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EXHIBIT 99.3
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
The unaudited pro forma consolidated financial information gives effect to the
Merger to be accounted for as a pooling of interests. The consolidated
financial information on the following pages presents (i) the historical
consolidated balance sheets of both the Corporation and Midlantic at June 30,
1995, and the pro forma consolidated balance sheet as of June 30, 1995, giving
effect to the Merger as if it had occurred on that date; and (ii) the
historical consolidated statements of income of both the Corporation and
Midlantic for the six months ended June 30, 1995 and 1994, and the pro forma
consolidated statements of income for the six months ended June 30, 1995 and
1994, giving effect to the Merger as if it had been effected for all periods
presented. Certain reclassifications have been made to the historical financial
information to conform presentation. Intercompany transactions between the
Corporation and Midlantic are immaterial and, accordingly, have not been
eliminated.
The pro forma consolidated balance sheet gives effect to anticipated expenses
and nonrecurring charges related to the Merger and assumes each of the
outstanding shares of Midlantic common stock is converted into 2.05 shares of
the Corporation's common stock. In addition, the pro forma consolidated
balance sheet assumes that all Midlantic stock options are exchanged for the
Corporation's common stock, in accordance with the terms of the agreement.
However, pro forma consolidated financial information excludes the estimated
effect of revenue enhancements and expense savings associated with the
consolidation of the operations of the Corporation and Midlantic.
During 1995 and 1994, the Corporation and Midlantic completed or have pending,
various other acquisitions which individually and in the aggregate are not
"significant subsidiaries" in relation to the Corporation. Accordingly, pro
forma financial information with respect to those acquisitions is not included
herein.
The pro forma consolidated financial information is intended for
informational purposes and may not be indicative of the financial position or
results that actually would have occurred had the transaction been consummated
on the dates indicated, or which will be attained in the future. The pro forma
consolidated financial information should be read in conjunction with the 1994
Annual Reports on Form 10-K and the Quarterly Reports on Form 10-Q for the
quarterly period ended June 30, 1995 of the Corporation and Midlantic.
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PNC BANK CORP.
Pro Forma Consolidated Balance Sheet (Unaudited)
June 30, 1995
PNC MIDLANTIC PRO FORMA
In millions BANK CORP. CORPORATION ADJUSTMENTS PRO FORMA
______________________________________________________________________________________________________________
ASSETS
Cash and due from banks $ 2,612 $ 834 $ 38 (A,B) $ 3,484
Short-term investments 502 593 1,095
Loans held for sale 733 733
Securities available for sale 2,447 814 3,261
Investment securities 16,658 2,478 19,136
Loans, net of unearned income 36,690 8,657 45,347
Allowance for credit losses (961) (339) (1,300)
--------------------------------------------------------------
Net loans 35,729 8,318 44,046
Other 4,042 697 13 (A,B,C) 4,752
--------------------------------------------------------------
Total assets $ 62,763 $ 13,734 $ 51 $ 76,548
==============================================================
LIABILITIES
Deposits
Noninterest-bearing $ 6,660 $ 2,798 $ 9,458
Interest-bearing 28,630 8,089 36,719
--------------------------------------------------------------
Total deposits 35,290 10,887 46,177
--------------------------------------------------------------
Borrowed funds
Federal funds purchased 2,154 68 2,222
Repurchase agreements 5,793 785 6,578
Commercial paper 576 576
Other 3,863 30 3,893
--------------------------------------------------------------
Total borrowed funds 12,386 883 13,269
Notes and debentures 8,995 373 9,368
Accrued expenses and other liabilities 1,656 194 $ 130 (C) 1,980
--------------------------------------------------------------
Total liabilities 58,327 12,337 130 70,794
--------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock 1 1
Common stock 1,182 158 $(158)(A) 1,736
554 (A)
Capital surplus 461 620 (620)(A) 707
246 (A)
Retained earnings 3,119 638 (124)(B,C) 3,633
Deferred ESOP benefit expense (83) (83)
Net unrealized securities (losses) (41) 4 (37)
Common stock held in treasury at cost (203) (23) 23 (A) (203)
--------------------------------------------------------------
Total shareholders' equity 4,436 1,397 (79) 5,754
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Total liabilities and shareholders' equity $ 62,763 $ 13,734 $ 51 $ 76,548
==============================================================================================================
See accompanying Notes to Pro Forma Consolidated Financial Information.
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PNC BANK CORP.
Pro Forma Consolidated Statement of Income (Unaudited)
Six months ended June 30, 1995
PNC MIDLANTIC
In thousands, except per share data BANK CORP. CORPORATION PRO FORMA (D)
___________________________________________________________________________________________
INTEREST INCOME
Loans and fees on loans $1,445,006 $ 361,703 $ 1,806,709
Securities 578,787 104,374 683,161
Other 42,929 23,121 66,050
--------------------------------------------
Total interest income 2,066,722 489,198 2,555,920
INTEREST EXPENSE --------------------------------------------
Deposits 612,618 135,857 748,475
Borrowed funds 418,867 20,371 439,238
Notes and debentures 288,935 17,170 306,105
--------------------------------------------
Total interest expense 1,320,420 173,398 1,493,818
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Net interest income 746,302 315,800 1,062,102
Provision for credit losses 3,000 3,000
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Net interest income less provision for
credit losses 746,302 312,800 1,059,102
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NONINTEREST INCOME
Investment management and trust 176,649 22,870 199,519
Service charges, fees and commissions 180,408 38,375 218,783
Mortgage banking 95,320 95,320
Net securities gains 9,036 184 9,220
Other 40,734 35,231 75,965
--------------------------------------------
Total noninterest income 502,147 96,660 598,807
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NONINTEREST EXPENSE
Staff expense 406,448 124,129 530,577
Net occupancy 69,712 21,720 91,432
Equipment 67,047 12,792 79,839
Amortization of intangibles 43,186 4,004 47,190
Federal deposit insurance 36,649 11,888 48,537
Other 240,740 59,460 300,200
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Total noninterest expense 863,782 233,993 1,097,775
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Income before income taxes 384,667 175,467 560,134
Applicable income taxes 122,028 65,751 187,779
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Net income $ 262,639 $109,716 $ 372,355
===========================================================================================
EARNINGS PER COMMON SHARE
Primary $1.13 $2.04 $1.09
Fully diluted 1.13 2.02 1.08
AVERAGE COMMON SHARES OUTSTANDING
Primary 231,388 52,790 339,608
Fully diluted 233,412 54,461 345,056
===========================================================================================
See accompanying Notes to Pro Forma Consolidated Financial Information.
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PNC BANK CORP.
Pro Forma Consolidated Statement of Income (Unaudited)
Six months ended June 30, 1994
PNC MIDLANTIC
In thousands, except per share data BANK CORP. CORPORATION PRO FORMA
(D)
_________________________________________________________________________________________
INTEREST INCOME
Loans and fees on loans $1,166,847 $ 331,021 $1,497,868
Securities 612,455 53,786 666,241
Other 50,796 32,189 82,985
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Total interest income 1,830,098 416,996 2,247,094
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INTEREST EXPENSE
Deposits 417,516 107,395 524,911
Borrowed funds 207,311 10,822 218,133
Notes and debentures 214,971 17,279 232,250
------------------------------------------
Total interest expense 839,798 135,496 975,294
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Net interest income 990,300 281,500 1,271,800
Provision for credit losses 50,045 18,983 69,028
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Net interest income less provision for
credit losses 940,255 262,517 1,202,772
------------------------------------------
NONINTEREST INCOME
Investment management and trust 146,461 20,642 167,103
Service charges, fees and commissions 180,041 37,966 218,007
Mortgage banking 80,363 80,363
Net securities gains (losses) 30,307 (3,374) 26,933
Other 49,619 62,324 111,943
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Total noninterest income 486,791 117,558 604,349
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NONINTEREST EXPENSE
Staff expense 410,871 114,115 524,986
Net occupancy 66,562 23,055 89,617
Equipment 65,580 12,915 78,495
Amortization of intangibles 37,830 3,225 41,055
Federal deposit insurance 36,339 14,381 50,720
Other 227,959 72,256 300,215
------------------------------------------
Total noninterest expense 845,141 239,947 1,085,088
------------------------------------------
Income before income taxes 581,905 140,128 722,033
Applicable income taxes 188,371 14,496 202,867
------------------------------------------
Income before cumulative effect of
change in accounting principle $ 393,534 $ 125,632 $ 519,166
=========================================================================================
EARNINGS PER COMMON SHARE BEFORE CUMMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE
Primary $1.66 $2.34 $1.50
Fully diluted 1.65 2.31 1.48
AVERAGE COMMON SHARES OUTSTANDING
Primary 236,974 52,868 345,353
Fully diluted 238,887 54,445 350,498
_________________________________________________________________________________________
See accompanying Notes to Pro Forma Consolidated Financial Information.
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NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
(A) The pro forma balance sheet gives effect to the proposed Merger of
the Corporation and Midlantic by combining the respective balance sheets
of the two companies at June 30, 1995 on a pooling-of-interests basis.
Cash and other assets have been adjusted to reflect the exercise of
Midlantic stock options for $13 million in cash and a related current tax
benefit of $32 million related to the exchange of the Corporation's common
stock for outstanding Midlantic options. The capital accounts have been
adjusted to reflect the issuance of 110.8 million shares of common stock
of the Corporation in exchange for all the outstanding shares of Midlantic
(common stock held in treasury was assumed to be canceled) and the assumed
exchange of the Corporation's Common Stock for all outstanding Midlantic
stock options. Midlantic's debentures, which approximated $73 million, are
convertible into Midlantic common stock at a conversion price of $48 per
share. For purposes of this pro forma consolidated balance sheet,
conversion of these debentures has not been assumed.
(B) Based upon a preliminary review of Midlantic's asset and liability
management position, the Corporation anticipates terminating its interest
rate cap position concurrent with or shortly after consummation of the
Merger. Upon termination, any losses, measured by the difference between
the unamortized premium and the estimated fair value, would be recognized
immediately in the results of operations. An adjustment of $60 million
(unamortized premium of $85 million net of estimated fair value payment
of $25 million) has been recorded in the pro forma balance sheet to
reflect the anticipated loss. This adjustment resulted in a $39 million
after-tax charge to retained earnings in the pro forma balance sheet.
The Corporation is continuing this review of Midlantic's asset and
liability management position and is considering various other actions
to maintain its existing interest rate risk position. As a result of
further analysis, certain reclassifications or sales of investment
securities currently classified in the held to maturity portfolio may
occur. Reclassifications, if any, will be accounted for at fair value with
any unrealized gain or loss, net of taxes, at the date of transfer
recognized as a separate component of shareholders' equity. If any such
securities are sold, gains or losses from such transactions would be
reflected in results of operations. At June 30, 1995, securities held to
maturity, on a pro forma basis, had a total net unrealized pretax loss of
$274 million.
Additionally, certain interest rate swaps are associated with
investment securities which are currently classified in the held to
maturity portfolio. If, as a result of the aforementioned review, such
securities are reclassified to the available for sale portfolio or sold,
the fair value, or the gain or loss on sale of such securities, will
also reflect the fair value of the related interest rate swaps, if any.
At June 30, 1995, interest rate swaps designated to held to maturity
securities, on a pro forma basis, had a total net unrealized pretax
loss of $249 million.
No adjustments have been made in the accompanying pro forma balance
sheet to reflect the potential reclassification of investment securities,
including the effect, if any, of the related interest rate swaps, as the
Corporation's management has not made a determination with respect to
such matters.
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(C) A liability of $130 million has been recorded in the pro forma
balance sheet to reflect management's estimate of anticipated expenses and
nonrecurring charges related to the Merger. This liability resulted in an
$85 million after-tax adjustment to retained earnings in the pro forma
balance sheet. It is anticipated that substantially all of these charges
will be recognized during 1995 upon consummation of the Merger and paid in
1995 and 1996. the following table provides details of the estimated
charges by type:
Pre-Tax Amount
Type of Cost (In Millions)
------------ --------------
Operations and Facilities $ 56
Personnel Related 40
Other 34
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$130
====
Operations and facilities charges consist of lease termination costs
and other related costs resulting from the consolidation of overlapping
branches and elimination of redundant operational facilities as well as
write-offs of computer hardware and software, signage and
telecommunication equipment due to incompatibility or duplication.
Personnel related costs consist primarily of charges related to employee
severance, termination of certain employee benefit plans and employee
outplacement assistance.
(D) The pro forma consolidated statements of income give effect to the proposed
Merger of the Corporation and Midlantic by combining the respective
statements of income of the two companies for the six month periods ended
June 30, 1995 and 1994. The pro forma statements of income do not give
effect to anticipated expenses and nonrecurring charges related to the
Merger and the estimated effect of revenue enhancements and expense
savings associated with the consolidation of the operations of the
Corporation and Midlantic.
Earnings per common share amounts for the Corporation and Midlantic are
based on the historical fully diluted weighted average number of common
shares outstanding for each company during the period. With respect to
the pro forma earnings per share computation, shares of Midlantic have been
adjusted to the equivalent shares of the Corporation for each period.
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