Wilmington Trust Company has agreed to pay $18.5 million to settle U.S. Securities and Exchange Commission charges of accounting and disclosure fraud for hiding mounting problems in its commercial real estate portfolio.

Wilmington Trust is now part of M&T Bank.

Wilmington Trust is now part of M&T Bank.

In announcing the settlement Thursday, the SEC said that instead of fully and accurately disclosing the volume of construction loans at least 90 days past due, Wilmington Trust “improperly excluded the matured loans from its public financial reporting.”

The bank holding company disclosed only $38.7 million in matured loans in the third quarter of 2009 and $30.6 million in the fourth quarter when the actual amounts for those periods were $338.9 million and $330.2 million respectively, the SEC said.

During 2009 and 2010, the SEC found, some of Wilmington Trust’s construction loans “began to mature without repayment or completion of the underlying project, Wilmington … did not renew, extend or take other appropriate action for 90 days or more on a material amount of its matured loans.” The bank then improperly excluded the matured loans from its public financial reports.

“Wilmington Trust prevented investors from learning the full scope of the troubles in its commercial real estate loan portfolio,” Andrew M. Calamari, director of the SEC’s New York Regional Office, said in a statement.

As part of the settlement, Wilmington, which was acquired by M&T Bank in 2011, agreed to the financial penalties and an order finding it violated federal securities laws.

The SEC said that during the second half of 2009, the company also failed to accurately disclose the amount of non-accruing loans in its portfolio and materially understated its loan loss provision and allowance for loan losses.

“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.”

The SEC’s investigation of Wilmington Trust is continuing, according to the statement.

M&T Bank’s stock rose slightly to $125.54 in trading Thursday.

Source: SEC Charges Bank Holding Company

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