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. 1 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. 2 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. 3 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. 4 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. 5 (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