EXHIBIT 99.2
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 September
30, 1995, and the pro forma consolidated balance sheet as of September 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 nine months ended September 30, 1995 and 1994, and the pro
forma consolidated statements of income for the nine months ended September
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 had
pending, various other acquisitions (including the Chemical Bank-New Jersey
transaction) which individually and in the aggregate were and are not
acquisitions of "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 statements are intended for
information purposes and may not be indicative of the combined financial
position or results of operations that actually would have occurred had the
transaction been consummated during the periods or as of 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
September 30, 1995 of the Corporation and Midlantic.
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PNC BANK CORP.
Pro Forma Consolidated Balance Sheet (Unaudited)
September 30, 1995
PNC MIDLANTIC PRO FORMA
In millions BANK CORP. CORPORATION ADJUSTMENTS PRO FORMA
______________________________________________________________________________________________________________
ASSETS
Cash and due from banks $ 2,124 $ 832 $ 9 (A) $ 2,985
20 (B)
Short-term investments 637 617 1,254
Loans held for sale 901 901
Securities available for sale 2,228 807 3,035
Investment securities 16,035 2,444 18,479
Loans, net of unearned income 36,815 8,785 45,600
Allowance for credit losses (943) (341) (1,284)
------------------------------------------------------------
Net loans 35,872 8,444 44,316
Other 3,421 717 33 (A) 4,162
23 (B)
(85)(B)
53 (C)
------------------------------------------------------------
Total assets $61,218 $13,861 $ 53 $75,132
============================================================
LIABILITIES
Deposits
Noninterest-bearing $ 6,496 $ 2,729 $ 9,225
Interest-bearing 26,517 8,128 34,645
------------------------------------------------------------
Total deposits 33,013 10,857 43,870
------------------------------------------------------------
Borrowed funds
Federal funds purchased 3,407 53 3,460
Repurchase agreements 5,427 923 6,350
Commercial paper 490 490
Other 3,359 30 3,389
------------------------------------------------------------
Total borrowed funds 12,683 1,006 13,689
Notes and debentures 9,616 369 9,985
Accrued expenses and other liabilities 1,402 180 $150 (C) 1,732
------------------------------------------------------------
Total liabilities 56,714 12,412 150 69,276
SHAREHOLDERS' EQUITY
Preferred stock 1 1
Common stock 1,184 158 (158)(A) 1,739
555 (A)
Capital surplus 465 619 (619)(A) 714
249 (A)
Retained earnings 3,189 683 (42)(B) 3,733
(97)(C)
Deferred ESOP benefit expense (92) (92)
Net unrealized securities gains (losses) (45) 4 (41)
Common stock held in treasury at cost (198) (15) 15 (A) (198)
------------------------------------------------------------
Total shareholders' equity 4,504 1,449 (97) 5,856
------------------------------------------------------------
Total liabilities and shareholders' equity $61,218 $13,861 $ 53 $75,132
==============================================================================================================
See accompanying Notes to Pro Forma Consolidated Financial Information.
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PNC BANK CORP.
Pro Forma Consolidated Statement of Income (Unaudited)
Nine months ended September 30, 1995
PNC MIDLANTIC
In thousands, except per share data BANK CORP. CORPORATION PRO FORMA (D)
- -------------------------------------------------------------------------------------------
INTEREST INCOME
Loans and fees on loans $2,194,025 $555,281 $2,749,306
Securities 841,761 157,728 999,489
Other 70,410 30,224 100,634
--------------------------------------------
Total interest income 3,106,196 743,233 3,849,429
--------------------------------------------
INTEREST EXPENSE
Deposits 941,996 208,858 1,150,854
Borrowed funds 626,580 30,671 657,251
Notes and debentures 426,525 25,678 452,203
--------------------------------------------
Total interest expense 1,995,101 265,207 2,260,308
--------------------------------------------
Net interest income 1,111,095 478,026 1,589,121
Provision for credit losses 4,500 4,500
--------------------------------------------
Net interest income less provision for
credit losses 1,111,095 473,526 1,584,621
--------------------------------------------
NONINTEREST INCOME
Investment management and trust 273,306 35,330 308,636
Service charges, fees and commissions 272,125 58,289 330,414
Mortgage banking 146,653 146,653
Net securities gains 9,080 184 9,264
Other 88,270 53,896 142,166
--------------------------------------------
Total noninterest income 789,434 147,699 937,133
--------------------------------------------
NONINTEREST EXPENSE
Staff expense 611,289 189,447 800,736
Net occupancy and equipment 206,073 51,928 258,001
Amortization of intangibles 66,416 6,868 73,284
Federal deposit insurance 38,534 11,473 50,007
Other 374,272 89,790 464,062
--------------------------------------------
Total noninterest expense 1,296,584 349,506 1,646,090
--------------------------------------------
Income before income taxes 603,945 271,719 875,664
Applicable income taxes 192,260 100,884 293,144
--------------------------------------------
Net income $ 411,685 $170,835 $ 582,520
===========================================================================================
EARNINGS PER COMMON SHARE
Primary $1.78 $3.20 $1.71
Fully diluted 1.77 3.14 1.69
AVERAGE COMMON SHARES OUTSTANDING
Primary 230,869 52,854 339,221
Fully diluted 233,087 54,672 345,165
===========================================================================================
See accompanying Notes to Pro Forma Consolidated Financial Information.
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PNC BANK CORP.
Pro Forma Consolidated Statement of Income (Unaudited)
Nine months ended September 30, 1994
PNC MIDLANTIC
In thousands, except per share data BANK CORP. CORPORATION PRO FORMA
(D)
-----------------------------------------------------------------------------------------
INTEREST INCOME
Loans and fees on loans $1,818,974 $505,305 $2,324,279
Securities 947,572 80,668 1,028,240
Other 71,121 52,085 123,206
------------------------------------------
Total interest income 2,837,667 638,058 3,475,725
------------------------------------------
INTEREST EXPENSE
Deposits 664,777 162,673 827,450
Borrowed funds 333,322 15,906 349,228
Notes and debentures 354,313 25,865 380,178
------------------------------------------
Total interest expense 1,352,412 204,444 1,556,856
------------------------------------------
Net interest income 1,485,255 433,614 1,918,869
Provision for credit losses 60,123 23,768 83,891
------------------------------------------
Net interest income less provision for
credit losses 1,425,132 409,846 1,834,978
------------------------------------------
NONINTEREST INCOME
Investment management and trust 218,815 31,927 250,742
Service charges, fees and commissions 275,135 57,995 333,130
Mortgage banking 159,274 159,274
Net securities gains (losses) (13,895) (3,374) (17,269)
Other 78,561 80,380 158,941
------------------------------------------
Total noninterest income 717,890 166,928 884,818
------------------------------------------
NONINTEREST EXPENSE
Staff expense 618,999 172,338 791,337
Net occupancy and equipment 200,022 52,361 252,383
Amortization of intangibles 59,478 4,843 64,321
Federal deposit insurance 54,745 21,386 76,131
Other 347,810 104,073 451,883
------------------------------------------
Total noninterest expense 1,281,054 355,001 1,636,055
------------------------------------------
Income before income taxes 861,968 221,773 1,083,741
Applicable income taxes 280,436 19,894 300,330
------------------------------------------
Income before cumulative effect of
change in accounting principle $ 581,532 $201,879 $ 783,411
=========================================================================================
EARNINGS PER COMMON SHARE BEFORE CUMMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE
Primary $2.45 $3.76 $2.26
Fully diluted 2.44 3.71 2.24
AVERAGE COMMON SHARES OUTSTANDING
Primary 236,954 52,944 345,490
Fully diluted 238,807 54,501 350,533
_________________________________________________________________________________________
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 consolidated balance sheet gives effect to the proposed
Merger of the Corporation and Midlantic by combining the respective
balance sheets of the two companies at September 30, 1995 on a
pooling-of-interests basis. Cash and other assets have been adjusted
to reflect the exercise of Midlantic stock options for $9 million in
cash and a related current tax benefit of $33 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 111.1 million shares of the Corporation's common stock 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 outstanding Midlantic stock options.
Midlantic's debentures, which approximated $69 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 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. Interest rate caps are accounted for on the accrual basis under
the Corporation's accounting policies because they are designated to
certain interest bearing assets which modify their interest rate
characteristics. Upon termination, any losses, measured by the difference
between the unamortized premium and the fair value payment to the
Corporation, would be recognized immediately in the results of operations.
This is because the predominant characteristic of the interest rate cap
is that of a purchased option for which losses are expensed upon
termination under the Corporation's accounting policies. An adjustment
of $65 million (unamortized premium of $85 million net of estimated fair
value payment of $20 million to the Corporation) has been recorded in the
pro forma consolidated balance sheet to reflect the anticipated loss.
This adjustment resulted in a $42 million after-tax charge to retained
earnings in the pro forma balance sheet.
Management is continuing its review of the asset/liability positions
of Midlantic and the Corporation and is considering various actions
consistent with the Corporation's strategic initiatives related to
balance sheet repositioning and interest rate risk management. In
connection therewith, the Corporation is considering reclassifying
investment securities to the available-for-sale portfolio. Any
reclassifications of investment securities will be accounted for at
fair value and would include the fair value of associated financial
derivatives. Unrealized gains and losses would be recorded as a
component of shareholders' equity, net of tax.
The Corporation may sell securities classified as available for sale
as part of the overall asset/liability management process. Realized gains
and losses would be reflected in the results of operations and would
include the fair value of financial derivatives associated with such
securities.
On a pro forma basis, the combined investment securities of the
Corporation and Midlantic had a net unrealized pretax loss of
$226 million at September 30, 1995. The associated financial derivatives
had an estimated net unrealized pretax loss of $283 million, including
deferred losses on terminated swap contracts.
No adjustments have been made in the accompanying pro forma consolidated
balance sheet to reflect the potential reclassification or sale of
investment securities, including the effect, if any, of the related
interest rate swaps, as the Corporation's management has not made a
final determination with respect to such matters.
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(C) In connection with the closing in the fourth quarter of 1995 of the
Midlantic merger, the Corporation currently estimates it will record
merger-related and nonrecurring charges of between $150 million and
$180 million, compared with an original estimate of $130 million. The
increase in the estimate is primarily due to more aggressive plans with
respect to operations and facilities consolidations. Management continues
to review integration plans and final determination of the amount of
the charges will be made prior to year end. There can be no assurance that
such expenses and charges will not exceed the amounts described above.
A liability of $150 million has been recorded in the pro forma
consolidated balance sheet to reflect an estimate of anticipated expenses
and nonrecurring charges related to the Merger. This liability resulted in
a $97 million after-tax adjustment to retained earnings in the pro forma
consolidated balance sheet. Should the anticipated expenses and
nonrecurring charges exceed the amount reflected in the pro forma
consolidated balance sheet, shareholders' equity would be reduced by the
after-tax effect of such excess. It is anticipated that substantially all
of these charges will be recognized upon consummation of the Merger and
paid in 1995 and/or 1996. The following table provides details of the
estimated charges by type:
Estimated
Pre-Tax Amount
Type of Cost (In Millions)
------------ --------------
Operations and Facilities $ 70
Personnel Related 44
Other 36
----
$150
====
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. Other charges include investment banking
fees, legal and accounting fees, proxy registration/filing fees and
mailing costs and adjustment of state deferred tax assets relating to
the Merger.
(D) The pro forma consolidated statements of income give effect to the
proposed Merger by combining the respective statements of income of
the two companies for the nine months ended September 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.
6