UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-14659

WILMINGTON TRUST CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		51-0328154
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
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)

None
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding as of March 31, 2010
Common stock — Par Value $1.00		91,197,969 shares

 

 

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

TABLE OF CONTENTS

		Page
PART 1. FINANCIAL INFORMATION
Item 1 Financial Statements (unaudited)
Consolidated Statements of Condition			1
Consolidated Statements of Income			3
Consolidated Statements of Changes in Stockholders’ Equity			5
Consolidated Statements of Cash Flows			6
Notes to Consolidated Financial Statements			8
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Company overview			46
Results for the three months ended March 31, 2010			47
Regional Banking			53
Net interest income			60
Net interest margin			61
Noninterest income			65
Corporate Client Services			65
Wealth Advisory Services			67
Assets under management and administration			69
Affiliate money managers			70
Noninterest expenses			72
Capital resources			73
Liquidity and funding			77
Credit risk and asset quality			81
Derivatives, hedging instruments, other off-balance-sheet arrangements, and other contractual obligations			92
Other information			94
Item 3 Quantitative and Qualitative Disclosures About Market Risk			96
Item 4 Controls and Procedures			101
PART II. OTHER INFORMATION
Item 1 Legal Proceedings			102
Item 1A Risk Factors			102
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			102
Item 3 Defaults upon Senior Securities			103
Item 4 Submission of Matters to a Vote of Security Holders			103
Item 5 Other Information			103
Item 6 Exhibits			104
Exhibit 31
Exhibit 32

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

PART 1 – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)

		March 31,				December 31,
(in millions, except per share amounts)		2010				2009
ASSETS
Cash and due from banks		$	188.2			$	202.9
Interest-bearing deposits in other banks			130.5				165.4
Federal funds sold and securities purchased under agreements to resell			20.1				15.1
Investment securities available for sale			658.1				747.6
Investment securities held to maturity (fair value of $101.8 in 2010 and $101.8 in 2009)			106.9				112.9
Total investment securities			765.0				860.5
Federal Home Loan Bank and Federal Reserve Bank stock, at cost			26.8				26.8
Loans:
Commercial, financial, and agricultural loans			2,539.1				2,627.0
Real estate — construction loans			1,872.9				1,956.4
Commercial mortgage loans			2,130.0				2,102.3
Total commercial loans			6,542.0				6,685.7
Residential mortgage loans			428.2				431.0
Consumer loans			1,319.5				1,408.9
Loans secured with investments			425.9				441.6
Total retail loans			2,173.6				2,281.5
Total loans, net of unearned income of $6.2 in 2010 and $6.4 in 2009			8,715.6				8,967.2
Reserve for loan losses			(299.8	)			(251.5	)
Net loans			8,415.8				8,715.7
Premises and equipment, net			141.1				146.8
Goodwill, net of accumulated amortization of $29.8 in 2010 and 2009			359.6				363.2
Other intangible assets, net of accumulated amortization of $44.8 in 2010 and $49.9 in 2009			34.2				40.2
Accrued interest receivable			57.2				66.9
Other assets			483.6				493.6
Total assets		$	10,622.1			$	11,097.1

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED) — (Continued)

		March 31,				December 31,
(in millions, except per share amounts)		2010				2009
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand deposits		$	676.7			$	1,470.6
Interest-bearing deposits:
Savings deposits			930.6				921.5
Interest-bearing demand deposits			3,980.9				3,590.7
Certificates under $100,000			1,003.8				1,000.6
Local certificates $100,000 and over			123.7				136.9
Total core deposits			6,715.7				7,120.3
National brokered certificates			1,107.6				1,270.6
Total deposits			7,823.3				8,390.9
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase			429.5				575.8
Other debt			28.0				28.0
Total short-term borrowings			457.5				603.8
Accrued interest payable			57.5				56.7
Other liabilities			286.3				295.7
Long-term debt			443.5				442.9
Total liabilities			9,068.1				9,790.0
Stockholders’ equity:
Wilmington Trust stockholders’ equity:
Preferred stock: $1.00 par value, 1,000,000 shares authorized, 330,000 5% cumulative shares issued and outstanding			323.7				323.3
Common stock: $1.00 par value, authorized 150,000,000 shares, issued 100,234,596 in 2010 and 78,528,346 shares in 2009			100.2				78.5
Capital surplus			465.2				214.8
Retained earnings			1,067.1				1,101.5
Accumulated other comprehensive loss			(109.6	)			(116.3	)
Total contributed capital and retained earnings			1,846.6				1,601.8
Less: treasury stock: 9,036,627 shares in 2010 and 9,131,360 shares in 2009, at cost			(292.6	)			(295.1	)
Total Wilmington Trust stockholders’ equity			1,554.0				1,306.7
Noncontrolling interest			—				0.4
Total stockholders’ equity			1,554.0				1,307.1
Total liabilities and stockholders’ equity		$	10,622.1			$	11,097.1

See notes to Consolidated Financial Statements

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

		For the three months ended
		March 31,
(in millions, except per share amounts)		2010				2009
NET INTEREST INCOME
Interest and fees on loans		$	91.4			$	102.9
Interest and dividends on investment securities:
Taxable interest			5.5				13.2
Tax-exempt interest			0.1				0.1
Dividends			0.3				0.5
Interest on deposits in other banks			0.2				0.2
Interest on federal funds sold and securities purchased under agreements to resell			—				0.1
Dividends on Federal Home Loan Bank and Federal Reserve Bank stock			—				0.1
Total interest income			97.5				117.1
Interest on deposits			14.2				28.7
Interest on short-term borrowings			0.7				1.5
Interest on long-term debt			7.9				8.4
Total interest expense			22.8				38.6
Net interest income			74.7				78.5
Provision for loan losses			(77.4	)			(29.5	)
Net interest income after provision for loan losses			(2.7	)			49.0
NONINTEREST INCOME
Advisory fees:
Wealth Advisory Services:
Trust and investment advisory fees			34.4				31.1
Mutual fund fees			0.9				7.5
Planning and other services			8.8				10.9
Total Wealth Advisory Services			44.1				49.5
Corporate Client Services:
Global corporate trust services			23.0				19.4
Retirement services			21.5				16.1
Investment/cash management services			3.5				4.1
Total Corporate Client Services			48.0				39.6
Cramer Rosenthal McGlynn			4.7				3.0
Roxbury Capital Management			0.1				(0.8	)
Total advisory fees			96.9				91.3
Amortization of affiliate intangibles			(1.9	)			(2.3	)
Total advisory fees after amortization of affiliate intangibles			95.0				89.0
Service charges on deposit accounts			7.7				7.9
Loan fees and late charges			1.7				2.3
Card fees			2.2				2.0
Other noninterest income			0.7				1.9
Securities gains, net of losses			0.2				12.1
Total other-than-temporary impairment losses			(29.9	)			(4.5	)
Amount of loss recognized in other comprehensive income (before taxes)			11.9				—
Net other-than-temporary impairment losses recognized in income			(18.0	)			(4.5	)
Total noninterest income			89.5				110.7
Net interest and noninterest income		$	86.8			$	159.7

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) — (Continued)

		For the three months ended
		March 31,
(in millions, except per share amounts)		2010				2009
NONINTEREST EXPENSE
Salaries and wages		$	49.2			$	49.1
Incentives and bonuses			7.1				4.9
Employment benefits			16.1				16.7
Net occupancy			8.1				7.8
Furniture, equipment, and supplies			10.2				10.5
Advertising and contributions			1.7				2.5
Servicing and consulting fees			3.5				4.1
Subadvisor expense:
Retirement services			9.9				6.7
Other services			1.6				1.4
Travel, entertainment, and training			1.7				1.8
Originating and processing fees			2.9				2.3
Insurance			6.6				4.2
Conversion errors			—				2.8
Legal and auditing fees			2.7				2.3
Other noninterest expense			10.2				9.5
Total noninterest expense			131.5				126.6
NET (LOSS)/INCOME
(Loss)/income before income taxes and noncontrolling interest			(44.7	)			33.1
Income tax (benefit)/expense			(16.4	)			11.2
Net (loss)/income before noncontrolling interest			(28.3	)			21.9
Net income attributable to noncontrolling interest			0.9				0.1
Net (loss)/income attributable to Wilmington Trust Corporation			(29.2	)			21.8
Dividends and accretion on preferred stock			4.6				4.6
Net (loss)/income available to common shareholders		$	(33.8	)		$	17.2
Net (loss)/income per common share:
Basic		$	(0.44	)		$	0.25
Diluted		$	(0.44	)		$	0.25
Weighted average common shares outstanding (in thousands):
Basic			76,465				68,945
Diluted			76,465				68,945

See notes to Consolidated Financial Statements

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

		Wilmington Trust Corporation
																		Accumulated
																		other
		Preferred				Common				Capital				Retained				comprehensive				Treasury				Noncontrolling
(in millions, except share amounts)		stock				stock 1				surplus				earnings				loss 2				stock				interest				Total
2010
Balance at January 1, 2010		$	323.3			$	78.5			$	214.8			$	1,101.5			$	(116.3	)		$	(295.1	)		$	0.4			$	1,307.1
Comprehensive loss
Net loss 3			—				—				—				(29.2	)			—				—				—				(29.2	)
Other comprehensive income			—				—				—				—				6.7				—				—				6.7
Total comprehensive loss																															(22.5	)
Cash dividend paid: $0.01 per common share			—				—								(0.6	)			—				—				—				(0.6	)
Cash dividend paid on preferred stock			—				—				—				(4.2	)			—				—				—				(4.2	)
Common stock issued (21,706,250 shares issued)			—				21.7				251.6				—				—				—				—				273.3
Common stock issued under employment benefit plans and to the Board of Directors (102,757 shares issued)			—				—				(2.6	)			—				—				2.6				—				—
Stock-based compensation expense			—				—				1.4				—				—				—				—				1.4
Preferred stock discount accretion			0.4				—				—				(0.4	)			—				—				—				—
Acquisition of treasury stock (8,024 shares acquired)			—				—				—				—				—				(0.1	)			—				(0.1	)
Net income attributable to noncontrolling interest			—				—				—				—				—				—				0.9				0.9
Decrease in noncontrolling interest			—				—				—				—				—				—				(1.3	)			(1.3	)
Balance at March 31, 2010		$	323.7			$	100.2			$	465.2			$	1,067.1			$	(109.6	)		$	(292.6	)		$	—			$	1,554.0
2009
Balance at January 1, 2009		$	321.5			$	78.5			$	216.4			$	1,103.7			$	(84.5	)		$	(301.7	)		$	0.2			$	1,334.1
Comprehensive income
Net income 3			—				—				—				21.8				—				—				—				21.8
Other comprehensive loss			—				—				—				—				(6.1	)			—				—				(6.1	)
Total comprehensive income																											—				15.7
Cash dividend paid: $0.1725 per common share			—				—				—				(11.8	)			—				—				—				(11.8	)
Cash dividend paid on preferred stock			—				—				—				(2.9	)			—				—				—				(2.9	)
Preferred stock discount accretion			0.5				—				—				(0.5	)			—				—				—				—
Common stock issued under employment benefit plans and to the Board of Directors (193,159 shares issued)			—				—				(4.3	)			—				—				4.3				—				—
Stock-based compensation expense			—				—				1.5				—				—				—				—				1.5
Acquisition of treasury stock (1,967 shares acquired)			—				—				—				—				—				(0.1	)			—				(0.1	)
Net income attributable to noncontrolling interest			—				—				—				—				—				—				0.1				0.1
Balance at March 31, 2009		$	322.0			$	78.5			$	213.6			$	1,110.3			$	(90.6	)		$	(297.5	)		$	0.3			$	1,336.6

See notes to Consolidated Financial Statements

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

		For the three months ended
		March 31,
(in millions)		2010				2009
OPERATING ACTIVITIES
Net (loss)/income before noncontrolling interest		$	(28.3	)		$	21.9
Adjustments to reconcile net (loss)/income to net cash provided by operating activities:
Provision for loan losses			77.4				29.5
Provision for depreciation and other amortization			5.1				5.6
Amortization of other intangible assets			2.3				2.6
Amortization of discounts and premiums on investment securities available for sale			0.3				0.5
Accretion of discounts and premiums on investment securities held to maturity			(0.3	)			(0.3	)
Tax refund received			33.5				—
Deferred income taxes			(22.0	)			(1.3	)
Originations of residential mortgages			(32.8	)			(79.3	)
Gross proceeds from sales of residential mortgages			33.4				80.4
Gains on sales of residential mortgages			(0.6	)			(1.1	)
Securities (gains)/losses:
Other-than-temporary impairment			18.0				4.5
Other			(0.2	)			(12.1	)
Amortization of gain on interest rate floor			(2.1	)			(3.5	)
Stock-based compensation expense			1.4				1.5
Decrease/(increase) in other assets			36.4				(0.3	)
Decrease in other liabilities			(12.9	)			(33.6	)
Net cash provided by operating activities		$	108.6			$	15.0
INVESTING ACTIVITIES
Proceeds from sales of investment securities available for sale		$	0.2			$	404.8
Proceeds from maturities of investment securities available for sale			203.7				239.1
Proceeds from maturities of investment securities held to maturity			1.3				1.2
Purchases of investment securities available for sale			(112.5	)			(187.8	)
Purchases of investment securities held to maturity			—				(0.6	)
Purchases of Federal Home Loan Bank and Federal Reserve Bank stock, at cost			—				(5.0	)
Decrease in cash due to divestiture of Grant Tani Barash & Altman			(3.2	)			—
Purchase of residential mortgages			(1.7	)			—
Net decrease in loans			208.9				190.8
Purchases of premises and equipment			(3.5	)			(3.8	)
Dispositions of premises and equipment			—				0.2
Net cash provided by investing activities		$	293.2			$	638.9
FINANCING ACTIVITIES
Net (decrease)/increase in demand, savings, and interest-bearing demand deposits		$	(394.6	)		$	492.8
Net decrease in certificates of deposit			(173.0	)			(633.6	)
Net decrease in federal funds purchased and securities sold under agreements to repurchase			(146.3	)			(591.4	)
Net increase in U.S. Treasury demand deposits			—				6.0
Proceeds from issuance of common stock			274.0				—
Stock issuance costs			(0.7	)			—
Net decrease in line of credit			—				(20.0	)
Cash dividends			(4.8	)			(14.7	)
Acquisition of treasury stock			(0.1	)			(0.1	)
Net cash used for financing activities		$	(445.5	)		$	(761.0	)
Effect of foreign currency translation on cash			(0.9	)			(0.2	)
Decrease in cash and cash equivalents			(44.6	)			(107.3	)
Cash and cash equivalents at beginning of period			383.4				476.7
Cash and cash equivalents at end of period		$	338.8			$	369.4

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) — (Continued)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

		For the three months ended
		March 31,
(in millions)		2010				2009
Cash paid during the quarter for:
Interest		$	22.0			$	32.0
Taxes			—				17.5
Non-cash items:
Loans transferred to OREO 1		$	13.6			$	5.6

See notes to Consolidated Financial Statements

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Accounting and reporting policies

We maintain our accounting records and prepare our financial statements in accordance with U.S. generally accepted accounting principles (GAAP) and reporting practices prescribed for the banking industry. Using these principles, we make subjective judgments about uncertainties and trends and we make estimates and assumptions about the amounts we report in our financial statements and notes, including amounts for revenue recognition, the reserve for loan losses, pension and other benefit plans, stock-based employee compensation, investment securities valuations, goodwill impairment, loan origination fees and costs, income taxes, and other items. We evaluate these estimates on an ongoing basis.

The precision of these estimates and the likelihood of future changes are subject to various risks and uncertainties, and depend on a number of assumptions, estimates, expectations, assessments of potential developments, other underlying variables, and a range of possible outcomes. Circumstances that differ significantly from our judgments and estimates could cause our actual financial results to differ from our expectations.

Our financial results could be affected adversely by, among other things, changes in national or regional economic conditions; changes in market interest rates; fluctuations in equity or fixed income markets; changes in the market values of, or expected cash flows from, securities in our investment portfolio; significant changes in banking laws or regulations; changes in accounting policies, procedures, or guidelines; increased competition for business; higher-than-expected credit losses; the effects of acquisitions; the effects of integrating acquired entities; a substantial and permanent loss of either client accounts and/or assets under management at Wilmington Trust and/or affiliate money managers Cramer Rosenthal McGlynn (CRM) and Roxbury Capital Management (RCM); changes in the regulatory, judicial, legislative, or tax treatment of business transactions; new litigation or developments in existing litigation; and economic uncertainty created by unrest in other parts of the world.

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

We may use the following abbreviations throughout this report:

ARB:		Accounting Research Bulletin
ASC:		Accounting Standards Codification
ASU:		Accounting Standards Update
CPP:		U.S. Department of the Treasury Capital Purchase Program
EITF:		Emerging Issues Task Force
ESPP:		Employee Stock Purchase Plan
FASB:		Financial Accounting Standards Board
FHLB:		Federal Home Loan Bank of Pittsburgh
FIN:		FASB Interpretation (Number)
FOMC:		Federal Open Market Committee
FRB:		Federal Reserve Bank
FSP:		FASB Staff Position
GAAP:		U.S. generally accepted accounting principles
IRS:		Internal Revenue Service
NYSE:		New York Stock Exchange
OTTI:		Other-than-temporarily impaired
SEC:		Securities and Exchange Commission
SERP:		Supplemental Executive Retirement Plan
SFAS:		Statements of Financial Accounting Standards
TARP:		U.S. Department of the Treasury Troubled Asset Relief Program

Throughout this report, we use “net (loss)/income” to mean “net (loss)/income attributable to Wilmington Trust Corporation.”

Our consolidated financial statements include the accounts of Wilmington Trust Corporation, our wholly owned subsidiaries, and the subsidiaries in which we are majority owner. We eliminate intercompany balances and transactions in consolidation. For more information about our accounting policies, read Note 2, “Summary of significant accounting policies,” in our 2009 Annual Report on Form 10-K.

Although we are majority owner of CRM, we do not consolidate its results because CRM owners retain control over certain governance matters. We do not consolidate the results of RCM because we are not majority owner and RCM owners retain control over certain governance matters. For information on how we account for CRM, RCM, and other subsidiaries and affiliates, read Note 4, “Affiliates and acquisitions,” in our 2009 Annual Report on Form 10-K.

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

During the first quarter of 2010, we entered into an agreement with the principals of Grant Tani Barash & Altman, LLC (GTBA) and related parties, pursuant to which we sold 80% of the limited liability company interests in GTBA to those principals. The agreement also limited future profit distributions to us. This transaction resulted in a $0.1 million net loss recorded in the 2010 first quarter. Prior to February 16, 2010, the date of this agreement, GTBA’s results were consolidated in our financial statements. During the period from January 1, 2010 to February 16, 2010, GTBA’s contribution to our consolidated statement of income was approximately $2.6 million of revenue (net of amortization), approximately $1.8 million of expense, and $0.9 million of noncontrolling interest. As of February 16, 2010, GTBA’s results have not been consolidated in our financial statements. We account for our remaining ownership interest in GTBA under the cost method of accounting. In 2009, GTBA’s contribution to our consolidated statement of income was approximately $13.5 million of revenue (net of amortization), approximately $12.0 million of expense, and $0.4 million of noncontrolling interest.

We have applied our critical accounting policies and estimation methods consistently in all periods presented in this report and we have discussed these policies with our Audit Committee. The information in this report has not been audited. It includes all adjustments of a normal recurring nature that we believe are necessary for fair presentation. We have reclassified certain prior-year amounts to conform to the current-year presentation. The consolidated financial statements in this report should be read in conjunction with the “Consolidated Financial Statements” and the “Notes to Consolidated Financial Statements” in our 2009 Annual Report on Form 10-K.

2. Stock-based compensation plans

The Compensation Committee and the Select Committee of our Board of Directors administer a long-term incentive plan, an executive incentive plan, an employee stock purchase plan (ESPP), and a directors’ deferred fee plan. We account for our stock-based compensation plans in accordance with ASC 718, “Stock Compensation.” For more information about these plans and how we determine valuations of stock-based awards, read Note 19, “Stock-based compensation plans,” in our 2009 Annual Report on Form 10-K.

The common shares we issue as stock-based compensation come from our treasury, which held approximately 9.0 million shares at March 31, 2010. This is more than adequate to meet the share requirements of our current stock-based compensation plans.

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Stock-based compensation expense

		For the three months ended
		March 31,
(in millions)		2010				2009
Compensation expense:
Common stock options		$	0.6			$	1.1
Restricted common stock			0.5				0.5
Employee stock purchase plan			0.3				(0.1	)
Total compensation expense		$	1.4			$	1.5
Tax benefit			0.4				0.6
Net income effect		$	1.0			$	0.9

Stock options

		For the three months ended
		March 31,
Stock option valuation assumptions		2010		20091
Risk-free interest rate		2.23% - 3.72%			—
Volatility of Corporation’s common stock		34.06% - 44.50%			—
Expected dividend yield		1.42% - 2.96%			—
Expected life of options		4.6 to 8.7 years			—

For the valuation assumptions in the table above:

•

We use the Black-Scholes valuation method.

•

The risk-free interest rate is the U.S. Treasury rate commensurate with the expected life of options on the date of each grant.

•

We based the volatility of our stock on historical volatility over a span of time equal to the expected life of the options.

•

We based the expected life of stock option awards on historical experience. Expected life is the period of time we estimate that granted stock options will remain outstanding.

Stock-based compensation expense for incentive stock options and the ESPP affects our income tax expense and effective tax rate, because we are not allowed a tax deduction unless the award recipient or ESPP subscriber makes a disqualifying disposition upon exercise. As a participant in the CPP, we may not deduct compensation of more than $500,000 paid to any named executive officer identified in our proxy statement for any year in which the U.S. Treasury holds any debt or equity security we issued to the U.S. Treasury under the CPP.

No stock options were exercised during the three months ended March 31, 2010 or 2009.

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Long-term incentive plan option activity

						Weighted				Weighted
		Common				average				average				Aggregate
		stock				exercise				remaining				intrinsic value
For the three months ended March 31, 2010		options				price				contractual term				(in millions)
Outstanding at January 1, 2010			7,432,171			$	31.67
Granted			708,500			$	12.84
Exercised			—			$	—
Expired			(369,777	)		$	26.54
Forfeited			(13,200	)		$	36.62
Outstanding at March 31, 2010			7,757,694			$	30.19			5.9 years				$	8.8
Exercisable at March 31, 2010			4,958,772			$	36.17			4.2 years				$	—

Unvested stock options

At March 31, 2010, total unrecognized compensation cost related to unvested common stock options was $4.8 million, which we expect to record over a weighted average period of 1.8 years. Stock options awarded since we became a participant in the CPP do not vest until the stated vesting period or, in certain circumstances, until the U.S. Treasury no longer holds any debt or equity securities we issued under the CPP, whichever is later.

Restricted common stock grants

We measure the fair value of restricted common stock by the last sale price of our common stock on the grant date. We amortize the value of restricted stock grants into stock-based compensation expense on a straight-line basis over the requisite service period for the entire award. At March 31, 2010, total unrecognized compensation cost related to restricted stock grants was $4.1 million, which we expect to record over a weighted average period of 1.4 years.

Under our incentive plans, the vesting period for some of our restricted stock awards can accelerate upon retirement and in certain other circumstances. When we award restricted stock to people from whom we may not receive services in the future, such as those who are eligible for retirement, we recognize the expense of restricted stock grants when we make the award, instead of amortizing the expense over the vesting period of the award. In the first quarter of 2010, we recorded $0.5 million of expense for restricted stock grants. Restricted stock awarded to certain officers since we became a participant in the CPP does not vest until the stated vesting period or until the U.S. Treasury no longer holds any debt or equity securities we issued under the CPP, whichever is later.

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Restricted common stock activity

		Restricted				Weighted average fair
For the three months ended March 31, 2010		common shares				value at grant date
Outstanding at January 1, 2010			417,009			$	18.36
Granted			102,757			$	13.38
Vested			(40,158	)		$	22.23
Forfeited			—			$	—
Outstanding at March 31, 2010			479,608			$	16.97

Employee stock purchase plan (ESPP)

For the ESPP, we record stock-based compensation expense based on the fair value of plan participants’ options to purchase shares, amortized over the plan’s fiscal year. We use the Black-Scholes method to determine the fair value of these options. For the three months ended March 31, 2010, total recognized compensation cost related to the ESPP was $0.3 million and total unrecognized compensation cost related to this plan was $0.1 million.

ESPP Activity

		Shares reserved for				Subscriptions				Price per
		future subscriptions				outstanding				share
Balance at January 1, 2009			709,842				90,158
Forfeitures			88,360				(88,360	)		$	27.67
Shares issued			—				(1,798	)		$	27.67
Subscriptions entered into on June 1, 2009			(285,745	)			285,745			$	12.67
Forfeitures			34,602				(34,602	)		$	12.67
Balance at January 1, 2010			547,059				251,143
Forfeitures			21,851				(21,851	)		$	12.67
Balance at March 31, 2010			568,910				229,292

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3. Comprehensive (loss)/income

		For the three months ended
		March 31,
(in millions)		2010				2009
Net (loss)/income before noncontrolling interest		$	(28.3	)		$	21.9
Other comprehensive (loss)/income, net of tax:
Net unrealized gains on securities, net of taxes of $1.0 and $0.0			1.9				—
Reclassification adjustment for securities gains included in net income, net of taxes of $(0.1) and $(2.8)			(0.1	)			(4.8	)
Non-credit portion of OTTI held-to-maturity investment securities recognized in other comprehensive income (OCI), net of taxes of $(4.3) and $0.0			(7.6	)			—
Accretion of non-credit portion of OTTI investment securities losses that were previously recognized in OCI, net of taxes of $(0.1) and $0.0			(0.2	)			—
Reclassification of unrealized losses recorded previously at the time of transfer to held-to-maturity, net of taxes of $2.2 and $0.0			3.8				—
Reclassification adjustment of current period other-than-temporary impairment that was previously recognized in OCI, net of taxes of $6.1 and $0.0			11.0				—
Reclassification from accumulated OCI into earnings of discounted cash flow hedges, net of taxes of $(0.7) and $(1.4)			(1.4	)			(2.1	)
Foreign currency translation adjustments, net of taxes of $(0.6) and $(0.2)			(1.1	)			(0.4	)
SERP1 liability adjustment, net of taxes of $0.1 and $0.7			0.2				1.2
Minimum pension liability adjustment, net of taxes of $0.0 and $0.0			0.2				—
Comprehensive (loss)/income before the noncontrolling interest		$	(21.6	)		$	15.8
Comprehensive income attributable to the noncontrolling interest			0.9				0.1
Comprehensive (loss)/income attributable to Wilmington Trust Corporation		$	(22.5	)		$	15.7

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4. Earnings per share

Computation of basic and diluted earnings per share

		For the three months ended
		March 31,
(in millions, except per share amounts)		2010				2009
Net (loss)/income		$	(29.2	)		$	21.8
Dividends and accretion on preferred stock			4.6				4.6
Net (loss)/income available to common shareholders		$	(33.8	)		$	17.2
Average common shares issued and outstanding			76.5				68.9
Dilutive common shares from employee stock options, unvested restricted stock, ESPP subscriptions, and stock warrants			—				—
Total diluted common shares issued and outstanding			76.5				68.9
Basic (loss)/income per common share		$	(0.44	)		$	0.25
Diluted (loss)/income per common share1		$	(0.44	)		$	0.25
Cash dividends declared per common share		$	0.01			$	0.1725
Anti-dilutive equity instruments excluded from calculation			10.3				8.6

5. Fair value measurement of assets and liabilities

In accordance with ASC 825, “Financial Instruments,” we disclose the estimated fair values of certain financial instruments, whether or not we recognize them at fair value in our Consolidated Statements of Condition. This note summarizes the methods and assumptions we use to estimate fair value.

Fair value generally is the exchange price on which a willing buyer and a willing seller would agree when market conditions are not distressed. Because of the uncertainties inherent in determining fair value, fair value estimates may not be precise. Many of our fair value estimates are based on highly subjective judgments and assumptions we make about market information and economic conditions. Changes in market interest rates or any of the assumptions underlying our estimates could cause those estimates to change significantly.

We do not believe that the aggregate fair value amounts presented in this Note offer a full assessment of our consolidated financial condition, our ability to generate net income, or the value of our company, because the fair value amounts presented here do not consider any value that may accrue from existing client relationships or our ability to create value by making loans, gathering deposits, or providing fee-based services. In addition, the amounts presented here do not include the values of nonfinancial assets and liabilities or intangible assets.

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

We measure the fair values of assets and liabilities in accordance with ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 establishes a three-level hierarchy that prioritizes the factors (inputs) used to calculate the fair value of assets and liabilities:

•

Level 1. Level 1 inputs are unadjusted quoted prices, such as NYSE closing prices, in active markets for identical assets. Level 1 is the highest priority in the hierarchy.

•

Level 2. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as other significant inputs that are observable at commonly quoted intervals, such as interest rates, foreign exchange rates, and yield curves.

•

Level 3. Level 3 inputs are unobservable inputs. Typically, our own assumptions determine these inputs, since there is little, if any, related market activity. Level 3 is the lowest priority in the hierarchy.

If we use multiple input levels to calculate the fair value of an asset or liability, then the lowest-level significant input determines the level for the entire fair value measurement of that asset or liability. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and it considers factors specific to the asset or liability.

In accordance with GAAP, we may be required to measure certain assets and liabilities at fair value on a nonrecurring basis. These adjustments typically relate to lower-of-cost or fair value accounting, or write-downs of individual assets due to impairment.

The following paragraphs summarize how we determine fair values and the inputs we use to calculate fair values.

Cash and due from banks, short-term investments, accrued interest receivable, short-term borrowings, and accrued interest payable. Since these instruments have short maturities, their fair values are approximately the same as their carrying values.

Investment securities. We review our debt and equity investment securities at least quarterly to determine their fair values. The key determinants of fair value are market interest rates, credit spreads, and investor perceptions. When market interest rates rise or credit spreads widen, the fair values of debt and equity securities typically decline and unrealized losses increase. Conversely, when market interest rates fall or credit spreads tighten, the fair values of debt and equity securities typically increase. As a security’s fair value rises, unrealized losses may decrease or unrealized gains may increase.

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

To determine the fair values of most of our investment securities, we consider a variety of factors and use criteria specified by the SEC and FASB. We use financial market data, credit data, cash flow projections, and other analytics generated internally and by third parties. Where possible, we draw parallels from the trades and quotes of securities with similar features. If these parallels are not available, we base fair value on the market prices of comparable instruments as quoted by broker-dealers, with adjustments for maturity dates, underlying assets, credit ratings, and other items, if necessary.

To estimate the fair value of our collateralized mortgage obligations and mortgage-backed debt securities, we use a market approach based on the quoted prices of similar issues. To estimate the fair value of our obligations of state and political subdivisions (municipal bonds), we use a market approach based on the quoted prices of similar issues and index rates, taking into account any estimated prepayment rates. Sector spread, credit rating spread, and coupon structure spread adjustments are then made to the quoted prices of these similar issues and index rates. To estimate the fair value of our government agency securities, we use a market approach based on the quoted price of the issue or, if this is not available, the quoted price of a similar issue. To estimate the fair value of our preferred stocks, we use a market approach based on the quoted price of the stock.

Because the market for pooled trust preferred securities (TruPS) remains illiquid, we use mainly Level 3 inputs obtained from brokers or third-party advisors to determine the fair value of these securities. We also use an internal model that reflects liquidity and credit risk to discount cash flow projections provided by the third-party advisors.

The base cash flow for these calculations is the remaining expected future cash flow of each pooled TruPS, based on its contractual terms, and adjusted for current and expected future defaults. We adjust our default assumptions each quarter based on, among other factors, the current financial sector environment, developments related to the financial institutions whose securities underlie the pooled TruPS, and estimates of loss severity. We also adjust the discount rate for appropriate risk premiums, including liquidity risk and credit risk. Based on changes in certain yield curves related to the financial sector, and other factors, we estimate the associated risk premium for each individual security and adjust its discount rate accordingly.

While estimating fair values and the inputs to fair value calculations in illiquid markets is inherently uncertain, we believe that our methodology applies assumptions that market participants would find relevant, and provides the best estimate of fair value at each reporting period.

For more information about our investment securities, read Note 10, “Investment securities,” in this report.

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FHLB and FRB stock. The fair value of FHLB and FRB stock is assumed to equal its cost basis, since the stock is nonmarketable but redeemable at its par value.

Derivative financial instruments. We base the fair value estimates of derivative instruments on pricing models that use assumptions about market conditions and risks that are current as of the reporting date.

For our interest rate swaps, we obtain data on interest rates from an independent third-party advisor. We use data provided by this advisor to determine the fair values of our interest rate swaps by using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). We base the variable cash payments (or receipts) on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

To comply with ASC 820, we incorporate credit valuation adjustments to reflect both our nonperformance risk and the respective counterparty’s nonperformance risk. In adjusting the fair value of our derivative contracts for the effects of nonperformance risk, we consider the effect of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Most of the inputs we use to value our swap contracts are Level 2 inputs. For credit valuation adjustments, we use some Level 3 inputs, such as internal estimates of current credit spreads for our swap clients, to evaluate the likelihood of default by us and our counterparties. For more information about our use of derivatives, read Note 6, “Derivative and hedging activities,” in this report.

At times, we may use interest rate swaps and floors, primarily to hedge the interest rate risk associated with floating rate commercial loans and subordinated long-term debt. In accordance with ASC 815, “Derivatives and Hedging,” the estimated fair values of these instruments represent the amounts we would have expected to receive or pay to terminate such agreements.

Loans. To determine the fair values of loans that are not impaired, we employ discounted cash flow analyses that use interest rates and terms similar to those currently being offered to borrowers. This methodology is consistent with the guidance in ASC 825-10-55-3, and we believe our disclosures provide a fair value that is more indicative of an entry price. We do not record loans at fair value on a recurring basis. We record fair value adjustments to loans on a nonrecurring basis to reflect full and partial charge-offs due to impairment. For impaired loans, we use a variety of techniques to measure fair value, such as using the current appraised value of the collateral, discounting the contractual cash flows, and analyzing market data that we may adjust due to the specific characteristics of the loan or collateral.

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Deposits. The fair values of demand deposits equal the amount payable on demand as of the reporting date. The carrying amounts for variable rate deposits approximate their fair values as of the reporting date. To estimate the fair values of fixed rate CDs, we use a discounted cash flow analysis that incorporates prevailing market rates for CDs with comparable maturities.

Long-term debt. Under the guidance of ASU 2009-05, “Measuring Liabilities at Fair Value,” we base the fair value of long-term debt on recent market activity in our own debt issuances.

Commitments to extend credit and letters of credit. The fair values of loan commitments and letters of credit approximate the fees we charge for providing these services.

Carrying values and estimated fair values

		As of March 31, 2010								As of December 31, 2009
		Carrying				Fair				Carrying				Fair
(in millions)		value				value				value				value
Financial assets:
Cash and due from banks		$	188.2			$	188.2			$	202.9			$	202.9
Short-term investments			150.6				150.6				180.5				180.5
Investment securities			765.0				759.9				860.5				849.4
FHLB and FRB stock			26.8				26.8				26.8				26.8
Loans, net of reserves			8,415.8				8,335.0				8,715.7				8,579.6
Interest rate swap contracts			45.2				45.2				45.0				45.0
Accrued interest receivable			57.2				57.2				66.9				66.9
Financial liabilities:
Deposits		$	7,823.3			$	7,894.7			$	8,390.9			$	8,459.5
Short-term borrowings			457.5				457.5				603.8				603.8
Interest rate swap contracts			46.7				46.7				45.7				45.7
Accrued interest payable			57.5				57.5				56.7				56.7
Long-term debt			443.5				434.1				442.9				432.2

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Fair values measured on a recurring basis

To determine fair values measured on a recurring basis in the first quarter of 2010:

•		We used Level 1 and Level 2 inputs for investment securities. To determine the proper level of detail for disclosure, we considered the nature of each type of security listed and its associated risk, as well as its industry sector, vintage, geographic concentration, credit quality, and economic characteristics.
•		We used Level 2 inputs for interest rate swap contracts. Credit valuation adjustments did not significantly change the overall valuation of these contracts.
•		There were no transfers between Level 1 and Level 2 for the first quarter of 2010.

Fair value of assets and liabilities measured on a recurring basis as of March 31, 2010

		Quoted
		prices in
		active				Significant
		markets for				other				Significant
		identical				observable				unobservable
		instruments				inputs				inputs
(in millions)		(Level 1)				(Level 2)				(Level 3)				Total
Assets:
Investment securities available for sale:
U.S. Treasury securities		$	242.0			$	—			$	—			$	242.0
Government agency securities			—				146.7				—				146.7
Obligations of state and political subdivisions			—				5.0				—				5.0
Collateralized mortgage obligations:
Secured by residential mortgages			—				45.0				—				45.0
Mortgage-backed debt securities:
Residential mortgage-backed securities			—				188.8				—				188.8
Preferred stock:
Large financial institutions			—				21.3				—				21.3
Small financial institutions			—				3.0				—				3.0
Total preferred stock			—				24.3				—				24.3
Other marketable equity securities:
Mutual funds			—				3.0				—				3.0
Other			—				3.3				—				3.3
Total other marketable equity securities			—				6.3				—				6.3
Total investment securities available for sale			242.0				416.1				—				658.1
Interest rate swap contracts			—				45.2				—				45.2
Total assets		$	242.0			$	461.3			$	—			$	703.3
Liabilities:
Interest rate swap contracts		$	—			$	46.7			$	—			$	46.7
Total liabilities		$	—			$	46.7			$	—			$	46.7

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Fair values measured on a nonrecurring basis

To determine fair values measured on a nonrecurring basis in the first quarter of 2010:

•		For loans, we used Level 2 or Level 3 inputs, consisting principally of third party appraisals, and the previously described techniques. Loan amounts are based mainly on the lesser of the fair value of the loan’s collateral or the loan balance. Typically, loans measured at fair value on a nonrecurring basis represent loans for which we have recorded a partial charge-off in the current period. These amounts do not include fully charged-off loans, because we carry fully charged-off loans at zero on our balance sheet. Also, according to ASC 820, measurements for impaired loans that are determined using a present value technique are not considered fair value measurements under the standard and, therefore, are not included. Because an appraisal values the underlying collateral and not the specific loan, and because the real estate market is not a consistent, active market for all property types, we consider third party appraisals to meet the definition of Level 2 inputs as described in ASC 820. Internal appraisals may be considered Level 2 or Level 3 inputs depending on the factors used in the calculation. We make no adjustments to third party appraised values, other than costs to sell, in estimating the fair value of the loans.
•		For other real estate owned (OREO), we used Level 2 or Level 3 inputs, which consist of appraisals or internal estimates of fair value. OREO is recorded on our balance sheet at the lesser of the related loan balance or the fair value of the property, net of cost to sell, when we obtain control of the property. Consistent with the discussion of loans above, we consider third party appraisals to meet the definition of Level 2 inputs.
•		For TruPS, we used Level 2 and Level 3 inputs, as continued illiquidity in the market for these instruments made it difficult to determine their valuation. We obtained these inputs from brokers along with cash flow projections from third-party advisors. We then used an internal model that reflects liquidity and credit risk to discount cash flow projections provided by the third-party advisors, as described earlier in this note.

At March 31, 2010, all of our HTM investment securities with fair values measured on a nonrecurring basis were OTTI TruPS. For more information about these securities, read Note 10, “Investment securities,” in this report.

Wilmington Trust Corporation and subsidiaries
Form 10-Q for the three months ended March 31, 2010

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Fair value of assets and liabilities measured on a nonrecurring basis as of March 31, 2010

		Quoted prices
		in active				Significant
		markets for				other				Significant
		identical				observable				unobservable
		instruments				inputs				inputs
(in millions)		(Level 1)				(Level 2)				(Level 3)				Total
Loans		$	—			$	19.4			$	2.0			$	21.4
Other real estate owned			—				8.9				—				8.9
Investment securities held to maturity:
Pooled trust-preferred securities			—				—				27.3				27.3
Total assets		$	—			$	28.3			$	29.3			$	57.6
Liabilities		$	—			$	—			$	—			$	—