<PAGE>
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 19, 1995
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 set forth in the earnings 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 Earnings News Release dated July 19, 1995.
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CORESTATES FINANCIAL CORP
(Registrant)
By /s/David T. Walker
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David T. Walker
Deputy Chief Counsel
Dated: July 19, 1995
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Exhibit Index
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<TABLE>
<CAPTION>
Exhibit No. Page
- ----------- ----
<S> <C> <C>
99 CoreStates Financial
Corp Earnings News
Release Dated July
19, 1995 4
</TABLE>
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CoreStates Financial Corp
Broad and Chestnut Streets
PO Box 7558
Philadelphia PA 19101-7558
[LOGO OF CORESTATES APPEARS HERE]
Contact Gary Brooten or Linda Stryker
(215) 973-3546
For Release Immediately Upon Receipt
CORESTATES REPORTS SECOND QUARTER EARNINGS RECORDS;
PER SHARE OPERATING EARNINGS UP 22% FROM 1994
Philadelphia, July 19, 1995--CoreStates Financial Corp today reported
record second quarter earnings based on strong revenue growth and expense
control in its basic businesses. The company also said progress on its BEST
restructuring during the second quarter reinforces its confidence in achieving
the BEST project's goals.
Net income was $125,970,000 or 89 cents per share for the second quarter
and $181,337,000 or $1.27 per share for the first half of 1995. Last year's
income was $63,091,000 or 44 cents per share for the second quarter and
$29,666,000 or 23 cents per share for the first half.
Excluding one-time items in both years that are detailed below, normalized
second quarter operating earnings were $124,037,000 or 88 cents per share in
1995, up 22% from $102,738,000 or 72 cents per share in 1994.
This second quarter operating record was evident in strong performance
ratios. Operating return on average assets was 1.75% for the quarter and return
on average equity was 22.03%.
First half operating earnings, also excluding one-time items in both years,
were $237,643,000 or $1.67 per share in 1995 and $200,543,000 or $1.40 per share
in 1994.
more
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2
Terrence A. Larsen, chairman, said the second quarter results "reflected
strength in our basic banking businesses. Our customers are generally doing
well, and their increased level of activity and success gives us more
opportunities to do good business with them."
He said the results also included "full achievement of the anticipated
second quarter benefits of our BEST redesign project."
INCOME AND EXPENSE
The largest single factor in the year-to-year earnings growth was an 8.3%
increase in net interest income. Average loans grew by $1 billion and, although
industry margins have been under pressure, the net interest margin grew 24 basis
points to 6.10%. CoreStates' net interest margin, based on a unique business mix
and tightly disciplined management of interest rate risks, has been among the
strongest of major banking companies for many quarters.
The solid performance extended into the noninterest categories as well,
Larsen said. All major categories of fee revenue were up from the first quarter,
a reversal of sluggishness in overall fee revenue growth in the last three
quarters.
CoreStates' expense ratio, continuing a two-year trend that has been
accelerated by the company's redesign project, dropped by nearly two percentage
points to 57.2%, Larsen said.
IMPACT OF THE BEST REDESIGN PROJECT
When CoreStates announced the results of its BEST (Building Exceptional
Service Together) process redesign project at the end of March, the company said
it expected the project to have a positive impact of 2 cents per share on second
quarter earnings.
Larsen said the actual impact was 3 cents per share, compared to the 2
cents in the original projection. The difference was a matter of timing details
and "should not change the course of BEST
more
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3
implementation over coming quarters," Larsen added. "We expect to remain on the
originally announced schedule, with confidence that we will meet our targets."
"Our people have done a tremendous job of serving customers and keeping the
company running smoothly during this period of change," he said. "The strong
growth in our basic business results, even as we worked on implementing BEST, is
a tribute to their efforts."
CREDIT QUALITY
The quarter saw continued signs of improving credit quality, with total
non-performing assets dropping to $243 million on June 30 from $352 million a
year ago and $299 million on March 31. About half of the second quarter decline
resulted from payment of a single major credit. The June 30, 1995 total
represented 0.84% of total assets and 1.16% of total loans plus real estate
foreclosed or in foreclosure.
The reserve for loan losses at June 30 was $497 million, or 2.38% of total
loans and 254% of total non-performing loans. Net charge-offs were $26.3 million
for the second quarter and $53.2 million for the first six months of 1995,
compared to $140.3 million and $172.5 million, respectively, in 1994. The large
charge-offs in the first quarter of 1994 were related to the acquisition of
Constellation Bancorp.
OTHER BALANCE SHEET MATTERS AND RATIOS
Consolidated total assets at June 30 were $29.0 billion, including $20.9
billion of consolidated net loans. Consolidated total deposits were $21.0
billion.
Shareholders' equity at June 30 was $2.25 billion, or 7.7% of total assets.
The Tier 1 leverage ratio (Tier 1 or core capital as a
more
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4
percentage of quarterly average assets) was 7.2% for the second quarter. Tier 1
capital at June 30 was 7.9% of risk-adjusted assets and total capital was 11.6%
of risk-adjust assets, well in excess of the regulatory minimums of 4% and 8%,
respectively.
Larsen said that the company so far this year has repurchased 5.6 million
shares, approximately 4% of shares outstanding, under its authority to
repurchase up to 5% of shares per year. These repurchases are in addition to
shares purchased for benefit plans or the dividend reinvestment plan.
ONE-TIME ITEMS EXCLUDED FROM NORMALIZED OPERATING RESULTS
The one-time items not included in operating earnings were acquisition
costs of 89 cents per share for Constellation Bancorp and 28 cents per share for
Independence Bancorp in the first and second quarters of 1994, respectively; a
one-time gain of 8 cents per share on a transaction involving CoreStates'
Electronic Payment Services, Inc., joint venture and a one-time restructuring
charge of 49 cents per share for the BEST redesign project, both in the first
quarter of 1995; and a second quarter restructuring credit of 1 cent per share
related to BEST.
-30-
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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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1995 1994 1995 1994
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Income before cumulative
effect of a change in
accounting principle....... $125,970(a)(b) $63,091(b) $181,337(a)(b) $ 33,096(b)
======== ======= ======== ========
Net income................... $125,970(a)(b) $63,091(b) $181,337(a)(b) $ 29,666(b)(c)
======== ======= ======== ========
Per Share:
Income before cumulative
effect of a change in
accounting principle....... $0.89(a)(b) $0.44(b) $1.27(a)(b) $0.23(b)
===== ===== ===== =====
Net income................... $0.89(a)(b) $0.44(b) $1.27(a)(b) $0.21(b)(c)
===== ===== ===== =====
Average number of
shares outstanding......... 140,914 142,139 142,571 143,368
======= ======= ======= =======
</TABLE>
(a) In March 1995, CoreStates completed an intensive review of its operations
and businesses and announced a corporate-wide process redesign plan, which
restructures its banking services around customers and enhances employees'
authority to make decisions to benefit customers. As a result of this
process redesign, CoreStates recorded a $110.0 million pre-tax
restructuring charge, $70.0 million after-tax or $0.49 per share, in March
1995. In the second quarter of 1995, CoreStates recorded a restructuring
credit of $3.0 million, $1.9 million after-tax or $0.01 per share, related
to a gain on the curtailment of future pension benefits associated with
employees terminated during the second quarter. The process redesign is
expected to generate by late 1996, annual run-rate efficiencies which will
reduce expenses by approximately $180 million and revenue enhancements
which will net an addition of approximately $30 million to revenues,
combining to improve net income at an annual rate of $0.90 per share.
(b) Excluding an after-tax restructuring credit of $1.9 million, or $0.01 per
share, recorded in the second quarter of 1995 and a first quarter of 1995
after-tax restructuring charge of $70.0 million, or $0.49 per share, both
related to a corporate-wide process redesign; an after-tax gain of $11.8
million, or $0.08 per share, related to changes in an investment in an
affiliate joint venture, recorded in the first quarter of 1995; and after-
tax merger-related charges of $127.8 million, or $0.89 per share, recorded
in the first quarter of 1994 for the Constellation Bancorp 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 three
and six months ended June 30, 1995 and 1994 were as follows:
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<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30. June 30,
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1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Income before cumulative
effect of a change in
accounting principle.... $124,037 $102,738 $237,643 $200,543
Per share................. $0.88 $0.72 $1.67 $1.40
Return on average total
assets.................. 1.75% 1.48% 1.69% 1.46%
Return on average common
shareholders' equity.... 22.03 18.55 20.81 17.41
</TABLE>
(c) Reflects the writedown to fair value for certain mortgage securities deemed
to be impaired under FASB's 1994 interpretation of FAS 115.
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