<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): OCTOBER 18, 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 October 18,
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
-------------------------
David T. Walker
Senior Vice President
Dated: October 18, 1995
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Exhibit Index
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Exhibit No. Page
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99 CoreStates Financial
Corp Earnings News
Release Dated October
18, 1995 4
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EXHIBIT 99
CORESTATES DETAILS RECORD EARNINGS, UP 28%;
BUILDS MOMENTUM ON ITS BEST REDESIGN PROJECT
Philadelphia, October 18, 1995--CoreStates Financial Corp today
reported details of record third quarter earnings disclosed October 10.
Per share operating earnings were up 28% from 1994 levels that were a
record at the time. The banking services company also detailed rapid
progress toward achieving the planned financial benefits of its BEST
process redesign project.
Net income was $133,946,000 or 96 cents per share for the third
quarter and $315,283,000 or $2.23 per share for the first nine months of
1995. Last year's net income was $104,221,000 or 74 cents per share for
the quarter and $133,887,000 or 97 cents per share for the first nine
months.
Excluding one-time items in both years that are detailed below,
normalized operating earnings were up 28% from 74 to 95 cents per share
for the third quarter, and up 22% from $2.14 to $2.62 per share for the
first nine months.
Performance ratios continued to strengthen. On an operating basis,
return on average assets was 1.85% and return on average equity was
22.94%, highest in recent CoreStates history and exceptional by industry
norms.
-more-
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2
Terrence A. (Terry) Larsen, chairman, said the year-to-year earnings
improvement was based on continuing broad strength in CoreStates' basic
banking businesses, highlighted by a 5% increase in net interest income,
modest growth in service fees and a decrease of more than 6% in non-
financial expenses fueled by the BEST process redesign project.
Stronger net interest income derived from a $1.4 billion year-to-
year increase in average loans, primarily in credit cards and the asset-
based lending of the company's Congress Financial subsidiary. The net
interest margin, which had been steady around a very strong 5.90% for the
past year and increased to an unsustainable 6.10% in the second quarter,
returned to 5.90% in the third quarter.
Larsen said the third quarter results included a penny per share
from repayment of second quarter Federal Deposit Insurance Corporation
premiums that were reduced retroactively. Reduced FDIC premiums have been
built into the budget beginning with the third quarter and will not
directly impact the bottom line going forward.
"Some of the reduced expense will be offset by adjustments to our
cost of funds," he said, "but most will be used to fund stepped-up
investment in technology to support improved products and services and
revenue growth in the future."
He said fee revenues in the third quarter were sluggish, as they
have been for most of the past year.
The year-to-year decrease in expenses included a decline of more
than 7% in personnel expense as the BEST redesign actions begin to take
effect. Occupancy expenses also trended down in the third quarter. Of the
major expense categories, only equipment was up, reflecting the
investments in technology.
IMPACT OF THE BEST REDESIGN PROJECT
CoreStates continued in the third quarter to run ahead of schedule
in achieving the projected financial benefits of its BEST (Building
Exceptional Service Together) process redesign project. This resulted
from accelerated achievement of cost efficiencies,
-more-
Page 5 of 9
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3
Larsen said, reflecting timing in carrying out certain BEST redesign
ideas.
"We are monitoring the course of implementation closely," Larsen
said. "We now expect to remain ahead of our plan for at least another
quarter. Our progress to date certainly reinforces our confidence in
fully attaining our BEST projections."
The pre-tax BEST impact for the quarter was $22.0 million, or 10
cents per share, compared to a projection of five cents per share. The
company expects the ultimate impact of BEST to be approximately 22.5
cents per share in the fourth quarter of 1996, after all the BEST ideas
have been implemented, and to continue thereafter at the annualized rate
of 90 cents per share.
Cost savings attributed to BEST amounted to $20.5 million for the
quarter, double the $10.1 million projection. Revenue increases
attributable to BEST were $1.5 million, less than the projected $1.9
million for the third quarter. Larsen said this gap also appeared to be
related to timing and "we expect BEST revenue enhancements to catch up
with our projections in the fourth quarter, eliminating the modest
shortfall of the first two quarters of implementation."
CREDIT QUALITY
Non-performing assets declined further to $208 million at September
30 compared to $357 million a year ago and $243 million at June 30. The
September 30 levels were equivalent to 0.7% of total assets and 0.9% of
total loans plus real estate foreclosed or in process of foreclosure.
CoreStates made a $2.5 million increase in its basic loan loss
provision for the third quarter to $27.5 million.
"We have held the basic provision flat for two years, and this
modest increase reflects our loan growth and signs of maturing of the
economic cycle," Larsen said.
Net charge-offs were $23.5 million for the quarter and $76.7 million
for the first nine months of 1995, compared to $22.4 million and $194.9
million, respectively, in 1994. The 1994 figure included $103.1 million
of charge-offs associated with the acquisition of
-more-
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4
Constellation Bancorp. The loan loss reserve at September 30 was $501.4
million, or 2.4% of total loans and 301% of non-performing loans.
BALANCE SHEET ITEMS AND RATIOS
Consolidated total assets at September 30 were $28.8 billion,
including $21.2 billion of consolidated net loans. Consolidated total
deposits were $20.7 billion.
Shareholders' equity at September 30 was $2.32 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 7.4% for the third quarter.
Tier 1 capital at September 30 was 8.1% of risk-adjusted assets and total
capital was 11.8% of risk-adjusted assets, well in excess of regulatory
minimums of 4% and 8% respectively.
CoreStates so far in 1995 has repurchased 5.9 million shares,
approximately 4.1% 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 and the dividend reinvestment plan.
CoreStates said that in light of its recently announced merger agreement
with Meridian Bancorp repurchases will be suspended.
ONE-TIME ITEMS EXCLUDED FROM NORMALIZED OPERATING RESULTS
The one-time items not included in normalized 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
BEST restructuring credits for gains on pension benefit curtailments of a
penny per share in each of the second and third quarters of 1995.
-30-
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CoreStates Financial Corp
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------- -----------------------------------
1995 1994 1995 1994
----------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Income before cumulative
effect of a change in
accounting principle.... $133,946(a)(b) $104,221(b) $315,283(a)(b) $137,317(b)
======== ======== ======== ========
Net income................ $133,946(a)(b) $104,221(b) $315,283(a)(b) $133,887(b)(c)
======== ======== ======== ========
Per Share:
Income before cumulative
effect of a change in
accounting principle..... $0.96(a)(b) $0.74(b) $2.23(a)(b) $0.97(b)
===== ==== ==== =====
Net income................. $0.96(a)(b) $0.74(b) $2.23(a)(b) $0.95(b)(c)
===== ===== ===== =====
Average number of
shares outstanding....... 139,176 141,033 141,427 142,581
======= ======= ======= =======
</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. CoreStates recorded
restructuring credits of $3.0 million, $1.9 million after-tax or $0.01 per share
in the second quarter of 1995 and $2.4 million, $1.5 million after-tax or $0.01
per share in the third quarter of 1995, related to gains on the curtailment of
future pension benefits associated with employees terminated during the second
and third quarters. 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, combining to improve net income at an annual rate of $0.90 per share.
(b)Selected financial results for the three and nine months ended September 30,
1995 and 1994 excluding: after-tax restructuring credits of $1.5 million, or
$0.01 per share in the third quarter of 1995 and $1.9 million, or $0.01 per
share, 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, all 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
$167.4 million, or $1.17 per share, recorded in the 1994 nine-month period, were
as follows:
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<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 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.... $132,419 $104,221 $370,062 $300,764
Per share................. $ 0.95 $ 0.74 $ 2.62 $ 2.14
Return on average total
assets.................. 1.85% 1.50% 1.74% 1.47%
Return on average common
shareholders' equity.... 22.94 18.91 21.53 17.95
</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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