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July 24, 2009
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Wilmington Trust Corp.’s (WL) second quarter operating earnings of $0.06 per diluted share were four pennies ahead of our estimate and much ahead of consensus. However, as expected by the company a few days ago, the results suffered an 83.1% increase in provision and a special consideration of Federal Deposit Insurance Corporation (FDIC) of approximately $5 million.
Excluding preferred dividends, net loss available to common shareholders came in at $13.6 million or $0.20 per diluted share, compared to a net loss of $19.5 million or $0.29 per diluted share in the prior-year quarter. The results for the reported quarter included securities losses of $23.4 million on trust-preferred investment securities, which reduced earnings by approximately $0.26 per diluted share. The operating earnings exclude this after-tax securities impairment.
Credit metrics worsened during the quarter, with period-end non-performing assets increasing to 3.59% of loans (up 93 bps sequentially) and quarterly net charge-offs at 0.39% of average loans (up 17 bps sequentially). During the reported quarter, WL increased provision for loan losses to $54.0 million from $29.5 million in the prior quarter. The loan-loss-reserve ratio increased to 2.02% from 1.77% in the prior quarter.
Tax-equivalent net interest income increased 3.9% sequentially but decreased 4.5% year-over-year to $82.1 million, as Net Interest Margin (NIM) increased 25 bps sequentially but decreased 1 bp year-over-year to 3.16% at the end of second quarter 2009. Average loans decreased 1.3% sequentially but increased 3.4% year-over-year to $9.4 billion. Average deposits decreased 2.2% sequentially and 3.4% year-over-year to $7.6 billion.
Total non-interest income decreased 26.3% sequentially and 12.4% year-over-year to $81.6 million. Non-interest expenses increased 1.4% sequentially but decreased 31.9% year-over-year to $128.4 million.
The non-interest expense for the quarter included the special FDIC insurance assessment of $5.3 million. The year-over-year increase in non-interest expenses resulted primarily from the two CCS retirement services acquisitions completed in 2008.
Return on Equity (ROE) for the quarter came in at negative 3.58%, an improvement from negative 7.01% in the prior-year quarter and Return on average Assets (ROA) was negative 0.32%, an improvement from negative 0.66% in the prior-year quarter.
Book value at June 30, 2009 was $14.26 per share, compared to $14.64 at March 31, 2009 and $15.85 at June 30, 2008.
Though loan growth has been impressive relative to many of its peers -- Webster Financial (WBS), Valley National (VLY) and Fulton Financial (FULT) -- so far, mainly due to strong economic growth in the Delaware region, the pace of growth has started to moderate in the last few quarters.
We expect the pace to slow down further in the near to medium-term, based on the ongoing weakness in the economy. Thus, we are maintaining our Sell recommendation on the shares of WL.
Read the full analyst report on "WL"
Read the full analyst report on "WBS"
Read the full analyst report on "VLY"
Read the full analyst report on "FULT"
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