-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, o7GAkui/ltnBeFwkwCnjhL/hbKMekzTuXAUDf16wkYCD0SB+HTdV/DG+PbfOIjmm Kl/xNwVxmYnNEBYN0QoSnw== 0000950109-94-001684.txt : 19940914 0000950109-94-001684.hdr.sgml : 19940914 ACCESSION NUMBER: 0000950109-94-001684 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940627 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19940913 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORESTATES FINANCIAL CORP CENTRAL INDEX KEY: 0000069952 STANDARD INDUSTRIAL CLASSIFICATION: 6021 IRS NUMBER: 231899716 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-11285 FILM NUMBER: 94548780 BUSINESS ADDRESS: STREET 1: CENTRE SQ W STREET 2: 1500 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19101 BUSINESS PHONE: 2159733806 MAIL ADDRESS: STREET 1: 1500 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19101 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL CENTRAL FINANCIAL CORP DATE OF NAME CHANGE: 19830517 8-K/A 1 AMENDMENT #1 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 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 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- RESTATED CONDENSED COMBINED BALANCE SHEET (UNAUDITED) March 31, 1994 (in thousands, except per share amounts)
CoreStates CoreStates Independence and and Bancorp and Independence Subsidiaries Subsidiaries Restated ---------------- ---------------- ---------------- 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
See footnotes to Restated Condensed Combined Balance Sheet. -4- 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- CORESTATES FINANCIAL CORP RESTATED CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED) Three Months Ended March 31, 1994 (in thousands, except per share amounts)
CoreStates CoreStates Independence and and Bancorp and Independence Subsidiaries Subsidiaries(A) Combined ------------ --------------- ------------ 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
See Footnotes to Restated Condensed Combined Statements of Income -6- CORESTATES FINANCIAL CORP RESTATED CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED) Three Months Ended March 31, 1993 (In thousands, except per share amounts)
CoreStates CoreStates Independence and and Bancorp and Independence Subsidiaries Subsidiaries(A) Combined ------------ --------------- ------------ 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
See Footnotes to Restated Condensed Combined Statements of Income -7- CORESTATES FINANCIAL CORP RESTATED CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED) YEAR ENDED DECEMBER 31, 1993 (in thousands, except per share amounts)
CoreStates Independence CoreStates & and Bancorp, Inc and Independence Subsidiaries Subsidiaries (A) Combined ------------ ---------------- ------------- 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
See Footnotes to Restated Condensed Combined Statements of Income. -8- CORESTATES FINANCIAL CORP RESTATED CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED) YEAR ENDED DECEMBER 31, 1992 (in thousands, except per share amounts)
CoreStates Independence CoreStates & and Bancorp and Independence Subsidiaries Subsidiaries (A) Combined ------------ ---------------- ------------ 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
See Footnotes to Restated Condensed Combined Statements of Income. -9- CORESTATES FINANCIAL CORP RESTATED CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED) YEAR ENDED DECEMBER 31, 1991 (in thousands, except per share amounts)
CoreStates & CoreStates Independence Independence and Bancorp, and Bancorp Subsidiaries Subsidiaries (A) Combined ------------ ---------------- ------------ 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
See Footnotes to Restated Condensed Combined Statements of Income. -10- 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:
Increase (decrease) Cumulative in net income increase (decrease) ------------------ in common Amount Per Share shareholders' equity --------- ---------- --------------------- 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
(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- 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- PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED) June 30, 1994 (in thousands, except per share amounts)
CoreStates Germantown Pro Forma and Savings Pro Forma Balance ASSETS Subsidiaries Bank Adjustments Sheet -------------- ------------ ------------- ------------ 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
See Footnotes to Pro Forma Condensed Combined Balance Sheet. -13- 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- PRO FORMA CONDENSED COMBINED INCOME STATEMENT (UNAUDITED) Six Months Ended June 30, 1994 (in thousands, except per share amounts)
Corestates Germantown Pro Forma and Savings Pro Forma Balance Subsidiaries Bank Adjustments Sheet ------------ ---------- ----------- --------- 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
-15- CORESTATES FINANCIAL CORP PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED) YEAR ENDED DECEMBER 31, 1993 (in thousands, except per share amounts)
CoreStates CoreStates Germantown and and Germantown Pro Forma Germantown Subsidiaries Saving Bank Ajustments Pro Forma ------------ ----------- ----------- ------------ 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
See Footnotes to Restated Condensed Combined Statements of Income. -16- 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- -----END PRIVACY-ENHANCED MESSAGE-----