PNC Bank 2002 Annual Report Download - page 100

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NOTE 23 INCOME TAXES
The components of income taxes were as follows:
Year ended December 31
In millions 2002 2001 2000
Current
Federal $86 $195 $226
State 48 40 32
T
otal current 134 235 258
Deferred
Federal 463
(
51
)
363
State 24 313
Total deferred 487 (48) 376
Total $621 $187 $634
Significant components of deferred tax assets and liabilities are
as follows:
December 31 - in millions 2002 2001
Deferred tax assets
A
llowance for credit losses $297 $225
Compensation and benefits 31
Net unrealized securities losses 75
Loan valuations related to
institutional lending repositioning 135 330
Other 171 163
T
otal deferred tax assets 603 824
D
eferred tax liabilities
Leasing 1,372 1,182
Depreciation 66 53
Net unrealized securities
g
ains 87
Com
p
ensation and benefits 26
Other 155 89
T
otal deferred tax liabilities 1
,
706 1
,
324
Net deferred tax liability $1,103 $500
A reconciliation between the statutory and effective tax rates
follows:
Year ended December 31 2002 2001 2000
Statutory tax rate 35.0% 35.0% 35.0%
Increases (decreases) resulting from
State taxes 2.5 4.6 1.6
Tax-exempt interest (.4) (1.7) (.6)
Goodwill 2.9 .9
Life insurance (1.1) (3.3) (1.0)
Tax credits (2.4) (7.2) (1.8)
Other (.2) 1.0 (.3)
Effective tax rate 33.4% 31.3% 33.8%
At December 31, 2002 the Corporation had available $3.8
million of federal income tax credit carryforwards which
expire in 2022.
NOTE 24 LEGAL PROCEEDINGS
The several putative class action complaints filed during 2002
were consolidated in a consolidated class action complaint
brought on behalf of purchasers of the Corporation’s
common stock between July 19, 2001 and July 18, 2002. The
consolidated class action complaint names the Corporation,
the Chairman and Chief Executive Officer, the former Chief
Financial Officer, the Controller and the Corporation’s
independent auditors for 2001 as defendants and seeks
unquantified damages, interest, attorneys’ fees and other
expenses. The consolidated class action complaint alleges
violations of federal securities laws related to disclosures
regarding the three 2001 transactions that gave rise to a
financial statement restatement announced by the Corporation
on January 29, 2002 and related matters. The Corporation and
all other defendants have filed a motion to dismiss this lawsuit.
Management believes there are substantial defenses to this
lawsuit and intends to defend it vigorously. The impact of the
final disposition of this lawsuit cannot be assessed at this time.
Also, in August 2002, the United States Department of
Labor began a formal investigation of the Administrative
Committee of the Corporation’s Incentive Savings Plan
(“Plan”) in connection with the Committee’s conduct relating
to the Corporation’s common stock held by the Plan and the
Corporation’s restatement of earnings for 2001. Both the
Administrative Committee and the Corporation are
cooperating fully with the investigation. The impact of the
final disposition of this investigation cannot be assessed at this
time.
The Corporation and persons to whom the Corporation
may have indemnification obligations, in the normal course of
business, are subject to various other pending and threatened
legal proceedings in which claims for monetary damages and
other relief are asserted. Management does not anticipate that
the ultimate aggregate liability, if any, arising out of such other
legal proceedings will have a material adverse effect on the
Corporation’s financial position, although at the present time,
management is not in a position to determine whether any
pending or threatened legal proceedings will have a material
adverse effect on the Corporation’s results of operations in
any future reporting period.