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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
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 or the transaction period
from to
---------------------- ----------------------
PNC BANK CORP.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1435979
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE PNC PLAZA
249 FIFTH AVENUE
PITTSBURGH, PENNSYLVANIA 15222-2707
(Address of principal executive offices)
(Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE - (412) 762-1553
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
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
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT
$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
8.1/4% Convertible Subordinated Debentures Due 2010
9.875% Subordinated Capital Notes Due 1999
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. [ ]
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AMOUNTED TO APPROXIMATELY $9.85 BILLION AT FEBRUARY 29, 1996.
NUMBER OF SHARES OF REGISTRANT'S COMMON STOCK OUTSTANDING AT FEBRUARY 29, 1996:
341,535,524
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF PNC BANK CORP.'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED
DECEMBER 31, 1995 ("ANNUAL REPORT TO SHAREHOLDERS") ARE INCORPORATED BY
REFERENCE INTO PARTS I AND II AND PORTIONS OF THE DEFINITIVE PROXY STATEMENT OF
PNC BANK CORP. FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 23,
1996 ("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 ITEM 402(a)(8) OF REGULATION S-K.
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INDEX
PART I
PAGE
Item 1 Business 1
Item 2 Properties 11
Item 3 Legal Proceedings 11
Item 4 Submission of Matters to a Vote of Security Holders 12
PART II
Item 5 Market for Registrant's Common Equity and Related Stockholder
Matters 13
Item 6 Selected Financial Data 13
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations 13
Item 8 Financial Statements and Supplementary Data 13
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure *
PART III
Item 10 Directors and Executive Officers of the Registrant 13
Item 11 Executive Compensation 14
Item 12 Security Ownership of Certain Beneficial Owners and Management 14
Item 13 Certain Relationships and Related Transactions 14
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 14
SIGNATURES 15
EXHIBIT INDEX 18
* Not Applicable.
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PART I
ITEM 1 - BUSINESS
BUSINESS OVERVIEW
Introduction
PNC Bank Corp. ("PNC Bank" or "Corporation") is a bank holding company
registered under the Bank Holding Company Act of 1956, as amended ("BHC
Act"). PNC Bank 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 Bank has
diversified its geographical presence and product capabilities through
strategic bank and nonbank acquisitions and the formation of various
nonbanking subsidiaries. At December 31, 1995, the Corporation operated
banking subsidiaries in Pennsylvania, Delaware, Florida, Indiana,
Kentucky, Massachusetts, New Jersey and Ohio, and conducted nonbanking
operations throughout the United States. The Corporation's major
businesses include consumer banking, corporate banking, real estate
banking, mortgage banking and asset management. At December 31, 1995, the
Corporation's consolidated total assets, deposits and shareholders' equity
were $73.4 billion, $46.9 billion and $5.8 billion, respectively. Based
on total assets, PNC Bank was the 12th largest bank holding company in the
United States at December 31, 1995. During 1995, the Corporation and
subsidiaries employed approximately 25,400 persons on a full-time
equivalent basis.
Effective December 31, 1995, Midlantic Corporation ("Midlantic"), a
regional bank holding company headquartered in Edison, New Jersey, merged
with and into PNC Bancorp, Inc., a wholly-owned subsidiary of the
Corporation. Approximately 112 million shares of the Corporation's common
stock were issued in connection with the merger. At closing, Midlantic had
consolidated total assets, deposits and shareholders' equity of $13.6
billion, $11.0 billion and $1.4 billion, respectively, and 308 branch
offices in New Jersey and Pennsylvania. The transaction was accounted for
as a pooling of interests, and accordingly, all financial information has
been restated as if the entities were combined for all periods presented.
Midlantic Bank, N.A., Midlantic's principal subsidiary, will continue to
operate under its present name until integration and consolidation plans
are fully implemented in the third quarter of 1996. At that time, it is
expected that Midlantic Bank, N.A. will be merged or otherwise combined
with PNC Bank, National Association, a wholly-owned subsidiary of the
Corporation.
The in-market nature of the Midlantic transaction is expected to generate
substantial economies by reducing costs associated with overlapping and
duplicative operations and provide opportunities to enhance revenues
through marketing of the Corporation's products and services to a new
customer base. The extent and timing of cost savings and revenue
enhancements are dependent on various factors, some of which are beyond
the control of the Corporation. Such factors include conversion
strategies, customer attrition and competitive responses. Therefore, no
assurances can be given with respect to the ultimate level of cost savings
and revenue enhancements to be realized, or that such amounts will be
realized in the time frame initially anticipated.
Certain other merger and acquisition activities of the Corporation are
summarized under the section entitled "Mergers and Acquisitions" in the
"Corporate Financial Review" and in "Note 2 - Mergers and Acquisitions" of
the "Notes to Consolidated Financial Statements" included on pages 23 and
53, respectively, of the Annual Report to Shareholders, which discussion
is incorporated herein by reference.
LINES OF BUSINESS
PNC Bank delivers a broad range of financial services and products to its
customers through five lines of business: Consumer Banking, Corporate
Banking, Real Estate Banking, Mortgage Banking and Asset Management.
Additional information relating to the lines of business is set forth
under the caption entitled "Line of Business Results" in the "Corporate
Financial Review" included on pages 35 through 39 of the Annual Report to
Shareholders, which is incorporated herein by reference.
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CONSUMER BANKING Consumer Banking provides lending, deposit, personal
trust, brokerage, investment, payment system access and other financial
services to individuals and small businesses. Consumer Banking serves more
than 3.2 million households and 135,000 small businesses, with an average
loan portfolio exceeding $15.4 billion and more than $34.2 billion in
average deposits. The principal focus of Consumer Banking is on providing
products and services sought by its customers in a cost-effective manner.
In 1995, Consumer Banking reorganized its delivery channels around customer
segments. The "Private Bank" serves affluent customers. The "Community
Bank" serves traditional retail customers through its "Branch Bank",
entrepreneurs, community businesses, institutions and nonprofit
organizations through its "Business Bank" and customers who prefer
alternative delivery systems through the "Direct Bank". Consumer Banking's
services are provided through approximately 950 community banking offices
located in the Corporation's primary markets. In addition, services are
provided through alternative delivery systems, such as the Corporation's
telebanking center and automated teller machines ("ATMs"), and regional
banking centers which offer a wide array of products at each center.
Alternative delivery systems, such as the telebanking center, are expected
to allow the Corporation to provide products and services more efficiently
than traditional banking delivery systems.
The Corporation continues to invest in operating platforms and alternative
retail delivery systems, such as The National Financial Services Center,
its Pittsburgh-based telebanking center, and to consolidate its retail
branches. The Corporation also continues to evaluate strategic alliances
to leverage its delivery capabilities. During 1995, the Corporation
entered into agreements with third parties to provide certain
administrative, marketing, data processing, customer support and related
services for the Corporation's credit card and merchant services
businesses. In addition, an agreement with the American Automobile
Association announced in February 1996 is designed to offer the
Corporation's products and services nationally to the organization's more
than 34 million members through the Corporation's alternative delivery
capabilities.
CORPORATE BANKING Corporate Banking provides traditional and asset-based
financing, liquidity and treasury management, corporate and employee
benefit trust, capital markets, direct investment, leasing and other
financial services to businesses and governmental entities. Corporate
Banking serves businesses with annual revenues of $5 million or more,
including specialized industries such as communications, health care,
natural resources, metals, public finance, financial services and
automobile dealer finance. In addition to serving customers within its
primary markets, Corporate Banking has offices in several major United
States cities to reach the national market. Corporate Banking's focus is
on developing and delivering specific products and services to build and
enhance client relationships. This line of business has one of the largest
market share positions of middle-market companies located in the
Corporation's primary markets. In addition, Corporate Banking maintains
banking relationships with many of the largest companies in the United
States and is a major provider of treasury management products and
services to large corporate customers.
REAL ESTATE BANKING Real Estate Banking provides lending, deposit,
treasury management, syndication, commercial mortgage-backed
securitizations and other non-credit services to customers that manage and
develop commercial and residential real estate properties and facilities.
In 1995, Real Estate Banking focused on expanding its customer base and
product line. Its customers include developers, builders, investors,
mortgage bankers, property managers and institutions. In 1995, Real Estate
Banking formed a joint venture with a leading commercial mortgage banker
to provide its customers with better access to institutional debt and
equity markets and introduced a commercial mortgage-backed securitization
product as a real estate financing alternative. It also formed a team to
serve the real estate needs of the Corporation's treasury management
customers. In 1996, Real Estate Banking will further emphasize its
securitization capabilities and expand private debt/equity placement
opportunities.
MORTGAGE BANKING Mortgage Banking activities include acquisition,
origination, securitization and servicing of residential mortgages, as
well as retention of selected loans in the portfolio. Mortgage loans are
originated through PNC Bank's branch network and PNC Mortgage's network of
85 origination offices in 29 states and nationally by telephone through
its National Mortgage Center. At December 31, 1995, PNC Mortgage was the
nation's 13th largest retail mortgage originator and 17th largest mortgage
servicer. At such date, PNC Mortgage's servicing portfolio totaled $37.3
billion, including $25.1 billion serviced for others. PNC Mortgage intends
to continue to develop new ways, using technology and multiple
distribution channels, to deliver mortgage loans and financial services to
meet the needs of its customers in the intensely competitive environment
in which it operates.
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ASSET MANAGEMENT Asset Management provides trust and mutual fund products
and services including investment management, strategy, research and asset
servicing. In 1995, the Corporation acquired BlackRock Financial
Management, L.P. ("BlackRock") to expand its asset management service
capabilities. At December 31, 1995, PNC Bank ranked as one of the top 20
investment managers in the United States. PNC Asset Management had
discretionary authority over $96 billion in assets and over $282 billion
in assets under administration. It is the second largest bank manager of
mutual funds and one of the largest mutual fund service providers. It
manages or acts as sub-advisor to 94 mutual funds with assets of $42
billion and provides custody services for mutual funds with $130 billion
in assets. PNC Bank also provides accounting and administrative services
for funds with over $100 billion in assets, transfer and shareholder
services for approximately 3.5 million mutual fund shareholder accounts
and investment research services to more than 250 financial institutions.
In 1996, the Corporation consolidated the PNC Funds, Midlantic's Compass
Funds and BlackRock's open-end mutual funds into one $10 billion fund
family with a portfolio of 28 mutual funds to facilitate broader
distribution capabilities and attract more customers. Most recently, the
Corporation established CastleInternational Asset Management Inc., an
international investment company in Edinburgh, Scotland, to expand
international equity money management capabilities.
SUBSIDIARY BANKS
While the Corporation manages its businesses on a line-of-business basis,
its corporate legal structure currently consists of 10 bank subsidiaries
and over 150 active nonbank subsidiaries. Selected information as of
December 31, 1995, for the Corporation's banks is set forth below.
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Dollars in billions PERCENTAGE
TOTAL OF TOTAL
SUBSIDIARY BANK/HEADQUARTERS ASSETS ASSETS
- ---------------------------------------------------------------------------
PNC Bank, National Association,
Pittsburgh, PA $41.9 57%
Midlantic Bank, National Association,
Edison, NJ 13.6 18
PNC Bank, Kentucky, Inc., Louisville, KY 5.0 7
PNC Bank, Ohio, National Association,
Cincinnati, OH 4.0 5
PNC Mortgage Bank, National
Association, Pittsburgh, PA 3.2 4
PNC Bank, Delaware, Wilmington, DE 2.5 3
PNC Bank, New England, Boston, MA 1.3 2
PNC National Bank, Wilmington, DE .9 1
PNC Bank, Indiana, Inc., New Albany, IN .5 1
PNC Bank, FSB, Vero Beach, FL .1 -
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STATISTICAL DISCLOSURES BY BANK HOLDING COMPANIES
The "Statistical Information" contained on pages 73 through 81 of the
Annual Report to Shareholders is incorporated herein by reference.
RISK MANAGEMENT
In the normal course of business, the Corporation is subject to various
risks, the most significant of which are credit, liquidity and interest
rate. Although it cannot eliminate these risks, the Corporation has risk
management processes designed to provide for risk identification,
measurement, monitoring and control.
CREDIT RISK Credit risk represents the possibility that a customer or
counterparty may not perform in accordance with contractual terms. Credit
risk results from extending credit to customers, purchasing securities and
entering into certain off-balance-sheet financial derivative
transactions. Risk associated with the extension of credit includes
general risk, which is inherent in the lending business, and risk specific
to individual borrowers. The Corporation seeks to manage credit risk
through portfolio diversification, underwriting policies and procedures,
and loan monitoring practices. Information relating to the distribution of
the loan portfolio by type of loan, loan maturities and interest
sensitivity is set forth under the section entitled "Loans" in the
"Corporate Financial Review" and "Loans" in the "Statistical Information"
included on pages 27 and 28 and page 77, respectively, of the Annual
Report to Shareholders, which is incorporated herein by reference.
Credit Administration, which includes credit policy, loan review and loan
workout, is responsible for the overall management of credit risk and the
development, application and enforcement of uniform policies and
procedures across PNC Bank. One objective is diversification by industry
concentration, geographic distribution and the type of borrower. Policies
contain limits on amounts that may be committed for specified categories
of loans and individual borrowers. These limits are specified for both
consolidated and individual bank exposure levels. Specific underwriting
policies have been adopted for many categories of exposure including
commercial real estate, cable, cellular, broadcasting, health care and
automobile dealers, as well as general policies covering standards of
documentation, collateral coverage, guarantee provisions, environmental
risk protection and approval processes.
PNC Bank receives collateral to support credit extensions and commitments
when deemed necessary, the amount of which is based on management's credit
evaluation of the borrower. The most significant categories of collateral
include real estate, commercial business assets, cash on deposit and
marketable securities. In addition, for some loans made on the basis of
the general creditworthiness of the borrower, additional security in the
form of real and personal property may be obtained that may not be
directly related to the purpose of the loan.
In order to assess and monitor the degree of risk in the loan portfolio, a
lender-initiated credit risk grading system is used. A risk grade is
assigned to each loan at origination based on an assessment of the
borrower's financial capacity to service the debt and the presence and
value of collateral. Industry and economic risks are also considered when
assigning such grades. Risk grades are maintained by the loan officer
whose responsibilities include monitoring the risk inherent in such
individual credits. An independent corporate loan review function assesses
the credit granting process and reviews risk grades for compliance with
policies.
Asset and liability ("A&L") management seeks to minimize the credit risk
associated with its activities, including financial derivatives, primarily
by entering into transactions with only a select number of high-quality
institutions, establishing credit limits, requiring bilateral-netting
agreements, and in certain instances, requiring segregated collateral.
Additional information with respect to risk associated with the
Corporation's financial derivatives is set forth under the section entitled
"Financial Derivatives" in the "Corporate Financial Review" included on
pages 31 through 34 of the Annual Report to Shareholders, which is
incorporated herein by reference.
LIQUIDITY RISK Liquidity represents an institution's ability to generate
cash or otherwise obtain funds at reasonable rates to satisfy commitments
to borrowers and demands of depositors and debtholders, and invest in
strategic initiatives. Liquidity risk represents the likelihood the
Corporation would be unable to generate cash or otherwise obtain funds at
reasonable rates for such purposes. Liquidity is managed through the
coordination of the relative maturities of assets, liabilities and
off-balance-sheet positions and is enhanced by the ability to raise funds
in capital markets through direct borrowing or securitization of assets,
such as automobile and credit card loans.
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As described under "Liquidity" in the "Corporate Financial Review" on page
41 of the Annual Report to Shareholders, which is incorporated herein by
reference, management believes that the Corporation has sufficient
liquidity to meet its current commitments and obligations to customers,
debtholders and others.
INTEREST RATE RISK Interest rate risk arises primarily through the
Corporation's normal business activities of extending loans and taking
deposits. Interest rate risk is the sensitivity of net interest income and
the market value of financial instruments to the timing, magnitude and
frequency of changes in interest rates. Interest rate risk results from
various repricing frequencies and the maturity structure of assets,
liabilities, and off-balance-sheet positions. Interest rate risk also
results from, among other factors, changes in the relationship or spread
between interest rates. Many factors, including economic and financial
conditions, general movements in market interest rates and consumer
preferences, affect the spread between interest earned on assets and
interest paid on liabilities. Financial derivatives, primarily interest
rate swaps, caps and floors, are used to alter the interest rate
characteristics of assets and liabilities. For example, receive-fixed
interest rate swaps effectively convert variable-rate assets to fixed-rate
assets.
In managing interest rate risk, the Corporation seeks to minimize reliance
on a particular interest rate scenario as a source of earnings.
Accordingly, wholesale activities including securities, funding, financial
derivatives and capital market activities are used in managing core
business exposures within specified guidelines. Interest rate risk is
centrally managed by A&L management. As part of the overall interest rate
risk management process, A&L management will initiate various actions to
manage risks within the Corporation's guidelines. Such actions are
dependent on costs, existing and expected economic conditions, the
Corporation's business strategies and various other factors. A committee
composed of members of senior management and a committee of the
Corporation's Board of Directors oversees A&L management and periodically
reviews interest rate risk exposures.
The Corporation uses a number of measures to monitor and manage interest
rate risk, including income simulation and interest sensitivity ("gap")
analyses. In addition, the Corporation is in the process of developing
measures of longer-term interest rate sensitivity, including duration of
equity and equity at risk. Such models are designed to estimate the
impact on the value of equity resulting from changes in interest rates and
supplement the simulation model and gap analyses.
An income simulation model is the primary tool used by management to
assess the direction and magnitude of changes in net interest income
resulting from changes in interest rates. Key assumptions employed in the
model include interest rate movements, balance sheet growth, prepayment
speeds on mortgage-related assets, cash flows and maturities of financial
instruments, changes in market conditions, loan volumes and pricing,
deposit sensitivity, customer preferences, and management's financial and
capital plans. The assumptions are developed based on current business and
A&L management strategies, historical experience, the current economic
environment, forecasted economic conditions and other analyses. These
assumptions are inherently uncertain and subject to change as time passes.
Accordingly, under these scenarios the model is not an estimate of
expected net interest income nor does it precisely predict the impact of
higher or lower interest rates on net interest income.
The Corporation's guidelines provide that net interest income should not
decrease by more than 3 percent if interest rates gradually increase or
decrease from current rates by 100 basis points over a twelve month
period. At December 31, 1995, based on results of the simulation model,
the Corporation was within these guidelines. The impact of changes in
interest rates on these measures will differ from simulated results due to
various factors including timing, magnitude and frequency of interest rate
changes, the relationship or spread between various interest rates,
changes in market conditions, loan pricing and deposit sensitivity,
customer preferences and competition. In addition, the actual results will
be affected by the impact of mergers or acquisitions and business and A&L
management strategies that differ from those assumed in the model.
Additional interest rate scenarios are modeled to address a wider range of
rate movement, yield curve, term structure and basis risk exposures.
Depending on market conditions and other inherent risks, these scenarios
may be modeled more or less frequently. Such analyses are used as
supplemental measurements only and limits have not been established.
The Corporation also employs interest sensitivity (gap) analyses. A gap
analysis represents a point-in-time net position of assets, liabilities
and off-balance-sheet instruments subject to repricing in specified time
periods. A cumulative asset-sensitive gap position indicates the
Corporation's assets are expected to reprice more quickly than its
liabilities. Alternatively, a cumulative liability-sensitive gap position
indicates the Corporation's liabilities are expected to reprice more
quickly than its assets. The gap analysis does not accurately measure the
magnitude of changes in net interest income since changes in interest
rates over time do not impact all categories of assets, liabilities and
off-balance-sheet instruments equally or simultaneously. The Corporation's
limit for the cumulative one-year gap position is 10 percent.
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During January 1996, to reduce exposure to declining interest rates, the
Corporation added receive-fixed interest rate swaps with a term of two
years which converted designated assets from variable rates to fixed
rates. As a result, the asset sensitivity of the Corporation's cumulative
one-year gap position was reduced from 7.0 percent at December 31, 1995,
to 3.8 percent.
The "Interest Rate Sensitivity (Gap) Analysis" table set forth in the
"Corporate Financial Review" on page 42 of the Annual Report to
Shareholders is incorporated herein by reference.
EFFECT OF GOVERNMENTAL MONETARY POLICIES
The earnings and operations of bank holding companies and their
subsidiaries are affected by the monetary and fiscal policies of the
United States government and its agencies, including the 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
monetary policies of the Federal Reserve Board have had a significant
effect on the operating results of banking institutions in the past and
are expected to continue to do so in the future. It is not possible to
predict the nature or timing of future changes in monetary and fiscal
policies or the effect that they may have on the Corporation's business
and earnings.
SUPERVISION AND REGULATION
INTRODUCTION
Bank holding companies, banks and many of their nonbank affiliates are
extensively regulated under both federal and state law. The following
information describes certain aspects of that regulation applicable to the
Corporation and its subsidiaries, and does not purport to be complete. The
discussion is qualified in its entirety by reference to all particular
statutory or regulatory provisions.
The Corporation is a legal entity separate and distinct from its
subsidiary banks and its nonbank subsidiaries. Accordingly, the right of
the Corporation, and consequently the right of creditors and shareholders
of the Corporation, to participate in any distribution of the assets or
earnings of any subsidiary is necessarily subject to the prior claims of
creditors of the subsidiary, except to the extent that claims of the
Corporation in its capacity as creditor may be recognized. The principal
source of the Corporation's revenue and cash flow is dividends from its
subsidiary banks and nonbank subsidiaries. There are legal limitations on
the extent to which its subsidiary banks can finance or otherwise supply
funds to the Corporation and its nonbank subsidiaries.
BANK HOLDING COMPANIES
GENERAL As a registered holding company, the Corporation is regulated
under the BHC Act and is subject to supervision and regular inspection by
the Board of Governors of the Federal Reserve System ("Federal Reserve
Board"). The BHC Act requires, among other things, the prior approval of
the Federal Reserve Board in any case where the Corporation proposes to
(i) acquire all or substantially all of the assets of any bank, (ii)
acquire direct or indirect ownership or control of more than 5 percent of
the voting shares of any bank, or (iii) merge or consolidate with any
other bank holding company.
ACQUISITIONS/PERMISSIBLE BUSINESS ACTIVITIES The BHC Act currently permits
bank holding companies from any state to acquire banks and bank holding
companies located in any other state, subject to certain conditions,
including certain nationwide- and state-imposed concentration limits.
Effective June 1, 1997, the Corporation's subsidiary banks will have the
ability, subject to certain restrictions, including state opt-out
provisions, to consolidate with one another or to acquire by acquisition
or merger branches outside their home states. States may affirmatively
opt-in to permit these transactions earlier, which Delaware and
Pennsylvania, among other states, have done. The establishment of new
interstate branches also will be possible in those states with laws that
expressly permit it. Interstate branches will be subject to certain laws
of the states in which they are located. Competition may increase further
as banks branch across state lines and enter new markets.
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Under the BHC Act, the Corporation is prohibited, with certain exceptions,
from acquiring direct or indirect ownership or control of more than 5
percent of any class of voting shares of any nonbanking corporation.
Further, the Corporation may not engage in any business other than
managing and controlling banks or furnishing certain specified services to
subsidiaries, and may not acquire voting control of nonbanking
corporations except those corporations engaged in businesses or furnishing
services that the Federal Reserve Board deems to be closely related to
banking.
COMMUNITY REINVESTMENT Bank holding companies and their subsidiary banks
are subject to the provisions of the Community Reinvestment Act of 1977,
as amended ("CRA"). Under the terms of the CRA, each subsidiary bank's
record in meeting the credit needs of the community served by that bank,
including low- and moderate-income neighborhoods, is generally annually
assessed by that bank's primary regulatory authority. When a bank holding
company applies for approval to acquire a bank or other bank holding
company, the Federal Reserve Board will review the assessment of each
subsidiary bank of the applicant bank holding company, and such records
may be the basis for denying the application. At December 31, 1995, the
Corporation's subsidiary banks were rated "Outstanding" or "Satisfactory"
with respect to CRA.
SOURCE OF STRENGTH POLICY 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 its "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 fund fully 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.
SUBSIDIARY BANKS
GENERAL The Corporation's subsidiary banks are subject to supervision and
examination by applicable federal and state banking agencies, including,
with respect to national banks, the Office of the Comptroller of the
Currency ("OCC"). In addition, all of the subsidiary banks are insured by
and subject to some or all of the regulations of the Federal Deposit
Insurance Corporation ("FDIC"). The Corporation's subsidiary banks are
also subject to various requirements and restrictions under federal and
state law, including requirements to maintain reserves against deposits,
restrictions on the types, amounts and terms and conditions of loans that
may be granted and limitations on the types of investments that may be
made and the types of services that may be offered. Various consumer laws
and regulations also affect the operations of the subsidiary banks.
DIVIDEND RESTRICTIONS Dividends from the Corporation's subsidiary banks
constitute the principal source of income to the parent company. The
Corporation's subsidiary banks are subject to various statutory and
regulatory restrictions on their ability to pay dividends to the
Corporation. Under such restrictions, the amount available for payment of
dividends to the Corporation by all subsidiary banks totaled $650 million
at December 31, 1995. In addition, bank regulators may have authority to
prohibit a bank subsidiary from paying dividends, depending upon the
subsidiary's financial condition, if such payment is deemed to constitute
an unsafe or unsound practice. The OCC and the Federal Reserve Board have
indicated their view that it generally would be an unsafe and unsound
practice to pay dividends except out of current operating earnings. The
ability of the subsidiary banks to pay dividends in the future is
presently, and could be further, influenced by bank regulatory and
supervisory policies.
AFFILIATE TRANSACTION RESTRICTIONS The Corporation's subsidiary banks are
subject to federal laws that limit the transactions by subsidiary banks to
or on behalf of their parent company and to or on behalf of any nonbank
subsidiaries. Such transactions by a subsidiary bank to its parent company
or to any nonbank subsidiary are limited to 10 percent of a bank
subsidiary's capital and surplus and, with respect to such parent company
and all such nonbank subsidiaries, to an aggregate of 20 percent of such
bank subsidiary's capital and surplus. Further, loans and extensions of
credit generally are required to be secured by eligible collateral in
specified amounts. Federal law also prohibits subsidiary banks from
purchasing "low-quality" assets from affiliates.
FDIC CROSS-GUARANTEE PROVISIONS The Corporation's subsidiary banks are
subject to the "cross-guarantee" provisions under federal law that provide
that if one depository institution subsidiary of a multi-bank holding
company fails or requires FDIC assistance, the FDIC may assess a "commonly
controlled" depository institution 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.
7
10
FDIC INSURANCE ASSESSMENTS Deposits of the Corporation's bank subsidiaries
are insured by the FDIC and are subject to FDIC insurance assessments. The
amount of FDIC assessments paid by individual insured depository
institutions is based on their relative risk as measured by regulatory
capital ratios and certain other factors. During 1995, the FDIC's Board of
Directors significantly reduced premium rates assessed on deposits insured
by the Bank Insurance Fund ("BIF"). Under the current regulations, the
Corporation is not assessed a premium on BIF-insured deposits. The rates
assessed for deposits insured by the Savings Association Insurance Fund
("SAIF") continue to range from 23 cents per $100 of eligible deposits
to 31 cents per $100 of eligible deposits. Approximately $5.3 billion of
the Corporation's deposits are insured by the SAIF and assessed 23 cents
per $100 of eligible deposits. Congress and various governmental agencies
are considering a number of proposals to recapitalize the SAIF, including
a significant one-time assessment on all SAIF-insured deposits. Management
currently cannot predict the outcome of these proposals or the effect, if
any, on the Corporation or any of its subsidiary banks.
ENFORCEMENT POWERS OF FEDERAL BANKING AGENCIES 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 on whether the institution in question is considered
"well capitalized", "adequately capitalized", "undercapitalized",
"significantly undercapitalized" or "critically undercapitalized". At
December 31, 1995, all of the Corporation's subsidiary banks exceeded the
required ratios for classification as "well capitalized." The
classification of depository institutions is primarily for the purpose of
applying the federal banking agencies' prompt corrective action powers and
is not intended to be, and should not be interpreted as, a representation
of the overall financial condition or prospects of any financial
institution.
The agencies' prompt corrective action powers can include, among other
things, requiring an insured financial institution to adopt a capital
restoration plan which cannot be approved unless guaranteed by the
institution's parent company; placing limits on asset growth and
restrictions on activities; including restrictions on transactions with
affiliates; restricting the interest rate the institution may pay on
deposits; prohibiting the payment of principal or interest on subordinated
debt; prohibiting the holding company from making capital distributions
without prior regulatory approval; and, ultimately, appointing a receiver
for the institution. Among other things, only a "well capitalized"
depository institution may accept brokered deposits without prior
regulatory approval and only an "adequately capitalized" depository
institution may accept brokered deposits with prior regulatory approval.
CAPITAL GUIDELINES Under the risk-based capital guidelines applicable to
the Corporation and each of its subsidiary banks, the minimum guideline for
the ratio of total capital to risk- weighted assets (including certain
off-balance-sheet activities, such as standby letters of credit) is 8.00
percent. At least half of the total capital must be "Tier 1" capital, which
primarily includes common shareholders' equity and qualifying preferred
stock, less goodwill and other disallowed intangibles. "Tier 2" capital
includes, among other items, certain cumulative and limited-life
preferred stock, qualifying subordinated debt and the allowance for credit
losses, subject to certain limitations, less required deductions as
prescribed by regulation.
In addition, the federal bank regulators established leverage ratio (Tier
1 capital to total adjusted average assets) guidelines providing for a
minimum leverage ratio of 3 percent for bank holding companies and banks
meeting certain specified criteria, including that such institutions have
the highest regulatory examination rating and are not contemplating
significant growth or expansion. Institutions not meeting these criteria
are expected to maintain a ratio which exceeds the 3 percent minimum by at
least 100 to 200 basis points. The federal bank regulatory agencies may,
however, set higher capital requirements when particular circumstances
warrant. Under the federal banking laws, failure to meet the minimum
regulatory capital requirements could subject a bank to a variety of
enforcement remedies available to federal bank regulatory agencies.
At December 31, 1995, all of the subsidiary banks' total and Tier 1
risk-based capital ratios and leverage ratios exceeded the minimum
regulatory capital requirements.
Additional discussion of the Corporation's current capital levels is set
forth under the caption entitled "Capital" in the "Corporate Financial
Review" on pages 30 and 31 of the Annual Report to Shareholders, which is
incorporated herein by reference.
Effective in January 1995, the federal banking agencies revised the
risk-based capital standards described above to include concentration of
credit risk and the risks of nontraditional activities. The Federal
Reserve Board, the FDIC and the OCC also subsequently amended their
capital standards to include a bank's exposure to declines in economic
value
8
11
of its capital due to changes in interest rates. The Corporation
understands that such agencies intend to continue reviewing the issue of
interest rate risk as it may affect capital adequacy.
NONBANK SUBSIDIARIES
The nonbank subsidiaries of the Corporation are subject to regulatory
restrictions imposed by the Federal Reserve Board and other federal or
state regulatory agencies.
The Corporation's subsidiaries engaged in securities-related activities
are regulated by the Securities and Exchange Commission ("SEC"). The
activities of the Corporation's two subsidiaries which are registered
broker dealers are also monitored by the OCC in one instance and the
Federal Reserve Board in the other instance. Each such company is also
subject to rules and regulations promulgated by the National Association
of Securities Dealers, Inc., the Securities Investors Protection
Corporation and various state securities commissions, and with respect to
public finance activities the Municipal Securities Rulemaking Board.
Several nonbank subsidiaries of the Corporation are registered investment
advisers and are subject to the regulations of the SEC and may be subject
to regulations of one or more state securities commissions. Additionally,
these investment advisers, as subsidiaries of a national bank, are subject
to supervision by the OCC. Investment companies (as defined in the
Investment Company Act of 1940, as amended) advised by a subsidiary of the
Corporation are registered with the SEC.
Other nonbank subsidiaries of the Corporation are regulated under federal
and/or state mortgage lending, insurance and consumer laws, among others.
LEGISLATIVE PROPOSALS AND REFORMS
Significant legislative proposals and reforms affecting the financial
services industry have been discussed and evaluated by Congress. In 1995,
such proposals included legislation to revise the Glass-Steagall Act and
the BHC Act to expand permissible activities for banks, principally to
facilitate the convergence of commercial and investment banking. Certain
proposals also sought to expand insurance activities of banks. It is
unclear whether any of these proposals, or any form of them, will become
law. Consequently, it is not possible to determine what effect, if any,
they may have on the Corporation and its subsidiaries.
COMPETITION
Bank holding companies and their subsidiaries are subject to vigorous and
intense competition from various financial institutions and other
"nonbank" or non-regulated companies or firms that engage in similar
activities. The Corporation's subsidiary banks compete for deposits with
other commercial banks, savings banks, savings and loan associations,
insurance companies and credit unions, as well as issuers of commercial
paper and other securities, including shares in mutual funds. In making
loans, the Corporation's subsidiary banks compete with other commercial
banks, savings banks, savings and loan associations, consumer finance
companies, credit unions, leasing companies and other nonbank lenders. In
addition, various nonbank subsidiaries engaged in investment banking and
venture capital activities compete with commercial banks, investment
banking firms, insurance companies and venture capital firms. In providing
asset management services, the Corporation's subsidiaries compete with
many large commercial banks, trust companies, brokerage houses, mutual
fund managers, registered investment advisors and insurance companies.
The Corporation and its subsidiaries compete not only with financial
institutions based in the states in which the subsidiary banks are
located, but also with a number of large out-of-state and foreign banks,
bank holding companies and other financial and nonbank institutions. Some
of the financial and other institutions operating in the same markets are
engaged in national and international operations and have more assets and
personnel than the Corporation. Some of the Corporation's competitors are
not subject to the extensive bank regulatory structure and restrictive
policies which apply to the Corporation and its subsidiaries.
9
12
EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning each executive officer of the Corporation as of
March 1, 1996 is set forth below. Each executive officer held the position
indicated or another senior executive position with the same entity or one
of its affiliates or a predecessor corporation for the past five years,
except as otherwise noted in the footnotes below.
YEAR
NAME AGE POSITION WITH CORPORATION EMPLOYED(1)
- ---------------------------------------------------------------------------------------------------------
Thomas H. O'Brien 59 Chairman and Chief Executive Officer 1962
James E. Rohr 47 President and Director 1972
Garry J. Scheuring (2) 56 Vice Chairman and Director 1990
Howard I. Atkins 45 Executive Vice President, Asset and Liability Management 1990
Susan B. Bohn 51 Executive Vice President, Corporate Development and 1986
Communications
Richard C. Caldwell 51 Executive Vice President, Asset Management 1990
Walter E. Gregg, Jr. 54 Executive Vice President, Finance and Administration 1974
Frederick J. Gronbacher 53 Executive Vice President, Division Head - Consumer Banking 1976
Robert L. Haunschild 46 Senior Vice President and Chief Financial Officer 1990
William J. Johns 49 Senior Vice President and Chief Accounting Officer 1974
Edward P. Junker III 59 Vice Chairman 1964
Ralph S. Michael III 41 Executive Vice President, Corporate Banking 1979
Thomas E. Paisley III 48 Senior Vice President and Chairman, Corporate Credit Policy 1972
Committee
Helen P. Pudlin 46 Senior Vice President and General Counsel 1989
Bruce E. Robbins 51 Executive Vice President, Real Estate Banking 1973
- ---------------------------------------------------------------------------------------------------------
(1) Where applicable, refers to year first employed by predecessor company or
acquired company.
(2) Mr. Scheuring became Vice Chairman of the Corporation in connection with
the Midlantic merger effective December 31, 1995. Since 1992, Mr. Scheuring
has been Chairman of the Board, President and Chief Executive Officer of
Midlantic Bank, N.A. From April 1991 until the merger, he was Chairman of the
Board, President and Chief Executive Officer of Midlantic. Prior thereto, he
was Vice Chairman of Continental Bank Corporation. In connection with the
Midlantic merger, the Corporation and Mr. Scheuring entered into an Employment
Agreement which is attached hereto as Exhibit 10.7.
10
13
ITEM 2 - PROPERTIES
The executive and administrative offices of the Corporation and PNC Bank,
National Association ("PNC Bank, N.A."), are located at One PNC Plaza, 249
Fifth Avenue, Pittsburgh, Pennsylvania. The thirty-story structure is
owned by PNC Bank, N.A. The Corporation and PNC Bank, N.A. occupy
substantially all of the building. In addition, PNC Bank, N.A. owns a
thirty-four story structure adjacent to One PNC Plaza, known as Two PNC
Plaza, 620 Liberty Avenue, Pittsburgh, Pennsylvania, that houses
additional office space. PNC Bank, N.A. also owns a data processing and
telecommunications center located in a suburb of Pittsburgh, Pennsylvania.
The Corporation's subsidiaries also own or lease numerous other premises
for use in conducting banking and nonbanking activities. The facilities
owned or occupied under lease by the Corporation's subsidiaries are
considered by management to be adequate. Neither the location of any
particular office nor the unexpired term of any lease is deemed material
to the business of the Corporation.
Additional information pertaining to the Corporation's properties is set
forth in "Note 8 - Premises, Equipment and Leasehold Improvements" of the
Notes to Consolidated Financial Statements included on page 56 of the
Annual Report to Shareholders, which is incorporated herein by reference.
ITEM 3 - LEGAL PROCEEDINGS
A consolidated purported class action complaint was filed in March 1995 in
the United States District Court for the Western District of Pennsylvania
against the Corporation, its Chairman and Chief Executive Officer and its
Senior Vice President and Chief Financial Officer, on behalf of a
purported class of persons who purchased the Corporation's securities
between April 18, 1994 and November 15, 1994. The lawsuit was consolidated
from four lawsuits filed in November and December 1994. The consolidated
complaint alleges violations of federal securities laws and common law
relating to disclosures regarding the Corporation's net interest income,
interest rate risk, future prospects, and related matters, and seeks,
among other things, unquantified damages. The magistrate judge has
recommended that the district court deny the pending motion to dismiss as
to all claims except a common law claim, and the recommendation has been
appealed to the district court judge. Management believes there are
meritorious defenses to this consolidated lawsuit and intends to defend it
vigorously. Management believes that the final disposition will not be
material to the Corporation's financial position.
In January 1992, a purported class action lawsuit was filed against PNC
National Bank ("PNCNB"), a national bank subsidiary of the Corporation
located in Wilmington, Delaware, alleging that PNCNB violated Pennsylvania
law in connection with credit card annual fees, late fees, over-credit
limit fees, and returned check fees charged to Pennsylvania cardholders.
The lawsuit is brought on behalf of a purported class of resident
individuals of Pennsylvania who have contracted for, been charged, had
reserved, or had paid these fees, and seeks, among other things,
unquantified compensatory and triple damages and injunctive relief. The
lawsuit was filed in the Court of Common Pleas of Allegheny County and was
removed to the United States District Court for the Western District of
Pennsylvania. The district court dismissed the lawsuit, holding that
Pennsylvania law is preempted by federal banking laws. The Third Circuit
Court of Appeals, after initially holding that there was no federal court
jurisdiction and remanding the case to state court, has vacated its
opinion and granted a rehearing.
The case against PNCNB is one of several similar cases pending against
other credit card issuers. In cases not involving PNCNB, the Supreme
Courts of California and Colorado, and one federal appeals court, have
upheld dismissal on the ground that state law restrictions on credit card
late fees are preempted by federal law, but the Supreme Court of New
Jersey has reached a contrary conclusion. The United States Supreme Court
has agreed to review the California late fee case, the outcome of which
will resolve the conflict and affect the case against PNCNB. In an appeal
of Pennsylvania Superior Court decisions against other credit card issuers
holding that federal law does not preempt Pennsylvania law purportedly
restricting annual fees, late fees, over-credit limit fees, and returned
check fees, the Pennsylvania Supreme Court has indicated it will defer
further proceedings until after the United States Supreme Court renders
its decision. The impact of the final disposition of the lawsuit brought
against PNCNB cannot be assessed at this time.
In March 1996, the Superior Court of New Jersey, Middlesex County,
dismissed, pursuant to agreement of the parties, the previously reported
purported class action lawsuit commenced in July 1995 against Midlantic,
Midlantic's chief executive officer and its directors and the Corporation,
relating to the merger with Midlantic. No compensation was paid by any
defendant to plaintiff or plaintiff's attorneys.
11
14
The Corporation, in the normal course of business, is subject to various
other pending and threatened lawsuits in which claims for monetary damages
are asserted. Management, after consultation with legal counsel, does not
anticipate that the ultimate aggregate liability, if any, arising out of
such other lawsuits will have a material effect on the Corporation's
financial position.
At the present time, management is not in a position to determine whether
any pending or threatened litigation will have a material adverse effect
on the Corporation's results of operations in any future reporting period.
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
A special meeting of shareholders of the Corporation was held on November
17, 1995, for the purpose of approving the reorganization agreement and
related merger agreement with Midlantic. The Midlantic merger was approved
and the votes cast for, against or abstained and the number of broker
non-votes were as follows:
Aggregate Votes For: 134,723,297
Aggregate Votes Against: 31,698,946
Number of Abstentions: 1,426,164
Number of Broker Non-Votes: 800,649
Holders of the Corporation's common stock and preferred stock voted
together as a single class. The following table sets forth as of September
29, 1995 record date, the number of shares of each class of stock that was
issued and outstanding and entitled to vote, the voting power per share
and the aggregate voting power of each class:
NUMBER OF SHARES AGGREGATE
TITLE OF CLASS VOTING RIGHTS ENTITLED TO VOTE VOTING POWER
- --------------------------------------------------------------------------------------
Common Stock 1 vote per share 228,598,590 228,598,590
$1.80 Cumulative Convertible
Preferred Stock - Series A 8 votes per share 17,951 143,608
$1.80 Cumulative Convertible
Preferred Stock - Series B 8 votes per share 6,336 50,688
$1.60 Cumulative Convertible
Preferred Stock - Series C 4 votes per 2.4 shares 361,363 602,271
$1.80 Cumulative Convertible
Preferred Stock - Series D 4 votes per 2.4 shares 479,383 798,971
TOTAL POSSIBLE VOTES 230,194,128*
- --------------------------------------------------------------------------------------
* Represents greatest number of votes possible. Actual aggregate voting
power was less since each holder of preferred stock is entitled to a
number of votes equal to the number of full shares of common stock into
which such holder's preferred stock is convertible.
12
15
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
29, 1996, there were 65,572 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 applicable government regulations and policies (such as those
relating to the ability of the subsidiary banks and nonbank subsidiaries
to upstream dividends to the parent company). The Federal Reserve Board
has the power to prohibit the Corporation from paying dividends without
prior regulatory approval. Further discussion concerning dividend
restrictions is set forth under the caption "Supervision and Regulation"
in Part I, Item 1 of this Form 10-K and in "Regulatory Matters" on page 65
of the Annual Report to Shareholders, 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 85 of the Annual
Report to Shareholders, which is incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
"Selected Consolidated Financial Data" on page 71 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 and analysis of the Corporation's financial position and
its results of operations set forth under the section entitled "Corporate
Financial Review" on pages 23 through 44 of the Annual Report to
Shareholders are incorporated herein by reference. See also the additional
discussion included under the captions "Business Overview" and "Risk
Management" in Part I, Item 1-Business of this Form 10-K.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The "Report of Ernst & Young LLP, Independent Auditors," "Consolidated
Financial Statements" and "Selected Quarterly Financial Data" on pages 45,
46 through 70, and 72, respectively, of the Annual Report to Shareholders
are incorporated herein by reference.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to the principal occupations of directors of the
Corporation, their ages, directorships in other companies, and respective
terms of office under the heading "Election of Directors - Information
Concerning Nominees" in the Proxy Statement is incorporated herein by
reference.
Information regarding compliance with Section 16(a) of the Securities
Exchange Act of 1934 set forth under the heading "Certain Reports" in the
Proxy Statement 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".
Information regarding the involvement of the Corporation's Chairman and
Chief Executive Officer and Senior Vice President and Chief Financial
Officer in a certain legal proceeding set forth under the heading "Legal
Proceedings" in the Proxy Statement is incorporated herein by reference.
13
16
ITEM 11 - EXECUTIVE COMPENSATION
Information regarding compensation of directors and executive officers
under the captions entitled "Election of Directors - Compensation of
Directors", "Election of Directors - Common Stock Purchase Guideline" and
"Compensation of Executive Officers", excluding the "Personnel and
Compensation Committee Report on Executive Compensation", in the Proxy
Statement is incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding the beneficial ownership of the equity securities of
the Corporation by all directors, each of the five highest compensated
executive officers, all directors and executive officers of the
Corporation as a group and certain other beneficial owners under the
heading "Security Ownership of Directors and Executive Officers and
Certain Beneficial Owners-Security Ownership of Directors and Executive
Officers" in the Proxy Statement is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding transactions and relationships with certain
directors and executive officers of the Corporation and their associates
under the heading "Compensation of Executive Officers-Compensation
Committee Interlocks and Insider Participation" in the Proxy Statement is
incorporated herein by reference.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following report of independent auditors of the Corporation and
consolidated financial statements, included in the Annual Report to
Shareholders, are incorporated herein by reference.
PAGE OF
FINANCIAL STATEMENTS ANNUAL REPORT
-------------------------------------------------------------------------------------------
Report of Ernst & Young LLP, Independent Auditors 45
Consolidated Balance Sheet as of December 31, 1995 and 1994 46
Consolidated Statement of Income for the three years ended December 31, 1995 47
Consolidated Statement of Changes in Shareholders' Equity for the
three years ended December 31, 1995 48
Consolidated Statement of Cash Flows for the three years ended December 31, 1995 49
Notes to Consolidated Financial Statements 50-70
Quarterly Selected Financial Data 72
FINANCIAL STATEMENT SCHEDULES
-------------------------------------------------------------------------------------------
Not applicable.
REPORTS ON FORM 8-K
-------------------------------------------------------------------------------------------
The following reports on Form 8-K were filed during the quarter ended
December 31, 1995, or thereafter:
A Current Report on Form 8-K dated as of September 26, 1995, was filed
pursuant to Item 5 to report the Corporation's consolidated financial
results for the three months and nine months ended September 30, 1995, the
receipt of regulatory approvals in connection with the Midlantic merger
and other Midlantic merger-related matters, and the appointment of an
additional director to the Corporation's Board of Directors.
14
17
A Current Report on Form 8-K dated as of December 31, 1995, was filed
pursuant to Item 2 to report the effectiveness of the merger with
Midlantic and the appointment of 4 additional directors to the
Corporation's Board of Directors. The Form 8-K also reported pursuant to
Item 5 the completion of actions that accelerated the repositioning of the
Corporation's balance sheet and provided an estimate of combined earnings
for 1995 giving effect to the Midlantic transaction. The following
financial statements were reported as having been previously filed: (a)
audited consolidated financial statements of Midlantic as of December 31,
1994 and 1993, and for each of the three years in the period ended
December 31, 1994, including the independent auditor's report thereon; (b)
unaudited consolidated interim financial statements of Midlantic as of
September 30, 1995 and 1994, and for the three months and nine months
ended September 30, 1995 and 1994; (c) pro forma consolidated financial
information (unaudited) as of September 30, 1995 and for the nine months
ended September 30, 1995 and 1994, giving effect to the Midlantic merger;
and (d) pro forma consolidated financial information (unaudited) for each
of the three years in the period ended December 31, 1994, giving effect to
the Midlantic merger.
A Current Report on Form 8-K dated January 24, 1996, was filed pursuant to
Item 5 to report the Corporation's consolidated financial results for the
three months and year ended December 31, 1995.
EXHIBITS
The exhibits listed on the Exhibit Index on pages 18 and 19 of this Form
10-K are filed herewith or are incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, PNC Bank Corp. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PNC BANK CORP.
(Registrant)
By: /s/ ROBERT L. HAUNSCHILD
-------------------------
Robert L. Haunschild
Senior Vice President and
Chief Financial Officer
Date: March 27, 1996
15
18
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
PNC Bank Corp. and in the capacity and on the dates indicated.
SIGNATURE TITLE DATE
----------------------- ------------------------- -----------------------
/s/ THOMAS H. O'BRIEN
-------------------------- Chairman, Chief Executive March 27, 1996
Thomas H. O'Brien Officer and Director
(Principal Executive Officer)
/s/ ROBERT L.HAUNSCHILD
-------------------------- Senior Vice President and March 27, 1996
Robert L. Haunschild Chief Financial Officer
(Principal Financial Officer)
/s/ WILLIAM J. JOHNS
-------------------------- Senior Vice President and March 27, 1996
William J. Johns Chief Accounting Officer
(Principal Accounting Officer)
*
-------------------------- Director March 27, 1996
Paul W. Chellgren
*
-------------------------- Director March 27, 1996
Robert N. Clay
*
-------------------------- Director March 27, 1996
William G. Copeland
*
-------------------------- Director March 27, 1996
George A. Davidson
*
-------------------------- Director March 27, 1996
David F. Girard-diCarlo
*
-------------------------- Director March 27, 1996
Dianna L. Green
*
-------------------------- Director March 27, 1996
C. G. Grefenstette
*
-------------------------- Director March 27, 1996
Arthur J. Kania
16
19
*
-------------------------- Director March 27, 1996
Bruce C. Lindsay
*
-------------------------- Director March 27, 1996
Thomas Marshall
*
-------------------------- Director March 27, 1996
W. Craig McClelland
*
-------------------------- Director March 27, 1996
Donald I. Moritz
*
-------------------------- Director March 27, 1996
Jackson H. Randolph
*
-------------------------- President and Director March 27, 1996
James E. Rohr
*
-------------------------- Director March 27, 1996
Roderic H. Ross
*
-------------------------- Director March 27, 1996
Vincent A. Sarni
*
-------------------------- Vice Chairman and Director March 27, 1996
Garry J. Scheuring
*
-------------------------- Director March 27, 1996
Thomas J. Usher
*
-------------------------- Director March 27, 1996
Milton A. Washington
*
-------------------------- Director March 27, 1996
Helge H. Wehmeier
* March 27, 1996
By /s/ MELANIE S. CIBIK
--------------------------
Melanie S. Cibik
Attorney-in-fact, pursuant to
Powers of Attorney filed
herewith
17
20
EXHIBIT INDEX
3.1 Articles of Incorporation of the Corporation, as amended,
incorporated herein by reference to Exhibit 3.1 of the Annual
Report on Form 10-K for the year ended December 31, 1993.
3.2 By-Laws of the Corporation, as amended, incorporated herein by
reference to Exhibit 4.2 to the Corporation's Registration
Statement on Form S-8 at File No. 33-62311.
4.1 Instruments defining the rights of holders of long-term debt of
the Corporation and its subsidiaries are not filed as Exhibits
because the amount of debt under each instrument is less than 10
percent of the consolidated assets of the Corporation. The
Corporation undertakes to file these instruments with the
Commission on request.
4.2 Designation of Series: $1.80 Cumulative Convertible Preferred
Stock -- Series A, incorporated herein as part of Exhibit 3.1.
4.3 Designation of Series: $1.80 Cumulative Convertible Preferred
Stock -- Series B, incorporated herein as part of Exhibit 3.1.
4.4 Designation of Series: $1.60 Cumulative Convertible Preferred
Stock -- Series C, incorporated herein as part of Exhibit 3.1.
4.5 Designation of Series: $1.80 Cumulative Convertible Preferred
Stock -- Series D, incorporated herein as part of Exhibit 3.1.
10.1 Supplemental Executive Retirement Income and Disability Plan of
the Corporation, incorporated herein by reference to Exhibit 10.2
of the Annual Report on Form 10-K for the year ended December 31,
1990 ("1990 Form 10-K"). *
10.2 Supplemental Executive Life Insurance and Spouse's Benefit Plan
of the Corporation, incorporated herein by reference to Exhibit
10.3 of the 1990 Form 10-K. *
10.3 1992 Long-Term Incentive Award Plan of the Corporation,
incorporated herein by reference to Exhibit 4.3 of the
Registration Statement on Form S-8 at File No. 33-54960. *
10.4 1992 Director Share Incentive Plan, incorporated herein by
reference to Exhibit 10.6 of the Annual Report on Form 10-K for
the year ended December 31, 1992.*
10.5 PNC Bank Corp. 1994 Annual Incentive Award Plan, incorporated by
reference to Exhibit 10.6 of the Annual Report on Form 10-K for
the year ended December 31, 1994 ("1994 Form 10-K").*
10.6 PNC Bank Corp. Directors Retirement Plan, incorporated by
reference to Exhibit 10.7 of the 1994 Form 10-K.*
10.7 Employment Agreement dated as of December 29, 1995, between the
Corporation and Garry J. Scheuring, filed herewith.*
10.8 PNC Bank Corp. 1996 Executive Incentive Award Plan, filed
herewith. *
11 Calculation of Primary and Fully Diluted Earnings Per Share,
filed herewith.
12.1 Computation of Ratio of Earnings to Fixed Charges, filed
herewith.
12.2 Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Dividends, filed herewith.
13 Excerpts of the Annual Report to Shareholders for the year ended
December 31, 1995, filed herewith. Such Annual Report, except for those
portions thereof that are expressly incorporated by reference
herein, is furnished for information of the Securities and
Exchange Commission 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.
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23 Consent of Ernst & Young LLP, independent auditors for the
Corporation, filed herewith.
24.1 Power of Attorney of certain directors and officers of the
Corporation, filed herewith.
24.2 Power of Attorney of Robert N. Clay, filed herewith.
24.3 Power of Attorney of David F. Girard-diCarlo, filed herewith.
24.4 Power of Attorney of Thomas Marshall, filed herewith.
24.5 Power of Attorney of Donald I. Moritz, filed herewith.
24.6 Power of Attorney of Vincent A. Sarni, filed herewith.
24.7 Power of Attorney of Helge H. Wehmeier, filed herewith.
27.1 Financial Data Schedule, filed herewith.
27.2 Restated Financial Data Schedule, filed herewith.
* Denotes management contract or compensatory plan.
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