It is has become clear that until today shareholders of Wilmington Trust had no idea how bad things had gotten for the bank.
Bad enough, in fact, that management chose to sell itself at a price roughly 43 percent belowits market value on Friday.
Its decision to sell to M&T Bank in a stock deal worth approximately 0.051 of an M&T share is the result of a 37 percent increase in reserves for loan losses (most of them construction-related), as well as increases in loan charge-offs and those that are no longer accruing interest.
While Wilmington has a strong franchise in asset management and trust services, it has been crushed by heavy lending to the construction industry in Delaware, a sector which management characterizes as in a “protracted recessionary environment.”
Those are the kind of factors that led the company to sell itself at its tangible book value and hope that shareholders can be rewarded by owning shares of M&T. Today, that reward seems very far away.
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