Exhibit 99.2
AGREEMENT BY AND BETWEEN
PNC BANK, NATIONAL ASSOCIATION
PITTSBURGH, PENNSYLVANIA
AND
THE OFFICE OF THE COMPTROLLER OF THE CURRENCY
PNC Bank, National Association, Pittsburgh, Pennsylvania (Bank) and the
Comptroller of the Currency of the United States of America (Comptroller) wish
to protect the interests of the depositors, other customers, and shareholders of
the Bank, and, toward that end, wish the Bank to continue to operate safely and
soundly and in accordance with all applicable laws, rules and regulations.
The Comptroller, through his National Bank Examiner, has examined the
Bank, and the findings are contained in the Report of Examination, dated
December 31, 2001 (ROE).
In consideration of the above premises, and in consideration of the
actions that the Bank has voluntarily taken to date to address the matters set
forth in the ROE, it is agreed, between the Bank, by and through its duly
elected and acting Board of Directors (Board), and the Comptroller, through his
authorized representative, that the Bank shall operate at all times in
compliance with the articles of this Agreement.
ARTICLE I
(1) This Agreement shall be construed to be a "written agreement entered
into with the agency" within the meaning of 12 U.S.C. ss. 1818(b)(1).
(2) This Agreement shall be construed to be a "written agreement between
such depository institution and such agency" within the meaning of 12 U.S.C. ss.
1818(e)(1) and 12 U.S.C. ss. 1818(i)(2).
(3) This Agreement shall be construed to be a "formal written agreement"
within the meaning of 12 C.F.R. ss. 5.51(c)(6)(ii). See 12 U.S.C. ss. 1831i.
(4) This Agreement shall be construed to be a "written agreement or other
written statement for which a violation may be enforced" within the meaning of
12 U.S.C. ss. 1818(u).
(5) All reports or plans which the Bank or Board has agreed to submit to
the Deputy Comptroller pursuant to this Agreement shall be forwarded by
overnight delivery to:
Grace E. Dailey
Deputy Comptroller
for Large Bank Supervision
Office of the Comptroller of the Currency
250 E Street, S.W.
Mail Stop 6-1
Washington, D.C. 20219
with a copy hand delivered to:
Linda S. Cunningham
Examiner-in-Charge
Office of the Comptroller of the Currency
Two PNC Plaza
Mail Stop P2-PTPP-20-3
620 Liberty Avenue
Pittsburgh, PA 15222-2719
ARTICLE II
STATUS REPORTS
(1) The Board shall submit status reports to the Deputy Comptroller. These
reports shall set forth in detail:
(a) actions taken to comply with each Article of this Agreement;
(b) the results of those actions; and
(c) a description of the actions needed to achieve full compliance
with each Article of this Agreement.
(2) The status reports should also include any actions initiated by the
Board and the Bank in response to the comments contained in the ROE. Prior to
the implementation of the requirements of each Article of this Agreement, the
Board shall cause to be submitted a copy of
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the respective program to the Deputy Comptroller for written determination of no
supervisory concern.
(3) The first status report shall be submitted for the period ending
September 30, 2002, and will be due within fifteen (15) days of that date.
Thereafter, progress reports will be due within ten (10) days after the end of
each calendar quarter.
ARTICLE III
MANAGEMENT
(1) Within ninety (90) days after the effective date of this Agreement,
the Board shall ensure that the Bank has satisfactory senior managers in place
on a full-time basis to carry out the Board's policies, ensure compliance with
this Agreement, applicable laws, rules and regulations, and to manage the
day-to-day operations of the Bank in a safe and sound manner. Not later than one
hundred eighty (180) days after the Bank receives the ROE, the Board shall take
all steps necessary to ensure that the Bank is deemed to be "well managed" as
that term is defined in 12 C.F.R. ss. 5.39. For purposes of this Agreement,
senior managers of the Bank shall be defined as the Bank's Chairman, the Vice
Chairman, all Group Executives, the Chief Credit Policy Officer, and the Chief
Financial Officer.
(2) If any position mentioned in Paragraph 1 of this Article is vacant now
or in the future, including if the Board alters an existing senior manager's
authority and/or responsibilities, and a position mentioned in Paragraph 1 of
this Article becomes vacant, the Board shall, within ninety (90) days of such
vacancy, submit to the Deputy Comptroller for a written determination of no
supervisory objection a capable person for the vacant position who shall be
vested with sufficient executive authority to ensure the Bank's compliance with
this
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Agreement and the safe and sound operation of functions within the scope of that
position's responsibility. Prior to the appointment of any individual to a
senior manager's position, the Bank shall secure the written determination of no
supervisory objection from the Deputy Comptroller regarding such appointment,
unless the Deputy Comptroller provides a written waiver of this requirement.
(3) The requirement to submit information and the obligation to secure a
written determination of no supervisory objection are based on the authority of
12 U.S.C. ss. 1818(b) and do not require the Comptroller to complete his review
and act on any such information or authority within ninety (90) days.
ARTICLE IV
RISK MANAGEMENT
(1) Within sixty (60) days after the effective date of this Agreement,
Bank management shall submit to the Board for its review and approval a written
plan to enhance the overall risk exposure of the Bank and risk management
culture of the Bank. The Board and management shall take all necessary steps
designed to ensure the implementation of and compliance with this plan. The risk
management plan shall include or provide for, at a minimum, the following:
(a) Development of a desired risk profile, consistent
with the Bank's overall strategic plan and financial
condition, for: (i) the Bank as a whole; (ii) by risk
type; and (iii) for all corporate and business line
levels.
(b) Enhanced policies and procedures consistent with the
Bank's desired risk profile to identify, assess,
manage and monitor risk exposures of the Bank,
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including risks associated with any new lines of
business or significant acquisitions. The procedures
shall ensure that strategic direction and risk
tolerances are communicated throughout the Bank.
(c) Creation and implementation of a formal written plan
to align the Bank with its desired risk profile,
including the development of written plans with time
frames addressing how the Bank will mitigate risks
where exposure is high.
(d) Enhancements in management information systems, so
that all material changes in corporate and business
line risk profiles are apparent to, and can be
addressed by, both the Board and senior management.
Each business line must quantitatively and/or
qualitatively measure and monitor risk, so that risk
levels can be aggregated for the corporation, and
reported to management and the Board.
(e) Establishment of risk-return metrics (benchmarks) for
each corporate and business line of the Bank to
provide pertinent parties within the Bank, including
the Board, with prior notice and a reasonable
opportunity to review whatever appropriate action
should be taken when a metric(s) is at risk of being
transgressed.
(f) Revisions to the Bank's performance management and
compensation systems to reflect accountability for
compliance with the Bank's risk management
objectives.
(g) Formalization and implementation of an enhanced Key
Business Initiative (KBI) process designed to ensure
compliance with the KBI and to ensure
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that the risks for a contemplated new product or
service are commensurate with the risk profile for:
(i) the Bank as a whole; (ii) all pertinent risk
categories; and (iii) for the pertinent corporate or
business line.
ARTICLE V
CREDIT ADMINISTRATION AND CREDIT RISK
(1) Within sixty (60) days after the effective date of this Agreement,
Bank management shall submit to the Board for its review and approval, and the
Board shall ensure Bank adherence to a written program designed to enhance the
credit administration and management of the credit risk of the Bank. The program
shall include, but not be limited to:
(a) Development of a well-defined, long-term written
strategy for the Bank's future lending activities.
(b) Implementation of procedures designed to ensure the
use of available portfolio management tools in credit
decisions and credit reviews.
(c) Refinement of the Bank's valuation model to include
industry risk in the pricing of individual credits.
(d) Execution of a strategic initiative designed to
reduce troubled assets on the Bank's books.
(e) Implementation of enhanced procedures that result in
accurate risk ratings being assigned to existing and
future credit relationships and that enable the Bank
to identify and correct deficiencies in the risk
rating process.
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(f) Enhancements to the Bank's independent loan review
system to review the Bank's loan and lease portfolios
designed to ensure that the Bank is identifying and
categorizing its problem credits on a timely basis.
(2) Within sixty (60) days after the effective date of this Agreement,
Bank management shall submit to the Board for review and approval, and the Board
shall implement and thereafter ensure Bank adherence to a written program that
provides timely updates and appropriate revisions to the Bank's Allowance for
Loan and Lease Losses (ALLL) model, and the maintenance by the Bank at all times
of an adequate ALLL.
ARTICLE VI
FINANCIAL SUBSIDIARIES SAFEGUARDS
(1) Not later than sixty (60) days after the effective date of this
Agreement, the Bank shall have in place all necessary policies, procedures and
practices to ensure that the Bank is appropriately insulated from any financial
or operational risks associated with the Bank's establishment of financial
subsidiary(ies).
(2) Not later than sixty (60) days after the effective date of this
Agreement, the Bank shall have in place all necessary policies, procedures and
practices to ensure that the Bank's separate corporate identity and limited
liability are preserved vis-a-vis its financial subsidiaries.
ARTICLE VII
CONCLUDING PROVISIONS
(1) It is expressly and clearly understood that if, at any time, the
Comptroller deems it appropriate in fulfilling the responsibilities placed upon
him by the several laws of the United
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States of America to undertake any action affecting the Bank, nothing in this
Agreement shall in any way inhibit, estop, bar, or otherwise prevent the
Comptroller from so doing.
(2) Any time limitations imposed by this Agreement shall begin to run from
the effective date of this Agreement. Such time requirements may be extended in
writing by the Comptroller or his duly authorized representative for good cause
upon written application by the Board.
(3) The provisions of this Agreement shall be effective upon execution by
the parties hereto and its provisions shall continue in full force and effect
unless or until such provisions are amended in writing by mutual consent of the
parties to the Agreement or excepted, waived, or terminated in writing by the
Comptroller.
(4) To the extent that any of the provisions of this Agreement conflict
with the terms found in any existing agreement between the Comptroller and the
Bank, including the Decision of the Office of the Comptroller of the Currency on
the Application to Charter the Bank, the provisions of this Agreement shall
control.
(5) In each instance in this Agreement in which the Board is required to
ensure adherence to, and undertake to perform certain obligations of the Bank,
it is intended to mean that the Board shall: (i) authorize and adopt such
actions on behalf of the Bank as may be necessary for the Bank to perform its
obligations and undertakings under the terms of this Agreement; (ii) require the
timely reporting by Bank management of such actions directed by the Board to be
taken under the terms of this Agreement; (iii) follow-up on any non-compliance
with such actions in a timely and appropriate manner; and (iv) require
corrective action be taken in a timely manner of any non-compliance with such
actions.
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(6) This Agreement does not form, and may not be construed to form, a
contract binding on the OCC or the United States. Notwithstanding the absence of
mutuality of obligation, or of consideration, or of a contract, the OCC may
enforce any of the commitments or obligations herein undertaken by the Bank
under its supervisory powers, including 12 U.S.C. ss. 1818(i), and not as a
matter of contract law. The Bank expressly acknowledges that neither the Bank
nor the OCC has any intention to enter into a contract. The Bank also expressly
acknowledges that no OCC officer or employee has statutory or other authority to
bind the United States, the U.S. Treasury Department, the OCC, or any other
federal bank regulatory agency or entity, or any officer or employee of any of
those entities to a contract affecting the OCC's exercise of its supervisory
responsibilities. The terms of this Agreement, including this paragraph, are not
subject to amendment or modification by any extraneous expression, prior
agreements or arrangements, or negotiations between the parties, whether oral or
written.
IN TESTIMONY WHEREOF, the undersigned, authorized by the Comptroller,
has hereunto set his hand on behalf of the Comptroller.
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Grace E. Dailey Date
Deputy Comptroller
for Large Bank Supervision
Office of the Comptroller of the Currency
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IN TESTIMONY WHEREOF, the undersigned, as the duly elected and acting
Board of Directors of the Bank, have hereunto set their hands on behalf of the
Bank.
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James E. Rohr Date
Chairman of the Board and Chief Executive
Officer
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Paul W. Chellgren Date
Director
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Robert N. Clay Date
Director
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George A. Davidson, Jr. Date
Director
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David F. Girard di-Carlo Date
Director
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Walter E. Gregg, Jr. Date
Director
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William R. Johnson Date
Director
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Bruce C. Lindsay Date
Director
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Thomas H. O'Brien Date
Director
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Jane G. Pepper Date
Director
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Lorene K. Steffes Date
Director
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Dennis F. Strigl Date
Director
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Thomas J. Usher Date
Director
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Milton A. Washington Date
Director
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Helge H. Wehmeier Date
Director
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