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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): July 20, 1994
CoreStates Financial Corp
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(Exact name of registrant specified in its Charter)
Pennsylvania 0-6879 23-1899716
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(State or other (Commission (IRS Employee
jurisdiction of File Number) identification No.)
incorporation)
Centre Square West, 1500 Market Street
Philadelphia, Pennsylvania 19101
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(Address of principal executive offices) (Zip Code)
Registrant's telephone, including area code: (215) 973-3806
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(Former name and former address, if changed since last report)
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Item 5. Other Events.
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The information regarding earnings and the restatement of the results of
the 1993 fourth and 1994 first quarters set forth in the news release of
CoreStates Financial Corp as Exhibit 99 is incorporated by reference and made a
part hereof.
Item 7. Exhibits
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99 CoreStates Financial Corp News Release dated July 20, 1994.
CORESTATES FINANCIAL CORP
(Registrant)
By /s/ David T. Walker
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David T. Walker
Deputy Chief Counsel
Dated: July 21, 1994
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Exhibit Index
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Exhibit No. Page
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99 CoreStates Financial
Corp News Release
dated July 20, 1994 4
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[LETTERHEAD OF CORESTATES APPEARS HERE]
Exhibit 99
[LOGO OF CORESTATES
APPEARS HERE]
Contact Gary Brooten or Gregg Feistman
215 973-3546
For Release Immediately Upon Receipt
CoreStates Reports Solid Earnings
For Second Quarter; First Quarter Restated
Without Effect on Current Financial Position
Philadelphia, July 20, 1994--CoreStates Financial Corp today
reported operating earnings for the second quarter, excluding one-time
charges associated with the acquisition of Independence Bancorp on June
27, of $102,738,000 or 72 cents per share, reflecting a quite strong
1.48% return on average assets and 18.55% return on equity. Second
quarter earnings in 1993, restated to include Independence results, were
$91,391,000 or 63 cents per share.
Net income for the 1994 second quarter, including the one-time
charges, was $63,091,000 or 44 cents per share.
Terrence A. Larsen, chairman, said the year-to-year improvement in
operating earnings reflected solid growth in revenues across the bank
holding company's basic businesses while expenses remained essentially
flat.
Total net interest income was up more than 5%, reflecting both a
moderate increase in average loans and a 26 basis-point increase in the
net financial margin to a very strong 5.86%. Revenues from fee-based
services also increased, with fees for international services showing the
strongest rate of growth.
"We are pleased at the basic stability and growth in our core
businesses, though industry fundamentals are not as strong as we would
like to see," said Larsen. He cited uneven patterns of loan volume so far
in 1994, attributable to continuing uncertainties in the business
climate, the recent increases in the prime lending rate and intensified
competition in key markets.
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"In the setting of ongoing pressures on our industry, we are
focusing more directly on expenses," he added. "We have managed expenses
closely in the normal course of business and have met our consolidation
targets on schedule. In view of the challenges we see in the business
climate over the next year, we must ensure that we are operating at the
lowest reasonable expense levels and achieving the highest possible
productivity levels."
The one-time charges associated with the Independence deal included
a $25 million provision for loan losses and $34 million in closing and
consolidation costs.
Total non-performing assets were $352 million on June 30, 1994,
compared to $501 million on March 31, 1994, and $529 million on June 30,
1993. The sharp decline during the second quarter resulted from a bulk
sale of loans and significant charge-offs, reflecting primarily the
planned upgrading of the portfolio purchased with the first quarter
acquisition of Constellation Bank. The June 30, 1994 non-performing
assets represented 1.28% of total assets and 1.79% of total loans plus
real estate foreclosed or in process of foreclosure.
The consolidated loan loss provision for the second quarter,
including the $25 million special provision for Independence, was $50.0
million. Net charge-offs were $140.3 million for the second quarter and
$172.5 million for the first six months of 1994, compared with $27.3 and
$50.8 million, respectively, a year earlier. The consolidated reserve
for loan losses at June 30, 1994, was $475 million or 180% of total non-
performing loans.
Consolidated total assets at June 30 were $27.5 billion, including
consolidated net loans of $19.6 billion. Consolidated total deposits were
$20.1 billion.
Shareholders' equity at June 30 was $2.2 billion, or 8.0% of total
assets. The Tier 1 leverage ratio (Tier 1 or core capital as a percentage
of quarterly average assets) was 7.7% for the quarter. Tier 1 capital at
June 30 was 9.1% of risk-adjusted assets and total capital was 13.2% of
risk-adjusted assets, compared to minimum regulatory requirements of 4%
and 8% respectively.
Besides the Constellation and Independence transactions that
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closed in the first and second quarters, respectively, CoreStates,
assuming regulatory approval, expects to close its acquisition of
Germantown Savings Bank early in the fourth quarter.
Six-Month Results and First Quarter Restatement
Operating earnings for the first six months, before one-time charges
associated with the two acquisitions and changes in accounting
principles, were $200,543,000 or $1.40 per share in 1994 compared to
$171,672,000 or $1.18 per share in 1993. The 1994 results represented an
operating return on average assets of 1.46% and return on equity of
17.41%.
Net income for the first six months of 1994, including the
acquisition-related charges, was $29,666,000 or 21 cents per share.
The net figure included $195 million in pre-tax charges ($127.8 million
after tax) associated with the Constellation acquisition that had been
recorded originally in Constellation's fourth-quarter 1993 results and
therefore in CoreStates' 1993 results as restated in May 1994 to reflect
the pooling of interests of the two companies.
Following discussions with Securities and Exchange Commission staff,
CoreStates has restated the results of the 1993 fourth and 1994 first
quarters to shift the $195 million in charges to the first quarter.
The change has no effect on CoreStates' financial position as
reported for either March 31 or June 30, 1994. It also has no effect on
CoreStates trends and basic operating results, excluding the one-time
merger-related costs, over the last three quarters.
Larsen said the company on July 11 received SEC staff comments on a
recently-filed shelf registration statement that questioned the timing of
the recording of the $195 million merger-related charges.
"It is important to note that this is not an issue of whether these
non-recurring $195 million of charges have been publicly disclosed.
They have been thoroughly discussed in our annual report to
shareholders and elsewhere in required filings," Larsen said. "This is
an issue of historical timing that has no financial impact on the
company today or going forward."
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CoreStates Financial Corp
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
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1994 1993(a) 1994 1993(a)
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<S> <C> <C> <C> <C>
Income before cumulative effect of
a change in accounting principle $63,091(b) $91,391 $33,095(b) $171,672
======= ======= ======= ========
Net income $63,091 $91,391 $29,665(c) $158,662(d)
======= ======= ======= ========
Per Share
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Income before cumulative effect of
a change in accounting principle $0.44(b) $0.63 $0.23(b) $1.18
===== ===== ===== =====
Net income $0.44 $0.63 $0.21(c) $1.09(d)
===== ===== ===== =====
Average number of shares outstanding 142,139 145,476 143,368 145,255
======= ======= ======= =======
</TABLE>
(a) Restated to include Constellation Bancorp which was acquired on March 16,
1994 and Independence Bancorp which was acquired on June 27, 1994. Both
transactions were accounted for as a pooling of interests.
(b) Excluding after-tax merger-related charges of $127.8 million or $0.89 per
share recorded in the first quarter of 1994 for the Constellation
acquisition and $39.6 million or $0.28 per share recorded in the second
quarter of 1994 for the Independence acquisition, selected financial
results for the second quarter and six months of 1994 compared to the prior
year follows:
<TABLE>
<S> <C> <C> <C> <C>
Income before cumulative effect of
a change in accounting principle $102,738 $91,391 $200,543 $171,672
Per share $0.72 $0.63 $1.40 $1.18
</TABLE>
(c) Reflects Independence's writedown to fair value for certain mortgage
securities deemed to be impaired under FASB's 1994 interpretation of FAS
115.
(d) Reflects the adoption of Statement of Financial Accounting Standards No.
112, "Employers' Accounting for Postemployment Benefits" (FAS 112). As
required under FAS 112, CoreStates recognized immediately the January 1,
1993 transitional liability of $20.0 million pre-tax, $13.0 million after-
tax, as the cumulative effect of a change in accounting principle in the
first quarter of 1993.
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