<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported): June 27, 1994
CoreStates Financial Corp
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in Charter)
Pennsylvania 0-6897 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)
Page 1 of 17
<PAGE>
Item 7. Financial Statements and Exhibits. Page
----
(a) Restated Financial Information of
CoreStates Financial Corp and Subsidiaries
(Unaudited)
(1) Introductory Note to Restated Financial
Information (Unaudited) 3
(2) Restated Condensed Combined Balance Sheet
(Unaudited) as of March 31, 1994 4
(3) Footnotes to Restated Condensed
Combined Balance Sheet 5
(4) Restated Condensed Combined Statement of
Income (Unaudited) for the three months
ended March 31, 1994 6
(5) Restated Condensed Combined Statement of
Income (Unaudited) for the three months
ended March 31, 1993 7
(6) Restated Condensed Combined Statement of
Income (Unaudited) for the year ended
December 31, 1993 8
(7) Restated Condensed Combined Statement of
Income (Unaudited) for the year ended
December 31, 1992 9
(8) Restated Condensed Combined Statement of
Income (Unaudited) for the year ended
December 31, 1991 10
(9) Footnotes to Restated Condensed Combined
Statements of Income 11
Pro Forma Financial Information of CoreStates
Financial Corp and Subsidiaries (Unaudited)
(10) Introductory Note to Pro Forma Financial
Information (Unaudited) 12
(11) Pro Forma Condensed Combined Balance Sheet
(Unaudited) as of June 30, 1994 13
(12) Footnotes to Pro Forma Condensed
Combined Balance Sheet 14
(13) Pro Forma Condensed Combined Statement of
Income (Unaudited) for the six months
ended June 30, 1994 15
(14) Pro Forma Condensed Combined Statement of
Income (Unaudited) for the year ended
December 31, 1993 16
(15) Footnotes to Pro Forma Condensed Combined
Statements of Income 17
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this Form 8-K/A, amendment No. 1 to its current
report on Form 8-K dated June 27, 1994 to be signed on its behalf by the
undersigned thereunto duly authorized.
CORESTATES FINANCIAL CORP
By: /s/ Albert W. Mandia
-----------------------
Albert W. Mandia
Executive Vice President, Finance
(Principal Accounting Officer)
Dated: September 13, 1994
Page 2 of 17
<PAGE>
RESTATED FINANCIAL INFORMATION OF
CORESTATES FINANCIAL CORP AND SUBSIDIARIES
(UNAUDITED)
The following unaudited condensed combined financial statements
reflect the restatement for the acquisition of Independence Bancorp, Inc.
("Independence") under the pooling of interests method of accounting ("the
Merger"). Under such method of accounting, the historical book values of the
assets, liabilities and shareholders' equity of Independence, as reported on its
consolidated balance sheet, and modified for intercompany balances, are carried
over onto the consolidated balance sheet of CoreStates and no goodwill or other
intangible assets are created. CoreStates will include in its Consolidated
Statement of Income for the year ending December 31, 1994 the results of
operations of Independence beginning January 1, 1994, as modified for
intercompany transactions and has combined and restated as its income for prior
periods the reported results of operations of Independence for such prior
periods, as modified for intercompany transactions.
The accompanying income statements for the three months ended March
31, 1994 and the year ended December 31, 1993 have been restated subsequent to
the release of March 31, 1994 financial statements to reflect merger-related
charges of $127.8 million after-tax, or $0.89 per share, related to the March
16, 1994 acquisition of Constellation Bancorp ("Constellation") in the first
quarter of 1994, rather than in the fourth quarter of 1993 as previously
reported. This restatement was made after discussions with the Securities and
Exchange Commission staff which resulted in these charges being reflected in the
quarter that the acquisition was consummated. This restatement has no effect on
CoreStates' financial position as reported for either March 31, 1994 or June 30,
1994. The restatement also has no effect on CoreStates' basic operating
results, excluding the one-time merger-related charges. On a pre-tax basis, the
merger-related charges consisted of a $120.0 million provision for loan losses,
a $28.0 million addition to the OREO reserve, $13.0 million for the writedown of
purchased mortgage servicing rights and related assets, and $34.0 million for
expenses directly attributable to the Constellation acquisition.
This restated financial information is based on the adjustments set
forth herein and in the notes to such statements. The restated information has
been prepared using the historical consolidated financial statements of both
CoreStates and Independence and should be read in conjunction with such
historical financial statements and notes thereto. Certain amounts have been
reclassified for comparative purposes. The restated condensed combined
financial statements do not purport to be indicative of the combined financial
position or results of operations for future periods or indicative of the
results that actually would have been realized had the entities been combined
during these periods.
The accompanying unaudited restated financial statements reflect an
equivalent per Independence Common Share value of 1.5 CoreStates Common Shares
which represents the number of CoreStates Common Shares issued upon consummation
of the Merger on June 27, 1994 in exchange for each Independence Common Share
outstanding.
Cash dividends per share declared for the periods presented assume
that CoreStates would have declared cash dividends per share equal to the cash
dividends per share declared by CoreStates prior to December 31, 1993.
Unaudited proforma financial information reflecting CoreStates
proposed business combination with Germantown Savings Bank ("Germantown") is
presented on pages 13-17. See "Pro Forma Financial Information" on page 12.
-3-
<PAGE>
RESTATED CONDENSED COMBINED BALANCE SHEET
(UNAUDITED)
March 31, 1994
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
CoreStates
CoreStates Independence and
and Bancorp and Independence
Subsidiaries Subsidiaries Restated
---------------- ---------------- ----------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks..................... $2,278,945 $114,600 $2,329,479 (A)
Time deposits............................... 1,289,804 42,395 1,332,199
Investment securities held-to-maturity...... 2,058,251 2,058,251
Investment securities available for sale.... 375,672 566,629 921,681 (C)
Loans....................................... 18,535,299 1,691,393 20,201,692 (A)
Allowance for loan losses................... (532,606) (33,016) (565,622)
-------------- -------------- --------------
Net Loans................................. 18,002,693 1,658,377 19,636,070
Federal funds sold and securities
purchased under agreements
to resell................................. 403,662 72,500 442,462 (A)
Trading account securities.................. 3,761 3,761
Due from customers on
acceptances............................... 304,102 304,102
Premises and equipment...................... 378,730 33,051 411,781
Other assets................................ 596,571 67,925 650,259 (A)(C)
-------------- -------------- --------------
$25,692,191 $2,555,477 $28,090,045
============== ============== ==============
LIABILITIES
Deposits:
Domestic:
Non-interest bearing..................... $6,272,922 $374,626 $6,583,482 (A)
Interest bearing......................... 11,651,676 1,754,043 13,405,719
Overseas branches and
subsidiaries............................ 728,645 728,645
-------------- -------------- --------------
Total deposits.......................... 18,653,243 2,128,669 20,717,846
Funds borrowed.............................. 2,191,643 51,406 2,209,349 (A)
Bank acceptances outstanding................ 305,109 305,109
Other liabilities........................... 1,046,567 28,870 1,059,781
Long-term debt.............................. 1,478,531 132,880 1,586,411 (A)
-------------- -------------- --------------
Total liabilities...................... 23,675,093 2,341,825 25,878,496
-------------- -------------- --------------
SHAREHOLDERS' EQUITY
Common stock................................ 129,146 29,296 145,650 (B)(C)
Capital surplus............................. 680,532 92,606 778,485 (B)(C)
Retained earnings........................... 1,262,193 94,140 1,342,187 (C)
Treasury stock.............................. (54,773) (2,390) (54,773)(C)
-------------- -------------- --------------
Total shareholders' equity............. 2,017,098 213,652 2,211,549
-------------- -------------- --------------
$25,692,191 $2,555,477 $28,090,045
============== ============== ==============
Book Value per Share........................ $15.88 $18.47 $15.41
</TABLE>
See footnotes to Restated Condensed Combined Balance Sheet.
-4-
<PAGE>
FOOTNOTES TO RESTATED CONDENSED
COMBINED BALANCE SHEET
(A) Reflects the elimination of intercompany deposits and Federal funds
transactions.
(B) Reflects the conversion of 11.566 million outstanding Independence Common
Shares on March 31, 1994 into 17.349 million CoreStates Common Shares.
(C) Reflects the cancellation of 563,000 shares of Independence Common Shares
owned by CoreStates and carried at fair value and 152,742 shares of
Independence Common Shares held as Treasury stock.
-5-
<PAGE>
CORESTATES FINANCIAL CORP
RESTATED CONDENSED COMBINED STATEMENT OF INCOME
(UNAUDITED)
Three Months Ended March 31, 1994
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
CoreStates
CoreStates Independence and
and Bancorp and Independence
Subsidiaries Subsidiaries(A) Combined
------------ --------------- ------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans........................................ $358,299 $33,893 $391,908
Interest on investment securities................................. 32,176 7,850 40,026
Interest on time deposits in banks................................ 14,445 351 14,796
Interest on federal funds sold and securities purchased
under agreements to resell...................................... 2,278 303 2,458 (B)
Other interest income............................................. 21 21
-------- ------- --------
Total interest income.......................................... 407,219 42,397 449,209
-------- ------- --------
INTEREST EXPENSE
Interest on deposits.............................................. 73,643 13,098 86,741
Interest on funds borrowed........................................ 16,766 317 16,960 (B)
Interest on long-term debt........................................ 15,286 2,168 17,170
-------- ------- --------
Total interest expense......................................... 105,695 15,583 120,871
-------- ------- --------
Net interest income............................................... 301,524 26,814 328,338
Provision for losses on loans..................................... 145,000 1,905 146,905
-------- ------- --------
Net interest income after provision for losses on loans........... 156,524 24,909 181,433
-------- ------- --------
NON-INTEREST INCOME
Service charges on deposit accounts.............................. 43,818 2,204 46,022
Trust income..................................................... 23,365 1,228 24,593
Fees for international services.................................. 18,139 18,139
Debit and credit card fees....................................... 13,726 672 14,398
Securities gains (losses)........................................ 6,911 (14) 6,897
Other operating income........................................... 33,425 2,473 35,898
-------- ------- --------
Total non-interest income..................................... 139,384 6,563 145,947
-------- ------- --------
NON-FINANCIAL EXPENSES
Salaries, wages and benefits..................................... 147,398 11,530 158,928
Net occupancy.................................................... 28,451 1,741 30,192
Equipment expenses............................................... 17,789 1,415 19,204
Other operating expenses......................................... 154,764 8,246 163,010
-------- ------- --------
Total non-financial expenses.................................. 348,402 22,932 371,334
-------- ------- --------
Income (loss) before income taxes................................ (52,494) 8,540 (43,954)
Provision for income taxes....................................... (16,606) 2,647 (13,959)
-------- ------- --------
Income (loss) before cumulative effect of a
change in accounting principle.................................. (35,888) 5,893 (29,995)
Cumulative effect of a change in
accounting principle (F)........................................ (3,430) (3,430)
-------- ------- --------
Net income (loss)............................................ $(35,888) $ 2,463 $(33,425)
======== ======= ========
Average common shares outstanding................................. 128,089 11,542 144,612
PER COMMON SHARE DATA
Income before cumulative effect of a change in
accounting principle............................................ $(0.28) $0.50 $(0.21)
Net income (loss)................................................. $(0.28) $0.21 $(0.23)
Cash dividends declared........................................... $0.30 $0.29 $0.30
</TABLE>
See Footnotes to Restated Condensed Combined Statements of Income
-6-
<PAGE>
CORESTATES FINANCIAL CORP
RESTATED CONDENSED COMBINED STATEMENT OF INCOME
(UNAUDITED)
Three Months Ended March 31, 1993
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
CoreStates
CoreStates Independence and
and Bancorp and Independence
Subsidiaries Subsidiaries(A) Combined
------------ --------------- ------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans.................................................. $353,798 $35,424 $389,222
Interest on investment securities........................................... 45,521 9,696 55,217
Interest on time deposits in banks.......................................... 12,560 403 12,297
Interest on federal funds sold and securities purchased under agreements to
resell.................................................................... 1,586 196 1,779(B)
Other interest income....................................................... 13 13
-------- ------- --------
Total interest income................................................... 413,478 45,719 459,158
-------- ------- --------
INTEREST EXPENSE
Interest on deposits........................................................ 88,071 16,186 104,257
Interest on funds borrowed.................................................. 13,281 865 14,143(B)
Interest on long-term debt.................................................. 16,965 1,889 18,818
-------- ------- --------
Total interest expense.................................................. 118,317 18,940 137,218
-------- ------- --------
Net interest income......................................................... 295,161 26,779 321,940
Provision for losses on loans............................................... 27,500 3,225 30,725
-------- ------- --------
Net interest income after provision for losses on loans..................... 267,661 23,554 291,215
-------- ------- --------
NON-INTEREST INCOME
Service charges on deposit accounts......................................... 40,590 2,052 42,642
Trust income................................................................ 24,209 1,163 25,372
Fees for international services............................................. 15,483 15,483
Debit and credit card fees.................................................. 13,271 545 13,816
Securities gains (losses)................................................... 3,022 (173) 2,849
Other operating income...................................................... 26,643 3,001 29,644
-------- ------- --------
Total non-interest income............................................... 123,218 6,588 129,806
-------- ------- --------
NON-FINANCIAL EXPENSES
Salaries, wages and benefits................................................ 142,624 11,713 154,337
Net occupancy............................................................... 27,578 1,663 29,241
Equipment expenses.......................................................... 17,492 1,545 19,037
Other operating expenses.................................................... 90,628 7,832 98,460
-------- ------- --------
Total non-financial expenses............................................ 278,322 22,753 301,075
-------- ------- --------
Income before income taxes.................................................. 112,557 7,389 119,946
Provision for income taxes.................................................. 37,507 2,158 39,665
-------- ------- --------
Income before cumulative effect of a change in accounting principle......... 75,050 5,231 80,281
-------- ------- --------
Cumulative effect of a change in
accounting principle (D).................................................. (13,010) (13,010)
-------- ------- --------
Net income.................................................................. $ 62,040 $ 5,231 $ 67,271
======== ======= ========
Average common share outstanding............................................ 128,300 11,404 145,109
PER COMMON SHARE DATA
Income before cumulative effect of a change in accounting principle......... $0.58 $0.46 $0.55
Net income.................................................................. $0.48 $0.46 $0.46
Cash dividends declared..................................................... $0.27 $0.29 $0.27
</TABLE>
See Footnotes to Restated Condensed Combined Statements of Income
-7-
<PAGE>
CORESTATES FINANCIAL CORP
RESTATED CONDENSED COMBINED STATEMENT OF INCOME
(UNAUDITED)
YEAR ENDED DECEMBER 31, 1993
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
CoreStates Independence CoreStates &
and Bancorp, Inc and Independence
Subsidiaries Subsidiaries (A) Combined
------------ ---------------- -------------
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans.............. $1,442,794 $142,221 $1,585,015
Interest on investment securities....... 172,748 32,422 205,170
Interest on time deposits in banks...... 43,049 1,373 44,340
Interest on federal funds sold and
securities purchased under
agreements to resell.................. 6,119 1,269 7,280(B)
Other interest income................... 59 59
---------- -------- ----------
Total interest income.............. 1,664,769 177,285 1,841,864
---------- -------- ----------
Interest Expense:
Interest on deposits.................... 320,086 59,727 379,813
Interest on funds borrowed.............. 64,457 2,652 67,001(B)
Interest on long-term debt.............. 61,572 8,289 69,779
---------- -------- ----------
Total interest expense............. 446,115 70,668 516,593
---------- -------- ----------
Net interest income................ 1,218,654 106,617 1,325,271
Provision for losses on loans............. 110,000 11,201 121,201
---------- -------- ----------
Net interest income after
provision losses on loans........ 1,108,654 95,416 1,204,070
---------- -------- ----------
Non-Interest Income:
Service charges on deposit accounts..... 170,786 8,642 179,428
Trust income............................ 97,306 4,487 101,793
Fees for international services......... 69,432 69,432
Debit and credit card fees.............. 59,500 2,217 61,717
Securities gains........................ 15,748 362 16,110
Other operating income.................. 131,882 13,668 145,550
---------- -------- ----------
Total non-interest income.......... 544,654 29,376 574,030
---------- -------- ----------
Non-Financial Expenses:
Salaries, wages and benefits............ 576,470 46,498 622,968
Net occupancy........................... 108,295 6,656 114,951
Equipment expenses...................... 69,072 5,772 74,844
Other operating expenses................ 394,424 34,675 429,099
---------- -------- ----------
Total non-financial expenses....... 1,148,261 93,601 1,241,862
---------- -------- ----------
Income before income taxes.............. 505,047 31,191 536,238
Provision for income taxes.............. 165,497 8,312 173,809
---------- -------- ----------
Income before cumulative effect of a
change in accounting principle........ 339,550 22,879 362,429
Cumulative effect of a change in
accounting principle, net of tax (D).. (13,010) (13,010)
---------- -------- ----------
Net income.............................. $326,540 $22,879 $349,419
========== ======== ==========
Average common shares outstanding....... 128,570 11,438 145,398
Per Common Share Data:
Income before cumulative effect of a
change in accounting principle........ $2.64 $1.98 $2.49
Net Income.............................. $2.54 $1.98 $2.40
Cash dividends declared................. $1.14 $1.16 $1.14
</TABLE>
See Footnotes to Restated Condensed Combined Statements of Income.
-8-
<PAGE>
CORESTATES FINANCIAL CORP
RESTATED CONDENSED COMBINED STATEMENT OF INCOME
(UNAUDITED)
YEAR ENDED DECEMBER 31, 1992
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
CoreStates Independence CoreStates &
and Bancorp and Independence
Subsidiaries Subsidiaries (A) Combined
------------ ---------------- ------------
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans.............. $1,497,408 $150,355 $1,647,763
Interest on investment securities....... 194,029 44,863 238,851 (B)
Interest on time deposits in banks...... 55,635 2,298 58,613
Interest on federal funds sold and
securities purchased under
agreements to resell.................. 15,622 932 16,554
Other interest income................... 57 57
---------- -------- ----------
Total interest income.............. 1,762,751 199,128 1,961,838
---------- -------- ----------
Interest Expense:
Interest on deposits.................... 489,503 80,952 570,455
Interest on funds borrowed.............. 57,070 3,410 60,480
Interest on long-term debt.............. 72,828 5,638 78,425 (B)
---------- -------- ----------
Total interest expense............. 619,401 90,000 709,360
---------- -------- ----------
Net interest income................ 1,143,350 109,128 1,252,478
Provision for losses on loans............. 129,300 30,950 160,250
---------- -------- ----------
Net interest income after
provision for losses on loans.... 1,014,050 78,178 1,092,228
---------- -------- ----------
Non-Interest Income:
Service charges on deposit accounts..... 154,667 8,465 163,132
Trust income............................ 92,654 4,077 96,731
Fees for international services......... 60,247 60,247
Debit and credit card fees.............. 149,892 2,186 152,078
Securities gains (losses)............... 15,085 (1,280) 13,805
Other operating income.................. 114,178 10,493 124,671
---------- -------- ----------
Total non-interest income.......... 586,723 23,941 610,664
---------- -------- ----------
Non-Financial Expenses:
Salaries, wages and benefits............ 582,067 45,837 627,904
Net occupancy........................... 106,203 6,562 112,765
Equipment expenses...................... 79,350 6,239 85,589
Other operating expenses................ 445,723 34,612 480,335
---------- -------- ----------
Total non-financial expenses....... 1,213,343 93,250 1,306,593
---------- -------- ----------
Income before income taxes.............. 387,430 8,869 396,299
Provision for income taxes.............. 126,408 1,757 128,165
---------- -------- ----------
Income before cumulative effect of a
change in accounting principle........ 261,022 7,112 268,134
Cumulative effect of a change in
accounting principle, net of tax (E).. (84,946) 4,378 (84,946)(C)
---------- -------- ----------
Net income.............................. $176,076 $11,490 $183,188
========== ======== ==========
Average common shares outstanding....... 119,350 11,173 135,813
Per Common Share Data:
Income before cumulative effect of a
change in accounting principle........ $2.19 $0.63 $1.97
Net Income.............................. $1.48 $1.02 $1.35
Cash dividends declared................. $1.02 $1.16 $1.02
</TABLE>
See Footnotes to Restated Condensed Combined Statements of Income.
-9-
<PAGE>
CORESTATES FINANCIAL CORP
RESTATED CONDENSED COMBINED STATEMENT OF INCOME
(UNAUDITED)
YEAR ENDED DECEMBER 31, 1991
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
CoreStates &
CoreStates Independence Independence
and Bancorp, and Bancorp
Subsidiaries Subsidiaries (A) Combined
------------ ---------------- ------------
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans.............. $1,946,080 $170,761 $2,116,841
Interest on investment securities....... 209,009 52,734 261,743
Interest on time deposits in banks...... 73,775 6,006 79,768 (B)
Interest on federal funds sold and
securities purchased under
agreements to resell.................. 25,558 1,316 26,874
Other interest income................... 51 51
---------- -------- ----------
Total interest income.............. 2,254,473 230,817 2,485,277
---------- -------- ----------
Interest Expense:
Interest on deposits.................... 835,700 114,712 950,399 (B)
Interest on funds borrowed.............. 166,487 5,118 171,605
Interest on long-term debt.............. 84,418 5,945 90,363
---------- -------- ----------
Total interest expense............. 1,086,605 125,775 1,212,367
---------- -------- ----------
Net interest income................ 1,167,868 105,042 1,272,910
Provision for losses on loans............. 272,596 18,665 291,261
---------- -------- ----------
Net interest income after
provision for losses on loans.... 895,272 86,377 981,649
---------- -------- ----------
Non-Interest Income:
Service charges on deposit accounts..... 135,148 7,841 142,989
Trust income............................ 93,386 3,976 97,362
Fees for international services......... 47,275 47,275
Debit and credit card fees.............. 166,167 1,889 168,056
Securities gains (losses)............... (14,175) 307 (13,868)
Other operating income.................. 159,312 14,439 173,751
---------- -------- ----------
Total non-interest income.......... 587,113 28,452 615,565
---------- -------- ----------
Non-Financial Expenses:
Salaries, wages and benefits............ 575,438 44,921 620,359
Net occupancy........................... 115,462 6,386 121,848
Equipment expenses...................... 83,091 5,975 89,066
Other operating expenses................ 455,265 32,927 488,192
---------- -------- ----------
Total non-financial expenses....... 1,229,256 90,209 1,319,465
---------- -------- ----------
Income before income taxes.............. 253,129 24,620 277,749
Provision for income taxes.............. 90,503 5,664 97,432 (C)
---------- -------- ----------
Net income.............................. $ 162,626 $ 18,956 $ 180,317
========== ======== ==========
Average common shares outstanding....... 117,016 11,012 133,534
Per Common Share Data:
Net Income.............................. $1.39 $1.72 $1.35
Cash dividends declared................. $0.97 $1.16 $0.97
</TABLE>
See Footnotes to Restated Condensed Combined Statements of Income.
-10-
<PAGE>
FOOTNOTES TO RESTATED CONDENSED
COMBINED STATEMENTS OF INCOME
(A) Certain amounts have been reclassified for comparative purposes.
(B) Reflects the elimination of intercompany interest on deposits, long-term
debt and federal funds transactions.
(C) In 1993, Independence retroactively adopted FAS 109 as of January 1, 1987.
Independence's adoption of FAS 109 and the impact of applying pooling of
interests accounting rules had the following effects on restated income
and period-end common shareholders' equity:
<TABLE>
<CAPTION>
Increase (decrease) Cumulative
in net income increase (decrease)
------------------ in common
Amount Per Share shareholders' equity
--------- ---------- ---------------------
<S> <C> <C> <C>
Three Months ended:
March 31, 1994........ - - -
Year ended:
December 31, 1993.. - - -
December 31, 1992.. $(4,378) $(.03) -
December 31, 1991.. (1,265) (.01) $4,378
</TABLE>
(D) Effective January 1, 1993, CoreStates adopted FAS 112, "Employers'
Accounting for Postemployment Benefits." CoreStates recognized the January
1, 1993 FAS 112 transitional liability of $20.0 million, $13.0 million
after-tax or $0.09 per share, as the cumulative effect of a change in
accounting principle. The impact of FAS 112 on Independence is immaterial.
(E) Effective January 1, 1992, CoreStates adopted FAS 106, "Employers
Accounting for Postretirement Benefits other than Pensions." CoreStates
elected to recognize immediately the January 1, 1992 transitional liability
of $128.7 million, $84.9 million after-tax or $0.62 per share, as the
cumulative effect of a change in accounting principle. The impact of FAS
106 on Independence is immaterial.
(F) During the first quarter of 1994, Independence recognized a $3.4 million
after-tax, or $0.02 per share, impairment loss on certain mortgage
securities. The loss was the result of a write down to fair value of these
securities which were deemed to be impaired. This resulted from a Financial
Accounting Standards Board ("FASB") interpretation of a 1993 accounting
change, Statement of Financial Accounting Standards No. 115. The
interpretation reached by a consensus of the FASB Emerging Issues Task
Force in March 1994 provided more definitive criteria for recognition of
impairment losses on these types of securities.
-11-
<PAGE>
PRO FORMA FINANCIAL INFORMATION
OF CORESTATES FINANCIAL CORP AND SUBSIDIARIES
(UNAUDITED)
The following unaudited pro forma condensed combined financial statements
reflect the proposed combination of CoreStates and Germantown Savings Bank
("Proposed Combination") as if it had become effective on January 1, 1993 for
pro forma statement of income presentation and on June 30, 1994 for pro forma
balance sheet presentation. The Proposed Combination will be accounted for, in
accordance with generally accepted accounting principles, as a purchase of
Germantown by CoreStates. Under the purchase method of accounting, all assets
and liabilities of Germantown at June 30, 1994 have been adjusted, net of income
tax effects, to their current fair values and combined with the asset and
liability book values of CoreStates. The Consolidated Balance Sheet and
Statements of Income of CoreStates reflect the restatement for the June 27, 1994
acquisition of Independence Bancorp, Inc. under the pooling of interests method
of accounting as presented on pages 3-11.
This pro forma financial information is based on the estimates and
assumptions set forth in the notes to such statements. The pro forma
adjustments made in connection with the development of the pro forma information
are preliminary and have been made solely for purposes of developing such pro
forma information as necessary to comply with the disclosure requirements of the
Commission. Where applicable, the pro forma adjustments have been separately
tax effected at a 35% statutory rate. The pro forma information has been
prepared using the historical consolidated financial statements and notes
thereto. The unaudited pro forma condensed combined financial statements do not
purport to be indicative of the combined financial position or results of
operations of future periods or indicative of the results that actually would
have been realized had the entities been a single entity during these periods.
The accompanying unaudited pro forma financial information assumes that
5.399 million CoreStates Common Shares will be issued in the Proposed
Combination.
Pro forma cash dividends declared for the periods presented assume that
CoreStates would have declared cash dividends per share equal to the cash
dividends per share declared by CoreStates prior to June 30, 1994.
-12-
<PAGE>
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(UNAUDITED)
June 30, 1994
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
CoreStates Germantown Pro Forma
and Savings Pro Forma Balance
ASSETS Subsidiaries Bank Adjustments Sheet
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Cash and due from banks................. $2,217,192 $25,266 $ (113) (A) $2,242,345
Time deposits........................... 1,686,462 139 1,686,601
Investment securities................... 2,970,896 533,337 7,819 (D) 3,512,052
Loans, net of unearned discounts........ 19,562,687 1,009,174 12,522 (D) 20,584,383
Allowance for loan losses............... (475,296) (23,770) (499,066)
Federal funds sold and securities
purchased under agreements to resell... 57,853 18,000 (7,000) (A) 68,853
Trading account securities.............. 2,876 2,876
Due from customers on acceptances....... 319,691 319,691
Premises and equipment.................. 420,034 7,065 427,099
Other assets............................ 701,214 25,452 143,793 (B)(D) 870,459
-------------- ------------ ------------- ------------
Total assets....................... $27,463,609 $1,594,663 $157,021 $29,215,293
============== ============ ============= ============
LIABILITIES
Deposits:
Domestic:
Non-interest bearing.................. $5,961,821 $52,447 $ (113) (A) $6,014,155
Interest bearing...................... 13,322,247 1,380,050 9,362 (D) 14,711,659
Overseas branches and subsidiaries..... 841,504 841,504
-------------- ------------ ------------- ------------
Total deposits....................... 20,125,572 1,432,497 9,249 21,567,318
Funds borrowed.......................... 2,186,305 (7,000) (A) 2,179,305
Bank acceptances outstanding............ 307,216 307,216
Other liabilites........................ 1,023,152 10,661 46,147 (B)(D) 1,079,960
Long-term debt.......................... 1,657,175 117,058 (C) 1,774,233
-------------- ------------ ------------- ------------
Total liabilites.................... 25,299,420 1,443,158 165,454 26,908,032
SHAREHOLDERS' EQUITY
Common stock............................ 145,849 420 5,399 (C) 151,248
(420) (C)
Capital surplus......................... 781,516 38,653 137,673 (C) 919,189
(38,653) (C)
Retained earnings....................... 1,356,105 112,432 (112,432) (C) 1,356,105
Treasury stock.......................... (119,281) (119,281)
-------------- ------------ ------------- ------------
Total shareholders' equity......... 2,164,189 151,505 (8,433) 2,307,261
Total liabilities and.............. -------------- ------------ ------------- ------------
shareholders' equity............... $27,463,609 $1,594,663 $157,021 $29,215,293
============== ============ ============ ============
Shares Outstanding (in thousands)....... 141,310 4,196 1,203 146,709
Book value per share.................... $15.32 $36.11 $15.89
</TABLE>
See Footnotes to Pro Forma Condensed Combined Balance Sheet.
-13-
<PAGE>
FOOTNOTES TO PROFORMA CONDENSED COMBINED BALANCE SHEET
(UNAUDITED)
(A) Elimination of intercompany deposits and other intercompany funding.
(B) Reflects charges of approximately $41.9 million, $27.3 million after the
related tax effects, for expenses directly attributable to the Proposed
Combination including $16.1 million to cash out Germantown stock options,
$10.0 million to write down duplicate Germantown facilities and systems and
$9.0 million for employee severance.
(C) Represents the purchase price in the Proposed Combination using the
following assumptions:
1) Shareholders of Germantown will receive, for each of the 4,195,647
Germantown Common Shares outstanding at June 30, 1994, $62 per
share payable 55% in equivalent value CoreStates Common Shares,
45% in cash, for a total purchase price of $260 million.
2) The market value for CoreStates Common Shares, for purposes of
Germantown pro forma calculations, was assumed to be $26.50 per
share.
3) CoreStates Common Shares issued in the Proposed Combination will
equal 5.399 million shares.
4) The cash portion of the purchase price was assumed to be raised
through the issuance of seven-year notes at 7 1/4%.
5) The elimination of Germantown's total shareholders' equity at
June 30, 1994 after reduction for the $41.9 million, $15.7
million after-tax, of expenses directly attributable to the
proposed combination.
(D) Represents the estimated adjustments of Germantown's assets and liabilities
to their fair values (which were determined using information available at
the most recent practicable date), the intangible asset related to the
value of the deposit base acquired, which is estimated to be approximately
$28 million ($43 million marked up for deferred taxes as required by FAS
109), and the adjustment of approximately $101 million arising from the
excess of the total purchase price over net assets acquired (i.e.
goodwill).
-14-
<PAGE>
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
(UNAUDITED)
Six Months Ended June 30, 1994
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Corestates Germantown Pro Forma
and Savings Pro Forma Balance
Subsidiaries Bank Adjustments Sheet
------------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans................... $813,054 $38,737 $ (1,252)(B) $850,539
Interest on investment securities............ 80,081 14,012 (1,150)(B) 92,943
Interest on time deposits in banks........... 26,345 2 26,347
Interest on federal funds sold and
securities purchased under agreements to
resell...................................... 3,652 375 (101)(A) 3,926
Other interest income........................ 33 33
------------ ---------- ---------- ---------
Total interest income.................... 923,165 53,126 (2,503) 973,788
Interest Expense:
Interest on deposits......................... 168,838 20,208 (3,121)(B) 185,925
Interest on funds borrowed................... 39,599 60 (101)(A) 39,558
Interest on long-term debt................... 36,725 4,209 (B) 40,934
------------ ---------- ---------- ---------
Total interest expense................... 245,162 20,268 987 266,417
------------ ---------- ---------- ---------
Net interest income...................... 678,003 32,858 (3,490) 707,371
Provision for losses on loans................. 196,900 200 197,100
------------ ---------- ---------- ---------
Net interest income after provision
for losses on loans.................... 481,103 32,658 (3,490) 510,271
------------ ---------- ---------- ---------
Non-Interest Income:
Service charges on deposits.................. 93,006 1,356 94,362
Trust income................................. 49,213 49,213
Fees for international services.............. 37,440 37,440
Debit and credit card fees................... 30,503 80 30,583
Securities gains (losses) 9,920 145 10,065
Other operating income....................... 67,902 682 (2)(A) 68,582
------------ ---------- ---------- ---------
Total non-interest income 287,984 2,263 (2) 290,245
------------ ---------- ---------- ---------
Non-Financial Expenses:
Salaries, wages and benefits................. 319,948 10,214 330,162
Net occupancy................................ 58,621 2,346 60,967
Equipment expense............................ 38,466 829 39,295
Other operating expenses..................... 295,417 5,232 5,506 (A)(B) 306,155
------------ ---------- ---------- ---------
Total non-financial expense.............. 712,452 18,621 5,506 736,579
------------ ---------- ---------- ---------
Income before income taxes.................... 56,635 16,300 (8,998) 63,937
Provision for income taxes.................... 23,539 5,544 (3,149)(B) 25,934
------------ ---------- ---------- ---------
Income before cumulative effect of a
change in accounting principle (D).......... $ 33,096 $10,756 $ (5,849) $ 38,003
============ ========== ========== =========
Average common shares outstanding............. 143,368 4,195 148,766
Per Common Share Data:
Income before cumulative effect of a
change in accounting principle.............. $ 0.23 $ 2.56 $ 0.26
Cash dividends declared....................... $ 0.60 $ 0.25 $ 0.60
</TABLE>
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<PAGE>
CORESTATES FINANCIAL CORP
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(UNAUDITED)
YEAR ENDED DECEMBER 31, 1993
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
CoreStates
CoreStates Germantown and
and Germantown Pro Forma Germantown
Subsidiaries Saving Bank Ajustments Pro Forma
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans.............. $1,585,015 $84,413 $ (2,504)(B) $1,666,924
Interest on investment securities....... 205,170 27,371 (2,383)(A)(B) 230,158
Interest on time deposits in banks...... 44,340 10 44,350
Interest on federal funds sold and
securities purchased under
agreements to resell.................. 7,280 680 7,960
Other interest income................... 59 59
------------ ----------- ----------- ------------
Total interest income.............. 1,841,864 112,474 (4,887) 1,949,451
------------ ----------- ----------- ------------
Interest Expense:
Interest on deposits.................... 379,813 47,746 (6,180)(B) 421,379
Interest on funds borrowed.............. 67,001 124 (83)(A) 67,042
Interest on long-term debt.............. 69,779 8,474 (B) 78,253
------------ ----------- ----------- ------------
Total interest expense............. 516,593 47,870 2,211 566,674
------------ ----------- ----------- ------------
Net interest income................ 1,325,271 64,604 (7,098) 1,382,777
Provision for losses on loans............. 121,201 1,900 123,101
------------ ----------- ----------- ------------
Net interest income after
provision losses on loans........ 1,204,070 62,704 (7,098) 1,259,676
------------ ----------- ----------- ------------
Non-Interest Income:
Service charges on deposit accounts..... 179,428 3,268 (19)(A) 182,677
Trust income............................ 101,793 101,793
Fees for international services......... 69,432 69,432
Debit and credit card fees.............. 61,717 163 61,880
Securities gains (losses)............... 16,110 1,179 17,289
Other operating income.................. 145,550 1,824 147,374
------------ ----------- ----------- ------------
Total non-interest income.......... 574,030 6,434 (19) 580,445
------------ ----------- ----------- ------------
Non-Financial Expenses:
Salaries, wages and benefits............ 622,968 19,992 642,960
Net occupancy........................... 114,951 4,618 119,569
Equipment expenses...................... 74,844 1,728 76,572
Other operating expenses................ 429,099 11,840 11,609(A)(B) 452,548
------------ ----------- ----------- ------------
Total non-financial expenses....... 1,241,862 38,178 11,609 1,291,649
------------ ----------- ----------- ------------
Income before income taxes................ 536,238 30,960 (18,726) 548,472
Provision for income taxes................ 173,809 10,462 (6,554)(B) 177,717
------------ ----------- ----------- ------------
Income before cumulative effect of a
change in accounting principle.......... $ 362,429 $20,498 $ (12,172) $ 370,755
=========== =========== =========== ============
Average common shares outstanding....... 145,398 4,136 151,031
Per Common Share Data:
Income before cumulative effect of a
change in accounting principle........ $2.49 $4.68 $2.45
Cash dividends declared................. $1.14 $0.40 $1.14
</TABLE>
See Footnotes to Restated Condensed Combined Statements of Income.
-16-
<PAGE>
FOOTNOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(UNAUDITED)
(A) Reflects the elimination of intercompany interest on long-term debt and
other intercompany funding and intercompany servicing fees.
(B) Reflects the anticipated impact of the purchase accounting adjustments
(which were determined using information available at the most recent
practicable date) assuming the Proposed Combination was effective on
January 1, 1993. For the purposes of determining the effects on the pro
forma combined condensed statements of income, the following pro forma
adjustments have been made (in thousands):
1) Amortization of the premium on the loan and investment securities
portfolios and certificates of deposit and the related income tax
effects.
2) Amortization of intangibles including goodwill and deposit base
intangible which was calculated using lives of 15 years and 10 years,
respectively. As required by FAS 109, the provision for income taxes
assumes that the amortization of the deposit base intangible is
deductible for Federal income tax purposes.
3) Interest expense on the seven-year 7 1/4% notes which were assumed
issued to fund the cash portion of the purchase price.
(C) Effective January 1, 1993, CoreStates adopted FAS 112, "Employers'
Accounting for Postemployment Benefits." CoreStates recognized the January
1, 1993 FAS 112 transitional liability of $20.0 million, $13.0 million
after-tax or $0.09 per share, as the cumulative effect of a change in
accounting principle. The impact of FAS 112 on Germantown is immaterial.
(D) During the first quarter of 1994, Independence recognized a $3.4 million
after-tax, or $0.02 per share, impairment loss on certain mortgage
securities. The loss was the result of a write down to fair value of these
securities which were deemed to be impaired. This resulted from a Financial
Accounting Standards Board ("FASB") interpretation of a 1993 accounting
change, Statement of Financial Accounting Standards No. 115. The
interpretation reached by a consensus of the FASB Emerging Issues Task
Force in March 1994 provided more definitive criteria for recognition of
impairment losses on these types of securities.
-17-
