING FROM THE BOARD ON MAY 20, 1999
** ASSOCIATE DIRECTOR
59
<PAGE>
================================================================================
WILMINGTON TRUST CORPORATION
================================================================================
PRINCIPAL OFFICERS
TED T. CECALA
Chairman and
Chief Executive Officer
ROBERT V. A. HARRA JR.
President, Chief Operating Officer,
and Treasurer
DAVID R. GIBSON
Senior Vice President
and Chief Financial Officer
THOMAS P. COLLINS
Vice President, Legal, and Secretary
RONALD K. PENDLETON
Auditor
- --------------------------------------------------------------------------------
STANDING COMMITTEES
EXECUTIVE COMMITTEE
Ted T. Cecala, CHAIRMAN
Carolyn S. Burger
Robert C. Forney
Robert V. A. Harra Jr.
Hugh E. Miller
Thomas P. Sweeney
AUDIT COMMITTEE
Charles S. Crompton Jr., CHAIRMAN
Richard R. Collins
David P. Roselle
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
TRUST COMMITTEE
(WILMINGTON TRUST COMPANY)
Robert V. A. Harra Jr., CHAIRMAN
Robert J. Christian
Howard K. Cohen
H. Stewart Dunn Jr.
Edward B. du Pont
Walter D. Mertz
G. Burton Pearson Jr.
- --------------------------------------------------------------------------------
OPERATING SUBSIDIARIES
WILMINGTON TRUST COMPANY
Brandywine Finance Corporation
Brandywine Insurance Agency, Inc.
Brandywine Life Insurance Company, Inc.
Delaware Corporate Management, Inc.
Organization Services, Inc.
Rodney Square Distributors, Inc.
Rodney Square Management Corporation
Wilmington Brokerage Services Company
WTC Corporate Services, Inc.
WILMINGTON TRUST OF PENNSYLVANIA
WILMINGTON TRUST FSB
WT INVESTMENTS, INC.
60
<PAGE>
================================================================================
WILMINGTON TRUST COMPANY
================================================================================
PRINCIPAL OFFICERS
TED T. CECALA
Chairman and
Chief Executive Officer
ROBERT V. A. HARRA JR.
President, Chief Operating Officer,
and Treasurer
ROBERT J. CHRISTIAN
Senior Vice President, Asset Management
HOWARD K. COHEN
Senior Vice President,
Corporate Financial Services
WILLIAM J. FARRELL II
Senior Vice President, Information Technology,
Trust Operations, and Systems Development
DAVID R. GIBSON
Senior Vice President, Finance,
and Chief Financial Officer
JOSEPH M. JACOBS JR.
Senior Vice President,
Administration
HUGH D. LEAHY JR.
Senior Vice President,
Personal Banking
ROBERT A. MATARESE
Senior Vice President,
Commercial Banking
RITA C. TURNER
Senior Vice President,
Marketing
THOMAS P. COLLINS
Vice President, Legal,
and Secretary
RONALD K. PENDLETON
Auditor
- --------------------------------------------------------------------------------
DELAWARE ADVISORY BOARD
John E. Burris, CHAIRMAN
John L. Allen Sr.
Joseph R. Bateman
Leland Berry
Alfred G. Best
A. Dean Betts
W. Cecil Carpenter
Crawford J. Carroll
W. Pierce Ellis
Robert N. Emory
Ralph G. Faries Jr.
James A. Flood Sr.
R. Clay Foltz
Robert H. George
Jackie Hickman
John Janosik
John W. Jardine Jr.
Claude E. Lester
T. William Lingo
Ernest E. Megee Jr.
Marion W. Moore
R. Byron Palmer
William J. Paskey Jr.
R. James Quillen Jr.
William C. Robertson Jr.
John M. Short
Charles P. Spicer
J. Edward Taylor
Harry K. F. Terry
Robert L. Thompson
W. Pierce Thompson
Ebe Stephen Townsend Jr.
Robert W. Tunnell
William W. Vanderwende
James C. White
John E. Willey Jr.
W. Robert Williams
61
<PAGE>
================================================================================
WILMINGTON TRUST OF PENNSYLVANIA
================================================================================
BOARD OF DIRECTORS
TED T. CECALA, CHAIRMAN
GERARD A. CHAMBERLAIN
ROBERT C. FORNEY
ROBERT V. A. HARRA JR.
HUGH E. MILLER
LEONARD W. QUILL
- --------------------------------------------------------------------------------
PRINCIPAL OFFICERS
TED T. CECALA
Chairman
ROBERT V. A. HARRA JR.
President
HUGH D. LEAHY JR.
Senior Vice President
ROBERT A. MATARESE
Senior Vice President
GERARD A. CHAMBERLAIN
Secretary
MARTIN B. MCDONOUGH JR.
Treasurer
RONALD K. PENDLETON
Auditor
================================================================================
WILMINGTON TRUST FSB
================================================================================
BOARD OF DIRECTORS
ROBERT V. A. HARRA JR., CHAIRMAN
MICHAEL K. BLOXHAM
WERNER C. BROWN
TED T. CECALA
THOMAS P. COLLINS
EDWARD B. DU PONT
THOMAS L. DU PONT
PETER E. GUERNSEY JR.
BERNARD B. ISAACSON
HUGH D. LEAHY JR.
CURTIS L. LYMAN
WALTER F. WILLIAMS
- --------------------------------------------------------------------------------
PRINCIPAL OFFICERS
ROBERT V. A. HARRA JR.
Chairman and Chief Executive Officer
MICHAEL K. BLOXHAM
President, Maryland
CURTIS L. LYMAN
President, Florida
PETER E. GUERNSEY JR.
President, New York
MICHAEL J. MEDIANO
President, California
DAVID R. GIBSON
Senior Vice President, Finance,
and Chief Financial Officer
HUGH D. LEAHY JR.
Senior Vice President and Treasurer
ROBERT A. MATARESE
Senior Vice President
THOMAS P. COLLINS
Vice President, Legal, and Secretary
RONALD K. PENDLETON
Auditor
62
<PAGE>
================================================================================
WILMINGTON TRUST CORPORATION
================================================================================
STOCKHOLDER INFORMATION
CORPORATE HEADQUARTERS
Wilmington Trust Center
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
(302) 651-1000
(800) 441-7120
COMMON STOCK
Wilmington Trust Corporation common stock is traded under the symbol WL on the
New York Stock Exchange.
DIVIDENDS
Dividends usually are declared in the first month of each quarter to
stockholders of record as of the first business day in February, May, August,
and November. Dividend payment dates usually are two weeks later. Wilmington
Trust has paid cash dividends on its common stock since 1914.
STOCK TRANSFER AGENT, DIVIDEND REINVESTMENT AGENT, AND REGISTRAR OF STOCK
Inquiries relating to stockholder records, stock transfers, changes of
ownership, changes of address, duplicate mailings, dividend payments, and the
dividend reinvestment plan should be directed to the stock transfer agent:
NORWEST BANK MINNESOTA, N.A.
SHAREOWNER SERVICES
TELEPHONE:
(800) 999-9867
MAILING ADDRESS:
P.O. Box 64854
St. Paul, MN 55164-0854
STREET ADDRESS:
161 North Concord Exchange
South St. Paul, MN 55075
DIVIDEND REINVESTMENT AND VOLUNTARY STOCK PURCHASE PLAN
The Corporation offers a plan under which participating stockholders can
purchase additional shares of the Corporation's common stock through automatic
reinvestment of their regular quarterly cash dividends and/or voluntary cash
payments. All commissions and fees connected with the purchase and safekeeping
of the shares are paid by the Corporation. For details of the plan, contact the
stock transfer agent.
DUPLICATE MAILINGS
You may receive more than one copy of the Annual Report due to multiple accounts
within your household. The Corporation is required to mail an Annual Report to
each name on our stockholder list unless the stockholder requests that duplicate
mailings be eliminated. To eliminate duplicate mailings, please send a written
request to the stock transfer agent.
ANNUAL MEETING
The annual meeting of the Corporation's stockholders will be held at the
Wilmington Trust Plaza, 301 West 11th Street, Wilmington, Delaware, at 10:00
a.m. on Thursday, May 20, 1999.
INFORMATION REQUESTS
Analysts, investors, news media representatives, and others seeking financial
information, including requests for the Annual Report on Form 10-K filed with
the Securities and Exchange Commission, should contact Ellen J. Roberts, Vice
President, (302) 651-8069.
THIS ANNUAL REPORT WAS DESIGNED BY REESE, TOMASES & ELLICK, INC., AND PRINTED BY
CEDAR TREE PRESS.
PHOTOGRAPHY: KEVIN FLEMING, SETH JOEL, ADDISON GEARY, MARK ROSS
[LOGO] THIS ANNUAL REPORT WAS PRINTED ON RECYCLED PAPER.
<PAGE>
WILMINGTON TRUST CORPORATION
Rodney Square North
1100 North Market Street
Wilmington, DE19890
(302) 651-1000
(800) 441-7120
CALIFORNIA
Santa Monica
DELAWARE
52 offices throughout the state
FLORIDA
North Palm Beach, Tequesta, Stuart, Vero Beach
MARYLAND
Easton, Ocean City, Riverside, Salisbury
NEVADA
Las Vegas
NEW YORK
Midtown Manhattan
PENNSYLVANIA
Villanova, Haverford, Lionville,
Media, Philadelphia, West Chester
[LOGO] WILMINGTON TRUST
www.wilmingtontrust.com
SUBSIDIARIES OF WILMINGTON TRUST CORPORATION
<PAGE>
Wilmington Trust Corporation has four direct subsidiaries, Wilmington
Trust Company, a Delaware-chartered bank and trust company, Wilmington Trust of
Pennsylvania, a Pennsylvania-chartered bank and trust company, Wilmington Trust
FSB, a Federally-chartered savings bank headquartered in Maryland, and WT
Investments, Inc., a Delaware holding company. Wilmington Trust Company has the
following active 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. Rodney Square Management Corporation Delaware
10. Rodney Square Distributors, Inc. Delaware
11. Siobain VI, Ltd. Delaware
12. WTC Corporate Services, Inc. Delaware
13. WT Services of Delaware, Inc. Delaware
14. Wilmington Brokerage Services Company Delaware
<PAGE>
Delaware Corporate Management, Inc. has two wholly-owned subsidiaries,
Special Services Delaware, Inc., and Organizational Services, Inc., both
incorporated in Delaware.
Organization Services, Inc. has two wholly-owned subsidiaries,
Organizational Services Overseas, Inc. and Custody Services Limited, both
incorporated in Delaware.
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 Nos. 33-43675 and 333-69479) pertaining to the Thrift Savings Plan,
in the Registration Statement (Form S-8 No. 333-04042) pertaining to the 1996
Long-Term Incentive Plan and the 1996 Employee Stock Purchase Plan, in the
Registration Statement (Form S-3 No. 333-49019) pertaining to the registration
of $225 million in debentures, and in the Registration Statement (Form S-3 No.
333-69453) pertaining to the registration of 11,700 shares of common stock of
our report dated January 22, 1999, with respect to the consolidated financial
statements of Wilmington Trust Corporation and subsidiaries incorporated by
reference in the Annual Report on Form 10-K for the year ended December 31,
1998.
Philadelphia, Pennsylvania
March 30, 1999
<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, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000872821
<NAME> _____________________
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
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<INT-BEARING-DEPOSITS> 0
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0
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