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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
COMMISSION FILE NUMBER 1-9718
THE PNC FINANCIAL SERVICES GROUP, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1435979
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
ONE PNC PLAZA
249 FIFTH AVENUE
PITTSBURGH, PENNSYLVANIA 15222-2707
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
Registrant's telephone number, including area code - (412) 762-2000
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Securities registered pursuant to Section 12(b) of the Act:
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Name of Each Exchange
Title of Each Class on Which Registered
- ------------------- -----------------------
COMMON STOCK, PAR VALUE $5.00 New York Stock Exchange
$1.60 CUMULATIVE CONVERTIBLE PREFERRED STOCK-SERIES C, PAR VALUE $1.00 New York Stock Exchange
$1.80 CUMULATIVE CONVERTIBLE PREFERRED STOCK-SERIES D, PAR VALUE $1.00 New York Stock Exchange
SERIES G JUNIOR PARTICIPATING PREFERRED SHARE PURCHASE RIGHTS New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
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$1.80 CUMULATIVE CONVERTIBLE PREFERRED STOCK - SERIES A, PAR VALUE $1.00
$1.80 CUMULATIVE CONVERTIBLE PREFERRED STOCK - SERIES B, PAR VALUE $1.00
8.25% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2008
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes X No
--- ---
The aggregate market value of the registrant's outstanding voting common stock
held by nonaffiliates on June 28, 2002, determined using the per share closing
price on that date on the New York Stock Exchange of $52.28, was approximately
$14.8 billion. There is no non-voting common equity of the registrant
outstanding.
Number of shares of registrant's common stock outstanding at February 28, 2003:
282,825,171
DOCUMENTS INCORPORATED BY REFERENCE
Portions of The PNC Financial Services Group, Inc. Annual Report to Shareholders
for 2002 ("Annual Report to Shareholders") are incorporated by reference into
Parts I, II, III and IV and portions of the definitive Proxy Statement of The
PNC Financial Services Group, Inc. to be filed pursuant to Regulation 14A for
the annual meeting of shareholders to be held on April 22, 2003 ("Proxy
Statement") are incorporated by reference into Part III of this Form 10-K. The
incorporation by reference herein of portions of the Proxy Statement shall not
be deemed to specifically incorporate by reference the information referred to
in Items 306(c), 306(d) and 402(a)(8) and (9) of Regulation S-K.
TABLE OF CONTENTS
Page
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PART I
Item 1 Business 3
Item 2 Properties 9
Item 3 Legal Proceedings 10
Item 4 Submission of Matters to a Vote of Security
Holders 10
Executive Officers of the Registrant 11
PART II
Item 5 Market for Registrant's Common Equity and
Related Stockholder Matters 11
Item 6 Selected Financial Data 12
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Item 7A Quantitative and Qualitative Disclosures About
Market Risk 12
Item 8 Financial Statements and Supplementary Data 12
Item 9 Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure 12
PART III
Item 10 Directors and Executive Officers of the Registrant 12
Item 11 Executive Compensation 12
Item 12 Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters 12
Item 13 Certain Relationships and Related Transactions 13
Item 14 Controls and Procedures 13
PART IV
Item 15 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 13
SIGNATURES 15
CERTIFICATIONS 16
EXHIBIT INDEX E-1
PART I
Forward-Looking Statements: From time to time The PNC Financial Services Group,
Inc. ("PNC" or "Corporation") has made and may continue to make written or oral
forward-looking statements with respect to the Corporation's outlook or
expectations for earnings, revenues, expenses, capital levels, asset quality or
other future financial or business performance, strategies and expectations and
the impact of legal, regulatory and supervisory matters on the Corporation's
business operations and performance. This Annual Report on Form 10-K ("Form
10-K") also includes forward-looking statements. Forward-looking statements are
typically identified by words or phrases such as "believe," "feel," "expect,"
"anticipate," "intend," "outlook," "estimate," "forecast," "project,"
"position," "target," "assume," "achievable," "potential," "strategy," "goal,"
"objective," "plan," "aspiration," "outcome," "continue," "remain," "maintain,"
"seek," "strive," "trend," and variations of such words and similar expressions,
or future or conditional verbs such as "will," "would," "should," "could,"
"might," "can," "may" or similar expressions.
The Corporation cautions that forward-looking statements are subject to numerous
assumptions, risks and uncertainties, which change over time. Actual results
could differ materially from those anticipated in forward-looking statements and
future results could differ materially from historical performance.
Forward-looking statements speak only as of the date they are made, and the
Corporation assumes no duty and does not undertake to update forward-looking
statements.
The factors discussed elsewhere in this report and the following factors, among
others, could cause actual results to differ materially from those anticipated
in forward-looking statements or from historical performance:
(1) changes in political, economic or industry conditions, the interest
rate environment or financial and capital markets, which could result in: a
deterioration in credit quality, increased credit losses, and increased
funding of unfunded loan commitments and letters of credit; an adverse
effect on the allowances for credit losses and unfunded loan commitments and
letters of credit; a reduction in demand for credit or fee-based products
and services; a reduction in net interest income, value of assets under
management and assets serviced, value of private equity investments and of
other debt and equity investments, value of loans held for sale or value of
other on-balance-sheet and off-balance-sheet assets; or changes in the
availability and terms of funding necessary to meet PNC's liquidity needs;
(2) relative and absolute investment performance of assets under management;
(3) the introduction, withdrawal, success and timing of business initiatives
and strategies, decisions regarding further reductions in balance sheet
leverage, the timing and pricing of any sales of loans held for sale, and
PNC's inability to realize cost savings or revenue enhancements, or to
implement integration plans relating to or resulting from mergers,
acquisitions, restructurings and divestitures;
(4) customer borrowing, repayment, investment and deposit practices and their
acceptance of PNC's products and services;
(5) the impact of increased competition;
(6) how PNC chooses to redeploy available capital, including the extent and
timing of any share repurchases and investments in PNC businesses;
(7) the inability to manage risks inherent in PNC's business;
(8) the unfavorable resolution of legal proceedings or government inquiries;
the impact of increased litigation risk from recent regulatory
developments; and the impact of reputational risk created by recent
regulatory developments on such matters as business generation and
retention, the ability to attract and retain management, liquidity and
funding;
(9) the denial of insurance coverage for claims made by PNC;
(10) an increase in the number of customer or counterparty delinquencies,
bankruptcies or defaults that could result in among other things, increased
credit and asset quality
2
risk, a higher provision for credit losses and reduced profitability;
(11) the impact, extent and timing of technological changes, the adequacy of
intellectual property protection and costs associated with obtaining rights
in intellectual property claimed by others;
(12) actions of the Federal Reserve Board;
(13) the impact of legislative and regulatory reforms and changes in accounting
policies and principles;
(14) the impact of the regulatory examination process, the Corporation's failure
to satisfy the requirements of written agreements with regulatory agencies,
and regulators' future use of supervisory and enforcement tools; and
(15) terrorist activities and international hostilities, including the
situations surrounding Iraq and North Korea, which may adversely affect the
general economy, financial and capital markets, specific industries, and
the Corporation.
Some of the above factors are described in more detail in the "Risk Factors"
section of the "Financial Review" included on pages 48 through 53 of the Annual
Report to Shareholders, and factors relating to interest rate risk, operational
risk, trading activities, financial and other derivatives and off-balance sheet
activities are discussed in the "Risk Management" section of the "Financial
Review" included on pages 53 through 61 of the Annual Report to Shareholders.
Factors relating to credit risk and liquidity are discussed in the "Consolidated
Balance Sheet Review" section of the "Financial Review" included on pages 40
through 48 of the Annual Report to Shareholders. The Annual Report to
Shareholders is incorporated herein by reference. Other factors are described
elsewhere in this Form 10-K and the Annual Report to Shareholders.
ITEM 1 - BUSINESS
BUSINESS OVERVIEW The Corporation is a bank holding company registered under the
Bank Holding Company Act of 1956, as amended ("BHC Act") and a financial holding
company under the Gramm-Leach-Bliley Act ("GLB Act"). PNC was incorporated under
the laws of the Commonwealth of Pennsylvania in 1983 with the consolidation of
Pittsburgh National Corporation and Provident National Corporation. Since 1983,
PNC has diversified its geographical presence, business mix and product
capabilities through strategic bank and nonbank acquisitions and the formation
of various nonbanking subsidiaries.
The Corporation is one of the largest diversified financial services companies
in the United States, operating businesses engaged in regional community
banking; wholesale banking, including corporate banking, real estate finance and
asset-based lending; wealth management; asset management and global fund
processing services. The Corporation and its subsidiaries provide certain
products and services nationally and others in PNC's primary geographic markets
in Pennsylvania, New Jersey, Delaware, Ohio and Kentucky. The Corporation and
its subsidiaries also provide certain banking, asset management and global fund
processing services internationally. At December 31, 2002, the Corporation's
consolidated total assets, deposits and shareholders' equity were $66.4 billion,
$45.0 billion and $6.9 billion, respectively. In the context of this Business
Overview, financial and other information by segment is included in "Note 26
Segment Reporting" of the "Notes To Consolidated Financial Statements" included
on pages 100 and 101 of the Annual Report to Shareholders and incorporated
herein by reference. Information on certain acquisitions and divestitures is
included in "Note 2 NBOC Acquisition" and "Note 4 Discontinued Operations"
included on pages 81 and 83, respectively, of the Annual Report to Shareholders
and is incorporated herein by reference.
REVIEW OF BUSINESSES Information relating to the Corporation's businesses, which
reflect its operating structure during 2002, is set forth under the captions
"Overview" and "Review of Businesses" in the "Financial Review" included on
pages 28 through 37 of the Annual Report to Shareholders and is incorporated
herein by reference.
SUBSIDIARIES The corporate legal structure currently consists of two subsidiary
banks, with their subsidiaries, and over 70 active nonbank subsidiaries. PNC
Bank, National Association ("PNC Bank"), headquartered in Pittsburgh,
Pennsylvania, is the Corporation's principal bank subsidiary. At December 31,
2002, PNC Bank had total consolidated assets representing approximately 90% of
the Corporation's consolidated assets. For additional information on
subsidiaries, see Exhibit 21 to this Form 10-K, which is incorporated herein by
reference.
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES The following statistical
information is included on the indicated pages of the Annual Report to
Shareholders and is incorporated herein by reference:
Pages of
Annual
Report to
Shareholders
-----------------
Average Consolidated Balance Sheet And Net Interest Analysis 110-111
Analysis of Year-To-Year Changes In Net Interest Income 109
Book Values Of Securities 45 and 85
Maturities And Weighted-Average Yield of Securities 86
Loan Types 41 and 87
Loan Maturities And Interest Sensitivity 113
Nonaccrual, Past Due and Restructured Loans 41, 42, 74 and 88
Potential Problem Loans and Loans Held for Sale 41-42
Summary of Loan Loss Experience 43, 44 and 112
Allocation of Allowance for Credit Losses 43, 44 and 112
Average Amount and Average Rate Paid on Deposits 110-111
Time Deposits of $100,000 or More 92 and 113
Selected Consolidated Financial Data 26-27
Short-Term Borrowings 113
RISK FACTORS & MANAGEMENT The Corporation is subject to a number of risk factors
including, among others: business and economic conditions; the successful
execution of the Corporation's 2001 strategic repositioning; changes in the
underlying factors, assumptions and estimates inherent in the Corporation's
critical accounting policies and judgments; compliance with applicable standards
established by supervisory
3
and regulatory bodies; monetary and other policies; competition;
disintermediation; and risk relating to asset management performance, fund
servicing, acquisitions, and terrorist activities and international hostilities.
These factors, and others, could impact the Corporation's business, financial
condition and results of operations. In the normal course of business, the
Corporation assumes various types of risk, which include, among others, credit
risk, market risk, interest rate risk, liquidity risk, operational risk, and
risk associated with trading activities, financial and other derivatives and
"off-balance-sheet" activities. PNC has risk management processes designed to
provide for risk identification, measurement and monitoring.
Risk factors are described in more detail in the "Credit Risk", "Liquidity" and
"Risk Factors" sections of the "Financial Review" included on pages 43 through
46, 46 through 48, and 48 through 53, respectively, of the Annual Report to
Shareholders, which is incorporated herein by reference. The Corporation's risk
management processes are described in more detail in the "Risk Management"
section of the "Financial Review" included on pages 53 through 61 of the Annual
Report to Shareholders, which is incorporated herein by reference. Also, see the
Forward-Looking Statements section at the beginning of Part I of this Form 10-K
for certain other factors that could cause actual results to differ materially
from forward-looking statements or historical performance.
EFFECT OF GOVERNMENTAL, MONETARY AND OTHER POLICIES The activities and results
of operations of bank holding companies and their subsidiaries are affected by
monetary, tax and other policies of the government and its agencies, including
the Board of Governors of the Federal Reserve System ("Federal Reserve Board").
An important function of the Federal Reserve Board is to regulate the national
supply of bank credit. The Federal Reserve Board employs open market operations
in U.S. Government securities, changes in the discount rate on bank borrowings
and changes in reserve requirements on bank deposits to implement its monetary
policy objectives. These instruments of monetary policy are used in varying
combinations to influence the overall level of bank loans, investments and
deposits, the interest rates charged on loans and paid for deposits, the price
of the dollar in foreign exchange markets and the level of inflation. The
Federal Reserve Board's policies influence the rates of interest that PNC
charges on loans and pays on borrowings and interest-bearing deposits and can
also affect the value of on-balance-sheet and off-balance-sheet financial
instruments. Those policies also influence, to a significant extent, the cost of
funding for the Corporation. It is not possible to predict the nature or timing
of future changes in monetary, tax and other policies or the effect that they
may have on the Corporation's activities and results of operations.
IMPACT OF INFLATION The assets and liabilities of the Corporation are primarily
monetary in nature. Accordingly, future changes in prices do not affect the
obligations to pay or receive fixed and determinable amounts of money. During
periods of inflation, monetary assets lose value in terms of purchasing power
and monetary liabilities have corresponding purchasing power gains. The concept
of purchasing power, however, is not an adequate indicator of the effect of
inflation on banks because it does not take into account changes in interest
rates, which are an important determinant of the Corporation's earnings. A
discussion of interest rate risk is set forth under the caption "Interest Rate
Risk" in the "Risk Management" section of the "Financial Review" included on
pages 53 through 55 of the Annual Report to Shareholders, and is incorporated
herein by reference.
SUPERVISION AND REGULATION
OVERVIEW
The Corporation and its subsidiaries are subject to numerous governmental
regulations, some of which are highlighted below and in "Note 3 Regulatory
Matters" of the "Notes To Consolidated Financial Statements" included on pages
82 and 83 of the Annual Report to Shareholders, which is incorporated herein by
reference. Applicable laws and regulations restrict permissible activities and
investments and require compliance with protections for loan, deposit,
brokerage, fiduciary, mutual fund and other customers, among other things. They
also restrict the Corporation's ability to repurchase stock or to receive
dividends from its bank subsidiaries and impose capital adequacy requirements.
The consequences of noncompliance can include substantial monetary and
nonmonetary sanctions.
In addition, the Corporation and its subsidiaries are subject to comprehensive
examination and supervision by, among other regulatory bodies, the Federal
Reserve Board and the Office of the Comptroller of the Currency ("OCC"). These
regulatory agencies generally have broad discretion to impose restrictions and
limitations on the operations of a regulated entity where the agencies
determine, among other things, that such operations are unsafe or unsound, fail
to comply with applicable law or are otherwise inconsistent with laws and
regulations or with the supervisory policies of these agencies. This supervisory
framework could materially impact the conduct, growth and profitability of the
Corporation's operations.
The Corporation and certain of its subsidiaries are also subject to regulation
by the Securities and Exchange Commission ("SEC") by virtue of the Corporation's
status as a public company and due to the nature of certain of its businesses.
There are numerous rules governing the regulation of financial services
institutions and their holding companies. Accordingly, the following discussion
is general in nature and does not purport to be complete or to describe all of
the laws and regulations that apply to the Corporation and its subsidiaries.
The discussion below begins by presenting a general description of the principal
regulations affecting the Corporation. It then summarizes key regulatory
developments that took place in 2002, including ongoing adverse
4
consequences. The general regulatory description should be reviewed in light of
these 2002 developments.
GENERAL
As a bank holding company and, as discussed below, a "financial holding
company," the Corporation is subject to supervision and regular inspection by
the Federal Reserve Board. The Federal Reserve Board's prior approval is
required whenever the Corporation proposes to acquire all or substantially all
of the assets of any bank or thrift, to acquire direct or indirect ownership or
control of more than 5% of the voting shares of any bank or thrift, or to merge
or consolidate with any other bank holding company or thrift holding company.
When reviewing bank acquisition applications for approval, the Federal Reserve
Board considers, among other things, each subsidiary bank's record in meeting
the credit needs of the communities it serves in accordance with the Community
Reinvestment Act of 1977, as amended ("CRA"). At December 31, 2002, both of the
Corporation's bank subsidiaries, PNC Bank and PNC Bank, Delaware, were rated
"outstanding" with respect to CRA.
The GLB Act, which was enacted on November 12, 1999 and portions of which became
effective on March 11, 2000, permits a qualifying bank holding company to become
a financial holding company and thereby to affiliate with financial companies
engaging in a broader range of activities than had previously been permitted for
a bank holding company. Permitted affiliates include securities underwriters and
dealers, insurance companies and companies engaged in other activities that are
determined by the Federal Reserve Board, in consultation with the Secretary of
the Treasury, to be "financial in nature or incidental thereto" or are
determined by the Federal Reserve Board unilaterally to be "complementary" to
financial activities. A bank holding company may elect to become a financial
holding company if each of its subsidiary banks is "well capitalized," is "well
managed," and has at least a "satisfactory" CRA rating. The Corporation became a
financial holding company as of March 13, 2000.
The Federal Reserve Board is the "umbrella" regulator of a financial holding
company. In addition, the financial holding company's operating entities, such
as its subsidiary broker-dealers, investment managers, investment companies,
insurance companies and banks, are also subject to the jurisdiction of various
federal and state "functional" regulators.
The Corporation's subsidiary banks and their subsidiaries are subject to
supervision and examination by applicable federal and state banking agencies,
including the OCC with respect to PNC Bank and the Federal Deposit Insurance
Corporation ("FDIC") and the Delaware Office of the State Bank Commissioner with
respect to PNC Bank, Delaware. One aspect of this regulation is that the
Corporation's subsidiary banks are subject to various federal and state
restrictions on their ability to pay dividends to PNC Bancorp, Inc., the parent
of the subsidiary banks, which in turn may affect the ability of PNC Bancorp,
Inc. to pay dividends to the Corporation. These dividends constitute the
principal source of the Corporation's revenue and cash flow at the parent
company level. Without regulatory approval, the amount available for the payment
of dividends by PNC Bank and PNC Bank, Delaware was approximately $460 million
at December 31, 2002. The Corporation's subsidiary banks are also subject to
federal laws limiting extensions of credit to their parent holding company and
nonbank affiliates as discussed in "Note 3 Regulatory Matters" of the "Notes To
Consolidated Financial Statements" included on pages 82 and 83 of the Annual
Report to Shareholders, which is incorporated herein by reference.
Under Federal Reserve Board policy, a bank holding company is expected to act as
a source of financial strength to each of its subsidiary banks and to commit
resources to support each such bank. Consistent with the "source of strength"
policy for subsidiary banks, the Federal Reserve Board has stated that, as a
matter of prudent banking, a bank holding company generally should not maintain
a rate of cash dividends unless its net income available to common shareholders
has been sufficient to fully fund the dividends and the prospective rate of
earnings retention appears to be consistent with the corporation's capital
needs, asset quality and overall financial condition.
In addition to dividends from PNC Bank and PNC Bank, Delaware, other sources of
parent company liquidity for the Corporation include cash and short-term
investments, as well as dividends and loan repayments from other subsidiaries.
As of December 31, 2002, the Corporation had approximately $719 million in funds
available from its cash and short-term investments or other funds available from
unrestricted subsidiaries. The Corporation currently has available funds to pay
dividends at current rates through 2003.
Subsidiary banks are also limited by law and regulation in the scope of
permitted activities and investments. Subsidiary banks and their operating
subsidiaries may engage in any activities that are determined by the OCC to be
part of or incidental to the business of banking. The GLB Act, however, permits
a national bank, such as PNC Bank, to engage in expanded activities through the
formation of a "financial subsidiary." PNC Bank has filed a financial subsidiary
certification with the OCC and may thus engage through a financial subsidiary in
any activity that is financial in nature or incidental to a financial activity
with certain exceptions, including insurance underwriting, insurance
investments, real estate investment or development, and merchant banking.
In order to qualify to establish or acquire a financial subsidiary, PNC Bank and
each of its depository institution affiliates must be "well capitalized" and
"well managed" and may not have a less than "satisfactory" CRA rating. In
addition, the total assets of all financial subsidiaries of a national bank may
not exceed the lesser of $50 billion or 45% of the parent bank's total assets. A
national bank that is one of the largest 50 insured banks in the United States,
such as PNC
5
Bank, must also have issued debt with certain minimum ratings. In addition to
calculating its risk-based capital information from its consolidated financial
statements, a national bank with one or more financial subsidiaries must also be
"well capitalized" after excluding from its assets and equity all equity
investments, including retained earnings, in a financial subsidiary, and the
assets of the financial subsidiary from the bank's consolidated assets. Any
published financial statement for a national bank with a financial subsidiary
must provide risk-based capital information under both methods described above.
The bank must also have policies and procedures to assess financial subsidiary
risk and protect the bank from such risks and potential liabilities.
As a regulated financial services firm, the Corporation's relationships and good
standing with its regulators are of fundamental importance to the continuation
and growth of the Corporation's businesses. The Federal Reserve Board, OCC, SEC,
and other domestic and foreign regulators have broad enforcement powers, and
powers to approve, deny, or refuse to act upon applications or notices of the
Corporation or its subsidiaries to conduct new activities, acquire or divest
businesses or assets, or reconfigure existing operations. In addition, the
Corporation and its bank subsidiaries are subject to examination by various
regulators, which results in examination reports and ratings (which are not
publicly available) that can impact the conduct and growth of the Corporation's
businesses. These examinations consider not only compliance with applicable laws
and regulations, but also capital levels, asset quality and risk, management
ability and performance, earnings, liabilities, and various other factors. An
examination downgrade by any of the Corporation's federal bank regulators
potentially can result in the imposition of significant limitations on the
activities and growth of the Corporation and its subsidiaries.
For example, as subsidiaries of a financial holding company under the GLB Act,
the nonbank subsidiaries of the Corporation are allowed to conduct new financial
activities or acquire nonbank financial companies with after-the-fact notice to
the Federal Reserve Board. In addition, the Corporation's nonbank subsidiaries
(and financial subsidiaries of the Corporation's subsidiary banks) are now
permitted to engage in certain activities that were not permitted for banks and
bank holding companies prior to enactment of the GLB Act, and to engage in
certain activities that previously were permitted, all on less restrictive
terms. Among other activities, the Corporation currently relies on its status as
a financial holding company to conduct mutual fund distribution activities,
merchant banking activities, and underwriting and dealing activities.
To continue to qualify for financial holding company status, the Corporation's
subsidiary banks must maintain "well capitalized" capital ratios, examination
ratings of "1" or "2" (on a scale of 1 to 5), and certain other criteria that
are incorporated into the definition of "well managed" under the Bank Holding
Company Act and Federal Reserve Board rules. If the Corporation were no longer
to qualify for this status, it could not continue to enjoy the after-the-fact
notice process for new nonbanking activities and nonbanking acquisitions, and
would be required promptly to enter into an agreement with the Federal Reserve
Board providing a plan for the Corporation's subsidiary bank(s) to meet the
"well capitalized" and "well managed" criteria. The Federal Reserve Board would
have broad authority to limit the activities of the Corporation. Failure to
satisfy the criteria within a six-month period could result in a requirement
that the Corporation conform its existing nonbanking activities to activities
that were permissible prior to the enactment of the GLB Act. If a subsidiary
bank of the Corporation failed to maintain a "satisfactory" or better rating
under the CRA, the Corporation could not commence new activities or make new
investments in reliance on the GLB Act.
In addition, if the Corporation's subsidiary banks were no longer "well
capitalized" and "well managed" within the meaning of the Bank Holding Company
Act and Federal Reserve Board rules (which take into consideration capital
ratios, examination ratings and other factors), the expedited processing of
certain types of Federal Reserve Board applications would not be available to
the Corporation. Moreover, examination ratings of "3" or lower, lower capital
ratios than peer group institutions, regulatory concerns regarding management,
controls, assets, operations or other factors, can all potentially result in
practical limitations on the ability of a bank or bank holding company to engage
in new activities, grow, acquire new businesses, repurchase its stock or pay
dividends, or continue to conduct existing activities.
Certain subsidiaries of the Corporation's BlackRock, Inc. subsidiary
("BlackRock") have qualified as "financial subsidiaries," as described above, of
PNC Bank. If a subsidiary bank of the Corporation were to fail to meet the "well
capitalized" or "well managed" and related criteria, PNC Bank would be required
to enter into an agreement with the OCC to correct the condition. The OCC would
have the authority to limit the activities of the bank. If the condition were
not corrected within six months or within any additional time granted by the
OCC, PNC Bank could be required to conform the activities of its financial
subsidiaries to activities in which a national bank could engage directly. In
addition, if the bank or any insured depository institution affiliate receives a
less than satisfactory CRA examination rating, PNC Bank would not be permitted
to engage in any new activities or to make new investments in reliance on the
financial subsidiary authority.
The federal banking agencies possess broad powers to take corrective action as
deemed appropriate for an insured depository institution and its holding
company. The extent of these powers depends upon whether the institution in
question is considered "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." Generally, the smaller an institution's capital base in
relation to its total assets, the greater the scope and severity of the
agencies' powers, ultimately permitting the agencies to appoint a receiver for
the
6
institution. Business activities may also be influenced by an institution's
capital classification. For instance, only a "well capitalized" depository
institution may accept brokered deposits without prior regulatory approval and
an "adequately capitalized" depository institution may accept brokered deposits
only with prior regulatory approval. At December 31, 2002, both of the
Corporation's subsidiary banks exceeded the required ratios for classification
as "well capitalized." Additional discussion of capital adequacy requirements is
set forth under the caption "Capital" in the "Financial Review" and in "Note 3
Regulatory Matters" of the "Notes to Consolidated Financial Statements" on pages
47 and 48 and pages 82 and 83, respectively, of the Annual Report to
Shareholders, which sections are incorporated herein by reference.
Regulatory matters could also increase the cost of FDIC deposit insurance
premiums to an insured bank. Both of the Corporation's subsidiary banks are
insured by the FDIC and subject to premium assessments. Since 1996, the FDIC has
not assessed banks in the most favorable capital and assessment risk
classification categories for insurance premiums for most deposits, due to the
favorable ratio of the assets in the FDIC's deposit insurance funds to the
aggregate level of insured deposits outstanding. This has resulted in
significant cost savings to all insured banks. Recent costs to the FDIC in
resolving several large bank and savings institution receiverships, however,
have caused this ratio to decline to the point that the FDIC may be required in
the near future to once again begin to assess deposit insurance premiums against
insured banks in the most favorable capital and assessment risk classification
categories. Deposit insurance premiums are assessed as a percentage of the
deposits of the insured institution. If the FDIC assesses premiums for all
deposits, it would impose a significant cost to all insured banks, including the
Corporation's subsidiary banks, reducing the net spread between deposit and
other bank funding costs and the earnings from assets and services of the bank,
and thus the net income of the bank. FDIC deposit insurance premiums are "risk
based", therefore, higher fee percentages would be charged to banks that have
lower capital ratios or higher risk profiles. These risk profiles may take into
account weaknesses that are found by the primary banking regulator through its
examination and supervision of the bank. A negative evaluation by the FDIC or a
bank's primary federal banking regulator, as a result, could increase the costs
to a bank and result in an aggregate cost of deposit funds higher than that of
competing banks in a lower risk category.
The Corporation's subsidiary banks are subject to "cross-guarantee" provisions
under federal law that provide that if one of these banks fails or requires FDIC
assistance, the FDIC may assess a "commonly-controlled" bank for the estimated
losses suffered by the FDIC. Such liability could have a material adverse effect
on the financial condition of any assessed bank and the Corporation. While the
FDIC's claim is junior to the claims of depositors, holders of secured
liabilities, general creditors and subordinated creditors, it is superior to the
claims of shareholders and affiliates, such as the Corporation.
The Corporation's subsidiaries are subject to regulatory requirements imposed by
the Federal Reserve Board and other federal and state agencies. The
Corporation's registered broker-dealer subsidiaries, including one of
BlackRock's subsidiaries, are regulated by the SEC and either by the OCC or the
Federal Reserve Board. They are also subject to rules and regulations
promulgated by the National Association of Securities Dealers, Inc. ("NASD"),
among others. Three subsidiaries, including one of BlackRock's subsidiaries, are
registered as commodity pool operators with the Commodity Futures Trading
Commission ("CFTC") and the National Futures Association ("NFA"), and are
subject to regulation by them.
Several of the Corporation's subsidiaries, including certain BlackRock
subsidiaries, are registered with the SEC as investment advisers and, therefore,
are subject to the requirements of the Investment Advisers Act of 1940 and the
SEC's regulations thereunder. The principal purpose of the regulations
applicable to investment advisers is the protection of clients and the
securities markets, rather than the protection of creditors and stockholders of
investment advisers. The regulations applicable to investment advisers cover all
aspects of the investment advisory business, including limitations on the
ability of investment advisers to charge performance-based or non-refundable
fees to clients, record-keeping, operating, marketing and reporting
requirements, disclosure requirements, limitations on principal transactions
between an adviser or its affiliates and advisory clients, as well as general
anti-fraud prohibitions. The Corporation's investment advisory subsidiaries also
may be subject to certain state securities laws and regulations. In addition,
the Corporation's investment adviser subsidiaries, such as certain BlackRock
subsidiaries, that are investment advisors to registered investment companies
and other managed accounts are subject to the requirements of the Investment
Company Act of 1940 and the SEC's regulations thereunder.
Additional legislation, changes in rules promulgated by the SEC, other federal
and state regulatory authorities and self-regulatory organizations, or changes
in the interpretation or enforcement of existing laws and rules may directly
affect the method of operation and profitability of investment advisers. The
profitability of investment advisers could also be affected by rules and
regulations which impact the business and financial communities in general,
including changes to the laws governing taxation, antitrust regulation and
electronic commerce.
Under various provisions of the federal securities laws (including in particular
those applicable to broker-dealers, investment advisers and registered
investment companies and their service providers), a determination by a court or
regulatory agency that certain violations have occurred at a company or its
affiliates can result in a limitation of permitted activities, disqualification
to continue to conduct certain
7
activities and an inability to rely on certain favorable exemptions. Certain
types of infractions and violations can also affect a public company in its
timing and ability expeditiously to issue new securities into the capital
markets. In addition, expansion of activities of a broker-dealer generally
requires approval of the New York Stock Exchange and/or NASD, and regulators may
take into account a variety of considerations in acting upon such applications,
including internal controls, capital, management experience and quality, and
supervisory concerns.
For additional information about the regulation of BlackRock, see the discussion
under the "Regulation" section of Item 1. Business in BlackRock's most recent
Annual Report on Form 10-K, which may be obtained electronically at the SEC's
home page at www.sec.gov.
2002 REGULATORY DEVELOPMENTS
On July 18, 2002, the SEC, with the Corporation's consent, entered an Order
Instituting Public Administrative Proceedings Pursuant to Section 8A of the
Securities Act of 1933 and 21C of the Securities Exchange Act of 1934, Making
Findings and Imposing Cease-and-Desist Order ("Commission Order") in connection
with three 2001 transactions that gave rise to a financial statement restatement
announced by the Corporation on January 29, 2002. In consenting to the entry of
the Commission Order and the SEC's jurisdiction, the Corporation did not admit
or deny the SEC's findings. Collateral consequences from entry of the Commission
Order include the loss of "safe harbor" protection for forward-looking
statements under the Private Securities Litigation Reform Act for three years
from the date of the Commission Order and the potential for restrictions on the
licenses, registrations, and regulatory approvals of the Corporation's
subsidiaries engaged in broker-dealer and other regulated financial businesses
and impacting the status of the Corporation's subsidiaries as government
contractors. The potential restrictions are considered unlikely to be imposed.
On the same date, the Corporation announced that it had entered into a written
agreement with the Federal Reserve Bank of Cleveland ("Federal Reserve") and
that its principal subsidiary, PNC Bank, had entered into a written agreement
with the OCC. These agreements (together, the "Regulatory Agreements") address
such issues as risk, management and financial controls. As a result of entering
into the Regulatory Agreements, the Corporation and PNC Bank were required to
obtain approval of the Federal Reserve and the OCC, respectively, prior to
adding new directors or employing new senior executive officers, and were
prohibited from making "golden parachute payments," as defined in applicable
regulations, without prior regulatory approval. PNC Bank also was subject to
increases in deposit insurance premium assessments and regulatory examination
fees.
The Corporation and PNC Bank were also advised by the Federal Reserve Board and
the OCC, respectively, that the Corporation and PNC Bank no longer satisfied
financial holding company and financial subsidiary requirements for purposes of
the GLB Act. The Corporation and PNC Bank entered into agreements with the
Federal Reserve and the OCC, respectively, that required the Corporation and PNC
Bank to provide a plan for the Corporation's subsidiary bank, PNC Bank, to meet
the "well capitalized" and "well managed" criteria within a 180 day period from
receipt of the notices. During that interim period, the Corporation and PNC Bank
were prohibited from engaging in new activities or making new investments in
reliance on the regulatory procedures and powers pursuant to the GLB Act without
prior approval of the Federal Reserve or the OCC, respectively. The failure to
satisfy the requirements of the agreements could have resulted in the
Corporation's and PNC Bank's loss of powers allowed under the GLB Act.
As of December 19, 2002, the Federal Reserve notified the Corporation, and the
OCC notified PNC Bank, that the Corporation and PNC Bank were in full compliance
with the financial holding company and financial subsidiary requirements,
respectively, for purposes of the GLB Act, reflecting that PNC Bank now met both
the "well capitalized" and "well managed" criteria. This removed the limitations
placed in July 2002 on the Corporation's engaging in new activities or making
new investments and on PNC Bank's financial subsidiary activities. However, the
Regulatory Agreements remain in place, and the Corporation and PNC Bank,
respectively, in certain circumstances must continue to obtain prior approval
from the Federal Reserve or the OCC, respectively, before making acquisitions or
engaging in new activities.
The Federal Reserve and the OCC also notified the Corporation and PNC Bank,
respectively, that, as of December 19, 2002, the Corporation and PNC Bank were
no longer required to obtain approval of the Federal Reserve and the OCC,
respectively, prior to adding new directors or employing new senior executive
officers, and, in general, were not prohibited from making "golden parachute
payments." Also, PNC Bank is no longer subject to increased regulatory
examination fees. In addition, the FDIC has informed PNC Bank that, as of
January 1, 2003, the bank was no longer subject to increases in deposit
insurance premium assessments because it has been returned to the most favorable
assessment risk classification category.
Under applicable regulations, as long as the Corporation remains subject to the
Regulatory Agreement with the Federal Reserve, the Corporation must obtain prior
regulatory approval to repurchase its common stock in amounts that exceed 10
percent of consolidated net worth in any 12-month period. The Corporation has
incurred, and may continue to incur, additional operating costs in connection
with compliance with the Regulatory Agreements including, among others,
incremental staff and continued higher legal and consulting expenses. Further,
the reputational risk created by the Commission Order and the Regulatory
Agreements could still have an impact on such matters as business generation and
retention, the ability to attract and retain management, liquidity and funding.
8
The Corporation believes that it has made substantial progress to date in
enhancing its risk management and governance practices and improving its
regulatory relations, while addressing the various requirements set forth in the
Regulatory Agreements. There can be no assurance, however, as to the precise
timing for determining that all required corrective actions have been taken to
the appropriate satisfaction of the Federal Reserve and the OCC. The Board and
senior management team are committed to the goal of establishing the Corporation
as an industry leader in the areas of governance, corporate conduct, risk
management and regulatory relations, and to meeting all of the Corporation's
commitments to its regulators. While the Corporation believes that substantial
progress has been made in this pursuit to date, the Corporation also recognizes
that this remains an important ongoing effort requiring dedication and a
commitment of resources at all levels of the institution.
COMPETITION The Corporation and its subsidiaries are subject to intense
competition from various financial institutions and from "nonbank" entities that
engage in similar activities without being subject to bank regulatory
supervision and restrictions. This is particularly true as the Corporation
expands nationally and internationally beyond its primary geographic region,
where expansion requires significant investments to penetrate new markets and
respond to competition, and as the Corporation and other entities expand their
activities pursuant to the GLB Act, as discussed above.
In making loans, the subsidiary banks compete with traditional banking
institutions as well as consumer finance companies, leasing companies and other
nonbank lenders. Loan pricing and credit standards are under competitive
pressure as lenders seek to deploy capital and a broader range of borrowers have
access to capital markets. Traditional deposit activities are subject to pricing
pressures and customer migration as a result of intense competition for consumer
investment dollars. The Corporation's subsidiary banks compete for deposits with
not only other commercial banks, savings banks, savings and loan associations
and credit unions, but also insurance companies and issuers of commercial paper
and other securities, including mutual funds. Various nonbank subsidiaries
engaged in investment banking, private equity and venture capital activities
compete with commercial banks, investment banking firms, merchant banks,
insurance companies, venture capital firms and other investment vehicles. In
providing asset management services, the Corporation's subsidiaries compete with
many investment management firms, large banks and other financial institutions,
brokerage firms, mutual fund complexes, and insurance companies.
The ability to access and use technology is an increasingly important
competitive factor in the financial services industry. Technology is not only
important with respect to delivery of financial services, but in processing
information. Each of the Corporation's businesses consistently must make
technological investments to remain competitive.
See "Supervision and Regulation," "Competition," "Disintermediation," "Asset
Management Performance" and "Fund Servicing" within the "Risk Factors" section
of the "Financial Review" included on pages 51 and 52 of the Annual Report to
Shareholders, which is incorporated herein by reference.
EMPLOYEES Average full-time equivalent employees totaled approximately 23,900
for full year 2002, and were approximately 23,800 for the month of December
2002.
SEC REPORTS The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and in accordance
with the Exchange Act, PNC files annual, quarterly and current reports, proxy
statements, and other information with the SEC. PNC's SEC File Number is 1-9718.
You may read and copy any document PNC files with the SEC at the SEC's Public
Reference Room at 450 Fifth Street NW, Washington, D.C. 20549. You can obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet site that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the SEC, including PNC's filings. The address of the
SEC's website is http://www.sec.gov. Copies of such materials can also be
obtained at prescribed rates from the public reference section of the SEC at 450
Fifth Street NW, Washington, D.C. 20549.
The Corporation makes its annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and amendments to those reports filed or
furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act
available free of charge on or through the Corporation's Internet site as soon
as reasonably practicable after it files such material with, or furnishes it to,
the SEC. The Corporation's Internet address is http://www.pnc.com.
ITEM 2 - PROPERTIES
The executive and administrative offices of the Corporation and PNC Bank are
located at One PNC Plaza, Pittsburgh, Pennsylvania. The thirty-story structure
is owned by PNC Bank. The Corporation and PNC Bank occupy the entire building.
In addition, PNC Bank owns a thirty-four story structure adjacent to One PNC
Plaza, known as Two PNC Plaza, that houses additional office space.
The Corporation and its subsidiaries own or lease numerous other premises for
use in conducting business activities. The facilities owned or occupied under
lease by the Corporation's subsidiaries are considered by management to be
adequate. Additional information pertaining to the Corporation's properties is
set forth in "Note 13 Premises, Equipment and Leasehold Improvements" of the
"Notes To Consolidated Financial Statements" included on page 89 of the Annual
Report to Shareholders, which is incorporated herein by reference.
9
ITEM 3 - LEGAL PROCEEDINGS
The several putative class action complaints filed during 2002 in the United
States District Court for the Western District of Pennsylvania were consolidated
in a Consolidated Class Action Complaint filed on October 4, 2002 brought on
behalf of purchasers of the Corporation's common stock between July 19, 2001 and
July 18, 2002. The Consolidated Class Action Complaint names as defendants the
Corporation, the Chairman and Chief Executive Officer, the former Chief
Financial Officer, the Controller, and the Corporation's independent auditors
for 2001 and seeks unquantified damages, interest, attorneys' fees and other
expenses. The Consolidated Class Action Complaint alleges violations of federal
securities laws related to disclosures regarding the three 2001 transactions
that gave rise to a financial statement restatement announced by the Corporation
on January 29, 2002, and related matters. The Corporation and all other
defendants have filed a motion to dismiss this lawsuit. Management believes
there are substantial defenses to this lawsuit and intends to defend it
vigorously. The impact of the final disposition of this lawsuit cannot be
assessed at this time.
In August 2002, the Department of Labor began a formal investigation of the
Administrative Committee of the Corporation's Incentive Savings Plan ("Plan") in
connection with the Committee's conduct relating to the Corporation's common
stock held by the Plan and the Corporation's restatement of earnings for 2001.
Both the Administrative Committee and the Corporation are cooperating fully with
the investigation. The impact of the final disposition of this investigation
cannot be assessed at this time.
The Corporation received a letter from a shareholder in 2002 demanding that the
Corporation take action against parties allegedly responsible for the events
giving rise to the SEC consent order filed on July 18, 2002 and that it consider
action against directors of the Corporation who approved certain bonus payments.
Management referred this demand to the Board of Directors. The Corporation has
recently been advised that the shareholder does not intend to pursue claims
derivatively on behalf of the Corporation at this time.
In February 2002, Washington Mutual Bank, FA, the buyer of the Corporation's
residential mortgage banking business, filed a lawsuit against the Corporation
in the Superior Court of the State of California for the County of Los Angeles
alleging various state law claims relating to certain closing date purchase
price adjustments in dispute between the parties and seeking compensatory
damages with respect to certain of the disputed matters, unquantified punitive
damages, and declaratory and other relief. The Corporation filed a motion in the
litigation to compel arbitration in accordance with the provisions of the
purchase agreement and to stay the litigation pending that determination, which
was granted by the Court. On January 9, 2003, the Corporation and the buyer
agreed to a settlement of all issues in dispute between them in connection with
the sale of the Corporation's residential mortgage banking business. The
settlement has been reported in the fourth quarter of 2002 by the Corporation in
discontinued operations, and resulted in a net loss on sale of business, net of
tax, for 2002 of $16 million.
On January 14, 2003, an arbitration panel of the National Association of
Securities Dealers, Inc. ("NASD") issued an award against J.J.B. Hilliard, W.L.
Lyons, Inc. ("Hilliard Lyons"), a subsidiary of the Corporation, and certain of
its employees with respect to a claim filed by First of Michigan Corporation
(now Fahnestock & Co., Inc.) arising out of Hilliard Lyons' hiring of brokers
and support staff from First of Michigan Corporation ("First of Michigan") in
late 1997 and spring 1998. The events underlying First of Michigan's claim all
occurred prior to the Corporation's acquisition of Hilliard Lyons in December
1998. The panel awarded First of Michigan $22 million (actual damages of $16
million and prejudgment interest and costs of $6 million), resulting in a fourth
quarter 2002 pretax charge at the Corporation of $10 million, after taking into
account the application of related reserves and accruals.
The Corporation and persons to whom the Corporation may have indemnification
obligations, in the normal course of business, are subject to various other
pending and threatened legal proceedings in which claims for monetary damages
and other relief are asserted. Management does not anticipate that the ultimate
aggregate liability, if any, arising out of such other legal proceedings will
have a material adverse effect on the Corporation's financial position, although
at the present time, management is not in a position to determine whether any
pending or threatened legal proceedings will have a material adverse effect on
the Corporation's results of operations in any future reporting period.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the fourth quarter of 2002.
10
EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding each executive
officer of the Corporation as of March 10, 2003 is set forth below. Each
executive officer held the position or positions indicated or another executive
position with the same entity or one of its affiliates for the past five years
unless otherwise indicated below.
Year
Name Age Positions with Corporation Employed(1)
- ---- --- ---------------------------- -----------
James E. Rohr 54 Chairman and Chief Executive 1972
Officer(2)
Joseph C. Guyaux 52 President 1972
William S. Demchak 40 Vice Chairman and Chief
Financial Officer 2002
William C. Mutterperl 56 Vice Chairman 2002
Joseph J. Whiteside 61 Vice Chairman 2002
Timothy G. Shack 52 Executive Vice President and 1976
Chief Information Officer
Thomas K. Whitford 47 Executive Vice President and 1990
Chief Risk Officer
John J. Wixted, Jr. 51 Senior Vice President and 2002
Chief Regulatory Officer
Michael J. Hannon 46 Senior Vice President and 1982
Chief Credit Policy Officer
Robert C. Barry, Jr. 60 Senior Vice President and 1997
Director of Finance
Richard J. Johnson 46 Senior Vice President and 2002
Director of Finance
Samuel R. Patterson 44 Controller 1986
Helen P. Pudlin 53 Senior Vice President and 1989
General Counsel
- ---------------
(1) Where applicable, refers to year employed by predecessor company.
(2) Also serves as a Director of the Corporation.
William S. Demchak joined the Corporation as Vice Chairman and Chief Financial
Officer in September 2002. From 1997 to May 2002, he served as Global Head of
Structured Finance and Credit Portfolio for J.P. Morgan Chase & Co.
William C. Mutterperl joined the Corporation as Vice Chairman in October 2002.
From August 2002 to October 2002, he was a Partner in the business law division
of the international law firm of Brown Rudnick Berlack Israels LLP. From
February 2002 to May 2002, he served as Executive Director of the Independent
Oversight Board for Arthur Andersen LLP, headed by former Federal Reserve
Chairman Paul Volcker. From April 1985 to December 2001, he served as Executive
Vice President, or another executive position, General Counsel and Secretary to
FleetBoston Financial Corp.
Joseph J. Whiteside joined the Corporation as Vice Chairman in October 2002.
From 2001 to 2002 he served as Chairman and Chief Executive Officer for Homeside
Lending, Inc. From 1996 to 2001 he served as Executive Vice President for
National Australia Bank.
John J. Wixted, Jr. joined the Corporation as Senior Vice President and Chief
Regulatory Officer in August 2002. From 1996 to 2002 he served as Senior Vice
President for Banking Supervision and Regulation for the Federal Reserve Bank of
Chicago.
Richard J. Johnson joined the Corporation as Senior Vice President and Director
of Finance in December 2002. From 1999 to 2002 he served as President and Chief
Executive Officer for J.P. Morgan Services. From 1996 to 1998 he served as Chief
Financial Officer for J.P. Morgan Europe.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Corporation's common stock is listed on the New York Stock Exchange and is
traded under the symbol "PNC." At the close of business on February 28, 2003,
there were 51,754 common shareholders of record.
Holders of common stock are entitled to receive dividends when declared by the
Board of Directors out of funds legally available therefor. The Board of
Directors may not pay or set apart dividends on the common stock until dividends
for all past dividend periods on any series of outstanding preferred stock have
been paid or declared and set apart for payment. The Board presently intends to
continue the policy of paying quarterly cash dividends. However, the amount of
any future dividends will depend on earnings, the financial condition of the
Corporation and other factors, including contractual restrictions and applicable
government regulations and policies (such as those relating to the ability of
bank and nonbank subsidiaries to pay dividends to the parent company).
Management expects that the parent company will have sufficient liquidity
available to pay dividends at current rates through 2003.
The Federal Reserve Board has the power to prohibit the Corporation from paying
dividends without its approval. Further discussion concerning dividend
restrictions and restrictions on loans or advances from bank subsidiaries to the
parent company is set forth under the caption "Supervision and Regulation" in
Part I, Item 1 of this Form 10-K, under the caption "Liquidity" in the
"Consolidated Balance Sheet Review" section of the "Financial Review" included
on page 46 of the Annual Report to Shareholders, and in "Note 3 Regulatory
Matters" of the "Notes To Consolidated Financial Statements" included on pages
82 and 83 of the Annual Report to Shareholders, each of which is incorporated
herein by reference.
Additional information relating to the common stock is set forth under the
caption "Common Stock Prices/Dividends Declared" on page 113 of the Annual
Report to Shareholders, which is incorporated herein by reference.
11
Information regarding the Corporation's compensation plans under which equity
securities of the registrant are authorized for issuance as of December 31, 2002
is included in the table under Item 12 of this Form 10-K.
ITEM 6 - SELECTED FINANCIAL DATA
The information set forth under the caption "Selected Consolidated Financial
Data" in the "Financial Review" on pages 26 and 27 of the Annual Report to
Shareholders and under the caption "Average Consolidated Balance Sheet and Net
Interest Analysis" in the "Statistical Information" on pages 110 and 111 of the
Annual Report to Shareholders is incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The discussion of the Corporation's financial condition and results of
operations set forth under the section "Financial Review" on pages 26 through 66
of the Annual Report to Shareholders is incorporated herein by reference.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information set forth in the "Risk Management" section in the "Financial
Review" on pages 53 through 61 of the Annual Report to Shareholders is
incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The "Report of Deloitte & Touche LLP, Independent Auditors," "Consolidated
Financial Statements," "Notes To Consolidated Financial Statements" and
"Selected Quarterly Financial Data" on pages 67, 68 through 71, 72 through 107,
and 108, respectively, of the Annual Report to Shareholders are incorporated
herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
(a) Previously reported.
(b) None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors and nominees required by this item is set forth
under the caption "Election of Directors - Information Concerning Nominees" in
the Proxy Statement filed for the annual meeting of shareholders to be held on
April 22, 2003 and is incorporated herein by reference.
Information regarding compliance with Section 16(a) of the Securities Exchange
Act of 1934 is set forth under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Proxy Statement filed for the annual meeting of
shareholders to be held on April 22, 2003 and is incorporated herein by
reference.
Information regarding executive officers of the Corporation is included in Part
I of this Form 10-K under the caption "Executive Officers of the Registrant."
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this item is set forth under the captions "Election
of Directors - Compensation of Directors" and "Compensation of Executive
Officers," excluding the information set forth under the caption "Personnel and
Compensation Committee Report," in the Proxy Statement filed for the annual
meeting of shareholders to be held on April 22, 2003 and is incorporated herein
by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this item regarding security ownership of certain
beneficial owners and management is set forth under the captions "Security
Ownership of Directors, Nominees and Executive Officers" and "Security Ownership
of Certain Beneficial Owners" under the heading "Security Ownership of
Directors, Nominees and Executive Officers" in the Proxy Statement filed for the
annual meeting of shareholders to be held on April 22, 2003 and is incorporated
herein by reference.
Information regarding the Corporation's compensation plans under which equity
securities of the registrant are authorized for issuance as of December 31, 2002
is included in the table which follows. Additional information regarding these
plans is included in "Note 22 Stock-Based Compensation Plans" of the "Notes To
Consolidated Financial Statements" included on pages 96 and 97 of the Annual
Report to Shareholders and is incorporated herein by reference.
12
EQUITY COMPENSATION PLAN INFORMATION AT DECEMBER 31, 2002
- ----------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c)
Number of securities
Weighted-average remaining available for
Number of securities to exercise price of future issuance under
be issued upon exercise outstanding equity compensation plans
of outstanding options, options, warrants (excluding securities
warrants and rights and rights reflected in column (a))
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY COMPENSATION PLANS APPROVED BY SECURITY HOLDERS
1997 Long-Term Incentive Award Plan (Note 2)
Stock Options 15,540,719 $55.33
Incentive Share Awards 63,500 N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Subtotal 15,604,219 4,479,088
- ----------------------------------------------------------------------------------------------------------------------------------
1996 Executive Incentive Award Plan
Incentive Awards N/A 245,392
Employee Stock Purchase Plan 200,000 (Note 1) 1,975,504
1992 Director Share Incentive Plan N/A 375,239
Central Incentive Compensation Plan N/A 5,058
- ----------------------------------------------------------------------------------------------------------------------------------
Total approved by security holders 15,804,219 7,080,281
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY COMPENSATION PLANS NOT APPROVED BY SECURITY HOLDERS None N/A None
- ----------------------------------------------------------------------------------------------------------------------------------
Total 15,804,219 7,080,281
- ----------------------------------------------------------------------------------------------------------------------------------
N/A - not applicable
Note 1 - 85% of the lower of the fair market value on the first or last day of
each six-month offering period.
Note 2 - The maximum number of Shares that may be issued or as to which grants
or awards may be made under the Incentive Plan (excluding Shares issued pursuant
to grants or awards made prior to February 20, 1997) is (i) 10,141,853 Shares
plus (ii) as of January 1 of each calendar year commencing with 1998 an
additional number of Shares equal to 1.5% of the total issued shares of Common
Stock (including reacquired Shares) at the end of the immediately preceding
calendar year. However, no more than 3% of the total issued Shares of Common
Stock (including reacquired Shares) at the end of the immediately preceding
calendar year is cumulatively available for grants and awards made in any
calendar year. In addition, Incentive Share awards granted during any calendar
year may not exceed 20% of the maximum number of Shares available for grants and
awards made during such calendar year.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth under the captions
"Transactions Involving Directors and Executive Officers" and "Legal
Proceedings" in the Proxy Statement filed for the annual meeting of shareholders
to be held on April 22, 2003 and is incorporated herein by reference.
ITEM 14 - CONTROLS AND PROCEDURES
The information set forth under the caption "Internal Controls and Disclosure
Controls and Procedures" in the "Financial Review" on page 61 of the Annual
Report to Shareholders is incorporated herein by reference.
PART IV
ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS The following report of independent auditors and
consolidated financial information of the Corporation included in the Annual
Report to Shareholders are incorporated herein by reference.
Pages of
Annual
Report to
Financial Statements Shareholders
- -------------------- ------------
Report of Deloitte & Touche LLP, Independent Auditors 67
Consolidated Statement Of Income for the three years
ended December 31, 2002 68
Consolidated Balance Sheet as of December 31, 2002
and 2001 69
Consolidated Statement Of Shareholders' Equity for the
three years ended December 31, 2002 70
Consolidated Statement Of Cash Flows for the three
years ended December 31, 2002 71
Notes To Consolidated Financial Statements 72-107
Selected Quarterly Financial Data 108
- --------------------------------------------------------------------
No financial statement schedules are being filed.
13
The report of the Corporation's former independent auditors follows:
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
Shareholders and Board of Directors
The PNC Financial Services Group, Inc.
We have audited the accompanying consolidated balance sheet of The PNC Financial
Services Group, Inc. and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 2001. These
financial statements are the responsibility of The PNC Financial Services Group,
Inc.'s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The PNC Financial
Services Group, Inc. and subsidiaries at December 31, 2001 and 2000, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
- ------------------------
Pittsburgh, Pennsylvania
March 1, 2002
REPORTS ON FORM 8-K The following reports on Form 8-K were filed during the
quarter ended December 31, 2002.
On November 14, 2002, the Corporation filed a Form 8-K which included
information under Item 9 Regulation FD Disclosure related to certifications of
the Corporation's Chairman and Chief Executive Officer and Vice Chairman and
Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. Conformed copies of such
certifications were filed as Exhibits with this Form 8-K filing.
On December 19, 2002, the Corporation filed a Form 8-K which included
information under Item 5 Other Events and Regulation FD Disclosure related to a
news release regarding notification from the Federal Reserve Bank of Cleveland
that the Corporation was in full compliance with the financial holding company
and financial subsidiary requirements under the Gramm-Leach-Bliley Act. A copy
of the news release was filed as an Exhibit with this Form 8-K filing.
EXHIBITS The exhibits listed on the Exhibit Index on pages E-1 through E-3 of
this Form 10-K are filed herewith or are incorporated herein by reference.
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE PNC FINANCIAL SERVICES GROUP, INC.
(Registrant)
By: /s/ William S. Demchak
- ---------------------------------------------
William S. Demchak
Vice Chairman and Chief Financial Officer
March 13, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of The PNC Financial
Services Group, Inc. and in the capacities indicated on March 13, 2003.
Signature Capacities
- ------------------------------- ---------------------------------------------
/s/ James E. Rohr Chairman, Chief Executive Office and Director
- ------------------------------- (Principal Executive Officer)
James E. Rohr
/s/ William S. Demchak Vice Chairman and Chief Financial Officer
- ------------------------------- (Principal Financial Officer)
William S. Demchak
/s/ Samuel R. Patterson Controller
- ------------------------------- (Principal Accounting Officer)
Samuel R. Patterson
* Paul W. Chellgren; Robert N. Clay; J.
Gary Cooper; George A. Davidson, Jr.;
Richard B. Kelson; Bruce C. Lindsay;
Anthony A. Massaro; Thomas H. O'Brien;
Jane G. Pepper; Lorene K. Steffes; Dennis
F. Strigl; Stephen G. Thieke; Thomas J.
Usher; Milton A. Washington; and Helge H.
Wehmeier
*By: /s/ Thomas R. Moore
-----------------------------------------
Thomas R. Moore, Attorney-in-Fact,
pursuant to Powers of Attorney filed
herewith
15
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, James E. Rohr, certify that:
1. I have reviewed this annual report on Form 10-K of The PNC Financial
Services Group, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 13, 2003
/s/ James E. Rohr
- -----------------
James E. Rohr
Chairman and Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, William S. Demchak, certify that:
1. I have reviewed this annual report on Form 10-K of The PNC Financial
Services Group, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
16
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 13, 2003
/s/ William S. Demchak
- ----------------------
William S. Demchak
Vice Chairman and Chief Financial Officer
17
EXHIBIT INDEX
Exhibit
No. Description Method of Filing+
- ------- --------------------------------------------- -----------------------------------
3.1 Articles of Incorporation of the Corporation, Incorporated herein by reference to
as amended and restated as of April 24, 2001. Exhibit 3.1 of the Corporation's
Quarterly Report on Form 10-Q for
the quarter ended March 31, 2001.
3.2 By-Laws of the Corporation, as amended and Filed herewith.
restated.
4.1 There are no instruments with respect to
long-term debt of the Corporation and its
subsidiaries that involve securities
authorized under the instrument in an
amount exceeding 10 percent of the total
assets of the Corporation and its
subsidiaries on a consolidated basis. The
Corporation agrees to provide the SEC with
a copy of instruments defining the rights
of holders of long-term debt of the
Corporation and its subsidiaries on
request.
4.2 Terms of $1.80 Cumulative Convertible Incorporated herein by reference to
Preferred Stock, Series A. Exhibit 3.1 of the Corporation's
Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
4.3 Terms of $1.80 Cumulative Convertible Incorporated herein by reference to
Preferred Stock, Series B. Exhibit 3.1 of the Corporation's
Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
4.4 Terms of $1.60 Cumulative Convertible Incorporated herein by reference to
Preferred Stock, Series C. Exhibit 3.1 of the Corporation's
Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
4.5 Terms of $1.80 Cumulative Convertible Incorporated herein by reference to
Preferred Stock, Series D. Exhibit 3.1 of the Corporation's
Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
4.6 Terms of Series G Junior Participating Incorporated herein by reference to
Preferred Stock. Exhibit 3.1 of the Corporation's
Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
4.7 Rights Agreement between the Corporation and Incorporated herein by reference to
The Chase Manhattan Bank dated May 15, 2000. Exhibit 1 to the Corporation's
Report on Form 8-A filed May 23, 2000.
4.8 First Amendment to Rights Agreement between Filed herewith.
the Corporation, The Chase Manhattan Bank,
and Computershare Investor Services, LLC
dated January 1, 2003.
10.1 The Corporation's Supplemental Executive Incorporated herein by reference to
Retirement Plan, as amended. Exhibit 10.1 of the Corporation's
Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002.*
10.2 The Corporation's ERISA Excess Pension Plan, Incorporated herein by reference to
as amended as of January 1, 1999. Exhibit 10.2 of the Corporation's
Annual Report on Form 10-K for the
year ended December 31, 1999 ("1999
Form 10-K").*
10.3 The Corporation's Key Executive Equity Incorporated herein by reference to
Program, as amended. Exhibit 10.3 of the Corporation's
Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002.*
10.4 The Corporation's Supplemental Incentive Incorporated herein by reference to
Savings Plan, as amended as of January 1, Exhibit 10.4 of the Corporation's
1999. 1999 Form 10-K.*
E-1
Exhibit
No. Description Method of Filing+
- ------- --------------------------------------------- -----------------------------------
10.5 The Corporation's 1997 Long-Term Incentive Award Filed herewith.*
Plan, as amended.
10.6 The Corporation's 1996 Executive Incentive Award Incorporated herein by reference to
Plan, as amended. Exhibit 10.6 of the Corporation's
Quarterly Report on Form 10-Q for
the quarter ended June 30, 2001.*
10.7 PNC Bank Corp. and Affiliates Deferred Compensation Incorporated herein by reference to
Plan, as amended and restated. Exhibit 10.7 of the Corporation's
Quarterly Report on Form 10-Q for
the quarter ended March 31, 2002.*
10.8 Form of Change in Control Severance Agreement. Incorporated herein by reference to
Exhibit 10.17 of the Corporation's
Annual Report on Form 10-K for the
year ended December 31, 1996 ("1996
Form 10-K"). *
10.9 Forms of Amendment to Change in Control Severance Incorporated herein by reference to
Agreements. Exhibit 10.9 of the Corporation's
Annual Report on Form 10-K for the
year ended December 31, 2000.*
10.10 Forms of Second Amendment to Change in Control Incorporated herein by reference to
Severance Agreements. Exhibit 10.15 of the Corporation's
Quarterly Report on Form 10-Q for
the quarter ended September 30, 2001.*
10.11 1992 Director Share Incentive Plan. Incorporated herein by reference to
Exhibit 10.13 of the Corporation's
1999 Form 10-K.*
10.12 The Corporation's Directors Deferred Compensation Incorporated by reference to Exhibit
Plan. 10.1 of the Corporation's Quarterly
Report on Form 10-Q for the quarter
ended September 30, 1996.*
10.13 The Corporation's Outside Directors Deferred Stock Incorporated herein by reference to
Unit Plan. Exhibit 10.15 of the Corporation's
1999 Form 10-K.*
10.14 Trust Agreement between PNC Investment Corp., as Filed herewith.*
settlor, and Hershey Trust Company, as trustee.
10.15 Employment Agreement between the Corporation and Filed herewith.*
Joseph J. Whiteside.
10.16 The Corporation's Incentive Savings Plan, as amended Filed herewith.
as of January 1, 2001.
10.17 First Amendment to the Corporation's Incentive Filed herewith.
Savings Plan.
10.18 Second Amendment to the Corporation's Incentive Filed herewith.
Savings Plan.
10.19 The Corporation's Employee Stock Purchase Plan, as Incorporated herein by reference to
amended. Exhibit 99 of the Corporation's
Quarterly Report on Form 10-Q for the
quarter ended September 30, 2001.
10.20 BlackRock, Inc. 2002 Long Term Retention and Incorporated by reference to BlackRock,
Incentive Plan. Inc.'s Quarterly Report on Form 10-Q
(Commission File No. 001-15305) for
the quarter ended September 30, 2002
("BlackRock Third Quarter 2002 Form
10-Q").
10.21 Share Surrender Agreement, dated October 10, 2002, Incorporated by reference to the
among BlackRock, Inc., PNC Asset Management, BlackRock Third Quarter 2002 Form 10-Q.
Inc., and The PNC Financial Services Group, Inc.
10.22 Initial Public Offering Agreement, dated Incorporated by reference to BlackRock,
September 30, 1999, among BlackRock, Inc., The PNC Inc.'s Registration Statement on Form
Financial Services Group, Inc., formerly PNC Bank S-1 (Registration No. 333-78367), as
Corp., and PNC Asset Management, Inc. amended, originally filed with the SEC
on May 13, 1999.
10.23 Amendment No. 1 to the Initial Public Offering Incorporated by reference to the
Agreement, dated October 10, 2002, among The PNC BlackRock Third Quarter 2002 Form 10-Q.
Financial Services Group, Inc., PNC Asset
Management, Inc. and BlackRock, Inc.
10.24 Amended and Restated Stockholders Agreement, dated Incorporated by reference to BlackRock,
September 30, 1999, by and among BlackRock, Inc., Inc.'s Registration Statement on Form
PNC Asset Management, Inc. and certain employees S-1 (Registration No. 333-78367), as
of BlackRock, Inc. and its affiliates. amended, originally filed with the SEC
on May 13, 1999.
10.25 Amendment No. 1 to the Amended and Restated Incorporated by reference to the
Stockholders Agreement, dated October 10, 2002, BlackRock Third Quarter 2002 Form 10-Q.
by and among BlackRock, Inc., PNC Asset
Management, Inc. and certain employees of
BlackRock, Inc. and its affiliates.
E-2
Exhibit
No. Description Method of Filing +
- ------- ---------------------------------------------------- -----------------------------------
12.1 Computation of Ratio of Earnings to Fixed Charges. Filed herewith.
12.2 Computation of Ratio of Earnings to Fixed Charges Filed herewith.
and Preferred Dividends.
13 Excerpts from the Corporation's Annual Report to Filed herewith.
Shareholders for the year ended December 31,
2002. Such Annual Report, except for the portions
thereof that are expressly incorporated by
reference herein, is furnished for information of
the SEC only and is not deemed to be "filed" as
part of this Form 10-K.
21 Schedule of Certain Subsidiaries of the Corporation. Filed herewith.
23.1 Consent of Deloitte & Touche LLP, independent Filed herewith.
auditors for the Corporation.
23.2 Consent of Ernst & Young LLP, former independent Filed herewith.
auditors for the Corporation.
24 Powers of Attorney. Filed herewith.
99.1 Agreement between The PNC Financial Services Group, Incorporated herein by reference to
Inc. and Federal Reserve Bank of Cleveland. Exhibit 99.1 of the Corporation's
Current Report on Form 8-K dated
July 18, 2002.
99.2 Form of Agreement between PNC Bank, National Incorporated herein by reference to
Association and Office of the Comptroller of the Exhibit 99.2 of the Corporation's
Currency. Current Report on Form 8-K dated
July 18, 2002.
99.3 Form of Order of the Securities and Exchange Incorporated herein by reference to
Commission Instituting Public Administrative Exhibit 99.3 of the Corporation's
Proceedings Pursuant to Section 8A of the Current Report on Form 8-K dated
Securities Act of 1933 and 21C of the Securities July 18, 2002.
Exchange Act of 1934, Making Findings and Imposing
Cease-and-Desist Order.
- ---------------
+ Incorporated document references to filings by the Corporation are to SEC
File No. 1-9718.
* Denotes management contract or compensatory plan.
Copies of these Exhibits may be obtained electronically at the SEC's home page
at www.sec.gov or from the public reference section of the SEC, at prescribed
rates, at 450 Fifth Street NW, Washington, D.C. 20549. Copies may also be
obtained by any shareholder, without charge, upon written request addressed to
Computershare Investor Services, Post Office Box 3504, Chicago, Illinois
60690-3504, by calling (800) 982-7652 or via e-mail at
web.queries@computershare.com.
E-3