<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
JANUARY 19, 1999
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
PNC BANK CORP.
(Exact name of registrant as specified in its charter)
COMMISSION FILE NUMBER 1-9718
PENNSYLVANIA 25-1435979
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE PNC PLAZA
249 FIFTH AVENUE
PITTSBURGH, PENNSYLVANIA 15222-2707
(Address of principal executive offices)
(Zip Code)
(412) 762-1553
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 5. OTHER EVENTS
Fourth Quarter 1998 Financial Results
On January 19, 1999, PNC Bank Corp. ("Corporation") reported results
of operations for the three months and year ended December 31, 1998.
A copy of the earnings press release issued by the Corporation is
attached as Exhibit 99 and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The exhibit listed on the Exhibit Index on page 3 of this Form 8-K is
filed herewith.
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: January 19, 1999 By: /s/ ROBERT L. HAUNSCHILD
-------------------------
Robert L. Haunschild
Senior Vice President and
Chief Financial Officer
2
<PAGE> 3
EXHIBIT INDEX
99 Earnings press release issued by the Corporation on January 19, 1999, with
respect to the results of operations for the three months and year ended
December 31, 1998, filed herewith.
3
<PAGE> 1
Exhibit 99
PNC BANK CORP.
Public Relations
One PNC Plaza
249 Fifth Avenue
Pittsburgh, PA 15222-2707
412 762-8221
NEWS RELEASE PNCBANK
CONTACTS:
MEDIA:
- ------
Jonathan Williams
(412) 762-4550
[email protected]
INVESTORS:
- ----------
William H. Callihan
(412) 762-8257
[email protected]
PNC BANK CORP. REPORTS RECORD
FOURTH QUARTER AND FULL YEAR 1998 EARNINGS
PITTSBURGH, Jan. 19, 1999 - PNC Bank Corp. (NYSE: PNC) today reported
record fourth quarter and full year 1998 earnings. Fourth quarter earnings were
$285 million or $0.92 per diluted share compared with 1997 fourth quarter
earnings of $265 million or $0.85 per diluted share. Full year earnings
increased to $1.115 billion compared with $1.052 billion in the prior year. Full
year diluted earnings per share increased 10% to $3.60 from $3.28 in 1997.
Return on average common shareholders' equity was 20.25% for the fourth
quarter and 20.81% for the full year compared with 20.28% and 20.01%,
respectively, a year ago. Return on average assets was 1.46% for the fourth
quarter and 1.49% for the full year compared with 1.49% for the respective 1997
periods.
"Our record earnings in a very challenging environment resulted from
strong performance across a diverse portfolio of businesses," said Thomas H.
O'Brien, chairman and chief executive officer. "Our current portfolio of
businesses is well-positioned to deliver strong returns and growth going
forward. The recently announced sale of our credit card business will strengthen
our capital position, improve our risk profile and allow us to redeploy capital
in ways that reflect our disciplined focus on creating superior value for
shareholders."
FOURTH QUARTER HIGHLIGHTS
o Total revenue grew 26% in the quarter-to-quarter comparison.
o Noninterest income grew $279 million driven by 47% growth in fee-based
revenue and represented 55% of total revenue.
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<PAGE> 2
PNC Bank Corp. Reports Record Fourth Quarter and Full Year 1998 Earnings--Page 2
o Completed the acquisition of Hilliard-Lyons, Inc., a retail brokerage
firm with 90 offices in 13 Midwestern and Southeastern states
o Completed the sale of the corporate trust and escrow business to Chase
Manhattan Trust Company, N.A.
o Completed the sale of $821 million of non-affinity, non-relationship
credit card receivables
o Announced the agreement to sell PNC Bank's credit card subsidiary,
including the remaining $3 billion in credit card receivables, to MBNA
Corporation
FOURTH QUARTER INCOME STATEMENT REVIEW
Taxable-equivalent net interest income increased $26 million from the
fourth quarter of 1997 to $665 million in the fourth quarter of 1998 due to
growth in earning assets. The net interest margin was 3.77% for the fourth
quarter of 1998 compared with 3.81% in the prior quarter and 3.95% in the fourth
quarter of 1997. The net interest margin was lower than the prior-year quarter
due to a change in balance sheet composition and the financing cost of the
Midland acquisition.
The provision for credit losses was $115 million in the fourth quarter
of 1998, covering net charge-offs excluding credit card, compared with $25
million last year.
Noninterest income was $797 million in the fourth quarter of 1998.
Asset management, mutual fund servicing, consumer services, corporate services
and mortgage banking revenues each grew 30% or more compared with the prior-year
quarter. Noninterest income included $76 million of net gains from the sale of
the corporate trust and escrow business and the sale of non-affinity,
non-relationship credit cards. These items were primarily offset by a
higher-than-planned provision for credit losses. Mortgage banking hedging
activities resulted in $42 million of net securities gains that largely offset
an increase in the amortization of residential mortgage servicing rights
("MSR").
Asset management and mutual fund servicing fees grew 59% and 30%,
respectively, from the fourth quarter of 1997, primarily reflecting significant
new business and performance fees. Assets under management increased to
approximately
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<PAGE> 3
PNC Bank Corp. Reports Record Fourth Quarter and Full Year 1998 Earnings--Page 3
$170 billion at Dec. 31, 1998, compared with $137 billion at Dec. 31, 1997. At
Dec. 31, 1998, PFPC Worldwide provided custody and accounting/administration
services for $315 billion and $252 billion of mutual fund assets, respectively.
The comparable amounts were $232 billion and $183 billion, respectively, a year
ago.
Consumer services revenue increased $30 million or 34% compared with
the fourth quarter of 1997 primarily due to an increase in brokerage accounts.
Fees for corporate services, which include treasury management, capital markets
and commercial mortgage servicing, increased 49% to $82 million in the fourth
quarter of 1998 primarily resulting from the Midland acquisition.
Mortgage banking revenue grew $52 million or 90% from the prior-year
quarter primarily due to significant mortgage refinance activity and higher
servicing income reflecting the impact of servicing portfolio acquisitions.
Residential mortgage originations totaled $4 billion compared with $2 billion in
the year-earlier period. At Dec. 31, 1998, approximately $62.1 billion of
mortgages were serviced, including $54 billion serviced for others.
Noninterest expense of $896 million increased $181 million compared
with the fourth quarter of 1997. The increase in noninterest expense was
primarily due to higher amortization of residential MSR, incentive compensation
commensurate with revenue growth and the impact of acquisitions.
The managed efficiency ratio, which excludes amortization of
intangibles, distributions on capital securities and mortgage banking hedging
activities, improved to 52.8% in the fourth quarter of 1998 from 56.7% in the
prior-year quarter.
FULL YEAR HIGHLIGHTS
o Total revenue grew 19% in the year-to-year comparison.
o Noninterest income grew $768 million driven by 32% growth in fee-based
revenue and represented 50% of total revenue.
o Significant investments were made in businesses positioned for
superior growth, including the acquisition of Hilliard-Lyons, Inc.,
Midland Loan Services, L.P., the Arcand Company (now Columbia Housing
Corporation), the asset based finance business of BTM Capital and over
$25 billion of residential mortgage servicing.
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<PAGE> 4
PNC Bank Corp. Reports Record Fourth Quarter and Full Year 1998 Earnings--Page 4
o Strategic actions were taken to redeploy capital to higher-performing
businesses and strengthen PNC Bank's risk profile. In the fourth
quarter, the sale of the corporate trust and escrow business was
completed and the sale of the credit card business was announced,
which will provide capital flexibility to pursue strategies focused on
growth and improved returns.
FULL YEAR INCOME STATEMENT REVIEW
Taxable-equivalent net interest income increased $75 million to $2.599
billion for full year 1998 due to growth in earning assets. The net interest
margin narrowed to 3.85% compared with 3.94% in the prior year primarily due to
a change in balance sheet composition.
The provision for credit losses increased to $225 million in 1998
compared with $70 million last year.
Noninterest income was $2.623 billion or 50% of total revenue in 1998
compared with $1.855 billion or 42% of total revenue in 1997. Asset management,
mutual fund servicing, consumer services, corporate services and mortgage
banking revenues each grew 25% or more compared with the prior year. Noninterest
income included $162 million of net gains from the sale of the corporate trust
and escrow business, branch sales and the sale of non-affinity, non-relationship
credit cards. These items were primarily offset by a higher-than-planned
provision for credit losses, one-time costs related to consumer banking
initiatives and valuation adjustments on certain market-sensitive asset
positions. Mortgage banking hedging activities resulted in $104 million of net
securities gains and $61 million of trading gains that largely offset an
increase in residential MSR amortization.
Asset management and mutual fund servicing fees grew 35% and 29%,
respectively, from 1997, reflecting significant new business and performance
fees. Consumer services revenue increased $78 million or 25% compared with 1997
primarily due to an increase in credit card and brokerage accounts. Fees for
corporate services, which include treasury management, capital markets and
commercial mortgage servicing, increased 30% to $257 million in 1998 resulting
from the Midland acquisition and higher treasury management and capital markets
fees.
Mortgage banking revenue grew $144 million or 68% from the prior year
primarily due to significant mortgage refinance activity and higher servicing
income resulting from servicing portfolio acquisitions. Residential mortgage
originations totaled $12.4 billion compared with $6.1 billion in 1997.
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<PAGE> 5
PNC Bank Corp. Reports Record Fourth Quarter and Full Year 1998 Earnings--Page 5
Noninterest expense of $3.261 billion increased $599 million compared
with 1997 primarily due to higher amortization of residential MSR, incentive
compensation commensurate with revenue growth, the impact of acquisitions and
consumer banking initiatives.
The managed efficiency ratio, which excludes amortization of intangibles,
distributions on capital securities and mortgage banking hedging activities,
improved to 54.8% in 1998 from 56.1% in the prior year.
BALANCE SHEET REVIEW
Total assets were $77.2 billion at Dec. 31, 1998. Average earning assets
increased $3.4 billion from the prior year to $67.4 billion primarily due to
higher loans and loans held for sale. Average loans grew $2.8 billion to $55.7
billion, a 5.3% increase from the prior year. Growth in commercial loans more
than offset a decline in commercial and residential mortgages and downsizing of
the indirect automobile lending portfolio. The increase in commercial loans was
primarily in secured lending and middle market. Loans represented 82.6% of
average earning assets in 1998 and 1997. Average loans held for sale increased
$2 billion from the prior year, reflecting higher residential mortgage
originations. Average securities available for sale decreased $1.4 billion to
$7.4 billion or 10.9% of average earning assets in 1998.
Average deposits were $44.9 billion in 1998 compared with $44.5 billion
in 1997 and represented 60.2% of total sources of funds in 1998 compared with
63.0% in 1997. Average borrowed funds increased $3.2 billion compared with last
year. Liquidity was strengthened as 48% of wholesale liabilities had a maturity
beyond one year at Dec. 31, 1998, compared with 29% at Dec. 31, 1997.
Shareholders' equity totaled $6.0 billion at Dec. 31, 1998. The leverage
ratio was 7.22% and Tier I and total risk-based capital ratios are estimated to
be 7.7% and 11.0%, respectively.
The ratio of nonperforming assets to total loans and foreclosed assets
was 0.58% at Dec. 31, 1998, and Sept. 30, 1998, and 0.61% at Dec. 31, 1997.
Nonperforming assets were $332 million at Dec. 31, 1998, compared with $329
million at Sept. 30, 1998, and $333 million a year ago.
The allowance for credit losses was $753 million at Dec. 31, 1998, and
represented 255% of nonperforming loans compared with 289% at Sept. 30, 1998,
and 352% at Dec. 31, 1997. Net charge-offs were $447 million or .80% of average
loans in 1998 compared with $272 million or .51%, respectively, a year ago. The
increase was primarily associated with credit cards and a charge-off in the
fourth quarter of 1998 related to credit exposure to certain bankrupt affiliates
of the Allegheny Health, Education and Research Foundation.
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<PAGE> 6
PNC Bank Corp. Reports Record Fourth Quarter and Full Year 1998 Earnings--Page 6
PNC Bank Corp., headquartered in Pittsburgh, is one of the largest
diversified financial services organizations in the United States. Its major
businesses include Regional Community Banking, Corporate Banking, Private
Banking, Mortgage Banking, Secured Lending, Asset Management and Mutual Fund
Servicing.
Visit PNC Bank on the World Wide Web at http://www.pncbank.com
PNC Bank Corp.'s SEC reports, accessible on its website, identify factors
that can affect forward-looking statements.
[TABULAR MATERIAL FOLLOWS]
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<PAGE> 7
PNC BANK CORP. AND SUBSIDIARIES Page 7
Consolidated Financial Highlights
<TABLE>
<CAPTION>
Three months ended December 31 Year ended December 31
-----------------------------------------------------------------
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL PERFORMANCE (in millions, except per share data)
Revenue
Net interest income (taxable-equivalent basis) $665 $639 $2,599 $2,524
Noninterest income 797 518 2,623 1,855
Total revenue 1,462 1,157 5,222 4,379
Net income 285 265 1,115 1,052
Per common share
Basic earnings .93 .86 3.64 3.33
Diluted earnings .92 .85 3.60 3.28
Cash dividends declared .41 .39 1.58 1.50
SELECTED RATIOS
Return on
Average common shareholders' equity 20.25% 20.28% 20.81% 20.01%
Average assets 1.46 1.49 1.49 1.49
Net interest margin 3.77 3.95 3.85 3.94
Noninterest income to total revenue 54.51 44.77 50.23 42.36
After-tax profit margin 19.49 22.90 21.35 24.02
Managed efficiency * 52.82 56.72 54.76 56.07
Net charge-offs to average loans 1.24 .59 .80 .51
* Excluding amortization of intangibles, distributions on capital securities and mortgage banking hedging activities
<CAPTION>
December 31 September 30 June 30 March 31 December 31
1998 1998 1998 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA (in millions)
Assets $77,207 $76,238 $75,873 $72,355 $75,120
Earning assets 69,027 68,638 68,353 65,210 66,688
Loans, net of unearned income 57,650 56,752 56,237 54,511 54,245
Securities available for sale 7,074 7,152 7,540 7,511 8,522
Deposits 47,496 46,875 47,096 46,068 47,649
Borrowed funds 20,946 19,972 20,488 18,375 19,622
Shareholders' equity 6,043 5,793 5,633 5,487 5,384
Common shareholders' equity 5,729 5,479 5,318 5,173 5,069
CAPITAL RATIOS
Leverage 7.22% 7.18% 7.18% 7.36% 7.30%
Common shareholders' equity to assets 7.42 7.19 7.01 7.15 6.75
ASSET QUALITY RATIOS
Nonperforming assets to loans and foreclosed assets .58% .58% .57% .61% .61%
Allowance for credit losses to loans 1.31 1.44 1.53 1.67 1.79
Allowance for credit losses to nonperforming loans 255.25 289.02 315.09 320.96 351.79
Book value per common share $18.86 $18.21 $17.64 $17.20 $16.87
====================================================================================================================================
</TABLE>
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<PAGE> 8
PNC BANK CORP. AND SUBSIDIARIES Page 8
Consolidated Statement of Income
<TABLE>
<CAPTION>
Three months ended December 31 Year ended December 31
-----------------------------------------------------------
In millions, except per share data 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans and fees on loans $1,166 $1,118 $4,590 $4,354
Securities available for sale 101 119 425 540
Other 87 44 298 157
-----------------------------------------------------------
Total interest income 1,354 1,281 5,313 5,051
INTEREST EXPENSE
Deposits 376 370 1,471 1,457
Borrowed funds 319 279 1,269 1,099
-----------------------------------------------------------
Total interest expense 695 649 2,740 2,556
-----------------------------------------------------------
Net interest income 659 632 2,573 2,495
Provision for credit losses 115 25 225 70
-----------------------------------------------------------
Net interest income less provision for credit losses 544 607 2,348 2,425
NONINTEREST INCOME
Asset management 205 129 626 462
Mutual fund servicing 48 37 182 141
Service charges on deposits 52 51 203 203
Consumer services 117 87 390 312
Corporate services 82 55 257 198
Mortgage banking 110 58 357 213
Net securities gains 43 21 120 49
Other 140 80 488 277
-----------------------------------------------------------
Total noninterest income 797 518 2,623 1,855
NONINTEREST EXPENSE
Staff expense 393 322 1,416 1,241
Net occupancy and equipment 112 98 409 369
Amortization 129 56 432 174
Marketing 18 11 96 70
Distributions on capital securities 17 13 60 43
Other 227 215 848 765
-----------------------------------------------------------
Total noninterest expense 896 715 3,261 2,662
Income before income taxes 445 410 1,710 1,618
Income taxes 160 145 595 566
-----------------------------------------------------------
Net income $285 $265 $1,115 $1,052
- --------------------------------------------------------------------------------------------------------------------------------
Net income applicable to common shareholders $280 $262 $1,098 $1,037
EARNINGS PER COMMON SHARE
Basic $.93 $.86 $3.64 $3.33
Diluted .92 .85 3.60 3.28
CASH DIVIDENDS DECLARED PER COMMON SHARE .41 .39 1.58 1.50
AVERAGE COMMON SHARES OUTSTANDING
Basic 301.5 303.2 300.8 310.1
Diluted 304.7 309.5 305.1 316.2
================================================================================================================================
</TABLE>
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<PAGE> 9
PNC BANK CORP. AND SUBSIDIARIES Page 9
Details of Net Interest Income
<TABLE>
<CAPTION>
NET INTEREST INCOME
Taxable-equivalent basis Three months ended December 31 Year ended December 31
----------------------------------------------------------
In millions 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income
Loans $1,171 $1,123 $4,611 $4,376
Securities available for sale 102 120 430 546
Other 87 45 298 158
----------------------------------------------------------
Total interest income 1,360 1,288 5,339 5,080
Interest expense
Deposits 376 370 1,471 1,457
Borrowed funds 319 279 1,269 1,099
----------------------------------------------------------
Total interest expense 695 649 2,740 2,556
----------------------------------------------------------
Net interest income $665 $639 $2,599 $2,524
================================================================================================================================
<CAPTION>
Taxable-equivalent basis December 31 September 30 June 30 March 31 December 31
Three months ended - in millions 1998 1998 1998 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income
Loans $1,171 $1,172 $1,144 $1,124 $1,123
Securities available for sale 102 104 107 117 120
Other 87 85 69 57 45
------------------------------------------------------------------
Total interest income 1,360 1,361 1,320 1,298 1,288
Interest expense
Deposits 376 371 363 361 370
Borrowed funds 319 337 320 293 279
------------------------------------------------------------------
Total interest expense 695 708 683 654 649
------------------------------------------------------------------
Net interest income $665 $653 $637 $644 $639
================================================================================================================================
</TABLE>
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<PAGE> 10
PNC BANK CORP. AND SUBSIDIARIES Page 10
Details of Net Interest Margin
<TABLE>
<CAPTION>
NET INTEREST MARGIN
Three months ended December 31 Year ended December 31
---------------------------------------------------------
Taxable-equivalent basis 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rates earned/paid
Yield on earning assets
Loans 8.06% 8.27% 8.28% 8.27%
Securities available for sale 5.58 6.19 5.83 6.22
Other 6.70 6.68 6.82 6.75
Total yield on earning assets 7.70 7.96 7.92 7.93
Rate on interest-bearing liabilities
Deposits 4.03 4.23 4.13 4.18
Borrowed funds 5.51 5.91 5.82 5.91
Total rate on interest-bearing liabilities 4.59 4.82 4.77 4.78
---------------------------------------------------------
Interest rate spread 3.11 3.14 3.15 3.15
Impact of noninterest-bearing sources .66 .81 .70 .79
---------------------------------------------------------
Net interest margin 3.77% 3.95% 3.85% 3.94%
================================================================================================================================
<CAPTION>
Taxable-equivalent basis December 31 September 30 June 30 March 31 December 31
Three months ended 1998 1998 1998 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rates earned/paid
Yield on earning assets
Loans 8.06% 8.28% 8.23% 8.36% 8.27%
Securities available for sale 5.58 5.85 5.86 6.01 6.19
Other 6.70 6.87 6.80 6.96 6.68
Total yield on earning assets 7.70 7.92 7.89 8.00 7.96
Rate on interest-bearing liabilities
Deposits 4.03 4.17 4.15 4.19 4.23
Borrowed funds 5.51 5.83 5.81 5.85 5.91
Total rate on interest-bearing liabilities 4.59 4.82 4.79 4.79 4.82
------------------------------------------------------------------
Interest rate spread 3.11 3.10 3.10 3.21 3.14
Impact of noninterest-bearing sources .66 .71 .71 .75 .81
------------------------------------------------------------------
Net interest margin 3.77% 3.81% 3.81% 3.96% 3.95%
=================================================================================================================================
</TABLE>
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<PAGE> 11
PNC BANK CORP. AND SUBSIDIARIES Page 11
Details of Noninterest Income
<TABLE>
<CAPTION>
NONINTEREST INCOME
Three months ended December 31 Year ended December 31
----------------------------------------------------------
In millions 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset management $205 $129 $626 $462
Mutual fund servicing 48 37 182 141
Service charges on deposits 52 51 203 203
Consumer services
Credit card 36 29 129 93
Brokerage 27 14 75 54
Insurance 16 11 49 40
Other 38 33 137 125
----------------------------------------------------------
Total consumer services 117 87 390 312
Corporate services 82 55 257 198
Mortgage banking
Servicing 54 31 160 116
Origination 24 14 79 47
Marketing 32 13 111 47
Sales of servicing 7 3
----------------------------------------------------------
Total mortgage banking 110 58 357 213
Net securities gains 43 21 120 49
Other 140 80 488 277
----------------------------------------------------------
Total noninterest income $797 $518 $2,623 $1,855
================================================================================================================================
<CAPTION>
December 31 September 30 June 30 March 31 December 31
Three months ended - in millions 1998 1998 1998 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset management $205 $143 $137 $141 $129
Mutual fund servicing 48 47 46 41 37
Service charges on deposits 52 53 50 48 51
Consumer services
Credit card 36 35 32 26 29
Brokerage 27 16 17 15 14
Insurance 16 12 11 10 11
Other 38 35 33 31 33
-------------------------------------------------------------------
Total consumer services 117 98 93 82 87
Corporate services 82 57 67 51 55
Mortgage banking
Servicing 54 44 33 29 31
Origination 24 18 20 17 14
Marketing 32 24 30 25 13
Sales of servicing 7
-------------------------------------------------------------------
Total mortgage banking 110 86 83 78 58
Net securities gains 43 51 3 23 21
Other 140 141 132 75 80
-------------------------------------------------------------------
Total noninterest income $797 $676 $611 $539 $518
================================================================================================================================
</TABLE>
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<PAGE> 12
PNC BANK CORP. AND SUBSIDIARIES Page 12
Details of Noninterest Expense
<TABLE>
<CAPTION>
NONINTEREST EXPENSE
Three months ended December 31 Year ended December 31
----------------------------------------------------------
In millions 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Staff expense
Compensation $353 $287 $1,220 $1,049
Employee benefits 40 35 196 192
----------------------------------------------------------
Total staff expense 393 322 1,416 1,241
Net occupancy and equipment
Net occupancy 56 50 204 189
Equipment 56 48 205 180
----------------------------------------------------------
Total net occupancy and equipment 112 98 409 369
Amortization
Mortgage servicing rights 99 32 321 81
Goodwill 19 13 68 53
Other 11 11 43 40
----------------------------------------------------------
Total amortization 129 56 432 174
Marketing 18 11 96 70
Distributions on capital securities 17 13 60 43
Other 227 215 848 765
----------------------------------------------------------
Total noninterest expense $896 $715 $3,261 $2,662
================================================================================================================================
<CAPTION>
December 31 September 30 June 30 March 31 December 31
Three months ended - in millions 1998 1998 1998 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Staff expense
Compensation $353 $291 $285 $291 $287
Employee benefits 40 44 49 63 35
-----------------------------------------------------------------
Total staff expense 393 335 334 354 322
Net occupancy and equipment
Net occupancy 56 47 52 49 50
Equipment 56 52 50 47 48
-----------------------------------------------------------------
Total net occupancy and equipment 112 99 102 96 98
Amortization
Mortgage servicing rights 99 147 42 33 32
Goodwill 19 18 18 13 13
Other 11 10 11 11 11
-----------------------------------------------------------------
Total amortization 129 175 71 57 56
Marketing 18 14 27 37 11
Distributions on capital securities 17 16 14 13 13
Other 227 204 233 184 215
-----------------------------------------------------------------
Total noninterest expense $896 $843 $781 $741 $715
================================================================================================================================
</TABLE>
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<PAGE> 13
PNC BANK CORP. AND SUBSIDIARIES Page 13
Consolidated Balance Sheet
<TABLE>
<CAPTION>
December 31 December 31
Dollars in millions, except par value 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $2,534 $4,303
Short-term investments 1,014 1,526
Loans held for sale 3,226 2,324
Securities available for sale 7,074 8,522
Loans, net of unearned income of $554 and $412 57,650 54,245
Allowance for credit losses (753) (972)
--------------------------
Net loans 56,897 53,273
Other 6,462 5,172
--------------------------
Total assets $77,207 $75,120
==========================
LIABILITIES
Deposits
Noninterest-bearing $9,943 $10,158
Interest-bearing 37,553 37,491
--------------------------
Total deposits 47,496 47,649
Borrowed funds
Bank notes and senior debt 10,384 9,826
Federal funds purchased 390 3,632
Repurchase agreements 1,669 714
Other borrowed funds 6,722 3,753
Subordinated debt 1,781 1,697
--------------------------
Total borrowed funds 20,946 19,622
Other 1,874 1,815
--------------------------
Total liabilities 70,316 69,086
Mandatorily redeemable capital securities of subsidiary trusts 848 650
SHAREHOLDERS' EQUITY
Preferred stock 7 7
Common stock - $5 par value
Authorized 450,000,000 shares
Issued 352,822,767 and 348,447,600 shares 1,764 1,742
Capital surplus 1,250 1,042
Retained earnings 5,262 4,641
Deferred benefit expense (36) (41)
Accumulated other comprehensive income (43) (23)
Common stock held in treasury at cost: 49,091,295 and 48,017,641 shares (2,161) (1,984)
--------------------------
Total shareholders' equity 6,043 5,384
--------------------------
Total liabilities, capital securities and shareholders' equity $77,207 $75,120
===================================================================================================================================
</TABLE>
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<PAGE> 14
PNC BANK CORP. AND SUBSIDIARIES Page 14
Consolidated Average Balance Sheet Data
<TABLE>
<CAPTION>
Three months ended December 31 Year ended December 31
----------------------------------------------------------
In millions 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Interest-earning assets
Securities available for sale $7,323 $7,769 $7,374 $8,774
Loans, net of unearned income
Consumer (excluding credit card) 11,075 11,108 11,073 11,291
Credit card 3,570 3,803 3,849 3,558
Residential mortgage 12,193 12,966 12,496 13,105
Commercial 24,593 19,838 22,773 19,014
Commercial real estate 3,442 4,067 3,279 4,068
Other 2,493 1,881 2,223 1,871
----------------------------------------------------------
Total loans, net of unearned income 57,366 53,663 55,693 52,907
Loans held for sale 4,295 1,680 3,371 1,417
Other 881 975 1,001 919
----------------------------------------------------------
Total interest-earning assets 69,865 64,087 67,439 64,017
Noninterest-earning assets 7,512 6,782 7,187 6,627
----------------------------------------------------------
Total assets $77,377 $70,869 $74,626 $70,644
==========================================================
LIABILITIES
Interest-bearing liabilities
Deposits $37,048 $34,655 $35,581 $34,864
Borrowed funds 22,723 18,624 21,809 18,594
----------------------------------------------------------
Total interest-bearing liabilities 59,771 53,279 57,390 53,458
Noninterest-bearing deposits 9,202 9,925 9,315 9,670
Other 1,756 1,601 1,578 1,501
----------------------------------------------------------
Total liabilities 70,729 64,805 68,283 64,629
Mandatorily redeemable capital securities of subsidiary trusts 848 650 762 537
SHAREHOLDERS' EQUITY 5,800 5,414 5,581 5,478
----------------------------------------------------------
Total liabilities, capital securities and shareholders' equity $77,377 $70,869 $74,626 $70,644
==========================================================
COMMON SHAREHOLDERS' EQUITY $5,486 $5,099 $5,267 $5,162
=================================================================================================================================
</TABLE>
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<PAGE> 15
PNC BANK CORP. AND SUBSIDIARIES Page 15
Consolidated Balance Sheet Data
<TABLE>
<CAPTION>
AVERAGE BALANCES
December 31 September 30 June 30 March 31 December 31
Three months ended - in millions 1998 1998 1998 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets
Securities available for sale $7,323 $7,073 $7,323 $7,784 $7,769
Loans, net of unearned income
Consumer (excluding credit card) 11,075 11,038 10,995 11,186 11,108
Credit card 3,570 4,029 4,048 3,748 3,803
Residential mortgage 12,193 12,455 12,560 12,784 12,966
Commercial 24,593 23,359 22,425 20,665 19,838
Commercial real estate 3,442 2,850 3,206 3,624 4,067
Other 2,493 2,207 2,114 2,076 1,881
------------------------------------------------------------------
Total loans, net of unearned income 57,366 55,938 55,348 54,083 53,663
Loans held for sale 4,295 3,850 2,948 2,363 1,680
Other 881 1,097 1,069 959 975
------------------------------------------------------------------
Total interest-earning assets 69,865 67,958 66,688 65,189 64,087
Noninterest-earning assets 7,512 7,332 6,944 6,952 6,782
------------------------------------------------------------------
Total assets $77,377 $75,290 $73,632 $72,141 $70,869
==================================================================
LIABILITIES
Interest-bearing liabilities
Deposits $37,048 $35,353 $34,956 $34,945 $34,655
Borrowed funds 22,723 22,642 21,844 19,989 18,624
------------------------------------------------------------------
Total interest-bearing liabilities 59,771 57,995 56,800 54,934 53,279
Noninterest-bearing deposits 9,202 9,169 9,213 9,685 9,925
Other 1,756 1,632 1,445 1,474 1,601
------------------------------------------------------------------
Total liabilities 70,729 68,796 67,458 66,093 64,805
Mandatorily redeemable capital securities of subsidiary trusts 848 848 698 650 650
SHAREHOLDERS' EQUITY 5,800 5,646 5,476 5,398 5,414
------------------------------------------------------------------
Total liabilities, capital securities and shareholders'
equity $77,377 $75,290 $73,632 $72,141 $70,869
==================================================================
COMMON SHAREHOLDERS' EQUITY $5,486 $5,332 $5,161 $5,083 $5,099
=================================================================================================================================
<CAPTION>
LOAN PORTFOLIO
December 31 September 30 June 30 March 31 December 31
Period ended - in millions 1998 1998 1998 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consumer (excluding credit card) $10,980 $11,120 $11,035 $11,106 $11,205
Credit card 2,958 3,874 4,150 3,729 3,830
Residential mortgage 12,265 12,388 12,698 12,351 12,785
Commercial 25,182 24,239 23,359 21,823 19,989
Commercial real estate 3,449 2,838 2,872 3,467 3,974
Other 3,370 2,738 2,516 2,428 2,874
------------------------------------------------------------------
Total loans 58,204 57,197 56,630 54,904 54,657
Unearned income (554) (445) (393) (393) (412)
------------------------------------------------------------------
Total loans, net of unearned income $57,650 $56,752 $56,237 $54,511 $54,245
=================================================================================================================================
</TABLE>
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<PAGE> 16
PNC BANK CORP. AND SUBSIDIARIES Page 16
Asset Quality Data
<TABLE>
<CAPTION>
ALLOWANCE FOR CREDIT LOSSES
Year ended December 31 Three months ended
-----------------------------------------------------------------------------------------------
December 31 September 30 June 30 March 31 December 31
In millions 1998 1997 1998 1998 1998 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning balance $972 $1,166 $816 $859 $912 $972 $1,027
Charge-offs
Consumer (excluding credit card) (83) (104) (21) (19) (19) (24) (26)
Credit card (297) (208) (77) (73) (75) (72) (54)
Residential mortgage (7) (9) (1) (1) (3) (2) (1)
Commercial (122) (48) (101) (8) (7) (6) (18)
Commercial real estate (8) (12) (1) (4) (1) (2) (5)
Other (7) (4) (2) (2) (2) (1) (1)
-----------------------------------------------------------------------------------------------
Total charge-offs (524) (385) (203) (107) (107) (107) (105)
Recoveries
Consumer (excluding credit card) 34 36 8 8 8 10 10
Credit card 17 25 5 4 5 3 5
Residential mortgage 1 1 1
Commercial 20 38 8 6 3 3 4
Commercial real estate 3 12 1 1 1 6
Other 2 1 1 1
-----------------------------------------------------------------------------------------------
Total recoveries 77 113 23 19 18 17 25
-----------------------------------------------------------------------------------------------
Net charge-offs (447) (272) (180) (88) (89) (90) (80)
Provision for credit losses 225 70 115 45 35 30 25
Acquisitions 3 8 2 1
-----------------------------------------------------------------------------------------------
Ending balance $753 $972 $753 $816 $859 $912 $972
====================================================================================================================================
<CAPTION>
NONPERFORMING ASSETS
December 31 September 30 June 30 March 31 December 31
Period ended - in millions 1998 1998 1998 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonperforming loans
Commercial $188 $148 $129 $145 $128
Commercial real estate 50 73 80 81 94
Residential mortgage 51 56 56 51 44
Consumer 6 5 7 7 10
--------------------------------------------------------------------
Total nonperforming loans 295 282 272 284 276
Foreclosed assets
Commercial real estate 15 20 22 23 27
Residential mortgage 17 18 20 19 21
Other 5 9 9 9 9
--------------------------------------------------------------------
Total foreclosed assets 37 47 51 51 57
--------------------------------------------------------------------
Total nonperforming assets $332 $329 $323 $335 $333
====================================================================================================================================
</TABLE>
