-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, roJXCKJ76F7HrPCJ3lp2UD5idzb5L6E9/NWHl3/L5ZNpGzSkULPiHYMJklPMNJ8T aRP1EH5ntmNtL3HLAFnJdQ== 0000950128-95-000098.txt : 19950516 0000950128-95-000098.hdr.sgml : 19950516 ACCESSION NUMBER: 0000950128-95-000098 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PNC BANK CORP CENTRAL INDEX KEY: 0000713676 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 251435979 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09718 FILM NUMBER: 95539770 BUSINESS ADDRESS: STREET 1: ONE PNC PLAZA STREET 2: FIFTH AVE & WOOD ST CITY: PITTSBURGH STATE: PA ZIP: 15265 BUSINESS PHONE: 4127622666 MAIL ADDRESS: STREET 1: ONE PNC PLAZA STREET 2: FIFTH AVENUE & WOOD STREET CITY: PITTSBURGH STATE: PA ZIP: 15265 FORMER COMPANY: FORMER CONFORMED NAME: PNC BANK CORP /PA/ DATE OF NAME CHANGE: 19930428 FORMER COMPANY: FORMER CONFORMED NAME: PNC FINANCIAL CORP DATE OF NAME CHANGE: 19920703 10-Q 1 PNC BANK 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 0F 1934 For the Quarterly Period Ended March 31, 1995 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 (I.R.S. Employer incorporation or organization) Identification No.)
ONE PNC PLAZA FIFTH AVENUE AND WOOD STREET PITTSBURGH, PENNSYLVANIA 15265 (Address of principal executive offices) (Zip Code) (412) 762-3900 (Registrant's telephone number, including area code) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock ($5 par value): 228,536,110 shares outstanding at April 30, 1995. Exhibit Index appears on page 5 2 PART I--FINANCIAL INFORMATION ITEM 1. Financial Statements The following consolidated financial information of PNC Bank Corp. and subsidiaries ("Corporation") is incorporated herein by reference to the 1995 First Quarter Corporate Financial Review ("Financial Review") which is filed herewith as Exhibit 99. Page references set forth below are to such Financial Review.
Financial Information Page Reference --------------------- -------------- Consolidated Balance Sheet as of March 31, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Consolidated Statement of Income for the three months ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 23 Consolidated Statement of Cash Flows for the three months ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . 24 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . 25-29
The statistical disclosure under the caption "Average Consolidated Balance Sheet and Net Interest Analysis" in the Financial Review at pages 30 and 31 is incorporated herein by reference. Certain other statistical disclosure is included below in Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, as permitted by Guide 3, Statistical Disclosures by Bank Holding Companies. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The information contained under the caption "Corporate Financial Review" in the Financial Review at pages 2 through 21 is incorporated herein by reference. 2 3 PART II--OTHER INFORMATION ITEM 1. Legal Proceedings The Corporation's Annual Report on Form 10-K for the year ended December 31, 1994 includes a description of a purported class action lawsuit filed against the Corporation and two of its executive officers, alleging violations of federal securities laws and common law relating to certain disclosures. On May 2, 1995, the Corporation filed a motion to dismiss the consolidated complaint. ITEM 6. Exhibits and Reports on Form 8-K (a) The exhibits listed on the Exhibit Index on Page 5 of this Form 10-Q are filed herewith. (b) A Current Report on Form 8-K dated as of April 17, 1995, was filed pursuant to Item 5 to report the Corporation's consolidated financial results for the three months ended March 31, 1995. (c) A Current Report on Form 8-K was filed on, and dated as of, January 6, 1995, pursuant to Item 5 to report (i) certain actions taken by the Corporation to reduce its interest rate sensitivity; (ii) to announce a charge to earnings related to the cost of consolidating existing telephone banking centers and continued rationalization of the branch network; and (iii) the authorization by the Corporation's Board of Directors to purchase up to 24 million shares of the Corporation's common stock over the next two years. (d) A Current Report on Form 8-K dated as of January 13, 1995, was filed on January 23, 1995, pursuant to Item 5 to report (i) the Corporation's consolidated financial results for the three months and twelve months ended December 31, 1994; and (ii) the completion of the acquisition of Indian River. (e) A Current Report on Form 8-K dated as of February 28, 1995, was filed on March 14, 1995, pursuant to Item 5 to report (i) the completion of the acquisition of BlackRock; (ii) the completion of the acquisition of Brentwood; and (iii) the entering into a definitive agreement to acquire Chemical Bank New Jersey. 3 4 SIGNATURES Pursuant to the requirements 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. PNC BANK CORP. (Registrant) Date: May 15, 1995 By /s/ Robert L. Haunschild ---------------------- Robert L. Haunschild SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER 4 5 EXHIBIT INDEX The following exhibits are filed herewith: 11 Calculation of Primary and Fully Diluted Earnings Per Common Share. 12.1 Computation of Ratio of Earnings to Fixed Charges. 12.2 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. 27 Financial Data Schedule. 99 1995 First Quarter Corporate Financial Review. 5 EX-11 2 PNC BANK 10-Q 1 EXHIBIT 11 PNC BANK CORP. AND SUBSIDIARIES CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER COMMON SHARE
Three months ended March 31 In thousands, except per share data 1995 1994 - ------------------------------------------------------------------------------------------ PRIMARY WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Weighted average shares of common stock outstanding 231,408 234,863 Weighted average common shares to be issued using average market price and assuming exercise of stock options 1,181 1,835 ---------------------------- Primary weighted average common shares outstanding 232,589 236,698 ============================ FULLY DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Weighted average shares of common stock outstanding 231,408 234,863 Weighted average common shares to be issued using average market price or period-end market price, whichever is higher, and assuming: Conversion of preferred stock Series A & B 208 241 Conversion of preferred stock Series C 651 705 Conversion of preferred stock Series D 833 873 Conversion of debentures 69 75 Exercise of stock options 1,294 1,835 ---------------------------- Fully diluted weighted average common shares outstanding 234,463 238,592 ============================ PRIMARY EARNINGS PER COMMON SHARE Net income $125,651 $205,689 Less: Preferred dividends declared 393 419 ---------------------------- Net income applicable to primary earnings per common share $125,258 $205,270 Primary earnings per common share $.54 $.87 ============================ FULLY DILUTED EARNINGS PER COMMON SHARE Net income $125,651 $205,689 Add: Interest expense on convertible debentures (net of tax) 11 12 ---------------------------- Net income applicable to fully diluted earnings per common share $125,662 $205,701 Fully diluted earnings per common share $.54 $.86 - ------------------------------------------------------------------------------------------
EX-12.1 3 PNC BANK 10-Q 1 EXHIBIT 12.1 PNC BANK CORP. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Year ended December 31 Three months ended ------------------------------------------------------------------ Dollars in thousands March 31, 1995 1994 1993 1992 1991 1990 - -------------------------------------------------------------------------------------------------------------------------------- EARNINGS Income before taxes and cumulative effect of changes in accounting principles................ $183,708 $ 902,389 $1,116,612 $ 778,122 $ 548,201 $ 29,425 Fixed charges excluding interest on deposits.......................... 353,761 1,043,195 649,898 517,424 513,370 918,698 -------------------------------------------------------------------------------------- Subtotal............................ 537,469 1,945,584 1,766,510 1,295,546 1,061,571 948,123 Interest on deposits.................. 292,334 935,876 742,772 1,063,422 1,727,765 1,973,087 -------------------------------------------------------------------------------------- Total............................... $829,803 $2,881,460 $2,509,282 $2,358,968 $2,789,336 $2,921,210 ====================================================================================== FIXED CHARGES Interest on notes and debentures...... $143,447 $ 515,732 $ 265,353 $ 145,125 $ 95,207 $ 84,045 Interest on borrowed funds............ 204,122 499,252 362,995 352,162 398,779 816,448 Amortization of notes and debentures.. 206 1,346 967 970 584 538 Interest component of rentals ........ 5,986 26,865 20,583 19,167 18,800 17,667 -------------------------------------------------------------------------------------- Subtotal............................ 353,761 1,043,195 649,898 517,424 513,370 918,698 Interest on deposits.................. 292,334 935,876 742,772 1,063,422 1,727,765 1,973,087 -------------------------------------------------------------------------------------- Total............................... $646,095 $1,979,071 $1,392,670 $1,580,846 $2,241,135 $2,891,785 ====================================================================================== RATIO OF EARNINGS TO FIXED CHARGES Excluding interest on deposits...... 1.52x 1.87x 2.72x 2.50x 2.07x 1.03x Including interest on deposits...... 1.28 1.46 1.80 1.49 1.24 1.01 - ---------------------------------------------------------------------------------------------------------------------------------
EX-12.2 4 PNC BANK 10-Q 1 EXHIBIT 12.2 PNC BANK CORP. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Year ended December 31 Three months ended ------------------------------------------------------------------ Dollars in thousands March 31, 1995 1994 1993 1992 1991 1990 - ----------------------------------------------------------------------------------------------------------------------------------- EARNINGS Income before taxes and cumulative effect of changes in accounting principles.. $183,708 $ 902,389 $1,116,612 $ 778,122 $ 548,201 $ 29,425 Fixed charges and preferred stock dividends excluding interest on deposits.............. 354,336 1,045,609 652,432 521,908 518,004 922,156 ----------------------------------------------------------------------------------- Subtotal................................... 538,044 1,947,998 1,769,044 1,300,030 1,066,205 951,581 Interest on deposits......................... 292,334 935,876 742,772 1,063,422 1,727,765 1,973,087 ----------------------------------------------------------------------------------- Total...................................... $830,378 $2,883,874 $2,511,816 $2,363,452 $2,793,970 $2,924,668 =================================================================================== FIXED CHARGES Interest on notes and debentures............. $143,447 $ 515,732 $ 265,353 $ 145,125 $ 95,207 $ 84,045 Interest on borrowed funds................... 204,122 499,252 362,995 352,162 398,779 816,448 Amortization of notes and debentures......... 206 1,346 967 970 584 538 Interest component of rentals................ 5,986 26,865 20,583 19,167 18,800 17,667 Preferred stock dividend requirements........ 575 2,414 2,534 4,484 4,634 3,458 ----------------------------------------------------------------------------------- Subtotal................................... 354,336 1,045,609 652,432 521,908 518,004 922,156 Interest on deposits......................... 292,334 935,876 742,772 1,063,422 1,727,765 1,973,087 ----------------------------------------------------------------------------------- Total...................................... $646,670 $1,981,485 $1,395,204 $1,585,330 $2,245,769 $2,895,243 =================================================================================== RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS Excluding interest on deposits.............. 1.52x 1.86x 2.71x 2.49x 2.06x 1.03x Including interest on deposits.............. 1.28 1.46 1.80 1.49 1.24 1.01 - -----------------------------------------------------------------------------------------------------------------------------------
EX-27 5 PNC BANK 10-Q
9 This schedule contains summary financial information extracted from the consolidated financial information incorporated by reference to the 1995 First Quarter Corporate Financial Review which is filed herewith as Exhibit 99 and is qualified in its entirety by reference to such financial information. 0000713676 PNC BANK 1,000,000 3-MOS DEC-31-1995 MAR-31-1995 2,699 0 0 0 3,137 17,070 16,369 35,724 (981) 62,094 32,941 13,780 1,384 9,599 1,181 0 1 3,208 62,094 707 295 22 1,024 292 640 384 0 1 437 184 126 0 0 126 .54 .54 2.72 294 161 8 0 1,002 (40) 18 981 981 0 0
EX-99 6 PNC BANK 10-Q 1 Exhibit 99 FINANCIAL HIGHLIGHTS
Three months ended March 31 1995 1994 - -------------------------------------------------------------------------------------------------------------------- FINANCIAL PERFORMANCE (Dollars in thousands, except per share data) Net interest income (taxable-equivalent basis) $392,168 $505,804 Net income 125,651 205,689 Fully diluted earnings per common share .54 .86 Return on average total assets .83% 1.41% Return on average common shareholders' equity 11.71 19.32 Net interest margin 2.72 3.68 After-tax profit margin 19.97 26.91 Overhead ratio 69.50 55.84 SELECTED AVERAGE BALANCES (In millions) Assets $ 61,693 $ 58,966 Earning assets 57,448 55,182 Loans, net of unearned income 35,315 32,023 Securities 20,903 21,238 Deposits 33,052 31,737 Shareholders' equity 4,357 4,330 - --------------------------------------------------------------------------------------------------------------------
MARCH 31 December 31 March 31 1995 1994 1994 - ---------------------------------------------------------------------------------------------------------------------- SELECTED RATIOS Capital Risk-based capital Tier I 8.26% 8.62% 9.86% Total 11.14 11.45 12.42 Leverage 6.26 6.59 7.15 Common shareholders' equity to total assets 7.04 6.82 6.97 Average common shareholders' equity to average total assets 7.03 7.09 7.31 Asset quality Net charge-offs to average loans .24 .29 .29 Nonperforming loans to total loans .85 .90 1.09 Nonperforming assets to total loans and foreclosed assets 1.25 1.25 1.56 Nonperforming assets to total assets .72 .69 .85 Allowance for credit losses to total loans 2.75 2.83 2.94 Allowance for credit losses to nonperforming loans 324.94 314.17 269.60 Book value per common share As reported $19.08 $18.76 $18.14 Excluding net unrealized securities losses 19.36 19.26 18.53 - ----------------------------------------------------------------------------------------------------------------------
TABLE OF CONTENTS 2 Corporate Financial Review 22 Consolidated Financial Statements 30 Average Consolidated Balance Sheet and Net Interest Analysis 32 Corporate Information 2 CORPORATE FINANCIAL REVIEW THE FOLLOWING CORPORATE FINANCIAL REVIEW SHOULD BE READ IN CONJUNCTION WITH THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF PNC BANK CORP. AND SUBSIDIARIES ("CORPORATION") INCLUDED HEREIN AND THE CORPORATE FINANCIAL REVIEW AND AUDITED CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE CORPORATION'S 1994 ANNUAL REPORT. overview - --------------------------------------------------------------- Net income for the first quarter of 1995 was $125.7 million, or $.54 per fully diluted share, compared with $205.7 million, or $.86 per share, for the first quarter of 1994. Return on assets and return on common shareholders' equity were .83 percent and 11.71 percent, respectively, in the first quarter of 1995 compared with 1.41 percent and 19.32 percent a year ago. Management took strategic actions in the latter part of 1994 to reduce sensitivity to significantly higher interest rates and to realign the Corporation's balance sheet. These actions substantially eliminated liability sensitivity at one year and mitigated the impact of significantly higher interest rates on net interest income. Financial results for the first quarter of 1995 reflect the costs associated with these actions. The Corporation's balance sheet realignment is expected to include further reductions of the securities portfolio and certain low-spread loans through scheduled maturities and repayments or sales. In connection with this downsizing, in January 1995 the board of directors authorized the purchase of up to 24 million common shares over a two-year period, or approximately 10 percent of shares outstanding at year-end 1994. During the first quarter of 1995, approximately 4.5 million shares were purchased by the Corporation pursuant to this plan. In the first quarter of 1995, the nation's real gross domestic product grew at a preliminary annual rate of 2.8 percent according to the United States Commerce Department. The Federal Reserve has continued to exercise monetary policies designed to reduce inflationary pressures associated with the economic expansion. Based on recent economic indicators, management expects economic growth to slow throughout 1995, which may reduce inflationary pressures. As a result, management expects a modest increase in short-term interest rates during the remainder of 1995. Should interest rates increase more than anticipated or a flat yield curve persist, the Corporation's financial results would likely be adversely affected. mergers and acquisitions - --------------------------------------------------------------- During the first quarter of 1995, the Corporation completed the acquisition of BlackRock Financial Management L.P. ("BlackRock"), a New York-based, fixed-income investment management firm with approximately $25 billion in assets under management at closing. The transaction was accounted for under the purchase method and the Corporation paid $71 million in cash and issued $169 million of unsecured notes. The Corporation also acquired Indian River Federal Savings Bank, Vero Beach, Florida, and Brentwood Financial Corporation, Cincinnati, Ohio, for $33 million in cash. The acquisitions added assets and deposits of approximately $175 million and $140 million, respectively. In addition, the Corporation announced a definitive agreement to acquire the Chemical Bank franchise in southern and central New Jersey. The transaction includes approximately $3.3 billion of assets and $2.9 billion of retail deposits and is expected to close by year-end 1995, pending regulatory approvals. The acquisition has an indicated value of approximately $500 million and will be accounted for under the purchase method. During 1994, the Corporation completed the acquisitions of United Federal Bancorp, Inc., State College, Pennsylvania, and First Eastern Corp., Wilkes-Barre, Pennsylvania. The acquisitions added assets and deposits of $2.8 billion and $2.4 billion, respectively. In addition, in June 1994, the Corporation purchased a $10 billion residential mortgage servicing portfolio from the Associates Corporation of North America. 2 3 CORPORATE FINANCIAL REVIEW income statement review - --------------------------------------------------------------- INCOME STATEMENT HIGHLIGHTS
Three months ended March 31 Change ----------------- Dollars in millions 1995 1994 Amount Percent - -------------------------------------------------------------- Net interest income (taxable-equivalent basis) $392 $506 $(114) (22.5)% Provision for credit losses 25 (25) (100.0) Noninterest income before securities transactions 236 228 8 3.4 Net securities gains 1 30 (29) (95.9) Noninterest expense 437 427 10 2.5 Net income 126 206 (80) (38.9) - --------------------------------------------------------------
NET INTEREST INCOME AND NET INTEREST MARGIN On a fully taxable-equivalent basis, net interest income for the first quarter of 1995 decreased $113.6 million, compared with the first quarter of 1994. A $2.3 billion increase in average earning assets was more than offset by a narrower net interest margin compared with the prior-year period. NET INTEREST INCOME
Three months ended Taxable-equivalent basis MARCH 31 December 31 March 31 In millions 1995 1994 1994 - ------------------------------------------------------------- Net interest income before swaps and caps Interest income $1,045 $1,027 $855 Loans fees 17 15 19 Taxable-equivalent adjustment 8 8 8 ------------------------------------ Total interest income 1,070 1,050 882 Interest expense 637 598 433 ------------------------------------ Net interest income before swaps and caps 433 452 449 Effect of swaps and caps on Interest income (37) (17) 21 Interest expense 4 2 (36) ------------------------------------ Total swaps and caps (41) (19) 57 ------------------------------------ Net interest income $ 392 $ 433 $506 - -------------------------------------------------------------
VOLUME/RATE ANALYSIS
Three months ended Increase (Decrease) March 31 Due to Changes in 1995 versus 1994 ------------------------- Rate/ In millions Volume Rate Volume Total - --------------------------------------------------------------- Interest income $36 $ 140 $12 $ 188 Interest expense 24 168 12 204 Interest rate swaps and caps 3 (101) (98) --------- Net interest income 21 (131) (4) $(114) - ---------------------------------------------------------------
Net interest income declined and net interest margin narrowed in the comparisons primarily due to the adverse impact of interest rate swaps and caps and the costs of actions taken in 1994 to reduce interest sensitivity and down size the securities portfolio. These factors are expected to continue to adversely impact net interest income and net interest margin in 1995. In addition, the Corporation's net interest income and margin continue to be adversely impacted by higher interest rates, competitive loan pricing, rising deposit and borrowing costs and changes in deposit composition. NET INTEREST MARGIN
Three months ended Taxable-equivalent MARCH 31 December 31 March 31 basis 1995 1994 1994 - ------------------------------------------------------------- Interest rate spread before swaps and caps Book-basis yield on earning assets 7.29% 6.91% 6.23% Effect of loan fees .11 .10 .14 Taxable-equivalent adjustment .06 .06 .06 ------------------------------------ Taxable-equivalent yield on earning assets 7.46 7.07 6.43 Rate on interest-bearing liabilities 5.13 4.64 3.69 ------------------------------------ Interest rate spread before swaps and caps 2.33 2.43 2.74 Effect of Noninterest-bearing sources .67 .62 .48 Interest rate swaps and caps on Interest income (.25) (.12) .16 Interest expense .03 .01 (.30) ------------------------------------ Total swaps and caps (.28) (.13) .46 ------------------------------------ Net interest margin 2.72% 2.92% 3.68% - -------------------------------------------------------------
3 4 CORPORATE FINANCIAL REVIEW PROVISION FOR CREDIT LOSSES The Corporation did not record a provision for credit losses in the first quarter of 1995. The provisions for credit losses was $25.0 million in the first quarter of 1994. Stronger economic conditions combined with management's ongoing attention to asset quality resulted in a stable level of nonperforming assets, lower net charge-offs, and a higher reserve coverage of nonperforming loans. Based on the current risk profile of the loan portfolio and assuming economic trends continue, management does not expect to record a provision for credit losses during the remainder of 1995. Should risk profile of the loan portfolio or the economy deteriorate, asset quality may be adversely impacted and a provision for credit losses may be required. NONINTEREST INCOME Noninterest income before securities transactions increased 3.4 percent to $235.9 million in the first quarter of 1995. Excluding securities transactions, noninterest income was 37.6 percent of total revenue in the first quarter of 1995 compared with 31.1 percent a year earlier. Net securities gains totaled $1.3 million in the first quarter of 1995 compared with $30.4 million in the year-earlier period. NONINTEREST INCOME
Change Three months ended March 31 --------------------- Dollars in thousands 1995 1994 Amount Percent - --------------------------------------------------------------------------------------------------------------------------- Investment management and trust Trust $ 50,967 $ 49,399 $ 1,568 3.2% Mutual funds 28,173 23,568 4,605 19.5 -------------------------------------------- Total investment management and trust 79,140 72,967 6,173 8.5 Service charges, fees and commissions Deposit account and corporate services 39,542 39,806 (264) (.7) Credit card and merchant services 14,175 12,920 1,255 9.7 Brokerage 9,243 8,677 566 6.5 Corporate finance 10,707 10,679 28 .3 Other services 17,757 15,820 1,937 12.2 -------------------------------------------- Total service charges, fees and commissions 91,424 87,902 3,522 4.0 Mortgage banking Servicing 31,123 29,877 1,246 4.2 Sale of servicing 12,258 5,145 7,113 138.3 Marketing 1,269 2,870 (1,601) (55.8) -------------------------------------------- Total mortgage banking 44,650 37,892 6,758 17.8 Other 20,645 29,398 (8,753) (29.8) -------------------------------------------- Total noninterest income before securities transactions 235,859 228,159 7,700 3.4 Net securities gains 1,254 30,392 (29,138) (95.9) -------------------------------------------- Total $237,113 $258,551 $(21,438) (8.3)% - ---------------------------------------------------------------------------------------------------------------------------
4 5 CORPORATE FINANCIAL REVIEW INVESTMENT MANAGEMENT AND TRUST
Assets at March 31 -------------------------------------------------------------------------- Revenue for the three months Discretionary Nondiscretionary Total ended March 31 ---------------------- ------------------------- ------------------------- ------------------- In millions 1995 1994 1995 1994 1995 1994 1995 1994 - ----------------------------------------------------------------------------------------------------------------------------- Personal and charitable $23,266 $23,940 $ 10,986 $ 9,280 $ 34,252 $ 33,220 $36 $36 Institutional 20,683 5,755 33,706 71,971 54,389 77,726 15 13 --------------------------------------------------------------------------------------------------- Total trust 43,949 29,695 44,692 81,251 88,641 110,946 51 49 Mutual funds 35,830 22,777 89,506 57,154 125,336 79,931 28 24 --------------------------------------------------------------------------------------------------- Total $79,779 $52,472 $134,198 $138,405 $213,977 $190,877 $79 $73 - -----------------------------------------------------------------------------------------------------------------------------
Investment management and trust revenue increased 8.5 percent to $79.1 million primarily due to the BlackRock acquisition which was completed on February 28, 1995. On an annualized basis, BlackRock is expected to increase investment management and trust revenue by approximately 20 percent. Total trust and mutual funds assets increased $23.1 billion to $214.0 billion at March 31, 1995. BlackRock added approximately $25 billion in discretionary assets, $15 billion of which are institutional funds and the remainder are mutual funds. At March 31, 1995, the composition of total discretionary assets was 45 percent fixed-income, 32 percent money market, 22 percent equity and one percent other assets. The PNC Family of Funds is included in the discretionary mutual funds category. Assets in these funds totaled $5.6 billion at March 31, 1995 compared with $4.0 billion a year ago. Nondiscretionary assets declined in the comparison as a decline in institutional trust custody business was partially offset by the addition of mutual fund custody services. Service charges, fees and commissions increased $3.5 million, or 4.0 percent, to $91.4 million, primarily due to acquisitions and growth in brokerage and other consumer-related fees. In April 1995, the Corporation announced an agreement with First Data Corporation/Card Services Group and Card Issuer Program Management Corporation to provide marketing expertise and processing technology designed to increase the Corporation's share of the credit card business. Fee income and operating expenses related to the credit card business are each expected to be reduced by approximately $20 million during the remainder of 1995 as a result of this relationship. Mortgage banking income increased $6.8 million to $44.7 million primarily due to gains from sales of servicing totaling $12.3 million in the first quarter of 1995 compared with $5.1 million in the prior-year period. MORTGAGE SERVICING PORTFOLIO
In millions 1995 1994 - ------------------------------------------------------------ Balance at January 1 $40,966 $35,527 Originations 921 2,033 Acquisitions 64 461 Repayments (836) (2,284) Sales (1,128) (488) --------------------------- Balance at March 31 $39,987 $35,249 - ------------------------------------------------------------
During the first quarter of 1995, the Corporation funded $921 million of residential mortgages, approximately 89 percent of which represented new financing. PNC Mortgage directly originated 63 percent of total volume in 1995. At March 31, 1995, the Corporation's mortgage servicing portfolio totaled $40.0 billion, including $28.6 billion serviced for others. The servicing portfolio had a weighted-average coupon rate of 7.90 percent, an unamortized carrying value of $307 million and an estimated fair value of $513 million. Other noninterest income decreased $8.8 million primarily due to lower venture capital income and lower gains from sales of assets. 5 6 CORPORATE FINANCIAL REVIEW NONINTEREST EXPENSE Noninterest expense totaled $437.4 million in the first quarter of 1995 compared with $426.8 million in the first quarter of 1994. The increase was due to acquisitions. Excluding acquisitions, noninterest expense decreased 3.6 percent in the comparison. NONINTEREST EXPENSE
Three months ended March 31 Change Dollars in --------------- thousands 1995 1994 Amount Percent - --------------------------------------------------------------- Compensation $163,107 $ 164,792 $(1,685) (1.0)% Employee benefits 38,751 42,107 (3,356) (8.0) ------------------------------ Total staff expense 201,858 206,899 (5,041) (2.4) Net occupancy 34,704 32,420 2,284 7.0 Equipment 34,146 32,862 1,284 3.9 Amortization of intangible assets 21,146 19,560 1,586 8.1 Federal deposit insurance 18,376 18,176 200 1.1 Taxes other than income 12,057 11,096 961 8.7 Other 115,092 105,833 9,259 8.7 ------------------------------ Total $437,379 $ 426,846 $10,533 2.5% - ---------------------------------------------------------------
The overhead ratio was 69.5 percent in the first quarter of 1995 compared with 55.8 percent in the year-earlier period. The higher overhead ratio primarily reflects the impact of lower net interest income. Staff expense decreased 2.4 percent in the year-to-year comparison primarily due to lower staff levels. Average full-time equivalent employees decreased to approximately 20,300 for the first quarter of 1995 compared with approximately 21,000 a year ago. The impact of approximately 1,300 employees added from acquisitions was more than offset by lower staffing in the Consumer Banking line of business. The Mass Market sector experienced reductions due to centralization and branch rationalization initiatives. Mortgage Banking benefitted from the consolidation of operations centers and efficiencies gained from the use of technology. Pension and postretirement benefit expense declined $4.2 million due to lower staff levels and a higher discount rate used to estimate pension obligations. Amortization of intangibles increased $1.6 million as higher amortization of goodwill from acquisitions was partially offset by the impact of slower mortgage prepayments on the amortization of mortgage servicing rights. The increase in the remaining noninterest expense categories was primarily due to acquisitions. line of business results - --------------------------------------------------------------- The management accounting process uses various methods of balance sheet and income statement allocations, transfers and assignments to evaluate the performance of various business units. Unlike financial accounting, there is no comprehensive, authoritative body of guidance for management accounting equivalent to generally accepted accounting principles. The following information is based on management accounting practices which conform to and support the management structure of the Corporation and is not necessarily comparable with similar information for any other financial services institution. Designations, assignments, and allocations may change from time to time as the management accounting system is enhanced and business or product lines change. In 1995, the Corporation realigned its line of business management structure along customer segments. The principal change was segregating the trust business, previously managed separately, into the corporate and consumer banking organizations, as applicable. In addition, consistent with the Corporation's strategic focus and balance sheet realignment, asset/liability management has been redefined as a support function for the core lines of business. Results for the first quarter of 1994 are presented on a basis consistent with this new structure. For management reporting purposes, the Corporation has designated three lines of business: Corporate Banking, Consumer Banking, and Asset Management. The financial results presented in this section reflect each line of business as if it operated on a stand-alone basis. Securities or borrowings, and related interest rate spread, have been assigned to each line of business based on its net asset or liability position. Consumer Banking and Asset Management were net generators of funds and, accordingly, were assigned securities, while Corporate Banking received an assignment of borrowings as a net asset generator. An assignment of securities is accompanied by an assignment of equity in accordance with the methodology described below. The interest rate spread on the remaining securities, the impact of financial derivatives, and securities transactions are excluded from line of business results and 6 7 CORPORATE FINANCIAL REVIEW are reported separately in asset/liability management activities. Capital is assigned to each business unit based on management's assessment of inherent risks. Equity levels at independent companies that provide products and services similar to those provided by the respective business unit are also considered. Capital assignments are not equivalent to risk-based capital guidelines and the total amount assigned may vary from consolidated shareholders' equity. LINE OF BUSINESS HIGHLIGHTS
Return on Average Assigned Three months ended March 31 Balance Sheet Revenue Earnings Equity ----------------------------------------------------------------------------------- Dollars in millions 1995 1994 1995 1994 1995 1994 1995 1994 - ----------------------------------------------------------------------------------------------------------------------------- Corporate Banking Large Corporate $ 3,877 $ 3,494 $ 37 $ 53 $ 12 $ 24 10% 25% Middle Market 10,906 9,860 139 136 39 55 11 17 Equity Management 186 169 4 12 2 7 15 58 ---------------------------------------------------------- Total Corporate Banking 14,969 13,523 180 201 53 86 11 20 ---------------------------------------------------------- Consumer Banking Private Banking 1,045 844 57 51 9 8 26 33 Mass Market 25,609 23,891 304 272 57 50 17 14 Mortgage Banking 11,268 10,094 93 93 13 12 11 13 ---------------------------------------------------------- Total Consumer Banking 37,922 34,829 454 416 79 70 16 15 ---------------------------------------------------------- Asset Management 246 241 36 30 9 7 57 50 ---------------------------------------------------------- Total lines of business 53,137 48,593 670 647 141 163 14 18 Asset/liability management activities 8,964 9,517 (27) 112 (19) 70 Unallocated provision 13 (19) Other unallocated items (408) 856 (24) (3) (9) (8) ---------------------------------------------------------- Total $61,693 $58,966 $619 $756 $126 $206 12% 19% - ----------------------------------------------------------------------------------------------------------------------------------
Total earnings contributed by the lines of business were $141 million in the first quarter of 1995 compared with $163 million in the first quarter of 1994. The decline, attributable to Corporate Banking, primarily resulted from an increase in the allocated provision for credit losses which was negative in the prior-year period. Line of business earnings differ from reported consolidated net income in both periods due to asset/liability management activities, differences between specific reserve allocations to the lines of business and the consolidated provision for credit losses, and certain unallocated revenues and expenses. The decline in consolidated earnings was primarily due to the impact of interest rate swaps and caps, and lower net securities gains which are reported in asset/liability management activities. 7 8 CORPORATE FINANCIAL REVIEW CORPORATE BANKING Corporate Banking provides traditional financing, liquidity and treasury management, corporate and employee benefit trust, capital markets, direct investment and other financial services to businesses and governmental entities. It serves customers within the Corporation's primary markets as well as from a network of offices located in major U.S. cities. Corporate Banking includes: Large Corporate--customers having annual sales of more than $250 million; Middle Market--customers with annual sales of $5 million to $250 million and those in certain specialized industries such as real estate, communications, health care, natural resources, leasing and automobile dealer finance; and Equity Management--private equity investments. Corporate Banking provided 38 percent of line of business earnings in the first quarter of 1995 compared with 53 percent in the first quarter of 1994. Large Corporate earnings declined in 1995 as the benefit of an increase in average loans was more than offset by the impact of narrower spreads in the loan portfolio and the benefit from resolution of a problem asset a year ago that negatively affected the comparison. Middle Market earnings declined primarily due to a higher provision for credit losses in 1995 compared with a negative provision a year ago resulting from a significant reduction of problem assets. CONSUMER BANKING Consumer Banking provides lending, deposit, personal trust, brokerage and investment, payment system access and other financial services to consumers and small businesses. It provides services through a network of community banking and mortgage offices, alternative delivery systems such as ATMs and telephone banking, and regional banking centers offering a wide-array of products at a single point of contact. Consumer Banking includes: Private Banking--affluent consumers and charitable organizations with specialized banking requirements; Mass Market--small business customers having annual sales of up to $5 million and all other consumers who use traditional branch and direct banking services; and Mortgage Banking--residential and loan origination, acquisition and servicing activities and residential mortgage loans held in portfolio. The earnings contribution from Consumer Banking increased to 56 percent in the first quarter of 1995 from 43 percent a year ago. Earnings from Private Banking increased in the first quarter of 1995 as the benefit from loan growth, new trust business and higher brokerage fees more than offset expense growth from continued resource investment in this sector. Mass Market earnings benefitted from an increase in average loans and deposits as a result of acquisitions and a greater assigned value for core deposits in the higher interest rate environment in 1995. Mortgage Banking continued to operate in an environment characterized by significantly reduced volumes. Earnings increased as the impact of lower originations was more than offset by the benefit of an increase in portfolio loans and higher gains on sales of mortgage servicing rights. ASSET MANAGEMENT Asset Management provides trust and mutual fund investment management, strategy, and research, and asset servicing for institutional and family wealth customers. It serves customers through one unified money management organization. Asset Management contributed 6 percent of line of business earnings in the first quarter of 1995 compared with 4 percent a year ago. Asset management earnings increased primarily due to a higher level of managed mutual fund assets, and growth in fund accounting and administrative services business. BlackRock is expected to increase earnings of this line of business during the remainder of 1995. 8 9 CORPORATE FINANCIAL REVIEW balance sheet review - --------------------------------------------------------------- AVERAGE ASSETS
MARCH 31 December Three months ended 31 March 31 In millions 1995 1994 1994 - ------------------------------------------------------------- Assets $61,693 $62,952 $58,966 Earning assets 57,448 59,173 55,182 Loans, net of unearned income 35,315 34,955 32,023 Securities 20,903 22,923 21,238 - -------------------------------------------------------------
LOANS Average loans for the first quarter of 1995 increased 10.3 percent over the comparable period in 1994, to $35.3 billion. Acquisitions increased the loan portfolio primarily in the Consumer Banking line of business. Excluding the impact of acquisitions, average loans increased 6.2 percent. The proportion of average loans to average earning assets increased to 61.5 percent in the first quarter of 1995 compared with 58.0 percent a year ago. Management expects this ratio to increase further in 1995 as a result of loan growth and a decline in the securities portfolio. The Corporation manages credit risk associated with its lending activities through underwriting policies and procedures, portfolio diversification and loan monitoring practices. The loan portfolio composition did not change significantly since year-end 1994. LOAN PORTFOLIO COMPOSITION
December Percent of gross MARCH 31 31 March 31 loans 1995 1994 1994 ------------------------------------------------------------ Commercial 34.3% 34.9% 38.2% Real estate project 4.6 4.6 5.0 Real estate mortgage Residential 27.8 26.0 24.0 Commercial 3.4 3.5 3.1 Total real estate mortgage 31.2 29.5 27.1 Consumer 24.9 25.8 25.4 Other 5.0 5.2 4.3 ---------------------------------- Total 100.0% 100.0% 100.0% ------------------------------------------------------------
At March 31, 1995, loan outstandings and net unfunded commitments increased $2.2 billion, or 3.6 percent, since year-end 1994. Unfunded commitments are net of participations and syndications. In addition, the Corporation had letters of credit outstanding totaling $4.4 billion and $4.3 billion at March 31, 1995 and December 31, 1994, respectively, consisting primarily of standby letters of credit. Total commercial loan outstandings declined $104 million from year-end 1994, reflecting a reduction in certain low-spread loans. Growth in commercial unfunded commitments was broad based and increased $1.6 billion, or 8.6 percent, in the comparison. Total real estate project exposure increased slightly since year-end 1994. Real estate projects primarily consist of retail and office, multi-family, hotel/motel and residential projects. Approximately 72 percent of total outstandings are located in the Corporation's primary markets. The remaining projects are geographically dispersed throughout the United States. Real estate mortgage outstandings increased 6.3 percent primarily due to acquisitions and portfolio management strategies. As part of its overall asset/liability management strategy, the Corporation retains certain originated residential mortgage products in the loan portfolio. The remainder of its originations are securitized and sold. Consumer loan outstandings totaled $9.0 billion at March 31, 1995 compared with $9.2 billion at year-end 1994. The decline was primarily due to a planned reduction in indirect automobile loans. 9 10 CORPORATE FINANCIAL REVIEW LOANS
MARCH 31, 1995 December 31, 1994 ----------------------------------------------------------------- NET UNFUNDED Net Unfunded In millions OUTSTANDINGS COMMITMENTS Outstandings Commitments - -------------------------------------------------------------------------------------------------------------------------- Commercial Manufacturing $ 2,375 $ 6,217 $ 2,434 $ 6,011 Retail/Wholesale 2,352 2,412 2,148 2,123 Service providers 1,512 1,506 1,534 1,384 Communications Cable 711 209 691 215 Telephone/cellular 290 1,106 285 923 Other 161 181 125 93 ----------------------------------------------------------------- Total communications 1,162 1,496 1,101 1,231 Financial services 521 2,750 691 2,502 Real estate related 651 192 610 180 Health care 676 1,025 606 958 Public utilities 171 1,153 254 1,079 Other 2,921 3,793 3,067 3,447 ----------------------------------------------------------------- Total commercial 12,341 20,544 12,445 18,915 Real estate project Construction and development 429 261 394 254 Medium-term financings 1,214 41 1,234 56 ----------------------------------------------------------------- Total real estate project 1,643 302 1,628 310 Real estate mortgage Residential 9,990 1,049 9,283 769 Commercial 1,222 19 1,261 19 ----------------------------------------------------------------- Total real estate mortgage 11,212 1,068 10,544 788 Consumer Home equity 2,576 1,513 2,625 1,761 Automobile 2,419 2,534 Student 1,304 5 1,258 30 Credit card 804 3,575 817 3,423 Other 1,871 351 1,953 330 ----------------------------------------------------------------- Total consumer 8,974 5,444 9,187 5,544 Other 1,790 998 1,843 917 Unearned income (236) (240) ----------------------------------------------------------------- Total, net of unearned income $35,724 $28,356 $35,407 $26,474 - --------------------------------------------------------------------------------------------------------------------------
10 11 CORPORATE FINANCIAL REVIEW SECURITIES The securities portfolio declined $714 million from year-end 1994 to $20.2 billion at March 31, 1995. Securities represented 35.5 percent of earning assets at March 31, 1995 compared with 36.3 percent at December 31, 1994 and 37.5 percent a year ago. As part of the Corporation's balance sheet realignment, management anticipates a continued reduction in the securities portfolio through scheduled maturities and anticipated repayments or sales. As a result of the balance sheet realignment, the securities portfolio is expected to represent approximately 30 percent of earning assets by the end of 1995. At March 31, 1995, the securities portfolio included $11.3 billion and $2.6 billion of collateralized mortgage obligations and mortgage-backed securities, respectively. The characteristics of these investments include principal guarantees, primarily by U.S. Government agencies, marketability, and availability as collateral for additional liquidity. The expected lives of mortgage-related securities can vary as a result of changes in interest rates. The Corporation monitors the impact of this risk through the use of an income simulation model as part of the asset/liability management process. Other U.S. Government agencies securities and asset-backed private placements represent AAA-rated, variable-rate instruments. The interest rates on these instruments float with various indices and are limited by periodic and maximum caps. These securities have an initial specified term at the end of which the maturity may be extended or called at the option of the issuer. Other debt securities consist primarily of private label collateralized mortgage obligations.
SECURITIES MARCH 31, 1995 December 31, 1994 -------------------------------------------------------------------------------------------- UNREALIZED Unrealized AMORTIZED --------------- Amortized ---------------- In millions COST GAINS LOSSES FAIR VALUE Cost Gains Losses Fair Value - ---------------------------------------------------------------------------------------------------------------------------------- Investment securities Debt securities U.S. Treasury $1,795 $37 $1,758 $1,794 $93 $1,701 U.S. Government agencies and corporations Mortgage-related 10,643 632 10,011 10,920 1,025 9,895 Other 1,000 15 985 1,000 28 972 State and municipal 344 $19 1 362 348 $12 2 358 Asset-backed private placements 1,597 7 1,590 1,597 33 1,564 Other debt Mortgage-related 700 21 679 726 43 683 Other 675 8 667 769 20 749 Other 316 1 317 310 1 311 -------------------------------------------------------------------------------------------- Total $17,070 $20 $721 $16,369 $17,464 $13 $1,244 $16,233 -------------------------------------------------------------------------------------------- Securities available for sale Debt securities U.S. Treasury $324 $3 $321 $401 $8 $393 U.S. Government agencies and corporations Mortgage-related 1,890 $19 21 1,888 2,161 69 2,092 Other 25 3 22 25 4 21 Other debt Mortgage-related 703 6 697 749 17 732 Other 113 1 6 108 117 $2 119 Corporate stocks and other 104 1 4 101 105 1 6 100 ------------------------------------------------------------------------------------------- Total $3,159 $21 $43 $3,137 $3,558 $3 $104 $3,457 - ----------------------------------------------------------------------------------------------------------------------------------
11 12 CORPORATE FINANCIAL REVIEW Securities available for sale are recorded at fair value in the consolidated balance sheet and net unrealized gains or losses, net of tax, are reflected as an adjustment to shareholders' equity. The Corporation may sell such securities as part of the overall asset/liability management process should market conditions or other factors warrant. Gains and losses from such transactions would be reflected in results of operations. The table below sets forth the expected maturity distribution of the securities portfolio as of March 31, 1995. Mortgage-related securities and other instruments are distributed based on expected weighted average lives determined by historical experience. The expected weighted average life of the securities portfolio was 3 and one-half years at March 31, 1995 compared with 4 years at year-end 1994. EXPECTED MATURITY DISTRIBUTION OF SECURITIES
Weighted 1997 and Average Dollars in millions 1995 1996 beyond Total Life - ----------------------------------------------------------------------------------------------------------------------------- Investment securities Debt securities U.S. Treasury $ 1,795 $ 1,795 3.8 yr U.S. Government agencies and corporations Mortgage-related $ 1,361 $ 1,577 7,705 10,643 3.7 Other 1,000 1,000 1.3 State and municipal 14 22 308 344 9.1 Asset-backed private placements 1,347 250 1,597 1.5 Other debt Mortgage-related 65 95 540 700 2.5 Other 236 237 202 675 1.4 Other 316 316 NM ------------------------------------------------------ Total investment securities 1,676 4,278 11,116 17,070 3.3 Securities available for sale Debt securities U.S. Treasury 56 226 39 321 1.5 U.S. Government agencies and corporations Mortgage-related 239 271 1,378 1,888 5.4 Other 5 17 22 2.8 Other debt Mortgage-related 102 120 475 697 3.7 Other 3 3 102 108 6.5 Corporate stocks and other 101 101 NM ------------------------------------------------------ Total securities available for sale 400 625 2,112 3,137 4.6 ------------------------------------------------------ Total $ 2,076 $ 4,903 $13,228 $20,207 3.5 yr ------------------------------------------------------ Percent of total 10.3% 24.3% 65.4% 100.0% ------------------------------------------------------ Securities with interest rates that are Fixed $ 1,757 $ 2,190 $11,077 $15,024 Variable 319 2,713 2,151 5,183 - -----------------------------------------------------------------------------------------------------------------------------
NM--not meaningful 12 13 CORPORATE FINANCIAL REVIEW AVERAGE FUNDING SOURCES
Three months ended MARCH 31 December 31 March 31 In millions 1995 1994 1994 - --------------------------------------------------------------- Deposits $33,052 $33,409 $31,737 Borrowed funds 13,328 11,642 11,543 Notes and debentures 9,736 12,593 10,142 Shareholders' equity 4,357 4,386 4,330 - ---------------------------------------------------------------
FUNDING SOURCES Average deposits increased $1.3 billion, or 4.1 percent, compared with the first quarter of 1994 primarily due to acquisitions. Average noninterest-bearing sources were 13.0 percent of total funding sources during the first quarter of 1995 compared with 14.1 percent a year ago. FUNDING SOURCES
MARCH 31 December 31 In millions 1995 1994 - ----------------------------------------------------------- Deposits Demand, savings and money market $17,798 $19,313 Time 14,012 13,100 Foreign 1,131 2,598 ------------------------- Total deposits 32,941 35,011 Borrowed funds Repurchase agreements 7,059 3,785 Treasury, tax and loan 886 1,989 Federal funds purchased 2,928 2,181 Commercial paper 825 1,226 Other 2,082 2,427 ------------------------- Total borrowed funds 13,780 11,608 Notes and debentures Bank notes 6,815 8,825 Federal Home Loan Bank 1,287 1,384 Other 1,497 1,545 ------------------------- Total notes and debentures 9,599 11,754 ------------------------- Total $56,320 $58,373 - -----------------------------------------------------------
Total deposits at March 31, 1995 decreased $2.1 billion, or 5.9 percent, since year-end 1994. Demand, savings and money market deposits declined $1.5 billion to $17.8 billion and time deposits increased $912 million to $14.0 billion at March 31, 1995. The change in deposit composition was primarily due to customers shifting to higher rate deposit products. Brokered deposits totaled $2.4 billion at March 31, 1995 compared with $2.8 billion at December 31, 1994. Retail brokered deposits are issued or participated-out by brokers in denominations of $100,000 or less. Such deposits represented 75.0 percent of the total brokered at March 31, 1995 compared with 77.2 percent at year-end 1994. The change in the composition of borrowed funds and notes and debentures reflects asset/liability management activities to utilize less costly sources of funds. In addition, the Corporation extended the maturity structure of approximately $15.5 billion of interest-bearing funding sources that matured in the first quarter of 1995. These initiatives were achieved through a variety of funding sources, primarily repurchase agreements and term Federal funds, with maturities ranging from six months to one year. CAPITAL Acquisition capability, funding alternatives, new business activities, deposit insurance costs, and the level and nature of expanded regulatory oversight depend in large part on a banking institution's capital strength. The minimum regulatory capital ratios are 4.00 percent for Tier I, 8.00 percent for total risk-based and 3.00 percent for leverage. However, regulators may require higher capital levels when a bank's particular circumstances warrant. To be classified as well capitalized, regulators require capital ratios of 6.00 percent for Tier I, 10.00 percent for total risk-based and 5.00 percent for leverage. At March 31, 1995, the capital position of each bank affiliate was classified as well capitalized. RISK-BASED CAPITAL AND CAPITAL RATIOS
MARCH 31 December 31 Dollars in millions 1995 1994 - ------------------------------------------------------------ CAPITAL COMPONENTS Shareholders' equity $4,390 $ 4,394 Goodwill (622) (373) Net unrealized securities losses 65 119 ---------------------------- Total Tier I risk-based capital 3,833 4,140 Subordinated debt 752 752 Eligible allowance for credit losses 585 605 ---------------------------- Total risk-based capital $5,170 $ 5,497 ---------------------------- ASSETS Risk-weighted assets and off-balance-sheet instruments $46,401 $48,007 Average tangible assets 61,175 62,842 CAPITAL RATIOS Tier I risk-based capital 8.26% 8.62% Total risk-based capital 11.14 11.45 Leverage 6.26 6.59 - ------------------------------------------------------------
13 14 CORPORATE FINANCIAL REVIEW Shareholders' equity declined slightly at March 31, 1995 compared with year-end 1994 primarily due to the impact of the Corporation's share repurchase program. Goodwill increased in the comparison due to the acquisition of BlackRock in February 1995. The pending acquisition of Chemical Bank New Jersey is not expected to significantly impact capital ratios. In January 1995, the board of directors approved a stock repurchase program which authorized the Corporation to purchase up to 24 million additional common shares over the next two years. As of March 31, 1995, approximately 4.5 million shares were purchased by the Corporation pursuant to this plan at an average price of $24.14 per share. The Corporation maintains its capital positions primarily through the issuance of debt and equity instruments, its dividend policy and retained earnings. risk management - --------------------------------------------------------------- The Corporation's ordinary course of business involves varying degrees of risk taking, two of the most significant of which are interest rate risk and credit risk. In order to manage these risks, the Corporation has risk management processes designed to provide for risk identification, measurement, monitoring and control. INTEREST RATE RISK Interest rate risk is the sensitivity of net interest income and the market value of financial instruments to the magnitude, direction and frequency of changes in interest rates. Interest rate risk results from various repricing frequencies, changes in the relationship or spread between interest rates and the maturity structure of assets, liabilities, and off-balance-sheet positions. Asset/liability management uses a variety of investments, funding sources and off-balance-sheet instruments in managing the overall interest rate risk profile of the Corporation. A number of tools are used to measure interest rate risk including income simulation modeling and interest sensitivity ("gap") analyses. A dynamic income simulation model is the primary mechanism used by management to measure interest rate risk. The primary purpose of the simulation model is to assess the direction and magnitude of the impact of most likely (a "base case" which management believes is reasonably likely to occur) and higher and lower ("alternative") interest rate scenarios on net interest income. The results of the simulation model are highly dependent on numerous assumptions. These assumptions generally fall into two categories: those relating to the interest rate environment and those relating to general business and economic factors. Assumptions related to the interest rate environment include the level of various interest rates, the shape of the yield curve, and the relationship among these factors as rates change. Also included are other rate-related factors, such as prepayment speeds on mortgage-related assets and the cash flows and maturities of financial instruments including index-amortizing interest rate swaps. Assumptions related to general business and economic factors include changes in market conditions, loan volumes and pricing, deposit sensitivity, customer preferences, competition, and management's financial and capital plans. The assumptions are developed based on current business and asset/liability management strategies, historical experience, the current economic environment, forecasted economic conditions and other analyses. These assumptions are inherently uncertain and subject to change as time passes. Accordingly, they are updated on at least a quarterly basis and will not necessarily provide a precise estimate of net interest income or the impact of higher or lower interest rates. Using these assumptions, the model simulates net interest income under the base case scenario and evaluates the relative risk of changes in interest rates by simulating the impact on net interest income of gradual parallel shifts in interest rates of 100 basis points higher and lower than the base case scenario. In such alternative scenarios, certain assumptions that are directly dependent on the interest rate environment are adjusted for the respective higher or lower interest rate environment. Other assumptions related to general and economic factors are held constant with those developed for the base case scenario. As a result, the alternative interest rate scenarios indicate what may happen to net interest income if interest rates were to change to the levels of the higher and lower scenarios but do not predict what may happen to net interest income if business and economic assumptions are not realized. Actual results will differ from the simulated results of the base case scenario and of each alternative scenario due to various factors including timing, direction, magnitude and fre- 14 15 CORPORATE FINANCIAL REVIEW quency of interest rate changes, the relationship or spread between various interest rates, changes in market conditions, loan volumes and pricing, deposit sensitivity, customer preferences, competition, and the actual interaction of the numerous assumptions. In addition, the actual results will be affected by the impact of mergers or acquisitions and business and asset/ liability management strategies that differ from those assumed in the model. While the simulation model measures the relative risk of changes in interest rates on net interest income, the actual impact on net interest income could exceed or be less than the amounts projected in the base case and in each alternative scenario. If interest rates exceed those assumed in the high alternative scenario, or if interest rates are less than those assumed in the low alternative scenario, the actual impact on net interest income could further differ from the simulated results. Based on recent economic indicators, management expects economic growth in 1995 to be at a slower pace than recently experienced. The slower economic growth may reduce inflationary pressures and, accordingly, the Federal Reserve may be less aggressive with respect to increases in interest rates during 1995 compared with 1994. The simulated results of management's base case scenario for 1995 are consistent with previously reported expectations. The following table sets forth interest rates for the periods indicated including management's base case scenario and the industry consensus for the twelve months ended March 31, 1996 as reported in the Blue Chip Financial Forecasts. INTEREST RATES [CAPTION] Industry Consensus Base case scenario Average for ------------------ Twelve Months March December March Ended March 1995 1995 1996 1996 - --------------------------------------------------------------- Federal funds 6.00% 6.50% 6.50% 6.23% 3-month LIBOR 6.28 6.75 6.75 6.50 5-year U.S. Treasury Note 7.05 7.40 7.40 7.10 Spread between Fed funds and 5-year Treasury 105bp 90bp 90bp 87bp - ---------------------------------------------------------------
The Corporation's current base case scenario assumes a 50 basis point increase in the Federal funds rate in September 1995. The results of the simulation model include the impact of actions taken by management during the latter part of 1994 to reduce the adverse impact of interest rates significantly above the base case scenario. The model also includes the impact of management's plans to reduce further the securities portfolio, through scheduled maturities and repayments, and to repurchase common stock. The model does not reflect the impact of pending acquisitions. If interest rates increase evenly over the next four quarters by 100 basis points more than the base case scenario, the simulation model projects net interest income would decline from the base case scenario by 3.6 percent. Conversely, if interest rates decline by 100 basis points, net interest income would exceed the base case scenario by 3.3 percent. In addition to the simulation model, management performs an interest sensitivity (gap) analysis which represents a point-in-time net position of assets, liabilities and off-balance-sheet instruments subject to repricing in specified time periods. A cumulative liability-sensitive gap position indicates liabilities are expected to reprice more quickly than assets over a specified time period. Alternatively, a cumulative asset-sensitive gap position indicates assets are expected to reprice more quickly than liabilities. The gap analysis alone does not accurately measure the magnitude of changes in net interest income since changes in interest rates over time do not impact all categories of assets, liabilities and off-balance-sheet instruments equally or simultaneously. The liability sensitivity of the cumulative one-year gap position was 1.9 percent of total earning assets at March 31, 1995, compared with 1.5 percent at December 31, 1994, and 19.1 percent a year ago. FINANCIAL DERIVATIVES As part of its overall asset/liability management process, the Corporation enters into or may terminate off-balance-sheet financial derivatives positions. Substantially all such instruments are used to manage interest rate risk and consist of interest rate swaps, interest rate caps, and futures and forward contracts. Interest rate swaps are agreements with a counterparty to exchange periodic interest payments that are calculated on a notional principal amount. Interest rate swaps, including those with index-amortizing features are used to alter the repricing characteristics of interest-bearing assets or liabilities. 15 16 CORPORATE FINANCIAL REVIEW Interest rate caps are agreements where, for a fee, the counterparty agrees to pay the Corporation the amount, if any, by which a specified market interest rate exceeds a defined cap rate, up to a contractually specified limit, applied to a notional amount. Futures contracts are agreements to purchase or sell a financial instrument at a specified future date, quantity and price or yield. Futures contracts are standardized contractual terms traded on organized exchanges. Forward contracts provide for the delivery of financial instruments at a specified future date and at a specified price or yield. The Corporation uses forward contracts to manage interest rate risk associated with its mortgage banking activities. Commitments to purchase and sell forward contracts totaled $311 million and $532 million, respectively, at March 31, 1995. Substantially all contracts mature within 90 days. Financial derivatives involve, to varying degrees, interest rate and credit risks in excess of the amount recognized in the balance sheet. The Corporation manages overall interest rate risk, including that related to financial derivatives, as part of its asset/liability management process. Financial derivatives are also subject to the Corporation's credit policies and procedures. FINANCIAL DERIVATIVES [CAPTION] Positive Negative Total In millions Notional Fair Notional Fair Notional March 31, 1995 Value Value Value Value Value - --------------------------------------------------------------------------- Interest rate swaps Receive-fixed $ 219 $ 6 $11,281 $ (393) $11,500 Pay-fixed 2,045 5,423 (130) 7,468 Basis swap 440 440 ------------------------------------------------ Total swaps 2,704 6 16,704 (523) 19,408 Interest rate caps 5,500 69 5,500 Eurodollar futures 2,500 2,500 ------------------------------------------------ Total $10,704 $ 75 $16,704 $ (523) $27,408 ------------------------------------------------ December 31, 1994 Interest rate swaps Receive-fixed $ 119 $ 4 $11,375 $ (772) $11,494 Pay-fixed 5,060 26 658 (19) 5,718 ------------------------------------------------ Total swaps 5,179 30 12,033 (791) 17,212 Interest rate caps 5,500 132 5,500 ------------------------------------------------ Total $10,679 $162 $12,033 $ (791) $22,712 - ------------------------------------------------------------------------------
The Corporation is currently considering various alternatives regarding financial derivatives, including termination of certain contracts. Fair values of financial derivatives are estimates of amounts that would be received or paid upon termination of such contracts. Such fair values are not recorded in the Corporation's financial statements. Under current accounting guidance, if the interest rate swaps or futures are terminated, the net loss would be deferred and amortized over the shorter of the remaining original life of the agreements or the designated instrument. Upon termination of the interest rate caps, any losses, measured by the difference between the unamortized premium, $118.3 million at March 31, 1995, and the estimated fair value, would be recognized immediately. If the underlying designated instruments are no longer reflected in the financial statements, a net loss would be recognized immediately for derivatives related to such instruments. Substantially all receive-fixed swaps are index amortizing and are primarily associated with commercial loans and deposits. The Corporation receives payments based on fixed interest rates and makes payments based on floating money market indices, primarily one-month and 3-month LIBOR. The notional values of the receive-fixed swaps amortize on predetermined dates and in predetermined amounts based on market movements of the designated index, which are primarily 3-year U.S. Treasury constant maturities and 3-month LIBOR. The Corporation's swaps do not contain leverage or any similar features. In management's base case scenario, substantially all index-amortizing swaps would fully extend. Should interest rates remain at current levels, or decline, expected lives will decline as the swaps begin to amortize. Approximately $5.0 billion of the Corporation's pay-fixed interest rate swaps are associated with collateralized mortgage and U.S. Treasury obligations in the investment securities portfolio. The Corporation receives payments based on floating money market indices, primarily 3-month LIBOR, and pays fixed interest rates. Substantially all of these pay-fixed swaps mature by the end of 1998. During the first quarter of 1995, the Corporation entered into forward start, pay-fixed interest rate swap contracts with a $2.0 billion notional value to alter the repricing characteristics of overnight borrowings. The Corporation pays 6.20 percent and receives the average Federal funds rate over the term of the contracts. The contracts were effective April 3, 1995 and mature June 30, 1995. During the first quarter of 1995, the Corporation entered into a "basis swap" with a notional value of $440 million to modify the interest rate characteristics of one-year bank notes. 16 17 CORPORATE FINANCIAL REVIEW The bank notes bear interest based on the 6-month Treasury bill index. Under this swap, the Corporation receives payments based on the 6-month Treasury bill index and makes payments based on 1-month LIBOR. The contract matures in February 1996. FINANCIAL DERIVATIVES ACTIVITY
Notional value January 1 Maturities/ March 31 In millions 1995 Additions Amortization 1995 --------------------------------------------------------------- Interest rate swaps Receive-fixed $11,494 $ 100 $ (94) $11,500 Pay-fixed 5,718 2,000 (250) 7,468 Basis swaps 440 440 Interest rate caps 5,500 5,500 Eurodollar futures 2,500 2,500 ---------------------------------------------- Total $22,712 $5,040 $(344) $27,408 ---------------------------------------------------------------
In November 1994, the Corporation paid a $129.6 million premium for interest rate caps with a notional value of $5.5 billion associated with fixed-rate collateralized mortgage obligations in the investment securities portfolio. The caps require the counterparty to pay the Corporation the excess of 3-month LIBOR over a specified cap rate, currently 6.00 percent, computed quarterly, applied to the notional value of the contracts. At March 31, 1995, 3-month LIBOR was 6.25 percent. The cap rate adjusts to 6.50 percent during the fourth quarter of 1995 and the contracts expire during the fourth quarter of 1997. The agreements limit the amount payable to the Corporation to 150 basis points over the cap rate. The effect of these caps is to modify the interest rate characteristics of certain fixed-rate collateralized mortgage obligations to be variable within certain ranges. In March 1995, the Corporation sold June 1995 Eurodollar futures contracts with a notional value of $2.5 billion. The futures contracts hedge interest rate risk associated with the anticipated rollover of approximately $2.5 billion of short-term borrowings maturing in June 1995. For interest rate swaps and caps, interest payments and with respect to caps, the premium, are exchanged; therefore, cash requirements and exposure to credit risk are significantly less than the notional principal amounts. The Corporation seeks to minimize the credit risk associated with its interest rate swaps and caps activities primarily by entering into transactions with only a select number of high-quality institutions, establishing credit limits with counterparties and, where applicable, requiring segregated collateral or bilateral netting agreements. Eurodollar futures are traded on a regulated exchange and settlement of gains and losses occurs daily; therefore there is minimal credit risk to the Corporation. During the first quarter of 1995, interest rate swaps and caps negatively affected net interest income by $40.8 million compared with a benefit of $56.7 million in 1994. Based on its base case scenario, and as reflected in the results of the simulation model, management expects interest rate swaps and caps will continue to adversely impact net interest income in 1995. The following table sets forth the maturity distribution of the notional value of interest rate swaps, assuming management's base case interest rate scenario and the associated weighted average interest rates on the instruments maturing in the respective year. Variable rates paid or received are subject to change as the underlying index floats with changes in the market. MATURITY DISTRIBUTION OF INTEREST RATE SWAPS
1999 and Dollars in millions 1995 1996 1997 1998 beyond Total - ----------------------------------------------------------------------------------------------------------------------------- Receive-fixed Notional value $2,294 $3,256 $5,292 $ 658 $11,500 Weighted average fixed interest rate received 6.05% 5.48% 5.38% 5.04% 5.52% Weighted average variable interest rate paid 6.41 6.41 5.70 5.75 6.05 Pay-fixed Notional value $2,070 $ 165 $1,040 $4,050 $ 143 $ 7,468 Weighted average variable interest rate received 6.18% 6.37% 5.77% 5.75% 5.75% 5.87% Weighted average fixed interest rate paid 6.27 7.50 7.90 7.93 9.59 7.49 - -----------------------------------------------------------------------------------------------------------------------------
17 18 CORPORATE FINANCIAL REVIEW CREDIT RISK Credit risk represents the possibility that a customer or counter party may not perform in accordance with contractual terms. Credit risk is inherent in the lending business and results from extending credit to customers, purchasing securities, and entering into certain off-balance-sheet financial instruments. The Corporation seeks to manage credit risk through diversification, utilizing exposure limits to any single industry or customer, requiring collateral and selling participations to third parties. NONPERFORMING ASSETS
March 31 December 31 Dollars in millions 1995 1994 - ---------------------------------------------------------- Nonaccrual loans Commercial $129 $143 Real estate project 71 70 Real estate mortgage 94 97 ------------------------------ Total nonaccrual loans 294 310 Restructured loans 8 9 ------------------------------ Total nonperforming loans 302 319 Foreclosed assets Real estate project 89 77 Real estate mortgage 32 26 Other 24 24 ------------------------------ Total foreclosed assets 145 127 ------------------------------ Total $447 $446 ------------------------------ Nonperforming loans to total loans .85% .90% Nonperforming assets to total loans and foreclosed assets 1.25 1.25 Nonperforming assets to total assets .72 .69 - ----------------------------------------------------------
The following table sets forth changes in nonperforming assets during the first quarter of 1995. CHANGE IN NONPERFORMING ASSETS
In millions 1995 - ---------------------------------------------------------- Balance at January 1 $446 Transferred from accrual 95 Acquisitions 1 Returned to performing (10) Principal reductions (56) Sales (8) Charge-offs and valuation adjustments (21) -------- Balance at March 31 $447 - ----------------------------------------------------------
Accruing loans contractually past due 90 days or more as to the payment of principal or interest totaled $161 million at March 31, 1995 compared with $148 million at December 31, 1994. Residential mortgages and student loans totaling $57 million and $30 million, respectively, were included in the total at March 31, 1995 compared with $50 million and $36 million, respectively, at year-end 1994. ALLOWANCE FOR CREDIT LOSSES In determining the adequacy of the allowance for credit losses, the Corporation allocates reserves to specific problem loans based on a collectibility review and pools of watchlist and non-watchlist loans for various credit risk factors. Effective January 1, 1995, the Corporation adopted Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan," as amended by SFAS No. 118. Under this Standard, the Corporation estimates a portion of the allowance for credit losses on impaired loans based on the present value of expected cash flows or the fair value of the underlying collateral if the loan repayment is expected to come from the sale or operation of such collateral. The allowance for credit losses totaled $981 million at March 31, 1995 compared with $1.0 billion at December 31, 1994. The allowance as a percentage of period-end loans and nonperforming loans was 2.75 percent and 324.9 percent, respectively, at March 31, 1995. The comparable year-end 1994 amounts were 2.83 percent and 314.2 percent, respectively. 18 19 CORPORATE FINANCIAL REVIEW CHARGE-OFFS AND RECOVERIES
Dollars in millions Three months Percent of ended Net Average March 31, 1995 Charge-offs Recoveries Charge-offs Loans ----------------------------------------------------------------- Commercial $17 $ 9 $ 8 .27% Real estate project 1 1 .25 Real estate mortgage 4 1 3 .11 Consumer 18 8 10 .45 ------------------------------------ Total $40 $18 $22 .24% ------------------------------------------------ Three months ended March 31, 1994 Commercial $12 $ 7 $ 5 .18% Real estate project 3 3 .71 Real estate mortgage 6 1 5 .22 Consumer 17 7 10 .48 ------------------------------------ Total $38 $15 $23 .29% -----------------------------------------------------------------
Annualized net charge-offs as a percentage of average loans were .24 percent for the first quarter of 1995 compared with .29 percent in the corresponding 1994 period. LIQUIDITY RISK Liquidity represents an institution's ability to generate cash or otherwise obtain funds at reasonable rates to satisfy commitments to borrowers and demands of depositors and debtholders, and invest in other strategic initiatives. Liquidity risk represents the inability to generate cash or otherwise obtain funds at reasonable rates to satisfy commitments to borrowers, as well as the obligations to depositors and debtholders. Liquidity is managed through the coordination of the relative maturities of assets, liabilities and off-balance-sheet positions and is enhanced by the ability to raise funds in capital markets. Liquid assets consist of cash and due from banks, short-term investments, loans held for sale and securities available for sale. At March 31, 1995, such assets totaled $6.8 billion. Liquidity is also provided by residential mortgages which may be used as collateral for funds obtained through the Federal Home Loan Bank system and by mortgage-related securities available as collateral for securities sold under agreements to repurchase. At March 31, 1995, approximately $5.2 billion of residential mortgages were available as collateral for borrowings from the Federal Home Loan Bank system. Mortgage-related securities available as collateral for securities sold under agreements to repurchase totaled $3.5 billion at March 31, 1995. The planned reduction in the securities portfolio and related wholesale funding sources is not expected to materially affect overall liquidity. Liquidity for the parent company and its affiliates is also generated through the issuance of securities in public or private markets, lines of credit and dividends from subsidiaries. Under effective shelf registration statements at March 31, 1995, the Corporation had available $140 million of debt, $300 million of preferred stock and $350 million of securities that may be issued as either debt or preferred stock. In addition, the Corporation had a $300 million unused committed line of credit. Funds obtained from any of these sources can be used for both bank and nonbank activities. In addition to current parent company funds, the funding for pending or potential acquisitions may include the issuance of instruments that qualify as regulatory capital, such as preferred stock or subordinated debt. Management believes the Corporation has sufficient liquidity to meet its current obligations to customers, debtholders and others. The impact of replacing maturing liabilities is reflected in the income simulation model used in the Corporation's overall asset/liability management process. At March 31, 1995, the model assumed rising interest rates and a resulting higher cost of replacement funding. 19 20 CONSOLIDATED BALANCE SHEET
MARCH 31 December 31 Dollars in millions, except par values 1995 1994 - --------------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 2,699 $ 2,592 Short-term investments 533 809 Loans held for sale 437 487 Securities available for sale 3,137 3,457 Investment securities, fair value of $16,369 and $16,233 17,070 17,464 Loans, net of unearned income of $236 and $240 35,724 35,407 Allowance for credit losses (981) (1,002) ---------------------------- Net loans 34,743 34,405 Other 3,475 4,931 ---------------------------- Total assets $62,094 $64,145 ---------------------------- LIABILITIES Deposits Noninterest-bearing $ 6,578 $ 6,992 Interest-bearing 26,363 28,019 ---------------------------- Total deposits 32,941 35,011 Borrowed funds Federal funds purchased 2,928 2,181 Repurchase agreements 7,059 3,785 Commercial paper 825 1,226 Other 2,968 4,416 ---------------------------- Total borrowed funds 13,780 11,608 Notes and debentures 9,599 11,754 Accrued expenses and other liabilities 1,384 1,378 ---------------------------- Total liabilities 57,704 59,751 ---------------------------- SHAREHOLDERS' EQUITY Preferred stock - $1 par value Authorized: 17,592,735 and 17,601,524 shares Issued and outstanding: 912,177 and 920,966 shares Aggregate liquidation value: $19 1 1 Common stock - $5 par value Authorized: 450,000,000 shares Issued: 236,249,010 and 236,063,418 shares 1,181 1,180 Capital surplus 463 462 Retained earnings 3,062 3,018 Deferred ESOP benefit expense (83) (83) Net unrealized securities losses (65) (119) Common stock held in treasury at cost: 7,126,985 and 2,814,910 shares (169) (65) ---------------------------- Total shareholders' equity 4,390 4,394 ---------------------------- Total liabilities and shareholders' equity $62,094 $64,145 - ---------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. 20 21 CONSOLIDATED STATEMENT OF INCOME
Three months ended March 31 In thousands, except per share data 1995 1994 - ----------------------------------------------------------------------------------------------------------------------- INTEREST INCOME Loans and fees on loans $ 707,039 $572,836 Securities 295,423 295,808 Other 21,621 26,460 ------------------------------ Total interest income 1,024,083 895,104 INTEREST EXPENSE Deposits 292,334 200,004 Borrowed funds 204,121 96,737 Notes and debentures 143,654 101,022 ------------------------------ Total interest expense 640,109 397,763 ------------------------------ Net interest income 383,974 497,341 Provision for credit losses 25,015 ------------------------------ Net interest income less provision for credit losses 383,974 472,326 NONINTEREST INCOME Investment management and trust 79,140 72,967 Service charges, fees and commissions 91,424 87,902 Mortgage banking 44,650 37,892 Net securities gains 1,254 30,392 Other 20,645 29,398 ------------------------------ Total noninterest income 237,113 258,551 NONINTEREST EXPENSE Staff expense 201,858 206,899 Net occupancy and equipment 68,850 65,282 Other 166,671 154,665 ------------------------------ Total noninterest expense 437,379 426,846 ------------------------------ Income before income taxes 183,708 304,031 Applicable income taxes 58,057 98,342 ------------------------------ Net income $ 125,651 $205,689 ------------------------------ EARNINGS PER COMMON SHARE Primary $ .54 $ .87 Fully diluted .54 .86 CASH DIVIDENDS DECLARED PER COMMON SHARE .35 .32 AVERAGE COMMON SHARES OUTSTANDING Primary 232,589 236,698 Fully diluted 234,463 238,592 - -----------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. 21 22 CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended March 31 In millions 1995 1994 - --------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $ 126 $ 206 Adjustments to reconcile net income to net cash provided by operating activities Provision for credit losses 25 Depreciation, amortization and accretion 62 56 Deferred income taxes 29 (8) Net securities gains (1) (30) Net gain on sales of assets (10) (19) Valuation adjustments on assets, net of gains on sales 1 (5) Changes in Loans held for sale 62 448 Other (641) ------------------------------ Net cash provided by operating activities 269 32 INVESTING ACTIVITIES Net change in loans (298) (143) Repayment Securities available for sale 107 955 Investment securities 408 1,242 Sales Securities available for sale 614 6,166 Loans 102 537 Foreclosed assets 8 25 Purchases Securities available for sale (281) (5,651) Investment securities (12) (2,360) Loans (30) (10) Net cash paid for acquisitions (68) (129) Other 1,895 161 ------------------------------ Net cash provided by investing activities 2,445 793 FINANCING ACTIVITIES Net change in Noninterest-bearing deposits (445) (171) Interest-bearing deposits (1,825) (508) Federal funds purchased 744 (674) Sale/issuance Repurchase agreements 27,845 38,805 Commercial paper 1,179 608 Other borrowed funds 26,620 25,983 Notes and debentures 1,354 820 Common stock 7 8 Redemption/maturity Repurchase agreements (24,571) (38,611) Commercial paper (1,580) (691) Other borrowed funds (28,075) (25,386) Notes and debentures (3,682) (210) Net acquisition of treasury stock (96) (4) Cash dividends paid to shareholders (82) (75) ------------------------------ Net cash used by financing activities (2,607) (106) ------------------------------ INCREASE IN CASH AND DUE FROM BANKS 107 719 Cash and due from banks at beginning of year 2,592 1,817 ------------------------------ Cash and due from banks at end of period $ 2,699 $ 2,536 - ---------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. 22 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS accounting policies - --------------------------------------------------------------- BUSINESS PNC Bank Corp. provides a full range of banking and related financial services through its subsidiaries to consumers, small businesses and corporate customers and is subject to intense competition from other financial services companies with respect to these services and customers. PNC Bank Corp. is also subject to the regulations of certain federal and state agencies and undergoes periodic examinations by such regulatory authorities. BASIS OF FINANCIAL STATEMENT PRESENTATION The unaudited consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles and include the accounts of PNC Bank Corp. and its subsidiaries ("Corporation"), substantially all of which are wholly owned. In the opinion of management, the financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the interim periods presented. In preparing the unaudited consolidated interim financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ from such estimates. The notes included herein should be read in conjunction with the audited consolidated financial statements included in the Corporation's 1994 Annual Report. ALLOWANCE FOR CREDIT LOSSES Effective January 1, 1995, the Corporation adopted Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan," as amended by SFAS No. 118. Under this Standard, the Corporation estimates credit losses on impaired loans based on the present value of expected cash flows or the fair value of the underlying collateral if the loan repayment is expected to come from the sale or operation of such collateral. For purposes of this Standard, nonaccrual and restructured commercial, real estate project and commercial real estate loans are considered to be impaired. Prior to 1995, the credit losses related to these loans were estimated based on undiscounted cash flows or the fair value of the underlying collateral. The allowance is maintained at a level believed by management to be sufficient to absorb estimated potential credit losses. Management's determination of the adequacy of the allowance is based on periodic evaluations of the credit portfolio and other relevant factors. This evaluation is inherently subjective as it requires material estimates, including the amounts and timing of expected future cash flows on impaired loans, which may be susceptible to significant change. The allowance for credit losses on impaired loans pursuant to SFAS No. 114 is one component of the methodology for determining the allowance for credit losses. The remaining components of the allowance for credit losses provide for estimated losses on consumer loans and residential real estate mortgages, and general amounts for historical loss experience, uncertainties in estimating losses and inherent risks in the various credit portfolios. NONPERFORMING ASSETS Foreclosed assets are comprised of property acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure and loans where the Corporation has possession of the underlying collateral. Foreclosed assets are recorded as other assets in the consolidated balance sheet. The interest collected on impaired loans is recognized on the cash basis or cost recovery method depending on the collectibility of the loans. FINANCIAL DERIVATIVES The Corporation uses off-balance-sheet financial derivatives as part of its overall asset/liability management process. Substantially all of such instruments are used to manage interest rate risk and consist of interest rate swaps, interest rate caps, and futures and forward contracts. Futures contracts, which are used to manage interest rate risk, are commitments to either purchase or sell a financial instrument at a future date for a specified price and are settled in cash. To qualify for hedge accounting, the futures contract must be designated as a hedge of an asset, liability, firm commitment or anticipated transaction exposing the Corporation to interest rate risk and the futures contract must reduce such risk. For anticipated transactions, the significant characteristics and expected terms of the anticipated transaction must be identified and the anticipated transaction must be probable of 23 24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS occurring. Under hedge accounting, gains and losses on futures contracts are deferred and included in the carrying value of related assets and liabilities. The deferred gains and losses are amortized as a yield adjustment over the expected life of the hedged instrument. If the hedged instruments are disposed of, the unamortized deferred gains or losses are included in the determination of the gain/loss on the disposition of such instruments. EARNINGS PER COMMON SHARE Primary earnings per common share is calculated by dividing net income adjusted for preferred stock dividends declared by the sum of the weighted average number of shares of common stock outstanding and the number of shares of common stock which would be issued assuming the exercise of stock options during each period. Fully diluted earnings per common share is based on net income adjusted for interest expense, net of tax, on outstanding convertible debentures and dividends declared on nonconvertible preferred stock. The weighted average number of shares of common stock outstanding is increased by the assumed conversion of outstanding convertible preferred stock and convertible debentures from the beginning of the year or date of issuance, if later, and the number of shares of common stock which would be issued assuming the exercise of stock options. Such adjustments to net income and the weighted average number of shares of common stock outstanding are made only when such adjustments dilute earnings per common share. mergers and acquisitions - --------------------------------------------------------------- During the first quarter of 1995, the Corporation completed the acquisition of BlackRock Financial Management L.P., a New York-based, fixed-income investment management firm with approximately $25 billion in assets under management at closing. The transaction was accounted for under the purchase method and the Corporation paid $71 million in cash and issued $169 million of unsecured notes. In connection with this acquisition, the Corporation recorded $239 million of intangible assets. The Corporation also acquired Indian River Federal Savings Bank, Vero Beach, Florida, and Brentwood Financial Corporation, Cincinnati, Ohio, for $33 million in cash. The acquisitions added assets and deposits of approximately $175 million and $140 million, respectively. In addition, the Corporation announced a definitive agreement to acquire the Chemical Bank franchise in southern and central New Jersey. The transaction includes approximately $3.3 billion of assets and $2.9 billion of retail deposits and is expected to close by year-end 1995, pending regulatory approvals. The acquisition has an indicated value of approximately $500 million and will be accounted for under the purchase method. During 1994, the Corporation completed the acquisitions of United Federal Bancorp, Inc., State College, Pennsylvania, and First Eastern Corp., Wilkes-Barre, Pennsylvania. The acquisitions added assets and deposits of $2.8 billion and $2.4 billion, respectively. In addition, in June 1994, the Corporation purchased a $10 billion residential mortgage servicing portfolio from the Associates Corporation of North America. cash flows - --------------------------------------------------------------- For purposes of the statement of cash flows, the Corporation defines cash and due from banks as cash and cash equivalents. During the first quarter of 1995 and 1994, interest paid on deposits and other contractual debt obligations was $705.3 million and $422.1 million, respectively. Income tax refunds of $47.6 million were received during the first quarter of 1995, and income taxes of $34.5 million were paid in the prior-year period. Loans transferred to foreclosed assets aggregated $24.8 million in 1995 and $9.4 million in the first quarter of 1994. The table below sets forth information pertaining to acquisitions which affect the statement of cash flows for the three months ended March 31, 1995 and 1994.
Three months ended March 31 In millions 1995 1994 - ---------------------------------------------------------- Assets acquired $517 $944 Liabilities assumed 410 788 Cash paid 107 156 Cash and due from banks received 39 27 - ----------------------------------------------------------
In addition, the Corporation issued $169 million of unsecured notes in connection with the BlackRock acquisition. 24 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS securities - ---------------------------------------- The following table sets forth the amortized cost, unrealized gains and losses, and the fair value of the securities portfolio at March 31, 1995 and December 31, 1994.
SECURITIES MARCH 31, 1995 December 31, 1994 ------------------------------------------ -------------------------------------------- UNREALIZED Unrealized AMORTIZED ------------------ Amortized ------------------ In millions COST GAINS LOSSES FAIR VALUE Cost Gains Losses Fair Value - ---------------------------------------------------------------------------------------------------------------------------------- Investment securities Debt securities U.S. Treasury $ 1,795 $ 37 $ 1,758 $ 1,794 $ 93 $ 1,701 U.S. Government agencies and corporations Mortgage-related 10,643 632 10,011 10,920 1,025 9,895 Other 1,000 15 985 1,000 28 972 State and municipal 344 $19 1 362 348 $12 2 358 Asset-backed private placements 1,597 7 1,590 1,597 33 1,564 Other debt Mortgage-related 700 21 679 726 43 683 Other 675 8 667 769 20 749 Other 316 1 317 310 1 311 ------------------------------------------------------------------------------------------ Total $17,070 $20 $721 $16,369 $17,464 $13 $1,244 $16,233 ------------------------------------------------------------------------------------------ Securities available for sale Debt securities U.S. Treasury $324 $ 3 $321 $ 401 $ 8 $ 393 U.S. Government agencies and corporations Mortgage-related 1,890 $19 21 1,888 2,161 69 2,092 Other 25 3 22 25 4 21 Other debt Mortgage-related 703 6 697 749 17 732 Other 113 1 6 108 117 $ 2 119 Corporate stocks and other 104 1 4 101 105 1 6 100 ------------------------------------------------------------------------------------------ Total $ 3,159 $21 $ 43 $ 3,137 $ 3,558 $ 3 $ 104 $ 3,457 - ----------------------------------------------------------------------------------------------------------------------------------
25 26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS nonperforming assets - --------------------------------------------------------------- Nonperforming assets are comprised of nonaccrual and restructured loans, and foreclosed assets. These assets were as follows:
MARCH 31 December 31 In millions 1995 1994 - -------------------------------------------------------- Nonaccrual loans $294 $310 Restructured loans 8 9 ------------------------ Total nonperforming loans 302 319 Foreclosed assets 145 127 ------------------------ Total nonperforming assets $447 $446 - --------------------------------------------------------
Information with respect to impaired loans and the related allowance determined in accordance with SFAS No. 114 is set forth below.
MARCH 31 In millions 1995 - ------------------------------------------------------ Impaired loans With a related allowance for credit losses $ 148 Without a related allowance for credit losses 97 ------- Total impaired loans $ 245 ------- Allowance for credit losses $ 25 Average recorded investment 256 - ------------------------------------------------------
During the first quarter of 1995, interest income recognized on impaired loans was $474 thousand. allowance for credit losses - --------------------------------------------------------------- The following table presents changes in the allowance for credit losses:
In millions 1995 1994 - ------------------------------------------------------------ Balance at January 1 $1,002 $972 Charge-offs (40) (38) Recoveries 18 15 -------------------- Net charge-offs (22) (23) Provision for credit losses 25 Acquisitions 1 6 -------------------- Balance at March 31 $ 981 $980 - ------------------------------------------------------------
26 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS notes and debentures - --------------------------------------------------------------- Notes and debentures consisted of the following:
MARCH 31 DECEMBER 31 In millions 1995 1994 - ------------------------------------------------------------ BANKING SUBSIDIARIES Bank notes $6,815 $ 8,825 Federal Home Loan Bank 1,287 1,384 Student Loan Marketing Association 300 500 Other 182 ------------------------------ Total banking subsidiaries 8,584 10,709 OTHER SUBSIDIARIES Senior notes 164 164 Subordinated notes 746 746 ESOP borrowing 101 110 Other 4 25 ------------------------------ Total other subsidiaries 1,015 1,045 ------------------------------ Total $9,599 $11,754 - ------------------------------------------------------------
Notes and debentures have scheduled repayments for the years 1995 through 1999 and thereafter of $6.9 billion, $1.2 billion, $65 million, $153 million, and $1.3 billion, respectively. In April 1995, the Corporation issued $350 million of 7.875 percent unsecured subordinated bank notes due in 2005. financial derivatives - --------------------------------------------------------------- The notional value of financial derivatives and the related fair values were comprised of the following:
Positive Negative Total In millions Notional Fair Notional Fair Notional March 31, 1995 Value Value Value Value Value - ------------------------------------------------------------------------- Interest rate swaps Receive-fixed $ 219 $ 6 $11,281 $ (393) $11,500 Pay-fixed 2,045 5,423 (130) 7,468 Basis swap 440 440 ------------------------------------------------- Total swaps 2,704 6 16,704 (523) 19,408 Interest rate caps 5,500 69 5,500 Eurodollar futures 2,500 2,500 ------------------------------------------------- Total $10,704 $ 75 $16,704 $ (523) $27,408 ------------------------------------------------- December 31, 1994 Interest rate swaps Receive-fixed $ 119 $ 4 $11,375 $ (772) $11,494 Pay-fixed 5,060 26 658 (19) 5,718 ------------------------------------------------- Total swaps 5,179 30 12,033 (791) 17,212 Interest rate caps 5,500 132 5,500 ------------------------------------------------- Total $10,679 $162 $12,033 $ (791) $22,712 - ---------------------------------------------------------------
27 28 STATISTICAL INFORMATION AVERAGE CONSOLIDATED BALANCE SHEET AND NET INTEREST ANALYSIS
1995 1994 FIRST QUARTER Fourth Quarter Taxable-equivalent basis ----------------------------------------------------------------------------------- Average balances in millions, interest in AVERAGE AVERAGE Average Average thousands BALANCES INTEREST YIELDS/RATES Balances Interest Yields/Rates - ---------------------------------------------------------------------------------------------------------------------------------- ASSETS Interest-earning assets Short-term investments $ 771 $ 12,411 6.53% $ 771 $ 11,115 5.72% Mortgages held for sale 412 8,469 8.23 477 8,884 7.45 Securities U.S. Treasury 2,176 20,810 3.88 2,174 24,394 4.45 U.S. Government agencies and corporations 14,110 198,622 5.63 15,930 243,014 6.10 State and municipal 347 8,864 10.23 352 9,239 10.49 Other debt 3,955 65,196 6.59 4,153 65,047 6.27 Corporate stocks and others 315 4,856 6.25 314 4,903 6.25 --------------------- --------------------- Total securities 20,903 298,348 5.72 22,923 346,597 6.04 Loans, net of unearned income Commercial 12,129 241,853 7.98 12,311 222,072 7.16 Real estate project 1,619 38,305 9.46 1,670 35,668 8.47 Real estate mortgage 10,882 204,069 7.50 10,236 184,382 7.21 Consumer 9,023 200,355 9.01 9,061 195,334 8.55 Other 1,662 27,726 6.72 1,677 27,847 6.62 --------------------- --------------------- Total loans, net of unearned income 35,315 712,308 8.10 34,955 665,303 7.57 Other interest-earning assets 47 741 6.38 47 617 5.25 --------------------- --------------------- Total interest-earning assets/interest income 57,448 1,032,277 7.21 59,173 1,032,516 6.95 Noninterest-earning assets Allowance for credit losses (1,000) (1,026) Cash and due from banks 2,147 2,308 Other assets 3,098 2,497 ------- ------- Total assets $61,693 $62,952 ------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities Interest-bearing deposits Demand $ 3,310 17,378 2.13 $ 3,496 17,782 2.02 Savings 2,284 14,540 2.58 2,406 14,474 2.39 Money market 6,025 53,517 3.60 6,546 52,241 3.17 Other time 13,616 181,407 5.39 13,048 166,843 5.07 Deposits in foreign offices 1,702 25,492 5.99 1,447 19,759 5.42 --------------------- --------------------- Total interest-bearing deposits 26,937 292,334 4.39 26,943 271,099 3.99 Borrowed funds Federal funds purchased 2,132 31,382 5.97 2,621 35,272 5.34 Repurchase agreements 6,859 103,037 6.01 4,677 59,477 5.05 Commercial paper 1,078 15,639 5.88 1,443 19,340 5.32 Other 3,259 54,063 6.68 2,901 46,769 6.39 --------------------- --------------------- Total borrowed funds 13,328 204,121 6.16 11,642 160,858 5.48 Notes and debentures 9,736 143,654 5.94 12,593 167,837 5.32 --------------------- --------------------- Total interest-bearing liabilities/interest expense 50,001 640,109 5.16 51,178 599,794 4.65 Noninterest-bearing liabilities and shareholders' equity Demand and other noninterest-bearing deposits 6,115 6,466 Accrued expenses and other liabilities 1,220 922 Shareholders' equity 4,357 4,386 ------- ------- Total liabilities and shareholders' equity $61,693 $62,952 ------------------------------------------------------------------------------- Interest rate spread including interest rate swaps and caps 2.05 2.30 Impact of noninterest-bearing liabilities .67 .62 ------------------------------------------------------------------------------- Net interest income/margin on earning assets $ 392,168 2.72% $ 432,722 2.92% - ----------------------------------------------------------------------------------------------------------------------------------
Nonaccrual loans are included in loans, net of unearned income. The impact of interest rate swaps and caps is included in the interest income/expense and average yields/rates for commercial loans, U.S. Government agencies and corporations securities, all interest-bearing deposits, other borrowed funds and notes and debentures. 28 29 STATISTICAL INFORMATION
1994 1994 1994 Third Quarter Second Quarter First Quarter - --------------------------------------------------------------------------------------------------------------------- Average Average Average Average Average Average Balances Interest Yields/Rates Balances Interest Yields/Rates Balances Interest Yields/Rates - ---------------------------------------------------------------------------------------------------------------------- $ 744 $ 9,493 5.06% $ 855 $ 10,666 5.00% $ 864 $ 9,220 4.32% 546 10,026 7.35 724 12,681 7.01 926 16,241 7.03 3,008 37,751 4.99 4,244 51,997 4.91 3,439 39,514 4.66 15,494 237,219 6.12 15,206 229,640 6.04 15,520 224,558 5.79 359 9,246 10.30 369 9,566 10.36 379 9,783 10.33 3,245 49,231 6.07 1,746 24,823 5.69 1,625 21,247 5.23 316 4,818 6.10 294 3,996 5.44 275 4,184 6.10 - ---------------------- -------------------- -------------------- 22,422 338,265 6.03 21,859 320,022 5.86 21,238 299,286 5.65 12,454 230,552 7.34 12,075 213,853 7.10 11,349 204,046 7.29 1,621 34,587 8.46 1,736 33,767 7.80 1,723 31,827 7.49 9,836 175,174 7.12 8,981 156,806 6.98 9,055 151,988 6.71 8,993 192,343 8.49 8,617 175,131 8.15 8,450 170,595 8.19 1,590 24,587 6.16 1,122 19,448 6.94 1,446 19,337 5.38 - ---------------------- -------------------- -------------------- 34,494 657,243 7.58 32,531 599,005 7.38 32,023 577,793 7.29 69 827 4.76 93 1,024 4.39 131 1,027 3.17 - ---------------------- -------------------- -------------------- 58,275 1,015,854 6.94 56,062 943,398 6.74 55,182 903,567 6.59 (1,043) (997) (986) 2,107 2,029 2,228 2,649 2,531 2,542 - ------- ------- ------- $61,988 $59,625 $58,966 --------------------------------------------------------------------------------------------------------------- $ 3,561 13,139 1.46 $ 3,380 8,344 .99 $ 3,377 6,315 .76 2,547 11,504 1.79 2,381 6,851 1.15 2,391 3,870 .66 6,712 44,641 2.64 6,495 37,421 2.31 6,493 32,255 2.01 13,125 160,701 4.86 12,988 155,764 4.76 13,232 155,692 4.77 1,712 19,547 4.53 884 9,132 4.14 223 1,872 3.41 - ---------------------- -------------------- -------------------- 27,657 249,532 3.58 26,128 217,512 3.34 25,716 200,004 3.15 3,550 40,613 4.54 2,821 28,434 4.04 2,254 18,326 3.30 4,615 49,901 4.29 4,879 48,241 3.97 6,065 51,828 3.47 1,405 16,343 4.61 925 9,681 4.20 500 4,095 3.32 1,776 24,304 5.43 2,342 24,218 4.15 2,724 22,488 3.21 - ---------------------- -------------------- -------------------- 11,346 131,161 4.59 10,967 110,574 4.04 11,543 96,737 3.37 11,358 131,921 4.63 11,030 113,949 4.14 10,142 101,022 4.04 - ---------------------- -------------------- -------------------- 50,361 512,614 4.04 48,125 442,035 3.68 47,401 397,763 3.39 6,325 6,124 6,021 942 1,108 1,214 4,360 4,268 4,330 - ------- ------- ------- $61,988 $59,625 $58,966 - --------------------------------------------------------------------------------------------------------------------------- 2.90 3.06 3.20 .55 .52 .48 - --------------------------------------------------------------------------------------------------------------------------- $ 503,240 3.45% $501,363 3.58% $505,804 3.68% - ---------------------------------------------------------------------------------------------------------------------------
29 30 CORPORATE INFORMATION CORPORATE HEADQUARTERS PNC Bank Corp. One PNC Plaza Fifth Avenue and Wood Street Pittsburgh, Pennsylvania 15265 STOCK LISTING PNC Bank Corp. common stock is traded on the New York Stock Exchange (NYSE) under the symbol PNC. REGISTRAR AND TRANSFER AGENT Chemical Bank J.A.F. Building P. O. Box 3068 New York, New York 10116-3068 800-982-7652 INQUIRIES Individual shareholders should contact: Shareholder Relations at 800-843-2206 or the PNC Bank Hotline at 800-982-7652 Analysts and institutional investors should contact: William H. Callihan, Vice President, Investor Relations, at 412-762-8257 News media representatives and others seeking general information should contact: Jonathan Williams, Vice President, Media Relations, at 412-762-4550 FORM 10-Q The Quarterly Report on Form 10-Q is filed with the Securities and Exchange Commission. This report, excluding exhibits, may be obtained without charge by writing to Glenn Davies, Vice President, Financial Reporting, at corporate headquarters. COMMON STOCK PRICES/DIVIDENDS DECLARED The table below sets forth by quarter the range of high and low sale prices for PNC Bank Corp. common stock and the cash dividends declared per common share.
Cash Dividends 1995 Quarter High Low Declared - --------------------------------------------------------------- First $25.750 $21.125 $ .35 - --------------------------------------------------------------- 1994 Quarter - --------------------------------------------------------------- First $29.875 $25.250 $ .32 Second 31.625 26.125 .32 Third 30.000 25.625 .32 Fourth 26.375 20.000 .35 ----------------------------------- Total $1.31 - ---------------------------------------------------------------
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN The PNC Bank Corp. dividend reinvestment and stock purchase plan enables holders of common and preferred stock to purchase additional shares of common stock conveniently and without paying brokerage commissions or service charges. A prospectus and enrollment card may be obtained by writing to Shareholder Relations at corporate headquarters. 30 -----END PRIVACY-ENHANCED MESSAGE-----