<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 8-K
----------------
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): May 19, 1994
CORESTATES FINANCIAL CORP
(EXACT NAME OF REGISTRANT SPECIFIED IN ITS CHARTER)
PENNSYLVANIA 0-6879 23-1899716
(STATE OR OTHER (COMMISSION (IRS EMPLOYEE
JURISDICTION OF FILE NUMBER) IDENTIFICATION NO.)
INCORPORATION)
CENTRE SQUARE WEST,
1500 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19101
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE, INCLUDING AREA CODE: (215) 973-3806
(FORMER NAME AND FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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<PAGE>
ITEM 5. OTHER EVENTS
As previously announced, CoreStates Financial Corp ("CoreStates") and
Germantown Savings Bank ("GSB") have entered into a definitive agreement, dated
March 7, 1994, providing for CoreStates to acquire GSB for a combination of cash
and stock. Under the terms of the agreement, each of GSB's 4,194,647 shares of
common stock, par value $0.10 per share, will be exchanged for cash and Core-
States common shares or a combination of cash and CoreStates common shares
valued at $62.00.
The transaction, which will be accounted for as a purchase, is subject to
receipt of regulatory and GSB's shareholder approval.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Page
(i) Consolidated Statements of Income For the Three
Months Ended March 31, 1994 and 1993 3
(ii) Consolidated Balance Sheet as of March 31, 1994 4
(iii) Consolidated Statements of Changes in Shareholders'
Equity For the Three Months Ended March 31, 1994 and 1993 5
(iv) Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1994 and 1993 6
(v) Notes to Interim Consolidated Financial Statements 7-10
CoreStates Financial Corp
(Registrant)
By: /s/ David T. Walker
-------------------------
David T. Walker
Deputy Chief Counsel
Dated: May 19, 1994
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<PAGE>
GERMANTOWN SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands except Per Share Amounts)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
-----------------------
1994 1993
-----------------------
<S> <C> <C>
Interest income:
Loan interest and fees $19,601 $21,421
Interest and dividends on
investment securities 6,629 7,143
Interest on money market instruments 235 197
------- -------
Total interest income 26,465 28,761
------- -------
Interest expense:
Interest on deposits 10,178 13,085
Other 28 27
------- -------
Total interest expense 10,206 13,112
------- -------
Net interest income 16,259 15,649
Provision for possible loan losses 100 850
------- -------
Net interest income after provision
for possible loan losses 16,159 14,799
------- -------
Noninterest income:
Net security gains 4 317
Service fees and other 1,123 1,137
------- -------
Total noninterest income 1,127 1,454
------- -------
Noninterest expenses:
Salaries and employee benefits 5,121 4,952
Occupancy expense 1,094 1,038
FDIC insurance 837 791
Depreciation and amortization 270 239
Amortization of value ascribed to
acquired intangibles 117 227
Other 1,909 2,350
------- -------
Total noninterest expenses 9,348 9,597
------- -------
Income before income taxes 7,938 6,656
Applicable income taxes 2,691 2,254
------- -------
Net income $ 5,247 $ 4,402
======= =======
Earnings per common share:
Net income $ 1.18 $ 1.01
======= =======
Weighted-average common shares outstanding 4,434 4,349
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE>
GERMANTOWN SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited)
March 31, 1994
--------------
<S> <C>
ASSETS
Cash and due from banks $ 20,637
Money market instruments 38,326
----------
Total cash and cash equivalents 58,963
----------
Securities held-to-maturity (Market value: $512,723) 514,494
Securities available-for-sale at market value
(Net amortized cost: $22,717) 24,167
----------
Total securities 538,661
----------
Loans:
Mortgage 652,283
Consumer 367,046
Commercial 2,225
----------
Total 1,021,554
Less: Unearned income (7,430)
Allowance for possible loan losses (23,507)
----------
Net loans 990,617
----------
Accrued interest receivable 8,069
Premises and equipment, net 7,308
Deferred tax asset 9,318
Other 9,465
----------
Total assets $1,622,401
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Noninterest-bearing deposits $ 45,080
Interest-bearing checking accounts 121,558
Money market and super NOWs 234,198
Passbooks, clubs and other savings 306,534
Savings certificates of $100,000 and over 33,496
Other savings certificates 712,742
----------
Total deposits 1,453,608
Other 22,049
----------
Total liabilities 1,475,657
----------
Shareholders' Equity:
Preferred stock (par value $0.10)
15,000,000 shares authorized, none issued or outstanding --
Common stock (par value $0.10)
35,000,000 shares authorized, 4,194,647 outstanding 419
Additional paid-in capital 38,627
Retained earnings 106,755
Net unrealized holding gains on available-for-sale securities 943
----------
Total shareholders' equity 146,744
----------
Total liabilities and shareholders' equity $1,622,401
==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE>
GERMANTOWN SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Net
Additional Unrealized
Preferred Common Paid-in Retained Holding
Stock* Stock Capital Earnings Gains Total
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1992 -- $411 $36,798 $ 83,085 -- $120,294
11,313 stock
options exercised 1 145 146
Net income 4,402 4,402
Cash dividend paid
($0.10 per share) (411) -- (411)
---------------------------------------------------------
Balance at
March 31, 1993 -- $412 $36,943 $ 87,076 -- $124,431
=========================================================
Balance at
December 31, 1993 -- $419 $38,480 $101,928 $1,164 $141,991
5,313 stock
options exercised 147 147
Net income 5,247 5,247
Cash dividend paid
($0.10 per share) (420) (420)
Change in net unreal-
ized holding gains -- (221) (221)
---------------------------------------------------------
Balance at
March 31, 1994 -- $419 $38,627 $106,755 $ 943 $146,744
=========================================================
</TABLE>
* The Bank's Articles of Incorporation authorize the issuance of 15,000,000
shares of preferred stock, par value $0.10 per share. The preferred stock may
be issued at any time upon terms as determined by the Board of Directors.
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE>
GERMANTOWN SAVINGS BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
------------------
1994 1993
------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,247 $ 4,402
Reconciliation of net income to cash provided
by operating activities:
Depreciation and amortization 270 239
Amortization of value ascribed to acquired
intangibles 117 227
Deferred taxes (157) (120)
Provision for possible loan losses 100 850
Gain on sales and calls of securities (4) (317)
(Gain) loss on sale of premises and equipment 13 (2)
(Increase) decrease in interest receivable (343) 118
Increase in interest payable 330 526
Increase in accrued expenses 1,573 1,359
-------- --------
Net cash provided by operating activities 7,146 7,282
-------- --------
Cash flows from investing activities:
Proceeds from amortization, prepayments and
maturities of securities 379,561 158,522
Proceeds from sales of securities -- 501
Purchases of securities (395,909) (173,490)
Principal collected on loans 89,597 66,298
Loans funded (63,976) (82,253)
Capital expenditures (184) (263)
Proceeds from sale of premises and equipment 57 27
Net decrease in other assets 133 374
-------- --------
Net cash provided by (used in)
investing activities 9,279 (30,284)
-------- --------
Cash flows from financing activities:
Net increase (decrease) in demand deposits, NOW
accounts, money market and savings accounts (4,572) 8,876
Proceeds from sale of savings certificates 36,872 52,307
Payments for maturing savings certificates (54,331) (60,349)
Net increase (decrease) in other liabilities (937) 77
Dividends paid (420) (411)
Proceeds from issuance of common stock 73 146
-------- --------
Net cash provided by (used in) financing
activities (23,315) 646
-------- --------
Net decrease in cash and cash equivalents (6,890) (22,356)
Cash and cash equivalents at beginning of period 65,853 65,609
-------- --------
Cash and cash equivalents at end of period $ 58,963 $ 43,253
======== ========
Supplemental disclosures:
Interest paid on deposits $9,876 $12,586
Income taxes paid 178 217
Transferred from loans to other real estate owned 151 490
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
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<PAGE>
GERMANTOWN SAVINGS BANK AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
(Unaudited)
1. Basis of Presentation:
The consolidated financial statements include the accounts of Germantown
Savings Bank (Bank) and its wholly owned subsidiaries, Morris Holdings, Inc.
and GSB Investment, Inc. All significant intercompany accounts and
transactions have been eliminated. These unaudited consolidated financial
statements are prepared in conformity with generally accepted accounting
principles and include all adjustments which, in the opinion of management,
are necessary for a fair statement of the results for the periods presented.
2. Securities Held-To-Maturity:
At March 31, 1994, the amortized cost, gross unrealized gains and losses,
and the approximate market values of held-to-maturity securities are as follows:
<TABLE>
<CAPTION>
Net Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and agencies $259,525 $ 3 $1,079 $258,449
GNMA, FNMA and FHLMC
mortgage-backed securities 254,969 3,173 3,868 254,274
----------------------------------------------
$514,494 $ 3,176 $4,947 $512,723
==============================================
</TABLE>
At March 31, 1994, the maturity distribution of the amortized cost and the
approximate market values of held-to-maturity securities by contractual maturity
are shown below. Since borrowers may have the right to call or prepay
obligations with or without prepayment penalties, expected maturities will
differ from contractual maturities.
<TABLE>
<CAPTION>
March 31, 1994
---------------------
Net
Amortized Market
Cost Value
---------------------
<S> <C> <C>
Due 1 year or less $179,275 $179,220
After 1 year to 5 years 80,250 79,229
After 5 years to 10 years -- --
More than 10 years -- --
---------------------
259,525 258,449
GNMA, FNMA and FHLMC
mortgage-backed securities 254,969 254,274
---------------------
$514,494 $512,723
=====================
</TABLE>
3. Securities Available-For-Sale:
At March 31, 1994, the maturity distribution of the net amortized cost and
the carrying amount (approximate market value) of available-for-sale securities
by contractual maturity are shown below. Since borrowers may have the right to
call or prepay obligations with or without prepayment penalties, expected matu-
rities will differ from contractual maturities.
<TABLE>
<CAPTION>
March 31, 1994
--------------------
Net
Amortized Carrying
Cost Value
--------------------
<S> <C> <C>
Due 1 year or less $ -- $ --
After 1 year to 5 years 710 715
After 5 years to 10 years 6,074 7,202
More than 10 years 15,933 16,250
--------------------
$22,717 $24,167
====================
</TABLE>
During the first quarter of 1994, available-for-sale securities with a
carrying value (market value) of $2,684 were called. The Bank received proceeds
including scheduled payments of $2,609 and recognized net profits of $75 on
these transactions. Also during the quarter, held-to-maturity securities with a
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<PAGE>
cost of $15,346 were called. The Bank received proceeds including amortization
and prepayments of $15,275 and recognized net losses of $71 on these
transactions. The Bank did not sell any available-for-sale securities or held-
to-maturity securities during the first quarter of 1994. During the first
quarter of 1993, corporate and municipal securities with a carrying value of
$18,750 were called. The Bank received proceeds of $19,063 and recognized net
profits of $313 on these calls and scheduled payments. In addition, the Bank
sold its holding of preferred stock. The carrying value of this stock was
$497; the proceeds received were $501; and the profit was $4 on this sale.
4. Loans:
The Bank's construction, direct residential, consumer and commercial
lending activity is generally limited to southeastern Pennsylvania, south and
central New Jersey, Delaware and northeastern Maryland. The Bank's indirect
residential mortgage lending activity includes regions that Management believes
are not experiencing unusual economic problems. These lending activities could
be affected by regional economic problems or a downturn in real estate values.
Included in other assets on the consolidated balance sheet at March 31, 1994
is other real estate owned of $1,186.
5. Premises and Equipment:
At March 31, 1994, premises and equipment are as follows:
<TABLE>
<CAPTION>
March 31,
1994
---------
<S> <C>
Land $ 396
Buildings and improvements 10,296
Equipment 11,693
-------
22,385
Less: Accumulated depreciation and amortization 15,077
-------
$ 7,308
=======
</TABLE>
6. Allowance for Possible Loan Losses:
Changes in the allowance for possible loan losses are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March_31,
-----------------------
1994 1993
------ ------
<S> <C> <C>
Balance at beginning of period $23,043 $18,855
Provision charged to income 100 850
Charge-offs (142) (286)
Recoveries 506 356
------- -------
Balance at end of period $23,507 $19,775
======= =======
</TABLE>
7. Income Taxes:
The components of applicable income taxes are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March_31,
---------------------
1994 1993
------ ------
<S> <C> <C>
Federal:
Currently payable $2,848 $2,374
Deferred tax (benefit) (157) (120)
------ ------
2,691 2,254
State: Currently payable -- --
------ ------
$2,691 $2,254
====== ======
</TABLE>
The Bank established a subsidiary in Delaware to hold a portion of the
Bank's securities in 1989. As a result, there is no applicable state tax in
either quarter of 1994 or 1993.
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<PAGE>
At March 31, 1994, items that give rise to significant portions of the
Bank's deferred tax asset, calculated at a 35% tax rate, are as follows:
<TABLE>
<CAPTION>
March 31,
1994
---------
<S> <C>
Allowance for possible loan losses $8,227
Postretirement benefits other
than pensions 1,485
Other, net (394)
------
$9,318
======
</TABLE>
8. Earnings per Common Share:
Earnings per common share is based on income divided by the weighted-average
number of shares and equivalent shares outstanding for each of the periods
presented. When the closing price at the end of a period or the average market
price of the common stock for the period, whichever is greater, exceeds the
exercise price of options, the number of shares of common stock is increased by
the number of shares issuable on the exercise of options based on the assumption
that common stock could be purchased with the proceeds from the exercise of
options. At March 31, 1994 and 1993, the weighted-average number of common and
common share equivalents outstanding amounts to 4,434,183 and 4,348,595,
respectively.
9. Stock Option Plan and Program:
During the first quarter of 1994 and 1993, transactions in the Bank's Stock
Option Plan and Program are as follows:
<TABLE>
<CAPTION>
Plan Program
----------------------- ----------------------
Per Share Per Share
Shares Price Shares Price
------- -------------- ------ --------------
<S> <C> <C> <C> <C>
Exercisable 12/31/92 318,649 9.75 to 21.875 55,443 9.75 to 21.875
Exercised (6,000) 9.75 to 21.875 (5,313) 9.75
------- ------
Exercisable 3/31/93 312,649 9.75 to 21.875 50,130 9.75 to 21.875
======= ======
Exercisable 12/31/93 269,107 9.75 to 29.00 43,504 9.75 to 29.00
Exercised -- (5,313) 13.75
------- ------
Exercisable 3/31/94 269,107 9.75 to 29.00 38,191 9.75 to 29.00
======= ======
</TABLE>
10. Financial Instruments with Off-Balance Sheet Risk:
The Bank is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to originate and/or purchase
residential, consumer and construction loans and standby letters of credit to
guarantee performance of a customer to a third party. Such instruments generally
have fixed expiration dates or termination clauses and may require payment of
fees to the Bank. The Bank uses the same credit policies in making commitments
and issuing standby letters of credit as it does for on-balance sheet instru-
ments. However, these instruments are properly not recorded on the Bank's
financial statements. Management believes its diversified loan portfolio is not
dependent upon any particular economic sector.
Since some commitments and letters of credit are expected to expire without
being drawn down, the amounts summarized below at March 31, 1994 and 1993 do not
necessarily represent future cash requirements:
<TABLE>
<CAPTION>
March 31,
1994 1993
-------- --------
<S> <C> <C>
Commitments to extend credit $74,384 $132,875
Standby letters of credit 211 211
</TABLE>
11. Conversion:
In April 1987, the Bank completed its conversion from a state-chartered
mutual savings bank to a state-chartered stock savings bank through amendments
to its charter and sale of 4,025,000 shares of $0.10 par value common stock. The
net proceeds of the sale were $36,356.
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<PAGE>
At the time of conversion, the Bank established a liquidation account in
the amount of $23,778 equal to the Bank's total net worth as of December 31,
1986. The liquidation account has been established for a period of 10 years for
the benefit of eligible depositors who continue to maintain their deposit
accounts in the Bank after conversion, subject to downward adjustment. Eligible
depositors would be entitled, in the unlikely event of complete liquidation of
the Bank, to receive liquidating distributions of any assets remaining after
payment of all creditors' claims (including the claims of all depositors at the
time of liquidation), but before any distributions made to the Bank's
shareholders, equal to their proportionate interest at that time in the
liquidation account. Except for the repurchase of stock by the Bank, the
existence of the liquidation account will not restrict the use or application of
such capital.
12. Agreement between GSB and CoreStates Financial Corp:
On March 7, 1994, GSB and CoreStates Financial Corp entered into an
agreement for CoreStates to acquire GSB for a combination of cash and stock.
Assuming approval by regulators and by GSB shareholders, the transaction is
expected to close in the third quarter of 1994, and will be accounted for as a
purchase. The accompanying financial statements do not include any adjustments
in contemplation of this proposed acquisition.
13. Other Matters:
The Bank is required to maintain certain levels of regulatory capital. At
March 31, 1994, the Bank's leverage capital ratio is 8.87%, and the Bank's total
risk-based capital ratio is 18.44%.
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