<PAGE>
Rule 424 (b) (2)
File Nos. 33-54049
Pricing Supplement No. 119 Dated February 9, 1996
(To Prospectus dated September 15, 1994 and Prospectus Supplement dated
September 15, 1994).
$1,000,000,000
CORESTATES CAPITAL CORP
Senior Medium-Term Fixed Rate Notes Due
Nine Months or More From Date of Issue
Unconditionally Guaranteed as to Payment of Principal, Premium,
if any, and Interest by
CORESTATES FINANCIAL CORP
Cusip: 21869EFA8
Principal Amount: $ 35,000,000.00
Interest Rate per annum: 5.625%
Maturity Date: 02/12/2001
Settlement Date: 02/12/1996
Interest Payment Schedule: FEB/AUG 12th
First Coupon: 08/12/1996
Day Count: 30/360
Initial Redemption Date, if any:
Optional Repayment Dates, if any:
PAGE 1 OF 3
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MTN Pricing Supplement
RECENT DEVELOPMENTS
The following is unaudited consolidated financial information for
CoreStates Financial Corp ("CoreStates") and its subsidiaries for the three and
twelve-month periods ended December 31, 1995 and 1994. The following financial
information should be read in conjunction with the current report on Form 8-K
filed January 17, 1996 and with the financial information for the twelve months
ended December 31, 1994 contained in CoreStates' Annual Report on Form 10-K.
These reports are incorporated by reference in the accompanying prospectus. See
"Incorporation of Certain Documents by Reference" in the accompanying
prospectus.
Operating results, key financial ratios and per share information are
summarized in the following table (in millions, except per share):
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- ---------------------
1995 1994 1995 1994
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net interest income (taxable
equivalent basis).......................... $ 378.8 $ 364.4 $1,505.8 $1,410.6
======= ======= ======== ========
Income before the cumulative effect of
a change in accounting principle........... $ 137.0 $ 111.5 $ 452.2 $ 248.8
Exclude after-tax effects of:
Restructuring charge (credit).............. (4.1) - 62.5 -
EPS gain................................... - - (11.8) -
Merger-related charges..................... - - - 167.4
------- ------- -------- --------
Operating earnings........................... $ 132.9 $ 111.5 $ 502.9 $ 416.2
======= ======= ======== ========
Operating earnings per share................. $ 0.96 $ 0.78 $ 3.58 $ 2.92
======= ======= ======== ========
Return on average equity (a)................. 22.52% 19.50% 21.78% 18.34%
Return on average assets (a)................. 1.84 1.60 1.77 1.50
Net interest margin.......................... 5.97 5.89 5.97 5.80
Average common shares outstanding............ 138,468 142,252 140,600 142,498
</TABLE>
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(a) Calculated based on "operating earnings." See definitions of operating
earnings in "Fourth Quarter Results."
The ratio of earnings from continuing operations before income taxes to
fixed charges of continuing operations for the twelve months ended December 31,
1995 was as follows:
<TABLE>
<S> <C>
Combined CoreStates (parent company)
and CoreStates Capital.................. 2.75x
CoreStates consolidated:
Excluding interest on deposits.......... 3.72x
Including interest on deposits.......... 1.90x
</TABLE>
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MTN Pricing Supplement
RECENT DEVELOPMENTS - continued
Forth Quarter Results
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In the fourth quarter of 1995, CoreStates Financial Corp ("CoreStates")
recorded net income of $137.0 million or $0.99 per share. "Operating earnings"
for the fourth quarter of 1995, which has been defined for purposes of this
discussion as net income excluding a restructuring credit, was $132.9 million,
or $0.96 per share. This represents a 23.1% increase on a per share basis when
compared to fourth quarter of 1994 net income and operating earnings of $111.5
million, or $0.78 per share. The restructuring credit is related to "BEST", the
corporate-wide process redesign, and is discussed below.
The $21.4 million improvement in operating earnings for the fourth quarter
of 1995, as compared to the fourth quarter of 1994, was primarily due to a 3.9%
increase in taxable equivalent net interest income coupled with a $16.1 million
or 5.2% decrease in expenses excluding the restructuring credit. The net
interest margin for the fourth quarter of 1995 was 5.97% compared to 5.89% for
the fourth quarter of 1994. The increase in the level of taxable equivalent net
interest income was primarily related to improved interest rate spreads on
deposits and prime-based loans, higher earnings on non-interest bearing funding
and loan growth. Also contributing to the improvement in fourth quarter
operating earnings was a $7.2 million, or 8.4% increase in non-interest income
reflecting a $7.4 million gain on the sale of the Corporate Trust business. The
financial impact of those aspects of the process redesign implemented since
March 31, 1995 resulted in an increase in the fourth quarter of 1995 operating
earnings of $33.4 million pre-tax, or $0.15 per share after-tax, as compared to
the fourth quarter of 1994. This impact principally related to expense savings
and exceeded original projections by $0.06 per share due to the realization of
benefits earlier than planned.
For the full-year 1995, CoreStates achieved record earnings due to
continued growth in basic banking businesses, driven primarily by an increase in
net interest income and reductions in operating expenses resulting from the
implementation of the process redesign. CoreStates' "operating earnings" for the
full-year 1995, defined as net income excluding the BEST related net
restructuring charge and a gain related to a change in ownership interests in an
affiliate joint venture, were $502.9 million, or $3.58 per share, reflecting
growth of 22.6% on a per share basis when compared to operating earnings of
$416.2 million, or $2.92 per share for the full-year 1994. Operating earnings
for the full-year 1994 exclude merger-related charges of $167.4 million after-
tax, or $1.17 per share, and the cumulative effect of a change in accounting
principle. The net restructuring charge, gain on affiliate joint venture and
1994 merger-related charges are discussed below. CoreStates recorded net income
of $452.2 million, or $3.22 per share for the full-year 1995, compared to net
income of $245.4 million, or $1.73 per share for the full-year 1994.
The largest contributor to the $86.7 million improvement in operating
earnings for the full-year 1995 was a $95.2 million, or 6.7% increase in taxable
equivalent net interest income. The net interest margin for the full-year 1995
was 5.97%, 17 basis points above the full-year 1994. The increases in taxable
equivalent net interest income and net interest margin were primarily related to
improved interest rate spreads on deposits and prime-based loans, higher
earnings on non-interest bearing funding, reduced non-performing loans, and loan
growth, particularly in credit card outstandings and asset-based lending at
Congress Financial Corporation, CoreStates' commercial finance subsidiary. Net
interest income and the net interest margin at CoreStates continue to benefit
from the interest rate risk management strategy of maintaining a relatively
neutral interest rate risk sensitivity and avoiding speculative interest rate
positions.
Also contributing to the improvement in the full-year 1995 operating
earnings was a $26.7 million, or 2.2% decrease in non-financial expenses
excluding the net restructuring change, and a $13.7 million, or 2.4% increase in
non-interest income, excluding the gain of affiliate joint venture and $7.4
million gain on the sale of the Corporate Trust business. The financial impact
of those aspects of the process redesign implemented during 1995 was to increase
full-year revenue by $6.1 million and decrease full-year non-financial expenses
by $56.8 million, for an aggregate increase in operating earnings of $62.9
million pre-tax, or $0.28 per share after-tax.
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MTN Pricing Supplement
RECENT DEVELOPMENTS - continued
Fourth Quarter Results - continued
- ----------------------------------
Restructuring Charge/Credit - In March 1995, CoreStates completed an
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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, $2.4 million, $1.5 million
after-tax or $0.01 per share in the third quarter of 1995, and $6.4 million,
$4.1 million after-tax or $0.03 per share in the fourth quarter of 1995, related
to gains on the curtailment of unvested pension benefits associated with
employees displaced during 1995.
Joint Venture - In March 1995, Electronic Payment Services, Inc. ("EPS") an
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affiliate joint venture formed in 1992 to combine the consumer electronic
transaction processing businesses of CoreStates and three other partners,
admitted a fifth partner and increased the ownership interest of an existing
partner. As a direct result of the change in its ownership interest, CoreStates
recognized a pre-tax gain of $19.0 million, $11.8 million after-tax or $0.08 per
share in the first quarter of 1995.
1994 Merger -Related Charges - Upon consummation of their respective
----------------------------
acquisitions by CoreStates in 1994, Independence Bancorp, Inc. ("Independence")
and Constellation Bancorp ("Constellation") recorded merger-related charges in
connection with a change in strategic direction related to problem assets and to
conform consumer lending charge-off policies to those of CoreStates, and for
expenses directly attributable to the acquisition. These merger-related charges
totaled $167.4 million after-tax, or $1.17 per share. On a pre-tax basis, the
merger-related charges consisted of a $145.0 million provision for loan losses,
a $32.0 million addition to the OREO reserve, $13.0 million for the writedowns
of purchased mortgage servicing rights and related assets, and $63.7 million for
expenses directly attributable to the acquisition including $13.0 million of
severance costs related to approximately 715 employees.
1994 Accounting Change - During the first quarter of 1994, CoreStates
----------------------
recognized a $3.4 million after-tax, or $0.02 per share, impairment loss on
certain mortgage securities as a cumulative effect of a change in accounting
principle. The loss was the result of a writedown to fair value of these
securities, which were deemed to be impaired. This resulted from the Financial
Accounting Standards Board's ("FASB") 1994 interpretation of Statement of
Financial Accounting Standards No. 115. The interpretation, reached by a
consensus of the FASB Emerging Issues Task Force in March 1994, provides more
definitive criteria for recognition of impairment losses on these types of
securities.
Total non-performing assets of $171.5 million or 0.58% of assets at
December 31, 1995 decreased by $139.4 million, or 44.8% from December 31, 1994.
The decrease from December 31, 1994 was primarily in the non-performing real
estate portfolio, which declined by $78.4 million or 40.5% and the
non-performing commercial loan portfolio, which decreased $35.7 million or
40.9%.
The provision for loan losses for the fourth quarter of 1995 was $27.5
million, up $2.5 million from the prior year fourth quarter, but level with the
1995 third quarter provision. The allowance for loan losses at December 31, 1995
was $495.1 million, or 2.35% of loans and 341.7% of non-performing loans.
Consolidated total assets at December 31, 1995 were $29.6 billion, up $0.3
billion from $29.3 billion at 1994 year-end. The December 31, 1995 tier 1
capital ratio, total capital ratio and tier 1 leverage ratio at 8.4%, 12.1%
and 7.6%, respectively, were well in excess of regulatory guidelines.
