NEW YORK/WASHINGTON (Reuters) - Wilmington Trust Co, now part of M&T Bank Corp, will pay $18.5 million to settle charges that it underreported the amount of construction loans that were not being repaid after the financial crisis, the U.S. Securities and Exchange Commission said on Thursday.
The SEC said that Wilmington Trust in the third and fourth quarters of 2009 failed to disclose more than $330 million of loans that were at least 90 days past due, and materially misreported such loans in the first half of 2010. It said Wilmington Trust did not set aside enough money for loan losses.
Mounting losses from construction loans and commercial mortgages were a major factor in Wilmington Trust’s agreement in November 2010 to sell itself to M&T at a 46 percent discount to its market value at that time. The merger closed in May 2011.
“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,” Andrew Ceresney, director of the SEC enforcement division, said in a statement.
Wilmington Trust settled the charges case without admitting or denying the SEC’s findings. All the alleged wrongful conduct predated the M&T purchase.
Warren Buffett’s Berkshire Hathaway Inc is among the largest shareholders of M&T, which is based in Buffalo, New York.
Michael Zabel, an M&T spokesman, said: “While we cannot speak to things that occurred at the former company, it’s important to resolve issues from the past as we continue to build on Wilmington Trust’s legacy both in Delaware and in the wealth and trust management business.”
M&T last month said the U.S. Department of Justice was still pursuing a related probe into Wilmington Trust’s financial reporting and securities filings.
It is unclear how Thursday’s settlement might affect M&T’s planned $3.7 billion purchase of New Jersey’s Hudson City Bancorp Inc. That merger was announced in August 2012, but has yet to close.
Federal regulators have raised concerns over M&T’s internal controls, including those to combat money laundering.
Reporting by Sarah N. Lynch and Jonathan Stempel; Editing by Leslie Adler