Senior executives and others at National City Corp. will take home about $200 million after PNC Financial Services Group takes over the troubled institution, according to a filing Tuesday with the Securities and Exchange Commission.
PNC is obliged to pay the money because of agreements National City executives had in place if their employer was acquired.
PNC agreed to acquire the Cleveland-based bank -- the nation's eighth-largest -- on Oct. 24 for $5.6 billion in stock in what analysts describe as a bargain. The government-assisted deal is expected to close by Dec. 31 but might take longer to complete, said the securities filing.
"In this climate, it's troubling to see $200 million being paid in golden parachutes," said Mike Lapham, director of the Responsible Wealth project at United for a Fair Economy, Boston.
National City stock has dropped about 85 percent this year, hurt by years of subprime lending. To conserve capital, the bank slashed its dividend to one penny a share in April, but it was already being scrutinized by potential acquirers.
To fund the merger, PNC will use $7.7 billion it received from the Treasury for selling the government preferred shares. The stock sale is part of the government's program to strengthen financial institutions.
"(National City) is essentially run into the ground, and then for executives to be rewarded with taxpayer money is certainly troubling," Lapham said.
It was not clear how many National City executives and officers would split the approximately $200 million.
But documents indicate at least 21 and as many as 50 executives are covered by such agreements.
Also unclear is whether the Treasury's restrictions on executive pay at banks receiving government money apply in this case.
"If there's government money involved with this deal to make it possible, hopefully, Treasury's regulations apply," Lapham said. "But the regulations they put out are somewhat limited and fairly vague. So that remains to be seen."
National City CEO Peter Raskind and two other top executives would divide about $41 million in golden parachutes once PNC acquires National City, the Plain Dealer of Cleveland reported in late October.
A PNC spokesman referred questions to National City, whose spokesmen could not be reached yesterday.
The merger will make PNC the fifth-largest bank in the United States, with $181 billion in deposits -- $85 billion from PNC and $96 billion from National City.
In addition, PNC will receive about $725 million in corporate income-tax credits it can use to offset future tax bills. The credit stems from the $19.9 billion PNC expects to lose over time from bad loans PNC will acquire from the bank, plus a recent tax ruling by the Internal Revenue Service that allows such credit from bank deals.
In the meantime, PNC and National City are assessing their respective personnel, offices, equipment and other assets "where they may take advantage of redundancies," said the filing.
PNC expects to wring about $1.2 billion in combined costs from the deal, it said.
Over the next 26 months, it will cost PNC about $500 million to integrate the two banks, including $228 million to convert branches.
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