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, 1993
OR
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _____________________ to __________________
Commission file number 1-9718
PNC BANK CORP.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1435979
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
ONE PNC PLAZA
FIFTH AVENUE AND WOOD STREET
PITTSBURGH, PENNSYLVANIA 15265
(Address of principal executive offices)
(Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE - (412) 762-2666
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 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 $6,412,000,000 AT FEBRUARY 28, 1994.
NUMBER OF OUTSTANDING SHARES OF REGISTRANT'S COMMON STOCK AS OF FEBRUARY 28,
1994: 234,871,944.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE PNC BANK CORP. ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED
DECEMBER 31, 1993 ("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 26,
1994 ("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.
PART I PAGE
----
Item 1 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 3 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 4 Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . *
PART II
Item 5 Market for Registrant's Common Equity and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 6 Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 8 Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . 11
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
PART III
Item 10 Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . 12
Item 11 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 12 Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . 12
Item 13 Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . 12
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on
Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
*Not Applicable.
PART I
ITEM 1--BUSINESS
INTRODUCTION
PNC Bank Corp. ("Corporation") is a bank holding company registered
under the Bank Holding Company Act of 1956, as amended ("Act"). The
Corporation was incorporated under Pennsylvania law in 1983 with the
consolidation of Pittsburgh National Corporation and Provident National
Corporation. Since 1983, the Corporation has diversified its geographical
presence and product capabilities through numerous strategic acquisitions and
the formation of various non-banking subsidiaries. At December 31, 1993, the
Corporation operated 9 banking subsidiaries ("Banks") in Pennsylvania,
Kentucky, Ohio, Delaware, Massachusetts and Indiana and 78 non-banking
subsidiaries. The Corporation's total assets and total shareholders' equity
were $62.1 billion and $4.3 billion, respectively. Based on 1993 year-end
assets, the Corporation was the 10th largest bank holding company in the nation
as reported by the American Banker. The Corporation employs approximately
21,100 people on a full-time equivalent basis.
In 1993, the Corporation's strategic focus was on refining the
line-of-business organizational structure; strategic growth through
acquisitions and continued investment in targeted businesses; managing the
revenue and expense relationship associated with the Corporation's mature
businesses; and marketing the Corporation under a new unified identity with an
emphasis on customer satisfaction.
On November 30, 1993, the Corporation consummated its acquisition of the
Sears Mortgage Banking Group, which consisted primarily of Sears Mortgage
Corporation, Sears Mortgage Securities Corporation and Sears Savings Bank.
Upon consummation, Sears Savings Bank was converted to a national banking
association and renamed PNC Mortgage Bank, National Association ("PNC
Mortgage"), and the other acquired entities became wholly-owned subsidiaries of
PNC Mortgage. With this acquisition, the Corporation added consumer assets of
$7.6 billion; a mortgage servicing portfolio approximating $27 billion,
including $21 billion serviced for others; and a national residential mortgage
production network consisting of 117 locations in 33 states. Other acquisitions
during the year are described under Item 7 of this Form 10-K.
The Corporation delivers a full range of banking products and services
to its customers through four lines of business: Corporate Banking, Retail
Banking, Investment Management and Trust, and Investment Banking. For the most
part, these products and services are distributed through the Corporation's
retail banking and mortgage origination office networks or its wholesale
banking offices in certain major metropolitan areas located in the U.S.
1
Corporate Banking provides financing, liquidity and cash management, and
financial services to businesses and government entities. Corporate Banking's
focus is on serving customers by developing and delivering products and
services specific to their needs. Certain market studies indicate that this
line of business has established one of the largest market shares among middle
market companies in the Corporation's primary markets, which include Delaware,
Indiana, Kentucky, New Jersey, Ohio and Pennsylvania. In addition, Corporate
Banking maintains banking relationships with many of the largest companies in
the U.S. and is a major provider of cash management services.
Retail Banking provides lending, deposit, investment, payment systems
access, and other financial services to consumers and small businesses. Such
services are primarily provided through the Corporation's 550 banking offices
located in Pennsylvania, Kentucky, Ohio, Delaware and Indiana. Certain retail
products, including residential mortgages, student loans and credit cards, are
centrally managed to enhance the Corporation's ability to provide high quality,
low cost products. The primary focus of Retail Banking is on enhancing sales
and service levels by pursuing acquisitions and consolidating certain
operations. Retail Banking serves more than two million households and more
than 70,000 small businesses, operates one of the largest student lending
businesses in the U.S. and maintains a mortgage origination network with
offices in 33 states.
Investment Management and Trust provides investment advice, asset
management, and administrative and custodial services to individuals,
institutions and mutual funds. Additionally, economic and investment research
services are sold to more than 230 institutions, including brokerage firms,
insurance companies, pension funds and other banks. At December 31, 1993, the
market value of trust assets under administration totaled $193 billion, with
discretionary authority over $57 billion. According to published rankings, the
Corporation ranks as the largest bank manager of mutual funds, one of the
largest bank trustees for individuals, the fourth-largest institutional money
fund manager and the seventh-largest bank money manager in the nation.
Investment Banking includes the asset/liability management function of the
Corporation as well as underwriting, brokerage and direct investment services.
Full-service retail brokerage services are provided in selected offices within
the Retail Banking office network through PNC Brokerage Corp and PNC Securities
Corp. In addition, securities underwriting services are provided by PNC
Securities Corp which ranks as one of the largest bank underwriters of revenue
bonds for the health care industry and colleges and universities. Private
equity placements for middle market and smaller companies to finance growth or
ownership transition are provided by PNC Capital Corp, PNC Venture Corp and PNC
Equity Management Corp.
For additional line of business information, see pages 27 through 30 of
the Annual Report to Shareholders, which are incorporated herein by reference.
2
Subsidiary Banks
Information as of December 31, 1993 for the Corporation's five largest
Banks is set forth below.
- ------------------------------------------------------------------------------------------------------------------------
Dollars in billions APPROXIMATE
PERCENTAGE OF
TOTAL CONSOLIDATED TOTAL NUMBER OF RETAIL
SUBSIDIARY BANK/LOCATION ASSETS TOTAL ASSETS DEPOSITS OFFICES
- ------------------------------------------------------------------------------------------------------------------------
PNC Bank, National Association $40.5 65 % $21.0 365
Pittsburgh, PA
PNC Bank, Kentucky, Inc. 5.7 9 3.4 68
Louisville, KY
PNC Mortgage Bank, National Association 5.1 8 3.0 117
Pittsburgh, PA
PNC Bank, Ohio, National Association 4.3 7 2.6 62
Cincinnati, OH
Bank of Delaware 2.9 5 1.7 40
Wilmington, DE
- -------------------------------------------------------------------------------------------------------------------------
CREDIT RISK MANAGEMENT
For a description of the Corporation's credit risk management
activities, information concerning the distribution of the loan portfolio and a
discussion and analysis of risk elements in the loan portfolio see pages 31-35
of the Annual Report to Shareholders, incorporated herein by reference.
For additional information regarding the Corporation's business, see
Items 7 and 8 of this Annual Report on Form 10-K.
SUPERVISION AND REGULATION
Bank Holding Companies
As a registered holding company, the Corporation is regulated under the
Act and is subject to supervision and regular inspection by the Board of
Governors of the Federal Reserve System ("Federal Reserve Board"). The 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.
Bank holding companies and their subsidiary banks are also 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 annually assessed by that bank's primary regulatory
3
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. The federal banking
agencies have issued a notice of proposed rulemaking that would replace the
current CRA assessment system with a new evaluation system that would primarily
rate institutions based on their actual lending activity in the community.
Under the current proposal, each institution would be evaluated based on the
degree to which it is providing loans, branches and other services and
investments to low- and moderate-income areas.
The Act prohibits the Federal Reserve Board from approving a bank
holding company's application to acquire a bank or bank holding company located
outside the state in which the operations of its banking subsidiaries are
principally conducted, unless such acquisition is specifically authorized by
statute of the state in which the bank or bank holding company to be acquired
is located. Pennsylvania law permits bank holding companies located in any
state to acquire Pennsylvania banks and bank holding companies, provided that
the home state of the acquiring company has enacted "reciprocal" legislation.
In this context, reciprocal legislation is generally defined as legislation
that expressly authorizes Pennsylvania bank holding companies to acquire banks
or bank holding companies located in another state on terms and conditions
substantially no more restrictive than those applicable to such an acquisition
in Pennsylvania by a bank holding company located in the other state.
Under the Act, the Corporation is prohibited, with certain exceptions,
from acquiring direct or indirect ownership or control of more than 5% of any
class of voting shares of any non-banking 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 non-banking corporations except those corporations
engaged in businesses or furnishing services which the Federal Reserve Board
deems to be so closely related to banking as "to be a proper incident thereto".
The Federal Reserve Board has determined that a number of activities meet this
standard and include: making and servicing loans; performing certain fiduciary
functions; leasing real and personal property; underwriting and dealing in
government obligations and certain money market instruments; underwriting and
dealing, to a limited extent, in corporate debt obligations and other
securities that banks may not deal in; providing foreign exchange advisory and
transactional services; and owning, controlling or operating a savings
association, if the savings association engages only in deposit-taking
activities and lending and other activities that are permissible for bank
holding companies. The Board, from time to time, may revise the list of
permitted activities.
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, including capital funds during periods of financial stress,
to support each such bank. Although this "source of strength" policy has been
challenged in litigation, the Federal Reserve Board continues to take the
position that it has the authority to enforce it. 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
company's capital needs, asset quality and overall financial condition.
4
Subsidiary Banks
The Banks are subject to supervision and examination by applicable
federal and state banking agencies, including the Office of the Comptroller of
the Currency ("Comptroller") in the case of subsidiaries that are national
banks. All of the Banks are insured by, and therefore subject to regulations
of, the Federal Deposit Insurance Corporation ("FDIC"), and are also subject to
requirements and restrictions under federal and state law, including
requirements to maintain reserves against deposits, restrictions on the types
and amounts of loans that may be granted and the interest that may be charged
thereon, and limitations on the types of investments that may be made and the
types of services that may be offered. Numerous consumer laws and regulations
also affect the operations of the Banks including, among others, disclosure
requirements, antidiscrimination provisions, and substantative contractual
limitations with respect to deposit accounts. The banking agencies, together
with the Departments of Justice and Housing and Urban Development, have
announced that they intend to enforce more rigorously compliance with community
reinvestment, antidiscrimination and other fair lending laws and regulations.
In addition to the impact of regulation, commercial banks are affected
significantly by the actions of the Federal Reserve Board as it attempts to
control the money supply and credit availability in order to influence the
economy.
The parent company's principal assets are its loans and advances to, and
investments in, its Banks and other subsidiaries. Dividends from the
Corporation's Banks constitute the principal source of income to the parent
company. The Banks are subject to various statutory restrictions on their
ability to pay dividends to the Corporation. Under such restrictions, the
amount available for payment of dividends to the Corporation by the Banks was
$942.8 million at December 31, 1993. In addition, the Comptroller and the
FDIC, in the case of national bank subsidiaries, and the FDIC or the Federal
Reserve Board, in the case of state bank subsidiaries, have authority to
prohibit any such Bank from engaging in an unsafe or unsound practice in
conducting its business. The payment of dividends, depending upon the
financial condition of the Bank in question, could be deemed to constitute such
an unsafe or unsound practice, and the regulatory agencies 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 Banks to pay
dividends in the future is presently, and could be further, influenced, among
other things, by applicable capital guidelines or by bank regulatory and
supervisory policies.
The ability of the Banks to make funds available to the parent company
is also subject to restrictions imposed by federal law. For a discussion of
these restrictions see "Regulatory Matters" on pages 56-57 of the Annual Report
to Shareholders, incorporated herein by reference.
The Banks are also subject to the "cross-guarantee" provisions of
federal law which 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 actual or estimated
losses suffered by the FDIC. Such liability could have a material adverse
effect upon the financial condition of any assessed bank and its parent
company. 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.
5
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. Under this system, in establishing the
insurance premium assessment for each bank, the FDIC will take into
consideration the probability that the deposit insurance fund will incur a loss
with respect to an institution, and will charge an institution with perceived
higher inherent risks a higher insurance premium. The FDIC will also consider
the different categories and concentrations of assets and liabilities of the
institution, the revenue needs of the deposit insurance fund, and any other
factors the FDIC deems relevant. Current regulations provide for a minimum
assessment of 23 cents per $100 of eligible deposits. A significant increase
in the assessment rate or a special additional assessment with respect to
insured deposits could have an adverse impact on the results of operations and
capital levels of the Banks or the Corporation.
The federal banking agencies possess broad powers to take corrective
action as deemed appropriate for an insured depository institution and its
holding companies. The extent of these powers depends upon whether the
institution in question is considered "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized" or
"critically undercapitalized." At December 31, 1993, all of the Banks exceeded
the required ratios for classification as well capitalized. Generally, as an
institution is deemed to be less well capitalized, the scope and severity of
the agencies' powers increase. The agencies' corrective 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 holding company; placing limits on asset growth and
restrictions on activities; placing restrictions on transactions with
affiliates; restricting the interest rate the institution may pay on deposits;
prohibiting the institution from accepting deposits from correspondent banks;
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. 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
only an "adequately capitalized" depository institution may accept brokered
deposits with prior regulatory approval. For a discussion of the current
capital levels of the Corporation, see "Capital" on page 37 of the Annual
Report to Shareholders, incorporated herein by reference.
Non-bank Subsidiaries
All of the non-bank subsidiaries of the Corporation are subject to
regulatory restrictions imposed by the Federal Reserve Board and other federal
or state regulatory agencies. For example, two subsidiaries of the Corporation
are registered broker-dealers. The activities of these companies are monitored
by the Comptroller in one instance and the Federal Reserve Board in the other
instance and both are subject to rules and regulations promulgated by the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc., the Municipal Securities Rulemaking Board, the Securities
Investors Protection Corporation and various state securities commissions.
Several other non-bank affiliates of the Corporation are registered investment
advisors and are subject to the regulations of the Securities and Exchange
Commission and may be subject to one or more state securities commissions.
Additionally, certain of these investment advisors are subsidiaries of national
banks and are subject to supervision by the Comptroller. Other non-bank
subsidiaries of the Corporation are regulated under federal and/or state
mortgage lending, insurance and consumer laws, among others.
6
GOVERNMENTAL POLICIES
The operations of financial institutions may be affected by legislative
changes. For example, Congress is presently considering various administration
proposals, including proposals to consolidate the bank regulatory agencies, to
authorize interstate branching and to amend various consumer protection laws.
In addition, Congress is considering various issues relating to the separation
of banking and commerce including, for example, banks' mutual fund activities.
Financial institutions' operations also may be affected by the policies of
various regulatory authorities. In particular, bank holding companies and
their subsidiaries are affected by the credit policies of the Federal Reserve
Board. An important function of the Federal Reserve Board is to regulate the
national supply of bank credit. Among the instruments of monetary policy used
by the Federal Reserve Board to implement its objectives are: open market
operations in U.S. Government securities; changes in the discount rate on bank
borrowings; and changes in reserve requirements on bank deposits.
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 of future changes
in monetary and fiscal policies, or the effect that they may have on the
Corporation's business and earnings.
COMPETITION
Bank holding companies and their subsidiaries are subject to intense
competition from various financial institutions and other companies or firms
that engage in similar activities. The Banks compete for deposits with other
commercial banks, savings banks, savings and loan associations, insurance
companies, credit unions and issuers of commercial paper and other securities,
such as shares in money market funds. In making loans, the Banks compete with
other commercial banks, savings banks, savings and loan associations, consumer
finance companies, credit unions, leasing companies and other lenders. In
addition, PNC Securities Corp, PNC Brokerage Corp, PNC Capital Corp, PNC
Venture Corp and PNC Equity Management Corp compete with commercial banks,
investment banking firms, insurance companies and venture capital firms. In
providing trust and money management services, the Corporation competes with
other large commercial banks, trust companies, brokerage houses, mutual fund
managers and insurance companies. Many such competitors have substantial
resources and operations which are national or international in scope.
The Corporation and its subsidiaries compete not only with financial
institutions based in the states in which the Banks are located, but also with
a number of large out-of-state and foreign banks, bank holding companies and
other financial institutions which have an established market presence in each
state. Some of the financial institutions operating in these markets are
engaged in local, regional, national and international operations and have more
assets and personnel than the Corporation.
7
EXECUTIVE OFFICERS
Information concerning each executive officer of the Corporation as of
February 28, 1994 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:
Mr. Caldwell whose principal occupation prior to 1990 was Executive Vice
President and Manager of the Trust Division of Harris Trust and Savings Bank,
Chicago; Mr. Haunschild whose principal occupation prior to 1990 was Partner in
the Pittsburgh Office of Ernst & Young; and Ms. Pudlin whose principal
occupation prior to 1989 was Partner in the Philadelphia law firm of Ballard
Spahr Andrews & Ingersoll.
NAME AGE POSITION WITH PNC BANK CORP. - YEAR EMPLOYED
---- --- --------------------------------------------
Thomas H. O'Brien 57 Chairman and Chief Executive Officer. Employed
in 1962.
James E. Rohr 45 President. Employed in 1972.
Richard C. Caldwell 49 Executive Vice President, Investment Management
and Trust. Employed in 1990.
Walter E. Gregg, Jr. 52 Executive Vice President, Finance and Administration. Employed in 1974.
Robert L. Haunschild 44 Senior Vice President, Planning/Finance. Employed in 1990.
Joe R. Irwin 58 Executive Vice President and Chief Investment Officer. Employed in 1963.
William J. Johns 46 Senior Vice President and Controller. Employed in 1974.
Edward P. Junker, III 57 Vice Chairman. Employed in 1964.
Thomas E. Paisley, III 46 Senior Vice President and Chairman, Corporate Credit Policy Committee.
Employed in 1972.
Helen P. Pudlin 44 Senior Vice President and General Counsel. Employed in 1989.
Bruce E. Robbins 49 President and Chief Executive Officer PNC Bank, National Association -
Pittsburgh. Employed in 1973.
8
NAME AGE POSITION WITH PNC BANK CORP. - YEAR EMPLOYED
---- --- --------------------------------------------
A. William Schenck, III 50 Executive Vice President, Retail Banking. Employed in 1969.
Richard L. Smoot 53 President and Chief Executive Officer, PNC Bank, National Association -
Philadelphia. Employed in 1987.
Herbert G. Summerfield, Jr. 53 Executive Vice President, Real Estate. Employed in 1970.
Walter L. West 51 Treasurer. Employed in 1966.
STATISTICAL DISCLOSURES BY BANK HOLDING COMPANIES
The statistical information contained on pages 63-72 of the Annual
Report to Shareholders is incorporated herein by reference.
ITEM 2--PROPERTIES
The executive and administrative offices of the Corporation and PNC
Bank, National Association ("PNC Bank, N.A.") are located in One PNC Plaza,
located at Fifth Avenue and Wood Street, Pittsburgh, Pennsylvania. This
thirty-story structure is owned by PNC Bank, N.A. The Corporation and PNC
Bank, N.A. occupy the entire building. In January 1993, PNC Bank, N.A.
purchased a thirty-four story structure adjacent to One PNC Plaza, now known as
Two PNC Plaza, that contains additional office space. PNC Bank, N.A. also owns
a recently-constructed data processing and telecommunications center located in
a suburb of Pittsburgh.
The Corporation's subsidiaries own or lease numerous other premises
for use in conducting banking and non-banking 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.
9
ITEM 3 - LEGAL PROCEEDINGS
On December 13, 1993, the United States District Court for the Western
District of Pennsylvania dismissed with prejudice the previously reported
consolidated federal securities law class action lawsuit commenced in April
1990 against the Corporation and certain present and former directors and
executive officers and the previously reported shareholders' derivative suit
against such individuals. The dismissal was entered pursuant to a settlement
agreement approved by the court. The cost of settlement was covered by
insurance and existing litigation reserves.
In January 1992, a lawsuit was filed against PNC National Bank
("PNCNB"), a national bank subsidiary of the Corporation located in Wilmington
Delaware, alleging that PNCNB violated Pennsylvania statutes in connection with
certain fees charged on credit cards issued by PNCNB. The lawsuit is brought
on behalf of a purported class of resident individuals of Pennsylvania who have
contracted for, been charged, had reserved, or have paid these fees, and seeks,
among other things, unquantified compensatory and triple damages and injunctive
relief. In March 1992, PNCNB filed an answer to the amended complaint, denying
liability and raising several affirmative defenses, and in January 1993, PNCNB
filed a motion for judgment on the pleadings seeking dismissal of the suit.
The lawsuit was filed in the Court of Common Pleas of Allegheny County and has
been removed to the United States District Court for the Western District of
Pennsylvania. PNCNB is vigorously defending the lawsuit. The impact of the
final disposition of this litigation on the Corporation cannot be assessed at
the present time. The lawsuit is one of several brought against a number of
banks, challenging whether a credit card issuing bank can impose various types
of fees allowed by the state where the issuer is located on cardholders
residing in other states that allegedly limit or prohibit those fees.
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 adverse 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.
10
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Corporation's common stock is listed on the New York Stock
Exchange and is traded under the symbol "PNC". At the close of business on
February 28, 1994, there were 43,456 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 upon
earnings, the financial condition of the Corporation and other factors
including applicable government regulations and policies. The ability to
maintain dividends at current levels is affected by the level of core earnings,
economic conditions, credit quality, regulatory policies, capital needs, growth
objectives, the ability of the Banks and non-bank subsidiaries to upstream
dividends to the parent company and other relevant factors. See further
discussion concerning dividend restrictions under Item 1 of this Form 10-K and
in "Regulatory Matters" on pages 56-57 of the Annual Report to Shareholders,
which is incorporated herein by reference.
Additional information relating to the common stock under the caption
"Stock Prices/Dividends Declared" on page 80 of the Annual Report to
Shareholders is incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
"Selected Consolidated Financial Data" on page 61 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
"Corporate Financial Review 1993 versus 1992" and "Management's
Discussion and Analysis 1992 Versus 1991" on pages 24-37 and 73-76,
respectively, of the Annual Report to Shareholders are incorporated herein by
reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The "Report of Independent Auditors," "Consolidated Financial
Statements" and "Selected Quarterly Financial Data" on pages 38, 39-60 and 62,
respectively, of the Annual Report to Shareholders are incorporated herein by
reference.
11
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 definitive proxy statement of the Corporation for
the annual meeting of shareholders to be held on April 26, 1994 ("Proxy
Statement") is incorporated herein by reference. Information regarding timely
filing of initial reports of ownership and reports of changes in ownership of
any equity securities of the Corporation 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.
ITEM 11 - EXECUTIVE COMPENSATION
Information regarding compensation of directors and executive officers
under the headings "Election of Directors - Compensation of Directors" and
"Compensation of Executive Officers" 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 each director and nominee for director, each
of the five highest compensated executive officers and all directors and
executive officers of the Corporation as a group under the heading "Security
Ownership of Certain Beneficial Owners and Management - Security Ownership of
Directors and Executive Officers" in the Proxy Statement is incorporated herein
by reference. Information regarding ownership of the equity securities of the
Corporation by certain other beneficial owners under the heading "Security
Ownership of Certain Beneficial Owners and Management - Security Ownership of
Certain Beneficial Owners" 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.
12
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K
The following consolidated financial statements and report of
independent auditors of the Corporation, included in the Annual Report to
Shareholders at the page indicated, are incorporated herein by reference.
INDEX TO FINANCIAL STATEMENTS PAGE
- ----------------------------- ----
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Consolidated Balance Sheet as of December 31, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . 39
Consolidated Statement of Income for the three years ended December 31, 1993 . . . . . . . . . . . . . 40
Consolidated Statement of Changes in Shareholders' Equity for the three years ended
December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Consolidated Statement of Cash Flows for the three years ended December 31, 1993 . . . . . . . . . . . 42
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Selected Quarterly Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
FINANCIAL STATEMENT SCHEDULES
Not applicable.
REPORTS ON FORM 8-K
A Current Report on Form 8-K ("Current Report") dated as of November 19,
1993 was filed on December 7, 1993 pursuant to Items 2 and 5 to report: (i)
completion of the acquisition of Sears Mortgage Corporation, Sears Mortgage
Securities Corporation and Sears Savings Bank, FSB, and (ii) completion of the
acquisition of Gateway Fed Corporation.
Also, a Current Report dated as of January 19, 1994 was filed on January
26, 1994 pursuant to Item 5 to report: (i) the Corporation's consolidated
financial results for the three months and twelve months ended December 31,
1993, and (ii) completion of the acquisition of United Federal Bancorp, Inc.
No pro forma financial statements were required to be filed with either
such Current Report.
EXHIBITS
The exhibits listed on the Exhibit Index on pages 15-16 of this Form
10-K are filed herewith or are incorporated herein by reference.
13
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.
By /s/ Thomas H. O'Brien
------------------------------
Thomas H. O'Brien
Chairman and Chief Executive Officer
Date: March 16, 1994
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 capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/Thomas H. O'Brien Chairman, Chief Executive March 16, 1994
- --------------------------------- Officer and Director
Thomas H. O'Brien (Principal Executive Officer)
/s/Walter E. Gregg, Jr. Executive Vice President March 16, 1994
- ---------------------------------- (Principal Financial Officer)
Walter E. Gregg, Jr.
/s/William J. Johns Senior Vice President and March 16, 1994
- ---------------------------------- Controller
William J. Johns (Principal Accounting Officer)
Patricia J. Clifford
William G. Copeland
George A. Davidson, Jr.
C.G. Grefenstette A majority of the
Thomas Marshall Directors
W. Craig McClelland
Donald I. Moritz
Jackson H. Randolph By /s/Timothy C. Roach
James E. Rohr -----------------------------------------
Thomas J. Usher Timothy C. Roach, Attorney-in-Fact
Date: March 16, 1994
14
EXHIBIT INDEX
3.1 Articles of Incorporation of the Corporation as amended, filed herewith.
3.2 By-Laws of the Corporation, as amended, filed herewith.
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 upon 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 Description of the Corporation's Senior Executive Compensation Plan,
incorporated herein by reference to Exhibit 10.4 of the Annual Report on
Form 10-K for the year ended December 31, 1992 ("1992 Form 10-K").
10.4 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.
10.5 1992 Director Share Incentive Plan, incorporated herein by reference to
Exhibit 10.6 of the 1992 Form 10-K.
11 Calculation of Primary and Fully Diluted Earnings Per Share, filed
herewith.
15
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
Stock Dividends, filed herewith.
13 Annual Report to Shareholders for the year ended December 31, 1993,
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 Major Subsidiaries of the Corporation, filed herewith.
23 Consent of Ernst & Young, independent auditors for the Corporation,
filed herewith.
24 Power of Attorney of certain directors of the Corporation, filed
herewith.
16