O

Comptroller of the Currency

Administrator of National Banks

Northeastern District

1114 Avenue of the Americas, Suite 3900

New York, New York 10036

December 3, 2003 **CRA Decision #121**

# January 2004

Richard K. Kim, Esq.

Wachtell, Lipton, Rosen & Katz

51 West 52^nd^ Street

New York, NY 10019-6150

Re: Merger of UnitedTrust Bank, Bridgewater, New Jersey into PNC Bank,
National Association, Pittsburgh, Pennsylvania.

Application Control Numbers: 2003 NE 02 040 and 2003 NE 05 152

Dear Mr. Kim:

This is to inform you that on December 3, 2003, the Office of the
Comptroller of the Currency ("OCC") approved your proposal, filed on
behalf of PNC Bank, National Association ("PNC and Bank"), to merge
UnitedTrust Bank ("UnitedTrust') into PNC under PNC's charter and title.
At the time of the proposed merger, PNC Bancorp, Inc. will wholly-own
PNC and UnitedTrust.[^1]

This approval is granted based on a thorough review of all information
available, including commitments and representations made in the
application and the merger agreement and the Bank's representatives.

The merger of UnitedTrust into PNC is legally authorized as an
interstate merger transaction under the Riegle-Neal Act, 12 USC §§
215a-1 and 1831u. The OCC reviewed the proposed merger under the
criteria of the Bank Merger Act, 12 U.S.C. 1828(c), the Community
Reinvestment Act, 12 U.S.C. § 2901, [et]{.underline}.
[seq]{.underline}., and applicable OCC regulations and policies. Among
other matters, we found that the proposed transaction would not have any
anticompetitive effects, since the banks will be affiliated at the time
of the merger.

The OCC considered the financial and managerial resources of the banks,
their future prospects, and the convenience and needs of the communities
to be served.[^2] PNC is a strong financial institution with \$61
billion in assets and \$6 billion in capital with 680 offices in 9
states, as of June 30, 2003. UnitedTrust has \$3 billion in assets and
\$305 million in capital with 52 offices in 2 states. PNC's acquisition
of UnitedTrust will have no significant impact on PNC's condition.
Current customers of UnitedTrust are expected to have access to greater
banking services than presently available at those branches.

In addition, the Bank Merger Act requires the OCC to consider "\... the
effectiveness of any insured depository institution involved in the
proposed merger transaction in combating money laundering activities,
including in overseas branches." 12 U.S.C. § 1828(c)(11). We considered
this factor and believe the approval of this transaction is consistent
with that statutory provision.

With respect to CRA, the OCC takes into account the applicants' record
of helping to meet the credit needs of their entire communities,
including low- and moderate-income neighborhoods, when evaluating
certain applications, including transactions subject to the Bank Merger
Act.[^3] The OCC's review revealed no evidence that the applicants'
record of helping to meet the credit needs of their communities,
including low- and moderate-income neighborhoods, is less than
satisfactory.

PNC received an "Outstanding" CRA rating in the OCC's April 15, 2002
Performance Evaluation ("PE"). UnitedTrust received a "Satisfactory" CRA
rating in the Federal Reserve Bank of New York's March 4, 2002 PE.
Neither of the PEs disclosed any substantive fair lending concerns.[^4]
The merger is not expected to alter PNC's CRA policies, procedures, or
assessment areas, because PNC is already located in the MSAs where
UnitedTrust operates.

The OCC received comments from one community organization.[^5] One
concern raised by the commenter was with the decline in PNC's home
purchase mortgage lending since the sale of its mortgage subsidiary, PNC
Mortgage Corp., in early 2001. PNC responded that it remained committed
to increasing opportunities for low-and moderate-income ("LMI")
borrowers to become homeowners. Through a third party relationship, PNC
offers mortgages with down payments as low as 3 percent, Federal Housing
Administration products, and Fannie Mae affordable mortgage products. In
addition, PNC recently added a product with a closing cost assistance
grant of up to \$1000 for first-time LMI borrowers. PNC continues to
offer refinance loans, a primary product line for the bank, and some
home improvement loans. Additionally, PNC represented that it has a
special team of underwriters to review applications from LMI individuals
for mortgage loans reportable under the Home Mortgage Disclosure Act
("HMDA"). When conducting future CRA examinations of PNC, the OCC will
consider PNC's record of meeting credit needs in its assessment areas
through its lending activities.[^6]

The commenter also expressed concerns with the potential for branch
closings by PNC. PNC responded that it did plan to close some branches
that were in close proximity to each other, but that none of the
potential closures would be in LMI areas.[^7] PNC also indicated that it
would continue to follow its procedures for assessing the impact of any
branch closing prior to closing a branch.[^8] The most recent PE
indicated that PNC\'s record of opening and closing branch offices had
not adversely affected accessibility of its delivery systems to LMI
individuals. Since that PE was issued, the OCC found PNC's record of
opening and closing branch offices continued to not adversely affect
accessibility to LMI individuals, because PNC had closed only one branch
in an LMI area.

Another issue raised by the commenter concerned denial disparity ratios
for conventional home purchase and home improvement loans based on 2002
HMDA data. The commenter's analysis indicated that PNC denied
applications to Latinos and African Americans more often than to Whites
in several MSAs. PNC responded that since selling its mortgage company
in 2001, the bulk of its mortgage lending has consisted of refinancings.
Additionally, PNC provided an analysis of its refinance lending
indicating that PNC's denial disparity ratios in the largest MSAs cited
by the commenter were generally lower or comparable to the industry
average.[^9] Further, PNC pointed out that in 2002 it received a greater
percentage of home improvement and refinancing applications from African
Americans and Hispanics than in 2001.

It is important to note that HMDA data alone are not adequate to provide
a basis for concluding that a bank is engaged in lending discrimination
or in indicating whether its level of lending is sufficient. HMDA data
do not take into consideration borrower creditworthiness, housing
prices, and other factors relevant in each of the individual markets,
nor do they fully reflect the range of a bank's lending activities or
efforts. Nevertheless, denial disparity ratios are of concern to the OCC
and are evaluated in fair lending examinations.[^10]

In sum, based on the CRA records of performance of the applicant banks,
the OCC found approval to be consistent with the CRA.

The commenter also requested that the OCC conduct a public hearing.[^11]
After careful consideration, the OCC has determined not to conduct a
hearing on this merger application.

The general standard the OCC applies to determine whether to hold a
public hearing is contained in 12 C.F.R. § 5.11, which provides:

> *The OCC generally grants a hearing request only if the OCC determines
> that written submissions would be insufficient or that a hearing would
> otherwise benefit the decision making process. The OCC also may order
> a hearing if it concludes that a hearing would be in the public
> interest.*

The commenter requested a hearing primarily to clarify information
regarding HMDA data discrepancies and potential branch closings.
However, the commenter did not indicate why written submissions would be
insufficient to make an adequate presentation of these and other issues
to the OCC. Accordingly, the standards for conducting a hearing were not
satisfied, and the OCC determined not to conduct a hearing.

For the reasons set forth above, the OCC found that the transaction met
the relevant statutory criteria for approval. Inasmuch as the
transaction also raised no supervisory or policy concerns, the
application was approved.

As a reminder, the district office must be advised in writing 10 days in
advance of the desired effective date for the purchase and assumption so
that the OCC may issue the necessary certification. The effective date
must be after the expiration of the period during which the Department
of Justice may file an injunction to stop the purchase and assumption,
i.e., at least 15 days after the date of this letter for applications
processed under normal procedures, and at least five (5) days after this
date for applications processed under emergency procedures and after all
other regulatory approvals have been obtained.

The OCC will issue a letter certifying consummation of the transaction
when we receive:

1.  A Secretary's Certificate for each institution, certifying that a
    majority of the board of directors approved the merger.

2.  An executed merger agreement with Articles of Association for the
    resulting bank attached.

3.  A Secretary's Certificate from each institution, certifying that the
    shareholder approvals have been obtained.

If the merger is not consummated within one year from the approval date,
the approval shall automatically terminate, unless the OCC grants an
extension of the time period.

This approval, and the activities and communications by OCC employees in
connection with the filing, do not constitute a contract, express or
implied, or any other obligation binding upon the OCC, the U.S., any
agency or entity of the U.S., or any officer or employee of the U.S.,
and do not affect the ability of the OCC to exercise its supervisory,
regulatory and examination authorities under applicable law and
regulations. The foregoing may not be waived or modified by any employee
or agency of the OCC or the U.S.

If you have any questions, please contact me at (212) 790-4055.

Sincerely,

/s/ Sandya Reddy

Sandya Reddy

Senior Licensing Analyst

[^1]: On November 19, 2003, the Board of Governors of the Federal
    Reserve System approved the applications by PNC Financial Services
    Group, Inc., a financial holding company, to acquire United National
    Bancorp, a bank holding company, and by PNC Bancorp, Inc., a bank
    holding company, to merge with United National Bancorp, thereby
    indirectly acquiring UnitedTrust.

[^2]: One community organization raised concerns regarding a deferred
    prosecution agreement entered this year between the United States
    Department of Justice and PNC ICLC Corp., a non-bank, indirect
    subsidiary of PNC Financial Services Group, Inc. The agreement
    concerns transactions that occurred in 2001. The OCC\'s
    administrative action against PNC was resolved with a Formal
    Agreement entered in 2002. The Agreement addressed management
    systems, risk management, credit administration, and internal
    controls. As a result of PNC\'s full compliance, the Agreement was
    lifted in September 2003. The community organization also expressed
    concern about a statement by PNC\'s Chief Executive Officer that the
    merger application had been reviewed with PNC\'s regulators. OCC
    policy contemplates that national banks discuss potential merger
    applications with the OCC to allow the OCC to identify significant
    policy, legal, CRA, consumer compliance, or supervisory issues that
    may exist. *See* Comptroller\'s Corporate Manual: Business
    Combinations (April 1998) at 14-15, 91. Additionally, the community
    organization complained that PNC\'s response to one of the
    organization\'s comments was signed by am employee who was a former
    Federal Reserve Board official. The commenter provided no
    information or legal authority to indicate that this contact was
    improper.

[^3]: [See]{.underline} 12 U.S.C. § 2903; 12 C.F.R. § 25.29(a). The
    special community reinvestment requirements of the Riegle-Neal Act,
    12 U.S.C. § 1831(u)(b)(3), are not applicable, because PNC and
    UnitedTrust will be affiliated at the time of the bank merger at
    issue. Thus, the resulting bank will not have a branch or bank
    affiliate immediately following the transaction in any state in
    which PNC did not previously have a branch or bank affiliate.

[^4]: PNC's PE stated that based on public comments, consumer complaint
    information, Home Mortgage Disclosure Act data, and small business
    data, the OCC determined that a comprehensive fair lending
    examination was not needed. UnitedTrust's PE stated that no
    practices violating the substantive fair lending laws were
    identified that would have an impact on the bank's CRA rating.

[^5]: The OCC also received a consumer complaint from an individual
    regarding the manner in which PNC had handled a specific loan. PNC
    investigated the consumer complaint and responded to that
    individual. Customers who wish to resolve complaints against
    national banks are encouraged to contact the OCC's Customer
    Assistance Group.

[^6]: The CRA does not require banks to make particular types of loans.

[^7]: PNC indicated that since the April 15, 2002 PE, the bank had
    closed only one branch in an LMI area.

[^8]: In addition, federal law requires banks to give notice of proposed
    branch closings to the appropriate federal regulatory agency and to
    the bank's customers. 12 U.S.C. § 1831r-l. The OCC also considers a
    bank's record of branch closings in conducting CRA examinations.

[^9]: The commenter also expressed concern that PNC's analysis did not
    agree with the data available to the public on the Federal Financial
    Institution Examination Counsel ("FFEIC") website. The OCC confirmed
    that the data reported by PNC bank was consistent with the data on
    the FFIEC website. The reason for the discrepancy noted by the
    commenter was that PNC reported the data using proprietary software
    that designates the race of the primary applicant as the race of the
    applicant. For the purpose of its response to the commenter, PNC
    determined that analyzing HMDA data with the race of the primary
    applicant as the race of the applicant provided a better picture of
    its lending efforts to minorities. The FFIEC website does not
    display the data this way, but instead shows all "joint race"
    applications separate from minority applications.

[^10]: The commenter's submission also contained e-mails from two former
    PNC employees who suggested they had been victims of racially
    discriminatory employment practices. Because the OCC does not have
    enforcement authority over employment discrimination issues, the OCC
    did not investigate this concern. The Equal Employment Opportunity
    Commission has jurisdiction over such matters.

[^11]: Additionally, the commenter requested that the OCC extend the
    public comment period. The OCC determined not to grant an extension
    of the comment period, because the commenter did not demonstrate
    that additional time was necessary to develop factual information,
    and no extenuating circumstances were present. *See* 12 C.F.R. §
    5.10(b)(2)(ii), (iii). However, the OCC considered all comments
    received after the close of the comment period.