M&T Bank Corporation has signed a definitive agreement with Wilmington Trust Corporation to buy Wilmington in a deal valued at $351 million, forming one of the largest banks in the eastern side of the US, the firms announced today.

The announcement confirmed press speculation, as reported by this publication last week, that Wilmington, which was founded by the du Pont family dynasty, was seeking a buyer. Wilmington had a capital infusion earlier this year when it raised $274 million in a March share sale after losses on commercial real estate loans and on investments in pools of trust-preferred securities issued by other financial institutions.

Meanwhile, Wilmington reported a loss of $365.3 million for the 2010 third quarter. After dividends and accretion on preferred stock, the net loss available to common shareholders was $369.9 million, or $4.06 per share. The primary causes of the loss were continued deterioration in commercial credit quality, which resulted in a loan loss provision of $281.5 million. There was also an income tax expense of $100.7 million, as the company established a valuation allowance on deferred tax assets. At September 30, 2010, the company remained well capitalized and had sufficient liquidity, it said in a results statement.

Under the terms of the agreement announced today, Wilmington Trust common shareholders will receive 0.051372 shares of M&T common stock in exchange for each share of Wilmington Trust common stock they own in a stock-for-stock transaction. The deal is expected to close by the middle of next year, according to a statement.

Headquartered in Buffalo, NY, M&T has $68.2 billion in assets, and has extensive operations in the mid-Atlantic region.  Wilmington Trust, based in Wilmington, DE, has $10.4 billion in assets.

"This strategic partnership brings together two institutions that share many common values, and that operate several distinct but complementary lines of business," said M&T Chairman and chief executive, Robert Wilmers.

Explaining the case for the deal, Donald Foley, Chairman and CEO of Wilmington Trust, said that recent results showed that the firm continued to face “difficult realities” linked to the loan portfolio of its banking business, even though some of its fee-based businesses were performing strongly.

“As a result, our board examined a range of strategic alternatives and has held discussions with several potential partners. After careful study, the board, advised by its lead financial adviser Lazard Freres & Co, concluded that our merger with M&T is the best available option for our stockholders and also serves the interests of our clients and almost 3,000 staff members,” Foley said in the statement.

“In M&T, Wilmington Trust has found a partner with complementary businesses, a strong financial foundation and an outstanding reputation. Our merger will allow us to build on our many strengths and preserve our commitment to clients and the Delaware community,” he added.

Following completion of the deal, M&T will operate approximately 800 branches and 2,000 ATMs in eight states, the District of Columbia and Ontario, Canada. 

M&T expects to gain approximately $8.3 billion in deposits and $8.1 billion in loans from the agreement (before acquisition accounting adjustments), giving M&T the top deposit share and a strong commercial lending position in Delaware, the firms said.