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, 2001
COMMISSION FILE NUMBER 1-9718
THE PNC FINANCIAL SERVICES GROUP, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1435979
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE PNC PLAZA
249 FIFTH AVENUE
PITTSBURGH, PENNSYLVANIA 15222-2707
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
Registrant's telephone number, including area code - (412) 762-1553
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Securities registered pursuant to Section 12(b) of the Act:
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Name of Each Exchange
Title of Each Class on Which Registered
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COMMON STOCK, PAR VALUE $5.00 New York Stock Exchange
$1.60 CUMULATIVE CONVERTIBLE PREFERRED STOCK-SERIES C, PAR VALUE $1.00 New York Stock Exchange
$1.80 CUMULATIVE CONVERTIBLE PREFERRED STOCK-SERIES D, PAR VALUE $1.00 New York Stock Exchange
SERIES G JUNIOR PARTICIPATING PREFERRED SHARE PURCHASE RIGHTS New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
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$1.80 CUMULATIVE CONVERTIBLE PREFERRED STOCK - SERIES A, PAR VALUE $1.00
$1.80 CUMULATIVE CONVERTIBLE PREFERRED STOCK - SERIES B, PAR VALUE $1.00
8.25% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2008
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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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
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The aggregate market value of the voting common equity held by non-affiliates of
the registrant amounted to approximately $15.5 billion at February 28, 2002.
There is no non-voting common equity of the registrant outstanding.
Number of shares of registrant's common stock outstanding at February 28, 2002:
283,182,441
DOCUMENTS INCORPORATED BY REFERENCE
Portions of The PNC Financial Services Group, Inc. 2001 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. filed pursuant to Regulation 14A for the annual meeting of shareholders to
be held on April 23, 2002 ("Proxy Statement") are incorporated by reference into
Part III of this Form 10-K. The incorporation by reference herein of portions of
the Proxy Statement shall not be deemed to specifically incorporate by reference
the information referred to in Items 306(c), 306(d) and 402(a)(8) and (9) of
Regulation S-K.
TABLE OF CONTENTS
PART I Page
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Item 1 Business 3
Item 2 Properties 8
Item 3 Legal Proceedings 8
Item 4 Submission of Matters to a Vote of Security
Holders 9
Executive Officers of the Registrant 9
PART II
Item 5 Market for Registrant's Common Equity and
Related Stockholder Matters 9
Item 6 Selected Financial Data 9
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
Item 7A Quantitative and Qualitative Disclosures
About Market Risk 10
Item 8 Financial Statements and Supplementary Data 10
Item 9 Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure 10
PART III
Item 10 Directors and Executive Officers of the
Registrant 10
Item 11 Executive Compensation 10
Item 12 Security Ownership of Certain Beneficial
Owners and Management 10
Item 13 Certain Relationships and Related
Transactions 11
PART IV
Item 14 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 11
SIGNATURES 12
EXHIBIT INDEX E-1
PART I
Forward-Looking Statements: From time to time The PNC Financial Services Group,
Inc. ("PNC" or "Corporation") has made and may continue to make written or oral
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act with respect to the outlook or expectations for earnings,
revenues, asset quality, share repurchases and other future financial or
business performance, strategies, and expectations. This Annual Report on Form
10-K ("Form 10-K") also includes forward-looking statements. Forward-looking
statements are typically identified by words or phrases such as "believe,"
"feel," "expect," "anticipate," "intend," "outlook," "estimate," "forecast,"
"position," "poised," "target," "mission," "assume," "achievable," "potential,"
"strategy," "goal," "objective," "plan," "aspiration," "outcome," "continue,"
"remain," "maintain," "seek," "strive," "trend" and variations of such words and
similar expressions, or future or conditional verbs such as "will," "would,"
"should," "could," "might," "can," "may" or similar expressions.
The Corporation cautions that forward-looking statements are subject to numerous
assumptions, risks and uncertainties, which change over time. Actual results
could differ materially from those anticipated in forward-looking statements and
future results could differ materially from historical performance.
Forward-looking statements speak only as of the date they are made, and the
Corporation assumes no duty to update forward-looking statements.
In addition to factors mentioned elsewhere in this report, the following
factors, among others, could cause actual results to differ materially from
forward-looking statements or historical performance:
(1) adjustments to recorded results of the sale of the residential mortgage
banking business after disputes over certain closing date adjustments have
been resolved;
(2) changes in political, economic or industry conditions, the interest rate
environment or financial and capital markets, which could result in: a
deterioration in credit quality and increased credit losses; an adverse
effect on the allowance for credit losses; a reduction in demand for credit
or fee-based products and services, net interest income, value of assets
under management and assets serviced, value of venture capital investments
and of other debt and equity investments, value of loans held for sale or
value of other on-balance-sheet and off-balance-sheet assets; or changes in
the availability and terms of funding necessary to meet PNC's liquidity
needs;
(3) relative investment performance of assets under management;
(4) the introduction, withdrawal, success and timing of business initiatives
and strategies, decisions regarding further reductions in balance sheet
leverage, the timing and pricing of any sales of loans held for sale, and
PNC's inability to realize cost savings or revenue enhancements, implement
integration plans and other consequences of mergers, acquisitions,
restructurings and divestitures;
(5) customer borrowing, repayment, investment and deposit practices and their
acceptance of PNC's products and services;
(6) the impact of increased competition;
(7) the means PNC chooses to redeploy available capital, including the extent
and timing of any share repurchases and investments in PNC businesses;
(8) the inability to manage risks inherent in PNC's business;
(9) the unfavorable resolution of legal proceedings or government inquiries;
(10) the denial of insurance coverage for claims made by PNC;
(11) an increase in the number of customer or counterparty delinquencies,
bankruptcies or defaults that could result in, among other things,
increased credit and asset quality risk, a higher loan loss provision and
reduced profitability;
(12) the impact, extent and timing of technological changes, the adequacy of
intellectual property protection and costs associated with obtaining rights
in intellectual property claimed by others;
2
(13) actions of the Federal Reserve Board, legislative and regulatory reforms,
and regulatory, supervisory or enforcement actions of government agencies;
and
(14) terrorist activities, including the September 11th terrorist attacks, which
may adversely affect the general economy, financial and capital markets,
specific industries, and PNC. The Corporation cannot predict the severity
or duration of effects stemming from such activities or any actions taken
in connection with them.
Some of the above factors are described in more detail in the "2002 Operating
Environment" and "Risk Factors" sections of the "Financial Review" included on
pages 30 and 43 through 47, respectively, of the Annual Report to Shareholders,
which are incorporated herein by reference, and factors relating to credit risk,
interest rate risk, liquidity risk, trading activities, financial and other
derivatives and "off-balance-sheet" activities are discussed in the "Risk
Management" section of the "Financial Review" included on pages 47 through 57 of
the Annual Report to Shareholders, which is incorporated herein by reference.
Other factors are described elsewhere in this report.
ITEM 1 - BUSINESS
BUSINESS OVERVIEW The Corporation is a bank holding company registered under the
Bank Holding Company Act of 1956, as amended ("BHC Act") and a financial holding
company under the Gramm-Leach-Bliley Act ("GLB Act"). PNC was incorporated
under the laws of the Commonwealth of Pennsylvania in 1983 with the
consolidation of Pittsburgh National Corporation and Provident National
Corporation. Since 1983, PNC has diversified its geographical presence,
business mix and product capabilities through strategic bank and nonbank
acquisitions and the formation of various nonbanking subsidiaries.
The Corporation is one of the largest diversified financial services companies
in the United States, operating businesses engaged in regional community
banking, corporate banking, real estate finance, asset-based lending, wealth
management, asset management and global fund services. The Corporation provides
certain products and services nationally and others in PNC's primary geographic
markets in Pennsylvania, New Jersey, Delaware, Ohio and Kentucky. The
Corporation also provides certain banking, asset management and global fund
services internationally. At December 31, 2001, the Corporation's consolidated
total assets, deposits and shareholders' equity were $69.6 billion, $47.3
billion and $5.8 billion, respectively.
In the context of this Business Overview, further information is contained in
"Note 2 Discontinued Operations," "Note 3 Restatements" and "Note 4 Fourth
Quarter Actions" of the "Notes To Consolidated Financial Statements" included on
pages 72 and 73 of the Annual Report to Shareholders and incorporated herein by
reference. Financial and other information by segment is included in "Note 26
Segment Reporting" of the "Notes To Consolidated Financial Statements" included
on pages 88 and 89 of the Annual Report to Shareholders and incorporated herein
by reference.
REVIEW OF BUSINESSES Information relating to the Corporation's businesses, which
reflect its operating structure during 2001, is set forth under the captions
"Overview" and "Review of Businesses" in the "Financial Review" included on
pages 28 through 38 of the Annual Report to Shareholders and incorporated
herein by reference.
SUBSIDIARIES The corporate legal structure currently consists of two subsidiary
banks and over 70 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, 2001, PNC Bank, N.A.
had total consolidated assets representing approximately 90% of the
Corporation's consolidated assets. For additional information on subsidiaries,
see Exhibit 21 to this Form 10-K, which is incorporated herein by reference.
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES The following statistical
information is included on the indicated pages of the Annual Report to
Shareholders and is incorporated herein by reference:
Pages of
Annual
Report to
Shareholders
----------------------------------------------------------------
Average Consolidated Balance Sheet and Net Interest
Analysis 96-97
Analysis of Year-to-Year Changes in Net Interest
Income 95
Book Values of Securities 42 and 74
Maturities and Weighted-Average Yield of Securities 75
Loan Types 41 and 75
Loan Maturities and Interest Sensitivity 99
Nonaccrual, Past Due and Restructured Loans 49 and 76
Potential Problem Loans and Loans Held for Sale 49
Summary of Loan Loss Experience 48 and 98
Allocation of Allowance for Credit Losses 48 and 98
Average Amount and Average Rate Paid on Deposits 39 and 96-97
Time Deposits of $100,000 or More 79 and 99
Selected Consolidated Financial Data 26-27
Short-Term Borrowings 99
RISK FACTORS & MANAGEMENT The Corporation is subject to a number of risk factors
including, among others: business and economic conditions; the successful
execution of the Corporation's strategic repositioning; changes in the
underlying factors, assumptions and estimates inherent in the Corporation's
critical accounting policies and judgments; compliance with applicable standards
established by supervisory and regulatory bodies; the impact of the two
restatements of the Corporation's 2001 consolidated results announced in early
2002; monetary and other policies; competition; disintermediation; and risk
relating to asset management performance, fund servicing, acquisitions, and
terrorist activities. These factors, and others, could impact the Corporation's
business, financial condition and results of operations. In the normal course of
business, the Corporation assumes various types of risk, which include, among
others, credit risk, interest rate risk, liquidity risk and risk
3
associated with trading activities, financial and other derivatives and
"off-balance-sheet" activities. PNC has risk management processes designed to
provide for risk identification, measurement and monitoring.
Risk factors are described in more detail in the "Risk Factors" section of the
"Financial Review" included on pages 43 through 47 of the Annual Report to
Shareholders, which is incorporated herein by reference. The Corporation's risk
management processes are described in more detail in the "Risk Management"
section of the "Financial Review" included on pages 47 through 57 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
pages 50 and 51 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 19 Regulatory Matters" of the "Notes To Consolidated Financial Statements"
included on pages 80 and 81 of the Annual Report to Shareholders, which is
incorporated herein by reference. These regulations cover, among others,
permissible activities and investments and dividend limitations on the
Corporation and its subsidiaries, and consumer-related protections for loan,
deposit, brokerage, fiduciary and mutual fund and other customers. The rules
governing the regulation of financial services institutions and their holding
companies are very detailed and technical. Accordingly, the following discussion
is general in nature and does not purport to be complete or to describe all of
the laws and regulations that apply to the Corporation and its subsidiaries.
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 others, 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, 2001, both of the Corporation's bank subsidiaries, PNC Bank, N.A.,
and PNC Bank, Delaware, were rated "outstanding" with respect to CRA.
The GLB Act, which was enacted on November 12, 1999, and portions of which
became effective on March 11, 2000, permits a qualifying bank holding company
to become a financial holding company and thereby to affiliate with financial
companies engaging in a broader range of activities than had previously
been permitted for a bank holding company. Permitted affiliates include
securities underwriters and dealers, insurance companies and companies
engaged in other activities that are 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.
The Corporation 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
4
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 the Federal Deposit Insurance
Corporation ("FDIC") with respect to PNC Bank, Delaware. One aspect of this
regulation is that the Corporation's subsidiary banks are subject to various
federal and state restrictions on their ability to pay dividends to PNC Bancorp,
Inc., the parent of the subsidiary banks, which in turn may affect the ability
of PNC Bancorp, Inc. to pay dividends to the Corporation. These dividends
constitute the Corporation's principal source of revenue and cash flow. PNC
Bank, N.A. was not permitted to pay dividends to the parent company as of
December 31, 2001 without prior approval from banking regulators as a result of
the repositioning charges taken in 2001 and prior dividends. Under these
limitations, PNC Bank, N.A.'s capacity to pay dividends without prior regulatory
approval can be restored through retention of earnings. Management expects PNC
Bank, N.A.'s dividend capacity relative to such legal limitations to be restored
during 2002 from retained earnings. The parent company currently has available
funds to pay dividends at current rates through 2002. The Corporation's
subsidiary banks are also subject to federal laws limiting extensions of credit
to their parent holding company and nonbank affiliates as discussed in "Note 19
Regulatory Matters" of the "Notes To Consolidated Financial Statements" included
on pages 80 and 81 of the Annual Report to Shareholders, which is incorporated
herein by reference.
Under Federal Reserve Board policy, a bank holding company is expected to act as
a source of financial strength to each of its subsidiary banks and to commit
resources to support each such bank. Consistent with the "source of strength"
policy for subsidiary banks, the Federal Reserve Board has stated that, as a
matter of prudent banking, a bank holding company generally should not maintain
a rate of cash dividends unless its net income available to common shareholders
has been sufficient to fully fund the dividends and the prospective rate of
earnings retention appears to be consistent with the corporation's capital
needs, asset quality and overall financial condition.
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 through a
financial subsidiary 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. In
addition to calculating its risk-based capital information from its consolidated
financial statements, a national bank with one or more financial subsidiaries
must also be "well capitalized" after excluding from its assets and equity all
equity investments, including retained earnings, in a financial subsidiary, and
the assets of the financial subsidiary from the bank's consolidated assets. Any
published financial statement for a national bank with a financial subsidiary
must provide risk-based capital information under both methods described above.
The bank must also have policies and procedures to assess financial subsidiary
risk and protect the bank from such risks and potential liabilities.
As a regulated financial services firm, the Corporation's relationships and good
standing with its regulators are of fundamental importance to the continuation
and growth of the Corporation's businesses. The Federal Reserve Board, OCC,
Securities and Exchange Commission ("SEC"), and other domestic and foreign
regulators have broad enforcement powers, and powers to approve, deny, or refuse
to act upon applications or notices of the Corporation or its subsidiaries to
conduct new activities, acquire or divest businesses or assets or reconfigure
existing operations. The Corporation and its subsidiaries are subject to
examination by various regulators which results in examination reports and
ratings (which are not publicly available) that can impact the conduct and
growth of the Corporation's businesses. These examinations consider not only
compliance with applicable laws and regulations, but also capital levels, asset
quality and risk, management ability and performance, earnings, liabilities, and
various other factors. The ratings are largely at the discretion of the
regulator and involve many qualitative judgments that are not as a practical
matter subject to review or appeal. An examination downgrade by any of the
Corporation's regulators potentially can result in significant limitations on
the activities and growth of the Corporation and its subsidiaries.
For example, as subsidiaries of a financial holding company under the GLB Act,
the nonbank subsidiaries of the Corporation are allowed to conduct new financial
activities or acquire non-bank financial companies with after-the-fact notice to
the Federal Reserve Board. In addition, the Corporation's nonbank subsidiaries
(and financial subsidiaries of the Corporation's subsidiary banks) are now
permitted to engage in certain activities that were not permitted for banks and
bank holding companies prior to enactment of the GLB Act, and to engage in
certain activities that previously were
5
permitted, all on less restrictive terms. Among other activities, the
Corporation currently relies on its status as a financial holding company to
conduct mutual fund distribution activities, merchant banking activities and
underwriting and dealing activities.
To continue to qualify for financial holding company status, the Corporation's
subsidiary banks must maintain "well capitalized" capital ratios, examination
ratings of "1" or "2," and certain other criteria that are incorporated into the
definition of "well managed" under the Bank Holding Company Act and Federal
Reserve Board rules. If the Corporation were no longer to qualify for this
status, it could not continue to enjoy the after-the-fact notice process for new
nonbanking activities and non-banking acquisitions, and would be required
promptly to enter into an agreement with the Federal Reserve Board providing a
plan for the Corporation's subsidiary bank(s) to meet the "well capitalized" and
"well managed" criteria. The Federal Reserve Board would have the authority to
limit the activities of the Corporation. Failure to satisfy the criteria within
a six-month period could result in a requirement that the Corporation conform
its existing nonbanking activities to activities that were permissible prior to
the enactment of the GLB Act. If a subsidiary bank of the Corporation failed to
maintain a "satisfactory" or better rating under the CRA, the Corporation could
not commence new activities or make new investments in reliance on the GLB Act.
In addition, if the Corporation's subsidiary banks were no longer "well
capitalized" and "well managed" within the meaning of the Bank Holding Company
Act and Federal Reserve Board rules (which take into consideration capital
ratios, examination ratings and other factors), the expedited processing of
non-bank applications for new activities and acquisitions under the pre-GLB Act
processes would not be available to the Corporation, and the Corporation would
be required to file applications with, and wait for a decision from, the Federal
Reserve Board. Moreover, examination ratings of "3" or lower, lower capital
ratios than peer group institutions, regulatory concerns regarding management,
controls, assets, operations or other factors, or simply poor relations with
regulatory staff, can all potentially result in practical limitations on the
ability of a bank or bank holding company to engage in new activities, grow,
acquire new businesses, repurchase its stock or pay dividends, or continue to
conduct existing activities.
Certain subsidiaries of the Corporation's BlackRock, Inc. subsidiary have
qualified as "financial subsidiaries," described above, of PNC Bank, N.A. If a
subsidiary bank of the Corporation were to fail to meet the "well capitalized"
or "well managed" and related criteria, PNC Bank, N.A. must enter into an
agreement with the OCC to correct the condition. The OCC would have the
authority to limit the activities of the bank. If the condition were not
corrected within six months or within any additional time granted by the OCC,
PNC Bank, N.A. could be required to conform its activities to the permitted
activities of an operating subsidiary of a national bank (which generally are
limited to activities in which a national bank could engage directly). In
addition, if the bank or any insured depository institution affiliate receives a
less than satisfactory CRA examination rating, PNC Bank, N.A. would not be
permitted to engage in any new activities or to make new investments in reliance
on the financial subsidiary authority. For additional information about the
regulation of BlackRock, see discussion under "Regulation" in BlackRock, Inc.'s
2001 Annual Report on Form 10-K that may be obtained electronically at the SEC's
home page at www.sec.gov.
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 than 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, 2001, both of the Corporation's subsidiary
banks exceeded the required ratios for classification as "well capitalized."
Additional discussion of capital adequacy requirements is set forth under the
caption "Capital" in the "Financial Review" on pages 42 and 43 of the Annual
Report to Shareholders, which is incorporated herein by reference.
Regulatory matters could also increase the cost of FDIC deposit insurance
premiums to an insured bank. Both of the Corporation's subsidiary banks are
insured by the FDIC and subject to premium assessments. Since 1996, the FDIC has
not assessed banks for insurance premiums for most deposits, due to the
favorable ratio of the assets in the FDIC's deposit insurance funds to the
aggregate level of insured deposits outstanding. This has resulted in
significant cost savings to all insured banks. Recent costs to the FDIC in
resolving several large bank and savings institution receiverships, however,
have caused this ratio to decline to the point that the FDIC may be required in
the near future to once again begin to assess deposit insurance premiums against
insured banks. Deposit insurance premiums are assessed as a percentage of the
deposits of the insured institution. If the FDIC assesses premiums, it would
impose a significant cost to all insured banks, including the Corporation's
subsidiary banks, reducing the net spread between deposit and other bank funding
costs and the earnings from assets and services of the bank, and thus the net
income of the bank. When they are charged, FDIC deposit insurance premiums are
"risk based" with higher fee percentages being charged to banks that have lower
capital
6
ratios or higher risk profiles. These risk profiles may take into account
weaknesses that are found by the primary banking regulator through its
examination and supervision of the bank. A negative evaluation by the FDIC or
a bank's primary federal banking regulator, as a result, can increase the
costs to a bank during those periods in which the FDIC assesses deposit
insurance premiums and result in an aggregate cost of deposit funds higher
than that of competing banks in a lower risk category.
The Corporation's subsidiary banks are subject to "cross-guarantee" provisions
under federal law that provide that if one of these banks fails or requires FDIC
assistance, the FDIC may assess a "commonly-controlled" bank for the estimated
losses suffered by the FDIC. Such liability could have a material adverse effect
on the financial condition of any assessed bank and the Corporation. While the
FDIC's claim is junior to the claims of depositors, holders of secured
liabilities, general creditors and subordinated creditors, it is superior to the
claims of shareholders and affiliates, such as the Corporation.
The Corporation's subsidiaries are subject to regulatory requirements imposed by
the Federal Reserve Board and other federal and state agencies. The
Corporation's registered broker-dealer subsidiaries are regulated by the SEC and
either by the OCC or the Federal Reserve Board. They are also subject to rules
and regulations promulgated by the National Association of Securities Dealers,
Inc., 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 of the Corporation's subsidiaries are registered with the SEC as
investment advisers and, therefore, are subject to the requirements of the
Investment Advisers Act of 1940 and the SEC's regulations thereunder. The
principal purpose of the regulations applicable to investment advisers is the
protection of clients and the securities markets, rather than the protection of
creditors and stockholders of investment advisers. The regulations applicable to
investment advisers cover all aspects of the investment advisory business,
including limitations on the ability of investment advisers to charge
performance-based or non-refundable fees to clients, record-keeping and
reporting requirements, disclosure requirements, limitations on principal
transactions between an adviser or its affiliates and advisory clients, as well
as general anti-fraud prohibitions.
The Corporation's investment advisory subsidiaries also may be subject to
certain state securities laws and regulations. In addition, the Corporation's
investment adviser subsidiaries provide advisory services to mutual funds and,
therefore, are subject to the requirements of the Investment Company Act of 1940
and the SEC's regulations thereunder.
Additional legislation, changes in rules promulgated by the SEC, other federal
and state regulatory authorities and self-regulatory organizations, or changes
in the interpretation or enforcement of existing laws and rules may directly
affect the method of operation and profitability of investment advisers. The
profitability of investment advisers could also be affected by rules and
regulations which impact the business and financial communities in general,
including changes to the laws governing taxation, antitrust regulation and
electronic commerce.
Under various provisions of the federal securities laws (including in particular
those applicable to broker-dealers, investment advisers and registered
investment companies and their service providers), a determination by a court or
regulatory agency that certain violations have occurred at a company or its
affiliates can result in a limitation of permitted activities, disqualification
to continue to conduct certain activities and an inability to rely on certain
favorable exemptions. Certain types of infractions and violations can also
affect a public company in its timing and ability expeditiously to issue new
securities into the capital markets. In addition, expansion of activities of a
broker-dealer generally requires approval of the New York Stock Exchange and/or
National Association of Securities Dealers, Inc., and regulators may take into
account a variety of considerations in acting upon such applications, including
internal controls, capital, management experience and quality, and supervisory
concerns.
The staffs of the SEC and the Federal Reserve Board have informed the
Corporation that they are conducting inquiries with respect to the transactions
with subsidiaries of a third party financial institution described in "Note 3
Restatements" of the "Notes To Consolidated Financial Statements" included on
pages 72 and 73 of the Annual Report to Shareholders and incorporated herein by
reference. PNC is cooperating with these inquiries. PNC cannot predict whether
these inquiries, regulatory examinations or other regulatory activities will
result in any of the adverse effects described above.
COMPETITION The Corporation and its subsidiaries are subject to intense
competition from various financial institutions and from "nonbank" entities that
engage in similar activities without being subject to bank regulatory
supervision and restrictions. This is particularly true as the Corporation
expands nationally and internationally beyond its primary geographic region,
where expansion requires significant investments to penetrate new markets and
respond to competition, and as the Corporation and other entities expand their
activities pursuant to the GLB Act, as discussed above.
In making loans, the subsidiary banks compete with traditional banking
institutions as well as consumer finance companies, leasing companies and other
nonbank lenders. Loan pricing and credit standards are under competitive
pressure as lenders seek to deploy capital and a broader range of borrowers have
access to capital markets. Traditional deposit activities are subject to pricing
pressures and customer migration as a result of intense competition for consumer
investment dollars. The Corporation's subsidiary banks compete for deposits with
not only other commercial banks, savings banks, savings and loan associations
7
and credit unions, but also insurance companies and issuers of commercial
paper and other securities, including mutual funds. Various nonbank
subsidiaries engaged in investment banking, private equity and venture capital
activities compete with commercial banks, investment banking firms, merchant
banks, insurance companies, venture capital firms and other investment
vehicles. In providing asset management services, the Corporation's
subsidiaries compete with many investment management firms, large banks and
other financial institutions, brokerage firms, mutual fund complexes, and
insurance companies.
The ability to access and use technology is an increasingly important
competitive factor in the financial services industry. Technology is not only
important with respect to delivery of financial services, but in processing
information. Each of the Corporation's businesses consistently must make
technological investments to remain competitive.
EMPLOYEES Average full-time equivalent employees totaled approximately 24,500 in
2001, and were approximately 24,200 in December 2001.
ITEM 2 - PROPERTIES
The executive and administrative offices of the Corporation and PNC Bank, N.A.
are located at One PNC Plaza, Pittsburgh, Pennsylvania. The thirty-story
structure is owned by PNC Bank, N.A. The Corporation and PNC Bank, N.A. occupy
the entire building. In addition, PNC Bank, N.A. owns a thirty-four story
structure adjacent to One PNC Plaza, known as Two PNC Plaza, that houses
additional office space.
The Corporation and its subsidiaries own or lease numerous other premises for
use in conducting business activities. The facilities owned or occupied under
lease by the Corporation's subsidiaries are considered by management to be
adequate.
Additional information pertaining to the Corporation's properties is set forth
in "Note 12 Premises, Equipment and Leasehold Improvements" of the "Notes To
Consolidated Financial Statements" included on page 77 of the Annual Report to
Shareholders, which is incorporated herein by reference.
ITEM 3 - LEGAL PROCEEDINGS
Several putative class action complaints were filed during 2002 in the United
States District Court of the Western District of Pennsylvania against the
Corporation, its Chairman, President and Chief Executive Officer, its Chief
Financial Officer and the independent auditors of the Corporation's 2001
consolidated financial statements alleging violations of federal securities laws
related to disclosures regarding 2001 financial results, the transactions
described in "Note 3 Restatements" of the "Notes To Consolidated Financial
Statements" included on pages 72 and 73 of the Annual Report to Shareholders,
which is incorporated herein by reference, and related matters, and seeking
unquantified damages on behalf of putative classes of persons who purchased the
Corporation's common stock, attorneys' fees and other expenses. Certain of the
complaints also name the Corporation's former Chairman, its Vice Chairman,
and/or an Executive Vice President as additional defendants. Management believes
there are substantial defenses to the lawsuits and intends to defend them
vigorously. The impact of the final disposition of these lawsuits cannot be
assessed at this time.
In January 2001, PNC sold its residential mortgage banking business. Certain
closing date purchase price adjustments aggregating approximately $300 million
pre-tax are currently in dispute between the parties. The Corporation has
established a receivable of approximately $140 million to reflect additional
purchase price it believes is due from the buyer. The buyer has taken the
position that the purchase price it has already paid should be reduced by
approximately $160 million. The Corporation has established specific reserves
related to a portion of its recorded receivable. The purchase agreement requires
that an independent public accounting firm determine the final adjustments. The
buyer also has filed a February 2002 lawsuit against the Corporation in the
Superior Court of the State of California for the County of Los Angeles alleging
various state law claims relating to the adjustments and seeking compensatory
damages with respect to certain of the disputed matters that the Corporation
believes are covered by the process provided in the purchase agreement,
unquantified punitive damages and declaratory and other relief. The Corporation
has filed a motion in the litigation to compel a determination of all issues
pursuant to the process provided in the purchase agreement and to stay the
litigation pending that determination. Management intends to assert the
Corporation's positions vigorously. Management believes that, net of available
reserves, an adverse outcome, expected to be recorded in discontinued
operations, could be material to net income in the period in which recorded, but
that the final disposition of this matter will not be material to the
Corporation's financial position.
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 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.
The staffs of the SEC and the Federal Reserve Board have informed PNC that they
are conducting inquiries with respect to the transactions with subsidiaries of a
third party financial institution described in "Note 3 Restatements" of the
"Notes To Consolidated Financial Statements" included on pages 72 and 73 of the
Annual Report to Shareholders, which is
8
incorporated herein by reference. PNC is cooperating with these inquiries.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the fourth quarter of 2001.
EXECUTIVE OFFICERS OF THE REGISTRANT Information concerning each executive
officer of the Corporation as of March 8, 2002 is set forth below. Each
executive officer held the position or positions indicated or another executive
position with the same entity or one of its affiliates for the past five years.
Positions with Year
Name Age Corporation Employed(1)
-------------------------------------------------------------------
James E. Rohr 53 Chairman, President and 1972
Chief Executive Officer (2)
Walter E. Gregg, Jr. 60 Vice Chairman (2) 1974
Joseph C. Guyaux 51 Group Executive, Regional 1972
Community Banking
Michael J. Hannon 45 Chief Credit Policy 1982
Officer
Robert L. Haunschild 52 Chief Financial Officer 1990
Ralph S. Michael III 47 Group Executive, PNC 1979
Advisors and PNC
Capital Markets
Samuel R. Patterson 43 Controller 1986
Helen P. Pudlin 52 General Counsel 1989
Timothy G. Shack 51 Group Executive and Chief 1976
Information Officer
Thomas K. Whitford 46 Group Executive, 1983
Strategic Planning
-------------------------------------------------------------------
(1) Where applicable, refers to year first employed by predecessor company.
(2) Also serves as a Director of the Corporation.
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, 2002,
there were 54,385 common shareholders of record.
Holders of common stock are entitled to receive dividends when declared by the
Board of Directors out of funds legally available therefor. The Board of
Directors may not pay or set apart dividends on the common stock until dividends
for all past dividend periods on any series of outstanding preferred stock
have been paid or declared and set apart for payment. The Board presently
intends to continue the policy of paying quarterly cash dividends. However, the
amount of any future dividends will depend on earnings, the financial condition
of the Corporation and other factors, including contractual restrictions and
applicable government regulations and policies (such as those relating to the
ability of bank and nonbank subsidiaries to pay dividends to the parent
company). PNC Bank, N.A. was not permitted to pay dividends to the parent
company as of December 31, 2001 without prior approval from banking regulators
as a result of the repositioning charges taken in 2001 and prior dividends.
Under these limitations, PNC Bank, N.A.'s capacity to pay dividends without
prior regulatory approval can be restored through retention of earnings.
Management expects PNC Bank, N.A.'s dividend capacity relative to such legal
limitations to be restored during 2002 from retained earnings. The parent
company currently has available funds to pay dividends at current rates through
2002.
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" included on pages 51 and 52
of the Annual Report to Shareholders, and in "Note 19 Regulatory Matters" of the
"Notes To Consolidated Financial Statements" included on pages 80 and 81 of the
Annual Report to Shareholders, each of which is incorporated herein by
reference.
Additional information relating to the common stock is set forth under the
caption "Common Stock Price/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 pages 26 and 27 of the Annual Report to
Shareholders and under the caption "Average Consolidated Balance Sheet and Net
Interest Analysis" in the "Statistical Information" on pages 96 and 97 of the
Annual Report to Shareholders is incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The discussion of the Corporation's financial condition and results of
operations set forth under the section "Financial Review" on pages 26 through 60
of the Annual Report to Shareholders is incorporated herein by reference.
9
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The information set forth in the "Risk Management" section in the "Financial
Review" and in "Note 2 Discontinued Operations" on pages 47 through 57 and 72,
respectively, 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 61, 62 through 65, 66 through 93, and 94,
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
In addition to serving as the independent auditor of the Corporation's 2001
consolidated financial statements, Ernst & Young LLP executes the Corporation's
internal audit program under the direction of PNC's corporate audit staff. Ernst
& Young LLP also provides various tax and nonattest and advisory services to the
Corporation.
Under rule amendments regarding auditor independence adopted by the SEC,
beginning August 5, 2002, independent accountants will no longer be permitted to
provide audit clients with certain non-audit services. Accordingly, PNC has
decided to have separate internal and independent audit providers commencing
with fiscal 2002. Ernst & Young LLP has acted as independent auditor with
respect to the Corporation's 2001 financial statements and will continue to
provide various internal audit, tax, and nonattest and advisory services to the
Corporation. PNC has engaged Deloitte & Touche LLP as the Corporation's
principal accountants to audit the Corporation's 2002 consolidated financial
statements. These actions were recommended by the Audit Committee and approved
by the Corporation's Board of Directors on December 18, 2001. Ernst & Young
LLP's role as the Corporation's independent auditor will cease upon the filing
of this Form 10-K.
Ernst & Young LLP's reports on the Corporation's financial statements for the
past two fiscal years did not contain an adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles. During the two most recent fiscal years and any
subsequent interim period preceding the date of this Form 10-K, (i) there were
no disagreements with Ernst & Young LLP on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of Ernst & Young LLP,
would have caused Ernst & Young LLP to make a reference to the subject matter of
the disagreement in connection with its reports in the financial statements for
such years, and (ii) there were no reportable events as defined in Item 304 of
Regulation S-K.
The Corporation has provided Ernst & Young LLP with a copy of the disclosure in
this Item 9 and has requested that Ernst & Young LLP furnish the Corporation
with a letter to update the letter previously provided pursuant to Item
304(a)(3) of Regulation S-K, which was included as Exhibit 16 to the
Corporation's Form 8-K dated December 18, 2001. The updated letter is included
as Exhibit 16 to this Form 10-K.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors and nominees required by this item is set forth
under the caption "Election of Directors - Information Concerning Nominees" in
the Proxy Statement filed for the annual meeting of shareholders to be held on
April 23, 2002 and is incorporated herein by reference.
Information regarding compliance with Section 16(a) of the Securities Exchange
Act of 1934 is set forth under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Proxy Statement filed for the annual meeting of
shareholders to be held on April 23, 2002 and is incorporated herein by
reference.
Information regarding executive officers of the Corporation is included in Part
I of this Form 10-K under the caption "Executive Officers of the Registrant."
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this item is set forth under the captions "Election
of Directors - Compensation of Directors" and "Compensation of Executive
Officers," excluding the information set forth under the caption "Personnel and
Compensation Committee Report," in the Proxy Statement filed for the annual
meeting of shareholders to be held on April 23, 2002 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 captions "Security
Ownership of Directors, Nominees and Executive Officers" and "Security Ownership
of Certain Beneficial Owners" under the heading "Security Ownership of
Directors, Nominees and Executive Officers" in the Proxy Statement filed for the
annual meeting of shareholders to be held on April 23, 2002 and is incorporated
herein by reference.
10
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth under the captions
"Transactions Involving Directors, Nominees and Executive Officers" and "Legal
Proceedings" in the Proxy Statement filed for the annual meeting of shareholders
to be held on April 23, 2002 and is incorporated herein by reference.
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.
Pages of
Annual
Report to
Financial Statements Shareholders
----------------------------------------------------------------
Report of Ernst & Young LLP, Independent Auditors 61
Consolidated Statement of Income for the three
years ended December 31, 2001 62
Consolidated Balance Sheet as of December 31, 2001
and 2000 63
Consolidated Statement of Shareholders' Equity
for the three years ended December 31, 2001 64
Consolidated Statement of Cash Flows for the
three years ended December 31, 2001 65
Notes To Consolidated Financial Statements 66-93
Selected Quarterly Financial Data 94
----------------------------------------------------------------
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, 2001.
Form 8-K dated October 29, 2001, reporting on entering into an underwriting
agreement with respect to the public offering of $600,000,000 of Floating Rate
Senior Notes due 2004 and $400,000,000 of 5.75% Senior Notes due 2006
(collectively, the "Notes") and the form of the Notes and the related
Guarantees.
Form 8-K dated December 18, 2001, reporting on a change in the Corporation's
certifying accountant in connection with rule amendments regarding auditor
independence adopted by the SEC that will become effective August 5, 2002.
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.
11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE PNC FINANCIAL SERVICES GROUP, INC.
(Registrant)
By: /s/ Robert L. Haunschild
---------------------------------------
Robert L. Haunschild
Chief Financial Officer
March 29, 2002
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 29, 2002.
Signature Capacities
---------------------------------------------------- ----------------------------------------------------
/s/ James E. Rohr Chairman, President and Chief Executive Officer
---------------------------------------------------- (Principal Executive Officer)
James E. Rohr
/s/ Robert L. Haunschild 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; Thomas H. O'Brien; Jane G.
Pepper; Lorene K. Steffes; Dennis F. Strigl;
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
12
EXHIBIT INDEX
Exhibit
No. Description Method of Filing +
------------------------------------------------------------------------------------------------------------------------------
3.1 Articles of Incorporation of the Corporation, as amended and Incorporated herein by reference to Exhibit
restated as of April 24, 2001. 3.1 of the Corporation's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2001.
3.2 By-Laws of the Corporation, as amended and restated. Incorporated herein by reference to Exhibit 4.2
to Post-Effective Amendment No. 1 to the
Corporation's Registration Statement No.
333-65042 on Form S-8 filed on December 6, 2001.
4.1 There are no instruments with respect to long-term debt of the
Corporation and its subsidiaries that involve securities
authorized under the instrument in an amount exceeding 10
percent of the total assets of the Corporation and its
subsidiaries on a consolidated basis. The Corporation agrees
to provide the SEC with a copy of instruments defining the
rights of holders of long-term debt of the Corporation and its
subsidiaries on request.
4.2 Terms of $1.80 Cumulative Convertible Preferred Stock, Series A. Incorporated herein by reference to Exhibit 3.1
of the Corporation's Quarterly Report on Form
10-Q for the quarter ended March 31, 2001.
4.3 Terms of $1.80 Cumulative Convertible Preferred Stock, Series B. Incorporated herein by reference to Exhibit 3.1
of the Corporation's Quarterly Report on Form
10-Q for the quarter ended March 31, 2001.
4.4 Terms of $1.60 Cumulative Convertible Preferred Stock, Series C. Incorporated herein by reference to Exhibit 3.1
of the Corporation's Quarterly Report on Form
10-Q for the quarter ended March 31, 2001.
4.5 Terms of $1.80 Cumulative Convertible Preferred Stock, Series D. Incorporated herein by reference to Exhibit 3.1
of the Corporation's Quarterly Report on Form
10-Q for the quarter ended March 31, 2001.
4.6 Terms of Series G Junior Participating Preferred Stock. Incorporated herein by reference to Exhibit
3.1 of the Corporation's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2001.
4.7 Rights Agreement between the Corporation and Chase Manhattan Bank Incorporated herein by reference to Exhibit 1
dated May 15, 2000. to the Corporation's Report on Form 8-A
filed May 23, 2000.
10.1 The Corporation's Supplemental Executive Retirement Plan, as Incorporated herein by reference to Exhibit
amended as of January 1, 1999. 10.1 of the Corporation's Annual Report on Form
10-K for the year ended December 31, 1999 ("1999
Form 10-K").*
10.2 The Corporation's ERISA Excess Pension Plan, as amended as of Incorporated herein by reference to Exhibit
January 1, 1999. 10.2 of the Corporation's 1999 Form 10-K. *
10.3 The Corporation's Key Executive Equity Program, as amended as of Incorporated herein by reference to Exhibit
January 1, 1999. 10.3 of the Corporation's 1999 Form 10-K. *
10.4 The Corporation's Supplemental Incentive Savings Plan, as amended Incorporated herein by reference to Exhibit
as of January 1, 1999. 10.4 of the Corporation's 1999 Form 10-K. *
E-1
10.5 The Corporation's 1997 Long-Term Incentive Award Plan, as amended. Filed herewith. *
10.6 The Corporation's 1996 Executive Incentive Award Plan, as amended. Incorporated herein by reference to Exhibit
10.6 of the Corporation's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2001. *
10.7 PNC Bank Corp. and Affiliates Deferred Compensation Plan, as Incorporated herein by reference to Exhibit
amended as of January 1, 1999. 10.11 of the Corporation's 1999 Form 10-K. *
10.8 Form of Change in Control Severance Agreement. Incorporated herein by reference to Exhibit
10.17 of the Corporation's Annual Report on
Form 10-K for the year ended December 31,
1996 ("1996 Form 10-K"). *
10.9 Forms of Amendment to Change in Control Severance Agreements. Incorporated herein by reference to Exhibit
10.9 of the Corporation's Annual Report on Form
10-K for the year ended December 31, 2000. *
10.10 Forms of Second Amendment to Change in Control Severance Incorporated herein by reference to Exhibit
Agreements. 10.15 of the Corporation's Quarterly Report
on Form 10-Q for the quarter ended September
30, 2001.*
10.11 1992 Director Share Incentive Plan. Incorporated herein by reference to Exhibit
10.13 of the Corporation's 1999 Form 10-K. *
10.12 The Corporation's Directors Deferred Compensation 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. *
10.13 The Corporation's Outside Directors Deferred Stock Unit Plan. Incorporated herein by reference to Exhibit
10.15 of the Corporation's 1999 Form 10-K. *
10.14 Amended and Restated Trust Agreement between the Corporation, as Incorporated herein by reference to Exhibit
Settlor, and Hershey Trust Company, as successor Trustee to 10.18 of the Corporation's 1996 Form 10-K. *
NationsBank, N.A., Trustee.
10.15 Consulting arrangement between the Corporation and Thomas H. Incorporated herein by reference to Exhibit
O'Brien. 10.17 of the Corporation's Quarterly Report
on Form 10-Q for the quarter ended June 30,
2000.
12.1 Computation of Ratio of Earnings to Fixed Charges. Filed herewith.
12.2 Computation of Ratio of Earnings to Fixed Charges and Preferred Filed herewith.
Dividends.
13 Excerpts from the Corporation's Annual Report to Shareholders for Filed herewith.
the year ended December 31, 2001. 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.
16 Letter from Ernst & Young LLP pursuant to Item 304(a)(3) of Filed herewith.
Regulation S-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.
99 The Corporation's Employee Stock Purchase Plan, as amended. Incorporated herein by reference to Exhibit 99
of the Corporation's Quarterly Report on Form
10-Q for the quarter ended September 30, 2001.
-----------------------------------------------------------------------------------------------------------------------------
+ Incorporated document references to filings by the Corporation are to
SEC File No. 1-9718.
* Denotes management contract or compensatory plan.
E-2