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. 12 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 -------------------------------------------------------------- Total liabilities and shareholders' equity $ 62,763 $ 13,734 $ 51 $ 76,548 ==============================================================================================================
See accompanying Notes to Pro Forma Consolidated Financial Information. 13 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 -------------------------------------------- Net interest income 746,302 315,800 1,062,102 Provision for credit losses 3,000 3,000 -------------------------------------------- Net interest income less provision for credit losses 746,302 312,800 1,059,102 -------------------------------------------- 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 -------------------------------------------- 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 -------------------------------------------- Total noninterest expense 863,782 233,993 1,097,775 -------------------------------------------- Income before income taxes 384,667 175,467 560,134 Applicable income taxes 122,028 65,751 187,779 -------------------------------------------- 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. 14 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 ------------------------------------------ Total interest income 1,830,098 416,996 2,247,094 ------------------------------------------ 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 ------------------------------------------ Net interest income 990,300 281,500 1,271,800 Provision for credit losses 50,045 18,983 69,028 ------------------------------------------ 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 ------------------------------------------ Total noninterest income 486,791 117,558 604,349 ------------------------------------------ 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. 15 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. 16 (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 ---- $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. 17