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, 1999.
COMMISSION FILE NUMBER 1-9718.
THE PNC FINANCIAL SERVICES GROUP, INC.
(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, INCLUDING ZIP CODE)
Registrant's telephone number, including area code - (412) 762-1553
PNC Bank Corp.
(Former Name, or Former Address, if changed since last Report)
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
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_
The aggregate market value of the voting common equity held by non-affiliates of
the registrant amounted to approximately $11.3 billion at February 29, 2000.
There is no non-voting common equity of the registrant outstanding.
Number of shares of registrant's common stock outstanding at February 29, 2000:
292,548,003
DOCUMENTS INCORPORATED BY REFERENCE
Portions of The PNC Financial Services Group, Inc. 1999 Annual Report ("Annual
Report to Shareholders") are incorporated by reference into Parts I and II and
portions of the definitive Proxy Statement of The PNC Financial Services Group,
Inc. for the annual meeting of shareholders to be held on April 25, 2000 ("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) and (9) of Regulation S-K.
TABLE OF CONTENTS
PART I Page
--------
Item 1 Business 2
Item 2 Properties 6
Item 3 Legal Proceedings 6
Item 4 Submission of Matters to a Vote of Security
Holders 6
Executive Officers of the Registrant 6
PART II
Item 5 Market for Registrant's Common Equity and
Related Stockholder Matters 6
Item 6 Selected Financial Data 7
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
Item 7A Quantitative and Qualitative Disclosures
About Market Risk 7
Item 8 Financial Statements and Supplementary Data 7
Item 9 Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure 7
PART III
Item 10 Directors and Executive Officers of the
Registrant 7
Item 11 Executive Compensation 7
Item 12 Security Ownership of Certain Beneficial
Owners and Management 7
Item 13 Certain Relationships and Related
Transactions 7
PART IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K 8
SIGNATURES 9
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 forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
with respect to financial performance and other financial and business matters.
This report also includes forward-looking statements. Forward-looking statements
are typically identified by words or phrases such as "believe," "expect,"
"anticipate," "intend," "estimate," "position" and variations of such words and
similar expressions, or future or conditional verbs such as "will," "would,"
"should," "could," "may" or similar expressions. The Corporation cautions that
forward-looking statements are subject to numerous assumptions, risks and
uncertainties, all of which change over time, and the Corporation assumes no
duty to update forward-looking statements. Actual results could differ
materially from those anticipated in forward-looking statements.
In addition to factors previously disclosed by the Corporation and those
identified elsewhere in this Report, the following factors, among others, could
cause actual results to differ materially from forward-looking statements:
increased credit risk; the introduction, withdrawal, success and timing of
business initiatives and strategies; changes in competitive conditions; the
inability to sustain revenue and earnings growth; the inability to realize cost
savings or revenues and implement integration plans associated with acquisitions
and divestitures; changes in economic conditions, interest rates and financial
and capital markets; inflation; changes in investment performance; customer
disintermediation; customer borrowing, repayment, investment and deposit
practices; customer acceptance of PNC products and services; the inability of
the Corporation or others to remediate year 2000 concerns; and the impact,
extent and timing of technological changes, capital management activities,
actions of the Federal Reserve Board and legislative and regulatory actions and
reforms.
ITEM 1 - BUSINESS
BUSINESS OVERVIEW The PNC Financial Services Group, Inc. 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 recently enacted
Gramm-Leach-Bliley 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 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 regional banking, wholesale banking and asset
management businesses that provide products and services nationally and in PNC's
primary geographic markets in Pennsylvania, New Jersey, Delaware, Ohio and
Kentucky. At December 31, 1999, the Corporation's consolidated total assets,
deposits and shareholders' equity were $75.4 billion, $46.7 billion and $5.9
billion, respectively. For information about principal acquisitions and
divestitures and sale of subsidiary stock during 1999, see "Note 2 -
Acquisitions and Divestitures" and "Note 3 - Sale of Subsidiary Stock" of the
"Notes to Consolidated Financial Statements" included on page 67 of the Annual
Report to Shareholders and incorporated herein by reference. Financial and other
information by segment is included in "Note 23 - Segment Reporting" of the
"Notes to Consolidated Financial Statements" included on pages 79 and 80 of the
Annual Report to Shareholders and incorporated herein by reference.
REVIEW OF BUSINESSES The information relating to PNC Bank - Regional Banking,
PNC Bank - Corporate Banking, PNC Secured Finance, PNC Mortgage, PNC Advisors,
BlackRock and PFPC is set forth under the captions "Overview" and "Review of
Businesses" in the "Financial Review" included on pages 36 through 45 of the
Annual Report to Shareholders, and is incorporated herein by reference.
2
SUBSIDIARIES The corporate legal structure currently consists of four subsidiary
banks and over 75 active nonbank subsidiaries. PNC Bank, National Association
("PNC Bank, N.A."), headquartered in Pittsburgh, Pennsylvania, is the
Corporation's principal bank subsidiary. At December 31, 1999, PNC Bank, N.A.
had consolidated total assets of $68.2 billion, representing approximately 90%
of the Corporation's consolidated total 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:
Page of
Annual
Report to
Shareholders
- -----------------------------------------------------------------
Average Consolidated Balance Sheet and Net Interest
Analysis 86-87
Analysis of Year-to-Year Changes in Net Interest
Income 85
Book Values of Securities 68
Maturities and Weighted-Average Yield of Securities 69
Loan Types 69
Loan Maturities and Interest Sensitivity 89
Nonaccrual, Past Due and Restructured Loans 64 and 70
Potential Problem Loans 50
Summary of Loan Loss Experience 88
Allocation of Allowance for Credit Losses 88
Average Amount and Average Rate Paid on Deposits 86-87
Time Deposits of $100,000 or More 89
Selected Consolidated Financial Data 35
Short-Term Borrowings 89
RISK MANAGEMENT In the normal course of business, the Corporation assumes
various types of risk, the most significant of which are credit, liquidity,
interest rate and market risk. To manage these risks, PNC has risk management
processes designed to provide for risk identification, measurement, monitoring
and control. Information relating to credit, liquidity, interest rate and market
risk and the Corporation's risk management processes is set forth under the
section "Risk Management" in the "Financial Review" included on pages 50 through
53 of the Annual Report to Shareholders, which is incorporated herein by
reference.
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 United States 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. 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
page 52 of the Annual Report to Shareholders, and is incorporated herein by
reference.
SUPERVISION AND REGULATION The Corporation and its subsidiaries are subject to
numerous governmental regulations, some of which are highlighted below and in
"Note 17 - Regulatory Matters" of the "Notes to Consolidated Financial
Statements" included on pages 73 and 74 of the Annual Report to Shareholders,
("Note 17 - Regulatory Matters"), which is incorporated herein by reference.
These regulations cover, among other things, permissible activities and
investments and dividend limitations on the Corporation and its subsidiaries,
and consumer-related protections for loan, deposit, brokerage, fiduciary, mutual
fund and other customers.
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, to acquire direct or indirect ownership or control of
more than 5% of the voting shares of any bank, or to merge or consolidate with
any other bank 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, 1999, the Corporation's principal bank subsidiary, PNC
Bank, N.A., was rated "Outstanding" with respect to CRA; its other bank
subsidiaries were rated "Satisfactory."
As a bank holding company, the Corporation may not, with certain exceptions,
acquire direct or indirect ownership or control of more than 5% of any class of
voting shares of any nonbanking 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 unless the Federal Reserve
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Board determines such businesses and services to be closely related to banking.
The Gramm-Leach-Bliley Act ("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 has 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 declared by the Federal Reserve
Board, in cooperation with the Treasury Department, to be "financial in nature
or incidental thereto" or are declared 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.
PNC became a financial holding company as of March 13, 2000.
The Federal Reserve Board is the umbrella supervisor of a financial holding
company. The GLB Act requires the Federal Reserve Board to defer to the actions
and requirements of the "functional" regulators of subsidiary broker-dealers,
investment managers, investment companies, insurance underwriters and brokers,
banks and other regulated institutions. Thus, the various state and federal
regulators of a financial holding company's subsidiaries retain their
jurisdiction and authority over such operating entities. As the umbrella
supervisor, however, the Federal Reserve Board has the potential to affect the
operations and activities of a financial holding company's subsidiaries through
its authority over the financial holding company parent. In addition, the
Federal Reserve Board retains back-up regulatory authority over functionally
regulated subsidiaries, such as broker-dealers and banks, to intervene directly
in the affairs of the subsidiaries for specific reasons.
The Corporation's subsidiary banks and their subsidiaries are subject to
supervision and examination by applicable federal and state banking agencies,
including such federal agencies as the Office of the Comptroller of the Currency
("OCC") with respect to PNC Bank, N.A. and PNC Advisors, N.A., the Federal
Deposit Insurance Corporation ("FDIC") with respect to PNC Bank, Delaware, and
the Office of Thrift Supervision with respect to PNC Bank, FSB. 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 Corporation's principal source of income. Without
regulatory approval, the amount available for dividend payments to PNC Bancorp,
Inc. by all bank subsidiaries was $489 million at December 31, 1999. 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 17 - Regulatory Matters."
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.
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, N.A., to engage in expanded activities
through the formation of a "financial subsidiary." PNC Bank, N.A. has filed a
financial subsidiary certification with the OCC and may thus engage in any
activity that is financial in nature or incidental to a financial activity,
except for insurance underwriting, insurance investments, real estate investment
or development, or merchant banking. In order to qualify to establish or acquire
a financial subsidiary, PNC Bank, N.A. 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 Bank, N.A., must
also have issued debt with a certain rating.
A financial holding company or national bank engaging in activities permitted
under the GLB Act can be subject to various corrective actions by the FRB or
OCC, respectively, if the "well capitalized" or "well managed" requirements
noted above are not met. These corrective actions could include requiring
divestiture of the activities conducted in reliance on the GLB Act. In addition,
if the CRA rating requirements discussed above are not met, the financial
holding company or national bank would not be permitted to engage in new
activities, or to make new investments, in reliance on the GLB Act.
4
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, as an institution is deemed to be less well
capitalized, the scope and severity of the agencies' powers increase, ultimately
permitting the agency to appoint a receiver for the 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, 1999, all 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" on page 49 of the Annual Report to
Shareholders, which is incorporated herein by reference.
All of the Corporation's subsidiary banks have deposits insured by the FDIC and
are subject to premium assessments. The FDIC assessment is based upon the
institution's relative risk as measured by regulatory capital ratios and certain
other factors. Under current regulations, the Corporation's subsidiary banks are
not assessed a premium on deposits insured by either the Bank Insurance Fund or
the Savings Association Insurance Fund. However, insured depository institutions
continue to pay premiums based upon deposit levels to service debt issued by a
governmental entity.
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 restrictions imposed by
the Federal Reserve Board and other federal and state agencies. The
Corporation's six registered broker-dealer subsidiaries are regulated by the
Securities and Exchange Commission ("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., among others. Two subsidiaries
are registered as commodity pool operators with the Commodity Futures Trading
Commission and the National Futures Association, and are subject to regulation
by them. Several subsidiaries that are registered investment advisers are
subject to regulation by the SEC and other agencies. Several subsidiaries also
provide investment advisory and other services to registered investment
companies and thus are subject to certain obligations under the Investment
Company Act of 1940, as amended.
The rules governing the regulation of financial services institutions and their
holding companies are very detailed and technical. Accordingly, the above
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.
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 beyond its primary geographic footprint, 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 broad 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 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 banks and other financial institutions,
brokerage firms, mutual fund complexes, investment management firms 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.
EMPLOYEES Average full-time equivalent employees totaled approximately 25,600 in
1999, and were approximately 27,200 in December 1999.
5
ITEM 2 - PROPERTIES
The executive and administrative offices of the Corporation and 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 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. has operations centers in Pittsburgh and Philadelphia, Pennsylvania. A new
facility is presently under construction for the Pittsburgh operations center,
with completion expected in 2000. The Philadelphia operations center is located
in a leased facility.
The Corporation's 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 10 - Premises, Equipment and Leasehold Improvements" of the "Notes to
Consolidated Financial Statements" included on page 71 of the Annual Report to
Shareholders, which is incorporated herein by reference.
ITEM 3 - LEGAL PROCEEDINGS
The information set forth in "Note 25 - Litigation" of the "Notes to
Consolidated Financial Statements" included on page 81 of the Annual Report to
Shareholders is incorporated herein by reference.
ITEM 4 - SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the fourth quarter of 1999.
EXECUTIVE OFFICERS OF THE REGISTRANT Information concerning each executive
officer of the Corporation as of March 15, 2000 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.
Year
Name Age Position with Corporation Employed(1)
- -------------------------------------------------------------------------------
Thomas H. O'Brien (2) (3) 63 Chairman, Chief Executive 1962
Officer and Director
James E. Rohr (2) (3) 51 President, Chief Operating 1972
Officer and Director
Walter E. Gregg, Jr. (2) 58 Vice Chairman and Director 1974
Joseph C. Guyaux 49 Executive Vice President 1972
and Chief Executive Officer,
PNC Bank - Regional
Community Banking
Robert L. Haunschild 50 Senior Vice President and 1990
Chief Financial Officer
Ralph S. Michael III 45 Executive Vice President 1979
and Chief Executive
Officer, PNC Bank -
Corporate Banking
Thomas E. Paisley III 52 Senior Vice President and 1972
Chairman, Corporate
Credit Policy Committee
Samuel R. Patterson 41 Controller 1986
Helen P. Pudlin 50 Senior Vice President and 1989
General Counsel
Bruce E. Robbins (4) 55 Executive Vice President 1973
and Chief Executive
Officer, PNC Secured
Finance
Thomas K. Whitford 44 Executive Vice President 1983
and Chief Executive
Officer, PNC Advisors
(1) Where applicable, refers to year first employed by predecessor company
or acquired company.
(2) Office of the Chairman member.
(3) Mr. O'Brien will retire as Chief Executive Officer effective May 1,
2000, but not as Chairman of the Board. Mr. Rohr will become Chief
Executive Officer effective May 1, 2000 and will retain the title of
President.
(4) Mr. Robbins will retire effective June 30, 2000.
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, 2000,
there were 60,407 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
6
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 upstream dividends to the parent
company). 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 Risk" in the "Risk Management" section of the "Financial Review" on
pages 51 and 52 of the Annual Report to Shareholders, and in "Note 17 -
Regulatory Matters", which are incorporated herein by reference.
Additional information relating to the common stock is set forth under the
caption "Common Stock Prices/Dividends Declared" on the inside back cover of the
Annual Report to Shareholders, which is incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
The information set forth under the caption "Selected Consolidated Financial
Data" in the "Financial Review" on page 35 and the caption "Average Consolidated
Balance Sheet and Net Interest Analysis" in the "Statistical Information" on
pages 86 and 87 of the Annual Report to Shareholders is incorporated herein by
reference. Average common shareholders' equity to average assets for the
Corporation was 7.43%, 7.06%, 7.31%, 8.11% and 7.64% for 1999, 1998, 1997, 1996
and 1995, respectively.
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 35 through 57
of the Annual Report to Shareholders is incorporated herein by reference.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information set forth under the captions "Interest Rate Risk," "Market Risk"
and "Financial Derivatives" in the "Financial Review" on pages 52 through 55 of
the Annual Report to Shareholders is incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The "Report of Ernst & Young LLP, Independent Auditors," "Consolidated Financial
Statements," "Notes to Consolidated Financial Statements" and "Selected
Quarterly Financial Data" on pages 59, 60 through 63, 64 through 83, and 84,
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
There were no reportable events.
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 and is incorporated herein by reference.
Information regarding compliance with Section 16(a) of the Securities Exchange
Act of 1934 set forth under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" 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."
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 "Personnel and Compensation Committee Report on
Executive Compensation," in the Proxy Statement and is incorporated herein by
reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth under the caption "Security
Ownership of Directors, Nominees and Executive Officers" in the Proxy Statement
and is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth under the caption
"Transactions Involving Directors, Nominees and Executive Officers" in the Proxy
Statement and is incorporated herein by reference.
7
PART IV
ITEM 14 - 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.
Page of
Annual
Report to
Financial Statements Shareholders
- ----------------------------------------------------------------
Report of Ernst & Young LLP, Independent Auditors 59
Consolidated Statement of Income for the three
years ended December 31, 1999 60
Consolidated Balance Sheet as of December 31, 1999
and 1998 61
Consolidated Statement of Shareholders' Equity
for the three years ended December 31, 1999 62
Consolidated Statement of Cash Flows for the
three years ended December 31, 1999 63
Notes to Consolidated Financial Statements 64-83
Selected Quarterly Financial Data 84
- ----------------------------------------------------------------
No financial statement schedules are being filed.
REPORTS ON FORM 8-K The following reports on Form 8-K were filed during the
quarter ended December 31, 1999.
Form 8-K dated October 20, 1999, filing an earnings release reporting the
Corporation's consolidated financial results for the three and nine months ended
September 30, 1999, and information on the Corporation's businesses for the nine
months ended September 30, 1999 and 1998.
Form 8-K dated October 26, 1999, reporting on entering into an underwriting
agreement with respect to the public offering of $400,000,000 of 7.50%
subordinated notes due 2009 and on the form of the notes and related guarantee.
EXHIBITS The exhibits listed on the Exhibit Index on pages E-1 and E-2 of this
Form 10-K are filed herewith or are incorporated herein by reference.
8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant, The PNC Financial Services Group, Inc., 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/ Robert L. Haunschild
- ---------------------------------------------------
Robert L. Haunschild, Senior Vice President
and Chief Financial Officer
March 27, 2000
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 27, 2000.
Signature Capacities
- ---------------------------------------------------- ----------------------------------------------------
/s/ Thomas H. O'Brien Chairman, Chief Executive Officer
- ---------------------------------------------------- and Director (Principal Executive Officer)
Thomas H. O'Brien
/s/ Robert L. Haunschild Senior Vice President and Chief Financial
- ---------------------------------------------------- Officer (Principal Financial Officer)
Robert L. Haunschild
/s/ Samuel R. Patterson Controller
- ---------------------------------------------------- (Principal Accounting Officer)
Samuel R. Patterson
* Paul W. Chellgren; Robert N. Clay; George A. Directors
Davidson, Jr.; David F. Girard-diCarlo; Walter E.
Gregg, Jr.; William R. Johnson; Bruce C. Lindsay;
W. Craig McClelland; Jane G. Pepper; Jackson H.
Randolph; James E. Rohr; Roderic H. Ross; Richard
P. Simmons; 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
9
EXHIBIT INDEX
Exhibit
No. Description Method of Filing +
- ----------------------------------------------------------------------------------------------------------------------------
3.1 Articles of Incorporation of the Corporation, as amended and Filed herewith.
restated as of March 14, 2000.
3.2 By-Laws of the Corporation, as amended. Incorporated herein by reference to Exhibit
99.2 of the Corporation's Current Report
on Form 8-K dated January 15, 1998.
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 upon request.
4.2 Terms of $1.80 Cumulative Convertible Preferred Stock, Series A. Included as part of Exhibit 3.1.
4.3 Terms of $1.80 Cumulative Convertible Preferred Stock, Series B. Included as part of Exhibit 3.1.
4.4 Terms of $1.60 Cumulative Convertible Preferred Stock, Series C. Included as part of Exhibit 3.1.
4.5 Terms of $1.80 Cumulative Convertible Preferred Stock, Series D. Included as part of Exhibit 3.1.
4.6 Terms of Fixed/Adjustable Rate Noncumulative Preferred Stock, Included as part of Exhibit 3.1.
Series F.
10.1 The Corporation's Supplemental Executive Retirement Plan, as Filed herewith. *
amended as of January 1, 1999.
10.2 The Corporation's ERISA Excess Pension Plan, as amended as of Filed herewith. *
January 1, 1999.
10.3 The Corporation's Key Executive Equity Program, as amended as of Filed herewith. *
January 1, 1999.
10.4 The Corporation's Supplemental Incentive Savings Plan, as amended Filed herewith. *
as of January 1, 1999.
10.5 The Corporation's 1997 Long-Term Incentive Award Plan. Incorporated herein by reference to
Exhibit 4.3 to Post-Effective Amendment
No. 1 to the Corporation's Registration
Statement No. 33-54960 on Form S-8 filed
with the SEC on April 25, 1997.*
10.6 Form of Nonstatutory Stock Option Agreement under 1997 Award Plan. Incorporated herein by reference to Exhibit
10.6 of the Corporation's Annual Report on
Form 10-K for the year ended December 31,
1997 ("1997 Form 10-K").*
10.7 Form of Nonstatutory Stock Option Agreement under 1997 Award Plan Incorporated herein by reference to Exhibit
for options granted on or after February 17, 1999. 10.8 of the Corporation's Annual Report on
Form 10-K for the year ended December 31,
1998.*
10.8 Form of Addendum to Nonstatutory Stock Option Agreement relating Incorporated herein by reference to Exhibit
to Reload Nonstatutory Stock Options. 10.8 of the Corporation's 1997 Form 10-K.*
10.9 Form of Reload Nonstatutory Stock Option Agreement. Incorporated herein by reference to Exhibit
10.9 of the Corporation's 1997 Form 10-K.*
E-1
10.10 The Corporation's 1996 Executive Incentive Award Plan. Incorporated herein by reference to Exhibit 10.2
of the Corporation's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996.*
10.11 PNC Bank Corp. and Affiliates Deferred Compensation Plan, as Filed herewith.*
amended as of January 1, 1999.
10.12 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").*
10.13 1992 Director Share Incentive Plan. Filed herewith.*
10.14 The Corporation's Directors Deferred Compensation Plan. Incorporated by reference to Exhibit 10.1 of the
Corporation's Quarterly Report on Form 10-Q for
the Quarter ended September 30, 1996.*
10.15 The Corporation's Outside Directors Deferred Stock Unit Plan Filed herewith.*
10.16 Amended and Restated Trust Agreement between the Corporation, Incorporated herein by reference to Exhibit 10.18
as Settlor, and Hershey Trust Company, as successor of the Corporation's 1996 Form 10-K.*
Trustee to NationsBank, N.A., Trustee.
12.1 Computation of Ratio of Earnings to Fixed Charges. Filed herewith.
12.2 Computation of Ratio of Earnings to Fixed Charges and Filed herewith.
Preferred Dividends.
13 Excerpts from the Corporation's Annual Report to Shareholders Filed herewith.
for the year ended December 31, 1999. 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 Consent of Ernst & Young LLP, independent auditors for the Filed herewith.
Corporation.
24 Powers of Attorney. Filed herewith.
27 Financial Data Schedule. Filed herewith.
- ----------------------------------------------------------------------
+ Incorporated document references to filings by the Corporation are to SEC
File No. 1-9718.
* Denotes management contract or compensatory plan.
E-2