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SEC Charges Bank Holding Company in Delaware with Improper Accounting and Disclosure of Past Due Loans


Washington D.C., Sept. 11, 2014 —

The Securities and Exchange Commission today announced accounting and disclosure fraud charges against a Delaware-based bank holding company for failing to report the true volume of its loans at least 90 days past due as they substantially increased in number during the financial crisis.

An SEC investigation found that as the real estate market declined in 2009 and 2010 and its construction loans began to mature without repayment or completion of the underlying project, Wilmington Trust Company did not renew, extend, or take other appropriate action for 90 days or more on a material amount of its matured loans.  Instead of fully and accurately disclosing the amount of these accruing loans as required by accounting guidance, Wilmington Trust improperly excluded the matured loans from its public financial reporting. 

Wilmington Trust, which was acquired by M&T Bank in May 2011, has agreed to pay $18.5 million in disgorgement and prejudgment interest to settle the SEC’s charges. 

“Improper application of accounting principles by Wilmington Trust had the effect of misleading investors about a key credit quality metric during a time of significant upheaval and financial distress for the bank,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement.  “Investors must know when banking institutions are unable to recover on material amounts of outstanding loans, which means those institutions must carefully adhere to relevant accounting rules.”

Andrew M. Calamari, Director of the SEC’s New York Regional Office, added, “By failing to fully disclose the actual volume of accruing loans past due 90 days or more, Wilmington Trust prevented investors from learning the full scope of the troubles in its commercial real estate loan portfolio.”

According to the SEC’s order instituting a settled administrative proceeding, Wilmington Trust omitted from its disclosures in the third and fourth quarters of 2009 approximately $338.9 million and $330.2 million, respectively, in matured loans 90 days or more past due.  Instead, it disclosed just $38.7 million in such loans for the third quarter and only $30.6 million in its annual report following the fourth quarter.  Wilmington Trust also materially misreported this category of loans in the first and second quarters of 2010.  Furthermore, Wilmington Trust failed to accurately disclose during the second half of 2009 the amount of non-accruing loans in its portfolio, and materially understated its loan loss provision and allowance for loan losses during this same period.

Wilmington Trust consented to the entry of the order finding that it violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 as well as the reporting, books and records, and internal controls provisions of the federal securities laws.  In addition to the monetary sanctions, Wilmington Trust agreed to cease and desist from committing or causing any violations and any future violations of these provisions.

The SEC’s investigation, which is continuing, has been conducted by Margaret Spillane, James Addison, and Michael Osnato of the New York Regional Office.  The SEC appreciates the assistance of the U. S. Attorney’s Office for the District of Delaware, Federal Bureau of Investigation, Federal Reserve, and Office of the Special Inspector General for the Troubled Asset Relief Program.


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