Baltimore's Wilmington Trust unit under regulatory agreement

U.S. move is not expected to affect sale to M&T Bank

March 28, 2011|By Hanah Cho, The Baltimore Sun

Baltimore-based Wilmington Trust Federal Savings Bank, which provides commercial banking and wealth management, has entered into an agreement with federal regulators to boost capital levels and reduce bad loans on its books.

The agreement, reached last month, comes as the bank's parent, Wilmington Trust Corp., is being acquired by M&T Bank Corp., but bank officials and analysts said the regulatory scrutiny is not expected to affect the merger.

The Office of Thrift Supervision found that Wilmington Trust Federal Savings "has engaged in unsafe or unsound practices." Under the so-called supervisory agreement, the thrift also agreed to appoint by June 30 an independent director and senior executive and to revise its policies and procedures related to covering loan losses, among other requirements.

"We're fully aware of the agreement, and nothing in it will delay or alter our merger plans," M&T spokesman Philip Hosmer said Monday. Hosmer declined to comment further because the merger is pending.

In a regulatory filing, Wilmington Trust Federal Savings said its board and management "are working to resolve the issues raised in the agreement and have already taken actions to comply with some of the agreement's requirements." The thrift's parent company declined to comment.

Delaware-based Wilmington Trust Corp., struggling with bad real estate loans, agreed in November to sell itself to Buffalo, N.Y.-based M&T for $351 million.

The purchase is expected to add to M&T Bank's presence in the Mid-Atlantic region. In recent years, the bank has acquired struggling rivals in Maryland, including Baltimore's Provident Bank in 2008 and the failed Towson-based Bradford Bank, which was seized by federal regulators in 2009.

The deal with Wilmington Trust is awaiting state and federal regulatory approval. Wilmington Trust shareholders approved the sale last week and is expected to close by midyear.

Wilmington Trust Federal Savings provides commercial banking, wealth advisory and corporate client services outside Delaware. The thrift has offices from California to Florida and across the Northeast in Massachusetts, New Jersey, New York and Pennsylvania.

Wilmington Trust Corp. does not operate retail branches in Maryland. It has wealth management and corporate client offices in Baltimore and Bel Air. Hosmer said M&T Bank will retain the 35 employees in those two offices.

The savings bank subsidiary has assets of $1.9 billion, part of the parent company's total $10.9 billion in assets at the end of last year, according to regulatory filings.

Once the acquisition is complete, many of the problems faced by Wilmington Trust Federal Savings will likely be resolved as it is integrated into M&T Bank, said Bert Ely, a Virginia-based banking analyst.

"Essentially, when a troubled bank gets taken over by a stronger bank, the issues that the order raises go away," Ely said. "The institution that was taken over essentially disappears."

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