ITEM 1.
BUSINESS
DESCRIPTION OF BUSINESS
Wilmington Trust Corporation is (we are) a Delaware corporation and financial holding company under the Bank Holding Company Act. We provide a full range of banking and other financial services through our banking and other subsidiaries.
Our principal subsidiary is Wilmington Trust Company (WTC), a Delaware-chartered bank and trust company founded in 1903. We also own two other depository institutions: Wilmington Trust of Pennsylvania (WTPA), a Pennsylvania-chartered bank and trust company, and Wilmington Trust FSB (WTFSB), a federally-chartered savings bank.
Organizationally, we have four business segments: Regional Banking, Corporate Client Services (CCS), Wealth Advisory Services (WAS), and Affiliate Money Managers.
More information about our business is in this report’s Management Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and in Notes 1 and 23 of the Notes to Consolidated Financial Statements, and is incorporated by reference herein.
STAFF MEMBERS
At year-end 2007, we had 2,672 full-time-equivalent staff members. We provide a variety of benefit programs for these staff members, including pension, incentive compensation, thrift savings, stock purchase, and group life, health, and accident plans. We consider our relationships with these staff members to be good, and we believe our ability to attract and retain high-quality staff members substantiates this.
STATISTICAL INFORMATION
The following information, as required by SEC Industry Guide 3, is contained in the MD&A and the Notes to Consolidated Financial Statements, and is incorporated from the following pages of the Annual Report by reference herein.
SUPERVISION AND REGULATION
As a publicly traded company that issues stock, we are subject to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Our stock is traded on the New York Stock Exchange, and we are subject to that exchange’s rules and regulations. Our Board of Directors has implemented a system of strong corporate governance practices. More information about this is available on our Web site at www.wilmingtontrust.com.
We are a bank holding company, a thrift holding company, and a financial holding company under the Bank Holding Company Act. We and WTC are regulated by the Delaware Department of Banking and the Federal Reserve Board (FRB). WTPA is regulated by the Pennsylvania Department of Banking and the FRB. WTFSB is regulated by the Office of Thrift Supervision (OTS). WTC, WTPA, and WTFSB (collectively, the banks) are subject to the rules and regulations of the Federal Deposit Insurance Corporation (FDIC). In addition, some of our subsidiaries are regulated by other federal and state authorities as well as by regulatory authorities of other countries in which we conduct business.
The FDIC insures deposits in the banks up to applicable limits. Currently, only WTFSB is required to pay premiums for FDIC insurance coverage.
Safety and soundness. The FRB requires us to operate in a safe and sound manner. If the FRB determines there is a serious risk to the financial safety and soundness of a subsidiary bank, it can require us to terminate the activity presenting the risk or terminate our control of the subsidiary.
Federal regulations establish dollar amount limits and collateral requirements for assets the banks purchase from non-bank affiliates. For these purposes, we and most of the companies we control are considered affiliates of the banks. In addition, the Federal Reserve Act and the FRB impose dollar amount, credit quality, and other limitations on loans the banks make to directors, officers, principal shareholders, and their related interests.
Capital requirements and dividend limitations. To assess the capital adequacy of bank holding companies and their bank subsidiaries, the FRB and other federal banking agencies have adopted risk-weighted capital standards. As of December 31, 2007, we and the banks were well capitalized, with capital levels that exceeded the minimum thresholds. For more information about this, read Note 16 of the Notes to Consolidated Financial Statements.
Dividends paid by the banks to us, and by us to shareholders, are subject to FRB, OTS, Delaware, and other legal and regulatory restrictions. More information about this is also in Note 16.
Bank Holding Company Act (BHCA). The BHCA requires us to have prior approval from the FRB before we may acquire control of a bank or before any company may acquire control of us. The BHCA also requires us to have the FRB’s prior approval before we acquire ownership or control of more than 5% of the outstanding shares of any class of a bank’s or bank holding company’s voting securities; acquire substantially all of a bank’s assets; or merge or consolidate with a bank holding company. Likewise, any bank holding or other company seeking to obtain control of us would need prior approval from the FRB and, because we are also a thrift holding company, prior approval from the OTS.
As a financial holding company, we may engage in activities permitted by the BHCA without obtaining prior FRB approval. In addition, we may engage in activities not otherwise permitted for bank holding companies, generally without the FRB’s prior approval. These activities include those that the FRB has determined are beneficial in nature, incidental to financial activities, or complementary to a financial activity. The BHCA does not place territorial restrictions on the activities of nonbank subsidiaries of financial holding companies.
Bank Secrecy Act, USA PATRIOT Act, and Office of Foreign Assets Control regulations (collectively, the BSA laws). The BSA laws require us to establish policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing activities. If we fail to comply with these laws, significant criminal and civil penalties can be imposed on us, and our charter, license, and/or deposit insurance can be revoked. We have adopted appropriate policies, procedures, and controls to comply with the BSA laws, and we will revise them as needed.
Privacy and information security. Federal and state laws and regulations require us to respect the privacy of our clients and to protect the security and confidentiality of their nonpublic personal information. These laws and regulations limit our disclosure of nonpublic client information to nonaffiliated third parties; require us to inform clients of our privacy and information-sharing policies; and require us to notify clients and regulators if an unauthorized disclosure occurs and there is concern the disclosed information may be misused. We have information security programs to safeguard the confidentiality and security of client information, and to ensure its proper disposal.
Interstate Banking Act. As an institution headquartered in Delaware, we are subject to the provisions of the Interstate Banking Act embraced by Delaware. Under this Act, Delaware permits mergers between Delaware banks and out-of-state
banks, and allows the merged institution to open new offices in Delaware. Delaware does not permit out-of-state banks to establish new branches in Delaware or acquire Delaware branches of other institutions without first merging with them.
Community Reinvestment Act (CRA). The CRA requires banks to help serve the credit needs of the communities it serves. This includes extending credit and providing other services to low- and moderate-income individuals and families. We are required to meet or exceed federal definitions of well-managed and well-capitalized, to be rated at least satisfactory under the CRA. If we fail to meet these requirements, we may incur penalties, which could include denials of applications to add branches, relocate, add subsidiaries and affiliates, and merge with or purchase other financial institutions. We also could be required to cease engaging in financial holding company activity or divest ownership of one or more of the banks.
Fair Housing Act. This Act and the CRA prohibit us from discriminating against or withholding services from individuals who live in economically depressed areas.
Residential mortgage usury laws. Since Delaware, Maryland, and Pennsylvania have not overridden federal legislation that preempted state usury laws on residential first mortgage loans, there currently is no limit on interest rates the banks can charge on residential first mortgage loans. In today’s interest rate environment, these usury laws do not materially affect the banks’ lending programs.
Consumer protection laws. Our banking activities are subject to a variety of federal and state consumer protection laws, including:
•
The Truth-in-Lending Act, which mandates disclosures for certain consumer loans;
•
The Truth-in-Savings Act, which mandates deposit-related disclosures;
•
The Equal Credit Opportunity Act, which prohibits discrimination; and
•
The Fair Credit Reporting Act, which, if we deny a client’s application for credit, requires us to tell the client which credit bureau we used to evaluate the application, and which imposes rules for information sharing and pre-screened offers of credit.
Wilmington Brokerage Services Company (WBSC), our broker-dealer subsidiary, is registered as a broker-dealer with and is subject to regulation by the SEC and the securities administrators of the states in which it is registered. In addition, WBSC is a member of the Financial Industry Regulatory Authority (FINRA), and subject to FINRA regulations. WBSC is also a member of the Securities Investor Protection Corporation, which, in the event of a broker-dealer’s liquidation, provides some financial protections for securities holders. Several of our subsidiaries, including WBSC, also are registered as investment advisors with the SEC and in some states.
ADDITIONAL INFORMATION
We provide corporate news and other information about our company on our Web site at www.wilmingtontrust.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports are available in the Investor Relations section of our Web site, under “SEC filings.” We post these reports to our Web site as quickly as possible after we file them electronically with or furnish them to the SEC.
Our Corporate Governance Guidelines, Code of Conduct and Ethics, and the charters of our Audit, Compensation, and Nominating and Corporate Governance Committees are available in the About Us section of our Web site. This section also contains any amendments to or waivers from the Code of Conduct and Ethics that apply to any of our directors or executive officers.
Printed copies of these materials are available free of charge to any shareholder who requests them by contacting Investor Relations at (302) 651-8527 or IR@wilmingtontrust.com.
ITEM 1A.
ITEM 1A.
RISK FACTORS
Information required by this Item is in the MD&A in the risk discussion on pages 41-43 of the Annual Report, and is incorporated by reference herein.
Our certificate of incorporation and bylaws and Delaware law include certain anti-takeover protections. These protections could discourage potential acquisition proposals, or delay or prevent a change in control of our company. These provisions
require us to have a classified Board of Directors, require shareholders to inform us if they nominate directors, and give us the ability to issue up to 1 million shares of preferred stock and 150 million shares of common stock.
ITEM 1B.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
We have no outstanding unresolved comments from SEC staff.
ITEM 2.
ITEM 2.
PROPERTIES
Our largest properties are in downtown Wilmington, Delaware: the Wilmington Trust Center (1100 North Market Street) and the Wilmington Trust Plaza (301 West Eleventh Street). Our main office is in the Wilmington Trust Center, which is owned by Rodney Square Investors, L.P., one of our subsidiaries. At the end of 2007, the outstanding mortgage on this building was $39,933,430.00. The Wilmington Trust Plaza, an operations facility, is an unencumbered property owned by a subsidiary.
At December 31, 2007, our branch office (as defined by banking regulators) and other office locations were as follows:
California: One office each in Los Angeles, Costa Mesa, and Beverly Hills (Grant Tani Barash & Altman).
Connecticut: One office in Stamford.
Delaware: 47 branch offices throughout the state (24 in New Castle County, including one each at the Wilmington Trust Center and Wilmington Trust Plaza; 7 in Kent County; and 16 in Sussex County).
Florida: One branch office in North Palm Beach and one office each in Palm Beach, Stuart, and Vero Beach.
Georgia: One office in Atlanta.
Maryland: One branch office in Baltimore and one office in Bel Air.
Massachusetts: One office in Boston.
Minnesota: One office in Bloomington.
Nevada: One branch office in Las Vegas.
New Jersey: One office each in Princeton and Mt. Laurel.
New York: Two offices in New York City (midtown) and Soho.
Pennsylvania: One branch office each in Bethlehem, Doylestown, Philadelphia, Villanova, and West Chester.
South Carolina: One office in Charleston.
Vermont: One office in Burlington.
Europe: One office each in the Channel Islands (Jersey), England (London), Ireland (Dublin), Germany (Frankfurt), and Luxembourg.
Caribbean: One office in Grand Cayman.
We own 29 of these offices. We lease space for the others. We believe these offices are suitable and adequate for our needs, and that we could accommodate further growth by utilizing existing capacity or by acquiring or renting additional space. More information about our lease obligations is in the discussion of contractual obligations, which is on page 59 in our Annual Report, and in Note 13, “Commitments and contingencies,” which begins on page 93 of our Annual Report.
Three of our reporting segments - Regional Banking, CCS, and WAS - operate principally at Wilmington Trust Center. CCS and WAS also lease a substantial portion of a facility across the street from Wilmington Trust Center. Regional Banking operates our branch offices, except for the one in Florida, which WAS operates. Regional Banking and WAS operate our offices in Maryland, New Jersey, and Pennsylvania. WAS operates our offices in California, Connecticut, Georgia, Florida, and Massachusetts. WAS and CCS operate our offices in New York. CCS operates our offices in Minnesota, Nevada, South Carolina, Vermont, Europe, and the Caribbean.
Our fourth reporting segment - Affiliate Money Managers - comprises Cramer Rosenthal McGlynn (CRM) and Roxbury Capital Management (RCM). CRM leases office space in White Plains and New York, New York. RCM leases office space in Santa Monica, California.
ITEM 3.
ITEM 3.
LEGAL PROCEEDINGS
This information is in the risk discussion in the Annual Report on page 57, and is incorporated by reference herein.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of 2007.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Information about our common stock, as well as the frequency and amount of dividends paid during the last two years, is in the section on stockholder information in the Annual Report on pages 116 and 117 and is incorporated by reference herein.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
SHARE REPURCHASE ACTIVITY DURING THE FOURTH QUARTER OF 2007
Includes 833 shares tendered for exercise of stock options and zero shares to cover payroll taxes on the vesting of restricted stock.
In April 2002, our Board of Directors authorized the repurchase of up to 8 million shares of our stock.
The Federal Reserve Board’s policy is that a bank holding company should not pay dividends unless its prospective earnings retention rate is consistent with its capital needs, asset quality, and overall financial condition. We believe our payment of dividends during 2007 was consistent with the Federal Reserve Board’s policy.
ITEM 6.
ITEM 6.
SELECTED FINANCIAL DATA
Balance sheet
Income statement
Per-share data
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Information required by this Item is in the Annual Report on pages 8-61, and is incorporated by reference herein.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this Item is in the risk discussion in the Annual Report on pages 51-55, and is incorporated by reference herein.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Information required by this Item is on the pages of the Annual Report indicated below, and is incorporated by reference herein.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in accountants or disagreements with KPMG LLP, our independent registered public accounting firm, on accounting and financial disclosure.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Information required by this Item is in the Controls and Procedures section on page 60 of the Annual Report, and in Management’s Discussion of Financial Responsibility on page 112 of the Annual Report, and is incorporated by reference herein.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
We have no information to report in addition to what is disclosed elsewhere in this report.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Information required by this Item is on pages 11-12, 30, 5, 1, 6, and 9 of our Proxy Statement, and is incorporated by reference herein.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item is on pages 14-30 and 20 of our Proxy Statement, and is incorporated by reference herein.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information required by this Item is in Item 5 and on pages 13 and 14 of our Proxy Statement, and is incorporated by reference herein.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required by this Item is on pages 20 and 3-4 of our Proxy Statement, and is incorporated by reference herein.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information required by this Item is on page 10 of our Proxy Statement, and is incorporated by reference herein.
PART IV
ITEM 15.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The financial statements required by this Item are incorporated by reference from Item 8. No additional financial statement schedules are required to be filed as part of this report.
The exhibits listed below have been or are being filed as part of this report. Any exhibit is available to any shareholder:
•
Free of charge on our Web site at www.wilmingtontrust.com or through the SEC’s Web site at www.sec.gov.
•
By sending a written request, plus $0.20 per page for duplicating costs, to Investor Relations at our headquarters address or to IR@wilmingtontrust.com.
Incorporated by reference to Exhibit 3(a) to the Report on Form S-8 of Wilmington Trust Corporation filed on October 31, 1991.
Incorporated by reference to Exhibit 1 to the Current Report on Form 8-K of Wilmington Trust Corporation filed on December 22, 2004.
Incorporated by reference to Exhibit 1 to the Form 8-A/A of Wilmington Trust Corporation filed on December 16, 2004.
Filed herewith.
Incorporated by reference to Exhibit 10(i) to the Annual Report on Form 10-K of Wilmington Trust Corporation filed on March 30, 1996.
Incorporated by reference to Exhibit 10(l) to the Annual Report on Form 10-K of Wilmington Trust Corporation filed on March 30, 1996.
Incorporated by reference to Exhibit 10(m) to the Annual Report on Form 10-K of Wilmington Trust Corporation filed on March 30, 1996.
Incorporated by reference to Exhibit 10(n) to the Annual Report on Form 10-K of Wilmington Trust Corporation filed on March 30, 1996.
Incorporated by reference to Exhibit 10.7 to the Annual Report on Form 10-K of Wilmington Trust Corporation filed on March 1, 2007.
Incorporated by reference to Exhibit 10.8 to the Annual Report on Form 10-K of Wilmington Trust Corporation filed on March 1, 2007.
Incorporated by reference to Exhibit 10.18 to the Annual Report on Form 10-K of Wilmington Trust Corporation filed on April 2, 2001.
Incorporated by reference to Exhibit 10.21 to the Annual Report on Form 10-K of Wilmington Trust Corporation filed on April 2, 2001.
Incorporated by reference to Exhibit 10.22 to the Annual Report on Form 10-K of Wilmington Trust Corporation filed on April 2, 2001.
Incorporated by reference to Exhibit 10.23 to the Annual Report on Form 10-K of Wilmington Trust Corporation filed on April 2, 2001.
Incorporated by reference to Exhibit 4.6 to the Annual Report on Form 10-K of Wilmington Trust Corporation filed on March 27, 1997.
Incorporated by reference to Exhibit A to the Proxy Statement of Wilmington Trust Corporation filed on March 31, 1999.
Incorporated by reference to Exhibit 10.64 to the Quarterly Report on Form 10-Q of Wilmington Trust Corporation filed on November 9, 2004.
Incorporated by reference to Exhibit 4.9 to the Annual Report on Form 10-K of Wilmington Trust Corporation filed on April 2, 2001.
Incorporated by reference to Exhibit 10.45 to the Annual Report on Form 10-K of Wilmington Trust Corporation filed on March 15, 2004.
Incorporated by reference to Exhibit 10.61 to the Quarterly Report on Form 10-Q of Wilmington Trust Corporation filed on August 9, 2004.
Incorporated by reference to Exhibit 10.44 to the Quarterly Report on Form 10-Q/A of Wilmington Trust Corporation filed on March 25, 2003.
Incorporated by reference to Exhibit 10.45 to the Quarterly Report on Form 10-Q of Wilmington Trust Corporation filed on August 14, 2002.
Incorporated by reference to Exhibit 10.46 to the Quarterly Report on Form 10-Q of Wilmington Trust Corporation filed on August 14, 2002.
Incorporated by reference to Exhibit 10.53 to the Annual Report on Form 10-K of Wilmington Trust Corporation filed on March 15, 2004.
Incorporated by reference to Exhibit 10.59 to the Quarterly Report on Form 10-Q of Wilmington Trust Corporation filed on May 10, 2004.
Incorporated by reference to Exhibit 10.63 to the Quarterly Report on Form 10-Q of Wilmington Trust Corporation filed on November 9, 2004.
Incorporated by reference to Exhibit 10.65 to the Current Report on Form 8-K of Wilmington Trust Corporation filed on December 19, 2005.
Incorporated by reference to Exhibit 10.66 to the Quarterly Report on Form 10-Q of Wilmington Trust Corporation filed on November 9, 2004.
Incorporated by reference to Exhibit 10.67 to the Quarterly Report on Form 10-Q of Wilmington Trust Corporation filed on November 9, 2004.
Incorporated by reference to Exhibit 10.36 to the Annual Report on Form 10-K of Wilmington Trust Corporation filed on March 15, 2005.
Incorporated by reference to Exhibit 10.37 to the Annual Report on Form 10-K of Wilmington Trust Corporation filed on March 15, 2005.
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.
February 28, 2008
/s/ Ted T. Cecala
TED T. CECALA, Director, Chairman of the Board and Chief Executive Officer
/s/ Gailen Krug
GAILEN KRUG, Director
/s/ Robert V.A. Harra Jr.
ROBERT V.A. HARRA JR., Director, President, and Chief Operating Officer
REX L. MEARS, Director
/s/ David R. Gibson
DAVID R. GIBSON, Executive Vice President and Chief Financial Officer
/s/ Stacey J. Mobley
STACEY J. MOBLEY, Director
/s/ Kevyn N. Rakowski
KEVYN N. RAKOWSKI, Senior Vice President and Controller
/s/ Michele M. Rollins
MICHELE M. ROLLINS, Director
/s/ Carolyn S. Burger
CAROLYN S. BURGER, Director
/s/ David P. Roselle
DAVID P. ROSELLE, Director
/s/ Thomas L. duPont
THOMAS L. DUPONT, Director
/s/ Oliver R. Sockwell
OLIVER R. SOCKWELL, Director
/s/ R. Keith Elliott
R. KEITH ELLIOTT, Director
/s/ Robert W. Tunnell Jr.
ROBERT W. TUNNELL JR., Director
/s/ Donald E. Foley
DONALD E. FOLEY, Director
/s/ Susan D. Whiting
SUSAN D. WHITING, Director