<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): January 22, 1997
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) 973-7488
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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(a) and the consolidated financial highlights
(unaudited) of CoreStates Financial Corp as Exhibit 99(b) are incorporated by
reference and made a part hereof.
Item 7. Exhibits.
---------
99(a) CoreStates Financial Corp Earnings News Release dated January 22, 1997.
99(b) CoreStates Financial Corp Consolidated Financial Highlights (Unaudited)
for three months and twelve months ended December 31, 1996 and 1995.
SIGNATURE
---------
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/ Christopher J. Carey
------------------------------
Christopher J. Carey
Senior Vice President
Dated: January 22, 1997
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Exhibit Index
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Exhibit No. Page
- ----------- ----
99(a) CoreStates Financial Corp Earnings News
Release dated January 22, 1997 4
99(b) CoreStates Financial Corp Consolidated
Financial Highlights (Unaudited) for three
months and twelve months ended December 31,
1996 and 1995. 9
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Exhibit 99(a)
Contact Gary Brooten or George Biechler [LOGO OF CORESTATES
(215) 973-3546 APPEARS HERE]
For Release Immediately Upon Receipt
CoreStates Reports Continued Strong Operating Results
Philadelphia, January 22, 1997--CoreStates Financial Corp today reported
operating earnings, excluding significant and unusual items detailed in
footnotes at the end of this release, of $201,595,000 or 93 cents per share
for the fourth quarter and $780,789,000 or $3.57 per share for the full year
1996. The comparable 1995 numbers were $196,100,000 or 89 cents per share for
the quarter and $727,028,000 or $3.28 per share for the full year.
Net income including the significant and unusual items was $195,546,000 or
91 cents per share for the quarter and $649,144,000 or $2.97 per share for the
full year 1996. The comparable numbers for 1995 were $192,145,000 or 87 cents
per share and $655,176,000 or $2.95 per share, respectively. All 1995 numbers
were restated for the April 9, 1996 acquisition of Meridian Bancorp.
Based on operating earnings, CoreStates' 1996 performance ratios for the
fourth quarter and full year again rank among the best for large U.S. banks.
Return on average assets was 1.81% for the quarter and 1.78% for the year, while
return on average equity was 21.03% for the quarter and 20.07% for the year.
Chairman Terrence A. Larsen characterized the year's operating results as a
"productive beginning for the new CoreStates," which has grown by approximately
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50% as a result of the merger.
"During 1996 we substantially remade the company as we integrated the
results of two major re-engineering programs and consolidated the largest merger
in our history. While the company is different than it was a year ago, our
operating returns of more than 20% on equity and approximately 1.8% on assets in
both the quarter and the year reflect the same outstanding effort on the part of
our 19,000 people," Larsen said. "Overall we continued the strong operating
performance that CoreStates has delivered consistently during the 1990s."
The Fourth Quarter
Operating earnings were up year to year by 4.5% on a per share basis, driven
by moderate loan growth and significant reductions in non-financial expenses.
Average loans were up nearly $1 billion or 3.0% from a year ago, and would
have been higher save for loan sales during 1996 totaling more than $1.3
billion.
"Our loan growth has been encouraging considering the extremely competitive
market for most types of commercial lending all year," Larsen said. He noted
that CoreStates for credit quality reasons has continued to abstain from
soliciting pre-approved credit card accounts, which had been a CoreStates
strategy until late 1994, and as a result average credit card outstandings grew
by only $150 million.
Net interest income was down slightly as a result of a year-to-year decline
of 4 basis points in the net interest margin for the quarter. The margin remains
among the best in the industry at 5.46% for the quarter.
Growth of 14.7% in international fees was offset by declines elsewhere, so
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that both revenues from fee-based services and total non-interest income were
flat.
Larsen said non-financial expenses on an operating basis fell 4.8% from
$428.4 million to $407.7 million for the quarter, fueled by merger-related
efficiencies. The expense ratio declined to 53.43% for the quarter, compared to
54.99% in 1995.
Full Year 1996
Operating earnings were up 8.8% per share. The primary driver of the
earnings growth was a decrease of $124 million, or 7.1%, in total non-financial
expenses. The decrease included all of the merger efficiencies planned for 1996,
with the rest coming from completion of the re-engineering projects undertaken
by both CoreStates and Meridian prior to their merger agreement. The full-year
expense ratio was 53.71%, down from 57.07% for the full year 1995.
Other components of the full-year earnings were essentially flat. Net
interest income was down slightly; though average loans increased by more than
$670 million and the net interest margin increased by 6 basis points to 5.53%,
total average earning assets decreased by more than $1 billion. Non-interest
income also was flat compared to 1995.
Credit Quality and Capital Condition
Indicators of credit quality continued strong. Non-performing assets at
December 31 were $245 million, down from $264 million at September 30, 1996 and
$268 million at December 31, 1995. The 1996 year-end non-performing assets
represented 0.75% of total loans plus real estate foreclosed and 0.54% of total
assets.
The provision for loan losses was $40.0 million in the fourth quarter and
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$228.8 million for the full year 1996, compared to $38.2 million and $144.0
million respectively in 1995. Net charge-offs were $37.9 million for the fourth
quarter and $188.7 million for the full year 1996, compared to $54.5 million and
$154.9 million, respectively, a year earlier. The 1996 full-year figures
included a $70 million provision for loan losses related to the Meridian
acquisition, and a $5.8 million charge-off related to a policy change to charge
off delinquent credit card loans at 150 days instead of the industry-norm 180
days.
The reserve for possible loan losses at December 31 was $710 million, or
2.17% of total loans and 322% of non-performing loans.
Consolidated total assets at December 31 were $45.5 billion, including
consolidated net loans of $32.8 billion. Consolidated total deposits were $33.7
billion. The comparable figures for December 31, 1995 were $46.0 billion, $31.7
billion and $34.0 billion, respectively.
Shareholders' equity at December 31 was $3.7 billion or 8.1% of total
assets. The Tier 1 leverage ratio (Tier 1 or "core" capital as a percentage of
quarterly average assets) was 8.46% for the fourth quarter. Tier 1 capital at
December 31 was 9.45% of risk-adjusted assets and total capital was 13.23% of
risk-adjusted assets, well above regulatory minimums of 4% and 8% respectively.
Shareholders' equity and shares outstanding at year-end were reduced by the
repurchase of shares in connection with the repurchase program authorized by the
directors in October. That program authorizes repurchase of a total of 22
million shares, exclusive of purchases for compensation and benefit programs, by
the end of 1997.
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CoreStates Financial Corp
(In thousands, except per share)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------------- ----------------------------
1996 1995(a) 1996 1995(a)
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Net interest income plus
non-interest income........ $761,465 $771,778 $3,040,559 $3,049,147
======== ======== ========== ==========
Net income................... $195,546(b) $192,145(b) $649,144(b) $655,176
======== ======== ========== ==========
Net income per share......... $0.91(b) $0.87(b) $2.97(b) $2.95
======== ======== ========== ==========
Average number of
shares outstanding......... 215,866 219,915 218,812 222,268
======== ======== ========== ==========
</TABLE>
(a) On April 9, 1996, CoreStates acquired Meridian Bancorp, Inc. ("Meridian")
in a transaction accounted for as a pooling of interests. All prior period
data presented has been restated to include Meridian.
(b) Selected financial results for the three and nine months ended December 31,
1996 and 1995, excluding the significant items listed below, were as
follows:
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------------- ----------------------------
1996 1995(a) 1996 1995(a)
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Net income................... $195,546 $192,145 $649,144 $655,176
Exclude the following after
tax items:
Restructuring and merger-
related charges.......... 6,049 4,911 150,840 92,151
Net investment gains....... - (956) (28,115) (8,638)
SAIF Fund special
assessment............... - - 8,920 -
EPS gain................... - - - (11,761)
-------- -------- -------- --------
Operating earnings........... $201,595 $196,100 $780,789 $727,028
======== ======== ======== ========
Operating earnings per share. $0.93 $0.89 $3.57 $3.28
Return on average total
assets..................... 1.81% 1.74% 1.78% 1.63%
Return on average
shareholders' equity....... 21.03% 20.36% 20.07% 19.43%
</TABLE>
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CoreStates Financial Corp
Consolidated Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Twelve months ended
December 31, December 31,
------------------------------------------- -----------------------------------------
Percent Percent
1996 1995(a) change 1996 1995(a) change
------------- ------------- --------- -------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
PER COMMON SHARE DATA
- ---------------------
Net income $0.91(b) $0.87(b) 4.6% $2.97(b) $2.95(b) 0.7%
Cash dividends declared 0.47 0.42 11.9% 1.73 1.44 20.1%
Book value 17.40 17.61
FINANCIAL RATIOS
- ----------------
Return on average shareholders' equity 20.40%(b) 19.95%(b) 16.69%(b) 17.51%(b)
Return on average total assets 1.75%(b) 1.71%(b) 1.48%(b) 1.47%(b)
Net interest margin (FTE) 5.46% 5.50% 5.53% 5.47%
Risk-based capital - Tier 1 9.45% 9.20%
- Total capital 13.23% 12.71%
Tier 1 leverage ratio 8.46% 7.99%
Shareholders' equity / Total assets 8.12% 8.43%
ASSET QUALITY (dollars in thousands)
- ------------------------------------
Allowance for loan losses $710,327 $670,265
Allowance for loan losses / Loans 2.17% 2.11%
Net charge-offs $37,912 $54,528 $188,705 $154,861
Net charge-offs / Average loans (annualized) 0.46% 0.69% 0.59% 0.50%
Nonperforming assets $244,963 $268,306
Nonperforming assets / Total loans plus OREO 0.75% 0.85%
Nonperforming assets / Total assets 0.54% 0.58%
Allowance for loan losses / Nonperforming loans 321.72% 290.40%
AVERAGE BALANCES (in millions)
- ------------------------------
Loans, net of unearned discounts $32,620 $31,655 3.0% $31,939 $31,267 2.1%
Earning assets 39,540 39,959 -1.0% 39,208 40,228 -2.5%
Total assets 44,363 44,633 -0.6% 43,794 44,705 -2.0%
Deposits 32,325 32,761 -1.3% 32,367 33,102 -2.2%
Interest bearing liabilities 29,973 30,815 -2.7% 29,783 31,344 -5.0%
Shareholders' equity 3,814 3,821 -0.2% 3,890 3,742 4.0%
PERIOD END BALANCES (in millions)
- ---------------------------------
Loans $32,777 $31,714 3.4%
Total assets 45,494 45,997 -1.1%
Deposits 33,727 33,964 -0.7%
Total liabilities 41,798 42,121 -0.8%
Shareholders' equity 3,696 3,876 -4.6%
</TABLE>
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(a) Restated to include Meridian.
(b) SELECTED FINANCIAL RESULTS EXCLUDING SIGNIFICANT ITEMS (in thousands, except
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per share data) Selected financial results for the three and twelve month
- --------------
periods ended December 31, 1996 and 1995, excluding the significant items listed
below, were as follows:
<TABLE>
<CAPTION>
Three Months Ended December 31,
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Percent
1996 1995(a) change
------------- ------------- ---------
<S> <C> <C> <C>
Net income $195,546 $192,145 1.8%
Exclude the following after-tax items:
Restructuring and merger-related charges 6,049 4,911
Certain investment gains - (956)
SAIF special assessment - -
Gain on affiliate joint venture - -
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Operating earnings $201,595 $196,100 2.8%
============= =============
Operating earnings per share $0.93 $0.89 4.5%
Return on average shareholders' equity 21.03% 20.36%
Return on average total assets 1.81% 1.74%
<CAPTION>
Twelve Months Ended December 31,
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Percent
1996 1995(a) Change
------------- --------------- --------------
<S> <C> <C> <C>
Net income $649,144 $655,176 -0.9%
Exclude the following after-tax items:
Restructuring and merger-related charges 150,840 92,251
Certain investment gains (28,115) (8,638)
SAIF special assessment 8,920 -
Gain on affiliate joint venture - (11,761)
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Operating earnings $780,789 $727,028 7.4%
============= ===============
Operating earnings per share $3.57 $3.28 8.8%
Return on average shareholders' equity 20.07% 19.43%
Return on average total assets 1.78% 1.63%
</TABLE>
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CoreStates Financial Corp
Consolidated Financial Highlights -- continued
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
December 31,
-------------------------------------------
Percent
1996 1995(a) change
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<S> <C> <C> <C>
TAX EQUIVALENT INCOME STATEMENT
- --------------------------------
(in thousands, except per share data)
Net interest income $543,104 $554,264 -2.0%
Provision for losses on loans 40,000 38,225 4.6%
Non-Interest Income:
Service charges on deposit accounts 61,927 61,883 0.1%
Trust income 42,261 41,755 1.2%
Fees for international services 26,956 23,496 14.7%
Debit and credit card fees 18,656 22,444 -16.9%
Income from investment in EPS, Inc. 7,710 7,548 2.1%
Income from trading activities 9,336 8,658 7.8%
Securities gains 4,036 5,729
Other operating income 53,495 53,839 -0.6%
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Total non-interest income 224,377 225,352 -0.4%
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Non-Financial Expenses:
Salaries, wages and benefits 206,717 218,651 -5.5%
Net occupancy 37,157 38,196 -2.7%
Equipment expenses 30,242 30,883 -2.1%
Restructuring and merger-related charges 9,602 2,037
Other operating expenses 133,570 140,693 -5.1%
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Total non-financial expenses 417,288 430,460 -3.1%
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Income Before Income Taxes 310,193 310,931 -0.2%
Provision for income taxes 114,647 118,786 -3.5%
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Net Income $195,546 (b) $192,145 (b) 1.8%
============= =============
<CAPTION>
Twelve months ended
December 31,
---------------------------------------------
Percent
1996 1995(a) change
-------------- -------------- ---------
<S> <C> <C> <C>
TAX EQUIVALENT INCOME STATEMENT
- --------------------------------
(in thousands, except per share data)
Net interest income $2,167,684 $2,200,195 -1.5%
Provision for losses on loans 228,767 144,002 58.9%
Non-Interest Income:
Service charges on deposit accounts 243,696 244,439 -0.3%
Trust income 167,138 162,776 2.7%
Fees for international services 101,761 94,396 7.8%
Debit and credit card fees 74,707 83,812 -10.9%
Income from investment in EPS, Inc. 29,902 49,114 -39.1%
Income from trading activities 25,216 35,403 -28.8%
Securities gains 59,512 31,475
Other operating income 197,143 180,807 9.0%
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Total non-interest income 899,075 882,222 1.9%
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Non-Financial Expenses:
Salaries, wages and benefits 826,442 904,377 -8.6%
Net occupancy 157,358 159,530 -1.4%
Equipment expenses 120,602 118,532 1.7%
Restructuring and merger-related charges 139,702 138,600
Other operating expenses 532,724 564,489 -5.6%
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Total non-financial expenses 1,776,828 1,885,528 -5.8%
-------------- --------------
Income Before Income Taxes 1,061,164 1,052,887 0.8%
Provision for income taxes 412,020 397,711 3.6%
-------------- --------------
Net Income $649,144 (b) $655,176 (b) -0.9%
============== ==============
</TABLE>
- -----------------------------------------------
(a) Restated to include Meridian.
(b) FOR SELECTED FINANCIAL RESULTS EXCLUDING SIGNIFICANT ITEMS - SEE FOOTNOTE
(b), PAGE 1.
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CoreStates Financial Corp and Subsidiaries
CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 3,462,287 $ 3,662,143
Time deposits, principally Eurodollars...................... 2,443,154 1,909,260
Federal funds sold and securities purchased under
agreements to resell..................................... 509,694 719,937
Trading account assets...................................... 122,317 147,218
Investment securities available-for-sale.................... 2,394,166 2,572,315
Investment securities held-to-maturity (market value:
1996-$1,692,243; 1995-$3,075,964)........................ 1,689,058 3,059,917
Total loans, net of unearned discounts of
$204,521 in 1996 and $232,077 in 1995.................... 32,777,032 31,714,152
Less: Allowance for loan losses.......................... (710,327) (670,265)
------------ ------------
Net loans.............................................. 32,066,705 31,043,887
Due from customers on acceptances........................... 738,077 560,707
Premises and equipment...................................... 625,876 664,279
Other assets................................................ 1,442,860 1,657,579
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Total assets........................................... $45,494,194 $45,997,242
============ ============
LIABILITIES
Deposits:
Domestic:
Non-interest bearing................................... $ 9,330,445 $ 8,937,147
Interest bearing....................................... 22,986,955 23,883,726
Overseas branches and subsidiaries....................... 1,409,756 1,142,947
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Total deposits......................................... 33,727,156 33,963,820
Short-term funds borrowed................................... 2,633,157 3,677,013
Bank acceptances outstanding................................ 727,728 549,048
Other liabilities........................................... 1,661,162 1,719,697
Long-term debt.............................................. 3,049,297 2,212,099
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Total liabilities...................................... 41,798,500 42,121,677
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COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY
Preferred stock: authorized 10.0 million
shares; no shares issued................................. - -
Common stock: $1 par value; authorized 350.0 million
shares; issued 223.6 million shares in 1996 and
230.2 million shares in 1995 (including
treasury shares of 8.9 million in 1996 and
7.8 million in 1995, and unallocated shares
held by Employee Stock Ownership Plan (ESOP)
of 2.3 million in 1996 and 2.3 million in 1995).......... 223,599 230,231
Other common shareholders' equity, net...................... 3,472,095 3,645,334
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Total shareholders' equity............................. 3,695,694 3,875,565
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Total liabilities and shareholders' equity............. $45,494,194 $45,997,242
============ ============
</TABLE>
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